Property seems paler, but it’s anyone’s call

Volumes shrink, prices weaken but some segments are holding firm

BASED on the latest monthly developer sales data from the Urban Redevelopment Authority (URA), property prices could be on the downward trend.

Developer sales fell, with April seeing only 274 transactions. This is about 9 per cent lower than the 301 units sold in March, though still higher than the 174 units sold in February.

And while it is difficult to accurately pinpoint price movements with such low volume, an analysis by Knight Frank of overall median prices achieved nevertheless registered an 8.9 per cent drop in April, falling to $943 psf compared to $1,035 psf in March.

The peak median price of over $1,400 psf was reached in August 2007.

Knight Frank director (research and consultancy) Nicholas Mak also explained that the analysis was a ‘median of median prices’, and so may not be a precise reflection of price movements.

Mr Mak also said that applying a different mode of analysis to the same data - the formula used to calculate URA’s quarterly property price index for instance - could even show that prices have increased slightly.

Still, a comparison of monthly median prices of recently launched developments does suggest that prices could be falling.

The 79-unit Blu Coral was launched in February with nine units sold at a median price of $872 psf. In March, 28 units were sold at a median price of $802 psf, while in April, 18 units were sold at a median price of $657.

Similarly, 53 units of the 106-unit, The Verve, were launched in March with 36 units sold at a median price of $1,187 psf. In April, 8 units were sold at a median price of $1,055 psf.

And nine units of the 625-unit, The Quartz, were sold in March at a median price of $742 psf, followed by 14 units sold in April at a median price of $721 psf.

Interestingly, one unit of Waterfront Waves was sold at $909 psf in April, higher than the median price of $806 in March when 14 units were sold.

Perhaps another indication of the weakening market is that 43 units of 659-unit The Parc Condominium, previously reported as being fully sold, have re-emerged on the market. According to the monthly data, the returned units first appeared in February.

A source that did not want to be named also said that these units were returned by buyers who chose not to exercise their options, forfeiting a quarter of the 5 per cent downpayment in the process.

Jones Lang LaSalle head of research (South-East Asia) Chua Yang Liang has also analysed median prices as a measure of volatility and suggests that this has increased in the Outside Central Region (OCR).

Dr Chua explained that volatility, as a measure of how wide market prices are per unit dollar of the median price achieved could also reflect, ‘the market’s speculative level’. As such, he said: ‘It would appear that upgraders may be returning, with entry level projects that are moderately priced between $750 to $850 psf as the preferred choice.’

Supporting this were the healthy sales of the 56-unit Stadia at Yio Chu Kang, which saw 52 units sold. Two units were sold for under $750 psf while the remaining 50 were sold at between $750 and $1,000 psf.

In the OCR, Dr Chua said based on the analysis, median prices continued to soften by 4.2 per cent. But he also added that the analysis was just an ‘indication of the market’s mood’, and does not account for product differentiation or physical attributes of each development.

While the volume of sales was low in the Central Core Region with just 19 non-landed homes transacted, Dr Chua believes that the low volatility in median prices there suggests that market activity and future prices in the high end market are likely to remain stable.

Also holding this view is CB Richard Ellis Research executive director Li Hiaw Ho who noted that two units in Scotts Square were sold at around $4,300 psf, a unit at Orchard Scotts was sold at $2,520 psf and two units at Skypark were sold at around $2,300 psf.

‘Although high-value transactions were limited, the individual transactions seemed to indicate that prices in the high-end market were still holding firm,’ he added.

The analysis of price movements will however, remain an academic one, and as such will remain open to debate.

Colliers International director (research and advisory) Tay Huey Ying said there were too few transactions at the higher end of the market to comment fairly on the sector.

And even for the OCR, she noted that the median transacted price for mass-market units averaged $792 psf in April, about 8 per cent higher than the average median price of $729 in August 2007 when the highest sale volume for the sector was registered.

Source : Business Times - 16 May 2008

Leng Beng says S’pore real estate market sustainable

CityDev boss sees further investment opportunities ahead

HOTEL and property tycoon Kwek Leng Beng believes Singapore’s real estate market is sustainable and further investment opportunities lie ahead.

‘I am also waiting for the opportunity … to go in and buy at the right time,’ he said at a property conference yesterday.

The executive chairman of City Developments said growth in Macau’s gaming industry had driven up residential property prices there sharply. And with two integrated resorts and big events such as the Youth Olympics in the next few years, Mr Kwek reckons the future is bright for Singapore real estate.

According to country head of Jones Lang LaSalle Singapore Christopher Fossick, the current slowdown in property demand is largely sentiment-driven, and many investors are probably waiting to purchase at better prices.

In terms of office space, Mr Kwek said: ‘There has been a lot of talk that by 2010 and 2011 there will be a lot of oversupply. I do not believe so because in the first place, construction is a problem here.’

He cited rising construction costs as a reason for this view.

While office rents have been rising, Mr Fossick does not see this as a major business concern. Sharing feedback from multinational companies, he said wages are a much larger component of the cost of doing business, compared with rents.

Mr Kwek is also positive on the outlook for the hospitality real estate market. He believes the shortage of hotel rooms in Singapore and the rise in intra-regional travel will keep room rates on an uptrend.

Although Mr Kwek is generally upbeat on prospects for local real estate, he did express one concern. While investments from institutional funds have helped steady the market, ‘funds have a duration of life and will get out’, he said.

On the other hand, ‘for the retail buyers, when they get out, they don’t get out all at the same time’.

Mr Kwek asked in a panel discussion why the recent boom in Singapore’s property market did not attract many individual investors from the West, while funds showed huge interest. The director of property at Henderson Global Investors Asia, Chris Reilly, said this could be due to the lack of familiarity with Asian real estate among retail buyers in the West.

Source : Business Times - 16 May 2008

CDL chief Kwek Leng Beng awaiting right time to buy

PROPERTY tycoon Kwek Leng Beng has warned that most property investors follow the herd instinct and wait too long in a cautious market - then make a wrong move.

The executive chairman of City Developments (CDL) said he remains upbeat about prospects for the real estate scene in Singapore, despite recent weak sales volumes.

Mr Kwek, who was a panellist at the Financial Times Asia Property Summit held at his St Regis Hotel yesterday, said the property market is just consolidating.

The mood in the Singapore property market is cautious in the wake of the United States sub-prime crisis, with many buyers and sellers preferring to remain on the sidelines.

He said he was waiting for the opportunity to ‘go in and buy at the right time, be a bottom fisher’.

But most people will do the opposite, he said. ‘You notice (people) will keep on waiting… until it’s too late,’ he said.

‘It’s the herd instinct… the majority will be wrong.’ A shrewd investor will act on his own, he said.

If the casino-led boom in Macau’s luxury homes market is anything to go by, Singapore will do even better as it will have two casinos and other major events, he said.

‘We are victims of our own success,’ Mr Kwek.

‘In the old days, we had only regional investors from Indonesia, Malaysia, Taiwan… But today, we have big investors like Morgan Stanley, hedge funds.’

Mr Christopher Fossick, Jones Lang LaSalle’s managing director for South-east Asia, who was on the same panel, said there is now a higher proportion of investors than before, compared with occupiers.

Investors tend to be more sensitive to market sentiment, he said.

CDL, which has held back the launch of four residential projects because of poor sentiment, said in its recent earnings announcement that it plans to release them once sentiment improves and when pent-up demand can be realised.

‘In the first place, we were sick,’ said Mr Kwek of the property market before its recent boom. ‘But today, we have shifted to another platform. Instead of relying on technology, we are relying on our status as a global city.’

He also told reporters yesterday that hotel rates will continue to rise this year because of short supply.

The office market will also do well, though rent increases have moderated. As for the much talked-about office oversupply situation come 2010 or 2011, Mr Kwek thinks supply will not pose a problem then because the current construction boom will check that.

Source : Straits Times - 16 May 2008

Further drop in new home sales and launches in April

Prices also show signs of weakening as buyers adopt a more cautious stance

THE private home market continued to weaken last month, with launches of new homes falling to their lowest level in at least 10 months.

Sales volumes and median prices also dipped, according to monthly figures released by the Urban Redevelopment Authority yesterday.

HOLDING UP: Some projects such as The Lakeshore (above) still enjoyed steady sales, with 32 of its 848 units taken up last month. — PHOTO: FAR EAST ORGANIZATION

Developers launched only 271 homes last month, fewer than half the 642 units launched in March.

The number of homes sold also fell, to 274 in the month, from 322 previously. These figures exclude executive condominiums.

‘It is clear that homebuyers were in no hurry to make purchases and were taking more time to assess the market,’ said Mr Li Hiaw Ho, the executive director of CB Richard Ellis (CBRE) Research.

He attributed this trend to the continuing instability of financial markets and increasing concerns over the higher cost of living.

Perhaps as a result of the slowdown, prices have begun to show signs of strain.

An analysis by property firm Knight Frank found median prices of new homes sold last month had slid 9 per cent to $943 per sq ft (psf), from $1,035 psf in March.

One reason for the lower prices could be that most of the homes launched and sold were in cheaper mass-market developments.

Eight out of 10 homes sold in the month cost $1,000 psf or less. Only seven homes, or about 2 per cent of the total sold, fetched more than $2,000 psf.

This is a major reversal from previous months. As recently as in December, more than 70 per cent of the homes sold for the month cost more than $2,000 psf.

The strength of the mass-market segment last month was the bright spot in an otherwise dismal set of figures yesterday.

The best-selling project was a suburban development: Stadia in Yio Chu Kang Road, which sold more than 90 per cent of its 56 units within the month.

‘Latent demand remains strong, especially for the mass-market projects that are reasonably priced between $750 and $850 psf,’ said Mr Chua Yang Liang, the head of South-east Asia research at Jones Lang LaSalle.

On the other hand, only three units were launched in the prime core central region. Demand for homes in this high-end area and in the mid-tier city-fringes remained fragmented and weak, said Mr Chua.

Property consultants said they expect buying activity to remain slow in the coming months as the current gloomy sentiment persists.

But some, such as CBRE’s Mr Li, expect sales to start improving next month as developers begin stepping up launches.

Mr Ku Swee Yong, Savills Singapore’s director of business development and marketing, said buyers are starting to return to the market.

‘I dare say last month’s sales numbers will be the lowest we will see this year,’ he said.

‘Showflat crowds are still pretty good, and from now on, we should see launches picking up.’

Having some high-profile launches would give the market a boost, said Mr Nicholas Mak, the director of research and consultancy at Knight Frank.

‘Essentially, the lukewarm sentiment can be explained primarily by the lack of launches of major developments that might cause excitement.’

Source : Straits Times - 16 May 2008

Interest in Asian property seen growing

GIC Real Estate says weaker market favours those taking strategic position

THE sub-prime crisis may have affected Asian property markets, but interest in the sector is likely to grow. The Government of Singapore Investment Corp’s (GIC) real estate arm is also confident about investment opportunities going forward.

‘There is plenty to go around - we will all have fun competing,’ said president of GIC Real Estate Seek Ngee Huat at a property conference yesterday.

Going by the pace at which real estate projects are emerging in Asian cities, Dr Seek believed that there would be a continuous supply to meet different risk-return appetites.

Dr Seek recognised that the sub-prime crisis has weakened Asian markets, particularly Japan and Australia. ‘The contagion effects of the sub-prime crisis . . . can potentially accelerate the downward spin of the current cycle,’ he said.

Nevertheless, the outlook for the property market was not entirely bleak. ‘Weak markets favour those who have capacity to take a strategic position,’ Dr Seek said. ‘The sub-prime meltdown presents threats but there are also opportunities.’

And many around the world are likely to see investment opportunities in Asian property markets as well. ‘Massive build-up of investment funds in the world, coupled with the attraction of Asia as a growth region of the future, will ensure continuous global interest in Asian real estate,’ said Dr Seek. He pointed out that this will inevitably lead to greater competition.

Dr Seek said that GIC Real Estate had focused mainly on developed markets in its first 10 years, and only started investing in Asia in the 1990s. Even then, it was ‘way ahead’ of other institutional investors.

GIC Real Estate ranks among the world’s top 10 real estate investment firms, according to its website. The unit has over 200 investments across more than 30 countries, culminating in a multi-billion US dollar portfolio.

GIC Real Estate had in March, through its affiliate Reco Hotels JV Private Ltd, entered into a joint venture with Host Hotels & Resorts Inc to explore investment opportunities in Asia and Australia. The real estate unit also bought the Westin Tokyo hotel for about 80 billion yen (S$1.05 billion) in February.

Source : Business Times - 16 May 2008

NTUC Income to sell Beach Rd property

AMID a quiet property market, NTUC Income is selling a small commercial property in Beach Road that could fetch around $24 million to $26 million.

Beach Junction, at 67 Beach Road, is a 999-year leasehold building opposite Shaw Towers. It sits at the junction of Beach Road and Middle Road.

The six-storey development has a net lettable area of about 19,000 sq ft and is fully tenanted.

More than half of the leases expire this year, which means there is potential for near-term rental appreciation, according to marketing agent CB Richard Ellis.

‘This is also a unique opportunity for owner-occupiers looking for their own building in a very accessible location,’ it said.

The property is served by City Hall and Bugis MRT stations. Accessibility will be enhanced by the completion of Esplanade station on the Circle Line by 2010.

New investors or owner-occupiers will also be able to give the building a new name.

An industry source told BT that the site is worth about $1,300-$1,400 psf.

Besides being close to the huge, eco-friendly South Beach mixed project by a City Developments-led consortium, Beach Junction is expected to benefit from plans for the nearby Ophir Road/Rochor Road corridor, which will be transformed into a commercial node with offices, hotels and supporting uses.

Expression of interest for Beach Junction closes at 3pm on June 5.

Source : Business Times - 16 May 2008

Bar raised; no gold BCA design awards

THE Building and Construction Authority (BCA) announced the results of its 2008 Universal Design Awards yesterday.

Out of 34 entries - one more than in the inaugural competition last year - three buildings garnered a silver award and six attained a bronze award.

Buildings were judged on six criteria - connectivity, accessibility, user-friendliness, safety, aesthetics and corporate philosophy. ‘No gold awards were given out because we have raised the bar,’ said assessment panel chairman Cheong Hee Kiat.

Prof Cheong explained that this year the judges went beyond surface compliance with the first four criteria, deciding that barrier-free access was the bare minimum. They looked for a corporate commitment to universal design, which broadly means ‘design that is friendly to all’, on the part of building owners, designers and developers.

BCA building plan and management director Wong Wai Ching said universal design is ‘an increasing concern against the backdrop of a greying population’, and encouraged the public to highlight the lack of friendly features through BCA’s feedback channels.

Alluding to a 1990 code that legally requires all new buildings to meet minimum accessibility standards, Mr Wong said: ‘Over the years we have been upgrading the barrier-free code to make more requirements mandatory.’

In that vein, BCA is looking at incorporating current universal design recommendations into the code when it next comes under review five years from now.

More owners and developers are using BCA awards to market their buildings, Mr Wong said. It is a ‘differentiating factor in a highly competitive market’, he believes.

The nine winners will receive their awards from National Development Minister Mah Bow Tan at the BCA Awards Night next Thursday.

Source : Business Times - 16 May 2008

CDL reveals what it does for society and environment

CITY Developments Ltd (CDL) yesterday launched its first annual report focusing on the property developer’s impact on the environment, such as energy usage and carbon emissions.

The 54-page voluntary report, one of the first of its kind for a Singapore public-listed company, also details CDL’s activities and performance on various social and environmental issues, including efforts to improve the efficiency of energy and water use at its property projects and to reduce the amount of waste it generates.

But profits still come first, managing director Kwek Leng Joo said at a media conference to launch the report yesterday.

‘Businesses are for profit. Companies are out there not primarily to do charity work, think about how they should protect the environment or how they should repay kindness to society,’ he said. ‘The primary obligations are to the shareholders and investors.’

A company needs to be profitable first ‘before it can even put itself in a position to talk about CSR (corporate social responsibility) or anything else’, Mr Kwek said.

Just a day earlier, CDL reported a 31 per cent jump in net profit to $165 million in the first quarter from a year earlier. And last year saw record revenue and profit for the second-largest developer here amid the boom in property prices.

But a public-listed company must also be sure that ‘whatever kind of business it is in is sustainable’, which is where CSR issues are relevant, Mr Kwek said.

As a major property developer, paying attention to environmental conservation and protection issues is necessary to ensure that its core business of developing and managing new projects is sustainable in the long term, he added.

According to the report, CDL invests 2-5 per cent of the construction cost of a project in environmentally friendly ‘green’ design and features.

The company said it aims to track and measure its social and environmental efforts and performance against international benchmarks, and is setting up a formal CSR committee comprising senior management that will report directly to Mr Kwek.

Zoe Knight, head of socially responsible investment research at Merrill Lynch, said the report is a ‘breakthrough’ for Singapore.

Other Singapore-listed companies that have published separate environmental impact reports include Singapore Airlines and Chartered Semiconductor Manufacturing.

Source : Business Times - 16 May 2008

US sub-prime crisis hurting Asian property: GIC

THE sub-prime crisis in the United States is starting to weaken Asian property markets, said the real estate arm of the Government of Singapore Investment Corporation (GIC) yesterday.

GIC Real Estate president Seek Ngee Huat told a regional property conference that the impact of the crisis could hasten downtrends in the Asian property markets, according to a report by news agency Reuters.

‘The contagion effects of the sub-prime crisis can potentially accelerate the downward spin of the property cycle,’ he said in a keynote speech at the Financial Times Asia Property Summit.

‘Some market weakening is being sensed in Asia, particularly in Japan and in Australia.’

In Australia, house prices are growing more slowly and demand for mortgages fell 6.1 per cent in March from February, according to the Reuters report.

It added that in Japan, the stock of unsold apartments is rising, while housing starts fell 15.6 per cent in March from a year ago.

Housing starts - the number of new private homes under construction - are used as an indicator of the state of an economy.

On the bright side, the sub-prime carnage presents opportunities for well-positioned players, Dr Seek said.

But he added that any interested party would face competition from other institutional investors.

‘As always, weak markets favour those with the capacity to take strategic positions, and so the sub-prime meltdown presents threats as well as opportunities,’ he was quoted by Reuters as saying.

Morgan Stanley has estimated that GIC manages more than US$330 billion (S$456.8 billion) of assets. This makes it the world’s third-largest sovereign wealth fund, behind the Abu Dhabi Investment Authority and Norway’s Government Pension Fund.

GIC Real Estate is also one of the top 10 property investors in the world, with more than 200 investments across more than 30 countries.

Its multibillion-dollar portfolio includes the Queen Victoria Building in Sydney and the Westin Paris in France, among other buildings.

In his speech, Dr Seek said that GIC began by investing in developed markets. It only started to focus on emerging markets in Asia in the mid-1990s.

Source : Straits Times - 16 May 2008

Bags and bins as CapitaLand goes green

It will offer re-usable shopping bags in its malls, recycling bins at all its properties

PROPERTY giant CapitaLand has launched a new campaign to encourage users of its malls, offices and serviced apartments here to adopt a green lifestyle.

It is starting the initiative with 100,000 re-usable shopping bags that come with a novel incentive programme.

CapitaLand president and chief executive officer Liew Mun Leong said that, while the idea of re-usable shopping bags is not new, the company has added a new twist.

‘It will have a mini loyalty programme to further influence our shoppers to adopt a greener way of shopping.’

Those who pick up one of the bags - to be given out at CapitaLand malls - will be able to collect stamps when they use the bags. Three stamps will entitle them to a limited edition umbrella.

CapitaLand’s ‘Building a Greener Future’ programme kicked off yesterday, with a ceremony at the Raffles City shopping centre officiated by Dr Yaacob Ibrahim, Minister for the Environment and Water Resources.

The programme will comprise a series of further initiatives over the next few years.

Mr Liew said that, from today, 168 customised recycling bins will also be placed at the company’s 22 malls, offices and Ascott serviced residences.

‘We hope this will encourage the recycling of paper, metal and plastic by making it more convenient for our shoppers, tenants and residents to do so at our CapitaLand properties.’

An estimated 600,000 shoppers pass through the company’s 11 malls every day, or some 18 million each month.

CapitaLand vice-president for corporate social responsibility Baey Yam Keng said that more initiatives will be rolled out in the coming months. It is understood that these will include programmes for schools and the possible adoption of water bodies such as reservoirs.

Dr Yaacob said the Government is heartened to see the private sector embracing and spreading the green message.

‘It is obvious that they know best how to implement this at their operations and we do not want to legislate this but rather work with them.

‘We encourage more private sector parties to take up such initiatives in the future.’

Source : Straits Times - 16 May 2008