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

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

The green route to en bloc redevelopment – Demolition is wasteful and not environmentally friendly, says Hillcrest MD

THE property boom here prompted Hong Kong- based Hillcrest Capital to buy the 34-unit Anderson Green in February for $112 million in February. But instead of tearing it down to build a new condo, it will gut it, then reuse the existing structure.

Hillcrest managing director Lyon Lau says: ‘It is not environmentally friendly to demolish a perfectly fine building only to rebuild something similar.

‘Although the concept of alteration and addition might be new to Singapore, in Hong Kong it has been practised widely.’

More than 160 residential buildings have been sold en bloc for redevelopment here in the past two years, but many are still structurally sound.

Architect Tai Lee Siang, president of the Singapore Institute of Architects (SIA), says: ‘Buildings are designed to stand for as long as the materials they are built of allow them to stand. This can be hundreds of years or less than a week – think of cardboard houses.’

Most of the buildings that have been sold are about 20 years’ old, but the sites they sit on can house bigger and taller projects, so it makes business sense to demolish them.

Anderson Green, which will be relaunched for sale as 21 Anderson, is already built up to its maximum potential, so strictly speaking the decision to not demolish was not completely for the love of the environment.

But perhaps what is really not sustainable are periodic increases in plot ratios.

The National University of Singapore’s Assistant Professor Hee Limin (Department of Architecture, School of Design and Environment) says: ‘In a way our planning system encourages this redevelopment.’

According to her, it’s a shame that economic forces ‘control’ the landscape. And these economic forces do not take all factors into consideration.

There is also a cost implication in the ‘embodied energy’ in buildings, she says. This refers not only to the energy it uses once it is up and running, but the resources exhausted to build and possibly recycling it.

The study of a ‘life cycle’ of a building is still relatively new. But considering US National Institute of Standards and Technology figures, which reveal that building construction consumes 40 per cent of the raw stone, gravel and sand used and 25 per cent of the virgin timber used worldwide each year, the price of a new building is actually considerably higher.

City Developments Ltd (CDL) recently won the Building and Construction Authority’s Green Mark Platinum award and is probably the greenest developer in Singapore. Its general manager Eddie Wong concedes: ‘While there are negative environmental and social impacts from en bloc redevelopment, we must also be mindful of the tremendous positive effects of such redevelopment’.

He highlights a reduction in long-term energy consumption through more energy-efficient buildings.

CDL does recycle some building debris, but recycling or reusing a whole building is a different matter.

The most environmentally friendly solution would be to not demolish buildings at all, but ‘economic forces’ are not likely to support this.

Pioneer architect Tay Kheng Soon of Akitek Tenggara says the simplest solution would be to allow the transfer of development rights.

‘Owners of a site that has been given increased plot ratio should be able to sell to a developer who wants higher plot ratio on another site. This would also require a masterplan that allows for plot ratio increases above those pegged at a certain level. All in all, it requires a more sophisticated planning process than the present one.’

Other ways suggested by Mr Tay include rating existing buildings based on heritage. ‘The lower the rating, the more demolition is permitted. Correspondingly, a higher-rated property will enjoy a property tax rebate to balance out the benefits.’

SIA’s Mr Tai adds: ‘The attitude of keeping and maximising the value of old buildings for urban renewal requires a complete change of mindset. This is not always possible as it is human nature to yearn for growth, change and improvement.’

The Building and Construction Authority is encouraging the use of recycled materials in construction.

It promotes the use of Eco-concrete made from recycled material used in pilot projects for non-structural works such as pavement slabs in housing estates, linkways and park connectors.

Source : Business Times – 11 Sept 2007

Some Katong commercial properties going for en-bloc sale – Buildings include Katong Shopping Centre; sales could help rejuvenate area and boost image

FACED with flagging businesses and dwindling human traffic, the shop owners of several commercial buildings in Katong are coming together to sell their properties en bloc.

This has led to renewed interest in the old East Coast hot spot recently, sparking hopes among residents and shopkeepers nearby that the area – famed for its good food and old-world charm – will get the rejuvenation that it needs to boost its image.

At least five commercial buildings along Mountbatten Road and East Coast Road have, or are in the process of engaging marketing agents to launch their collective sales. These include Katong Mall, Paramount Hotel and Shopping Centre, Roxy Square, Katong Plaza and the iconic Katong Shopping Centre, said Mr Lui Seng Fatt, the regional director and head of investments at Jones Lang LaSalle.

In its heyday, Katong Shopping Centre was the heart and soul of the East. But as the years wore on, the lack of entertainment facilities and an attractive retail mix made it a poor rival to malls like Parkway Parade.

Many of these buildings in Katong are more than 20 years old and, in the case of Katong Shopping Centre, which opened in 1973, more than 30.

Dr Lim Un Huat, an owner of several shops at Katong Mall, told The Straits Times most shop owners were in favour of a collective sale, and were waiting for the right price to sell.

Mr Lui said the ‘tired-looking’ buildings were overdue for a revamp, especially since residential projects in the area have gone upmarket.

Prices of homes in the Katong, Meyer and Amber Road residential enclave have soared recently with the property boom. The area’s proximity to the upcoming Integrated Resort in Marina Bay is an added lure.

United Industrial Corporation’s One Amber and Grand Duchess sold out around $700 to $800 per sq feet (psf) recently. CapitaLand’s The Seafront on Meyer and GuocoLand’s The View @ Meyer fetched new highs of between $1,500 psf and $1,800 psf.

While the shop owners do not expect to make a ‘huge windfall’, Mr Lui said selling en bloc would help them unlock the value of their shops.

He estimates that the prices transacted would be between $500 psf and $1,000 psf, depending on the building.

Colliers International’s executive director for investment sales, Mr Ho Eng Joo, said Katong’s rejuvenation would be a ‘natural progression’ following the influx of residents living in the area’s new condominiums.

‘Katong’s residential area is getting quite vibrant, so the commercial side has to catch up now,’ he said.

The only setback, he added, would be the new rules for collective sales – expected to kick in next month – which will prolong the sale process.

But in three or four years’ time, Katong could be transformed, he added.

However, while some property consultants remain optimistic about Katong’s future, others remain cautious.

Director of marketing and business development Ku Swee Yong at Savills Singapore said the area was a ‘bit of a mixed bag’ – comprising offices, residential apartments, hotels and retail space – which makes it ‘neither here nor there’ for redevelopment.

‘The area’s physical limitations mean a very creative approach is needed to redevelop it,’ he added.

From a conservation perspective, the revitalisation of Katong is desirable if done properly, said Singapore Heritage Society president Kevin Tan.

Over the years, the retail business in the area has withered, and given way to maid agencies, pubs and video arcades. But this can be changed by injecting some new life and a new trade mix into the area, he added.

He hopes, however, that the architecture of Katong Shopping Centre will be conserved as it was ‘very important in East Coast’s history’.

Shop owner Dr Lim concurred: ‘We all hope to bring back the hustle and bustle of the old Katong.’

MOVING FORWARD

‘Katong’s residential area is getting quite vibrant, so the commercial side has to catch up now.’ MR HO, Colliers International executive director for investment sales

OBSTACLES TO BEAT

‘The area’s limitations mean a very creative approach is needed to redevelop it.’ MR KU, Savills Singapore director of marketing and business development, on the area’s mixed developments

Source : Straits Times – 10 Sept 2007

Horizon Towers deal in limbo as sales committee quits

The majority sellers of Horizon Towers were supposed to get together last night to resolve a problem, but things ended up being possibly worse.

The sales committee quit last night at the meeting held at Holiday Inn Park View Hotel, and even up to 11pm, no new committee had been formed, BT understands.

The majority sellers who arrived with their lawyers in tow were supposed to decide how to respond to a lawsuit which they face brought by Hotel Property Ltd (HPL), Morgan Stanley Real Estate managed funds and Qatar Investment Authority 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 a proper application.

HPL and its partners in February signed a deal with 84 per cent of the owners of Horizon Towers to buy the property en bloc for $500 million, for redevelopment. There have been media reports that some sellers regretted their decision to sell at that price when neighbouring developments later sold for twice as much per square foot.

Last night’s meeting plunged into limbo when the sales committee quit. Sellers who appeared at the meeting said volunteers were being asked to serve on a new sales committee, and that two men stepped forward on condition they would be granted blanket immunity from legal proceedings.

However, they did not get their condition, and no conclusion was reached.

BT understands that by the time the meeting started, there were only three people left on the committee as the other members had quit in the past weeks. This fails to meet the quorum needed of five people on the committee.

Throughout the meeting that started at 8pm and was scheduled to end by 11:59pm yesterday, groups of people and individuals were seen leaving the ballroom at different times to discuss and to smoke.

The meeting was tightly monitored by about six security officers who made sure only majority sellers were allowed into the ballroom. Applause interspersed with cheering was heard at different intervals of the meeting.

The majority owners whom BT spoke to estimated there were more than a hundred people who turned up.

They had a mixed response regarding the outcome. One man seemed upset that the sales committee had quit and said: ‘I don’t know what’s going to happen now. Who cares?’ Another seemed pessimistic about the chances of another committee being formed: ‘Who would want to be on the sales committee now with the threats of legal suits?’

At press time, the meeting was still going on, BT understands.

Source : Business Times – 8 Sept 2007

It’s a real mess: Judge (Court orders a stay on Phoenix Court en bloc sale)

IT HAD seemed like a walk in the park for Phoenix Court residents en route to a windfall, when the owners of all but one of the units agreed to sell off their apartments collectively for $88.1 million.

But just 11 days to go before the owners were due to pocket $1.8 million each, the sale has been stalled indefinitely — in a complicated legal saga that demonstrates why impending sweeping changes to the en bloc legislation, unveiled just two weeks ago in Parliament, are desperately needed.

On Friday, High Court Judge Andrew Ang, after hearing an appeal by the dissenting co-owners ordered that the sale be put on hold as he reserved judgement.

The tussle began in April last year when owners of freehold Phoenix Court, a 13-storey apartment block in River Valley, inked the Collective Sale Agreement (CSA). Out of the 47 units, the only dissenting co-owners were an elderly couple, Mr Yip Hoi Thong and Madam Ng Swee Lang.

Six months later, a deal was sealed with Bukit Panjang Plaza for $88.1 million. The sale committee went on to apply for a Strata Titles Board (STB) order to proceed with the sale in January. After the Board dismissed the couple’s objection, they took the matter to the High Court, demanding that the sale be annulled due to “defective” procedures.

Their lawyer, Senior Counsel Michael Hwang, argued that two of the three majority owners who had applied to the STB for the sale order, were not authorised to do so.

He also took issue with the fact that the valuation report by Savills was done six weeks after the CSA was signed — which while in line with current legislation, would flout new laws which are expected to kick in next month.

Furthermore, the method of distribution of the sale proceeds was also omitted from the sale and purchase (S&P) agreement.

Lawyer Christopher Yong, who was acting for the sale committee, pointed out that it was common industry practice to set out the method in the CSA only, adding that it was “at worst a technical error” that should not jeopardise the whole sale.

But Mr Hwang argued that the S&P agreement must define the contractual obligations between a buyer and the individual owners — since members of sale committee “lose interest very quickly, especially if they have gotten their money”.

The prevalent practice of treating the owners as one collective entity has resulted in many problems arising from “post-completion issues”, including the deadline for each owner to vacate.

Mr Yong maintained that what mattered was for the STB to be satisfied that the deal was done in “good faith” . He said the statutory requirements “are not absolute” and a deal must be allowed to go through as long as the procedural lapses are immaterial.

But Mr Hwang disagreed: “This is in effect a compulsory acquisition. The onus is on those who acquire my clients’ properties to adhere strictly to the requirements set out by the law.”

With the sale due to go through on Sept 18 and with many owners already committed to their new properties, Justice Ang did not hide his unease at ordering a stay on the deal — a move that could potentially result in further lawsuits by the buyers.

“Aptly summed up, it’s a real mess,” the judge said as he shook his head.

This is not the only “mess” for Phoenix Court residents. In a separate development, a group of 13 majority owners — who had turned their backs on the sale — have filed an appeal after their case was dismissed by the High Court. The group argued that the extension to the CSA — which had already expired — was not valid.  

Source : Today – 8 Sept 2007

HPL: Horizon Towers sales committee tried to scupper deal

Several members of the Horizon Towers sales committee tried to scupper the en bloc sale by rallying the rest of the majority sellers into going back on their collective agreement, according to an affidavit filed in the High Court yesterday by the buyers.

The claim is one of several in the late-night filing made yesterday by Hotel Properties Ltd (HPL), Morgan Stanley Real Estate-managed funds and Qatar Investment Authority.

HPL and its partners had in February signed a deal with 84 per cent of the owners of Horizon Towers to buy the Leonie Hill property en bloc for $500 million. The sale fell through last month when 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, through their lawyers Allen & Gledhill, are suing the majority sellers for failing to file a proper application.

In its affidavit – a copy of which was obtained by BT – HPL and its partners alleged that some members of the Horizon Towers sales committee tried to defeat the collective sale by encouraging the other majority sellers to go back on the agreement.

The affidavit said an anonymous circular was sent to all residents of Horizon Towers in late April. The circular said: ‘If enough like-minded owners rescind the agreement and the majority falls below 80 per cent, the application to the STB can be repealed . . . With cohesive cooperation, this movement can be successful.’

The circular included a blank ‘Letter to rescind participation in the collective sale agreement of Horizon Towers’ and urged owners to send their replies to two mailboxes – which the affidavit claims belong to two current members of the sales committee.

The affidavit also quoted from other anonymous flyers sent to the residents of Horizon Towers, which said the sellers were being paid a ‘paltry sum’ for their development.

HPL and its partners charge that some of the sellers want to back out of the deal because they were unhappy with the price offered for the development.

There had been several media reports that some sellers regretted their decision to sell Horizon Towers to HPL and its partners for $500 million, when neighbouring developments – such as The Grangeford – subsequently sold for double the per-square-foot amount.

The buyers’ case is that the majority sellers of Horizon Towers did not do their utmost to submit a proper application for a collective sale order to the STB.

They said the sellers filed the application only in April – two months after the deal was signed, and just four months ahead of the deadline for the completion of the sale. The buyers said this was a ‘breach of (the sellers’) express obligation to apply expeditiously for the collective sale order’.

They also claim the sellers were ambivalent about the dates for the STB hearing and were slow in releasing documents which the objectors – the minority sellers who objected to the en bloc sale – had requested.

This affidavit comes just ahead of a meeting today of all the majority sellers of Horizon Towers. They are meeting to decide how they should respond to HPL’s suit.

The sellers need to decide if they should accede to HPL’s demand that the sellers extend the deadline of the sale by four months, appeal against the STB’s decision and file a fresh application to the STB, if necessary. Alternatively, they can contest the suit.

Source : Business Times – 7 Sept 2007

En bloc sales slow to a trickle, may pick up later

After the breathless rush earlier in the year, there was just a single collective sale in August – that of Margate Mansion at a modest $58 million.

In contrast, the first seven months of 2007 saw a total of 62 collective sale transactions worth about $11.86 billion, based on industry figures compiled by Credo Real Estate. This reflects an average of around nine deals each month, worth almost $1.7 billion between them. The impact of the sub-prime mortgage woes in the US and the stock market rout that followed was obvious.

Credo managing director Karamjit Singh observed that the Singapore property market usually tends to take a breather in the third quarter.

But he expects the pace of collective sale transactions to pick up again in Q4 – assuming that the sub-prime crisis does not escalate further. Still, he does not expect activity to be as intense as in the first seven months of this year, before the current lull set in. ‘Any recovery in land buying would be resuming from a high base. Some developers have already bought sites, so their appetites are satiated and they would need to offload some new projects before they replenish their landbanks,’ Mr Singh added.

CB Richard Ellis executive director Jeremy Lake expects the number of collective sale transactions to average about two to three per month for the rest of the year. Contributing to this trend are high asking prices on part of the owners and upcoming changes to the en bloc legislation that could lengthen the gestation period before sites can be launched for tender.

Both Mr Lake and Mr Singh believe that benchmark prices may still be achieved for residential land in the months ahead. ‘The critical factor will be how the end-product market fares. If developers see strong home buying at their launches, they will keep replenishing their landbanks. If not, developers may be more selective about their land acquisitions,’ Mr Lake says.

DTZ Debenham Tie Leung director (investment advisory services) Shaun Poh reckons that over the next couple of months one is unlikely to see any benchmark residential land prices being achieved through en bloc sales. He felt that deals were likely to be in the $50 million to $100 million range and the buyers were likely to be smaller developers and contractors.

On a more positive note, Cushman & Wakefield managing director Donald Han felt that the current lull in the collective sales market presented buying opportunities. ‘For investors who’ve missed out on the action earlier, especially international funds, because the pace of transactions was too quick for them to do due diligence, this is the best time to come in and negotiate – on their (buyers’) terms,’ Mr Han added.

Credo’s Mr Singh noted that fundamentals in the property market were still very strong. ‘There’s still an undersupply situation, created by strong home buying since 2005 and exacerbated by the strong wave of en bloc sales which will cause a temporary withdrawal of supply as sites sold through collective sales are redeveloped. International funds are still prepared to invest in Singapore property because this place seems to have some exciting years ahead,’ he said.

Source : Business Times – 06 Sept 2007

DC rates hoisted by as much as 112%

The government yesterday announced what is possibly the sharpest hikes in development charge (DC) rates, which are payable for enhancing the use of some sites or building bigger projects on them.

The Ministry of National Development (MND) cited the rise in market values as the reason for the increases.

On average, the DC rate for non-landed residential use was raised by 58 per cent and that for commercial use by 42 per cent. The average DC rate was also increased 23 per cent for hotel use, 11 per cent for landed residential use, and 2 per cent for industrial or warehouse use.

But the escalations were much bigger in certain locations – as high as 112.1 per cent for non-landed residential use in the Everton/Spottiswoode Park vicinity and 104.5 per cent for commercial use in the Maxwell Road/Telok Ayer St and Anson Road areas, based on Jones Lang LaSalle’s analysis.

The latest increases, which take effect today, are in addition to the 40 per cent across-the-board appreciation in DC rates announced on July 18 arising from a change in formula for computing DC.

While yesterday’s increases look steep, they did not surprise most market watchers given the substantial appreciation in land values over the past six months.

As to whether the latest hikes will further slow en bloc sales, which have decelerated lately as developers become more cautious about land-banking amid the stock market rout and credit tightening fears, property agents offered a range of views.

Credo Real Estate’s managing director Karamjit Singh estimates that probably only about 20 to 30 per cent of all collective sale sites have substantial DC components amounting to 10 per cent or more of total land value. ‘For many of these sites with high DC component, the increase may have been anticipated and priced in, so things can move on. For those that haven’t, their progress for an en bloc sale could be affected if owners are unwilling to lower their price expectations.’

Jones Lang LaSalle’s regional director and head of investments Lui Seng Fatt too said: ‘Despite the stellar increases in DC rates, the impact of the DC hike on en bloc residential developments remains marginal on most sites, especially freehold sites. Some leasehold sites with substantial DC components, however, may feel the heat.’

CB Richard Ellis executive director Li Hiaw Ho said the hikes will to ‘a small extent, slow down collective sales’. ‘Coupled with homeowners’ expectations of high prices for their properties, developers might not be as aggressive in acquiring sites,’ he added.

Colliers International’s director for research and consultancy Tay Huey Ying said two rounds of DC hikes in July and September, and global credit tightening, will likely lead to more cautious bidding by developers and more realistic price expectations by sellers.

Ms Tay said that increases in land prices may not be as phenomenal in the coming six months compared with the past six months. ‘But demand for development land should stay healthy as the end-market for residential property is expected to remain healthy on the back of strong economic prospects,’ she added.

Analysts noted that in any case, the supply of collective sale sites will slow due to impending changes to en bloc sale rules requiring more safeguards and procedures.

DC is specified according to use groups and is listed by 118 geographical sectors or locations across Singapore.

The 112 per cent hike in non-landed residential DC rates in the Everton/Spottiswoode Park area was attributed by most analysts to the Spottiswoode Apartment and Oakswood Heights collective sales in April and June at $732 psf per plot ratio and $740 psf ppr respectively – more than twice the land value of $307 psf ppr implied by the July ‘07 DC rate for the location.

And the DC rate hikes of 107.5 per cent each in the Newton/Surrey/Lincoln roads and River Valley/Jalan Mutiara areas were attributed to the collective sales of Lincoln Lodge for $1,449 psf ppr, and Bishopswalk for $1,544 psf ppr respectively, which are about three times the $492 psf ppr land value implied by the July ‘07 DC rate for the locations.

The Maxwell Road and Anson Road areas topped the increases for commercial use with gains of 104.5 per cent each, likely due to prices achieved at two recent state tenders for commercial sites at Anson Road. The same two locations also recorded the biggest increases in hotel use rates, at 66.7 per cent each, and again, this was probably due to two hotel sites at Gopeng Street and Tras Street sold by the state at significantly higher land values than implied by July DC rates.

As for industrial DC rates, the highest increase of 15.8 per cent was for the Pasir Panjang/Science Park area, followed by 11.1 per cent hikes in 15 other locations including Henderson Industrial Park, Bukit Merah View, Redhill and Hoy Fatt Rd/Alexandra Road, according to JLL’s analysis.

Source : Business Times – 1 Sept 2007

Record rise in development fee could slow collective sales

PROPERTY developers will now have to pay a much bigger fee if they want to buy and redevelop a site to enhance its use, such as in a collective sale.

The charges they must pay were raised sharply by the Government yesterday, in what is believed to be the steepest round of hikes ever.

The record increases – which come into effect today – are likely to put a dampener on the collective sale frenzy, property consultants said.

The main impact of higher development charges is that they make it more costly for developers to acquire sites for redevelopment.

Although the half-yearly revision of these development charges is a routine affair, the extent that they rose by yesterday caught market watchers by surprise.

The charges even doubled in some areas, which consultants said has never happened before.

These rises come on top of an unexpected round of hikes in July, which pushed up all development charges by 40 per cent across the board.

Development charges, which can amount to millions of dollars, are based on recent land and property values.

They are revised in March and September every year to keep them up to date with current market values.

Their dramatic rise yesterday was mostly due to the unusually steep climb in property and land prices over the last six months, and particularly because of the record- breaking run of collective sales recently.

The charges are divided by sector – including commercial, hotel and residential – and into 118 locations.

The biggest rises this time round were for non-landed residential sites in the Spottiswoode/Cantonment area, the River Valley/Kay Poh Road/Kellock Road area, and the Newton/Surrey/Lincoln roads area.

Charges in these areas rose by between 108 per cent and 112 per cent, an unprecedented jump.

They may have been boosted by recent deals such as the collective sale of Lincoln Lodge in Newton, which set a benchmark for the area.

In general, charges for non-landed residential land rose by up to 85 per cent in the downtown area, up to 100 per cent in Orchard and 89 per cent in Sentosa.

Islandwide, they rose by 58 per cent on average – the highest increase among the different sectors. Up to last week, consultants were predicting an average rise of 25 per cent at most.

Charges for commercial land, which includes shops and offices, went up by 42 per cent on average.

The largest hikes were for land in the Telok Ayer/Amoy Street area and the Anson Road area. Charges in these locations grew by 105 per cent.

In other sectors, the average hike for hospital and hotel land was 23 per cent, and 11 per cent for landed residential sites. Industrial land saw charges go up by 2 per cent on average.

Given the July rises, some consultants were surprised that yesterday’s hikes were so high.

The ‘double whammy’ of rises in July and yesterday, coming at a time when global credit is tightening, could dampen the collective sale market, said Ms Tay Huey Ying, director for research and consultancy at Colliers International.

The hikes are ‘likely to lead to more cautious bidding by developers and more realistic price expectations by sellers’, she said.

At the same time, Ms Tay added, the supply of collective sale sites could also take a beating as upcoming changes in legislation make it more difficult for estates to go en bloc.

But most developers have already acquired significant land banks and are likely to have locked in lower development charges, noted Mr Nicholas Mak, director of research and consultancy at Knight Frank. He added that another result of the hikes could be a shift in collective sale activity to the suburban areas.

‘The rates are significantly steeper now for prime areas, so suburban areas such as Bedok and Buona Vista may look more attractive to developers,’ said Mr Mak.

Source : Straits Times – 1 Sept 2007