Business Times - 05 Jun 2010
PERSONAL SPACE
Room to grow
Ditching the dark, sophisticated look favoured by young professionals, the Ongs have made their family home modern, fuss-free andfamily-oriented. By Corinne Kerk
IT was late 2009 and the property market, after a brief slump, was making a rather quick and unexpected recovery. Like many other buyers, Eileen Wee and her husband, Vincent Ong, were caught unawares. Twice, they missed out on paying the deposit for a property because in both cases, they were just 30 minutes too late when trying to hand in their cheques. 'People were going for viewings with their cheque books,' Ms Wee remembers of what she now calls those 'close shaves'.
But as it turns out, that wasn't such a bad thing after all. Because eventually, the couple were led to an intermediate terrace house off Upper Thomson Road which held a lot of promise.
Like other intermediate terraces, there wasn't enough light coming into the three-storey, 3,600 sq ft home, which sits on 2,000 sq ft of land. However, the space was a nice, supersize upgrade from their previous home - a 1,000 sq ft, 2+1 apartment - and large enough to house three generations of family members - the couple, their two-year-old daughter, Kayla, Eileen's mother and Vincent's father. Plus, it would give Vincent what he'd always wanted - his own piece of land.
So they bought the property and set about turning it into a home.
First to go were the dark floor tiles and blue walls, which were ditched in favour of creamy white tiles and walls. Even the furniture and furnishings were in white, to enhance the sense of light and brightness in the house.
'Some people say the colour scheme of mainly white and a bit of black, is too stark or boring, but you can always add accents like colourful paintings,' says Ms Wee, a director in a boutique public relations and events company. Examples in her home include a dash of bright orange in the form of see-through plastic stools, as well as splashes of colour from paintings on the walls.
Next, several walls came tumbling down. There's the one separating the wet and dry kitchens, so more light can filter into the dining area. Another stood between a second floor bedroom and a corridor. Glass was used as a replacement, to help bring more sunshine into the home. 'The idea is to create space, bring in as much natural light and make it as clean-looking and airy as possible,' explains Vincent, a general manager in a multi-national company.
What they - and most guests - really like about the house though, is the double volume ceiling at the front half of the building, which gives it a 'loft feel' and allows for greater connectivity. 'So while we have our personal space, we can also see what's going on downstairs, even if we're on the second floor,' he says.
The high ceiling and windows also allow an almost unobstructed view from the second floor, of the trees that lead to Upper Peirce Reservoir. To light up the space, they picked a pair of Coral hanging lamps in natural bamboo plywood from Air Division, designed by New Zealander, David Trubridge.
'The lamps cast an interesting pattern on the walls at night,' adds Ms Wee. Only trouble is, owing to the height of the ceiling, they haven't yet figured out the best way to change the bulbs when they eventually blow. 'We'll probably need a super tall ladder!' she laughs.
While those lamps were chosen for their aesthetic effects, a practical must-have for the family is the dry kitchen with a good-sized island counter. 'My father-in-law likes to cook,' explains Ms Wee, who admits she's not so handy in the kitchen herself. 'The island is also the focal point for us when our church friends come over for meals. We have large groups of 40 to 50 people and we lay the food out on the counter and everyone gathers around.'
Another essential is her home office, which was created by knocking down a wall between a second-floor bedroom and what was a small, windowless study. The work area is now large, bright and airy, with light coming from windows at both ends of the room.
Ms Wee's favourite part of the house though, is the spacious living room, because 'after a long day, it's nice to come home and see Kayla playing there, jumping up and down'. 'The home has to have a feel-good factor for us, especially since we travel quite a bit,' she says. 'The layout is practical and everything is functional, from the kitchens to the walk-in wardrobe where we each have our own space.'
However, the house, into which they moved in January, is still a work in progress. 'If time permits, I want to get a lounge chair for my home office, put up a big mirror on the dining room wall, do up the balcony outside the master bedroom and buy more paintings, chairs and lights.'
What the couple learnt from renovating their previous home - which was 'pretty dark' and where the air-conditioner was constantly switched on - also guided them as they worked on this one. 'Then, we were typical of young professionals who wanted a dark, sophisticated look,' says Ms Wee. 'But this house is family-oriented. It is modern and fuss-free because we don't want clutter, and everyone has their own space. There are three generations here and we can live harmoniously together.'
And that, surely, makes having missed out on the first two properties a blessing in disguise.
btnews@sph.com.sg
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Saturday, June 5, 2010
BT : Markets down, opportunities up
Business Times - 05 Jun 2010
SHOW ME THE MONEY
Markets down, opportunities up
Real estate is beginning to offer attractive value for investors looking to buy, according to Citi
By TEH HOOI LING
SENIOR CORRESPONDENT
EXCESS liquidity, once so ample, has now decelerated to a point that we are witnessing a slight contraction, according to Citi's equity strategists Markus Rosgen and Elaine Chu in their recent corporate securities strategy report.
Stock prices tend to rise or fall in tandem with liquidity in the system.
According to Citi, there remains a risk that we have not seen the end of the excess liquidity contraction. But markets have had a tendency to respond ahead of a resumption of excess liquidity growth. As soon as it is no longer getting worse, i.e. the rate of liquidity contraction slows, markets will respond positively.
Purely on the basis of extrapolating the data, Mr Rosgen and Ms Chu reckon that this should be occurring late summer or early in the fourth quarter.
Periods of liquidity contraction are usually followed by expansion. And typically, contraction periods are shorter than expansionary periods. On average, liquidity contractions have lasted for 6.3 months. The longest cycle was 13 months in late 1994/95. The shortest was two months, in May and June 1989. March this year was the first month when a negative liquidity growth was registered.
I tried to look at the data slightly differently for the Singapore market. I compared the latest month's M2 money supply to the average M2 levels of the three months prior.
M2 includes currency in active circulation, demand deposits, fixed deposits, negotiable certificate of deposits, savings and other deposits.
The change in M2 relative to the average of the prior three months is also a good indicator of the market.
From the chart, you can see that indeed such a measurement of money supply does provide a good indication of where the market is heading. In the last 18 years, the biggest spike in M2 relative to its levels in the prior three months took place in November 1998. The stock market bottomed in August that year. Still, had one gone into the market in December, one would still be able to make 56 per cent return in the following six months.
Back in 1998, M2 had continued to surge in the following two months, in December 1998 and January 1999.
During the months when M2 contracted, the stock market too retreated. Unfortunately, from the chart, it appears that the change in M2 relative to its three months average generally is more a coincident indicator rather than a leading indicator.
In any case, the interesting thing to note is that in Singapore, the M2 has not seen a drop relative to its prior three months' average since February 2006.
This is an indication of sustained inflow of funds into the Singapore economy. It suggests that people are parking their funds here, getting ready to invest, either in Singapore or elsewhere in the region given the relatively stronger economic prospects. It is also a sign that the market is confident of the strength of the Singapore dollar.
Even in the last few months, when global markets are gripped by jitters, money continued to flow into the Singapore banking system. M2 grew by 9.8 per cent, 8.8 per cent, and 9.0 per cent from a year ago in February, March and April. The May numbers are not out yet.
But admittedly, the expansion rate has slowed slightly compared with the 10 and 11 per cent range chalked up in November 2009 to January 2010.
Still, the growth over the previous three months' average of 2.2 per cent, 0.9 per cent, 1.9 per cent, and 1.2 per cent in the first four months of this year remain decent.
What is it is that, when markets go down, opportunities go up. 'It is easier for realistically priced markets to rise than the other way round,' said Mr Rosgen and Ms Chu.
'Over the last few months, many things have begun to fall in place. Valuations have retreated from above average to below average, expectations from excessive towards the much more realistic. The US dollar, from being viewed as passe, to being now actually stronger. And liquidity, once so ample, has now actually contracted.'
Asian markets, excluding Japan, are now trading at 1.8 times book value, down from 2.2 times. As a region, valuations have moved from above average to just below average. And they are now where they should be at this stage of recovery, instead of being well ahead prior to the recent correction.
In terms of price-earnings ratio, the region is trading at 17.4 times on a trailing basis. This corresponds with valuations in between year one and year two of previous market recoveries.
Meanwhile, given the strong run-up in the US dollar, its further ascent will be more moderate. In this case, the deflationary pressure in the region will be lessened. This bodes well for the markets, according to Citi.
So what should investors buy?
Real estate either on a price-to-book value or enterprise value/sales bases is beginning to offer attractive value, said Mr Rosgen and Ms Chu. According to them, on both metrics, the sector has only been cheaper three times previously: in the early 1990s, the Asian crisis, and then in 2001. On an EV/sales basis, the sector has gone from expensive to cheap. 'Yes, it has been cheaper, but the risk/reward suggests that one should be slowly adding to this sector.'
Citi's credit research has this to say about China's real estate sector: 'We argue that Chinese property developers faced more challenges back then in October 2008 than what they are facing now, in terms of GDP growth trend, balance sheet liquidity, refinancing pressure, and access to capital markets, albeit policy is probably harsher now.'
In terms of ownership, the real estate has gone from being hot favourite on the back of further US dollar and reflation to now being a consensus underweight. 'The combination of being an underweight and having value makes the idea of beginning to dip one's feet in the water all the more alluring.'
But there remains risks: further tightening beyond the forecasts set by Citi's China team, further downward revisions to earnings and for the real estate sector, the net asset value. Lastly, valuations for China's stock markets, although more attractive now, have not triggered a buy yet.
· The writer is a CFA charterholder
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
UNDERWEIGHT SECTOR
Citi argues that Chinese property developers faced more challenges back in October 2008 than what they are facing now
SHOW ME THE MONEY
Markets down, opportunities up
Real estate is beginning to offer attractive value for investors looking to buy, according to Citi
By TEH HOOI LING
SENIOR CORRESPONDENT
EXCESS liquidity, once so ample, has now decelerated to a point that we are witnessing a slight contraction, according to Citi's equity strategists Markus Rosgen and Elaine Chu in their recent corporate securities strategy report.
Stock prices tend to rise or fall in tandem with liquidity in the system.
According to Citi, there remains a risk that we have not seen the end of the excess liquidity contraction. But markets have had a tendency to respond ahead of a resumption of excess liquidity growth. As soon as it is no longer getting worse, i.e. the rate of liquidity contraction slows, markets will respond positively.
Purely on the basis of extrapolating the data, Mr Rosgen and Ms Chu reckon that this should be occurring late summer or early in the fourth quarter.
Periods of liquidity contraction are usually followed by expansion. And typically, contraction periods are shorter than expansionary periods. On average, liquidity contractions have lasted for 6.3 months. The longest cycle was 13 months in late 1994/95. The shortest was two months, in May and June 1989. March this year was the first month when a negative liquidity growth was registered.
I tried to look at the data slightly differently for the Singapore market. I compared the latest month's M2 money supply to the average M2 levels of the three months prior.
M2 includes currency in active circulation, demand deposits, fixed deposits, negotiable certificate of deposits, savings and other deposits.
The change in M2 relative to the average of the prior three months is also a good indicator of the market.
From the chart, you can see that indeed such a measurement of money supply does provide a good indication of where the market is heading. In the last 18 years, the biggest spike in M2 relative to its levels in the prior three months took place in November 1998. The stock market bottomed in August that year. Still, had one gone into the market in December, one would still be able to make 56 per cent return in the following six months.
Back in 1998, M2 had continued to surge in the following two months, in December 1998 and January 1999.
During the months when M2 contracted, the stock market too retreated. Unfortunately, from the chart, it appears that the change in M2 relative to its three months average generally is more a coincident indicator rather than a leading indicator.
In any case, the interesting thing to note is that in Singapore, the M2 has not seen a drop relative to its prior three months' average since February 2006.
This is an indication of sustained inflow of funds into the Singapore economy. It suggests that people are parking their funds here, getting ready to invest, either in Singapore or elsewhere in the region given the relatively stronger economic prospects. It is also a sign that the market is confident of the strength of the Singapore dollar.
Even in the last few months, when global markets are gripped by jitters, money continued to flow into the Singapore banking system. M2 grew by 9.8 per cent, 8.8 per cent, and 9.0 per cent from a year ago in February, March and April. The May numbers are not out yet.
But admittedly, the expansion rate has slowed slightly compared with the 10 and 11 per cent range chalked up in November 2009 to January 2010.
Still, the growth over the previous three months' average of 2.2 per cent, 0.9 per cent, 1.9 per cent, and 1.2 per cent in the first four months of this year remain decent.
What is it is that, when markets go down, opportunities go up. 'It is easier for realistically priced markets to rise than the other way round,' said Mr Rosgen and Ms Chu.
'Over the last few months, many things have begun to fall in place. Valuations have retreated from above average to below average, expectations from excessive towards the much more realistic. The US dollar, from being viewed as passe, to being now actually stronger. And liquidity, once so ample, has now actually contracted.'
Asian markets, excluding Japan, are now trading at 1.8 times book value, down from 2.2 times. As a region, valuations have moved from above average to just below average. And they are now where they should be at this stage of recovery, instead of being well ahead prior to the recent correction.
In terms of price-earnings ratio, the region is trading at 17.4 times on a trailing basis. This corresponds with valuations in between year one and year two of previous market recoveries.
Meanwhile, given the strong run-up in the US dollar, its further ascent will be more moderate. In this case, the deflationary pressure in the region will be lessened. This bodes well for the markets, according to Citi.
So what should investors buy?
Real estate either on a price-to-book value or enterprise value/sales bases is beginning to offer attractive value, said Mr Rosgen and Ms Chu. According to them, on both metrics, the sector has only been cheaper three times previously: in the early 1990s, the Asian crisis, and then in 2001. On an EV/sales basis, the sector has gone from expensive to cheap. 'Yes, it has been cheaper, but the risk/reward suggests that one should be slowly adding to this sector.'
Citi's credit research has this to say about China's real estate sector: 'We argue that Chinese property developers faced more challenges back then in October 2008 than what they are facing now, in terms of GDP growth trend, balance sheet liquidity, refinancing pressure, and access to capital markets, albeit policy is probably harsher now.'
In terms of ownership, the real estate has gone from being hot favourite on the back of further US dollar and reflation to now being a consensus underweight. 'The combination of being an underweight and having value makes the idea of beginning to dip one's feet in the water all the more alluring.'
But there remains risks: further tightening beyond the forecasts set by Citi's China team, further downward revisions to earnings and for the real estate sector, the net asset value. Lastly, valuations for China's stock markets, although more attractive now, have not triggered a buy yet.
· The writer is a CFA charterholder
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
UNDERWEIGHT SECTOR
Citi argues that Chinese property developers faced more challenges back in October 2008 than what they are facing now
BT : E&O launches Penang condo in S'pore
Business Times - 05 Jun 2010
E&O launches Penang condo in S'pore
This is first time it is marketing new launch out of Penang
By CHEAH UI-HOON
SINGAPOREANS will soon have first dibs on a prime Penang condominium project with Eastern & Oriental Bhd setting up a sales office here.
The Kuala Lumpur-based property developer has had such good response from its previous roadtrips in Singapore, Hong Kong and London that it decided this time to launch sales of one tower of its seafront condominiums here.
'This is the first time we're marketing a new launch out of Penang because we've seen very good response in previous roadtrips,' says Eric Chan, E&O's executive director. 'It's timely now to introduce this to the region via Singapore.'
The company is launching sales of the second block - out of seven - of the RM1.8 billion (S$776.4 million) Quayside Seafront Resort Condominium development. Quayside is the last phase of the 240-acre Seri Tanjung Pinang development in north-east Penang, on reclaimed land.
Seri Tanjung Pinang features a guarded community of luxury seafront villas, semi-detached and courtyard terrace homes, condominiums and service apartments.
The Quayside condominiums - with seven blocks of seafront units - will sprawl across an 8.4 hectare site, with seven acres of landscaped gardens and 4.5 acres of a signature waterpark. The total site will cover 21 acres.
The project, which has 1,200 units, is expected to be completed in about seven to 10 years.
Quayside was officially unveiled in February. To date, almost 60 per cent of the units in the first tower have been sold, with foreign buyers accounting for about 10 per cent of sales. It is also just a short walk to the neighbouring Straits Quay, an international marina.
The estimated average price for a Tower 2 unit is close to RM800 per square foot, and units range from 1,137 sq ft for a one-bedroom apartment to 7,159 sq ft for a penthouse.
Prices for Tower 2 units start from RM811,000 for a one-bedroom unit and RM2,225,000 for a three-bedroom condominium.
As the first release, prices are primed to offer early birds a 5 per cent discount.
E&O is also confident of the potential capital appreciation based on the track record of its previous launches, says Mr Chan. 'Buyers of E&O properties have typically enjoyed an attractive level of capital appreciation. For instance, our Ariza courtyard terraces at Seri Tanjung Pinang have appreciated by approximately 30 per cent to 40 per cent since its maiden launch,' he says.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
PRIME PROPERTY
The Quayside Seafront Resort Condominium (above) is part of the Seri Tanjung Pinang development in north-east Penang which includes service apartments and a marina (next)
E&O launches Penang condo in S'pore
This is first time it is marketing new launch out of Penang
By CHEAH UI-HOON
SINGAPOREANS will soon have first dibs on a prime Penang condominium project with Eastern & Oriental Bhd setting up a sales office here.
The Kuala Lumpur-based property developer has had such good response from its previous roadtrips in Singapore, Hong Kong and London that it decided this time to launch sales of one tower of its seafront condominiums here.
'This is the first time we're marketing a new launch out of Penang because we've seen very good response in previous roadtrips,' says Eric Chan, E&O's executive director. 'It's timely now to introduce this to the region via Singapore.'
The company is launching sales of the second block - out of seven - of the RM1.8 billion (S$776.4 million) Quayside Seafront Resort Condominium development. Quayside is the last phase of the 240-acre Seri Tanjung Pinang development in north-east Penang, on reclaimed land.
Seri Tanjung Pinang features a guarded community of luxury seafront villas, semi-detached and courtyard terrace homes, condominiums and service apartments.
The Quayside condominiums - with seven blocks of seafront units - will sprawl across an 8.4 hectare site, with seven acres of landscaped gardens and 4.5 acres of a signature waterpark. The total site will cover 21 acres.
The project, which has 1,200 units, is expected to be completed in about seven to 10 years.
Quayside was officially unveiled in February. To date, almost 60 per cent of the units in the first tower have been sold, with foreign buyers accounting for about 10 per cent of sales. It is also just a short walk to the neighbouring Straits Quay, an international marina.
The estimated average price for a Tower 2 unit is close to RM800 per square foot, and units range from 1,137 sq ft for a one-bedroom apartment to 7,159 sq ft for a penthouse.
Prices for Tower 2 units start from RM811,000 for a one-bedroom unit and RM2,225,000 for a three-bedroom condominium.
As the first release, prices are primed to offer early birds a 5 per cent discount.
E&O is also confident of the potential capital appreciation based on the track record of its previous launches, says Mr Chan. 'Buyers of E&O properties have typically enjoyed an attractive level of capital appreciation. For instance, our Ariza courtyard terraces at Seri Tanjung Pinang have appreciated by approximately 30 per cent to 40 per cent since its maiden launch,' he says.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
PRIME PROPERTY
The Quayside Seafront Resort Condominium (above) is part of the Seri Tanjung Pinang development in north-east Penang which includes service apartments and a marina (next)
BT : URA sells 3 plots of heavy vehicle parks
Business Times - 04 Jun 2010
URA sells 3 plots of heavy vehicle parks
THE Urban Redevelopment Authority (URA) yesterday said that it has sold three land parcels of heavy vehicle parks at Bukit Batok West Avenue 5 and Senoko Drive through a public auction.
The 15,600 square metres heavy vehicle park site at Bukit Batok West Avenue 5 was sold to Uni Development for $5 million, or $30 per square foot (psf) of site area.
The two other land parcels, both at Senoko Drive, have site areas of 10,000 sq m each. One was sold to Huationg Inland Transport Service for $4 million, or $37 psf of site area; while the other was sold to Huationg (Asia) for $3 million, or $28 psf of site area.
The land parcels were launched for sale on May 10. The parcel at Bukit Batok West Avenue 5 was offered for sale on a 10-year lease while the other two parcels at Senoko Drive were offered for sale on 15-year leases.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
URA sells 3 plots of heavy vehicle parks
THE Urban Redevelopment Authority (URA) yesterday said that it has sold three land parcels of heavy vehicle parks at Bukit Batok West Avenue 5 and Senoko Drive through a public auction.
The 15,600 square metres heavy vehicle park site at Bukit Batok West Avenue 5 was sold to Uni Development for $5 million, or $30 per square foot (psf) of site area.
The two other land parcels, both at Senoko Drive, have site areas of 10,000 sq m each. One was sold to Huationg Inland Transport Service for $4 million, or $37 psf of site area; while the other was sold to Huationg (Asia) for $3 million, or $28 psf of site area.
The land parcels were launched for sale on May 10. The parcel at Bukit Batok West Avenue 5 was offered for sale on a 10-year lease while the other two parcels at Senoko Drive were offered for sale on 15-year leases.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : 20,258 HDB owners register for subletting
Business Times - 04 Jun 2010
20,258 HDB owners register for subletting
THE HDB has announced that as of April 30, 20,258 owners have registered their subletting of homes with HDB. This figure includes those with tenancies commencing before and after Feb 1, 2010.
On Jan 12 this year, HDB announced that with effect from Feb 1, 2010, flat owners who sublet rooms in their HDB flats will have to register with HDB within seven days of doing so. They are also required to notify HDB when they renew or terminate their subletting contracts, and when there are changes to their subtenant's particulars.
This rule applied to all and existing cases of rooms sublets.
For new cases of subletting from Feb 1, 2010, owners are required to register with the HDB within seven days from the start date of subletting.
For subletting tenancies that commenced before Feb 1, 2010, owners are given a six-month grace period from Feb 1, 2010 to register their subletting with HDB.
HDB may impose a penalty on those who flout the rule. The penalty may involve a fine of up to $3,000 or, for recalcitrant cases, compulsory acquisition of their flats.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
20,258 HDB owners register for subletting
THE HDB has announced that as of April 30, 20,258 owners have registered their subletting of homes with HDB. This figure includes those with tenancies commencing before and after Feb 1, 2010.
On Jan 12 this year, HDB announced that with effect from Feb 1, 2010, flat owners who sublet rooms in their HDB flats will have to register with HDB within seven days of doing so. They are also required to notify HDB when they renew or terminate their subletting contracts, and when there are changes to their subtenant's particulars.
This rule applied to all and existing cases of rooms sublets.
For new cases of subletting from Feb 1, 2010, owners are required to register with the HDB within seven days from the start date of subletting.
For subletting tenancies that commenced before Feb 1, 2010, owners are given a six-month grace period from Feb 1, 2010 to register their subletting with HDB.
HDB may impose a penalty on those who flout the rule. The penalty may involve a fine of up to $3,000 or, for recalcitrant cases, compulsory acquisition of their flats.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : Subsales become big money-spinners in 2010
Business Times - 04 Jun 2010
Subsales become big money-spinners in 2010
A higher proportion of them are profitable and the gains have shot up, too
By KALPANA RASHIWALA
(SINGAPORE) Subsales are becoming more and more profitable.
At the low point of the market in the first quarter of 2009, only 67.5 per cent of the subsales of private apartments and condos yielded a profit.
That proportion grew to 95.1 per cent in Q1 this year and 96.1 per cent in April, according to Savills Singapore's analysis of URA Realis caveats data.
It attributes the trend to improving sentiment and prices in the first four months of this year.
Meanwhile, the average gain per unit from profitable subsales of non-landed private homes increased from $105,663 in Q1 last year to $284,764 in Q1 this year and $363,465 in April.
In terms of percentage return, the average gain from profitable subsales has risen from 13.1 per cent in Q1 2009 to 22.4 per cent in the first four months of 2010.
Subsales, often used as a proxy of speculative activity, refer to secondary-market transactions in projects that have yet to receive Certificate of Statutory Completion. This can take place three to 12 months after Temporary Occupation Permit (TOP).
Caveat matches that Savills traced up to May 12 this year show that the number of subsales that yielded gains exceeding $1 million shot up from seven transactions in Q4 last year to 32 in January-April 2010. Twentyfive of these lucrative deals this year were for properties in Districts 1 (which covers Marina Bay), 9 and 10 (in Singapore's traditional prime districts).
The highest subsale gain this year, of about $3.3 million, was reaped on a 30th-floor unit at Marina Bay Residences; it had been bought (also in the subsale market) in January 2007 for $4.97 million and divested in April this year for $8.29 million.
The next most profitable subsale this year involved a 13th-floor unit at The Oceanfront @ Sentosa Cove. The unit was bought from City Developments in July 2006 for $7.02 million and sold for $10.08 million in March 2010 - a gain of $3.06 million.
The Oceanfront recorded six subsales this year with gains of more than $1 million each. All these units were bought in 2006, before the big push in luxury home prices in 2007. Recent launches in the location - The Residences at W Singapore Sentosa Cove and Seascape - could have encouraged the Oceanfront subsales, said Savills Singapore director of prestige homes and investment Steven Ming.
Oceanfront received TOP in March this year, and it is often around this time that a flurry of subsale activity occurs as projects then have added appeal to buyers seeking properties that they can move into or rent out soon.
This year, up to April, One Amber in Katong had the most subsale transactions (51 deals), followed by The Parc Condominium in West Coast (41 deals) and Marina Bay Residences (MBR) with 39 subsales. One Amber and MBR received TOP in April; The Parc Condominium's TOP is expected in Q3.
Those who bought units on the old deferred payment scheme may also find it opportune to cash out of their investment instead of paying the bulk of the purchase price to the developer at TOP and having to find a bank loan and, possibly, a tenant.
Savills calculated profit or loss as the difference between sale and purchase prices, without factoring in other expenses such as agent fees and stamp duty.
It found 919 subsale caveats for non-landed private homes in Q1 this year, as reflected in URA's Realis system as at May 12. Of these, it found previous caveat records for 86.1 per cent or 791 units. It then compared the latest subsale price with the earlier price. Out of 203 subsale caveats for April, it found earlier caveat matches for 87.7 per cent.
Less than 5 per cent of subsales in January-April 2010 incurred a loss. On average, the loss was $215,802, down from $343,982 in Q1 2009.
The biggest subsale loss this year was for a unit at Leonie Parc View that sold in February for $5 million, or $1.24 million below the $6.24 million it had previously transacted at in July 2007. The seller had bought his unit from the developer.
The 919 subsale caveats in Q1 this year reflect a pick-up from 749 deals in Q4 2009. Savills' Mr Ming attributes this to spillover from strong buying sentiment in the primary market in Q1.
'We believe new launches, which are usually at higher prices, could also have fuelled subsales in projects launched earlier in the vicinity,' says Mr Ming.
Knight Frank managing director (residential services) Peter Ow predicts subsale volumes are likely to soften over the next six months amid worries about the fallout from Europe's economic woes. At home, there are concerns about an increase in private housing supply from the bumper state land sales scheduled for H2 2010.
The proportion of profitable subsale deals as well as profit margins could ease as prices enter a period of 'stabilisation', Mr Ow says.
Much will also depend on the entry point of these specuvestors. 'If they bought in 2008 or early 2009, it may still be possible to walk away with gains.'
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Subsales become big money-spinners in 2010
A higher proportion of them are profitable and the gains have shot up, too
By KALPANA RASHIWALA
(SINGAPORE) Subsales are becoming more and more profitable.
At the low point of the market in the first quarter of 2009, only 67.5 per cent of the subsales of private apartments and condos yielded a profit.
That proportion grew to 95.1 per cent in Q1 this year and 96.1 per cent in April, according to Savills Singapore's analysis of URA Realis caveats data.
It attributes the trend to improving sentiment and prices in the first four months of this year.
Meanwhile, the average gain per unit from profitable subsales of non-landed private homes increased from $105,663 in Q1 last year to $284,764 in Q1 this year and $363,465 in April.
In terms of percentage return, the average gain from profitable subsales has risen from 13.1 per cent in Q1 2009 to 22.4 per cent in the first four months of 2010.
Subsales, often used as a proxy of speculative activity, refer to secondary-market transactions in projects that have yet to receive Certificate of Statutory Completion. This can take place three to 12 months after Temporary Occupation Permit (TOP).
Caveat matches that Savills traced up to May 12 this year show that the number of subsales that yielded gains exceeding $1 million shot up from seven transactions in Q4 last year to 32 in January-April 2010. Twentyfive of these lucrative deals this year were for properties in Districts 1 (which covers Marina Bay), 9 and 10 (in Singapore's traditional prime districts).
The highest subsale gain this year, of about $3.3 million, was reaped on a 30th-floor unit at Marina Bay Residences; it had been bought (also in the subsale market) in January 2007 for $4.97 million and divested in April this year for $8.29 million.
The next most profitable subsale this year involved a 13th-floor unit at The Oceanfront @ Sentosa Cove. The unit was bought from City Developments in July 2006 for $7.02 million and sold for $10.08 million in March 2010 - a gain of $3.06 million.
The Oceanfront recorded six subsales this year with gains of more than $1 million each. All these units were bought in 2006, before the big push in luxury home prices in 2007. Recent launches in the location - The Residences at W Singapore Sentosa Cove and Seascape - could have encouraged the Oceanfront subsales, said Savills Singapore director of prestige homes and investment Steven Ming.
Oceanfront received TOP in March this year, and it is often around this time that a flurry of subsale activity occurs as projects then have added appeal to buyers seeking properties that they can move into or rent out soon.
This year, up to April, One Amber in Katong had the most subsale transactions (51 deals), followed by The Parc Condominium in West Coast (41 deals) and Marina Bay Residences (MBR) with 39 subsales. One Amber and MBR received TOP in April; The Parc Condominium's TOP is expected in Q3.
Those who bought units on the old deferred payment scheme may also find it opportune to cash out of their investment instead of paying the bulk of the purchase price to the developer at TOP and having to find a bank loan and, possibly, a tenant.
Savills calculated profit or loss as the difference between sale and purchase prices, without factoring in other expenses such as agent fees and stamp duty.
It found 919 subsale caveats for non-landed private homes in Q1 this year, as reflected in URA's Realis system as at May 12. Of these, it found previous caveat records for 86.1 per cent or 791 units. It then compared the latest subsale price with the earlier price. Out of 203 subsale caveats for April, it found earlier caveat matches for 87.7 per cent.
Less than 5 per cent of subsales in January-April 2010 incurred a loss. On average, the loss was $215,802, down from $343,982 in Q1 2009.
The biggest subsale loss this year was for a unit at Leonie Parc View that sold in February for $5 million, or $1.24 million below the $6.24 million it had previously transacted at in July 2007. The seller had bought his unit from the developer.
The 919 subsale caveats in Q1 this year reflect a pick-up from 749 deals in Q4 2009. Savills' Mr Ming attributes this to spillover from strong buying sentiment in the primary market in Q1.
'We believe new launches, which are usually at higher prices, could also have fuelled subsales in projects launched earlier in the vicinity,' says Mr Ming.
Knight Frank managing director (residential services) Peter Ow predicts subsale volumes are likely to soften over the next six months amid worries about the fallout from Europe's economic woes. At home, there are concerns about an increase in private housing supply from the bumper state land sales scheduled for H2 2010.
The proportion of profitable subsale deals as well as profit margins could ease as prices enter a period of 'stabilisation', Mr Ow says.
Much will also depend on the entry point of these specuvestors. 'If they bought in 2008 or early 2009, it may still be possible to walk away with gains.'
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : Making a quick killing from subsales
Business Times - 04 Jun 2010
Making a quick killing from subsales
Many had owned units for less than a year before they sold them for profit
By KALPANA RASHIWALA
(SINGAPORE) Nearly a quarter of those who profitably disposed of a condo or private apartment in the subsale market in the first four months of this year had owned the unit for less than a year, according to an analysis by Savills Singapore.
This is higher than the 19.7 per cent who had held their properties for under a year before divesting them in the subsale market at a profit in Q4 2009. The figure for Q3 last year was 18.2 per cent.
Market watchers suggest the higher proportion of subsales involving a sub-one year holding period may have underscored the Government's announcement on Feb 19 imposing a seller's stamp duty on those who flip a private home within a year of purchase in a bid to deter property speculation.
Subsales - which refer to secondary market transactions involving projects that have yet to receive Certificate of Statutory Completion - are tracked as a gauge of property speculation.
One of the more lucrative subsale deals this year with a sub-one year holding period involved a unit of about 3,900 sq ft at Urban Suites on Hullet Road that was bought from the developer in January this year for $8.8 million and sold for $10.9 million in March, resulting in a cool $2.1 million profit in just two months.
Then there was a 46th level unit at Marina Bay Residences that transacted in the subsale market in March for nearly $8.3 million - nearly $2.2 million above what the seller had paid for the unit just seven months earlier (also in the subsale market).
Savills, which studied URA Realis caveats data up to May 12 this year, traced 969 subsale deals for non-landed homes for the first four months of this year for which there were caveats of previous transactions. From these matches, it identified 923 gains and of these, 224 or 24.3 per cent involved holding periods below a year.
Among the 46 subsales in the first four months of 2010 that incurred a loss, just one unit had been kept for under a year.
Savills also looked at holding periods for overall subsale deals, regardless of whether they were profitable, and this shows that 50.2 per cent of the 969 properties disposed of in the subsale market in the first four months of 2010 had been bought in 2007, the previous peak year for the property market. Another 25.8 per cent were acquired last year and 13.4 per cent in 2006.
Knight Frank managing director (residential services) Peter Ow said: 'Going ahead, it will be harder to make short-term gains from property as we expect the market to stabilise.'
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Making a quick killing from subsales
Many had owned units for less than a year before they sold them for profit
By KALPANA RASHIWALA
(SINGAPORE) Nearly a quarter of those who profitably disposed of a condo or private apartment in the subsale market in the first four months of this year had owned the unit for less than a year, according to an analysis by Savills Singapore.
This is higher than the 19.7 per cent who had held their properties for under a year before divesting them in the subsale market at a profit in Q4 2009. The figure for Q3 last year was 18.2 per cent.
Market watchers suggest the higher proportion of subsales involving a sub-one year holding period may have underscored the Government's announcement on Feb 19 imposing a seller's stamp duty on those who flip a private home within a year of purchase in a bid to deter property speculation.
Subsales - which refer to secondary market transactions involving projects that have yet to receive Certificate of Statutory Completion - are tracked as a gauge of property speculation.
One of the more lucrative subsale deals this year with a sub-one year holding period involved a unit of about 3,900 sq ft at Urban Suites on Hullet Road that was bought from the developer in January this year for $8.8 million and sold for $10.9 million in March, resulting in a cool $2.1 million profit in just two months.
Then there was a 46th level unit at Marina Bay Residences that transacted in the subsale market in March for nearly $8.3 million - nearly $2.2 million above what the seller had paid for the unit just seven months earlier (also in the subsale market).
Savills, which studied URA Realis caveats data up to May 12 this year, traced 969 subsale deals for non-landed homes for the first four months of this year for which there were caveats of previous transactions. From these matches, it identified 923 gains and of these, 224 or 24.3 per cent involved holding periods below a year.
Among the 46 subsales in the first four months of 2010 that incurred a loss, just one unit had been kept for under a year.
Savills also looked at holding periods for overall subsale deals, regardless of whether they were profitable, and this shows that 50.2 per cent of the 969 properties disposed of in the subsale market in the first four months of 2010 had been bought in 2007, the previous peak year for the property market. Another 25.8 per cent were acquired last year and 13.4 per cent in 2006.
Knight Frank managing director (residential services) Peter Ow said: 'Going ahead, it will be harder to make short-term gains from property as we expect the market to stabilise.'
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
ST : Sub-letting room? Grace period to register ends soon
Jun 4, 2010
Sub-letting room? Grace period to register ends soon
By Lee Yen Nee
THE Housing Board yesterday reminded flat owners who sub-let rooms before Feb 1 that they have until July 31 to register their tenants' details with the HDB.
All flat owners are now required to register the sub-letting arrangements, under a new rule introduced earlier this year.
From Feb 1, anyone sub-letting a room has been given seven days to register, but a six-month grace period expiring July 31 was granted for those who had sub-let before the beginning of February.
In all, 20,258 flat owners had registered their subletting of rooms with the HDB, as of April 30.
That figure includes flat owners with sub-letting tenancies commencing both before and from Feb 1, the board said.
Part of the reason the new rule was introduced was to try to curb the worsening activities of loan sharks.
Some people who borrow from loan sharks and who rent rooms in HDB flats have been known to use their former addresses when borrowing.
That leaves a flat's new occupants to face possible harassment from the illegal moneylenders.
The rule was implemented to track those who borrow from loan sharks.
'There is no need to seek prior approval for subletting of rooms,' the HDB said.
However, flat owners are required to notify the HDB when they renew or terminate their sub-letting contracts, as well as when a new sub-let starts.
Registration can be done online or at any HDB branch office.
The board said that those who flout the rule may be fined up to $3,000. For recalcitrant cases, compulsory acquisition of their flats could be carried out.
Sub-letting room? Grace period to register ends soon
By Lee Yen Nee
THE Housing Board yesterday reminded flat owners who sub-let rooms before Feb 1 that they have until July 31 to register their tenants' details with the HDB.
All flat owners are now required to register the sub-letting arrangements, under a new rule introduced earlier this year.
From Feb 1, anyone sub-letting a room has been given seven days to register, but a six-month grace period expiring July 31 was granted for those who had sub-let before the beginning of February.
In all, 20,258 flat owners had registered their subletting of rooms with the HDB, as of April 30.
That figure includes flat owners with sub-letting tenancies commencing both before and from Feb 1, the board said.
Part of the reason the new rule was introduced was to try to curb the worsening activities of loan sharks.
Some people who borrow from loan sharks and who rent rooms in HDB flats have been known to use their former addresses when borrowing.
That leaves a flat's new occupants to face possible harassment from the illegal moneylenders.
The rule was implemented to track those who borrow from loan sharks.
'There is no need to seek prior approval for subletting of rooms,' the HDB said.
However, flat owners are required to notify the HDB when they renew or terminate their sub-letting contracts, as well as when a new sub-let starts.
Registration can be done online or at any HDB branch office.
The board said that those who flout the rule may be fined up to $3,000. For recalcitrant cases, compulsory acquisition of their flats could be carried out.
ST : China 'mulling over property tax'
Jun 4, 2010
China 'mulling over property tax'
BEIJING: A senior official with China's powerful planning agency has confirmed media reports that the country is studying a possible nationwide property tax, but has no specific plan, China Business News reported yesterday.
It also said Shanghai was considering introducing the tax in the city on a trial basis. Previous media reports that China could expand the property tax, now levied on commercial property, to cover the residential sector have driven down the Shanghai Composite Index by over 20 per cent this year.
The newspaper, citing an unnamed senior official at the National Development and Reform Commission, said there was no timetable yet for any expanded tax rollout. The official said China encouraged trials by local governments to launch the tax but added there was no specific plan for a nationwide programme.
China introduced fresh steps to curb excessive housing price rises in some cities in April, including higher downpayments and mortgage rates. These measures have driven down the number of transactions but prices have remained near record levels.
Most developers are postponing project launch dates and are waiting to see market developments before pricing new projects. Real estate prices rose a record 12.8 per cent in April from a year earlier, the National Bureau of Statistics said on May 11.
'The government should have put in tougher enforcement earlier to prevent the high prices,' said Mr Lu Qilin, a Shanghai-based researcher at property consultancy UWin. 'If the government doesn't stop this soon, the bubble will burst.'
REUTERS, BLOOMBERG
China 'mulling over property tax'
BEIJING: A senior official with China's powerful planning agency has confirmed media reports that the country is studying a possible nationwide property tax, but has no specific plan, China Business News reported yesterday.
It also said Shanghai was considering introducing the tax in the city on a trial basis. Previous media reports that China could expand the property tax, now levied on commercial property, to cover the residential sector have driven down the Shanghai Composite Index by over 20 per cent this year.
The newspaper, citing an unnamed senior official at the National Development and Reform Commission, said there was no timetable yet for any expanded tax rollout. The official said China encouraged trials by local governments to launch the tax but added there was no specific plan for a nationwide programme.
China introduced fresh steps to curb excessive housing price rises in some cities in April, including higher downpayments and mortgage rates. These measures have driven down the number of transactions but prices have remained near record levels.
Most developers are postponing project launch dates and are waiting to see market developments before pricing new projects. Real estate prices rose a record 12.8 per cent in April from a year earlier, the National Bureau of Statistics said on May 11.
'The government should have put in tougher enforcement earlier to prevent the high prices,' said Mr Lu Qilin, a Shanghai-based researcher at property consultancy UWin. 'If the government doesn't stop this soon, the bubble will burst.'
REUTERS, BLOOMBERG
TODAY ONLINE : Action won't be taken against agent, as no scare tactics involved: ERA
Action won't be taken against agent, as no scare tactics involved: ERA
05:55 AM Jun 04, 2010
by Joanne Chan
SINGAPORE - Real estate firm ERA has reminded its property agents to be careful in their choice of words when it comes to written communications.
In an email to its more than 3,000 agents on Tuesday, ERA's associate director of Asia-Pacific, Mr Eugene Lim, said agents have a responsibility to communicate the latest property market information to customers.
But agents are not to "twist the information and use them as scare tactics on customers".
The email added that agents should "never use overly strong words like the market is going to crash".
This follows a report carried by MediaCorp on Tuesday that some agents are employing "scare tactics" to close deals.
Emails forwarded to MediaCorp earlier detailed how some agents are using the Government's recent land sales as a bargaining tool to lower client expectations of property prices.
One agent reportedly disclosed that a deal was closed after the client was told that the "market is going to crash".
ERA said it had investigated the alleged complaint and found that the transaction was sealed at market price, fully supported by a bank valuation.
The property firm added that no scare tactics were involved. As such, no disciplinary action will be taken against the agent.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
05:55 AM Jun 04, 2010
by Joanne Chan
SINGAPORE - Real estate firm ERA has reminded its property agents to be careful in their choice of words when it comes to written communications.
In an email to its more than 3,000 agents on Tuesday, ERA's associate director of Asia-Pacific, Mr Eugene Lim, said agents have a responsibility to communicate the latest property market information to customers.
But agents are not to "twist the information and use them as scare tactics on customers".
The email added that agents should "never use overly strong words like the market is going to crash".
This follows a report carried by MediaCorp on Tuesday that some agents are employing "scare tactics" to close deals.
Emails forwarded to MediaCorp earlier detailed how some agents are using the Government's recent land sales as a bargaining tool to lower client expectations of property prices.
One agent reportedly disclosed that a deal was closed after the client was told that the "market is going to crash".
ERA said it had investigated the alleged complaint and found that the transaction was sealed at market price, fully supported by a bank valuation.
The property firm added that no scare tactics were involved. As such, no disciplinary action will be taken against the agent.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
ST : China firm places bullish top bid for Upper Serangoon site
Jun 3, 2010
China firm places bullish top bid for Upper Serangoon site
By Joyce Teo
THE tender for a plum 0.5ha residential development site near Potong Pasir MRT station yesterday drew 15 bidders and a higher-than-expected top bid.
This keen interest came despite a recent announcement by the Government that it would release a record amount of development land in the second half year.
China-based Qingdao Construction (Singapore) put in an aggressive bid of $607.20 per sq ft per plot ratio (psf ppr) or $113.74 million. It came in just above the second highest bid of $590.50 psf ppr or $110.6 million from Malaysia's SP Setia International.
Apart from these two top foreign bids, the rest of the bids were largely within or even below expectations.
The 99-year leasehold site, sandwiched between Upper Serangoon Road and Pheng Geck Avenue, has a maximum gross floor area of 187,313 sq ft.
Analysts had said that it could fetch $450-$560 psf ppr or $84 million-$105 million. With its proximity to an MRT station, it was expected to be very popular.
It is the second land tender to close after the Government announced a record release of sites for sale in the second half.
The first - an executive condo (EC) plot in Sengkang - attracted a record top bid for EC land last week, though the other bids were within expectations.
Given the ample upcoming residential supply, the response of 15 bids is above market expectations and the quantums of the top few bids are bullish, said CBRE Research executive director Li Hiaw Ho.
'The relatively smaller size of the site, compared to the previous sites offered by the state, is an advantage because it does translate to a lower price quantum.'
Colliers International director for research and advisory Tay Huey Ying said the top bid is the second highest ever received for a non-landed housing plot in a city fringe area. It is just 5 per cent off the $639 psf ppr bid for the Ascentia Sky site in Alexandra Road in late 2007.
Other bidders included Koh Brothers, Far East Organization, Allgreen Properties and MCL Land. Hong Leong Holdings unit Kingston Development made the lowest bid of $320.70 psf ppr or $60.1 million.
Qingdao Construction, experts say, was a lot more aggressive as it had failed to win any sites in a few recent tenders.
Its managing director Zuo Hai Bin told The Straits Times it would have missed out had it made a lower bid. He said it plans to build about 150-160 units, mostly two- to three-bedroom units. The break-even cost is about $950 psf.
The Qingdao group has, through Qingjian Realty, previously developed Natura Loft, a HDB design, build and sell scheme project in Bishan. Apartments on the Upper Serangoon site could sell for possibly $1,100-$1,200 psf, experts said.
In January-April this year, sub-sale units in nearby 8@Woodleigh and Woodsville 28 went for $880-$1,130 psf.
'The top two bidders are foreign players eager to gain a foothold in Singapore's growing property market,' said DTZ's head of South-east Asia research, Ms Chua Chor Hoon. Local developers are unlikely to bid as keenly given that the property market has quietened down last month and with the record government land release, she added.
The Upper Serangoon site was on the confirmed list, which means that it was scheduled for tender without developers having to indicate interest first.
China firm places bullish top bid for Upper Serangoon site
By Joyce Teo
THE tender for a plum 0.5ha residential development site near Potong Pasir MRT station yesterday drew 15 bidders and a higher-than-expected top bid.
This keen interest came despite a recent announcement by the Government that it would release a record amount of development land in the second half year.
China-based Qingdao Construction (Singapore) put in an aggressive bid of $607.20 per sq ft per plot ratio (psf ppr) or $113.74 million. It came in just above the second highest bid of $590.50 psf ppr or $110.6 million from Malaysia's SP Setia International.
Apart from these two top foreign bids, the rest of the bids were largely within or even below expectations.
The 99-year leasehold site, sandwiched between Upper Serangoon Road and Pheng Geck Avenue, has a maximum gross floor area of 187,313 sq ft.
Analysts had said that it could fetch $450-$560 psf ppr or $84 million-$105 million. With its proximity to an MRT station, it was expected to be very popular.
It is the second land tender to close after the Government announced a record release of sites for sale in the second half.
The first - an executive condo (EC) plot in Sengkang - attracted a record top bid for EC land last week, though the other bids were within expectations.
Given the ample upcoming residential supply, the response of 15 bids is above market expectations and the quantums of the top few bids are bullish, said CBRE Research executive director Li Hiaw Ho.
'The relatively smaller size of the site, compared to the previous sites offered by the state, is an advantage because it does translate to a lower price quantum.'
Colliers International director for research and advisory Tay Huey Ying said the top bid is the second highest ever received for a non-landed housing plot in a city fringe area. It is just 5 per cent off the $639 psf ppr bid for the Ascentia Sky site in Alexandra Road in late 2007.
Other bidders included Koh Brothers, Far East Organization, Allgreen Properties and MCL Land. Hong Leong Holdings unit Kingston Development made the lowest bid of $320.70 psf ppr or $60.1 million.
Qingdao Construction, experts say, was a lot more aggressive as it had failed to win any sites in a few recent tenders.
Its managing director Zuo Hai Bin told The Straits Times it would have missed out had it made a lower bid. He said it plans to build about 150-160 units, mostly two- to three-bedroom units. The break-even cost is about $950 psf.
The Qingdao group has, through Qingjian Realty, previously developed Natura Loft, a HDB design, build and sell scheme project in Bishan. Apartments on the Upper Serangoon site could sell for possibly $1,100-$1,200 psf, experts said.
In January-April this year, sub-sale units in nearby 8@Woodleigh and Woodsville 28 went for $880-$1,130 psf.
'The top two bidders are foreign players eager to gain a foothold in Singapore's growing property market,' said DTZ's head of South-east Asia research, Ms Chua Chor Hoon. Local developers are unlikely to bid as keenly given that the property market has quietened down last month and with the record government land release, she added.
The Upper Serangoon site was on the confirmed list, which means that it was scheduled for tender without developers having to indicate interest first.
Thursday, June 3, 2010
BT : Retreat in US property after tax credit removed short-lived: analysts
Business Times - 03 Jun 2010
Retreat in US property after tax credit removed short-lived: analysts
Low mortgage rates and improving jobs market will underpin the sector
(NEW YORK) The retreat in the US housing market after the government halted its hefty tax credit in April should be short-lived, say analysts, and the market may resume its path to stability.
Home sales surged in April before the month-end deadline to take advantage of the credit and demand dropped sharply in the following weeks. But mortgage rates near record lows and an improving jobs market will help underpin the sector, even without the artificial stimulus of tax breaks, said analysts.
A housing sector rebound is seen as a key pillar in the economy's recovery, which has gained steam as consumer spending picks up while manufacturing activity, which has led the upswing, stays strong.
'It's back to a fundamentals market where there are no gimmicks,' said Mike Fratantoni, vice-president of research and economics at the Mortgage Bankers Association (MBA).
The first-time homebuyer credit, as well as US$1.4 trillion in debt purchases by the Federal Reserve, served their purpose: lowering mortgage rates and restoring life to the worst housing slump since the Depression.
Sales of new homes, juiced by the tax credit deadline, leaped almost 15 per cent in April to a two-year high. Existing home sales jumped 7.6 per cent in April and almost 23 per cent in the year.
But applications to buy homes plummeted by nearly a third to 13-year lows after tax credits of up to US$8,000 ended on April 30, proving that the incentive pulled sales forward, the Mortgage Bankers Association found.
Despite the recent drop-off, sales should stay elevated through the summer and then flat-line, said many analysts.
'Job growth has returned even more quickly than we anticipated and mortgage rates are trending down again below 5 per cent. Both will spur real home buying activity,' wrote John Burns Real Estate Consulting.
Deutsche Bank expects that housing will have a lesser hangover from federal incentives than many fear, akin to the auto market after the cash-for-clunkers programme ended last year.
'We believe that improving economic confidence, home price stabilisation and rising household incomes will provide an important tailwind to home resales - sufficient to offset the expired incentives,' Joseph LaVorgna and Carl Riccadonna wrote in a Deutsche report.
US non-farm payrolls rose by 290,000 in April, the fastest pace in four years, and a Reuters polls forecasts employers added another 513,000 jobs in May.
Trulia.com, a real estate website, said that Internet real estate searches are picking up after sinking in the first two weeks following April's spike.
'While there was a big hangover effect after the tax credit, we're starting to see people come back and searching again' in the latter part of May, said Ken Shuman of Trulia.
In data Trulia compiled for Reuters, cities across the country showed on-line property searches in the first two weeks of May erased a good chunk if not all of the activity in the last two weeks of the tax credit.
In Miami Beach, Florida, searches rose 2.8 per cent in the last two weeks of April compared with the prior two weeks, and then fell 6.6 per cent in the first two weeks of May. Memphis, Tennessee searches sank 29.1 per cent in the first two May weeks after a 10.9 per cent jump the prior two weeks.
'We do think there will be more market correction in some areas and we don't expect to see major price gains anywhere,'added Mr Shuman. 'We're not expecting a major double dip either, we're more in the flat-lining group.'
Stability would be welcome after a crash that swept prices down 30 per cent on average before gaining traction.
And few expect the housing market to turn bubbly, with unemployment and underemployment still high and banks seen repossessing nearly one million homes this year.
Households are also busy rebuilding balance sheets and are still as much as US$9 trillion dollars down in net worth from the peak, MBA's Mr Fratantoni noted. The MBA forecasts a 5 per cent drop in sales in the second quarter, having factored in the applications dive this month that followed April's spike.
It will be some months before it's clear whether the housing market is really on the road to recovery.
Mark Linne, executive vice-president of AppraisalWorld, said data at summer's end will better reflect the housing market's health, without the artificial prop of the tax credit.
'If we go through the summer and it's not robust and doesn't show any signs of life, then it continues like the groundhog thing - we wait through another winter.' - Reuters
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Staying strong: Despite the recent drop-off, sales should stay elevated through the summer and then flat-line, say analysts
Retreat in US property after tax credit removed short-lived: analysts
Low mortgage rates and improving jobs market will underpin the sector
(NEW YORK) The retreat in the US housing market after the government halted its hefty tax credit in April should be short-lived, say analysts, and the market may resume its path to stability.
Home sales surged in April before the month-end deadline to take advantage of the credit and demand dropped sharply in the following weeks. But mortgage rates near record lows and an improving jobs market will help underpin the sector, even without the artificial stimulus of tax breaks, said analysts.
A housing sector rebound is seen as a key pillar in the economy's recovery, which has gained steam as consumer spending picks up while manufacturing activity, which has led the upswing, stays strong.
'It's back to a fundamentals market where there are no gimmicks,' said Mike Fratantoni, vice-president of research and economics at the Mortgage Bankers Association (MBA).
The first-time homebuyer credit, as well as US$1.4 trillion in debt purchases by the Federal Reserve, served their purpose: lowering mortgage rates and restoring life to the worst housing slump since the Depression.
Sales of new homes, juiced by the tax credit deadline, leaped almost 15 per cent in April to a two-year high. Existing home sales jumped 7.6 per cent in April and almost 23 per cent in the year.
But applications to buy homes plummeted by nearly a third to 13-year lows after tax credits of up to US$8,000 ended on April 30, proving that the incentive pulled sales forward, the Mortgage Bankers Association found.
Despite the recent drop-off, sales should stay elevated through the summer and then flat-line, said many analysts.
'Job growth has returned even more quickly than we anticipated and mortgage rates are trending down again below 5 per cent. Both will spur real home buying activity,' wrote John Burns Real Estate Consulting.
Deutsche Bank expects that housing will have a lesser hangover from federal incentives than many fear, akin to the auto market after the cash-for-clunkers programme ended last year.
'We believe that improving economic confidence, home price stabilisation and rising household incomes will provide an important tailwind to home resales - sufficient to offset the expired incentives,' Joseph LaVorgna and Carl Riccadonna wrote in a Deutsche report.
US non-farm payrolls rose by 290,000 in April, the fastest pace in four years, and a Reuters polls forecasts employers added another 513,000 jobs in May.
Trulia.com, a real estate website, said that Internet real estate searches are picking up after sinking in the first two weeks following April's spike.
'While there was a big hangover effect after the tax credit, we're starting to see people come back and searching again' in the latter part of May, said Ken Shuman of Trulia.
In data Trulia compiled for Reuters, cities across the country showed on-line property searches in the first two weeks of May erased a good chunk if not all of the activity in the last two weeks of the tax credit.
In Miami Beach, Florida, searches rose 2.8 per cent in the last two weeks of April compared with the prior two weeks, and then fell 6.6 per cent in the first two weeks of May. Memphis, Tennessee searches sank 29.1 per cent in the first two May weeks after a 10.9 per cent jump the prior two weeks.
'We do think there will be more market correction in some areas and we don't expect to see major price gains anywhere,'added Mr Shuman. 'We're not expecting a major double dip either, we're more in the flat-lining group.'
Stability would be welcome after a crash that swept prices down 30 per cent on average before gaining traction.
And few expect the housing market to turn bubbly, with unemployment and underemployment still high and banks seen repossessing nearly one million homes this year.
Households are also busy rebuilding balance sheets and are still as much as US$9 trillion dollars down in net worth from the peak, MBA's Mr Fratantoni noted. The MBA forecasts a 5 per cent drop in sales in the second quarter, having factored in the applications dive this month that followed April's spike.
It will be some months before it's clear whether the housing market is really on the road to recovery.
Mark Linne, executive vice-president of AppraisalWorld, said data at summer's end will better reflect the housing market's health, without the artificial prop of the tax credit.
'If we go through the summer and it's not robust and doesn't show any signs of life, then it continues like the groundhog thing - we wait through another winter.' - Reuters
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Staying strong: Despite the recent drop-off, sales should stay elevated through the summer and then flat-line, say analysts
BT : KepLand uses rights proceeds for Lakeside site
Business Times - 03 Jun 2010
KepLand uses rights proceeds for Lakeside site
KEPPEL Land said in an update yesterday that it has used another $75.8 million of the proceeds from its rights issue last year, which netted the developer a total of $700.6 million.
KepLand, the property arm of Keppel Corporation, has now used $666.6 million of the proceeds from the rights issue.
The latest amount will be used to fund a quarter of the cost of a 99-year leasehold residential plot near Lakeside MRT Station, which KepLand won in a government land tender last month. The property group put in the top bid of $303 million - or $499 per sq ft per plot ratio - for the site, trumping 13 other bidders.
KepLand has said that it plans to develop a condominium with about 550 units - ranging from 500 sq ft to 1,400 sq ft - on the land parcel, which marked the developer's first acquisition of a pure residential site in Singapore in six years.
The units will be in one-bedroom to four-bedroom configurations as well as penthouses. The project is expected to be launch ready by the end of this year and completed at the end of 2013, KepLand said last month.
KepLand shares gained 2 cents to close at $3.46 yesterday.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
KepLand uses rights proceeds for Lakeside site
KEPPEL Land said in an update yesterday that it has used another $75.8 million of the proceeds from its rights issue last year, which netted the developer a total of $700.6 million.
KepLand, the property arm of Keppel Corporation, has now used $666.6 million of the proceeds from the rights issue.
The latest amount will be used to fund a quarter of the cost of a 99-year leasehold residential plot near Lakeside MRT Station, which KepLand won in a government land tender last month. The property group put in the top bid of $303 million - or $499 per sq ft per plot ratio - for the site, trumping 13 other bidders.
KepLand has said that it plans to develop a condominium with about 550 units - ranging from 500 sq ft to 1,400 sq ft - on the land parcel, which marked the developer's first acquisition of a pure residential site in Singapore in six years.
The units will be in one-bedroom to four-bedroom configurations as well as penthouses. The project is expected to be launch ready by the end of this year and completed at the end of 2013, KepLand said last month.
KepLand shares gained 2 cents to close at $3.46 yesterday.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : Financial woes ahead for property developers: report
Business Times - 03 Jun 2010
Financial woes ahead for property developers: report
(BEIJING) China's property developers will have financial difficulties in the future as the liability ratio of 13 of the country's top 50 listed developers had already exceeded 70 per cent, yesterday's Shanghai Securities News reported.
The government's recent property market tightening will continue to slow the market in the second half of the year, said the newspaper, citing a report released by China Real Estate Appraisal (CRA) on Tuesday.
The report indicated that centrally administered state-owned property developers had fared better than other enterprises amid the government tightening measures.
Stock prices of listed property developers had slumped well over 20 per cent since the government introduced macro control measures in April.
China Overseas Land and Investment Ltd, subsidiary of the centrally administered China State Construction Engineering Corporation, had maintained rapid growth and replaced China Vanke Co as the country's largest listed property developer by market value, said the CRA report.
Total assets of the top 50 listed property enterprises hit 1.78 trillion yuan (S$367.8 billion) at the end of 2009, up 38.8 per cent year on year, it said.
Total revenue of these companies rose 48.3 per cent year on year to stand at 406.04 billion yuan, while net profit topped 83.84 billion yuan, up 67.38 per cent\. \-- Xinhua
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Financial woes ahead for property developers: report
(BEIJING) China's property developers will have financial difficulties in the future as the liability ratio of 13 of the country's top 50 listed developers had already exceeded 70 per cent, yesterday's Shanghai Securities News reported.
The government's recent property market tightening will continue to slow the market in the second half of the year, said the newspaper, citing a report released by China Real Estate Appraisal (CRA) on Tuesday.
The report indicated that centrally administered state-owned property developers had fared better than other enterprises amid the government tightening measures.
Stock prices of listed property developers had slumped well over 20 per cent since the government introduced macro control measures in April.
China Overseas Land and Investment Ltd, subsidiary of the centrally administered China State Construction Engineering Corporation, had maintained rapid growth and replaced China Vanke Co as the country's largest listed property developer by market value, said the CRA report.
Total assets of the top 50 listed property enterprises hit 1.78 trillion yuan (S$367.8 billion) at the end of 2009, up 38.8 per cent year on year, it said.
Total revenue of these companies rose 48.3 per cent year on year to stand at 406.04 billion yuan, while net profit topped 83.84 billion yuan, up 67.38 per cent\. \-- Xinhua
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : State land tenders still fetching record prices
Business Times - 03 Jun 2010
State land tenders still fetching record prices
Top bid for condo plot near Potong Pasir MRT is $607 psf ppr
By KALPANA RASHIWALA
A STATE tender for a 99-year leasehold private housing site next to Potong Pasir MRT Station has fetched a record land price for the area - $607 per square foot per plot ratio (psf ppr).
This is also the second highest price paid for a 99-year condo site sold by the state in Singapore's Rest of Central Region.
However, analysts point out that save for the top two bids - both of which were from foreign parties (Qingdao Construction of China and SP Setia Bhd of Malaysia) - the offers, from local players, were within expectations.
DTZ's South-east Asia research head Chua Chor Hoon observed that 'more foreign players are entering the local property development market as they see growth opportunities in Singapore'.
'As they've no or very little landbank in Singapore, they have to bid more aggressively than local developers to gain a foothold.'
Yesterday's tender drew a whopping 15 bids, as the plot's relatively small size rendered the total investment quantum affordable to a wider pool of contenders.
The competition among them, as well as the plot's choice location next to an MRT station close to the city, helped to create a bullish top bid, say industry players.
There was a significant gap between the top two bids, which came in at around $600 psf ppr, and the next three bids (from Koh Brothers, Far East Organization and Allgreen Properties), which congregated around the $500 psf ppr level. The lowest offer, from Hong Leong Group, was $321 psf ppr.
When the 53,516 sq ft site at Pheng Geck Avenue was launched in April, analysts had predicted bids of $450-560 psf ppr.
Qingdao Construction director Zuo Haibin acknowledged that his company's bid was 'not cheap', but noted that it had not been able to clinch any sites at state tenders in the past eight months.
Qingdao's breakeven cost is likely to be around $950 psf; it will handle the project's construction as well.
Mr Zuo added that the company is looking at an average selling price of about $1,000-1,050 psf, although the actual pricing will depend on market conditions at the time of launch, which is expected by year-end.
CBRE Research said that units at 8@ Woodleigh and Woodsville 28 nearby were transacted in the subsale market at $865-1,130 psf in January-April this year. Both projects are also 99-year leasehold.
Qingdao's proposed scheme comprises 150-160 apartments, ranging from one to four-bedders. There will be two levels of basement carparking.
This will be Qingdao's third property development here. It is developing Natura Loft, a Design, Build and Sell Scheme project in Bishan, for HDB.
The company also has a 20 per cent stake in a light industrial development in the Kallang Pudding area.
Mr Zuo told BT that Qingdao plans to list its operations here on the Singapore bourse around late-2011 or early-2012. The company is part of QingJian Group in China.
Other bidders at yesterday's tender included Frasers Centrepoint, Sing Holdings, Hoi Hup, Sim Lian Land and Wah Khiaw Developments.
Colliers International said yesterday's top bid was 5 per cent shy of the $639 psf ppr that Wing Tai and Greatearth paid for the Ascentia Sky plot in the Alexandra Road area in December 2007.
That is the record price for condo land sold by the state in Rest of Central Region.
Qingdao Construction's bid is also 40 per cent above the $434 psf ppr that Frasers Centrepoint paid for the Woodsville 28 site in July 2007.
However, that site is farther from the MRT station.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
State land tenders still fetching record prices
Top bid for condo plot near Potong Pasir MRT is $607 psf ppr
By KALPANA RASHIWALA
A STATE tender for a 99-year leasehold private housing site next to Potong Pasir MRT Station has fetched a record land price for the area - $607 per square foot per plot ratio (psf ppr).
This is also the second highest price paid for a 99-year condo site sold by the state in Singapore's Rest of Central Region.
However, analysts point out that save for the top two bids - both of which were from foreign parties (Qingdao Construction of China and SP Setia Bhd of Malaysia) - the offers, from local players, were within expectations.
DTZ's South-east Asia research head Chua Chor Hoon observed that 'more foreign players are entering the local property development market as they see growth opportunities in Singapore'.
'As they've no or very little landbank in Singapore, they have to bid more aggressively than local developers to gain a foothold.'
Yesterday's tender drew a whopping 15 bids, as the plot's relatively small size rendered the total investment quantum affordable to a wider pool of contenders.
The competition among them, as well as the plot's choice location next to an MRT station close to the city, helped to create a bullish top bid, say industry players.
There was a significant gap between the top two bids, which came in at around $600 psf ppr, and the next three bids (from Koh Brothers, Far East Organization and Allgreen Properties), which congregated around the $500 psf ppr level. The lowest offer, from Hong Leong Group, was $321 psf ppr.
When the 53,516 sq ft site at Pheng Geck Avenue was launched in April, analysts had predicted bids of $450-560 psf ppr.
Qingdao Construction director Zuo Haibin acknowledged that his company's bid was 'not cheap', but noted that it had not been able to clinch any sites at state tenders in the past eight months.
Qingdao's breakeven cost is likely to be around $950 psf; it will handle the project's construction as well.
Mr Zuo added that the company is looking at an average selling price of about $1,000-1,050 psf, although the actual pricing will depend on market conditions at the time of launch, which is expected by year-end.
CBRE Research said that units at 8@ Woodleigh and Woodsville 28 nearby were transacted in the subsale market at $865-1,130 psf in January-April this year. Both projects are also 99-year leasehold.
Qingdao's proposed scheme comprises 150-160 apartments, ranging from one to four-bedders. There will be two levels of basement carparking.
This will be Qingdao's third property development here. It is developing Natura Loft, a Design, Build and Sell Scheme project in Bishan, for HDB.
The company also has a 20 per cent stake in a light industrial development in the Kallang Pudding area.
Mr Zuo told BT that Qingdao plans to list its operations here on the Singapore bourse around late-2011 or early-2012. The company is part of QingJian Group in China.
Other bidders at yesterday's tender included Frasers Centrepoint, Sing Holdings, Hoi Hup, Sim Lian Land and Wah Khiaw Developments.
Colliers International said yesterday's top bid was 5 per cent shy of the $639 psf ppr that Wing Tai and Greatearth paid for the Ascentia Sky plot in the Alexandra Road area in December 2007.
That is the record price for condo land sold by the state in Rest of Central Region.
Qingdao Construction's bid is also 40 per cent above the $434 psf ppr that Frasers Centrepoint paid for the Woodsville 28 site in July 2007.
However, that site is farther from the MRT station.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : S'pore developers tread softly amid China curbs
Business Times - 03 Jun 2010
S'pore developers tread softly amid China curbs
As tighter measures kick in, they will monitor situation before new launches
By UMA SHANKARI
(SINGAPORE) Even as China developers continue to delay home sales, their Singapore-listed counterparts are ploughing ahead with their Chinese project launches.
But some Singapore developers concede that they will be monitoring the market closely before fixing future launches. They also expect demand from homebuyers to soften over the rest of the year as the impact of China's recent tightening measures kick in.
Already, property signings in Beijing slumped nearly 70 per cent to 3,357 in May from April, the Shanghai Securities News reported on Tuesday citing data from bjfdc.gov.cn. In Shanghai, China's financial centre, transactions may have dropped about 70 per cent to 2,550 signings, and in the industrial city of Shenzhen, sales fell 62 per cent, the paper reported.
But the five developers BT contacted said that they have yet to see a significant drop-off in home sales.
CapitaLand, which has a pipeline of around 20,000 units in China, said that it sold over 200 homes in April and May. It remains 'on track' to launch three new residential projects in the second half of the year, a spokesman said.
Keppel Land also said that there is no change in the launch schedule of its projects, which are mostly townships, for this year.
'We target to launch another 3,400 homes across different cities in China this year, although we will monitor the market closely and adjust our sale launches accordingly,' said a Keppel Land spokesman.
Sales for Keppel Land's China properties have been 'encouraging'. The developer said it sold over 900 homes in its townships in April and May.
China-based Yanlord Land also said that it remains 'on track' with its delivery and development schedule. And GuocoLand, which has a 1,176-unit residential project in Tianjin in its portfolio, is now monitoring the market before fixing a launch date.
For now, most property groups are bracing themselves for a short-term fall in transaction volumes.
'The market remains volatile owing to concerns over new and potential government tightening measures,' said a spokesman for Yanlord Land. 'Many homebuyers have adopted a more cautious approach towards purchases, and this may lead to near-term softening of demand over the next 3-6 months.'
Said Ho Bee Investment's executive director Ong Chong Hua: 'The tightening measures are expected to continue to cool the market in terms of volume as well as capital values for the rest of the year.'
But the measures are healthy as they will prevent a bubble from forming and create a more sustainable and healthy residential market, Mr Ong added: 'In the mid to longer term, we are very confident about the residential market as it is underpinned by the shortage of homes to house a huge population base which has become more affluent through the last decade of rapid economic growth.'
Ho Bee's projects in China are still in the early stages of design and development, and so there are no launches planned yet.
Keppel Land also expects buying volume to taper down in the short term.
China has in recent weeks announced several measures to cool the property market as it tries to peel back a stimulus plan and a US$1.4 trillion lending binge that revived economic growth while raising the risk of asset bubbles.
Its government has restricted pre-sales by developers, curbed loans for third-home purchases, raised minimum mortgage rates and tightened downpayment requirements for second-home purchases.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
S'pore developers tread softly amid China curbs
As tighter measures kick in, they will monitor situation before new launches
By UMA SHANKARI
(SINGAPORE) Even as China developers continue to delay home sales, their Singapore-listed counterparts are ploughing ahead with their Chinese project launches.
But some Singapore developers concede that they will be monitoring the market closely before fixing future launches. They also expect demand from homebuyers to soften over the rest of the year as the impact of China's recent tightening measures kick in.
Already, property signings in Beijing slumped nearly 70 per cent to 3,357 in May from April, the Shanghai Securities News reported on Tuesday citing data from bjfdc.gov.cn. In Shanghai, China's financial centre, transactions may have dropped about 70 per cent to 2,550 signings, and in the industrial city of Shenzhen, sales fell 62 per cent, the paper reported.
But the five developers BT contacted said that they have yet to see a significant drop-off in home sales.
CapitaLand, which has a pipeline of around 20,000 units in China, said that it sold over 200 homes in April and May. It remains 'on track' to launch three new residential projects in the second half of the year, a spokesman said.
Keppel Land also said that there is no change in the launch schedule of its projects, which are mostly townships, for this year.
'We target to launch another 3,400 homes across different cities in China this year, although we will monitor the market closely and adjust our sale launches accordingly,' said a Keppel Land spokesman.
Sales for Keppel Land's China properties have been 'encouraging'. The developer said it sold over 900 homes in its townships in April and May.
China-based Yanlord Land also said that it remains 'on track' with its delivery and development schedule. And GuocoLand, which has a 1,176-unit residential project in Tianjin in its portfolio, is now monitoring the market before fixing a launch date.
For now, most property groups are bracing themselves for a short-term fall in transaction volumes.
'The market remains volatile owing to concerns over new and potential government tightening measures,' said a spokesman for Yanlord Land. 'Many homebuyers have adopted a more cautious approach towards purchases, and this may lead to near-term softening of demand over the next 3-6 months.'
Said Ho Bee Investment's executive director Ong Chong Hua: 'The tightening measures are expected to continue to cool the market in terms of volume as well as capital values for the rest of the year.'
But the measures are healthy as they will prevent a bubble from forming and create a more sustainable and healthy residential market, Mr Ong added: 'In the mid to longer term, we are very confident about the residential market as it is underpinned by the shortage of homes to house a huge population base which has become more affluent through the last decade of rapid economic growth.'
Ho Bee's projects in China are still in the early stages of design and development, and so there are no launches planned yet.
Keppel Land also expects buying volume to taper down in the short term.
China has in recent weeks announced several measures to cool the property market as it tries to peel back a stimulus plan and a US$1.4 trillion lending binge that revived economic growth while raising the risk of asset bubbles.
Its government has restricted pre-sales by developers, curbed loans for third-home purchases, raised minimum mortgage rates and tightened downpayment requirements for second-home purchases.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : Mezzanine loans revive as confidence returns
Business Times - 03 Jun 2010
Mezzanine loans revive as confidence returns
But banks' delay in foreclosing on defaulted loans seen as a drag
(NEW YORK) The W Hotel in Union Square has had an eventful six months. The 270-room hotel in New York City changed hands in December after the private equity division of Dubai World defaulted on a US$117 million mezzanine loan in the face of dwindling business. But the lender, LEM Mezzanine, could itself lose the hotel in the coming months as a result of its filing for bankruptcy protection this year.
Mezzanine loans, which are secured by stock or other ownership stakes in a company, became a popular form of secondary financing during the real estate boom, offering high returns to investors and high interest rates for borrowers. There is an estimated US$100 billion in mezzanine loans outstanding across the country, and when the economy slowed and business slumped they became a special headache for borrowers.
But despite built-in risks, lenders say mezzanine loans are beginning to resurface, albeit slowly.
'It's become something people want to do again,' said William Shanahan, vice-chairman at CB Richard Ellis who specialises in investment properties in New York. 'I think it's fair to say that right now, the desire to place mezzanine debt outweighs the demand for it, but a lot of people are looking to put mezzanine loans on their properties. There are a number of players out there right now.'
Like the level between the first and second floors for which it is named, mezzanine loans come second in priority to the first mortgage.
The loans are typically secured by stock in the company, so that if a property owner defaults, he risks not only handing over the keys to his building but also the equity tied to the asset. By comparison, when a borrower defaults on a first mortgage, only the property itself is at stake.
As a result, many building owners who financed property at the height of the real estate bubble, including the proprietors of the W Hotel and the Hancock Tower in Boston, were at the mercy of mezzanine lenders after the economy turned down, profits shrank and junior loans swirled into default.
In March last year, Normandy Real Estate Partners, based in New Jersey, took control of the Hancock Tower, the tallest building in New England, by quietly buying up mezzanine debt shortly after the property's owner, Broadway Partners, defaulted on loan payments.
But as banks begin to provide more senior financing on commercial assets and investor confidence returns to the market, so too will increased demand for new mezzanine loans, lenders said.
Since January, an estimated US$374 million in mezzanine and other secondary loans have been issued across the country, an increase from just US$210 million in all of last year, according to data provided by Jones Lang LaSalle, the Chicago-based commercial real estate services firm.
Typically, borrowers who are unable to secure all of their financing needs for a property acquisition with a first mortgage have few options other than a mezzanine loan, mainly because first mortgage lenders usually demand locked-in agreements barring a second mortgage with similar terms.
'Little by little, you're going to have more liquidity in the market, which means the volume of mezzanine lending is going to increase,' said Bruce Batkin, the president of Terra Capital Partners, a real estate investment company based in New York. 'I think that's going to be happening in the second half of the year.'
The Pembrook Group, a fund management company based in Harrison, NY, is expected to originate as much as US$100 million in mezzanine debt by the end of the year, including half a dozen pending deals in Chicago, California, Florida and Texas, said John Garth, a managing director in the New York City office of the six-year-old company.
In late January, the group placed a US$12 million mezzanine loan at an office park outside Pittsburgh owned by the Keystone Property Group, which secured a US$42 million mortgage from Deutsche Bank, Mr Garth said.
'Money has become much more available and at much more attractive rates in the last 90 days, and business is getting signed up and closed,' said Mr Garth, who said that Pembrook originated about US$250 million in mezzanine loans in 2006, at the peak of the market. 'It's literally been since the first of February that we've seen a lot of competition on high-quality deals, from Wall Street shops, banks and insurance companies.'
At the Partners Group, a private asset manager based in Switzerland, demand for mezzanine loans has escalated significantly since January, said Eliza Bailey, a senior vice-president in the company's San Francisco office. She predicted that by the end of this year, the group would place upwards of US$300 million in mezzanine debt, both nationally and globally.
Among the Partners Group's recent deals, she said, was a US$10 million mezzanine loan on a portfolio of commercial buildings throughout the United States, as well as an US$11.3 million loan on a collection of residential assets in Germany.
'It's improved dramatically in 2010 as far as the quality of the new asset deals that are in the market,' Ms Bailey said. 'There's more visibility to value the underlying assets, and there's a little bit more of a market acceptance of where we are in the cycle. In 2009, I don't think anybody was clear about where we were or where we were headed.'
Dan Gorczycki, a managing director at Savills, said that until banks ramped up efforts to foreclose on defaulted loans, rather than extend them indefinitely, mezzanine lending opportunities would continue to be relatively scarce. The so-called extend-and-pretend strategy practised by banks, he said, has prevented many commercial properties from returning to the market and, subsequently, from being refinanced with the help of mezzanine debt.
'Now that the market's recovered, some banks are getting tougher, but other banks are saying, 'Let's give these guys some more time to work things out',' . Mr Gorczycki said.
'When nobody's forced to sell, there's nothing left to buy,' he added\. \-- NYT
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Another owner? The W Hotel may change hands again as LEM Mezzanine files for bankruptcy protection
Mezzanine loans revive as confidence returns
But banks' delay in foreclosing on defaulted loans seen as a drag
(NEW YORK) The W Hotel in Union Square has had an eventful six months. The 270-room hotel in New York City changed hands in December after the private equity division of Dubai World defaulted on a US$117 million mezzanine loan in the face of dwindling business. But the lender, LEM Mezzanine, could itself lose the hotel in the coming months as a result of its filing for bankruptcy protection this year.
Mezzanine loans, which are secured by stock or other ownership stakes in a company, became a popular form of secondary financing during the real estate boom, offering high returns to investors and high interest rates for borrowers. There is an estimated US$100 billion in mezzanine loans outstanding across the country, and when the economy slowed and business slumped they became a special headache for borrowers.
But despite built-in risks, lenders say mezzanine loans are beginning to resurface, albeit slowly.
'It's become something people want to do again,' said William Shanahan, vice-chairman at CB Richard Ellis who specialises in investment properties in New York. 'I think it's fair to say that right now, the desire to place mezzanine debt outweighs the demand for it, but a lot of people are looking to put mezzanine loans on their properties. There are a number of players out there right now.'
Like the level between the first and second floors for which it is named, mezzanine loans come second in priority to the first mortgage.
The loans are typically secured by stock in the company, so that if a property owner defaults, he risks not only handing over the keys to his building but also the equity tied to the asset. By comparison, when a borrower defaults on a first mortgage, only the property itself is at stake.
As a result, many building owners who financed property at the height of the real estate bubble, including the proprietors of the W Hotel and the Hancock Tower in Boston, were at the mercy of mezzanine lenders after the economy turned down, profits shrank and junior loans swirled into default.
In March last year, Normandy Real Estate Partners, based in New Jersey, took control of the Hancock Tower, the tallest building in New England, by quietly buying up mezzanine debt shortly after the property's owner, Broadway Partners, defaulted on loan payments.
But as banks begin to provide more senior financing on commercial assets and investor confidence returns to the market, so too will increased demand for new mezzanine loans, lenders said.
Since January, an estimated US$374 million in mezzanine and other secondary loans have been issued across the country, an increase from just US$210 million in all of last year, according to data provided by Jones Lang LaSalle, the Chicago-based commercial real estate services firm.
Typically, borrowers who are unable to secure all of their financing needs for a property acquisition with a first mortgage have few options other than a mezzanine loan, mainly because first mortgage lenders usually demand locked-in agreements barring a second mortgage with similar terms.
'Little by little, you're going to have more liquidity in the market, which means the volume of mezzanine lending is going to increase,' said Bruce Batkin, the president of Terra Capital Partners, a real estate investment company based in New York. 'I think that's going to be happening in the second half of the year.'
The Pembrook Group, a fund management company based in Harrison, NY, is expected to originate as much as US$100 million in mezzanine debt by the end of the year, including half a dozen pending deals in Chicago, California, Florida and Texas, said John Garth, a managing director in the New York City office of the six-year-old company.
In late January, the group placed a US$12 million mezzanine loan at an office park outside Pittsburgh owned by the Keystone Property Group, which secured a US$42 million mortgage from Deutsche Bank, Mr Garth said.
'Money has become much more available and at much more attractive rates in the last 90 days, and business is getting signed up and closed,' said Mr Garth, who said that Pembrook originated about US$250 million in mezzanine loans in 2006, at the peak of the market. 'It's literally been since the first of February that we've seen a lot of competition on high-quality deals, from Wall Street shops, banks and insurance companies.'
At the Partners Group, a private asset manager based in Switzerland, demand for mezzanine loans has escalated significantly since January, said Eliza Bailey, a senior vice-president in the company's San Francisco office. She predicted that by the end of this year, the group would place upwards of US$300 million in mezzanine debt, both nationally and globally.
Among the Partners Group's recent deals, she said, was a US$10 million mezzanine loan on a portfolio of commercial buildings throughout the United States, as well as an US$11.3 million loan on a collection of residential assets in Germany.
'It's improved dramatically in 2010 as far as the quality of the new asset deals that are in the market,' Ms Bailey said. 'There's more visibility to value the underlying assets, and there's a little bit more of a market acceptance of where we are in the cycle. In 2009, I don't think anybody was clear about where we were or where we were headed.'
Dan Gorczycki, a managing director at Savills, said that until banks ramped up efforts to foreclose on defaulted loans, rather than extend them indefinitely, mezzanine lending opportunities would continue to be relatively scarce. The so-called extend-and-pretend strategy practised by banks, he said, has prevented many commercial properties from returning to the market and, subsequently, from being refinanced with the help of mezzanine debt.
'Now that the market's recovered, some banks are getting tougher, but other banks are saying, 'Let's give these guys some more time to work things out',' . Mr Gorczycki said.
'When nobody's forced to sell, there's nothing left to buy,' he added\. \-- NYT
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Another owner? The W Hotel may change hands again as LEM Mezzanine files for bankruptcy protection
Wednesday, June 2, 2010
ST Forum : Share details of lift upgrading costs with residents
Jun 2, 2010
Share details of lift upgrading costs with residents
THE estate I live in has been selected for the Lift Upgrading Programme (LUP). Though I am not required to vote and share the LUP cost as I am residing on a lift-landing floor, I laud the programme for the greater convenience it affords the residents, especially the elderly.
HDB has also thoughtfully introduced affordable payment schemes for those residents who have financial difficulties.
LUP is a cost-sharing programme with the Government and town councils subsidising a substantial part of the total upgrading cost. Residents benefiting from it may be paying only a small fraction of the cost, subject to a cap of $3,000 for Singapore citizen households. HDB should reveal more details on lift construction costs to the residents so they understand what they are paying for.
Take a three-room flat in a standard block for example. The information contained in the provided brochure indicated that the Government pays $19,800 or 90 per cent, the town council pays $1,100 or 5 per cent, and each household pays $1,100 or 5 per cent.
Do all these estimated amounts mean each household would have had to pay an estimated $22,000 without subsidies?
But with subsidies, each would pay only $1,100?
If 32 households benefit in one three-room standard block, based on $22,000 (without subsidy) per household, does this mean the estimated cost of adding one new lift to one such block is about $704,000?
I believe HDB would have the lift-construction costs prior to dividing the estimated shared amounts payable by the three parties, but there is no information regarding this in the brochure.
HDB should provide in the brochure the estimated total construction cost of adding one new lift to the block slated for upgrading so that the residents can understand even better and vote confidently for the LUP without any doubt.
Loh Ching Tiam
Share details of lift upgrading costs with residents
THE estate I live in has been selected for the Lift Upgrading Programme (LUP). Though I am not required to vote and share the LUP cost as I am residing on a lift-landing floor, I laud the programme for the greater convenience it affords the residents, especially the elderly.
HDB has also thoughtfully introduced affordable payment schemes for those residents who have financial difficulties.
LUP is a cost-sharing programme with the Government and town councils subsidising a substantial part of the total upgrading cost. Residents benefiting from it may be paying only a small fraction of the cost, subject to a cap of $3,000 for Singapore citizen households. HDB should reveal more details on lift construction costs to the residents so they understand what they are paying for.
Take a three-room flat in a standard block for example. The information contained in the provided brochure indicated that the Government pays $19,800 or 90 per cent, the town council pays $1,100 or 5 per cent, and each household pays $1,100 or 5 per cent.
Do all these estimated amounts mean each household would have had to pay an estimated $22,000 without subsidies?
But with subsidies, each would pay only $1,100?
If 32 households benefit in one three-room standard block, based on $22,000 (without subsidy) per household, does this mean the estimated cost of adding one new lift to one such block is about $704,000?
I believe HDB would have the lift-construction costs prior to dividing the estimated shared amounts payable by the three parties, but there is no information regarding this in the brochure.
HDB should provide in the brochure the estimated total construction cost of adding one new lift to the block slated for upgrading so that the residents can understand even better and vote confidently for the LUP without any doubt.
Loh Ching Tiam
ST : China's property market tipped for further growth
Jun 2, 2010
sme spotlight
China's property market tipped for further growth
EVEN though it is a relatively new industry, China's property market has a huge potential to grow over the next decade or so, said Mr Zhu Zhong Yi, vice-president of the China Real Estate Association.
Mr Zhu was in Singapore yesterday to speak at the inaugural Singapore Sino Property Investment Forum held at Orchard Parade Hotel.
Speaking in Mandarin, he said that to ensure healthy growth and stability in the property market, China needs to adopt a number of measures.
He said the Chinese government and industry players should focus on raising living standards and ensuring that people can afford to own property.
To do that, the government has to properly regulate market prices, he added.
Mr Zhu noted that property prices are rising at different rates in different parts of China. The government needs to introduce some control to ensure the stability of the property market, he said.
He added that residential property development in China should be sustainable.
A sustainable approach benefits the environment, and it also brings about about cost-savings for developers, he said.
Other speakers at the forum included Ms Lim Bee Imm, senior manager of property sales at leading local developer Far East Organization, and Mr Nicholas Mak, a real estate lecturer from Ngee Ann Polytechnic.
LEE YEN NEE
sme spotlight
China's property market tipped for further growth
EVEN though it is a relatively new industry, China's property market has a huge potential to grow over the next decade or so, said Mr Zhu Zhong Yi, vice-president of the China Real Estate Association.
Mr Zhu was in Singapore yesterday to speak at the inaugural Singapore Sino Property Investment Forum held at Orchard Parade Hotel.
Speaking in Mandarin, he said that to ensure healthy growth and stability in the property market, China needs to adopt a number of measures.
He said the Chinese government and industry players should focus on raising living standards and ensuring that people can afford to own property.
To do that, the government has to properly regulate market prices, he added.
Mr Zhu noted that property prices are rising at different rates in different parts of China. The government needs to introduce some control to ensure the stability of the property market, he said.
He added that residential property development in China should be sustainable.
A sustainable approach benefits the environment, and it also brings about about cost-savings for developers, he said.
Other speakers at the forum included Ms Lim Bee Imm, senior manager of property sales at leading local developer Far East Organization, and Mr Nicholas Mak, a real estate lecturer from Ngee Ann Polytechnic.
LEE YEN NEE
TODAY ONLINE : Two mansions up for sale
Two mansions up for sale
05:55 AM Jun 01, 2010
SINGAPORE - Two freehold residential sites have been put up for collective sale for the same asking price - at least $22.5 million each - while another en bloc deal has been sealed for $95 million.
The 11-storey Waldorf Mansions in the Balestier area was built in the 1990s and occupies 11,384 square feet. Under the Master Plan 2008, the site is zoned for residential development and can be built up to a height of 36 storeys.
Foh Pin Mansion, at the junction of Charlton and Upper Serangoon roads, is a 30-year-old apartment block with 21 units. It sits on a 34,154-sq-ft site which, according to the same Master Plan, can be redeveloped into a three-storey mixed landed housing development.
The launch of both tenders yesterday came as it emerged that Pender Court condominium off West Coast Highway had been sold for $95 million - making it the seventh en bloc sale of the year, according to Mr Karamjit Singh, managing director of Credo Real Estate, which marketed the site.
The amount is under the minimum asking price of $100 million, but would nonetheless reap the owners of the 48 units nearly $2 million each.
As the agent also for Waldorf Mansion, Credo said the new site could yield some 50 residential units. The $22.5 million price tag would equate to $709 psf per plot ratio inclusive of development charge - meaning the developer would expect to break-even at about $1,100 psf, Credo added.
Ngee Ann Polytechnic real estate lecturer Nicholas Mak expects the site to draw small developers because of the lack of small plots in the Government Land Sales programme; and its freehold status means they can sit on the site should the market fall.
Savills Singapore, which is handling the Foh Pin Mansion sale, expects the property - which is in an established estate - to draw a strong response in view of the keen bidding for recent Government land sales in the area.
The tender for Foh Pin Mansion closes on June 28 and that for Waldorf Mansions the day after.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
05:55 AM Jun 01, 2010
SINGAPORE - Two freehold residential sites have been put up for collective sale for the same asking price - at least $22.5 million each - while another en bloc deal has been sealed for $95 million.
The 11-storey Waldorf Mansions in the Balestier area was built in the 1990s and occupies 11,384 square feet. Under the Master Plan 2008, the site is zoned for residential development and can be built up to a height of 36 storeys.
Foh Pin Mansion, at the junction of Charlton and Upper Serangoon roads, is a 30-year-old apartment block with 21 units. It sits on a 34,154-sq-ft site which, according to the same Master Plan, can be redeveloped into a three-storey mixed landed housing development.
The launch of both tenders yesterday came as it emerged that Pender Court condominium off West Coast Highway had been sold for $95 million - making it the seventh en bloc sale of the year, according to Mr Karamjit Singh, managing director of Credo Real Estate, which marketed the site.
The amount is under the minimum asking price of $100 million, but would nonetheless reap the owners of the 48 units nearly $2 million each.
As the agent also for Waldorf Mansion, Credo said the new site could yield some 50 residential units. The $22.5 million price tag would equate to $709 psf per plot ratio inclusive of development charge - meaning the developer would expect to break-even at about $1,100 psf, Credo added.
Ngee Ann Polytechnic real estate lecturer Nicholas Mak expects the site to draw small developers because of the lack of small plots in the Government Land Sales programme; and its freehold status means they can sit on the site should the market fall.
Savills Singapore, which is handling the Foh Pin Mansion sale, expects the property - which is in an established estate - to draw a strong response in view of the keen bidding for recent Government land sales in the area.
The tender for Foh Pin Mansion closes on June 28 and that for Waldorf Mansions the day after.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
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