Mar 08 2010

Commercial property insurers see tougher times

Premiums, returns expected to come under pressure, says FM Global chief

A BUMPER 2009 for commercial property insurers could depress premiums and hurt returns this year, according to Shivan Subramaniam, chairman and CEO of FM Global, a mutual commercial insurer.

The lack of natural disasters and the recovery in financial markets means insurers head into 2010 with very strong balance sheets and underwriting results, Mr Subramaniam said.

For 2009, industry-wide net after-tax income for US property/casualty insurers is expected to have risen more than eight-fold to US$30.6 billion, from US$3.8 billion in 2008, according to reports.

Last month, Fitch Ratings upgraded the outlook on FM Global to ’stable’ from ‘negative’, noting a recovery in the insurer’s capital position. Policy-holder surplus jumped 35 per cent to US$6.2 billion last year thanks to strong earnings and a rebound in investments,

‘You’re almost pushed to write more business, and if everybody does that, the only thing is that prices go down,’ Mr Subramaniam told BT. Falling premiums could hurt insurers badly if even a moderate disaster happens this year, he said. And there has already been a massive earthquake in Chile.

‘Chile could turn out to be a very expensive loss for the industry,’ Mr Subramaniam said. ‘The Chile quake had 600 times more force than Haiti – and Chile is the world centre for copper mining.’ Initial estimates of US$2 billion in insured losses are likely too low, he said.

The threat of climate change could also put a dent in profitability, according to Mr Subramaniam. ‘We can’t really say whether there is climate change or not, but what we do know is there is an increase in frequency and severity of those locations that are exposed to flood, wind and earthquake,’ he said.

That could lead to more losses for the industry. But Mr Subramaniam says FM Global’s method of treating insurance as an engineering problem – using technology to minimise damage and disruption – rather than an actuarial one may help preserve its margins.

‘From an engineering point of view, it doesn’t matter that there are going to be more floods, or larger floods – we can engineer for that,’ he said. Being a mutual company also allows FM Global to absorb more short-term volatility than most publicly listed insurers, he said.

Forecasters see an above average hurricane season this year, on top of the two big earthquakes in Haiti and Chile.

Source: Business Times, 8 Mar 2010

Mar 08 2010

Some maids double as ‘hostel manager’ or ‘concierge’

DOMESTIC helpers or hostel managers? When it comes to some maids working in several private houses surrounding the Mt Elizabeth Hospital, the distinction is often not so clear.

One such maid, who gave her name as Madam Kartini, cooks, does the dishes and irons the laundry for 71-year-old ‘Lina’ and her son in a two-storey house in Jalan Lada Puteh.

When she is not cleaning, she acts as the concierge for the illegal budget accommodation at her employer’s house.

Madam Kartini’s contact details, as well as photographs of the house, are listed on a website advertising the house as a hostel for Indonesian visitors. Charges are between $60 and $110 for a night, depending on the number of guests.

As the contact person for the business, Madam Kartini liaises with the largely Indonesian clientele in their native tongue – overcoming the language barrier faced by her Mandarin-speaking employer.

‘She handles everything. She’s the one who handles telephone bookings, prepares the rooms, hands over the keys and settles payment,’ explained a 47-year-old Indonesian businessman who has helped several of his friends book rooms from Madam Kartini over the last three years.

‘Once, my friend arrived past midnight and she was at the house waiting for him,’ he added.

According to Madam Kartini, her employer lives there, but is usually not around during the day. Her son lives in a terrace house across the road, where the doors are also open to foreigners.

It is a similar story at the stretch of private houses along the nearby Jalan Elok where, residents told The Straits Times, maids acted as the contact points for their respective houses.

The owners of these houses – on the other hand – were rarely seen, said residents, and some do not even live there. One resident sees her neighbour only occasionally dropping off her laundry.

‘The maids run the show – they will even dress properly to fetch tenants from the hospital,’ said a resident who declined to be named. One of the maids even handed out a name card with her name, contact number, and the heading ‘Rental Room With AC’. AC stands for air-conditioning.

These maids seem unaware that their activities are illegal. Under the Ministry of Manpower’s regulations, maids are allowed to perform domestic duties at only their employers’ residences.

Employers violate work permit conditions when they use their maids to perform non-domestic work, or to work outside of employers’ residences. If convicted, employers can be fined up to $5,000 or jailed up to six months, or both.

Source: Straits Times, 8 Mar 2010

Mar 08 2010

Terrace house ‘hostels’ for medical tourists

SEVERAL terrace house owners in the quiet lanes near Mount Elizabeth Hospital are opening their doors to medical tourists and travellers seeking budget accommodation in the heart of Orchard Road.

They charge between $50 and $120 per room a night, depending on the number of guests and whether it is peak season.

A room in a hotel in that area could cost at least three or four times more. For the price they pay, tenants get a bed, bathroom access, air-conditioning and housekeeping services. Rooms with bathrooms are pricier. These ‘hostels’ are often fronted by the owners’ maids, usually Indonesians, who can communicate better with these overseas patients, many of whom are also Indonesians.

The owners, however, appear to be breaking the Urban Redevelopment Authority’s (URA) rules, which state that private properties cannot be converted to other uses such as workers’ dormitories or boarding houses. The Straits Times found at least eight terrace houses within a two-minute walk of Mount Elizabeth Hospital where foreigners can stay on a short-term basis for a fee.

Most are in Jalan Elok, between the hospital grounds and York Hotel, but there are also a few along Jalan Lada Puteh, which is behind the hospital and next to Lucky Plaza.

On one Tuesday afternoon, The Straits Times spotted a group of six Indonesians dragging their suitcases behind them and entering one of the houses along Jalan Elok. When approached, one said they were in Singapore on vacation and had heard about the lodging from a friend back home. The group booked two rooms for $120 a night.

Moments after the group entered, a woman in a blue sports car pulled up just outside the house. Madam S.L. Chong, 64, identified herself as the owner but said the group who had just walked in were her Indonesian husband’s relatives.

The housewife said she charged them a minimal fee, as she was ‘unemployed and needed to make a living’. She claimed that she had approval from the URA to do this.

However, a check with the authority showed that this was not true. Its spokesman said it would investigate the possible infringement. The URA usually issues a warning notice to offenders and, if the unauthorised use does not stop, they can be charged in court and face fines of up to $200,000 or jail of up to a year, or both.

Two doors away from Madam Chong’s house, Madam Lily Lim told a similar story – that those staying temporarily in her house were her in-laws from Indonesia.

However, when The Straits Times contacted Madam Lim as an interested customer to inquire about lodging, she offered a room in her house at $50 a day.

When asked about this, Madam Lim insisted these rates were only for her relatives and said she did not require government approval for this.

Like Madam Chong, she said she could not afford to house them for free.

Business appears brisk at these ‘hostels’. The housekeepers of two of such houses said all their six bedrooms were fully occupied, for the next eight days for one of them.

A 47-year-old Indonesian businessman who has helped friends book accommodation at these houses said that, during the Formula One race season or other peak periods, these ‘hostels’ charged almost double the usual rates to cash in on the hotter demand.

Two houses at Jalan Elok even had an additional room built in the parking space, he said. It is understood that some houses have also repartitioned their bedrooms. ‘You can tell; some of the walls sound hollow,’ said the businessman.

Unauthorised repartitioning with the purpose of operating a boarding house is also illegal, said the URA.

Some of the owners of these terrace houses do not even live there, said other Jalan Elok residents. Indonesian housekeepers, allegedly employed as maids, are left in charge of a host of additional responsibilities such as providing housekeeping services to tenants.

Such accommodation, though illegal, do cater to the need for affordable short-term stays, filling a gap between hotels and hostels, which are usually run-down.

Several guests The Straits Times approached said they were in Singapore either to seek medical help or to visit relatives in hospital. Some were private students from countries such as Vietnam and China.

Mr Jim Chen, 40, a tenant from the Philippines, ditched his initial plans of staying at a serviced apartment at the nearby Lucky Plaza because it was ‘just too crowded and too noisy’. The fitness centre manager, who is in Singapore for physiotherapy, settled for a room in a Jalan Elok house, where he found the environment more tranquil.

An Indonesian maid, who gave her name as Madam Kartini and who advertises a house on Jalan Lada Puteh with rooms for rent on a website, said: ‘Most of them are here for medical treatments. We rarely have tourists.’

She added that most patients and their relatives stayed for a couple of days but some, such as cancer patients undergoing chemotherapy, would stay much longer, sometimes for more than a month.

Apart from the convenient distance from one of the region’s largest private hospitals, the main draw of these ‘hostels’ is their affordability. ‘Medical expenses are already so costly, and everything else in Singapore is also very expensive,’ said Madam Kartini. ‘At least they can now save on lodging.’

A hotel room in this prime area goes for between $200 and $600 a night.

Some residents in the area, though, are unhappy.

A resident in her 30s, who declined to be named, is disturbed by how such businesses have ’spoilt the neighbourhood’. She complained of shady characters. ‘It is no longer the case where I can let my son play outside,’ she added.

Mr Woo Chan Joo, a 77-year-old retiree, lives across a house where rooms used to be rented out until a fire there two months ago put an end to that. He said: ‘There were many people coming and going, some of them were in wheelchairs, some bandaged… It’s more peaceful now.’

Source: Straits Times, 8 Mar 2010

Mar 08 2010

Agents trustworthy? Take it with a pinch of salt

I REFER to last Friday’s letter by Singapore Accredited Estate Agencies, ‘Untrustworthy? Not property agents’, and beg to differ from its over-optimistic and illusory views of property agents.

Recently, I saw a property and after some negotiations via an agent, confirmed the purchase. I was scheduled to make a 1 per cent payment for the option to purchase that evening. I arrived slightly early and was surprised to see the agent showing the unit to other potential buyers.

When I confronted him, he tried to explain it away. That evening, I was not given the option to purchase. The agent gave a lot of excuses. I was upset. I went to the owner’s home and learnt that the owner did not know we were supposed to close the deal that evening.

The property was sold to another the day after the evening I was scheduled to accept the option to purchase.

I am disappointed there are no regulations to curb unscrupulous agents who manipulate transactions to their own benefit, at the expense of the seller or the buyer.

Roger Tan

Source: Straits Times, 8 Mar 2010

Mar 08 2010

1 Finlayson Green sold, say sources

Headline price is said to be $145 million

The office block that is 1 Finlayson Green has been sold, BT understands.

The price is said to be about $145 million, or 37 per cent below the $230.88 million the seller had paid for the property in June 2007.

A unit of UK-based property fund group Develica is believed to have signed an agreement recently to sell the 19-storey freehold office tower to a foreign-domiciled fund initiated by low-profile Indonesian investor Norman Winata.

BT understands the sale is being effected through a sale of shares in the company that owns the asset.

Develica is understood to have borrowed from National Australia Bank, Hypo Real Estate and Citibank. Market watchers say the three banks would have consented for the sale to take place.

1 Finlayson’s current net lettable area (NLA) is said to be about 89,000 square feet. Based on this, the latest transacted price of $145 million reflects about $1,630 per square foot.

A market watcher described the pricing as ‘about right’. In January, CapitaCommercial Trust sold Robinson Point – a freehold, 21-storey office building – for $203.3 million or $1,527 psf, based on its NLA of 133,139 sq ft. 1 Finalyson Green’s location is considered to be superior, being closer to Raffles Place MRT Station.

For 1 Finlayson Green, some market watchers suggest that there could be some other fees or costs associated with the transaction which could take its net acquisition price above the $145 million headline price paid by the buyer.

When Develica bought the property over two years ago from Singapore’s Hong Leong Group, its NLA was reported to be about 86,500 psf. Develica was later reported to have refurbished the building for $2 million and increased net lettable area by 7 per cent by leasing to one tenant per floor. That would have boosted the property’s NLA to about 92,500 sq ft. However, industry observers have been citing the building’s NLA at between 88,200 and 89,000 sq ft recently.

1 Finlayson Green received its Temporary Occupation Permit in 1994.

Source: Business Times, 8 Mar 2010

Mar 08 2010

Nomura bearish on S’pore developers

It sees pressure on residential prices and low rents impacting sales

THE latest Nomura Singapore Residential Property Report held firm to its bearish stance on local developers, based on expectations of a continued fall in transaction volumes.

Nomura analysts Tony Darwell and Sai Min Chow foresee a downward reassessment of price growth expectations putting pressure on these transaction volumes.

‘Demand for Singapore residential assets appears to be underpinned by the perception of relative value, despite an unprecedented fall in yields,’ the analysts stated in the report.

According to them, a ‘marked compression in residential yields’ had resulted from the divergent forces of asset value growth and falling rents over the last year.

Since early 2009, mass rents and luxury rents have fallen by 6.7 per cent and 14.6 per cent, respectively.

‘With a significant recovery in rentals unlikely, asset prices appear at risk,’ they said.

Residential yields in the mass market are now at 3.53 per cent, compared with 4.14 per cent 12 months ago.

The luxury market also saw its residential yields fall by about 100 basis points over the last 12 months to 2.25 per cent, what the report called ‘an unprecedented historical low’.

Putting additional pressure on asset prices and transaction volumes is the second round of government intervention last month that sought to discourage short-term speculative activity and tighten the supply of credit to the housing market.

‘We believe the government wants to check both volumes and prices, which will likely weigh on the Singapore developers whose stock prices are some 0.75x correlated with transaction volumes,’ the report said.

‘We retain our cautious stance on Singapore-domiciled developers. We believe they are pricing in ‘continued exuberance’, equating to a 25 per cent+ rise in asset prices beyond our expectations over the next 12-24 months – which we see as too optimistic given underlying physical market fundamentals.’

Source: Business Times, 8 Mar 2010

Mar 08 2010

Yishun industrial site up for sale by public tender

An industrial site in Yishun has been put up for sale by public tender.

The land parcel was made available for sale through the Reserve List system in May 2007. Under the system, a site would be released for sale only if a bid with an acceptable minimum price is received.

Last month, the Urban Redevelopment Authority (URA) announced that it had received an application from a developer to put up the land parcel for tender.

The developer has committed to bid at least S$11.5 million for the land parcel in the public tender.

Located at Yishun Avenue 6, the land parcel has a site area of some 1.42 hectares and a maximum gross plot ratio of 2.5. It can be developed for a variety of uses under “Business 1″ zoning.

The site will have a lease period of 60 years.

Source: Channel News Asia, 8 Mar 2010

Mar 08 2010

Larger sites to be released in H2 2010: Mah

Singapore government will make available a larger supply and wider variety of sites in the reserve list in the second half of this year, National development minister Mah Bow Tan told Parliament on Monday.

Mr Mah said the move is to give developers more choices.

The H2 2010 Government Land Sale will be announced later.

Mr Mah added that the government will consider releasing a reserve first site for sale immediately if there is more than one party that submits a minimum bid price that is close to the Government’s Reserve Price for the site, within a reasonable period.

Previously, a site is only released for sale if a developer submits a minimum bid that matches or exceeds the Reserve Price.

The government will, also with immediate effect, reduce the deposit required from successful applicants of reserve list sites from 5 per cent to 3 per cent of the minimum bid, subject to a cap of $5 million (US$3.6 million), to reduce the cash flow burden to successful applicants.

Source: Business Times, 8 Mar 2010

Mar 08 2010

No further measures to cool property market for now: Mah Bow Tan

National Development Minister Mah Bow Tan on Monday said the government will not be introducing more measures to cool the market for now.

He was responding to Members of Parliament who raised concerns about property prices, during debate over the ministry’s budget.

Sales of private homes gained momentum in the second half of last year, driving overall prices up by some 1.8 per cent in 2009.

Last month, the government introduced two more anti-speculative measures, on the back of a spike in sales transactions in January.

Mr Mah said that while no further measures will be introduced, the government stands ready to do more if there are signs of overheating in the property market.

He assured that there will be an ample supply of private homes to meet demand over the next two years.

Mr Mah also spoke on freeing up more land for businesses, when several government agencies move out of the central business district to Jurong Gateway and Paya Lebar Central by 2015.

Source: Channel News Asia, 8 Mar 2010

Mar 08 2010

Home loans volume could be lower in 2010 but values expected to rise

Singapore banks are not likely to see a significant jump in home loans growth this year.

According to analysts, that’s because they do not expect the number of transactions to increase greatly from last year as the steam runs out of the mass market property segment.

But they said support could come from interest in the mid-tier to high-end property sectors.

Singapore’s property market has been on a run. The number of home sales came in at between 33,000 and 34,000 last year, close to the peak seen in 2007 and that has helped Singapore banks pull through a challenging year.

But market-watchers do not expect to see the same pace of growth in home sales this year.

And some said this could put a dent in the plans of local banks to grow loans here as they try to expand.

Leng Seng Choon, associate director, co-head of Research, DMG & Partners Securities, said: “From the overall perspective, if the loans market is only so big in Singapore, and a few major players want to expand their market share or have higher loan growth, we may see some of them falling behind in some of their guidances.”

DBS and UOB have suggested single digit growth in loans for the year while OCBC targets low double digits with home loans making up about a quarter of their portfolios.

While the number of transactions may not increase as sharply as last year, their value may improve.

This is because, interest could be returning, for the higher end of the property markets.

Chua Chor Hoon, head of Southeast Asia Research, DTZ Debenham Tie Leung, said: “In terms of value, they may be able to lend out more than they did last year… and that’s because prices have moved up a fair bit from last year, and we’re seeing more interest in the mid tier and higher end.”

Analysts also said that growing economic stability could provide more help for banks. With job security and growth seemingly on the way, more buyers are expected to enter the market, expanding the pool of borrowers for local lenders.

Source: Channel News Asia, 8 Mar 2010

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