Wing Tai bullish despite end of deferred payment scheme In Singapore

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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Singapore Horizon Towers battle returns to Strata Titles Board

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

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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Singapore Analysts see no property bubble

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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Acer Building in Singapore Jurong for sale

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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Singapore URA property auction attracts $37m of bids

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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Rising inflation a major risk in emerging markets: economist - Singapore

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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Singapore Economy may take breather in 2008 with 4-6% growth

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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