Betting on retail assets

Asia's retail and hospitality sectors are expected to benefit from strong growth in intra-regional travel, reports UMA SHANKARI

DEVELOPERS are investing in the retail and hospitality sectors in Singapore and the rest of Asia in a big way, banking on an expected surge in retail spending and tourism.

Consumer spending in the region is supported by rising income levels that are translating into retail sales and the development of the shopping scene into something closer to that in the US and Europe. One clear sign of positive retail sentiment is that many international and luxury brands are expanding into major retail hubs across Asia, CB Richard Ellis (CBRE) points out.

Some of the world's biggest names, including Bulgari and Giorgio Armani, unveiled flagship stores in Tokyo in the fourth quarter of 2007 - despite Japan's overall sluggish economic recovery.

The rise in retail spending in Asia is also driven by growing intra-regional tourism, industry players say.

Asia continues to benefit from its position as the world's second-most visited region after Europe, achieving record growth in terms of hotel occupancy and average room rates in 2007.

South Asia and South-east Asia in particular enjoyed double-digit growth in revenue per available room, with South Asia seeing a 40.4 per cent increase and South-east Asia seeing 16.9 per cent growth, according to data from industry body, the Pacific Asia Travel Association (Pata).

Cushman & Wakefield (C&W) noted in a recent report: 'Inter-regional in-bound visitors are expected to continue in the medium-term, but the greatest growth will be intra-regional through the continuing expansion of road and air routes throughout Asia, including budget airlines, as well as the enhanced capacity of the new aircraft - the A380 and B787.'

Intra-Asia travel is expected to be especially strong on two routes - Hong Kong traffic into Japan is expected to grow 17 per cent from 2007 to 2009, while the number of visitors from the Chinese mainland to Singapore is expected to grow 16 per cent in the same period.

In view of all this, it is perhaps not surprising that investors and developers are forking out big bucks for retail and hospitality property such as hotels, serviced apartments and malls, as well as assets such as retail and hotel-based real estate investment trusts (Reits).

The interest in retail assets is driven by expectations of a broad-based increase in rents and capital values in Singapore, brought on by increased retail spending.

Singapore's retail sector was especially active in 2007, with retail sales totalling some $23.8 billion - 7.1 per cent higher than in 2006. This year, retail sales are expected to grow about 5-10 per cent and demand for retail space is expected to remain strong.

In a recent report, Credit Suisse said it expects retail growth here to be supported by benign economic indicators, high population growth, increasing household income, tourism growth and other 'feel-good' factors.

'This is expected to drive rentals up 5-10 per cent, translating into 10 per cent rental revenue growth for suburban malls and 20 per cent for central malls in 2008 given strong reversions,' Credit Suisse analysts Shirley Wong and Leng Chye Teo said.

The research team recently initiated coverage of three Singapore-listed retail Reits: CapitaMall Trust, Frasers Centrepoint Trust and Macquarie Meag Prime Reit, with 'outperform' calls on the first two and a 'neutral' call on the third.

CBRE said similarly that retail rents are likely to increase in 2008, albeit at a more moderate rate due to an abundance of choice for retailers as a significant amount of new space comes on stream. 'We expect both Orchard Road and suburban mall rents to increase 3-5 per cent in 2008, down from our earlier estimate of 4-7 per cent for Orchard Road and 3-6 per cent for suburban malls,' CBRE said.

However, the retail sector here will have to grapple with downside risks such as rising inflation, the trickle- down impact of the US sub-prime mortgage crisis and lacklustre global stock markets, property analysts say.

The outlook for the hospitality sector is a bit more bullish. In particular, Singapore, which enjoyed record growth in terms of both occupancy and room rates in 2007, is expected to see more corporate and meetings, incentives, conventions & exhibitions (MICE) travellers. Industry players believe this segment will continue to grow even if leisure tourism were to slow.

Hoteliers here have told BT they expect room rates to shoot up another 25-40 per cent this year, driven by the Formula One Grand Prix race and the tight supply of hotel rooms. Room rates rose 15-25 per cent in 2007.

One new trend that is expected to shake up both the retail and hospitality sectors across Asia is the arrival of gaming in a big way.

Right now, roulette wheels are spinning and jackpot machines are whirring in casinos across a dozen Asian countries, C&W noted in a report.

Investment in casinos is continuing apace in Macau - thought by many to be Asia's gambling capital - where there are currently more than 20 casino complexes. Singapore is about to open its own two integrated resorts, while Japan is moving closer to an overhaul of its strict gambling laws - which could see luxury casino complexes opening in Tokyo and on the southern island of Okinawa by 2012. Other countries reportedly considering lifting bans on casinos include Taiwan, Thailand and Indonesia.

Said C&W: 'Governments may not always be totally happy with the idea of their citizens gambling, or tourists pouring in for slot machines and blackjack, but Macau's US$7.2 billion in gaming income, US$15 billion in investment in just five years, 68.7 per cent surge in construction investment, an 80 per cent rise in property transactions, large-scale convention centre and hotel construction, thousands of new jobs and 19 per cent per annum retail sales growth are mighty powerful inducements - and most (governments) seem to think these are numbers worth betting on.'

Source : Business Times - 15 Apr 2008

Changing home investment scene

Non-landed residential market most likely to gain from influx of foreign talent, say CHUA YANG LIANG and JACQUELINE WONG

SINGAPORE'S non-landed residential market put in a strong performance last year, sub-prime notwithstanding, driven by the luxury and prime segments whose resale capital values saw stunning year-on-year growth of 51.7 per cent and 50.6 per cent respectively.

Lights, camera, action: Key projects and events, including the Marina Bay Sands integrated resort (above), the Singapore Formula One Grand Prix and the Singapore Youth Olympics in 2010, will push Singapore up a notch on the tourist destination list and also increase the expatriate work force and demand for housing

The buoyant buying sentiment coupled with high global liquidity helped propel high-end condominium prices beyond the $4,000 per square foot mark, with one new development reportedly closing at $5,000 psf - a historic milestone.

Spurred by the large gap of around 35 per cent between resale and new residential launch prices in prime districts (9-11), investor interest was at a crest in 2007. There was $8.5 billion worth of collective sales transacted by institutional investors and developers. This is 18 per cent more than the value of en bloc deals done in 2006 and 2005 put together ($7.2 billion).

With the new en bloc regulations introduced last October, overall costs of collective sale deals have risen and coupled with the overall cautious sentiment, the level of en bloc transactions will be more moderate in 2008.

The euphoria in the non-landed residential market is an unexpected by-product of an enlarged foreign population that catapulted leasing demand to a new level and changed the residential investment climate. While the clouds brought on by the US sub-prime debacle remain in the short term, the long-term outlook is positive.

Shifting buyer demographics

As the birth rate of the indigenous population is below replacement level, immigration is necessary to sustain the continued growth of the local economy. In 2007, the total population stood at 4.59 million with foreigners making up well over a million. This is an increase of 33 per cent from the 750,000 foreigners recorded in 2000.

Naturally, the residential market feels the impact of this sudden influx. The ratio of Singaporean buyers in the Core Central region today is less than half while foreigners of non-resident status have edged up to a quarter of the total buyers. Although less pronounced in the Outside Central region, foreign ownership (excluding companies) has also increased by some nine percentage points.

Continual government efforts to attract foreign investments and immigration-friendly policies to support this long-term economic growth will benefit the residential market tremendously.

Last year, the Economic Development Board brought in more than $16 billion worth of commitments in fixed-asset investment. These are expected to create some 28,600 new jobs and add $11.6 billion per year to Singapore's GDP. This strong job creation benefited both locals and foreigners - local employment grew by 92,100 while foreign employment jumped by a remarkable 144,500. As a result of the slower growth in Singapore's indigenous work force and a faster increase in employment opportunities, one out of three of the 2.73 million people employed in Singapore is a foreigner.

Continual population growth is essential to fuel our economic engine. The estimated population of 6.5 million is projected to be met in 40 to 50 years' time, predominantly through immigration. These foreigners do not qualify for subsidised public housing and require ministerial approval for the purchase of any landed properties. So the non-landed residential market is likely to feel the bulk of this demand.

Just in 2007 alone, foreigners and permanent residents (PRs) chalked up 8,884 units in sales (some 77.8 per cent higher than 2006), which accounts for 29.1 per cent of total private non-landed residential transactions. This sales figure is the highest in 13 years and is likely to rise further over time.

While foreign purchasers are still predominantly from our neighbouring countries - Indonesia, Malaysia and Thailand - the buyers are increasingly becoming more diversified. The next emerging groups are South Koreans (7 per cent), mainland Chinese (7 per cent) and Indians (12 per cent). Notable countries making their first foray into the Singapore market include Myanmar, the Middle East, Russia and Ireland.

Return of corporate buyers

Another rising trend is residential investments made by property funds and financial institutions since 2003. Attracted by yields above 4 per cent between 2003 and H105, these foreign institutional investors snapped up residential units to inject into their yield-focused investment portfolios. In the last 12 months, although yields have compressed to below 4 per cent, interest from Middle Eastern funds and opportunistic funds has been strong.

Out of the total $2.6 billion worth of non-landed residential developments, 42 per cent was transacted by these funds, and included anything from several units to whole condominium blocks and even development sites. These investors include Macquarie Global Property Advisors, Kuwait Finance House and US-based Wachovia Development.

Institutional investors remain optimistic about the upside potential of the Singapore residential market. Many of these investors are looking at total return, that is, including capital appreciation rather than just income yield. The majority of the investors have pumped these projects into their investment portfolio.

The minority have exited by riding on local capital growth or price differential when these properties were marketed in the home country of these foreign funds. This trend of institutional buyers in the residential market is likely to remain. Their interest is fuelled by the remaking of Singapore where several new developments and initiatives have been slated to transform it into a global city.

New lifestyle

With tourism a key component of GDP, two massive integrated resorts are now under construction - Marina Bay Sands, located at Marina South (completion in 2009) and Resorts World at Sentosa (completion in 2010). Other key projects and events include the Singapore Formula One Grand Prix and the Singapore Youth Olympics in 2010. The completion of these projects and events will push Singapore up a notch on the tourist destination list and also increase the expatriate workforce and demand for housing.

Pro-business environment

Singapore's strength lies in its corruption-free government, socially and politically stable climate, sound economic fundamentals, favourable tax policies, and a well-regulated and robust financial sector. Singapore has always been perceived as a safe, pro-business environment that is supported by a well-respected government with transparent and consistent policies that protect companies' physical and intellectual property (IP) investments.

Investors can also enjoy the benefits of an extensive global network of free trade agreements, avoidance of double taxation agreements and investment guarantee agreements. No longer seen as a little red dot on the global stage, Singapore has transformed itself into a global hub for business and investment. In the 2007 World Competitiveness Yearbook, Singapore was ranked second to the US as the most competitive economy globally.

While the banking and insurance-related services still constitute the largest component of financial sector GDP, several emerging financial clusters have contributed increasingly to its growth. These include the sentiment-sensitive industries of wealth advisory, brokerage and treasury clusters. Collectively, these sectors all contribute towards the growth of Singapore as an internationally competitive financial centre.

Singapore's multicultural and racial base also offers the corporate world a platter of business platforms conducted in a choice of languages other than English.

The network and cultural connections that the indigenous population has with its neighbouring countries make Singapore the ideal melting pot where deals are made between Asia and the rest of the world. Coupled with a well-educated and highly skilled work force, and a world-class network of air, sea and IT infrastructure, it is not surprising that capital, enterprise and talent have been attracted to this island city-state.

Consequently, more than 26,000 international companies have made Singapore their base camp as well as a gateway to the region.

Hubs of hubs

Singapore is also recognised as one of the premier asset management centres in the Asia-Pacific. Its pro-business regulatory framework and competitive tax framework also spearheaded its success as a Reit hub.

The operation of Changi Airport's Terminal 3 along with the proposed Seletar Aerospace Park has enabled the city state to consolidate its status as a regional aviation hub as well as an aerospace maintenance, repair and overhaul (MRO) hub.

Ranked the best in Asia by the World Health Organisation, Singapore has also established itself as a multi-faceted medical hub serving Asia and the world and is earning a global reputation as a medical convention and training centre.

More than 400,000 international patients visit Singapore for a whole range of healthcare services annually. It has also attracted many world renowned medical professionals to work in the internationally accredited hospitals and specialty centres located here.

Besides priding itself on an international standard education system, Singapore has also attracted world-class institutions with strong industry links to set up centres of excellence in education and research. They include respected names such as Insead and University of Chicago Graduate School of Business.

To meet the rising demand for quality schools for expatriate children, the list of international schools has also been growing. The NPS International School, part of a pioneering group of educational institutions headquartered in Bangalore, India, opened its Singapore campus in January 2008, while United World College of South-east Asia has announced plans to set up a second campus.

With such accolades and continual developmental growth in each economic sector, Singapore continues to attract a global pool of investors and talent. Incoming talent will not only bring their unique expertise but also put demand on the housing market. Eventually, some of them will bring their families and possibly even consider permanent residency.

All these developments have collectively positioned Singapore high on the list of many global investors and given them the confidence to continue investing in the Singapore residential market.

A global city in the tropics

With Singapore being a base for many regional and international conglomerates, it is also now home to a myriad of global talents and their families. Singapore is indeed transforming itself into a global city in the tropics, possibly close to being on par with London and New York in the West.

The economic rise of Asia, especially China and India, has filtered through to a buoyant economy in Singapore, resulting in a surge in demand for both office and housing space. Both office rents and housing prices have escalated over the past year. Nonetheless, prices remain highly competitive when compared to global cities such as London, New York and Hong Kong.

Singapore's strategic placement between two rising global economic engines of India and China makes it a popular choice of relocation, if not as a base for a second home for expatriates.

The non-landed residential market will continue to benefit further from the influx of these foreigners. The demand pool for the non-landed residential market, which traditionally came from the local population and residents of neighbouring countries - Malaysia and Indonesia - will become ethnically more diverse with buyers from China, India, Korea and corporate entities increasing their share.

Its multiculturalism and tolerance of diverse ethnicities support the quick and smooth assimilation of new immigrants into the larger society - a sociological strength that favours Singapore greatly. This attribute will continue to attract expatriates as well as residents of other Asian cities to Singapore.

In the longer term, the foreign ownership of residential properties in Singapore will become increasingly more cosmopolitan than that of Hong Kong, which is likely to remain dominated by mainland Chinese. The level of foreign ownership will continue to rise and eventually resemble what is found in London today - making Singapore the first global city of the tropics.

Chua Yang Liang is head of research, South-east Asia, Jones Lang LaSalle; and Jacqueline Wong is head of residential, Singapore, Jones Lang LaSalle

Source : Business Times - 27 Mar 2008

Seven tips for buying a second home

There are still pockets of new developments in Singapore that are priced below $1,000 per sq ft, writes PETER OW

HOUSE hunting can be challenging at a time when sellers are holding firm despite a quieter property market while buyers are expecting a steeper discount based on weaker sentiment from the US sub-prime woes.

Those on a strict budget should note, however, that the record prices were achieved mainly by new launches in the first 10 months of 2007. This is also true in suburban locations as buyers pay more for new developments under construction. Nonetheless, there are still pockets of new developments in selected parts of Singapore that are priced below $1,000 per sq ft such as Bedok and Jurong.

Well, it may be the right time to start looking for a second home as an investment. Given the more cautious economic climate and rising inflation, price naturally becomes the most significant factor for a property purchase as that would have an impact on initial cash outlay and the long-term mortgage financing of the property. Here are seven key tips to note when shopping for a second residential property for investment. Before buying, ask yourself the following questions:

# Is the price reasonable?

# What are the prospects of getting a tenant?

# Can you possibly stay there yourself?

# Can you get financing and service the monthly instalments?

# What is the expected return on the investment?

# How long will you hold your investment?

# Is the tenure important?

Price: While price is a key consideration, nobody can predict when prices will hit rock bottom. Thoroughly research the locations you are interested in, walk around the area and check out the resale values. This is probably the best time to negotiate when nobody is interested in buying as there will be less competition.

Location: Location, location, location, that's what property is all about. We have to ask ourselves: Is this a location where expatriates like to stay? Districts 9, 10 and 11 will readily satisfy the criteria of convenience and proximity to the CBD. Outside these districts, a development near an MRT station, suburban shopping centre, or good views of the sea or waterway have great potential. For such locations, regardless of good times or bad, one will be able to find a tenant. Getting the wrong location might result in vacant periods when the economy is not doing well.

Returns: When buying primarily for investment, yield or return on investment is the key thing to consider. If the financing cost is low and the returns are much higher, then the second residential property purchase will, indeed, be an asset and a financial nest egg. A savvy investor might find that investing in equities offers higher returns. But equities are also riskier. Any property that gives you a gross return of 4-5 per cent is considered fair, while 6-7 per cent is good. Rentals are usually fixed for two years which gives you security of tenure.

Under current conditions, an investment in property will be better than putting money into bonds or fixed deposits, where yields are relatively low. However, when shopping around do not get the notion that high-end or luxury properties always give better returns. Keep in mind that not many expatriates have a rental budget of $30,000 to $40,000 a month. You may be surprised to find that an HDB flat near an MRT station will give you a higher return (possibly 10 per cent) than most private properties.

Financing: Look for a financing package that suits your needs. Most banks offer packages without a lock-in period at higher interest rates while those with lock-ins have a lower rate. However, early redemption or refinancing can be costly. If you are an investor with a long-term view, go for a package that offers the lower interest rate so as to reduce your costs as much as possible.

You must also consider how affordable your monthly repayments are. As a guide, they should not exceed 30 per cent of your disposable income. Most of us use our CPF to pay part of the purchase price or the monthly instalments. The prudent approach is not to do that. One should keep enough money in the CPF to pay instalments for a one-year period. This is a defensive strategy so that should you be out of work for a year, the loan can still be serviced.

Time frame: Property is an illiquid asset - it takes time to get in as well as to sell out. Thus, we should look at a longer time frame for property investment, preferably a three- to five-year holding period. Property prices go up and down, but if you look back over 30 years, the new peak has always been higher than the previous one. This leads us to the next consideration.

Can you stay in the property?: It is good to take this into consideration because if there is a need you can move into the property, be it for downgrading or upgrading. So if you have a family of four, it is advisable to buy a three or four-bedroom apartment. You will also have a choice of which property to rent out and which to occupy. You may want to rent out the unit that gives you the better return.

Tenure: Is a freehold property better than a 99-year leasehold? The answer is no because the rentals of both will be the same since the tenant will not bother about the tenure. Leasehold properties, being cheaper, will give a comparatively higher yield. Every investor has his own criteria for investment, thus a property suitable for one might not be suitable for another. However, bear in mind that the less risky the investment, the lower the likely return. Also, with any property investment, it is best to take the long-term view.

Peter Ow is executive director (residential) at Knight Frank

Source : Business Times - 27 Mar 2008

Last year's boom in investment sales likely to continue in '08

IT was an eventful 2007 for the Singapore property investment sales market, which hit a record $55.29 billion in volume of transactions. This was 81 per cent higher than the previous record of $30.59 billion in 2006. The robust momentum in the investment market was largely driven by active acquisition of development sites by developers in both the private and public sectors. The office sector was also very active.

The investment market was exceptionally active last year for the following reasons:

# A reversal of the 'perfect storm' - a combination of factors that allowed Singapore's property market to hit the sweet spot.

# Strong economic growth of 7.7 per cent in 2007.

# Office and residential market property booms.

# Strong interest from foreign real estate investors, both corporate and individuals.

# Emergence of Singapore as a service centre hub for Asia, for example private banking, back offices, medical centre and education.

# Feel-good factors such as the Formula One and integrated resorts.

The private sector investment sales market took the lead in 2007, accounting for 79 per cent of total investment sales or $43.63 billion. Public sector sales contributed the remaining 21 per cent or $11.66 billion.

Altogether, 39 government sites were bought by developers during the year, made up of three 'white' sites, 12 residential sites, eight commercial sites, six hotel sites and 10 industrial sites.

In addition, five residential sites at Sentosa Cove were sold for a total of $1.11 billion in 2007.

Significant public land sales in 2007 included a prime 'white' site at Marina View (Land Parcel A), which was awarded to Macquarie Global Property Advisors (MGPA) for $2.02 billion, and a commercial site at Beach Road, which was sold to a consortium comprising City Developments, the Istithmar Group and the Elad Group for $1.69 billion.

By sector, the residential sector took the lead in investment sales in 2007. Total residential investment sales amounted to $34.43 billion in 2007, representing 62 per cent of total investment sales and an increase of 118 per cent year on year.

A total of 116 collective sales were transacted in 2007, generating investment sales of $13.64 billion, exceeding the $8.2 billion from a total of 79 collective sales concluded in 2006 and is the highest ever.

Interestingly, many, including a number of overseas institutions and individuals, were observed to have purchased bulk apartments in residential projects before or after each project was officially launched for sale.

There was the purchase of 16 units at The Orchard Residences by a Thai investor for $135 million and a fund linked to MGPA acquired 162 units at The Cascadia for a total of $280.36 million. Also, a joint venture between US-based Wachovia Group and City Developments acquired 44 units at Cliveden at Grange for $432.43 million.

Investment activity in the office sector remained strong throughout the year, with increasing foreign investor participation, supported by strong market fundamentals.

Total office investment sales generated $14.19 billion worth of sales or 26 per cent of the year's total investment sales. This was nearly triple the $4.79 billion recorded in 2006. On the back of an upbeat office market, prime office properties continued to be highly sought after by Reits and foreign funds as they expanded their investment reach in Singapore.

About $4.86 billion worth of private en bloc office buildings and strata-titled office properties was acquired by these investors which in turn gave them a 54 per cent share of the $8.97 billion in total private major office transactions in 2007. The most significant transaction was the acquisition of Temasek Tower by MGPA at $1.04 billion.

Other notable office sales included the sale of Chevron House to a US fund for $730 million and the sale of 78 Shenton Way to Commerz Grundbesitz Investmentgesellschaft (CGI), a German fund, for $650.78 million. The deal was CGI's first foray into the Singapore property market.

Another German fund, SEB Asset Management, displayed strong interest in office properties by acquiring the SIA Building, 12 floors at Springleaf Tower and 10 floors in 79 Anson Road for a total of $965.91 million in 2007.

In addition, New Star Asset Management, a UK fund, acquired Parakou Building for $128 million and One Phillip Street for $99.02 million.

Reit-related office sales in 2007 included Keypoint at Beach Road which was acquired by Allco Commercial Reit for $370 million, inclusive of income support of up to $10.5 million for two years to be provided by the vendor. Both Keppel Land and Cheung Kong Holdings divested their one-third stakes in One Raffles Quay to K-Reit and Suntec Reit respectively, for $941.5 million each.

Looking ahead, strong office demand and potential for further rental escalation will lead to more buying of quality office properties in 2008. The sustained influx of foreign investors should continue to lead to brisk activity in the office investment market and provide strong support to prices.

Despite some volatility resulting from the global credit crunch and the slowing down of the US economy, investment sentiment will remain positive albeit a little cautious in 2008, due to the healthy economic forecast for Singapore.

Mounting inflationary pressure, the divergence of the weakening US dollar, the high level of liquidity in the investment market and the perception of promising returns have combined to make Singapore real estate an attractive investment alternative.

Investment activity in the office sector is likely to continue to outperform other property sectors given the limited supply coming on stream in the short term.

Foreign funds and Reit-related parties will also continue to lend support to the investment market, showing keen interest particularly in offices, retail and industrial assets.

The writer is executive director, investment properties, at CB Richard Ellis

Source : Business Times - 27 Mar 2008

Don't know what to do during the current property lull?'

PROPERTY EXPERTS GIVE SOME TIPS

# Seven tips for buying a second home

Did you know, for example, that an HDB flat near an MRT station will give you a higher rental yield than most private properties?

# The importance of being earnest when going en bloc

A major en bloc sales agent discusses the impact of the new legislation on collective sales introduced last year on warring owners.

# Are you overpaying for your home loan?

Is the deferred payment period on the condo unit you bought a little while ago expiring soon? Read an independent mortgage broker's advice before you go shopping for that home loan.

# Aim for a landed home

So you've missed out buying a condo last year? Not to worry. Landed homes may become more appealing this year as they have yet to see the sharp price appreciation experienced by their non-landed counterparts.

Source : Business Times - 25 Mar 2008

Kuwaiti firm still in talks over mega deal

A MAJOR $818.4 million residential property deal that fell through recently could be revived.

The potential buyer, Kuwait Finance House (KFH), said last week it was still in talks to buy the 97 units at GuocoLand’s freehold Goodwood Residence.

KFH said it had a positive view of the outlook for Singapore’s property market.

A fund to be managed by the Islamic investment bank had agreed on the deal last December.

However, KFH did not exercise its purchase options, which lapsed, GuocoLand said on March 10. It also said the parties were in talks ‘with a view to a grant of fresh options for units in the development’.

Last week, KFH said it was still in talks with GuocoLand with respect to the ‘terms of the purchase’, which are being reviewed by both parties. Industry sources had speculated that KFH wanted out as the price was too high.

KFH had done the deal at a median price of $3,200 per sq ft (psf), when nearby projects in the Bukit Timah/Newton Circus area were going for an average price of $2,500 psf or below.

KFH said it was upbeat about Singapore, given the Republic’s status as a financial hub, the integrated resorts and the introduction of events such as Formula One.

‘The current cautious sentiment driven by external factors will abate in due time and, as a global city, Singapore will remain an investment destination for international real estate investors,’ KFH said.

Source : Straits Times - 24 Mar 2008

Investment sales could hit $25b this year: CBRE

This would be about half of the record $54.5b of deals done last year

DESPITE the current subdued mood, property investment sales this year could be substantial - about half of the record $54.48 billion clocked last year, CB Richard Ellis estimates.

It bases the estimate on a tally of $5.91 billion of investment sales deals struck in the first two-and-a-half months of this year.

'Assuming Q1 2008 ends with $6 billion, the full-year figure could be around $24-25 billion. That would still be the third most active year on record, after $54.48 billion in 2007 and $30.59 billion in 2006,' says CB Richard Ellis executive director (investment properties) Jeremy Lake.

Investment sales are seen as a gauge of major players' confidence in the sector's mid- to long-term prospects.

CBRE's definition of investment sales includes those with a value of at least $5 million, comprising government and private sales, buildings and land, strata and en bloc. It also includes change of ownership of real estate via share sales.

Mr Lake reckons momentum this year will be generated by the sale of income-producing completed properties like malls, office blocks and industrial buildings, as well as the sale of sites through the Government Land Sales Programme, while the collective sales market has stalled.

'Continued strong growth in Asia, coupled with Singapore's position as a financial services hub and popular business destination for MNCs, will help maintain a healthy level of investment activity in the Singapore property market,' CBRE said in a report issued yesterday.

CBRE's analysis shows the private sector made up 55 per cent or $3.27 billion of the $5.91 billion investment sales deals sealed in the first two-and-a-half months of 2008.

Land sales by the public sector contributed the remaining 45 per cent or $2.64 billion.

The biggest land deal so far this year was the award of a hospital site at Novena Terrace/Irrawaddy Road to Parkway Holdings for $1.25 billion ($1,600 per square foot per plot ratio).

Splitting deal value by sectors, CBRE said the residential sector accounted for $2.23 billion or 38 per cent of total investment sales.

'Compared with the heightened investors' interest in en bloc acquisition witnessed in 2007, investors' demand for private residential land continued to be lukewarm in the first quarter of 2008,' it said.

'Developers are no longer as keen to acquire more sites compared to last year as most of them have built a relatively strong inventory of freehold residential sites from the robust collective sales market in 2007.

'Developers have already taken the cue to act cautiously. The buying of sites has been so far limited to specific choice sites since the response to recent new launches has been subdued.

'In addition, the release of more affordable 99-year leasehold residential sites by the government for sale in the first half of 2008 may sway some buying interest away from prime freehold residential sites in the private sector.

'The only successful collective sale deal in Q1 08 was Ban Guan Park, which was acquired by Link THM Holdings for $31.10 million ($870 psf per plot ratio).'

The office sector accounted for 34 per cent or $2.01 billion of investment sales so far in 2008, on the back of big transactions like Hitachi Tower for $811 million or $2,901 psf, Singapore Power Building ($1.01 billion or $1,820 psf) and One Phillip Street ($99.02 million or $2,749 psf).

'Going forward, strong office demand and potential for further rental escalation would lead to more acquisitions of office properties in 2008.' CBRE said. 'The sustained influx of foreign investors should continue to lead to steady activity in the office investment market.'

Source : Business Times - 18 Mar 2008

Property investment market robust but outlook ahead challenging

Singapore's property investment market remained robust in the first two and a half months of this year, with investment sales totalling S$5.9 billion in that period.

The is according to a survey by consultant CB Richard Ellis.

It said strong economic fundamentals and the positive long-term outlook in Singapore underpinned property investment activity.

This is despite uncertain global economic conditions and a slowdown in the US economy.

The private sector led the property sales, raking in S$3.27 billion and accounting for more than half of the total investments here.

Public land sales contributed the remaining 45 percent or S$2.6 billion.

The office sector performed well in the first quarter of 2008, with about a third of total investment sales or S$2 billion so far.

Investment activity in the residential sector slowed considerably in the first quarter.

It contributed 38 percent of total investment sales or S$2.23 billion to date.

CBRE noted that developers are no longer as keen to acquire more sites for redevelopment compared with last year.

Investment in the industrial sector amounted to some S$333 million so far in the first quarter, driven largely by purchases by real estate investment trusts.

For the rest of the year, CBRE said it expects conditions for investment sales to be challenging.

It believes that investors are likely to take a longer time to assess the market before making any deals.

Going forward, CBRE said a healthy level of investment activity in the Singapore property market is expected to continue amidst strong growth in Asia and Singapore's position as a financial services hub. - CNA/ms

Source : Channel NewsAsia - 17 Mar 2008

Singaporeans flocking to overseas property launches held here

IT IS the world’s tallest condominium, a spiral-shaped architectural feat that soars 150 storeys into the Chicago sky.

The best part: An apartment in this iconic building in the United States will cost you less than a unit at The Sail @ Marina Bay here.

Little wonder, then, that more than 800 people turned up at the launch of the much-vaunted Chicago Spire in Singapore’s Four Seasons Hotel last week.

‘Both the turnout and the sales were overwhelming and way beyond expectations,’ said Mr Michael Ng, managing director of Savills Singapore, which is marketing the project worldwide.

‘Everyone was a bit uncertain about how the market would take to it, given the United States’ economic issues. But I think the strength was that the Singapore dollar was at a record high and the interest came pouring in,’ he said.

Savills could not disclose official sale figures, but sources said about 30 units were sold, mostly one- and two-bedroom flats that averaged US$1 million (S$1.38 million) each.

About half the buyers are said to be Singaporeans or permanent residents and the rest, expatriates.

The response to the Chicago Spire - where units cost about US$1,000 per sq ft, 60 per cent less than The Sail - mirrors the growing demand in Singapore for overseas properties , said marketing agents.

‘Interest has definitely increased as Singapore becomes more open and more receptive to overseas investments,’ said Mrs Doris Tan, managing director of DST International Property Services, which markets foreign properties in Singapore and South-east Asia.

Her company brings in developments both in established markets such as Britain and the United States, as well as emerging ones, including Bulgaria, Bali and Dubai.

Mrs Tan’s clients, mainly Singaporeans or permanent residents, are ’sophisticated investors who know what’s going on in property markets around the world’.

In recent years, the exhibitions she holds have seen bigger crowds and better sales. A popular property now attracts up to 100 people over two days.

‘Of course, the prices in Singapore have gone up a lot, so these provide an alternative,’ she added.

But large crowds do not always translate into many buyers, warned an agent who declined to be named.

‘You can get fantastic turnouts, but sales usually amount to only about 5 per cent of the crowd,’ he said.

Generally, the most seasoned investors buy homes in markets they know well.

Civil engineer Peter Rudland, 58, now owns six homes in London, where he worked before coming to Singapore, and one in Manchester, where he was born.

The British-born permanent resident has also resold a number of London investment properties for a profit of at least 20 per cent.

‘London is very safe financially,’ he said. ‘Singapore has too many speculators. I wouldn’t want to speculate here.’

Source : Sunday Times - 16 Mar 2008

Opportunistic investors recoil from Asia property

They see more scope for picking up cheaper properties in US, Europe; loans in Japan tougher

Opportunistic investors are pulling back from Asian property because they see more scope for picking up distressed assets in the United States and Europe, and loans are harder to get in Japan, one of their favourite markets.

Hedge funds have stopped dabbling in property in the region, fund managers say. And although private equity players will continue to develop property in India and China, they are more likely to buy buildings on the cheap in the West than in Asia.

'Six months ago, it was quite straightforward. We didn't have to answer questions about why to invest in Asia,' Guy Cawthra, Asia fund strategist at Morley Fund Managers, told a recent conference in Hong Kong. 'Now investors say 'we might not want to invest in Asia; we want to invest in Europe, the UK and the US'.'

In the wake of the 1997-98 economic crisis, Asia - in particular, Japan and South Korea - drew a raft of investment from funds run by the likes of Morgan Stanley, General Electric and private equity firms such as Carlyle Group .

Many made fat profits on a revival by Asian property markets, which are now mostly strong because of a shortage of new supply and still buoyant economies.

Researchers at consultants Jones Lang LaSalle forecast Tokyo office prices will steady this year after a 28 per cent jump in 2007, while Seoul, Hong Kong, Singapore and Shanghai are still on the up.

Better opportunities now lie elsewhere for investors who think they can spot a market trough and ride a recovery.

Because of tight credit and a worsening economy, US commercial real estate values could fall by 20 per cent in the next five years from their 2007 peak, JPMorgan analysts forecast, causing losses of about US$120 billion, including on commercial mortgage-backed securities.

London office values have dropped 12 per cent from a peak in the middle of last year, and they will be pressured further by forecasts of a 10 per cent decline in rental values through 2009.

'I think a lot of investors will return to home markets,' said Bart Coenraads, head of real estate at Fortis Investments. 'Some will try to buy distressed core and refinance it. They could make good returns.'

Last year, total direct investment in the Asia-Pacific region jumped 27 per cent to US$121 billion - a sixth of the global total - with about half invested in Japan, which has been popular for its rock-bottom interest rates.

However, Japanese banks are getting cold feet on property, analysts say, giving loans worth only 60-70 per cent of a building's value, compared to 80-90 per cent a couple of years ago.

Lower debt gearing is likely to crimp returns for equity investors. But having spent years setting up teams, private equity funds are unlikely to withdraw completely from Asia, said Tim Bellman, global head of strategy for ING Real Estate.

Many, such as Morgan Stanley Real Estate Funds, no longer see themselves as 'opportunistic', and are in Asia for the long haul.

'Funds have been raised and platforms are set up, and they don't want to unwind them overnight,' Mr Bellman said. 'But at the margin, opportunistic investors who looked at Asia are finding those opportunities back home.'

Morgan Stanley is building housing in China and taking stakes in Indian developers in a high-risk, high-return strategy. But the US investment bank also bought the Tokyo headquarters of Citigroup last month, indicating it is still interested in 'core' assets that are low risk but give modest returns. -- Reuters

Source : Business Times - 11 Mar 2008

Investors eye real estate after tough 2007

Asian property and niche sectors are attracting assets

Many investors in alternative assets plan to invest more in real estate after poor returns from the sector in 2007, a PricewaterhouseCoopers (PwC) survey showed yesterday.

John Forbes, UK real estate leader at PwC, said some investors had been lured back to UK property after prices fell sharply.

Growth areas such as Asian property and niche sectors such as student housing were also attracting assets, he said.

PwC's global survey, which polled 226 institutional investors and alternative investment providers in the fourth quarter of 2007, showed a gross 41 per cent of investors plan to increase real estate allocations over the next three years.

That compares with 40 per cent for private equity, 35 per cent for commodities and 33 per cent for hedge funds.

However, 21 per cent of investors planned to reduce their allocations to real estate, compared with 16 per cent for hedge funds, 15 per cent for commodities and 11 per cent for private equity.

Forbes said: 'UK real estate capital values are down perhaps 20 to 25 per cent from the top of the market. For some types of investors that will discourage them.

'But for opportunistic investors, who have been out of the UK market for the past two to three years, the UK is starting to look cheap so they are coming back.'

UK commercial property delivered a total return, which combines rental income and capital growth, of -3.4 per cent in 2007, as the credit crisis bit and investor sentiment soured.

The survey also showed less than half of respondents were satisfied with the performance of hedge funds, while nearly a fifth were dissatisfied.

That compares with private equity, where two- thirds were satisfied and only 7 per cent dissatisfied, or real estate, where 57 per cent were happy with performance and 11 per cent unhappy.

The survey follows a strong year for hedge funds. According to Credit Suisse/Tremont they returned 12.56 per cent in 2007.

Rob Mellor, UK financial services tax leader at PwC, said hedge funds had to become better at managing investor expectations and explaining how they achieved returns, especially when conditions turn.

Some may have feared the credit crisis would hit hedge fund returns harder than it eventually did, he said. -- Reuters

Source : Business Times - 11 Mar 2008

Demand for single office units still going strong in quiet market

Investors turn more cautious, but small firms still interested in strata-titled offices.

ALL has turned quiet on the housing front, but some other segments of the property market appear to have escaped that fate.

Still going strong in particular are sales of single office units in larger commercial buildings. Known as strata-titled offices, these properties recorded active demand in the fourth quarter last year, even as home sales were taking a breather.

A healthy 13 transactions of strata offices occurred between October and December, up from only five in the previous quarter, according to data from CB Richard Ellis (CBRE).

Most of the properties were in the city area - Suntec City, Tong Building in Orchard Road, Springleaf Tower in Anson Road - and changed hands at well above $2,000 per sq ft (psf), CBRE said.

Altogether, $750.8 million worth of strata offices were sold in the fourth quarter, bringing the total for last year to $1.7 billion - more than four times the figure for 2006.

Prices also rose solidly throughout the year. At Suntec City Tower 1, a favourite strata-office location, unit prices climbed about 50 per cent from just above $1,500 psf in January to almost $2,400 psf in December - the highest level in two years.

The steady take-up of single units is due largely to the wider boom in Singapore’s office market. A shortage of offices, even as expanding businesses push up demand for space, has boosted prices and rents across the board, drawing much interest from investors, said CBRE’s executive director of investment properties , Mr Jeremy Lake.

But in recent months, even investor demand for offices has slowed as the United States sub-prime mortgage problems spread and sentiment in the market grew more cautious.

This has hit sales of entire office buildings, but strata offices have been less affected, said Mr Shaun Poh, a senior director of investment advisory services and auctions at DTZ Debenham Tie Leung.

He attributes this to the smaller businesses that are the other main source of demand for single office units. These businesses plan to occupy the space themselves rather than lease it out for rental income.

‘Smaller units, of the $1 million to $3 million variety, are more digestible for some buyers,’ he said. ‘They appeal to end-users who are moving from renting to buying now that rents have risen so fast.’

DTZ is marketing a floor of offices at Peninsula Plaza near the City Hall area, consisting of six strata units with a total floor area of about 8,500 sq ft. The units are tenanted at about $4 psf, but rents in the building have moved up to between $7 and $8 psf, said Mr Poh.

The indicative price for the floor is $17.5 million, or about $2,050 psf. At this price, with a projected $7.50 psf rental, the net yield works out to about 4 per cent, he added.

Since the property went on the market earlier this week, DTZ has received ‘more than 10 enquiries’, Mr Poh said.

‘Some are investors looking to buy the whole floor, but we’ve also seen interest from end-users in electronics or shipping firms who are interested in buying just one or two units.’

In general, however, experts feel that strata-office sales might not be as strong in the first quarter of this year as last year.

Colliers International has not yet sold any strata offices at auction this year, after selling one a month between October and December. In December, a 3,003 sq ft unit was sold at United House, for a healthy $2,497 psf.

But Mr Poh said that, while sales might slow, prices are unlikely to fall any time soon.

‘Prices have not gone up, but neither have they come down,’ he said.

‘If they can be maintained in such an environment, and if things get a bit more optimistic, prices could even go up 10 to 20 per cent over the next year.’

Source : Sunday Times - 9 Mar 2008

Speculators holding out for higher prices

Subsale activity slows but transacted prices remain resilient

Property prices have been bolstered by speculators in the last year. But now that speculation is on the decline, could prices follow suit?

An analysis by Savills Singapore of properties subsold last year after being bought from developers in the same year has revealed that while subsale activity dropped significantly in the last quarter, subsale prices did not, suggesting that speculators are not ready to offload their investments yet.

The number of subsales fell by 66.7, 69.1 and 39.1 per cent in the high, mid and mass-market segments respectively in the fourth quarter of last year from a quarter earlier.

However, average gains made from subsales over the developers' sale price remained relatively stable. They came to 34.2 per cent in the high-end segment in Q4, 14 percentage points higher than the full-year average gains. In the mid-tier segment, average gains fell marginally by 2.4 points to 21.1 per cent, while in the mass-market segment, they rose 1.6 points to 17.2 per cent.

Savills director (marketing and business development) Ku Swee Yong adds: 'Speculators appear to be holding out for better prices.'

Interestingly, Savills's analysis also shows that there have been several speculators that have subsold on very thin profit margins of 5 per cent or less, adding credence to market talk that some speculators may be looking to offload properties at bargain prices soon.

However, while Mr Ku believes that speculators that cannot manage the mortgage payments - especially after holding for a year or more on the deferred payment scheme - might be letting go at lower profits, he does not think they represent a majority.

By his estimation, there are about 6,000 residential units that will receive TOP (temporary occupation permit) this year. 'While there may be some dumping from those who cannot afford to pay up at the point of TOP, we do not think that it will constitute more than one per cent of the 6,000 units,' he adds.

The situation could change next year.

'We expect around 10,000 units to receive TOP in 2009. Those who bought using the deferred payment scheme in the last couple of years might let go if they are really speculators and cannot afford to pay,' says Mr Ku.

But he is optimistic that the low mortgage rates may mitigate the need to sell. 'The buyers might go for rental yield instead.'

Subsales of major new launches in the high-end sector, which include developments such as Marina Bay Residences, Scotts Square and The Orchard Residences, fell to just four transactions in Q4, compared to 32 for the full year.

Two subsales were done at less than 10 per cent above the developer's sale price.

The average gains from subsales over the developer's sale price were highest in the high-end market, substantiating Mr Ku's belief that this segment could prove more resilient if the global economic downturn is prolonged. 'There is a large proportion of buyers in the high-end market that are so rich, they buy properties with cash.'

This segment is also largely supported by foreign buyers and Mr Ku says: 'Foreigners are not speculators.'

Last year, the mid-tier segment saw 140 subsales of newly launched developments like Sky @ Eleven, The Rochester and One North Residences.

In Q4, one subsale was transacted at just 2.3 per cent above the developer's sale price.

In the mass market, there were 49 subsales of newly launched projects such as The Parc Condominium, Casa Merah and Clementiwoods for the year.

In Q4, there were 14 subsale transactions. Three were done at less than 10 per cent above the developer's sale price.

The number of Sky @ Eleven subsales - over 60 - was among the highest in 2007. In July and August, four units were subsold for over 50 per cent of the developer's sale price.

But the days of huge capital gains could be over.

Mr Ku says that, based on data for January so far, subsale gains could trend downwards slightly. But he adds that there is no evidence that speculators will find themselves in negative territory yet.

Source : Business Times - 7 Mar 2008

Rising inflation, not recession fears, is investors' key worry

Soaring prices darken horizon, but savvy investors can still spot opportunities

INVESTORS have been bombarded with talks of a looming United States recession for months now.

The real worry they face, however, is much closer to home - rising levels of inflation in Singapore and the rest of Asia.

After all, rising inflation breeds deadly uncertainties for business - and, often, that is bad news for stock prices.

Walk into any coffee shop, and the buzz is about the price hike in festive goodies and higher fuel prices during the recent Chinese New Year celebrations.

The mood contrasts starkly with that a few years ago, when Singaporeans were preoccupied with the lack of work in a sluggish economy - sob stories of professionals being forced to become taxi drivers after losing their jobs.

Now, there are jobs aplenty, but the consumer price index - the main measure of inflation - has jumped sharply, from 1.3 per cent in June to 4.4 per cent in December, after staying well under the radar at a benign 1 per cent or less in the past five years.

Crude oil prices are bubbling past US$100 a barrel, and gold is making swift strides towards US$1,000 an ounce. The record high prices of an assortment of soft commodities, from wheat to coffee, are sparking fresh fears that rising food prices will drive up inflation sharply worldwide.

Historically, inflation has been the great enemy of equity investors.

Older investors will recall the bogeyman of stagflation - low growth, rising unemployment and high inflation - hitting the world in the 1970s.

As crude oil quadrupled in price, the stocks of OCBC Bank, for instance, plunged to just a fraction of the $50 a share they had reached in 1972.

Still, inflationary pressures today are nowhere as dire as they were in the 1970s.

Experts believe things will sort themselves out a lot sooner this time.

China might grow at a slower but more sustainable pace after the Summer Olympics in August, as its frenzied construction programme winds down. This should put a cap on soaring raw material prices caused by the insatiable demands being made by a booming Chinese economy.

In the West, central banks might clamp down on the loose credit unleashed by falling interest rates, as the sub-prime mess gets sorted out.

Property plays

UNTIL these problems are sorted out, however, investors should be aware that financial assets, such as equities, provide little hedge against inflation.

As costs escalate, investors demand a lower price for shares to compensate for the higher risk in holding them in uncertain, economic times.

In extreme cases, this has resulted in a longish bear market, such as in the 1970s.

It would be wrong for investors to assume that any slowdown in the US can be tackled by a few interest rate cuts by the Federal Reserve, given complications created by rising inflation worldwide.

It would, however, be foolish for investors to allow the doomsday headlines to numb them into inaction.

Already, some Singaporeans are making a smart move by snapping up HDB flats - the best hedge against inflation available to investors in the mass market.

Recently, a stunning 9,900 applications were recorded for the 278 flats that the HDB had offered during its February bi-monthly sales.

A successful application might be likened to winning a 4-D lottery. The value of the flat is likely to spike up, while inflation erodes the value of the loan used to pay for the flat.

For investors who do not qualify for an HDB flat, investing in a private property makes good sense for the same reasons, as the bubble in the residential market deflates.

But there is no need to despair, if they do not have the financial means to do so.

Seizing chances

EVEN though inflation can be a stock killer, equity investments still make solid sense, if an investor looks to the long term.

For the first time in years, there seem to be a lot of genuine bargains in beaten-down sectors, such as real estate and financials, where stocks have lost 30 per cent to 40 per cent of their value in the past six months.

Investors will simply have to keep their cool, keep plenty of cash on hand, ignore the incessant market noise about a recession and inflation, and get ready to pounce on any opportunities that come along.

Stick to the bluest of the blue chips, which will survive and remain in far better shape than other counters, as the stock market continues its bumpy roller-coaster ride in an inflationary and recession-hit environment.

Just bear in mind that big sell-offs present rare and not-to-be-missed opportunities to buy into big dividend-paying banks or cash cows like SingTel.

This will give investors a once-in-a-generation opportunity to make big returns when inflation is successfully nailed down again.

The local stock market has weathered numerous crises - the 1973 oil crisis after the Arab-Israeli war, the 1987 Wall Street meltdown, the 1997 Asian financial crisis and, more recently, the collapse of the dot.com bubble in 2000.

Staying nimble

THOSE with the perseverance to ride out the current credit crunch and accompanying inflation problem will certainly be richer for it.

They might not make it to the league of the Li Ka Shings or Kwek Hong Pngs who rode through the 1970s stagflation crisis to become billionaires with their shrewd investments - but they will at least build up a nest egg for a comfortable retirement.

Take advantage of the bear market while it lasts. It is a great boon for nimble and courageous investors.

Source : Straits Times - 25 Feb 2008

Property speculation: Bought last year - Stuck this year

Speculators paying the price of market cooldown as offers slow to a trickle

BUSINESSMAN Alan Lim is a seasoned property investor, so he knows the value of not losing his nerve in testing times like now.

Last year, when the property market was scorching hot, he picked up a new condominium unit at Lumiere off Shenton Way for about $1.3 million, and another at The Inspira off Mohamed Sultan Road for more than $1.4 million.

He intended to ‘flip’ or resell them for a quick profit.

Property agents flocked to him with eager would-be buyers. But he rejected them all in anticipation that prices would keep soaring.

Now, the offers have slowed to a trickle and the prices buyers are willing to pay are falling, falling.

But he claims to be not too worried.

‘Of course, when the market was hot last year, everybody called me. This year, there are still agents calling, there are still offers but they are lower,’ said Mr Lim, who is in his 40s and lives with his accountant wife and three kids in a Clementi Park condo which he bought nine years ago.

He looks at property in the same light as the stock market: ‘If you have holding power, you’re all right. I think I can hold.’

While Mr Lim may be able to wait out the market cooldown, other would-be ‘flippers’ are not so lucky.

Agents say a rash of people who bought condos at the height of the property fever last year with the intention of offloading them for fat returns are now having trouble doing so.

Many are meeting an icy response in today’s fast-cooling market where collective sales have come to a standstill, new project launches are being delayed and once-ubiquitous record prices are few and far between.

A detached house in Kembangan, for instance, has been on the market for more than two months with no takers even though it is going for $2.5 million - well below the market price of $2.8 million to $2.9 million, said Mr Eric Cheng, executive director of HSR property group.

‘If you look at newspaper ads now, sellers are giving more commissions to agents because they want to dispose of their house quickly. Price may not be their greatest concern,’ he said.

A major property firm, which declined to be named in the interests of its clients, also said home-buying interest has dwindled in recent months.

‘According to our agents, the sub-sale market has been very quiet, in line with the cautious mood of the general market,’ said a company spokesman.

This has led to owners ‘not asking for sky-high prices. They’re more realistic and more willing to negotiate’, he added.

Sub-sales are when a person buys an uncompleted home and then sells it again before it is built, without ever living in it. They are often used to measure speculation, or ‘flipping’ in the property market.

‘Flipping’ is not a new phenomenon, having been around for as long as there were profits to be made in buying and reselling homes.

In fact, there has been much less speculative behaviour in this property boom than during the last peak in the 1990s, said industry players.

‘Those who have tried flipping before and were burned when the market crashed, either in the mid-1990s or the early 2000s, tended to be a bit more cautious this time round,’ said Mr Nicholas Mak, director of research and consultancy at property consultancy Knight Frank.

He added that most would-be flippers are well-heeled as they have to be able to pay for the property - usually high-end condos - in the first place.

Alternatively, some younger buyers may pool their money to target the mid-tier market, where properties cost less than $3 million each.

But one thing most flippers had in common now was that they probably did not expect the quick turnaround in the market, said Mr Mak.

‘Seven, eight months ago, no one knew that the United States sub-prime mortgage crisis would have such a great effect. Nobody expected the sentiment in the property market to cool so suddenly.’

But the spokesman for the major property firm noted that while transaction volumes have slowed, home prices are not exactly plunging.

‘At this point in time, we have not noticed any sub-sales done below the original sale price. Sellers are still making some margins though they may be lower than they expected,’ he said.

This is because most sellers seem unwilling to let go of their property below a certain price level. One agent is marketing a two-bedroom unit at Viz@Holland near Holland Village for $1.03 million, or $1,260 per sq ft (psf). This is below the bank’s valuation which she said is between $1,300 and $1,500 psf.

‘Last year, the owner had an offer for $1,240 psf but he didn’t take it. Now he’s willing to settle for $1,200 psf, but not lower,’ she said.

Soon, however, more sellers may find themselves squeezed for cash. Several projects, including The Sail @ Marina Bay and One Amber in Marine Parade, are scheduled to be completed soon, at which point buyers will have to cough up large payments for the homes.

Signs of strain have already appeared.

Three of the top five projects with the most sub-sales recorded slight dips in the median prices of such deals last month, according to consultancy CB Richard Ellis. These are Icon in Tanjong Pagar, Citylights in Lavender and One Amber.

‘Most sellers still think the market will pick up so it’s all about holding power now,’ said HSR’s Mr Cheng. ‘But a minority over-committed thanks to deferred payment schemes, and the lump sums are due soon, so they are in a hurry to sell.’

Deferred payment plans allowed buyers to put an upfront deposit for an uncompleted home and then delay the bulk of payments until the property was built, which could be up to a few years later.

Such schemes were exploited by speculators who would resell the property before completion without needing to fork out the bulk of payments. But the schemes were removed in October last year precisely to discourage speculation.

Those who bought under these plans could now have trouble reselling the homes as deferred payment may no longer be available for their would-be buyers.

On the bright side, this could present buying opportunities for home seekers, Mr Cheng said.

‘If the owners are desperate, they may ask for $700,000 but accept 10 per cent less. Some of these condos would be worth

The bright side

‘If the owners are desperate, they may ask for $700,000 but accept 10 per cent less. Some of these condos would be worth considering for buyers.’ MR ERIC CHENG, executive director of HSR property group, on buying opportunities for home seekers

Anxious seller

AN INDONESIAN home buyer is sitting on three brand-new condominiums he bought in Singapore last year for almost $3 million in all.

He is eager to sell one - a two-bedroom unit at Parbury Hill in Upper East Coast - and use the cash to hold on to the other two until the market picks up again, his property agent told The Sunday Times.

‘Price-wise, he doesn’t mind losing some money because he’s holding three properties at one go,’ the agent said. He asked not to be named to protect his client’s identity.

But he revealed that the buyer, who works in the plastics industry, is ‘not one of those super-rich Indonesians’.

‘He is just speculating,’ the agent said, adding that the man was ‘enticed into purchasing the properties because of the property fever’.

The buyer had successfully ‘flipped’ a few others previously and found himself drawn to the easy profits of a ‘few hundred thousand dollars’. But he ended up ‘committing more than he expected’.

He is now willing to let go of the Upper East Coast condo at $670,000, about 5 per cent below its estimated market value.

Even then, response has been ‘very slow’ since advertisements for the recently completed property were placed a few weeks ago.

‘It hasn’t been on the market very long, but he’s getting kan cheong (Cantonese for anxious),’ the agent said.

Meanwhile, the Indonesian still has to make payments for his other two condos here: a studio at Tribeca in Kim Seng Road and a two-bedroom unit at 2RVG in River Valley.

The two cost him more than $2 million when he bought them in the middle of last year, at the time the property boom reached fever pitch. He also booked a unit at One Rochester in Buona Vista but let the option lapse, which means he did not end up actually buying the unit and forfeited his deposit.

The situation is not hopeless however, his agent said. Even if he sells the East Coast condo below market value, he will probably still make a profit on it and if the market does pick up, he stands to make an even bigger profit on the other two downtown properties.

Source : Sunday Times - 24 Feb 2007

Weak US$ lures foreign buyers to US property

Florida is the most popular state, accounting for 26% of all transactions

Canadian retiree Sheldon Kovensky felt the lure that attracts so many foreign buyers to sunny Florida these days - falling prices for luxurious oceanfront condos that can be bought with weak US dollars.

Mr Kovensky has been scouring south Florida from Miami Beach to Palm Beach in search of a three-bedroom apartment on the sand.

Armed with a Canadian dollar that has gained 25 per cent against the greenback in the last two years, he is expecting a big bargain.

'We're hoping to get an apartment worth about a million (US dollars) that I can purchase for about 20 per cent less,' he said by phone from his home in Unionville, Ontario, as he faced digging out from a snowstorm.

'The Canadian dollar is on par and the Florida market has dropped 20 to 30 per cent, so you get a lot of bang for your buck,' he added.

Realtors, analysts and buyers said that the strength of the Canadian dollar, the euro and other foreign currencies, on top of a falling real estate market, is making the United States an enticing place for foreigners looking to buy property.

In fact, they said, the combination of the weak US dollar and the allure of Miami as a cosmopolitan, multilingual city may be helping to prop up a faltering, overbuilt condo market that had been expected to crash but has seen, to date, only a small drop in prices compared to other Florida cities.

In a study by the National Association of Realtors last year, Florida was the top destination for foreign buyers, accounting for 26 per cent of all transactions, ahead of California at 16, Texas at 10 and Arizona at 6 per cent.

More than 7 per cent of all Florida homes were sold to foreigners, the study found, and 65 per cent of realtors said that they had brokered at least one foreign deal.

Online property auction site FastHomeAuction.com in December reported a record number of foreign visitors, citing the weakness of the US dollar as a key contributor.

Jan de Vetten, a Dutch toy trader who has built a side business helping friends and business associates buy Florida homes, said that in some cases they are getting properties at half price.

'They negotiate typically 25 to 30 per cent off the asking price and the euro is almost a dollar and a half now, so they probably have another 10 to 15 per cent in value,' he said.

Foreign buying was also reported brisk in Arizona, New York and elsewhere.

In New York, Manhattan's average sales price soared to a record US$1.4 million in the fourth quarter last year as foreigners pushed up demand.

In Phoenix, cash-toting Canadians are snapping up second properties, mostly high-end homes on golf courses as refuges from the harsh winter, agents said. Many hail from Calgary, Canada's oil boomtown.

'There's definitely some Canadian money in town,' said Julie Goodman, a Remax agent who said that she had sold six properties and had another four families coming this month for visits. 'They pay cash and know that cash talks.'

After the US market peaked in late 2005 and the sub-prime mortgage crisis set in, sales and prices began tumbling across Florida. The worst was felt in west coast cities like Punta Gorda, where condo sales fell 50 per cent, and Fort Myers, where the median price of an apartment fell 21 per cent in 2007.

While Miami sales fell - 39 per cent for existing single-family homes and 41 per cent for condos - median prices remained resilient before finally weakening in December 2007.

For the year, the median Miami condo price rose 6 per cent. But analysts expected a drop in coming months as thousands of new condo units come onto the market.

The weakness in the greenback, agents said, is attracting buyers to Miami from continental Europe, Scandinavia and Canada in addition to the traditional influx of cash from volatile South American countries, particularly Venezuela.

A strong pound has Britons looking outside their traditional stomping ground in Orlando, Florida, said Vani Ungapen, director of research at the Florida Association of Realtors.

'Most of them are buying high-end homes,' she said. 'They are looking for a big house with a swimming pool, and you can't buy that in London.'

Brokers said that Miami Beach's famous South Beach district is luring Italians, French and Germans; Russians are flocking to Sunny Isles Beach to the north; Venezuelans who may be fearing socialist President Hugo Chavez are buying in Doral, to the west.

Miami broker Brigitte Benichay said that middle- class French entrepreneurs are eager to join a 30,000-strong French community in Miami and open businesses here.

'Because of the strength of the euro, they are paying cash,' she said. 'Eighty per cent of the ones I meet want to pay all cash. Business is very strong.'

The Beacon Council, Miami's business development agency, said that foreign businesses are increasingly setting up shop in the city.

The number of multinational projects it is working on has virtually doubled in five years, and those companies are bringing employees interested in buying property.

'The economic market here is diversified. We're not any longer dependent on one industry, like tourism, or on one region, like Latin America,' president Frank Nero said.

Despite explosive price increases in recent years, Mr Nero said, prices can look cheap to someone from Paris or Madrid. -- Reuters

Source : Business Times - 21 Feb 2008

Asian real estate securities now offered to retail investors

REAL estate has been the hottest investment topic in Singapore over the last year or so, and now retail investors have a new avenue for investing in Asia’s property market.

An arm of Deutsche Bank - RREEF - on Monday launched three new funds investing in property , backed by a belief that the sector has plenty of upside in Asia.

Asian real estate is at an ‘early stage of a long-term structural uplift’, said RREEF Asia Pacific real estate securities head Daniel Ekins.

RREEF said these new funds - previously exclusive to institutional and wealthy investors - are now offered to local retail investors. A minimum investment of US$1,000 (S$1,400) is needed.

‘Asia’s rising prosperity and consistent high economic growth have driven greater demand for residential and commercial real estate, creating exceptional growth potential for real estate securities in the region,’ said Mr Ekins.

Asia-listed real estate developers and real estate investment trusts (Reits) look set to deliver as much as a 20 per cent profit growth this year, he added. Global real estate securities have outperformed global stocks by 12.5 per cent and bonds by 24.6 per cent over a five-year period, the bank said.

One of the funds, the Asia-Pacific Real Estate Securities Fund, has a pure Asian focus, and will add to a growing crop of similar products, including the Barclays Asian Real Estate Income Fund and the Henderson Asia-Pacific Property Equity Fund.

Mr Ekins expects yearly returns of 12 per cent to 17 per cent in about five years.

Reits will comprise 20 per cent of the fund’s investment, while the remaining consists of publicly traded firms that own, develop or manage real estate.

RREEF has 65.2 billion euros (S$135 billion) in assets under management worldwide, with 10 billion euros in the Asia-Pacific.

Source : Straits Times - 20 Feb 2008

R&D carrot may be ideal diet for some outfits

Estate duty abolition may also help banks and push up property prices.

It was a Budget that failed to excite the stock market very much, but analysts said that some of the initiatives announced could benefit research-intensive firms and companies in the healthcare, technology, finance and property sectors - mostly in the longer term.

Shrugging off Friday’s Budget announcement, the benchmark Straits Times Index fell 5.34 points - or 0.2 per cent - to close at 3,083.3 points yesterday.

As UOB Kay Hian predicted at the start of the day: ‘Concerns over a slower earnings growth and higher inflation will limit any euphoric market rally.’

But contrary to what was suggested by the market, some listed companies here will be better off due to the Budget, analysts said. Singapore’s bid to move up the R&D value chain could perhaps have the most impact, the analysts added.

OCBC Investment Research said that Biosensors International, LMA NV and ST Engineering could benefit as Singapore increases its yearly R&D spending to $7.5 billion, or 3 per cent of GDP, by 2010.

The firm also said that Venture Corporation and Chartered Semiconductor - both of which spent a substantial proportion of their operating expenses in R&D - stand to benefit in particular as the R&D tax deduction is increased from 100 per cent to 150 per cent and an R&D tax allowance of up to 50 per cent of the first $300,000 of taxable income is given.

‘Both Venture Corporation and Chartered Semiconductor spent a substantial proportion of their operating expenses in R&D,’ OCBC’s research unit said in a note yesterday. ‘Venture spent about $29.6 million on R&D in FY07, while Chartered spent about $159.8 million. We can expect both companies to see significant tax reductions in the coming years.’

UOB Kay Hian similarly identified Creative Technology, Venture Corp and Biosensors as listed companies that could gain from the R&D push.

Also expected to have a major impact is the abolition of estate duty, which analysts said could boost Singapore’s competitiveness as the region’s wealth management hub and attract more foreign investment.

‘We think the removal of estate duty is good news for the Singapore property market, as real estate is a natural choice for some of this money to be invested, especially with high inflation and negative real returns,’ said Lehman Brothers in a note yesterday.

The research firm noted that property prices generally gain in the 12 months following the removal of estate duty. The note said: ‘Malaysia abolished the estate duty in late 1991 and home prices rose 12 per cent on average in the ensuing 12 months. More recently, Hong Kong abolished the estate duty in early 2006 and property prices were up 6 per cent on average in the following 12 months. We think this could be more than coincidence.’

UOB Kay Hian, on the other hand, said that the clearest beneficiaries from the removal of estate duty would be financial institutions. The firm reiterated its ‘buy’ calls on DBS, OCBC and Hong Leong Finance in view of this.

UOB Kay Hian also said that listed medical plays such as Raffles Medical Group and Parkway Holdings will benefit from the government’s commitment to implementing means testing - which allows for a gradual shift of high-income patients from government hospitals to private hospitals.

However, there is a consensus among analysts that any boost from this Budget is expected to kick in only in the longer term.

‘The business-related Budget initiatives are part of the government’s ongoing efforts to transform the Singapore economy into a knowledge-based economy and grow the services sector, in our view,’ Deutsche Bank summed up in a note. ‘While positive in the long term, these moves are unlikely to have a tangible impact in the near term.’

Source : Business Times - 19 Feb 2008

Survey shows Malaysians hot on property trail

MALAYSIANS are keen property purchasers, and many are still on the lookout for investment opportunities, according to a recent survey.

Real estate website iProperty.com said that a significant 88 per cent of those polled online over six weeks in November and December expressed an intention to acquire a property within the next 12 months. Nearly half or 48 per cent of the 2,066 respondents claimed that they had purchased at least one property over the past 24 months, and 10 per cent said that they had acquired two or more.

Given the current economic uncertainties, developers who were concerned about weaker demand would be heartened to know that a fair number of Malaysians are apparently still hot on the property trail and planning to maximise loan arrangements.

More than three-quarters of respondents told iProperty that they would fund their properties by taking loans that provide 80 to 100 per cent financing. This practice allows the buyer greater disposable income to invest in other assets, Robert Kiyosaki, an investor and self-help author, told BT.

An investor who declined to be identified has acquired three apartments over the past three years and regularly attends new launches.

In his books, Mr Kiyosaki advocates investing in assets that generate passive income so that one can eventually live off those sources of funds.

In general, locals continue to show an interest in residential units over high-rise development.

iProperty said that 62 per cent of respondents, citing potential capital appreciation gains as the main reason - corresponding with their primary attraction to the property investment - indicated their preference for landed units.

This is consistent with other surveys. Over the past three years, property consultants CH Williams' CEO opinion survey has revealed Malaysian investors to be most interested in terraced/link residential units, followed by semi-detached/detached houses. In comparison, residential condominiums/apartments are top of the property list for foreign buyers.

Buyers prefer landed properties as they tend to appreciate more over the longer term than apartments, but that is because the scarcity of land in Klang Valley, for example, has resulted in fewer houses being built.

Still, some residential apartments in prime areas are selling like hot cakes as evidenced by the following:

Over the past month, 65-70 per cent of the 318 units of Twins Damansara in the upmarket suburb of Damansara Heights, which retails from upwards of RM700,000 (S$307,160), has been sold. In November, 90 per cent of the 90-unit One Jelatek condominiums situated 10 minutes from an LRT station in Ampang were signed up in less than two hours.

Within a week of its launch this month, Gaya Bangsar saw 95 per cent of its 285 units priced between RM350,000 and RM900,000 snapped up. The developer expects the units, which were sold at an average RM550 per square foot, to appreciate by 20 to 30 per cent in the next three to four years.

The Internet is increasingly the medium used in property searches, with half of iProperty's respondents turning to it first, and up to 86 per cent using it primarily for its speed and convenience.

Source : Business Times - 31 Jan 2008

Global investors favour US, but China rises

Global property investors still favour US commercial real estate by a wide margin, but second- place China is rapidly closing in, according to an annual report tracking institutional investor interest.

New York and Washington headed the list of preferred cities for commercial real estate investors, the first time two US cities were on top in 16 years of the survey, sponsored by the Association of Foreign Investors in Real Estate (AFIRE).

Respondents said they found investing in US commercial real estate easier than it has been in years, as the credit crisis has driven out investors who relied heavily on cheap debt to finance purchases.

Most respondents were institutional real estate investors who tend to rely less on borrowing.

London tied Washington in second among most attractive cities for commercial real estate. Paris was next, and Shanghai zoomed up from the ninth spot to fill out the top five cities in the survey, which was released yesterday.

Five of the respondents' top 10 global cities are in Asia.

'One of the significant findings that cannot be overlooked is the jump in investors' confidence in China,' AFIRE chief executive James Fetgatter said in an interview.

More respondents said the United States offered the best opportunity for capital appreciation, ahead of China. But the US lead over China as favourite among respondents narrowed to less than five percentage points in 2007 from 27 points in 2005.

India fell to third from second place and Russia moved from fifth to fourth - tied with Mexico, which had been seventh.

About 200 members were surveyed for the report by the association, whose members hold US$700 billion of cross-border real estate, including US$230 billion in the United States.

Within the US property market, the most dramatic change was a reversal of investors' preference for retail property over office space.

Despite the credit problems, Australia's Centro Properties Group is battling to secure new debt for its US shopping centre holdings, retail property moved from fifth out of five categories to the No 1 spot. In contrast, office fell from its long-time top spot to the bottom.

Hotel property was the second-most-preferred US property type, up from third. Industrial property came third, up from fourth, and apartments came in fourth, down from second.

After New York and Washington, the most popular US cities for commercial property investment were Los Angeles, San Francisco and Seattle. Las Vegas saw a marked improvement as an investment location, moving to No 8 from 16th.

Conducted in the final quarter of 2007, the survey reflects the credit crunch that was underway. Stingier lenders and pricier loans drove out private investors who dominated US commercial real estate acquisitions in the past few years. - Reuters

Source : Business Times - 29 Jan 2008