Q3 may see slowdown in private home sales

But new launches may accelerate activity again, say market watchers.

Private home sales are expected to slow this quarter – the result of the twin effects of the US sub-prime woes which made the headlines in August and the just-ended Hungry Ghost month.

But the pace of activity is expected to pick up again as developers step up launches and confidence recovers, say property market watchers.

Fresh price benchmarks may still be set for projects offering compelling propositions, but developers are likely to tread carefully before upping prices.

CB Richard Ellis (CBRE) estimates that the total number of new private homes sold by developers in the primary market during Q3 will be 3,500-4,000 units including sales from ongoing projects. This is lower than the 5,129 units sold in Q2 and 4,783 units transacted in Q1 this year.

Activity also decelerated in the secondary market in Q3. ‘Whereas the first and second quarters saw resale volumes of 4,645 units and 6,514 units respectively, it is likely that Q3 figures will be lower, probably in the region of 4,000 to 4,500 units,’ CBRE executive director Li Hiaw Ho says.

‘Anecdotal evidence suggests that subsale activities have been muted as investors become more cautious,’ Mr Li added. Subsales as a percentage of total private housing sales are likely to fall below the 7.4 per cent and 9.7 per cent in Q1 and Q2, he predicts.

Subsales, often used as a gauge of speculative activity, involve projects that have yet to receive a Certificate of Statutory Completion, while resales, which are also secondary-market transactions, cover completed developments.

But the current slowdown in activity is not such a bad thing, says DTZ Debenham Tie Leung executive director Ong Choon Fah.

‘The market has been going up quite dramatically. It’s good that people step back and evaluate their positions before moving on. This window also creates an opportunity for people to enter the market. When the market is so hot, everytime you put in an offer at the seller’s asking price, he raises his price,’ she says.

Ong Chong Hua, executive director of Ho Bee Investment, also describes the current slowdown as ‘a healthy consolidation after a robust period of growth in sales volumes as well as prices’.

‘Activity will start picking up slowly and I think confidence will come back, as developers start launching more projects. Buyers will be cautious but underlying demand is still strong. The share market seems to have consolidated and strong economic fundamentals are still in place for Singapore and the Asian region,’ he said.

Among the projects expected to be released soon are MCL Land’s Hillcrest Villas cluster terrace homes along Dunearn Road, Ho Bee’s Turquoise condo at Sentosa Cove, Bukit Sembawang’s Paterson Suites and SC Global’s Hilltops in so said to have Cairnhill. CapitaLand is albegun selling Latitude at Jalan Mutiara at around $2,800 per square foot on average.

Projects that are slated for launch in Q4 include Lippo’s condo on Sentosa Cove, Ritz-Carlton Residences at Cairnhill, and the second phase of Marina Bay Financial Centre.

Says DTZ’s Mrs Ong: ‘Sales activity may be slow for the next couple of months, but this will depend on the type of projects launched and their price points. If developers release projects that are targeted at home owners, demand is still very much there. But if they’re targeting investors or want to set benchmark prices, buyers will take a longer time to consider.’

Ho Bee’s Mr Ong said: ‘Developers will definitely be more cautious in moving up prices and trying to set benchmarks all the time. They will test the waters.

‘But I don’t think anybody will cut prices because fundamentals are still strong. There’s still a shortage of homes, with a lot of those who sold their homes in en bloc sales looking for replacement properties.’

CBRE’s executive director (residential) Joseph Tan reckons that the market could still see benchmark prices if the right kind of products are offered, such as branded residences.

Looking to the final quarter of 2007, the residential market will remain active as the government’s projected economic growth rate of 7 to 8 per cent for 2007 remains on track. ‘If developers sell around 3,000 to 4,000 units in Q4, then the total number of new homes sold in 2007 will be a new record of 17,000 to 18,000 units,’ CBRE’s Mr Li said.

This will be significantly higher than the 11,147 units sold in the primary market last year.

Source : Business Times – 12 Sept 2007

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Property boom far from over: Kwek Leng Beng

CITY Developments executive chairman Kwek Leng Beng believes that the property boom here is far from over, despite the current financial market turmoil.

‘The boom actually just started in 2005, and if you’re thinking of a relapse, I don’t think that is possible,’ he told chief executives yesterday at the Forbes Global CEO Conference.

‘Sub-prime has to some extent affected Singapore … there’s a psychological fear of what will happen.’

But ‘our banks are still lending a lot of money’, Mr Kwek noted. ‘They’re a little bit more cautious, but we have plenty of liquidity.

‘The banking and financial systems here are very well controlled … they are well regulated and the central bank has taken action to pre-empt crises like what you’ve seen in sub-prime.’

The property tycoon, who is also chairman of Millennium & Copthorne Hotels, was speaking at a panel discussion on global real estate trends.

He said that, after adjusting for inflation, high-end residential property prices have risen only about 10 per cent in real terms from their lowest level over the past decade, ‘which is not alarming’.

He said: ‘My advice is, look at it realistically – crisis means opportunity. I’m a bottom-fisher, I like to go in when the market is bad.

‘I believe there’s still a lot of upside. The mid-end is still 19 per cent below the peak of ‘96.’

In addition, he said Singapore had introduced a lot of initiatives over the past 10 years to attract foreigners to live and work here, which has fuelled demand for property.

‘You may say it’s very dull, but we are going to have the integrated resorts, Formula One, and a host of other events that will make Singapore an exciting city to live, work and play.’

Other panellists were also optimistic on the prospects for further growth in property development in China, India, and the Middle East.

Vincent Lo, the chairman and chief executive of Hong Kong-based Shui On Group, who was also on the panel, said he was ‘very bullish’ on the property market in China. ‘We have waiting lists for our office space till 2010.’

Kushal Pal Singh, chairman of DLF Group, the largest real estate developer in India, said there remained a ‘huge gap between demand and supply’ of residential property there.

Hayan Merchant, chief executive of Dubai-based Ruwaad Holdings, said the current pace of development in Dubai and the United Arab Emirates more generally was ‘unprecedented’.

The property, hospitality and tourism investment and development company is looking at moving into Asia ‘in the next three to five years’, Mr Merchant told reporters in a separate briefing. He said Ruwaad was looking particularly at Singapore, Malaysia, China and India for expansion opportunities. 

Source : Business Times – 12 Sept 2007

Plenty of upside left in mid-tier property market: Kwek Leng Beng

DESPITE woes in the United States’ housing market, there is still plenty of zing in Singapore’s red-hot property market.

Banks are still lending a lot of cash and mid-tier homes are still on offer at prices below 1996’s peak, says Mr Kwek Leng Beng, executive chairman of leading developers City Developments and Hong Leong Group.

‘I believe that there is still a lot of upside. At the mid-tier, prices are still less than 90 per cent of the peak in 1996,’ he told delegates yesterday at the Forbes Global CEO Conference.

His bullish view was echoed by his counterparts from other parts of Asia, including China, India and the Middle East.

They agreed that real estate remains hot property in their countries even as problems in the US have thrown global financial markets into a tizzy.

‘The (Shanghai) market is very strong because the inherent demand is just tremendous,’ said Hong Kong developer Shui On Group chief executive (CEO) Vincent Lo.

Residences next to the hip Xintiandi area are commanding prices of up to US$10,000 (S$15,236) per sq m, he said, adding that the waiting list for office space in the city stretches to 2010.

In the United Arab Emirates (UAE), property development is growing at unprecedented rates, said Dubai 9 Group managing director Hayan Merchant, noting that 26.5 per cent out of the world’s 130,000 cranes are in the UAE.

About 30 million sq ft of office space will be added in Dubai next year, he said, while another 42 million sq ft – equivalent to all the office space in downtown San Francisco – will come online the following year.

Singapore’s boom should continue even though psychological fears over the ongoing global credit crunch may take a little of the fizz out, said Mr Kwek. He said that lenders in Singapore are a little more cautious but there is still plenty of liquidity.

He added that historic prices over the past 10 years imply that the ‘right’ selling price for top-end properties should be about $3,600 per sq ft on average.

‘We are doing about $4,000. It’s about 10 per cent up, which is not alarming.’

The Government’s efforts to make Singapore a ‘global city’ that attracts foreigners to live here will help sustain the property bull run, he said.

He said that last weekend, he had met a group of foreigners, some of whom were developers, visiting Singapore for the first time. After four or five days, they started asking about buying high-end condominiums and office blocks.

‘All the real estate sectors – industrial, retail, commercial and residential – have kicked off. And this has to do with growing interest in Singapore as a global city.’

Source : Straits Times – 12 Sept 2007

Plunge in August auction sales partly due to US sub-prime woes

SALES of properties on auction here plummeted last month, in one of the first signs that the global credit crunch may be taking a toll on Singapore’s property market.

Only $10.79 million of properties were sold under the hammer in the month, less than one-fifth of what was fetched in each of June and July, said property firm Colliers International, one of the biggest auctioneers here.

Since March, the value of properties sold via auction each month has ranged from $33 million to $108 million. But this plunged last month, said Colliers, which released a report on auction sales yesterday.

In previous years, August has traditionally been a slow month for property sales due to the Hungry Ghost Festival.

But superstitious buyers were not the reason auction sales turned in an exceptionally poor showing in this year’s hungry ghost month, which stretched from Aug 13 to Monday.

Colliers said the nosedive in sales was mainly due to the recent stock market volatility caused by United States sub-prime mortgage worries, new government policies, and higher asking prices by sellers.

‘Given the good property market performance, many sellers have raised their expectations and upped their asking prices, especially for properties with en bloc potential,’ said Ms Grace Ng, Colliers’ auctioneer and deputy managing director.

She added that these properties have also become less appealing, thanks to the newly announced rules governing collective sales, which will make it more difficult for developments to sell en bloc.

In addition, the ’stock market turmoil amid the US sub-prime woes’ has also contributed to the ’slowdown in the market, as buyers take a cautious stand’, Ms Ng said.

Only 10 properties were sold via auction in this year’s hungry ghost month, less than one-tenth of the 131 that were put up for sale in the period.

The properties that were sold fetched $9.56 million in all – a tiny fraction of the $133.86 million achieved in last year’s double hungry ghost month and ‘one of the lowest seen in the past 10 years’, Colliers added.

Although the hungry ghost month typically sees fewer property sales due to superstitious buyers and sellers, the firm said this is unlikely to be the reason for the plunge in auction sales of property.

Indeed, the number of properties put up for auction by their owners in the period surged to 88, the highest level in at least a decade.

On the other hand, the number of repossessed properties – traditionally the main source of supply for auction sales – fell to 43, down from 239 last year and the lowest level since 1998. This was largely due to the buoyant economy and climbing property prices, said Colliers.

All this shows that auction sales in the hungry ghost month were being moved more by market conditions than superstitious beliefs, the firm added.

But Ms Ng was quick to point out that the firm is still receiving plenty of inquiries about auction properties from potential buyers.

‘The inquiries are still there, but people are thinking twice before jumping in,’ she said. ‘They may be taking a step back and reassessing the prices.’

Colliers also noted that while auction sales may have plunged in the hungry ghost month, other segments of the property market appeared to still be going strong.

For instance, the total number of homes sold in the period is ’still at a very healthy level’, although it has been falling since May, the firm said.

Source : Straits Times – 12 Sept 2007

Eco-friendly project for iconic site in Beach Road

CDL-led consortium wins tender for hotly contested site with $1.68b bid.
 
SINGAPORE’S fast changing city skyline is set for an eye-catching addition after a consortium was awarded a large, hotly contested Beach Road site, with a winning bid of $1.689 billion.

The new development, called South Beach, features two striking towers, 45 storeys and 42 storeys tall, plus the original conserved military buildings of the old Beach Road Camp which will be restored.

The project will boast premium office space, two hotels, shops and city residences.

Competition to develop the 3.5ha site – seen by some as the last major iconic site in town – was fierce but was won by a consortium led by City Developments (CDL).

The futuristic design, with environmentally friendly features, is by renowned British architects Foster & Partners.

The winning bid works out to $1,068.6 per square foot of potential gross floor area and was the higher of two tender submissions earlier shortlisted by the Urban Redevelopment Authority (URA) for their acceptable concept proposals.

Keppel Land and partner Hong Kong’s Cheung Kong Holdings lost out with their bid of $1.386 billion.

CDL, which tendered via Scottsdale Properties, tied up with Dubai World’s Istithmar Beach Road FZE and Elad Group Singapore, with equal stakes. US-based El-Ad Group, which bought New York’s landmark Plaza Hotel from CDL executive chairman Kwek Leng Beng and his partner in 2004, is owned by Israeli billionaire Yitzhak Tshuva.

Said Mr Kwek: ‘We are confident that South Beach will elevate Singapore’s branding as a global city and help attract more prominent investors all over the world.’

CDL said the 99-year leasehold development, which has a gross floor area of 146,827 sq m, will be built by 2012.

The office space will be substantial as URA requires the developers to set aside at least 40 per cent of the space for office use. At least 30 per cent of the space must be for hotel rooms.

‘Given its strategic location, South Beach is designed with a clear intent to bring economic benefits to complement the rapid growth of our city-state,’ said CDL’s managing director Kwek Leng Joo.

The consortium’s proposal adopted environmental design and green technology to create a distinctive, high-quality development that fits in well with the tropical climate and the urban context.

A key feature of the winning design is a large ‘environmental filter’ canopy that covers the open spaces and ties together the new and conservation buildings within the site.

The first storey is laid out with a series of internal streets, which will enhance street level vibrancy and allow pedestrians to move about easily.

‘The concept is a big step forward in strengthening Singapore’s stand as an environmentally friendly city,’ said Singapore Institute of Architects’ president Tai Lee Siang.

When the Beach Road tender closed in July, the URA received seven submissions from major developers and firms. Five were rejected even though some of them came with higher bids.

For instance, the Lippo Group, which had tendered through Overseas Union Enterprise, submitted two bids above the winner’s price.

‘It’s a good price for the CDL consortium because this is the last iconic site in Singapore,’ said Mr Ku Swee Yong of property consultancy Savills Singapore. ‘And hotel room rates and office leasing rates have been showing strong growth.’

Mr Li Hiaw Ho, executive director of CBRE research, said the site will add at least 500,000 sq ft of new office space and about 700 to 800 hotel rooms. It would relieve an office space shortage and offer rooms for visistors to the Formula One race, he said.
 
Source : Straits Times – 11 Sept 2007

Pinetree condo put up for sale – Indicative price for the 12-year-old freehold site in Balmoral Park is $140m to $150m

PINETREE Condominium in Balmoral Park has been put up for sale by tender with an indicative price of $140 million to $150 million.

The freehold residential redevelopment site in district 10, which is about 12 years old, was put up for sale through an expression-of-interest exercise in April last year.

The indicative price then was about $59 million. This represents an increase in price by about 11/2 times.

More than 80 per cent of the owners have now agreed to the collective sale.

The block is being marketed by Jones Lang LaSalle, whose regional director and head of investments Lui Seng Fatt said: ‘There have not been many collective sale sites in the exclusive Balmoral Park area and with the recent hike in development charge, Pinetree Condominium, which has no development charge, will be an attractive site for developers to consider.’

Mr Lui said there would be no development charge payable as the current gross floor area is maximised.

Based on a sale at $140 million, the 41,361-square-foot property, which can have an estimated gross floor area of up to 66,178 square feet, will cost about $2,100 per square foot per plot ratio (psf ppr).

Mr Lui added that the site can be combined with the adjoining landed properties to form a total potential land area of approximately 68,633 sq ft, which would yield a total combined gross floor area of 109,800 sq ft.

Based on this size, a developer could build a new development consisting of 70 to 80 luxury apartment units. Mr Lui estimates a break-even price of about $3,100 psf.

Some benchmark prices in the same area include those of The Solitaire, which has had a few transactions done above $2,200 psf, and Orange Grove Residences, which had transactions ranging from $2,100 to $2,350 psf.

Source : Business Times – 11 Sept 2007

Questions for KepLand to address

MORE than a month after Keppel Land’s sale of its one-third stake in One Raffles Quay (ORQ) to its listed trust K-Reit Asia, questions are still being raised about the site’s pricing. KepLand sold its share in ORQ for $941.5 million, which works out to some $2,109 per square foot (psf).

While KepLand has described the price as fair and pointed out that the sale comes with significant long-term strategic benefits for it, some analysts and shareholders are still wondering if KepLand could have got a better deal if it had sold to a third party.

When the deal was first announced, analysts pointed out that the price appeared to be on the low-end of the range, considering ORQ’s prime Grade A status. Nearby, 1 Finlayson Green was sold to a UK property fund at a considerably higher $2,650 psf in June.

The company’s share price has slipped some 8.3 per cent to $7.70 from $8.40 when the deal was announced on July 30. While part of the fall can be attributed to a broad market pull-back, the overall property index has fallen by a smaller 3.5 per cent.

At the heart of the matter is a series of discounts offered by KepLand to K-Reit. KepLand says that the effective price for its one-third ORQ stake comes to between $2,882-$3,052 psf. But the actual price paid by K-Reit was much lower. For starters, the trust received a 10-15 per cent discount as it was only being sold a minority stake in the project.

In addition, a discount of $150 psf was given as K-Reit faces potential tax exposure from its ORQ stake. The stake sold to K-Reit was in ORQ’s North Tower, which is classified as ‘trading property’ – unlike the South Tower. Profit on the sale of trading properties is subject to tax.

Both reasons for the discounts have come under market scrutiny. For one, some shareholders and analysts have questioned the rationale for the 10-15 per cent discount. Said one analyst BT spoke to: ‘Why 10-15 per cent? Why not 5 per cent?’

KepLand, on its part, said that a 10-15 per cent discount is ‘within market range for a sizeable transaction with minority rights and limited financing options’ – but there is no full agreement in the market on that. Similarly, there are questions as to why the North Tower was classified as a trading property.

KepLand needs to explain its rationale to shareholders and analysts quickly. The developer has already met with some institutional investors to explain the pricing, BT understands.

But more of an effort has to be made, especially when it comes to retail investors, who have been left somewhat in the dark. This is especially urgent as KepLand will soon have to hold an extraordinary general meeting to obtain shareholders’ approval for the sale.

Keppel Land owns about 40 per cent of K-Reit. And most analysts BT spoke to agree on one thing – that the sale is positive for KepLand from a strategic long-term view as there is a recurrent stream of fee income which would not be the case if the stake had been sold to a third party.

An analysis by Goldman Sachs, for example, shows that the net benefit to a developer is roughly the same from selling to a sponsored Reit or from selling to a third party at a price that is nearly 20 per cent more. But more investors need to be convinced of that. And the rationale for the discounts has to be explained better.

Source : Business Times – 11 Sept 2007

KSH wins deal to build boutique hotel – The project will be part of Marina Bay’s newest lifestyle hub

KSH Holdings, a construction and property development group, yesterday said it has won a contract to build a luxury boutique hotel at Clifford Pier.

The contract, which BT understands is worth close to $120 million, is awarded by Hong-Kong listed property group Sino Land, the sister company of Singapore property giant Far East Organization.

The Clifford Pier hotel will be part of Marina Bay’s newest lifestyle hub, and will offer a wide mix of complementary uses, including F&B, retail and entertainment outlets, KSH said.

Work on the project will start this month and is expected to be completed within 20 months.

In December last year, Sino Land won the hotly contested site at Collyer Quay. The site also includes the single-storey Clifford Pier and the former two-storey Customs Harbour Branch Building.

Then Sino Land, which is controlled by the family of property magnate Ng Teng Fong, put in the two highest bids out of the three short-listed.

The winning tender of $165.8 million was anchored by a luxury boutique hotel featuring about 120 rooms with ‘full sea views’.

KSH said that under the terms of the contract, it will provide a range of services for the building of the six-storey hotel, including conserving Clifford Pier and the former Customs Harbour Branch Building.

The new contract brings the total value of construction contracts secured by the company since the beginning of this year to $279 million. The contract also brings the existing order books of the company’s construction business to a new high of $405 million.

‘Going forward, we are confident that this mega project will further enhance our track record and put us in an excellent position to secure prestigious projects of higher contract values,’ said Choo Chee Onn, KSH’s executive chairman.

The company also said that its fully owned subsidiary Kim Seng Heng Engineering Construction recently secured three new contracts with a combined value of $63.9 million.

KSH’s shares gained 3 cents to close at $1.12 yesterday.

Source : Business Times – 11 Sept 2007

Indonesian group set to take over Shining Corp

AN INDONESIAN group is poised to take over Sesdaq-listed building contractor and buildings materials supplier Shining Corporation and turn it into a property developer in Singapore, with a focus on high-end residential projects.

Shining Corporation said yesterday it has entered into an agreement for British Virgin Island-incorporated Citipoint Asia Real Estate Capital, which is owned by Indonesia’s GoldenFlowerGroup, to invest up to about $42 million in the company for a 69.2 per cent stake.

Citipoint is a special purpose vehicle wholly owned by Indonesian Nico Po who, together with his Indonesian father Po Sun Kok, control the GoldenFlowerGroup, whose interests range from apparel manufacturing to financial services and real estate. In Singapore, the group’s investment holdings include MacDonald House, an office building along Orchard Road, and 51 apartment units at Suite@Central, also in the Orchard Road area. A recent en-bloc acquisition of residential land at 55 Devonshire Road is set to launch the group into the development of high-end residential apartments.

Under the placement agreement announced by Shining yesterday, Citipoint will invest $21.75 million through the subscription of 167.3 million new shares in Shining at 13 cents apiece. A further injection of up to $20 million is expected through the issue of up to 155.65 million free warrants to Citipoint at an exercise price of 13 cents a share.

The 167.3 million placement shares will give Citipoint an equity stake of 53.7 per cent. If the warrants are fully exercised, the stake will go up to 69.2 per cent of the enlarged capital.

The deal is subject to certain conditions to be met by March 31, 2008. They include: a whitewash waiver to exempt Nico Po from a general offer; the approval of the Singapore Exchange; a requirement for Shining to maintain a net tangible asset of $12 million by Dec 31, 2007; and the approval by Shining shareholders.

In a statement, Nico Po said: ‘I am excited by the prospects of securing a majority stake in Shining Corporation Ltd.’

He added that with the enlarged capital base and access to the GoldenFlowerGroup’s real estate expertise, he hoped the company would be able to leverage its potential to be a high-end residential property developer.

Tan Kay Kiang, Shining Corporation’s chairman added: ‘The Singapore property and construction market has seen considerable growth in recent years.’

He added that the company has increasingly felt the need to have an increased market capitalisation and larger financial resources for growth in this market.

In view of the new thrust, certain business divisions of Shining will be divested.

Source : Business Times – 11 Sept 2007

Horizon Towers canvassing for sales committee

Some majority sellers of Horizon Towers who have been trying to find volunteers to form a new sales committee are understood to have found five – just enough to meet the quorum needed.

With a handful of willing candidates, they are trying to arrange for a meeting to be held on Sunday to discuss the election of a new committee, a source said.

The remaining three members of the previous sales committee of nine quit in a meeting last Friday. The others quit in the days leading up to the meeting as pressure mounted, along with threats of legal suits. If the majority sellers succeed in getting a new committee together, it will be the third for the Horizon Towers sale.

At the meeting on Friday, the majority sellers were supposed to decide on how to respond to a lawsuit brought by Hotel Property Ltd (HPL) and its partners after the en bloc sale of their Leonie Hill property fell through last month.

The Strata Titles Board (STB) refused to grant a collective sale order, saying that Horizon Towers had filed a defective application.

HPL and its partners are suing the majority sellers for failing to file properly.

However, sellers that BT spoke to said that the meeting was more focused on the issue of finding enough volunteers to form a sales committee, rather than deciding on the next course of action.

A lawyer that BT spoke to said that under the current Land Titles (Strata) Act, which governs en bloc sales, there is no mention of needing a sales committee for a collective sale to go through.

He said that having a sales committee is more of a practical issue, as it would be impossible to manage such a big en bloc sale without one.

However, under proposed new rules, an en bloc sales committee must be set up and its members elected at an extraordinary general meeting convened by the estate’s management corporation.

This will apply to all projects which have yet to obtain the required majority consent from owners at the time the amendments are passed by Parliament, most likely this quarter.

HPL and its partners have given the majority sellers up to today to extend the en bloc sale completion deadline to Dec 11 and ‘do everything necessary to obtain the collective sales order’.

Should they lose their case, each of the 255 owners of 173 units who signed off on the en bloc sale may be liable for about $4 million.

Source : Business Times – 11 Sept 2007