Property firms record good H1 gains, outlook bright

ALL the big listed property groups have reported substantial gains in net earnings for the period ended June 30, 2007.

And the earnings outlook for the second half is positive, as developers continue to progressively recognise profits from Singapore residential projects already sold based on percentage of completion, enjoy higher rents from their Singapore office portfolios and book fair value gains on investment properties, says DBS Vickers Securities analyst Wallace Chu.

In fact, in the latest results reason, bottom lines were substantially boosted in many instances by revaluation gains on investment properties – particularly office properties that have gone up sharply in price – arising from the implementation this year of Financial Reporting Standard 40 (FRS 40).

This standard requires that fair-value gains and losses on investment properties be recorded in the profit-and-loss account. Some companies chose to do valuations and book gains on investment properties for their financial periods ended June 30 this year, such as CapitaLand and UOL Group, while others, such as Keppel Land and Singapore Land, have said they will do so at the end of the year.

The biggest revaluation gains seen this reporting season came from CapitaLand. It booked fair value gains of $645.4 million for Q2 ended June 30, 2007 and $647.4 million in H1 2007. But that’s not surprising since the group, including its listed unit CapitaCommercial Trust, has one of the biggest office portfolios in Singapore.

But even without such gains, CapitaLand’s net earnings were up substantially year-on-year for Q2 and H1, due to the strength of its overall operations, especially residential development sales in Singapore and China, and higher fee-based income from commercial and retail operations.

City Developments, too, posted the best result in its history – with strong showings from residential property development, rental properties and hotel operations under listed Millennium & Copthorne Hotels and CDL Hospitality Trusts. Q2 net earnings rose 333 per cent year on year to $194.4 million, and CityDev’s H1 bottom line improved 272 per cent to $320.5 million.

Management emphasised that the sterling results were achieved without booking any revaluation gains on the group’s substantial investment property portfolio, including offices.

CityDev said it is continuing its conservative accounting policy of stating investment properties at cost less accumulated depreciation and impairment losses, an option allowed under FRS 40.

KepLand, which has said it will revalue its investment properties at year-end, saw its Q2 and H1 net earnings go up 42 per cent and 56 per cent respectively on the back of strong residential sales in Singapore and overseas and the robust Singapore office market.

Analysts expect the group to book gains of $221.6 million in the second half of this year from the divestment of its one-third stake in One Raffles Quay to K-Reit Asia – if the transaction is approved by shareholders of both companies.

As well, KepLand’s second-half earnings are expected to be boosted by fair-value gains on revaluation of its investment properties at year-end under FRS 40, given the group is a major office landlord.

Most Singapore listed developers, which have enjoyed strong Singapore residential sales in the recent past, can look forward to continue progressively booking profits from these projects in accordance with the percentage of completion. CityDev will start booking from its Solitaire condo from Q4 2007 onwards, while profits from One Shenton will be recognised in stages starting next year.

The group sold 1,315 homes valued around $2.4 billion in H1 2007 – about three times the value in the same period last year. The group’s share of pre-tax profit from residential sales yet to be booked is about $1.4 billion. This is expected to be recognised progressively over the next few years.

So far, the sub-prime woes and ensuing credit crunch in the US do not appear to have cooled developers’ residential sales in Singapore or prices – as is evident from the strong take-up rate for Frasers Centrepoint’s Soleil @ Sinaran launch, despite the benchmark price for the location.

But if and when they do, that could cast a pall on developers’ residential profits going forward. ‘Sentiment and strength of the equity market will be more important share price drivers for listed property groups,’ an analyst with a foreign broking house says.

Source : Business Times – 30 Aug 2007

Rise in office rentals slows to 2.7% in July

PRIME office rents went up by 2.7 per cent last month, the slowest monthly rise so far this year, according to a report by consultancy Cushman & Wakefield yesterday.

Since January, office rents have been rising by 4.5 per cent to 9 per cent.

An acute supply crunch and burgeoning demand from expanding businesses in Singapore have been pushing up office rents since last year, prompting market watchers to air concerns over Singapore’s competitiveness.

Although rents overall grew at a slower pace last month, monthly rents for prime offices – those in the Central Business District, City Hall, Orchard and Bugis areas – were at record highs.

Rents in these areas hit $11.82 per sq ft (psf) last month, up from $11.51 psf in June, said Cushman & Wakefield.

Rents in the top 25 Grade A offices, which are in the best category of space in Singapore, rose 2.8 per cent to an average of $12.07 psf per month.

In sought-after Raffles Place, rents now average $12.96 psf per month, about 58.8 per cent above the last peak in June 1996.

At the very top end, City Developments’ Republic Plaza has achieved monthly rentals of $17.50 psf, the developer said earlier this month.

Cushman & Wakefield managing director Donald Han said rents, although still on the rise, should climb at a slower pace.

‘We are already at a very high base, so any increase cannot go up at the same rate of 4 to 5 per cent every month,’ he said. ‘At some stage, it’s got to slow down.’

Mr Han added that tenants are actively looking to minimise increases in their occupancy costs by relocating some operations outside high-priced central areas.

Recent moves by the Government to provide more data on the office market and assure tenants of ample future supply also seem to have paid off, said Mr Han.

‘I think that has had some impact in terms of tenants resisting high rentals by landlords,’ he said.

However, Mr Han believes the balance of power still lies with the landlords. ‘In general, we’re still looking at a mismatch between supply and demand,’ he said.

‘But moving forward, tenant relationships and finding quality tenants may become more important than trying to chase the highest rents in the marketplace.’

Source : Straits Times – 22 Aug 2007

More properties sold for $4,000 psf in July

DEVELOPERS managed to sell 72 homes for more than $4,000 per square foot last month – four-and-a-half times the 16 homes they sold at this price in June, latest figures show.

According to Knight Frank’s analysis of official data released yesterday, the big jump came as a result of the launch of Scotts Square by Wheelock Properties (Singapore).

Sixty-four of the total 150 units in the project sold by the developer in July were in the above $4,000 to $4,500 psf price band, while the other 86 units were sold in the above $3,500 to $4,000 psf range.

The median price for the 150 units sold at Scotts Square was $3,959 psf, with the lowest price being $3,638 psf and the highest $4,428 psf, according to the Urban Redevelopment Authority’s (URA) data on the number of homes in uncompleted projects launched and sold by developers in July.

Other projects that saw primary market sales at above $4,000 psf last month include The Orchard Residences, The Marq On Paterson Hill and Cliveden at Grange.

‘These were the same developments that contributed to the number of units that were sold above $4,000 psf in June,’ Knight Frank said.

The median price for the 25 units sold by City Developments for Cliveden in July was $3,729 psf, with the range of prices being $3,265 psf to $4,162 psf.

SC Global sold two units at The Marq in July, at $4,908 psf and $4,978 psf.

The Orchard Residences saw six primary market transactions last month at prices ranging from $2,808 psf to $4,577 psf, with a median price of $4,047 psf.

Soon Su Lin, chief executive of Orchard Turn Developments, the project’s developer, confirmed that the company has sold a penthouse for $5,500 psf – a new record for a condo in Singapore – but that the transaction was registered only in early August.

Examples of projects with primary market transactions at median prices above $3,000 psf in July include The Lumos at Leonie Hill, Parkview Eclat at Grange Road and Paterson Suites at Paterson Road/Lengkok Angsa.

The URA data also showed there were some projects with transactions at much lower prices in other segments of the real estate market.

GuocoLand sold 19 units at The Quartz in Buangkok at a median price of $648 psf, with the actual prices ranging from $554 to $749 psf.

Five homes at Suffolk Premier were sold at $481 to $753 psf and six units at La Casa in Woodlands fetched $506-561 psf. Far East Organization sold 13 units at The Lakeshore near Boon Lay MRT Station at $684-866 psf.

Brisbane Development sold six cluster landed homes at the freehold Illoura project at Old Holland Road at $970 to $1,175 psf while Clydesbuilt Capital found buyers for two freehold strata-titled detached homes at Lornie 18 at $1,150 psf each.

Grensburg Investment sold 65 units at Fontaine Parry at Poh Huat Road at $591-994 psf.

United Engineers sold 365 homes at The Rochester in the one-north precinct at $905 to $1,680 psf.

CapitaLand sold 55 units at The Seafront On Meyer at $1,364-$2,182 psf. Knight Frank’s analysis shows that developers sold a total of 1,378 uncompleted homes in July, up nearly 20 per cent from the figure for June.

The total number of uncompleted homes launched in July increased 15.7 per cent to 1,315 units over the same period. 

Source : Business Times – 16 Aug 2007

Sizzling real estate sector

Bullish investors may drive 2007 sales to a record high, while home prices and rents continue to surge. KALPANA RASHIWALA reports

After years of being in the doldrums, the Singapore property market has been staging a spectacular recovery in the past couple of years. The rally is being fuelled by a surge in confidence from foreign investors as well as local buyers. The real estate sector is firing on all cylinders, including investment sales, residential and office.

A whopping $24.81 billion worth of investment sale deals were sealed in the first six months of this year, according to CB Richard Ellis (CBRE). Investment sale deals – a gauge of major property players’ confidence level in the mid-to-long-term prospects for the real estate sector – include collective sales, other land deals, transactions of entire office and other buildings, as well as strata-titled units above $5 million. The first half of 2007’s sparkling investment sale numbers include some 75 collective sales worth $9.3 billion, higher than $8.2 billion for the whole of last year.

CBRE expects the full-year investment sale figure to surpass the record $30.51 billion set in 2006, hitting as high as $35 billion.

Major deals in H1 this year include the $1.04 billion sale of Temasek Tower, the collective sale of Leedon Heights ($835 million) and Novotel Clarke Quay Hotel ($201 million).

In the residential sector, the Urban Redevelopment Authority’s (URA) Q2 price index for private homes was up 8.3 per cent from the preceding quarter and 21 per cent higher year on year. And latest Q2 official figures show that the residential price recovery that began some two years ago in the high-end segment fuelled by foreign buyers has started filtering down to other segments of the market, based on URA’s sub-indices.

Prices of non-landed private homes in the Core Central Region (CCR) – which includes prime districts 9, 10, 11, Downtown Core (including Marina Bay) and Sentosa – were up 7.9 per cent in Q2 over Q1, while prices of non-landed homes in Rest of Central Region (RCR) – which includes areas like Bukit Merah, Queenstown, Geylang, Toa Payoh and Katong – rose 8.1 per cent over the same period. The Outside Central Region (OCR), covering suburban mass-market locations like Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok, posted a 7.2 per cent quarter-on-quarter rise in Q2.

The rental market has also been sizzling, with residential rental indices of non-landed private homes rising 12 per cent in Q2 over Q1 for the CCR, and by 10 per cent and 9.4 per cent respectively for RCR and OCR in the same period. The Q2 rental indices were up around 35 per cent from a year ago for each of the CCR and RCR, and by 28.3 per cent for OCR.

In the public housing segment, the Housing & Development Board’s (HDB) resale flat price index rose 3 per cent quarter-on-quarter in Q2, compared with a 1.3 per cent gain in Q1.

The outlook for the residential sector is bright. Most property consultants predict that URA’s overall private home price index may surge a further 8 to 15 per cent in the second half, chalking a full-year increase of 23 to 30 per cent. Analysts generally expect HDB resale flat prices to post an 8 to 10 per cent full-year increase.

Interestingly, collective sales have caused a ripple effect. For instance, those who sell their homes through en bloc sales are looking for replacement homes, in many cases outside the prime districts where they sold their en bloc properties because of rapidly rising prices in the prime locations.

This has helped to spur a recovery in the other market segments, even HDB resale flats, where a few units have been purchased at record prices by those who sold their private homes through en bloc sales.

At the same time, as developers pull down en bloc sale sites to redevelop them, the resulting shortage of prime district apartments has helped fuel rental hikes for such homes. In the industrial property market, average rents for all categories of space increased in Q2 this year. High-tech space posted the biggest quarter-on-quarter gain of 11.9 per cent to $2.35 psf per month, as the office space shortage and rising office rentals led many qualifying occupiers to move to high-tech properties, according to CBRE. The average monthly prime retail rent along Orchard Road posted a 1.8 per cent quarter-on quarter gain in Q2 to $34.40 psf – close to the $35.10 psf achieved in 1996.

As for the office sector, a shortage of space in the near term, coupled with strong demand from occupiers including big-wig international financial institutions have been the key factors driving a whopping 80 per cent year-on-year rise in CBRE’s average prime rental in Q2 to $10.80 psf a month. This surpassed the 1996 peak of $9.90 psf a month, and is fast closing in on the 1990 historic peak of $11.50 psf a month. The Q2 office rental figure is also more than double the $4 psf during the current cycle trough in Q1 2004.

Market watchers expect office rents to head further north in the next few years because of the supply crunch. However, the government has been releasing more office sites, including the maiden ‘transitional office’ plot which can be built into a low-rise office building in about a year.

In addition, it has made available more 99-year condo sites, mostly in suburban locations. Besides tackling the supply side, the authorities have also begun releasing more property market data so that participants can make more informed decisions. So far, the indication from government is that it is not inclined to intervene to cool demand.

Fundamentals for the Singapore real estate sector remain strong for the next couple of years, at least – barring unforeseen circumstances.

Of course, a sustained rout in the local stock market because of the selldown on Wall Street is likely dent sentiment in the Singapore property market. But there could also be a more direct hit if the US sub-prime mortgage default fiasco dries up some of the liquidity that has been powering the local real estate sector’s sparkling recovery.

Source : Business Times – 9 Aug 2007

The subsale train gathers speed

The prices are climbing but developers are poised to sell more private homes than ever before. There is also evidence to show that speculative activity has been accelerating by the quarter.

The property mania that has gripped Singapore of late has been captured in hard, official numbers.

Developers sold 9,385 uncompleted private homes in the first six months of this year, less than a thousand units shy of the record 10,363 units sold through all of last year, according to latest official figures. Market watchers expect the eventual sales for 2007 to range between 14,000 and 18,000 units, assuming that the US sub-prime mortgage woes do not have a contagion effect here.

As expected, the prices have been rising fast. The Urban Redevelopment Authority’s (URA) price index for private homes shot up 8.3 per cent in Q2 over the preceding quarter. This means that the index has risen 13.5 per cent for the first six months of this year.

A straw poll of property consultants by BT suggested that the full-year price increase could come in between 23 and 30 per cent. So prices still have between 8 and 15 per cent to climb in the second half.

The downside risk remains from the correction in the US sub-prime market. ‘Unless this spreads into global financial markets, the Singapore property market is unlikely to be affected in the immediate term,’ Jones Lang LaSalle’s head of research (South-east Asia) Chua Yang Liang says. ‘Meanwhile, we are watching the market very closely,’ he added.

One aspect that bears watching is the surging speculative activity. Subsales islandwide jumped 67.4 per cent to 1,254 units in Q2. More than half the subsale deals in Q2 were in the Core Central Region (CCR), which includes districts 9, 10, 11, Downtown Core (including Marina Bay) and Sentosa.

Islandwide, subsale deals accounted for 9.7 per cent of the total private housing deals in Q2. During the same period last year, such deals made up just 2.6per cent of the pie. Still, the latest figures are way short of speculative fever that raged in Q21996, when 28 per cent of total private residential transactions involved subsale deals.

Knight Frank director Nicholas Mak reckons that the share of subsale deals will continue to grow gradually but is unlikely to reach the levels seen in 1996. ‘Back then, the ease of getting 95 to 100 per cent bank financing for property purchases was a key reason fuelling speculative activity. Nowadays banks are more cautious,’ he says.

Going forward, subsale activity may find another engine. It may be driven not so much by the prospect of big, instant gains but by those who bought their homes on deferred payments and reach the point where they have to pay the bulk of their purchase price, says DTZ Debenham Tie Leung executive director Ong Choon Fah. ‘So rather than fork out more money, they may just sell their units since the market has gone up so much in the last couple of years or so since they bought them,’ Mrs Ong reckons.

Subsales involve projects that have yet to receive a Certificate of Statutory Completion, while resales, which are also secondary market transactions, cover completed developments.

The total number of resales jumped 40.2 per cent quarter on quarter to 6,514 units in Q2. This brought total secondary market transactions in Q2 to 7,768 units, up 44 per cent from the preceding quarter and, according to Knight Frank, a level not seen before in the private property market.

Also interesting is the breakdown in the price index for non-landed homes by regions. In all three regions – CCR, Rest of Central Region (RCR) and Outside Central Region (OCR) – the price gains in Q2 over Q1 were higher for completed homes than for uncompleted ones, reversing the general trend seen for at least the past couple of years.

‘The trend reversal seen this quarter across all markets is reflective of the urgent demand for completed residential properties for immediate occupation by those who have sold their homes through en bloc sales looking for replacement properties,’ Colliers International director Tay Huey Ying said.

In tandem with URA’s earlier flash estimate, non-landed homes in RCR (including places like Bukit Merah, Queenstown, Geylang, Toa Payoh and Katong) posted the biggest price gains in Q2, with an overall (both uncompleted and completed homes) increase of 8.1 per cent, followed by CCR (up 7.9 per cent ) and OCR – which covers suburban mass-market locations like Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok – rising 7.2 per cent.

Ms Tay argues that the price recovery in this region can be attributed not just to a general filtering-down effect from the higher-priced tiers, but also to investors buying units in older developments with en bloc sale potential such as Neptune Court, Ivory Heights, Lakepoint Condominium and Clementi Park.

DTZ’s Mrs Ong reckons that the rate of price gains may moderate in the second-half. ‘Developers who bought their sites through en bloc sales in 2006 and earlier, before the surge in land prices seen this year, can probably sell their new projects without setting benchmark prices. Developers are likely to be more sensitive in pricing their projects so aggressively until things are clearer.’

Source : Business Times – 28 Jul 2007

Core central home rents up 12% in Q2

Some say that rentals for private homes islandwide have never risen so much from one quarter to another over the past decade.

Not surprisingly, it was the Core Central Region (CCR) – which includes prime districts 9, 10, 11, Downtown Core (including Marina Bay) and Sentosa – that posted the biggest increase in rents for condos and private apartments in Q2 over the preceding quarter. They rose 12 per cent.

But the buoyant demand for housing in the prime areas continued to filter down to the rest of the market in Q2, as reflected in a 10 per cent rise in URA’s rental increase for the Rest of Central Region (RCR) and a 9.4 per cent hike in the Outside Central Region (OCR).

OCR covers suburban mass-market locations like Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok, while RCR includes areas like Bukit Merah, Queenstown, Geylang, Toa Payoh and Katong.

Knight Frank said that, based on its research, rentals for properties in the East Coast, Thomson and Bishan areas grew by a strong 10 to 12 per cent quarter-on-quarter in Q2 this year, matching the rental growth seen in the CCR.

‘Noticeably, more foreign companies and expatriates are becoming more concerned with rising housing rentals and costs. Nonetheless, their top priority is to be able to enrol their children in international schools here, where the supply of teachers and space for students is far more inelastic when compared to rental properties,’ Knight Frank director (research & consultancy) Nicholas Mak said.

URA’s 12 per cent rental index hike for the CCR in Q2 was much higher than a 7.6 per cent gain registered in Q1.

CB Richard Ellis executive director Li Hiaw Ho said: ‘The slew of en-bloc sales in the past two years being concentrated in the CCR has led to a shortage of apartments for rent in the region, as reflected in this region leading the pack in terms of the increase in the rental index for non-landed properties in Q2.

‘This uptrend is expected to continue as developments which have been collectively sold give way to redevelopment. Some of the major en-bloc sales in the prime area in Q2 include Leedon Heights, Himiko Court, Elmira Heights and Fairways Condominium.’

URA’s overall rental index for private homes in Q2 was up 10.4 per cent from the preceding quarter, and 31.2 per cent higher year-on-year.

‘This is the highest quarter-on-quarter, and year-on-year growth since URA made rental data available to the public. Nonetheless, as of Q2 2007, private residential property rentals are still about 21.4 per cent lower than the all-time high in Q1 1996,’ said Knight Frank’s Mr Mak.

Source : Business Times – 28 Jul 2007

Private homes: Rents up 10.4% in 2nd quarter

ALL private home owners have good reason to celebrate these days, but landlords should really pop the champagne – while their tenants should drown their sorrows.

Rents rose at an unprecedented rate in the April to June period, outpacing home prices which were far from sluggish.

Official figures showed yesterday that rents jumped 10.4 per cent in the quarter, trumping the 7.6 per cent rise in the first three months of the year. They are now 31.2 per cent higher than a year ago.

This is the highest quarterly and yearly growth since the Government made rental data public, said property firm Knight Frank. It is also the first time private home rents have shown double-digit growth in a quarter, it added.

Rents this year have gone up 18.7 per cent, compared to only 14.1 per cent in the whole of last year, added consultancy CB Richard Ellis.

More important, rents rose across the board, according to new Urban Redevelopment Authority (URA) figures yesterday.

Although the core central region still led the pack with a 12 per cent jump over the first quarter, the rest of Singapore was not far behind.

Rents in the city fringe areas went up 10 per cent while those in suburban districts were just behind with a 9.4 per cent rise.

Knight Frank’s latest data shows that homes in the East Coast, Thomson and Bishan areas saw rents rise by 10 to 12 per cent, matching the pace in the prime districts.

But while landlords enjoy the bubbly, their tenants are far from happy with surging rents becoming a source of concern among foreign companies bringing in growing numbers of expats.

To help tenants get a better idea of the market, the Government yesterday released data on median home rentals, breaking it down for the first time by project.

This allows potential tenants to compare median rentals – that is, the level at which half the rentals are higher and the other half lower – of individual condominiums.

The figures showed that The Pier at Robertson, for instance, commands a median monthly rental of $6.30 per sq ft (psf), or $3,150 for a 500 sq ft unit. At the other end of the spectrum, Neptune Court has median monthly rentals of $1.56 psf, or $1,560 for a 1,000 sq ft apartment.

This new data is available on the URA website. The agency also took pains to point out that while median rents overall rose to $2.17 psf per month, there were ‘a significant number of properties which were rented out at below $1.50 psf per month’.

Also, while rents are soaring, they are still some 21 per cent lower than the 1996 high, said Knight Frank.

The key reason for the rental rebound is the slew of collective sales, said experts. And as more and bigger estates are torn down, rents can be expected to surge further as displaced owners and tenants look for hew homes.

Similarly, private home prices are set for a good run.

They jumped 8.3 per cent in the second quarter to hit a level not seen since 1997. But what raised eyebrows was that prices of non-landed homes in the city-fringe areas outpaced those in red-hot prime districts.

Even in suburban areas, prices climbed 7.2 per cent – well above the 2 per cent rise in the previous quarter.

Perhaps most significantly, prices of completed homes rose more than those of uncompleted ones for the first time in at least two years.

This is a sign that the strong price rebound is due to genuine buying demand, said property consultants. Traditionally, prices of uncompleted homes tend to lead price increases because more people want to buy new homes.

Source : Straits Times – 28 Jul 2007

Prices rising across the board in property market

The property boom is now ringing across the country, with all segments, including the HDB market, recording rising prices.

The biggest winners were private homes, with prices up 8.3 per cent in the April to June quarter. This is on top of a 4.8 per cent increase in the first three months of the year.

The number of new homes sold hit a record 5,129 units in the second quarter, 7 per cent up on the first quarter.

Landed homes, which have not moved much over the past year, also sprang into life and registered price rises of 7.1 per cent, up from 2.9 per cent in the first quarter.

And resale prices in the HDB market rose 3 per cent, up from a 1.25 per cent rise in the first quarter.

‘The benefits of the improving economy are now being seen more widely across the board, demonstrated by the mass market increases and a higher number of HDB upgraders,’ said property firm Jones Lang LaSalle’s regional managing director, Mr Chris Fossick.

Government figures also show that demand is pushing up private home prices in most parts of the country.

Prices in central Singapore, the city fringes and suburban areas rose between 7.2 per cent and 8.1 per cent in the second quarter.

‘The even performance across all regions…is a positive as it implies that there is now greater uniformity in wealth creation across all segments,’ said Ms Tay Huey Ying,of property consultancy Colliers International.

The wealth of data released yesterday by the Urban Redevelopment Authority (URA) – it included new information on housing rentals and office rents – also revealed some notable developments in the roaring market.

One was the bigger jump in prices of completed homes over uncompleted ones.

In the central core region – where the most expensive housing is found – prices of completed homes rose 8.5 per cent, compared with 7.1 per cent for uncompleted ones.

Usually, glamorous launches of prime homes attract higher prices than completed ones. But the huge number of displaced en bloc sellers looking for a roof over their heads has boosted demand for existing property.

Consultants said that because of strong leasing demand – in part contributed by owners and tenants displaced by en bloc sales – completed properties have become more attractive for investors, too.

Indeed, rents have been soaring, with some owners demanding a doubling of rent or more – and getting it.

The new figures have also cast more light on property speculation. In the second quarter, owners’ sales of uncompleted homes amounted to less than 10 per cent of the total deals done.

But there was a hike in the prime central core region, where such sales accounted for 19.4 per cent of deals done. This is up from 12.4 per cent in the first quarter.

By contrast, in the second quarter of 1996 – when speculation was rife – subsales accounted for about 28 per cent of all deals.

On the supply side, 43,018 – mostly flats but with about 3,000 houses – will be built between now and 2010, the URA said. About 76 per cent of these will be completed in 2009 and 2010.

Overall, private home prices are now about 18.5 per cent below the 1996 peak and at a level similar to that in the second half of 1994.

Also yesterday, the HDB released more information on sales, including median resale prices, rental data and the amount of cash-over-valuation (COV) that buyers are paying.

It shows, for example, that the median COV for a five-room flat can reach $60,000 in Bukit Timah town, but is zero in Woodlands.

 Source : Straits Times – 28 Jul 2007

Residential supply crunch to get worse, says Citigroup

The property supply crunch is likely to get worse despite government assurances that supply over the next few years is sufficient, Citigroup says in a report released yesterday.

The report comes just a week after the investment bank advocated a shift from property to bank stocks, amid what it termed ‘policy uncertainty’.

Since mid-May the government has announced measures to tackle the surge in the property market – especially the rise in office rents. This has undermined the performance of property stocks, Citigroup said in a July20 report.

In yesterday’s report, Citigroup analysts Chua Hak Bin and Lim Jit Soon say a supply crunch can be expected because the number of units completed from 2007 to 2010 will likely fall short of the Urban Redevelopment Authority’s projection of 42,200.

‘Completion rates have been consistently over-estimated in the past,’ the analysts say. ‘Units under construction provide better guidance and suggest a potential shortfall. Shortage of construction materials and workers implies that risk of delays has risen.’

Units under construction far lag completion estimates, with only 25,100 to be built from 2007-2010, according to Citigroup. Specifically, just 4,573 units are under construction in 2007 plus a further 6,633 in 2008. Jobs growth and the foreign worker inflow continue to overwhelm available residential units, Citigroup says. Jobs growth in 2007 is keeping pace with the 176,000 jobs generated in 2006, of which about half were taken up by foreigners.

‘Accommodating the current flow of foreign workers looks near impossible with the current supply stock and pipeline,’ the bank’s report says.

‘The lack of any slack also shows in completed but unsold units, which reached a new low of 567 at the end of the first quarter of 2007.’

En bloc sales will exacerbate the residential supply squeeze, Citigroup reckons. And it sees a risk of more policy measures.

‘The government will likely favour supply side responses, including more land supply, more HDB flats and further relaxation of measures on rental of HDB properties,’ it says. ‘But demand-side measures cannot be ruled out if price increases continue to accelerate and speculation begins to test the comfort zone of the authorities.’

Anticipating dampening policies, Citigroup last week called for a shift from property counters to banks.

But it remains positive about the fundamentals for property because demand and supply dynamics continue to favour rental and capital growth for both the office and residential sectors. Still, policy uncertainty has affected the share prices of some property stocks, the report said.

Banks, which are beneficiaries of the property upturn because of property loans, are better proxies for the property boom, it said.

‘With reasonable valuations and steady earnings growth, banks provide exposure to the reflation theme without the downside from policy uncertainty.’

Source : Business Times – 24 Jul 2007

Rise in value of office space here is highest in the world

SINGAPORE’S office buildings have shot up in value by more than anywhere else in the world over the past year.

These soaring values, as well as a rush of investment capital into Singapore, have made the property market here the world’s hottest.

This was revealed by property firm Jones Lang LaSalle (JLL) earlier this week, ahead of a fuller report on global real estate investment due out next month. It will track property deals above US$5 million (S$6.5 million) worldwide, most of which involve commercial real estate, such as offices and shops.

JLL’s head of Asia capital markets, Mr Stuart Crow, elaborated on the preliminary findings yesterday.

He told The Straits Times that capital values of property in Singapore, particularly offices, have risen the most in the world in terms of a straight monetary increase rather than a percentage rise.

In the prime Raffles Place area, office values rose by US$804 per sq ft (psf) in the last 12 months, boosted by a supply crunch and soaring rentals. This is more than double the increase in Hong Kong’s central district, where offices rose about US$280 psf in value on average, he said.

In percentage terms, Singapore’s office values jumped a staggering 105 per cent in a year to reach $1,568.50 psf last month.

In Hong Kong, values rose only 16.7 per cent in the same period to hit US$1,958.60 psf. But Mumbai’s growth beat Singapore’s in percentage terms – up 123 per cent to US$1,166.20 psf.

Office values in Singapore have been driven up by an acute supply crunch as well as soaring demand from expanding businesses. But some experts have warned that rising office prices and rent could hurt the Republic’s competiveness.

The surge in real estate values here has also been boosted by buzzing investor interest in Singapore, said Mr Crow.

In the first half of this year, US$3.7 billion worth of real estate changed hands here – a 40 per cent jump from a year earlier and the fourth highest figure in the Asia-Pacific region, behind Japan, Australia and China.

Mr Crow believes property investments here will double in the next six months to reach about US$8 billion for the whole year. ‘We’re still in the early stages. Next year, investment flows may strengthen even further.’

He said many new foreign players have arrived in Singapore’s real estate market, adding that it has been transformed from an ‘opportunistic’ destination to a ‘core market’.

Of the last 18 major office transactions in Singapore, 16 have involved foreign buyers, noted Mr Crow. About 11 of these were making their first acquisition in Singapore; for some, their first in Asia.

British-based property fund Develica, for one, bought its first Asian building last month, 1 Finlayson Green, for $231 million.

Source : Straits Times – 20 Jul 2007