How HDB flats are priced affordably

July 16, 2008

How HDB flats are priced affordably

I REFER to the letter from Mr See Leong Kit, 'Market-based pricing has cost buyers dearly' (July 7).

HDB adopts a market-based pricing approach so as to reflect the true subsidy that buyers enjoy. Under this approach, HDB determines the market value of the flat, based on its location, finish and other attributes. Then, it sells the flat at a discount to the market value. HDB buyers understand this, and appreciate that new HDB flats are priced lower than resale flats. Similarly, when they want to sell their flat in the open market, they do so at the prevailing market value, not at their cost of purchase of the flat.

We also wish to highlight that this approach has enabled HDB to continue to price its flats affordably despite the current sharp escalation in construction costs. Currently, a new four-room flat can cost close to $300,000 to develop, taking into account land, building and other costs. This is significantly higher than the subsidised price of a four-room flat in Punggol/Sengkang sold by HDB at about $200,000 to $260,000.

Through the market-subsidy approach to pricing, HDB has been able to keep its flats affordable for Singaporeans. On average, first-time flat buyers need to pay only about 20 per cent of their monthly household income to service their housing loan. This is well within the 25 to 30 per cent that is commonly cited internationally as the benchmark for affordable housing. Lower-income households can enjoy additional help in the form of the Additional CPF Housing Grant.

Mr See commented that young couples have to wait as long as six years for new flats. This is incorrect. New Build-To-Order flats take about three years to complete from time of registration. Those with urgent housing needs can consider the resale market where there is a wide range of resale flats to match the preference and budget of buyers. Eligible first-time buyers can also enjoy a CPF Housing Grant of $30,000/$40,000.

Kee Lay Cheng (Ms)
Deputy Director (Marketing & Projects)
for Director (Estate Administration & Property)
Housing & Development Board



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‘Realistic’ prices drive home sales

‘Realistic’ prices drive home sales

Wednesday • July 16, 2008


Christie Loh


christie@mediacorp.com.sg





FOR nine months over an unfolding global credit crunch, developers here held back from pushing out condominiums and houses into the market. Homebuyers found little variety in the showrooms.

But when the supply gate was unlatched in June, interest poured back in — especially into the mass-market segment — resulting in a bumper month for sales despite the recent stock market and economic gloom.

In June, 801 private residential units were sold out of 1,069 launched, according to monthly data released yesterday by the Urban Redevelopment Authority (URA).

The two figures are the highest since August 2007. They also represent a surge from May, when only 476 units were launched and 453 sold.

“Developers are trying to launch their projects before the lunar seventh month. That is traditionally a very slow period for the whole market,” explained Colliers International’s research director Tay Huey Ying.

Superstitious buyers generally stay away during what is known as the Hungry Ghost Month, which starts on Aug 1.

Ms Tay said the dearth of launches before Jube had led to “pent-up demand”, which was boosted further by “realistic” prices. As the United States subprime mortgage woes weighed on buying sentiment, developers have had to ditch their “aggressive pricing strategy”, she said.

For instance, the recently-launched Dakota Residences along Geylang River reportedly drew an average price of $970 per square foot (psf), which is below the range of $1,000-$1,100 that co-developer Ho Bee Investment had expected mid-last year (2007).

Such suburban projects accounted for the bulk of launches in June. About 44 per cent of the new launches came from the Rest of Central Region, followed by 33 per cent in the Outside Central Region.

The luxury sector is seeing fewer launches, said Knight Frank’s consultancy and research director Nicholas Mak, because most of these high-end buyers are investors, not owner-occupiers. And investor sentiment is weak right now, he explained. In contrast, mass-market homebuyers are in the market for a live-in place.

June did not clock any transactions above $4,000 psf, the level generally viewed by analysts as indicative of exuberant demand. The highest price last month was $3,653 psf for a unit in Nassim Park Residences.

Asked if the fresh worries in the US financial industry would hurt property demand here in the weeks ahead, Mr Mak said July’s data should still be healthy.

August, however, may see sales volumes dip – if the worries persisted -- followed by slight price contractions in the second half of the year.

“I think homebuyers will find economic problems scarier than the Ghost Month,” said Mr Mak.




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Giant property IPO if Mapletree decides to list

July 14, 2008
Giant property IPO if Mapletree decides to list
Temasek unit ramping up property funds to lay base for consistently
high ROE model
By KALPANA RASHIWALA

(SINGAPORE) An initial public offering for Mapletree Investments Pte
Ltd, a fully-owned subsidiary of Temasek Holdings, could take place
in the near future, The Business Times understands.

Based on recent valuations, the entity could have a market cap of
over $5 billion.

When contacted, a Mapletree spokeswoman said: 'We are ready for an
IPO in terms of our business profile and track record. However, the
decision to IPO the company will rest with our board and
shareholders.'

'Over the last few years, we have put in place processes and
governance similar to that of a listed company, to ready ourselves
for an eventual IPO. What will drive the IPO decision, however, will
be the readiness and attractiveness of our business model and
strategy as a real estate capital management company.'

A key internal threshold the group has to cross to be IPO-ready is
that the ratio of assets under management (AUM) to assets owned by
Mapletree must exceed 1.0. 'As at March 31, 2008, our AUM to owned
assets was 0.5 and the ratio currently is about 0.8, including the
recently completed acquisition of the $1.7 billion JTC portfolio by a
private trust led and sponsored by Mapletree. We expect the ratio to
exceed 1.0 by March 2009,' the spokeswoman added. The next target
will be to grow this ratio to 3.0 within three to five years.

AUM refers to assets held in Mapletree-managed private and listed
funds with third-party investors.

Growing the AUM business will enable Mapletree to earn more fee
income from managing property funds as well as managing the
properties owned by these funds.

'Strong recurring fee income will be the bedrock of our strategy for
delivering consistently high returns on equity (ROE) of above 10 per
cent to shareholders,' Mapletree's spokeswoman added.

Fees collected from managing funds and the properties held by these
funds generally tend to be more stable than the property development
and ownership business, which is more cyclical and considered more
risky from an investment point of view.

'Our fee income made up about 10 per cent of total revenue for
financial year ended March 2008 and we hope to grow this to 50 per
cent in three to five years.'

One event that could help Mapletree reach the target of a 3.0 ratio
for AUM to owned assets sooner is the much-anticipated flotation of
Mapletree Commercial Trust, which will hold about $3 billion of
assets including Vivocity, St James Power Station, Harbourfront
Centre and some nearby office blocks.

This trust was to have been floated by April this year but has been
held back because of adverse stockmarket conditions.

The investment proposition of a potential IPO for Mapletree
Investment would be that 'we offer a strong real estate capital
management platform with an Asian focus for investors', Mapletree's
spokeswoman said.

'However, investors who want a more targeted approach, for example,
India or China, can invest directly in our funds. So we offer a whole
suite of investment opportunities,' she added.

For the year ended March 31, 2008, Mapletree posted a 3 per cent dip
in net earnings to $1.04 billion due to a lower net revaluation gain
and higher net finance cost. Operating profit, however, rose 35 per
cent to $146.9 million, on the back of first full-year contributions
from VivoCity and St James Power Station and maiden contribution from
The Beacon, a residential project at Cantonment Road.

Mapletree's revenue jumped 69 per cent to $365.6 million.

Shareholder funds increased 28 per cent year-on-year to $4.4 billion
as at March 31, 2008.

That could potentially translate to a market cap of more than $5
billion, assuming that Mapletree shares hypothetically trade at a 23
per cent premium to its net asset value. The 23 per cent premium was
the peer mean based on the July 11 closing share prices of
CapitaLand, City Developments (after taking into account investment
properties at valuation), Keppel Land and Singapore Land.

Mapletree Investments manages six property funds, including the
listed Mapletree Logistics Trust. The group had $3.1 billion of AUM
as at end-March 2008, a 94 per cent jump year on year, while
Mapletree's owned assets rose at a slower pace of 45 per cent to $5.7
billion.

Recently, the group formed a joint-venture private fund with Arcapita
Bank to hold the $1.7 billion portfolio of properties acquired from
JTC Corp. In April, Mapletree launched an India-China fund that has
so far bought $600 million of assets. These initiatives will drive
fee income revenue, which increased nearly 50 per cent to $29 million
in the latest financial year.

Prices of good class bungalows still going up, but volume falls

July 14, 2008
Prices of good class bungalows still going up, but volume falls
25 deals done in H1 worth $440.65m, against 87 deals for 2007 worth
$1.15b
By ARTHUR SIM

THE volume of transactions of good class bungalows (GCBs) may have
fallen along with other property sectors but values have not.

A GCB is one that sits on designated land no smaller than 15,000 sq
ft. And according to an analysis by CB Richard Ellis (CBRE), there
were 25 GCB transaction in the first half of 2008.

While this may be a fraction of the 87 transactions in 2007, the
total value for H1 2008 is already $440.65 million, almost 40 per
cent of the total value for the whole of 2007 which saw $1.15 billion
worth of deals.

There are several explanations for this, including the possibility
that bigger GCBs were sold this year, but it also seems clear that
prices have risen.

Upon closer analysis, CBRE found that some of the GCBs sold in 2008
had already changed hands once before in 2007. For instance, a house
at Fifth Avenue was sold for $17.4 million in June 2007 and then sold
again for $19.7 million in March this year - representing a gain of
about 13 per cent.

Another house in Cluny Hill was sold in January 2007 for $15 million,
re-sold six months later for $20.2 million and then sold again in May
this year for $21.5 million.

CBRE director (luxury homes) Douglas Wong says: 'There is still
buying interest in the GCB market as it is always regarded as an
attractive investment in the long term and/or for owner-occupation.'

This certainly seems to be supported by the fact that CBRE and Mr
Wong handled possibly the biggest GCB deal ever done here - a house
in Leedon Park which sold for $43.2 million in May, bought by a
Singaporean.

That locals make up the bulk of GCB buyers is interesting as
foreigners have been very much credited with bolstering the luxury
non-landed sector. Mr Wong also believes that of the estimated 2,400
GCBs in Singapore, these are owned by a small pool of about 1,000
wealthy individuals, suggesting that many own more than one GCB.

In tracking GCB transactions, CBRE found that there were two
recent 'peaks' in the sector. (CBRE defines 'peak' in terms of volume
rather than price).

The first peak occurred in 1999, when 77 transactions were recorded
after the property market bottomed out during the Asian financial
crisis.

The second peak occurred in 2006 with 119 deals done following a
protracted period of market stagnation from 2000 to 2004.

In 2006, the 119 GCBs were sold with transacted value totalling
$1.225 billion, double the value in 1999.

On average, each GCB cost $9 million to $10 million. In comparison,
at the bottom of the market in 2002, the average price of a GCB was
$6 million to $7 million.

Of the 25 GCBs sold in H1 2008, about half were sold for over $15
million. Of these, six were sold for more than $20 million.

And as CBRE notes, luxury properties are often seen as a barometer of
the health of the overall market. When there are signs of the market
turning, GCBs and luxury apartments will reflect this first and post
bigger gains ahead of the broader residential market.

So it is good news then that for the rest of the year, CBRE expects
GCB prices to remain firm or even see a marginal upside.

IndyMac fails as 'problem' US banks multiply

July 14, 2008
IndyMac fails as 'problem' US banks multiply

THE collapse of IndyMac Bank, which could add up to be the most
expensive bank failure ever in the United States, comes as the number
of 'problem' institutions is on the rise.

The Federal Deposit Insurance Corp (FDIC) disclosed last month that
it was closely watching 90 financial institutions on its 'problem
list', up from 76 in the first quarter of the year, CNN reported
yesterday.

The total assets of these institutions rose from US$22.2 billion to
US$26.3 billion (S$30.2 billion to S$35.8 billion), the FDIC said.

The number of troubled institutions monitored by the FDIC had grown
in each of the last six quarters, starting in the autumn of 2006,
when there were just 47 on the list, CNN said. The last time it
approached this level was in the autumn of 2004, when the number was
95.

The FDIC does not publish a list of troubled banks out of concern
that it could spur a bank run, which is what happened to IndyMac,
according to CNN.

The Office of Thrift Supervision, which oversaw IndyMac, criticised
US Senator Charles Schumer. It said a June 26 letter that he had
written to regulators questioning IndyMac's viability prompted the
run on the bank, during which customers withdrew more than US$1.3
billion, prompting a liquidity crisis.

IndyMac, which was closed last Friday by US federal regulators, will
re-open today with a new charter and a new name - IndyMac Federal
Bank.

But analysts feared thousands of IndyMac customers could lose as much
as US$500 million, CNN said.

Customers who found locked doors and armed guards last Friday
afternoon could use ATM cards over the weekend to get to their money.
An estimated 5 per cent of the US$19 billion deposited in the bank,
however, was not insured, CNN said.