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1st November 2014

Singapore Real Estate

Rents set to fall with flood of new condos

Landlords of older properties will be affected too as tenants get more choices

Source: Straits Times / Money

Potential condo glut in Dairy Farm, Hillview area

IT'S fast turning into a tenants' market with an impending flood of new apartments set to drive down rents.

Landlords have less reason to cheer, given that they are already battling the effects of cutbacks on foreign employment and shrinking expatriate housing budgets.

Market experts warn that it is not just owners at newly completed developments who might have difficulty finding tenants or securing higher rents. Investors at older properties nearby are likely to feel the heat from the sheer number of new units as well.

"When many get the keys to their new houses at the same time, there could be as many as 30 to 40 people who want to rent out their units all at once," said PropNex Realty chief executive Mohamed Ismail.

"Existing tenants in older flats nearby will always think about moving across to a newer flat, with brand new furnishings.

"And these new units may end up having a lower rental rate because of the competition."

Industry players have long flagged the mounting supply of new condominium units as a pressing concern. In the past year alone, about 16,000 non-landed private homes were completed, according to Urban Redevelopment Authority figures.

Look further ahead and the situation becomes even more alarming for landlords: There are 25,000 new units expected to be completed between this quarter and the end of next year, with more than half in the suburbs.

A significant proportion of the 16,000 already built in the past year have been erected amid clusters of new homes, indicating that certain parts of the island are already experiencing a sudden supply glut, according to consultants DTZ.

About 2,300 units have been completed over the past year in the Katong, Joo Chiat and Amber Road precinct, also known as District 15. This includes The Shore Residences, a 408-unit condo, and the 383-unit Silversea - both developed by Far East Organisation.

Another 239 units at Hong Leong Holdings' The Meyerise condo were completed this year.

In District 19 - which encompasses Punggol, Sengkang and Hougang - 2,300 new units have hit the suburban precinct in the past year.

This will be followed by a further 3,000 condo units over the next 12 months, with the completion of projects such as Sim Lian's 882-unit A Treasure Trove and Keppel Land's 622-unit The Luxurie.

"Because these areas have seen the largest increase in the supply of non-landed units in the past year, they are likely to see the most rental pressure as tenants would have a wider selection of options, increasing their bargaining power," said DTZ research director Lee Lay Keng.

Experts note that areas that are well-connected to transport nodes or have malls and popular schools could have enough rental demand to soak up the fresh supply.

Still, landlords with units in outlying districts do not just face competition from new completions in the immediate vicinity, said Ms Lee.

"Tenants who intend to rent a unit in a suburban condo can rent a unit anywhere in the suburban areas, all things being equal, unless they have very strong reasons for living in a particular area," she added.

DTZ's analysis also showed that median rents at older condos slipped in the six months after completion, although they picked up subsequently.

At The Interlace, a 1,040-unit project in Depot Road, median rents fell 12 per cent to $3.04 per sq ft (psf) six months after it was completed.

In the three months after it was ready for occupation, rents at the 775-unit condo The Anchorage in Alexandra Road slipped 8 per cent to $3.03 psf.

Elsewhere, the numbers point to a potential glut in the vicinity of Dairy Farm Road and Hillview Avenue.

Two new condos were completed there in the past year - accounting for 710 apartments - but supply is gathering pace with at least 1,500 additional units from three new developments due for completion by 2016.

These will add to a substantial supply from the handful of older projects nearby.

SP Setia's 483-unit Eco Sanctuary, which was launched in 2012, is expected to be completed in two years.

Far East's mixed-development The Hillier is partially completed.

It opened the commercial component hillV2 earlier this year. The 528 residential units are expected to be ready next year.

Said PropNex Realty's Mr Ismail: "As long as the Government is stringent in bringing in foreigners, obviously there will be a correction in rents. It's a matter of time, demand and supply."

-By Cheryl Ong

No stress in DBS' S'pore home loans: CEO

Source: Straits Times / Money

THE largest local bank has given its Singapore mortgages a clean bill of health.

DBS Group Holdings chief executive Piyush Gupta said the bank has not identified any stress in its Singapore home loans.

Housing non-performing loans (NPL) came in at $110 million in the third quarter ended Sept 30 - unchanged from the previous quarter and down from $119 million in the same period a year earlier.

It is doing better in this segment than the other two local banks. OCBC and United Overseas Bank (UOB), which both reported quarterly earnings on Thursday, saw housing NPLs rise. OCBC's third-quarter housing NPL was $272 million, up from $253 million in the previous quarter and $227 million last year. UOB's housing NPL was $502 million, up from $447 million in the previous quarter and $295 million last year.

DBS' mortgage book here could grow by about $3.8 billion this year, up from original forecasts for a loan growth of between $2 billion and $2.5 billion, Mr Gupta said.

One reason is that a larger percentage of its loans goes to those buying HDB homes as well as those buying units to live in, rather than for investment purposes, he said.

Another is that DBS seems to have defended its turf well.

"The outflows have been much, much softer than we expected. Typically, you'll lose (some) amount of mortgage growth because of refinancing out, because of property sales, disposals," he said.

"That activity has slowed down and therefore, the attrition is much, much slower than we anticipated," he added.

He said Credit Bureau Singapore data showed DBS' delinquency rate for home loans is "substantially better". Its delinquency rate is 30 basis points lower than the industry average.

-By Mok Fei Fei

Bank loans down by $100m in Sept

Businesses holding back on borrowing amid modest prospects: Economist

Source: Straits Times / Money

BANK lending flatlined in September as concerns about global economic conditions forced businesses to become more cautious.

Total bank loans came in at $604.5 billion, a dip from the $604.6 billion disbursed in August, according to preliminary data from the Monetary Authority of Singapore (MAS) yesterday.

It's a reversal from August's 1.2 per cent increase over July.

While credit growth has risen every month, compared with the same period a year ago, it is trending towards a slower pace.

Overall loans in September - comprising both business and consumer lending - was 10.6 per cent up on the $546.6 billion disbursed in the same period a year ago.

August lending rose 11.8 per cent over the same month last year, while July lending increased by 10.8 and June loans were up 12.3 per cent.

A drop in business loans mitigated the rise in consumer lending in September.

Lending to businesses in September came in at $370.9 billion, a fall of 0.4 per cent over August's $372.2 billion. Loans to major sectors, like manufacturing, building and construction, general commerce as well as transport, storage and communication, all fell from August.

Financial institutions saw increased lending, preventing a steeper decline in business loans.

CIMB economist Song Seng Wun said business owners are holding back in a more modest economic environment.

"A sombre assessment of growth prospects for this year and next year, together with volatility in the financial markets and slowing growth momentum in the region, have impacted the business environment," added Mr Song.

"They are being more selective and making a more careful assessment in terms of expanding and hiring."

Consumer loans, meanwhile, rose 0.5 per cent over August to $233.6 billion.

Housing and bridging loans, the largest lending category, rose 0.6 per cent to $174.5 billion, better than August's 0.5 per cent rise over July.

DBS economist Irvin Seah said: "The macro-prudential measures which the Government introduced will continue to have an impact on consumer loans, with transaction volumes moderating and prices also easing as well."

Car loans fell for the 26th straight month, dropping 1.7 per cent from August to $9.05 billion.

-By Mok Fei Fei

Construction firms 'already upgrading workers'

Source: Straits Times / Money

NEW measures aimed at raising the percentage of higher-skilled workers in the construction industry reinforce ongoing efforts by firms to upgrade their employees, construction companies told The Straits Times.

Companies say their efforts were already under way, even before new regulations requiring companies to have a minimum percentage of higher-skilled workers were unveiled on Thursday.

Still, firms said it remains to be seen whether efforts to help lift the sector out of its productivity slump will pay off in the long term.

The new regulations, announced on Thursday by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, require at least 10 per cent of work permit holders in each firm to be classified as higher-skilled, and will take effect on Jan 1, 2017.

The move is part of a raft of measures aimed at building a more productive construction workforce and encouraging firms to retain higher-skilled work permit holders.

The changes will be phased in over the next two years to give firms time to adapt. Those that fail to meet the targets will face curbs on hiring.

About 60 per cent of firms already meet the new requirement. Of the remainder, most - about 80 per cent - need to upgrade one or two work permit holders over the next two years.

Employers told The Straits Times they are already making efforts to raise skill levels, and do not foresee problems meeting the requirements.

"The requirements are not hard to meet," said Mr Peter Chew, managing director of CAK & FG Survey, which employs about 90 work permit holders. Just 5 per cent of them fall into the higher-skilled category.

"We always encourage our workers to study, and we do send them for engineering survey courses with the Land Surveyors Board," he said.

Firms already meeting the requirements say a more productive team is essential given that the industry is already being squeezed by higher foreign worker levies and tighter hiring quotas.

Straits Construction executive director Kenneth Loo said more than 20 per cent of its 500 work permit holders are classified as higher-skilled. "We will increase this percentage if possible, because with the tightening regimes in place, we need to expect as much work as possible from each worker," he said.

Mr Augustus Peh, managing director of commercial interior renovation firm Spacelogic, said the company trains its workers with the aim of eventually promoting them to managers.

"We need to upgrade them so that they can work towards becoming managers... We want to retain them, because once they get used to the work, they become more efficient," he said.

About 40 per cent of its 50 work permit holders are higher-skilled workers.

Larger firms and main contractors are likely to have an easier time complying, but smaller subcontractors - whose labour requirements tend to fluctuate from project to project - might struggle, said Santarli Construction general manager Andrew Seet.

Thirty per cent of its 120 work permit holders are higher-skilled.

Mr Richard Teo, project manager of CHL Construction, said the workers he had sent on training courses came back more safety-conscious. But training can only do so much.

"There are always good workers and bad workers. Productivity also depends on their own qualities. Some can have better skills but they don't contribute much to productivity," he said.

-By Marissa Lee & Chia Yan Min

Sleepy Seletar to get a boost from new mall

Rich history, aerospace park also add to district's appeal

Source: Straits Times / Money

ON TOP of its rich history as the former site for the British naval and air bases, the Seletar district is also an up-and-coming neighbourhood.

The shopping prospects are about to get a much-needed jolt in the form of the upcoming Seletar Mall, while a range of housing options is also emerging in the wake of the new aerospace park.

The four-storey mall at the junction of Sengkang West Avenue and Fernvale Road opens soon. It has already secured tenants for more than 90 per cent of its space. These include FairPrice Finest supermarket, Shaw Theatres and Foodfare, as well as big brands Uniqlo, BHG and Amore Fitness.

Seletar Mall, which also has two basement levels of retail, comes with a gross floor area of 284,000 sq ft and net lettable area of 188,000 sq ft.

The project is a joint venture between Singapore Press Holdings (SPH) and United Engineers Developments.

Mr Wong Xian Yang, manager of research and consultancy at OrangeTee, noted that the mall would be welcomed by residents as it is in a "still-sleepy" area with few retail offerings.

"The good tenant mix will also liven things up in the district, appealing especially to young families living there," he added.

Other malls in the vicinity include Fernvale Point in Sengkang West, Greenwich V in Seletar Close and Ang Mo Kio Hub in Ang Mo Kio Avenue 3.

Property consultants told The Straits Times that they expect buying interest in the area to be good as well, thanks to the Seletar Aerospace Park, which will serve the aviation industries when completed by 2018.

Mr Wong noted that the aerospace park is expected to "drive job creation and boost demand for nearby properties".

PropNex chief executive Mohamed Ismail said: "There is also high potential for future capital appreciation... as the industrial park will serve as a key attraction to professionals and services to the area."

Resale prices in the area rose 53 per cent from 2010 to the third quarter of this year, although new home launches dipped 4 per cent over the same period.

At the same time, a spate of new projects has enlivened the area, including The Greenwich, the 99-year leasehold residential component of a mixed development in Seletar Road.

The 319-apartment condominium has sold units at an average price of $1,210psf over the past six months, according to Squarefoot Research.

Units at the 99-leasehold Seletar Park Residence, which is just behind The Greenwich, have sold at an average price of $1,239 psf in the past six months. It is expected to be completed by the end of this year.

Floravista and Floraview in Cactus Road was launched by developer Oxley YCK in January. The freehold units have been going for an average of $1,267 psf.

Mr Wong singled out Floraview as a "good deal" for investors, pointing to its lower selling price in comparison with the neighbouring Floraville condominium, which has average prices of $1,288 psf.

Mr Ismail noted that these projects are in a residential precinct "rich with Singaporean history".

"The fact that these are near a wide array of amenities but still nestled in a serene and tranquil environment would be appealing for buyers who want a bit of quiet."

-By Jacqueline Woo

More flats for parenthood as couples await housing

Popular rental scheme has delivered results - and babies - says minister

Source: Straits Times / Top of The News

MORE temporary flats will be set aside for couples waiting for their new Housing Board flats under a rental programme which, as National Development Minister Khaw Boon Wan put it, has been "delivering results, and babies".

Under the rental programme, called the Parenthood Provisional Housing Scheme (PPHS), more than 100 babies were born to those living in 1,000 or so flats - a hit rate of 10 per cent.

This result was not bad, said Mr Khaw.

The popularity of the scheme - and its success in raising fertility - has prompted the Government to allocate another 800 temporary flats for couples from next year.

And to ease costs, couples can co-rent these flats.

"Helping young couples set up their first home so that they can start their family early is our top priority," Mr Khaw said in a blog post yesterday.

The scheme began in January last year with 1,150 flats in Ang Mo Kio, Bedok, Boon Lay and Dover. Rentals range from $800 for a three-room flat in Boon Lay to $1,900 for a Dover five-roomer.

The flats can be rented by first-timer married couples with children under 16, who are waiting for Build-To-Order (BTO) flats. In April, the scheme was extended to those without children, and in September, to married couples who are first-timers and second-timers, as well as divorced or widowed parents with children.

"This is a good scheme which has been well received," said Mr Khaw yesterday.

So far, 110 babies have been born to those in PPHS flats. He said this was "not bad at all".

About 800 more flats, some in Bukit Merah and Queenstown, will be retrofitted and rolled out to couples from early next year.

From today, both new applicants and existing tenants can apply to co-rent and co-pay for PPHS flats. A maximum of two families can share a flat.

"This will be useful for those who feel that they do not need a whole flat," said Mr Khaw.

Co-tenants will settle co-renting details privately, such as how much each tenant will pay and how the bedrooms will be divided.

Mr Gerald Teo's family lived in a PPHS flat for about a year, before getting the keys to their BTO flat in May. He and his wife used to live with her parents, but the flat "got a bit too cramped" when their son was born, said Mr Teo, 28, who works in finance.

The PPHS flat "gave us a bit more freedom", he added.

-By Janice Heng

Farmers in limbo as land leases run out

Farms in Lim Chu Kang waiting for new plots

Source: Straits Times / Singapore

THE future hangs in the balance for farmers in Lim Chu Kang, who will not have their leases renewed as their farms have to make way for army training grounds.

A total of 62 farms, ranging from vegetable plots to frog breeders, will have to move out between 2017 and 2021, after their leases expire.

Despite being told of the decision by the Singapore Land Authority in September, they have yet to get details of exactly where they will move to, and the size of the plots available for tender.

Said Mr Alan Toh, 50, who owns the 4ha Yili Vegetation that produces Chinese cabbage and baby bok choy: "We cannot decide whether to bid on the new land plots or not because we still do not know much at the moment."

However, farms whose leases run out between this year and early 2017 will be given an extension until June 2017 to move. The land has been slated to replace the Defence Ministry's current training grounds, which it is giving up for the development of Tengah New Town, according to the Agri-Food and Veterinary Authority of Singapore (AVA).

Ten farmers The Straits Times spoke to said they had expected to have their leases extended.

Orchid farmer Lim Kah Hin, 54, for instance, built a $500,000 greenhouse last year, and had expected at least two more three-year renewals on his lease, which expires in 2017, because nearby farms had been approved to stay on until 2021 or longer. "I would not have built it if I knew I was going to move," he said of the greenhouse.

Fish farm Apollo Aquaculture Group's chief executive, Mr Eric Ng, 41, has started talks with architects, but is still waiting to hear details of available plot sizes. "We are prepared to move and pump in money at the new place," he said. "But we still do not know the type of land we are going to get."

The planned move has also shaken the confidence of farmers who hope to pass on the family business. Previously, they held the land for 20 years, but now will be given only a 10-year lease after they secure a new site, with the possibility of extending for another decade.

Farm 85 director Tan Koon Hua, 46, said: "I am reluctant to ask my children to take over when I am not sure of the future of my farms." He has three affected vegetable farms totalling 10ha.

The AVA said farmers who demonstrate a good track record with consistently high productivity will be assessed favourably in their bids for new land. It said the new sites in Lim Chu Kang and Sungei Tengah will be smaller, and will be available for tender from next year.

To help farmers manage with less space, the AVA has launched a $63 million fund to help them invest in high-tech farming equipment and systems, which should help "raise their productivity and intensify the use of limited farmland".

Still, farmers say they have only a few months to decide if they want to move or leave the business. Mr John Hay, 60, of Hay Dairies, which produces goats' milk, said: "That is not enough time. It is a multi-million-dollar investment."

Added frog farmer Chelsea Wan, 31: "We will move if the return on investment makes sense... but it is hard, with only a 10-year lease."

-By Aw Cheng Wei

Companies' Brief

Yoma Strategic Holdings

Source: Straits Times / Money

Broker: DBS Group Research

Call: Buy

Target price: 82 cents

YOMA reported earnings of $800,000 for the second quarter of 2015, but its profits are below expectations. We have cut fiscal 2015 and 2016 core profit forecasts by 24 per cent and 6 per cent respectively due to weaker-than-expected operating results. But we believe its current share price has factored in these shortfalls.

Despite challenges in Myanmar, Yoma continues to sell more properties and has diversified into fast-growth areas like KFC restaurants. They may not contribute materially in the near term but we are optimistic about their prospects. Hence we maintain our "buy" call.

Views, Reviews & Forum

URA chief planner cycles for work and fun

Source: Straits Times / Singapore

THE car has taken a back seat for Singapore's chief urban planner, Mr Lim Eng Hwee.

After several outings with cycling enthusiasts for two years, the 49-year-old now cycles at least twice a week to work, pedalling 15km between his home in Frankel Avenue and his office in Maxwell Road.

His decision to switch from four wheels to two is partly prompted by his work.

He is chief planner of the Urban Redevelopment Authority (URA) and its deputy chief executive officer.

The post puts him in charge of implementing Singapore's urban planning and land-use policies but it is also significant that the URA is the agency that unveiled the National Cycling Plan last year as part of the nation's land-use masterplan.

A $50 bicycle was his way of getting around Harvard University in 1997, when he was doing his Master in Public Administration course in the US.

But he stopped cycling when he returned home. "Singapore was not a place to cycle," he said, recalling a few close shaves with buses on the roads.

However, his return to biking has opened his eyes to gaps in the existing infrastructure.

"You discover how you can make things easier. Little details count. Like whether there's a small kerb and whether the drain grating lies one way or the other because if it's parallel to the rider and you're using a bicycle with slim tyres, your wheel can get trapped and you may fall," he said.

But more importantly, the commute has become a journey of joy. "I take the park connector to East Coast Park and I see groups of people jogging, doing tai chi or folk dance... You definitely start your day on a better note."

Cycling has also given him a new perspective of the development projects he oversees and whose sites he visits regularly.

He takes the MRT to these places, and it has given him ideas on ways to improve the train stations and pedestrian paths.

"If you're driving, you zoom past many places. Cycling is slower, so you see a lot more things," he said.

This fresh perspective is one reason the URA office now has folding bicycles that staff can use for such visits. They are encouraged to take them on the train or in their car to complete the "last mile" to the work site.

But Mr Lim has no plans to sell his car, which he uses on weekends for the family and trips to the market, and on days when he has to go to meetings at different places.

"Cars are useful but you need not own one... The important thing from the planning point is to make non-motorised transport options as pleasant, friendly and convenient as driving," he said.

-By Lim Yan Liang

Omega Healthcare to Buy Aviv REIT in $1.65 Billion Deal

Source: Bloomberg / News

Omega Healthcare Investors Inc. (OHI) agreed to buy Aviv REIT Inc. (AVIV) for about $1.65 billion in stock to create a real estate investment trust with skilled nursing facilities in 41 U.S. states.

Omega offered 0.90 of a share for each Aviv share, equivalent to $34.97 per share, Hunt Valley, Maryland-based Omega said in a statement today. That’s about 16 percent more than Aviv’s closing stock price yesterday.

Real estate companies are taking advantage of the growing demand for medical services and nursing homes as the U.S. population ages. In August, NorthStar Realty Finance Corp. agreed to buy Griffin-American Healthcare REIT II for about $3.4 billion. Ventas Inc. in June said it would purchase American Realty Capital Healthcare Trust Inc. for $2.6 billion.

Omega Chief Executive Officer Taylor Pickett will lead the new company, which will have 874 properties. Aviv Chairman and CEO Craig Bernfield will join the board.

“The combined company will have unrivaled resources to pursue attractive acquisition and development opportunities,” Pickett said in the statement. It “will also have the human and capital resources to pursue new operator relationships for continued external growth.”

Aviv REIT went public in March 2013, raising $264 million in its initial stock offering. Shares of the Chicago-based company climbed 12 percent today to $33.73 and have gained 42 percent this year. Omega fell 1.8 percent today to $38.16.

The companies expect to complete the deal by the end of March. Omega shareholders will hold about 70 percent of the enlarged company. Partners at Aviv Healthcare Properties LP will own the rest.

-By David Risser and Neil Callanan

Hilton Looks at Luxury Deals Following $1.95 Billion Sale

Source: Bloomberg / News

Hilton Worldwide Holdings Inc. (HLT), the largest publicly traded hotel operator, is considering buying high-end urban hotels or resorts to spend $1.95 billion in proceeds from the sale of Manhattan’s Waldorf Astoria hotel.

Hilton, which earlier this month agreed to sell the property on Park Avenue to China’s Anbang Insurance Group Co., is looking at hotels in U.S. gateway cities and resort properties, Chief Executive Officer Christopher Nassetta said today on a third-quarter earnings call with analysts.

“We’re looking both at large single assets and portfolios, with a focus on the upper-upscale and luxury segment,” he said. “And they’ll be a mixture of assets that are pre-existing in our portfolio of brands, and those that are not, with the objective to have a blend of things.”

Hilton said it will have more specific details on assets and markets in the next 60 to 90 days. The company is seeking to spend the Waldorf proceeds in a so-called 1031 exchange, to defer the payment of capital-gains taxes. Hilton’s sale of the 83-year-old Art Deco building, which occupies an entire block in midtown Manhattan, is the largest ever for a U.S. hotel, according to research firm Lodging Econometrics.

Last December, McLean, Virginia-based Hilton, majority-owned by Blackstone Group LP, raised $2.71 billion in a record initial public offering for the hotel industry.

-By Nadja Brandt

Additional Articles Of Interests - Local & Overseas Real Estate