Developers unfazed by rise in property fee

Developers unfazed by rise in property fee

Experts raise concern that Govt may take further steps to cool real estate boom

PROPERTY players have shrugged off the sharp increases in development charges that came out of the blue on Wednesday.

They say the impact of the hikes will be minimal, as development charges - which developers pay to enhance a site’s use - comprise only a small proportion of total development costs.

However, experts fear the move foreshadows further steps by the Government to cool the sizzling property market, which they say could result in a market correction.

The anxiety stems from the Government’s unexpected move to raise development charges on Wednesday by 40 per cent.

These fees are payable if developers want to intensify the use of a site, for instance, by building a bigger project. However, fees paid to top up a site’s lease back to 99 years will not be affected.

Wednesday’s announcement caught the market off-guard and prompted a knee-jerk selldown of property stocks.

But major developers were unfazed yesterday. Keppel Land said its land bank has already been fully paid for and so will not be affected by the changes.

City Developments said the hikes would have an ‘insignificant impact’ on its existing projects.

‘However, we will take this increase into consideration for future acquisitions,’ a spokesman added.

Even CapitaLand took the changes in its stride, even though its recent buys of Gillman Heights off Alexandra Road and Farrer Court in Farrer Road will be among those hardest hit by the hikes.

‘These are large and branded residential developments for which we have factored in a conservative estimate of the development charge and other such business costs,’ CapitaLand said.

It added that it expected the hikes to raise total development costs by between 1 per cent and 3 per cent for these two estates.

Farrer Court, the largest collective sale in Singapore, will see its development charge rise by about $110 million, or 6 per cent of the land price, said Credo Real Estate, which marketed the site.

But Credo executive director Tan Hong Boon noted that this increase was unusually high and that development charges actually do not apply to many estates.

These include Grangeford Apartments in Leonie Hill, whose residents are in collective sale talks, and Pacific Mansion in River Valley, which is seeking a record price in a tender that closes next Thursday.

‘Yes, the hikes will affect some potential collective sale sites, and owners may have to expect lower prices,’ said Mr Tan.

He cited an example. ‘If owners wanted $100 million for an estate that comes with a $20 million development charge, then the developer would be prepared to pay $120 million. But now, the charge will rise to $28 million, so owners should expect to get only $92 million instead of $100 million.’

However, Mr Tan estimated that there is ’still $7 billion to $10 billion worth of properties that have collective sale potential’.

He and other property consultants are more worried about the motivation behind the hikes than their actual impact.

‘A lot of people wonder if it’s the start of the Government trying to impose some order into the market,’ said Mr Lui Seng Fatt, regional director and head of investments at Jones Lang LaSalle.

‘They’re waiting to see what’s coming next.’

Another consultant said: ‘The actual change itself is not hugely significant.

‘Then the question is, why introduce it at all? It’s a wake-up call, maybe, that the Government can take action.’
Source : International Herald Tribune - 20 Jul 2007

DC hike changes market dynamics, mood

DC hike changes market dynamics, mood

Some fence-sitters stirred into action, others wait

A day after the government effectively raised development charge (DC) rates across-the-board by 40 per cent, there seemed to be a shift in the mood and dynamics of the Singapore property market.

Some worried that Wednesday’s surprise move could presage more measures from the government that might impact the market while others were stirred into action as greed gave way to a dose of realism.

Property consultants told BT that owners in estates planning collective sales were busy calling one another yesterday, saying they should stop sitting on the fence and speed up the signing of the collective sale agreement (CSA) before any further measures were announced - instead of waiting for higher and higher prices.

‘There’s caution, more realism in the air today,’ Knight Frank’s managing director Tan Tiong Cheng confirmed.

The hike also made some developments more attractive and others less so - depending on how high their DC component was.

DTZ Debenham Tie Leung director Shaun Poh reckons that developers who wish to continue landbanking may focus on sites with little or no DC component.

Some of these sites are in prime areas - such as Rivershire, The Claymore and Watten Estate Condo - and already have high development baselines.

In contrast, developers are likely to adopt a wait-and-see attitude for sites with significant DC components - say 15 per cent or more of total land value. Wednesday’s hike is likely to add 6 per cent or more to the land cost of these sites. Those affected are likely to include 99-year leasehold properties such as privatised HUDC estates.

One influential developer told BT that while the measure was unlikely to cool the market, it could add to the cost of doing business. For example, if en bloc sellers in prime locations refused to budge, the move could fuel further hikes in the price of luxury homes on such redeveloped sites. The other question hanging in the air was: What next?

‘Basically the question is: Is there going to be another jab from the government?’ said Knight Frank’s Mr Tan.

The announcement could also make the players more realistic in their expectations.

DTZ’s Mr Poh said: ‘Hopefully, this announcement will bring some balance to the property market. Owners can’t just keep pushing up reserve prices higher and higher all the time.’

Agreeing, a seasoned industry player added that developers, too, may become cautious about buying en bloc sales sites and increasingly turn to the Government Land Sales programme. ‘They’ll see how buyers respond to new launches in coming weeks,’ he added.

The Real Estate Developers Association of Singapore has so far not given any reaction to Wednesday’s change.

A City Developments spokesman said: ‘Our preliminary finding is that there will be insignificant impact on our existing projects. However, we will take this increase into consideration for future acquisitions.’

And with the ’second whammy’ on the way on Sept1, when the government is expected to raise DC rates for specific locations and use groups based on market values, it makes more sense for developers to wait for another six weeks for a clearer picture to emerge before making any decisions on such sites.

DTZ’s Mr Poh reckons that in cases where owners controlling the minimum 80 per cent of share values have signed CSAs or where signing is at advanced stages, ‘there’ll be no rolling back’ in terms of lowering prices. Most CSAs give sales committees the power to raise reserve prices, but not to lower them, he explains.

‘But for cases where signing of CSAs has not begun, agents will be discussing price strategies with sales committees, especially if the DC component is big and urge owners to be more realistic as developers’ potential profit margins will be eroded,’ he added.
Source : Business Times - 20 Jul 2007

‘Super luxury’ tower rises in Singapore

‘Super luxury’ tower rises in Singapore

SINGAPORE: The Orchard Residences is being built on superlatives. The building, now under construction on Singapore’s premier shopping street, Orchard Road, is being touted as a “super luxury” 56-story tower.

With 46 residential floors atop a multi-story retail space, the building will top out at 218 meters, or 715 feet. That will make it the tallest building in the neighborhood, towering over the 30-floor Marriott hotel across the street.

And in March, a unit sold for more than 4,000 Singapore dollars, or $2,627, a square foot, the city’s highest price for condominium units in nearly a decade.

The development is a joint venture of two regional property titans: Sun Hung Kai Properties of Hong Kong and CapitaLand of Singapore. Soon Su Lin, chief executive officer of the joint venture company Orchard Turn Developments, attributes the record sale price, at least in part, to the partners’ history of developing world-class properties.

Ninety-eight of the 175 units were snapped up in an invitation-only sale to business partners, associates and referrals. Soon said about half the buyers came from throughout Asia, including Indonesia, Japan, India and Hong Kong. The remaining units are being shown by appointment; prices are not being listed publicly.

Foreign buyers are expected to continue to play a significant role in the high-end market in Singapore, said Chua Yang Liang, head of research for Jones Lang LaSalle real estate here.

“Singapore’s competitiveness in terms of high-end property prices against other global cities of Tokyo, New York, London will continue to be the main factor attracting these foreign buyers,” he said. Top properties in Singapore sold for an average of 2,078 Singapore dollars, or $1,365, a square foot in the first quarter of this year, according to Jones Lange LaSalle.

In contrast, The Straits Times reported, apartments in New York are selling for $4,000 a square foot and London flats for as much as $9,000 a square foot.

Typical three- and four-bedroom units in Orchard Residences will range from 1,800 square feet to 2,800 square feet, with penthouse units from 4,200 square feet to 5,000 square feet.

While the penthouse is usually considered the most luxurious property in a development, it may not be in this building.

“One key feature of our residential development is the recreation of the ultimate private orchard for the exclusive use of our residents,” Soon said, referring to a 75,000-square-foot landscaped garden on the ninth level. It will have mangosteen trees, native to the region, and nutmeg trees, which used to be grown in the area and gave Orchard Road its name. Three garden units, ranging from 4,400 square feet to 6,500 square feet, will have direct access to the area.

Other recreational facilities on that level include a pool, tennis court and a “party house” that residents can rent for private events. On the 30th floor there will be a gym, a meditation deck, a yoga room and other amenities for the residents’ use.

An observation deck will occupy the 55th and 56th floors. The developers say there will be public access to the top two levels, but they are still working out the details.

Residential and retail display suites are scheduled to open in July. The retail space is set for completion by Christmas 2008, with the residential tower to be ready by the end of 2009.

Source : International Herald Tribune - 20 Jul 2007

Tulip Garden sold en bloc for $516m

Tulip Garden sold en bloc for $516m 
THE 164-unit Tulip Garden estate in Farrer Road has been sold en bloc for $516 million, reaping owners anything from $2.5 million to $4.2 million each.
However, the price paid by Bravo Building Construction is below the $633 million - that is $1,250 per sq ft (psf) of potential gross floor area - asked for by the owners when the freehold estate went on sale by tender in late May.

Bravo’s price values the sprawling 316,709 sq ft estate at $1,018 psf and there is no development charge payable. That is still well up on the indicative price of only $900 psf placed on the estate when an expression of interest was called for at the start of the year.

The smallest units are 1,700 sq ft - these owners will get about $2.5 million - while the largest go up to 3,400 sq ft. Owners of these will get $4.2 million. Records show that a 2,659 sq ft unit sold for $3.4 million, or $1,278.7 psf, in June. But late last year, a 2,583 sq ft unit sold for $1.975 million, or $765 psf.

Bravo Building Construction bought Pender Court in West Coast earlier this month for $80 million. Its development projects include the 35-unit Sims Dorado in Geylang.

Tulip Garden is in a hot spot for potential collective sale properties. It is a road away from Leedon Heights, which GuocoLand bought in April for $835 million, or about $1,062 psf. The leasehold Farrer Court, sold en bloc late last month, is a stone’s throw away.
The Straits Times, 20 July 2007

1,000 fires recorded in HDB rubbish chutes last year

1,000 fires recorded in HDB rubbish chutes last year 
Town councils urged to install systems that automatically detect, put out such blazes
By Khushwant Singh 
THERE were about 1,000 fires in HDB rubbish chutes last year, despite a public education programme for residents in blocks prone to such incidents.
Now, the National Fire Prevention Council is urging all town councils to install systems which can automatically detect and put out fires.

These systems - tested last year by the council as part of its fight against chute fires - comprise smoke detectors that are linked to a water sprinkling system to extinguish blazes.

So far, only Jurong Town Council has installed the system in six chutes at Block 546, Jurong West Street 52.

The systems were put in place in April, at a cost of $500 each.

The block has had five cases of refuse chute fires in the past two years, which was above average.
Asked why the system was not in place at other blocks, a town council spokesman said that as it was a trial project and because no fires had occurred since then, the effectiveness of the system could not yet be ascertained.

The 1,000 rubbish chute fires form a large chunk of the total of 4.702 fires reported last year - the second-lowest in two decades - the fire prevention council said at its annual general meeting yesterday.

The lowest was in 2003 when 4,500 fires were reported.

The decline was an indication of the effectiveness of the council in promoting fire safety awareness, said the chairman of its board of directors, Mr Shaw Vee King.

Also yesterday, the council announced that it would take on a new task: helping people here to be prepared for other emergencies.

And after 21 years, it now has a new name - the National Fire and Civil Emergency Preparedness Council (NFEC).

The organisation’s new moniker and logo were unveiled at the meeting yesterday, which was held at the Grand Hyatt Hotel.

Mr Shaw, 63, said that terror attacks in other countries have highlighted the importance of preparing the community for emergencies and building resilience.

The NFEC yesterday also said that its mass fire evacuation drill is becoming more popular.

It had to be extended from two weeks in 2005 to a month last year because more companies wanted to take part.
The Straits Times, 20 July 2007