Surprisingly low bids for Marina View site - Singapore

Surprisingly low bids for Marina View site - Singapore

Top offer of $952m a sign that property investors could be turning cautious

By Fiona Chan, Property Reporter

BARELY two months after a site at Marina View fetched a record $2.02 billion, a similar plot next door has managed only half that price.
The unexpectedly low bids for the plot, which was seen as highly attractive, came on top of lukewarm response to other recent land sales. This is further proof that sentiment in the property market has started to cool, consultants warned.

The second Marina View plot drew only two bids when its tender closed yesterday. The top offer came in at $952.9 million - a far cry from the first site’s price and well below the experts’ predictions of up to $1.6 billion.

Both Marina View sites, which are located behind the One Shenton condominium, had the same high bidder: Macquarie Global Property Advisers (MGPA), a private equity real estate firm partly owned by Australia’s Macquarie Bank Group.

Property group CapitaLand also put in offers for both plots.

MGPA’s offer in September for the first site, which is slightly bigger, worked out to $1,409 per sq ft per plot ratio (psf ppr), almost double the $779 psf ppr bid it submitted for the second site.

The stark difference shows how much the mood in the market has shifted in just two months, said Knight Frank director of research and consultancy Nicholas Mak.

‘Clearly, they had a change of heart,’ he said. ‘The two sites are right next to each other, but the second bid is only 55 per cent of the previous bid.’

Mr Mak agreed that the price is ’still decent’, and that there was ‘a fair bit of exuberance in land tenders previously’.

But, in general, property investors are now turning more cautious, he said. This is due to stock market volatility, uncertainty over the global credit crunch and recent government measures in the property market.

The Government last month removed the deferred payment scheme for homebuyers in a surprise move that is being seen as an act to discourage speculation.

Mr Mak suggested, however, that this may have helped overcool the market.

Following the Government’s move, a residential land parcel on Enggor Street at Tanjong Pagar attracted only two offers when it went on sale, while an office site in Tampines found just one bidder.

This is despite these plots being fairly attractive, said Mr Mak.

‘If the Government throws in a site in Jurong, they may not get any bids at all.’

But while other consultants agreed that developers and investors are now more circumspect, some said the low Marina View bids could be an aberration.

‘The mood has changed somewhat, but it’s not as drastic as this. This is a bit of a flash in the pan,’ said Mr Li Hiaw Ho, CB Richard Ellis’ executive director.

He had expected bids for the second Marina View site to come in at a lower level because 25 per cent of the plot’s gross floor area must be used for hotel rooms, which have slightly lower land values.

Mr Li said, however, that the huge difference in bids was unexpected. He attributed it partly to the fact that there were only two bids: ‘This cannot draw out the most competitive offers.’

The Marina View site has a land area of about 0.9ha and a maximum floor area of 1.2 million sq ft. On top of the hotel use requirement, at least 60 per cent of the plot’s area must be given to offices.

If MGPA is awarded the second site, it could lower its average price for the two plots to about $1,100 psf ppr and combine them to form a mega commercial development, said Mr Donald Han, managing director of Cushman & Wakefield.

Source : Straits Times - 14 Nov 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985
mindy@mindyyong.com

http://www.hotvictory.com

Singapore Property boom expected to continue

Singapore Property boom expected to continue

Robust economy, jobs growth, strong housing demand and en bloc sales proceeds are key drivers, say KU SWEE YONG and ZENG ZHEN
THE bullish sentiment in Singapore’s residential market continued into 2007 from where it left off in 2006. In the first nine months of this year, the market recorded a total of 29,331 sales transactions worth some $52 billion. This represents a year-on-year increase of 89 and 116 per cent respectively.

The demand for high-end residential housing has been growing at a feverish pace over the past two years and although the stock market plunge may have affected investor sentiment, new benchmark prices continued to make headlines over the past two quarters. Rising fast to support the high-end residential sector are the mid-tier and mass market segments, which have picked up significantly since early 2007 with record prices set at several project launches. Strong economic outlook, coupled with higher salaries and bigger bonuses and rapid jobs growth have brought new impetus for investors, home owners and speculators to upgrade and/or to purchase.

Comparing average prices with those at the end of 2006, the average price for homes in the super luxury market segment (luxury developments which crossed the $2,500 psf mark in Q4/2006) jumped 42 per cent to $3,700, while the high-end market segment (luxury developments in Districts 1, 4, 9, 10 & 11) rose by 36 per cent to $2,076 per sq ft. The average prices for both mid-tier and mass market developments have also risen by more than 50 per cent, albeit from a lower base, to $1,250 per sq ft and $700 per sq ft respectively.

One major market driver is en bloc sales, which have been very active since early 2005. However, with the prolonged US sub-prime credit woes, hikes in development charge rates and the tightening of en bloc sales legislation, the en bloc sizzle has taken a breather from the end of the third quarter of this year.

This has been a phenomenal year for en bloc sales. Since January, some 95 en bloc sales with a total value of $11.3 billion were transacted, compared to 65 transactions totalling $7.5 billion for the whole of 2006. The displaced tenants and owner-occupiers from these properties have contributed to the overall increase in rentals and capital values of homes in the mid-tier, mass and public market segments.

Notwithstanding the stock market shock in the third quarter, the buying momentum is expected to resume between next month and early 2008 given the wave of purchases from displaced en bloc-owners who are expected to collect their money and buy a replacement home around this time. This time round, the mid-tier and mass market segments will lead the way with a strong growth, lending solid fundamentals to prices in the high-end and luxury sectors.

For next year, the residential market in Singapore is expected to remain strong with all segments looking set to continue growing supported by robust domestic economy, jobs growth, wage growth in both the public and private sectors, strong housing demand from expatriates relocating to Singapore and reinvestment of proceeds from en bloc sales.

The general market consensus is that supply will tighten due to a short- term supply crunch in 2008, as the expected demolitions from en bloc sales outstrip the completion of new projects. The tightness in supply will be exacerbated by the need to fill job vacancies which stood at close to 40,000 by mid-2007 with unemployment standing at 1.7 per cent in September 2007.

An estimated 10,000 units from en bloc sales are also expected to be demolished in 2008 while TOPs from new projects are expected to re-supply only 8,000 units. (This is largely due to the few construction starts back in 2003 and 2004 when economic confidence was low, which resulted in low completion numbers in 2007 and 2008.)

Furthermore, there is also the potential risk for a slower pace of construction of residential properties arising from the strong competition for resources in the construction sector. This is largely due to the fact that several of these mega projects are also scheduled for completion within the next three to four years. Some of these mega projects include the two integrated resorts, BFC, petrochemicals plants in Jurong Island, public infrastructure such as the Circle Line and Circle Line Extension, common services tunnel in Marina Bay, sports hub at Kallang, and Gardens by The Bay.

On the demand side, there are several significant events that could spur investments into Singapore. The first is next September’s Formula 1 night race, which will bring international attention to Singapore starting from February, when the F1 season begins.

The weakening US dollar, strengthening Sing dollar, reduced confidence in US markets and political uncertainties as several key regional countries will be holding their general elections soon, could encourage more high-net-worth individuals (HNWIs) from around the region to park some of their wealth here.

The strong Singapore property market has also caught the eye of fund managers from Europe, the Middle East and Japan who have been investing in Asian real estate; and Singapore will benefit from that allocation in 2008 and beyond.

The high-end market is expected to remain steady with average prices likely to rise by another 15 to 20 per cent to hit an average of $3,000 per sq ft. With such strong demand, it would not be to far-fetched to expect some units in super luxury residential projects to cross the $6,000 per sq ft mark.

Developers will continue to raise prices for luxury high-end apartments with superior product quality, such as more spacious surrounding, and designer fixtures and fittings. At the same time, the replacement cost of land, whether from en bloc sales or government land sales, will continue to go up.

Meanwhile, Singapore’s status as a global financial centre, tax-friendly environment, strong currency and liquidity in the local market will keep attracting investment interest from the fast-growing private banking sector which, in turn, are attracting HNWIs to the region as well as expatriates entering Singapore’s job market.

While the high-end market takes a slower growth next year over an increased baseline, the mid-tier and mass markets will surge in 2008 due to strong demand and spill-over effects from the high-end market. Twelve months ago, we proclaimed that 2007 will be the year of resurgence for the mass market. We were spot on. We now know that the resurgence is backed by solid fundamentals and we expect this sector to soar in 2008.

Assuming two-thirds of home owners, who sold their properties en bloc in the first nine months of 2007, will buy replacement homes, we could expect to see some 4,300 buyers with a budget of approximately $7.5 billion looking for homes in the first half of 2008.

Soaring high-end prices and supply crunch in prime districts have forced some buyers to turn their attention to mid-tier projects. In addition, public and private sector wage rise backed by robust domestic economy, tighter job market will also drive up demands from HDB upgraders or families exceeding the HDB income ceiling, particularly in the mass market segment.

Strong demand could also push mid-tier prices up by another 20 to 40 per cent to between $1,500 and $2,000 per sq ft for the whole of 2008. Areas that will benefit from the rise in the mid-tier market include Balestier, Bukit Timah, Novena, Thomson and Upper East Coast. As many of the mass market areas are still relatively undervalued, it is expected that prices will grow strongly, up by between 30 and 50 per cent from a low base, with average prices reaching around $1,000 per sq ft. Areas likely to see the most significant price gains include Upper Paya Lebar, Hougang, Ang Mo Kio, Upper Thomson to Mandai, Clementi, West Coast, Jurong East, Upper Bukit Timah and Bedok.

There are several projects in the high-end and super luxury markets to keep an eye on in 2008, such as the Ritz-Carlton Residences at Cairnhill, Hilltops at Cairnhill, Paterson Suites at Paterson Road, and The Marina Collection and The Quayside Isle in Sentosa Cove. We would also be monitoring The Cascadia and Floridian at Bukit Timah, and the development by CDL in Thomson Road for signals of strength in the mid-tier market. For the mass market segment, it will be the developments at Simon Road and Bedok Reservoir and Park Natura at Bukit Batok. In the landed property sector, international attention-grabbers in Sentosa Cove could be launched in 2008.

The rental market is also expected to strengthen. Based on robust demand and limited supply being completed, coupled with the withdrawal of properties in the prime districts through en bloc sales, rentals are likely to hit new highs.

Rents in prime districts will increase by 20 to 30 per cent next year, to an average of $6 to $8 per sq ft per month. The trend of existing tenants in prime districts moving out to fringe or suburban areas will continue, and this will support the annual 50 to 80 per cent growth of the suburban rental markets, at average rents of $4 to $5 per sq ft per month.

Though the property market continues to exhibit strong performance, there are several factors which could affect the residential sales market. Factors such as prolonged uncertainties in the global equity markets, further property measures imposed by the government to cool the market, rising oil prices and high inflation rate could possibly dampen investors’ sentiment and confidence. Increased operating costs due to rising residential and office rents have also sparked concerns about the erosion of Singapore’s attractiveness for MNCs.

The Singapore government targets a long-term economic growth of 4 to 6 per cent per annum. We have been making basic changes to diversify our economy, through the IRs (conventions/exhibitions, Universal Studios theme parks), through investments in R&D and intellectual property, through continued liberalisation of funds management, private banking and insurance industries. This re-positioning of Singapore as a vibrant, global city will continue to support the residential market.

Singapore is undergoing a structural upwards re-rating of the property market. Barring unexpected shocks, property prices will continue to rise for at least three years, and if the IRs deliver their performance, another five to seven years. And even if there were a downturn in the property sector beyond 2012, the authors believe that bottom prices then will still be higher than the prices of 2007.

Given the factors outlined above, what might be the opportunity cost of doubting the continued growth in this market and staying on the sidelines and waiting for it to drop?

Source : Business Times - 14 Nov 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985
mindy@mindyyong.com

http://www.hotvictory.com

Six winning research projects awarded up to $60m in funding - Singapore

Six winning research projects awarded up to $60m in funding - Singapore

All have potential to be developed into industries: NRF chairman Tony Tan
By CHEN HUIFEN
THE National Research Foundation (NRF) will award up to $60 million in funding to six projects as part of an inaugural competitive research programme (CRP) launched in April.
The winners of the maiden grant call were chosen by an international evaluation panel from a pool of 124 proposals submitted.

Proposals were assessed on the quality of the research ideas, feasibility, the track record of the researchers and potential contribution to the economy.

‘Each programme demonstrated internationally competitive high-impact science, strong research teams and strong potential to generate economic and/or societal benefits for Singapore,’ said the international evaluation panel chairman, Rita Colwell.

‘The final programmes selected also involved meaningful partnerships between industry and academia aimed at realising the potential of use-inspired research to generate solutions and opportunities.’

Two of the six winning projects emerged from Nanyang Technological University (NTU). One involves the application of photonic technology in biotech and communications processes. The other is looking at integrating membrane distillation and solar technologies to bring about a natural system for water recycling.
Choo Fook Hoong, a team member of the water production and recycling project, said that he is thrilled to have won a grant. ‘Basically, this recognises all the hard work that we put in and we look forward to the challenge,’ he said.

The remaining grant recipients came from the National University of Singapore (NUS). They will research lipids, spintronics (a form of technology that makes use of the spinning state of electrons), membrane materials for energy applications and new methods to make graphene materials for the electronics industry.

‘All six programmes have the potential, at this stage, to be developed into industries,’ said NRF chairman Tony Tan. ‘Obviously, not all of them will fulfil that promise to the same extent, but that’s the essence of what research is.

‘Maybe, out of the six, two of them can actually turn out to become a significant economic development. At this stage, we don’t really know, and we shouldn’t try to put very detailed economic considerations at this stage, otherwise it is not research.’

NRF has also launched the second grant call under the CRP. The panel - made up mainly of eminent scientists and academics from Europe and the US - noted that there were no female or private sector winners this time.

‘I hope there would be greater diversity, many kinds of diversity, in the future,’ said Dr Colwell.

NRF has allocated $250 million over four years for grants in a bid to encourage a ‘bottom-up’ approach towards new research ideas that Singapore may invest in. Up to $10 million, to be disbursed over three to five years, is available for each approved project.

The scheme complements the existing NRF strategic research programmes which focus largely on three fields: biomedical sciences, environmental and water technologies, and interactive and digital media.

Source : Business Times - 14 Nov 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985
mindy@mindyyong.com

http://www.hotvictory.com

Ho Bee posts 297% jump in Q3 earnings - Singapore

Ho Bee posts 297% jump in Q3 earnings - Singapore

Revenue up 137.9% due mainly to a 149% rise in development properties’ sale
By KALPANA RASHIWALA
HO Bee Investment, the dominant residential developer at Sentosa Cove, yesterday posted net earnings of $39.27 million for the third quarter ended Sept 30, up 297 per cent from $9.89 million a year earlier.

The jump was on a 137.9 per cent increase in revenue to $129.6 million, due mainly to a 149 per cent rise in the sale of development properties.

The main contributor to revenue was progressive recognition of sales of residential projects such as Coral Island, which obtained a Temporary Occupation Permit in August, Orange Grove Residences, The Coast and Paradise Island.

For the first nine months of this year, Ho Bee’s net profit leaped 391.8 per cent year on year to a record $233.4 million, benefiting not only from a 133.8 per cent increase in revenue to $535.4 million but also a $71 million gain in fair-value changes on investment properties.

Chairman and CEO Chua Thian Poh said the group’s revenue and earnings for the rest of the year and the next few years will be buttressed by the progressive recognition of income from successful residential projects that have been launched.

In its results statement, Ho Bee said that the recent withdrawal of the Deferred Payment Scheme by the authorities will have an initial impact on prices and demand.

‘The group does not anticipate its upcoming residential projects in the Core Central Region, which includes Sentosa Cove, to be adversely affected as underlying demand from both local and foreign buyers is expected to remain relatively strong,’ it said.

Mr Chua said that despite good sales, ‘we continue to be prudent in the way we conduct our business, always bearing in mind that we have to ensure long-term sustainable growth for shareholders’.

Ho Bee’s Q3 earnings per share jumped to 5.33 cents from 1.34 cents in the year-ago period.

Net asset value per share was 102.8 cents at Sept 30, up from 67.9 cents as at Dec 31, 2006. On the stock market yesterday, Ho Bee shares ended one cent higher at $1.78

Source : Business Times - 14 Nov 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985
mindy@mindyyong.com

http://www.hotvictory.com

Splurging on luxury items up 29% in Q2: report - Singapore

Splurging on luxury items up 29% in Q2: report - Singapore

By UMA SHANKARI
(SINGAPORE) Sales of luxury timepieces, jewellery and designer fashion items, as well as takings at fine dining establishments, were 29 per cent higher in the second quarter of 2007 as compared to the same three months last year, says a new report by American Express.

The report - Lifestyle Index and Spending Trends - also shows that tourists contributed $3 out of every $10 of what AmEx calls ‘luxury lifestyle spending’ in the second quarter of the year.

Spending in the sector is growing by 30 per cent annually - affirming Singapore’s status as a playground for the world’s affluent.

The report tracks spending by AmEx cardholders in four key segments, based on data from more than 100 retail and dining establishments. And foreign tourists are spending more and more on luxuries.

Consumers from the US led tourist spending in two out of the four categories tracked in the report - luxury watches and fine dining. Consumers from Britain led spending on high-end jewellery, while Indonesians led spending on designer fashion.

Other top-spending tourists include visitors from Malaysia, Hong Kong, Australia and Japan. The report identifies Indians, who are increasingly travelling to Singapore for leisure, as one of the fastest-growing groups of affluent spenders.

But the strong tourist spending in no way overshadowed the growing appetite of local affluent consumers for luxury lifestyle goods, AmEx said.

From April to June 2007, purchases by local people accounted for 64 per cent of luxury watch sales, 71 per cent of high-end jewellery sales, 72 per cent of designer fashion sales and 74 per cent of fine dining billings.

‘We are seeing sustained growth in affluent spending, particularly among our cardmembers, both in terms of total amounts spent as well as the size of individual transactions,’ said Atul Mathur, AmEx’s senior VP for Asean and South Asia.

‘And the Singapore experience mirrors similar spending growth patterns across the region.’

In particular, sales of luxury watches rose by 52 per cent in the second quarter of this year.

Singapore is one of the most popular shopping destinations in the world when it comes to luxury watches, industry players say. Watch retailers here stock a wide range of brands and bring in rare limited editions.

Spending on high-end jewellery also grew by 51 per cent in the second quarter, while high-end fashion sales were up by 34 per cent. Fine dining spending also grew, but at a relatively slower 19 per cent.

The report shows that affluent consumers are paying more for each item. For example, when it came to luxury watches, AmEx cardmembers spent an average of $3,465 per transaction in the second quarter of 2007, up 62 per cent compared to a year ago.

Source : Business Times - 14 Nov 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985
mindy@mindyyong.com

http://www.hotvictory.com

Separate deals, but court rules it’s en bloc deal - Singapore

Separate deals, but court rules it’s en bloc deal - Singapore

UOL unit says 53 separate contracts signed; at stake is $286,200 in stamp duty
By WEE LI-EN
(SINGAPORE) En bloc sale or 53 separate contracts entered into by individual owners of the apartments to sell? That was the $286,000 question that emerged in the High Court in what can be described as a test case for property developers to get savings on stamp duty.

Justice Tan Lee Meng said that the case raises an interesting question as to how stamp duty is assessed on properties bought through en bloc sales.

United Overseas Land subsidiary UOL Development Novena (UOLD) claimed that its purchase of 53 properties at Minbu Road for $61 million was not an en bloc sale but 53 separate contracts which it entered into with the individual owners.

At stake was $286,200 in stamp duty savings if it was found to have bought the 53 properties separately.

This is because under the Stamp Duties Act, stamp duty is charged at one per cent on the first $180,000 of purchase price, two per cent on the next $180,000 and three per cent on the balance of the purchase price that exceeds $360,000.

The way this works out is that stamp duty can be calculated simply by taking three per cent of the purchase price minus $5,400 - that being the sum of one per cent on $180,000 and two per cent on the next $180,000.

So if there was only one contract arising from an en bloc sale, the $5,400 could only be subtracted once.

But if there were 53 contracts, then $5,400 can be subtracted 53 times, resulting in savings of $286,200 for the property developer.

However, the High Court ruled last month that UOLD bought the 53 properties in an en bloc sale.

The court said that the owners of the Minbu properties intended to sell their properties on the basis of an en bloc sale.

The invitation to tender issued by the owners said that they ‘collectively’ invite offers to buy their property on an ‘en bloc’ basis.

The court also found that there is no evidence that UOLD’s offer to buy the Minbu properties for $61 million was made on the basis that separate contracts were to be entered for each property.

And even though the owners sent 53 separate letters of acceptances to UOLD according to the developer’s request, the court found that the owners did not ‘give any thought’ to converting the en bloc sale to 53 separate contracts.

Justice Tan Lee Meng said that the case raises an interesting question as to how stamp duty is assessed on properties bought through en bloc sales.

However, he found that the plan for 53 separate contracts was mooted ‘for the sole purpose of lessening the stamp duty payable on the en bloc sale’.

BT understands from UOLD’s lawyers that the developer has not filed an appeal yet. It has until tomorrow to do so.

UOLD was represented by Tan Kay Kheng and Teo Lay Khoon from WongPartnership.

Source : Business Times - 14 Nov 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985
mindy@mindyyong.com

http://www.hotvictory.com

Modest bidding for CBD office site as caution sinks in - Singapore

Modest bidding for CBD office site as caution sinks in - Singapore

Top offer of $779.42 psf ppr half of next- door site’s recent bid
By KALPANA RASHIWALA

(SINGAPORE) The new-found caution surrounding the Singapore office market is now spilling over to the Central Business District.
Reflecting this, a site at Marina View diagonally behind One Shenton yesterday attracted a top bid from Macquarie Global Property Advisors (MGPA) of $779.42 psf per plot ratio - only about half of the group’s winning bid in September for the site next door.

Knight Frank managing director Tan Tiong Cheng acknowledged that office investors have turned cautious. ‘The outcome of the sub-prime episode may have an impact on demand for office space in Singapore, while the government has expressly stated recently it will boost supply of office land in the next few years to alleviate the current shortage,’ he said.

Another reason for the lower bid for the latest site - Marina View Land Parcel B - is that it has a minimum hotel component of at least 25 per cent of the site’s maximum gross floor area, property consultants said. ‘Hotel land values are a lot lower than office values,’ said Mr Tan.

‘The latest tender outcome is also a knee jerk-reaction to what has been happening lately in the US - the sub-prime crisis being worse than initially thought and big banks being affected. Banks are prime users of office space.’

The only other bid at yesterday’s tender came from units of CapitaLand, at $898 million or $734.52 psf ppr.

BT understands that CapitaLand was to team up with Thai tycoon Charoen Sirivadhanabhakdi’s privately held vehicle Pacific Coast Assets, had its bid been successful.

By most counts, the top bid at yesterday’s tender by MGPA unit MGP Kimi of $952.89 million or $779 psf ppr was lower than had been predicted.

CB Richard Ellis executive director Li Hiaw Ho had expected Marina View Land Parcel B to fetch about $1,200 to $1,300 psf ppr, lower than the $1,409 psf ppr that an MGPA unit paid in September for the next door Marina View Land Parcel A, considering the minimum hotel component for the latest plot. ‘There is a chance that the state’s reserve price may not have been met and that the latest site may not be awarded,’ Mr Li suggests.

However, other property consultants argued that the plot will be awarded.

Mr Tan said his firm, Knight Frank, predicted in late July projected that the site would attract bids of $1.1 billion to $1.3 billion, or $900-1,060 psf ppr. ‘Taking the mid point of $1.2 billion, the top bid was about 20 per cent lower than our projection. To me that is within range, and I would expect the site to be awarded,’ Mr Tan said.

‘The price is still substantially higher than other sites sold in the Marina Bay area in recent years.’

Jones Lang LaSalle’s Asia Capital Markets head Stuart Crow said: ‘The price seems fair going by recent land bids and taking into account the hotel component for this site.’

MGPA’s top bid at yesterday’s tender also ‘reinforces the foreign investor interest in the Singapore property market fundamentals’, he added. ‘In my view, the site will be awarded.’

Mr Crow estimates that MGPA’s bid price for Parcel B yesterday reflects a break-even cost of about $2,200 to $2,300 psf for the office component of a potential development on the site. As for the hotel component, market watchers estimate the break-even cost could be about $700,000 to $800,000 per room.

Marina View Land Parcel B has a site area of about 0.9 hectare and can be developed into a maximum gross floor area (GFA) of about 1.22 million sq ft, of which at least 60 per cent must be for offices and at least another 25 per cent for hotel use.
Source : Business Times - 14 Nov 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985
mindy@mindyyong.com

http://www.hotvictory.com

Overstretched Singapore pushes back projects worth $2b

Overstretched Singapore pushes back projects worth $2b

Move to ease pressure on construction resources
By UMA SHANKARI
(SINGAPORE) The government said yesterday that it would postpone several public projects - at a time when the building boom is stretching Singapore’s construction resources to the limit.

Construction squeeze: Developers say most contractors are fully booked for the next 12 months. Construction costs have also gone up by as much as 40 per cent over the last year on the back of rising raw material prices and wage increases brought on by tight labour supply
The government’s cut-back could reduce the demand for additional construction manpower in the next two years by 20-40 per cent. The authorities will further relax policies on the employment of foreign manpower and help expand construction capacity.

The government’s move to push back projects worth at least $2 billion comes as construction costs escalate and contractors are in short supply.

Developers told BT that most contractors are fully booked for the next 12 months.

Construction costs have also gone up by as much as 40 per cent over the last year on the back of rising raw material prices and wage increases brought on by tight labour supply.

‘The investment and property boom is leading to a construction squeeze,’ said Citigroup economist Chua Hak Bin. ‘The property boom is moreover not confined to just one segment, but is across the board - commercial, residential, infrastructure and the integrated resorts (IRs).’

Annual construction demand is expected to hit $19-$22 billion in 2007, and is likely to be sustained at this high level in 2008 and 2009, said industry regulator Building and Construction Authority (BCA).

The sharp increase in construction demand in Singapore also coincides with a global surge in construction activity - especially in China, India and the Middle East.

For developers here, this adds up to a shortage of contractors and rising costs. ‘Contractors are booked 12, 15 months ahead,’ said the chief executive of a Singaporean developer. ‘And it’s not just the main contractors; the main contractors are saying that sub-contractors are hard to find as well.’

‘I think most contractors already have big orderbooks, so supply is tight,’ said Cheang Kok Kheong, development and property general manager for Frasers Centrepoint (FCL). ‘There are many big projects for them, such as the IRs and the Gardens by the Bay.’

FCL is not feeling the pinch as it has the support of contractors it has worked with for many years, Mr Cheang said. But others, he added, might not be as lucky. ‘If you don’t have that many projects and you are new in the market, then there will be difficulties getting contractors,’ he said. FCL’s construction costs have gone up by 20-30 per cent over the last year. Other developers report cost increases of up to 40 per cent.

Several big projects have already been hit. Genting International recently upped its budget for its Sentosa IR to $5.75 billion - from an original $5.2 billion. The company said that $275 million of the $550 million budget increase is due to rising construction costs.

And in August this year, Marina Bay Sands said that its cost could escalate to $5.2 billion, from $5.05 billion originally.

On the flip side, things are starting to look very bright for construction companies, as the sector is coming off a decade of sub-zero growth rates.

Kim Eng analyst Wilson Liew estimates that some contractors are now able to command a higher pre-tax margin of about 15 per cent, as compared to 5 per cent in the past. ‘This margin is expected to improve even further as established contractors hold greater bargaining power amidst an increased number of contracts,’ he said.

But this could soon change. Right now, BCA is working with developers and builders to expand the capacity of both local and foreign firms in Singapore. It is also exploring attracting new foreign contractors - especially those in the top-tier and specialist trades - to come to Singapore, it said.

The government will also monitor the manpower situation closely and will further adjust its manpower policies if necessary, BCA said.

For now, various government agencies have identified a list of public projects in the pipeline for 2008 and 2009 that could be rescheduled to 2010 and beyond.

The projects being deferred include the Health Ministry’s National Addiction Management Centre, and Cluster C of the Changi Prison Complex.

Public sector projects that are ‘essential’ - such as those required for Singapore’s economic growth or needed to meet key social needs such as public housing - would not be affected, BCA said.

‘The bulk of the construction activities and resources in 2008 and 2009 are expected to be concentrated on mega projects such as the IRs, Marina Business Financial Centre, Downtown MRT Line and petrochemical plants,’ said BCA. ‘Once these have been completed, more construction resources and capacity will be available for other new projects beyond 2009.’

Source : Business Times - 14 Nov 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985
mindy@mindyyong.com

http://www.hotvictory.com