Govt’s new building plan will cater to low-income families

China’s 2009 investments in the real estate industry rose 16.1 per cent to 3.6 trillion yuan (S$738 billion), the country’s housing ministry said yesterday in a report ahead of a press conference.

Sales increased 42.1 per cent to 930 million square metres, the ministry said. The government will build 2.8 million housing units this year, ensuring that the country’s low-income earners can afford accommodation, the ministry said.

The government will build three million low-cost housing units this year for people who are priced out of the property boom, according to the ministry’s report, echoing a March 5 pledge by Chinese Premier Wen Jiabao to curb speculation.

‘The government will increase the construction and supply of commercial housing, public-lease house and accommodation with controlled prices,’ said Jiang Weixin, Minister of Housing and Urban-Rural Construction, at a press conference yesterday.

China’s January property prices in 70 cities rose 9.5 per cent at the fastest pace in 21 months compared with a year earlier, the National Development and Reform Commission said on Feb 11 in a report.

Still, the country’s property speculation is already under control, as prices have reached ’stable levels’ after soaring to records, the ministry said. There are ‘positive changes in the market’, according to the report, which didn’t give details.

Source: Business Times, 9 Mar 2010

It will allow owners to sell for less than they owe and give them cash as well

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

The new programme, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s US$75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery – the last thing it wants in an election year.

Taking effect on April 5, the programme could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification programme to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage.

Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

‘We want to streamline and standardise the short sale process to make it much easier on the borrower and much easier on the lender,’ said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes US$150,000. Mr Paul has an offer for US$48,000, but the bank holding the mortgage says that it wants at least US$90,000. The frustrated owner is contemplating foreclosure.

To bring the various parties to the table – the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property – the government intends to spread its cash around.

Under the new programme, the servicing bank, as with all modifications, will get US$1,000. Another US$1,000 can go towards a second loan, if there is one. And for the first time, the government would give money to the distressed homeowners themselves. They will get US$1,500 in ‘relocation assistance’.

Should the incentives prove successful, the short sales programme could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighbouring homes.

Source: Business Times, 9 Mar 2010

Bryan Roddy says it seemed like a smart investment in April 2007 when he and his partners bought a US$1.2 million home in Greenwich, Connecticut, added two bedrooms and baths and priced it at US$2.9 million to lure Manhattan buyers. They listed the Havemeyer Place property in October 2008, a month after Lehman Brothers Holdings went bankrupt and sent markets tumbling. The house is still for sale.

The so-called move-up market in Greenwich, known as the hedge-fund capital of the US, has dried up as the lingering effects of the financial crisis strand potential buyers in their current homes. ‘There was no one in that price range looking,’ said Mr Roddy, 48, a principal of Roddy Construction, a residential building and renovation firm in Norwalk, Connecticut.

Greenwich home sales from US$2 million to US$2.99 million fell 45 per cent last year, more than any other price category and the most since broker Russell Pruner began tracking the data in 1976. Fifty-two such properties in town changed hands, compared with 94 in 2008.

‘That’s in many cases a trade-up, or entry level,’ said Mr Pruner, also the owner of Shore & Country Properties in Riverside, Connecticut. Move-up sales are largely driven by locals looking for bigger homes and New York apartment owners seeking their first place in the suburbs, he said.

Buyers who can afford to pay US$2 million to US$3 million still rely on mortgage financing, said Alan Rosenbaum, principal of GuardHill Financial Corp, a New York-based mortgage brokerage with Greenwich clients. Lenders have curbed financing at that level to between 50 per cent and 70 per cent of the purchase price, he said.

At the same time, declining real estate prices mean people who need to sell their existing homes before buying another may have less cash for the purchase. ‘In the past, when you sold one home to buy another, you normally reaped a nice profit and you used that profit as a downpayment for your new home,’ Mr Rosenbaum said. ‘Many people who are trading up from the smaller home don’t have enough equity.’

Manhattan apartment prices fell 21 per cent from their market peak in 2008, according to data from New York appraiser Miller Samuel Inc and broker Prudential Douglas Elliman Real Estate. The median price of cooperatives and condominiums slid 10 per cent to US$810,000 in the fourth quarter from a year earlier, the companies said in a Jan 5 report. The median price hit US$1.03 million at the top of the Manhattan market in the second quarter of 2008.

Wall Street firms paid about US$20 billion in bonuses in 2009, down about a third from 2007, New York State Comptroller Thomas DiNapoli said on Feb 23. The average industry bonus was US$123,000, excluding stock options or other deferred pay. The financial industry cut 26,300 jobs in New York last year, contributing to the decline in the Connecticut real estate market. The median price of a single-family home in Greenwich, which lies about 30 miles north-east of midtown Manhattan, dropped a record 18 per cent to US$1.6 million, according to Mr Pruner. Sales fell 20 per cent to 370, with declines in all price ranges of more than US$1 million.

Of 514 homes for sale in town at the beginning of February, 20 per cent were priced between US$2 million and US$3 million, according to Shore & Country. Of 98 new listings between Jan 10 and Feb 10, more than half had previously failed to attract a buyer, according to data compiled by Jeanne Howell, a broker for Greenwich Fine Properties.

Gary Disher, a co-investor with Mr Roddy on the Havemeyer Place home, was unable to sell it last year after reducing the price to US$2.5 million, so he took it off the market in December. He relisted the residence in January for US$3 million in a bid to grab attention from buyers in a different price bracket, he said. ‘We wanted to make sure that we weren’t missing people that would be potential buyers in the US$3 million to US$4 million category,’ he said. On Feb 18, he dropped the price to US$2.49 million.

Source: Business Times, 9 Mar 2010

Buildability score, energy efficiency certification being revised upwards

THE Building & Construction Authority (BCA) is set to make changes to some of its regulations to push the construction industry towards green building and greater productivity.

The mandatory minimum energy efficiency standard that must be met before a new building can receive a Green Mark certification will be raised by 10 per cent from today’s standard. The energy efficiency standards for other Green Mark levels – Gold, GoldPlus, and Platinum – will also be upped.

BCA will also increase the regulated minimum buildability score so that firms will have to use labour-efficient construction technologies. The industry regulator said that it has not yet decided on the new minimum score, which now stands at 75 – a significant climb from 61 in 2001.

‘The industry can seek government funding to build capability in areas such as prefabrication, precast technology and other construction technology to meet the new buildability requirements,’ said Grace Fu, Senior Minister of State at the Ministry of National Development. She announced the changes in Parliament yesterday.

During the Budget announcement on Feb 22, the government said that it will set aside $250 million to steer the construction sector towards higher productivity. This followed the Economic Strategies Committee last month highlighting the need for strong measures to boost Singapore’s productivity level.

Giving more details yesterday, BCA said that the funds will be used to cover three broad aspects: to co-fund manpower development; to provide funding support to encourage companies to adopt technology and equipment that could lead to significant productivity improvement; and to provide financial support to builders to help them develop capability in more complicated civil engineering projects and building projects.

BCA hopes to get the construction sector to raise the quality of its workforce, design buildings that are easier to construct and adopt more advanced construction technologies. The government has said that it will raise its foreign worker levies from July this year. Yesterday, Ms Fu said that it is estimated that the higher levies could result in 1-2 per cent rise in construction costs for the industry – although the actual cost impact will vary from firm to firm. On the other hand, the $250 million fund will work as a carrot and support the construction firms as they try to adopt productivity improvement measures.

Further upstream, developers and architects will have to design for greater buildability. BCA also wants to raise the energy efficiency standard for new buildings by 10 per cent – which means that the power consumption for new buildings that are Green Mark-certified will be about 10 per cent lower as compared to their older counterparts.

Developers said that they welcomed the move and added that the new target is within reach.

‘The revised standards will definitely improve the long-term sustainability of Singapore and contribute towards our overall energy efficiency goal of 35 per cent savings by 2030,’ said Tan Swee Yiow, Keppel Land’s chief executive for its Singapore commercial business unit.

Added a City Developments spokesman: ‘While the development of green buildings may cost more, by adopting the low-energy passive facade design, we do not foresee the need to increase our present green building investment of between 2 per cent and 5 per cent of our construction cost.’

Source: Business Times, 9 Mar 2010

THE National Environment Agency (NEA) will soon start prohibiting construction activities from 10pm on the night before a Sunday or a public holiday to 10am on the day itself. This new prohibition will apply to construction sites within 150 metres of residential areas and noise-sensitive developments that start work from Sept 1 this year.

‘We will implement the changes progressively to give the construction industry sufficient time to adjust,’ said Yaacob Ibrahim, Minister for the Environment and Water Resources, while announcing the ministry’s latest measures in Parliament yesterday. ‘NEA will extend this prohibition to the rest of the day on Sundays and public holidays for sites starting work from Sept 1, 2011,’ Dr Yaacob added.

According to the minister, NEA received 14,000 and 12,000 complaints about construction noise in 2008 and 2009 respectively, compared to 9,000 and 6,000 such complaints in 2007 and 2006 respectively.

This change in policy will create a need for construction firms to rejig their work schedules, CSC Holdings Ltd CEO See Yen Tarn noted.

‘There are certain activities that have to be carried out continuously, one process after another. You cannot excavate something and then let it sit there for 24 hours, for example,’ said Mr See.

Tan Wey Pin, executive director of Lum Chang Building Contractors, also noted that almost all construction sites in Singapore will be situated within 150 metres of a residential area. Currently, his firm’s workers end work any time between 7pm and midnight on Saturday and work from 8am to 5pm on Sunday, excluding overtime.

NEA will also tighten noise standards for new and in-use vehicles, from Oct 1, 2010 and April 1, 2011, respectively. The new-vehicle standards will be based on those currently used in Japan and the European Union.

On the industrial front, there will be a mandatory requirement for companies in the industry sector using more than 15 gigawatt- hours of energy each year to appoint an energy manager that will monitor and report energy use to NEA from 2013, as part of the Energy Conservation Act that will come into force in the same year.

‘NEA will introduce the Energy Efficiency National Partnership, or EENP, in April to help companies build up the necessary capabilities before the mandatory energy management practices come into effect,’ said Dr Yaacob.

Several companies that fall in this category appear to be ahead of the curve.

‘We do more than an energy manager’s job. We have monitored the consumption of energy from Day 1,’ said CV Jagadish, CEO of Systems on Silicon Manufacturing Co Pte Ltd. This year, the company aims to reduce energy usage by almost 4 million kilowatt-hours.

STMicroelectronics will also have no trouble complying with the requirement. ‘Our site electrical manager is our resident Energy Conservation Champion, who constantly drives energy reduction opportunities at our wafer fab,’ said Renato Sirtori, group vice-president and chief financial officer of Asia STMicroelectronics.

Source: Business Times, 9 Mar 2010

Price takes into account NTA of $9.5m and $92.5m shareholder loan

CAPITAMALLS Asia (CMA) has bought an integrated development in Chengdu comprising retail, residential and office components for 554.2 million yuan (S$114 million) from CapitaRetail China Development Fund II (CRCDF II).

CMA has a 45 per cent stake in CRCDF II. CMA, listed on the Singapore bourse late last year, is 65.5 per cent owned by CapitaLand.

The acquisition is being effected through the purchase of a 100 per cent stake in Growing State Holdings Limited (GSHL), a Hong Kong-incorporated investment holding company whose fully-owned China unit is developing the integrated project.

The $114 million cash consideration took into account, among other factors, the net tangible assets of GSHL of about $9.5 million as at Jan 31, 2010, and a shareholder’s loan of about $92.5 million from CRCDF II to GSHL.

CMA estimates its total expenditure on the development, inclusive of the land cost of 305 million yuan and construction and fitting-out costs, at about 1.79 billion yuan. This works out to 8,866 yuan (S$1,823) per square metre of gross floor area (GFA).

The development will have a total GFA of 201,813 square metres and about 1,348 car park lots when completed.

This will include a shopping mall with a GFA of 133,571 sq m and residential and office components with planned GFA of 33,246 sq m and 22,820 sq m respectively.

The integrated development is in Chengdu’s Gao Xin district, at the core of the city’s upcoming South Business District (SBD), north of the South Third Ring Road. The project is within 50 metres of a completed metro train station which is expected to be operational by Q3 this year.

Tianfu Mall, which is currently in the early stages of development, is slated to open at end-2013. It will serve a catchment population of about 400,000 people within a five-kilometre radius.

CMA chairman Liew Mun Leong said: ‘Our integrated development, located right in the heart of the South Business District, will benefit from the demand in this new catchment area for quality retail, residential and office real estate.’

The company’s chief executive officer, Lim Beng Chee, said: ‘This is a win-win deal for both CapitaMalls Asia and CapitaRetail China Development Fund II. The fund is already fully committed, and CapitaMalls Asia will be able to quickly ramp up development and capitalise on the potential of the site as all the development approvals have already been obtained.

‘Our acquisitions of Meili Mall in Chengdu and this integrated development will increase our presence and exposure in China, which we target to account for 40 per cent of the total value of our properties.’

Last month, CMA announced its purchase of Meili Mall for 459.9 million yuan from a unit of China Vanke, China’s biggest residential developer. Including fitting-out, CMA’s estimated total expenditure on Meili Mall is 520 million yuan. Meili Mall’s targeted opening date is mid-2013.

Source: Business Times, 9 Mar 2010

JTC invites consultants to study impact of cavern at Tanjung Kling site

No stone is being left unturned in Singapore’s underground push. Even the birds at Jurong Bird Park will not be ignored as the impact of construction and cavern operation on them will also be taken into account under a full-scale feasibility study called last Friday for an underground warehousing/logistics and data centre in Jurong.

The three-phased comprehensive study of the Tanjung Kling site – from preliminary geological assessment and market research to concept development – is expected to take up to two years in all, and follows a five-month ‘geological investigation and ground characterisation’ study called last November.

JTC Corporation on Friday invited consultants to undertake the latest study for what will be its third mega underground facility – following the start of construction recently of its $1 billion first-phase Jurong Rock Cavern to store oil, and its on-going 14-month feasibility study for an underground science city (USC) at Kent Ridge.

Both the USC and underground warehousing and data centre could be undertaken concurrently if the studies prove feasible, JTC earlier told BT.

Even the Economic Strategies Committee in its report last month recommended that Singapore’s push underground – given the limited surface land available here – be supported by a national geology office which should, among other things, develop a subterranean land rights system and determine how underground areas can be priced.

For JTC’s latest study, the appointed consultant will need to assess the technical requirements of warehousing and logistics players and developers and data centre operators, in order to develop the facility’s conceptual design.

The site comprises Tanjung Kling and Jurong Hill and is bounded by four roads – Jalan Ahmad Ibrahim, Jurong Pier Road, Jalan Buroh and Pioneer Road. It can potentially provide cavern space of over 1.1 million square metres and free up 45 hectares of surface land for other uses.

The consultant will also engage specialists, including environmental consultants and ornithologists, to ’study the impact of the underground development, during both the construction phase and the operational phase, to existing surface developments, traffic, environment, population working in the area and birds residing in the Jurong Bird Park,’ the JTC tender said.

‘Of particular concern will be the impact of construction noise and vibration… to the behaviour of birds in the Bird Park. The consultant shall engage with Jurong Bird Park to address their concerns on such impact to their bird population as well as to their operations,’ it stressed.

The preliminary geological assessment – expected to take five months – will include the consultant’s take on the total cavern space and volume that can be constructed.

Next will be the preliminary concepts, with the consultant recommending – from a list of usage possibilities like general cargo and chemical logistics to container depot – on what will be viable for siting in the underground cavern.

Finally, the study’s concept development phase will include its design, method of excavation and will even explore the feasibility of locating a district cooling system in the cavern complex.

The Tanjung Kling area was chosen for the underground ware- housing/data centre facility after earlier studies of geological conditions, JTC said. By going underground, the facility will enjoy advantages like shielding from heat and temperature humidity, have low background radiation and have less disturbance from vibration.

Source: Business Times, 9 Mar 2010

Changes made to reserve list system make it easier for developers to trigger sites for sale

The government has tweaked its bi-annual land sales programme to make land supply more responsive to market demand.

Three changes have been made to the reserve list system, National Development Minister Mah Bow Tan said in Parliament.

He added that the government does not intend to introduce more measures to curb speculation at the moment.

‘We don’t intend to introduce more measures for now, but we will monitor the market closely. If there are signs that the market will overheat again, we are ready to introduce additional measures to stabilise the market.’

The second-half 2010 government land sales programme will have a ‘larger supply and wider variety of sites’ on the reserve list to give developers more choices.

The Ministry of National Development (MND) will also now consider releasing a site on the reserve list for sale once it has received ’sufficient market interest’ – that is, if two or more developers submit minimum bids that are close to the government’s reserve price for the site within a reasonable period.

Right now, a site is only released for sale if a developer submits a minimum bid that matches or exceeds an undisclosed reserve price set by the government.

The deposit due from applicants of reserve list sites will also be reduced from 5 per cent of the minimum bid price to 3 per cent, capped at $5 million. The reduced deposit is expected to lower upfront costs to developers and reduce their cashflow burden when they trigger sites on the reserve list.

Developers welcomed the increase in future supply.

‘I think that the changes are a good sign,’ said MCL Land chief executive Koh Teck Chuan. ‘The government probably felt that they needed to balance the demand (for land sites) with more supply.’

He hopes that the increase in supply could moderate the aggressive bidding by developers seen for recent state land tenders.

The Real Estate Developers’ Association of Singapore (Redas) said that it welcomes the improvements made to the reserve list system. ‘These measures (the lower deposit and the release of sites as and when there is sufficient market interest) will help minimise the cost burden on developers who trigger the sites for sale and make the reserve list system more responsive as a whole to market conditions.’

Redas president Simon Cheong warned last month that many developers are now facing depleting landbanks following brisk home sales in recent months. Developers, he said, were surprised at the speed of the recovery in the property market and are looking forward to sites in the confirmed list to replenish their landbanks.

The changes announced yesterday could also be aimed at keeping private home prices affordable, analysts said.

‘We believe that these measures are being introduced so as to enhance flexibility in the land sale system as well as to try and increase affordability in the mass-market private housing market,’ DBS Group Research analyst Adrian Chua said.

But he noted that while the land bidding process may become less competitive, the impact on land prices may be marginal in a buoyant market.

Others similarly said that if the government’s intention is to check land prices – and also check climbing private home prices – increasing future supply is unlikely to have much of an impact now.

‘Developers are still going to bid aggressively because they want their sites now,’ said Colin Tan, Chesterton Suntec International research and consultancy director. He said that the government should consider releasing two or three sites at a go as this will have a bigger impact.

Colliers director for research and advisory Tay Huey Ying said that new sites on the H2 2010 land sales programme could include plots in newer towns and with no particular MRT advantage.

‘As prices of mass-market home in prime mass-market locales or near MRT stations are near peak, the market has been urging the government to release more affordable mass-market sites to the meet demand by upgraders,’ Ms Tay said.

The tweaks come a month after the Economic Strategies Committee recommended a review of and improvements to the reserve list system to make it less onerous for developers to trigger sites on the list.

Mr Mah also said that the government would progressively release sites at new growth areas in Jurong Gateway, Paya Lebar Central and Kallang Riverside for development from this year. Several government agencies will also be relocated out of the central area to Jurong Gateway and Paya Lebar Central to catalyse growth there.

MND and two of its statutory boards, Agri-Food & Veterinary Authority of Singapore and the Building & Construction Authority, will move to Jurong Gateway by 2015. They will be joined by the Ministry of the Environment and Water Resources and its statutory boards PUB and National Environment Agency.

Elsewhere, the Singapore Workforce Development Agency will move to Paya Lebar Central. Its new continuing education and training campus, due to be completed by the end of 2013, will also be located there.

‘The relocation of government agencies will free up prime office space in the city to meet private sector demand, as, by 2015, the current supply of about one million square metres of office space in the pipeline should have been taken up,’ Mr Mah said.

Source: Business Times, 9 Mar 2010

WITH regard to property agents’ call for curbs on subletting (‘Property agents call for curbs on subletting’, Sunday), I do not think the restrictions will work.

If 10,000 HDB flats and 10,000 private flats are available for subletting, and the HDB introduces a new rule that means only 7,000 HDB flats are available, the net supply reduction of rental homes will push tenants to compete for the remaining 17,000 HDB or private flats and individual rooms in HDB or private flats.

The net result is an increase in rental rates. This increase in rental rates will encourage people to buy more HDB and private flats for rental return or capital gain.

In other words, tweaking the rules will only redistribute rental income among home owners.

A more effective solution is to moderately regulate dual ownership of HDB and private property by taxation, rental restriction and other ways.

This will reduce actual demand for homes, rental rates and home prices.

David Loo

Source: Straits Times, 9 Mar 2010

I REFER to Mr Roger Tan’s Forum Online letter yesterday, ‘Agents trustworthy? Take it with a pinch of salt’.

We thank Mr Tan for sharing his encounter with a property agent. We agree that the agent should have explained to Mr Tan clearly why he was not given the Option to Purchase. The service lapse or misunderstanding could have been avoided.

It would appear from Mr Tan’s version of the incident that it was the seller’s appointed agent he negotiated with. While Mr Tan might have confirmed the sale price he was prepared to pay with the agent, he had not given the 1 per cent option money yet and no contract had been entered upon.

One likelihood is that the seller’s agent might still have been trying to obtain the best possible sale price for his client by showing other prospective buyers before consolidating all offers for his client’s consideration. There were at the same time instances when, unlike Mr Tan, buyers did not turn up to pay the 1 per cent option money as agreed and other potential buyers were turned away in the interim at the expense of sellers. It is also the seller’s prerogative to decide finally on the sale.

The agent would have breached the ethical code if he had explicitly stated that Mr Tan’s offer to his client would be presented only upon the latter’s agreement to pay him a commission. Should this have arisen, he could be acting in dual representation and in conflict of interest with his seller-client. Or if the agent had concealed any offers to his client, he would also be acting unethically.

For alleged misconduct, Singapore Accredited Estate Agencies is prepared to probe and initiate disciplinary proceedings if the agent is accredited or the agency he works with is accredited, and the seller-client comes forward to lodge a complaint with Mr Tan.

Dr Tan Tee Khoon
Chief Executive Officer
Singapore Accredited Estate Agencies

Source: Straits Times, 9 Mar 2010