ST : HK chief addresses housing concerns

Oct 14, 2010

HK chief addresses housing concerns

Govt to release more land, curb property investment immigration

HONG KONG: The city will suspend a permanent residency scheme for wealthy investors and build more flats, as part of new measures to cool its overheating property sector and appease public anger.

In his annual policy address laying out Hong Kong's policy blueprint for the coming year, Chief Executive Donald Tsang said he was responding to public concern about the residential housing shortage and skyrocketing prices.

'Housing is currently the greatest concern of our people,' he said. 'Many find it unnerving that property prices have kept rising and years of hard-earned savings cannot even cover a down payment.'

To increase supply, the government will release land for about 20,000 more private flats annually over the coming decade, while about 61,000 private residential units will be added over the next three to four years.

Mr Tsang also announced plans to build residential property on the site of the city's old airport, Kai Tak, which was closed down in 1998. The prime site at Victoria Harbour remains undeveloped as the government cleans up heavy aviation pollution.

Property prices here have risen 15 per cent since the beginning of the year, after rising by a third last year. The increase is mainly fuelled by low interest rates and purchases by wealthy mainland Chinese facing policy tightening at home.

Some investors, such as those from the Chinese mainland, bought apartments in Hong Kong to take part in a scheme allowing them to obtain permanent residency if they invest at least HK$6.5 million (S$1.1 million) in real estate or specified financial assets. Since the introduction of the Capital Investment Scheme in October 2003, a total of HK$52.9 billion has been invested in the city, with a third of that going into property, Citigroup said in a report.

Mr Tsang said the government would adopt a temporary amendment to the scheme, which takes effect from today.

The speech sent share prices of major property developers plunging before the sector recovered much of its lost ground. Sun Hung Kai Properties dropped 0.59 per cent and Sino Land fell 0.12 per cent.

Mr Simon Smith, head of research at consultancy Savills Valuation and Professional Services, said: 'The new policy measures are fairly conservative... It is the government's intention to gently head off the bubble; it is not easy to do.'

Mr Tsang also said yesterday that Hong Kong's economy is expected to grow 5 to 6 per cent this year as it completes its recovery from the global financial crisis.

Noting the city's rich-poor gap, he said his administration will set up a HK$10 billion 'Community Care Fund' to provide assistance in areas not covered by the existing welfare system. He will raise half of the fund from the business community.

Critics said, however, that the proposals do not address poverty and property prices systematically. Opposition legislator Lee Cheuk-yan said the new charity fund is too ad hoc, urging Mr Tsang to launch a tax credit for the poor and a government-run pension instead.

Public anger was on display outside as Mr Tsang spoke inside the British colonial era Legislative Council building.

'With property prices soaring to new heights, the poorer sections of society have no hopes of buying their own apartments,' protester Penny Keung said.

Poor air quality, which is another frequent complaint of residents, was also addressed in Mr Tsang's speech. He said he aims to cut the city's greenhouse gas emissions by up to 33 per cent by 2020 with a shift from fossil fuels to nuclear energy, but environmentalists warned about the dangers of nuclear waste.

AGENCE FRANCE-PRESSE, REUTERS

ST : Woman loses battle to save her property firm

Oct 14, 2010

Woman loses battle to save her property firm

Court orders winding up of debt-ridden Consult Asia

By K.C. Vijayan

A BUSINESSWOMAN here has failed to stop her debt-ridden firm, property developer Consult Asia, from being wound up.

High Court Judge Lai Siu Chiu, who ordered the winding up of Ms Florence Koh's firm, has approved the appointment of FTI Consulting as liquidators for Consult Asia.

FTI will move in to search and recover assets the firm may have, in order to settle its debts.

Ms Koh, 46, a former lawyer, has been battling for the last five months to keep a grip on her firm, which began in 1993 as a management consultancy and went on to become a developer. She had owned all but one of the firm's one million shares.

In December 2006, she approached DB Trustee (Hong Kong), a Hong Kong-based subsidiary of Deutsche Bank, to underwrite a loan of $54.6 million.

To secure the loan, she pledged Consult Asia's assets to DB as collateral.

When Consult Asia started defaulting on the loan in August 2008, DB Trustee sought repayment.

Receivers moved in that month, seizing two of the firm's key properties and selling them, retrieving $40.8 million.

One property was a refurbished conservation house with a six-storey extension in Balestier Road; the other was a plot of land at the junction of Still and Changi roads, which had been earmarked for development into a mall-cum-residence.

With $40.8 million in returns from the sale, DB Trustee was still owed some $26 million as of July, said court documents.

This outstanding sum led to Monday's move to wind up the firm.

The firm, through its lawyer Nicholas Narayanan, objected to the High Court move to liquidate it on the grounds that the two properties had been sold at less than what they were worth; Mr Narayanan said a valuation report estimated that they could have fetched about $75 million, which would have cleared its debts and forestalled the liquidation.

To Consult Asia's making a claim against DB Trustee for the undervaluation, DB's lawyers countered that Consult Asia should have sued the receivers and managers appointed to handle the sale if they were unhappy.

For Ms Koh, the court order is her third setback in five months. In July, she was ordered to pay a $20,000 fine for being in contempt of court; she had repeatedly failed to hand over records sought by receivers and managers. Two months before that, she was ordered to personally bear legal costs for two cases she lost in the Court of Appeal involving the firm.

vijayan@sph.com.sg

ST : Paramount Hotel site up for sale again

Oct 14, 2010

Paramount Hotel site up for sale again

By Joyce Teo



THE freehold site occupied by Paramount Hotel and Paramount Shopping Centre is up for collective sale with the same asking price as that three years ago - $200 million.

Located near the popular Parkway Parade mall in the east, the plot boasts frontage along both Marine Parade and East Coast roads.

The ageing 229-room hotel and 95 shops that the land currently hosts are housed in a four-storey podium and an eight-storey tower block.

Marketing agent Jones Lang LaSalle said the 102,685 sq ft site - which the owners unsuccessfully tried to sell in 2007 - has a gross plot ratio of up to 3.0 and an indicative price of $200 million.

The firm said the land currently zoned for hotel use could be redeveloped into a hotel-cum-retail development, with a gross floor area of up to 308,056 sq ft and up to 460 hotel rooms.

Jones Lang LaSalle's national director and head of commercial investments, Ms Quek Soh Hoon, said the site - located in an established residential area - can be converted to residential use, albeit at a lower gross plot ratio of 2.1.

She said it could take a high-rise tower with 205 residential apartments, assuming a unit size of 1,000 sq ft.

Assuming 60 per cent of the site is redeveloped into a hotel with the rest earmarked for commercial use, the vendors' asking price for the land parcel would work out to $691 per sq ft (psf) per plot ratio.

This is inclusive of a development charge of about $12.8 million.

But if a potential buyer wants to build a condominium on the site, the asking price would work out to $1,113 psf, inclusive of a higher development charge of $40 million, said Ms Quek.

In this case, condo units may have to be sold at $1,900 to $2,000 psf - a new benchmark level for the area.

Singapore-based YTC Corporation owns Paramount Hotel as well as a few shop units, while the other shops are owned by different individuals.

YTC also owns Peninsula Excelsior Hotel in Coleman Street.

The tender closes on Nov 23.

ST : HDB flats - a plump investment option

Oct 14, 2010

HDB flats - a plump investment option

No surprise, given their great locations and high rental yields

By Dennis Chan

LAST week's news of an HUDC flat in Bishan changing hands at $1.1 million has ignited fresh discussion on public housing among keen property watchers.

Should a 24-year-old public flat on a 99-year lease be worth so much?

To be fair, it is a misnomer to equate the record-setting Shunfu Road flat at Block 315 with public housing - although technically, it is correct.

HUDC estates are an anachronism from the 1970s, a hybrid housing type to meet the needs of middle-income Singaporeans who did not qualify for Housing Board (HDB) flats but could not afford private property. Only 18 such estates were built before the HUDC programme was stopped in 1987 due to falling demand.

Since then, all HUDC estates, with the exception of Braddell View, have been privatised or earmarked for privatisation.

This explains the $1.1 million price tag for the 1,668 sq foot apartment, which works out to $659 per sq foot (psf). The Shunfu HUDC estate is in the midst of being privatised, explaining the high price. The value of an HUDC flat usually rises when the estate is privatised and ownership restrictions are lifted. Some estates also gate up their grounds and build a clubhouse and swimming pool, increasing the value to buyers.

The price paid is reasonable for a private apartment in District 20, a short walk to the Marymount MRT station.

But for a true reflection of the value of an HDB flat, you have to look at HDB transactions in that area.

A bigger HDB executive maisonette at Block 301, even closer to the MRT station, fetched $760,000 or $447 psf.

These two Shunfu transactions, registered last month, were likely inked around July - before the Government's Aug 30 measures to cool the property market. Since then, HDB estimates that transaction volumes last month have fallen by a quarter compared with the previous month.

Under these circumstances, we are unlikely to see an HDB flat cross the psychological threshold of $1 million soon. The record of $900,000 for a penthouse maisonette in Bishan Street 24 transacted in July should remain safe for a while.

In fact, some property analysts are predicting a slide in HDB prices, following the tightening of credit and changes in rules making it harder for private property owners to buy an HDB resale flat.

Based on lower upfront cash demanded by sellers, ERA Asia-Pacific associate director Eugene Lim estimated prices have softened by 5 per cent.

While the recent cooling measures may dampen prices for a while, market fundamentals will take over. So long as the economy hums along and the population continues to grow, prices of HDB flats will remain firm, as they are good investment options with high rental yield.

Take a three-room flat in Toa Payoh. Based on HDB data, the median price is $300,000 while the median rent is $1,550 a month. This works out to a rental yield of 6.2 per cent. And if the Toa Payoh flat price were to fall by 10 per cent, the yield will rise to almost 7 per cent.

Consider that banks pay a measly 0.125 per cent for deposits, and that home financing costs hover at 1.5 per cent to 2.6 per cent interest - and it seems almost a no-brainer to buy an HDB flat, fulfil the requisite minimum occupation period (now five years) and then let it out.

There is a simple reason why HDB flats attract such good yield.

They tend to be well located, with many within walking distance of MRT stations, and with an abundance of amenities such as schools, markets and eating outlets nearby. Buyers also have the confidence that even an ageing HDB estate will be well maintained.

Moreover, HDB flat prices are, in a sense, artificially depressed because of ownership restrictions. Buyers must stay in a flat for five years. Only citizens and permanent residents are eligible to buy HDB flats.

HDB flats thus exchange hands at prices lower than what they could fetch if those ownership restrictions were lifted.

In contrast, rental rates for HDB flats reflect the full market value of their excellent location and surrounding amenities, which is why HDB flats, on a psf basis, can be rented out for as much if not more than private condos in far-flung estates.

When rental rates are high while sale prices are depressed, the rental yield becomes more attractive.

The Government's commitment to public housing and its constant injection of funds to spruce up HDB estates, means an HDB flat here has enormous stored value, unlike public housing elsewhere.

It was baffling to hear some analysts advising owners to sell their flats, on the premise that prices have peaked, with little upside expected.

Between selling an HDB flat for capital gain and keeping it for long-term rental income, I would plump for the latter.

So what if someone offers you $50,000 more than what your flat is worth today? You can make back that same amount by letting it out for less than three years, if you take the example of the three-room Toa Payoh flat above.

Just how much stored value there is in HDB estates can be estimated by looking at the Pinnacle@Duxton development in Tanjong Pagar. A recent classified advertisement had an asking rent of $4,500 a month for a five-room unit. The eventual rental may be a tad lower, but the asking price is indicative of the attractiveness of HDB flats in prime locations.

The Pinnacle, with its excellent location and ground-breaking architecture, sold at an average price of $335,000 for four-room flats and $395,000 for five-room flats at its 2004 initial launch. Leftover flats were sold at average prices of $486,000 and $590,000 respectively last year. The priciest was a 49th-storey unit sold at $645,800.

Pinnacle flats should be available on the resale market from end-2014 when the five-year minimum occupation period is up. If there is one HDB development that can breach the $1 million mark, the Pinnacle is it.

And remember, you read it here first.

dennis@sph.com.sg