Considerable interest expected in two sites on H1 list; MTI to also replenish reserve list which will have one new site and seven brought over from 2009

The government will bring back the confirmed list for industrial land sales in H1 next year, providing further evidence of an economy on the mend.

Market watchers have welcomed the move and expect to see considerable interest in sites on the upcoming list.

The Ministry of Trade and Industry (MTI) said yesterday that it will reinstate the confirmed list and replenish the reserve list ‘in view of the improved economic conditions, and to continue to meet demand for industrial land’.

The confirmed list will comprise two sites. One is a new 60-year leasehold parcel in Ubi Road 1, with a gross plot ratio of 2.5 and zoned for Business 1 development.

Details of this site could be released in June next year.

The other site, transferred from the H2 2009 reserve list, is in Tampines Industrial Ave 4. Details on the 30-year leasehold parcel could be out in March.

MTI launches sites on the confirmed list for tender based on a schedule. It suspended this arrangement for the whole of 2009 as the economy tanked and put a dampener on manufacturing.

The industrial property market also softened, with rents sliding and vacancies rising.

The Urban Redevelopment Authority’s industrial space rental index lost 8.5 points between Q1 and Q3 this year.

Demand for state industrial land started showing up some time in May. Three sites on the reserve list have been triggered for sale this year and developers competed intensely for them, reflecting a shift in sentiment.

The keen bidding got some market observers wondering if the confirmed list would make a comeback in H1 next year – which it will.

Knight Frank’s head of industrial business space Lim Kien Kim said that with the improving economic outlook, space requirement expectations will rise.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said that there is a need ‘to prepare for medium-term demand’, as plots released next year will probably not be ready for occupation until after 2011.

Unlike sites on the confirmed list, those on the reserve list are put up for sale only if interested parties submit applications and undertake to bid a minimum amount acceptable to the government.

The upcoming reserve list will have eight sites. There is a new one at Pioneer Road North and Soon Lee Road, which has a 30-year lease and could be made available in May next year.

There are also seven others carried over from the H2 2009 reserve list, spread across areas such as Woodlands, Kaki Bukit and Yishun.

Together, the 10 sites amount to 21.85 hectares.

Market watchers believe that there will be demand for sites on the confirmed list, especially the one in Tampines Industrial Ave 4. Tampines is a growing industrial area and has attracted high value-added industries, said Mr Lim.

Colliers International director (Industrial) Tan Boon Leong notes that the parcels on the confirmed list happen to be two of the largest in the land sales programme – the Tampines site is 5 ha and the Ubi site 3.39 ha.

He suggests that the government could be testing the market’s reaction to large sites, given the strong interest that developers have shown in state industrial land in the past few months.

Source: Business Times, 31 Dec 2009

THE improving property market has prompted owners at Green Lodge Condominium in Toh Tuck Road to put their estate up for collective sale.

They want $135 million for the freehold estate in Toh Tuck Road, an asking price of $683 per sq ft per plot ratio, including development charge.

That will give owners about $1.55 million to $1.58 million per unit – about 40 per cent more than the open market price, said Mr Jeffrey Goh, head of investment sales at the estate’s marketing agent, Newman & Goh.

Like other sales launched in the latter half of this year, the Green Lodge owners voted for the en bloc sale many months ago but have held off until the market looked more promising.

The majority agreed to sell their property as early as April but the market was very weak then, said Mr Goh.

Green Lodge condo sits on a site of 151,075 sq ft near the Toh Tuck campus of the Canadian International School.

With a plot ratio of 1.4, it can be redeveloped to about 211 units of boutique apartments of about 1,000 sq ft, said Mr Goh. The new development could sell for at least $1,250 per sq ft (psf) on average, he added.

Other residential developments in the vicinity include The Beverly – which was launched earlier this year at an average price of $750 psf – Signature Park and Goodluck Garden.

More owners are now working towards launching their properties for collective sale in the wake of the improving market.

There will be more collective sale launches in the first and second quarters of next year, Mr Goh said.

But the success rate is still up in the air as there remains a mismatch of price expectations between sellers and buyers, he said.

There have been several collective sale launches this year but only one of them – Dragon Mansion – was sold.

The tender for Green Lodge closes on Jan 13, a day before the close of another collective sale tender – Mayfair Gardens in Rifle Range Road.

Source, Straits Times 31 December 2009

THE Government launched its industrial land sales programme for the first half of 2010 yesterday with clear signs that it feels the market has turned.

The Ministry of Trade and Industry has reinstated two sites on the confirmed list and placed eight on the reserve list.
It had suspended the confirmed list earlier this year in the light of the downturn but yesterday’s announcement reflects the recent turnaround in the property sector.

The total land area on the sales list is 21.85ha.

DTZ’s head of South-east Asian research Chua Chor Hoon added: ‘The Government’s release of the two confirmed sites reflects that the property market is past the worst stage and is getting back on its feet.’

Confirmed sites are put up for tender regardless of a developer’s prior expression of interest.

The confirmed sites are a 5ha lot at Tampines Industrial Avenue 4 and 3.39ha at Ubi Road 1.

Tender details for the Tampines site will be released in March while the Ubi Road details will be out in June.

The eight sites on the reserved list are in Pioneer Road North/Soon Lee Road, Woodlands Avenue 2, Kaki Bukit Avenue 4, Ubi Road 1/Ubi Avenue 4, Serangoon North Avenue 4, Toh Tuck Avenue and two parcels in Yishun Avenue 6.

Sale conditions for Pioneer Road North/Soon Lee Road will be out around May while details for the other sites are already available and applications can be submitted.

Sites on the reserve list will be triggered for tender only when an initial offer that meets the minimum purchase price is made.

Knight Frank’s business space industrial director Lim Kien Kim said the launch is in line with growing expectations as the economy is improving.

Source, Straits Times 31 December 2009

Office rents in Singapore are down almost 50 per cent for the entire 2009 and observers said this is mainly due to the global economic crisis.

But the fall is not cause for undue concern as it follows a 90 per cent spike in rents in 2008.

However, analysts said there’s room for rents to fall further in 2010.

Singapore’s office rentals have suffered amid the global downturn as many companies with offices here either wound-up operations, or cut back on space needs.

Chua Chor Hoon, senior director, Research, DTZ Debenham Tie Leung (SEA), said: “I think it swung from extreme pessimism in the beginning of the year to hopeful optimism at the end of the year. In the beginning of the year, no one was looking at lease renewal or expanding, but towards the end of the year we see more activity coming in.”

Donald Han, managing director, Cushman & Wakefield, said: “It’s been pretty much a slide down the hill in terms of rents concerned, mainly because of the fact that after the global financial crisis, a lot of banks have started to retrench staff and give up premises.

“We have pretty much bad news in the first and second quarter where rents came down by as much as 40 per cent in the first half of 2009. The good news is we started to see an uptick in demand in the third quarter.”

However, rather than stop rents from falling further, the demand only helped slow down the pace of the decline.

At the beginning of the year, renting office space in Singapore in the prime areas would cost about S$16 per square foot. But that’s down to about S$7.90 now. The lowest rents have ever been is S$4.30 in 2003.

Analysts said that the fall this year isn’t as bad as it seems when taken in historical context.

Mr Han added: “In 2007, when the market went up at stratospheric levels, rents went up by 89 per cent in just one year. So to come down 55 per cent in 2009, versus an uptick of almost 90 per cent, we still have a balance of upside in that sense.”

At its peak, prices for some office buildings hit as high as S$21 per square foot.

And property watchers said rents are likely to continue falling before bottoming out at the end of 2010 at about S$6.

They said one reason for a continued fall is new supply coming on stream.

Mr Han added: “The biggest problem for office market is the supply element has been huge mainly because of Government Land Sales introduction in 2007. A lot will start to complete in 2010 and 2011.”

Mr Chua added: “The supply is substantially higher than historical average. There is more than two million square feet of new supply this year compared to historical average of 1.5m square feet. And we are going to have more than two million square feet of new supply over the next two years. That’s something that’s going to weigh down on the office sector.

DTZ added that the outlook for the office sector will depend largely on Singapore’s economic recovery as this will affect expansion plans for businesses.

It also added that it’s unlikely that the government can help as its main control method is to use supply via the government land sales programme.

However, any action is unlikely to be felt in the near term as office buildings usually take about four to five years to complete.

Source: Channel News Asia, 30 Dec 2009

Far East Organization said it has seen strong demand for its latest project, The Shore Residences, since private previews started two weeks ago.

The 408-unit residential development is located in the Katong area.

Far East said over 70 units have been sold and prospective buyers have also registered their interest for units, which will be released at the official launch on January 21.

Among them, the one- and two-bedroom units were most popular.

According to Far East, almost all of the 84 one-bedroom units, priced from S$658,000 each, have been sold out.

The two-bedroom units, which make up the majority of the development, are priced from S$1.1 million.

The Shore Residences is expected to be ready in 2015.

Source: Channel News Asia, 30 Dec 2009

Economies began year on the brink of disaster before a modest H2 recovery

The global economy that was headed for an abyss at the start of 2009 now appears to be in recovery, but remains fragile and scarred by the worst crisis in decades.

The year began with major economies on the brink of disaster in what turned into the steepest global slump since the Great Depression, before a modest second-half comeback in most of the world.

US gross domestic product (GDP) sank at a horrific annual 6.4 per cent pace in the first quarter, dragged down by a housing market collapse that hammered the financial sector and the rest of the economy. Jobs were being lost at a pace of 700,000 per month.

The eurozone saw a 2.5 per cent GDP slide – a potential 10 per cent annualised drop – in the first quarter that was the worst on record and offered the prospect of economic meltdown. Japan’s economy was falling at a 14.2 per cent rate.

‘The world economy is facing a deep recession,’ the International Monetary Fund (IMF) warned in January.

A study by economists at the University of California and Trinity College of Dublin found that world trade fell faster and stock markets plunged further in the first year of this crisis than in 1929-30, and that the decline in manufacturing was as severe as the start of the Great Depression. ‘At the same time, the response of monetary and fiscal policies, not just in the United States but globally, was quicker and stronger this time,’ the economists wrote.

Governments launched stimulus programmes of hundreds of billions of dollars, and central banks cut rates to record lows – near zero in the US and Japan – while pumping trillions into the banking system to help restore credit flows.

Slowly, the efforts seem to have borne fruit. The main economies are growing, even if the pace is less than spectacular.

‘To date, the results are mixed,’ C Fred Bergsten, director of the Washington-based Peterson Institute for International Economics, said in a recent speech. Mr Bergsten said the interventions ‘appear to have arrested the precipitous downward slide and, in most cases, restored at least some positive momentum’.

Nariman Behravesh, chief economist at research firm IHS Global Insight, says central banks led by the Federal Reserve deserve credit for ‘unorthodox monetary policy’ including so-called quantitative easing, or pumping more money into the financial system, averting a global depression. ‘The difference between now and the Great Depression was that in the 1930s, the Fed allowed the money supply to shrink and wasn’t aggressive enough,’ Mr Behravesh said.

The US economy expanded at a 2.2 per cent pace in the third quarter after four quarters of contraction. Japan grew at a more moderate 1.3 per cent pace in July-September.

The 16-nation eurozone saw 0.4 per cent growth over the quarter, a sluggish annual pace, after five quarters of contraction.

China, which saw a slowdown but avoided recession, had third-quarter growth accelerating to 8.9 per cent in an expansion built on stimulus cash and bank lending.

Globally, the IMF projected in October that growth would be 3.1 per cent in 2010, after an estimated 1.1 per cent global contraction in 2009, the worst since World War II.

Morgan Stanley economist Joachim Fels and associates project 4 per cent global growth for 2010, but just 2 per cent in the advanced economies of the Group of 10. Mr Fels said that the economies will see ‘creditless recoveries’ where banks are reluctant to lend and predicted ‘a jobless G-10 recovery’ with unemployment still high in the United States, Europe and Japan.

Carl Weinberg, chief economist of High Frequency Economics, was less optimistic, saying an ongoing credit crunch particularly gave him ‘grave doubts about the capacity of any of (the top industrialised nations) to grow much in 2010, if at all.

‘We do not know of a single G-7 economy that will be able to grow next year without substantial incremental fiscal stimulus,’ he said.

Others argue that the global economic problems, instead of being solved, have been shifted by the government rescues, with the exit strategy unclear.

‘Toxic assets have basically been swept under the rug,’ says David Rosenberg, chief economist at Gluskin Sheff & Associates in Toronto.

‘Whatever bad assets have been resolved have almost entirely been placed on the books of governments and central banks, which now have their own particular set of risks, as we have witnessed very recently in places like Dubai, Mexico, Spain, Greece, UK, the Baltic states, not to mention at the state and local government level in the United States.’- AFP

‘We do not know of a single G-7 economy that will be able to grow next year without substantial incremental fiscal stimulus.’

- Carl Weinberg, chief economist of High Frequency Economics, expressing his doubts about the capacity of any of the top industrialised nations to grow much in 2010, if at all.

Source: Business Times, 30 Dec 2009

Re-rating follows recapitalisation exercise

MOODY’S Investors Service has upgraded AIMS-AMP Capital Industrial Reit’s corporate family rating to Ba2 from Caa1 following its recent recapitalisation exercise.

The industrial trust – which was formerly known as MacarthurCook Industrial Reit – underwent a change of name after a recent debt-and-equity-raising plan. The Reit placed out shares to new investor AMP Capital Holdings and existing sponsor AIMS Financial Group as well as other cornerstone investors. This was then followed by a rights issue and a new term loan.

Concluding a rating review that was started on Nov 9, Moody’s said that the rating outlook for the Reit is stable.

‘The upgrade reflects AIMS-AMP Capital Industrial Reit’s remarkably improved liquidity profile and capital structure following the successful completion of its recapitalisation plan and refinance of the maturing Singapore dollar loan,’ said Moody’s analyst Kaven Tsang.

The Reit has applied part of the proceeds from the issuances to complete its acquisition of a building (4A International Business Park) and will also acquire four new properties from AMP.

‘These new properties are cash flow generative and will to some extent support its income diversification and debt service coverage,’ Mr Tsang added.

In addition, its liquidity profile has improved substantially, without material refinancing needs in the near term, Moody’s noted. The Reit’s debt/capi-talisation leverage has fallen to 30 per cent, from 47 per cent as of Sept 2009. The Reit’s major borrowing, a new $175 million term loan, is only due in December 2012.

But Moody’s also noted that while new sponsor AMP’s ‘established market presence and solid track record’ could benefit AIMS-AMP Capital Industrial Reit as it pursues growth and seeks new funding, AMP still needs to establish a track record in managing the Reit’s business as planned.

Source: Business Times – 30 Dec 2009

IT WAS the rally that should never have happened. The world was in recession, credit was being crunched, investors across the board were in a state of near panic, yet no one seemed to have told real estate buyers.

After a tentative few months early in the year, property found its feet and staged the sort of upswing normally associated with economic booms, not near-busts.

Indeed, this year saw a recovery of Singapore’s residential market, said Frasers Centrepoint chief executive Lim Ee Seng.

‘We expected 2009 to be a very bad year for us but it turned out to be a good year,’ said EL Development managing director Lim Yew Soon.

Jones Lang LaSalle’s head of research for South-east Asia, Dr Chua Yang Liang, agreed: ‘It’s been a remarkable year – with transaction and pricing outperforming expectations, driven by latent demand, low interest rates and primed by lower pricing.’

Sales and prices of new private homes picked up significantly from April, a turnaround from the first quarter when sellers were cutting prices just to offload their homes.

As the private homes market swung quickly from despondency at the start of the year to ‘unwarranted enthusiasm’ in the middle, this year turned out to be a ‘record-breaking’ one, said DTZ head of South-east Asia research Chua Chor Hoon.

Record quarterly and monthly highs were achieved for launches and sales of new private homes while some new launches outside the city area sold at record prices, said Ms Chua.

Centro Residences in Ang Mo Kio, for instance, sold for more than $1,100 per sq ft (psf) – a suburban record.

Resale landed homes in prime districts also hit record prices while resale mass market home prices rebounded within two quarters to reach 2007 peak levels, Ms Chua added.

The four seasons

‘ONE of the hot topics this year was climate change, and if you apply that to the property market, it went through the four seasons for the first time ever,’ said Knight Frank chairman Tan Tiong Cheng.

The market is now in a ‘mild winter’ state, after a hectic year with an unusually hot summer, he said.

It started the year in deep winter – with only 108 new homes sold in January – the worst monthly sale figure on record. The mood was clearly grim.

Then came spring and sales quickly started to rise in February, easily pushing past the 1,000-unit mark to reach 1,332 units. March was similarly positive at 1,220 units.

By the time summer rolled around, market sentiment had improved tremendously.

Despite the heat, buyers were queueing outside showflats, eagerly awaiting their turn to pick a mass market unit.

Showflats of newly released projects aimed at HDB upgraders were packed to the brim on preview days with investors, singles, couples and families – often with grandparents in tow.

With affordability a key issue, developers turned to producing smaller and smaller units to satisfy those looking for an ‘affordable’ total outlay; never mind that the psf price may be high.

EL Development’s Mr Lim said: ‘Developers had to react to the market very fast. We were lucky to switch to small units for Illuminaire fast. Otherwise, we won’t be able to sell it out and at the price we achieved.’

Sales of new homes kept rising each month, culminating in a monthly record of 2,772 units in July.

‘We were supposed to be in a recession. The Government was talking about job losses which hit the lower-income group,’ said Knight Frank managing director, residential services Peter Ow.

‘Given the bleak outlook at that point, the momentum was surprising. It shows that you can never underestimate the purchasing power of the upgraders.’

Considering that the 2006-07 boom was led by the high-end segment with foreigners buying up a storm, many doubted the ‘bottom-up’ recovery was for real.

But it kept going strong amid concerns that a property bubble might be developing.

Government made its move

THAT prompted the Government to step in with anti-speculative measures in September.

It took away the interest absorption scheme, which allows buyers to defer payment until the project is completed, and said it will push out more supply.

An Urban Redevelopment Authority sample survey of recently launched projects showed that the average take-up rate of the interest absorption scheme was about 20 per cent to 25 per cent.

Property experts said at the time that the measures were minor and meant to get buyers to think twice about committing.

The Government continued to warn of the possibility of the market overheating. What followed seemed to suggest the measures had worked to some degree.

Signs of speculation disappeared, launches slowed and buyers were no longer rushing into new showflats to check out the latest launch and commit their cash.

Sales of new private homes slipped to 600 units last month, the second-lowest monthly sales this year.

But Jones Lang LaSalle’s Dr Chua feels the market will not see the full effect of the measures until early next year as activity traditionally winds down towards Christmas.

Ngee Ann Polytechnic lecturer Nicholas Mak believes there is a slowdown because developers have more or less run out of mass market projects while the high-end segment has yet to take off.

Looking ahead

EXPERTS say the slowdown – what DTZ’s Ms Chua describes as a ‘quieter and more rational mode’ – is a good thing.

It is a precursor to next year’s trend when the market is generally expected to revert to normal in terms of sales and upward price movements.

The bet is on a pick-up in the high-end segment as it has yet to push near previous peaks, experts say. With the opening of the two integrated resorts, more foreigners are expected to enter the Singapore market.

Dr Chua believes the high-end segment is likely to outperform the mass market on two levels.

Firstly, buyers of high-end homes are not so dependent on interest rates, which have been one of the key drivers in the mass market.

‘I reckon there is an upside to the currently low interest rates as we go into the second half of 2010 and that is likely to keep mass market activity in check,’ he said.

‘Secondly, regional economies have been performing better than expected and we can expect some of the higher-income foreigners to return to the Singapore market by the second to third quarter of 2010.’

Dr Chua does not expect a buying surge but more moderate growth.

‘I would describe the period since the collapse of Lehman Brothers in the later half of 2008 as that of a landscape of rolling hills. And now as we ascend, no one can really see what lies behind the knoll,’ he said.

Source: Straits Times, 30 Dec 2009

I REFER to last Wednesday’s letter, ‘HDB clears the air: Singles do get benefits’. How will current HDB ‘benefits’ help singles get their first affordable flat, when even married couples who benefit from pro-family policies have problems buying an affordable flat due to rising costs?

Prices of resale flats have increased by at least 30 to 100 per cent (depending on flat location and flat size) since 2004, but the grant to singles remains $11,000. Is this stationary amount enough to offset ever-increasing prices?

Forming a family with parents to get a subsidised new flat is often not an option as many factors restrict this. For example, ageing parents may not be willing to move to a new environment, or a smaller flat. Also, the chance of getting a flat this way is only 5 per cent since 95 per cent of chances go to married couples.

If the subsidy on a new two-room flat included in the selling price is for a family of two, I am sure all singles would be willing to pay $11,000 (the grant they get on a resale flat) on top of the selling price.

Have HDB’s pro-family policies really worked in encouraging marriage and having children? Is it not time to re-examine these policies and make changes to ensure that all citizens share the fruits of growth?

Source, Straits Times 30 December 2009

FLATS at Far East Organization’s new project are being sold with a 103-year lease even though the project in Katong sits on freehold land.

The rare step means Far East will have to settle for lower prices for the units, but it will retain an interest in the site and reap further benefits when the neighbourhood is further transformed.

Sales at the 408-unit The Shore Residences, which is opposite Katong Shopping Centre, start on Friday, New Year’s Day, but previews in recent weeks have already reaped contracts.

Far East’s executive director and chief operating officer of property sales, Mr Chia Boon Kuah, pointed out that the project sits on land with huge redevelopment potential.

‘The area has transformed and the pace of transformation is speeding up.’

An MRT station has been earmarked for nearby Marine Parade. There is also the Parkway Parade shopping centre, plenty of eating places in the area and the yet-to-be revamped Katong Mall.

Mr Chia also referred to the ‘bigger picture’ – Marina Bay, which will be only a 10-minute drive away.

While Far East cannot realise the full potential of the site now, by retaining the freehold title it will have the chance to participate eventually, he said.

Knight Frank chairman Tan Tiong Cheng told The Straits Times: ‘Far East is a privately owned firm, so this move does allow the family to hold on to the site for the benefit of their future generations.’

Selling a lease term instead of the entire freehold tenure is relatively rare, although Far East has done it before.

It launched two cluster housing projects – Cabana and The Greenwood – on freehold land with 103-year leases.

The 119-unit Cabana is in Sunrise Terrace, near Yio Chu Kang MRT station, while the 54-unit The Greenwood is in Greenwood Avenue.

The 99-year leasehold Spring Grove condo, which sits on the former Grange Road residence of the American ambassador, is a similar case.

The United States government bought the land in 1950 on a freehold lease but sold it on a 99-year lease to City Developments in 1991. The plot reverts to the US government at the end of this century.

Not many developers are keen on the strategy for the simple reason that 99 years is a long wait and they would not be around to enjoy the fruits of their efforts, say property experts.

Far East could charge more for The Shore if it were sold as a freehold project but it is giving that premium up in exchange for the reversionary interest in the land, experts say.

Another expert said: ‘There’ll be en-bloc sale potential if the market is good but the trump card is held by Far East, instead of the Government.’

Far East can either grant a lease top-up, buy back the land, sell the freehold tenure or not act.

‘When the owners want to do a collective sale in two or three decades’ time, they will have to refer to the holder of the freehold title, which is Far East,’ said Ngee Ann Polytechnic real estate lecturer Nicholas Mak.

‘A lot will then depend on the top-up premium that Far East will ask for.’

The project’s en-bloc potential is not an issue at the moment. Far East said it has sold ‘more than 70 units’ since it started previews about two weeks ago.

Most sales have been one-bedders from 592 to 732 sq ft and priced from $658,000 or $1,100 per sq ft (psf).

Prices for two-bedders, which are on higher floors, start from $1.1 million or $1,180 psf. The project also has three- and four-bedroom units. Prices will rise about 2 per cent at Friday’s launch.

Mr Chia said the demand for the one- and two-bedders may be due to a lack of smaller flats in the area, as well as the rejuvenation of the Katong neighbourhood.

Far East bought the former Rose Garden site, which is where The Shore is, in 2006 for $169.8 million, or $423 psf of potential gross floor area.

Source, Straits Times 30 December 2009