Scrapping valuation doesn't lower prices Source: Straits Times | Forum Letters THE valuation of a Housing Board resale flat involves a trained person stating his opinion of the unit's value, after having examined related matters affecting it ("Resale flat prices a hot topic at forum"; yesterday). It is neither a determination of the price nor the cost of constructing the flat. The HDB has stated that cash-over-valuation (COV) is not mandatory in a resale transaction; the board does not determine the resale price that is concluded between a willing buyer and a willing seller. The valuation gives transacting parties an idea of the immediate past prices of similar resale flats. People often mistake the purpose of a valuation as a process to set an "official price" of a resale flat. Some even allege that the HDB "legalised" the COV, but the reality is that a resale flat is transacted on a "willing buyer, willing seller" basis. It is the demand and supply of a particular resale flat that will determine whether it can command a price above or below its value then. The scrapping of the valuation of an HDB resale flat does not lower its price. Instead, it removes the guide for transacting parties to fall back on. A situation can arise where a buyer of a resale flat goes to a financier to borrow money, and he values the unit over and above what the market values it. Thus, without an independent valuation, he will have to spend more time with his financier over the difference in opinion of the flat's value. Patrick Sio Buyers look at transport options, waterfront views Page views on the STProperty website give an instant snapshot of what projects buyers are keen on. This week, we look at what's attracting attention in District 3 and 4. Source: Straits Times | Money BUYERS typically look at accessibility and transportation options when picking a home. This makes District 3 appealing to them as the Mass Rapid Transit (MRT) East-West Line runs through the Alexandra, Queenstown and Tiong Bahru areas. The top five projects in District 3 (see table) by page views on STProperty in the May 20-26 period were mostly 99-year leaseholds. Ascentia Sky topped the list, with an average asking price of $1,694 per sq ft (psf) for its two- and three-bedder units during the period. Urban Redevelopment Authority (URA) data showed that the average transacted price per unit for the project between Nov 1 and April 30 this year was $1,595 psf, for the five or fewer units sold during the six-month period. Alexis - the only freehold property among the top five projects - was second in terms of page views, followed by River Place, Echelon and The Metropolitan Condominium. The 293-unit Alexis, located on Alexandra Road, also had the highest average asking price of $1,828 psf for its one-, two- and three-bedder units. Conversely, the 509-unit River Place had the lowest average asking price among the top five at $1,531 psf for its one- and three-bedder units. District 4, on the other hand, appeals to buyers who want a waterfront view or a spot close to nature and greenery. It covers the Sentosa, Telok Blangah and HarbourFront areas. Both freehold condominiums and 99-year leaseholds have attracted attention from buyers. The recently launched 366-unit Corals at Keppel Bay led the list of top five projects in terms of page views on STProperty for the district in the May 20-26 period. Corals is the third residential project by Keppel Corporation and Keppel Land on the former Keppel Harbour site, after the 969-unit Caribbean at Keppel Bay and the 1,129-unit Reflections at Keppel Bay. A Keppel Land spokesman said more than 120 of the 160 launched two- and three-bedder units at Corals have been sold at asking prices ranging from $2,100 psf to $2,500 psf. Reflections and Caribbean were ranked second and fourth, respectively, on STProperty's top five projects in District 4. Keppel Land also said that 901 of the 950 launched units for Reflections have been sold since it was released for sale in April 2007. Another 150 units have been set aside for companies to lease. The Interlace, located at the end of Alexandra Road, and Skyline Residences in the tranquil estate of Telok Blangah, completed the list. With 124 one-, two- and three-bedder units, Skyline Residences is the only freehold project among the top five and had the highest average asking price of $2,178 psf. URA data showed that the average transacted price for the project from Nov 1 to April 30 this year was $1,993 psf, based on five or fewer sales transactions. RACHEL SCULLY Bank lending up 20% in April Increase led by loans to businesses, reflecting steady economic activity Source: Straits Times | Money By Fiona Chan Senior Economics Correspondent BANKS stepped up lending to companies and households in April, a sign that economic activity is continuing apace. Total bank loans accelerated for the fifth straight month in April, rising 20 per cent over a year ago, according to figures released by the Monetary Authority of Singapore (MAS) yesterday. The increase was led by loans to businesses, which climbed 23.7 per cent in the period, driven by lending to companies in general commerce, construction and financial institutions. "General momentum remains robust, even though businesses, especially small and medium-sized enterprises, may be facing headwinds in the form of tepid global demand and manpower constraints," said OCBC economist Selena Ling. CIMB economist Song Seng Wun added that it is particularly encouraging to see lending to commerce growing strongly. He noted that this segment - which includes restaurants and pubs - grew nearly 32 per cent in April over a year ago on top of a similar rate of increase last year. Meanwhile, consumer loans held steady, up 15 per cent in April from a year earlier. Housing loans rose 16 per cent but lending for cars fell 3.1 per cent, following new caps on vehicle loans earlier this year. The property sector contributed significantly to the year-on-year jump in lending, owing to developers drawing down on credit facilities and consumers taking new mortgages, said Mr Song. "Looking ahead, broad property lending is likely to sustain the relatively strong loan growth of 18 to 20 per cent year-on-year for the rest of the year," he added. On a month-on-month basis, however, the overall pace of bank lending appeared to be easing, the MAS data showed. Bank loans rose 0.9 per cent in April from March, down from the 1.5 per cent climb in March and the smallest increase in five months. The growth in business loans eased to 1 per cent month-on-month, and the rise in consumer loans likewise decelerated slightly to 0.7 per cent. This was partly due to "fewer working days, fewer car loans, and after four straight months of nearly 2 per cent growth", said Mr Song. Economic watchers have recently highlighted the rapid growth in debt levels in Asia, including in Singapore, although they say it has yet to reach dangerous levels. The International Monetary Fund recently warned that persistently low interest rates have fuelled strong credit growth and rising asset prices in many of the region's economies, and this could lead to asset bubbles if left unchecked. "I think the concern is still contained for now on the debt servicing front," said OCBC's Ms Ling, pointing to policies implemented recently to curb excessive borrowing for home and car purchases. But she added that if monetary indicators such as loans growth continue to accelerate, especially if fuelled by the easy liquidity conditions globally, that might indicate that the market is "setting itself up for a correction". fiochan@sph.com.sg Dual-key, double tenancy Buyers of such units can rent both out, avoid additional stamp duty Source: Straits Times | Money By Cheryl Ong DUAL-KEY units have become increasingly popular, and developers have been quick to meet the strong demand. The Fragrance group and World Class Land launched Urban Vista in Tanah Merah in March with such units, all around 700 sq ft each. The latest project with dual- key units is Liv on Sophia, which was launched last weekend. The Liv units at Mount Sophia are possibly the smallest dual-key apartments to hit the market. There are 64 units in the development in Adis Road near the Dhoby Ghaut MRT station, all two-bedders, ranging from 527 sq ft to 710 sq ft each. In principle, dual-key units have two separate entrances with their own keys, and are usually quite large to accommodate multi-generational families. But experts say smaller units are aimed at investors who might be looking for two streams of rental income. "When developers build small two-bedroom units, with each bedroom having its own key, then clearly they are targeted more at investors who want to rent out both units," said International Property Advisors chief executive Ku Swee Yong. Dual-key units were introduced by developer Frasers Centrepoint in 2009, mainly to cater to large families. But one attraction now is that purchasers of this kind of property can skirt the Additional Buyer's Stamp Duty (ABSD), Mr Ku said. In January, the Government extended the ABSD to Singaporeans buying their second residential property and the first purchase by permanent residents. Singaporeans buying a second property must pay a 7 per cent levy while those buying their third and subsequent property will pay an added levy of 10 per cent. This means that buyers of dualkey units are effectively buying one property but with the possibility of two tenancies. If a Singaporean purchased two shoebox units for leasing, he would have to pay an ABSD on the second property. Roxy-Pacific Holdings chief executive Teo Hong Lim said the firm designed Liv on Sophia with the many schools in the area in mind. These include Nanyang Academy of Fine Arts and Lasalle College of the Arts. "We always try to develop a different product," he said. "There are a lot of schools around there, so we felt that could be an area for students looking for housing. "Or it could be a single living on one side of the house while renting out the other side," he added. Mr Teo said the central region is the only area that does not have size restrictions on units so it was free to build smaller flats. Units in non-landed, private housing projects outside the central area will have to be at least 70 sq m. Shoebox units are typically under 50 sq m each. The dual-key units at Liv on Sophia feature an additional room called a "suite" but it will only have a kitchen counter instead of typical fixtures. Mr Teo said ample space has been allocated for a washing machine. Units at Liv on Sophia are priced between $2,450 and $2,500 psf. The freehold project will attain its Temporary Occupation Permit by June 30, 2018. ocheryl@sph.com.sg TWICE THE RENT When developers build small two-bedroom units, with each bedroom having its own key, then clearly they are targeted more at investors who want to rent out both units. - International Property Advisors chief executive Ku Swee Yong Sea change as condos sprout in Jalan Loyang Besar The new developments are set to transform the quiet waterfront neighbourhood Source: Straits Times | Money By Melissa Tan NEAR the eastern end of Pasir Ris Park is a quiet waterfront neighbourhood that has traditionally been a landed estate with pockets of chalet developments. However, in recent years, the Jalan Loyang Besar area has undergone a sharp transformation with the construction of several private condominiums. It is near the Downtown East complex in Pasir Ris, and some projects offer a view of the sea. Analysts say the district appeals to many because they can walk to the beach and the park, but added that it is fairly far from major transport nodes and does not have an upcoming MRT station nearby. The most recent launch in the area was the 58-unit Ocean Front Suites by Regal Realty, which went on the market in March this year. So far, 10 units have been sold at the development, at prices ranging from $1,499 to $1,574 per sq ft (psf), according to Urban Redevelopment Authority (URA) data. Unit sizes start from 409 sq ft, and the project is on a 946-year leasehold dating from 1937. "The average price of $1,500 psf might sound high, but it will attract buyers and investors as the units are small at 409 sq ft, and the absolute prices of $600,000 to $650,000 per unit are affordable," said Chris International director Chris Koh. He said prices in the Jalan Loyang Besar area are expected to increase in the near future as more developments sprout there. Other developments that are still under construction nearby include Sea Esta, Ripple Bay, Seastrand and the Watercolours executive condominium (EC). They are all on 99-year leasehold land. The 376-unit Sea Esta, which is being developed by Hoi Hup, went on the market in June last year and has been fully sold. New sale prices range between $720 psf and $1,059 psf. MCL Land's Ripple Bay and Far East Organization's Seastrand are more than 90 per cent sold. The 679-unit Ripple Bay, launched in March last year, had moved 667 units as at the end of April this year, according to URA data - that works out to 98 per cent sold. Seven units were sold in April at a median price of $913 psf. Of the 473 units at Seastrand, roughly 96 per cent or 452 units have been sold - five of them in April this year at a median price of $983 psf. The project went on the market in June 2011. The 416-unit Watercolours EC went on sale in May last year with an average launch price of $706 psf. Recently completed private residential projects in the area include the 71-unit Bluwaters 2, which received its temporary occupation permit (TOP) in 2010. It has seen 11 resale transactions since January last year, at prices ranging from $744 psf to $1,062 psf, according to caveats lodged with URA. Its 946-year leasehold dates from 1938. A two-bedder fetches rentals of between $2,600 and $3,200 per month. Bluwaters 2 is separate from the 45-unit Bluwaters condo, which is just a few blocks away and is also on a 946-year leasehold. It was completed in 2007. Both were developed by Novelty Group. There have been only six resale transactions at Bluwaters since January last year, at prices of between $954 psf and $1,046 psf. Rentals for two-bedroom units range from $2,600 to $3,200 per month. Analysts said the rental catchment for the area could come from expatriates working at the Tampines regional centre. There are two projects in the area with 999-year leasehold dating from 1885 - Coastal View Residences and Celadon View. Coastal View Residences is a small development with 40 units. The most recent resale at the project was in March this year, when a 1,162 sq ft unit was sold at $1,101 psf. It is next to Ocean Front Suites. As for Celadon View, it is an even smaller project with only 27 units. The most recent resale transaction here was in April this year - a 1,442 sq ft unit at $563 psf. A three-bedder at Celadon View rents out for $2,800 to $3,200 a month. Rents at a 99-year leasehold condo nearby, Lighthouse, go at $2,500 to $3,100 per month for a two-bedder. Completed in 2004, it has 51 units. Historical transaction prices vary, ranging from $344 psf for a 1,819 sq ft unit in 2006 to $856 psf for a 1,119 sq ft unit in September last year. melissat@sph.com.sg Buying opportunity after Reits rout Analysts believe 9.3% plunge last month may be overdone Source: Straits Times | Money By Alvin Foo INVESTORS in real estate investment trusts (Reits) here seem to have taken the old stock market mantra of "sell in May and stay away" to heart. Singapore Reits were ravaged last month, mostly on fears that the United States Federal Reserve will be slowing down its massive monetary stimulus prematurely. But analysts suggest the recent Reit rout may present a buying opportunity for several of these counters. They say the rush for the exit may have been overdone. The bloodletting began last week, with the FTSE ST Reit Index slumping 4.5 per cent in those five trading sessions for its worst one-week slide since June 2009. This was followed by a 5.2-per cent plunge this week as these worries intensified, leaving the index down 9.3 per cent for May. The mayhem saw some Reit counters, such as Cambridge Industrial Trust and Fortune Reit, sinking 6 per cent in a mere day. In a bid to kick-start the sluggish but now improving US economy, the Fed has been buying US$85 billion (S$107 billion) in bonds a month. This loose monetary policy is called quantitative easing (QE). But global markets were rattled in recent days by Fed chairman Ben Bernanke's comments that the monthly bond purchases might be slowed down if US job rates show sustained improvement. An abrupt end to QE and a rise in interest rates would hurt Reits, as it would increase refinancing costs and make it harder for them to raise funds. However, several local analysts are not overly concerned. "The concern is premature and we do not expect the Fed to cut back its bond purchases until 2014 versus the market's expectation of the second half of 2013," said Barclays analyst Tricia Song. CIMB noted: "Our strategists and economists expect a more orderly rollback of QE closer to year-end, in conjunction with stronger US economic growth. They do not expect a one-off withdrawal or sharp withdrawal when the recovery remains fragile." In addition, Deutsche Bank Markets Research believes the recent selldown reflected a re-rating of the Reit sector. The sector's price-to-book ratio of 1.3 was above long-term averages of 1.1, it said. This is the ratio of the company's stock price to its book value, that is, what the company is said to be worth overall. But analysts still say the sector is attractive for its defensive nature, given increasingly cautious market conditions. CIMB noted: "The sector's defensive nature will hold up well in a tactically cautious environment, while debt maturity is fairly well-staggered to minimise the impact of any spike in interest costs on refinancing." Barclays' Ms Song said: "We continue to believe that Singapore Reits' valuations are not expensive... we would accumulate on dips - our top picks are Keppel Reit and CapitaCommercial Trust." CIMB sees buying opportunities for Ascendas Reit, Frasers Centrepoint Trust, Frasers Commercial Trust and Cambridge Industrial Trust. Standard Chartered noted that in the recent first-quarter earnings season, retail landlords outperformed its expectations while hotel Reits saw revenue decline. It noted in a May 8 report: "We believe valuations are not far from the peak, and we see just 10 per cent upside from here unless interest rates stay low for a prolonged period." alfoo@sph.com.sg Elevated industrial prices 'here to stay' Freehold prices for upper-storey units post largest increase of 3.1% Source: Straits Times | Money By Rachel Scully ELEVATED prices and rents in Singapore's industrial sector are here to stay, property and research consultancy Savills Singapore has said in a new report. Prices for industrial properties are continuing to rise. For instance, freehold prices for upper-storey factory and warehouse units posted the largest rise of 3.1 per cent to $669 per sq ft (psf) in the first quarter, from the fourth quarter of last year. Novelty Bizcentre in Howard Road (see table) recorded the highest number of upper-storey unit transactions during the period at an average price of $925 psf. Prices rose less sharply for 60-year leaseholds for the same types of properties at 1.3 per cent to $457 psf, and by 1.2 per cent for 30-year leaseholds to $356 psf over the same period. Midview City in Sin Ming Lane topped the list of 60-year leaseholds with the most number of upper-storey units transacted in the quarter, while Synergy @ KB led the way for 30-year leaseholds. However, the Savills Research report also indicated that sales slowed down in the first quarter. The 704 caveats lodged for the purchase of strata factories and warehouses were down a hefty 45 per cent from the preceding quarter and 38 per cent from the 1,141 caveats lodged in the same three-month period last year. The leasing market, though, performed better with 1,513 sealed deals for factories and warehouses in the first quarter, up 2.2 per cent from the corresponding period last year. The segment was dominated by renewals and relocations of businesses in search of lower rents, said Savills Research. Occupancy rates at business parks strengthened to 82.8 per cent, up 1.9 percentage points from the preceding quarter. Monthly rents at business parks were up 2.6 per cent from $3.90 psf to $4 psf quarter on quarter. This was driven by new projects such as Nexus @ one-north, which commanded more than $5 psf per month. However, monthly rents for upper-storey factory and warehouse units was unchanged at $2 psf, and static at $3 psf for high-tech units, said Savills Research. These figures have been projected bearing in mind the Government's imposition in January of a seller's stamp duty (SSD) on industrial properties and land bought and sold within three years of purchase. "Notwithstanding declining yields and increasing supply, an era of elevated prices and rents has come upon us and is here to stay," said Savills Research head Alan Cheong. But it expects sales activity this year for the industrial sector to moderate further with the imposition of the SSD, though this will not be dramatic. "Barring extreme shocks, we do not expect a sharp pullback as rock-bottom interest rates will continue to draw industrialists to own their premises as a hedge against future rental increases," said Mr Cheong. Savills Research also said tenant resistance will continue to rein in rental increases as manufacturers strive to stay competitive globally in a challenging business climate. rjscully@sph.com.sg Conference to focus on linking Islamic finance sectors Source: Straits Times | Money By Magdalen Ng THE World Islamic Banking Conference Asia Summit starting here next week will focus on connecting the world of syariah-compliant finance. The annual summit's chief executive, Mr David McLean, said Islamic finance has achieved significant growth over the past decade but more needs to be done. He noted yesterday that Islamic assets account for less than 1 per cent of the global financial system, and that the industry still has to build significant economies of scale. "Being comparatively young, Islamic finance currently offers fewer product choices for consumers, while isolated pools of Islamic liquidity in each market restrict opportunities for more efficient allocation of capital across international jurisdictions," said Mr McLean. He added that the industry will need financial institutions, regulators and international standard- setting agencies to work more closely together if these challenges are to be overcome. More than 480 industry figures are expected to attend the three-day conference, which starts at the Pan Pacific Hotel next Monday. They include Mr Mohammad Y. Al-Hashel, governor of the central bank of Kuwait, and Mr Ranjit Ajit Singh, chairman of the Securities Commission Malaysia. Mr Ravi Menon, managing director of the Monetary Authority of Singapore, said yesterday: "The event is now an important platform connecting the vibrant Islamic finance industries in Asia and the Middle East. "The conference also reinforces the value proposition of Islamic finance to the wider industry in the region." songyuan@sph.com.sg Bids for prime Cecil St site tipped to draw a premium Tender set for 99-year leasehold site after developer's $624m commitment Source: Straits Times | Money By Chia Yan Min A PRIME financial district commercial site is now up for sale after a developer committed to pay at least $623.73 million. Once developed, the 0.8 ha site in Cecil Street will be connected to Tanjong Pagar MRT station. The 99-year leasehold site was made available for sale on the reserve list last December. Such sites go on sale by tender if a developer first commits to a minimum sum acceptable to the Government. The site includes open space of 17,355 sq ft. The trigger price means a unit price of $750.97 per sq ft per plot ratio (psf ppr), excluding the open space, said Mr Nicholas Mak, head of research at SLP International. The Urban Redevelopment Authority (URA) said the proposed development of up to 50 storeys will "enjoy excellent frontage and visibility", with the open space forming part of a green network including Tanjong Pagar Park and Pearl's Hill Park. R'ST Research director Ong Kah Seng said the site is expected to attract about five bids, and could fetch a winning bid of $830 to $980 psf ppr, owing to its strategic location. The development cannot be subdivided into strata office units for sale, but developers are unlikely to be deterred, said Mr Ong. Mr Mak noted that developers will be unable to sell off office units individually, and will need to rent out the units instead. "This restriction could drive away boutique developers that would need the down payments of strata-subdivided units to fund the construction," he said. Mr Donald Han, special adviser at HSR Property Consultants, said the site is likely out of the reach of most small and mid-sized developers, with the winning bid possibly crossing $1,100 psf ppr. This would exceed the $1.7 billion - or $1,006 psf ppr - paid by GuocoLand for its nearby site, the 290m skyscraper Tanjong Pagar Centre. "The market for commercial property has seen an upward reassessment, especially that of strata title offices, and this has created some optimism among commercial office developers," he said. Mr Han added that the site is "probably one of the last remaining commercial sites within the financial district". The public tender for the site is expected to be launched in about two weeks, with a tender period of eight weeks, the URA said. chiaym@sph.com.sg |