60% of The Marq buyers are foreigners

SC Global Development Ltd, which sold homes at its The Marq apartment project at a record price last month, said foreigners made up about 60 per cent of the buyers.

SG Global will price its penthouses, twice the size of its regular apartments at the development, at about $5,000 per square foot (psf), matching the record $5,100 achieved in other units, chief executive officer Simon Cheong said in an interview yesterday.

Singapore home prices are surging, driven by the longest economic expansion in a decade and the world’s fastest-growing population of millionaires. Investors paid between $11million and $31 million for the first 21 homes sold at The Marq, a five-minute walk to the main shopping district of Orchard Road. The units fetched an average price of $4,137 psf, the company said on June 28.

‘Singapore’s becoming more and more of a global city, and our buyers are well travelled and well heeled, and they compare our product against those in other gateway cities around the world, and they find the prices to be reasonable,’ Mr Cheong said.

SC Global shares were unchanged at $6.70 at the 5.05 pm close. SC Global’s stock almost tripled this year, compared with the 37per cent average gain for Singapore property index.

Source : Business Times – 17 Jul 2007

Keep it open to foreigners

Resentment over foreign purchases pushing up apartment prices is still only murmured about, but it will be out in the open if the price spiral continues at its present clip. The agencies tracking the property market will then face pressure to restrict sales to non-Singaporeans. The property firm Colliers International reckons that seven in 10 of these deals done this year in the upper price band were for investment and not occupation, a fact that could only harden opinion against outsiders feasting at the table. It is to be hoped public sentiment never gets that misguided. It is conceded the resentment is instinctive and quite natural, as happened when the pre-Hong Kong handover immigration wave in the 1990s stoked price pandemonium in the favoured Asia-Pacific destination cities of Vancouver, Sydney and Auckland. Any clamour to curb foreign interest in strata-title developments in Singapore should be resisted as counter-productive. It would be bad for the market, a blow to the economy and ultimately harmful to Singapore’s reputation for being welcoming of capital and talent. Foreign interest in any metropolitan city’s residential scene is a crucial stimulus not only for enhancing real estate value, but also for its catalytic effect of making a striving city a throbbing one and of keeping a great city great. Singapore in fact would gain a premium if foreign buyers of condominiums extended beyond South-east Asians to include more Japanese, Europeans and North Americans. That would be a triple-A rating in the confidence stakes.

Unlike limited landed property for which restrictions on foreign buyers should on no account be relaxed, the supply of apartments is ample. This makes the price frenzy an irrational one. First-time buyers, assuredly a constituency the Government must watch over, are not in the market for those luxury residences that keep setting new psf benchmarks and average transacted prices. But their worry that high-end price behaviour will influence the mass market of condos starting at about $600 psf will need careful tending by the Government. Some 23,000 condos due for completion by 2010 are unsold in this crazy market, but first timers’ jitters persist. Why? The answer may lie in the anxiety whipped up by news of ever more en bloc sales removing supply and upping sellers’ replacement cost. To get through this boom cycle without mishap, it is preferable that collective sales slow down until replacement supply appears in four to five years. There are signs these sales are decelerating as a new realism about illusory riches takes hold. The best thing that could happen now is an end to the en bloc round through natural attrition.

Source : Straits Times – 17 Jul 2007

More foreigners apply to buy landed homes

The number of applications by foreigners (including permanent residents) seeking approval from the government to buy landed properties in Singapore rose 30 per cent in 2006 against the preceding year, according to Singapore Land Authority.

‘This was possibly due to the strong economy, a favourable property market and interest in Sentosa Cove,’ an SLA spokeswoman said.

Foreigners including PRs face restrictions in buying landed properties in Singapore and need prior approval from the authorities before they can purchase such properties. Foreigners have to be PRs before they can receive permission to buy landed homes on mainland Singapore; Sentosa Cove is the only location where foreigners who are not PRs are allowed to purchase landed property.

Apart from an applicant’s PR status, sanction to buy landed property depends on his qualifications and economic contributions to Singapore, SLA’s spokeswoman stressed.

SLA declined to say how many applications were made by foreigners/PRs to buy landed property, and how many were approved.

However, based on DTZ Debenham Tie Leung’s analysis of caveats captured by the Urban Redevelopment Authority’s Realis database, foreigners including PRs bought 93 landed homes or 8.4 per cent of the total 1,108 landed homes transacted in Q1 2007, covering both primary and secondary markets, as well as completed and uncompleted properties.

These figures are higher than those for Q1 2006, when foreigners including PRs bought 43 landed homes, or 6.1 per cent of the total 706 landed homes that were transacted. During Q2 1996, at the height of the 1990s property bull run, PRs/foreigners purchased 31 landed homes, or 2.6 per cent of the total 1,188 landed homes that changed hands during the period.

DTZ’s analysis showed that for Q1 this year, PRs bought 86 landed homes while non-PR foreigners purchased seven such homes. The most popular landed homes among foreigners as a whole were terrace houses (45 units), followed by semi-detached (26 units) and detached houses (22 units).

Private apartments/condos – a class of properties where there are no restrictions on purchases by foreigners/PRs (unless they want to buy up an entire development) – made up the majority of private homes bought by foreigners in Q1 this year. In all, foreigners/PRs bought 2,008 non-landed private homes, accounting for 30.3 per cent of the total condos/apartments bought in the period.

In Q1 this year, foreigners/PRs bought 27.2 per cent of the overall 7,731 private homes (comprising both landed and non-landed homes) that changed hands. This share is almost double their 14.1 per cent share back in Q2 1996, when foreigners/PRs purchased 975 of the total 6,932 private residential properties transacted.

DTZ executive director Ong Choon Fah said the growing foreign buying of landed homes in Singapore reflects that many foreigners/PRs are raising their families here.

‘They may find that condos are too small. Very often they buy landed homes in locations close to the foreign/international schools that their children attend, for instance, in Lorong Chuan, where the Australian International School is located, and in the West Coast near the Japanese School,’ she added.

‘Many of these foreigners and PRs say Singapore is a very ‘liveable’ place. If they believe in the future of Asia, they’d want to raise their families in Asia, and Singapore is a good location, from which they can get exposure to China and India because of our connectivity,’ she added.

Since 1973, foreigners (including PRs) have been prohibited from buying landed property without prior government approval. All would-be buyers must seek permission from the Land Dealings (Approval) Unit under the SLA. Typically, it takes about four weeks for approval to be granted, but in the upscale waterfront locale of Sentosa Cove, the time has been fast-tracked to less than 48 hours.

Whether on mainland Singapore or Sentosa Cove, foreigners including PRs can at any one time own only one landed home in Singapore and must occupy it themselves rather than rent it out.

However, being a PR does not automatically mean one’s application to buy landed property will be approved. For instance, if the PR does not have the recognised qualifications or expertise/working experience required by Singapore or has not made any investment in the type of industry/service sector being promoted in Singapore, the application may be turned down. Even PRs who have set up businesses promoted by Singapore may find their applications rejected if their company’s paid-up capital and turnover do not meet certain requirements.

Source : Business Times – 14 Jul 2007

Foreigners buying homes: Should it be made easier or harder?

The spotlight has fallen on foreign buyers of private homes, after a recent call by Goldman Sachs for a liberalisation of rules governing their purchase of landed property. LYDIA LIM and SUE-ANN CHIA look at foreign buyers’ impact on the home-owning aspirations of Singaporeans

FOREIGNERS who buy real estate run the gamut from the fabulously wealthy looking for a place to park their money, to rich couples with plans to spend part of their retirement years here, to middle-income professionals in need of a stable roof over their head.

Not all of them have deep pockets, says Australian journalist David Fogarty, 41, who has worked here for 10 years.

He lived in rented apartments for most of that time but finally bought a place in a condominium in the River Valley area last year.

After being asked to vacate two rented homes in fairly quick succession, due to a collective sale and a buyover by a landlord’s daughter, he says he ‘got tired of living in other people’s property’.

‘The decision was based purely on the need for a place to live, not the prospect of making money,’ he tells Insight.

Still, there is concern among young home buyers like lawyer Aaron Kok that foreigners are nudging out Singaporeans to the suburbs for more affordable property.

But even in the suburbs, the 27-year-old feels the heat of the activity in the upper end of the property market. In the past six months, Mr Kok has seen the price of a new two-bedroom condominium he is eyeing in the east soar from $580,000 to over $700,000.

It is now out of his reach.

At the same time, he and his girlfriend do not qualify for a new HDB flat as their combined monthly income exceeds the $8,000 income cap.

‘With Singapore wanting to attract more and more foreigners here, properties in the prime locations will be snapped up and they will start to look at suburban areas. This means Singaporeans will be pushed to the periphery,’ he says.

Demand from foreigners has been on the rise since last year. Their share of private home purchases rose to 27.2 per cent in the first quarter of this year, a peak surpassed only once during the last boom, when the figure hit 32 per cent in the fourth quarter of 1995.

Buyers from traditional markets Indonesia and Malaysia continue to dominate, but demand is coming in strongly from other quarters as well – notably Indian nationals.

Foreign interest in landed homes is also on the rise, with applications to the Singapore Land Authority for permission to buy up 30 per cent last year, from the previous year.

Last week, Minister Mentor Lee Kuan Yew observed that demand for high-end offices and homes has increased with new inflows of financial sector professionals. He warned that rising rents must be kept in check or Singapore will lose its competitiveness.

Given the combination of soaring prices and looming anxiety among some first-time buyers, one view emerging is that it is time to review foreign ownership of residential properties.

Then again, a contrarian argument was put forth a fortnight ago by a property analyst of investment firm Goldman Sachs, in which he urged that rules on foreign buying be eased as it would spur the drive to draw foreign talent.

What is at stake in this nascent debate? Will foreigners lift the property market and the economy to greater heights? Or will more Singaporeans find themselves priced out of parts of their city, the way natives of other big cities found themselves elbowed out to the suburbs because of foreign buying?

No foreign hoarding of land

A CLOSER reading of the Residential Property Act, which regulates foreign buying, reveals that the Government’s concern is less over foreign ownership of homes than their holding and control of land.

Foreigners can buy as many private homes as they wish, but they cannot do the same with land.

The Act states that only permanent residents (PRs) can buy landed property, and they must first seek permission from the Law Ministry. Each PR can buy one landed property and only for his own occupation.

For apartments and condominiums, foreigners cannot, without prior approval of the Law Minister, buy every single unit in a particular development. That is the only way for an individual to gain control of a piece of land governed by strata title.

Apart from that restriction, foreigners are free to own as many units as they wish.

Underlying these rules is a simple matter of scarcity – homes can be built a lot faster than land is made.

Property analysts say the law is designed to prevent ‘land hoarding’ by foreigners. Without it, there is a risk that foreigners could acquire large tracts of land in Singapore and manipulate supply and pricing to their advantage, not to mention obstruct the Government’s urban renewal plans.

One outcome is that in the 30 years since the law was enacted, prices of luxury condominiums have outstripped those of bungalows, as foreigners are largely confined to the former category of homes.

Goldman Sachs analyst Leslie Yee estimates the price gap to be around 35 per cent. In his report, he called for these rules to be relaxed, ‘on the grounds of accelerating Singapore’s drive to attract foreign talent and bulk up its population’.

He argues that such a change will not detract from the national objective of widespread home ownership, as there is a ‘world-class public housing system’ in place to cater to the needs of 80 per cent of Singaporeans.

The Law Ministry responded quickly to say it has no plans to ease the curbs on foreign ownership of landed homes.

Mr Yee’s call was also met with consternation by other property analysts, who said the market is already bubbling and in little need of such a catalyst.

Mr Nicholas Mak, head of consultancy and research at Knight Frank, says any such relaxation would ‘open the floodgates too wide’.

Foreigners bought 249 landed homes last year, 65 per cent more than in 2005, according to an analysis by property firm DTZ Debenham Tie Leung.

Of these, 105 were in prime districts 9, 10 and 11.

Of the 68,402 landed homes here, only 10,526 are in these prime areas.

With many rich foreigners from the region waiting in the wings to snap up landed homes, Mr Mak says an easing of rules will serve mainly to profit property developers.

The big losers will be middle- and upper-middle class Singaporeans who aspire to own landed homes, as they will be ‘priced out’, he warns.

Moving up the property ladder

WITH public housing accounting for 79 per cent of homes here, most Singaporean home buyers are protected from foreign competition.

Only foreigners who are PR can buy HDB homes, but only on the resale market.

However, the top 20 per cent of families are not eligible to buy new HDB flats as their monthly household income exceeds the $8,000 ceiling.

They will be in the market for private homes and may find themselves up against foreigners with deeper pockets.

It was concern for this group that led to the Government’s first clampdown on what it termed ‘land speculation’ by foreign buyers in 1973.

It said then that if it did not step in, young middle-income earners such as engineers, teachers, junior executives and officers in the police and armed forces, who were not eligible to buy HDB flats, would find ’suitable housing beyond their means altogether’.

Thirty years on, this remains a concern, with a booming economy causing the tide of foreign interest in Singapore real estate to rise again.

Foreigners accounted for 27 per cent of all private property deals in the first quarter of this year. But for top-end luxury apartments, their share has now risen to around 60 per cent.

Ms Tay Huey Ying, director of research and consultancy at Colliers International, estimates that 70 per cent of these foreign purchases are for investment and 30 per cent for living in.

The impact of such strong foreign demand on prices bears watching, she says.

‘Although the high-end and luxury tier is most attractive to foreigners at this time, the very strong foreign demand has led to a spate of collective sales at this end.

‘This creates a supply crunch at this tier. Demand then filters down to the lower tiers, causing prices to go up,’ she adds.

Such a cascading effect is apparent in the latest Urban Redevelopment Authority flash estimates, which show that in the second quarter, home price increases spread beyond the high end to other parts of the market, including mass-market private condos and the HDB resale market.

Mr Charles Chong, who chairs the Government Parliamentary Committee on National Development, says there could be a political cost if more Singaporeans find themselves priced out of mass-market properties.

But he stresses that the rise in prices affects both Singaporeans and foreigners alike, as both groups include those in need of a home.

‘With rising prices, people need to put the blame somewhere and foreigners are a convenient place to park the blame,’ he says.

If the current surge in demand were to result in a short-term dearth of homes, property regulations may need to be tweaked, he adds.

But Professor Ong Seow Eng, deputy head of research at the National University of Singapore department of real estate, cautions against restrictions that may be seen as anti-foreigner.

‘I do not think it is appropriate for a government policy to protect local ownership, not if we truly want to become an international hub of choice,’’ he says.

‘Foreign ownership is a vote of confidence in Singapore,’ he adds.

Concurring, Mr Mak says he finds the current rules on foreign ownership ‘quite balanced’.

Unlike landed property, there is less need to restrict foreign buying of condominiums since supply is flexible, he argues, with government planners able to raise the plot ratio of land parcels should the need arise.

Property analysts also question the appropriateness of singling out foreigners for blame, given that the speculative activity of Singaporeans contributes to the price spiral as well.

Calming fears of S’porean buyers

THE Government has been at pains to reassure Singaporean buyers on two counts.

First, it has said that supply of new private homes is more than enough to meet demand.

This is unlike the situation in cities such as London, where a real estate boom coupled with a huge shortfall in housing supply has resulted in many locals being priced out of parts of the city.

London and Hong Kong also have no restrictions on foreign buying of real estate, whereas Middle Eastern states tend towards the other extreme, banning such purchases apart from exceptional cases. Singapore’s laws are in between these two extremes.

Second, National Development Minister Mah Bow Tan said two weeks ago that rapid price escalation is still confined to the luxury tier whereas prices of HDB resale flats are appreciating at a sustainable rate, in line with economic growth.

Even young home buyers like businessman Tan Sin Yat, 32, acknowledge that there are still affordable private homes to be had.

‘But you may have to look harder,’ he says.

The consensus appears to be that there is no urgent need to change existing rules on home purchases by foreigners, for now.

But the situation remains one that bears watching lest a speculative bubble builds up through a combination of local and foreign investor activity.

AS SINGAPORE draws more foreigners to work and invest here, how concerned are you at the impact this might have on property prices?

What do you think can be done to help Singaporeans and foreigners in search of affordable housing?

Source : Straits Times – 14 Jul 2007

Rule changes over the years

Sept 11, 1973: The Government imposes curbs on foreign ownership of residential properties and land zoned for residential development, to curb speculation.

With immediate effect, foreigners wishing to buy such real estate have to first obtain written permission.

Explaining the move, the Government said in a statement that it has ‘observed with great concern the recent steep rise of property values, particularly of residential and vacant lands’.

‘Unless dampened, middle-income groups, who are not eligible for Housing and Development Board flats, will find suitable housing beyond their means,’ the Government added.

October 1976: Enactment of the Residential Property Act, under which foreigners can buy private apartments in buildings of six levels or more, or flats in condominiums where ownership is by strata title.

Only permanent residents (PRs) can apply to the Law Minister to buy landed property.

August 1989: Rules on public housing are eased to allow PRs to buy resale HDB and HUDC flats. But they have to get clearance from two authorities: the HDB and the Law Ministry.

September 1991: Rules are liberalised to allow foreigners to buy HUDC flats built under phases one and two.

The requirement for PRs buying HDB resale flats to seek approval from the Law Ministry is removed. Thereafter, they need permission only from the HDB.

October 2003: Rules on foreign ownership are eased for Sentosa Cove, to allow foreigners who are not PRs to buy landed homes and land parcels.

They still need permission from the Government, but a fast-track process slashes the approval time in stages from weeks to just two days.

July 2005: Foreigners are allowed to buy apartments in developments of fewer than six levels, without the need for government approval.

National Development Minister Mah Bow Tan said the changes are to encourage foreigners to invest in property, to ‘complement our efforts to attract and anchor foreign talent in Singapore’.

Source : Straits Times – 14 Jul 2007

Foreign home buyers: Time to change rules?

Young Singaporeans like businessman Tan Sin Yat, 32, accept an influx of foreign home buyers as part and parcel of life in an open, globalised economy.

But they also know it will have an impact on their chances to move up the property ladder.

‘With more foreigners buying private property, it also means that Singaporeans, especially young professionals, will find it more difficult to get that dream condo in a good location as prices are going up faster than incomes,’ he says.

The share of private home purchases by foreigners rose to 27 per cent in the first quarter of this year.

But for luxury developments in the Marina Bay and Orchard areas, their share has now soared to around 60 per cent.

Property analysts say the surge in demand and price increases at the top end filters down to mass market condominiums, where it has an impact on middle-income Singaporeans looking to buy their first home or upgrade.

This is of concern to Mr Charles Chong, who chairs the Government Parliamentary Committee on National Development.

He says if demand cannot be met by supply in the short-term, some tweaking of existing property regulations may be needed.

While first-time home buyers may wish for more restrictions on foreign buying, an investment bank has recently called for a liberalisation of rules on landed property for foreigners, saying this would help draw more talent here.

What, then, is the right balance to strike for a global-city in the making like Singapore?

Insight reports.

Source : Straits Times – 14 Jul 2007

Landed property: Ministry says no plans to lift curbs on foreigners

There are no plans to liberalise the existing restrictions on foreigners buying landed properties in Singapore, the Law Ministry said yesterday.

‘In land scarce Singapore, landed properties have to be treated as a special category where purchases by foreigners are subject to special approval,’ a MinLaw spokesman said.

Earlier this week, BT reported on a paper by Goldman Sachs (Singapore), which argued a case for lifting restrictions on foreigners buying landed homes in Singapore. The Goldman Sachs paper said such a change would serve as a catalyst for further foreign buying of private homes and boost the current residential property upcycle.

Removing the restrictions would result in some positive spinoffs, and residential developers could gain from even greater foreign buying interest given the positive message such a move would send.

‘We think relaxing restrictions on foreigners buying landed property would accelerate Singapore’s efforts to attract foreign talent,’ the Goldman Sachs paper had said.

However, some BT readers take a different view. One, Singaporean Patrick Chia, managing director of Hospitality Associates, who is a landed property owner, said: ‘If foreigners are allowed to freely buy landed property, all the non-government owned landed property could theoretically and practically be bought up, because in this 21st Century, the world is flush with liquidity.

‘The current abundance of petro-dollars from the oil-rich Middle-East countries and Russia can easily buy up Singapore. So can the current American and European funds with their billions. Bankers and real estate agents can confirm that foreign funds are looking for Singapore property assets to buy.’

Mr Chia, who has nearly 30 years’ experience in the Singapore property business, also recapped the historical circumstances in the early 1970s that led to the government introducing the Residential Property Act in 1973. That law bars foreigners, including permanent residents, from buying landed property here without prior government approval.

‘Way back in 1973, with the first oil shock when oil prices sky-rocketed, then-rich neighbours, Indonesians and Malaysians, were able to freely buy Singapore landed property and much of the prime landed real estate were bought by them.

‘The government, realising the future implications of such a scenario if left unchecked, wisely instituted the current curbs to foreigner purchase of landed property,’ Mr Chia added.

And over the past 30 years, the government has continuously relaxed the curbs as needed, and pointed out that the Singapore government has been very accommodating in this regard compared with many other countries. In Singapore, foreigners have to be PRs before they can receive permission to buy landed homes on mainland Singapore, and Sentosa Cove is the only location where foreigners who are not PRs are allowed to purchase landed property. Even then, foreign would-be buyers must seek permission from the Land Dealings (Approval) Unit under the Singapore Land Authority.

Foreigners, including PRs, can at any one time own only one landed home in Singapore and must occupy it themselves rather than renting it out.

Among the criteria that the Minister for Law will consider when asked to approve foreigners/PRs buying a landed home in Singapore are the applicant’s qualifications and whether the applicant has made, or will be able to make, adequate economic contribution to Singapore.

Typically, it takes about four weeks for approval to be granted, but on Sentosa Cove, the time has been cut to less than 48 hours under a special fast-track approval scheme.

The landed properties that foreigners and PRs may be permitted to buy must have a land area of no more than 15,000 sq ft, although exceptions have been made, with some PRs buying Good Class Bungalows, which have a plot size of at least 1,400 square metres (about 15,070 sq ft).

Foreign buyers may acquire an unlimited number of non-landed private homes, that is, condominiums and apartments. The only foreigners who may buy HDB flats on the resale market are PRs.

Source : Business Times – 28 Jun 2007

Call to allow foreigners to buy landed homes

Goldman Sachs (Singapore) has argued a case for lifting restrictions on foreigners buying landed homes in Singapore, saying this would serve as a catalyst for further foreign buying of private homes and boost the current residential property upcycle.

Its analysis shows that the average price of a top-end bungalow (with a 15,000 sq ft land area) is about $17 million – or 35 per cent below that of a comparable condominium (a 7,500 sq ft unit priced at $3,500 psf), which goes for about $26.3 million.

‘We think this price gap can narrow to parity or very close to it, should the restrictions on foreign ownership of landed properties be relaxed,’ the bank said in a research note dated June 24.

‘In the event of an across-the-board relaxation of restrictions for landed property, we believe the positive effects would be two-fold: (1) developers with landbank for landed developments would benefit; and (2) all residential developers could gain from even greater foreign buying interest given the positive message such a move would send,’ it said.

Although the government has made no announcements on the subject, ‘we see the possibility of the government relaxing restrictions on foreigners buying landed property as higher than previously, because: (1) discussions with developers have affirmed our view of foreign interest in landed property, and (2) the tone of government policy changes has been firmly pro-immigration … We think relaxing restrictions on foreigners buying landed property would accelerate Singapore’s efforts to attract foreign talent,’ Goldman Sachs said in the research note.

‘In our view, foreigners would like the flexibility of greater choice of housing and the positive signal of Singapore’s open door policy emanating from such a move,’ Goldman Sachs argued. It added that a relaxation on foreign buying of landed homes would not hurt the national objective of giving Singaporeans a stake in the country by being able to buy and own residential properties at affordable prices as the public housing market addresses this objective.

In the first quarter of this year, foreigners accounted for 26 per cent of buyers of private homes, up from 23 per cent in 2006 and 21 per cent in 2005.

Under the Residential Property Act, foreigners (including permanent residents) are prohibited from buying landed property without prior approval from the government.

Foreigners have to be PRs before they can receive permission to buy landed homes on mainland Singapore; Sentosa Cove is the only location where foreigners who are not PRs are allowed to purchase landed property.

Foreigners, including PRs, can at any one time own only one landed home in Singapore and must occupy it themselves rather than rent it out.

Among the criteria that the Minister for Law will consider when asked to approve foreigners buying a landed home are the applicant’s qualifications and whether the applicant has made, or will be able to make, adequate economic contribution to Singapore.

However, foreign buyers may acquire an unlimited number of non-landed private homes – condominiums and apartments.

Goldman Sachs acknowledged that ‘for now, we note there is still no certainty of any policy change and the nature of change could be restricted to select types of landed property like Good Class Bungalows or cluster housing’.

The bank’s analysis of 36 landed property transactions at Sentosa Cove between January 2005 and May 2007 showed that Singaporean and foreign buyers each accounted for 44 per cent of purchases, with the balance accounted for by companies.

In contrast, Goldman Sachs’ study of islandwide private home transactions between January and May this year showed that foreign buyers accounted for just 8 per cent of total landed property deals, lower than their 29 per cent share of non-landed home purchases over the same period. This suggests the scope for a higher share of foreign buying if the landed private housing sector is also opened to foreigners.

‘We think relaxing restrictions on foreigners buying landed property would not adversely impact demand for condominiums and apartments, given the positive signal such a move would send to foreigners,’ the bank said. ‘Moreover, we look for a positive spill-over from rising landed property prices to condominiums and apartments.’

Goldman Sachs estimates about 2,800 landed homes with written permission for development, the bulk (2,565 units) of which have yet to be sold, will come on stream over the next few years.

This supply is almost 4 per cent of the current stock of landed homes in Singapore.

Among the developers with exposure to landbank slated for residential housing are Bukit Sembawang, Allgreen Properties, MCL Land, Fragrance Group, and Sing Holdings.

Source : Business Times – 26 Jun 2007

Foreign buyers sink $2.4b into office property

The shortage of office space on the island that has led to spiralling office rents and capital values has at the same time drawn more foreign investment into Singapore office blocks.

So far this year, foreign investors, including private equity groups and non-listed funds, have picked up about $2.4 billion worth of en bloc office buildings and sizeable strata office properties.

This surpasses the $1.9 billion for the whole of last year, which in turn was more than double the $733 million in 2005, according to latest data from CB Richard Ellis.

Also, the $2.4 billion of office buildings bought by foreign investors gave them a 69 per cent share of the $3.5 billion total in major office deals so far this year. The latter figure, for the period Jan 1 to June 8, 2007, is higher than the $3 billion chalked up for the whole of last year.

Big office acquisitions by overseas buyers this year include Macquarie Global Property Advisors’ $1.04 billion purchase of Temasek Tower in March, the $525 million sale of SIA Building on Robinson Road to German Pension fund SEB, the $260 million purchase of Vision Crest’s office block and The House of Tan Yeok Nee in the Penang Road/Clemenceau Avenue area by German fund manager Union Investment Real Estate AG (formerly known as Difa Deutsche Immobilien Fonds).

Local buyers have bought around $1.1 billion of office space so far this year, with the biggest deal being the $600 million collective sale of UIC Building at Shenton Way to United Industrial Corp. The mainboard-listed company itself owns 78.8 per cent of the property.

However, Singapore real estate investment trusts, or S-Reits, have not made any purchases of office blocks so far this year, after making acquisitions of over $700 million in each of the preceding three years.

CBRE excluded the Raffles City transaction in 2006 from its analysis as the apportionment of the value of the office space in the mixed development was not made public. The Raffles City complex also includes two hotels, convention facilities and a shopping centre, besides an office tower. Raffles City was purchased jointly by two Reits – CapitaCommercial Trust and CapitaMall Trust – for $2.1 billion. In its analysis, CBRE also excluded small strata office transactions.

Commenting on the big jump in the acquisition of office blocks by foreign buyers and falling purchases by S-Reits, CBRE executive director Jeremy Lake observed that while S-Reits are still bidding for office blocks in Singapore, they have not had much luck clinching acquisitions as the prices they can offer are constrained by the need for the acquisitions to be immediately yield-accretive to unit holders. Otherwise, there is a risk of the unit price of the Reit falling on the stock market.

On the other hand, foreign buyers, which are mostly private equity and unlisted funds, can bid more aggressively as they are looking at a total return story, Mr Lake said.

For instance, foreign buyers can offer a higher price for an office building that may reflect an initial yield, based on the building’s existing rental income of, say, only 2 or 3 per cent, with the knowledge that as leases come up for renewal at higher market rents, the yield may then go up to, say, 5 per cent. Also, these players may be looking at selling the assets and crystallising a capital appreciation a few years down the road, Mr Lake said.

Looking ahead, Mr Lake expects foreign buyers will continue to remain dominant buyers of office blocks in Singapore. He also reckons that the office en bloc market on the whole will remain very active for the rest of the year. Asked if there is a sufficient stock of office buildings for sale, he said: ‘When the market is strong, surprises come along the way. People whom you do not expect to sell their buildings will sell.’

CBRE data show that the average Grade A office rental value in prime locations has shot up 82 per cent over the past 12 months to $12.40 per square foot a month in Q2 this year.

The average capital value of prime office space has more than doubled over the past year to $2,500 psf in Q2, from $1,150 psf in the same period last year. At the trough of the current cycle, which stretched from Q3 2003 to Q2 2005, the figure was $980 psf.

DTZ Debenham Tie Leung data released yesterday evening also show that the average monthly prime rent in Raffles Place rose 20 per cent quarter-on-quarter to $13.10 psf in Q2.

Average rents in the Raffles Place and Marina Centre areas have more than doubled from a year ago.

Source : Business Times – 21 Jun 2007

Foreign purchases of subsale units hit 11-yr high

FOREIGNERS bought 241 private apartments and condos in the subsale market during the first quarter of this year, up 35 per cent from the preceding three months and the highest figure since 1996, according to DTZ Debenham Tie Leung’s analysis of caveats captured by Urban Redevelopment Authority’s Realis system.

The 241 subsale condos/apartments foreigners purchased in Q1 2007 gave them a nearly 36 per cent share of the total of 673 non-landed private homes purchased in the subsale market during the quarter. This is a much higher share compared with foreigners’ overall 27 per cent share of total private home purchases in the same period.

DTZ in its report suggests the increasing foreign subsale interest may mean that foreigners are turning to the subsale market to buy homes because they may have less access to high-profile launches in the primary market. ‘However, of greater significance is the fact that it also reflects their confidence about the investment potential of quality projects in Singapore,’ the study added.

Subsales, often seen as a gauge of speculative activity, refers to secondary market deals – properties not bought directly from developers – in projects yet to receive Certificate of Statutory Completion.

The Sail @ Marina Bay and Icon were among the projects that attracted relatively strong foreign buying in the subsale market in Q1. Foreign buyers accounted for 36 per cent, or 24 of the total 67 units at The Sail transacted in the subsale market in Q1 2007. Foreign purchasers also made up 25 per cent, or 18 of the 72 Icon units purchased in the subsale market. Other projects favoured by foreign buyers in the subsale market during the quarter included Sky @ Eleven in Thomson, The Cosmopolitan at River Valley/Kim Seng roads, Twin Regency at Kim Tian Road and Watermark at Robertson Quay.

DTZ observed that foreigners also upped their subsale purchases for high-end apartments/condos in the first three months.

At 26 per cent, Indonesians accounted for the lion’s share of foreign buyers of subsale apartments/condos, followed by Malaysians (21 per cent share) Australians (10 per cent), United Kingdom nationals (8 per cent), Indians (7 per cent), Koreans (5 per cent) and US citizens and mainland Chinese (with 3 per cent share each).

Historically, the highest levels of foreign buying of subsale condos/apartments were recorded in Q4 1995 (485 subsales), Q1 1996 (329 subsales) and Q3 1996 (321 subsales).

The total 673 subsale apartments/condo deals (involving buyers of various nationalities including Singaporeans) in the first quarter was 18 per cent higher than the preceding quarter and just over six times the 111 subsale deals done in Q1 2006.

The latest subsale figure was 8 per cent shy of the previous high recorded in Q2 1999, when 735 non-landed private homes changed hands in the subsale market. The highest figure ever reported was 1,653 in Q2 1996, at the peak of speculative fever in the mid-nineties. The 673 caveats lodged for subsale apartment/condo deals in the first quarter made up 11 per cent of total caveats lodged for non-landed private homes (comprising both primary and secondary market transactions) during the period. During the first three quarters in 1995, subsales made up 30 per cent or more of deals.

The median subsale price fell 2 per cent quarter-on-quarter to $1,005 psf in Q1 this year. However, it was still 65 per cent higher than the $609 psf posted in Q1 last year.

DTZ’s report also said the momentum in the subsale market is expected to keep up, particularly for high-profile projects, with likely support from foreigners increasingly positive about the potential of the Singapore residential property market. ‘However, the subsale market is expected to be increasingly competitive as choices increase,’ the firm added.

Source :  Business Times – 7 Jun 2007