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Archive for November 23rd, 2008

Asian property funds sitting on $10bn unspent capital

Posted by luxuryasiahome on November 23, 2008

Asian property funds are sitting on more than $10bn of unspent capital in expectation of a sharper downturn in the region’s real estate market.

Some, however, are braced for what one senior executive described as “a race against time – we do have a clear timetable to spend this and can only hope the market will bottom out before our deadline, which isn’t obvious at this stage”.

While the US and European property markets started weakening from the summer of 2007, when subprime mortgage lending in America first became an issue, Asian funds continued to raise money aggressively amid optimism that the crisis would not spread to the region.

Last month, Merrill Lynch completed fund-raising for a $2.6bn fund, its first dedicated to Asian real estate.

Morgan Stanley, which has been a big investor in Japanese property, is still in the process of raising several billion dollars for a global real estate fund that is expected to focus on Asia.

Gordon Marsden, senior associate director at DTZ, the real estate adviser, estimates that $10bn of $16bn in Asia-dedicated fund-raising completed in the past two or three years has not been spent.

“When the tables do turn, they will turn very quickly given this amount of money,” Mr Marsden said. “If they [the funds] don’t spend it, they will lose it.”

However, many executives attending last week’s Mipim Asia property conference in Hong Kong predicted that the Asian market was only in the early phase of a slowdown, mirroring broader economic difficulties across a region that has enjoyed a decade-long boom. Hong Kong, Singapore and Japan recently entered recession.

LaSalle Investment Management, which has $10bn of real estate assets under management in the Asia-Pacific region, also has $3bn of available equity capital.

“It’s a very good time to have capital, when market conditions are so tough, and we’re comfortable sitting tight,” said David Edwards, LaSalle’s regional director.

“We’re at the early stage of a correction, and that is not a compelling scenario to invest.”

LaSalle has three years to invest its spare capital, but across the sector, deadlines vary from fund to fund.

Source : Financial Times – 23 Nov 2008

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Good time to buy an exec condo?

Posted by luxuryasiahome on November 23, 2008

An executive condominium (EC) unit in Bishan was sold for a hefty $940,000 to a local buyer late last month.

At $699 per sq ft (psf), the price of the 99-year leasehold 1,346 sq ft unit was comparable to that of some private apartments.

‘The buyer, a permanent resident, bought it after the Lehman Brothers collapse. She likes the location and the view from the high-floor unit,’ said ERA agent Jacq Chong.

Ms Chong, who has brokered nine Bishan Loft deals at above $900,000 each since September, said buyers like the central location. The EC is within walking distance of Bishan MRT station.

ECs come with condo facilities but have sale restrictions similar to those for public housing. They were introduced in 1995 to bridge the gap between public housing and private apartments. The apartments are aimed at Singaporeans who can afford more than an HDB flat but may find private property out of their reach. New EC units can be bought only by households earning not more than $10,000 a month.

The Bishan Loft sellers who secured those healthy deals were lucky, as such transactions are no longer possible.

‘Certainly, ECs are not crisis-proof,’ said PropNex chief executive Mohamed Ismail, adding that EC unit prices could easily be affected by the downturn.

Indeed, two units at Bishan Loft were transacted in the past fortnight at $590 psf and $620 psf, said Ms Chong. ‘Location is very important. Although prices at Bishan Loft have come down, its value should not be affected as much as the other ECs.’

Still, this would be bad news for sellers – but good news for buyers who might want to start looking and planning. Those with a smaller budget would be glad to know that not all ECs command the same prices as Bishan Loft.

There are 23 completed ECs in Singapore. Most are in outlying areas like Choa Chu Kang and Woodlands, which means they would command much lower prices.

‘Buyers can consider an EC unit instead of an HDB flat if they can afford it. EC units may have more potential for capital appreciation as they are renovated and have condo facilities,’ said HSR Property Group executive director Eric Cheng.

DTZ Research senior director Chua Chor Hoon added: ‘For those who need to buy now, ECs are a good choice if they do not want to overstretch themselves with a private condo.’

By renting them out, they could get a yield of about 4 per cent, similar to that for a 99-year leasehold private condo, said Knight Frank’s director of research and consultancy Nicholas Mak.

Like HDB flats, EC units are subject to a minimum occupation period of five years. This means that they cannot be sold within five years. They also cannot be leased out as a whole unit during that period.

After five years, they can be sold, but only to Singaporeans and permanent residents. They become private property after 10 years, when they can also be sold to foreigners.

Prices of EC apartments that are 10 years old and above could be about 5 to 8 per cent higher than newer EC units, said PropNex’s Mr Mohamed Ismail.

Before an EC unit is 10 years old, its market is limited so sellers will not be able to raise prices significantly, said Mr Cheng.

‘Some sellers may want to wait for higher prices if their EC unit is already nine years old so the best time to buy is when it is between five and eight years old.’

There has been a rise this year in the number of buyers of EC units as HDB resale flat valuations went up a lot, he said.

But HDB resale prices are expected to fall. Although EC prices may also fall, there is a positive side in that they may rise once the ECs reach 10 years of age.

Still, Mr Mak cautioned that the gains may be insignificant and advised buyers to get an EC unit with a view of living in it in the longer term. He said capital gains after privatisation will not be big as the EC market tends to be limited to Singaporeans and permanent residents.

‘They are mostly HDB upgraders who are price-sensitive.’

Non-resident foreigners typically prefer districts 9, 10 and 11 and not the suburban areas where most ECs are located, he said. ‘EC prices also tend to be a bit of a laggard in a period of price appreciation.’

Buyers should also note that an EC would need more maintenance by the time it is 10 years old. This extra investment to maintain the property may cancel out the possible gains, he added.

Source : Sunday Times -23 Nov 2008

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Highest and costliest

Posted by luxuryasiahome on November 23, 2008

As befits its name, The Pinnacle@Duxton will be Singapore’s highest public housing block. At present, that title is shared by 40-storey blocks in Toa Payoh and Queenstown.

The project, with 1,848 flats, has also hit another high – a unit on the 49th storey is going for $645,800, making it Singapore’s costliest new public flat.

The HDB launched the project in 2004 at prices ranging from $289,200 to $439,400. The remaining 428 units were offered in the September 2008 Balloting Exercise, which received 3,116 applications.

The HDB says the selection exercise will start from this January.

Today, prices range from $457,000 to about $645,000.

In contrast, property experts say units at the nearby 41-storey Icon private condominium at Tanjong Pagar are going for $769,500.

Of the 1,848 flats at The Pinnacle, 1,232 are four-room flats ranging in size from 93sq m to 97 sq m.

The rest are five-room flats from 105 sq m to 108 sq m.

Construction on the massive project began in 2005 and will be completed in the second half of next year.

Two Sundays ago, Minister Mentor Lee Kuan Yew toured the 26th and 50th levels of the new flats, which lie within his Tanjong Pagar GRC.

Source : Sunday Times -23 Nov 2008

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Fewer expats

Posted by luxuryasiahome on November 23, 2008

Moving firms say more are seeking their services to relocate out of S’pore

Call it down and out of Singapore.

Amid leaner economic times, companies here are cutting costs and one option is to reduce the number of expatriates.

At least one employer – Fortis Bank – has asked some of its foreign staff to pack their bags, and the recent job cuts announced by financial giant Citigroup could see more departures.

Indeed, several moving companies tell The Sunday Times that their business has been boosted in recent months.

Geometra Worldwide Movers now sees at least 15 expatriates relocating per month compared to only two or three before September, said its operations manager Steven Raj.

Most of his clients are families heading back to the United States while others are returning to Europe and Australia.

Ms Angelika Si Hoe, director of moving broker Cross Roads, has seen a 20 per cent jump in the number of clients compared to the previous year – even though the year has not ended.

At least 10 per cent of these cases stem from layoffs in the last two months.

‘Some are quite distressed when they come to me because they just lost their job and don’t know where they are going to. It’s very difficult for them as many have children,’ she said.

White-collar expatriates typically hold employment passes. According to the Ministry of Manpower, there are 99,000 employment pass holders as of December last year.

Another indication of expatriates moving out is reflected in the housing market.

Mr Eugene Lim, assistant vice-president at property firm ERA, said human resource managers are inquiring about the possibility of breaking rental leases.

‘They are exploring options and doing their sums. This is an indication that they want to get out,’ he noted.

As most expatriate rental leases last two years, companies have been asking landlords if they are open to the idea of finding a replacement tenant for the remaining period, he added.

These inquiries, which currently number fewer than 100, are mainly from the finance sectors.

Some property agents have also observed that expatriates who are staying put are increasingly price-conscious. They are moving from the central areas to the suburbs where rentals are cheaper by at least 30 per cent.

On the education front, a check with four international schools – United World College of South East Asia, Tanglin Trust School, Singapore American School and Canadian International School – shows there has not been a significant impact on withdrawals and waiting lists yet.

They said the effect will be more clearly seen next year.

‘Many expatriate schools start around August so we would be able to see if there’s any trend only in mid-2009,’ said Singapore American School communications director Beth Gribbon.

The same tale is told by international business networks here. Said Australian Chamber of Commerce executive director Annette Tilbrook: ‘It is very early days and there is no obvious difference. We always have a reasonable outflux of expats at this time of the year. What we don’t know is whether there will be replacements next year.’

An Australian expatriate, who wanted to be known only as David, is one of those leaving.

The 45-year-old came three years ago to start his logistics firm but is returning to Melbourne with his wife and daughter because business has dived by 60 per cent in recent months.

‘I don’t think anyone saw this coming. First, the petrol crisis, then this. This was the straw that broke the camel’s back,’ he said.

A regional sales director at an American technology firm has also been asked to go because of cost-cutting. The 34-year-old and his wife plan to spend the next few months backpacking before returning to the US.

‘The job market we’re going back to in the US is pretty bad so we’re not intending to return immediately,’ he said.

Source : Sunday Times – 23 Nov 2008

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