Hong Kong property market gets hotter

Hong Kong property market gets hotter
Properties in HK$50m-HK$100m range particularly popular now
By JANE MOIR
IN HONG KONG
LUXURY rents in Hong Kong are soaring to new highs, with monthly payments hitting as much as HK$500,000 (S$97,000), as demand from financial services professionals shows no sign of abating.
The peak: Luxury rents in Hong Kong are soaring to new highs, with monthly rents hitting as much as HK$500,000 
Prime residential sites on the Peak and the south side of the island are being leased for up to HK$500,000 a month, with the luxury sector already up around 10 per cent in the first six months of the year.

According to property experts, there is still more room for growth this year as supply remains tight and professionals in the financial services industry with very large budgets continue to flood into the city.

As Ricky Poon, a director at Colliers International, explains, it used to be that the top-priced properties were standalone houses on individual plots.

However, today, houses that are part of a larger complex of properties are able to hit the HK$500,000 range. ‘It’s lack of supply,’ Mr Poon says. ‘If you want something very grand and super luxurious - and a house - there’s no supply at all.’

Developers have been fast to buy up land on the Peak over the years and they place up to five or six individual houses on the plot, rather than just one mega structure. ‘They can call this a single number plot, but it still has five houses on the lot … but these are still very expensive houses,’ adds Mr Poon.

The property firm is forecasting a rise in rents of 10 to 15 per cent this year as a whole. There’s also a lot of expatriates coming to Hong Kong, ’so we are seeing a lot more demand’, he stresses.

Summer is traditionally the busiest time for luxury leasing in Hong Kong as families move to the city in time for the new school year starting in September.

The issue of school places, however, still remains a thorny one for policy-makers, as international supply is tight and families are forced to put their children on waiting lists.

There have also been reports of million-dollar dividends being paid to secure a place as Hong Kong struggles with its supply of international school places. The options for families are either to enrol their child in a private school, or secure a place at the English Schools Foundation, which is subsidised by the government.

In the past year in particular, as more expatriates come to the city, places have become scant.

Office rents in the city are likewise still on a roll: the iconic International Finance Centre 2, which started leasing at the height of Sars in 2003 at just HK$25-35 per square foot, is now fetching rents of more than HK$100 per square foot.

Luxury sales are still rising, with properties in the HK$50 million to HK$100 million range particularly popular at the moment. ‘We’re still seeing a lot of buyers out there who like a good location and get these properties for their own use,’ Mr Poon explains.

In terms of the mass residential sector, the market is slowly improving but still remains up to 30 per cent off the prices in 1997, when the property sector as a whole last saw its major high.

According to the Land Registry of Hong Kong, property transactions in July were valued at a total of HK$38 billion, up 118.8 per cent from a year earlier but still down 3.4 per cent from June.

The number of transactions was up 67 per cent from a year earlier at 11,121, but down 7.2 per cent on June’s figure. Of the 11,121 sale and purchase agreements in July, 9,188 were for residential units - a drop of 4.8 per cent compared with June, but a rise of 70.2 per cent over the past 12 months.
Source : Business Times - 04 Aug 2007

SLA rents out more state properties

SLA rents out more state properties

By HAN MIN CHUNG
AS part of its efforts to increase the supply of office space, the Singapore Land Authority (SLA) said it has awarded the tender for three state properties to be rented out.
The property at 3 Shan Road, formerly Moulmein Community Centre, has been awarded to Phillip Securities Pte Ltd, which won the bid at $35,000 a month. Phillip is planning to set up an investor centre at the site. The tenancy is for three years and renewable on terms up to 2016.

The former CPIB building at Cantonment Road is awarded to Bravo Building Construction Pte Ltd, which put in the highest bid price of $91,731 a month.

The property development firm plans to spend $3 million to refurbish the property and transform it into an environmentally friendly building. It will also allow those with physical disabilities to get around more easily.

The SLA also awarded another former government building in Pearl’s Hill Terrace. What used to be the former CID Training Centre will be leased to Hean Nerng Warehousing Pte Ltd at $5,300 monthly.

Since the beginning of this year, the SLA has pushed out 13 properties for office use only.

The latest award brings the total estimated gross floor area for office use added by SLA this year to about 90,000 sq m.
More office space will be added over the next few months as more state properties are being offered. They include the property at 169 Sims Avenue, former Pei Chun Public School in Lorong 6 Toa Payoh; former ITE Balestier and Kim Keat Camp in Jalan Rajah, and the former Haig Boys’ School in Mountbatten Road.

Tenders have opened for the first and second properties. The tenders for the other separate sites are being evaluated.

SLA director of land operations Simon Ong said: ‘Financial institutions should find our state properties suitable for their needs as they are well-located, of the right size, easily adaptable and most importantly, at relatively affordable rentals.’
Source : Business Times - 04 Aug 2007

MAS monitoring US sub-prime impact on finance institutions in Singapore

MAS monitoring US sub-prime impact on finance institutions in Singapore
Exposure of local banks to CDOs said to be very low
By SIOW LI SEN
(SINGAPORE) The Monetary Authority of Singapore (MAS) says it is monitoring the impact of the US sub-prime mortgage market on local financial institutions.
‘MAS has been monitoring the development of the US sub-prime market and the financial institutions’ exposure to this sector as part of our market surveillance process. The institutions invest in a wide variety of instruments, including CDOs (collateralised debt obligations),’ MAS said.

CDOs - which are securities backed by loans and asset-backed bonds to earn higher returns - have been popular with the asset management arms and investment units of OCBC-owned Lion Capital and UOBAM, the asset arm of United Overseas Bank.

While many of these investments might be sound, a few could have some exposure to the sub-prime market.

As at Dec 31, 2006, Lion Capital (which is owned by two subsidiaries of OCBC, including its insurance company Great Eastern) had $7.7 billion in structured credits/CDOs or 24 per cent of total assets under management (AUM) of $32.2 billion.

UOBAM had US$7.7 billion or S$12 billion of CDOs under management, or about 50 per cent of its total AUM.

A recent report by Credit Suisse had said that the exposure of local banks to CDOs was extremely small.
 
A lot of insurance companies have been investing in high-yielding CDOs because returns on bonds have been low. American International Group, the world’s biggest insurer, may be sitting on losses of as much as US$2.3 billion from securities backed by sub-prime mortgages, estimated analysts in a Thursday report.

MAS added: ‘The choice and size of investments are based on the institution’s own investment policy, risk management process and risk appetite. They also have access to a wide range of hedging instruments to help them manage these positions. All financial institutions should factor in the current environment into their regular stress testing and take appropriate actions if they deem necessary.’

Yesterday, DBS said it has US$187 million of investments in securities linked to asset-backed debt, some of which are at risk from defaults in the US mortgage market.

The bank said 22 per cent of the US$850 million it has in collateralised debt and loan obligations are based on asset-backed securities. These have ‘various exposures’ to US sub-prime housing loans, it said in a statement.

‘The expected mark-to-market impact is not material to our capital position,’ said DBS. ‘We are comfortable with our investment portfolio and will continue to monitor the markets closely.’

Prices for CDOs - which repackage bonds, loans and derivatives into securities - have tumbled as rising defaults on home loans to buyers with poor credit decrease investor appetite for risk.

DBS said its entire portfolio of CDOs and CLOs (collateralised loan obligations) is rated investment-grade, with 15 per cent having the highest rating of AAA, 30 per cent with AA, and 55 per cent rated A.

UOB and OCBC did not comment on the CDOs invested by their asset management arm.

Fundsupermart general manager Wong Sui Jau said that he expects the banks to sell their structured products and CDO funds to institutional investors or through their private banking arms to high net worth investors.

He was confident that retail investors have little exposure to CDOs through unit trusts because the majority are into equity funds.

‘The majority of retail funds are equity funds,’ said Mr Wong, taking Fundsupermart’s customers as an example of investors’ choice.

Fundsupermart had $2.9 billion of assets under administration as at June 30.

The direct retailing arm accounts for $751 million in assets. Of these, only 3.4 per cent are in fixed-income funds (bond funds). ‘And out of these, I think most are into Singapore bond funds and global bond funds,’ said Mr Wong.

‘Global bond funds mostly would not hold any CDOs. Even if they did, the amount would be small,’ he said.

As for US high-yield fixed income, which may include CDOs, total sales of this type of fund through Fundsupermart since it started in 2000 amounted to $16.9 million.

And the only way an investor would know is to ask the fund manager.

Some bond funds have a very wide mandate to invest in a diversified portfolio of bonds, and a fund manager aiming to maximise return could try to have a small investment in higher-yielding debt. That’s when CDOs might be considered, said Mr Wong.

Source : Business Times - 04 Aug 2007

Forecast for ‘07 construction demand raised to $19b-$22b

Forecast for ‘07 construction demand raised to $19b-$22b

By ARTHUR SIM
(SINGAPORE) Construction demand continues apace, resulting in Building and Construction Authority (BCA) revising its forecast for construction demand for 2007. It now expects building contracts to reach between $19 billion and $22 billion in value, up about $3 billion from its earlier estimate of between $17 billion and $19 billion.
 
Ms Fu: Sunny forecast offers both opportunities and challenges for sector 
In a press statement released yesterday, BCA also said that for the first five months this year, construction demand reached about $7.6 billion in terms of contracts awarded.

It also said that the upward revision in construction demand could be attributed to the rise in residential and commercial demand stemming from the current property boom as well as higher construction costs.

Making reference to the revised figures last night, Minister of State for National Development Grace Fu added: ‘This buoyant outlook offers both opportunities and challenges for the building sector.’

Speaking at the anniversary dinner of the Singapore Institute of Valuers and Surveyors (SISV) last night, Ms Fu also emphasised the need for sustainable development.

In March, Ms Fu announced that the government was considering amending the Building Control Act to impose minimum requirements on environmental sustainability that are equivalent to BCA’s Green Mark certified standards for new buildings and existing ones that undergo major retrofitting.

Last night, Ms Fu added that this initiative was making progress. She said: ‘BCA has started consulting the industry players, including SISV, on the proposed legislative requirements.’

Ms Fu also reiterated that the government is aiming to reduce the reliance on sand and granite by 30 to 50 per cent over the next five years and that SISV members can play a key role in influencing consumption or construction materials and methods.

The private sector will, however, have a larger role to play.

According to BCA, of the forecast construction contracts to be awarded this year, private sector construction is expected to make up about 70 per cent of the demand.

Some major projects that are due to be awarded later this year include the Khoo Teck Puat Hospital in Yishun, construction parcels for the two Integrated Resorts, the redevelopment of Ocean Building and some private residential developments, including Reflections at Keppel Bay, a condo at Quayside Collection, Sentosa and The Seafront On Meyer condo.
Source : Business Times - 04 Aug 2007

STB rejects Horizon en bloc sale

STB rejects Horizon en bloc sale
Without going into details, the board says that statutory requirements had not been met
By MICHELLE QUAH

(SINGAPORE) Jubilant minority owners of Horizon Towers hugged and congratulated one another in court yesterday after the Strata Titles Board (STB) threw out the en bloc sale of the Leonie hill property on a technicality.
 
 
‘While some have made the issue out to be one about money, to some others it’s more than that - my clients are now very happy that they can keep their homes,’ said Philip Fong of Harry Elias Partnership, who represented a group of minorities.

But not everyone is pleased. The buyers of Horizon Towers - Hotel Properties Limited (HPL), Morgan Stanley Real Estate and Qatar Investment Authority - are considering their next move, which could include legal action against the sellers and the sales committee of Horizon Towers.

HPL said last night that it is ‘considering STB’s decision and reserves all its rights, including its rights against the subsidiary proprietors of the property who signed the collective sale agreement and the sales committee of the property’. It said that it would make further announcements if and when there are material developments.

HPL was represented by Senior Counsel K Shanmugam and William Ong of Allen & Gledhill.

HPL’s stock fell 20 cents to close at $4.68 yesterday.

STB’s rejection of the sale was unexpected - as was its brief, two-line judgment delivered after lunch yesterday.
Lawyers for the parties, who had spent a week putting their arguments to the board, told BT that they were taken aback when STB announced abruptly that it had decided to reject the application for a collective sale order because ’statutory requirements’ had not been met.

STB did not say what these requirements were. And attempts by BT to contact STB and the sellers’ representative, Senior Counsel Jimmy Yim of Drew & Napier, were unsuccessful.

But BT understands that the application for a collective sale order may have been rejected because insufficient notices were posted and some documents were not filed.

STB’s decision could have been prompted by arguments put by Senior Counsel Michael Hwang, representing a minority owner.

Mr Hwang said that his client objected to the collective sale because the application for the sale order did not comply with provisions in the Land Titles (Strata) Act, which governs collective sales in Singapore.

Legally, if an application to STB does not comply with requirements laid out in the Act, the board does not have the jurisdiction to grant an order, even if there are no objectors.

Some 84 per cent of Horizon Towers owners backed the collective sale - more than the 80 per cent requirement - but STB’s approval was still needed for the deal to go through.

STB’s decision yesterday to dismiss the application means that the en bloc sale of the property is effectively off. While the sellers have the right to appeal against the board’s decision, the lengthy process involved means that the deal is unlikely to be sealed by the Aug 11 deadline for the sale.

This could now pave the way for Horizon Towers to be sold at a higher price, thanks to the recent property boom.

The two-block development was pledged to be sold en bloc for $500 million in February. The price reflects a unit land price of $810 to $820 per square foot per plot ration (psf ppr), including a premium to top up the lease to 99 years from the remaining term of about 71 years.

If later collective sales are anything to go by, Horizon Towers could fetch a higher price. The development next door, The Grangeford, was pledged for sale in June to Overseas Union Enterprise for $625 million or about $1,820 psf ppr, including a premium to top up the lease.

That is the highest collective sale price paid for a 99-year leasehold property on a psf basis - and part of the reason for the Horizon Towers saga.

Horizon Towers’ majority owners, after signing off on the deal, became unhappy with the significantly lower price they were to receive.
 
Source : Business Times - 04 Aug 2007

Another big US home lender collapses as turmoil spreads

Another big US home lender collapses as turmoil spreads 
NEW YORK - IN A sudden move, American Home Mortgage Investment halted operations yesterday, becoming the second-biggest United States residential lender to fail this year.
Its collapse shows how problems in the US mortgage market are broadening.

Credit quality issues are beginning to affect lenders focused on borrowers with decent credit, as opposed to sub- prime borrowers thought to be posing greater risks.

While New York- based American Home focused on borrowers considered good credit risks, it made many loans to people who could not document income or assets.

‘Bankruptcy is the next logical step,’ said Mr Steve DeLaney, an analyst at JMP Securities in Atlanta.

American Home said investment bankers cut off credit earlier this week, leaving the company unable to fund at least US$750 million (S$1.13 billion) worth of mortgages promised to thousands of now-stranded borrowers.

‘Conditions in both the secondary mortgage market and the national real estate market have deteriorated to the point that our business is no longer viable,’ Mr Michael Strauss, American Home’s chief executive, said on Thursday in an e-mail to his staff.

American Home’s stock has dropped more than 95 per cent this year.

Dozens of mortgage lenders have shut their doors or tightened loan standards, as housing prices slumped, borrowing costs rose, and delinquencies and defaults soared.

New Century, the biggest independent US sub-prime lender, filed for bankruptcy in April.

Other lenders that emphasised higher-quality loans have also been challenged in the current downturn, including the largest, Countrywide Financial.

Countrywide, which has seen more problem loans among its more creditworthy customers, on Thursday issued an unusual statement saying its financial condition is ’strong’, and that it has nearly US$50 billion of ‘highly reliable’ short- term funding liquidity.

American Home offered many ‘Alt-A’ mortgages, which fall between prime and sub-prime in quality, as well as adjustable-rate loans.

Founded in 1987, the company said it had, by last year, become the 10th largest US retail mortgage lender.

Last year, it made almost US$60 billion in loans, making up about 2 per cent of the US residential market. Countrywide had a 16 per cent share.

REUTERS, BLOOMBERG NEWS
Source : Straits Times - 04 Aug 2007

4 hotels show why it pays to go green

4 hotels show why it pays to go green 
By Jessica Cheam 
VISITORS to Singapore can now choose to stay at a new breed of eco-friendly hotels that have won the green stamp of approval.
The Regent Singapore, Shangri- La, InterContinental and Changi Village Hotel were crowned with Energy Smart labels by the National Environment Agency (NEA) yesterday for their efforts in cutting energy usage.

This initiative, developed by the NEA and the National University of Singapore’s Energy Sustainability Unit (ESU), recognises the best-performing hotels.

Behind the recognition, however, lies another motivation. The truth is, being green makes money.

With oil prices close to US$80 per barrel - and the energy-intensive hotel industry set for massive growth - raising efficiency is more crucial than ever, said Senior Parliamentary Secretary (Environment and Water Resources) Amy Khor.

The Regent has proved this, achieving annual savings of $500,000 after an energy audit, said its director of engineering, Mr Lee Baharrudin.

The new scheme, which was launched yesterday, comes two years after a similar one was started for office buildings.

Hoteliers, like office block owners, can access www.esu.com.sg to get an assessment of their buildings’ performance.

It is then compared against a benchmark developed from a detailed survey sample of 30 hotels, said Associate Professor Lee Siew Eang, head of the ESU.

‘The industry will not make a quantum leap to become green overnight but at least we can start now,’ he said.

At a separate Singapore Institute of Surveyors and Valuers dinner last night, the Minister of State for National Development, Ms Grace Fu, called on the building sector to play its part in pushing for sustainable development.

The construction boom ‘represents an opportunity for the industry to develop a niche expertise’ in the field, she said.

Dr Khor said the labelling scheme will be extended to other building types such as shopping malls, hospitals and schools.
 
 
Source : Straits Times - 04 Aug 2007

Peter Kwee to build 200-room hotel on Laguna club grounds

Peter Kwee to build 200-room hotel on Laguna club grounds 
To be ready by 2010, the $90m project will be first hotel on golf course here
By Christopher Tan, Senior Correspondent 
GOOD TIMING: Mr Kwee’s project is well-placed to ride on the tourist boom resulting from the opening of the integrated resorts by 2010. — BT FILE PHOTO
 
ENTREPRENEUR Peter Kwee, known for his cars and country clubs, will build a 200-room hotel on the grounds of his Laguna National Golf & Country Club.
The project, estimated to cost $90million, is expected to be completed by 2010. It will be the first hotel on a golf course in Singapore.

Mr Kwee, 60, told The Straits Times that regulatory approval has been granted, adding that the design, plan approval and tender process will take around nine months. Construction will take about two years.

The hotel’s 2010 opening should leave it well-placed to cash in on the tourism boom that the integrated resorts are expected to herald.

Mr Kwee has not decided on the class of hotel. ‘The money is in three- and four-star hotels, but the prestige is in five- and six-star ones,’ he said.

But he is clear about other concepts he wants for the hotel, which will be his first in Singapore. He owns one hotel in Perth, Western Australia.

Mr Kwee said the Laguna hotel will be tied to the club membership and construction will coincide with a revamp of the golf course and its facilities, containing 16 rooms mainly to accommodate overseas players.

He has not decided whether Laguna will run the hotel but is in talks with a Japanese hotel management company.

He has also won approval to rebuild a Nassim Road site that may be used for a five-storey townhouse with a basement carpark and a swimming pool. This project will cost $120 million.

The real estate boom, with top-end apartments breaching $4,000 per sq ft and landed property crossing the $1,000 psf barrier, is good news to Mr Kwee. His land holdings stand at around 200,000 sq ft, all in the prime districts.

Barely three years ago, the Indonesian-born businessman had tongues wagging when he relinquished some properties, sports cars and two motor franchises.

Asked how much his net worth has increased with the boom, Mr Kwee said: ‘It does not matter whether my properties have gone up by $10 million to $20 million. I can eat only three meals a day.’
Source : Straits Times - 04 Aug 2007

Building regulator raises construction forecast for 2007

Building regulator raises construction forecast for 2007 
By Chua Hian Hou 

TAKING into account Singapore’s ongoing property boom, the Building and Construction Authority (BCA) has revised upward its construction demand forecast for the year.
Demand this year is expected to range between $19 billion and $22 billion, up from the $17 billion to $19 billion the BCA forecast in January. Demand reached $15.1 billion last year.

The BCA, the industry regulator, generates an annual construction demand forecast by polling private and public sector organisations about their development plans for the year, with the results released in January.

It recently did another study to check if its original forecast was still accurate and found that it had fallen short because of a ‘rise in residential and commercial demand due to the current property boom’.

A jump in construction costs also played a part in the BCA’s higher forecast.

The report estimated the private sector drives 70 per cent of the construction being done here, with projects involving office buildings and condominiums.

The rest comes from the public sector, with projects involving HDB flats and MRT tunnels.

In the first five months of the year alone, the agency said, construction demand had already hit $7.6 billion in terms of projects awarded.

Some projects now under way include the Marina Bay Financial Centre, various condominiums and foundation works for the Marina Bay Sands integrated resort.

Major projects that are expected to be awarded later this year include the Khoo Teck Puat Hospital in Yishun and condominiums like Reflections at Keppel Bay.
 
Source : Straits Times - 04 Aug 2007

Market flat on worries over credit crunch in US

Market flat on worries over credit crunch in US 
Volume shrinks to two-month low as trading steadies after volatile start to week
By Goh Eng Yeow, Markets Correspondent 
SINGAPORE shares made a brave bid to get off the canvas yesterday but ongoing jitters over the credit crunch engulfing international financial markets wiped out their early gains.
Yet, there was a sense of relief among dealers after the Straits Times Index greeted the end of the trading week with a gain, however measly, of just 0.58 of a point to 3,436.04.

Many had headed off for long lunches or packed up and gone home early, drawing little comfort from Wall Street’s late rebound overnight.

This was reflected in the trading volume, down from Thursday’s 3.09 billion shares worth $2.8 billion to 2.54 billion shares worth $2.8 billion yesterday - the lowest in two months.

‘We had an eventful week, experiencing bungee jumping with share prices and chasing after clients to pay up contra losses. Thank God it’s Friday and it’s all over,’ said a remisier.

But the relief felt by traders might be short-lived.

The lacklustre July jobs data in the United States, released late last night (Singapore time) may just sour investors’ appetite for stocks when trading re opens on Monday.

Singapore’s lack of direction was mirrored elsewhere in the region. Hong Kong’s Hang Seng Index was up 0.4 per cent, Tokyo’s Nikkei 225 Stock Average edged down a marginal 0.03 per cent, while Malaysia’s Kuala Lumpur Composite Index rose 0.16 per cent. The only exception was the domestically-driven Shanghai market, which shot to a record high with a gain of 3.5 per cent.

The big talking point among traders is the continuing fallout from the market in US sub-prime loans, which are given to borrowers with a shaky credit history.

Jitters over bank exposure sent United Overseas Bank’s share price tumbling 70 cents to $21, while DBS Group Holdings’ stock fell 50 cents to $21.90.

Among property counters, Hotel Properties fell 20 cents to $4.68 on a volume of 1.83 million shares, after the Strata Titles Board yesterday revoked the $500 million sale of Horizon Towers to the company.

But battered penny stocks regained their composure after two days of heavy selldown, with the UOB Sesdaq Index up 4.26 points, or 1.72 per cent, to 251.68.

‘There is a wave of short-covering by traders, which propelled some penny stocks sharply higher. And the flood of forced selling, which caused prices to tumble in the past two days, is largely over,’ said a trader.

Construction counters, which had been badly battered in the past few weeks, were among the big gainers yesterday.

Yongnam rose 4.5 cents to 44 cents, with 68.8 million shares changing hands, the second-most actively traded stock. CSC Holdings gained 2.5 cents to 35 cents on 30.11 million shares traded.

The stock of Midas Holdings, which makes aluminium products for rail transportation in China, rose 21 cents to $1.41 as 24 million shares changed hands.
Source : Straits Times - 04 Aug 2007