Court awards condo owners more than $200,000 after 6-year battle.

Court awards condo owners more than $200,000 after 6-year battle. But it's not over...

WATER from the common roof had seeped into the walls of the two condominium units.

By Arul John


25 April 2008

WATER from the common roof had seeped into the walls of the two condominium units.

The paint was peeling, the walls were stained and cracks were appearing.

The damage in one unit was so bad that the tenant ended her rental agreement and moved out.

A married couple who own the two apartments at Harbour View Towers took the management corporation (MC) to court when the problem persisted after their complaints.

Mr Cheng Fu Zay and Madam Lai Foong Har sued for damages such as loss of rental income, surveyors and valuers' fees and assessment costs.

After a six-year tug-of-war, the couple were awarded more than $200,000 in damages last week.

The couple's units - one on the 29th storey and another on the 30th in the same block - were rented out.

The couple discovered that water had seeped into the walls of both apartments because the common roof was poorly waterproofed, court documents stated, but it is not known when they discovered them.

The waterproofing contractor, Scott Vickers Engineering (SV), had given a 10-year warranty on the common roof. The condo was built in 1994.

COUPLE FILED CLAIM

Mr Cheng and Madam Lai filed a claim against the MC in March 2002 - two years before the waterproofing warranty expired.

They wanted the MC to waterproof the roof again and claimed damages.

At first, both sides tried mediation. But after 1 1/2 years, they were still in a deadlock.

In July 2005, the case ended up in the Subordinate Courts, with the waterproofing contractor named as a third party.

Both the MC and the waterproofing contractor admitted that the couple were liable to claim.

The MC then sued SV to re-waterproof the roof, which the latter finally did in November that year.

In April last year, the court ordered the MC to pay the couple damages of more than $300,000, which included loss of rental income of more than $200,000.

MC APPEALED

But the MC felt it should not have to pay and appealed.

Mr Cheng and Madam Lai also appealed to the Subordinate Courts for a higher amount for their 29th-storey unit, for which they were originally awarded about $125,500.

The judge dismissed their appeal and ruled that they were not entitled to claim for loss of rental income.

The MC was ordered to pay them only about $16,000 for both units combined, excluding interest.

COUPLE APPEALED

The MC agreed to pay this amount, but the couple appealed to the High Court last September.

They wanted to reclaim the earlier award of close to $100,000 for the loss of rental income for their 30th-storey unit, where the tenant moved out because of its condition.

They also wanted an extra of some $430,000 for the loss of rental income for the other unit, repair costs to both units, surveyors' and valuers' fees and interest.

Last week, the High Court ruled that the couple's claim for loss of rental income was reasonable.

Justice Woo Bih Li said that the damage made the 30-storey unit 'uninhabitable'.

The leakage had caused the staining, peeling, cracking and discolouration of the walls in three bedrooms, the living and dining rooms and the common toilet.

So much so the tenant was forced to terminate her rental agreement in January 2003. She had earlier sent two letters of complaint to the MC.

For the 29th-storey unit, the water that leaked into it had stained and discoloured the ceiling board and walls in one bedroom, and also damaged its doorframe.

But, Justice Woo added, the damage in this unit was not as bad. It was still in liveable condition and the tenant ended his tenancy because he had been posted overseas.

Justice Woo also noted that since the MC had re-waterproofed the common roof in November 2005, the earlier award for loss of rental income should be reduced.

The owners had earlier claimed they did not know about the re-waterproofing work until April 2006. So they did not rent out the units until after August that year as a water-flooding test had to be conducted first before the units could be rented out.

Justice Woo eventually awarded the couple about $170,000 for loss of rental income, about $14,000 for repair costs and surveyors' and valuers' fees, and $70,000 in assessment costs and interests.

On the MC's argument that the couple should not be compensated for loss of rental income, Justice Woo said the issue was whether the units could have been rented to paying tenants and if the owners could have got a rental sum at the full market rate.

He said: 'The MC had only itself to blame. It knew about the water seepage problem and that its own expert(s)... had recommended that the common roof be re-waterproofed.'

Instead, the MC had relied on its contractor and the warranty conditions to take remedial action, but there were delays.

MC APPEALING

The MC is appealing against the decision.

Mr Cheng and Madam Lai declined comment when contacted by The NewPaper.



The Harbour View Towers condominium. File Picture: BERITA HARIAN

Majority owners at Airview Towers win appeal

Business Times - 25 Apr 2008

Majority owners at Airview Towers win appeal

THE Court of Appeal has overturned the ruling by the High Court and Strata Titles Board (STB) on the collective sale of Airview Towers, paving the way for mainboard-listed Bukit Sembawang Estates to acquire the property for $202 million.

Located at St Thomas Walk, Airview Towers became the subject of a civil appeal after a sole resident, Ken Lee, objected to the collective sale, arguing that the minimum 80 per cent approval rate needed was not met in time.

This was because during the process of the collective sale, a few owners had sold their units and their successors had apparently not signed the documents agreeing to the en bloc sale at the date of application.

Although STB and the High Court had ruled in Mr Lee's favour, the Court of Appeal rejected their decision, based on a different interpretation of the reference period during which the minimum approval should be obtained.

The Court of Appeal also ruled that when previous flat-owners signed in favour of the en bloc sale during the permitted period, they also bound their property successors in title.

The group of majority owners in favour of the collective sale was represented by Harry Elias Partnership. The collective sale of the freehold property is expected to rake in about $2 million for each of the 100 owners.

Bukit Sembawang Estates plans to build a 36-storey condominium at the site.

Shares of Bukit Sembawang Estates were unchanged at $9.50 yesterday.

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.

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UOB Kay Hian wins office site with $242.5 psf bid

Business Times - 25 Apr 2008

UOB Kay Hian wins office site with $242.5 psf bid

By SIOW LI SEN

UOB Kay Hian Trading has landed the Scotts Road/ Anthony Road 15-year lease site with a surprising record bid of $242.5 per square foot (psf), double original estimates in a strongly contested tender.

The stockbroker beat seven other bidders for the transitional office site by offering $34 million for parcel A at Scotts Road/ Anthony Road with an area of 8,682.8 square metres (93,461 square feet). It is offered on a short-term lease of 15 years.

The tender surprised consultants who had expected bids to come in between $100 and $130 psf.

UOB Kay Hian's $242.5 psf bid was 16.5 per cent higher than the second bid from Sun Venture (S) Investments.

It is also 11 per cent more than what had been paid for the first transitional office site in Newton in August 2007.

This was awarded to Hwa Hong Corporation and KOP Capital for $37 million, or $219 psf.

The Urban Redevelopment Authority (URA) yesterday released the results of the latest transitional office tender, its fifth. The previous tender for a site in Aljunied Road closed with only one bidder and was withdrawn as the reserve price was not met.

But consultants said that the results of the latest tender does not necessarily signal a turnaround of the moribund property sector. They noted the prestigious location of the site and that it is a hop and skip away from the Newton MRT.

'I think it's too early to pop the champagne yet,' said Nicholas Mak, director of consultancy & research department, Knight Frank.

'As the site is located next to Newton MRT station and proximate to the Central Business District, companies leasing the space here can reduce their occupancy costs significantly yet still have their office located in a strategic location,' said Mr Mak.

Specifically, continued tight office supply and strong demand have sustained the growth in rentals for Q1 2008 in which average grade A office rentals in Raffles Place reached $17.63 psf per month. This rental level is much higher compared with the current monthly gross rent of $6-8 psf in the Scotts Road area.

UOB Kay Hian, consultants speculated, will move its back room offices to the Newton office when it is ready and free up the expensive space it currently occupies in Raffles Place.

Ku Swee Yong, Savills' director of business development and marketing, estimated that after factoring construction and the land costs, UOB Kay Hian will still make a nice profit on the Newton site based on monthly rental of $7 psf.

'Given this bid, the economics makes total sense,' he said.

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Far East Organization headed for rebranding

Business Times - 25 Apr 2008

PROPERTY
Far East Organization headed for rebranding

By ARTHUR SIM

FAR East Organization (FEO), headed by Singapore's richest man, Ng Teng Fong, looks set to undergo a corporate rebranding exercise as it gears up for challenging times ahead.

Mr Ng's son, Philip, who is also the company's CEO, said that it will be 'embarking on a formal and articulated programme to circumscribe a more visible corporate brand as well as define new sub-brands for our residential property sales and hospitality operations'.

The CEO also said: 'In this next phase of our organisational development, we will continue to be true to the vision of our founder and this means we must all participate in making Far East Organization an entrepreneurial organisation.'

Mr Ng was addressing his staff through the company newsletter, Landmark.

In it, he also outlined the challenges it faced in the preceding year as well as those it faces in the years ahead.

Saying that 2007 had been 'a rather chequered year', he added: 'Our performance across our spectrum of operations was somewhat uneven although business conditions for the better part of the year were quite rosy.'

While Mr Ng noted that 'business risks have heightened', and that 'there are now cycles within a cycle as globalisation impacts on us', he said: 'We see opportunities for business growth as Singapore transforms into a vibrant, global city that has an international marketplace for real estate and real estate products.'

Mr Ng revealed that its property sales operations have already been augmented with 'a network of regional offices and multi-country marketing channels'.

A substantial portion of FEO customers now come from overseas, including the Middle East, Europe, Russia, India and China, revealed Mr Ng. 'They are much more demanding especially of international products for which they are prepared to pay international prices,' he added.

'We need to be much more attuned to the life and living of other international cities and markets so that we understand the lifestyles and preferences of our customers,' he added.

To this end, FEO has already made considerable headway in fashioning new products for the global set, including The Scotts Tower, designed by Pritzker Prize winner Rem Koolhaas's architectural firm, Office for Metropolitan Architecture.

Also in the works is the 108-room hotel, Quincy, located off Orchard Road and styled after the trendy hotel chain, W Hotel.

To date, FEO has a development landbank of 11 million sq ft in Singapore. In 2007, it invested $1.15 billion to acquire development sites that will yield some 2.7 million sq ft of buildable area.



'We need to be much more attuned to the life of other international cities so that we understand the lifestyles and preferences of our customers.'
- Chief executive Philip Ng

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US slowdown impact will last longer than foreseen: OECD

Business Times - 25 Apr 2008


US slowdown impact will last longer than foreseen: OECD

(PRAGUE) US economic weakness and its impact on the global economy are likely to last up to nine months longer than previously expected, OECD secretary-general Angel Gurria was quoted as saying yesterday.

Mr Gurria said the OECD had initially thought the crisis would weigh on global economic growth in the first half of this year and there would be a slight recovery starting in early 2009.

'We expect a drop in the US economy this year and very weak growth in Europe. The crisis will be six to nine months longer than we had previously expected,' Mr Gurria was quoted as saying by Czech daily Hospodarske Noviny.

Mr Gurria is due to present the OECD's economic outlook for the Czech Republic later yesterday. His comments were translated into Czech by the paper.

He said no developed country will completely escape the global turmoil triggered by problems in the US sub-prime mortgage market.

'The crisis will have an impact on all developed countries,' he told the paper. 'But the problem is not the mortgage crisis itself and the real problems of the US economy. We are devastated by a huge crisis of trust.'

A Reuters poll earlier this week showed analysts' views that the US economy nearly stalled in the first quarter and will shrink between now and June, but any recession should be less severe than the last major downturn in the early 1990s.

For the year, economists saw the US economy expanding by one per cent, below forecasts in March of 1.4 per cent, although they predicted a rebound to 2.1 per cent in 2009.

Another Reuters poll showed forecast growth at 1.5 per cent in the eurozone this year, down from a January forecast of 1.8 per cent.

Mr Gurria said he would not recommend widespread action by European governments to keep economies running by easing tax burdens, as this move could deepen fiscal deficit problems. -- Reuters

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Pender Court en bloc sale fails, owners keep $12m

Business Times - 25 Apr 2008

Pender Court en bloc sale fails, owners keep $12m

Deal called off as buyer decides to cut losses on investment

By KALPANA RASHIWALA

(SINGAPORE) The sale of Pender Court off West Coast Highway to a unit of Bravo Building Construction has been called off. The buyer failed to complete the transaction by paying the remaining $72 million that it owed the sellers on the purchase price.

Owners of the 48 units will keep the $12 million, or an average of $250,000 per unit, they have received so far from the associated Bravo company, Pender Development Pte Ltd.

A Bravo spokeswoman told BT yesterday that the group decided to cut its losses on the investment so far rather than pump in more money as the venture was no longer profitable, given the bad publicity the company had been receiving lately from the rescission of two other en bloc sales to Bravo units - those of Tulip Garden in Holland Road and Makeway View in the Newton area.

Also, a party that was to buy an entire proposed 50-unit cluster housing project to be developed on the Pender Court site pulled out at the end of last month. 'My breakeven cost would have been about $2.7 million per cluster house. My purchaser withdrew. With the bad publicity that we currently have, I don't think the project can even fetch $2.3 million to $2.5 million per unit if I were to launch the development now,' said a Bravo spokeswoman.

'So we'd lose money. We might as well cut our loss now - I've lost $12 million - rather than make a bigger loss by pursuing the redevelopment.'

Even if Bravo had pursued its original plan to build a condo on the Pender Court site, the breakeven cost would be about $1,300 to $1,400 psf today, which would not be viable in the current market, the spokeswoman said.

BT understands that the $12 million that Pender Development has paid Pender Court's owners comprised two initial deposits of $4 million each - on the $80 million price - and a further $4 million that the buyer paid the owners for the latest extension. The deadline to complete the transaction ended yesterday.

Pender Court's $80 million en bloc sale was announced in July last year, which is when the Bravo associate paid an initial 5 per cent deposit. When the collective sale was approved by Strata Titles Board on Nov 21 last year, the Bravo associate paid the second 5 per cent deposit.

The completion date, which is when the remaining 90 per cent of the purchase price must be paid up, was to have been in late February. However, when this was not completed, the owners' lawyer served a notice advising the Bravo associate that if it does not complete the purchase within 14 days, the owners would rescind the deal. Before the 14 days ran out around mid-March, Bravo asked for an extension to April 24 and paid the owners a further $4 million on top of the original $80 million purchase price.

All $12 million have been disbursed to the owners, BT understands.

No further notice of rescission is required under a supplementary agreement signed seeking the extension until yesterday.



Costly choice: A unit of Bravo Building Construction didn't meet yesterday's deadline to cough up the remaining $72 million that it owed the sellers

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Tony Tan's 'worst recession' remark not a forecast

Business Times - 25 Apr 2008

Tony Tan's 'worst recession' remark not a forecast

'Pessimistic scenario' is one of three that GIC is working on

By CONRAD TAN

(SINGAPORE) Government of Singapore Investment Corp (GIC) deputy chairman Tony Tan yesterday clarified that his remarks earlier this week that the world could be facing its worst recession in 30 years unless policymakers act soon were not meant as a forecast for the global economy.

Instead, they referred to a 'pessimistic scenario' - one of three basic economic scenarios that GIC is working on as part of its risk management, he said.

GIC 'continuously reviews a range of economic scenarios' that can affect its investment strategy, he added.

GIC, which invests Singapore's foreign reserves overseas, is the world's third largest sovereign wealth fund, with an estimated US$330 billion in assets under management, according to Morgan Stanley in February.

Dr Tan, who is also an executive director of GIC, had warned at the inaugural GIC Staff Conference on Monday this week that unless policymakers act decisively, the world 'could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years'.

Yesterday, he indicated that GIC is working on three scenarios - an optimistic scenario in which neither the US economy nor global economy suffers a recession and the credit crisis ends quickly; a pessimistic scenario with a deep, prolonged global recession; and a 'middle' scenario in which the US suffers a mild recession but the global economy avoids a recession.

In 'normal' times, there would be a 'central' scenario representing the most likely outcome, with the optimistic and pessimistic scenarios on either side of it as extreme cases, each with a much lower chance of occurring than the central scenario, Dr Tan said.

'However, in light of the current fluid and uncertain times, the probability of the pessimistic scenario, while not the highest, has risen to a level that warrants serious consideration by GIC. That is why I highlighted this scenario at the GIC Staff Conference,' he said.

He did not state the respective probabilities GIC has attached to each of the three scenarios.

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Airview Towers en bloc case back to Strata board

April 25, 2008

RULING OVERTURNED

Airview Towers en bloc case back to Strata board

THE $202 million collective sale of Airview Towers may now be back on after the Court of Appeal yesterday overturned a High Court decision to axe the sale.

The case now goes back to the Strata Titles Board (STB), which will decide whether to approve the sale.

The Court of Appeal found that the 80 per cent requirement for a collective sale to go through was not necessary at the point of application with the STB.

Owners can apply for an STB order as long as the 80 per cent approval of owners is achieved within the set 12-month period for collecting signatures.

The STB and the High Court had rejected the sale of the River Valley area condominium to Bukit Sembawang Estates. They interpreted the law to mean that the 80 per cent requirement was necessary as at the date of application with the STB over the sale.

The Court of Appeal also found that the collective sale agreement bound all owners, including new ones who might have purchased a unit from a majority owner during the collective sale process.

The original owners, in signing up for a collective sale, signed for themselves and future buyers. Part of the dispute centred on two flats the owners sold after signing up for the sale.

The 100-unit estate had one objector, Mr Ken Lee, who was unrepresented. He was ordered to pay costs at the STB, High Court and Court of Appeal levels.

JOYCE TEO

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GIC says deep recession is but one of three likely outcomes

April 25, 2008

GIC says deep recession is but one of three likely outcomes

Risk of worst-case scenario is much higher now though: Tony Tan

By Bryan Lee

THE world could face its worst recession in 30 years, but that is, for now, just one of three possible scenarios that the Government of Singapore Investment Corporation (GIC) has drawn up.

GIC deputy chairman Tony Tan yesterday said the gloomy outlook he delivered at a staff meeting on Monday was not a prediction for the global economy.

As the probability of this worst-case scenario being realised had risen substantially, however, he decided to highlight it at the event.

'Let me state clearly that this is not GIC's forecast for the global economy,' he said, in response to queries by The Straits Times. 'As part of GIC's risk management discipline, GIC continuously reviews a range of economic scenarios which can affect GIC's investment strategy.'

Dr Tan on Monday warned that the world could descend into a deep and long recession.

This, however, can be mitigated if policymakers in the United States and elsewhere take decisive action soon. In particular, he has urged governments to move quickly to address the ailing US housing market that is at the heart of the current crisis.

His remarks were considered too pessimistic by economists. They said this slump, while serious, should not be as bad as those in the 1980s and 1990s.

Dr Tan declined to elaborate on what additional policy action the GIC was looking for.

He clarified, though, that the gloomy outlook he spoke of on Monday was referring only to one of three basic eventualities the GIC was looking into.

The optimistic case is one where the US and the world escape a recession and the credit crisis ends.

The pessimistic scenario is the one that he has raised. It envisions a deep and prolonged downturn across the globe.

Finally, the third possibility straddles the two extreme scenarios, where the US enters a mild recession but the rest of the world economy continues to expand.

In normal times, the central scenario would be the most likely one, with a 'dominant probability', said Dr Tan, while the optimistic and pessimistic scenarios would be outliers, each with much lower probabilities.

'However, in light of the current fluid and uncertain times, the probability of the pessimistic scenario, while not the highest, has risen to a level that warrants serious consideration by GIC,' he explained. 'That is why I highlighted this scenario at the GIC staff conference.'

His comments on Monday likely also reflect the GIC's conservative and cautious investment stance.

Dr Tan has said before that the GIC's investment philosophy is: If you look after the downside, the upside will look after itself.

He declined to disclose the actual probabilities the GIC had attached to each scenario.

His latest comments, however, suggest that the likelihood of each of the three scenarios may be far more similar these days, reflecting the great uncertainty that is noted widely by forecasters the world over.

The International Monetary Fund, for instance, has predicted that global economic growth will clock in at 3.7 per cent this year. But it also attaches a 25 per cent chance for a world recession, which it defines as global growth that is 3 per cent and below.

The world's economic woes today are largely the result of an ongoing credit crisis in the US and Europe.

Economists seem to be growing more optimistic that the risk of a complete financial meltdown has passed.

They note, however, that the possibility of things spiralling quickly out of hand is high. With the world's major financial systems being threatened, and credit being the lifeblood of almost every economy, the ongoing financial crisis-led downturn is not to be sniffed at.

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FEES UNPAID FOR 10 YEARS, OWNERS UNCONTACTABLE, SO...

April 25, 2008

FEES UNPAID FOR 10 YEARS, OWNERS UNCONTACTABLE, SO...

Condo unit to be auctioned off to recover money owed

By Joyce Teo

AN UNUSUAL auction of an apartment worth over $1 million is scheduled for next week - after the mysterious disappearance of the owners.

The three-bedroom unit at King's Mansion off Tanjong Katong Road has been vacant for more than 10 years.

Repeated attempts by the condo's management corporation (MC) to get in touch with the owners and their lawyers have failed.

The four owners, all foreigners, owe possibly $30,000 or more in maintenance fees.

So the MC is taking the rare step of putting the flat up for sale to recover the money without the owners' cooperation. The auction is set for next Wednesday.

Little information is available about the owners but it is believed they are Malaysians.

Although MCs are legally able to seize the property of debtor owners, such action is rare as few want to take action against their neighbours, property consultants say.

But this case is unusual as the owners have been absent from the freehold unit for so long - even ignoring the recent property boom.

The guide price for the 1,604 sq ft high-floor unit is about $1.1million to $1.2 million, said auctioneer Mary Sai of Knight Frank, which is conducting the auction. She said numerous attempts by the MC to get in touch with the owners and their lawyers had failed.

It is not known how much is owed by the owners as the MC has refused to comment.

But based on the condo's current fees, it could be up to $35,000 over 10 years - not counting interest.

MCs are permitted to lodge a charge against an owner's property if contributions are unpaid for more than 30 days after they have served a written notice of demand, said lawyer Vijai Parwani. They then have the authority to sell the property as if they were a registered mortgagee, he said.

If the owner wants to sell his property, he would not be able to complete the sale until the debt is settled.

MCs can also go to court or the Small Claims Tribunal to recover outstanding contributions. If owners still refuse to pay, the MCs can get a writ to seize and sell some household items to pay the debt, he said.

If the debt exceeds $10,000, the MC can apply to make the owner a bankrupt.

No matter what, seizing a defaulter's property for sale is absolutely the 'last resort', said Mr Raymond Choo, executive director of Chesterton International's property, assets and facilities management department.

It is a 'tedious and costly' process, he said.

It involves upfront costs, getting a resolution for the sale, doing a property valuation and engaging an auctioneer.

'There are other ways you can use before you resort to the power of sale,' he said.

Property consultants say they have not heard of any such cases recently as owners usually appear when threatened with a sale.

Ms Sai says the MC of Pandan Valley tried to put a unit up for auction a few months ago, but the owner appeared and paid up before the sale could happen.


joyceteo@sph.com.sg


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Transitional office site in Newton draws 8 offers

April 25, 2008

Transitional office site in Newton draws 8 offers

UOB Kay Hian tops bullish bidding for attractive plot next to MRT with $34m offer

By Jessica Cheam

A PRIME transitional office site in Newton attracted eight bids by the close of its tender yesterday, a clear reminder that demand for office space remains high.

The surprise top bidder was not the usual developer, but brokerage UOB Kay Hian. It offered $34 million, or $242.5 per sq ft (psf) of gross floor area, said the Urban Redevelopment Authority.

This was 16.5 per cent higher than the second bid, an offer of $29.2 million, or $208 psf, from Sun Venture Investments.

Property experts said UOB Kay Hian could be relocating some of its back-room operations from the financial district or expanding its office space.

Other bidders for the tender launched on Feb 28 include Scotts Development, Hersing Corporation and Sim Lian Land.

Mezzo Development trailed the field with a bid of $11.9 million, or $85 psf, for the 93,461 sq ft site.

Market watchers said the 15-year leasehold plot's attractive location next to the Newton MRT station fuelled the bullish bidding.

Mr Nicholas Mak, director of research and consultancy at Knight Frank, said tight office supply and strong demand have sustained the growth in rentals.

For the first quarter this year, average Grade A office rentals in Raffles Place reached $17.63 psf per month - much higher compared with monthly gross rentals of $6 psf to $8 psf in the Scotts Road area.

Companies leasing the Newton site, which can yield a maximum gross floor area of about 13,000sq m, could reduce their occupancy costs, yet still enjoy a strategic location, said Mr Mak.

He noted that the top bid is the highest average price paid for a transitional office site since the initiative was launched in July last year to address supply concerns.

Earlier this year, the Government chose not to award the tender for a similar office site in Aljunied because the only bid was too low. Mezzo Development had offered $7.8 million, or $38.35 psf.

Mr Ku Swee Yong, Savills Singapore's director of marketing and business development, said that if UOB Kay Hian relocates to the Newton site, it could gain by renting out its offices at UOB Plaza.

But Mr Mak reckons that the site will be used for expansion purposes. He added that the site could be merged with an adjacent land parcel, also a transitional office site. The tender for this plot closes on April 30.

As a result, the bidding for this site is expected to be relatively less aggressive.

GRAPHICS: G. CHANDRADAS

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Property price data can yield different conclusions

Business Times - 24 Apr 2008

NEWS ANALYSIS
Property price data can yield different conclusions

Same figures in flash estimate of property prices can be read very differently

By ARTHUR SIM

THE property price index (PPI) for the first quarter of 2008 will be released soon - and is unlikely to differ from an earlier flash estimate of a 4 per cent increase, despite developers starting to cut prices for new projects.

So how useful is the PPI? Does data overload cause confusion?

Last week, The Straits Times headline for the story on the flash estimate was 'Private homes sales recover in weak market'. In The Business Times, the headline was 'Private home sales tumble, prices weaken'.

As confusing as it sounds, both headlines were technically correct.

One reason could be how data is interpreted and the level of optimism or pessimism - the same figures can be read very differently.

Consider the flash PPI for Q1, which increased despite the quarter being one of the worst in recent years for new sales. Yet the consensus appeared to be that the PPI could still rise this year.

The PPI is essentially a transaction-based index. Properties are split into segments to form sub-indices that are then used to calculate the PPI.

The Urban Redevelopment Authority (URA) uses the moving-average method to compute the weights assigned to the various sub-indices. The weights, updated quarterly, are based on the moving average mix of transactions over the past 12 quarters.

While the PPI is widely used as the gauge of Singapore's property market, this method is not used universally.

In the United States, for instance, analysts are more likely to refer to 'housing starts' - the number of homes being built - as a gauge of the market, or more importantly, market sentiment.

There are also indices based on the prices of resale homes alone, as some believe this is a more accurate measure of prices the market will bear.

In Singapore, Jones Lang LaSalle (JLL) has been looking at other ways to track and gauge property price movements.

Recently, JLL's head of research (South-east Asia) Chua Yang Liang started to monitor the lowest-transacted median prices of properties in the Outside Core Region because he believes these are a more accurate reflection of price tolerance.

While such an index is in the works, Dr Chua says there could also be variables, pertaining to property size and location, that could have a significant bearing.

Recognising that the property market is becoming more fragmented, with the high-end sector in particular supported by foreigners and speculators, URA has provided separate PPIs for different regions, with the Outside Central Region being one and the Core Central Region and Rest of Central Region the other two.

But this has itself led to speculation on which region is performing better.

In one of its more pro-active moves, URA also began releasing monthly data on developer sales in the middle of last year when the market was most 'exuberant'.

While the rationale at the time was to make pricing of new launches even more transparent, it has inadvertently revealed how prices can be skewed.

Part of this could be due to developers sometimes selling units selectively to ensure prices remain high.

An optimist will interpret this as prices remaining stable, while a pessimist will only see that demand has fallen.

For the current PPI to be meaningful, there should be some correlation with sales volume, as both are tied to the basic mechanics of supply and demand.

However, after comparing sales volume against the PPI since the previous peak in the mid-1990s, no strong correlation could be determined.

One contrarian trend did emerge, and this was that since the last trough in Q4 1998, the PPI is more likely to rise as transaction volumes fall. Unfortunately, this only adds to the confusion.



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Is CCT getting 1 George Street too easily?

Business Times - 24 Apr 2008

Is CCT getting 1 George Street too easily?

By KALPANA RASHIWALA

CAPITACOMMERCIAL Trust's (CCT) $1.165 billion proposed acquisition of 1 George Street from CapitaLand announced last month will be put to a vote of unitholders before June 30 - with CapitaLand abstaining.

By all accounts, CCT unitholders will approve the acquisition. After all, it's not easy for Singapore real estate investment trusts (Reits) to grow through acquisitions these days. On the one hand, tight credit market conditions make it difficult to get debt funding while on the other, Reits are trading at relatively high distribution yields - because of the general stock market slide - making it difficult to make yield-accretive acquisitions if they need to raise equity to foot the bill.

CCT, however, is more fortunate. It won't be issuing any equity and has secured full debt funding for its proposed purchase of 1 George Street; and even then, its gearing will rise to only about 40 per cent from 27 per cent now.

However, CapitaLand shareholders will not get to vote on the sale of 1 George Street to CCT because the size of the transaction does not cross any of the thresholds that would trigger a mandatory shareholder vote. Put simply, although the transaction is big, it's small relative to CapitaLand's size.

Some parties are complaining that CapitaLand should have conducted an open competition to ensure that it obtained the highest price for the award-winning property.

CapitaLand may have gotten more than the $1.165 billion or $2,600 per square foot (psf) of net lettable area that it will get from CCT. A competition would have been more transparent, especially since the deal with CCT involves an income-support element. CapitaLand will top up any shortfall to ensure a minimum annual net property income of $49.5 million till 2013.

Bidding competition

Another reason CapitaLand should have had a bidding competition is because the headline price of $2,600 psf is lower than the $2,700 psf at which the asset was valued in a deal last August when CapitaLand bought the remaining half-share in the property - notwithstanding that confidence in the office market is weaker today and that the higher price earlier reflected control premium.

From the viewpoint of CapitaLand shareholders, the group could make a bigger profit from selling 1 George Street to external parties than the $47.1 million it expects to book from the proposed deal with CCT. (This amount is after accounting for the five-year income guarantee and CapitaLand's 30.5 per cent stake in CCT.)

Last month, when the deal was announced, CapitaLand Commercial CEO Wen Khai Meng said that the group has a 'certain responsibility to help our sponsored-Reit to grow'. CapitaLand is aiming for a balanced strategy on its office portfolio by allocating part of it for outright divestment to reap capital gains - as it has done for Temasek Tower, Hitachi Tower and Chevron House - and keeping a core portfolio of office properties for recurring income by divesting them to its sponsored Reits, which provide a tax-efficient structure for holding income-producing assets. Not only does CapitaLand retain a sponsor's stake in such Reits, it earns fees from managing the Reit - forming an integral part of its successful property fund management model. This strategy is a key attraction to CapitaLand as a stock.

Move is a departure

However, critics also note that CapitaLand's decision to offer 1 George Street directly to CCT marks a departure of what it has done for its divestments of other Singapore office assets in the past year or so. Temasek Tower, Hitachi Tower and Chevron House were sold through a competitive bidding process to external parties.

In the case of Temasek Tower which was sold in March 2007, CapitaLand Group president and CEO Liew Mun Leong subsequently revealed that CCT had made an offer for Temasek Tower, but its price was below the $1.04 billion offered by the eventual buyer, Macquarie Global Property Advisors Group. 'Its (CCT's offer) was below Macquarie's. We have no reason to give them. That shows we are very transparent. We are not inbreeding. Fair game,' Mr Liew had said.

Why was 1 George Street different? One point to note is that CapitaLand owned Temasek Tower, Hitachi Tower and Chevron House jointly with other parties, so it could not simply offer these office buildings to CCT on a platter; CCT would have had to compete with other bidders if it had wanted to buy these assets. 1 George Street is also a newer, higher-grade office block compared with the three sold earlier and hence a more desirable asset to CCT.

Perhaps CapitaLand may wish to make clear the criteria it uses in deciding when to offer assets directly to one of its sponsored Reits and when to have an open competition. Otherwise, some big-name overseas property investors may feel that there's a lack of transparency and a level playing field.

Of course, one could also argue that such investors may have to accept that Reits will always get the first bite when it comes to its sponsor's assets. After all, that's what it means to have a long-term sponsor committed to ensuring the Reit's growth.

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Australia to give foreign firms more time to develop property

Business Times - 24 Apr 2008

Australia to give foreign firms more time to develop property

(MELBOURNE) Australia will ease restrictions on land ownership by foreign companies, giving them as long as five years to develop vacant commercial property.

The rules will replace the current one-year deadline for foreign companies to commence development, Assistant Treasurer Chris Bowen said in a statement on his website yesterday. The 12-month limit was designed to prevent offshore investors engaging in land speculation.

Prime Minister Kevin Rudd, faced with inflation growing at the fastest pace in 16 years, wants to drive down prices by introducing more competition in the grocery market, where local operators Woolworths Ltd and Wesfarmers Ltd control more than three-quarters of supermarket sales.

'This reform creates a more level playing field, and pulls down the barriers to entry to foster competition,' Mr Bowen said in the statement. 'The grocery industry is a classic example, where in Australia we have a highly concentrated sector, especially by international standards.' The current rules discourage new competitors and prevent existing operators from expanding, Mr Bowen said.

Woolworths is the nation's largest grocer, followed by the Coles unit of Wesfarmers and the IGA chain operated by Metcash Ltd. Aldi Group, Germany's largest discount retailer, has more than 150 stores in Australia; Franklins, a unit of South Africa's No 2 retailer Pick'n Pay Stores Ltd, operates an 80-outlet chain.

Costco Wholesale Corp, the largest US warehouse-club chain, is identifying sites around the country to build large format outlets in Australia, it said in October.

'Twelve months is simply not enough time for completing all the statutory and commercial processes required to enable development to commence,' Mr Bowen said\. \-- Bloomberg

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London office market hit by credit crisis fallout

Business Times - 24 Apr 2008

London office market hit by credit crisis fallout

Rents, occupancy rates, sale prices may worsen if crisis continues: Moody's

(LONDON) London's office market faces 'imminent stress' as the fallout from the global credit crisis weakens demand for space in the city's financial district, Moody's Investors Service said.

Conditions in the City of London deteriorated faster than any other European market last year, Moody's analysts wrote in a report on commercial mortgage-backed debt yesterday. Rents, occupancy rates and sale prices may worsen if the credit crisis continues and the supply of property increases, the New York-based ratings firm said.

Banks and securities firms may cut as many as 40,000 jobs in London in the coming months, according to forecasts by analysts at JPMorgan Chase & Co.

About 7.3 million square feet of office space is due to be completed in London this year with a further 8.3 million square feet available by 2010, CB Richard Ellis Group, the world's largest realtor, said in a April 21 report.

'We regard the growing supply pipeline to be an important threat to the European office occupation markets,' wrote Moody's analysts Rod Bowers and Jeroen Heijdeman in London.

'In addition, occupier demand could be negatively affected if the financial turmoil in the global market continues for the next few quarters.'

Moody's report scores cities out of 100 based on factors including vacancy rates, the demand for property and expected supply.

The analysis covers 24 European office markets including Paris, Munich and Barcelona. The average score fell to 61 from 64.

The City of London's score dropped to 20 at the end of 2007 from 53 a year earlier. A level of 33 or below indicates markets under 'imminent stress' where supply is outstripping demand, usually coupled with rising vacancy rates, CBRE said.

Paris' La Defense financial district, previously the highest-ranking market, fell to 67 from 88. Dublin scored worst at 15, though up from 0 a year earlier.

Conditions improved most in Edinburgh, which rose to 88 from 59, making it the highest-scoring market. Any city scoring above 67 is considered 'basically sound,' with demand for property typically outpacing the growth in supply, the analysts wrote\. \-- Bloomberg



Sign of the times: About 7.3m sq ft of office space is due to be completed in London this year

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China warns of housing price hikes in second quarter

Business Times - 24 Apr 2008

China warns of housing price hikes in second quarter

(SHANGHAI) China's top economic planning agency has warned that a range of economic factors were likely to push up domestic property prices in the second quarter.

The National Development and Reform Commission (NDRC) said in a quarterly report on China's real estate sector released on Tuesday that upward pressure on housing prices was mounting again after a slight slowdown in the first three months.

'Excessive liquidity and the appreciating yuan are driving asset prices including houses higher, while soaring costs of steel and labour are also pushing prices forward, especially in small and medium-sized cities,' the report said.

'Meanwhile, huge amounts of funding have fled equity markets after recent slumps . . . investors are likely to reinvest the money in property instead of bank deposits.'

The report stressed that the government must keep housing market prices stable, partly through increasing the amount of land available for residential development.

Since 2005, China has taken a number of measures, including interest rate hikes and imposing taxes, to curb rapidly rising real estate prices amid concerns of a dangerous bubble in the sector.

In the wake of those measures, soaring home prices did cool to a certain extent. Official data said earlier that property prices in 70 major cities across the country rose 10.7 per cent year-on-year in March, down 0.2 per cent from February.

China has been struggling to rein in galloping inflation, which saw consumer prices soar 8 per cent for the first quarter of the year, near a 12-year high\. \-- AFP



Going higher: The NDRC says upward pressure on housing prices is mounting again after a slight slowdown in the first three months of the year

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House prices may fall more than during 1930s: economist

Business Times - 24 Apr 2008

House prices may fall more than during 1930s: economist

(NEW HAVEN, Connecticut) An influential economist who long predicted the housing market bubble cautioned on Tuesday that the slump in the US housing market could cause prices to fall more than they did in the Great Depression, and bailouts will be needed so millions don't lose their homes.

Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case- Shiller home price index, said there's a good chance housing prices will fall further than the 30 per cent drop in the historic depression of the 1930s. US home prices have dropped 15 per cent already since their peak in 2006, he said.

'I think there is a scenario that they could be down substantially more,' he said during a speech at the New Haven Lawn Club.

Mr Shiller's Standard & Poor's/Case-Shiller home price index is considered a strong measure of home prices because it examines price changes of the same property over time, instead of calculating a median price of homes sold during the month.

Mr Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct. Home prices rose about 85 per cent from 1997 to 2006 adjusted for inflation, the biggest national housing boom in US history, he said.

'Basically we're in uncharted territory,' Mr Shiller said. 'It seems we have developed a speculative culture about housing that never existed on a national basis before.'

Many people became convinced that housing prices would increase 10 per cent annually, a notion that Mr Shiller called crazy. – AP



Mr Shiller: 'It seems we have developed a speculative culture about housing that never existed on a national basis before.'



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$1b Sentosa hotels deal goes to S'pore-Japan joint venture

April 24, 2008

$1b Sentosa hotels deal goes to S'pore-Japan joint venture

By Lim Wei Chean

A SINGAPORE-JAPAN joint venture has been awarded a $1.05 billion contract to build three hotels on Sentosa Island, to date the juiciest plum dished out by the integrated resort.

Kajima-Tiong Seng beat several other companies to build the five-star hotels, officials from Resorts World at Sentosa announced yesterday.

The hotels, which are expected to provide over 1,000 rooms, will be the centrepiece of a $6 billion development on the resort island that will include a casino and a theme park.

The contract is the resort's biggest to date and brings the value of deals awarded to $2 billion.

Kajima-Tiong Seng is a tie-up between Japanese-led Kajima Overseas Asia and local Tiong Seng Contractors which also built the St Regis Singapore. The firm will also construct the Sentosa resort's main thoroughfare, Festive Walk.

The three hotels are the latest in a string of big construction projects handed out here. They include a $400 million contract to Sembawang Engineers and Constructors to build another massive resort nearby called the Marina Bay Sands' North Podium. It is expected to feature a casino, theatres and a retail arcade.

But the hefty construction contracts may not be all good news. They could add more pressure to an industry already stretched by a manpower crunch and the rising costs of raw materials, said Knight Frank's director of consultancy and research Nicholas Mak.

Construction overheads have gone up 40 per cent in the past two years and are expected to climb another 15 per cent to 20 per cent this year. They have been driven by steep increases in the prices of steel and concrete.

The spikes have already forced big projects like the two integrated resorts to revise their cost estimates.

Last November, Resorts World upped its budget from $5.2 billion to $6 billion.

Marina Bay Sands has also had problems keeping to its projections. Last August, its parent company said that costs are expected to rise by up to US$1.4 billion (S$1.89 billion) - a significant increase on the original US$3.6 billion price tag.

Today's construction industry is red hot, eclipsing even the heyday of 1997. Over $24.5 billion in contracts were awarded last year, up 46 per cent from the $16.8 billion awarded in 2006 and just above the $24 billion in the boom year of 1997.

Economists have forecast that the industry will grow between 10 per cent and 25 per cent this year, fuelled by developments like the two integrated resorts and the Downtown MRT line.

Government plans to defer about $3 billion in public sector projects to ease pressure on industry costs is also unlikely to make much of a dent.

Construction cost consultancy Rider Levett Bucknall was reported as saying that the move 'is expected to have a limited impact on relieving construction demand as it will represent around 10 per cent of annual demand'.

Contractors said that aside from raw material costs, labour is their other big headache as 'wages for workers are off the charts now'.

Staff poaching is a huge problem with companies making up for their shortage by offering workers from rival firms up to $800 more a month.

One contractor who declined to be named said: 'Every three to four months, we have to revise our pay. If we cannot keep up, the workers will leave.'

weichean@sph.com.sg



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Variety needed in HDB income-ceiling rule

April 24, 2008

Variety needed in HDB income-ceiling rule

MR SONG Yee Soon proposed that the household income ceiling be raised to more than $8,000 for high-end Housing Board flat buyers ('Raise income ceiling on HDB flats over $500k', April 16).

Over the years, the HDB has responded well to increasing diversity in housing needs. The Design, Build and Sell Scheme (DBSS) is one example. A DBSS flat may cost five times or more than a common HDB two-room flat. It shows how diverse HDB flat buyers are now.

But should the buyer of a $700,000 flat be subject to the same income ceiling as the buyer of a flat that costs one-sixth the price?

Also, many couples who marry at over 35 may not qualify for public flats. Older second-time buyers may also find this ceiling restrictive.

Couples who have worked overseas, and have missed the chance to apply for an HDB flat earlier, may face the same hurdle. Is there a better way to entice them home?

Should we be more empathetic to these fellow citizens, who are caught out by the income ceiling rule, and allow them to share the fruits of our nation's labour?

The income-ceiling rule is an elimination system, not an evaluation system. In an evaluation system, multiple factors and situations are assessed to derive a more balanced verdict.

Conversely, a complicated evaluation system with too many factors may be cumbersome and confusing to the public.

To keep it simple, retain the income-ceiling rule but refine it by incorporating additional factors.

For example, develop an age-specific income-ceiling scale, where older applicants can enjoy a higher ceiling. Raise the ceiling by $1,000 for those aged 35 and above, for instance.

We could also add a third factor - type of flat applied for. High-end flats could have a separate scale. Also, determine if three-room and smaller flats should have a separate ceiling.

These changes may increase the number of eligible buyers. Examine if additional housing funds are justified or changes should be made to the existing subsidy structure so the lower-income group are not disadvantaged as a result.

The challenge is how to achieve the optimal balance where social benefits of the public housing scheme are maximised within resource constraints.

Ng Ya Ken



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Bracing for tougher times ahead

Business Times - 23 Apr 2008

Bracing for tougher times ahead

ECONOMISTS read in the Monetary Authority of Singapore's (MAS) surprise decision two weeks ago to strengthen the Sing dollar an indication that inflationary concerns loomed large over downside growth risks, even as the global outlook grows cloudy with recession in the air.

While the Singapore economy got off to a robust start (though the final first-quarter growth may well be revised down from the 7.2 per cent flash estimate), gross domestic product (GDP) growth is widely expected to ease in the months ahead. The big question is - by how much, as the US economic downturn winds its way to Singapore and the rest of Asia.

For now, the prognosis remains an optimistic 'minimal hit' scenario with regional resilience and demand expected to offset much of the decline in the Western markets. The Singapore economy's growth is expected to remain within the trend potential rate of 4-6 per cent in 2008. But MAS did note: 'A more severe global downturn cannot be ruled out if there is a further escalation of the financial crisis in the US. If this occurs, Singapore's growth will be adversely affected.' And Government of Singapore Investment Corporation (GIC) deputy chairman Tony Tan - who in January said that his biggest worry for 2008 was inflation - has just warned about the impact of the world's deepest recession in 30 years, if policymakers in the US and other major markets do not take decisive and timely action to calm investors' nerves, improve sentiment and restore some market stability.

Hopefully, the necessary decisions and actions will not be derailed or otherwise impaired by the fact that there will be a changeover soon in the White House. And one would hope that the three presidential aspirants are giving the matter of global financial and economic stability some thought, despite their current preoccupation with domestic issues.

For Singapore and the rest of Asia, it's best to be prepared for rough times, even if the domestic economy manages to grow at a reasonably respectable rate.

It's when the chips are down that true colours show. Singapore, with its strong economic fundamentals and political stability, has mostly passed this test in recent crises. But the battles ahead could be tougher. Apart from facing a dramatically weaker global growth environment, Singapore will also face a host of keen rivals when it comes to attracting investments, from both the developed and developing world.

In 2003, Singapore was ranked as the world's best place to do business by the Economic Intelligence Unit. But the latest rankings see Denmark and Finland on top, with Singapore down to third place. Not a bad position to be in, but the change in ranking is a sobering reminder that the world has become increasingly competitive. In the recessionary environment that looms ahead, this will be even more true.

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Alternative real estate ripe for picking

Business Times - 23 Apr 2008

PROPERTY
Alternative real estate ripe for picking

By ARTHUR SIM

WITH probably less than 350 completed office and industrial buildings in Singapore available for sale on a strata basis, transaction volumes have been steadily rising with more investors seeing an upside.

In a White Paper, Colliers International notes that since 2006, the strata office sector saw sales transactions rise 59.1 per cent from 2005 levels while the corresponding rise for the strata industrial sector was 49.6 per cent.

By 2007, the office sector chalked up total annual sales of 595 transactions, a 117.2 per cent rise compared with 2005.

The industrial sector, on the other hand, saw 1,227 sales transactions in 2007, up 81.8 per cent from 2005.

While Colliers does say that some of the purchases were by end-users, it also believes that investors were drawn by the attractive net rental yields offered by these properties. This can range between 5 and 7 per cent.

Residential properties, however, offer net yields of 2.5 to 4 per cent.

'Judging from the caveats lodged for office and industrial properties, signs of interest in office and industrial properties started showing as early as 2006 when their capital values were at or close to rock bottom,' added Colliers.

Besides end-users and investors, Colliers believes there were buyers who bought units in ageing developments (particularly offices) with collective sale potential in the hope of reaping a windfall some time in the near future.

Examples of developments which were popular with such investors in the last two years include Textile Centre and Golden Mile Complex, both in the Beach Road area.

'With the office supply crunch likely to persist in the next two years, the industrial sector will continue to enjoy robust spillover demand from the office sector on top of demand from the mainstream manufacturing industry,' added Colliers.

Colliers also highlighted that, compared with the mid-1990s peak, capital values of office and industrial properties as at end-2007 were still some 27.5 per cent and 33.7 per cent lower. 'The sectors, thus, still hold immense upside potential in rents and capital values,' Colliers added.

Colliers said that the bulk of available strata office and industrial properties are likely to be more than 20 years old.

Strata office buildings that have seen high transaction volumes since January 2006 include Chinatown Point, International Plaza and People's Park Centre.

Strata industrial buildings that have seen high transaction volumes include E-Centre @ Redhill, Eunos Technolink and Ubi Tech Park.

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Landed plots fetch 22% less at URA auction

Business Times - 23 Apr 2008


Landed plots fetch 22% less at URA auction

By EMILYN YAP

LANDED-HOUSING sites at Sembawang were sold yesterday at prices 22 per cent lower on average than nearby plots a few months ago. Yesterday's auction by the Urban Redevelopment Authority was for 11 plots with 99-year leasehold tenure. All were sold - for a total of $45.29 million, or $223 per sq ft (psf) on average.

The plots come under phase two of Sembawang Greenvale estate. URA sold the 12 plots in nearby phase one in October last year for about $285 psf on average. Smaller developers and individuals turned up yesterday to bid for the phase two plots, which can be developed into 90 dwellings - one bungalow, 16 semi-detached houses and 73 terraced houses.

Fragrance Homes reaped the biggest harvest, winning four plots that can house eight semi-detached houses and 40 terraced houses. The largest plot, in Penaga Place, designated for 18 terraced houses across 35,624 sq ft, cost Fragrance $8.7 million or $244 psf. This was the highest psf price for any of the 11 plots.

Odeon Properties' $1.66 million bid for a plot in Kerong Lane represented the lowest psf price of $151. The 10,989 sq ft site can accommodate one bungalow and two semi-detached houses. Reflecting the better market last year, prices on a psf basis in phase one ranged from a higher $210 to $327 psf.

The only individual to submit a wining bid yesterday, Christina Sui Fong Fong, bought the third-largest land parcel for $6.65 million or $221 psf.

Asked about plans to release more landed-housing parcels, URA's director of land administration Choy Chan Pong said: 'We will be releasing according to market demand.'

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JTC to sell $1.7b of properties

JTC to sell $1.7b of properties

Volatile capital markets cited as main reason

Wednesday • April 23, 2008

BARRY PORTER
Business editor
barryporter@mediacorp.com.sg

JTC Corp has scrapped plans to divest a large chunk of its industrial property portfolio through a listed real estate investment trust (Reit).

Instead, it will sell the 62 properties for $1.71 billion to Temasek-linked Mapletree Investments, which it had earlier appointed to manage the planned trust. This is because of recent weak stock market conditions.

"Since the appointment of Mapletree as the Reit manager in February, the global and local capital markets have continued to remain volatile," explained Ms Ow Foong Pheng, JTC's chief executive.

Mapletree may still proceed with listing the properties as a REIT at a later date.

Singapore's 20 existing listed Reits have fallen on average by 11 per cent this year amid concerns that the credit crisis in the United States might spread and hurt their ability to finance short-term debt.

JTC's decision to divest followed Mr Raymond Lim's "Yellow Pages rule" in 2005, while championing entrepreneurship under the Ministry of Trade and Industry.

Besides cutting red tape, Mr Lim then said government agencies should not be in any business where the private sector is already performing and can be found in the Yellow Pages.

This was to help provide space for private businesses to bloom.

JTC heavily dominates Singapore's industrial property landscape.

Mapletree may be independently managed but it still has government links as it is part of the Temasek family.

Mr Hiew Yoon Khong, Mapletree's chief executive, said: "Mapletree will explore the possibility of listing the portfolio as a Reit, possibly in combination with other Mapletree industrial assets in due course.

"Meanwhile, our immediate focus will be to ensure a smooth transition for tenants and we look forward to working closely with them in the near future."

Mapletree has an asset base of around $4.4 billion, comprising office, logistics, industrial, retail and lifestyle properties. It also manages another $3 billion worth of properties across Asia.

In this sale, Mapletree will get 39 blocks of flatted factories, 12 amenity centres, six stack-up buildings, one ramp-up building, one warehouse, and three multi-tenanted business parks. They are the Synergy and Strategy at the International Business Park and Signature at the Changi Business Park.

JTC said it may still divest other industrial properties through trade sales.

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Deferred payment scheme: Up to 4,200 homes may be dumped

April 23, 2008

Deferred payment scheme: Up to 4,200 homes may be dumped

No URA figure on units sold but experts say 30% could be offloaded

By Jessica Cheam

THE hugely popular deferred payment scheme (DPS) - scrapped last year - may now be a thing of the past, but what sort of shadow will it cast on the Singapore property market going forward?

This has been the question on market watchers' lips since the Urban Redevelopment Authority (URA) revealed last week that as many as 29,250 homes offered under the DPS, including 5,760 unsold units as at the end of last month, will be completed from this year to 2013.

The concern is that speculators who bought homes under the DPS could dump their units at below-market prices, and this could drastically drag down overall sentiment.

But just how many units are at risk of being sold, and how big will the impact be?

The URA said while it has the number of units approved under DPS, it does not have data on how many units were actually sold under the scheme.

But four property experts The Straits Times spoke to estimated that up to 30 per cent of homes sold under the scheme last year could be held by speculators who may offload homes as the completion date nears. This translates to roughly 4,200 homes, going by a back-of-the-envelope calculation.

That is because out of the 23,490 units approved under the DPS and sold, only about 50 to 60 per cent - or roughly 14,000 - are likely to have been sold under the DPS, say property consultants and agency bosses from Knight Frank, Savills Singapore, HSR Property Group and PropNex.

The remaining 40 to 50 per cent were not bought under the DPS. Either developers did not eventually offer it, or buyers chose to pay via progressive payments, because buying a home with DPS usually means a further 2 to 3 per cent added to the price.

Next, property experts estimated that of the 14,000 or so homes sold under the DPS, about 20 to 30 per cent were probably sold to short-term investors or speculators.

This means that as a group, speculators could be holding on to as many as 4,200 units.

Why are speculators prone to selling their units as they near completion?

The DPS allowed buyers to pay just 10 or 20 per cent of the sale price upon purchase, with the rest due only when the unit received its temporary occupation permit (TOP) on completion.

Speculators would, therefore, typically opt for the DPS and hope to sell their units for a profit before the TOP. Any later and they would have to pay up for their homes by arranging for bank loans or other means of financing.

Industry experts were, however, divided on the impact these 4,200 homes would have on the market.

Some maintained that panic selling is not likely, given Singapore's strong economic outlook, which is backed by upcoming mega projects such as the integrated resorts and the 2010 Youth Olympics.

Mr Eric Cheng, HSR's executive director, noted that homes set to be completed this year and next are less likely to be sold indiscriminately, since their owners are probably sitting on healthy gains.

But those who bought at the peak of last year's buying frenzy, from April till October, are most likely to be at risk. These homes are likely to be completed after 2010.

Mr Ku Swee Yong, Savills' director of business development and marketing, said the sell-off will likely be staggered, because investors have different levels of holding power.

Also, investors have bigger coffers compared to the last property peak in 1996, he added.

But he warned that if too many units in a single large project get dumped at below-

market prices, overall market sentiment may be hit.

Mr Colin Tan, Chesterton International's head (research and consultancy), thinks that the potential risk created by the DPS is relatively high.

He added that data on homes sold under the DPS should be collected and made public, so investors know 'what they're getting themselves into'.

The DPS was scrapped abruptly last October after a decade-long run to remove excessive speculation and ensure financial prudence in the property market.



RUSHING IN: More than 8,000 units were sold at the peak of the property buying frenzy last year. -- PHOTO



jcheam@sph.com.sg



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Stage 3 of Circle Line set for Nov completion

April 23, 2008

Stage 3 of Circle Line set for Nov completion

By Christopher Tan

CONSTRUCTION of Stage 3 of the MRT Circle Line - a 5km, five-stop section linking Bartley and Marymount - will be completed as early as November.

The section, which will open for service in June next year, has entered a 'testing and commissioning' phase. This involves putting the system and infrastructure through tests and dry runs before it is handed over to the operator for trial runs.

Operator SMRT Corp said that it is assisting the Land Transport Authority (LTA) in the testing and commissioning, and 'progress has been good'.

Its spokesman added that the company was already running and maintaining the Kim Chuan Depot, where the Circle Line's driverless trains are parked. The depot is also the site of the line's operations control centre.

About 140 people have so far been hired, specifically for Stage 3 of the line and the Kim Chuan Depot, the spokesman said.

The Straits Times understands that the station nearest completion is Serangoon, an interchange station which joins a North-East Line station of the same name.

This station has the longest travellators in the entire MRT network. At 73m, they are about 20m longer than those in the Dhoby Ghaut interchange and the Changi Airport station, said the LTA.

Although Circle Line Stage 3 has only five stops - Marymount, Bishan, Lorong Chuan, Serangoon and Bartley - it is expected to be a boon to residents in the area.

For instance, those living in Serangoon will take only 25 minutes to get to Yishun if they change trains at Bishan, also an interchange station.

The alternative is to take a 45-minute bus ride or take the North-East Line to Dhoby Ghaut before transferring to the North-South Line.

Residents can also look forward to a new transport hub coming up at the Serangoon station. Like those in Toa Payoh and Ang Mo Kio, the Serangoon station will be connected to a bus interchange, so transfers from bus to train or vice versa can be done in air-conditioned comfort.

Property investment group Pramerica, which is planning a mega mall on 269,180 sq ft of land above the Serangoon station, is building the transport hub.

While things seem to be on track at Stage 3, sources said contractors and the LTA are still working to resolve the budget overruns triggered by the escalating cost of raw materials like concrete and steel.

'Prices are rising practically every month,'' an industry source said.

High-tensile steel, for instance, is now close to $1,400 per tonne, up from $1,235 in January and $753 in January last year.

Already, one contractor, Sweden's NCC International, is embroiled in a legal tussle with the LTA over stalled Circle Line works.

Last year, when NCC stopped work at the Tai Seng and MacPherson stations, the LTA had to appoint local firm Chye Joo Construction to finish the project.

Both parties have opted for arbitration, a closed-door court process, to settle the dispute over costs. It is believed to be the LTA's first arbitration case in over 20 years.

The process has not started because NCC is fighting to have foreign arbiters appointed, sources said.



PEOPLE MOVER: The Serangoon station on the Circle Line has the longest travellators in the MRT network. -- PHOTO: LTA

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JTC scraps plans to list assets in Reit

April 23, 2008

JTC scraps plans to list assets in Reit

Industrial landlord will instead sell 62 properties to a Temasek subsidiary for $1.71 billion

By Fiona Chan

JTC Corporation has scrapped its long-awaited plans to list its industrial assets in a property trust, citing volatile market conditions.

Instead, Singapore's biggest industrial landlord is selling the properties to Mapletree Investments, a subsidiary of Temasek Holdings, for $1.71 billion, JTC and Mapletree said in a joint statement yesterday.

Mapletree also said it might list the properties in a new trust, possibly combining them with some of its own assets.

The move caught market watchers by surprise, as Mapletree was hired in February to manage JTC's proposed billion-dollar real estate investment trust (Reit). The listing was set down for the middle of the year.

'It's definitely a surprise move. It's a complete U-turn from what JTC said earlier,' said Mr Tan Boon Leong, industrial director at property firm Colliers International.

'It may not sit too well with local and foreign investors, who were expecting a new Reit, to just go and sell off the properties like that. It may be seen as very 'Singapore Inc'.'

But Mr Dominic Peters, director of industrial services at Savills Singapore, said this was 'a better move than JTC having to list on its own because it is difficult to raise funds now'.

JTC said it would complete the sale of 62 properties, including 39 flatted factories and three business park buildings, to Mapletree by July 1. It added that this divestment option had been part of Mapletree's proposal to JTC when the former was appointed as manager of the future Reit, although it had not been disclosed then.

Mapletree has its own industrial property trust, Mapletree Logistics Trust, which is worth about $2.5 billion. Its biggest rival, Ascendas Reit, has a $4.2 billion industrial portfolio.

If Mapletree pumps all the JTC properties into its existing Reit, it could become 'the biggest industrial Reit around', said Mr Tan.

But Mapletree also has other unlisted assets in its industrial fund and could combine these with JTC's assets to form a whole new Reit.

Experts said one issue would be whether JTC's properties were a good fit with the Mapletree assets.

'I believe 95 per cent of JTC's assets are older flatted factories in housing estates with rentals of $1 to $2 per sq ft - a different portfolio from Mapletree,' said an industry watcher.

Colliers' Mr Tan said, however, that JTC's properties were all in 'great locations'. The tenants, though, should expect rentals to rise after Mapletree takes over, as it would have to improve asset yields before listing them.



FOR SALE: Among the industrial assets that JTC Corporation is selling to Mapletree Investments are The Synergy at the International Business Park (top) and a flatted factory property in Lower Delta Road (above). -- PHOTOS: ST FILE PHOTO, GAVIN ANDERSON




FOR SALE: Among the industrial assets that JTC Corporation is selling to Mapletree Investments are The Synergy at the International Business Park (top) and a flatted factory property in Lower Delta Road (above). -- PHOTOS: ST FILE PHOTO, GAVIN ANDERSON


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Analysts find GIC's views on recession too gloomy

April 23, 2008

Analysts find GIC's views on recession too gloomy

By Bryan Lee

THESE are turbulent times, but the world economy has seen worse in the past 30 years, according to economists who feel the Government of Singapore Investment Corporation's (GIC's) gloomy outlook is too bearish.

GIC deputy chairman Tony Tan said on Monday that the world could be facing its worst recession in three decades, if policymakers do not act soon to stem a global credit crisis.

He called for swift action to stabilise the United States housing market, which is at the heart of the problem. If left just to market forces, the recovery would be 'considerably more painful and long- drawn', he added.

Asian Development Bank managing director- general Rajat Nag disagrees with this prognosis.

'It's too pessimistic. We have to assume that things will get much worse in the US, Japan and elsewhere for this to happen,' he told reporters at a breakfast meeting. 'We are expecting an upturn in the US in the second half, when fiscal recovery measures kick in.'

UBS economist Paul Donovan said the downturn is certainly serious, as it is happening across the globe, but the recession in the early 1980s was far more severe, with US unemployment hitting a post-war high of 10.8 per cent in December 1982.

'I think 30 years is putting it a bit strongly. 1981 was very bad indeed, and that was synchronised... We are currently not like that,' he said.

Mr Donovan added that for individual economies, the downturns in the 1990s were worse. The US and Britain had tougher times in 1991, Europe in 1995 and Japan in the mid-1990s.

But he added that 'it is fair to say that this is a worse economic downturn than 2001'.

Analysts noted that despite the turmoil in the global banking sector, real economic activity has not been that badly hurt so far.

'The superlatives of 'the worst' and all that are more appropriate for the problems faced by financial markets,' said Action Economics economist David Cohen.

He pointed out that the recent International Monetary Fund forecast for world growth in gross domestic product of 3.7 per cent is about the average rate for the past 25 years.

'It doesn't sound like the worst disaster in three decades.'

As for the need for policy action, Mr Donovan said intervention is warranted, given the failure of several financial markets.

He hopes that the US government, on top of more rate cuts, will move to stabilise the financial sector so that it can 'get on with the process of repairing itself'.

A plan to bail out sub-prime home owners and their lenders, which is now being debated, could be helpful, he said.

Mr Cohen said the US Federal Reserve has already taken an unprecedented action by extending its role as 'lender of last resort' to investment banks.

He said it would be better to hold off more extreme measures until there is evidence that the downturn is getting more serious, given the uncertainty about the impact of financial sector problems on the overall economy.

bryanlee@sph.com.sg

ADDITIONAL REPORTING BY NICHOLAS FANG

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Refinance your home loan now

Refinance your home loan now

Doc Money tells you how

Putting off refinancing your mortgage could be a big mistake.

By Larry Haverkamp (Doc Money)
mail@AskDrMoney.com


22 April 2008

Putting off refinancing your mortgage could be a big mistake.

Last week, Mrs Money and I refinanced ours.

We used to live in an HDB flat and enjoyed HDB's 2.6 per cent interest. It is still the best loan deal in town.

If you have one, don't switch to a bank loan and don't even think about paying it off early.

That's because if you pay using your CPF, you are using money that earns 2.5 to 3.5 per cent interest to pay a loan that costs only 2.6 per cent. It's a bad move.

After 10 years in our beloved HDB flat, we moved to an executive condo. It is in a narrow niche between HDB and private property. Since we no longer qualify for an HDB loan, we now have to deal with the banks.

Ours had been charging us 3.5 per cent interest. Last month, the one-year lock-in ended and the bank sent a letter saying they were increasing our home loan rate to 3.75 per cent.

Whoa. I told Mrs Money: 'Something's not right here. Falling interest rates mean banks lower our fixed deposit rate. But they raise our home loan rate!'

INTEREST RATE FOR SUCKERS

I later found out 3.75 per cent is a 'sucker's' interest rate. It is for people who are told to pay more, so they do. They don't argue. They don't fight back. They don't refinance.

I called all the banks and got another surprise. They charge a lot less than the 3.75 per cent our bank was charging us.

The best deals are 'pegged rates'. They peg the interest to a benchmark like the Singapore inter-bank offer rate (Sibor) or the swap-offer rate (Sor). These rates are low and published daily in Business Times.

A typical pegged rate is the three-month Sor plus 1 per cent. Sor is now 1.35 per cent so you would pay 1.35 + 1 = 2.35 per cent per year.

I informed our bank that we would be moving our home loan to a bank charging us only 2.35 per cent.

Our bank suddenly became very friendly and offered us the same good deal.

Like magic, our home loan rate was cut almost by half, from 3.75 per cent to 2.35 per cent. Without my asking, the bank also waived its $500 loan conversion fee.

As we were leaving, I asked a throw away question: 'By the way, is that your lowest rate?'

The banker hesitated, then said: 'Actually, our lowest rate is not the 2.35 per cent you are paying. It is 2 per cent (Sor + 0.65 per cent). But it only applies to new customers. Sorry.'

I explained that I could go to another bank where I would be considered a new customer and entitled to their special rate. Our bank executive said: 'Oh... well... that's not necessary.' Then he gave us the lower home loan rate of 2 per cent.

TWO LESSONS

For me, a big lesson learnt has been that banks deal with thousands of customers. Customers, however, talk to just a few banks. It is no contest.

The banks have developed tactics that we cannot begin to match.

On the other hand, consumers are not powerless. It helps to know that other banks are hungry for our business. Competition makes the contest a bit fairer.

The second lesson is that life is unfair. It favours the rich. The lowest rates - 2 per cent - are reserved for private home loans.

For HDB flats, bank borrowers pay more. Variable rate loans start at 3.5 per cent.

Shop around and you can negotiate down to 3 per cent. With a two or three year lock-in, you can get an even lower interest rate, but not as low as for private property.


--------------------------------------------------------------------------------

Shop and save

Bank phone numbers

Citibank 6238 8838

DBS 6333 0033

Hong Leong 6416 2777

HSBC 6216 9081

Maybank 1800 629 2265

OCBC 1800 438 3333

Standard Chartered 1800 747 7000

UOB 1800 222 2121

HDB 1800 866 3060



Refinance your home loan now
TNP Illustration: SIMON ANG

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