S’pore Real Estate seen as top buy in Asia-Pac

S’pore Real Estate seen as top buy in Asia-Pac

Sentiment strongest in rental apartment, office, hotel/resort, retail sectors: survey
By KALPANA RASHIWALA

SHANGHAI, Singapore and Tokyo have emerged as the top three most promising Asia-Pacific cities for real estate investment prospects, according to a report from the US-based Urban Land Institute (ULI) and the accountancy firm PricewaterhouseCoopers (PwC).

‘Sentiment was strong among survey participants to either buy or hold all types of properties in Shanghai, Singapore and Tokyo, rather than sell properties, illustrating the cities’ strong popularity with the investment community,’ a news release by PwC and ULI said.

For Singapore, the strongest sentiment for buying property was in the rental apartment sector, followed by the office, hotel/ resort, retail and indus- trial/distribution property.

The report, Emerging Trends in Real Estate Asia Pacific 2008, is the second annual investor survey from ULI and PwC. It shows that Singapore has jumped from fourth to second placing for investment prospect rankings, and from ninth to third spot for development rankings. Singapore is ranked first for city risk ratings.

One respondent in the survey said Singapore was ‘certainly one of the markets in the area that provides a very stable legal and tax environment, and property rights that are beyond question. And it therefore is certainly one of the markets where many, especially Westerners, are very comfortable.’

The report was based on interviews and surveys with more than 190 professionals, including investors, developers, property company representatives, lenders, brokers and consultants.

The survey covered 20 cities. Shanghai was in the top position in the latest 2008 investment prospect ranking, up from second spot in the earlier ranking. Tokyo maintained its third position, while Osaka, which was first in the 2007 ranking, moved down to fourth position. Hong Kong was ranked fifth in the latest survey, moving up six positions.

While Singapore moved from fourth to second spot in investment prospect, sell recommendations increased for office, retail, and hotel/resort from 0 per cent in the 2007 report issued last year to 19 per cent, 13 per cent and 13 per cent respectively in the latest 2008 report.

Buy recommendations for industrial/distribution property increased from 35 per cent to 44 per cent.

The 2008 survey also shows that the growing Asia-Pacific real estate market still offers opportunities for investors and developers next year. Asia-Pac real estate executives’ response remains strong on overall economic and market fundamentals, regardless of interest rate increases.

High levels of equity capital continue to pour into the Asia-Pacific property pool. For 2008, the hotels sector tops the list of real estate performance prospects, followed by the office sector.

PwC’s tax partner in Singapore, David Sandison, said: ‘It’s expected that even greater amounts of capital will be flooding Asia Pacific real estate markets in 2008. The real challenge for investors will lie in finding the right assets against the backdrop of yield compression and scrutiny by regional governments and tax authorities.’

The strongest sentiment for buying in Singapore was for rental apartments, with about 53 per cent of respondents recommending a buy, 34 per cent hold and 13 per cent sell.

For office space, 52 per cent advised buying, 29 per cent hold and 19 per cent sell.

The survey also showed that 48.5 per cent recommended buying hotel & resort property, 38 per cent advised holding, and 13 per cent, selling. For retail property, 45 per cent advised buying, 41 per cent holding and 13 per cent selling.

In the industrial/distri- bution sector, about 44 per cent of respondents recommended buying, 42 per cent holding and 14 per cent, selling.

ULI is a global education and research institute championing responsible leadership in land use to enhance the total environment.

Source : Business Times - 28 sept 2007

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Mindy Yong
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mindy@mindyyong.com
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Ho Bee sells 20 units of Singapore Sentosa Cove condo

Ho Bee sells 20 units of Singapore Sentosa Cove condo

Turquoise goes on sale with prices ranging from $2,400 to $2,700 psf
By KALPANA RASHIWALA
HO BEE Investment has begun selling units at its Turquoise condo at Sentosa Cove at prices ranging from around $2,400 to $2,700 psf.

King’s 8: One of the eight freehold strata bungalows with strata areas of 4,898 to 5,414 sq ft at King’s Road that DTZ is marketing this weekend
Apartments cost around $5.3 million for a typical three-bedroom unit and about $6.4 million for a typical four-bedroom unit.

The listed developer sold about 20 of the 30 units that it released yesterday in the project, which comprises only 91 units in total.

Ho Bee seems to be in no hurry to sell out the 99-year leasehold project, given the increasing scarcity of new project launches on Sentosa Cove, market watchers say.

Three bedders in the development have an average size of about 2,100 sq ft, and four-bedders about 2,500 sq ft. Turquoise also has a variety of penthouse sizes - three bedders, four bedders (both of these come with their own jacuzzis), and three sky villas ranging from 6,900 to 7,900 sq ft and each with its own swimming pool.

Ho Bee is developing the six-and-a-half storey project on Sentosa Cove’s Waterfront Collection site, which is flanked by Tanjong Golf Course and waterways.

Over at King’s Road in the Bukit Timah area, DTZ Debenham Tie Leung is marketing this weekend King’s 8, comprising eight freehold strata bungalows. The strata areas of the units range from 4,898 sq ft to 5,414 sq ft, and are priced between $4.67 million and $4.98 million. The bungalows have two storeys plus an attic, basement, a private pool and two private carpark lots. King’s 8 is being developed by Longitude Central.

Over at Jansen Road, Fragrance Land is holding a soft launch for 12 strata terrace houses. Prices of the 999-year leasehold development range from $830 to $850 psf of strata area.

And at the prime Scotts Road, Wheelock Properties (Singapore) begins today the official launch of Scotts Square, releasing a limited number of units. During a preview of the project in July, it sold about half of the 338 apartments, at an average price of $3,983 psf.

Source : Business Times - 28 sept 2007

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Mindy Yong
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mindy@mindyyong.com
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Singapore Collective sale site flipped for 100% profit

Singapore Collective sale site flipped for 100% profit

Bought for $73m one year back, Emerald Mansion site sold for $148m

By KALPANA RASHIWALA

(SINGAPORE) The Cheong family, which bought Emerald Mansion through a collective sale last year for $73 million or $931 psf per plot ratio, recently sold the District 9 freehold property for double that amount, or around $148 million or $1,888 psf ppr, sources say.

Emerald Mansion: The $1,888 psf ppr price is a new high for the Cairnhill area, surpassing the $1,788 psf ppr that Char Yong Gardens fetched in June this year
The unit land price of $1,888 psf ppr is a new high for residential land in the Cairnhill area, surpassing the $1,788 psf ppr that Char Yong Gardens fetched in June this year.

BT understands that the new buyer of Emerald Mansion is a joint venture comprising a property fund managed by LaSalle Investment Management, and a local contractor - with the latter taking a minority stake.

No development charge is payable for the 29,810 sq ft site, which can be redeveloped up to its current gross floor area of 78,401 sq ft, which reflects a plot ratio of about 2.63. This is higher than the 2.1 plot ratio indicated for the site under Master Plan 2003.

BT understands that the original collective sale to the Cheong family - which has a substantial stake in International Plaza at Anson Road and is related to SC Global chairman and CEO Simon Cheong - was completed just a few months ago.

DTZ Debenham Tie Leung is believed to have brokered the latest sale of Emerald Mansion to the LaSalle Investment Management fund. DTZ declined to comment on the deal.

Based on LaSalle Investment Management’s $1,888 psf ppr acquisition cost of Emerald Mansion, the breakeven cost for a new apartment development on the site could be about $2,400 psf, according to market watchers. The site can be developed into around 55 apartments averaging 1,500 sq ft.

The developer of a project on the Emerald Lodge site next door is said to be eyeing an average price of about $3,000 psf in an upcoming launch.

Last month, LaSalle Investment Management clinched a 99-year leasehold commercial plot next to International Plaza at a state tender. Its winning bid of $237.2 million reflects a unit land price of $941 psf ppr.

The real estate money management firm, which is part of the Jones Lang LaSalle group, bid on behalf of its LaSalle Asia Opportunity III Fund, and is planning a 20-storey office development with about 200,000 sq ft net lettable area.
Source : Business Times - 28 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
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mindy@mindyyong.com
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Singapore Marina rising - and its prices follow suit

Marina rising - and its prices follow suit

SUTL’s One°15 banks on rising affluence and the IR effect to keep afloat
By VEN SREENIVASAN
AND CONRAD RAJ
(SINGAPORE) Asia’s most luxurious and modern marina will officially open tomorrow and, in keeping with the sudden rush of demand for the high life, it will raise its membership prices for the eighth time.

Ready to set sail: ‘This will become one of the world’s most well-integrated waterfront lifestyle communities,’ said Mr Tay, who has invested about $75 million into the facility which sits on a 30-year leased site.
Nestled within the Sentosa Cove enclave with a range of private members club facilities, One°15 Marina has been steadily attracting the well-heeled not just from Singapore, but around the world to join up as members.

Currently, some 60 per cent of its 2,800 members are Singaporeans or residents, while the rest are expatriates and other foreigners, some coming from as far as Spain and the US.

And with demand picking up steadily since its launch in April 2005, One°15 Marina will be raising its membership price to $43,888 from tomorrow - compared to $38,888 now. This is a far cry from the initial launch price of $23,888 for an individual transferable membership.

And with membership capped at 4,000, Arthur Tay, the 50-year-old businessman and founder of One°15 Marina Club, expects to gradually hike up the joining fee to $60,888 by the time the integrated resorts are fully operational. Meanwhile, the club is also looking at term memberships to accommodate ocean-lovers who may be here only for a few years.
‘We already have 204 completed berths, and will have 270 berths when fully completed, including 10 berths for mega yachts of up to 220 feet in length.’

‘This will become one of the world’s most well-integrated waterfront lifestyle communities,’ said Mr Tay, who has invested about $75 million into the facility which sits on a 30-year leased site.

‘We already have 204 completed berths, and will have 270 berths when fully completed, including 10 berths for mega yachts of up to 220 feet in length.’

Mega yachts are fully fitted luxury super vessels of over 80 feet in length which cruise the world’s oceans with their high net worth owners. There are some 7,000 of these around the world worth some US$107 billion, mostly in Europe and the United States.

Asian are said at present to own less than 100, with about 10 owned by Singaporeans and Singapore residents. But this is expected to grow rapidly in tandem with the changing wealth demographics. The club also has several boats for rent, including four houseboats which provide accommodation.

Mr Tay feels that Singaporeans should get off their bottoms and move on to see how their little island is rapidly transforming into the Monaco of the east.

Sitting in the luxurious living room of his $22 million, 116-foot mega yacht Hye Seas II (named partly after his father), Mr Tay feels that, with growing affluence, Singaporeans are increasingly demanding better cars, more expensive watches, bigger homes - and classier marinas.

Spread over some 14.2 hectares of water and 1.7 hectares of land, One°15 - built by Mr Tay’s SUTL Group of companies and named after its strategic location of one degree, 15 minutes north of the Equator in nautical terms - seems to fit the bill.

Cash is not a problem. The club is already raking in some $1 million in revenue each month from its services, including not only food and beverage but other services being provided to yacht owners like bunkering. And when it reaches its targeted membership of 4,000, it would have taken in more than $140 million from entrance fees alone.

Mr Tay is unfazed by the fact that the only two other major privately-owned marinas in Singapore have not enjoyed much success. Almost two years ago, NATSTEEL-owned Raffles Marina revealed that it was not in a position to redeem $27.7 million worth of unsecured notes it owed 1,701 members. With a loss of $32 million in 2004, and liabilities exceeding assets by $30.4 million, it was forced to restructure by getting members to swap their debentures for equity and a second membership. This came on the heels of the collapse of Ponggol Marina under debt of some $18 million, leaving its members losing millions of dollars more.

So why should One°15 Marina work?

‘Marinas are not new in this part of the world, but it is a shame they’ve gone to sleep in Singapore,’ Mr Tay said. ‘Today, Singapore is a medical hub, financial hub and a tourism hotspot. As its people become more affluent, their lifestyle demands and expectations will also rise,’ he added.

Mr Tay also does not discount taking the holding company public one of these days. ‘We need to do this only when we need capital for expansion, whether here or elsewhere.’

The company is already talking to the government about opening up marinas on some of the other islands around Singapore.

At the same time it is looking overseas, especially Vietnam. ‘There are also some other marinas in the region asking us to manage their properties, or look at some other form of collaboration,’ said Mr Tay.
Source : Business Times - 28 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
(+65)91002985
mindy@mindyyong.com
http://www.hotvictory.com

Mass market on the rebound of property

Mass market on the rebound of property

The outlook for this sector is bright, riding on strong demand fundamentals, says CHIA SIEW CHUIN

PRICES of mass market residential property are finally seeing a clear uptrend, as reflected in the latest Urban Redevelopment Authority’s (URA) statistics. Non-landed residential properties sited outside the central region (OCR) - where most suburban mass market properties are located - enjoyed a price rise of 7.2 per cent in Q2 2007. This trumped the 2 per cent rise in Q1 2007. It was the highest quarterly gain since the market bottomed in Q2 2004, and indicates that confidence in the high-end residential property market has filtered down to the mass market.

Upswing seen across all locations and projects

Based on caveats lodged, the upswing in prices of mass market developments occurred across most suburban locations, although to different degrees. (See Table 1) The steepest price rise was seen in District 5. Median prices in this district rose by some 46 per cent from the low point in Q3 2005 to Q2 this year. This was followed closely by District 22, with a 42 per cent price rise. District 21 saw a 41 per cent gain in median prices. District 18 had a slower recovery. As of Q2 2007, median prices of mass market projects in the east picked up by 13 per cent from its trough in Q4 2006. A similar trend was observed in district 27, where the median price of private homes registered an increase of 16 per cent between Q1 2007 (the district’s record low) and Q2 2007.

The upswing is also more pronounced in larger and newer projects, which boast comprehensive facilities, as well as in those close to MRT stations and amenities.

One example is Kovan Melody, located next to the Kovan MRT station in District 19. Median prices there rose by 16 per cent, from $520 per sq ft when it was launched in 2004 to $605 psf in Q2 2007. At the other end of the spectrum, smaller and older developments located further from amenities, saw slower or flat price recovery. For instance, Central View in district 19 recorded a price gain of about 6 per cent between Q4 2006, when median prices were at the lowest for the development and Q2 2007.

Buyers of mass market homes are genuine purchasers

URA figures show that new projects sold by developers and resale deals make up the bulk of transactions in mass market districts located in OCR. Such sales made up more than 95 per cent of all deals since the general market bottomed out in 2004. On the other hand, sub-sales - which refer to secondary market transactions in uncompleted projects and often seen as a proxy for speculative activity - remained low at under 5 per cent.

Although sub-sales as a percentage of total transactions in OCR have been rising since Q3 2006, they are still relatively low at 3.1 per cent as of Q2 2007. This compares to 19.4 per cent for high-end properties in the core central region (CCR) and 10.4 per cent for private homes located in the rest of central region (RCR).

When taken as a percentage of total new sales within the respective regions, the proportion of sub-sales was just 7 per cent for the OCR, compared to 53 per cent for the CCR and 27 per cent for the RCR.

Supply crunch driving the mass market recovery

The rapid pace at which residential developments in the central area have been collectively sold in the last two years created an acute supply crunch, stemming from the massive withdrawal of homes from the existing stock. This became one of the main drivers of the recovery in the mass market, which enjoyed a filtering down of demand, both in the sale and rental markets. Evidence of this can be seen in the much higher proportion of mass market property buyers with private residential addresses - from a low of 12 per cent in Q2 2002 to 61 per cent in Q2 2007.

However, the supply crunch is expected to be short term. The estimated 6,200 homes already withdrawn or about to be withdrawn from the stock in the central area - due to collective sales between 2005 and June 2007 - will be replaced by some 13,000 spanking new, modern and more luxurious homes in the next two years.

Moreover, the recent injection of private residential sites into the government land sale programme for H2 2007 could add another 5,580 new mass market homes.

Upswing in the mass market sustainable

Unlike the mid-1990s upturn that was propelled largely by speculative buying and weak demand fundamentals, the current upswing is supported by strong demand fundamentals on the back of bright economic prospects.

Historically, Singapore’s property cycles, measured from trough to trough, last between 10 and 13 years. Taking that as a guide, the current upswing in the mass market, which commenced in mid-2004 and picked up momentum this year, is likely to continue and peak in 2010. This coincides with the expected completion for many of the infrastructure programmes (such as the integrated resorts and Marina Bay Financial Centre) which support Singapore’s economic restructuring.

However, downside risks remain and they stem from the recent turbulence in world financial markets and uncertainty over the impact of the US sub-prime mortgage woes. Nevertheless, while the US and Europe may suffer a hit over the next few months, the economic fundamentals of Singapore and Asia remain strong.

Mass market prices could hit the 1990s peak

Launch prices of new mass market residential projects during the 1990s property boom ranged between $550 psf and $1,050 psf. One of these projects was Bishan 8, which was launched at a median $1,050 psf in 1997. The highest unit price achieved for a mass market project during the mid-1990s peak was a unit in Heritage View, which sold for $1,127 psf in September 1997.

In comparison, in the first eight months of this year, new mass market housing was launched at prices ranging from $500 psf to $880 psf, just some 9 to 16 per cent lower than the levels achieved at the last peak. The highest price achieved for mass market property in the current market was for a unit in The Parc, which sold for $1,040 psf in August this year.

Meanwhile, in the secondary market, the median resale price of mass market properties as of Q2 2007 was $516 psf, just some 14 per cent below the peak in Q3 1996. However, for those projects that were launched at the height of the boom in the mid-1990s, their median resale prices as of Q2 2007 are still some 11 to 45 per cent off from their highs. (See Table 2)

With the upswing expected to be sustained until 2010 at least, and assuming a conservative price growth of 5 per cent per quarter, prices of new mass market projects are likely to attain the 1990s peak level by H1 2008, barring unforeseen circumstances. For mass market properties in the secondary market, resale prices should match the last high by the end of 2008.

The writer is associate director of research and consultancy, Colliers International

Source : Business Times - 27 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
(+65)91002985
mindy@mindyyong.com
http://www.hotvictory.com

HDB resale market rides high

HDB resale market rides high

It’s certainly a seller’s market as prices trend upwards and demand for larger units rise, says EUGENE LIM

HDB resale prices have been recovering slowly but surely since a dip in late 2005 when anti-cashback measures were introduced to stamp out the illegal over-declaration of resale prices.

Sky-high: Prices for resale units hit a record high as a five-room unit in Kim Tian Place changed hands for $720,000 this year, leading to an overnight hike in prices by up to $200,000 above valuation
The recovery was based purely on the market fundamentals of an improving economy and employment market; as well as the actual play of supply and demand.

From Q4 2006’s 103.6 points on the HDB Resale Price Index, resale prices for HDB flats jumped 4.2 per cent in the first half of this year to reach 108 points in Q2 2007. Besides demand being fuelled by improving sentiment, the spate of collective sales in the private property market has unleashed a group of cash-rich house hunters, many of whom are opting for high-end resale HDB units. These buyers are willing to pay top dollar for flats that fit their criteria.

In June, wide media coverage of two five-room HDB flats that changed hands in the resale market at record-breaking prices of $675,000 in Jalan Mebina (off Tiong Bahru) and $720,000 in nearby Kim Tian Place spun the HDB resale market into euphoria. It led hopeful sellers all across Singapore to hike asking prices overnight, some by up to $200,000 above valuation.

This led to a mismatch of price expectations between sellers and buyers as these high-priced deals are limited to fairly new, well-renovated, high-floor resale flats in coveted estates such as Tiong Bahru and Queenstown.

The HDB was quick to respond to concern among home buyers about runaway prices and released additional data on median resale prices and median cash-over-valuation in all the housing estates. Median prices give a more accurate picture of the market and minimise the distorting impact of headline-grabbing prices.

With these additional statistics, to be provided by HDB on a quarterly basis from the second quarter, home buyers have better information on which to base their decisions. Sellers are also able to use these statistics to price their flats realistically and competitively.

Going forward, HDB resale prices are expected to continue trending upwards. HDB’s Resale Price Index rose by 3 per cent in Q2 2007 over the previous quarter, with price increases across most flat types and towns. Seventy per cent of the resale transactions in Q2 2007 were transacted at an average of $7,000 cash-over-valuation. As at the end of the first half, HDB resale prices have increased by 4.2 per cent. With such positive market sentiment, prices are likely to continue to rise in the subsequent quarters and we may possibly see an overall price increase of 6-9 per cent for the full year.

Resale volume

With improving sentiment, the volume of resale transactions jumped 39 per cent in Q2 2007 to 8,708 units from an all-time market low of 6,258 units recorded in Q1 2007.

HDB’s data also indicates a strong preference among buyers for larger flats. Between Q1 2007 and Q2 2007, executive flats saw the largest increase in resale transactions of 67 per cent (343 units); followed by five-room flats at 64 per cent (903 units); four-room flats at 31 per cent (726 units) and three-room flats at 25 per cent (482 units).

The resale mix for H1 2007 showed three-rooms making up 29 per cent (down from 2006’s 32 per cent; four-rooms at 37 per cent (about the same level as 2006); five-rooms at 25 per cent (up from 2006’s 22 per cent); and executive flats at 9 per cent (up from 2006’s 7.5 per cent).

This preference for larger flats is likely to continue for the rest of the year as the demand is fuelled by those upgrading from smaller flats as well as buyers who have been priced out of the booming private residential market. By year-end, we may possibly see three-room flats accounting for 25 per cent of resale transactions, four-rooms at 37 per cent, five-rooms at 28 per cent and executive flats at 10 per cent.

Assuming the current momentum holds, we are likely to see this year’s total resale volume surpassing last year’s 29,723 units, which was an all-time low. Some 30,000 to 32,000 are estimated to be transacted for the whole year.

Changes in housing policy

At last month’s National Day Rally, Prime Minister Lee Hsien Loong announced a slew of housing policy changes. These include:

Revised additional CPF housing grant: The Additional CPF Housing Grant (AHG) Scheme will be enhanced to provide more subsidy to lower-income families to help them buy their first HDB flat. The income ceiling for AHG will be raised from $3,000 to $4,000, while the maximum grant will be raised from $20,000 to $30,000.

The enhanced scheme can be used to subsidise the cost of buying a new or resale flat. It is expected to benefit an additional 1,300 first-timer households annually. In total, some 4,000 households are expected to benefit from this programme every year; and this may boost the demand for three-room flats which has been lessened in view of the current upgrading trend.

New HDB buy-back scheme: This scheme helps unlock the value of flats for elderly Singaporeans aged 62 and above, providing them with an income stream. HDB will buy back the tail-end of the lease on their two- or three-room flats, leaving them with a shorter lease of 30 years on the same flat.

The flat owner will then receive a payout from HDB in two parts - a lump sum upfront and monthly payments for the rest of his or her life which will serve as a form of annuity. This scheme is not expected to have a significant impact on the resale market as it focuses on the elderly.

Two new upgrading programmes: HDB will be introducing two new upgrading programmes, namely, the Home Improvement Programme (HIP) and the Neighbourhood Renewal Programme (NRP).

The HIP aims to address common maintenance problems in ageing flats, such as spalling concrete and ceiling leaks; while the NRP focuses on precinct- and block-level improvements.

These upgrading schemes are designed to improve the internal and external environment of affected flats. While the flats’ condition and aesthetics are improved, the possibility of fetching higher prices is basically dependent on supply and demand rather than upgrading per se.

With strong market fundamentals, supported now by added transparency in transaction information, the HDB resale market is expected to continue its uptrend for the rest of the year.

The writer is assistant vice-president, ERA Realty Network Pte
Source : Business Times - 27 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
(+65)91002985
mindy@mindyyong.com
http://www.hotvictory.com

Dispelling some auction myths

Dispelling some auction myths

Acquiring properties through an auction is not a taboo, says MARY SAI

WHEN one flips through the property classifieds these days, it not uncommon to see properties advertised for auction. It is also not uncommon for a prospective buyer to immediately get the impression that the property to be auctioned, or the owner, must have some problems, otherwise why auction?

Choice: Heritage properties at Emerald Hill road (above) are one example of the high-quality buys auctions can throw up. Good class bungalows and luxury properties, as well as those in developments with en bloc potential are also often up for grabs
This misconception stems mainly from the days when auctions were the main mode of sale for banks when they repossessed property from owners who defaulted in their loans. In the 1980s and 1990s, most of the property auctions were mortgagees’ auctions. So many people saw them as forced sales.

But today, in a bullish property market, auctioneers are seeing more owners choosing to auction their property. In this article, we try and dispel some of the misconceptions about auctioned property.

Myth No 1: Auctions are fire sales

Contrary to widespread belief, an auction can secure the best price through open competitive bidding. Even the courts recognise an auction sale as an appropriate way to sell a property under dispute. It is deemed that through competitive bidding, a fair open market value can be realised for the seller. An auction sale is not tantamount to a desperate sale. Although the auction sale can be organised within a fortnight, it does not mean that the vendor has to sell in a hurry at bargain basement prices! Similarly, in mortgagee auction sales the bank exercises due diligence and is guided by valuations when they sell repossessed properties. They are genuine sellers, not desperate sellers.

In a recent forced sale of a dilapidated two-storey building at 27 Onan Road, two auctions conducted failed to secure a buyer. However, instead of an expected fire sale in the third round of auction, the property went under the hammer for $610,000 - a whopping 36 per cent increase from the opening price of $450,000.

Another good example was a auction of a bungalow plot at 59 Goodman Road in January this year. Vigorous bidding from more than eight parties saw the property knocked down at a record price of $626 per sq ft while comparable sales then were transacted around $350-$400 psf. Similarly, the recent auction sale of bungalow plots at Sentosa Cove also saw benchmark prices established way above $1,000 psf for their 99-year leasehold titles.

Myth No 2: ‘Challenging’ properties are auctioned

Many people consider the auction route as the last resort for the sale of properties. It would be the mode of sale for ‘challenging’ properties - those with inauspicious numbers like 4, 14 or 44 or with irregularly-shaped sites.

Going through past auction data, we see no anecdotal evidence to show that auction properties carry more inauspicious house numbers or are of inferior quality. In the past year and a half, several investors have picked up gems like good class bungalows in Bukit Timah/Holland; heritage properties at Emerald Hill Road and shophouses fronting main roads like Serangoon Road, Geylang Road, South and North Bridge Roads. These properties have appreciated substantially, with some doubling from the time they were bought at auction.

Recently, there has been a trend of luxury properties put on the auction block, as well as those in developments with en bloc potential. Some of these include apartments in The Beaumont, Stevens Loft and Watten Estate Condo. Hence, there is no lack of quality properties to buy in the auction market.

Myth No 3: Auctioned properties bring bad luck

This superstitious belief can be traced to the days when auctions were mainly for banks’ foreclosed properties. People refrained from buying such properties as they feared they would suffer the same fate as the previous owners.

Today, this superstitious view is slowly disappearing with a younger generation of property buyers.

Again, not all auctioned properties are forced sales by banks as more owners are now choosing the auction route on their own accord. They see the many advantages of auction sale and want to leverage it in a bullish property market.

As a matter of fact, buyers who successfully bid for apartments at Leedon Heights, Tulip Gardens and Silver Towers are now laughing all the way to the bank as these developments have just been collectively sold. Good fortune was theirs as a result of their smart purchases at auctions.

Myth No 4: Hungry ghosts

The seventh lunar month has been traditionally the ‘Hungry Ghost Festival’ - an inauspicious period when buyers refrain from buying property. All the more so at auctions.

Generally, businessmen and property buyers who observe Chinese religious rituals during this period, would rather bid for goods that have been ceremoniously blessed by their gods which they believe will bring them good luck - items such as ‘black charcoal’, symbolic sculptures, etc.

However, in the past few years, many property buyers are breaking away from this trend and are buying properties during the Hungry Ghost month, even at auctions. In the latest auction on Aug 16, which fell on the third day of the Hungry Ghost month, a dilapidated two-storey conservation terrace house at Spottiswoode Park was aggressively bid for by six parties from an opening price of $680,00 to an eventual $1.36 million. That’s a 100 per cent increase! Two other properties were also sold at the same auction and these transactions defy the myth that property auctions are a ‘no-no’ during the Hungry Ghost Festival.

Conclusion

Auctions will go on, be it bullish or bearish markets. With technological advances, improvements such as electronic biddings may complement conventional auctions. At the same time, myths and misconceptions relating to property auctions will be erased over time as people become more familiar with this mode of sale. Having cleared the suspicions and doubts concerning auctions, buyers can safely head to the weekly property auctions and pick up some good buys.

The writer is Knight Frank’s auctions director
Source : Business Times - 27 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
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Talking of dollars and sense

Talking of dollars and sense

Effective deployment of funds can boost the capital appreciation and rental yield of an estate, says JORDAN NEO
IT IS an important mandate of the management council to keep watch over the expenditure of their estate, ensuring that funds are sensibly ploughed into areas which best meet the estate’s needs.
For example, should the money in your sinking fund for the year be used for lobby upgrading, or should it be used to build a state-of-the-art swimming pool? When the council is clear about long-term plans and its objectives (ie, functional over aesthetic), as well as the impact of certain major works on the estate’s value, decision-making becomes much more painless and effective. The situation whereby too much money is spent on some areas with not enough left over for others can then be avoided.

Clearly-defined plan

The council, with help from the managing agent (MA), also has the responsibility of devising a well-planned budget for the year, phasing various works by importance and collecting appropriate amounts for the maintenance and sinking funds to carry out these works.

Defects management is one area where council members must learn how to discern appropriate professional advice, knowing their likely orientation. An inexperienced council serving their first term often feels pressured to go all out. Over time, such actions can often do more harm than good. From our experience, the hefty amounts spent on futile lawsuits could have been better used to enhance the estate’s ambience and facilities.

Having said that, council members must be careful not to save money at the expense of the well-being of the estate. It is unwise to keep appointing different MAs in favour of the cheapest one, sacrificing the familiarity of the estate gained by the previous MA. Saving a few hundred dollars each month might look like a lot, but it is a negligible savings in the context of a budget for larger estates.

Similarly, experience tells us that it is often a short-sighted move to be stingy about the condominium manager’s salary, when he has the right skills to contribute to the estate. The returns of managing your estate effectively can outweigh the few hundred dollars saved per year many times over.

Council members would also do well by working with better established MAs who, by virtue of their portfolio size, are in the position to negotiate for better value through initiatives such as contractor accreditation, bulk purchase and so on. For example, Knight Frank Estate Management (KFEM) has in place panels of carefully selected and accredited contractors, subject to reassessment every year. Such value-added support for the council could help prevent instances where certain contractors are awarded jobs by certain council members ‘by default’, even if their pricing and workmanship are not necessarily above par.

Sinking fund for en bloc estates

We would caution owners not to stop maintaining their sinking fund unless they are certain that their collective sales is likely to go through and that there are sufficient funds for essential works before vacating the estate.

Even for estates which have just secured a collective sale, money from the sinking fund should still be spent on repair works pertaining to the safety, health and convenience of the residents, where necessary.

As there are usually one to two more years to go before the estate would be vacated, it would be unwise to ignore issues such as loose window grilles, faulty water tanks etc, in the hope that nothing major will happen before the developer takes over. On the other hand, it would certainly be pointless to spend money on further enhancing the estate aesthetically.

Under current rules, owners should not expect to collect back the sinking fund, though there have been some instances of developers redistributing the remaining sinking fund to subsidiary proprietors according to their share value. However, that would depend on the agreement between the buyers and the sellers before the closure of the deal. However, amendments to the law, which have yet to come into effect, would have money from the sinking fund returned to owners.

Source : Business Times - 27 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
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The ascent of Singapore landed housing

The ascent of Singapore landed housing

Solid gains await with double-digit price growth and Singapore’s scarcity of land, says LEONARD TAY

THE private residential market has been hogging the headlines in the past 18 months. Overall prices recovered in 2004 and 2005 by 0.9 per cent and 3.9 per cent respectively, and home prices shot up by 10.2 per cent in 2006 and another 13.5 per cent in the first half of 2007, led mostly by the condominium segment of the market.

It has been pretty obvious that non-landed homes have been leading the way in the strengthening residential market, with prices growing from a marginal 1.1 per cent in 2004 to 4.5 per cent in 2005, 11.1 per cent in 2006 and 14.2 per cent in the first six months of 2007 alone, according to numbers from the Urban Redevelopment Authority (URA).

What of landed properties then? Will landed properties match their high-rise counterparts in the price spiral?

Prices of landed homes have risen in line with the rest of the market. (See Table 1) From a marginal 0.6 per cent rise in 2004, prices of landed homes grew by 2.4 per cent in 2005, 6.7 per cent in 2006 and 10.1 per cent in the first half of 2007.

A breakdown in price of the different landed property types shows that detached houses have made the most headway over the past year. According to URA numbers, prices of detached houses rose by 12.3 per cent in H1 07, after increasing by 8.1 per cent in 2006.

As for semi-detached and terrace houses, their indices rose by 7.6 per cent and 9.3 per cent respectively in the first half of 2007, from 5.3 per cent and 5.2 per cent respectively in 2006. As detached houses comprise Good Class Bungalows (GCB), the price increases have been more pronounced given the demand for high-end homes.

Based on caveats for GCBs, the average price has risen by an estimated 30 per cent in 2006 and a further 25 per cent in the first half of 2007. Not only are prices registering double-digit growth, it has also been observed that certain GCBs have been sold and resold within 12 to 18 months.

An example of this trend is a GCB at Queen Astrid Park that was sold for $12.5 million in April 2006, only to be resold at $16 million in May and then again in December 2006 for $18 million. This is an increase of 44 per cent in seven months. Another GCB at Nassim Road was first sold for $9.8 million in February 2005 only to be sold another three times for $15 million in August 2006, $18.4 million in December 2006 and $24.2 million in June 2007, an increase of 147 per cent over some 28 months.

Overall, it appears that there are several solid reasons for optimism in the landed housing market, especially in the next 12 months.

As prices of landed property in Singapore have not risen as steeply as their non-landed counterparts, there would generally be some better bargains in the landed market compared with luxury condominiums that have already attained very high benchmarks.

Aside from the GCB market, the comparatively slower rise in prices for landed properties could be viewed more favourably vis-a-vis upper and middle-upper income local home buyers who might have been priced out of the luxury condominium market, especially in the very prime locations.

Secondly, landed housing will always be considered a scarce commodity in the Singaporean landscape. With limited land, landed housing at present comprises 29 per cent of all housing stock throughout the island as at June 2007, or 68,360 units out of 233,143 private homes. Due to its inherent scarcity, landed housing would always be the ultimate goal of Singaporeans, especially since foreigners are not ordinarily allowed to purchase these properties.

With regard to scarcity, landed housing can be an attractive investment property in the near future as a source of regular income. As Singapore welcomes more foreign professionals to its shores, houses for rent could prove to be valuable assets for rental income, especially so for foreign professionals who might be used to living in landed properties back home and are not allowed to purchase similar types of accommodation while working in Singapore.

In the first six months of 2007, URA’s rental indices for all the landed property types improved significantly. (See Table 2) During this period, rents of detached houses increased by 13 per cent followed by a 11.4 per cent rise for semi-detached houses and a extraordinary 17.3 per cent jump in rents for terrace houses. Compared with capital values of landed residences, rents have increased much faster.

Examples of recent rental transactions where the increases were evident include a detached house at Woodgrove Estate which was renewed at $15,000 a month, a 25 per cent increase from the previous rent of $12,000 a month. A detached house at Chancery Lane was rented at $16,500 a month, while a semi-detached house at Lim Tai See Walk was rented at $11,000 a month.

From a supply standpoint in the next five years, 1,872 landed units are under construction with another 2,579 landed units planned. Compared with the 28,082 non-landed units under construction and the 35,077 non-landed units that have not started, new supply of landed homes only account for 6.6 per cent of all new supply expected from the second half of 2007 to 2011, making it fairly certain that landed residential homes are going to remain a scarce product for the foreseeable future.

An increase in landed prices of some 20 per cent for the whole of 2007 might very well be on the cards, given an accumulation of the above factors. Demand for landed housing should increase, and prices would follow suit once the home-buying public realises that there are investment, as well as rental income opportunities in landed houses, and that prices have also not risen as much compared with condominiums in the prime areas.

Ultimately though, it will be the fundamental reality that landed housing will always be a scarce product in Singapore’s urban landscape that bodes well for this type of housing in the medium to long term.

The writer is director, CBRE Research
Source : Business Times - 27 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
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mindy@mindyyong.com
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Will the en bloc fever start cooling down ?

Will the en bloc fever start cooling down ?

Activity may slow down with tighter regulation, higher costs and longer sales periods, say KU SWEE YONG and YONG YUNG SHIN

THE past two years have been stellar for en bloc sales which saw some 160 redevelopment sites being sold across the island. From 2006 till 2008, more than 11,000 units would have been withdrawn, to be redeveloped into 16,000 to 19,000 new units. The final number could be lower if developers opt to build larger and more luxurious units.

The bulk of these redevelopment sites (about 95 in all) are located in the highly sought after Districts 9, 10 and 11. This has resulted in a possible shortage of high-end residential homes in the short to medium term as units are being torn down and redeveloped into new luxury condominiums.

For the first seven months of this year alone, we estimate that 61 en bloc sites have been sold for a total value of almost $11 billion. This surpasses last year’s record of $7.75 billion. For the rest of the year, we can expect a new record, both in terms of total value and number of sites sold. (See Table 1)

Going forward, we believe that en bloc activity will continue well into the next year, albeit at a much slower pace than in the past 12 months. There are several reasons for this.

Firstly, we will see larger en bloc sites in terms of size, number of units and value coming to the market. These large sites would require a little more time to obtain consensus among the sellers, as well as to find buyers with the financial muscle to acquire them.

Secondly, developers who needed to replenish their land bank have already done so and will be more selective going forward. The en bloc market could become a buyers’ market with developers possibly looking to acquire only prime redevelopment sites - sites which already have 100 per cent owner consensus or even those with negligible development charges (DC) rates.

Additionally, the recent proposed amendments relating to en bloc sales under the Land Titles (Strata) Act, which could come into force in October, will reset the collective sales process for those developments yet to garner the 80 per cent consensus.

A higher level of regulation and transparency is being introduced with stricter guidelines on the setting up of an en bloc sales committee. This will slow the pace in getting the whole process started.

Besides the changes to the Land Titles (Strata) Act, the latest revision in DC rates, which were announced on Aug 31, could potentially dampen the en bloc market further.

Going forward, whilst the location of the redevelopment sites remains paramount, we could expect developers’ interests to be channelled towards sites with minimal or no DC.

Whether the en bloc sale fever will actually cool is anyone’s guess at this point. The rising cost of land acquisition, higher DC rates, rising construction costs and the global economic climate all have a part to play in order for the market to thrive.

What’s the impact?

The wave of over 60 en bloc transactions between January to July this year could give rise to several thousand millionaires. Just taking the three months of April, May and June, we tabulated that there were some 34 sites with a total of 2,796 units sold, where the owners are expected to receive an average $3 million a unit.

Taking into account the need to apply to the Strata Titles Board for approval to proceed with the sale, all 2,796 displaced families could receive 95 per cent of their money by H1 2008. Assuming at least 2,000 of these owners are looking to buy another home, this would inadvertently create a surge in demand for homes both in the primary and more so in the secondary market, especially for those who need a place to stay.

Going forward, we expect a lull as the number of en bloc sites sold could slow down in the second half due to uncertainty, the possible introduction of new en bloc laws and rising DC rates. This would remove the additional demand from owners displaced by an en bloc sale.

Ku Swee Yong is director of marketing and business development, Savills Singapore; Yong Yung Shin is analyst, research & consultancy, Savills Singapore

Source : Business Times - 27 sept 2007

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How to choose a housing loan for you ?

How to choose a housing loan for you ?

DENNIS NG lists some criteria to look out for to ensure your package makes the most financial sense for you

Most consumers want to know which housing loan is the best in town. Unfortunately, that is the wrong question to ask.

There are more than 100 housing loan packages in the market and what is best for one person might not necessarily be the best for you. Each package has different features that are suitable for different needs.

Thus, a more appropriate question to ask is what are the factors that you should consider in choosing a housing loan? Here are some things you should note before signing on the dotted line for a home loan.

Pre-approval: Before you close a deal to buy a property, it is advisable for you to first get pre-approved for a bank loan.

With the setting up of the Credit Bureau in 2002, banks can now check your repayment history of loans and credit cards taken up with other banks. Were you late in paying instalments? Have you ever been sued? If the answer is yes, banks may not approve your loan application or they might approve a lower loan quantum. This could jeopardise your purchase of a property, and you might even have to forfeit the option money you paid.

Loan duration: A minimum loan duration is five years and the maximum 30 or 35 years, or till you are 65 or 70 years old, whichever is lower.

One way to decide on loan duration is to time the loan duration to match your intended retirement age. So, if you plan to retire by age 60, you should ensure the loan is fully paid up before you reach 60, rather than stretch it till you’re 65.

Floating or fixed: If you think interest rates have peaked and are likely to go down, you might want a floating rather than a fixed rate package.

However, if you’re worried about the possibility of banks revising interest rates upwards, you might want a package which fixes the interest rate for the next one to three years instead. It might not make sense to fix rates for more than three years since the lock-in period for most packages ends after three years. You can always shop around for a better package after that.

Flexibility of repayments: If you intend to make a lump sum repayment within the next one to three years, you should look for a package that offers you the flexibility to make such repayments without penalty. Some packages impose a penalty fee of up to 1.5 per cent of any lump sum repayment you make.

Transparency of rates: If you want to know the exact basis for the interest rates charged on the housing loan, you can consider loans pegged to interest rates that are publicly available, such as the three-month Singapore Inter-bank Offer rate (Sibor) or Swap Offer Rate (SOR) which move according to market conditions.

Basically, a home buyer pays an agreed percentage above the variable SOR for a specified period.

You might want to consider such a package if transparency is a key issue for you and you are of the view that Sibor or SOR rates are falling rather than rising.

Penalties: Ask if any penalty will be imposed if you make a full redemption of your loan and how long the penalty period is. Currently, there are some housing loan packages with zero penalty period, while most loans typically have a penalty period of one to three years.

Interest-only: If you are a high income earner and in high tax bracket, choosing an interest-only mortgage might make sense. You benefit through savings in income tax as the interest portion of loan instalments for investment properties is tax-deductible.

This package also works well for short-term investors. By paying back only the interest, investors would benefit from lower cash outflow until they sell the property. As a result, they may be able to invest in two properties instead of one.

Interest-offset: If you have substantial cash you might want to consider an interest-offset mortgage instead. This basically links your current account to your home loan. The interest earned in your current account is the same rate as that charged on your home loan. By offsetting the interest earned on your current account against your home loan interest, you can enjoy big savings - in time and money.

Every dollar you put into this current account would have same effect as making a partial repayment of your loan, but give you the added flexibility of drawing down the cash in the current account if you need to. Whereas if you do a lump sum prepayment, the cash is ‘locked’ in the property and you lose liquidity. Thus, an interest offset package enables you to pay a lower effective rate of interest on your housing loan so that a bigger portion of your monthly instalment goes toward reducing the principal. This allows you to pay off your loan sooner and pay less in interest.

Promotions: Sometimes, banks might offer special promotional packages. If you engage the services of a mortgage broker, he would be able to provide you updated information on such promotions which could translate to additional interest savings for you.

In the past, when consumers shopped for home loans, they had to contact each bank individually to gather information. This a tedious process that takes up a lot of time. In the last few years, with the emergence of independent mortgage brokers in Singapore, home loan shopping and comparison have been made easier.

Basically, an independent mortgage broker who knows your requirements can help you zoom in on the most attractive home loan packages. You typically do not have to pay for the service of a mortgage broker as banks pay them a fee as they also help banks save on staff costs and resources.

In more advanced countries such as the US and Australia, people usually apply for home loans through a mortgage broker rather than go to the bank directly. In Singapore, many people are still unaware of the services and benefits of engaging a mortgage broker, but things are likely to change with public education and increasing awareness
Source : Business Times - 27 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
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S’pore Real estate derivatives next for Singapore ?

S’pore Real estate derivatives next for Singapore ?

Despite their complexity, ONG CHOON FAH points out the distinct advantages this financial product can offer
THE management of risks is central to all investments, including real estate.
They allow investors exposure to a particular real estate market without acquiring the underlying physical asset. They can also be traded in smaller denominations and allows retail investors an additional investment instrument.
The financial markets have, since the 1970s, managed risks in the form of derivatives - financial instruments where the return is based on the return of another underlying asset eg, equity or bond. Often used by sophisticated investors such as investment banks and hedge funds, derivatives have a chequered history.

While some view them as a form of speculation, others view them as a way of hedging risk exposure.

With increasing sophistication and integration of the financial and real estate markets, underpinned by the globalisation of real estate investments, property derivatives are now available in many markets, including the UK, US, Germany, France, Australia, Japan and Hong Kong. Real estate derivatives usually have tenures of between one and five years and operate similarly as trades on the stock exchange.

Typically, one party bets that the total returns from the real estate, which includes rental income and capital appreciation, will exceed a stipulated figure while the other bets it will not. Like all derivatives, real estate derivatives serve some very important functions:

They provide valuable information on the underlying real estate assets on which futures contracts are based and in so doing, facilitate price discovery which is currently lacking due to the absence of a central exchange for real estate. Pricing of real estate derivatives also indicates prospects of the real estate market
They facilitate risk management through hedging, especially given the illiquid nature of real estate. Portfolio managers will then have the flexibility in terms of asset allocation and moving from one real estate market to another
They lower transaction costs, reduce lead time and hence increase market efficiency.

In addition, investors can get market exposure without issues relating to owning the physical real estate eg, management.

In the case of a Property Total Return Swap (PTRS), it enables real estate owners to sell their exposure in the real estate market without disposing the physical assets.

Unlike in the sale of real estate, where the vendor will need to build up his portfolio of assets all over again, in the case of PTRS, the vendor returns to his original market position upon maturity. Another advantage of PTRS is that it is liquid and can be traded in the secondary market before maturity.

There are many other forms of real estate derivatives. In a cash-backed contract, a single payment at the commencement of the contract is swapped for future payments in line with the performance of the underlying real estate asset. In other arrangements, cash flows are swapped periodically with payments, either pre-determined or dependent on the performance of the underlying real estate.

In the case of Property Index Forwards, it allows investors to gain exposure to the real estate market, without investing in the physical assets, where the return is equivalent to the capital performance of the real estate asset with consideration paid either at the start or upon maturity.

Yet another form is the Property Index Certificate (PIC), a total return instrument where payment is pegged to the rental income and capital return equivalent to the capital performance of an agreed real estate index. As the index reflects the appraisal of the underlying real estate asset, consideration payable for a PIC is equivalent to the level of the index at the time.

Being a financial instrument, there is no real estate agency fees payable with significantly lower legal costs and stamp duty compared with real estate transactions. The purchase price is also established at the onset, removing price uncertainty which is often clouded in a physical real estate transaction. With a fixed term contract, parties involved can establish an exit strategy based on the real estate index upon maturity.

In the UK, where real estate derivatives debut, derivatives for commercial properties are based on the All Property Annual Index by Investment Property Databank Ltd (IPD) which is widely accepted as an independent and good measure of real estate performance. The IPD represents over 40 per cent of the commercial market in the UK. Derivatives remain highly controversial as they are complicated and potentially less transparent.

Being complex financial instruments, there is a need to understand them well in order to use them effectively and responsibly, to manage risks. They allow investors exposure to a particular real estate market without acquiring the underlying physical asset. They can also be traded in smaller denominations and allows retail investors an additional investment instrument.

Growth of the real estate derivative markets in the UK and US have been driven mainly by institutional investors as they increase their asset allocation to real estate. Real estate swaps are also being established for sub-sectors of the market, together with capital-only and income-only swaps.

In Asia, the first real estate derivative was created in early 2007 between ABN Amro and Sun Hung Kai Financial based on a residential index - The University of Hong Kong’s Hong Kong Island Residential Price Index Series (HKU-HRPI). In the arrangement, ABN Amro gets exposure to the Hong Kong residential property market through receiving the change in the residential price index from Sung Hung Kai Financial. In turn, Sung Hung Kai Financial receives a payment based on an interest spread fixed on HIBOR. In so doing, ABN Amro is effectively buying an exposure in the Hong Kong residential market with Sun Hug Kai Financial virtually (as opposed to directly) selling the property.

The Reit market in Singapore has developed successfully since its debut in 2001. Today, there are 17 Reits listed on the Singapore Exchange, comprising both real estate assets in Singapore and the region.

For the next lap, it is timely that Singapore develops a real estate derivative market. This will further grow and enhance its role as a financial hub.

However, infrastructure must be developed in terms of industry standards for appraising the real estate assets, regulations and trading platforms.

Critical to this is the need for a robust and widely accepted real estate index/sub-indices on which to base the trade. These indices will need to be published as regular as on a monthly basis to underpin secondary market trades.

There is also a need for real estate forecasting capabilities to facilitate the market. As it is, various market participants are exploring the development of a real estate derivative market in Singapore and it is a matter of time before these instruments make their way to main street.

The writer is executive director, consulting & research, DTZ Debenham Tie Leung (SEA) Pte Ltd
Source : Business Times - 27 sept 2007

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Mindy Yong
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Time for some retail-tainment - Singapore

Time for some retail-tainment - Singapore

DAISY LOO looks at today’s malls - a careful mix of the right tenants, themes and well-planned layout to draw people in and keep them occupied longer

RETAILING these days is more than just about the shopping, it’s a total experience. That means both ‘hardware’ and ’software’ have to work together to give shoppers that feel-good factor.

Lifestyle element: Junction 8 (above) was among the first to introduce cineplexes and games arcades in shopping centres.
This is a far cry from shopping malls of old, which were just clusters of shops and food outlets. There was little thought given to tenant mix, themes or architectural designs. But with the growing sophistication of shoppers, malls had to improve their offerings. Efforts were made to cluster shops (tenant-mixing) to enhance synergy among different retailers and generate the best traffic flow within the complex to derive optimal rental returns.

Mall owners went into retail positioning, tenant-mix planning and theming to draw more shoppers and increase sales opportunity for retailers, which translates to better rental value per retail space.

Junction 8 was among the pioneers that introduced cineplexes and games arcades in shopping centres. Gradually, other services such as fitness, medical and educational centres found their way into malls.

All this was aimed at making shoppers stay longer at the malls. This is evident in the incorporation of libraries in malls, found at Compass Point, Hougang Mall, Lot 1 and Jurong Point. As these malls are located within the heartlands, the presence of libraries enhances their attractiveness to families and students, boosting traffic flow. Parkway Parade incorporated medical centres. The upmarket Paragon in Orchard Road has spas in its tenant mix that meld with its affluent shoppers’ lifestyles.

Apart from attracting more shoppers, these service trades help mall owners fill the less prime locations.

Other malls such as United Square and Velocity@Novena managed by UOL Group have resorted to theming as their selling point. United Square, which was relaunched in 2002, themed itself as a ‘kids’ learning mall’ since the mall owner saw an unmet demand for children’s education/enrichment facilities. About 55 per cent of its tenant mix caters to kids with another 15 per cent for F&B. This proved to be a great success as rentals increased by 38 per cent after the revamp and shopper count rose considerably.

Velocity@Novena Square is Singapore’s first sports and active lifestyle mall. Its anchor tenant is California Fitness Jacky Chan Sports, occupying three floors of about 27,000 sq ft. Sports mix takes up close to 40 per cent of the 170,000 sq ft mall, with F&B taking up another 30 per cent.

More than just a place for sports goods shopping, Velocity is becoming a favourite venue for sports events. The 2005 Sea Games flag-off, skating performances curling demonstration and the recent NBA Madness Asian Tour 2007 were just some of the events held at the mall. Since the revamp, rentals have jumped by more than 30 per cent.

Funan DigitaLife Mall started as a general shopping centre but it gradually attracted a critical mass of electronic and IT retailers as tenants. It has since established its niche as an IT mall, and was refurbished twice - in 1992 and 2005 - to meet shoppers’ demand.

Themed malls came to Orchard Road in 1996 with the opening of The Heeren Shops. Tenanted by lifestyle shops with unique product offerings, it has HMV as its anchor tenant. In 1997, the movie-themed Cathay Cineleisure Orchard opened. Aside from movie halls, its tenants offer entertainment and leisure activities, social clubs and dining.

Of late, as consumers pay more attention to health and wellness, we saw fitness and wellness centres setting up at malls, such as True Yoga at Pacific Plaza, California Fitness Centre at Bugis Junction, and Planet Fitness at VivoCity.

Retail has evolved from its traditional role of buying and selling to a lifestyle event. As lifestyle is an experience, it is dynamic and ever-evolving. Mall owners not only update a mall’s tenant mix, they likewise organise activities to enhance the shoppers’ experience.

The latest trend seen is the integration of a retail mall with other land uses to enhance the entertainment and lifestyle portion of shopping. The Singapore Flyer is one such development. It comprises a retail building, a 400-seat theatre and the Giant Observation Wheel. The soon-to-be-developed Sports Hub is another project that incorporates multiple uses, namely, sports, entertainment and lifestyle. Aside from the sporting facilities, leisure and commercial developments will be incorporated to drive mall traffic on event and non-event days alike.

As its name suggests, Marina Bay Sands Integrated Resort integrates all types of uses, namely, hotel, convention centre, casino and theatre. They complement each other to derive optimal benefits, targetting mainly the conventions business.

In this highly competitive environment, change is a certainty. We may not have the world’s largest nor tallest malls, but we can challenge ourselves to create the most innovative retail-lifestyle malls.

Why not have a retail-lifestyle mall amid nature? For instance, the Kranji countryside offers art galleries, pottery and woodwork. It also retails organically grown vegetables and plants. This amalgamation can be a new retail-lifestyle mall, except that all the tenants are not housed under one roof but linearly located amid nature. This venue is ideal for families and nature-lovers as it offers a different shopping ambience.

Instead of just having souvenir shops within zoos, bird parks and botanical gardens, why not turn them into retail-lifestyle malls? It is important, however, that such malls be aptly sized, with a critical mass of at least 50,000 sq ft to attract shoppers.

These malls will then become a destination for shopping, entertainment and interaction, with each ‘retail-tainment’ destination having its own distinct identity and selling point.

The writer is director and head of retail, Jones Lang LaSalle

Source : Business Times - 27 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
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mindy@mindyyong.com
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A glowing report card for the Singapore hotel industry

A glowing report card for the Singapore hotel industry

Business is brisk as visitor arrivals climb steadily, pushing up room rates and triggering a flurry of new hotel construction, writes DONALD HAN
SINGAPORE is all set to spur tourism in the next few years with high-impact projects like the two integrated resorts, the Singapore Flyer, the Formula One (F1) Grand Prix and a rejuvenated Orchard Road.

More tourists: Visitor arrivals are expected to hit 10.2 million this year. The STB has set a target of 17 million visitors by 2015 generating $30 billion in tourism receipts
Last year, a new record was set with 9.7 million foreign visitors coming to Singapore. This year’s visitor arrivals are expected to hit a blistering 10.2 million with Singapore Tourism Board (STB) numbers showing a glowing mid-term report card. From January to July this year, visitor figures reached 5.9 million, a 5 per cent rise over the same period last year. July alone saw hotels raking in $168 million in room revenue, a 28 per cent increase from a year ago. This puts it right on target for another record-breaking year.

STB has set a target of 17 million visitor arrivals by 2015 with $30 billion in tourism receipts. Based on the impressive year-on-year growth over the past 12 months, we should be on track to achieve the 2015 target.

To meet the growing number of visitor arrivals, more hotel rooms have to be built. Presently, there are about 37,000 rooms in Singapore. Based on new supply under construction, some 11,000 rooms will come on-stream by 2010. This includes 4,300 rooms from the two integrated resorts at Marina Bay and Sentosa. It is estimated that in 2010, a total of 14 million foreign visitors will visit Singapore. Based on a conservative average stay of 3.4 days, the city-state will experience an acute shortage of at least 35,000 rooms from now till 2010. Come next September, the F1 event alone will bring an estimated 50,000 visitors. In short, our existing hotel stock needs to be doubled in the next three years to meet surging demand.

To meet this need, the government has since 2006 offered 25 hotel sites for sale. Of this, 10 sites valued at $2.4 billion million have been acquired by developers. In addition, 11 hotels have effectively changed hands. Total private hotel investments soared to over $1.3 billion. Another two hotels, Paramount Hotel and Mitre Hotel, are either under negotiation or waiting for a finalised offer.

About 53 per cent or nine out of the total 17 hotel properties (including government sites), were sold to international investment funds, foreign hoteliers and investors since 2006. In the recent Beach Road tender, US-based Elad Group and Dubai-based Istithmar are joining forces to develop a $2.7 billion integrated hotel, office and retail project. The strong interest from foreign investors shows their astute reading of the opportunities arising from the shortage of Singapore hotel rooms, as well as the potential of reaping higher yields from room-rate increases. It is this overwhelmingly positive outlook that is driving investors’ appetite.

In the first half of this year, the average occupancy rate (AOR) hit a high of 86 per cent with average room rates (ARR) reaching $189. STB recently announced that ARR had increased to $210 in June, the highest rate ever achieved. AOR in July hit 91 per cent, a whisker shy away of November 2006’s 13-month peak of 92 per cent. With the third and fourth quarters typically being the busy period for hoteliers, room charges and occupancy rates are likely to be maintained or surge further.

For 2008, we are projecting that AOR will test the 90 per cent level with ARR expected to grow by at least 15 per cent from current levels.

With higher occupancy and rising room rates, the burning question is: Can Singapore hotels maintain their competitiveness to continue attracting foreign visitors? The answer is a resounding yes, based on the following reasons.

Singapore ranks sixth out of 15 key Asian cities in terms of ARR, according to a recent Cushman & Wakefield survey. Tokyo has the distinction of having the highest room rates in Asia followed by Hong Kong.

The government has been releasing more three-star hotel sites as part of its strategy to have enough affordable class hotels. These hotels cater to budget-conscious tourists, predominantly from South-east Asia, China and India. The hotel sites on the government sale list tend to be located at the city fringe such as Alexandra Road and Bencoolen Street. The latter is where Accor’s Ibis three-star 538-room hotel will be built.

The opening of Changi Airport’s Terminal 3 in January next year is set to bring in a steady stream of foreign visitors. The new terminal is capable of handling up to 22 million passengers a year and some of the world’s largest aircraft.

Despite the US sub-prime lending setback, Singapore’s hospitality sector is experiencing one of its strongest recoveries in over a decade. The market is at the initial stages of takeoff as the high-impact tourism projects start to unveil from 2008. This is when the world’s tallest observatory, the Singapore Flyer and the F1 Grand Prix take centrestage in thrilling visitors from around the world.

A year later, all eyes will be on the opening of Marina Bay Sands, which will be the most expensive casino-cum-integrated resort ever built. In 2010, Universal Studios and Resorts World will open their doors to charm a global audience.

Some cities looking to break onto the world stage have looked to hosting mega catalytic events like the Olympic Games, which would instantly give them global city status. Singapore has its own booster in the high-impact tourism projects that will be ready between 2008 and 2010. These should collectively propel Singapore to a different league in the global travel and hospitality industry.

The writer is managing director, Cushman & Wakefield
Source : Business Times - 27 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
(+65)91002985
mindy@mindyyong.com
http://www.hotvictory.com

The changing face of Singapore office space

The changing face of Singapore office space

CALVIN YEO looks at how the development of New Downtown at Marina Bay will shape new offerings in the current CBD

WITH demand for office space in Singapore outpacing supply in the last three and a half years on the back of healthy economic growth, rents have been surging, with prime space seeing a rise of over 200 per cent since the lows of 2004.

New look: The New Downtown (above) will not only bring a brand new skyline to the existing CBD (next), but also up the standards of design and facilities
Monthly gross rents of Grade A space in Raffles Place grew by a phenomenal 222 per cent from an average $3.95 per sq ft at the trough in Q1 2004 to a record $12.69 psf as at end Q2 this year. Occupancy of office space island-wide hit 92 per cent as of Q2 2007 - the highest level since Q3 1996, with most prime office buildings enjoying near full occupancy.

Against this backdrop of soaring rents and a dearth of supply, office tenants are eagerly awaiting new office stock coming to the market. This will largely comprise prime office developments in the New Downtown at Marina Bay.

Assuming the two new white sites at Marina View currently on tender are developed by 2011, the New Downtown would yield some 5.4 million sq ft of prime office space. This is equivalent to 47 per cent of the current Grade A stock in Raffles Place and Shenton Way/Tanjong Pagar.

The New Downtown at Marina Bay will not only give the Central Business District (CBD) a new skyline, but could also spur higher building standards in the existing CBD. When landlords of existing Grade A buildings in Raffles Place and Shenton Way/Tanjong Pagar redevelop or retrofit their properties in the coming years, they will have to raise their specifications to match those of offices in the New Downtown to stay competitive.

Among other things, this new office space will offer specifications and services catering to the evolving needs of multinationals and match the top standards found in other regional markets such as Hong Kong and Shanghai. Examples of such specifications include:
Larger floor plates in excess of 20,000 sq ft, against the current average of 13,000 sq ft
Enhanced efficiencies with column-free regular floor plates
Floor-to-ceiling heights in excess of 2.7m
More robust technical infrastructure, such as dual-feed power supply to overcome power failure, and dedicated emergency power feed.
New-generation prime office stock in the existing CBD can also be expected to offer services such as regular tenant feedback meetings.

An increasing number of companies are also looking to raise the quality of the work space, as an attractive office environment becomes key in recruiting and retaining the best talents, comprising largely the Generation X and Y workforce who drive change. Such an enviroment will also boost overall productivity. As such, we can expect future Grade A office supply in the existing CBD to feature the following:
Maximum work space adjacent to natural light and views
Good ventilation
Minimal noise intrusion from building mechanical services
Use of non-health hazardous building materials
Dedicated higher capacity IT fibre connectivity
Uninterrupted power supply.

With companies becoming more environmentally aware, tenants would also prefer to locate in an environmentally-friendly office building. This would include features such as efficient energy and water consumption and conservation systems, as well as measures on indoor pollutants against the corresponding green building maintenance and operational guidelines.

Hence, many redeveloped or retrofitted Grade A office buildings in the CBD can be expected to seek a Green Mark certification from the Building and Construction Authority.

In fact, the gentrification of the current CBD had already begun with the redevelopment of buildings such as Crosby House, Ocean Building and Overseas Union House. By 2011, some 3.5 million sq ft of redeveloped Grade A office space in the current CBD is expected to be completed.

Landlords of other older buildings in Raffles Place could choose to retrofit instead. For example, the landlords of 6 Battery Road, Singapore Land Tower and UOB Plaza II have opted for retrofitting. This includes re-cladding the building façade, creating space for cafes, installing multi-media screens, and upgrading lifts, lobbies, toilets and carparks. With this, they can command top rents and occupancy rates.

Second-tier buildings, such as those built on smaller footprints, could find a niche catering to tenants who do not require the most prime office locations or large floor plates. The answer is the boutique office, typically a high quality office building with a smaller footprint. These developments have small floor plates and target smaller space users such as fund managers, private banks, re-insurance firms, professional services firms and regional offices. They offer tenants the prestige and exclusivity of being a full-floor tenant.

The live, work and play concept is taking root here so tenants would appreciate features such as shower and fitness facilities and common break-out areas with wireless computer access and flexible after-office hours air-conditioning arrangements.

In this context, the clustering of eateries, convenience stores, laundries, mobile devices support centres, and covered walkways could just make buildings along a street collectively more attractive.

Some might say the current CBD lacks character. But with the New Downtown as catalyst, the older part of the business district could see an innovative repositioning that would help Singapore’s office market gain depth and breadth, catering to a broad range of tenants, from MNCs to boutique operations.

The writer is director of commercial leasing, Colliers International
Source : Business Times - 27 sept 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
(+65)91002985
mindy@mindyyong.com
http://www.hotvictory.com