Singapore Office rents moderate in first quarter of this year

Singapore Office rents moderate in first quarter of this year
 
Figures expected to stay strong due to high demand, tight supply, says CBRE

By Jessica Cheam 
THE verdict is in: prime office rents - which shot up last year - have slowed down in the first three months of this year.
Like residential property, office rentals did appreciate in the first quarter but at a slower pace than in the four quarters last year, said property consultancy CB Richard Ellis (CBRE).

But unlike homes, offices will still be able to achieve high rents due to strong demand and a lack of supply, said CBRE in a report released yesterday.

Prime office rents were up 6.7 per cent at an average of $16 per sq ft (psf) per month in the first quarter, while Grade A office space - the best grade of space - climbed 8.7 per cent to average $18.65 psf.

By comparison, quarterly rises for Grade A space last year ranged from 13.7 to 23.6 per cent and 10.3 to 25.6 per cent for prime office rents.

CBRE said rising rents coupled with the lack of space in the Central Business District (CBD) led some companies to relocate to refurbished state properties such as 991 Alexandra Road and the Phillip Investors Centre at the former Moulmein Community Centre.

Supply remains tight with occupancy levels at 97.6 per cent in the core CBD and 97 per cent in decentralised areas.

Grade A vacancy remained below 1 per cent, but increased slightly from 0.2 per cent in the fourth quarter of last year, to 0.6 per cent in the first quarter of this year.

CBRE estimated that about 10.3 million sq ft of office space could be completed by 2012, with the bulk coming online in 2010 and 2011.

On the supply side, a transitional office site that could yield 180,000 sq ft at Mountbatten Road was awarded in January. Also, two sites at Scotts Road and Anthony Road, comprising 243,191 sq ft in total, were launched by the Urban Redevelopment Authority in late February but have yet to be awarded.

Government agencies are also slated to relocate from the CBD, freeing up 212,000 sq ft of office space.

CBRE’s executive director of office services, Mr Moray Armstrong, said given the significant supply to come in the next few years, ‘we expect some landlords may start to moderate rental expectations’.

The office market ‘is likely to stabilise’ and the supply does not seem excessive, but Mr Armstrong added that the government needs to be ’sensitive to the forces of demand and supply’ and exercise prudence in future land sales.

He also added that pre-leasing activities are strong, especially in decentralised areas such as Tampines, Changi, Alexandra and HarbourFront due to cost-cutting measures taken by multinational companies.
Source : Straits Times  - 08 April 2008

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Singapore Tulip Garden sale off? How the deal went

Singapore Tulip Garden sale off? How the deal went 

Condo owners likely to call off $516m en bloc deal after developer misses payment deadline

By Joyce Teo, Property Correspondent 
LOSS AND GAIN: Bravo will forfeit its $25.8 million deposit if the Tulip Garden sale is axed. Each owner could pocket over $100,000.
 
THE $516 million collective sale of Tulip Garden condominium near Holland Road seems to be dead in the water after the developer missed a payment deadline yesterday.
The condo owners appear poised to formally call off the deal and pocket a cool $25.8 million - the original 5 per cent deposit paid by developer Bravo Building Construction.

Bravo would forfeit the sum if the deal is scrapped. That would mean each of the 164 unit owners could pocket more than $100,000 on average.

The cancellation of a collective sale because of a cash crunch is a rare event. Bravo and its partners say they have had trouble raising the necessary funds.

Earlier this year, the $162.8 million collective sale of Makeway View in the Newton area was ditched by an associate of Bravo. The firm said a higher-than-expected development charge was the reason for backing out. A deposit of $1.63 million was reportedly forfeited.

Last Saturday, Tulip Garden owners held a meeting and indicated in an informal show of hands that they wanted to cancel the sale if Bravo missed the latest payment, also $25.8 million. This payment had already been delayed at Bravo’s request from the middle of March.

How the deal went
July 2007: Bravo Building Construction decides to buy Tulip Garden en bloc for $516 million. It later pays a 5 per cent deposit of $25.8 million.

February 2008: The Strata Titles Board approves the sale. The sale completion date is set for May 28.
… more
By late yesterday, no payment had been made. Bravo was putting on a brave face but it was, in effect, accepting that the deal appeared to have been lost.

The developer had asked for more payment extensions - to make the next 5 per cent payment by June 7 and then complete the deal by Aug 7.

But based on last Saturday’s meeting, the owners appear unlikely to agree.

Almost all the owners at the meeting indicated that they wished to call off the sale and keep the deposit if Bravo did not pay up by yesterday, according to the people present.

A Bravo spokesman said yesterday that the firm is now seeking an ‘unconditional’ extension of time.

‘If these extensions are not obtained, the consortium will accept this costly missed opportunity to develop a stunning 350-unit condo with unmatched features in a prominent Holland Road corner,’ she said. The condo is on the corner of Holland Road and Farrer Road.

Bravo inked a deal to buy the freehold site in July last year. It was due to have been completed late next month.

The Bravo spokesman said the firm has been seeking partners since November last year.

‘The current turmoil in the financial and stock markets matched with sporadic bad news have caused unforeseen delays in securing ultimate approvals to commit funds,’ said Bravo. It added that the Tulip Garden owners had consented to the sale earlier than anticipated.

‘Coupled with the consortium’s strategic decision to significantly increase equity to balance the current cautious lending by banks, the current deadlines for next payments have become too constricted and no longer practical,’ it said.

Bravo added that it has tied up with two local and two foreign parties to buy Tulip Garden. But unless an extension is given, they will not be offering more money, said the spokesman.

She said that if Tulip Garden owners still want to attempt to sell en bloc, they may face an ‘unwelcome lower bid price’ given weaker market conditions.

Tulip Garden sold for about $1,018 per sq ft (psf), more than its earlier guide price of $900 psf in January last year. The development has 164 units comprising 96 flats, 66 maisonettes and two shophouses.

If the sale works out, flat owners stand to reap $2.5 million to $4.2 million while maisonette owners would receive about $3.4 million each. The shop units would get about $1.1 million each.

Amid last year’s booming market, Bravo also made two other fairly large collective sale deals: Pender Court, off Telok Blangah Road, at $80 million in July last year, and Makeway View.

Bravo has postponed the completion of Pender Court’s sale until late this month.

Given the slower market, more sellers are now open to lower prices. Yesterday, Royalville, a freehold mixed development off Sixth Avenue, was relaunched for sale en bloc at a lower indicative price of around $305 million.

It was offered for sale in a Nov 9 tender, which failed to attract bidders at its earlier guide price of $330 million to $350 million.

Source : Straits Times  - 08 April 2008

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Growth seen in Asia office rentals in ‘08

Growth seen in Asia office rentals in ‘08

But analysts say some cities, including S’pore, may see slowing rental growth, reports UMA SHANKARI
BUOYED by limited office supply in some cities and high GDP growth, all major office markets in Asia are expected to see rental growths in 2008, but the pace of growth will vary from city to city, property analysts say.
 
Upside trend: Data from Cushman & Wakefield shows rents at Raffles Place in Singapore (above) have risen 100 per cent in the last year as against Hong Kong’s 15 per cent. According to some reports, it is now more expensive to take up office space in Singapore than in Hong Kong 
‘Across the board, we still see positive demand for office markets across Asia,’ said Megan Walters, director of research and business analytics for Asia Pacific at Cushman & Wakefield (C&W). ‘But obviously the problems in the financial markets in the US have not been played out yet, and we have yet to see how it will affect investment markets in the region.’

The firm expects all offices markets in key cities across Asia to record increasing rents in 2008. However, about half the cities profiled - Singapore, Beijing, Shanghai, Chengdu, New Delhi, Mumbai, Kuala Lumpur and Bangkok - are expected to see slowing rental growth. The other cities - Hong Kong, Tokyo, Seoul, Taipei, Bangalore and Ho Chi Minh City - are still seeing accelerating rental growths.

Industry players here will perhaps be most interested in what is happening in Singapore and Hong Kong - long been seen as rivals in the region as a centre for international office services. The slowing rental growth in Singapore will be welcomed by many on the back of fears that the Singapore office market was overheating.

Rents here have been pushed up over the last few years mainly by expansion in the financial services sector owing to factors such as domestic growth, economic restructuring that resulted in the expansion of the service industries as well as the influx of both regional and global jobs into the market.

Rentals are not just climbing - they are climbing at a pace faster than ever seen before. Industry veterans have expressed fears that this could make Singapore less competitive compared with Hong Kong, where rents are rising at a more sedate pace.

For example, data from C&W shows that rents at Raffles Place in Singapore’s Central Business District (CBD) have risen 100 per cent in the last year unlike Hong Kong’s more moderate 15 per cent. And according to some reports, it is now more expensive to take up office space in Singapore than in Hong Kong.

Data released by Jones Lang LaSalle (JLL) yesterday shows that CBD core Grade A gross effective office rent in Singapore for the small space category (less than 10,000 square feet) stands at $17.35 per square foot per month (psf pm), up 8.4 per cent quarter on quarter from the $16.00 psf pm seen in Q4 2007. This is marginally higher than the quarterly rental growth of 7.4 per cent registered in Q4 2007, JLL said.

‘In comparison with Hong Kong, the current gross effective rent of Grade A offices in Hong Kong Central - equivalent to Raffles Place in Singapore - stands at US$15.10 psf pm,’ said JLL’s report. ‘This is some 21 per cent higher than Singapore’s CBD core prime Grade A gross effective rental value of US$12.50 psf pm (or $17.35 psf pm).’

However, things should even out with more supply coming onstream in Singapore. Market watchers say that the rate of rental growth will slow and occupancy rates will fall this year. ‘The growth in rental values is expected to moderate this year after a record increase in 2007,’ said Cheng Siow Ying, DTZ Debenham Tie Leung’s executive director.

Chris Archibold, head of commercial leasing at JLL, similarly noted that the rapid rental increase seen in Q1 2008 is mainly due to spillover demand.

He said: ‘While Singapore office rental growth in Q1 2008 is some cause for optimism in this uncertain market condition, the increase in rental value is largely a spillover from the previous quarters.’

And a new report by DTZ says that islandwide office occupancy dipped in the first quarter of 2008, easing half a percentage point quarter on quarter to 97.1 per cent. The dip followed a 0.1 point drop in Q4 2007 from Q3.

The average occupancy of office buildings at Raffles Place dropped half a percentage point to 97.8 per cent in Q1, while that at Marina Centre rose 0.7 percentage point to 99.8 per cent.

DTZ attributed the slight dips in occupancy partly to two office buildings coming onstream. Together, The Central and VisionCrest Commercial added some 538,100 sq ft of new office space - raising islandwide office stock one per cent quarter on quarter to 56.6 million sq ft. Both buildings are not even fully leased yet.

Some occupiers are beginning to exercise caution in their medium-term leasing requirements, DTZ’s Ms Cheng said. Going forward, the demand for CBD core office space in Singapore is expected to continue to be strong on the back of more demand from banks and financial institutions, many of which have set their sights on the burgeoning private wealth management in Asia.

But there will be some moderation for both rents and capital values. ‘Although the financial and business sector is still expected to remain robust, the more modest economic growth projected will see companies limiting their expansion of office space requirements,’ Knight Frank noted in a recent note. ‘Some landlords would also be more accommodating of tenants in order to attract or retain these users of office space.’

And for the rest of Asia, a lot depends on how the sub-prime crisis in the US plays out, property analysts said. The region’s investment markets - including for the office sector - are expected to emerge from the credit crunch better than their US or European counterparts.

Source : Business Times  - 08 April 2008

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Singapore Royalville back with lower en bloc price tag

Singapore Royalville back with lower en bloc price tag

New asking price of $1,106 psf per plot ratio is 10-15% less than before
By KALPANA RASHIWALA
ANOTHER en bloc sale property is back on the market with a lower asking price.
 
Second chance: Royalville is now being marketed together with adjoining drainage reserve, with a combined asking price of about $305 million. Some 140 units of an average size of 2,000 sq ft each can be built on the sites 
Royalville in Bukit Timah, off Sixth Avenue, has been relaunched - this time with a 10-15 per cent lower asking price than in October last year.

However, the property is still being launched based on last year’s collective sale agreement signed under the old rules and the reserve price is believed to be the same.

Last year, Royalville’s asking price was $330-350 million, which worked out to $1,235 to $1,305 per square foot (psf) of potential gross floor area, including development charges (DC) at the time.

This time, the 174,176 sq ft freehold Royalville site is being packaged with an 8,420 sq ft adjoining drainage reserve being sold by the Official Receiver.

The two properties, which are being marketed by Credo Real Estate, have a combined asking price of about $305 million.

This reflects a unit land price of $1,106 psf per plot ratio inclusive of $6 million DC for the two sites.

The site can be developed into a new condominium with about 140 units of an average size of 2,000 sq ft each.

Based on a land price of $1,106 psf ppr, the breakeven cost for a new condo on the site should be about $1,700 psf, Credo said.

‘New residential developments nearby such as Duchess Residences are transacting in the price range of above $2,000 psf,’ it added.

Last week, Jones Lang LaSalle relaunched Pinetree Condominium located in the Balmoral area at an indicative price of about $1,700 psf ppr, about 20 per cent lower than the previous indicative price of $2,100 psf ppr seven months ago.

Source : Business Times  - 08 April 2008

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Singapore HDB launches fifth DBSS site at Simei

Singapore HDB launches fifth DBSS site at Simei

By EMILYN YAP
THE Housing and Development Board (HDB) has launched a fifth Design, Build and Sell Scheme (DBSS) site at Simei Road for sale.
According to Nicholas Mak, director of consultancy and research at Knight Frank, the site may fetch between $49 million and $76 million, or $130 to $200 per square foot per plot ratio (psf ppr), and is likely to attract bidders such as medium-sized developers and construction companies.

The Simei site is the first to be offered under the scheme this year and has a site area of 16,825.5 square metres, with an allowable gross floor area of 35,333.55 sq m.

Property consultants considered the site attractive as it is located in a mature estate with comprehensive facilities. The site is a short walk from Simei MRT station and East Point Mall, and is also close to schools such as Anglican High School.

Director of marketing and business development at Savills Singapore, Ku Swee Yong, noted: ‘Demand should be strong with recent announcements by the MNCs and foreign banks that they are pushing backroom services into Changi’s office and industrial parks.’

He estimated that the Simei site may fetch between $57 million and $60 million, or $150 to $160 psf ppr.
 
On the supply side, Mr Mak pointed out: ‘As there has not been any major launch for a mass-market residential project in the Simei and Tampines areas, flats in the DBSS development at Simei Road will be more appealing to purchasers.’

He expected the site to take about 320 to 360 units.

The tender will close on June 3 at noon.

Under the DBSS, private developers undertake the design, construction and sale of public housing. Flats sold under the scheme come with a 99-year lease and buyers have to meet HDB eligibility conditions similar to those set for HDB-developed flats.

HDB awarded the fourth DBSS site in Bishan to Qingdao Construction Group in February, which put in a bid of $135.9 million or $237 psf ppr.

HDB plans to launch another two DBSS sites in Toa Payoh and Bedok.

Source : Business Times  - 08 April 2008

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Singapore home prices make 2nd highest jump globally

Singapore home prices make 2nd highest jump globally

Bulgaria, with 33.7% surge, tops world index, beating S’pore’s 31.3% rise
By ARTHUR SIM

THE average price of private housing in Singapore surged 31.3 per cent between Q4 2006 and Q4 2007 - the second-biggest jump in a world index topped by Bulgaria at 33.7 per cent.
Knight Frank said prices in Singapore rose steadily for all types of property, especially apartments.
 
 
Knight Frank tracks average prices worldwide via its Global House Index, which is based on an assessment of price changes in the mainstream housing markets of countries covered.

According to the index, Russia, Poland and Hong Kong, with respective hikes of 30, 22.4 and 22.3 per cent, ranked third, fourth and fifth.

However, price growth across the markets covered in the index fell year on year in the final quarter of 2007.

Knight Frank said price inflation globally during the year was 8.2 per cent, compared with 9.7 per cent the year before.

Knight Frank’s head of residential research Liam Bailey said that while property prices in Europe and America appear to be, ’suffering from the downturn in economic conditions’, prices in Asia and elsewhere, notably Singapore and Hong Kong, are performing well. Besides Singapore and Hong Kong, other Asian countries where home prices increased last year include China and Indonesia, which ranked 12th and 17th in the index with respective increases of 10.5 and 4.7 per cent. Knight Frank said prices in Singapore rose steadily for all types of property, especially apartments.
 
It said that in Hong Kong, almost half of the growth in prices happened in the last quarter of 2007 alone.

In China, home prices in 70 cities rose 10.5 per cent in 2007, with Shanghai’s 10.8 per cent growth marginally exceeding the national average.

Figures for December 2007 showed prices in Beijing fell as policies aimed at cooling speculative investment were introduced.

Shenzhen also saw a fall in prices towards the end of the year after credit was tightened in mid-2007.

Of Knight Frank’s list of top-30 countries with price movements, only five countries registered falls - the US, Germany, Latvia, Ireland and Estonia.

Underscoring the volatility of certain markets, Mr Bailey noted: ‘The most outstanding feature in this index in Europe is Bulgaria’s continued strong showing against the astonishing reversal of fortune witnessed in the three Baltic countries.’

Two of the three; Latvia and Estonia, suffered negative growth of -7.1 and -14.5 per cent, while prices in Lithuania grew only one per cent.’

He said that a year earlier, these countries saw respective price increases of 66.6, 23.8 and 23 per cent.
Source : Business Times  - 08 April 2008

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Yahoo not opposed to Microsoft bid if price is right, says board - NEW YORK

Yahoo not opposed to Microsoft bid if price is right, says board - NEW YORK
(NEW YORK) Yahoo is not opposed to Microsoft Corp’s bid for the Web media company, as long as it is at the right price, Yahoo’s board said yesterday.
‘We have continued to make clear that we are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders,’ the board said in a letter addressed to chief executive Steve Ballmer.

‘Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders.’

Yahoo has been responding to a three-week deadline issued by Mr Ballmer in a letter on Saturday for Yahoo to agree to Microsoft’s US$31 a share cash-and-stock offer or risk seeing the bid lowered.

Yahoo shares slipped 2 per cent in premarket trading to US$27.80, after closing at US$28.36 on Nasdaq on Friday.

Yahoo directors rebuffed Microsoft’s original offer in February, saying that it undervalued Yahoo and that it is seeking alternatives.
 
‘Our board has been actively and expeditiously exploring our strategic alternatives to maximise stockholder value, a process which is ongoing,’ Yahoo’s board said yesterday. ‘All of these actions have been driven by our overarching commitment to maximise stockholder value.

‘Our board’s view of your proposal has not changed. We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders.’

Yahoo shareholders and analysts said that Yahoo’s best options are to find an ally to help demonstrate that Yahoo is worth more as an independent player, or surprise the market with a strong show in its quarterly results.

The consensus on Wall Street is that no ‘white knight’ will emerge to whisk Yahoo away from Microsoft and its proposed cash-and-stock offer currently valued at US$42.2 billion.

In January, the cash-and-stock offer was valued at US$44.6 billion or 62 per cent above Yahoo’s market value. As at Friday, the deal was worth just under US$41 billion.

Meanwhile, a person familiar with the Chinese firm Alibaba’s plans said that the Internet firm is set to speed up plans to buy back a near 40 per cent stake owned by Yahoo, as Microsoft Corp threatens to go hostile with a lower bid for Yahoo. Alibaba wants to fund a buyback of all or part of the 39 per cent stake Yahoo owns, said the source.

Analysts said that this could come from a mix of foreign and local financial investors, including Chinese pension funds or state-backed firms looking to enter the Internet sector.

Alibaba plans to exercise its ‘right of first offer’ on the stake, which is stated in a 2005 agreement with Yahoo, should the two US firms reach a deal, a source told Reuters earlier. — Reuters, AP
Source : Business Times  - 08 April 2008

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Citibank S’pore posts record profits

Citibank S’pore posts record profits

Net earnings jump 35% to $683.5m for the year ended Dec 31, 2007
By CHOW PENN NEE

CITIBANK Singapore’s shift from niche operator to mass-market player with new consumer products has powered its profit.
 
Mr Larsen: Citibank’s partnership with SMRT has allowed it to access a whole new segment of people 
Citi’s locally incorporated consumer banking arm reaped a record net profit of $683.5 million for the year ended Dec 31, 2007 - a 35.3 per cent jump from $505.2 million in 2006.

Growth came from across product lines and customer segments, said Jonathan Larsen, Citibank Singapore’s chief executive and head of the bank’s South-east Asia global consumer group.

With 19 branches and a co-branding partnership with SMRT, the bank has become more visible and more mainstream, Mr Larsen said.

‘Our partnership with SMRT has exceeded all our expectations and is continuing to be a major force,’ he said. ‘It allows us to access a whole segment of people who wouldn’t have seen Citibank as a viable alternative to the local banks.’

Citibank Singapore’s earnings exclude profits from other Citibank divisions such as corporate, investment and private banking.

As a comparison, the consumer division of South-east Asia’s largest bank, DBS, posted a pre-tax profit of $1.3 billion last year. United Overseas Bank recorded an $862 million pre-tax profit for this segment. And OCBC Bank’s consumer business turned in a pre-tax profit of $631 million. Citibank Singapore’s pre-tax profit was $806.2 million. The local banks include profits from private banking and their consumer banking businesses around the region.

Citibank Singapore saw income before operating expenses swell 28.3 per cent to $1.4 billion, from $1.1 billion in 2006.

Fee and commission income jumped 45 per cent from $318.2 million in 2006 to $462 million, buoyed by a strong performance in wealth management such as investments and insurance. Strong demand for structured products, FX and alternative investments such as hedge funds also drove profit.

Net interest income or profit from loans, grew 21 per cent from $568.1 million in 2006 to $688.2 million, boosted by higher volumes of loans and credit facilities.

Customer loans grew to $10.2 billion from $9.4 billion the year before. Housing loans constituted just over a third of the loans portfolio at $3.6 billion, while non-housing loans such as unsecured credit constituted the bulk of loans at $6.2 billion.

Mr Larsen saw refinancing forming the bulk of the bank’s new loans portfolio. ‘Refinancing of loans is the major driver for new loans today,’ he said, noting that new purchases of homes have eased.

The bank has seen ‘reasonable growth (in loans) into this year’, he said. ‘I expect loan growth to be pretty healthy for rest of this year.’

He noted that even with the downward trend of the Singapore interbank rate, Citibank Singapore is not seeing a significant deterioration in net interest margins.

As for lowering its housing loan rates, he said that the bank will adjust them accordingly but has ‘no specific plans’ for now.

Non-performing credit facilities fell from $99.1 million to $85.1 million. Citi Singapore country officer Piyush Gupta said that the bank is yet to see an increase in delinquency despite the US sub-prime mortgage crisis. ‘We’re not picking up early signs of stress in our credit portfolio,’ he said. But ‘from a macro standpoint, it will have a bearing on the financial system and will have some bearing on home loans and loan growth’.

The bank’s total operating expenses rose 19 per cent to $571.3 million from $478.5 million in 2006, due to an increase in rent and headcount to support expansion.

Headcount grew from 2,600 in 2006 to 3,020 last year. Despite further job cuts in Citibank’s global operations, Mr Gupta said that there are no plans to shed jobs at Citi Singapore.

The region has contributed significantly to the bank’s bottom line. ‘At US$4.6 billion, Citi Asia was the top net contributor by region for Citi globally in 2007,’ said Mr Gupta.

‘Actually, given the write-offs we took in our portfolio in the US, we made more money in Asia than the entire company did in 2007.’
Source : Business Times  - 08 April 2008

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Singapore Home leases stagnant for 2 years, still looking soft

Singapore Home leases stagnant for 2 years, still looking soft

Foreigners could be switching from leasing to buying property, says Savills Singapore
By ARTHUR SIM

(SINGAPORE) Residential leasing transactions have stagnated in the past two years after falling from a recent high of 33,874 in 2005.

According to an analysis of Urban Redevelopment Authority data by Savills Singapore, transactions were about 15 per cent lower at 28,928 in 2006 and 28,893 in 2007, versus 2005.

Savills Singapore director of marketing and business development Ku Swee Yong said that as leases are generally renewed on a two-year basis, the drop between 2005 and 2006 should imply a rise in 2008.

But figures for the first two months of this year indicate that residential leasing is not likely to pick up. Indeed, Savills’ analysis reveals only 3,495 transactions.

The lowest number of quarterly transactions since the start of 2000 was 4,024 in Q1 2003, while the high of 9,917 was recorded in Q3 2005.

Mr Ku, who reckons foreigners make up about 90 per cent of the leasing market here, said it will be important to watch the figures over the next few quarters.

He thinks fewer financial-sector expatriates may relocate here due to the global credit crunch.

But according to some foreign business associations, there has been no let-up in the influx of expatriates so far.

American Chamber of Commerce executive director Dom LaVigne said: ‘Due to the strong business conditions in Singapore and based on what we’ve heard from our members hiring more employees, we think that the number of American expats living here will continue to rise in the coming years. Two years ago, there were 14,000 Americans in Singapore. Today there are 15,000 Americans and more than 3,000 US businesses here.’

The number of British expatriates here has also increased over the past two years, with the British Chamber of Commerce (BCC) saying about 20,000 British nationals now live in Singapore.

BCC spokesman Roman Scott, who is also managing director of the Calamander Group, said: ‘Although everyone is moaning (about rents), it’s mourning the end of a particularly good deal, not complaining that the recent sharp rises are unfair.’

BCC, which tracks the cost of housing and offices, believes the rise in rents is a function of market forces and a ‘long-overdue cyclical correction from artificial lows’.

Pointing out that rents fell sharply 10 years ago, Mr Scott said: ‘Given that real wages and wealth have actually risen in those 10 years in Singapore, this means rents are still cheaper in real terms than the previous high 10 years back, and affordable compared with other global cities, particularly Hong Kong and Tokyo.’

Rents, however, have been increasing rapidly. Based on Savills’ basket of properties, rents for high-end homes increased about 30 per cent year on year in Q4 2007. Savills noted that a 2,885-sq-ft unit at Ardmore Park was recently leased for $20,000 a month or about $7 per square foot (psf) a month.

For high-end properties, Savills says the quarterly average rent is now $6.68 psf a month.

January saw a particularly low number of new leases, with just 1,474 transactions. District 10, the most popular district, suffered a 42.2 per cent drop to 203 transactions, compared with 351 a year earlier.

Other districts in the top five, including districts 15, 9, 14 and 16, saw transactions fall 39.2, 50, 19.8 and 43.2 per cent respectively.

A shrinking pool of leasing properties due to collective sales could have exacerbated the drop in numbers, especially in the prime districts. But as Savills’ Mr Ku points out, demand should have spilled over into other districts, keeping the overall number of transactions up.

He believes foreigners could be simply switching from leasing to buying property.

‘This was helped by the attractive low cost of mortgages in Singapore and also the favourable tax advantages foreigners from certain countries enjoy from owning properties in Singapore,’ he said. ‘We certainly saw many tenants convert from leasing to owning in 2006-2007, starting with a change in US Federal Tax on US nationals’ housing benefits overseas.’

A separate analysis of property data by Chesterton International seems to support this assertion.

Comparing data from 1995 - during the run-up to previous property market peak - and 2007, Chesterton’s head of research and consultancy Colin Tan notes that while the percentage of foreigners, including permanent residents (PRs), buying non-landed private property increased from 17.9 per cent in 1995 to 29 per cent in 2007, the percentage of acquisitions by PRs alone doubled from 6.7 per cent to 14.4 per cent.

The relevance of this, according to Mr Tan, is that PRs tend to buy for owner-occupation while foreigners are more likely to buy for investment.

He said: ‘In recent years we have seen many purchases by Indian and Chinese nationals who are buying for owner-occupation, not investment. These people eventually become citizens. I personally know a number of them.’
Source : Business Times  - 08 April 2008

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