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Archive for August 7th, 2008

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M&C posts 22.4% fall in H1 profit due to slower growth

Posted by luxuryasiahome on August 7, 2008

Millennium & Copthorne Hotels has reported a 22.4 per cent decline in first-half earnings, due to slower growth in UK and New Zealand.

Profit for the six months ended June came in at 45 million pounds or US$88 million. The bottomline was also weighed down by costs of refurbishing hotels in Boston and Chicago.

M&C’s revenue rose by 4.5 per cent to 338 million pounds.

The group owns, manages and franchises a portfolio of hotels located in the United States, Europe, Middle East, Asia and New Zealand.

Source :  Channel NewsAsia – 7 Aug 2008

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Balestier hotel site awarded

Posted by luxuryasiahome on August 7, 2008

The Urban Redevelopment Authority on Thursday awarded a 99-year leasehold hotel development site at Balestier Road to HH Properties Pte Ltd, a venture between Hiap Hoe Ltd and its sister company SuperBowl Holdings.

HH Properties’s bid of $73.3 million or $172.10 per square foot per plot ratio was the highest of three bids received for the site at a state tender that closed on July 16.

The site is opposite the Sun Yat Sen Nanyang Memorial Hall, a national monument.

Source : Business Times – 7 Aug 2008

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Rising building cost squeezes mass market projects more

Posted by luxuryasiahome on August 7, 2008

Developers’ margins for prime projects less affected: Jones Lang LaSalle study

A 20 per cent rise in construction costs will shrink developers’ profit margin for a mass-market private condo by 55 per cent; but for a project in the prime districts, the profit margin will contract by 25 per cent, according to a Jones Lang LaSalle (JLL) study on the impact of rising construction costs on the property market.

The sensitivity analysis assumed land cost of $1,600 per square foot (psf) of potential gross floor area (GFA), base-case construction cost of $500 psf of GFA and selling price for the condo of $2,520 psf for a prime condo project. For a mass-market project, land cost and base-case construction cost were each assumed at $300 psf of GFA, and a selling price for the condo of $720 psf was imputed.

In both cases, a 20 per cent base-case developers’ profit margin was worked into the model, and the effects of construction costs rising by 10, 15 and 20 per cent respectively on profit margins studied.

‘As construction costs are usually at a bigger proportion to suburban land costs compared with the high land prices transacted in prime residential projects, any increase in construction costs will present a greater change in the profit margins in a mass-market project than that in a prime residential project,’ the study observed.

Given current weak outlook for home prices, ‘the unceasing escalation in building tender prices will definitely impact the profitability of residential developments’, JLL argued. ‘This will affect developers’ sentiments, which will be evidenced in their future land-bidding strategies,’ it added.

‘Rising construction costs, coupled with a ceiling selling price, will put downward pressure on land tender prices,’ the study predicted.

A BT story last month highlighted that, for the first time in at least two decades, construction costs for some 99-year leasehold condo sites bought at state tenders are actually higher than land costs. This is taking place against the backdrop of soaring construction costs and a weak home price outlook, resulting in developers lowering their land bids.

JLL’s study pointed out that pricing of mass-market condos, typically built on 99-year leasehold suburban sites bought at Government Land Sales (GLS) tenders, tends to be more illiquid. Prices of such entry-level private housing is often benchmarked against public housing prices as this market appeals to public housing upgraders. ‘For affordability reasons, developers are also resistant to push the prices of such mass market projects beyond a certain level at the risk of being priced out of the market,’ the study said.

Going forward, with concerns of weakened market sentiments and rising construction costs, it will be interesting to see how many 99-year leasehold residential sites will be triggered for release from the GLS Programme’s reserve list, as well as whether bids put in for the residential sites on the confirmed list will still be as competitive and will meet the government’s reserve price, JLL said.

‘Another question posed will be whether the government will be ready to accept tender bids that will fall below market expectations,’ it added.

The government launches reserve list sites for tender only upon successful application by a developer that undertakes to offer a minimum price acceptable to the state, while confirmed list sites are launched according to a prestated schedule regardless of demand.

This year, the government did not award the Ten Mile Junction site in Choa Chu Kang (which was to have a residential component) and a landed housing plot at Westwood Avenue in Jurong, as the respective top bids were too low.

In the private land segment, the en bloc sales market has been weak because of a ‘price misalignment between developers and collective sale site owners’ arising from developers being less willing to match the asking prices, JLL noted.

The Building and Construction Authority’s Building Tender Price Index rose 23.7 per cent last year and market watchers expect it to continue increasing this year.

High construction demand and competition for limited resources, insufficient tendering capacity among contractors, sub-contractors and suppliers, as well as volatile commodity prices, have contributed significantly to the increase in building tender prices.

Rising construction costs will lead to diminishing profits for developers as well as bearish land strategies, JLL said.

JLL also highlighted other implications of rising construction costs. With the government announcing the delay of $4.7 billion of public sector projects to ease pressure on construction demand, the potential benefits from these public sector projects, especially from public health care, will be delayed, JLL said. The construction of the new complex that will house the Communicable Disease Centre as well as a new hospital in Jurong, are among the projects delayed.

‘In addition, rising construction costs have also been a concern for the public housing sector, especially issues on whether increased costs will be passed on to the public,’ JLL’s report said.

Source : Business Times – 7 Aug 2008

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Maison Royale put up for collective sale

Posted by luxuryasiahome on August 7, 2008

MAISON Royale, a freehold residential site in Newton, has been put up for collective sale.

Maison Royale: Asking price for the 20-unit project is at least $50m. Some 40 units of about 1,000 sq ft each can be built on the condo site in Newton

Owners of the 20-unit project are asking at least $50 million. Including an estimated $300,000 development charge (DC) and taking into account a plot ratio of 2.8, the price works out to $1,273 per square foot per plot ratio (psf ppr).

In contrast, nearby Lincoln Lodge was sold for $243 million, or $1449 psf ppr including an estimated DC of $413,000 in June last year at the height of the en bloc frenzy.

The project was bought by a consortium comprising Koh Brothers, Heeton Holdings, KSH Holdings and Lian Beng Group. Their offer was the highest of several bids then. The developers have yet to tear down Lincoln Lodge to put up a new development, and have instead allowed occupants to keep renting for at least six months from the sale completion date in July this year.

The comparatively lower price for Maison Royale is in line with current weaker market sentiment, said Charles Chua, head of investment sales at PropNex Realty, which marketing the project.

‘Maison Royale is priced at a level where developers can feel that it is still worthwhile for them to go in,’ he said.

Maison Royale is on 14,107 sq ft of land. It is located at the junction of Newton and Surrey roads, a three-minute walk from Novena MRT station. Some 40 units of about 1,000 sq ft each can be built on the site, PropNex said.

If the site is sold for $1,265 psf ppr, the breakeven cost will be around $1,665 psf, it said. The successful developer could launch the apartments in the new development at around $1,915 psf, the firm added.

The tender for Maison Royale closes on Sept 9.

Source : Business Times – 7 Aug 2008

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Asian prime office prices may fall 10%

Posted by luxuryasiahome on August 7, 2008

Asian real estate prices may fall further and prime office values decline 10 per cent before year’s end, Singapore-based property investor Pacific Star Group said.

‘Most markets are peaking over the next 12 months, or even trending downwards,’ said Frank Vaessen, president of fund management at Pacific Star, which manages US$3 billion of assets globally. ‘Broadly speaking, the bottom could come sometime in late 2009 or early 2010.’ Faltering economic growth and the global credit contraction may ease demand for office and retail space in Asia. Rising inflation and falling equity markets may also dampen sales of homes in the region.

The price declines will bring valuations to a more ‘normal’ level after markets rose rapidly the past year, Mr Vaessen said yesterday.

Japan and South Korea’s office markets are expected to have the best performance in Asia as they benefit from a supply shortage, Mr Vaessen said. Both markets are set to offer property investors returns of as much as 13 per cent over the next five to seven years, he said.

Retail space in Beijing and Shanghai may also offer higher investment returns, Mr Vaessen said. Investors should stay away from Vietnam, Thailand and Malaysia, he added, citing Vietnam’s accelerating inflation and volatile currency and political instability in Thailand and Malaysia. – Bloomberg

Source : Business Times – 7 Aug 2008

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Occupancy level of JTC ready built facilities hits new high

Posted by luxuryasiahome on August 7, 2008

Business park segment contributed to 51% of total RBF net allocation in Q2

The net allocation for JTC ready-built facilities (RBF) in Q2 2008 reached 84,100 sq m, 2.2 times higher than the 38,300 sq m in the previous quarter.

This boosted the occupancy level by one percentage point to a new JTC record level of 94.9 per cent.

JTC said the performance was supported by a strong gross allocation of 159,100 sq m, the highest level since 2004.

Of the total RBF net allocation, 50.8 per cent was contributed by the business park segment. Gross allocation increased from 5,800 sq m in Q1 ‘08 to 45,400 sq m in Q2 ‘08 due to the newly available business park space at Fusionpolis, which accounted for 93 per cent (42,116 sq m) of the gross allocation for business park space in Q2 ‘08.

For the business park segment, related and supporting services industries contributed to a gross allocation of 44,200 sq m.

As a result of new supply coming on-stream at Fusionpolis, the occupancy level for business park space declined marginally by 0.4 per cent from the last quarter to 94.3 per cent.

Termination at 2,700 sq m remained largely unchanged in Q2 ‘08.

Stack-up factory space contributed 31 per cent to RBF net allocation. However, termination level increased to 75,000 sq m in Q2 ‘08, higher than the 51,200 sq m in Q1 ‘08.

The demand for flatted factory space fell by 1 per cent quarter-on-quarter (qoq) to 1.22 million sq m in Q2 ‘08, with corresponding supply remaining unchanged at 1.399 million sq m.

JTC said that negative net allocation for flatted factory space in Q2 ‘08 of 6,900 sq m marked the first negative quarter since Q2 ‘07.

This was driven by a 15 per cent lower (qoq) gross allocation to 53,400 sq m and a 62 per cent higher (qoq) termination to 60,300 sq m in the quarter.

According to JTC’s report, the electronics sector accounted for the highest termination of flatted factory space at 33,100 sq m in Q2′ 08, up from 5,000 sq m in the previous quarter.

The net allocation of JTC prepared industrial land (PIL) fell to 34 ha in Q2′ 08 from 114.9 ha in the previous quarter.

Gross allocation of 64.1 ha in the quarter was lower compared with 120.4 ha registered in the previous quarter.

PIL also saw a higher termination level of 30.1 ha in Q2′ 08 compared with 5.5 ha in Q1′ 08.

The manufacturing sector accounted for 54 per cent of the Q2′ 08 total PIL allocation. Within the manufacturing sector, the biomedical manufacturing segment was the highest taker of PIL at 57 per cent.

The net allocation for the JTC generic land segment dropped to 26.7 ha in Q2 ‘08 from 81.8 ha in Q1 ‘08, a fall of 67 per cent.

The net allocation for JTC specialised parks declined to 7.3 ha in the quarter, an 80 per cent drop from 33.1 ha in the preceding quarter.

Source : Business Times – 7 Aug 2008

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Sunny outlook for Sentosa resort homes?

Posted by luxuryasiahome on August 7, 2008

Analysts decipher clues from recent rental data

EARLY investors in Sentosa Cove homes must have possessed a large appetite for risk.

Although the idea of developing the 117-hectare Sentosa Cove into an idyllic waterfront enclave was mooted as early as the ’80s, the first land parcel was sold to the private sector for development only in 2003. As such, the rental market in Sentosa Cove was non-existent at the launch of earlier projects. Earlier investors had to bet their money solely based on their outlook for this exclusive marina community.

The situation is different today. Five years on, 99.6 per cent of parcels in Sentosa Cove have been successfully sold to private developers and individuals. These could yield over 2,000 condominium units and 400 bungalows and terraces. Of these, an estimated 300 homes have received Temporary Occupation Permits and so the Sentosa Cove leasing market is slowly taking form.

In fact, according to the Urban Redevelopment Authority, some 51 leasing contracts were recorded for Sentosa Cove homes between January last year and April this year. The leasing market for non-landed homes appeared to be more active than for landed homes. With 46 leases recorded for The Berth by the Cove, the only completed condominium development accounted for the lion’s share of the 51 leases signed.

This translates to a 23-per cent-tenancy rate for the 200-unit development assuming that the 46 leases are signed for typical two-year terms. This is a feat given the remaining 2,200 homes under construction. Activity in Sentosa Cove peaked in the July to Sept quarter last year in which 30 leasing contracts were recorded, representing more than half of the 51 leasing contracts signed so far.

But, mirroring the larger market, Sentosa Cove’s leasing market appears to have been affected by the weak sentiments due to the ailing United States economy and global markets stemming from the sub-prime mortgage crisis. Leasing activity slowed sharply, with just10 deals concluded in the first four months of this year. Median monthly rents in The Berth by the Cove weakened to $6.89 per sq ft in April this year. So, those who bought at the launch at an average price of $8601psf enjoy rental yields of 5.5 per cent.

But as the prices of Sentosa Cove units surged in tandem with the general market, investors who purchased last year at an average price of $1,520psf have to contend with lower rental yields averaging 3.5 per cent. Nevertheless, they enjoy a higher return compared to those who recently bought freehold luxury apartments on the mainland since the latter generate yields of roughly 2.3 per cent.

If investors in The Berth by the Cove are reaping healthy returns, will the same be said of those who bought Sentosa Cove apartments still under construction? Will rental rates hold in the face of increased supply?

Investors should bear in mind that Sentosa Cove will be kept at 2,500 units in size to preserve the exclusive resort ambience. Also, some owners will occupy their own properties, further limiting the rental supply.

With Singapore’s growing status as a global city, homes in Sentosa Cove will be in demand by the rising population of expatriates opting for an oceanfront resort lifestyle. So, the investment value of Sentosa Cove homes will be preserved for a long time to come.

Tay Huey Ying is the director of research and advisory at Colliers International. Audrey Tan is a research analyst at Colliers International.

Source : Today – 7 Aug 2008

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Housing agent fees: How low can they go?

Posted by luxuryasiahome on August 7, 2008

With guidelines axed next month, rates will come under pressure but big fall unlikely, say experts

PROPERTY experts expect agents to feel the pinch once fee guidelines are abolished next month, but the big question in the industry is just how low fees can go.

Real estate insiders concede that fees will come under pressure with buyers and sellers free to haggle, but dismiss the notion that rates could plummet to zero.

‘In a buyer’s market, perhaps, buyers can get away without paying. But agents also need their salaries and ultimately consumers will get the service they pay for,’ said PropNex chief executive Mohamed Ismail.

Agents spend about 40 per cent of their commission on the marketing, transport and operational costs of selling a flat. Active agents earn about $5,000 a month, said Mr Ismail, so how low rates go will depend on the individual.

Those who aim for a large turnover of properties might be willing to slash rates but this could be at the cost of service quality, he added.

Mr Eugene Lim, assistant vice-president at ERA Asia Pacific, does not see rates falling drastically as the current rate is one of the lowest in the region.

Fees will be negotiable next month, thanks to a decision by the Competition Commission of Singapore, which told the Institute of Estate Agents to axe its guidelines on commissions.

The 1999 guidelines were based on a 1974 Government Gazette that stipulated a 2 per cent fee payable to agents from sellers. In the past, when Housing Board prices were relatively low, agents began charging buyers a further 1 per cent.

The Consumers Association of Singapore is advising people not to be held to old guidelines and to avoid giving exclusive rights to agents. It also said agents should not collect fees from both buyers and sellers, due to conflict of interest.

The new playing field will offer plenty of scope for buyers, sellers and agents to negotiate, but agency boss Albert Lu of C&H Realty pointed out that the real estate market is ‘already very competitive’.

For private property sales, for example, agents are known to cut their commission charges from the recommended 2 per cent to 1 per cent for sellers.

‘It’s not in the interest of agencies to start price wars, as we end up hurting ourselves,’ said Mr Lu. But he suggested that agencies might devise ways to entice buyers and sellers, such as bundling home services.

Industry leaders do not rule out a ‘one-stop shop’ concept where agencies could offer agent and legal services along with loans, for example.

Analysts believe consumers will be quick to take advantage of the new system and start haggling, but given the slow market, it is unclear who has the upper hand. Prices have eased in favour of buyers but many sellers are not budging, so with volumes down, agents may see an incentive to give discounts.

Homebuyer Vivian Wong, 25, said she will bargain harder while agents vow to fight and justify commissions. HSR Property Group’s Mr William Tan, 43, said he was confident of retaining the 2 per cent commission.

‘In this new landscape, the better agents will survive because they will offer quality service consumers will pay for.’

Source : Straits Times – 7 Aug 2008

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DBS launches special interest-only mortgage

Posted by luxuryasiahome on August 7, 2008

Bank says borrowers will then have more cash to seize other investment chances

DBS Bank has launched an unusual mortgage product allowing savvy customers to take advantage of cheap borrowing costs and free up cash for investment opportunities.

The bank is offering customers the option of paying only the interest for the entire duration of their home loan. They pay the principal amount in a lump sum only at the end of the loan term.

This means they have extra cash for investing – money that would otherwise have formed the principal component of the loan repayments.

This product is the first of its kind, claims DBS. Currently, banks allow customers to pay interest only on a mortgage for up to three years.

The new product has raised some eyebrows among market players who note that this package is controversial as it may encourage imprudent borrowing.

Mr Koh Kar Siong, DBS’ head of consumer deposits and secured lending, said the new mortgage is aimed at savvy investors.

‘This product allows customers to have cash on hand so they are ready to seize any investment opportunities available in the stock market or in other asset classes.’

Businessman A. Lin, 54, likes the idea of using an interest-only mortgage to ‘finance a very good investment property for perhaps four to eight years, while ploughing the free cash into alternative strategies like hedge funds’.

But for the general home owner, it makes more sense to pay down loans now, said Mr Bryan Ong, of mortgage consultancy bcgroup. com.sg.

This is because the three-month Singapore Interbank Offered Rate (Sibor) is at a four-year low of 1 per cent. So a larger part of your instalment would go towards repaying the principal sum.

DBS’ interest-only mortgage charges 1.5 per cent on top of either the three-month Sibor or 12-month Sibor.

The cumulative interest payment on this mortgage will be much higher than the interest paid on a regular home loan because the principal sum is not reduced.

But Mr Koh noted that this mortgage has features to ensure customers are not overstretched. They can borrow only up to 70 per cent of the property purchase price. This will be cut to 50 per cent after 10 years – so the product is only for customers with deep pockets who can afford a large down payment.

Mr Koh said the product may attract 10 per cent to 15 per cent of customers looking to take up a new home loan or to refinance their loans.

Other banks may not follow suit. United Overseas Bank’s head of loans, Mr Kevin Lam, said an interest-only mortgage ‘is an interesting idea but it is likely to appeal only to a niche group of customers’.

‘We take a prudent approach when offering interest-only mortgages by looking at the customer’s profile and ability to pay both the interest and principal,’ he said.

‘If a customer fits the right profile, why not offer a loan on a valuation of 80 per cent? But in general, most customers prefer to pay off their mortgages.’

Standard Chartered Bank (Stanchart) said it ‘offers interest-only mortgages upon customers’ request and on a case- by-case basis for customers in exceptional circumstances, such as those with short-term cash flow problems’.

Mr Dennis Khoo, general manager of lending for Stanchart, said: ‘We advise customers to exercise prudence and to be well-informed when selecting a mortgage, so that they would not be over-leveraged.’

Source : Straits Times – 7 Aug 2008

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Ascott Raffles Place makes 50 units available first

Posted by luxuryasiahome on August 7, 2008

THE plush Ascott Raffles Place, the former Asia Insurance Building (AIB), had a soft opening yesterday, with its owner, the Ascott Group, making 50 units available.

National heritage building: The 146-unit premium serviced residence, the former Asia Insurance Building, will be officially launched in October

The remaining units of the 146-unit premium serviced residence project will be ready by its official launch set for October.

An Ascott press statement yesterday said the property, a national heritage building and South-east Asia’s tallest tower in the 1950s, was restored at a cost of $60 million.

It will be equipped with meeting rooms, WiFi connectivity, an infinity pool, jacuzzis, a fully equipped gymnasium, a fitness studio, a lounge bar and a fine-dining restaurant by award-winning Julien Bompard.

Ascott Raffles Place, situated within walking distance of the Raffles Place Mass Rapid Transit (MRT) station, is also close to a wide range of restaurants, cafes, pubs, shopping outlets and the upcoming Marina Bay Sands integrated resort.

The property is the latest addition to The Ascott Group’s seven serviced residences in Singapore, including Citadines Mount Sophia, which will open in 2009.

AIB was the first modern highrise office building erected in Singapore after World War II. It symbolised Singapore’s development as an important financial hub, and is one of the few remaining highrise buildings from the 1950s.

The property was designed by Dr Ng Keng Siang, the first Singaporean member of the Royal Institute of British Architects. The 52-year-old landmark was gazetted as a conservation building by the Urban Redevelopment Authority in April 2007.

Source : Business Times – 7 Aug 2008

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