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.

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.

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.

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

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

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.

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

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.

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.

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.

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.

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

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

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

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

TODAY ONLINE : Prime office rentals to rise 'strongly' in H2

Prime office rentals to rise 'strongly' in H2

05:55 AM Jun 02, 2010

by Julie Quek

SINGAPORE - Office rentals for international Grade A office space in Singapore's prime financial district look set to climb higher by at least 25 per cent over the next two years.

This was the view of property analysts who believe that office property rents have already reached bottom, and will likely see a strong pick-up from the second half of this year.

"International Grade A" refers to a new generation of office buildings in Singapore that are less than 10 years old, such as the Marina Bay Financial Centre (MBFC) and One Raffles Quay.

However, office rentals for Grade A-minus or Grade B buildings - developments in the financial district that are more than 10 years old - may still remain soft, said Mr Donald Han, managing director of Cushman and Wakefield.

A key driver propelling rents up is the strong demand from financial institutions and law firms for such International Grade A office property, said Mr Han.

He pointed out that these big players are moving to the MBFC so that they can expand and consolidate all their offices in one location.

"Companies are also looking to expand their offices this year, due mainly to the stronger than expected Singapore economy seen in the first quarter," said Mr Han.

Mr Tony Darwell, Nomura Singapore's executive director, noted that during from late 2007 to end of 2008, many companies faced a shortage of available office property space in Singapore.

As a result, many banks had to compromise and site their offices in different locations, said Mr Darwell.

Over the past six months, he has seen a surge of precommitment deals for International Grade A office space.

"In fact, some companies are even committing as early as one year before their current lease expires," said Mr Darwell.

Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved

BT : Housing problem worse than US

Business Times - 02 Jun 2010

Housing problem worse than US

It could stoke public discontent, warns a central bank adviser

(BEIJING) China's housing market problems are worse than those in the US before the global downturn as they could stoke public discontent, warned a central bank adviser.

The comments were made before China's State Council, or cabinet, announced that it would 'gradually reform the real estate tax' - the first official sign of a possible annual levy on residential housing aimed at reining in soaring prices.

'The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,' said Li Daokui, a member of the bank's monetary policy committee. 'It is more than (just) a bubble problem,' he told the Financial Times in an interview published yesterday.

The property market in the US collapsed as too many people were unable to repay their high-risk, or sub-prime mortgages, leading to a credit crunch in which thousands lost their homes and lending dried up. China has recently introduced a range of measures to prevent the growth of asset bubbles and soaring property prices.

The latest tax plan was expected to discourage property speculation and help replenish the coffers of local governments, which have been severely depleted by an investment binge over the past year, Chinese media reports have said.

Mr Li said that recent government measures to rein in the property market needed to be part of a long-term push to bring high housing prices under control, the Financial Times reported.

He warned that the high cost of housing could hamper future growth by slowing urbanisation. Rising prices were also a potential political flashpoint, especially among younger people who felt locked out of having their own home.

'When prices go up, many people, especially young people, become very anxious,' he said. 'It is a social problem.'

He added that there were still signs that the economy was overheating and recommended modest increases in deposit interest rates and the value of the Chinese currency, the report said.

Authorities have tightened restrictions on advance sales of new property developments, introduced new curbs on loans for third home purchases, and raised minimum downpayments for second homes.

Official data showed that real estate prices in 70 cities jumped 12.8 per cent in April, the fastest year-on-year rise for a single month in five years. -- AFP

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.



Stacking it higher: Li Daokui, a member of the bank's monetary policy committee, says that recent measures to rein in the property market needs to be part of a long-term push to bring high housing prices under control

TODAY ONLINE : Realtors body does not condone 'scare tactics'

Realtors body does not condone 'scare tactics'

05:55 AM Jun 01, 2010

by Joanne Chan



SINGAPORE - Property agents have been urged to be responsible in the light of "scare tactics" on clients' concerns.

Emails forwarded to MediaCorp detailed how some agents are highlighting the Government's recent land sales to lower client expectations of property prices. These emails detail correspondence between agents of real estate firm ERA.

In one email, a senior division director drew attention to a news report on land released for private homes. He called on agents to use the news as "a bargaining point to lower down your private residential seller's high expectations".

This prompted another agent to disclose that she closed a deal after telling her client that the "market is going to crash".

Industry observers said the gap between buyers' and sellers' expectations is widening due to mixed market sentiment.

ERA said it did not have specific guidelines on how agents should communicate with clients, as long as the information presented is factually correct. Mr Eugene Lim, ERA Asia-Pacific's associate director, said: "It could be wrong usage of the word or overly strong usage of the word". What the agent was trying to say was that there will be downward pressure on prices because supply is increasing. It is also a matter of perspective and opinion.

"Today's sellers" are not "spooked by language", as most have sufficient information to form an opinion, he added.

Mr Steven Tan, advisory committee member of Singapore Accredited Estate Agencies (SAEA), said such conduct is not condoned by the industry. Telling the seller that the market is going to crash will ultimately make the seller dispose of his property at a price below expectation.

"Instead, the agent should provide more comprehensive analysis of the market condition and get the best possible price for the seller," he said.

Dr Tan Tee Khoon, SAEA's chief executive officer, said it may not have been a scare tactic. Agents may be informing sellers about the likely implications of the land release, and if the latter intends to postpone selling - thinking that prices will continue to rise - such expectations may not be realised. It could have been "responsible advice to make hay while the sun shines and sell at the best price".

It is also "not untrue that prices may falter in due course" and sellers may not get the best deal if they delay, he added.

The National Development Ministry is setting up a statutory board, the Council for Estate Agencies, to implement a regulatory framework for real estate agents. Consumers who feel they have been disadvantaged or misled by agencies or agents can report such matters to the new council.

Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved

BT : Property sales dive 70% in Beijing and Shanghai

Business Times - 02 Jun 2010

Property sales dive 70% in Beijing and Shanghai

Developers delay launches on govt tightening measures

(BEIJING) Property sales in Beijing, Shanghai and Shenzhen fell as much as 70 per cent in May as developers delay sales following government tightening measures.

In China's capital Beijing property signings slumped nearly 70 per cent to 3,357 in May from April, the Shanghai Securities News reported, citing data from bjfdc.gov.cn. In Shanghai, the nation's financial centre, transactions may have dropped about 70 per cent to 2,550 signings, the paper reported, and in the industrial city of Shenzhen, sales fell 62 per cent.

China has restricted pre-sales by developers, curbed loans for third-home purchases, raised minimum mortgage rates and tightened down-payment requirements for second-home purchases. The government is trying to peel back a stimulus plan and US$1.4 trillion lending binge that revived economic growth while raising the risk of asset bubbles.

'The government should have put in tougher enforcement earlier to prevent the high prices,' said Lu Qilin, a Shanghai- based researcher at UWin. 'If the government doesn't stop this soon, the bubble will burst.'

An index tracking 34 real estate firms traded in Shanghai fell 2.2 per cent as of 1:13 pm yesterday, extending this year's loss to 30 per cent. China Vanke Co, the nation's biggest listed developer, dropped 1.3 per cent to 7.12 yuan. Poly Real Estate Group Co declined 3.9 per cent to 10.62 yuan.

Copper, aluminium and zinc also declined on concern slumping property transactions and slowing manufacturing growth in China, the world's biggest metals consumer, may hurt demand for commodities. Lead, nickel and tin fell.

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. Transactions for new homes in Shanghai fell 56 per cent in the month to May 16 from a month ago, to 520,000 square metres (5.6 million square feet), Mr Lu said.

Most developers are postponing project launch dates and are waiting to see market developments before finally pricing new projects, said Oscar Choi and Marco Sze, Hong Kong-based analysts at Citigroup Inc in a report distributed yesterday.

China's property market problems are worse than in the US or UK before the financial crisis, the Financial Times said yesterday, citing an interview with Li Daokui, a member of the Chinese central bank's monetary policy committee. The country's housing market problems combine a possible bubble with the risk of social discontent, he said.

China's State Council approved the National Development and Reform Commission's gradual property tax reform, according to a statement on the Chinese government website on Monday.

Shanghai's plan to begin a property tax on residential real estate has been submitted to the Chinese central government for review, the China Securities Journal reported on Monday. The city may impose the tax on people without residence permits and those who do not file income tax declarations for three years or more, the report said, citing unidentified people.

Shanghai developers have delayed sales of new residences because the municipal government hasn't announced its property policy, the Oriental Morning Post reported on Monday, citing unidentified developers. Only 46 of a scheduled 96 developments were put on sale for the month as of May 28, the newspaper reported, citing Soufun.com, a real estate data research website.

'We expect more measures to be introduced on developers, especially those to monitor construction schedule and restrict cash flow, thus pushing developers to cut the price earlier,' the Citigroup analysts wrote.

Shi Weijian, an analyst at Jianghai Securities, said Shanghai's government may announce a property tax as early as this month, which will likely be implemented at the end of the year. Shanghai home prices may fall between 25 per cent and 30 per cent from the introduction, he said.

Gao Jian, a Shanghai-based analyst at Northeast Securities, forecast a drop of prices of about 20 per cent should a property tax come into effect.

'We've seen downward pressure of housing transactions and prices, and the correction is likely to continue in the next one to two years,' he said. -- Bloomberg

Housing problem worse than US, Page 16

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.



Pulling the brakes: China has restricted pre-sales by developers, curbed loans for third-home purchases, raised minimum mortgage rates and tightened down-payment requirements for second-home purchases

BT : JTC awards Tampines industrial site tender

Business Times - 02 Jun 2010

JTC awards Tampines industrial site tender

JTC Corporation yesterday said it has awarded the tender for an industrial site at Tampines Industrial Avenue 4 to Soon Hock Tuas Development, which trumped nine other bidders at the close of the government's tender on May 12.

Soon Hock Tuas Development submitted the highest bid of $33.1 million for the 30-year-lease plot, which has a land area of 538,000 square feet. The price works out to $62 per square foot per plot ratio (psf ppr). The site has a gross plot ratio of 0.64 to 0.8.

Soon Hock Tuas Development's bid was slightly higher than market expectations. When the site was launched, analysts said that the land parcel can fetch $40-$50 psf ppr, which translates to some $17.2 to $21.5 million for the entire plot.

The developer's bid was also 7 per cent higher than the second highest bid of $31 million put in by Tat Hong Holdings and more than three times the amount of the lowest bid from Yee Lee Development, which offered $10.2 million.

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.