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Archive for August 12th, 2008

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Will falling bids lead to tweaking of GLS?

Posted by luxuryasiahome on August 12, 2008

Rising costs leave many developers with hands tied but govt retains options

WILL the Government Land Sales (GLS) Programme fizzle out because developers are offering low land bids in the face of rising construction costs?

Two suburban condo sites – at Woodleigh Close and Choa Chu Kang Drive – were sold at state tenders over the past few months at land prices below construction costs. The question is: Will the government still keep awarding Confirmed List sites if land bids continue to fall?

The problem with the Confirmed List system is that the government doesn’t reveal the minimum or reserve price for sites in this list, which are released according to a pre-stated schedule regardless of demand. Reserve List sites, on the other hand, are launched for tender only if a developer undertakes to bid at a minimum price that is acceptable to the state. Since this minimum price is publicised by the government when the sites are triggered for release, developers that take part in the ensuing tender will know the minimum price they need to bid.

Given the uncertain environment, it was a good move on the part of the authorities to have leaned more towards the Reserve List for the current H2 2008 GLS Programme.

As for sites on the Confirmed List (where the minimum price is not made public), these too have by and large been awarded. But there has been the odd case here and there where the government could not award a site because the top bid was too low. Some market watchers are wondering if that could become more commonplace.

A BT story last month highlighted that land bids for 99-year suburban condo sites have fallen below construction costs. This is the first time in at least two decades this has happened. Examples include Confirmed List sites at Woodleigh Close and Choa Chu Kang Drive, which fetched top bids of $270 psf of potential gross floor area (GFA) and $203 psf of GFA respectively at state tenders that closed in June and May respectively this year.

In both instances, the top bids were below construction costs. According to construction cost consultancy Rider Levett Bucknall (RLB), construction prices for medium-quality condominiums indicatively ranged from $280 to $350 psf of GFA for Q2 2008, up from the Q1 2008 figure of $260 to $320 psf of GFA.

The government awarded the two sites. But things may change in future.

Developers will have to allow a larger sum for contingencies for their projects because of the way prices of construction materials have been escalating. So there’s not much else they can do but bid lower for land – especially since the outlook for home prices remains weak.

A recent Jones Lang LaSalle study pointed out that ‘the unceasing escalation in building tender prices will definitely impact the profitability of residential developments’.

‘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.

But will it reach a point where the bids are too low for the state to award Confirmed List sites?

A lot will depend on the Chief Valuer’s assessment of reserve price, which might be adjusted lower if construction costs keep escalating.

So state land awards should still be possible as long as bids are reasonable, and not seen as opportunistic attempts by developers to get land on the cheap. After all, keeping land prices up has never been the objective of the GLS Programme. Rather, it has aimed to ensure a steady state of supply for the property market.

However, one could argue that land is a strategic resource of Singapore and should not be sold on the cheap, even if market conditions warrant it.

There are other dimensions to this discussion. Construction costs will not keep rising forever. Once oil prices are tamed and/or economic growth slows all over the world, construction material prices should also ease.

Meanwhile, if land bids slip further, perhaps one should be prepared for even fewer sites being released on the Confirmed List – unless they serve a strategic purpose.

Fortunately, there is still the Reserve List – which is not only a more market-driven approach but also takes guesswork out of developers’ equation.

Source : Business Times – 12 Aug 2008

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URA’s 99-yr site receives one bid

Posted by luxuryasiahome on August 12, 2008

An Urban Redevelopment Authority tender for a 99-year leasehold condominium site at Tampines Ave 1/Ave 10 facing Bedok Reservoir closed on Tuesday receiving just one bid.

Boon Keng Development bid S$84.63 million or S$117.96 per square foot of potential gross floor area. The bid was way below market expectations.

Source : Business Times – 12 Aug 2008

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NZ home prices fall for first time since Feb 2005

Posted by luxuryasiahome on August 12, 2008

New Zealand’s house prices fell from a year earlier for the first time in more than three years in July as record-high interest rates eroded demand for property.

Average prices dropped 2.2 per cent from a year earlier, Quotable Value New Zealand Ltd, the government valuation agency, said in a report released in Wellington yesterday.

That’s the first decline since the monthly series began in February 2005.

Home-loan interest rates have soared the past year, forcing buyers out of the market and requiring vendors to accept lower prices.

Reserve Bank of New Zealand governor Alan Bollard said in June that house prices will fall 7.7 per cent this year and won’t start rising until 2011.

‘We expect to see more weakness in house prices over the coming months,’ said Jane Turner, economist at ASB Bank Ltd. in Auckland. ‘Housing turnover has been on a steady decline since mid last year.’

House sales fell for a fourth straight month in June, reaching a 16-year low, according to Real Estate Institute figures published last month.

Home-loan approvals in July fell 27 per cent from a year earlier, according to the central bank.

‘Many sellers are accepting the state of the market and dropping their expectations accordingly,’ said Blue Hancock, a spokeswoman for the government agency. ‘The questions has now changed from when will prices stop rising to when can we expect to see them stabilise?’

Prices in Auckland, the nation’s largest city, fell 3.6 per cent. Wellington prices dropped 1.6 per cent, the agency said.

Global turmoil in credit markets has prompted lenders to raise borrowing costs by about one percentage point the past year, even as the central bank kept its benchmark interest rate unchanged at a record high.

Mr Bollard cut borrowing costs last month for the first time in five years and said further declines are possible.

The decline in prices adds to signs Quotable Value’s quarterly price index may fall for the first time in more than seven years. — Bloomberg

Source : Business Times – 12 Aug 2008

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Ayala Corp Q2 profit falls 38%

Posted by luxuryasiahome on August 12, 2008

Ayala Corp, the Philippines’ most valuable conglomerate, said that second-quarter net income slid 38 per cent, as bank and telecoms earnings weakened, and warned that inflationary pressures would hit its second half.

‘We expect operating conditions to remain challenging for the balance of this year and perhaps into early next year as we continue to feel the pressure from higher inflation and interest rates,’ CEO Jaime Augusto Zobel de Ayala said in a statement.

Ayala, valued at US$3.5 billion, owns the Philippines’ top property firm, Ayala Land, and water utility Manila Water. It also has interests in telecoms, banking, car distribution, electronics and business services such as outsourcing.

For the April-June quarter, unaudited net income was 3.7 billion pesos (S$117 million).

For January-June, net income dropped 45 per cent to 6.3 billion pesos, as capital gains fell and key businesses earned less.

Annual inflation hit a near 17-year high of 12.2 per cent in July and the central bank has raised rates by 75 basis points since June to prevent it from accelerating further. Borrowing costs are predicted to rise again, by 25 bps, later this month, raising consumers’ debt repayments and further crimping spending power.

‘The pressures of rising oil and commodity prices and tightening credit globally have created a much more challenging operating environment,’ Chief operating officer Fernando Zobel de Ayala said in the statement.

The group booked first-half capital gains of 2.7 billion pesos from the sale of shares in Globe Telecoms but they were way below the 7 billion pesos reported a year ago.

First half earnings from key businesses fell 23 per cent, with net profit at Globe Telecoms and Bank of the Philippine Islands slipping from a year ago as the economy slowed.

Shares of Ayala Corp fell 45 per cent in the first half of this year, underperforming the main stock index, which lost 32 per cent.

Ahead of the earnings yesterday, Ayala Corp closed up 2.4 per cent, while the main index was up 2.8 per cent. — Reuters

Source : Business Times – 12 Aug 2008

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Home sales to hit record this year, says Megaworld

Posted by luxuryasiahome on August 12, 2008

Despite rising prices, Philippine builder says demand is not flagging

Megaworld Corp, the Philippine builder controlled by billionaire Andrew Tan, says that apartment sales will reach a record this year as the nation withstands a credit crisis that triggered a property slump in the US and UK.

‘The world may be ending in other parts but not in the Philippines,’ Kingson Sian, executive director of the country’s second-biggest builder by market value, said in an interview. ‘This isn’t 1997.’

Banks continue to lend and the eight million Filipinos abroad are sending home cash in record amounts, softening the blows of commodities prices at records and a weakening of global growth, he said.

Megaworld shares, which has lost 57 per cent this year, dropped 89 per cent in 1997 when the Asian financial crisis eroded the peso and raised borrowing costs, hurting property sales.

‘It’s been a tough environment but the market hasn’t dried up,’ says Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc, which manages about US$5.9 billion in trust assets. ‘Some home buyers are just delaying their purchases.’

Philippine consumer prices last month rose a faster-than-estimated 12.2 per cent and the central bank warned of more rate increases after raising borrowing costs twice since June. Yet Mr Sian said that demand isn’t flagging and Megaworld will probably proceed with its plan to start a record 17 projects this year.

The Manila-based company booked 11.3 billion pesos (S$358.9 million) worth of orders from January to May, 71 per cent more than a year ago.

Mr Sian forecast 24 billion pesos in record reservation sales this year, 26 per cent more than in 2007.

The company’s market value increased more than eightfold in the five years through 2007 as falling interest rates and record remittances from overseas Filipinos fuelled a building spree that included Megaworld transforming a block of warehouses into Eastwood City, an upscale residential and commercial development in the Manila suburb of Quezon City.

Projects such as Eastwood and Forbes Town Center in one of the Philippines’ most expensive residential district have made Megaworld the nation’s biggest builder of residential towers.

Still, investors shouldn’t be rushing into Megaworld and other builders because of accelerating and rising interest rates, says Olan Caperina, who helps manage about US$6.7 billion at BPI Asset Management Inc in Manila. ‘Property stocks are for those with strong stomachs for high volatility.’

While builders have raised prices by 5 per cent to 15 per cent this year and more increases may be forthcoming, Mr Sian says that the orders haven’t stopped.

That’s partly because of overseas Filipinos, who account for about 15 per cent of Megaworld’s home sales. Cash from Filipinos abroad hit a record 14.4 billion pesos last year, helping boost economic growth to 7.3 per cent, the fastest in 31 years.

The central bank forecasts remittances, which make up a 10th of the country’s economy, will reach US$16.45 billion this year.

Philippine banks are also ‘liquid’, and some have approached Megaworld about ‘taking on our receivables,’ Mr Sian said. ‘So they’re still willing to fund home purchases.’

Bank loans will probably grow 10 per cent this year, according to the central bank.

‘There is pressure on banks to increase their loan portfolio if they want to grow,’ said Jody Santiago, strategist at the Manila unit of UBS. ‘The high-yielding government instruments where banks used to place their funds aren’t there anymore.’

Megaworld’s apartments, priced from 500,000 pesos to 10 million pesos, allows it to sell to a broad income group, Mr Sian said. This ‘diversity’ allows Megaworld, which sells units in 40 projects, to sell to buyers scaling back planned purchases, he added.

Ayala Land Inc, the nation’s largest builder by market value, has a portfolio of 21 residential projects.

Most of Megaworld’s projects are ’strategically located’ in Manila, says Mr Santiago, who recommends buying the company’s shares. ‘Megaworld bought these properties when the market was at a bottom so it’s not faced with inventory constraints in Manila as its rivals,’ he said. — Bloomberg

Source : Business Times – 12 Aug 2008

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MI-Reit’s 1Q09 distributable income up 67.8%

Posted by luxuryasiahome on August 12, 2008

MacarthurCook Investment Managers (Asia) Limited, the manager of MacarthurCook Industrial Reit (MI-Reit), on Tuesday announced a distributable income of S$6.6 million for the first quarter ended June 30, 2008 — up 67.8 per cent or S$2.7 million higher than a year ago.

The distribution per unit (DPU) of 2.35 cents for the quarter outperforms the 1Q 2008 DPU of 1.52 cents by 54.6 per cent and exceeds the previous quarter’s performance by 5.9 per cent.

The books closure date to determine the entitlement to the 1Q 2009 DPU of 2.35 cents is 20 August 2008 and the date payable is 22 September 2008.

The growth in distribution during the quarter was largely driven by rental contributions from the acquisitions of nine additional properties during the last financial year. In addition, pre-determined rental escalations for two of the properties have contributed to the organic growth of the portfolio.

The manager expects to deliver, for the coming year, a DPU that is in line with its recent performance.

Source : Business Times – 12 Aug 2008

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Straits Trading’s Q2 net falls 75% to $58.5m

Posted by luxuryasiahome on August 12, 2008

The Straits Trading Company’s second-quarter net profit fell 75 per cent to $58.5 million from a year earlier, despite a 57 per cent jump in revenue to $362.3 million.

The drop in net profit was due mainly to lower exceptional gains of $51.4 million compared to $229.2 million a year earlier.

Higher costs at its tin mining and smelting operations, which more than doubled to $237.3 million, also contributed to the fall in profit.

The group declared an interim cash dividend of two cents a share, to be paid in September.

Source : Business Times – 12 Aug 2008

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Hersing’s Q2 net profit tumbles 79.5%

Posted by luxuryasiahome on August 12, 2008

HERSING Corporation, which owns the ERA real estate marketing franchise here, on Tuesday posted second quarter net profit of S$1.3 million, down 79.5 per cent from the same period last year.

Revenue for the quarter ended June 30, 2008, slid 36.4 per cent to S$38.2 million. For the first six months of this year, Hersing’s net earnings fell 73 per cent year on year to S$2.6 million on the back of a 19.9 per cent drop in revenue to S$76.5 million.

Hersing shareholders will not be receiving a dividend for Q2 or H1 2008.

Source : Business Times – 12 Aug 2008

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Hotel Plaza Q2 net profit up 5 per cent

Posted by luxuryasiahome on August 12, 2008

Hotel Plaza Ltd has reported on Tuesday a net profit of S$16.3 million for Q2 2008, an increase of 5 per cent from the $15.5 registered a year ago.

Revenue for the quarter increased by 16 per cent to $79.9 million from $69.2 million in Q2′07.

Hotel Plaza attributed this to better performance from its hotels in Singapore, Australia and Vietnam.

The group’s investment properties were valued by a firm of independent valuers on 30 June and no gain or loss was recognised in the second quarter of 2008 as compared to a gain of $5.5 million in the corresponding quarter of 2007.

Due to the absence of fair value gain on investment properties, Hotel Plaza said pre-tax profit for Q2′08 increased marginally by 6 per cent to $21.2 million compared to $20.1 million for Q2′07.

Earnings per ordinary share for the quarter was 2.71 cents per share, down from 3.89 cents a year ago.

Source : Business Times – 12 Aug 2008

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UOL sees 49% drop in Q2 earnings

Posted by luxuryasiahome on August 12, 2008

PROPERTY group UOL’s second-quarter net profit fell 49 per cent to $145.0 million, from $286.3 million a year ago, as the group saw lower fair value gains on its investment properties.

Turnover for the three months ended june 30, 2008 rose 4 per cent to $209.3 million, up from $201.6 million in Q2 2007. The increase in revenue came largely from hotel operations, with improved performance of the UOL’s hotels in Singapore, Australia and Vietnam.

Revenue from property investments also improved due to higher average rental and occupancy rates in UOL’s investment properties, it said.

Separately, UOL’s listed subsidiary Hotel Plaza also reported its second quarter results yesterday. Hotel Plaza’s net profit for the three months ended June 30, 2008 increased marginally by 5 per cent to $16.2 million, from $15.5 million in the corresponding quarter of 2007.

Hotel Plaza’s revenue in second quarter of 2008 increased 16 per cent to $79.9 million, from $69.2 million a year ago, as the company’s hotels fared better.

UOL gained five cents to close at $3.26 yesterday. The stock has shed some 27.9 per cent since the start of the year.

Subsidiary hotel Plaza, on the other hand, lost three cents to close at a 52-week low of $1.49 yesterday. Hotel Plaza has lost 14.9 per cent in 2008.

Source : Business Times – 12 Aug 2008

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