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Wing Tai bullish despite end of deferred payment scheme In Singapore
By Nicholas Fang
ALREADY APPROVED: Wing Tai can still offer deferred payments for two upcoming launches in Newton Road and Oxley Walk, says chief operating officer Tan Hwee Bin. — ST PHOTO: LIM WUI LIANG
THE scrapping of the deferred payment scheme for new homes has failed to dampen the optimism of property group Wing Tai Holdings.
It can still offer the scheme on two yet-to-be-launched condominiums as it had obtained approval before the Government withdrew the scheme last week. The scheme allowed homebuyers to postpone most payments on uncompleted property.
The move to end the scheme was aimed at deterring speculators and forcing people to be more prudent when committing to pricey real estate.
Wing Tai chief operating officer Tan Hwee Bin told The Straits Times yesterday that ending the scheme was a good idea as it would create a basis for strong, sustainable market growth in the long run.
‘There will be a short-term impact for the market as a whole as buyers will have to manage their cash flows better.’
But she did not believe that Wing Tai itself would be affected, given its portfolio of largely upmarket developments.
‘About 80 per cent are located within districts 9, 10 and 11, and many of our clients are high net-worth individuals and serious investors as opposed to speculators.’
Wing Tai still has approval to offer deferred payments for its L’VIV condo in Newton Road and Belle Vue Residences in Oxley Walk - both set to be launched in the first half of next year.
Mainboard-listed Wing Tai yesterday said net earnings for the three months ended Sept 30 doubled to $61.8 million due to higher contributions from its VisionCrest and Casa Merah projects.
Revenues fell to $100.2 million from $164.8 million previously. Earnings per share rose to 8.58 cents from 4.29 cents while net asset value per share went up to $2.14 as at Sept 30, from $2.07 as at June 30.
Wing Tai also intends to increase its stable of retail and lifestyle brands next year. These businesses now contribute more than 10 per cent of revenues.
It currently has 18 brands in 129 outlets in Singapore, including well-known names such as Topman and Warehouse, sports giants Nike and Adidas, and mass market labels such as G2000, and Japanese restaurant chain Yoshinoya.
Ms Tan said Wing Tai is in talks with several mid- to high-end brands from Europe, Asia and the United States about coming to Singapore, but declined to reveal details.
Source : Straits Times - 31 Oct 2007
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Mindy Yong
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Singapore Horizon Towers battle returns to Strata Titles Board
Majority sellers start second attempt to get STB’s approval for the $500m sale
By Joyce Teo, Property Correspondent
THE saga of the botched $500 million collective sale of Horizon Towers moved a step closer to possible resolution when it returned to the Strata Titles Board (STB) yesterday.
Owners who support the bitterly contested sale to developer Hotel Properties and its two partners are battling it out with those opposed to the sale, first inked in February.
An earlier STB hearing ended abruptly on Aug 3, when the board threw out Horizon Towers’ application to approve the collective sale on technical grounds, because three pages were missing.
On Oct 11, the High Court overturned the STB’s decision and threw the case back to the board for the hearing to be continued.
The fight over Horizon Towers erupted in April when a group of owners decided the estate’s sale price was insufficient in view of the rising market.
The buyers have launched a lawsuit against the owners for alleged breach of contract. They want to claim lost profits of up to $1 billion.
New twist
In a surprising turn, Mr Cheong Yuen Hee of J. S. Yeh & Co, a lawyer appointed by an owner who had agreed to sell Horizon Towers en bloc, turned up unannounced.
That legal battle will be averted if the condo owners finally win the STB’s approval for the sale.
Lawyers from Allen & Gledhill, representing the buyers,
had wanted to take part in the STB hearing but their application for permission to do so was dismissed recently.
That leaves a battle between the majority owners, represented by Senior Counsel Chelva Rajah of Tan, Rajah and Cheah, and the minority owners, represented by various lawyers.
An otherwise unexciting hearing yesterday offered one surprise, when a lawyer turned up unannounced and was asked to leave the lawyers’ table.
He had been appointed by an owner who had agreed to sell Horizon Towers en bloc.
But before he left, the lawyer - Mr Cheong Yuen Hee of J. S. Yeh & Co - was allowed to outline his client’s key points of contention.
He was then asked to file a written submission.
Mr Cheong alleges there is a ‘frustrated’ collective sale agreement as well as sale and purchase agreement.
He said his client does not accept the new sales committee or its authority to extend the condo’s sale deadline to Dec 11.
The new committee recently stretched the deadline as part of its efforts to avert the buyers’ lawsuit.
A lawyer who has been following the case said Mr Cheong’s statement was significant.
‘It’s dramatic because it’s the first time a majority owner has come out to say the deal is dead, under the hammer of a lawsuit,” he said.
Yesterday was the first of several days of hearings scheduled until mid-November.
The next session is on Tuesday.
In coming sessions, to be held at a court room in City Hall building, lawyers will call witnesses to support their respective positions.
Source : Straits Times - 31 Oct 2007
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Singapore MAS forecasts more moderate growth next year
Diversified economy with less reliance on tech sector will soften external risks
By Jessica Cheam
SINGAPORE’S sizzling economy - on track for 7 per cent to 8 per cent growth this year - is expected to hum at a somewhat slower rate next year.
But it is still expected to power ahead at a 4 per cent to 6 per cent rate of expansion, thanks to a far more diversified economy.
In highlighting interesting shifts in the make-up of the economy yesterday, the Monetary Authority of Singapore’s (MAS) latest macro-economic review threw up this dramatic fact: the electronics industry, once all-important to the economy, contributed a puny 4 per cent to economic growth in the first half of this year.
That is a sea change from as recently as 2000, when its contribution to growth was a hefty 40 per cent.
Relying less on this sector to bring in the goods is, however, a good thing for the economy, especially in the face of a number of factors that could cause some economic turbulence - and thus lead to lower growth - next year.
Among these: high oil prices, now at about US$93 (S$135) a barrel, and possible further volatility in global markets.
But, the central bank said, diversified growth sources should see Singapore through.
For example, the booming construction, marine and oil-rig building industries will lead economic expansion next year. The MAS said the building boom will have its biggest payoff for the economy later this year and into the next, as many projects will be ready to receive large payments.
And as high oil prices continue to drive oil exploration, demand will spike for oil rig projects. A record number of oil rigs is set to be delivered by Singapore’s big shipyards next year.
Another strong performer will be the biomedical sector - pharmaceuticals and medical equipment, for instance.
‘This year, we can really see a marked change in the diversification of our gross domestic product (GDP),’ said CIMB-GK economist Song Seng Wun. ‘It’s the first time since the Asian financial crisis that we have this kind of balanced growth.’
Another key driver of growth this year, the MAS said, was ‘asset market-related’ activities - related to the property and financial services sector.
This contributed almost 30 per cent of GDP growth in the first half of this year, up from just 16 per cent for 2006.
It includes the wealth advisory and capital market segments, and the construction sector, which has been driven by the property boom.
This has also spilled over to financial and business services, where loans to the building and construction industry has hit double digit growth since the second half of last year.
Economists that The Straits Times spoke to are more optimistic about next year’s growth than the MAS.
CIMB-GK’s Mr Song is looking at a baseline growth of 6.5 per cent next year, while Standard Chartered economist Alvin Liew has set a 5.7 per cent target.
‘Growth will still be strong in various sectors, but it won’t be surging at the rates we’ve seen this year,’ he said.
But economists say one crucial aspect to watch out for is rising inflation.
It hit 2.9 per cent in August - the biggest monthly rise since 1994.
MAS expects inflation of 1.5 per cent to 2 per cent this year, and up to 3.5 per cent for the first half of 2008.
But it expects this to ease in the second half of the year, with inflation at 2 per cent to 3 per cent for the whole of 2008.
‘Ultimately, if we have high inflation, that could be destabilising for the economy. But we don’t think that’s a big risk,’ said Mr Song.
Source : Straits Times - 31 Oct 2007
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Mindy Yong
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Singapore Analysts see no property bubble
They’re mum on whether it’s a good time to buy, but agree S’pore fundamentals are pretty robust, reports GENEVIEVE CUA
PROPERTY: boom or bust? This was the intriguing question to which a capacity turnout of about 170 investors recently sought answers, at a dinner hosted by financial advisory firm ipac. The good news is that the experts at the evening’s panel do not foresee a bubble in the offing, based on three presentations - albeit with some concern expressed by Jones Lang LaSalle’s head of research, Chua Yang Liang.
The not-so-good news is that the experts shied away from the multi-million-dollar question of whether this was a good time to buy. What is more, over the past weekend, the surprise news of a halt to the popular deferred payment scheme for uncompleted properties appears to have cast a cloud over residential property’s upward trajectory.
In a deferred payment scheme, developers effectively extend free financing to buyers of uncompleted properties. Buyers need only pay an initial deposit of 10 to 20 per cent, with the balance due when the property is completed in a couple of years.
Thanks to this form of free credit, a sizeable number of speculators have rushed in to new home launches, as a rising market gives them a window to sell their units at a substantial profit in a short period.
The base case of one panellist, HSBC senior Asian economist Robert Prior-Wandesforde, is that there are few obvious triggers for a sharp deceleration in prices.
‘If we’re in a bubble, we’re in the early stages. The fundamentals are pretty robust. The mass market is just starting to see a recovery and that’s probably the safest area for investment,’ he told the audience. The supportive factors include the expected growth in employment and personal incomes.
The cost of servicing mortgage debt also remains relatively low at just about 14 per cent of household income, compared to 50 per cent in mature markets like London.
Contacted yesterday, he said: ‘I think the measure (to halt deferred pricing) will take a little bit of froth out of the market, but with employment booming, wages soaring and the real mortgage rate at its lowest level since 1990, the outlook still looks very promising.
‘We should also bear in mind that valuations are still way below the levels of the previous boom. When adjusted for the growth in incomes, the private residential property price index is little more than half of what it was in 1996.’
At the discussion, Dr Chua of JLL expressed concern over the price gap between new and resale homes in the prime districts. The gap has widened sharply this year, reaching a peak of 60 per cent, against a medium to long-term premium gap of 32 to 38 per cent. The resale market, he says, reflects true demand better, as deferred payment schemes in the new home market have inflated prices.
In terms of rental yields, rentals in the luxury prime segment have edged below the 10-year Singapore bond yield. The clampdown on deferred payment schemes should remove the speculative froth, he says. ‘Generally prices will take a breather in the next two to three years with the sheer volume of (new) stocks coming on stream. We expect some kind of softening, not a correction, but a softening.’
Sing Tien Foo, deputy head of the National University of Singapore’s department of real estate, pointed to property’s ability to help diversify a portfolio, thanks to a low correlation with stocks and bonds.
Prof Sing’s research has shown that property provided a positive hedge against inflation between 1992 and 2007, a period in which stocks and bonds did not provide such a hedge.
While all types of property offered a more-than perfect hedge against inflation, the best hedge was that offered by detached housing, followed by semi-detached homes.
Meanwhile, advisers are sounding caution. Roy Varghese of ipac says: ‘If you’re looking to invest, be very careful. You need to have an investment objective and that includes looking into the IRR (internal rate of return). You should be able to hold it for seven to 10 years. If you bought your property at a peak, your IRR will be low.’
Joseph Chong of New Independent expects the price gap between new uncompleted homes and resale homes to narrow. ‘The market should see a more moderate ascent in prices - instead of 20 per cent, perhaps 10 per cent in line with nominal GDP.
‘You should see more upside…But if your portfolio is not big enough, I don’t think you should bet on investment property in Singapore.’
Those with modest resources are better off investing in a global property fund or Reit, he adds.
Analysts, however, remained mostly sanguine over the medium-term outlook. Merrill Lynch’s property team wrote in a paper market that sentiment will be weak over one to two months. ‘However, we are of the view that genuine buyers do not buy houses on innovative purchase schemes by developers alone. We believe the more important considerations will be where Singapore is heading, will they be able to keep their jobs or businesses and will their salaries/profits increase.’
The firm’s economics team recently wrote that Asian property prices were not high relative to per-capita income, and advances have been modest compared to those in the UK, the US and Australia. The drivers include low real interest rates and positive demographics.
Citigroup analyst Wendy Koh said that while sentiment will weaken in the short term, residential prices are supported by strong fundamentals. In a note on Friday, she said: ‘We believe the current price increase is well supported by strong fundamentals such as the extremely tight physical supply and economic and wage growth.
‘We maintain our view that rental rates for residential units will continue to climb on the back of the relative net increase in housing stock due to low completion and relatively high demolition due to en blocs. The rise in rental rates will likely continue to support further price appreciation.’
Source : Business Times - 30 Oct 2007
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Mindy Yong
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mindy@mindyyong.com
Acer Building in Singapore Jurong for sale
ACER Computer International is selling its building at International Business Park in Jurong East.
The property is said to be worth about $75-80 million, or $337 to $360 psf of existing net lettable area (NLA).
The property, a high- tech business park development, was completed about 10 years ago on a site leased from JTC Corp for 30 years with an option to renew for a further 30 years.
Acer is paying JTC an annual land rent of $715,469, with an escalation of 4 per cent a year (as at Q3 2007). Acer Building’s new owner will likely pay JTC a slightly higher land rent each year.
Acer Computer (Singapore) will lease back 51,548 sq ft in the building - about 23 per cent of the property’s 222,510 sq ft NLA - from the new owner.
BT understands that the net property yield to the new owner can work out to around 6 to 7 per cent, based on a $75-80 million price.
DTZ Debenham Tie Leung is marketing Acer Building through an expression of interest exercise.
Source : Business Times - 30 Oct 2007
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Mindy Yong
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Singapore URA property auction attracts $37m of bids
Bidders included smaller developers, contractors and engineering firms
By KALPANA RASHIWALA
THE mood continued to be buoyant at two property auctions yesterday held by the Urban Redevelopment Authority (URA) and DTZ Debenham Tie Leung.
The URA auctioned 12 sub-divided landed housing plots near Sembawang Beach which can be developed into a total of 57 landed homes.
The auction fetched a total sum of $37.09 million, working out to about $285 per square foot of land area on an average basis.
The bidders included mostly smaller developers, contractors and engineering firms but also some individuals, like local advertising guru Lim Sau Hoong.
The chief executive of Singapore-based advertising agency 10AM Communications clinched the sole bungalow plot of 4,477 sq ft for $940,000.
Market watchers expect Ms Lim to spend a further $1.5 million on construction costs and fees, bringing her likely all-in investment for her bungalow at about $2.5 million.
Mecbonn Engineering, whose office is at International Plaza and which is controlled by a Tew family, walked away with the biggest plot, a 43,687 sq ft site slated for development into 23 terrace houses, for $14.3 million or $327.33 psf of land area.
The plot attracted a total of 107 bids from about eight parties.
A property consultant estimates Mecbonn’s break- even cost works out to about $1.3 million per terrace house.
The company also bought two smaller plots for semi-detached homes.
Fragrance Group unit Fragrance Homes bought two plots. It paid $9.2 million or $294 psf for a plot designated for 14 terrace houses and $1.76 million or $270 psf for a smaller plot for three terrace homes.
Fragrance Group boss Koh Wee Meng and his wife Lim Wan Looi too bought a semi-detached plot for $289 psf.
The 99-year leasehold land plots auctioned by the URA yesterday form the first phase of Sembawang Greenvale.
URA’s director of land administration, Choy Chan Pong, was pleased with the auction result, noting that it drew ‘wide participation and competitive bidding’.
‘We can consider releasing the next phase of Greenvale in the H1 2008 Government Land Sales Programme,’ he added.
DTZ Debenham Tie Leung’s auction at Amara Hotel saw a strong turnout of about 100, including spectators, with three mortgagee sale properties changing hands, including a ground floor shop unit at the freehold Grandlink Square at Guillemard Road selling for $226,000 or $1,102 psf of strata area.
The other two properties sold were a two-storey linked semi-D factory at 67E Tuas South Avenue 1, which fetched $1.3 million or about $139 psf of strata area, and a two-storey, freehold corner terrace house at 34 Maria Avenue in Opera Estate that was sold for $1.4 million, or $392 psf of land area.
Source : Business Times - 30 Oct 2007
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Mindy Yong
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Rising inflation a major risk in emerging markets: economist - Singapore
Currencies, property, stocks may become more attractive than debt for investors
By CONRAD TAN
(SINGAPORE) Rising price inflation is fast becoming a major risk in emerging markets around the world due to surging food, oil and asset prices, according to a senior economist.
On the rise: Rising food and fuel prices are sending inflation higher in most emerging economies
For investors, the inflationary pressures building up in these countries and the likely response of central banks means that emerging market currencies, equities, property and commodities are likely to become more attractive than debt - the traditionally favoured emerging market investment, Philip Poole, HSBC’s chief emerging markets economist, said recently.
Investment in new production capacity ‘has not kept pace’ with the recent rapid growth seen in most emerging economies, he said.
As a result, countries such as India - which now has very little spare productive capacity according to some estimates - are likely to experience increasingly severe price inflation as their economies continue to expand.
Elsewhere too, spare productive capacity has been falling, adding to inflationary pressures, except in China where investment in building more capacity has been consistently high, he said.
Food prices, traditionally accorded a high weight in consumer price inflation measures, have also surged due to unstable weather patterns, stronger demand from a growing middle class and a shift in land use away from agriculture to biofuels due to soaring oil prices, he said.
The combination of rising food and fuel prices is sending inflation higher in most emerging economies, he said.
He expects governments and central banks in these countries to step up their fight against inflation in the coming months, using a mix of policy tools, including allowing their domestic currencies to strengthen against the US dollar.
Part of the inflationary pressure build-up has been due to the actions of central banks themselves, he said.
When central banks intervene in financial markets to keep their domestic currencies low in order to maintain the competitiveness of their labour market and exports relative to their peers, they often do this by printing more local currency to buy foreign currencies such as the US dollar.
The new money then gets channelled into domestic assets such as property, contributing to price increases in these assets instead of the currency itself, he said.
The main anti-inflation policy tool employed by developed economies such as the United States and the European Union - raising interest rate targets to discourage borrowing - may not work for emerging economies, he said.
‘In an environment where you have open capital accounts and excess liquidity . . . it can be counter-productive to raise rates’, as this makes the local currency even more attractive relative to the US dollar, prompting a greater inflow of funds and raising inflationary pressure on the local economy, he said.
Instead, he expects to see central banks employ a broader range of tools to combat inflation, such as raising the regulatory reserve requirements of banks as China did recently - ‘effectively a tax on the private banking system’ - and allowing their domestic currencies to strengthen against the US dollar. A stronger local currency makes imports cheaper, which helps moderate price inflation.
As a result, Mr Poole believes investors in emerging market currencies, stocks, commodities and property stand to benefit from the inflationary pressures and the likely policy response in the near future.
Just this month, the Monetary Authority of Singapore said it would allow the Singdollar to strengthen at a slightly faster pace than before to cap inflationary pressures, while maintaining its long-standing official policy of allowing a ‘modest and gradual appreciation’ of the currency.
Source : Business Times - 30 Oct 2007
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Mindy Yong
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Singapore Economy may take breather in 2008 with 4-6% growth
Oil prices and financial volatility are concerns but other drivers of growth still intact, says MAS
By ANNA TEO
(SINGAPORE) After four years of robust above-trend growth, Singapore faces a rather ‘more uncertain’ outlook next year, says the Monetary Authority of Singapore (MAS), citing high oil prices and the chances of further bouts of financial volatility.
A temporary slowdown in the US, if confined to the housing sector with little impact on the consumer, should not derail Singapore’s growth prospects.
- MAS report
And as investors turn cautious amid lingering uncertainties over the US sub-prime crisis, Singapore’s property, wealth advisory and capital markets - the activities that saw much euphoria and froth in growth this year - will likely slow down in 2008. But other domestic sectors should still see healthy growth, and the economy, overall, revert to its medium-term trend potential of 4-6 per cent, MAS says.
This year, with the economy having grown 8.2 per cent in the first nine months after a blistering first half, Singapore’s GDP growth is on track to reach the upper end of the official 7-8 per cent forecast.
While there has been some slowdown in the growth momentum - as reflected in the third-quarter 6.4 per cent sequential GDP growth pace - financial markets have rebounded recently and underlying economic conditions remain supportive, says the central bank in its latest half-yearly Macroeconomic Review.
Barring a major fallout from the sub-prime mortgage crisis, domestic asset market-related activities, especially financial services, ’should see some tentative improvement’ in Q4, it says. In all, these asset market-related activities - key financial services and property-related transactions that saw quite some exuberance this year - accounted for 28 per cent of GDP growth in the first half.
But equity trading activity in 2008 is ‘generally not expected to match the highs registered this year’, and the domestic debt market could also see businesses adopt a wait-and-see approach amid lingering concerns over the credit market, MAS reckons. Market uncertainties could also dampen demand for wealth management services in 2008.
Related link:
Click here for MAS’ Macroeconomic Review
But the economy’s other growth drivers, notably non-electronics manufacturing, will be largely intact and set for further expansion next year.
Even prospects for the construction sector are ‘decidedly more sanguine’, as many of the projects started this year move into the higher-value stages, where the biggest payment streams kick in.
And the IT-related cluster - the only growth laggard earlier this year - should also see modest growth in the near term, according to the MAS in- house electronics manufacturers’ index.
An MAS study also finds ‘little evidence’ of any structural US-Asia decoupling, where analysts argue that East Asia’s growth cycle is now less subject to the vagaries of US growth.
According to MAS, the US and Asia ‘remain firmly coupled in the long run’, but are seeing weaker links in the short run due to several factors. These include the modest nature of the US slowdown so far, and the fact that domestic demand in Asia has buffered the region’s growth.
‘In the event of a severe recession in the US, however, it is unlikely that Asian exports and growth will be unaffected,’ the MAS report says.
But a temporary slowdown in the US, if confined to the housing sector with little impact on the American consumer, should not derail Singapore’s growth prospects.
And if the US economy fares better than expected, the second half of 2008 could surprise on the upside - in which case, Singapore’s asset market-related activities could ‘bounce back swiftly and strongly’, MAS says.
Source : Business Times - 30 Oct 2007
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Mindy Yong
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Singapore URA launches first hospital site in 30 years
By ARTHUR SIM
THE Urban Redevelopment Authority (URA) yesterday launched a hospital site at Novena Terrace/Irrawaddy Road for sale by public tender. URA said that the last hospital site launched was at Mount Elizabeth in 1976.
URA said that it worked with the Ministry of Health to identify the new site. The news comes after Health Minister Khaw Boon Wan said in December that four possible sites for hospital development had been identified. He said three of the sites were near existing public hospitals and a fourth was in the north.
The 1.7 ha Novena Terrace/Irrawaddy Road site, near Novena MRT Station, has a maximum permissible gross floor area (GFA) of about 72,350 sq m. At least 35 per cent of the GFA is to be set aside for hospital in-patient wards.
A maximum of 5 per cent of the total GFA may be for retail uses such as gift shops and food and beverage outlets.
Knight Frank director (research and consultancy) Nicholas Mak said that hospital sites are a ’specialised play’, and he does not expect more than five bids. Knight Frank estimates that the winning bid could be in the region of $600 million to $670 million. This works out to be about $770 to $860 per square foot per plot ratio (psf ppr).
‘I expect that the future development could be a combination of hospital as well as strata-titled medical suites that could be put up for sale,’ Mr Mak said.
The URA said Singapore has experienced ‘exponential growth’ in international patient numbers over the last few years, with more than 410,000 visitors in 2006.
‘Growing at a rate of 20 per cent per annum, Singapore expects to receive about one million international healthcare visitors by 2012,’ the URA said.
Healthcare sites do appear to be in demand. In September, a consortium called Singapore HealthPartners put in the highest bid of $265.3 million, or $431 psf ppr, for a hospital-cum-hotel site in Race Course Road. Also in the market for hospital sites could be healthcare real estate investment trusts like Parkway Life Reit and First Real Estate Investment Trust. According to its website, URA has fielded questions on whether a trust can be considered a developer for the site.
Source : Business Times - 30 Oct 2007
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Mindy Yong
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Five Singapore properties put up for en bloc sale
By KALPANA RASHIWALA
TENDERS for collective sales continue to be launched. The latest offerings include Dunearn Gardens near the Newton/ Scotts roads area, The Village in Pasir Panjang, and Riviera Point along River Valley Road.
Dunearn Gardens: Guide price for the 95,443 sq ft freehold site is $578.5m or $2,288 psf per plot ratio
CB Richard Ellis, which is marketing Dunearn Gardens, says the guide price for the 95,443 sq ft freehold site, is $578.5 million, which translates to about $2,288 per square foot per plot ratio, inclusive of an estimated $32.9 million development charge (DC). A new condo on the site would break even at about $2,900 to $3,000 psf, market watchers say.
The site is zoned for residential use with a 2.8 plot ratio (ratio of maximum potential gross floor area to land area). The maximum height allowed for the site is about 33 storeys. The plot can be redeveloped into a new condo with about 134 units averaging 2,000 sq ft each.
Credo Real Estate, the marketing agent for The Village, expects the freehold 102,642 sq ft site to fetch $75 million to $80 million. This reflects a unit land price of $646 to $680 psf per plot ratio, including an estimated DC of $17.75 million. Credo pointed to the possibility of the developer buying up to 20,000 sq ft of adjoining state land parcels, thus potentially enhancing the land size to 122,642 sq ft. In such a scenario, the developer’s unit land price would be lowered to $578 to $607 psf ppr - based on the $75 million-$80 million price tag set by The Village’s owners.
The site is zoned for residential use with a 1.4 plot ratio and five-storey maximum height.
Newman & Goh is marketing a few small sites. One of them is Riviera Point, a 14,580 sq ft plot at River Valley Road with a 2.8 plot ratio and 36-storey maximum height. Its owners are asking for $73.5 million, which works out to $1,800 psf ppr. No DC is payable.
Off Thomson Road, the property agent is marketing View Point and the nextdoor Shiba Apartments with asking prices of $20.5 million and $16.9 million respectively. These work out to around $792 psf ppr including DC.
Source : Business Times - 30 Oct 2007
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Mindy Yong
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mindy@mindyyong.com
Restoring a genuine Singapore property market
By CHOW PENN NEE
PROPERTY stocks were sent reeling yesterday following the government’s announcement to discourage speculative buying in the real estate market. In contrast, bank stocks rose. The divergence in stock performance between the two market sectors comes down to this: what is bad news for speculators may prove to be good news for banks.
The scrapping of the scheme which allows homebuyers to delay payments on new property may turn out to be a positive for the financial institutions giving out housing loans, as the measure weeds out punters from genuine buyers. The deferred payment scheme introduced 10 years ago allowed buyers to make as little as a 10 per cent downpayment, and pay the rest upon completion - sometimes after a time lag of three years. This encouraged many to enter the property market. Speculators did not even take the trouble to get a loan - merely coming up with the downpayment, and selling before completion of the property.
In the last few quarters, when the market turned red hot, some observers were surprised by what appeared to be muted home loans growth. The reason was that the deferred payment scheme, which discourages the early draw-down on loans (or even taking up a loan in the first place), had diluted the impact of the booming market on housing loans. Indeed, it was common to hear, at the results briefings of the local banks, the deferred payment scheme put forward as one of the main factors for the slower-than-expected pace of home loans growth.
With deferred payment now no longer an option, more buyers will be driven to take up home loans. And loans will be drawn down progressively, with borrowers paying a certain percentage of the purchase price at various stages of completion of the property. This should be positive for the loan books of the banks.
Take DBS Bank, for one. Singapore’s biggest bank had felt the ‘lag’ impact of the deferred payment scheme - it said a few months ago that it was expecting a sharper spike in home loans only in future quarters, due to investors taking out loans to pay for homes purchased using deferred payment schemes. With the scheme gone now, the bank told BT that the impact of the latest measure would be positive on its books - since, without the option of the deferred payment scheme, buyers have to seek financing and draw down the loans, if they don’t want to use a lot of their own cash.
The removal of the deferred payment scheme is not just positive on the loan books. For some time now, there has been growing concern that the scheme shifted the banks’ risk exposure from households to corporates. With buyers paying nothing in the early stages of a project with deferred payment, developers had to borrow more from the banks - or raise funds in the debt market - to finance their projects. This increased the banks’ exposure to property developers, and there is past evidence to suggest that corporates are more likely to default, should the market turn bad, than households.
According to MAS data, as at end-June, housing and bridging loans as well as loans to the building and construction sector made up nearly half of the more than $200 billion loan portfolio of commercial banks here. This has been a steady increase from the 33 per cent from about a decade ago, around the height of the last property boom. In absolute terms, housing and bridging loans were worth some $64 billion in June, compared with about $63 billion six months ago. As the Monetary Authority of Singapore had also previously said, the use of the deferred payment scheme by property developers introduces additional risks to the developers (and to the banks which finance these developers) because property purchasers under this scheme are not subject to credit checks by developers.
‘This is unlike property purchasers who apply for housing loans and are subject to credit assessment by banks. MAS expects banks to exercise prudence in their financing to the property developers and be fully cognisant of the additional risks from the use of deferred payment schemes,’ MAS had said then. The removal of the scheme will restore some balance, and the banks should have their exposure to households raised while lessening their exposure to developers.
The government’s removal of the deferred payment scheme - and expectations of further cooling measures - could keep the property market cautious in the near term. Buyers may adopt a wait-and-see approach, and new projects could see a slower take-up rate. That could crimp home loans growth in the short term. But in the longer term, doing away with deferred payment will put home financing on a far healthier plane. ‘Flippers’ who buy property to resell quickly to make a fast buck will be deterred, the speculative froth will be taken out of the market, and pricing will come to levels more in line with economic fundamentals. For banks, this means genuine homebuyers and investors as customers - and that cannot be a bad thing.
Source : Business Times - 30 Oct 2007
Singapore Property - Buy , Sell , Rent , Invest
Mindy Yong
(+65)91002985
mindy@mindyyong.com
Strong earnings results for third quarter so far-Singapore
Profits total $2.18b, up 46.7%, for 28 firms with year-ago comparison
By OH BOON PING
SINGAPORE-LISTED companies continued to put up a strong third-quarter performance, chalking up higher profits than a year ago.
As of yesterday, a total of 34 companies have released their financial results for the three months ended Sept 30, 2007, with combined net profits of $2.24 billion.
Of the 34 companies, 32 of them, or 94 per cent, were in the black.
Among these profitable companies, 20 reported higher net earnings than a year ago, while six reported lower net income.
For the 28 companies that have a year-ago comparison, their net profits totalled $2.18 billion, 46.7 per cent higher than the corresponding period last year.
On a nine-month basis, the 34 firms reported total net income of $6.99 billion, while the 28 firms with a year-ago comparison chalked up earnings of $6.84 billion - up 60.3 per cent year-on-year.
Leading the pack in terms of Q3 earnings is banking group DBS, which reported a net profit of $610 million - up from $552 million a year earlier. Its turnover rose 16.4 per cent to $1.54 billion from $1.32 billion.
DBS’s Q3 numbers came as the three Singapore-listed banking groups - including UOB and OCBC - were closely watched for the impact of recent financial market turmoil on their bottom lines.
Banking analysts had told BT earlier that they generally expected ‘decent’ Q3 earnings growth, but warned that the rosy forecasts could be thrown off if the banks made large provisions against earnings for any losses from their exposure to collateralised debt obligations or CDOs.
UOB is releasing its results today, while OCBC is scheduled to release its numbers on Nov 6.
At the sectoral level, property plays were perhaps the best-performing with most reporting higher earnings and turnover as well as significant growth. For example, CapitaLand more than doubled its Q3 net profit to $563.93 million, while nine-month net earnings more than trebled to $2 billion.
Its Q3 revenue rose 24.6 per cent to $895.77 million, while nine-month turnover was up at $2.47 billion - from $2.15 billion.
Likewise, Keppel Land more than doubled its Q3 net profit to $81.84 million, while turnover jumped 49.4 per cent to $381.97 million. Its nine-month net earnings surged 74.1 per cent to $207.31 million.
Real estate investment trusts (Reits) such as CapitaMall Trust, Mapletree Logistics Trust and K-Reit also did well, having reported both higher Q3 turnover and profits.
Besides the companies that have already reported their quarterly earnings, there are another 196 that are expected to release their Q3 numbers in the coming weeks, even though the number of firms with a December financial year-end stands at 495.
Companies with a market capitalisation of $75 million and below - in view of the higher relative costs for smaller firms - are exempted from reporting quarterly results. All listed companies, however, have to report their first-half and full-year results.
Source : Business Times - 30 Oct 2007
Singapore Property - Buy , Sell , Rent , Invest
Mindy Yong
(+65)91002985
mindy@mindyyong.com
Singapore Property shares take a beating
Developers with inventory in prime districts may face pricing pressure
By KALPANA RASHIWALA
PROPERTY analysts were still busy yesterday predicting how the market will be affected by the end of the deferred payment scheme (DPS) as property shares received their expected drubbing when trading opened.
Mr Gee : Pricing power is shifting very firmly away from developers
A report by OCBC Investment Research forecast tough times for the residential sector - but not everyone was gloomy.
The OCBC researchers said: ‘The significance of the current government move is that it is targeting at the demand side of the equation while previous measures (since end-2006) were mainly supply side . . . Demand-side measures historically tend to have severe repercussions on demand and hence pricing.
‘We thus see the latest action (and subsequent action if speculation continues) to be negative on the residential sector.’
A seasoned property consultant said: ‘The withdrawal of DPS will affect speculators, who have been focusing mainly on high-end homes but who have also filtered into mid-market projects as seen in One North Residences and The Rochester. However, even genuine home buyers and investors whose budgets are stretched by the rapid price appreciation will be affected. Sales volumes will come off.’
CIMB-GK Research said: ‘We believe developers with inventory in the prime districts could face pricing pressure as punters retreat. Developers are also likely to bear the brunt of greater financial prudence exercised by genuine home buyers as they no longer have the luxury of time to build up funds for repayment.’
The government’s announcement on Friday of the immediate withdrawal of the DPS means an end to the system in which private property buyers could buy units in uncompleted developments with just a 10 or 20 per cent downpayment, with the payment for the rest of the purchase price in some cases postponed until the completion of the project.
CIMB said in its research note yesterday: ‘We believe this move is aimed at discouraging speculative activity and is also a preventive measure to keep mass-market price escalations in check.’
There will be no new DPS developments available, although developers which have already obtained approval to offer the scheme for a project may continue to do so.
One development that seemed to be benefiting over the weekend from its approval for DPS was United Industrial Corporation’s (UIC) Park Natura, a five-storey freehold condo in the Toh Tuck area near the Bukit Batok Nature Reserve. The condo has an average price of about $1,000 per square foot. UIC is said to have sold more than 60 units over the weekend in the project, which has 192 units in total.
The developer is offering a partial deferred payment scheme where buyers pay an initial 10 per cent, with progress payments needed only after one year.
On the stock market yesterday morning, the Singapore Properties Equity Index fell as much as 2.1 per cent from Friday’s close to 1,545.16 points. It later recovered to end at 1,557.52 points - just 1.3 per cent lower than Friday’s finish.
City Developments lost 50 cents to close at $15.80, followed by SC Global Developments which eased 35 cents to finish at $5.50. Singapore Land lost 25 cents, closing at $9.85.
‘Purer developers with sizeable residential inventories are likely to be the most affected,’ CIMB said.
‘Stocks under our coverage with revalued net asset values that are particularly sensitive to asset price changes include Allgreen, Bukit Sembawang, City Developments, Ho Bee and UOL. We estimate that every 10 per cent change in residential prices will result in 5-10 per cent changes in stock valuations for these companies.
‘The sector is currently under review . . . we expect to lower our residential selling price assumptions by 10-15 per cent in the upcoming results season in view of mounting uncertainties in the property market,’ CIMB said.
Citigroup said that the DPS withdrawal has ‘probably removed the champagne from the party’ since property prices have been fuelled to some extent by the availability of deferred payments, which account for more than 70 per cent for some projects.
‘Sentiment will likely weaken in the short term, particularly in the luxury segment. Longer term, fundamentals, including strong economic growth, immigration and low interest rates will likely be supportive of property prices,’ the report said.
But other analysts, like JP Morgan’s Chris Gee, said that he was recommending investors to be underweight on the sector even before Friday’s announcement.
‘Pricing power is shifting very firmly away from developers because they now have more products to sell,’ he said. ‘But they’re not just competing among themselves for buyers but also with specu-vestors who’ve bought properties since 2005 and who can offer buyers properties that will be physically completed sooner than those that will be launched by developers in the near future.’
Source : Business Times - 30 Oct 2007
Singapore Property - Buy , Sell , Rent , Invest
Mindy Yong
(+65)91002985
mindy@mindyyong.com
S’pore Horizon Towers sale: Battle resumes today at strata board hearing
Two-week session to give final word on en bloc sale application
By MICHELLE QUAH
(SINGAPORE) The Horizon Towers saga goes back on the boil today when the majority owners’ application for a collective sale is again heard by the Strata Titles Board (STB).
The hearing, scheduled for two weeks, will be the final word on whether the en bloc sale goes through - and on a battle of wills between the project’s majority and minority owners.
The minority owners will take this final opportunity to scuttle what they say is a deal done ‘in bad faith’.
Their lawyers have repeatedly said that they have plenty of objections to the sale that they have not yet aired. It is believed that these range from alleged non-compliance with the law governing en bloc sales to the sale being prejudicial to the minority owners.
‘We have quite a few arrows we still haven’t shot,’ lawyer SK Phang, who represents a minority owners, has said.
The minority owners’ objections have stalled the en bloc sale. On Aug 3, the STB dismissed the majority owners’ application on the grounds that it was incomplete and the accompanying statutory declaration false, because it was missing three signature pages. This was before the STB had heard the merits of the case.
The STB’s decision was then overruled by the High Court, which said this month that the missing pages did not constitute a substantial omission that prejudiced the minority owners. The court sent the application back to the STB.
Today’s STB hearing picks up where the previous hearing left off in August. Over the next fortnight, the parties will call witnesses and present evidence to support their opposing claims on whether the collective sale application complies in form and substance with the law and whether the sale was conducted in good faith.
But this time majority owners are unlikely to collaborate with minority owners. At the previous STB hearing, majority and minority owners were seen hugging one another and celebrating the board’s decision to dismiss the application.
Several majority owners - after signing the deal to sell Horizon Towers for $500 million in February - regretted their decision when neighbouring developments began fetching much higher prices. They circulated anonymous flyers to other majority owners, asking them to rescind the deal.
The move transformed what would have been a run-of-the-mill en bloc sale into the drawn-out battle it has become.
But this time around, it will be in the majority owners’ interests to push the collective sale through. The buyers - Hotel Properties and its partners - have slapped a $1 billion lawsuit on them.
Angered by some majority owners’ attempts to sink the sale, HPL and its partners filed a suit in the High Court claiming damages of up to $1 billion, saying that the sellers had failed to honour their part of the bargain.
The suit has been stayed until the STB hearing is concluded. But HPL and its partners have indicated that they could revive the proceedings if the collective sale falls through.
HPL and its partners have been excluded from the STB hearing, after their application to intervene was dismissed recently.
Source : Business Times - 30 Oct 2007
Singapore Property - Buy , Sell , Rent , Invest
Mindy Yong
(+65)91002985
mindy@mindyyong.com
Singapore PM sees growth at higher end of 7-8% forecast
Asia’s fundamentals are strong, and S’pore’s links with China, India will offset US slowdown
By CHUANG PECK MING
(SINGAPORE) Singapore’s economy is likely to grow at ‘the higher end’ of the government’s forecast of 7-8 per cent this year, Prime Minister Lee Hsien Loong said in a labour movement speech yesterday.
Mr Lee: More major policies and initiatives will be necessary from time to time to enable Singapore to stay ahead and remain competitive
Painting an upbeat picture of the economy despite the threat of a recession in the United States, as the sub-prime mortgage crisis leads to an overdue correction in the stock markets, he said Singapore remains in a strong position.
‘The economy is doing well,’ Mr Lee said at the National Delegates Conference of the National Trades Union Congress. ‘I think we can achieve the higher end of the (forecast) range.’
While a recession may hit the US - and the ripple will spread to Singapore - the fundamentals for Asia remain robust, and China and India continue to grow rapidly, he said. ‘Our links with them will help us to weather a US slowdown.’
Mr Lee said the government has also moved to provide more office space in the next two or three years and cool the hot property market, which could dampen investment.
‘We will continue to monitor trends closely and take further action if necessary,’ he said. ‘We will make sure that the property market stays in balance over the long term.’
Mr Lee’s remarks came barely three weeks after the government published preliminary figures showing that the economy expanded by a blistering 9.4 per cent in the third quarter, trumping analysts’ forecasts and beating numbers racked up in the previous three months.
The higher-than-expected growth got economists in the private sector revising their full-year forecasts, with some going as high as 8.7 per cent.
With an average 8.2 per cent already secured for the first three quarters, the official forecast is very much in the bag.
Mr Lee yesterday noted that the hot economy is churning out a record number of jobs, some 114,000 in the first half of the year, while wages rose by a strong 7 per cent.
Citing a report in The Economist magazine, Mr Lee said: ‘Singapore is ‘booming, bustling and bursting at the seams, a developed country that grows at developing-country rates’.’
Singapore must keep adjusting and a