Investors pick up higher-end condos

Investors pick up higher-end condos

Value buys in prime areas available even though property market still weak

By Joyce Teo, Property Correspondent

SOME high-end condominiums recorded sparkling weekend sales even though the overall property market was generally quiet in terms of new launches.
Of the two new previews, Illuminaire on Devonshire sold out its 72 units at $1,630 to $1,730 per sq ft (psf), while Verdure in Holland Road sold 14 units of 34 launched units at $1,400 psf.

The 12-year-old Gallop Gables saw far stronger than expected demand, with investors picking up 28 units, even though they are about $3 million or more each.

Previously, the new projects that have attracted fairly strong interest, given today’s climate, were not in such prime areas. But some investors may be looking around now that the market has fallen quite a bit.

Mr Peter Ow of Knight Frank, which is marketing Verdure and Gallop Gables, said the response at these two sales showed individual investors are back.

‘These buyers are savvy investors who are already staying in prime areas,’ he said. ‘Generally, the property market is still weak, but there are value buys around. And people are beginning to see value in well-located projects.’

Of 14 Verdure units that Bukit Sembawang has sold during the preview, a few are penthouses. While the overall project is priced at $1,350 psf on average, the 14 were sold at an average of $1,400 psf, or from $1.5 million to $2.8 million.

A scheme offering interest absorption was available without any extra charge. The project, which has 68 units, will be launched this weekend.

Over at Gallop Gables near Botanic Gardens, Straits Trading sold 26 units - 16 more than its target. It had offered only 10 units with a guaranteed rental yield of 7 per cent for two years. The rest were purchased without the 7 per cent guarantee, but mostly with existing tenancies offering a rental yield of 3 to 5 per cent.

The buyers paid between $3,075,200 and $3,840,000, or an average price of $1,220 psf for the units, which averaged about 2,800 sq ft.

The buyers were mainly residents ranging in age from the mid-30s to the late 70s who bought for investment purposes, said Straits Trading, which had earlier said the sales would generate cash to allow it to invest in distressed assets.

A few buyers, it added, said they may live in the apartments after the end of the two-year rental guarantee period.

At Illuminaire, the affordable price drew both investors and speculators, industry experts said. As it has only one- and two-bedroom units, ranging in size from just 441 sq ft to 721 sq ft, the total price was kept low - from $749,000 to $1.21 million.

EL Development managing director Lim Yew Soon said he had changed the design of the project from a 36-unit development to a 72-unit one last September. By then, a three-bedroom showflat had already been completed - and had to be reconfigured into a smaller unit.

‘I realised the market would prefer small units,’ he said.

Mr Lim, who bought one unit for himself and kept two for business associates, said most buyers were keen on the interest absorption scheme, which was offered at no additional cost.

Some buyers also liked the unusual automated car parking system. There are two car lifts that will store cars in an adjoining multi-storey carpark block.

Source : Straits Times - 14 Apr 2009

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Refinancing guarantees: Govt won’t step in

Refinancing guarantees: Govt won’t step in

THE Government will not step in to guarantee loan extensions for property developers, said National Development Minister Mah Bow Tan yesterday.
He told Parliament that banks are still lending to developers and better placed to assess risks than the Government.

‘Besides bank loans, a number of developers have also managed to raise capital through other means such as rights issues or private placement,’ he said.

The minister was responding to a question from Ms Lee Bee Wah (Ang Mo Kio GRC) who asked if the authorities would consider assisting builders by bearing some of the banks’ lending risks for loan extensions. Recent financial reports have warned that local property developers may face problems refinancing debt because of tight credit markets.

While Mr Mah acknowledged that banks had become more cautious in approving loans to firms, he maintained that ‘these are commercial decisions that the banks themselves have to take, based on their assessment of the risks as well as the relationships they maintain with their customers’.

Data from the Monetary Authority of Singapore shows that total loans to the building and construction industry - mostly to developers - saw a 22 per cent hike in the 12 months to this February. While this growth has tapered off recently, total loans to the sector are still at a high of $50 billion, noted Mr Mah.

Help measures for the sector announced during the Budget include property tax deferment on land approved for development for up to two years, and 40 per cent property tax rebates for commercial and industrial properties.

Mr Mah said the Government will continue to monitor the situation closely. ‘If necessary, we are prepared to introduce further measures to help developers through the current downturn.’

Source : Straits Times - 14 Apr 2009

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HDB commercial, industrial rents down 5%

HDB commercial, industrial rents down 5%

By Jessica Cheam

MARKET rents for HDB’s commercial and industrial tenants have fallen 5 per cent since January, Senior Minister of State for National Development Grace Fu said yesterday.
The drop is in line with market conditions and is part of HDB’s regular review of market rents, she told Parliament.

Ms Fu highlighted the change to Madam Cynthia Phua (Aljunied GRC) who had asked if rental rates were being adjusted to market conditions.

Ms Fu also said that tenants, on renewing their leases, would have their rents adjusted to the market price, to make it fairer for all.

The HDB leases shops that are part of housing estates, along with office and factory space in industrial estates, as well as industrial land.

However, it will not freeze rents across the board because ‘a freeze on rent increases is not equitable as it will result in different rental subsidies for different tenants’, said Ms Fu.

‘It is also not advisable for HDB rents to be disconnected from market realities. A better approach to help businesses during the economic downturn is to provide rental rebates.’

She gave this response to Ms Lee Bee Wah (Ang Mo Kio GRC) who had asked whether the HDB and industrial landlord JTC Corp would freeze all rents.

Ms Lee also asked if tenants whose rents were raised recently could have them lowered to the previous level.

Ms Fu reiterated that rents have to be pegged to market rates to ‘ensure equity between two tenants’.

To help tenants, HDB and JTC are giving a 15 per cent rent rebate for commercial and industrial space for this year, as announced in the Budget, said Ms Fu.

For the small group of tenants who face substantial rent hikes despite these measures, HDB will stagger the increase over the tenancy term, she said.

Tenants can opt to renew their typical three-year leases for one or two years if they foresee rents falling.

Source : Straits Times - 14 Apr 2009

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Strong demand for new HDB flat offer

Strong demand for new HDB flat offer

2,652 applications seen yesterday for 438 units in various estates

By Joyce Teo

DEMAND was strong on day one of the Housing Board’s latest sale of new flats - with more than five applicants for every flat on offer.
The HDB yesterday launched 438 new flats for its April half-yearly sale. By 5pm, a total of 2,652 applications had been received.

These flats are located in 23 HDB towns and estates islandwide, such as Sengkang, Yishun and Jurong West.

Most of the flats offered - 313 units - are four-room units.

There are 80 five-room units, 35 executive flats and just 10 units of three-room premium flats.

The greatest concentration of the new flats on offer is in Sengkang, Yishun and Jurong West, with 85, 61, and 46 units respectively.

The other towns, such as Punggol, Tampines and Woodlands, have about 30 units or fewer each to offer.

Some popular HDB towns such as Ang Mo Kio, Jurong East and Queenstown have just three units for sale.

Prices start from $143,000 for a 93sqm, four-room unit in Marsiling Rise, Woodlands.

In Sengkang, the 77 four-room flats on offer are going for $183,000 to $288,000 each.

But in the estate of Bukit Merah, four-room flats being offered at Telok Blangah Street 31 are in a much higher price bracket of $400,000 to $468,000 each.

As these are new flats, only households with gross monthly incomes of not more than $8,000 can apply.

Interested buyers can apply online from today until next Monday, said the HDB.

Balloting results will be released from May 13 at 2pm.

PropNex chief executive Mohd Ismail said: ‘I would expect demand to be extremely strong because, at the moment, new flat buyers have no choice but to go for the build-to-order or DBSS (design, build and sell scheme) flats.’

Most of the flats offered in the half-yearly sale have been completed, which means buyers can move in quickly.

Also, some of the flats are in mature estates, which are hard to find, he added.

Mr Ismail said some of the new flats on offer are priced about 20 per cent below resale prices.

HDB resale prices have started to fall, albeit slightly.

The previous half-yearly sale was launched in October last year, when HDB offered 683 new flats.

That particular sale saw more than 7,000 applications in the first couple of days.

Source : Straits Times - 14 Apr 2009

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Bangkok roiled by pitched street battles

Bangkok roiled by pitched street battles

Nearly 100 injured as military enforces state of emergency

By Nirmal Ghosh, Thailand Correspondent

Firefighters spraying water on a burning bus set alight by red shirts, who also barricaded the road in Bangkok yesterday. — PHOTO: ASSOCIATED PRESS

BANGKOK: Thailand’s military yesterday finally moved to enforce a state of emergency, sparking violent confrontations for much of the day in various parts of the capital that left at least one dead.
Arson and street fights were reported as soldiers battled bands of red-shirted pro-democracy protesters defying the state of emergency and demanding the resignation of the government.

Nearly 100 people were reported to have been injured, many of them seriously. Many of them were soldiers but most of the injured were from among the protesters of the United Front for Democracy Against Dictatorship (UDD).

The government said last night that one man was killed in a clash at Government House although hospital sources reported two dead.

‘One hour ago there was a serious clash near Government House between protesters and local residents. Three were shot and one of them died at hospital,’ Cabinet minister Satit Wongnhongtaey said on local television.

Government spokesman Panitan Wattanayagorn had earlier said that soldiers were ‘under strict instructions not to fire (directly) at protesters’ and the military disclosed that troops were using a mix of blank rounds and real ammunition.

But while soldiers in some places were disciplined and fired only into the air to drive back protesters, there were occasions during intense skirmishes when they fired directly at them.

Both Prime Minister Abhisit Vejjajiva and his nemesis and UDD mentor, Mr Thaksin Shinawatra, were on the BBC and CNN to press their cases.

Mr Abhisit insisted that troops had brought the situation under control but Mr Thaksin, speaking from an undisclosed location in the Middle East, charged that the government was lying and that there had been many more deaths.

‘We are in control of the situation, except for the Government House,’ the protesters’ last stronghold, Mr Abhisit told CNN in an interview from Bangkok.

‘Our priority is restoring law and order. We respect the people’s right to protest,’ he added.

Mr Thaksin however told the BBC that protesters were being brutally suppressed. He repeated his call for a ‘peaceful revolution’ and demanded that the army be called off, and the UDD’s protests be allowed to proceed peacefully.

But Mr Abhisit, in a nationwide address, insisted that the protesters disperse or face the consequences.

‘Those who want to help the government restore normality can return home,’ he said. ‘The government has carefully mapped out a plan to implement the law.’

Mr Abhisit assumed office last December. The red shirts want him to quit and call fresh elections, saying that he came to power through an undemocratic parliamentary vote following a court ruling that drove Mr Thaksin’s allies from power.

By evening yesterday, after more than 12 hours of pitched battles, troops appeared to have achieved some level of control in certain areas of the capital while others remained on the brink.

Protest leaders called on their supporters who were pushed out of other places to return to the UDD’s main rally site at Government House, where by one estimate some 10,000 - including monks, women and children - had gathered.

‘Today is the government’s day, not by much, but they are able to provide law and order in areas of anarchy,’ said well-known political analyst Thitinan Pongsudhirak of Chulalongkorn University.

‘The army is very much with the government,’ he added.

Source : Straits Times - 14 Apr 2009

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Swift response to Gallop Gables units

Swift response to Gallop Gables units

By EMILYN YAP

INVESTORS made a dash for high-end residential development Gallop Gables after The Straits Trading Company offered a two- year guaranteed rental yield of 7 per cent on 10 units there last week.

‘It shows what clever marketing and publicity can do… Of course, the property itself is good.’

- Chesterton Suntec International’s head of research and consultancy Colin Tan

Not only did the company let go of all 10 units at the freehold Farrer Road estate in three days, it managed to sell another 16 without providing a rental guarantee. Prices of the 26 units ranged from $3,075,200 to $3,840,000, fetching an average of $1,220 psf.

The ‘overwhelming response’ was surprising because sales in the high-end property sector have been weak since the financial crisis erupted, said Straits Trading’s executive vice- president Eric Teng.

Even though the rental guarantee applied on just 10 apartments, ‘we were still able to sell more units because our prices were reasonable and competitive and we have an excellent well-maintained product’, he said.

Located near the Botanic Gardens, asking prices at the 12-year-old Gallop Gables have dropped in the last few months. Straits Trading put up two blocks of apartments for sale in July last year with a price tag of about $1,500 psf.

‘Feedback from prospects and buyers suggest that with less than one per cent per annum (from) fixed deposits in banks today, a yield of 3 to 4 per cent per annum and above in property rental is still an attractive proposition,’ Mr Teng added.

According to him, buyers were mainly locals in their mid-thirties to late- seventies. Most bought the units for investment though a few said they might move in when the rental guarantee ends.

The situation indicates that well-located high-end properties can still sell with good advertising, said Chesterton Suntec International’s head of research and consultancy Colin Tan.

‘It shows what clever marketing and publicity can do . . . Of course, the property itself is good.’

Encouraged by the response, Straits Trading is ready to sell more units at Gallop Gables but it is raising prices by up to 10 per cent. The new prices are ’still reasonable’ compared with those a year or two ago, said Mr Teng.

Units available for sale are ‘limited’ but the company prefers not to disclose the number as it is still monitoring the property market.

Source : Business Times - 14 Apr 2009

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Hotel occupancies, room rates expected to drop: CBRE Hotels

Hotel occupancies, room rates expected to drop: CBRE Hotels

Additional supply of rooms is likely to result in further softening of market

By NISHA RAMCHANDANI

SINGAPORE’S hotel industry will continue to see a downward trend as an additional supply of rooms is injected into the market.

Going by the Singapore Tourism Board’s (STB) forecast of 9-9.5 million visitors this year, hotel occupancies are likely to drop to 71 per cent, while room rates will fall about 12.5-15 per cent, said Robert McIntosh, executive director of CBRE Hotels (Asia-Pacific). As such, revenue per available room (revpar) should decline 23 per cent, he added.

For 2008, the average occupancy rate was 81 per cent while the average room rate was $246. Revpar was $199.

Singapore has close to 10,000 rooms in the four and five-star categories expected to come onstream by the end of 2012, representing a 39 per cent jump in supply. ‘With declining occupancy and revpar levels already apparent, the addition of new supply will likely result in a further softening of the market in the short term,’ said CBRE Hotels senior consultant Alison Poore.

At the same time, Singapore’s ‘underlying market fundamentals’ such as its infrastructure, steady stream of attractions and destination marketing initiatives are sound, placing it in good stead to respond swiftly when the economy starts to pick up. The launch of the two integrated resorts will also act as a driver.

In comparison, Bangkok will see over 6,000 four and five-star hotel rooms enter the market over the same time period, bringing the total supply of rooms in these categories to over 31,000. Faced with the double whammy of political upheaval and lower tourism demand on the back of the economic environment, hotels in Bangkok are likely to see further declining demand in the short term.

Mr McIntosh also pointed out that the increasing supply of hotel rooms can also lead to greater demand, thanks to factors such as additional marketing by individual hotels, reduced prices and new hotels catering for different segments.

‘This has positive implications for employment, demand for airline seats and expenditure in restaurants and other tourism attractions,’ he said, adding that extra supply can, however, affect existing hotels negatively as occupancies and room rates tend to fall.

Source : Business Times - 14 Apr 2009

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Heavier penalties to protect monuments from destruction

Heavier penalties to protect monuments from destruction

By CHUANG PECK MING

YOU can be fined more for smoking than for carrying out illegal works under the current Preservation of Monuments Act (PMA).

A person who smokes in a prohibited place or vehicle can be slapped with a fine of up to $1,000 - but the managers of a monument recently got away with just a $500 penalty for alteration works without the approval of the Preservation of Monuments Board (PMB).

The PMA has not been changed since it was enacted in 1971 - 38 years ago. Parliament yesterday passed the Preservation of Monuments Bill, which will bring the Act up to date and strengthen the authority’s hands in protecting national monuments.

The Bill will formalise the merger of PMB and the National Heritage Board (NHB) - and give the merged NHB more enforcement power.

It will provide heavier penalties to protect monuments against wilful destruction and illegal renovation works. The current maximum fine of $5,000 will be raised to $50,000 and/or maximum imprisonment of 12 months - with a further maximum fine of $2,500 daily in the event of a continued offence.

Companies will be fined a maximum of $200,000 and a further maximum of $100,000 a day in the event of a continued offence.

Offenders may also be ordered to restore a monument, in accordance with the board’s specifications, at their own expense.

Source : Business Times - 14 Apr 2009

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Govt doesn’t need to guarantee loans to developers: Mah

Govt doesn’t need to guarantee loans to developers: Mah

By CHEN HUIFEN

THERE is no need for the government to step in as a loan guarantor for property developers, even though banks have generally become more cautious about lending to them, National Development Minister Mah Bow Tan said yesterday.

Mr Mah: Total loans to the building and construction sector are still at a high level of $50b
Plenty of credit is still being extended to the building and construction sector, Mr Mah told Parliament yesterday. Data from the Monetary Authority of Singapore (MAS) shows total loans to the sector - with developers accounting for the lion’s share - grew 22 per cent in the 12 months to February.

‘While this growth has tapered off in recent months, total loans to the sector are still at a high level of $50 billion,’ he said. ‘Hence, I do not think the current situation warrants the government stepping in as a guarantor for loans to developers.’

Besides bank loans, some developers have raised capital in other ways, such as through rights issues or private placements, Mr Mah noted.

Also, Budget measures such as the deferral of property tax, rebates and a one- year extension of project completion period will mitigate the impact of tough economic conditions on the industry.

Banks are in a better position than the government to evaluate loans, based on their risk assessment experience and relationships with customers, Mr Mah said. However, he promised to monitor the credit situation closely and, ‘if necessary, we are prepared to introduce further measures to help developers through the current downturn’.

Mr Mah was responding to a question from MP Lee Bee Wah, who also asked about the possibility of freezing rents for all HDB and JTC premises.

In reply, Senior Minister of State for National Development Grace Fu said a rent freeze is not a fair solution to help businesses get through the downturn. It would amount to a varying subsidy because tenants locked in rent at different rates, depending on the market when they signed up, she said.

‘It is also not advisable for HDB rents to be different from market realities,’ Ms Fu said. ‘A better approach to help businesses during the downturn is to provide rent rebates.’

She was referring to 15 per cent rent rebates starting in January this year for companies operating in HDB, JTC, Singapore Land Authority and National Environment Agency premises. HDB has also revised rents 5 per cent down since January, she noted. And for the small number of tenants who face substantial rent increases despite these measures, HDB will stagger the increases over the tenancy term.

Source : Business Times - 14 Apr 2009

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Bank stocks rally, but analysts urge caution

Bank stocks rally, but analysts urge caution
No change in fundamentals seen; year ahead still looks tough

By CONRAD TAN

SINGAPORE bank stocks rose sharply yesterday amid a broad market rally across much of Asia. But analysts were quick to warn that little has changed in the outlook for banks here.

Outlook cloudy: With 19 US banks undergoing stress tests by regulators to determine whether they need more capital to withstand further losses if the recession worsens, not all of them are expected to pass
‘They still face a very challenging year and the economy is yet to face the worst,’ said Pauline Lee, an analyst at Kim Eng Securities. ‘The credit deterioration is just beginning. Concerns over rising non-performing loans linger.’

Shares in DBS Group and OCBC Bank closed at their highs for the day - DBS rose 3.8 per cent to $9.25, while OCBC gained 4.2 per cent to close at $5.69. United Overseas Bank shares finished 2.7 per cent higher at $10.78, after rising as much as 4.8 per cent earlier.

The Straits Times Index gained 2.6 per cent.

‘But fundamentally, nothing has changed - it’s still not so optimistic,’ said Brandon Ng at Phillip Securities. Loans growth has weakened and interest rates are low, which makes lending less profitable, he pointed out. Still he is telling clients to ‘ride the wave if you can’.

Other analysts said DBS’s performance isn’t likely to be hurt badly by the death of its chief executive Richard Stanley, who succumbed to infection on Saturday after more than two months of treatment for cancer.

‘While he was on medical leave they formed a group to take over his functions,’ said Kevin Scully, who heads independent equity research firm NetResearch Asia.

Ms Lee said ‘nothing much has changed’ at DBS, noting that chairman Koh Boon Hwee has overseen management of the group since Mr Stanley went on medical leave at the end of January.

In the coming months, ‘if there is clear leadership, with a very clear direction, that would be a positive re-rating for the stock’, Ms Lee added. ‘It depends on how long they take to find a candidate - of course, the sooner, the better.’

Mr Scully cautioned against reading very much into yesterday’s gains in equities. ‘I don’t think the markets have bottomed,’ he said. ‘The rally is obviously following what happened at Wells Fargo.’

Wells Fargo, one of the biggest US commercial banks, said last Thursday it expects to announce a record US$3 billion profit for the first quarter - much higher than analysts had forecast - when it publishes its financial results on April 22. The news sent stocks in the US soaring on Friday, when the Singapore market was closed for the Good Friday holiday.

But Mr Scully said he is ‘not convinced that Wells Fargo was actually profitable’. He suggests its earnings were boosted by changes in mark-to-market guidelines announced by the US Financial Accounting Standards Board. The move has raised howls of protest from critics, who say the changes make it easier for banks to hide losses on assets such as mortgage- backed securities, as long as they judge the losses to be temporary.

There is further trouble ahead, Mr Scully believes. With 19 US banks undergoing ’stress tests’ by regulators to determine whether they need more capital to withstand further losses if the recession is worse than expected, ‘it’s quite clear that not all of them passed’, he said.

According to a Bloomberg report on Friday, the US Federal Reserve has asked several banks, including Goldman Sachs and Citigroup, not to reveal the results of the tests. ‘If they all passed, they would have said that everybody passed,’ Mr Scully said.

Some of the stronger banks may be asked by the US government to bail out the weaker banks, he suggested. In that case, even the strong banks would require more capital to finance the acquisitions - ‘and that could mean further dilution for existing shareholders’.

Source : Business Times - 14 Apr 2009

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