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Opportunistic investors recoil from Asia property

Posted by luxuryasiahome on March 11, 2008

They see more scope for picking up cheaper properties in US, Europe; loans in Japan tougher

Opportunistic investors are pulling back from Asian property because they see more scope for picking up distressed assets in the United States and Europe, and loans are harder to get in Japan, one of their favourite markets.

Hedge funds have stopped dabbling in property in the region, fund managers say. And although private equity players will continue to develop property in India and China, they are more likely to buy buildings on the cheap in the West than in Asia.

‘Six months ago, it was quite straightforward. We didn’t have to answer questions about why to invest in Asia,’ Guy Cawthra, Asia fund strategist at Morley Fund Managers, told a recent conference in Hong Kong. ‘Now investors say ‘we might not want to invest in Asia; we want to invest in Europe, the UK and the US’.’

In the wake of the 1997-98 economic crisis, Asia – in particular, Japan and South Korea – drew a raft of investment from funds run by the likes of Morgan Stanley, General Electric and private equity firms such as Carlyle Group .

Many made fat profits on a revival by Asian property markets, which are now mostly strong because of a shortage of new supply and still buoyant economies.

Researchers at consultants Jones Lang LaSalle forecast Tokyo office prices will steady this year after a 28 per cent jump in 2007, while Seoul, Hong Kong, Singapore and Shanghai are still on the up.

Better opportunities now lie elsewhere for investors who think they can spot a market trough and ride a recovery.

Because of tight credit and a worsening economy, US commercial real estate values could fall by 20 per cent in the next five years from their 2007 peak, JPMorgan analysts forecast, causing losses of about US$120 billion, including on commercial mortgage-backed securities.

London office values have dropped 12 per cent from a peak in the middle of last year, and they will be pressured further by forecasts of a 10 per cent decline in rental values through 2009.

‘I think a lot of investors will return to home markets,’ said Bart Coenraads, head of real estate at Fortis Investments. ‘Some will try to buy distressed core and refinance it. They could make good returns.’

Last year, total direct investment in the Asia-Pacific region jumped 27 per cent to US$121 billion – a sixth of the global total – with about half invested in Japan, which has been popular for its rock-bottom interest rates.

However, Japanese banks are getting cold feet on property, analysts say, giving loans worth only 60-70 per cent of a building’s value, compared to 80-90 per cent a couple of years ago.

Lower debt gearing is likely to crimp returns for equity investors. But having spent years setting up teams, private equity funds are unlikely to withdraw completely from Asia, said Tim Bellman, global head of strategy for ING Real Estate.

Many, such as Morgan Stanley Real Estate Funds, no longer see themselves as ‘opportunistic’, and are in Asia for the long haul.

‘Funds have been raised and platforms are set up, and they don’t want to unwind them overnight,’ Mr Bellman said. ‘But at the margin, opportunistic investors who looked at Asia are finding those opportunities back home.’

Morgan Stanley is building housing in China and taking stakes in Indian developers in a high-risk, high-return strategy. But the US investment bank also bought the Tokyo headquarters of Citigroup last month, indicating it is still interested in ‘core’ assets that are low risk but give modest returns. — Reuters

Source : Business Times – 11 Mar 2008

Posted in General, Overseas Property, Property Investment | Tagged: , , , , , | Leave a Comment »

Opportunistic investors recoil from Asia property

Posted by luxuryasiahome on March 11, 2008

They see more scope for picking up cheaper properties in US, Europe; loans in Japan tougher

Opportunistic investors are pulling back from Asian property because they see more scope for picking up distressed assets in the United States and Europe, and loans are harder to get in Japan, one of their favourite markets.

Hedge funds have stopped dabbling in property in the region, fund managers say. And although private equity players will continue to develop property in India and China, they are more likely to buy buildings on the cheap in the West than in Asia.

‘Six months ago, it was quite straightforward. We didn’t have to answer questions about why to invest in Asia,’ Guy Cawthra, Asia fund strategist at Morley Fund Managers, told a recent conference in Hong Kong. ‘Now investors say ‘we might not want to invest in Asia; we want to invest in Europe, the UK and the US’.’

In the wake of the 1997-98 economic crisis, Asia – in particular, Japan and South Korea – drew a raft of investment from funds run by the likes of Morgan Stanley, General Electric and private equity firms such as Carlyle Group .

Many made fat profits on a revival by Asian property markets, which are now mostly strong because of a shortage of new supply and still buoyant economies.

Researchers at consultants Jones Lang LaSalle forecast Tokyo office prices will steady this year after a 28 per cent jump in 2007, while Seoul, Hong Kong, Singapore and Shanghai are still on the up.

Better opportunities now lie elsewhere for investors who think they can spot a market trough and ride a recovery.

Because of tight credit and a worsening economy, US commercial real estate values could fall by 20 per cent in the next five years from their 2007 peak, JPMorgan analysts forecast, causing losses of about US$120 billion, including on commercial mortgage-backed securities.

London office values have dropped 12 per cent from a peak in the middle of last year, and they will be pressured further by forecasts of a 10 per cent decline in rental values through 2009.

‘I think a lot of investors will return to home markets,’ said Bart Coenraads, head of real estate at Fortis Investments. ‘Some will try to buy distressed core and refinance it. They could make good returns.’

Last year, total direct investment in the Asia-Pacific region jumped 27 per cent to US$121 billion – a sixth of the global total – with about half invested in Japan, which has been popular for its rock-bottom interest rates.

However, Japanese banks are getting cold feet on property, analysts say, giving loans worth only 60-70 per cent of a building’s value, compared to 80-90 per cent a couple of years ago.

Lower debt gearing is likely to crimp returns for equity investors. But having spent years setting up teams, private equity funds are unlikely to withdraw completely from Asia, said Tim Bellman, global head of strategy for ING Real Estate.

Many, such as Morgan Stanley Real Estate Funds, no longer see themselves as ‘opportunistic’, and are in Asia for the long haul.

‘Funds have been raised and platforms are set up, and they don’t want to unwind them overnight,’ Mr Bellman said. ‘But at the margin, opportunistic investors who looked at Asia are finding those opportunities back home.’

Morgan Stanley is building housing in China and taking stakes in Indian developers in a high-risk, high-return strategy. But the US investment bank also bought the Tokyo headquarters of Citigroup last month, indicating it is still interested in ‘core’ assets that are low risk but give modest returns. — Reuters

Source : Business Times – 11 Mar 2008

Posted in General, Overseas Property, Property Investment | Tagged: , , , , , | Leave a Comment »

Opportunistic investors recoil from Asia property

Posted by luxuryasiahome on March 11, 2008

They see more scope for picking up cheaper properties in US, Europe; loans in Japan tougher

Opportunistic investors are pulling back from Asian property because they see more scope for picking up distressed assets in the United States and Europe, and loans are harder to get in Japan, one of their favourite markets.

Hedge funds have stopped dabbling in property in the region, fund managers say. And although private equity players will continue to develop property in India and China, they are more likely to buy buildings on the cheap in the West than in Asia.

‘Six months ago, it was quite straightforward. We didn’t have to answer questions about why to invest in Asia,’ Guy Cawthra, Asia fund strategist at Morley Fund Managers, told a recent conference in Hong Kong. ‘Now investors say ‘we might not want to invest in Asia; we want to invest in Europe, the UK and the US’.’

In the wake of the 1997-98 economic crisis, Asia – in particular, Japan and South Korea – drew a raft of investment from funds run by the likes of Morgan Stanley, General Electric and private equity firms such as Carlyle Group .

Many made fat profits on a revival by Asian property markets, which are now mostly strong because of a shortage of new supply and still buoyant economies.

Researchers at consultants Jones Lang LaSalle forecast Tokyo office prices will steady this year after a 28 per cent jump in 2007, while Seoul, Hong Kong, Singapore and Shanghai are still on the up.

Better opportunities now lie elsewhere for investors who think they can spot a market trough and ride a recovery.

Because of tight credit and a worsening economy, US commercial real estate values could fall by 20 per cent in the next five years from their 2007 peak, JPMorgan analysts forecast, causing losses of about US$120 billion, including on commercial mortgage-backed securities.

London office values have dropped 12 per cent from a peak in the middle of last year, and they will be pressured further by forecasts of a 10 per cent decline in rental values through 2009.

‘I think a lot of investors will return to home markets,’ said Bart Coenraads, head of real estate at Fortis Investments. ‘Some will try to buy distressed core and refinance it. They could make good returns.’

Last year, total direct investment in the Asia-Pacific region jumped 27 per cent to US$121 billion – a sixth of the global total – with about half invested in Japan, which has been popular for its rock-bottom interest rates.

However, Japanese banks are getting cold feet on property, analysts say, giving loans worth only 60-70 per cent of a building’s value, compared to 80-90 per cent a couple of years ago.

Lower debt gearing is likely to crimp returns for equity investors. But having spent years setting up teams, private equity funds are unlikely to withdraw completely from Asia, said Tim Bellman, global head of strategy for ING Real Estate.

Many, such as Morgan Stanley Real Estate Funds, no longer see themselves as ‘opportunistic’, and are in Asia for the long haul.

‘Funds have been raised and platforms are set up, and they don’t want to unwind them overnight,’ Mr Bellman said. ‘But at the margin, opportunistic investors who looked at Asia are finding those opportunities back home.’

Morgan Stanley is building housing in China and taking stakes in Indian developers in a high-risk, high-return strategy. But the US investment bank also bought the Tokyo headquarters of Citigroup last month, indicating it is still interested in ‘core’ assets that are low risk but give modest returns. — Reuters

Source : Business Times – 11 Mar 2008

Posted in General, Overseas Property, Property Investment | Tagged: , , , , , | Leave a Comment »

Investors eye real estate after tough 2007

Posted by luxuryasiahome on March 11, 2008

Asian property and niche sectors are attracting assets

Many investors in alternative assets plan to invest more in real estate after poor returns from the sector in 2007, a PricewaterhouseCoopers (PwC) survey showed yesterday.

John Forbes, UK real estate leader at PwC, said some investors had been lured back to UK property after prices fell sharply.

Growth areas such as Asian property and niche sectors such as student housing were also attracting assets, he said.

PwC’s global survey, which polled 226 institutional investors and alternative investment providers in the fourth quarter of 2007, showed a gross 41 per cent of investors plan to increase real estate allocations over the next three years.

That compares with 40 per cent for private equity, 35 per cent for commodities and 33 per cent for hedge funds.

However, 21 per cent of investors planned to reduce their allocations to real estate, compared with 16 per cent for hedge funds, 15 per cent for commodities and 11 per cent for private equity.

Forbes said: ‘UK real estate capital values are down perhaps 20 to 25 per cent from the top of the market. For some types of investors that will discourage them.

‘But for opportunistic investors, who have been out of the UK market for the past two to three years, the UK is starting to look cheap so they are coming back.’

UK commercial property delivered a total return, which combines rental income and capital growth, of -3.4 per cent in 2007, as the credit crisis bit and investor sentiment soured.

The survey also showed less than half of respondents were satisfied with the performance of hedge funds, while nearly a fifth were dissatisfied.

That compares with private equity, where two- thirds were satisfied and only 7 per cent dissatisfied, or real estate, where 57 per cent were happy with performance and 11 per cent unhappy.

The survey follows a strong year for hedge funds. According to Credit Suisse/Tremont they returned 12.56 per cent in 2007.

Rob Mellor, UK financial services tax leader at PwC, said hedge funds had to become better at managing investor expectations and explaining how they achieved returns, especially when conditions turn.

Some may have feared the credit crisis would hit hedge fund returns harder than it eventually did, he said. — Reuters

Source : Business Times – 11 Mar 2008

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Investments push Singapore growth again

Posted by luxuryasiahome on March 11, 2008

But the biggest problem facing policy-makers is inflation; if it doesn’t stabilise, we may see more drastic steps

SINGAPORE has enjoyed exceptionally strong and stable gross domestic product (GDP) growth in the last few years. For many years after 1997, Singapore’s economy had suffered volatile growth even as it was buffeted by a series of shocks – the Asian crisis, the bursting of the information technology (IT) bubble and then the Sars episode.

None of them was of Singapore’s making but the city-state suffered sharp downturns in each case. It may seem that a small, open economy like Singapore’s cannot avoid being hurt by external shocks.

However, Singapore had enjoyed prolonged periods of high-growth prior to 1997 and had seemed immune to these shocks. What changed after the Asian crisis?

In our view, the big change was in the role of domestic investment activity. Prior to 1997, Singapore relied heavily on high rates of investment that were sustained over decades. This was key to the city-state’s strategy of continuously moving up the value chain – from a British naval base to a low-end manufacturing and shipping hub, and then to a major electronics producer.

The last model broke down in the late 1990s. For many years after the Asian crisis, the city-state floundered for a new strategy and investment activity became erratic. Consumption demand was in no position to compensate, with consumers worried about falling asset values and an uncertain environment.

The lack of a domestic demand dynamic meant that exports became the mainstay and the economy became susceptible to external shocks.

All this has now changed as Singapore’s government and business leaders have set themselves to the task of transforming it into Asia’s ‘Global City’.

As a result, we are now seeing enormous investment projects that include the two integrated resorts, the Formula One circuit, the Gardens by the Bay, the new business district, additional MRT lines, the Orchard Road upgrade and so on.

Residential investment too has picked up as the city prepares for an accelerated pace of immigration.

Thus, in 2007, we saw fixed investment rise by 20.2 per cent which in turn drove the 7.7 per cent increase in GDP even as net exports slowed.

Note that private consumption plays a passive role with its share continuing to fall (38 per cent of GDP in 2007 compared to 45 per cent in 2001). Thus domestic demand is driven largely by swings in fixed investment.

So what does Singapore invest in? In 2007, residential construction rose 26 per cent, non-residential construction went up by 44 per cent, investment in transportation jumped 30 per cent and machinery rose 10 per cent.

In other words, Singapore is still investing in manufacturing but the focus has shifted towards creating a 21st century commercial/intellectual hub for Asia.

Looking ahead, most of the projects mentioned above are likely to run for at least another two years. Most of them are fully funded and are likely to continue, irrespective of external events.

There have been press reports that Singapore is facing a credit squeeze that may jeopardise some projects. We see no sign of this with bank credit expanding at over 20 per cent year on year.

It is possible that some people have not been able to access money but, given the explosive growth in loans, it can hardly be due to the reluctance of banks to expand.

It probably just reflects the strong demand for funds rather than the lack of supply. Thus, we feel that investment momentum will remain strong in 2008.

However, as we also expect exports to weaken due to the faltering US economy, we forecast that GDP growth will slow to 5.8 per cent this year; still a very strong level.

Despite our expectation that growth will slow in 2008, the biggest problem facing policy-makers is inflation. Consumer price inflation jumped to 6.6 per cent year on year in January. This is an unprecedented level for this traditionally low-inflation country. Housing-related costs have jumped especially high, but most other categories are also seeing large increases. This is now a major political issue and is being hotly debated in the media. So, will inflation naturally decline as growth slows?

In our view, slower growth in Singapore and in the world may take off some of the inflationary edge by the middle of 2008, but there is a more fundamental domestic problem. The economy is currently running at full capacity. The unemployment rate is down to 1.6 per cent which is the lowest since the Asian crisis.

Similarly, the office occupancy rate has jumped from 82 per cent in December 2003 to 93 per cent in December 2007, again levels not seen since 1997.

Thus, a GDP growth rate of 5.8 per cent is good enough to keep inflation on the boil. In a sense, this is the flip side of the investment boom that we are witnessing now.

Singapore’s government is well known for its ’supply-side’ approach to policy-making.

Characteristically, much of the response to the inflation pressure has been in terms of allowing faster population growth through immigration, encouraging more construction and so on.

Eventually these will expand capacity to keep up with growth. However, there is a more immediate need for a cyclical policy response. This has come in two ways.

First, the postponement of some large long-term public projects. Second and more importantly, the willingness to allow the Singapore dollar to appreciate at a faster pace. At the time of writing, the Singapore dollar stood at 1.39 to the US dollar. We expect it to hit 1.35 in less than six months.

If inflation still does not stabilise, we feel that we may see more drastic steps that may include a lowering of the Goods and Services Tax (GST), which has been hiked to 7 per cent.

SANJEEV SANYAL, chief economist for Deutsche Bank AG in Hong Kong

Source : Business Times – 11 Mar 2008

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All eyes on government land tenders this month

Posted by luxuryasiahome on March 11, 2008

$500m site above Serangoon MRT, 3 suburban housing plots on offer.

AMID the current quiet market, all eyes will be on four 99-year leasehold suburban Government Land Sale site tenders that close this month.

They comprise three private residential sites including one for landed housing, and a ‘white’ site above the Serangoon Circle Line MRT station that could potentially be worth more than $500 million.

The action kicks off today, with the closing of a tender for a landed housing parcel in Westwood Avenue, Jurong West, big enough for about 50-60 landed homes.

Cushman & Wakefield managing director Donald Han reckons the 151,759 sq ft plot could fetch about $200-250 psf of land area. The plot is next to the landed housing area at Westville.

Those looking for clues on how developers read the suburban mass-market residential sector will have to train their eyes on tender closings for two plots this month, both boasting scenic locations.

One is at West Coast Crescent next to Blue Horizon condo and faces West Coast Park and overlooks the sea. The other is in Yishun, fronting Lower Seletar Reservoir and close to Singapore Orchid Country Club/Golf Course. It is also near Khatib MRT station.

Property consultants polled by BT in January, when the tenders for the two sites were launched, indicated bids of about $200-300 psf per plot ratio (ppr) for the Yishun plot.

Mr Han reckons the winning bid will be closer to $300 psf ppr, reflecting a breakeven cost of about $550-600 psf and a possible average selling price of $700-800 psf for the new condo.

As for the West Coast plot, consultants earlier indicated a wide range of bids – $260-400 psf ppr.

Mr Han estimates the plot’s value at the higher end of that range, around $380-400 psf ppr as ‘it is near parks, recreational facilities and the sea’, translating to selling prices of about $850-950 psf for a new condo on the site, on a project-average basis.

He expects the Yishun and West Coast condo sites to attract at least five bids each, while the landed housing plot at Westwood Avenue could draw more bids, about five to eight.

‘Developers may be willing to look at smaller profit margins because these are sure-sell markets, given pent-up demand in the mass market. However, buyers are still price-sensitive,’ he said.

While some analysts and consultants still feel the mass-market will be relatively resilient this year, City Developments executive chairman Kwek Leng Beng recently offered a different perspective.

‘The mass market will do well, but selectively. It’s not going to be what you’ve seen before. . . people queuing up,’ he said, noting that the Housing & Development Board provides a credible alternative to mass- market private housing.

The Serangoon Central site was quietly launched in December by the Land Transport Authority.

The 269,180 sq ft plot can be developed into an estimated maximum potential gross floor area (GFA) of about 850,000 sq ft excluding a bus interchange that the successful bidder will have to build. The developer will be reimbursed the cost of building the interchange.

The site can be developed into any combination of commercial, hotel, residential, and sports and recreational use.

Cushman’s Mr Han said that assuming 30-40 per cent of the GFA is for retail use and the rest for residential, the plot could be worth about $400-450 psf ppr, or a total of around $340-380 million.

‘So the breakeven cost would be about $700 psf for the residential component and the developer might be able to achieve selling prices of say $900-1,000 psf on average. The retail component will break even at about $1,200-1,400 psf,’ he reckons.

However, other property insiders say that assuming an all-retail development, which would be the ‘highest and best use’ of the site, land bids could come in closer to the $600-700 psf ppr mark (about $500 million to $600 million in total).

‘Suburban malls are generally valued at about $1,800-2,000 psf of net lettable area currently,’ one player pointed out.

However, another major player countered that sentiment today is subdued, and said the challenge of securing bank finance for such a big project with a likely total investment of about $1 billion or more will put a dampener on bullish bidding for this site.

The action and market watching continues next month, with at least two interesting offerings at state land tenders – a private condo site at Toa Payoh Lorong2/3, and a 1.56-hectare site in Choa Chu Kang for residential development that comes with the existing Ten Mile Junction mall.

Source : Business Times – 11 Mar 2008

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Interest absorption scheme: New form of deferred payment – but with a catch

Posted by luxuryasiahome on March 11, 2008

Property developers and banks revive old scheme that involves interest absorption.

IN A bid to tempt home buyers back into the cooling property market, banks are teaming up with developers to bring back deferred payment – or something like it.

They are resurrecting an older scheme known as interest absorption, which also allows buyers to postpone the bulk of their payments on new homes.

This decade-old plan had been phased out over the last few years in favour of the more popular deferred payment. But it is now making a comeback after the Government pulled the plug on deferred payment plans last October, saying they encouraged speculation in the then red-hot property market.

Though interest absorption may sound like deferred payment, here’s the catch: The home buyer has to take up a bank loan at the point of purchase, with a specific bank that has tied up with the developer to offer the scheme.

In contrast, the deferred payment scheme did not require a buyer to take a loan until the home was fully built. This was thought to encourage speculation, as one could buy and resell many unbuilt homes without taking a single loan.

Interest absorption plans offer two extra deal sweeteners. First, the developer absorbs interest payments on the loan until completion. Depending on the loan amount and tenure, this could work out to a few tens of thousands of dollars.

Another perk: Most units sold under interest absorption schemes do not cost more than those under normal payment plans. Developers used to charge slightly more for units sold with deferred payment.

Industry experts say interest absorption plans were introduced in the late 1990s to spur home-buying in the downturn. Then, not all plans had a deferred payment component – in some, developers just absorbed interest until completion.

Only United Overseas Bank (UOB) and OCBC Bank offer interest absorption plans with a deferred payment feature. They have tied up mainly with smaller developers and projects. One is Cosmo in Guillemard Crescent, which is almost fully sold. While final figures are not in yet, developer Fission Development expects about half to opt for interest absorption. ‘It’s a good arrangement for everyone as the bank does a credit assessment of the buyer…so that takes a lot of the risk out of the equation for the developer,’ said Fission managing director Melvin Poh.

UOB is believed to have provided interest absorption with deferred payment for at least five projects launched in the last three months. A bank spokesman said the response ‘has always been positive…even before the abolishment of deferred payment’.

OCBC is offering the plan at a few other developments, but declined to comment, citing competitive reasons.

On the whole, interest absorption schemes shift the risk of buyer default from the developer to the bank, said director of marketing and business development Ku Swee Yong, at Savills Singapore.

‘I would expect the bank’s interest rate to be marked up slightly to account for the extra risk,’ he said, adding such plans would help genuine home buyers who may have needed the deferred payment scheme to buy a new home.

Meanwhile, boutique developer Roxy Homes will absorb stamp duty for buyers who pick up a unit at its Ambrosia project in East Coast Road this weekend.

How interest absorption scheme works:

A buyer makes a down payment, typically 20 per cent.

He defers the rest of the payments until the property is completed.

But he has to take up a bank loan at the point of purchase. The interest, however, is absorbed by the developer.

If the buyer resells the property before completion, he will have to pay a penalty to redeem or cancel the loan.

How prohibited deferred payment scheme worked:

Home buyers need not take a loan until the home was fully built.

This was a boon to speculators who could buy and resell unbuilt homes without taking a loan.

Source : Straits Times – 11 Mar 2008

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Kuwait fund pulls out of bulk purchase of high-end homes

Posted by luxuryasiahome on March 11, 2008

It allows options for 97 condo units at Goodwood Residence to lapse.

A KUWAIT bank fund that agreed in December to buy 97 units at posh Goodwood Residence for $818.4 million has let the purchase option lapse.

Kuwait Finance House has given no reason for the move, which could result in the firm having to pay developer GuocoLand multimillion-dollar penalties.

It could also be the first time a foreign institutional investor in Singapore has pulled out of such a deal, raising concerns that the property market, already hit by weaker sentiment, may be heading into a downturn.

‘While the current market is cautiously optimistic, news of such a pullout might cause it to turn more cautious,’ said Cushman and Wakefield managing director Donald Han.

GuocoLand did not provide a direct reason for the lapse but said in a statement yesterday that the private residential market in Singapore appears cautious.

The developer also said it is in talks with Kuwait Finance House, an Islamic investment bank, with ‘a view to a grant of fresh options for units in the development’.

The firm declined to comment further, citing ongoing talks. Kuwait Finance House also declined comment for the same reason.

Kuwait Finance House’s huge deal was for 97 four-bedders ranging from 2,500 sq ft to 3,900 sq ft at the former Casa Rosita site in Bukit Timah Road, near Newton Circus.

The condo has 210 freehold units on a large 24,845 sq m site fronting Goodwood Hill. The Kuwait fund’s purchase would have been the single-largest purchase of residential units under construction in Singapore.

Kuwait Finance House had agreed to buy the units at a median price of $3,200 per sq ft (psf), which would have set price benchmarks for the area. Industry sources said the price was way too high, considering that bulk purchases typically come with a discount.

‘If it were to have bought at an average of, say, $2,700 psf last December, it would still be a record for the Newton Circus area,’ said an industry source who declined to be named.

‘If it had held on for 15 to 20 years and leased the units for up to a 5 per cent yield, it may have been able to justify the deal. But if it had wanted to buy and sell, why didn’t it bargain for a rock-bottom price as the property had not been launched?’

It is believed that Kuwait Finance House was keen on flipping the units as they were marketed in Dubai recently, but the sale campaign was unsuccessful.

Another industry source, who declined to be named, said: ‘The pullout may be due to the terms of the deal. The buyer could have realised that it had bought at a higher-than-expected price, had problems flipping the units and wanted to cut its losses.

‘It could also reflect the current market and the possibility that the property market may stagnate in the next two to three years.’

The stale market appeared to have led GuocoLand to put off the launch of Goodwood Residence, scheduled initially for the first quarter.

Many developers are following suit, delaying launches until keen interest returns to the sector, which is in the doldrums with buyers and sellers staying on the sidelines.

A GuocoLand spokesman said: ‘We would be tapping selected overseas markets when we decide to launch Goodwood Residence at a later date.’

It added in its statement that the expiry of the options will not have any material financial effect on its net tangible assets per share or earnings per share for the financial year ending June 30.

Opting out

Kuwait Finance House’s $818.4 million deal was for 97 four-bedders ranging from 2,500 sq ft to 3,900 sq ft at the former Casa Rosita site in Bukit Timah Road, near Newton Circus.

It had agreed to buy the units at a median price of $3,200 psf, which would have set price benchmarks for the area. Sources say the price was too high, considering that bulk purchases typically come with discounts.

It is believed that Kuwait Finance House was keen on flipping the units as they were marketed in Dubai recently, but the sale campaign was unsuccessful.

Source : Straits Times – 11 Mar 2008

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MPs seek steps to prevent ‘magic dollars’ flat scam

Posted by luxuryasiahome on March 11, 2008

Greater flexibility in HDB loan rules for downgraders may help, say some.

THE emergence of a new scam by HDB flat sellers has prompted calls by some MPs for a review of loan rules for flat downgrading.

Housing agents say sellers who resort to the so-called ‘magic dollars’ scam often face financial difficulties and may be having a hard time in downgrading to cheaper flats.

Some MPs noted that greater flexibility in downgrading rules could help these people.

Property agents have recently seen an increase in deals where the seller and buyer collude to under-declare the sale price to the Housing Board.

The buyer pays the difference between this and the real price to the seller in cash, often in return for a discount.

These sellers are likely to have bought their homes at the previous market peak, leaving the flat in negative equity, where the mortgage is more than the property ’s value.

This means that any sales proceeds will go towards repaying the seller’s loan and the money taken from the Central Provident Fund (CPF).

This would leave him with no cash in hand.

The scam provides vital extra cash – indirectly from the seller’s CPF monies – in a buoyant HDB market with high resale prices.

Some families struggle to fork out the cash-over-valuation amount for a new flat.

Several MPs told The Straits Times that help could be given to such sellers so they do not flout the law.

Those caught in the scam could face jail and/or fines.

One agent said he has spoken to sellers seeking such deals. They are desperate for cash and stuck with a large flat they can no longer afford.

C&H Realty’s managing director Albert Lu added that sellers are unlikely to put themselves at risk of a jail term unless they have a strong motivation to do so, such as a need to avoid financial trouble.

A recent HDB market recovery – with prices up 17.5 per cent last year – has prompted sellers to offload properties .

But many who wish to downgrade are unable to get HDB loans which are less risky and have lower interest rates than bank loans. HDB does not give loans for downgrading.

Some MPs raised the issue in Parliament two weeks ago.

Mr Teo Ser Luck (Pasir-Ris Punggol GRC) said some families do not qualify for bank loans and are not eligible for rental flats.

‘If these families genuinely need help, could we then consider making the policy for downgrading more flexible?’ he asked.

Mr Charles Chong (Pasir Ris-Punggol GRC), chairman of the Government Parliamentary Committee for National Development, also supported a policy review.

Mr Masagos Zulkifli (Tampines GRC), however, said he felt the Government should not bail out those who had made mistakes. ‘That’s not the right thing to do,’ he said.

Ms Indranee Rajah (Tanjong Pagar GRC) said there is a need to distinguish between those who resort to the scam for extra cash and those driven to it by real need.

Ms Irene Ng (Tampines GRC) said one possible solution is to allow downgraders to take out HDB loans, especially if they have previously had only one housing subsidy.

The current policy is a ‘disincentive’ for families to downgrade, she said.

National Development Minister Mah Bow Tan had explained in Parliament that the HDB does not offer concessionary loans to downgraders as most would have benefited from selling their flats.

Mr Mah added, however, that ‘those who downgrade because of genuine financial difficulties do get special consideration from HDB. For such cases…HDB will continue to be flexible’.

Mr Teo said many families who approach him are in a dilemma. ‘Perhaps it’s desperation that makes them resort to such scams,’ he said.

‘The question is: Is it the strictness of our policy that has caused them to do that?’

Still, he noted that current policies are made for the majority’s benefit and ‘we have to work out the genuine cases and not let the exception become the rule’.

How the scam works

THE seller gets the buyer to agree to declare to the Housing Board that the flat was sold for a much lower price.

The buyer then pays the seller the difference between the actual price and the declared price in cash.

The seller gives the buyer a discount on the market value of the flat.

Source : Straits Times – 11 Mar 2008

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URA to market Ophir-Rochor site at global property fair

Posted by luxuryasiahome on March 11, 2008

SINGAPORE’S urban planner is going international to market the Ophir-Rochor district – touted as the nation’s next development hot spot.

The Urban Redevelopment Authority (URA) said yesterday that it will market a major site in this ‘new growth area’ at a renowned annual global property event in Cannes, from today till Friday. The 2.74ha site for office, hotel and other uses could fetch up to $1.4 billion, a property analyst estimates.

A URA-led team of local agencies and companies such as the Housing Board, Singapore Tourism Board and property developer City Developments (CDL) will exhibit and showcase property investment opportunities at the fair – the Marche International des Professionnels de L’Immobilier.

The Government last year unveiled plans to rejuvenate the hotchpotch Ophir-Rochor area with its mix of commercial buildings and old shophouses.

This is part of a masterplan to double the size of Singapore’s financial district to that of Hong Kong at about 2.82 million sq m of office space, National Development Minister Mah Bow Tan said in Parliament last month.

The Ophir-Rochor corridor will complement the financial district at Marina Bay and Raffles Place, surrounded by a vibrant arts and entertainment scene, said the URA.

The site, between Rochor and Ophir roads and surrounding Parkview Square, will go on sale in June, and is expected to yield 495 hotel rooms and 139,740 sq m of commercial space.

The URA said the site will have a minimum requirement for office and hotel use, and is the second to be released in the district.

Last September, a CDL-led consortium that included Middle East investors won the tender for a 3.5ha site at $1.689 billion to build an eco-friendly mixed-use project – South Beach – designed by world- renowned British architect Norman Foster and his partners.

Property analysts say the upcoming site is likely to garner international interest.

Savills Singapore’s director, Mr Ku Swee Yong, said the site is the ‘best piece this year’ – likely to get at least five bids. He estimates the land cost, based on certain assumptions, to be up to $1.4 billion, or $700 to $800 per sq ft per plot ratio.

Chesterton International head of research and consultancy Colin Tan said the property fair will keep Singapore’s property scene on the global radar, but he expressed concerns about big projects adding to the current strain on resources.

The URA has been participating in the French fair since 2002. It is one of the world’s largest real estate exhibitions, attracting about 26,000 delegates from 74 countries each year.

Source : Straits Times – 11 Mar 2008

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