HDB flat value will rise as long as economy grows: MM Lee

HDB flat value will rise as long as economy grows: MM Lee

By Asha Popatlal

SINGAPORE: Public flats will continue to appreciate in value as long as the Singapore economy continues to grow. And with limited space, the future of public housing looks set to go up - with more skyscraper flats to be built.

Minister Mentor Lee Kuan Yew said this as he launched The Pinnacle@Duxton, which at 50 storeys, is the tallest HDB development in Singapore.

The first rental HDB blocks in Tanjong Pagar were built in 1963 on the site where The Pinnacle@Duxton stands. Today, it is the site of the tallest HDB in the country and the scene has changed significantly.

Minister Mentor Lee attributes the change to an early policy decision to build a home-owning society, which is what motivates Singaporeans to upgrade this asset for a better life, something which could not have happened with just rental flats.

Going forward, Mr Lee expects more such flats to be built.

He said: “The Pinnacle@Duxton is therefore a good example that if the nation continues to do well, we can build more flats of this standard. But we should not make a quick profit from a resale of HDB flats. The rules on minimum occupation and requirement for family units nucleus are to discourage speculative purchases.”

Mr Lee gave out keys to seven of the first families to move in and visited one family, whose father had rented a flat in the area previously.

Speaking to reporters later, he said the government could have built a condominium in its place but preferred to build public flats in this central area and share the growth of the city with the people who had rented flats in the area before.

Responding to questions later on about young couples who are concerned about flat affordability, Mr Lee said this is linked to the country’s growth - if the country is doing well, property prices go up.

But if the economy goes down, unemployment goes up but incomes and property values decline.

One thing that will be going up is the height of future public housing.

Mr Lee said: “Well, it’s a very special problem we face because we can’t expand the city laterally, we have to expand the city vertically. Yes, we can have more (land) reclamations but that’s only about 10, 15 per cent and we’ve reached the limit. Therefore, I see more and more of the old blocks being demolished and new blocks like The Pinnacle@Duxton being built.”

Units at The Pinnacle@Duxton cost an average of $486,000 for a 4-room flat and $590,000 for a 5-room flat, when the last of the units were released in October.

The 50th-storey skybridge will also be open to non-residents for a $5 fee.

- CNA/ir

Source : Channel NewsAsia - 13 December 2009

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Reits an option for property investors

Reits an option for property investors

They offer a relatively liquid way to gain exposure to real estate sector, and dividend yields

By Joyce Teo

If you want to invest in property but cannot bear the idea of borrowing hundreds of thousands of dollars to buy that fancy condominium unit or going through the hassle of being a landlord, real estate investment trusts (Reits) might be worth considering.

Reit prices have risen this year, but they are still worth a look as they offer investors a relatively liquid way to gain exposure to property, and in various sectors and markets too.

Potential investors, however, have to do their homework and tread cautiously.

Reits have survived the credit market squeeze triggered by the subprime crisis.

MacarthurCook Industrial Reit, for instance, recently managed to get shareholders to approve its recapitalisation plan to save itself. It has huge debts due by the end of the year and would have had to be liquidated had the plan been rejected.

Its plan includes a rights issue which diluted its share price.

A recent OCBC Research report on the Reit sector said that while the pressure on some fronts has eased two years on - credit markets have stabilised, for instance - the economic outlook and its impact on Reit income remains uncertain.

Reits collect rent from tenants of the properties they own and pay out most of it as dividends to unit holders. You can trade Reits on the stock exchange, just like with stocks.

The 20 Reits in Singapore own mainly shopping malls, office buildings, industrial buildings, serviced apartments and hotels.

Investors typically seek out Reits for their dividend yields.

At the recent launch of Barclays Wealth’s prospects for property survey, Mr Manpreet Gill, its strategist for Asia, said that Singapore has a well-positioned listed Reit sector. He added that it is useful for an investor to diversify his property exposure by investing in Reits, among other instruments.

Mr Roger Tan, vice-president of the research department of the Securities Investors Association of Singapore, noted that Reit prices have been recovering this year, but many are still far from the highs seen in 2007.

For example, CapitaMall Trust is currently trading at around $1.70 and offers a dividend yield of around 5.5 per cent, compared with its high of $3.50 in May 2007, which saw it offering investors a yield of just 2.8 per cent, he said.

Another example is Suntec Reit, which is trading at around $1.28 and offering an annualised yield of close to 9 per cent, compared with its high of $2.10 in June 2007, when it offered investors a yield of only around 4 per cent.

Their price movements can be volatile, but Reits are considered a fairly safe haven in the long term, said DMG & Partners Securities analyst Jonathan Ng.

‘They are generally well managed by professional managers and you don’t have to worry about them going under.’

Unlike holding a physical property - which you may have problems unloading when the market turns sour - you have more liquidity when it comes to Reits, Mr Ng added.

OCBC has ‘buy’ calls on Mapletree Logistics Trust, Ascott Residence Trust and Suntec Reit, while Mr Ng likes CDL Hospitality Trusts. ‘The yield is not high now, but it’s a momentum play. There’s a growth story,’ he said of the trust.

He is forecasting a 6.5 per cent yield next year, and 7.4 per cent the following year.

He thinks the hospitality sector is the one to watch next year because the opening of the integrated resorts will give a big boost to tourist arrivals.

Mr Ng’s advice: ‘Pick a sector you know that has a strong sponsor and organic growth. For those looking to hold long-term, it is better to stick with the branded ones.’

Reits will eventually have debt due for refinancing. The CapitaLand and Ascendas sponsored Reits have good relationships with the banks, so it is not difficult for them to get debt financing, he explained.

Short-term investors, however, may want to buy the higher-yielding Reits, he said.

Reits can have high yields for two reasons. One, if the Reit is poorly managed, investors will value it at a lower price, causing yields to increase temporarily, said Mr Tan.

Two, if the Reit is unfamiliar to investors, its price will be a poor reflection of the Reit’s true value.

The sector the Reit is in is also key. The office sector, for instance, is still seeing falling rents and rising vacancy.

When it comes to Reits, it is important to assess the quality and potential of the underlying assets, and the management’s ability to extract those values in the long run, advised Mr Tan. When prices of Reits change, they usually reflect the optimism or pessimism of investors over these factors, he said.

Next year, investors should watch out for key risks which, according to OCBC Research, include a rise in interest rates, a double-dip recession and the threat of a new asset bubble.

‘Rising interest rates and inflation rates can hurt the value of a Reit because they erode the value of the cash flow that an investor receives from it,’ said Mr Tan.

However, while the investor may suffer in the short term, a good Reit can add value to his portfolio in the long run, he added.

Source : Straits Times - 13 December 2009

Buy Sell Rent invest In Singapore Property Real Estate

MINDY YONG

( +65 ) 91002985

mindy@mindyyong.com