Nov 25, 2009
Pine Grove residents keen to sell en bloc again
PINE Grove residents are looking to sell their sprawling Ulu Pandan estate en bloc, after failing to do so in previous attempts during the 2007 boom.
They are not alone. Industry sources say there is a growing group of other estates that previously failed to sell en bloc but is now looking for reruns.
The collection of signatures at Pine Grove, a 660-unit former HUDC estate on 893,178 sq ft of land, started on Nov 15. If successful, this latest attempt will net each unit owner at least $1.6 million to $2.05 million, depending on unit size.
Many units are about 1,754 sq ft and will achieve a price of about $1.95 million each, according to an owner who declined to be named. Prices are based on a reserve level of $1.246 billion, he added.
The total price works out to at least $740 per sq ft per plot ratio, estimated a property expert. This is because the buyer of the site will have to pay an upgrading premium, plus a differential premium on top of the asking price to cover the cost of bringing the land tenure up to 99 years and site redevelopment.
Marketing agent Jones Lang LaSalle declined to comment.
Pine Grove's collective sale attempts in 2007 failed to bear fruit, even though the average payout was eventually raised to about $2 million per unit.
At Tulip Garden in Holland Road, Bravo Building Construction failed to complete a $516 million collective sale purchase last year due to funding issues.
Residents of Chin Swee Road's Landmark Tower were unable to attract a buyer in their collective sale attempts in 2007 and last year, but are keen to try again.
The sale processes at Tulip Garden and Landmark Tower are still in the preliminary stage and The Straits Times understands both have yet to officially appoint a marketing agent.
The estates are understandably eager to try again now that the economic outlook has improved and private home prices have risen, said DTZ South-east Asia research head Chua Chor Hoon.
The recent market slowdown has yet to significantly hamper owners' expectations, given that the process of collecting signatures and launching the sale may take a while, said an expert.
Wednesday, November 25, 2009
ST Forum : Making a case for upgrading housing blocks in Redhill Close
Nov 25, 2009
Making a case for upgrading housing blocks in Redhill Close
THE Housing Board's letter, "Block eligible for other upgrading schemes", last Saturday, explained that "the Selective En-bloc Redevelopment Scheme (Sers) is implemented only for old HDB precincts that can be redeveloped to optimise land use".
I would like to draw attention to the area at Redhill Close, from Block 1 to Block 22. This precinct is huge and is very near the Redhill MRT station and other amenities like a market and food centre.
These blocks are only seven stories high and lift upgrading is not scheduled, even though the buildings are about 50 years old.
Why do the Bukit Merah View blocks have a better chance at Sers than Redhill Close? Could HDB advise if there are other upgrading programmes available for this precinct?
Christopher Chew
Making a case for upgrading housing blocks in Redhill Close
THE Housing Board's letter, "Block eligible for other upgrading schemes", last Saturday, explained that "the Selective En-bloc Redevelopment Scheme (Sers) is implemented only for old HDB precincts that can be redeveloped to optimise land use".
I would like to draw attention to the area at Redhill Close, from Block 1 to Block 22. This precinct is huge and is very near the Redhill MRT station and other amenities like a market and food centre.
These blocks are only seven stories high and lift upgrading is not scheduled, even though the buildings are about 50 years old.
Why do the Bukit Merah View blocks have a better chance at Sers than Redhill Close? Could HDB advise if there are other upgrading programmes available for this precinct?
Christopher Chew
ST : 185 evicted for subletting rental flats
Nov 25, 2009
185 evicted for subletting rental flats
THE Housing Board (HDB) has evicted 185 tenants in the past 12 months, after they were found to have illegally sublet their rental flats.
These tenants were living elsewhere while subletting the flats, which is disallowed under the law, said National Development Minister Mah Bow Tan.
'They have abused government subsidy and deprived the truly needy of a rental flat,' he said in a written reply to a question raised in Parliament on Monday.
He was responding to Mr Lim Biow Chuan (Marine Parade GRC) who asked for an update on the number of evictions of rental flat tenants, and if there are plans to review rental rates to take inflation and the higher cost of living into account.
Noting that rental flats are heavily subsidised, Mr Mah said there is no need to revise rental rates as these are already low and affordable - even for those who earn a very low income.
Households with a total monthly income of less than $800 pay only $30 a month for a one-room rental flat. Those with monthly incomes of between $800 and $1,500 pay 30 per cent of the market rate. Rental rates, Mr Mah said, have been frozen at $110 a month for one-room flats since 2005.
For tenants in severe financial difficulty, the HDB will extend more help, for example, by working out an instalment plan, Mr Mah said.
He also gave an update on studio apartments for the elderly, in response to a question from Nominated MP Paulin Tay Straughan. To date, the HDB has launched 17 such developments in both mature and non-mature estates, with near 100 per cent take-up rate.
SUE-ANN CHIA
185 evicted for subletting rental flats
THE Housing Board (HDB) has evicted 185 tenants in the past 12 months, after they were found to have illegally sublet their rental flats.
These tenants were living elsewhere while subletting the flats, which is disallowed under the law, said National Development Minister Mah Bow Tan.
'They have abused government subsidy and deprived the truly needy of a rental flat,' he said in a written reply to a question raised in Parliament on Monday.
He was responding to Mr Lim Biow Chuan (Marine Parade GRC) who asked for an update on the number of evictions of rental flat tenants, and if there are plans to review rental rates to take inflation and the higher cost of living into account.
Noting that rental flats are heavily subsidised, Mr Mah said there is no need to revise rental rates as these are already low and affordable - even for those who earn a very low income.
Households with a total monthly income of less than $800 pay only $30 a month for a one-room rental flat. Those with monthly incomes of between $800 and $1,500 pay 30 per cent of the market rate. Rental rates, Mr Mah said, have been frozen at $110 a month for one-room flats since 2005.
For tenants in severe financial difficulty, the HDB will extend more help, for example, by working out an instalment plan, Mr Mah said.
He also gave an update on studio apartments for the elderly, in response to a question from Nominated MP Paulin Tay Straughan. To date, the HDB has launched 17 such developments in both mature and non-mature estates, with near 100 per cent take-up rate.
SUE-ANN CHIA
ST Forum : Developers must bear cost of flood prevention steps
Nov 25, 2009
Developers must bear cost of flood prevention steps
MR CHRISTOPHER de Souza, the MP overseeing Bukit Timah, was reported stating that he would be looking into getting the management of private buildings in the area to enhance measures to prevent flooding in their basement carparks ('Working on flood controls', Monday).
I am surprised that the residents and officials accompanying Mr de Souza did not discuss what could be done to eliminate the flooding problem to existing and future developments in the area.
Why must owners in these private buildings enhance measures? Should it not be the responsibility of the developers?
Developments alongside the Bukit Timah Canal are susceptible to flash floods judging from historical evidence. I am baffled that professional builders and developers did not take this fundamental problem into account when they started work on the projects. If they had done their due diligence, residents would not have been so unpleasantly affected by last Thursday's deluge.
We are told that widening of the canals has been ongoing for many years. Yet, the flooding problem has not stopped.
Ultimately, the people responsible for flood safety are the developers and their professional consultants. It is they, and not the residents, who should bear the cost of repairs and preventive measures.
Michael Yeo
Developers must bear cost of flood prevention steps
MR CHRISTOPHER de Souza, the MP overseeing Bukit Timah, was reported stating that he would be looking into getting the management of private buildings in the area to enhance measures to prevent flooding in their basement carparks ('Working on flood controls', Monday).
I am surprised that the residents and officials accompanying Mr de Souza did not discuss what could be done to eliminate the flooding problem to existing and future developments in the area.
Why must owners in these private buildings enhance measures? Should it not be the responsibility of the developers?
Developments alongside the Bukit Timah Canal are susceptible to flash floods judging from historical evidence. I am baffled that professional builders and developers did not take this fundamental problem into account when they started work on the projects. If they had done their due diligence, residents would not have been so unpleasantly affected by last Thursday's deluge.
We are told that widening of the canals has been ongoing for many years. Yet, the flooding problem has not stopped.
Ultimately, the people responsible for flood safety are the developers and their professional consultants. It is they, and not the residents, who should bear the cost of repairs and preventive measures.
Michael Yeo
BT : How to reduce your taxes
Business Times - 25 Nov 2009
MONEY MATTERS
How to reduce your taxes
As 2009 draws to a close, you may wish to consider the following tax tips still available to you before Dec 31
By BJ OOI AND DAVE LOH
MANY people tend to focus only on investment when planning their finances. But it is equally important to consider your tax strategy, as income taxes can have a direct effect on your net disposable income.
Tax planning is not something that applies only to wealthy individuals. As 2009 draws to a close, you may wish to consider the following tax tips still available to you before Dec 31.
While these tips may help you to reduce your income tax bill for the Year of Assessment (YA) 2010, do note that they are general in nature, and you should consult your tax adviser about your particular situation.
Claim applicable reliefs
First, remember to claim any applicable relief in your tax return.
If you are a Singapore resident and have met the qualifying conditions, you may be entitled to claim tax relief as applicable to your situation. Examples include earned income relief, wife relief, child relief, parent relief and foreign maid levy relief for married female taxpayers.
Supplementary Retirement Scheme (SRS) contributions
The SRS is a voluntary retirement savings scheme that allows individuals to enjoy tax relief for the year in which the contributions are made to their SRS account.
Participation in SRS is available to Singaporeans, Singapore permanent residents and foreigners, and is subject to different contribution ceilings. For 2009, SRS contributions are capped at $11,475 for Singaporeans and permanent residents, and $26,775 for foreigners.
Funds in the SRS account can be used for selected investments, such as fixed deposits, insurance products and unit trusts.
In general, 50 per cent of total SRS distributions will become taxable on an individual contributor's retirement for Singaporeans and permanent residents. For foreigners, this is after the minimum 10-year holding period.
However, withdrawals can be staggered over 10 years to enjoy more tax savings.
Premature distribution is normally taxable in full, with a possible 5 per cent penalty.
Central Provident Fund (CPF) top-up
Under the CPF Minimum Sum Topping-Up Scheme, you can claim tax relief for the cash top-up made to your spouse or siblings who do not have income exceeding $2,000 in the year preceding the year of top-up, or to your grandparents or parents. For the YA 2010, the maximum amount of tax relief is $7,000.
In addition, you can claim separate CPF cash top-up relief if you or your employer have made cash top-ups to your own Minimum Sum under the CPF Minimum Sum Topping-Up Scheme. The maximum amount of tax relief is $7,000.
CPF contributions for self-employed
If you are a self-employed person who has made Medisave and voluntary CPF contributions in 2009, you may claim tax relief for your CPF contribution of up to 34.5 per cent of your net trade income assessed.
This is subject to the lower of the CPF relief capped at $26,393 for YA 2010, or the actual amount contributed by you.
Donations to approved charities
You can claim tax relief for cash donations made to an approved Institution of Public Character (IPC) or Qualifying Grant-making Philanthropic Organisations.
Besides cash, donations to IPCs can take the form of Singapore-listed shares, or unit trusts that are ready for trade in Singapore, as well as land and buildings.
To encourage greater charitable acts in 2009 during the recent downturn, applicable tax deductions for YA 2010 have been enhanced to 2.5 times the amount of donations made this year (that is, calendar year 2009).
If the tax deduction for the donation is more than the income for the year, the donor is allowed to carry forward the un-utilised deductions for a maximum of five years.
Not Ordinarily Resident (NOR) Scheme
If you are a non-resident of Singapore for three consecutive years immediately preceding the year that you have become a resident of Singapore, you can apply for the NOR status for a five-year period starting with that year of residency.
As a NOR taxpayer who spends at least 90 days outside Singapore for business with an employment income of at least $160,000, you can apply for the concession of time-apportionment of employment income. This means you would not be taxed on the portion of employment income that corresponds to the number of business days spent outside Singapore.
If you qualify as a NOR taxpayer earning at least $160,000 during the calendar year, you should review your travel schedule to ascertain whether you can apply for this time-apportionment concession.
Gains from Employee Stock Option Plan and Employee Share Ownership Scheme
If you are granted stock options or share awards by your employer, there are incentive schemes allowing partial tax exemption on the gains from these stock options and share awards.
Under certain conditions, you can also defer paying any applicable tax. You should consult your employer to confirm whether stock options or share awards qualify for the incentives to take advantage of this.
Rental income from property
If you own a rental property, you should know that while the rental income is taxable, you can claim rental expenses to offset the rental income.
There are different types of allowable deductible expenses, for example, mortgage interest, property tax, maintenance fee paid to management corporation, fire insurance and general repairs or maintenance undertaken, such as painting and pest control services.
However, the first time that you rent out your first property, certain expenses incurred to secure the first tenant are disallowed. These expenses include any commission paid to the property agent, advertising and legal costs.
For any subsequent property, your property agent's commission, advertising and legal expenses incurred for securing the first tenant is deductible against the rental income of that property. The agent's commission or costs for renewing the lease for a subsequent tenant is also deductible.
If you own several rental properties, rental losses from one property can be used to offset income from another.
Where the final amount from all the rental properties is a loss, you cannot offset the loss against income from other sources. You may, however, transfer this loss to your spouse if he or she has positive rental income to absorb the loss.
In general, any gains from the sale of property are considered capital gains and not subject to tax in Singapore.
However, the Inland Revenue Authority of Singapore may query the property sale and ask the taxpayer to provide additional information about the transaction to confirm this tax treatment.
Effective tax planning requires you to be aware of any changes to tax laws and regulations that may affect your tax position. You should speak to a tax adviser to determine whether there are any of such changes that you should capitalise on.
BJ Ooi is executive director and head of private client services, and Dave Loh is director at KPMG Tax Services in Singapore. The views expressed are those of the authors and do not necessarily represent the views of KPMG in Singapore
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
__._,_.___
MONEY MATTERS
How to reduce your taxes
As 2009 draws to a close, you may wish to consider the following tax tips still available to you before Dec 31
By BJ OOI AND DAVE LOH
MANY people tend to focus only on investment when planning their finances. But it is equally important to consider your tax strategy, as income taxes can have a direct effect on your net disposable income.
Tax planning is not something that applies only to wealthy individuals. As 2009 draws to a close, you may wish to consider the following tax tips still available to you before Dec 31.
While these tips may help you to reduce your income tax bill for the Year of Assessment (YA) 2010, do note that they are general in nature, and you should consult your tax adviser about your particular situation.
Claim applicable reliefs
First, remember to claim any applicable relief in your tax return.
If you are a Singapore resident and have met the qualifying conditions, you may be entitled to claim tax relief as applicable to your situation. Examples include earned income relief, wife relief, child relief, parent relief and foreign maid levy relief for married female taxpayers.
Supplementary Retirement Scheme (SRS) contributions
The SRS is a voluntary retirement savings scheme that allows individuals to enjoy tax relief for the year in which the contributions are made to their SRS account.
Participation in SRS is available to Singaporeans, Singapore permanent residents and foreigners, and is subject to different contribution ceilings. For 2009, SRS contributions are capped at $11,475 for Singaporeans and permanent residents, and $26,775 for foreigners.
Funds in the SRS account can be used for selected investments, such as fixed deposits, insurance products and unit trusts.
In general, 50 per cent of total SRS distributions will become taxable on an individual contributor's retirement for Singaporeans and permanent residents. For foreigners, this is after the minimum 10-year holding period.
However, withdrawals can be staggered over 10 years to enjoy more tax savings.
Premature distribution is normally taxable in full, with a possible 5 per cent penalty.
Central Provident Fund (CPF) top-up
Under the CPF Minimum Sum Topping-Up Scheme, you can claim tax relief for the cash top-up made to your spouse or siblings who do not have income exceeding $2,000 in the year preceding the year of top-up, or to your grandparents or parents. For the YA 2010, the maximum amount of tax relief is $7,000.
In addition, you can claim separate CPF cash top-up relief if you or your employer have made cash top-ups to your own Minimum Sum under the CPF Minimum Sum Topping-Up Scheme. The maximum amount of tax relief is $7,000.
CPF contributions for self-employed
If you are a self-employed person who has made Medisave and voluntary CPF contributions in 2009, you may claim tax relief for your CPF contribution of up to 34.5 per cent of your net trade income assessed.
This is subject to the lower of the CPF relief capped at $26,393 for YA 2010, or the actual amount contributed by you.
Donations to approved charities
You can claim tax relief for cash donations made to an approved Institution of Public Character (IPC) or Qualifying Grant-making Philanthropic Organisations.
Besides cash, donations to IPCs can take the form of Singapore-listed shares, or unit trusts that are ready for trade in Singapore, as well as land and buildings.
To encourage greater charitable acts in 2009 during the recent downturn, applicable tax deductions for YA 2010 have been enhanced to 2.5 times the amount of donations made this year (that is, calendar year 2009).
If the tax deduction for the donation is more than the income for the year, the donor is allowed to carry forward the un-utilised deductions for a maximum of five years.
Not Ordinarily Resident (NOR) Scheme
If you are a non-resident of Singapore for three consecutive years immediately preceding the year that you have become a resident of Singapore, you can apply for the NOR status for a five-year period starting with that year of residency.
As a NOR taxpayer who spends at least 90 days outside Singapore for business with an employment income of at least $160,000, you can apply for the concession of time-apportionment of employment income. This means you would not be taxed on the portion of employment income that corresponds to the number of business days spent outside Singapore.
If you qualify as a NOR taxpayer earning at least $160,000 during the calendar year, you should review your travel schedule to ascertain whether you can apply for this time-apportionment concession.
Gains from Employee Stock Option Plan and Employee Share Ownership Scheme
If you are granted stock options or share awards by your employer, there are incentive schemes allowing partial tax exemption on the gains from these stock options and share awards.
Under certain conditions, you can also defer paying any applicable tax. You should consult your employer to confirm whether stock options or share awards qualify for the incentives to take advantage of this.
Rental income from property
If you own a rental property, you should know that while the rental income is taxable, you can claim rental expenses to offset the rental income.
There are different types of allowable deductible expenses, for example, mortgage interest, property tax, maintenance fee paid to management corporation, fire insurance and general repairs or maintenance undertaken, such as painting and pest control services.
However, the first time that you rent out your first property, certain expenses incurred to secure the first tenant are disallowed. These expenses include any commission paid to the property agent, advertising and legal costs.
For any subsequent property, your property agent's commission, advertising and legal expenses incurred for securing the first tenant is deductible against the rental income of that property. The agent's commission or costs for renewing the lease for a subsequent tenant is also deductible.
If you own several rental properties, rental losses from one property can be used to offset income from another.
Where the final amount from all the rental properties is a loss, you cannot offset the loss against income from other sources. You may, however, transfer this loss to your spouse if he or she has positive rental income to absorb the loss.
In general, any gains from the sale of property are considered capital gains and not subject to tax in Singapore.
However, the Inland Revenue Authority of Singapore may query the property sale and ask the taxpayer to provide additional information about the transaction to confirm this tax treatment.
Effective tax planning requires you to be aware of any changes to tax laws and regulations that may affect your tax position. You should speak to a tax adviser to determine whether there are any of such changes that you should capitalise on.
BJ Ooi is executive director and head of private client services, and Dave Loh is director at KPMG Tax Services in Singapore. The views expressed are those of the authors and do not necessarily represent the views of KPMG in Singapore
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
__._,_.___
ST : Work to expand canals next year
Nov 25, 2009
Work to expand canals next year
Capacity of Bukit Timah Canal will be doubled from Wilby Road to Sixth Avenue
By Amresh Gunasingham
A DIVERSION canal which overflowed last Thursday and flooded parts of Bukit Timah Road will be expanded over two phases in the next three years, said the national water agency yesterday.
The tender has closed for the first phase, which will be a $20 million facelift to double the capacity of the main Bukit Timah Canal at its juncture with the diversion canal. This is the portion stretching from Wilby Road to Sixth Avenue.
A floodgate located at the Sixth Avenue junction to divert water from the main canal into the three-decade-old diversion was unable to contain rising water levels from 92mm of rain being dumped over half an hour. The rainfall is the second-biggest in the last two decades over the same period, following the 96mm in November 1995.
This caused water levels in the main canal to rise and breach the low-lying stretch from Third Avenue to Coronation Road.
PUB said construction would probably start in the third quarter of next year, and take two years.
The second phase will see the 3km diversion canal, stretching from Sixth Avenue to Sungei Ulu Pandan, widened in parts from 11m to more than 20m. It will also be deepened from the present 4m. Work on this phase is expected to start in two years.
The PUB will also install a sensor system along the Bukit Timah Canal near Blackmore Drive next week, to provide early warning to police and nearby developments if the canal's water level is rising.
Last Thursday, at the flood's height - between 1pm and 2pm - the floodwater was knee-deep, throwing traffic in Bukit Timah into chaos.
Property and cars were damaged as three underground carparks were partially submerged.
The diversion canal was built in 1972 and sized according to how much development there was in the area as well as economic considerations, said Mr Tan Nguan Sen, director of catchment and waterways at PUB, yesterday.
'We did not want to build oversized canals that would not be used to their full capacity.'
Since then, housing and infrastructure developments have burgeoned on the road, a key factor in the volume of water flowing over the surface.
Land scarcity limits the size of drainage systems so they cannot cater to every extreme event, said Mr Tan.
To cope with last week's volume of rainfall, the diversion canal would have to be 30m wide.
The buildings which had their basement carparks submerged are hoping to avoid a similar occurrence in future.
Corona Ville condominium, one of the three, has a drainage system linked directly to the diversion canal which overflowed.
PUB is in discussions with its management to install pump systems in the carpark. It is also talking to the Holland-Bukit Timah GRC about installing physical barriers such as sandbags to prevent water flowing into other developments.
The flood comes three years after one of Singapore's worst floodings in recent history. In December 2006, 345mm of rain fell over a 20-hour period, the third-highest in the last 75 years. Parts of the island from Thomson Road to Yio Chu Kang were submerged and landslides were triggered in Mandai Road and Bukit Batok West Avenue 2.
Work to expand canals next year
Capacity of Bukit Timah Canal will be doubled from Wilby Road to Sixth Avenue
By Amresh Gunasingham
A DIVERSION canal which overflowed last Thursday and flooded parts of Bukit Timah Road will be expanded over two phases in the next three years, said the national water agency yesterday.
The tender has closed for the first phase, which will be a $20 million facelift to double the capacity of the main Bukit Timah Canal at its juncture with the diversion canal. This is the portion stretching from Wilby Road to Sixth Avenue.
A floodgate located at the Sixth Avenue junction to divert water from the main canal into the three-decade-old diversion was unable to contain rising water levels from 92mm of rain being dumped over half an hour. The rainfall is the second-biggest in the last two decades over the same period, following the 96mm in November 1995.
This caused water levels in the main canal to rise and breach the low-lying stretch from Third Avenue to Coronation Road.
PUB said construction would probably start in the third quarter of next year, and take two years.
The second phase will see the 3km diversion canal, stretching from Sixth Avenue to Sungei Ulu Pandan, widened in parts from 11m to more than 20m. It will also be deepened from the present 4m. Work on this phase is expected to start in two years.
The PUB will also install a sensor system along the Bukit Timah Canal near Blackmore Drive next week, to provide early warning to police and nearby developments if the canal's water level is rising.
Last Thursday, at the flood's height - between 1pm and 2pm - the floodwater was knee-deep, throwing traffic in Bukit Timah into chaos.
Property and cars were damaged as three underground carparks were partially submerged.
The diversion canal was built in 1972 and sized according to how much development there was in the area as well as economic considerations, said Mr Tan Nguan Sen, director of catchment and waterways at PUB, yesterday.
'We did not want to build oversized canals that would not be used to their full capacity.'
Since then, housing and infrastructure developments have burgeoned on the road, a key factor in the volume of water flowing over the surface.
Land scarcity limits the size of drainage systems so they cannot cater to every extreme event, said Mr Tan.
To cope with last week's volume of rainfall, the diversion canal would have to be 30m wide.
The buildings which had their basement carparks submerged are hoping to avoid a similar occurrence in future.
Corona Ville condominium, one of the three, has a drainage system linked directly to the diversion canal which overflowed.
PUB is in discussions with its management to install pump systems in the carpark. It is also talking to the Holland-Bukit Timah GRC about installing physical barriers such as sandbags to prevent water flowing into other developments.
The flood comes three years after one of Singapore's worst floodings in recent history. In December 2006, 345mm of rain fell over a 20-hour period, the third-highest in the last 75 years. Parts of the island from Thomson Road to Yio Chu Kang were submerged and landslides were triggered in Mandai Road and Bukit Batok West Avenue 2.
BT : Buying a home: freehold vs leasehold
Business Times - 25 Nov 2009
Buying a home: freehold vs leasehold
NICHOLAS MAK examines how both tenures perform in rising and falling markets as well as in collective sales
THE question of whether to own freehold or leasehold property seems a perennial one, with pros and cons shifting with market cycles and new trends. Here, we examine the issue from the perspective of both a home owner and investor, and see how both tenures perform in rising and falling markets as well as in collective sales.
The chief attraction of 99-year leasehold property is that it is typically priced lower than a comparable freehold property. As a result, they are popular with HDB upgraders as entry-level private properties. Most mass-market homes are 99-year leasehold condominiums, with prices ranging from $500 per sq ft to $900 per sq ft. A typical family-size apartment could cost anything from $600,000 to $1.2 million.
For investors, leasehold properties usually offer a higher rental yield because of their lower capital cost. However, the higher yield merely compensates the owner for the decaying lease.
One of the more apparent disadvantages of owning a 99-year leasehold property is that the length of the lease is contracting daily. All else being equal, this would result in falling property value. However, certain external factors could slow the decline in value, such as if the property is sought after by tenants or buyers. This could be due to a prime location, improving infrastructure (such as a proposed MRT station nearby), or good amenities or popular schools in the vicinity.
When it comes to collective sales, there are usually fewer opportunities for them with 99-year homes. One reason is that many of them are still relatively new and in good condition. Thus, the owners do not feel any urgency to sell their homes collectively.
A more pertinent reason is that the premium payable to the government to top up a 99-year lease is quite high, based on the existing formula. And since developers factor the premium as part of the total land cost, the higher the premium the less the owner of the ageing leasehold would get in any collective sale.
As such, collective sales are not attractive to many owners of 99-year leasehold apartments unless the expense of maintaining their ageing properties are so high that a collective sale becomes the cheaper alternative.
A key benefit of owning freehold real estate is that the land value does not generally depreciate in the long term. Although all properties are subject to market fluctuations, the price of freehold land tends to be more stable than that of leasehold land over time. However, the value of a freehold property could still decrease over time due to the depreciating value of the ageing building. Over the long term, while the value of freehold land may increase or remain little changed, the value of the building would decline.
One factor that supports the value of freehold land in Singapore is its scarcity. Since all the land sold by the government is leasehold, the amount of freehold land would not increase. In fact, it might shrink over time if the government makes acquisitions of such land.
Another advantage of owning a freehold property is the potential of a windfall from a collective sale. If the value of the freehold land increases while the value of the ageing building declines, it could reach a stage where the redevelopment value of the property is worth more than the utility value of the existing building. As a result, the property owners may find a collective sale of their property to a developer to be highly profitable.
Some developers looking to acquire residential land for development may also prefer freehold land to ageing 99-year leasehold property because freehold land would not require the payment of a hefty premium for extending the lease.
For all these reasons, freehold residential properties are generally priced higher than 99-year leaseholds. The price range of freehold non-landed properties is also wider than that of comparable leasehold properties. Depending on the location, freehold property prices could vary from $600 psf to $4,000 psf or more. The majority of high-end residential properties are freehold.
For investors, one disadvantage of freehold property is the lower rental yield, a function of the higher cost of the property.
Also, while freehold properties have a higher likelihood of a collective sale than their leasehold counterparts, that can prove to be a double-edged sword. The property boom of 2005 to 2008 whipped up a collective sale frenzy. But some property owners who sold for a windfall found they could not get a replacement home in the same location from their proceeds. As the collective sale boom was powered by surging property prices, by the time en-bloc property sellers received their proceeds, the prices of comparable replacement homes would have moved out of reach.
Now, we look at the price performance of freehold and leasehold properties. Although freehold properties are usually priced higher than their leasehold counterparts, their rate of appreciation does not always outperform.
There were two property cycles between end-1998 and mid-2009. The first market boom, which started at end-1998 and ended in mid-2000, was a bottom-up price recovery. Demand started in the mass-market sector and moved up to the mid-tier and finally the high-end segment.
During this 18-month period, the average price of 99-year condominiums rose faster than that of freehold homes. The average price of freehold condominiums grew by 38.2 per cent, while the average price of 99-year leasehold condominiums surged by 46.2 per cent.
But on the way down, leasehold home prices also fell more steeply. On the downcycle between mid-2000 and the first half of 2004, the average price of leasehold condominiums fell 26.1 per cent, steeper than the freehold price decline of 17.6 per cent.
The most recent boom that lasted four years from mid-2004 to mid-2008 started with high-end property and gradually filtered down to the mass market.
Even when the mass-market sector started to pick up in 2007, the momentum in the high-end segment did not let up. As a result, freehold condominium prices jumped by an impressive 64.7 per cent on average, while the average leasehold property price rose some 50 per cent.
When the property market here started to contract in mid-2008 due to the global financial crisis, freehold condominium prices fell 26.5 per cent year on year, just slightly more than 99-year leaseholds, which dropped by 23.8 per cent.
What this study shows is that if the upswing in the property market is bottom-up, leasehold condominiums could outperform freehold ones. Conversely, if the boom is top down, freehold condominiums would deliver superior results. However, this study also illustrates that the faster the rise, the harder the fall. So in a top-down property boom, owners of freehold condominiums who had enjoyed a sharper price appreciation should be nimble enough to lock in their gains before the downtrend sets in.
In comparing freehold and leasehold residential properties, there is no conclusive evidence to show that one is better than the other. Ultimately, the decision boils down to budget and preference.
The writer is a real estate lecturer at Ngee Ann Polytechnic
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
Pros and cons: If the upswing in the property market is bottom-up, leasehold condominiums could outperform freehold ones. Conversely, if the boom is top down, freehold condominiums would deliver superior results
Buying a home: freehold vs leasehold
NICHOLAS MAK examines how both tenures perform in rising and falling markets as well as in collective sales
THE question of whether to own freehold or leasehold property seems a perennial one, with pros and cons shifting with market cycles and new trends. Here, we examine the issue from the perspective of both a home owner and investor, and see how both tenures perform in rising and falling markets as well as in collective sales.
The chief attraction of 99-year leasehold property is that it is typically priced lower than a comparable freehold property. As a result, they are popular with HDB upgraders as entry-level private properties. Most mass-market homes are 99-year leasehold condominiums, with prices ranging from $500 per sq ft to $900 per sq ft. A typical family-size apartment could cost anything from $600,000 to $1.2 million.
For investors, leasehold properties usually offer a higher rental yield because of their lower capital cost. However, the higher yield merely compensates the owner for the decaying lease.
One of the more apparent disadvantages of owning a 99-year leasehold property is that the length of the lease is contracting daily. All else being equal, this would result in falling property value. However, certain external factors could slow the decline in value, such as if the property is sought after by tenants or buyers. This could be due to a prime location, improving infrastructure (such as a proposed MRT station nearby), or good amenities or popular schools in the vicinity.
When it comes to collective sales, there are usually fewer opportunities for them with 99-year homes. One reason is that many of them are still relatively new and in good condition. Thus, the owners do not feel any urgency to sell their homes collectively.
A more pertinent reason is that the premium payable to the government to top up a 99-year lease is quite high, based on the existing formula. And since developers factor the premium as part of the total land cost, the higher the premium the less the owner of the ageing leasehold would get in any collective sale.
As such, collective sales are not attractive to many owners of 99-year leasehold apartments unless the expense of maintaining their ageing properties are so high that a collective sale becomes the cheaper alternative.
A key benefit of owning freehold real estate is that the land value does not generally depreciate in the long term. Although all properties are subject to market fluctuations, the price of freehold land tends to be more stable than that of leasehold land over time. However, the value of a freehold property could still decrease over time due to the depreciating value of the ageing building. Over the long term, while the value of freehold land may increase or remain little changed, the value of the building would decline.
One factor that supports the value of freehold land in Singapore is its scarcity. Since all the land sold by the government is leasehold, the amount of freehold land would not increase. In fact, it might shrink over time if the government makes acquisitions of such land.
Another advantage of owning a freehold property is the potential of a windfall from a collective sale. If the value of the freehold land increases while the value of the ageing building declines, it could reach a stage where the redevelopment value of the property is worth more than the utility value of the existing building. As a result, the property owners may find a collective sale of their property to a developer to be highly profitable.
Some developers looking to acquire residential land for development may also prefer freehold land to ageing 99-year leasehold property because freehold land would not require the payment of a hefty premium for extending the lease.
For all these reasons, freehold residential properties are generally priced higher than 99-year leaseholds. The price range of freehold non-landed properties is also wider than that of comparable leasehold properties. Depending on the location, freehold property prices could vary from $600 psf to $4,000 psf or more. The majority of high-end residential properties are freehold.
For investors, one disadvantage of freehold property is the lower rental yield, a function of the higher cost of the property.
Also, while freehold properties have a higher likelihood of a collective sale than their leasehold counterparts, that can prove to be a double-edged sword. The property boom of 2005 to 2008 whipped up a collective sale frenzy. But some property owners who sold for a windfall found they could not get a replacement home in the same location from their proceeds. As the collective sale boom was powered by surging property prices, by the time en-bloc property sellers received their proceeds, the prices of comparable replacement homes would have moved out of reach.
Now, we look at the price performance of freehold and leasehold properties. Although freehold properties are usually priced higher than their leasehold counterparts, their rate of appreciation does not always outperform.
There were two property cycles between end-1998 and mid-2009. The first market boom, which started at end-1998 and ended in mid-2000, was a bottom-up price recovery. Demand started in the mass-market sector and moved up to the mid-tier and finally the high-end segment.
During this 18-month period, the average price of 99-year condominiums rose faster than that of freehold homes. The average price of freehold condominiums grew by 38.2 per cent, while the average price of 99-year leasehold condominiums surged by 46.2 per cent.
But on the way down, leasehold home prices also fell more steeply. On the downcycle between mid-2000 and the first half of 2004, the average price of leasehold condominiums fell 26.1 per cent, steeper than the freehold price decline of 17.6 per cent.
The most recent boom that lasted four years from mid-2004 to mid-2008 started with high-end property and gradually filtered down to the mass market.
Even when the mass-market sector started to pick up in 2007, the momentum in the high-end segment did not let up. As a result, freehold condominium prices jumped by an impressive 64.7 per cent on average, while the average leasehold property price rose some 50 per cent.
When the property market here started to contract in mid-2008 due to the global financial crisis, freehold condominium prices fell 26.5 per cent year on year, just slightly more than 99-year leaseholds, which dropped by 23.8 per cent.
What this study shows is that if the upswing in the property market is bottom-up, leasehold condominiums could outperform freehold ones. Conversely, if the boom is top down, freehold condominiums would deliver superior results. However, this study also illustrates that the faster the rise, the harder the fall. So in a top-down property boom, owners of freehold condominiums who had enjoyed a sharper price appreciation should be nimble enough to lock in their gains before the downtrend sets in.
In comparing freehold and leasehold residential properties, there is no conclusive evidence to show that one is better than the other. Ultimately, the decision boils down to budget and preference.
The writer is a real estate lecturer at Ngee Ann Polytechnic
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
Pros and cons: If the upswing in the property market is bottom-up, leasehold condominiums could outperform freehold ones. Conversely, if the boom is top down, freehold condominiums would deliver superior results
BT : $20m for upgrading Bukit Timah diversion canal: PUB
Business Times - 25 Nov 2009
$20m for upgrading Bukit Timah diversion canal: PUB
By FELDA CHAY
ABOUT $20 million will be spent on the first stage of widening and deepening the Bukit Timah diversion canal to prevent a repeat of last Thursday's floods, national water agency PUB said yesterday.
Upgrading works on the stretch of the canal running from Wilby Road to the junction of Sixth Avenue will start in the third quarter of next year and will be completed in two years.
PUB will also install a water level sensor next week to give early warning of rising water levels in the Bukit Timah Canal near Blackmore Drive, said the director of its catchment and waterways department Tan Nguan Sen. PUB will notify traffic police and nearby condominiums if the water rises 'above a certain level'.
A second phase of upgrading works is also on the cards to expand the remaining stretch of the canal. This phase is set to start in 2011. When completed, the width of the canal, now 11 metres on average, will be expanded to 26m. It will be able to hold about twice the amount of water it can carry now. The three kilometre canal, stretching from Sixth Avenue to Sungei Ulu Pandan, overflowed last Thursday. Floodwater was knee-high in some places, and underground carparks in three buildings were flooded.
PUB is also working with Holland-Bukit Timah GRC to encourage the management of condos such as Corona Ville, where the basement carpark was flooded, to build physical crests to prevent water flowing in.
Mr Tan said that the flooding was caused by 'heavy and intense' rainfall over the Bukit Timah area, with 110 millimetres of rain - equivalent to about 115 Olympic-size pools of water.
The canal was built in 1972 as part of the Bukit Timah Flood Alleviation Scheme - a government project to divert water away from Bukit Timah, a low-lying area with a history of flooding.
Upgrading the canal is part of long-term planning for the area and has been planned even before the recent flood, Mr Tan said. This is in anticipation of increased storm water run-off - caused by a drop in grass-covered areas as a result of new developments in the area over the next 10 to 15 years.
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
$20m for upgrading Bukit Timah diversion canal: PUB
By FELDA CHAY
ABOUT $20 million will be spent on the first stage of widening and deepening the Bukit Timah diversion canal to prevent a repeat of last Thursday's floods, national water agency PUB said yesterday.
Upgrading works on the stretch of the canal running from Wilby Road to the junction of Sixth Avenue will start in the third quarter of next year and will be completed in two years.
PUB will also install a water level sensor next week to give early warning of rising water levels in the Bukit Timah Canal near Blackmore Drive, said the director of its catchment and waterways department Tan Nguan Sen. PUB will notify traffic police and nearby condominiums if the water rises 'above a certain level'.
A second phase of upgrading works is also on the cards to expand the remaining stretch of the canal. This phase is set to start in 2011. When completed, the width of the canal, now 11 metres on average, will be expanded to 26m. It will be able to hold about twice the amount of water it can carry now. The three kilometre canal, stretching from Sixth Avenue to Sungei Ulu Pandan, overflowed last Thursday. Floodwater was knee-high in some places, and underground carparks in three buildings were flooded.
PUB is also working with Holland-Bukit Timah GRC to encourage the management of condos such as Corona Ville, where the basement carpark was flooded, to build physical crests to prevent water flowing in.
Mr Tan said that the flooding was caused by 'heavy and intense' rainfall over the Bukit Timah area, with 110 millimetres of rain - equivalent to about 115 Olympic-size pools of water.
The canal was built in 1972 as part of the Bukit Timah Flood Alleviation Scheme - a government project to divert water away from Bukit Timah, a low-lying area with a history of flooding.
Upgrading the canal is part of long-term planning for the area and has been planned even before the recent flood, Mr Tan said. This is in anticipation of increased storm water run-off - caused by a drop in grass-covered areas as a result of new developments in the area over the next 10 to 15 years.
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
BT : Kwek: Govt can play downpayment card
Business Times - 25 Nov 2009
Kwek: Govt can play downpayment card
But resurgence in speculative activity not likely in short term, says CDL boss
By KALPANA RASHIWALA
(SINGAPORE) Property tycoon Kwek Leng Beng feels that the authorities could raise the downpayment on the purchase of private homes if there is a risk of resurgence in speculative activity.
Currently, home buyers make a 5 per cent minimum cash downpayment.
'The downpayment payable . . . can be increased to reduce the amount of speculation. This amount can be increased further should the speculation go unabated,' Mr Kwek said this week in an e-mail response to BT's questions.
He had been asked what steps the government could potentially take if a speculative bubble builds up again, following a recent statement by the Monetary Authority of Singapore that the risk of renewed escalation of property speculation could not be discounted.
In the short term, however, Mr Kwek said he does not envisage a resurgence in speculative activity, noting that developers' sales have slowed for three consecutive months since peaking in July this year.
On Nov 9, the Monetary Authority of Singapore said further action to cool the property market may be needed if recent measures to dampen speculation prove insufficient. It said 'the risk of a renewed escalation of speculative momentum cannot be discounted' as Singapore emerges from recession and with the market expecting low interest rates to persist for some time.
'Going forward, price levels and transaction activity bear close monitoring,' it said.
Mr Kwek, who is executive chairman of City Developments Ltd (CDL), was generally more measured in his outlook on the Singapore private residential sector in his latest interview than he had been during CDL's half-year results briefing in August.
He now says the Singapore private residential market 'will slow down' following the MAS warning and reinstatement of the confirmed list next year. 'The integrated resorts (IRs) will not affect the real estate market immediately, unless the world economy recovers substantially when the IRs open, which is not likely.'
In August, Mr Kwek had sounded more optimistic about how the opening of the two IRs with casinos next year will provide a fillip to the Singapore property market, especially luxury homes, citing the experience in Macau.
The pronouncement from Singapore's de facto central bank this month on the possible risk of a revival of property speculation came just three days after the Ministry of National Development announced it will offer eight sites that can potentially generate 2,925 private homes (including exec condos) for sale under the confirmed list in H1 2010.
The quantum was bigger than what most developers had expected.
'I was rather surprised by the quantum of the confirmed list but I can understand the government's explanation for introducing the number of land parcels in the confirmed list,' Mr Kwek told BT this week.
In announcing the confirmed list, MND noted that the private residential market had seen 'very strong demand' from February to September, with developers selling about 12,800 units in the first nine months of this year, against just 4,300 units for the whole of 2008.
The government has also sought to assure market players that there is ample supply and that there is no need for buyers to rush their purchase decisions.
In September, the government scrapped interest-only housing loans and the interest absorption scheme, which some market watchers blamed for stoking speculation.
After last year's global financial crash, developers began to enjoy a revival in home sales starting in February, peaking at 2,772 units in July. Sales have since slowed, easing to 811 units in October.
Mr Kwek also said the Singapore hotel market will improve in 2010. 'But by how much and how quickly will depend on the initial success of the IRs . . . The hospitality industry will be directly affected - either adversely or favourably - by the IRs,' he added.
CDL owns 54 per cent of Millennium & Copthorne Hotels plc, which in turn has a stake in CDL Hospitality Trusts - the biggest owner of hotels here.
Whne the economy recovers, the Singapore office market will rebound in tandem as business picks up in the various sectors, Mr Kwek said. Already, the decline in office rentals is moderating and the sector is seeing an increase in leasing activity and requests for proposals from occupiers, many of which are likely to firm up in the near future.
When asked if financial industry players in the West are likely to resume their pre-crash strategy of developing hubs in Singapore, Mr Kwek said: 'They have to address their own problems first and put their institutions on sound footing before they start to relocate and to expand.
'They cannot ignore the Asia-Pacific region, and I believe they also can't ignore Singapore, which has built up equity in its brand,' Mr Kwek said.
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
Mr Kwek: Market will slow down after MAS's warning and reinstatement of the confirmed list next year
Kwek: Govt can play downpayment card
But resurgence in speculative activity not likely in short term, says CDL boss
By KALPANA RASHIWALA
(SINGAPORE) Property tycoon Kwek Leng Beng feels that the authorities could raise the downpayment on the purchase of private homes if there is a risk of resurgence in speculative activity.
Currently, home buyers make a 5 per cent minimum cash downpayment.
'The downpayment payable . . . can be increased to reduce the amount of speculation. This amount can be increased further should the speculation go unabated,' Mr Kwek said this week in an e-mail response to BT's questions.
He had been asked what steps the government could potentially take if a speculative bubble builds up again, following a recent statement by the Monetary Authority of Singapore that the risk of renewed escalation of property speculation could not be discounted.
In the short term, however, Mr Kwek said he does not envisage a resurgence in speculative activity, noting that developers' sales have slowed for three consecutive months since peaking in July this year.
On Nov 9, the Monetary Authority of Singapore said further action to cool the property market may be needed if recent measures to dampen speculation prove insufficient. It said 'the risk of a renewed escalation of speculative momentum cannot be discounted' as Singapore emerges from recession and with the market expecting low interest rates to persist for some time.
'Going forward, price levels and transaction activity bear close monitoring,' it said.
Mr Kwek, who is executive chairman of City Developments Ltd (CDL), was generally more measured in his outlook on the Singapore private residential sector in his latest interview than he had been during CDL's half-year results briefing in August.
He now says the Singapore private residential market 'will slow down' following the MAS warning and reinstatement of the confirmed list next year. 'The integrated resorts (IRs) will not affect the real estate market immediately, unless the world economy recovers substantially when the IRs open, which is not likely.'
In August, Mr Kwek had sounded more optimistic about how the opening of the two IRs with casinos next year will provide a fillip to the Singapore property market, especially luxury homes, citing the experience in Macau.
The pronouncement from Singapore's de facto central bank this month on the possible risk of a revival of property speculation came just three days after the Ministry of National Development announced it will offer eight sites that can potentially generate 2,925 private homes (including exec condos) for sale under the confirmed list in H1 2010.
The quantum was bigger than what most developers had expected.
'I was rather surprised by the quantum of the confirmed list but I can understand the government's explanation for introducing the number of land parcels in the confirmed list,' Mr Kwek told BT this week.
In announcing the confirmed list, MND noted that the private residential market had seen 'very strong demand' from February to September, with developers selling about 12,800 units in the first nine months of this year, against just 4,300 units for the whole of 2008.
The government has also sought to assure market players that there is ample supply and that there is no need for buyers to rush their purchase decisions.
In September, the government scrapped interest-only housing loans and the interest absorption scheme, which some market watchers blamed for stoking speculation.
After last year's global financial crash, developers began to enjoy a revival in home sales starting in February, peaking at 2,772 units in July. Sales have since slowed, easing to 811 units in October.
Mr Kwek also said the Singapore hotel market will improve in 2010. 'But by how much and how quickly will depend on the initial success of the IRs . . . The hospitality industry will be directly affected - either adversely or favourably - by the IRs,' he added.
CDL owns 54 per cent of Millennium & Copthorne Hotels plc, which in turn has a stake in CDL Hospitality Trusts - the biggest owner of hotels here.
Whne the economy recovers, the Singapore office market will rebound in tandem as business picks up in the various sectors, Mr Kwek said. Already, the decline in office rentals is moderating and the sector is seeing an increase in leasing activity and requests for proposals from occupiers, many of which are likely to firm up in the near future.
When asked if financial industry players in the West are likely to resume their pre-crash strategy of developing hubs in Singapore, Mr Kwek said: 'They have to address their own problems first and put their institutions on sound footing before they start to relocate and to expand.
'They cannot ignore the Asia-Pacific region, and I believe they also can't ignore Singapore, which has built up equity in its brand,' Mr Kwek said.
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
Mr Kwek: Market will slow down after MAS's warning and reinstatement of the confirmed list next year
BT : CapitaLand raises $2.8b from CapitaMalls Asia IPO
Business Times - 25 Nov 2009
CapitaLand raises $2.8b from CapitaMalls Asia IPO
By UMA SHANKARI
(SINGAPORE) Property group CapitaLand said that it raised $2.8 billion by selling 34.5 per cent of its retail arm CapitaMalls Asia (CMA) in its initial public offering (IPO).
Both the placement and retail shares were oversubscribed, and the company also released all over-allotment shares. In total, 1.34 billion shares were sold at $2.12 apiece.
The listing of CMA - which has a $20.3 billion portfolio of 86 malls in Singapore, China, Malaysia, Japan and India - is Singapore's biggest IPO since Singapore Telecommunications raised more than $4 billion in 1993.
Analysts expect CMA shares to gain today on their debut, fuelled by demand from institutional investors keen to gain exposure to China's fast-growing consumer market. More than half of CMA's malls are in China.
In a note, DMG & Partners analysts Brandon Lee and Jonathan Ng gave a valuation range of $2.42- $3.01 for CMA's shares. This is between 14 and 42 per cent above the IPO price of $2.12.
CapitaLand had earlier set an indicative range of $1.98 to $2.39 for the IPO, but later decided to price it below the mid-point of the range - a move that analysts said was to ensure that the stock trades well after it debuts.
CapitaLand yesterday reported demand of about 2.5 times for the placement tranche of 1.059 billion shares. An additional 174.8 million shares were over-allotted due to strong demand from investors.
Also, the public offer (excluding reserved shares) of 95 million shares was 4.9 times subscribed. In addition, all of the 11.7 million shares reserved for the directors, management, employees and business associates of the group were also taken up.
'Upon completion of the IPO and assuming the full exercise of the over-allotment option, CapitaLand's shareholding interest in CapitaMalls Asia will be reduced from 100 per cent to 65.5 per cent, and the IPO would have raised approximately $2.8 billion,' CapitaLand said.
CMA chief executive Lim Beng Chee said that the company is well-positioned to ride on strong consumerism trends in Asia and will continue to grow its business in the region, with an initial focus on China and Singapore.
CMA marks the sixth entity within the CapitaLand group to be listed on the Singapore Exchange. CapitaLand has previously said that it could record a one-time gain of $883 million from this IPO.
Part of the proceeds will be paid out as a special dividend to the group's shareholders. The company will also use some of its proceeds to invest in its residential and service residence business units. In particular, CapitaLand is looking at Singapore, China, Australia and Vietnam for growth for the overall group.
CapitaLand's shares lost four cents to close at $4.11 yesterday.
CapitaLand raises $2.8b from CapitaMalls Asia IPO
By UMA SHANKARI
(SINGAPORE) Property group CapitaLand said that it raised $2.8 billion by selling 34.5 per cent of its retail arm CapitaMalls Asia (CMA) in its initial public offering (IPO).
Both the placement and retail shares were oversubscribed, and the company also released all over-allotment shares. In total, 1.34 billion shares were sold at $2.12 apiece.
The listing of CMA - which has a $20.3 billion portfolio of 86 malls in Singapore, China, Malaysia, Japan and India - is Singapore's biggest IPO since Singapore Telecommunications raised more than $4 billion in 1993.
Analysts expect CMA shares to gain today on their debut, fuelled by demand from institutional investors keen to gain exposure to China's fast-growing consumer market. More than half of CMA's malls are in China.
In a note, DMG & Partners analysts Brandon Lee and Jonathan Ng gave a valuation range of $2.42- $3.01 for CMA's shares. This is between 14 and 42 per cent above the IPO price of $2.12.
CapitaLand had earlier set an indicative range of $1.98 to $2.39 for the IPO, but later decided to price it below the mid-point of the range - a move that analysts said was to ensure that the stock trades well after it debuts.
CapitaLand yesterday reported demand of about 2.5 times for the placement tranche of 1.059 billion shares. An additional 174.8 million shares were over-allotted due to strong demand from investors.
Also, the public offer (excluding reserved shares) of 95 million shares was 4.9 times subscribed. In addition, all of the 11.7 million shares reserved for the directors, management, employees and business associates of the group were also taken up.
'Upon completion of the IPO and assuming the full exercise of the over-allotment option, CapitaLand's shareholding interest in CapitaMalls Asia will be reduced from 100 per cent to 65.5 per cent, and the IPO would have raised approximately $2.8 billion,' CapitaLand said.
CMA chief executive Lim Beng Chee said that the company is well-positioned to ride on strong consumerism trends in Asia and will continue to grow its business in the region, with an initial focus on China and Singapore.
CMA marks the sixth entity within the CapitaLand group to be listed on the Singapore Exchange. CapitaLand has previously said that it could record a one-time gain of $883 million from this IPO.
Part of the proceeds will be paid out as a special dividend to the group's shareholders. The company will also use some of its proceeds to invest in its residential and service residence business units. In particular, CapitaLand is looking at Singapore, China, Australia and Vietnam for growth for the overall group.
CapitaLand's shares lost four cents to close at $4.11 yesterday.
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