Singapore Real Estate 2008, 6-Month Market Review and Projection

“Where is the Market Heading?”

6-Month Market Review and Projection For Singapore Real Estate 2008

The Myth, Reality and Awkwardness of 2008

Now, let me take you through the market performance in the past six months by way of answering the following questions and then do a projection of the real estate market in the next six months:

(A) How has the market performed? (B) How different is it this time than last? (C) What do all these mean to real estate agents in general? And where do we go from here?

A – How Has the Market fared?

(1) Private Home Prices Jump 31% in the whole of 2007

From October up to end of December 2007, Singapore private home prices rose 6.6%, compared to 8.3% in the third quarter. For the whole year, home prices climbed 31% over 2006. Take up rate for new homes hit a record 15,000 new homes in 2007. It is a 34.5% growth over the 11,147 new homes sold in 2006.

Here are the price movements of condos and apartments in the last quarter of 2007 (Oct – Dec):

- In the Core Central Region, prices increased 7.0% (8.3% in the third quarter) on a quarterly basis in second quarter. This region comprises the traditional prime districts 9, 10 and 11 and Marina Bay and Sentosa.
- In the Rest of Central Region, prices increased 7.3% (7.9% in the third quarter) on a quarterly basis in the second quarter. This region comprises locations like Queenstown, Bukit Merah, Outram, Bishan, Kallang and Marine Parade.
- Outside Central Region, prices increased 7.5% (7.9% in the third quarter) in the same period. This region comprises locations like Woodlands, Jurong, Hougang, Ang Mo Kio, and all the outlaying areas.

Myth or Reality (1) : For the whole of 2008, barring any miracles, the take-up rate of new homes should be less than 10,000 given current uncertainties in the global economy. With Singapore’s domestic economy continued to be strong (driven by the ongoing boom in the construction sector) and the allure of Singapore as a safe haven and a global financial hub for a bigger portion of private wealth, the upside is still good.

The booming domestic sector should continue to support the sale of mid-end and mass-market homes which are expected to experience a healthy growth of 10% to 15% price rise. For the luxury homes segment, prices and take-up rate are expected to moderate, having gone through a vintage year of fast growth.

Awkwardness (1) : Sale volume and prices may continue to grow in 2008 on the back of sustained inflow of foreign funds seeking safe haven outside the United State of America, but buying activities may be restricted to institutional and corporate type of portfolio investments, such as bulk purchases (e.g. overseas property funds acquiring a number of blocks in a project), swop deals (e.g. between developers) and marriage deals (e.g. local and overseas joint ventures buying back own projects for mid-term investment income). Such purchases usually occur in selected areas like the Core Central Region and the outskirt of Orchard Road areas.

(2) Condo / Apartment Sales and Foreign Ownership of Private Homes in 2007

Table 1 – FIRST HALF 2007 Total Sale of private apartments/condos (including sub-sales)

(FB = foreign buyers) Source of statistics SISV RealinkFirst half private property sales were 19,801 units. Foreigners accounted for 2,763 or 13.95% of total transactions.

Table 2 – SECOND HALF 2007 Total Sale of private apartments/condos (including sub-sales)

(FB = foreign buyers) Source of statistics SISV Realink

Second half private property sales were 11,666 units. Foreigners accounted for 1,986 or 17.02% of total transactions.

Table 2.2 – Comparison between FIRST and SECOND HALF 2007 non-landed properties transactions (including sub-sales)

In the second half of 2007, while primary sales dropped 81.65% to only 2,565 units sold, private secondary sales actually improved 56.23% to 9,101 units sold, on the strength of spectacular hikes in private rentals. For the whole year, the first half outperformed the second half by 8,135 transactions.

Table 3 – Percentage of foreign ownership of condos / apartment in First and Second half of 2007

In the second half, the absolute numbers of foreign purchasers of condo / apartments were down. However, the percentage of foreign purchasers actually went up 2.02 percentage point. It means that while the overall purchases were reduced due to one reason or another, the number of foreign purchasers did not change drastically. It was reduced by only 1,103 units (3,205 – 2,102) for the whole year.

Myth or Reality (2) : Although the overall private home sales went down in the second half of 2007, foreign ownership of Singapore private homes gained in percentage term, especially for high-end homes.

The Million Dollar Question now is: “Will the trend of ‘sustained foreign buying’ continue in the first half of 2008?” From the appearance of the statistics, the answer has to be a YES. This is because of the following reasons:

(i) The threat of an economic recession in the US in 2008 looms larger each time a global financial institution made a revelation of massive write-down in relation to its exposure to the US sub-prime mortgages (e.g. UBS, Citigroup, and Merrill Lynch).
(ii) The value of US dollar will continue to weaken against Singapore dollar throughout the year, and Singapore will continue to be a safe haven for international funds.
(iii) The European economy is similarly under the weather due to its symbiotic relationship with the US market.
(iv) The Chinese real estate market has shown signs of over-heating and the risks of investing there have grown much larger.

Awkwardness (2) : With limited upside of less than 10% projected price growth, the buying activities may continue to thin, which means the percentage gain of foreign ownership will continue to rise amid smaller business volume for real estate agents.

(3) Landed Property Sales in 2007

(3.1) Good Class Bungalows (GCBs)
In 2007 so far, a total of 96 GCB were transacted amounting to $1.28 billion. The value is an all-time record and has surpassed slightly the $1.24 billion achieved for the whole of 2006.

However, in terms of transaction volume, GCB transactions from January to November this year still falls short of the 118 deals transacted for the whole of 2006. This could be due to the phenomenal rise in GCB prices and the restrictions placed on non-residing foreigners (only PRs are allowed to own GCB provided they obtained the approval from the land authority).

(3.2) Upside of Landed Home Prices Good
There are a number of compelling reasons for landed home prices to rise further:
 Limited stock - Currently, there are 68,360 landed houses in Singapore, making up only 29% of the total 233,143 private property stock.
 Limited new supply - In the next five year, supply of landed homes will remain subdued with only 1,872 landed units under construction and another 2,579 landed units being planned, accounting for only 6.6% of all new supply expected from the second half of 2007 to 2011.
 High rental return - Rents of landed homes have outpaced its capital values, according to URA’s rental indices for all the landed property types. In the first half of the year, rents of detached houses increased by 13%, semi-detached houses by 11.4% and terrace houses 17.3% hike in rents.

Table 4 - Sale of Landed Properties in First-half of 2007

Source of statistics SISV RealinkTable 5 - Sale of Landed Properties in Second-half of 2007

Source of statistics SISV RealinkTable 6 – Sale of Landed Properties in 3 Years starting 2005

Myth or Reality (3) : The increase in demand for landed properties continues to go up from 2005 onwards. However, the fundamentals on landed properties are different from non-landed properties. The former hinges on continued good performance of locals; while the latter the continued confidence in Singapore by foreigners. The following factors may lead to more locals having to dispose of their landed properties and down grade to smaller homes in 2008 and 2009:(i) the domestic economy relies only on the construction and services sector,
(ii) the traditional economic drivers such as electronics and pharmaceuticals continue their slump especially the electronics sector which has gone through 15 quarters without growth,
(iii) the threat of our trading partners, i.e. the EU and the US going into recession this year.

Awkwardness (3) : With more positives than negatives in the domestic economy in 2008 and a general expectation that 2009 will be an even better year, sellers in general will factor in the completed casinos, the F1 Circuit, the Gardens at the Marina (which has nothing to do with their landed property prices) when putting their homes on the market. With such a rosy economic backdrop, it will be tough for inexperienced agents to ‘talk down’ the asking price.

(4) Sub-sales of private homes – volume down but value hit 10-year high

The number of sub-sale transactions fell to 1,374 (or a quarter-to-quarter decline of 23%) in the third quarter of 2007. There were 1,184 or 13.9% of sub-sales in the second quarter and 6.3% in the first quarter of 2007.

Sub-sale value of apartments transacted in the first three quarters of 2007 was at an all-time annual high of $6.7 billion. However, in terms of volume, it is about half of what it was in 1995.

Sub-sales deals made up 19% of the volume, up from 16% in the second quarter. Median sub-sale prices are at a new record high of $1,246 psf. Quarter-to-quarter, the increase is 13.6% and a year-on-year increase of 25%.

The value per transaction of sub-sale apartments is also at a record high this year at $1.71 million per transaction. However, some prestigious projects have already shown sign of fatigues such as The Sail in Marina Bay which, according to caveats lodged, saw six (6) transactions in December 2007. The sub-sale prices of many units have drastically dropped – suggesting forced sales.

Table 7 – Sub-sale activities over the past 3 years

Myth or Reality (4) : In 2008, the developers will price their new launch projects at a 15% to 20% premium to factor in higher inflation risks and to protect the value of redevelopment sites where construction have not started. It will take longer time for developers to offload leftover units due to higher asking prices and ample supply of new condos and hybrid HDB flats in the next one to two years. By 2010, there will be an additional 43,000 new condos and apartments available either for occupation or launches in many parts of Singapore.

Awkwardness (4) : With a short-lived bull-run, investors and speculators alike will be left with high-priced properties that they have bought in 2007 before the en bloc craze came to a sudden halt. With Deferred Payment Scheme scrapped and banks tightening credit, sellers and agents will be hit be a double whammy of high inflationary pressure on holding / marketing costs while new supply of similar condos continue to rise.

(5) En bloc deals at all time high

For the whole of 2007, a total of 109 en bloc sale deals worth $13.3 billion were done. But, en bloc sales will be a passing phenomenon this year due to a combination of negative factors against en bloc sales such as:

 Massive Government Land Sale Programme (since January 2007)
 Withdrawal of Stamp Duty postponement (from January 2007)
 Withdrawal of Deferred Payment Scheme (from September 2007)
 Increase of Development Charge percentage from 50% to 70% of market value (from July 2007)
 Change in the Collective Sale Law (from Oct 2007)

Table 8 – Past 10-year en bloc sale record

Myth or Reality (5) : The slew of collective sales in the whole year of 2007 yielded $13.3 billion in total collective sale proceeds. The huge cash windfalls would be arriving for thousands of en bloc sellers who would need replacement properties. Most of the amount is due to come in between mid 2008 all the way to 2010, and this will prompt a pickup in market activity. Assuming 50% of the sellers affected by en bloc sales already have a second home, there will be at least $5 billion about to be ploughed back into the market from 2008 through to 2011.

Many owners of old condos and apartments, such Bayshore Park and some privatised HUDC projects, are hoping that the Government will increase the plot ratio in the new Master Plan to be promulgated this year, and this will allow them to sell their apartments collectively for a huge windfall.

Awkwardness (5) : A minority of en bloc sellers already flexed their muscles at the HDB resale flat market pumping up prices to unrealistically high level. Almost all flat sellers are now hoping to sell their flats to en bloc sellers and they will be willing to pass over a chance to sell at the market price and prefer to wait for their ‘Prince charming’.

(6) Investment sales hit historic high at $51 billion in 2007

Total investment sales of property registered an all-time historic record of $50.8 billion in 2007. It is a 66% jump from 2006’s $30.57 billion. Incidentally, the aggregate investment sales figure for eight long years of recession - from 1996 to 2003 - was only $54.9 billion.

Investment sales refer to major investment transactions like office buildings and shopping centres, as well as sites bought for development including collective sale deals, Government Land Sale (GLS) programme and strata-titled units of at least $5 million. They do not cover purchases of single property units by individuals.

Investment sales are considered a barometer of developers’ and big investors’ mid-to-long-term confidence in the market.

Table 9

With the passing of the new collective sales law and hefty increase in Development Charge percentage and DC rate, en bloc sales are expected to dwindle.

Residential deals halved from $20.3 billion in first half of the year (due mainly to robust collective sales) to $10.3 billion in the second, due to the sudden and drastic slowdown in collective sales.

Myth or Reality (6) : 2008’s overall investment sales of property are likely to be lower and hover around $30 billion. This is based on the assumption that foreign funds are still keen on Singapore’s commercial buildings and developers are still bullish about the Government Land Sale Programme. However, the situation will pan out depending very much on the resilience of the US economy against recession.

Awkwardness (6) : Sale of big ticket properties continue to shore up official numbers while individual agents are struggling to attract enquiries about their resale residential listings.

(7) HDB Resale Flat Prices Grew 17.4% in 2007

HDB resale flats price index registered a 5.6% increase in the fourth quarter of 2007. The quarter-on-quarter increases of HDB resale flats are as follows:

Table 10 – Price growth of HDB resale flats quarter-on-quarter

For the whole year, prices of HDB resale flats grew by 17.4% in 2007. The whole year resale transaction volume was 26,215 (excluding resale flats sold by HDB itself) and the majority of resale flats were transacted at high cash-over-valuation (COV) towards the second half of the year.

(7.1) More and more resale flat buyers need to fork out higher cash
Spurred on by the upward trend, flat sellers are now asking for prices that are significantly higher than valuations. And since July 2007, Cash-over-Valuation (COV) has become a norm for HDB resale flats and about 80% of HDB resale transactions attracted cash above valuation.

According to HDB figures, the median price for four- and five-room flats are $18,000 above valuation. For two- and three-room flats, the median amount was $15,000. The highest amount paid above valuation for a five-room flat was $150,000. The figures were $57,500 for a four-room flat and $40,000 for a three-room flat.

HDB statistics show that the median COV for executive flats in Bukit Timah rose to $137,500 in the third quarter of 2007. In Marine Parade, the COV for five-room flats hit $84,000 in the same quarter.

(7.2) Interests in HDB Resale Flats Up since July 2007
The table below shows the transaction volume of HDB resale flats for the whole of 2007.

Table 11 – Increasing volume of HDB resale flats transactions Month-on-Month

The tables below show that the 10 largest Housing estates have the highest number of flats sold; while the 3 smallest housing estates enjoy the highest transacted prices, due to rarity and good location.
Table 12 – The 10 largest HDB Estates sell the highest number of flats

Table

13 – The highest transaction prices always come from smaller HDB Estates

(7.3) HDB Resale Prices are Trending Upwards since July 2007
In December 2007, newer Design-and-Build 5-room flats at the precincts around Blocks 687 (A-D) and 690 (A-F) of Woodlands were transacted at between $320,000 and $347,000 depending on different attributes such as floor levels and facing. Other 5-room flats at older precincts have been transacted at the price range of between $270,000 and $300,000.

Six months earlier in June 2007, similar Design-and-Build 5-room flats at the same Woodlands precincts were transacted at between $270,000 and $315,000. That is a difference of 18.5% and 10% growth in transacted prices over a 6-month period.

Likewise, in December 2007, newer Design-and-Build 5-room flats at the precincts of Blocks 680 (A-E) to 683 (A-E) of Jurong West were transacted at between $307,000 and $370,000 depending on different attributes such as floor levels and facing. Other 5-room flats at older precincts have been transacted at the price range of between $205,000 and $287,000.
In June 2007, similar Design-and-Build 5-room flats at the same Jurong West precincts were transacted between $290,000 and $318,000. That is a price growth of around 15% for the similar resale flats.

(7.4) Case study on Tampinese Executive Flats
A study was done on the capital appreciation of Executive flats in Tampines during the past 12 months.

The parameter of the study is to compare prices of two categories of E flats – one group with poor attributes (therefore lower sale prices) and the other with good attributes (therefore higher sale prices) - and track the price mobility. The study yielded the following results:

Table 14

* LF = Low Floor / MF = Mid-Floor / HF = High Floor

 The price growth year-on-year (October 06 and Nov 07) between Executive flats with same attributes:

Price increase of Lowest priced E flat = $47,000 (14.7% increase in price)
Price increase of Highest priced E flat = $119,000 (27.3% increase in price)

 Compare First half-year growth (Oct 06 and May 07) between Executive flats with same attributes:

Price increase of Lowest priced E flat = - ($3,000) (price actually dropped)
Price increase of Highest priced E flat = $12,000 (2.8% increase in price)

 Compare Second half-year growth (May 07 and Nov 07) between Executive flats with same attributes:

Price increase of Lowest priced E flat = $50,000 (15.7% increase in price)
Price increase of Highest priced E flat = $107,000 (24.5% increase in price)

The following conclusions are drawn from the study:

(i) The comparative data shows that the price increase occurred only in the second half of 2007. This means that the HDB resale market is beginning to experience the effect of a better economy and the heightened activities may continue for a few years.
(ii) Price surge in E flat occurred after prices for private homes had reached a new historic height. It also showed that many middle-income group purchasers have been squeezed out of the private home market.
(iii) Resale flats with good attributes, such as high floor level, younger in age (newer in flat design) and closer to amenities like MRT station and shopping mall, achieve higher and faster appreciation in capital value.

Myth or Reality (7) : HDB resale activities have returned to the forth after the past 8 years of doldrums. While the psf prices of private condominiums have increased by leaps and bounds, the unit floor area costs of HDB flats in the heartlands remain affordable. With more and more middle income earners being squeezed out of the private property market, resale HDB flats have regained their favour among the higher income earners – hence the increases in transaction volumes as well as resale prices of larger HDB flats such as 5-room and executive flats.
Sellers of HDB flats that attracted high COVs may upgrade to mass market private homes with spare cash from the high COVs and thereby pumping up market activities. However, the high COVs for HDB resale flats may cause mass market property prices to climb and once again put private homes out of reach of HDB upgraders.

Awkwardness (6) : More and more sellers of mass market private homes are increasing their asking prices with the logical thinking that if HDB flats could fetch more than $700,000, a four-room private condo should command at least $1 million. Before more new condos come on stream, the tug-of-war between the sellers’ asking prices and the realistic prices buyers are willing to pay may cause the market to go through a three- or four-month drought.

B – How different is this time?

The second half real estate market told a very different story from the first half. The global situation has worsened since last August with the revelation of the sub-prime mortgage problems in the US effectively sidelining the majority of buyers. While the whole year records look impressive, the detailed numbers of the second half results were worrying, to say the least.

(1) The world may go into recession following the cues from the US

The huge losses experienced on the first day of Wall Street augur ill for the entire global economy. Year 2008 will be a volatile and difficult year for the US – the world’s largest economy. The US domestic economy will slow down due to the financial market woes.

The housing crisis in the US is far from over and the credit markets and still saddled with bad debts. With write-offs of over US$40 billion by banks looking to clear their books of sub-prime loans and investments, 2008 looks set to be more of the same story.

This will certainly drag down the entire economy and put pressure on corporate earnings. The crisis is affecting everybody, not just the financial sector.

The threat of recession, inflation and even stagflation cannot be dismissed. It appears that 2008 will be amongst the most challenging market environments facing the US and the rest of the world in many years.

(2) Massive inflation causing entire market to be jittery about 2008

As houses become more expensive and prices of food and petrol continue to climb, Singapore inflation rate could hit a high of 6% in the first three months of 2008.

With an 18% to 25% upward revision, the increase in annual values of properties is significantly higher this year and the quantum of the recent taxi fare hike, food price and oil price increases are all much higher than earlier expected. As such, the inflation rate this year will exceed the Monetary Authority of Singapore’s forecast of 3.5 to 4.5 per cent for 2008.

The consumer price index (CPI) surged 4.2% in November 2007 year on year, a 25-year high. And housing value has a significant weight in the CPI.

However, the irony facing Singapore is that a likely US recession this year could ease inflationary pressure with demand for essential goods and oil going lower as a result.

(3) Inflation but a falling real estate rate

With the cheapening of US dollars, more foreign investors are bringing their funds into the Singapore system in bid to salvage the value of the money they are holding. This has resulted in two developments: firstly, an asset price inflation, and secondly a falling interest rate.

The two phenomena do not usually occur together. When they happen, that is, rising asset prices despite a falling Sibor (Singapore Interbank Offered Rate), asset price inflation will escalate.

The three-month rate has fallen from 3.44% a year ago to 2.13% in the second week of January 2008. This is a negative real interest rate as the bank’s interest rate is lower than the inflation rate.

The challenge this year for Singapore economy is how to stave off the possibility recession in the US. There will be a second round of gradual appreciation of Sing dollar against the US dollar. It is expected that Sing dollar will appreciate against the US unit from 1.43 at the end of the first quarter to 1.39 in the same period in 2009.

(4) Foreigners account for a quarter of total residential sales

Foreigners and permanent residents (PRs) chalked up 7,902 sales from January to November, which accounted for 24.9% of total residential sales so far.

The sales figures are the highest in 13 years, due to a robust regional economy and increasing arrivals of expatriates in Singapore.

Institutional investors also entered the market in a big way, picking up anything from several units to whole condo blocks and even development sites. They include Macquarie Global Property Advisors, Goldman Sachs and United States-based Wachovia Development.

The buying momentum propelled high-end condo prices pass the $4,000 psf mark and surged past the $5,000 psf mark for the very first time in local history. A 53rd floor 5,048 sq ft penthouse unit at The Orchard Residences went for $5,600 per sq ft in October, or slightly more than $28 million.

All thanks to participation of foreign buyers, other developments that have registered sales of above $4,000 psf include Hilltops, Ritz-Carlton Residences and Scotts Square.

In the meantime, MAS data shows deposits by non-residents totalled $29.8 billion in October 2007. Compared to 2002, the deposits were only $10.6 billion. Foreigners not residing in Singapore are not allowed to open bank accounts here in Singapore but the rule does not apply to individuals who intend to invest in real estate in Singapore.

(5) Foreign investment funds are top buyers of Singapore real estate

The total investment sales volume so far this year is $50.78 billion. Likewise, foreign funds are responsible for the majority of the purchases of investment properties. These foreign funds include names like Macquarie Global Property Advisors (MGPA), US-based Goldman Sachs, US-based Wachovia Development Corporation, German SEB and Dubai World Group – with MGPA topping the chart with $4.3 billion of purchases.

(6) One million foreigners making Singapore home

Singapore’s population is 4.68 million. This number has been contributed by qualified foreigners coming to Singapore in drove – to be exact 1,005,500. This is the highest number of immigrants in more than twenty years and the first time Singapore receives over a million new immigrants.

In terms of percentage rise, this year’s increase is 14.9% compared with last year which also achieved an impressive growth at 9.7%. The number of Singaporeans and permanent residents here also grew 1.8%, the same as the previous year.

In terms of population increase, the one-million-addition makes up a 4.4% rise over the previous year. The last time Singapore enjoyed a higher increase in population was in 1982 where population grew by 4.5%.

(7) Sales in the second half of 2007 were not as brisk the first

Despite strong overall sale figures for the whole year, the actual situation on the ground (especially towards the end of the year) was harsher than it appeared on paper. Let’s look at two aspects of the general market: (a) transaction figures; and, (b) marketing period (as such per listing’s holding costs).

(7.1) Transaction figures

Table 15 – Transaction figures with statistics on foreign purchasers

The allure of oceanfront living at Sentosa Cove and Keppel Bay can be seen in the second half of 2007. Despite a general weakness of the market, District 4 continues to attract strong demands from foreign buyers.

(7.2) Marketing period and holding costs
Listings took longer marketing period to sell, if they are sold at all. Below shows the statistics of marketing period (therefore holding costs) for every listing sold.

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A-Reit buys Singapore Acer Building for $75m

A-Reit buys Singapore Acer Building for $75m
It also bags warehouse in CBP, announces completion of HansaPoint
By KALPANA RASHIWALA
ASCENDAS Real Estate Investment Trust (A-Reit) has bought the Acer Building at International Business Park in Jurong East for $75 million or $344 per square foot of lettable area.

The completion of HansaPoint@CBP and acquisition of the Acer and Sim Siang Choon buildings will have a positive effect on A-Reit’s distribution per unit.

Market sources say the price reflects an initial yield of 6.5-6.8 per cent.

A-Reit yesterday also announced the purchase of Sim Siang Choon Building, on the fringe of Changi Business Park (CBP), from Sim Siang Choon Hardware for $31.89 million.

This is a four-storey warehouse with a first-storey showroom and a separate single-storey warehouse.

In addition, A-Reit said HansaPoint@CBP received a Temporary Occupation Permit on Jan 22 and has achieved full occupancy.

The $28.6 million project’s major tenants include Rohde & Schwarz Systems & Communications Asia, Credit Suisse and Citco Fund Services (Singapore).

The completion of HansaPoint@CBP and acquisition of the Acer and Sim Siang Choon buildings will have a positive effect on A-Reit’s distribution per unit (DPU).

A-Reit is buying Acer Building from Acer Computer International.

The deal involves Acer’s local subsidiaries Acer Computer (Singapore) and Logistron Services leasing back 23 per cent of the current net lettable area for five years with an option to renew for a further 3+2 years.

The building’s current occupancy is 97 per cent.

Acer Building’s sale was handled by DTZ through an expression of interest exercise that drew five offers.

The other bidders are believed to have been two other Singapore Reits, Frasers Centrepoint and a private fund managed by Mapletree.

The property, a high- tech business park development, was completed in May 1996 on a site leased from JTC Corp for 30 years with an option to renew for a further 30 years. It has a total lettable area of 20,231 sq metres.

A-Reit’s manager says there is potential to create a further 1,200 sq metres of lettable space.

According to a report last year, Acer is paying JTC an annual land rent of $715,469 with escalation of 4 per cent a year as of Q3 2007.

The new owner is expected to pay JTC a slightly higher land rent each year, according to the report.

BT understands that A-Reit should enjoy considerable upside from positive rental reversion, as a number of leases in the building are up for renewal in the next one to two years.

Some of these tenants are paying monthly rent of $2 to $2.60 psf, whereas current rents for similar properties in International Business Park are $3.20 to $3.60 psf.

Besides Acer, other tenants in the building include Jacobs Engineering, Converge Asia and Nortrans Shipping.

Source : Business Times  - 29 Jan 2008

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Mindy Yong

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Singaporeans spent more on luxury goods last year

Singaporeans spent more on luxury goods last year

Entertainment and travel tabs beat all past records: Amex
By UMA SHANKARI
SPENDING on American Express (Amex) cards in Singapore rose 22 per cent in 2007, fresh figures show. The increase came after a 23 per cent rise in 2006.
Growing affluence, the strong economy and wider lifestyle choices contributed to higher spending last year, Amex said. Spending on its cards was particularly strong during the holiday season.

Consumers indulged themselves more in 2007. ‘We saw significant growth in spending in specific categories,’ said Atul Mathur, Amex senior vice-president for Asean and South Asia. ‘Spending on high fashion is growing more than 20 per cent a year, while growth in spending on luxury watches and jewellery is over 45 per cent.’

Spending on fine dining is growing about 20 per cent a year, he added.

Singaporeans have always been big on travel and entertainment, but they beat all previous standards in 2007, Amex said.

Billings on its Singapore Airlines co-brand cards grew 32 per cent from 2006, while spending at Amex Selects partner restaurants rose almost 35 per cent.

Amex believes the trend is likely to continue with new locations to visit and new experiences available locally.

Strong growth in spending in 2007 came not just from older affluent people but younger people indulging in such pastimes as clubbing, wellness, movies and music, Amex said.

Looking ahead, the integrated resorts and the Marina Bay developments are expected to propel growth.

‘Given our industry-leading products we expect spending to keep growing in 2008,’ Mr Mathur said. Amex plans to ‘invest significantly’ in new programmes this year to provide greater choice to its customers, he said.

Source : Business Times  - 29 Jan 2008

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

Many projects clinch Singapore URA provisional clearance in Q4

Many projects clinch Singapore URA provisional clearance in Q4

But developers are in no rush to launch condos ahead of Chinese New Year
By KALPANA RASHIWALA
A SLEW of projects from various segments - residential, hotels, office and industrial/warehouse - received provisional permission (PP) from Urban Redevelopment Authority in the fourth quarter of last year, based on official data released on Friday.

Mr Cheng: Property price consolidation in recent months takes expectations to a more realistic level
The private residential projects that bagged PP in Q4 included a 401-unit condo at Upper Thomson Road by UOL Group (on the former Green Meadows site), several strata housing projects at Gilstead Road and Paya Lebar Crescent and the high-profile Marina Bay Suites, whose preview incidentally has been postponed from the end of this month till after the Chinese New Year festivities.

URA data also showed that there are several high-end private residential projects that have secured the pre-requisites for sale - that is, Housing Developer’s Sale Licence and Building Plan Approval - but that had yet to be launched as at Dec 31, 2007.

These include Wing Tai’s 176-unit Belle Vue Residences at Oxley Walk, 45-unit Ardmore Point at Ardmore Park, 100-unit L’VIV at Newton Road, and City Developments’ 228- unit Sentosa Quayside and 77-unit Shelford Suites, among others.

Wing Tai deputy chairman Edmund Cheng said, when contacted by BT, that the group’s three projects are not quite ready for launch yet as the showflats, for one, are not ready. ‘It’s not a good time to launch in any case, as we’re crossing over to the Chinese New Year period,’ he added.

‘With all the global uncertainty, we’ll have to see how things pan out before we launch anything. But I don’t think it’s going to be all gloomy. I’m still quite positive about Singapore’s economic growth and this will provide the fundamentals for the property industry to go forward.

‘The consolidation in property prices we’ve been seeing for the past few months is a positive thing, bringing expectations to a more realistic level. Before that, prices were going up so fast, it was not to anybody’s interest including developers’, because our replacement costs were also so much higher,’ Mr Cheng explained.

Knight Frank executive director (residential) Peter Ow reckons it makes sense for most developers to hold back launching projects for now, because they would find it tough to achieve the kind of prices they may have in mind, in the current market.

‘Developers can afford to wait it out for a few months as most have strong financial muscle - thanks to the supernormal profits they’ve made in the past couple of years on the back of strong price appreciation, especially in the high-end segment,’ Mr Ow added.

Credo Real Estate managing director Karamjit Singh observed that residential developers are going ahead with securing planning approvals, designing their projects and building showflats but not in a rush with marketing them until sentiments become more conducive for launches, perhaps after Chinese New Year.

‘It’s a different story for developers of hotels and offices and to some extent industrial facilities. These sectors are experiencing a space shortage, especially for hotels and offices. So developers will rush to proceed with developing such projects once they receive planning approval,’ he added.

At least four hotel projects received PP in Q4: CityDev’s 257-room property at Sentosa Cove, CGH Group’s 272-room hotel in Tanjong Pagar, Haggai Institute for Advanced Leadership Training’s 180-room facility at Fairy Point Hill in Changi, and Hotel Grand Central’s 328-room hotel in Little India.

Two separate office developments on 99-year sites at Anson Road - by a unit of LaSalle Asia Opportunity Fund III, and by a Mapletree Investments subsidiary - clinched PP in Q4. URA also gave its nod for 144,870 sq metres (gross floor area) of office space and 5,530 sq m of retail space at Marina Bay Financial Centre’s Phase 2.

Also receiving the same approval were two transitional office projects on 15-year leasehold sites next to Newton MRT Station and in Tampines.

Among a string of industrial projects obtaining PP in Q4 were Ascendas Real Estate Investment Trust’s 74,660 sq metre business park project at Changi Business Park Ave 3 and HG Metal Manufacturing’s factory at Jurong Port Road. Jurong Port Pte Ltd also received approval to build a 10,240 sq metre extension to its existing warehouse at Jurong Port Rd and URA gave the green light for StorHub Self Storage to develop a warehouse project at Simei Avenue/Tampines St 92.
Source : Business Times  - 29 Jan 2008

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Goldman tells investors to sell Singapore banks

Goldman tells investors to sell Singapore banks

Call comes after key index drops 22 per cent from Oct peak
INVESTORS should sell shares of Singapore’s DBS Group Holdings Ltd and its two rivals on expectation the banks’ earnings growth will moderate, Goldman Sachs Group Inc said.
It’s ‘time to take profit, not bottom fish’ after the city-state’s lenders have fallen about 20 per cent from late last year, Goldman’s Singapore-based analyst Tan Bok Chuan said in a report dated Jan 27.

The analyst made his recommendation after the FTSE Strait Times Financials Index, whose 55 members include DBS, United Overseas Bank Ltd (UOB) and Oversea-Chinese Banking Corp (OCBC), Singapore’s three banks, dropped 22 per cent from a peak in October.

Any share price gains triggered by interest rate cuts by the US Federal Reserve would present selling opportunities, he said.

‘While the macro outlook for Singapore remains resilient despite an expected mild US recession, we are less sanguine on the Singapore banks’ earnings outlook,’ Mr Tan said.

Yesterday, DBS closed 88 cents or 4.6 per cent down to S$18.06. UOB fell 58 cents or 3.2 per cent to S$17.50, while OCBC fell 20 cents or 2.6 per cent to S$7.60.

The FTSE Strait Times Financials Index fell 3.3 per cent yesterday.

Goldman is keeping a ‘neutral’ call on the city’s three banks.

Mr Tan said declines to S$14.50 for DBS and S$15.50 for UOB would represent buying opportunities.

Investors should buy OCBC when it falls to S$6.80, he added.

Of the three banks, OCBC, owner of Singapore’s biggest life insurer, is the city-state’s ‘most defensive’ banking stock, Mr Tan said.

‘We like OCBC for its defensive qualities: adequate CDO (collateralised debt obligation) provisions in our view with minimal exposure to the US monoline bond insurers,’ Mr Tan said in a report.

OCBC said in November last year that it took a S$221 million ‘allowance’, or charge, on its asset- backed securities, writing down the value of the investments linked to US sub-prime mortgages to S$48 million as of Sept 30.

The bank has a CDO portfolio of S$641 million.

CDOs are securities that pool loans, bonds or credit- default swaps and use the income to pay investors.

The securities are divided into different parts of varying risk and return.

OCBC is also benefiting from declining interbank loan rates in Singapore, which means the cost of funding its loans is shrinking, Mr Tan said.

Singapore’s three- month interbank rate fell to a three-year low on Jan 25, 6.25 basis points to 1.5625 per cent yesterday, data compiled by Bloomberg showed.

A basis point is 0.01 percentage point.

The bank may report net income of S$2.11 billion for 2007, 13 per cent higher than Goldman’s earlier forecast, Mr Tan said.

Profit may fall to S$1.98 billion this year, still 14 per cent more than his previous estimate, Mr Tan said.

DBS, South-east Asia’s biggest bank, is the ‘most at risk operationally’, while UOB, Goldman’s least favoured of the three Singapore lenders, ‘continues to struggle to grow its regional franchise’, the Goldman analyst said. — Bloomberg

Source : Business Times  - 29 Jan 2008

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Singapore BBR wins $95.3m Ascendas contract

Singapore BBR wins $95.3m Ascendas contract

The office tower construction deal brings BBR’s order book to $517.9m
By CHEW XIANG

BBR Holdings has won a $95.3 million contract from Ascendas (Tuas) to build an office tower at the International Business Park in Jurong East.

Mr Tan: ‘We’ll have better control over construction schedule and be in a better position to manage costs’
Piling works begin next month and the tower is expected to be completed by August next year.

The turnkey design-and-build contract was secured through BBR’s wholly owned subsidiary Singapore Piling & Civil Engineering, the company’s construction arm.

The deal brings BBR’s current order book to $517.9 million, the company said.

BBR’s chief executive officer Andrew Tan said having an in-house specialist engineering division meant the company could execute its own bored piling and post-tensioning work.

‘This means that we will have better control over the construction schedule and will be in a better position to manage our costs,’ he said.

The project features two 12-storey tower blocks linked by a sky bridge. The site area is 17,858 square feet. When completed, the towers will yield 41,970 square metres of gross floor area.

The building has been designed to meet the BCA Green Mark GoldPPLUS rating, said BBR. The BCA Green Mark evaluates a building for its environmental impact and performance.

Recently, BBR won a $189.6 million contract from the Urban Redevelopment Authority to construct a common services tunnel in Singapore’s downtown core.

It has also secured a $6 million contract from the Land Transport Authority to upgrade vehicular bridges at seven locations in Singapore.

BBR has also ventured into property development and is now involved in two condominium projects at Nassim Hill and Holland Hill.

BBR shares closed trading yesterday at seven cents, down half a cent.

Source : Business Times  - 29 Jan 2008

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Keppel T&T full-year profit up 18.8% - Singapore

Keppel T&T full-year profit up 18.8% - Singapore

By ARTHUR SIM
HELPED by a significant rise in contributions from associated companies, Keppel Telecommunications and Transportation (Keppel T&T) achieved an 18.8 per cent rise in net profit to $51.45 million for the full year ended Dec 31, 2007.
Turnover rose 10.9 per cent to $103.1 million, attributed mainly to the improved performance of its logistics arm, Keppel Logistics.
The higher profit attributable to shareholders translated to earnings per share of 9.3 cents, up 17.7 per cent.

Earnings by business segments in 2007 saw the logistics, network engineering and investments sectors register net profit of $13.11 million, $7.44 million and $30.9 million, respectively.

Net cash used in investing activities was $19.3 million compared with $27.4 million in 2006.

Keppel T&T spent $83.6 million on investments in associated companies, including the acquisition of 50 per cent of Premier Data Centres, 30 per cent of iCELL and additional shares in MobileOne.

During the year, Keppel T&T said it received $64 million from its investment in MobileOne, with $46.7 million arising from capital reduction and $17.3 million from dividends.

Keppel T&T said Premier Data Centres made its maiden contribution to the group while Annto further improved on its 2006 performance. MobileOne continued to be a major contributor with a pre-tax contribution of $36.1 million.

Keppel T&T increased its effective equity holding in MobileOne during the year to 20 per cent.

Keppel T&T recommended a first and final dividend of six cents per share tax exempt one-tier.

For the current year, Keppel T&T said that with its data centre in Dublin fully occupied, it will be sourcing new sites to increase its data centre capacity in Europe.

It also said that the domestic logistics market will moderate this year while China’s domestic growth outlook remains strong and should continue to provide a good backdrop for the group’s logistics operations.

Source : Business Times  - 29 Jan 2008

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Asian bond market still holds bright spots: Hng Kiang - Singapore

Asian bond market still holds bright spots: Hng Kiang - Singapore

Stronger regional currencies make bonds attractive to foreign investors
By LYNETTE KHOO
(SINGAPORE) Although 2008 looks like a difficult year for credit markets and investors, the Asian bond market still has bright spots.

Mr Lim: S’pore is a gate-way for global investors to enter Asia’s bond markets
Speaking to some 1,000 delegates from 400 institutions across 30 countries at the fifth annual Citi Asia Pacific conference on fixed income, Lim Hng Kiang, Minister for Trade and Industry and deputy chairman of the Monetary Authority of Singapore (MAS), said yesterday that the outlook for the region remains positive.

With the strengthening of Asian currencies, local currency bonds are now on the radar screens of foreign investors seeking to diversify and enhance their returns. And domestic borrowers who want to steer clear of international markets are looking to Asian bonds as an attractive asset class.

This shows that economies are increasingly reliant on domestic demand and intra-regional credit investments, Mr Lim said. ‘The key is to have sufficiently deep and efficient markets to effectively channel the high bank liquidity and abundance of savings in Asia into regional investments.’
The Asian financial crisis in 1997-98 revealed the need for deep and liquid domestic bond markets to provide an alternative source of funds and reduce over-reliance on short-term or foreign currency bank borrowings to meet long-term funding needs.

Asian bond markets have evolved rapidly and made a ‘remarkable recovery’ based on stronger economic fundamentals and structural and fiscal reforms, Mr Lim noted.

Today, Asian economies are growing at an average of 8 per cent, with the size of the Asia (ex-Japan) domestic bond markets jumping almost five times from US$760 billion in 1997 to US$3.6 trillion. This far exceeds the growth rate for the global bond market, which has doubled since 1997.

Located in the heart of Asia, Singapore is a gateway for global investors to enter Asia’s bond markets. More than 600 local and foreign financial institutions based here can access the growing pool of investors and opportunities, Mr Lim said. ‘We are also poised to serve as the centre for debt financing in the area of infrastructure, real estate and transport-related projects.’

Since the establishment of the local real estate investment trust (Reit) market in 2002, there are now 19 Reits and one property business trust listed on the local bourse, totalling some $27 billion in market capitalisation. Issuance of commercial mortgage-backed securities also remains sturdy amid a strong Reit market.

The public-private partnership (PPP) framework is also expected to bring business opportunities to the debt capital market here, Mr Lim said. So far, PPPs have successfully tendered for ITE College West and the Singapore Sports Hub.

In a bid to offer a broad range of financial products and services, Singapore is also constantly reviewing its policies to ensure a level playing field for the development of Islamic financing.

But Asia faces yet another market storm - this time starting in the US and Europe, and rippling to the rest of the world. Although the characteristics of the 1997-98 crisis and the latest one are different, each reflects a lack of proper risk assessment, excessive leverage and the tendency of markets to extrapolate current conditions into the future, Mr Lim said.

While the adverse impact of a potential economic slowdown in the US is likely to be felt in Asia’s largely export-oriented Asian economies, he said he believes Asia’s resilience, led by strong economic growth and liquidity, ‘has thus far demonstrated its ability to weather the turbulence’.
Source : Business Times  - 29 Jan 2008

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Singapore Lippo boosts stake in Robinson to 29.99%

Singapore Lippo boosts stake in Robinson to 29.99%

Move can be seen as a bid to protect its stake or as shoring up its stake
By CHOW PENN NEE
(SINGAPORE) Lippo Group has responded to the takeover bid for Robinson from Dubai-based Al-Futtaim Group by boosting its own stake in the retailer to 29.99 per cent, just shy of the 30 per cent that will trigger a mandatory ge