Lushhomemedia

Singing the bubble blues

Posted by luxuryasiahome on November 21, 2009

Sales of private homes have dipped to their second lowest level this year in October according to data released by the Urban Redevelopment Authority (URA) this week.

While market observers believe that this downward trend was the result of the recent anti-speculative measures introduced by the Government, some analysts are sceptical that the market has started to cool.

According to statistics, sales of new properties have been tapering off in the last three months from 1,805 in August, to 1,143 in September, and 811 in October.

Still, this is after a record of 2,772 units sold in July and way above the year’s lowest level in January when only 108 units were sold.

Analysts reckoned that sentiment in the property market had simmered down in August and September as it coincided with the Hungry Ghost Festival, a traditionally quiet period.

Sales failed to pick up in September after the Government announced anti-speculative measures which included the removal of the Interest Absorption Scheme.

However, Chesterton Suntec International’s research and consultancy head Colin Tan said that the total of 811 units sold in October was still above average when compared to some 600 homes sold a month before 2007 – the height of the last property rally. This figure, he added, does not bode well when factors such as falling rents and supply glut are taken into account as well.

According to URA’s data, the vacancy rate of completed private residential units increased from 5.9 per cent as at the end of Q2 this year to 6.2 per cent as at end Q3.

“Government intervention is inevitable,” said Mr Tan, who attributes the strong showing in property sales to excess liquidity from both local and foreign buyers.

“This excess money is too strong to fight,” said Mr Tan. He also expects the authorities to consider reducing mortgage loan amount to a lower proportion of the sale price – down from the 80 per cent now.

“If confidence is hit badly, then at least the asset bubble will not be as large,” he added.

Meanwhile, Ngee Ann Polytechnic real estate lecturer Nicholas Mak takes a more sanguine view. “I don’t think the authorities will put in any measures in the next three to six months,” he said. “I expect sales to move forward on a steady keel and keep within the volume of 600 to 1,500 units.”

As long as there are no excessive signs of speculation and no sharp price increases, Mr Mak does not expect the authorities to take further action, particularly as the decline in rental is moderating and hitting bottom soon.

“Possible danger signs are when everything starts to go up: Prices, rentals and volume of speculation,” he said. “Then that is when the Government may do something.”

Jones Lang Lasalle South-east Asia’s head of research, Dr Chua Yang Liang, expects transaction volume in the non-landed segment to contract by a further 10 to 20 per cent on the back of the seasonal year-end slowdown and anti-speculative measures.

“However, should housing price growth continue to surge ahead of economic fundamentals despite the recent moral persuasion by the Government to cool residential demand, further anti-speculative measures with a bigger bite could be introduced. For example, a capital gains tax say for those who flip within a two-year period of the first purchase,” he said in response to the monthly sales figures released on Monday.

Source : Today – 21 Nov 2009

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Preview of Marina Bay Suites next week

Posted by luxuryasiahome on November 21, 2009

AFTER an almost two-year wait, Marina Bay Suites will finally be previewed next Wednesday to VVIPs and invited buyers, BT understands.

Pricing for the preview has not been finalised, but some market watchers suggest it could be a shade below $2,500 per sq ft on average. Others tip the average price at about $2,300 psf. No interest absorption scheme will be offered.

Early last year – when the 99-year leasehold project was expected to be released – the average price was tipped at about $2,800 psf.

The 66-storey condo block has 221 units, comprising 218 three- or four-room apartments and three penthouses.

Three-bedders range from about 1,570 to 1,620 sq ft; four-bedders will be 2,050 to almost 2,700 sq ft. The penthouses include two duplex units of about 4,700 and 8,100 sq ft and a single-level unit of around 5,600 sq ft.

Marina Bay Suites was due to be released early last year, but steadily worsening market conditions that culminated in the global financial slump meant the project could not be released in 2008. In March this year, Keppel Land – which is part of the consortium developing the condo – confirmed the project’s construction was deferred.

The other members of the consortium are Hongkong Land and Cheung Kong Holdings/ Hutchison Whampoa. Marina Bay Suites will be the second residential project on the Business and Financial Centre site, which the consortium bagged in a Singapore Government tender in 2005.

The first residential project – the 428-unit Marina Bay Residences (MBR) – sold out in three days in December 2006. The 55-storey development achieved an average price in the region of $1,850 psf, according to a statement by the developer at the time.

Many buyers flipped their units – in some cases within days of their purchase – for handsome gains as high as $1 million or even more for four-bedroom units that face Marina Bay.

MBR has one and two-bedroom units in addition to three and four-bedders. The project, along with the neighbouring completed development, The Sail @ Marina Bay, continues to make news in the secondary market. Sources say a 900 sq ft bay-front unit on the 50th floor at The Sail sold recently for about $3,000 psf, while a 30-odd storey four-bedder at MBR facing the bay fetched just above $2,700 psf.

Marina Bay Suites’ preview will be held on the mezzanine level of One Raffles Quay.

Source : Business Times – 21 Nov 2009

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MAS blocks bid by CIT to manage MI-Reit

Posted by luxuryasiahome on November 21, 2009

THE battle for control of MacArthurCook Industrial Reit (MI-Reit) appears to be over after the Monetary Authority of Singapore (MAS) blocked a rival from managing MI-Reit because of a potential conflict of interest.

Appendix 2 of MAS’s Code on Collective Investment Schemes sets out the responsibilities of property funds, and it is understood that this was the basis for MAS’s decision.

Cambridge Industrial Trust (CIT), which has been angling to take over as manager of MI-Reit, is also in the industrial property space.

‘There’s a clear conflict of interest,’ said Nicholas McGrath, who heads MI-Reit’s manager.

‘If there’s a property to be bought, where would they allocate it to?’

This comes just three days before a crucial extraordinary general meeting on Monday when MI-Reit unitholders will vote on a $400 million debt-and-equity rescue package that its manager says must be approved if the Reit is to survive.

MI-Reit needs to refinance $226 million in loans and meet a $90 million obligation to buy a property in International Business Park by the end of the year.

But CIT – which bought a close to 10 per cent stake in MI-Reit only after it announced the rescue package – said the refinancing deal destroys value as new investors would be getting a large stake in the Reit, massively diluting existing holdings.

It instead proposed that unitholders appoint CIT’s manager to manage MI-Reit, a move that MAS has now torpedoed.

Its chief executive Chris Calvert (who used to manage MI-Reit) had said that there had been talks to secure financing from National Australia Bank and others, and that CIT could use its own debt facility to fund some of MI-Reit’s most immediate needs.

Yesterday, Mr Calvert remained defiant despite admitting that all of CIT’s proposals to rescue MI-Reit had been contingent on it taking over as manager. He said CIT was exploring other options and would still vote against MI-Reit’s plan on Monday.

But Mr McGrath said that CIT owed a duty to its own unitholders to justify risking their capital by blocking the recapitalisation proposal.

CIT spent just over $10 million to buy up 26 million units earlier this month but may lose its investment if the rescue plan is scuppered and MI-Reit is forced into liquidation, he said.

‘The directors and trustee of CIT need to explain to CIT’s unitholders how they justify the decision to risk their capital without proposing any alternative other than possible receivership,’ Mr McGrath said.

He called on CIT to support its recapitalisation proposal.

‘There is no other proposal which addresses the issues which must be immediately addressed for MI-Reit.’

CIT is MI-Reit’s second largest shareholder after George Wang of AIMS Financial Group, its present sponsor.

Yesterday, MI-Reit lost 3.5 cents or 8.7 per cent to close at 36.5 cents in the market as investors fearing dilution bailed out of the trust.

CIT shares lost half a cent, closing at 42 cents.

Businessman Yap Chin Kok of logistics firm YCH Group sold some 8.3 million CIT units, taking his direct and deemed holding to below 6 per cent. The sales took place on Monday.

Source : Business Times – 21 Nov 2009

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HK clamps down on marketing of apartments

Posted by luxuryasiahome on November 21, 2009

HONG KONG plans to tighten restrictions on marketing of uncompleted apartments, responding to concerns that misleading sales tactics by property developers have contributed to a surge in prices this year.

The measures will require developers to provide more transparency about the square footage of apartments they are selling before completing, as well as information on floor numbering, said a statement from the Transport and Housing Bureau.

Chief Executive Donald Tsang told reporters yesterday about the rules, which were reached in an agreement with the Real Estate Developers Association of Hong Kong.

Hong Kong said developers will need to spell out the usable square footage inside the homes. It also will require that developers ‘provide floor numbering information in a more prominent manner in the sales brochures’.

Hong Kong developers also will need to publicly disclose transactions of uncompleted apartments within five working days of signing a preliminary sales agreement, down from the current one month.

Source : Business Times – 21 Nov 2009

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No stamp duty boost for Govt

Posted by luxuryasiahome on November 21, 2009

More units sold, but these may not match up to last year’s overall value

THIS year’s surprise housing boom may have provided an unexpected windfall for property owners – but not necessarily for the Government.

Developers and individual sellers will probably sell twice the number of private homes this year than they did last year, going by the latest property market figures.

However, the Government is unlikely to see an increase in its revenues from stamp duty, which is a tax on transactions such as property sales.

This is mainly because many of the homes sold in the current boom are much smaller in size and located in the cheaper suburban areas.

So the value of homes sold this year – which determines the amount of stamp duty payable – may not surpass that of last year, when more luxury homes were sold, say property consultants.

Stamp duty takings so far this year bear this out. From January to September, the Government took in $1.37 billion in stamp duty, according to figures from the Department of Statistics website.

This is about 15 per cent less than in the same period last year, even though the property market was slowing down then in anticipation of the financial crisis that hit hard in September that year.

For the whole of last year, the Government received $1.84 billion in stamp duty. This year’s stamp duty collections may be about the same level or even lower, now that the property boom appears to be losing steam, say property consultants.

However, stamp duties look set to exceed the Government’s initial expectations at the beginning of the year, when the recession was at its worst and the property market was in a slump.

In its January Budget, the Government projected stamp duty takings of only $1billion for the 2009 financial year, which started in April and ends in March next year. So far, between April and September, the Government has already collected $1.1 billion.

Stamp duty is a tax on commercial and legal documents used in some transactions such as property sales, which make up the bulk of stamp duty collections.

For housing transactions, stamp duty ranges from 1 per cent to 3 per cent of the purchase price. In the massive boom year of 2007, stamp duty reached a record $4.1 billion.

In the first nine months of this year alone, almost 25,800 private homes were sold – nearly double the number sold in the whole of last year.

But the sizes of the homes sold this year have generally shrunk, said Dr Chua Yang Liang, head of South-east Asia research at Jones Lang LaSalle.

‘Because unit sizes have fallen, the total quantum of the home price is less,’ he said. ‘The market value of transactions this year actually remains at about the same level as last year.’

A spike in demand for smaller mass-market homes means that while property developers are likely to double their sales of new homes this year compared with last year, the total value of sales will be halved, according to recent research by property consultancy CB Richard Ellis (CBRE).

In the coming months to the end of the Government’s 2009 financial year, there may be a pick-up in sales of upmarket homes, which could add to stamp duty collections, said Mr Li Hiaw Ho, executive director of CBRE Research.

He said the higher-end segment of the property market has not moved much in the current boom, but recent improved economic data may attract more buyers.

Foreigners, in particular, could be drawn back into the market early next year after the festive season is over, said Dr Chua.

‘The economy is showing a better outlook, and there is more bullishness compared with six months ago, so there is a potential for more interest in the high-end market,’ he said.

Source : Straits Times – 21 Nov 2009

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Reits row: MAS nixes idea of common manager

Posted by luxuryasiahome on November 21, 2009

Rare statement from regulator hints at concerns over MI-Reit, Cambridge tussle

ANY hopes that Cambridge Industrial Reit had of also managing MacarthurCook Industrial Reit (MI-Reit) were shot down by the regulator yesterday.

The Monetary Authority of Singapore (MAS) issued a strongly worded announcement on the issue just three days before a crucial meeting involving both Reits. The MAS said it will ‘not approve (the manager of Cambridge) being appointed as the manager of MI-Reit in view of potential conflicts arising from the competing interests of unit-holders’ in both.

Such MAS pronouncements are rare and likely indicate there were concerns over the way Cambridge and MI-Reit have been conducting their war of words through newspaper advertisements and a rash of announcements on the Singapore Exchange (SGX).

The MAS thunderbolt also seems to have prompted Cambridge to back away from the aggressive stance it has taken regarding MI-Reit.

Cambridge holds 9.76 per cent of MI-Reit and was preparing for a showdown with its management at Monday’s extraordinary general meeting to vote on MI-Reit’s refinancing plans.

MI-Reit’s proposed $430 million rescue package, involving a share placement to ‘cornerstone’ investors, a rights issue and $215 million in loans, had been branded as ‘value-destructive’ by Cambridge.

It launched an all-out campaign to drum up support for its case with various SGX announcements and newspaper ads giving its side of the story.

Cambridge wanted to oust MI-Reit’s manager and appoint its own, maintaining that the larger asset pool would bring more growth to both sets of unit-holders. It also said it wanted to implement an initiative to take advantage of the larger asset base – a comment that caused speculation about the two Reits merging.

Cambridge also stated it was finalising financing plans which would help MI-Reit deal with its debt.

Observers said all of these proposals would have been likely to make MI-Reit unit-holders vote against its own deal as Cambridge appeared to be able to deliver more value.

But Cambridge began backtracking on Thursday morning when it said it had no plans to merge the two Reits.

By making this announcement, Cambridge is also ruling itself out from a merger for the next six months.

On Thursday afternoon, Cambridge halted trading in its shares again pending an announcement. This was yesterday’s MAS ruling barring Cambridge’s manager taking on MI-Reit’s assets. Not long after that landed, Cambridge announced that it ‘has no financing arrangements in place for MI-Reit’.

With Cambridge having backed away from its key claims, MI-Reit made its own statement yesterday.

The manager said it has the ‘only proposal which meets the… funding requirements of MI-Reit which must be completed by Dec 31′.

Cambridge units, suspended on Thursday pending an announcement, closed half a cent down to 42 cents. MI-Reit closed 3.5 cents down to 36.5 cents with 4.7 million units traded.

Source : Straits Times – 21 Nov 2009

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HK faces asset bubble risk: central bank

Posted by luxuryasiahome on November 21, 2009

It attracted record HK$567.5 billion in fund inflows in the past 13 months

HONG KONG’S central bank chief Norman Chan warned that asset prices in the city could climb sharply next year and disconnect from fundamentals, raising the risk of a bubble, and said surging capital inflows posed a dilemma for policymakers across Asia.

‘With interest rates exceptionally low and with abundant liquidity around the world, Hong Kong faces the potential risk next year that asset prices may go up sharply and become increasingly disconnected from economic fundamentals,’ Mr Chan, head of the Hong Kong Monetary Authority, said in an article on its website.

While other economies could raise interest rates in a bid to curb inflation in assets such as property, that tactic could backfire and attract even more outside investors who are hungry for higher yields, Mr Chan noted.

Hong Kong faces a different challenge. Its currency peg to the US dollar forces it to track monetary policy in the United States, which is expected to keep rates low for some time.

The financial centre, a key gateway to mainland China, also prides itself on its open economy and thus would be unlikely to look at capital controls at this stage, analysts said. However, more measures to curb property speculation may be in the offing.

Emerging markets such as Brazil and Taiwan have both announced capital controls in recent weeks to keep what they say are ‘hot money’ speculative flows from fuelling sharp gains in their currencies and destabilising their recovering economies.

Russia said on Thursday it would consider ’soft’ measures to curb inflows, while Indonesia is also studying ways to control foreign investment in one-month central bank bonds.

Hong Kong attracted a record HK$567.5 billion (S$101.8 billion) in fund inflows between Oct 1 2008 and Nov 13, 2009, according to the HKMA. That has helped Hong Kong stock prices soar 57 per cent this year and property prices surge nearly 30 per cent.

Prices of luxury property in the city, however, have surged over 40 per cent this year as mainland Chinese have been snapping up apartments. A weak dollar and expectations that US, and therefore Hong Kong interest rates will stay low for some time are also encouraging foreigners to buy Hong Kong assets.

That prompted the HKMA last month to tighten mortgage lending rules, especially on luxury property, by capping the mortgage limit for property valued at US$2.6 million or more at 60 per cent, compared with 70 per cent previously. However, as many mainland Chinese buyers are flush with cash, that may not work.

The government has also said it is ready to release more land for sale to ward off a possible property bubble. This week it announced its first large-scale land sale in two years.

Mr Chan said it was not easy to say whether Hong Kong was now seeing an asset bubble but warned that values risked deviating from fundamentals.

Massive fund flows into the city’s banking system have put intense upward pressure on the Hong Kong dollar, forcing the HKMA to intervene repeatedly to keep the currency within its trading band against the US dollar.

The HKMA has injected a record HK$620 billion since October 2008.

In nearby South Korea, officials have also warned of the risk of a housing bubble and have threatened to raise interest rates from a record low 2 per cent to calm prices.

Source : Business Times – 21 Nov 2009

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Recapitalisation plan is only proposal that meets funding requirements: MI REIT

Posted by luxuryasiahome on November 20, 2009

The manager of MacarthurCook Industrial REIT said its recapitalisation plan is the only proposal which meets the REIT’s substantial and immediate funding requirements.

It said this is reinforced by Cambridge Industrial Trust’s (CIT’s) disclosure on Friday that it has no viable proposal or solution for MI-REIT and its unitholders.

CIT said on Friday that the Monetary Authority of Singapore would not allow its manager to be appointed as MI-REIT’s manager due to potential conflicts of interest.

This week, CIT launched a push to gain control of MI-REIT’s management, having bought a key 9.8 per cent stake in the trust earlier this month.

CIT said it will continue to explore options that do not involve it being appointed as MI-REIT’s manager.

It has also said that it has no current intention to merge with MI-REIT and that it has no financing arrangements in place for MI-REIT.

CEO of MI-REIT, Nicholas McGrath, said there is no other proposal which addresses the issues of MI-REIT.

He added that failure to gain unitholders’ approval for the recapitalisation plan at the extraordinary general meeting on Monday would put the REIT’s investors at significant risk of losing their money.

Source : Channel NewsAsia – 20 Nov 2009

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MAS says CITM cannot be appointed as MI-REIT’s manager

Posted by luxuryasiahome on November 20, 2009

Cambridge Industrial Trust Management Limited (CITM), as manager of Cambridge Industrial Trust (CIT), said on Friday the Monetary Authority of Singapore (MAS) will not approve CITM being appointed as the manager of MI-REIT.

CITM said this is due to potential conflicts arising from the competing interests of unitholders in CIT and MI-REIT.

CITM added that the only proposals being considered now are contingent upon CITM being appointed the manager of MI-REIT.

It is continuing explore options that do not involve its being appointed as manager of MI-REIT, and further announcement will be made as and when appropriate.

The company still intends to vote against the resolutions to be considered at the extraordinary general meeting of MI-REIT unitholders on 23 November 2009.

CITM launched a push to gain control of MI-REIT’s management, having bought a key 9.8 per cent stake in the trust earlier this month.

Source : Business Times – 20 Nov 2009

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CITM says no fund arrangement in place

Posted by luxuryasiahome on November 20, 2009

Cambridge Industrial Trust Management Limited (CITM), as manager of Cambridge Industrial Trust (CIT), clarified on Friday that it has no financing arrangements in place for MI-REIT.

CITM’s discussions on the alternative options are currently only preliminary and exploratory in nature.

On Thursday, CIT’s CEO Chris Calvert told Dow Jones Newswires that CIT is talking with National Australia Bank (NAB) and other banks about prospective arrangements.

NAB is CIT’s majority unitholder, having acquired a 56 per cent stake in August last year.

Source : Business Times – 20 Nov 2009

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