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New entrants flock in as property sector booms

The property boom over the past two years has drawn many new players who are looking to reap the high returns that property development has to offer.

Six companies made their maiden property purchases this year, data compiled by property firm CB Richard Ellis (CBRE) show. Among them are companies that have made a name for themselves in other businesses, such as construction company KSH Holdings and brokerage firm Kim Eng Holdings. Others are lesser known, like Duchess Development which was formed by two stockbrokers.

In addition, three other companies - BBR Holdings, Popular Holdings and Eastern Holdings - first made their appearance in 2006 with land purchases. This year, they have gone on to snap up more sites.

'When the market is good, it draws in players who may not have been active before,' said CBRE executive director Jeremy Lake.

He noted that many of the new entrants are construction companies that might have decided to take on development risks, after watching their developer clients reap big profits. During a property boom, such risks are lessened.

'If you get your timing right in property, the profits can be substantial,' Mr Lake said.

Experts said that the same trend was seen during the last property boom, which lasted from 1993 to 1996.

Companies that did not look at property development in the past are now beginning to do so because of the fatter margins.

One example is SuperBowl, which teamed up with its parent company Hiap Hoe to buy two sites for a total of $211.3 million.

SuperBowl's managing director Teo Ho Beng told BT that while the company will continue to focus on its core leisure and entertainment business, it will also increase its exposure to property development where the margins are better.

Similarly, KSH Holdings sees good opportunities in property development. The company's chairman and managing director Choo Chee Onn said that his company invested in residential sites this year because the opportunities opened up at the right time.

'Going forward, we will buy more sites if the right opportunities arise,' Mr Choo said in an interview. The company spent $180.8 million on two residential sites this year.

The first site, which KSH acquired in June with three other partners, was the construction company's first purchase of a land parcel.

Other companies branching out from their traditional core businesses for the first time this year include electrical and mechanical engineering firm Tee International.

However, new developers and developers looking at boutique projects still account for only a small chunk of total purchases in 2007.

CBRE's data shows that the bulk of sites sold this year went to big players such as companies linked to banker Wee Cho Yaw (UOL Group, Kheng Leong, United Industrial Corp and Singapore Land), Malaysian tycoon Quek Leng Chan's GuocoLand and property giant CapitaLand.

New and boutique developers together bought some $2.4 billion worth of land sites in 2007, which account for about 5 per cent of total investment sales so far this year.

In 2006, such developers accounted for about 4 per cent of all investment sales, while in 2005, the figure was about 3 per cent.

However, property analysts warned that these new entrants are by no means guaranteed success. For starters, most bought sites in the more central areas of Singapore, where the price gain is expected to moderate this year even as construction costs are set to keep climbing, leading to a drop in margins.

'For the high-end residential segment, there is now risk of a potential correction,' said OCBC Investment Research analyst Winston Liew.

New developers might not have the resources to keep construction costs down unless they are contractors themselves, experts said.

Next year, established developers who have carved out niches are likely to do best, analysts said.

'Going into 2008, we look for developers with specific niches and themes to outperform the sector as a whole,' said CIMB property analyst Donald Chua. The research firm believed that listed smaller-cap developers are likely to trade at a discount to target valuations in 2008.

OCBC's Mr Liew advocated being defensive when choosing property developer stocks. 'We prefer developers that are domestic focused with substantial pre-sold projects, opportunities to unlock value from investment properties and finally offering valuation upside,' he said. -   2007 December 24    SINGAPORE BUSINESS TIMES

Kuwait outfit snaps up 97 apartments in $818m deal
Purchase of units in GuocoLand's condo under development in Bukit Timah is biggest of its kind

Money spinner: GuocoLand's pre-tax profit from the sale of the 97 units alone works out to around $500 million. The company bought the former Casa Rosita site in April 2006 for $280 million or $706 psf per plot ratio

Foreign institutional investors continue to bulk buy apartments in new residential developments in Singapore.

The latest deal - and biggest such transaction to date - is Kuwait Finance House's $818.4 million purchase of 97 four-bedroom apartments in GuocoLand's freehold condo, Goodwood Residence. The property is being developed on the former Casa Rosita site.

The average unit price is understood to be slightly over $3,000 per square foot. This is a new high for the prime Bukit Timah area; it is about 25-30 per cent above the $2,500 psf average price that Sui Generis is fetching at nearby Balmoral Crescent.

At over $800 million, the deal is the 'single largest purchase of units in a Singapore residential project under construction', says GuocoLand group president and CEO Quek Chee Hoon.

Industry observers' back-of-the-envelope calculations show that GuocoLand's pre-tax profit from the sale of this first batch of 97 units alone works out to around $500 million.

The four-bedders bought by a fund managed by Kuwait Finance House (Malaysia) Berhad range from 2,500 sq ft to 3,900 sq ft, GuocoLand said.

The Singapore property arm of Malaysian tycoon Quek Leng Chan is likely to release the remaining 113 units in the 210-unit freehold condo for sale in the first quarter next year, depending on market conditions. The development includes apartments with two and three bedrooms, as well as penthouses.

The largest penthouse, a duplex unit of about 12,000 sq ft with a rooftop pool, is expected to go for nearly $40 million. The WOHA Architects-designed project also includes 15 cabana-styled apartments.

This is not KFH's first such investment in the Singapore property market. A few months ago, an Islamic real estate fund set up by KFH and the Malaysian government-owned Amanah Raya Berhad, picked up two blocks (with a total of 56 apartments) at Reflections at Keppel Bay for about $286 million.

Other recent foreign bulk purchases of apartments in new projects here include Macquarie Global Property Advisors's $136 million acquisition of 19 units at 8 Napier, at an average price of $3,550 psf.

A Spanish private-equity fund is believed to have bought 20 apartments at The Cascadia, further down Bukit Timah Road, at about $1,600 psf.

While Singapore developers and property consultants are cautious about prospects for high-end residential prices next year - most are expecting modest gains of up to 10 per cent, after a nearly 50 per cent spike this year - the outlook appears rosier to foreign investors, market watchers say.

'From the perspective of these foreign funds, they must place out monies they have raised. If they look at US, there are sub-prime and credit squeeze problems. Growth in Europe is slow. Frankly, they may not have a lot of options but to look to Asia,' the research head of a property fund management outfit said.

Also, Singapore appears an island of calm in a sea of turbulence, he said. 'It's relatively stable, will soon have the integrated resorts and F1 attractions, and the island has positioned itself as a wealth management hub - these are still important factors drawing foreign institutional money to Singapore property.'

Goodwood Residence, which will comprise two 12-storey blocks, is slated for completion in 2010.

The development has received the Building and Construction Authority's Green Mark Award (Platinum). Goodwood Residence will have more than 500 trees (including 58 preserved trees) planted in the estate. In addition, the development site shares a 150-metre-long boundary with the lush Goodwood Hill.

GuocoLand bought the former Casa Rosita site in April 2006 for $280 million or $706 psf per plot ratio.

Other upcoming Singapore condo projects by GuocoLand include Sophia Residence, with about 270 units, which the group plans to release around Q3 next year, and an upscale development on the Leedon Heights site that is slated for launch in 2009.

KFH is also co-sponsor - together with Singapore's Pacific Star Group - of the Baitak Asian Real Estate Fund, whose major investments include a stake in KL Pavilion, a mega development with luxury residential, mall, office and hotel components in the prime Bukit Bintang area of Kuala Lumpur.    -  2007 December 19    SINGAPORE BUSINESS TIMES

S'pore builders seen lagging Asian peers 
Policy risks, fallout from sub-prime crisis may hurt property developers in 2008

Singapore's property companies may lag behind Asian real estate developers for a second straight year in 2008 as government limits on speculation cool the housing market.

CapitaLand Ltd, South-east Asia's largest developer, is suffering its biggest quarterly decline in more than six years after the government raised development charges by as much as 58 per cent. The Singapore Property Equities Index has dropped 19 per cent so far this quarter, the most since a 35 per cent plunge in the third quarter of 2001.

International buyers, who accounted for more than 40 per cent of real estate purchases in 2006, bought 38 per cent fewer properties last quarter as capital-market gridlock caused by rising US sub-prime mortgage defaults curbed borrowing worldwide. The supply of new homes for sale next year may almost double by value compared with 2006, weighing on prices, according to CLSA Ltd.

'We can find better propositions elsewhere in the region, where there's more growth and value to be found,' said Leslie Phang, who helps manage US$1 billion at Commonwealth Private Bank in the city. He does not own local builders and prefers Hong Kong developer Sun Hung Kai Properties Ltd.

The decline in Singapore's property gauge compares with a 10 per cent drop in the Bloomberg Asia Pacific Real Estate Index, which tracks 164 companies. The Bloomberg World Real Estate Index has slipped 8.9 per cent this quarter. Singapore's property index climbed 1.3 per cent yesterday, the biggest rise since Nov 29.

Singapore's home price index increased 8.3 per cent in the three months ended September from the second quarter. That matched the June quarter's pace, the first time the growth rate failed to rise since mid-2005.

Demand for apartments grew this year as banks hired more expatriates. New York-based Morgan Stanley, the No 2 securities firm by market value, said in February that it would open a local prime brokerage office servicing hedge funds. Citigroup Inc, the biggest US bank by assets, followed with its own prime brokerage office in March.

About 19,200 jobs were created in financial services through September this year, government data showed. Foreigners accounted for about 43 per cent of total purchases in 2006, up from 14 per cent in 2005, according to CLSA, the Asian investment-banking arm of Paris-based Credit Agricole SA. Singapore home prices rose 13 per cent last year, beating all other Asian markets, according to Global Property Guide, a Manila-based researcher.

The number of foreign purchases fell 38 per cent to 2,073 last quarter, from a record high of 3,332 in the three months ended June 30, according to DTZ Singapore, the local unit of DTZ Holdings plc, a London real-estate brokerage.

The government scrapped a program on Oct 26 that allowed buyers of planned apartments to pay 10 per cent of the asking price and defer the remainder until completion. Builders face higher fees on new developments after the government raised charges by 58 per cent for apartment projects and by 42 per cent for commercial properties, starting Sept 1.

'There are still a lot of policy risks in this segment,' said Daphne Roth, vice-president of equity research at ABN Amro Private Banking in Singapore. 'The government doesn't want home prices to go up too much, too quickly and the policy changes introduced so far have already impacted the market.' CapitaLand has slumped 25 per cent in Singapore stock exchange trading during the fourth quarter, set for its biggest quarterly drop since a 47 per cent plunge in the three months ended September 2001. It has lost 29 per cent after reaching a record high on Apr 26, even though third-quarter profit more than doubled from a year earlier.

City Developments Ltd, controlled by billionaire Kwek Leng Beng, declined 18 per cent since the start of this quarter and plunged 23 per cent from its all-time high on June 19.

The selloff has left local property shares cheaper than their regional peers. The Singapore Property Index is valued at 11 times earnings, less than a third of its high of 38 times in March 2006. The Bloomberg measure of Asian real-estate stocks is valued at 19 times, while the global index is at 17 times.

Thue Isen, who helps oversee US$1 billion at Bankinvest Group in Singapore, including shares of CapitaLand and City Developments, said that the decline is a chance to buy local developers, which he finds more attractive than those in Hong Kong and China.

'People's expectations for the property market here have definitely dampened, which justifies some of those declines,' he said. 'If you look at economic and income growth and new offices starting up, the fundamentals haven't changed that much, so the pullback looks a bit excessive.'

CIMB-GK Research, based in Singapore, cut its price forecasts in a Dec 10 note. Properties costing at least S$1,200 a square foot may climb 8 per cent in 2008, compared with an earlier forecast of 15 per cent. Overall home prices will rise 15 per cent from a previous estimate of a 25 per cent increase, said Donald Chua, a Singapore-based analyst.

The brokerage, a unit of CIMB Bank Bhd, Malaysia's largest investment bank, also cut its rating on the industry to 'underweight' from 'overweight', citing slowing growth. The firm lowered its recommendation on CapitaLand to 'neutral' from 'outperform'.

CLSA forecasts that as many as 12,000 new homes under construction could be up for sale in the next year to 18 months in the most expensive residential districts, driving up supply and hurting prices. The 'unprecedented' inventory is worth S$21 billion, almost twice the S$11 billion invested in real estate in 2006, according to Yew Kiang Wong, a CLSA analyst in Singapore.

'There's just too much negative news out there right now, with the government regulations and concerns over sub-prime,' said Nicole Sze, Singapore-based investment analyst at Bank Julius Baer, which manages US$350 billion. 'We're unlikely to see the same kind of broad-based rally that we've had.'   -  2007 December 20   BLOOMBERG

RESIDENTIAL
Property boom expected to continue 
Robust economy, jobs growth, strong housing demand and en bloc sales proceeds are key drivers

The bullish sentiment in Singapore's residential market continued into 2007 from where it left off in 2006. In the first nine months of this year, the market recorded a total of 29,331 sales transactions worth some $52 billion. This represents a year-on-year increase of 89 and 116 per cent respectively.

The demand for high-end residential housing has been growing at a feverish pace over the past two years and although the stock market plunge may have affected investor sentiment, new benchmark prices continued to make headlines over the past two quarters. Rising fast to support the high-end residential sector are the mid-tier and mass market segments, which have picked up significantly since early 2007 with record prices set at several project launches. Strong economic outlook, coupled with higher salaries and bigger bonuses and rapid jobs growth have brought new impetus for investors, home owners and speculators to upgrade and/or to purchase.

Comparing average prices with those at the end of 2006, the average price for homes in the super luxury market segment (luxury developments which crossed the $2,500 psf mark in Q4/2006) jumped 42 per cent to $3,700, while the high-end market segment (luxury developments in Districts 1, 4, 9, 10 & 11) rose by 36 per cent to $2,076 per sq ft. The average prices for both mid-tier and mass market developments have also risen by more than 50 per cent, albeit from a lower base, to $1,250 per sq ft and $700 per sq ft respectively.

One major market driver is en bloc sales, which have been very active since early 2005. However, with the prolonged US sub-prime credit woes, hikes in development charge rates and the tightening of en bloc sales legislation, the en bloc sizzle has taken a breather from the end of the third quarter of this year.

This has been a phenomenal year for en bloc sales. Since January, some 95 en bloc sales with a total value of $11.3 billion were transacted, compared to 65 transactions totalling $7.5 billion for the whole of 2006. The displaced tenants and owner-occupiers from these properties have contributed to the overall increase in rentals and capital values of homes in the mid-tier, mass and public market segments.

Notwithstanding the stock market shock in the third quarter, the buying momentum is expected to resume between next month and early 2008 given the wave of purchases from displaced en bloc-owners who are expected to collect their money and buy a replacement home around this time. This time round, the mid-tier and mass market segments will lead the way with a strong growth, lending solid fundamentals to prices in the high-end and luxury sectors.

For next year, the residential market in Singapore is expected to remain strong with all segments looking set to continue growing supported by robust domestic economy, jobs growth, wage growth in both the public and private sectors, strong housing demand from expatriates relocating to Singapore and reinvestment of proceeds from en bloc sales.

The general market consensus is that supply will tighten due to a short- term supply crunch in 2008, as the expected demolitions from en bloc sales outstrip the completion of new projects. The tightness in supply will be exacerbated by the need to fill job vacancies which stood at close to 40,000 by mid-2007 with unemployment standing at 1.7 per cent in September 2007.

An estimated 10,000 units from en bloc sales are also expected to be demolished in 2008 while TOPs from new projects are expected to re-supply only 8,000 units. (This is largely due to the few construction starts back in 2003 and 2004 when economic confidence was low, which resulted in low completion numbers in 2007 and 2008.)

Furthermore, there is also the potential risk for a slower pace of construction of residential properties arising from the strong competition for resources in the construction sector. This is largely due to the fact that several of these mega projects are also scheduled for completion within the next three to four years. Some of these mega projects include the two integrated resorts, BFC, petrochemicals plants in Jurong Island, public infrastructure such as the Circle Line and Circle Line Extension, common services tunnel in Marina Bay, sports hub at Kallang, and Gardens by The Bay.

On the demand side, there are several significant events that could spur investments into Singapore. The first is next September's Formula 1 night race, which will bring international attention to Singapore starting from February, when the F1 season begins.

The weakening US dollar, strengthening Sing dollar, reduced confidence in US markets and political uncertainties as several key regional countries will be holding their general elections soon, could encourage more high-net-worth individuals (HNWIs) from around the region to park some of their wealth here.

The strong Singapore property market has also caught the eye of fund managers from Europe, the Middle East and Japan who have been investing in Asian real estate; and Singapore will benefit from that allocation in 2008 and beyond.

The high-end market is expected to remain steady with average prices likely to rise by another 15 to 20 per cent to hit an average of $3,000 per sq ft. With such strong demand, it would not be to far-fetched to expect some units in super luxury residential projects to cross the $6,000 per sq ft mark.

Developers will continue to raise prices for luxury high-end apartments with superior product quality, such as more spacious surrounding, and designer fixtures and fittings. At the same time, the replacement cost of land, whether from en bloc sales or government land sales, will continue to go up.

Meanwhile, Singapore's status as a global financial centre, tax-friendly environment, strong currency and liquidity in the local market will keep attracting investment interest from the fast-growing private banking sector which, in turn, are attracting HNWIs to the region as well as expatriates entering Singapore's job market.

While the high-end market takes a slower growth next year over an increased baseline, the mid-tier and mass markets will surge in 2008 due to strong demand and spill-over effects from the high-end market. Twelve months ago, we proclaimed that 2007 will be the year of resurgence for the mass market. We were spot on. We now know that the resurgence is backed by solid fundamentals and we expect this sector to soar in 2008.

Assuming two-thirds of home owners, who sold their properties en bloc in the first nine months of 2007, will buy replacement homes, we could expect to see some 4,300 buyers with a budget of approximately $7.5 billion looking for homes in the first half of 2008.

Soaring high-end prices and supply crunch in prime districts have forced some buyers to turn their attention to mid-tier projects. In addition, public and private sector wage rise backed by robust domestic economy, tighter job market will also drive up demands from HDB upgraders or families exceeding the HDB income ceiling, particularly in the mass market segment.

Strong demand could also push mid-tier prices up by another 20 to 40 per cent to between $1,500 and $2,000 per sq ft for the whole of 2008. Areas that will benefit from the rise in the mid-tier market include Balestier, Bukit Timah, Novena, Thomson and Upper East Coast. As many of the mass market areas are still relatively undervalued, it is expected that prices will grow strongly, up by between 30 and 50 per cent from a low base, with average prices reaching around $1,000 per sq ft. Areas likely to see the most significant price gains include Upper Paya Lebar, Hougang, Ang Mo Kio, Upper Thomson to Mandai, Clementi, West Coast, Jurong East, Upper Bukit Timah and Bedok.

There are several projects in the high-end and super luxury markets to keep an eye on in 2008, such as the Ritz-Carlton Residences at Cairnhill, Hilltops at Cairnhill, Paterson Suites at Paterson Road, and The Marina Collection and The Quayside Isle in Sentosa Cove. We would also be monitoring The Cascadia and Floridian at Bukit Timah, and the development by CDL in Thomson Road for signals of strength in the mid-tier market. For the mass market segment, it will be the developments at Simon Road and Bedok Reservoir and Park Natura at Bukit Batok. In the landed property sector, international attention-grabbers in Sentosa Cove could be launched in 2008.

The rental market is also expected to strengthen. Based on robust demand and limited supply being completed, coupled with the withdrawal of properties in the prime districts through en bloc sales, rentals are likely to hit new highs.

Rents in prime districts will increase by 20 to 30 per cent next year, to an average of $6 to $8 per sq ft per month. The trend of existing tenants in prime districts moving out to fringe or suburban areas will continue, and this will support the annual 50 to 80 per cent growth of the suburban rental markets, at average rents of $4 to $5 per sq ft per month.

Though the property market continues to exhibit strong performance, there are several factors which could affect the residential sales market. Factors such as prolonged uncertainties in the global equity markets, further property measures imposed by the government to cool the market, rising oil prices and high inflation rate could possibly dampen investors' sentiment and confidence. Increased operating costs due to rising residential and office rents have also sparked concerns about the erosion of Singapore's attractiveness for MNCs.

The Singapore government targets a long-term economic growth of 4 to 6 per cent per annum. We have been making basic changes to diversify our economy, through the IRs (conventions/exhibitions, Universal Studios theme parks), through investments in R&D and intellectual property, through continued liberalisation of funds management, private banking and insurance industries. This re-positioning of Singapore as a vibrant, global city will continue to support the residential market.

Singapore is undergoing a structural upwards re-rating of the property market. Barring unexpected shocks, property prices will continue to rise for at least three years, and if the IRs deliver their performance, another five to seven years. And even if there were a downturn in the property sector beyond 2012, the authors believe that bottom prices then will still be higher than the prices of 2007.

Given the factors outlined above, what might be the opportunity cost of doubting the continued growth in this market and staying on the sidelines and waiting for it to drop?   - 2007 November 14    SINGAPORE BUSINESS TIMES

A broadbased recovery in the housing market now looks imminent with some developers feeling confident enough to put in new benchmark bids for 99-year suburban leasehold sites.

But HDB upgraders are finally making a comeback, bolstered no doubt by salary revisions in the civil service and mid-year bonuses.

Even the much-anticipated fallout from the United States sub-prime crisis and subsequent global credit crunch appears to have left the Singapore property market relatively unscathed. Not only have foreign institutional investors continued to pump money into the property sector, a new base of investors, most notably from the Middle East, are making their presence felt.

Of course, there is still a level of volatility in some segments. The high-end and luxury residential sector may see both foreign and local investors make more cautious decisions about buying into a segment that is already a little peakish.

Speculators, who have been driving up prices in the high-end and luxury segments, also appear to be beating a retreat, after considering the upsides in flipping properties no longer worth the risks.

Emerging markets are also looking like pretty safe bets though.

Few will have failed to notice that when the US sub-prime situation started to unravel in July and August, the China and India markets seemed impervious to its effects.

The growth story of both these powerhouses is well known, so much so that industrialists and developers alike are looking for new frontiers.

Vietnam is certainly a hot favourite now but closer home, Malaysia too holds many opportunities.

And if the Singapore market is anything to go by, the increasingly buoyant high-end sector in its capital city certainly bodes well for the rest of the real estate market.

Risk aversion may yet be the catch phrase of choice for the months ahead.

Not surprising then, financial analysts have come out in support of the mass market and the mid-cap developers most exposed to this segment.

Also looking relatively safe is the growing Singapore real estate investment trust (S-Reit) sector. The first Reit was listed in 2002 and, to date, there are 17 S-Reits with more expected to be listed.    2007 September 27   SINGAPORE BUSINESS TIMES

The million-dollar club in Singapore continues to grow. The IRAS annual report shows that 2,121 taxpayers earned more than $1 million in Year of Assessment 2006, which assesses income earned in 2005. That was 22 per cent up from 1,738 million-dollar earners in 2004.

The bulk of these wealthy people were Singapore residents, with only 31 non-residents. For tax purposes, residents are defined as those physically present in Singapore for at least 183 days in a year.

The total income of this exclusive club has also grown. Their total assessable income earned in 2005 was $4.2 billion, up from $3.4 billion the year before. And the total tax assessed on their income was $682 million - about 17 per cent of total income tax collected from all individuals that year.   - SINGAPORE BUSINESS TIMES   2007 September 8

Sizzling real estate sector
Bullish investors may drive 2007 sales to a record high, while home prices and rents continue to surge

After years of being in the doldrums, the Singapore property market has been staging a spectacular recovery in the past couple of years. The rally is being fuelled by a surge in confidence from foreign investors as well as local buyers. The real estate sector is firing on all cylinders, including investment sales, residential and office.

A whopping $24.81 billion worth of investment sale deals were sealed in the first six months of this year, according to CB Richard Ellis (CBRE). Investment sale deals - a gauge of major property players' confidence level in the mid-to-long-term prospects for the real estate sector - include collective sales, other land deals, transactions of entire office and other buildings, as well as strata-titled units above $5 million. The first half of 2007's sparkling investment sale numbers include some 75 collective sales worth $9.3 billion, higher than $8.2 billion for the whole of last year.

CBRE expects the full-year investment sale figure to surpass the record $30.51 billion set in 2006, hitting as high as $35 billion.

Major deals in H1 this year include the $1.04 billion sale of Temasek Tower, the collective sale of Leedon Heights ($835 million) and Novotel Clarke Quay Hotel ($201 million).

In the residential sector, the Urban Redevelopment Authority's (URA) Q2 price index for private homes was up 8.3 per cent from the preceding quarter and 21 per cent higher year on year. And latest Q2 official figures show that the residential price recovery that began some two years ago in the high-end segment fuelled by foreign buyers has started filtering down to other segments of the market, based on URA's sub-indices.

Prices of non-landed private homes in the Core Central Region (CCR) - which includes prime districts 9, 10, 11, Downtown Core (including Marina Bay) and Sentosa - were up 7.9 per cent in Q2 over Q1, while prices of non-landed homes in Rest of Central Region (RCR) - which includes areas like Bukit Merah, Queenstown, Geylang, Toa Payoh and Katong - rose 8.1 per cent over the same period. The Outside Central Region (OCR), covering suburban mass-market locations like Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok, posted a 7.2 per cent quarter-on-quarter rise in Q2.

The rental market has also been sizzling, with residential rental indices of non-landed private homes rising 12 per cent in Q2 over Q1 for the CCR, and by 10 per cent and 9.4 per cent respectively for RCR and OCR in the same period. The Q2 rental indices were up around 35 per cent from a year ago for each of the CCR and RCR, and by 28.3 per cent for OCR.

In the public housing segment, the Housing & Development Board's (HDB) resale flat price index rose 3 per cent quarter-on-quarter in Q2, compared with a 1.3 per cent gain in Q1.

The outlook for the residential sector is bright. Most property consultants predict that URA's overall private home price index may surge a further 8 to 15 per cent in the second half, chalking a full-year increase of 23 to 30 per cent. Analysts generally expect HDB resale flat prices to post an 8 to 10 per cent full-year increase.

Interestingly, collective sales have caused a ripple effect. For instance, those who sell their homes through en bloc sales are looking for replacement homes, in many cases outside the prime districts where they sold their en bloc properties because of rapidly rising prices in the prime locations.

This has helped to spur a recovery in the other market segments, even HDB resale flats, where a few units have been purchased at record prices by those who sold their private homes through en bloc sales.

At the same time, as developers pull down en bloc sale sites to redevelop them, the resulting shortage of prime district apartments has helped fuel rental hikes for such homes. In the industrial property market, average rents for all categories of space increased in Q2 this year. High-tech space posted the biggest quarter-on-quarter gain of 11.9 per cent to $2.35 psf per month, as the office space shortage and rising office rentals led many qualifying occupiers to move to high-tech properties, according to CBRE. The average monthly prime retail rent along Orchard Road posted a 1.8 per cent quarter-on quarter gain in Q2 to $34.40 psf - close to the $35.10 psf achieved in 1996.

As for the office sector, a shortage of space in the near term, coupled with strong demand from occupiers including big-wig international financial institutions have been the key factors driving a whopping 80 per cent year-on-year rise in CBRE's average prime rental in Q2 to $10.80 psf a month. This surpassed the 1996 peak of $9.90 psf a month, and is fast closing in on the 1990 historic peak of $11.50 psf a month. The Q2 office rental figure is also more than double the $4 psf during the current cycle trough in Q1 2004.

Market watchers expect office rents to head further north in the next few years because of the supply crunch. However, the government has been releasing more office sites, including the maiden 'transitional office' plot which can be built into a low-rise office building in about a year.

In addition, it has made available more 99-year condo sites, mostly in suburban locations. Besides tackling the supply side, the authorities have also begun releasing more property market data so that participants can make more informed decisions. So far, the indication from government is that it is not inclined to intervene to cool demand.

Fundamentals for the Singapore real estate sector remain strong for the next couple of years, at least - barring unforeseen circumstances.

Of course, a sustained rout in the local stock market because of the selldown on Wall Street is likely dent sentiment in the Singapore property market. But there could also be a more direct hit if the US sub-prime mortgage default fiasco dries up some of the liquidity that has been powering the local real estate sector's sparkling recovery. - SINGAPORE BUSINESS TIMES  9 August 2007   By Kalpana Rashiwala

UOB tightens up on home loans in face of dizzy market
Bank imposes caps on valuations and puts 80% ceiling on loans

Wee Cho Yaw has done it again, though only time will tell if he was ahead of the curve.

At a time when property prices have started to touch giddy heights, the chairman of United Overseas Bank (UOB) has reportedly asked his institution to tighten lending criteria.

Since late last month, UOB has been lending only 80 per cent of a home's valuation, even though most banks are willing to stump up 90 per cent of the selling price.

UOB has also decided to put its own cap on valuations, which appear more conservative than the current market prices.

Mr Wee, arguably Singapore's sharpest banker, stepped down as chief executive of UOB in April this year and was succeeded by his oldest son, Ee Cheong.

UOB's stricter lending criteria mean that some potential borrowers have been turned away. A UOB mobile sales banker complained that she has been losing sales but has told prospective customers that she can try to appeal on their behalf. UOB is believed to be the first bank to make its lending norms more stringent.

At UOB's second-quarter results on Tuesday, Eddie Khoo, executive vice-president, personal financial services, said that less than 10 per cent of the bank's new home loans this year provided more than 80 per cent financing.

'We require a higher cash portion,' said Mr Khoo.

He said that more than 80 per cent of UOB's home loans were for owner occupation and that foreigners accounted for 20 per cent of home loan customers.

For certain hot projects in the prime districts such as Orchard Residences, Scotts Square or St Regis Residences, UOB has put a valuation cap of $3,600 per square foot (psf), even though sales and sub-sales have been reported at much higher prices.

Scotts Square, launched last week, saw 169 units sold at an average price of $3,983 psf. The highest price paid was $4,430 psf for a one-bedroom apartment on the 41st floor, of the 338-unit project, said Wheelock Properties, the developer.

The median price for St Regis Residences on Cuscaden Road, developed by City Developments, is $3,713 psf, according to Urban Redevelopment Authority data. In June, it was reported that a unit went for $4,635 psf at the 173-unit St Regis Residences which has only 15 units unsold.

At selected projects in the upmarket districts 9, 10, 11 and in Marina Bay, UOB is said to have set the valuation cap at not more than $2,600 psf.

Sub-sales of The Sail @ Marina Bay are being advertised at prices ranging from $1,900 psf to over $3,500 psf. Caveats lodged show that units were sold from prices as low as $1,249 psf for The Sail which was first launched in 2004.

Even for the recently launched Fontaine Parry near Serangoon, UOB is said to have a valuation cap of $834 psf. According to sole agent Knight Frank, the first phase of Fontaine Parry, which was sold out, saw prices starting at $850 psf and some sub-sales are now going for $900 psf.

For the first half of 2007, UOB grew its total home loans book 18 per cent, outpacing the industry average, to $20.7 billion. DBS's group home loans rose 8.75 per cent to $26.1 billion. UOB said Singapore mortgages were up 15 per cent while DBS reported an almost similar growth of 14 per cent.

In August 1995, Mr Wee said famously: 'I don't think the property market will collapse but prices have reached a high and the upside is limited.'

Although still sympathetic to first-time property buyers or HDB upgraders, he said the bank had more stringent criteria for speculative buyers and those investing in second properties.

The strategy meant that UOB lost some market share in property loans.

UOB that year reduced financing to only 65-70 per cent of the purchase price of a property, compared to about 90 per cent in 1992, just before the height of the property frenzy which peaked in 1996 before crashing.

Singapore's property market subsequently went into a long depression, which lasted for the most part of the decade until 2003 and sent many borrowers into negative equity - where the size of their loan was larger than the value of their property.

The bank is opting for caution again.

Said a spokesman: 'UOB has always taken a prudent approach in its credit assessment process. A loan application is assessed on the creditworthiness of the borrower as well as the merits of the property. We would consider the loan application favourably if the borrower meets our criteria. From time to time, the bank reviews its home mortgage policies, and if necessary, adjustments may be made to align with market conditions.'  - by Siow Li Sen   SINGAPORE BUSINESS TIMES   9 August 2007

COMMENTARY

2007 promises to be an interesting year for Singapore with the euphoric success at Marina Bay and a number of regional property players collaborating on the orderly playing field.    We have assembled a few key bits of research and news so one can interpolate as one wishes.     

Singapore is experiencing 'flavour' of the season for even some Western-based real estate investors and hedge funds to get their feet wet in Asia.   This trend started last year with Colony Capital of New York's purchase of Raffles Hotel with the Fairmont Hotel group.     

No better place than Singapore as a test market but German and Australian funds have been playing in this market for a number of years and Hong Kong players are demonstrating that they know how to cooperate for mutual profit.   This hasn't always been the case  as often the cities were competing. 

In any event, the developments taking place at Orchard Turn and Marina Bay is igniting the property market in Singapore.   And Sentosa is finally taking off like wild-fire after many years of dedicated effort.     Purchasers  of luxury condominiums are being asked to turn over blank cheques for the premium units and luxury residential condos have hit the $2,500 per sq ft price mark.    >> MORE

Much of Singapore property market's success is as a result of the expectation that more expatat's will be moving to the city fuelling growth in the luxury sector of the residential market and increased deman for office space.     Still, as typical of Asian investors, many are still treating Real Estate as yet another commodity - some of which is to be traded for profit .  - Andrea Eng

There's upside yet in Singapore property
Investing in property requires capital and time but the rewards can be substantial
Singapore's  property market is booming, with activity centred in districts 4, 9, 10, 11and 15. And I believe there is a lot more upside yet. Why? For each key event listed below, I expect an above average movement of $200 per square foot for the districts mentioned in the years ahead:

Year 2008: Singapore will host the world's first Formula One night racing. The world will be invited to Singapore, interact with and invest in Singapore.

Year 2009: The first integrated resort (IR) at Marina Bay will be completed with US$5 billion flowing into Singapore from the first wave of tourists. They will come from the business travel, meetings, conventions and dexhibitions segment.

Year 2010: The second IR on Sentosa will be completed with another US$5 billion flowing in from the second wave of tourists. These tourists will come from destinations beyond a nine-hour flight radius.

Year 2011: My guess is that there will be a general election in Singapore which could see some election year goodies.

Year 2015: Singapore celebrates her 50th birthday and hopefully fulfils Prime Minister Lee Hsien Loong's vision of Singapore as the jewel of the region.

Can we really profit from investing in the property market?

While many wealth creation fads come and go, property investment has consistently created more permanent millionaires than any other investing strategy in history.   Here are what some of the wealthiest Americans have said:

'Real estate is the basis for all wealth.' - Theodore Roosevelt

'Eighty per cent of all millionaires made it through real estate.' - Andrew Carnegie

'Buying real estate is the best, safest way to become wealthy.' - Marshall Fields 

The truth is that property investment is not just for the rich. If done correctly, anyone who has the desire to succeed can create enough passive income or a lump sum of cash to become financially free.

According to an annual World Wealth Report compiled recently by Merrill Lynch and research firm Capgemini, Singapore has 66,660 millionaires (in US$ terms). They account for about 1.5 per cent of the population, that is, three out of every 200 people here are millionaires. 

Where are the areas to invest? I highly recommend Sentosa Cove and District 10.

Sentosa Cove offers one of the most exciting propositions - a residential enclave that shares the island with an integrated resort. The wealthiest individuals in the world will be looking to buy your property which will be situated right next to their favourite entertainment spot.

In district 10, the Duchess area is the place where you can invest in your child's future. Within a one-km radius, it offers several premier schools: the Nanyang and Raffles Girls' primary schools, St Margaret's Secondary School, Nanyang Girls' High, Chinese High School, Hwa Chong Institution, National Junior College and Hwa Chong Junior College.    -  by Clement Chiang   SINGAPORE BUSINESS TIMES commentary   4 July  2007

Hot picks in real estate

2007  March 22:  It has been quite a year for the Singapore property market, emerging from the gloom and heading into uncharted territory. The spark that started the uptrend can be traced back to late 2004 when foreigners, flush with liquidity, began showing interest in Singapore's high-end property.

This was boosted by the country's plans for the Sentosa and Marina Bay integrated resorts as well as government efforts to make property more appealing by easing the approval process for foreigners to own land (in the case of Sentosa). Moreover, Singapore's property market had been lagging behind Asian cities like Shanghai, Hong Kong and Mumbai.

Capitalising on the government's effort to revitalise the property market, developers started acquiring prime land in the core central region (downtown core, Sentosa and districts 9, 10 and 11) in anticipation of rising property prices. It led to a series of en bloc deals in 2005 and 2006 as developers outbid each other to secure prime land.

This in turn prompted the government to hike the development charge (DC), with the rates for commercial use and office space rising by an average 12 per cent, landed residential use by 6 per cent and non-landed residential use by 14 per cent.

Reaping rewards 

Savvy investors who saw the glimmer of light in late 2005 as a buy signal are reaping the rewards of their investments. In 2006, the Singapore property equities index rose 67 per cent while the URA property price index for residential and commercial property increased by 10.2 per cent and 17 per cent respectively. Singapore Reits (S-Reits) have also done well, appreciating by more than 40 per cent on average in 2006.

Given the buoyant outlook, where should investors look for the best returns in 2007?

Home prices increased by 10 per cent in 2006, with the bulk of the price increase concentrated in the core central region. Prices are expected to rise by a further 12 per cent this year. Residential rents have also risen 14 per cent in 2006.

While the focus has been on the central region, the mass market could see the filter- down effects this year, for several reasons. First, the strong economy has led to greater job security and rising wages. Coupled with a partial restoration of CPF, demand for mass market projects is expected to rise as middle-income earners, who were most affected by structural changes, will have greater confidence to upgrade their properties.

Second, following the wave of en bloc deals, people who have sold their homes to developers would be shopping for replacement units. As some of them may be priced out of units in the original area, they would look for homes in outlying areas.

Third, the government's strategy of attracting foreign professionals into the country is paying dividends. Anecdotal evidence suggests many have decided to call Singapore home, driving up demand for private property. Many Singaporeans are also snapping up projects close to where the foreigners are working, in hopes of fetching rich rentals.

This can be seen in the recent launch of One North Residences at One North Research Hub in Buona Vista, which sold close to 80 per cent of the units in three days.

On the commercial side, the sharp 30 per cent spike in office rentals in 2006 was attributed to the shortage of prime office space. Although the government has released the Business and Financial Centre for development, no new office supply is expected to hit the market till late 2009. This has caused office rentals in the CBD to surge past $10 per sq ft with occupancy hitting 98.4 per cent for Grade A properties.

With more multinationals from the finance, IT and marine industries relocating to Singapore, demand has risen considerably, while downtown supply has dipped as old commercial buildings are being redeveloped into apartments. As such, the commercial sector will continue to do well for the next couple of years, and new records are expected to be set for Grade A properties. Sub-prime areas will also benefit from spillover demand.

Pockets of opportunities

As property recovers, property stocks have seen one of the best runs in recorded history, far outpacing the rise in real estate. While fundamentals are strong and profits should be very healthy, much of the prospects of property developers may already be in the stock price. However, there are pockets of opportunities, particularly in stocks exposed to the commercial sector as well as Reits.

With the crunch in office supply, commercial real estate landlords will see another stellar year. Given the discrepancy between rental yields of commercial property and the required returns of commercial Reits, value can be unlocked by landlords by selling these properties to existing players or floating a Reit themselves.

S-Reits outperformed their global peers in 2006 and are likely to see slower growth ahead. Given that it is increasingly difficult for Reit managers to make yield accretive acquisitions, it is likely that there will be some merger and acquisition (M&A) activity among listed players. Smaller Reits like Cambridge Industrial Trust, which typically have more attractive valuations and higher yields, are likely targets for takeover.

Property is riding high and will continue to see strong interest in 2007. For investors, this should be a good time to invest in well-located mass market projects, particularly those close to the city or MRT stations. Commercial landlords are also expected to enjoy a good run for at least the next two years. Grade A office buildings have already seen record rentals, and this is expected to spill over to the lower tiers. While prospects for property remain bright, property counters may have already priced in much of the good news. As such, investors should not expect the same gains as before and be more selective. -   Terence Wong is chief executive officer, and Alvin Yong, research associate, at SIAS Research Pte Ltd    SINGAPORE BUSINESS TIMES     22 March 2007

Overview

These are heady times to be a developer or an estate agent in Singapore. The city-state is in the grip of a property boom powered by economic growth, strong employment and a buoyant stockmarket. Rents, both residential and commercial, are rising fast. And new blocks of flats are selling even faster, sometimes within hours.

January 5th saw the launch of One Shenton, an apartment block near Marina Bay, just south of the central business district. Thousands turned up and virtually all of the 330 apartments on offer were sold within one-and-a-half days. The developer, City Developments (CDL), said it had sold the block for between S$1,500 and S$2,200 ($972 and $1,426) per square foot. The smaller, one-bedroom flats sold for about S$1m each; the biggest flats went for four times as much.

CDL has delayed selling the 11 penthouse units at One Shenton in the hope of attracting even higher prices. A few weeks ago the penthouses at the nearby Marina Bay Residences were sold for a new Singaporean record of S$3,400 per square foot. The rush has all the hallmarks of a speculative bubble, but few believe it is anywhere close to bursting just yet.   - 22 January 2007   THE ECONOMIST

'Property Prices to Rise on Consistent Demand'

Singapore's high-end property prices may rise by as much as 10 per cent this year amid consistent investments by overseas funds and expatriate workers, the chief executive of Southeast Asia's biggest property company said on Monday.

'2007 will be good year,' CapitaLand Ltd chief executive Liew Mun Leong told Dow Jones Newswires during a visit to Kuala Lumpur.

Still, that's a slower growth rate than last year. Analysts estimate prices of Singapore's high-end property market, which traditionally attracts rich buyers from Asia and funds looking to invest in the real estate sector, rose between 20 per cent and 30 per cent in 2006.

Mr Liew said CapitaLand expects medium-end property prices in Singapore to rise by 5 per cent compared to 2006, while high-end developments could see an increase of between 5 per cent and 10 per cent on year.

Mr Liew said the trend of prices rising is 'cascading down' to the other price segments also, driven by rising demand from expatriate workers in the city-state as well as investment funds that buy property.

However, the rise isn't creating a speculative bubble, he said.

'I would say that a bubble develops if there is no demand. And when I say demand I'm talking about real demand,' he said.

'I think in Singapore the demand is still there,' Mr Liew said. 'Because there is a lot of growth in expat housing. There are a lot of companies moving to Singapore and the reality is we need housing, whether it's (the) financial industry or manufacturing or other industry.' -- AP    8 January 2007

2006 The Year in Review
Far East Organization the biggest property investment buyer in 2006

Property tycoon Ng Teng Fong's Far East Organization was the biggest buyer in the property investment market in Singapore last year with about $1.6 billion worth of deals under its belt, according to the latest analysis by CB Richard Ellis (CBRE). 

CapitaCommercial Trust was the next biggest buyer with its purchases valued at $1.3 billion. The Singapore-listed real estate investment trust (Reit) was catapulted to the top buyers' list with its acquisition of a 60 per cent stake in Raffles City.

Las Vegas Sands was in third spot, with its $1.2 billion purchase of the Marina Bay integrated resort (IR) site.

City Developments, controlled by Kwek Leng Beng and his family, was in fourth position, with $1.127 billion, according to CBRE.

Following closely behind was the Riady family's Lippo Group (inclusive of Auric Pacific and Overseas Union Enterprise), with $1.067 billion. Other local players making it to the list of top buyers last year include Ho Bee (about $820 million), Frasers Centrepoint (also above $800 million), SC Global (about $720 million), GuocoLand ($510 million), MCL Land (about $420 million) and Wing Tai (about $380 million).

UOL Group bought about $340 million worth of properties, while United Industrial Corp and its subsidiary Singapore Land were involved in deals totalling around $240 million.

Also noteworthy was the strong inflow of foreign investment in the local real estate market last year. Besides Las Vegas Sands and Genting Group which bagged the Marina Bay and Sentosa IR plots respectively, other big foreign buyers were Australia's Lend Lease (over $650 million), CLSA-linked entities (which purchased SIA Building and HB Robinson), Lehman Brothers, Hong Kong's Park Hotel Group and Macquarie Global Property Advisors.

Latest updated figures from CBRE show the total investment sales of property in the Singapore market hit $28.19 billion last year, more than double the previous historical high of $13.5 billion in 2005.

Investment sales of property - seen as a barometer of developers' and big investors' mid-to-long-term confidence in the real estate market - refer to large investment transactions like office buildings and shopping centres, as well as sites bought for development, including collective sale deals. CBRE's figures also include sales of strata residential and commercial units costing $5 million or more.

For Far East's Mr Ng, the property buying spree last year began right from the word go, when the group placed, on the same day (Jan 18), top bids for two properties - the former Glutton's Square site on Orchard Road ($421.1 million) and Amberville ($183 million) in Katong. The latter marked the group's first private residential land purchase in Singapore for almost 10 years. Far East followed that up with a string of other residential site purchases throughout the year - Angullia Mansion, Skyline Angullia, Rose Garden, Pacific Court and a group of properties at Keng Chin Road in Bukit Timah. Mr Ng's Hong Kong arm, Sino Land, also clinched the coveted Collyer Quay site at a state land tender in December.

Properties sold by the private sector accounted for $23.6 billion, or 84 per cent of the total investment sales deals last year. The remaining $4.6 billion originated from public sector sales, including the land parcels for the two integrated resorts at Marina Bay and Sentosa.

By sector, the residential market accounted for the lion's share of $14.5 billion (roughly 51 per cent of 2006's total investment sales), up 91 per cent from the preceding year. Last year's $14.5 billion figure included a whopping $8 billion worth of collective sales deals - four times the $2 billion for the preceding year and the highest in the past decade.

It was also an active year for Good Class Bungalow sales, with nearly $1 billion worth of deals struck, up 33 per cent from 2005. The commercial property sector saw $9.9 billion of deals last year, up 49 per cent from 2005.

The hotel sector also recorded an unprecedented level of investment sales at $1.5 billion, reflecting the buoyant mood in the industry on the back of record visitor arrivals.

In terms of buyer profile, developers were tops with a total of about $11 billion worth of acquisitions, either done solo or jointly with other parties. Next were Singapore-listed Reits, accounting for $6.12 billion or almost 22 per cent of 2006's total investment sales. - SINGAPORE BUSINESS TIMES    Jan 15, 2007

Broad-based recovery in property seen

Property players polled by Business Times believe the market - which collapsed 10 years ago - is set for a broad-based recovery following recent signs that stability has returned.

Ten years after boom turned to bust in 1996, they believe that a sensible - as opposed to an unrealistic - mindset has taken hold, with sellers focusing on fair prices and buyers looking for fair value.

Property cycles, by definition, come and go. And many owners, still hurting from the 1990s, are not sure whether they are coming or going. So BT polled 13 major players on how things stand. The reactions were mixed - but mostly optimistic, although three abstained.

Seven of the remaining 10 believe that signs of a broad-based recovery will emerge this year. Their view also applies to the all-important residential mass market, which has traditionally been driven by Housing and Development Board upgraders.

For the high-end market, six of the 10 reckon prices will eventually hit 1996 levels - while four think otherwise.

BT also asked if speculation will make a comeback this year, and apart from those who said it 'never went away', five said no.

Jones Lang LaSalle's regional director and head of investments Lui Seng Fatt says property cycles are based on 'historical patterns', and using a seven-year cycle, 'we may peak in mid-2007'.

Property segments have also become increasingly inter-linked, and Mr Lui notes that the broad-based recovery is being led by the retail and office market. 'The retail market in particular has not been affected as much.'

If the mass market has been slow to pick up, it could be because buyers realise the investment potential of real estate is not what it used to be - not yet anyway.

Tay Huey Ying, associate director of research and consultancy at Colliers International, is sanguine. 'Properties are regarded more as consumption goods now, and there are more investment alternatives offering higher returns than direct property investments, like Reits and unit trusts,' he says. 'The number of upgraders has dwindled, as most home-owners are saddled with properties bought at high prices. Some are still in a negative-equity situation. Hence, the ability to upgrade is lower compared with 1996.'

But if buyers are wiser, what about developers? They too learned lessons from the last boom, according to City Developments group general manager Chia Ngiang Hong. 'Generally speaking, a property bubble with unsustainable prices is detrimental to the economy,' he says. 'Developers now pace their launches so as not to flood the market, mindful of the appetite of different-tier buyers.'

Of course, w