The government will build more Executive Condominiums (ECs) to meet the housing needs of what is described as the “sandwiched group”.

For this year, ECs will make up 10 per cent of about 12,000 new flats to be built.

National Development Minister Mah Bow Tan said this on Channel NewsAsia’s programme, “Talking Point”. He was responding to a question on prices for the market for ECs, which is regarded as the intermediate market between HDB flats and private apartments.

He said: “The EC market is really a hybrid. It is HDB in the first five years, which will morph into private after ten years. And the reason is we wanted to cater to the so-called sandwiched group – the S$8,000 to S$10,000 group. So that is the reason why the income ceiling for ECs is not S$8,000 but S$10,000.

“And we still give the S$30,000 grant. So if you are a person, couple who are earning say S$9,000, ideally that is the housing type for you. It is well-designed; it is in good location. It is something that would have all the amenities. And at the same time, you still enjoy the grant.

“So that is the reason why we are putting up more ECs on the market. We are catering for 80 per cent of the population, so EC is one housing form that we are watching, and we have recently let out two tenders. And if there is a market and there is a demand, we will let out more.”

This special edition of “Talking Point” can be viewed on Sunday night at 10.15pm on Channel NewsAsia.

Source: Channel News Asia, 13 Mar 2010

Hotels in Sentosa are riding on the latest wave to hit the island – the opening of Resorts World Sentosa (RWS).

Some have even closed down for renovations to ride on the expected increase in visitors.

Rasa Sentosa Resort has been on the island for 17 years, and had been renovated only once. It is time for a major makeover to prepare for the increased business that is likely to be generated from the buzz of the integrated resort.

After RWS opened, Rasa Sentosa saw occupancy rates rise by 10 per cent. The hotelier feels it is worth spending almost 10 months on renovations.

Ben Bousnina, general manager, Rasa Sentosa Resort said: “I think it is a good time to close now. I don’t think we are really missing the boat. Business, I think, will be flowing.

“The integrated resort is not seen as competition. I think it is an added value to the island and to Singapore.”

Another hotel company is also cashing in on the excitement from the integrated resort. Millennium & Copthorne International will open its sixth local branch on Sentosa this year.

Ng Chee Theam, regional CEO, Millennium & Copthorne International said: “Overall the casino has increased the occupancy percentage of hotels in Singapore – average rate has increased. And also, we saw an increase in length of stay for all the guests in Singapore.”

The group is working with Universal Studios to offer holiday packages for families.

Source: Channel News Asia, 13 Mar 2010

IS there or is there not a property bubble in China? That is the billion-dollar question that everybody is asking now. Before we attempt to answer that, it is instructive to examine what caused prices to race ahead in the last one year.

The obvious answer was the government’s four trillion yuan (S$816 billion) stimulus package introduced to support the economy in view of the collapse in exports. In his weekly market report recently, Tan Teng Boo of Capital Dynamics outlined how the stimulus package led to the rapid increase in property prices last year.

As part of the stimulus package, the central government ordered banks to turn on the tap to give loans freely. Last year, China’s financial institutions extended 9.59 trillion yuan in new credit. Of that, 1.4 trillion yuan went to individual housing loans and 576.4 billion yuan to housing development loans.

At the same time, the government was carrying out its stimulus programmes through the state-owned enterprises (SOEs). With slacking demand, many SOEs found themselves with excess capacities. Where to put the money that the government has injected? Since the property market has a reputation of generating quick and high returns, it became the natural choice for the SOEs to channel the extra money that they had received. Many SOEs established new business entities to venture into the lucrative property market. The participation of the SOEs with deep pockets into the property market initially sent land prices sky high. This subsequently led to elevated house prices.

Two, with the real economy slowing down significantly, some businesses decided to get out of their original business activities and instead used the profits that they had made in the past few years to invest in the property market. The switch gave further impetus to the property market. And three, in addition to the measures provided in the stimulus package to accelerate the construction of low-cost housing, the government also introduced other preferential policies in 2008-2009, directed specifically at the property sector. These included:

* Cutting the deed tax rate for first-time buyers of houses under 90 sq m from 3.5 per cent to one per cent;

* Exempting stamp duty on property purchases;

* Exempting land value-added tax on property sales;

* Cutting the minimum down payment for first-time home buyers to 20 per cent from 30 per cent;

* Cutting the interest rate for personal housing provident fund loans from 4.32 per cent to 4.05 per cent for five-year loans; for loans above five years, the reduction was from 4.86 per cent to 4.59 per cent;

* Cutting the interest rate on mortgages to 70 per cent of the benchmark lending rate;

* Reducing the ownership period eligible for tax exemption for sales of homes by individuals from five years to two years.

All the above measures drew in droves of buyers. Prices climbed. Then there was the hot money. China’s economy bottomed out in the first quarter of 2009.

According to Mr Tan, when it became apparent that economic activities have been successfully revived by the Chinese government’s aggressive expansionary policies, hot money began to flow in to take advantage of the opportunities presented by the fact that China’s economy would recover earlier and faster than the other economies. In 2009, China’s trade surplus fell US$99.4 billion from 2008, yet its foreign exchange reserves surged by US$453.1 billion to US$2.4 trillion. The strong inflow of hot money also played a role in pushing up property prices.

Meanwhile, there are compelling factors which ensure a strong and sustained domestic demand for property. First, the rapid rate of urbanisation. According to Lu Dadao, president of the Geographic Society of China, China took 22 years to increase its urbanisation rate from 17.9 per cent to 39.1 per cent. It took the UK 120 years, the United States 80 years and Japan more than 30 years to accomplish the same feat. With the relaxation of the household registration system, more and more people are moving to the cities, creating strong demand for urban housing.

Meanwhile, the psychological make-up of the Chinese, coupled with the lack of options in which to grow their nest eggs, make real estate an attractive place to park one’s money. Real estate is like the proverbial bar of gold. In a recent article, Time magazine interviewed a taxi driver in Shanghai who owns three apartments in the city. He hasn’t tried to rent out two of his three apartments, saying: ‘It’s not that important to gain income from them; there is security in just owning them. They are paid for, and I know that if I ever get into any kind of economic trouble, I can sell them. That’s real security.’

Real estate makes for a good hedge against inflation given the sharp expansion in money supply in 2009. That many are using their savings to pay for the apartment is supported by the statistics that China’s mortgage market constitutes only about 10 per cent of its gross domestic product. This compared with 48 per cent for Hong Kong. Keeping money in the bank yields only 2.25 per cent in a one-year fixed deposit.

Now, of course, the government is trying to reverse some of the policies. The question is, is it too late? For that, we need to answer how far ahead of fundamentals have property prices gone in China. In Japan, in the four years right before its property bubble went bust the average growth rate of residential land prices in the country’s six major cities was 25 per cent. China’s appreciation is nowhere near that.

And while the growth rate in US house prices in the 10 years before the sub-prime crisis broke out was not as strong as that of Japan’s, it was stronger and more sustained than that of China’s.

The worrying thing is, China’s prices are catching up fast. House prices in 70 large and medium-sized Chinese cities climbed 3.9 per cent in October last year. The pace of increase picked up to 5.7 per cent in November, and yet even higher to 7.8 per cent in December. In January this year, the number was a 9.5 per cent rise from one year earlier, the fastest growth in 19 months.

The government, it seems, will have to come up with harsher measures to cool things down. The consolation is, the consequences of a reversal in property prices would not inflict that great a pain in the Chinese economy given the lesser extent of credit being used in the market.

In China, personal savings and parental contribution are the two major sources of financing for home purchases. According to Patrick Chovanec, a professor at Beijing’s Tsinghua University who studies the Chinese real estate sector, only about 50 per cent of residential purchases are made using mortgages. The other half are paid for in full at the time of acquisition. (In the US, by contrast, over 90 per cent of residential housing transactions are financed with mortgages.) Wong Kok Hoi of APS Asset Management is of the view that if prices were to decline 20 per cent, a portion of the Chinese people’s substantial savings would be moved to the property market.

Even if prices were to decline by 30 per cent, the majority of home-owners would still not walk away from their mortgage obligations, as we saw in the US, because they still have positive equity in their homes, reckons Mr Wong. In that scenario, Shanghai-based banks would see their non-performing loans rise to 2 per cent and their profits impacted by 7 per cent.

All in all, it seems the bubble trouble in China is not as big as a lot of people fear it to be.

Source: Business Times, 13 Mar 2010

IN A clear warning to those who sublet their flats illegally, the Housing Board (HDB) has moved to take back three apartments linked to a real estate agent who owns five private properties.

One flat to be repossessed belongs to the real estate agent, Mr Poh Boon Kay, 61, and his wife, Madam Khoo Kim Cheng, 52, who had illegally sublet their four-room flat in Bukit Batok.

The other two flats in Telok Blangah and Bukit Batok are owned by the couple’s daughter and Madam Khoo’s 91-year-old aunt respectively. Both flats were also illegally rented out.

He acted as agent for the elderly woman and collected rent on her behalf.

The HDB said it is taking legal action to take back the units.

It is the most serious case of illegal subletting in the last two years. Only three other flats have been compulsorily acquired in that time.

In November last year, the HDB checked and found that Mr Poh had sublet his flat to three Myanmar couples without HDB approval.

The Pohs, who were not living there at that time, had also breached the Minimum Occupation Period (MOP) of three years. This rule states that buyers who purchase resale flats without a housing grant from the Central Provident Fund Board have to live in the flat for three years before they can rent out the whole unit.

The HDB then told Mr Poh this was unauthorised, and that they were intending to repossess his flat. On Dec 23, the HDB pasted a notice of intention to compulsorily acquire his flat.

The HDB told The Straits Times yesterday that Mr Poh will continue to hold the title deeds until investigations are complete. It will then decide whether to take back the title deeds officially and compensate him to the amount of $125,000.

Mr Poh, who claims he paid $155,000 for the house, can lodge an appeal against the notice. When asked, he said he was intending to appeal.

Mr Poh, an ordinary member of the Institute of Estate Agents (IEA), pleaded ignorance of the three-year MOP; he said he had been told by the HDB’s counter staff that he could sublet the flat after a year. He could not name the HDB employee.

But the HDB said that because of Mr Poh’s links to the other illegal subletting cases, his claims of ignorance could not be substantiated.

‘There is clear evidence that Mr Poh, a housing agent by profession, has been intentionally abusing HDB flats for monetary gains,’ said the HDB spokesman.

Mr Poh said he had not seen the acquisition coming. He added: ‘I can’t believe a notice can be served within a month of the HDB giving a warning letter.’

He said it was more usual for the HDB to send a second warning, or even fine an errant owner first.

The Housing and Development Act says, however, that the HDB can compulsorily acquire a flat once it ascertains that the owner is illegally subletting it.

‘HDB takes a stern view of unauthorised subletting, and will not hesitate to take strong action against those who flout the rules,’ it said.

The Board added that it will bring Mr Poh’s case to the attention of the IEA.

Mr Poh, who claims his daughter is stuck in the United States with marital problems, declined to discuss the cases involving her and his wife’s aunt.

He said he did not know for sure when they bought their flats.

The HDB has taken action against 56 such owners in the last two years, dishing out punishments ranging from fines of $1,000 to $21,000, to repossessing the flats involved.

HDB added that there was no discernible upward trend.

Flat owners who wish to rent out their flats must obtain approval from the Board and fulfil the MOP. The current MOP for subletting flats is five years for flats bought directly from the HDB or resale flats purchased with a CPF Housing Grant, and three years for resale flats bought without the CPF grant.

About 682,000 flats are eligible for subletting, but only 3per cent of these flats are sublet.

Source: Straits Times, 13 Mar 2010

THE Housing & Development Board yesterday said it has stepped up enforcement action against home-owners who illegally sub-let their government-subsidised flats. The move comes weeks after HDB unveiled policy changes designed to hurt speculators, including increases to the minimum occupation period (MOP).

HDB said that from January 2008 to December last year, it took enforcement action against 56 flat owners. They faced penalties that ranged from fines of $1,000 to $21,000, to repossession of their flats.

In particular, HDB shared details of a case in which a Bukit Batok flat owned by Poh Boon Kay and his wife Khoo Kim Cheng was repossessed after there was ‘blatant flouting of sub-letting rules’.

Mr and Mrs Poh own five private properties and Mr Poh is also a registered real estate agent. The couple did not fulfil the MOP of three years, which is required under HDB’s rules before a whole flat can be sub-let. They claimed that they were not aware of this policy. Further investigations showed that Mr Poh was related to two other cases of unauthorised sub-letting, at Bukit Batok and Telok Blangah. HDB will also take legal action to compulsorily acquire those two flats.

It reiterated yesterday that owners who wish to sub- let their whole flat must obtain approval from HDB and fulfil the MOP. The MOP for sub-letting is now five years for flats bought direct from HDB and resale flats bought with any CPF housing grant, and three years for resale flats bought without the CPF housing grant.

Home-owners must also comply with HDB rules regarding the maximum number of sub-tenants allowed for the flat’s size.

Source: Business Times, 13 Mar 2010

SINGAPORE is closing the gap on London and New York as a leading financial centre, according to a new ranking.

The poll placed the two heavyweights in joint top spot but London has lost 15 points since the index was published last September while New York has gained one. Both scored 775 out of 1,000.

But Asian cities are fast catching up in the Global Financial Centres Index.

Singapore, Hong Kong and Tokyo all registered double-digit gains to close the gap between New York and London and the rest to its narrowest since the survey began in 2007.

Hong Kong gained 10 points to be third while Singapore added 14 to stay fourth. Tokyo gained 18 points to leapfrog Zurich and Shenzhen into fifth place.

Four of the top 10 financial centres are now in Asia.

The six-monthly index is compiled by the Z/Yen Group think-tank and published by the City of London. It combines a survey of financial professionals with factors such as tax rates, airport satisfaction, office occupancy costs and stock exchange capitalisation.

Mr Stuart Fraser, chairman of the policy committee of the City of London, said the survey responses were more optimistic compared with those six months or a year ago.

However, he added: ‘Their optimism is still muted by the prospect of the challenges to be faced over the next few years in reaction to the financial crisis, and any reading of relative rankings needs to take account of a very large uncertainty factor.’

Among the top cities, Singapore was perceived to be riding out the financial crisis with more resilience than the others.

Respondents were asked which financial centres they believed were suffering most from the crisis. New York was named 110 times and London, 89.

In contrast, Hong Kong received less than 20 per cent of the mentions of New York while Singapore received fewer than 10 mentions overall.

Source: Straits Times, 13 Mar 2010

FAIRLY strong interest from developers is expected in a 99-year leasehold residential site at the corner of Upper Changi Road North and Flora Drive, which will be launched for sale in two weeks’ time.

It has been put to tender after an unnamed developer committed to bid at least $82 million, said the Urban Redevelopment Authority yesterday.

The 3.1ha site, which is not near any MRT station, can be developed into a condominium with about 390 units. Analysts expect fairly strong interest from developers, given the buoyant mass market.

They expect the top bids for the site to range from $300 per sq ft (psf) per plot ratio (ppr) to $400 psf ppr.

DTZ South-east Asia research head Chua Chor Hoon, who expects bids to fall between $300 and $350 psf ppr, said the units there could sell for $700 to $750 psf on average.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said the site is in a well-established residential area but is some distance from the Central Business District. Also, it is near Changi Prison.

‘This land tender could still be quite popular with developers and could attract about six to 10 bids because the mass-market segment could still enjoy steady demand in the next 12 months.’

Mr Mak added that projects in the area, such as Edelweiss Park Condo and Carissa Park Condo, are quite popular with Japanese families as they are near a large Japanese primary school, which means the project could attract both owner-occupiers and investors, he said.

The latest launch in the area, The Gale, drew 294 buyers in July last year who paid a median price of $696 psf.

The Upper Changi Road North site is on the Government’s reserve list, which means it is available for sale but is put up for public tender only after a developer pledges to put in a minimum bid.

It was first made available for sale on the reserve list in March 2008.

Source: Straits Times, 13 Mar 2010

BUYERS have snapped up units at a West Coast condominium despite the developer setting record prices for a mass market project.

Cheung Kong (Holdings) has sold all 100 units of The Vision released for its Phase 1 sale at prices ‘from $1,000 to $1,200 per sq ft (psf)’ for the two- to four-bedroom units, according to sales manager Cannas Ho yesterday.

However, market talk suggests that around 130 units or more have been booked. Sales apparently started on Thursday, when buyers handed over their cheques to confirm sales of 80 or so units without even viewing the showflat.

‘The response is unexpected. However, it proves that there is strong demand for mass market homes,’ said Colliers International’s director for research and advisory, Ms Tay Huey Ying.

The Hong Kong-based developer said the 100 units sold included two penthouses and ‘nearly half of the 14 strata terrace units’.

The Vision, a 99-year leasehold condo across the road from West Coast Park, has 281 apartments and 14 strata terrace units.

It is next to Blue Horizon, where units in the resale market have gone for $764 to $841 psf this year.

Ms Ho told a media briefing on Wednesday that The Vision will be the most luxurious building in the area.

She said then that the plan was to offer a second phase for sale by the end of the year.

The highest price done – for a strata terrace unit – was $3.2 million, she added yesterday.

About 70 per cent of the buyers are locals. The rest are from Malaysia, China and the United States.

More than 60 per cent are upgraders, while the rest are long-term investors in the leasing market, Ms Ho said.

Yesterday, Cheung Kong would say only that it had sold 100 units and that it would release another 20 units over the weekend.

A property expert said some buyers are clearly motivated by low interest rates and the fear of prices rising further, given the high land bids seen in recent tenders.

Colliers’ Ms Tay said: ‘There’s a possibility that these record prices can help to raise the negotiation power of home owners in the vicinity in asking for higher prices.

‘It is also likely to have the effect of raising the value of mass market homes in Singapore.’

Source: Straits Times, 13 Mar 2010

SELL-OUT launches – that’s what local property agents representing UK and US developers are enjoying.

The buying interest is thanks to depressed prices in the two markets and favourable currency rates; a confluence of factors that is giving Asians a buying opportunity like no other in recent years, leading some overseas developers to even bypass their own markets to market projects here.

When Savills Singapore marketed a high-end San Francisco condominium development last September, for example, it expected to sell fewer than 10 units. In the end, 24 sales for units ranging from US$650,000 to over US$3 million – were closed, says Julian Sedgewick, senior associate director for Savills Singapore’s international residential sales section.

‘It caught us by surprise, as we didn’t expect this. It was the first American property we’d marketed in a couple of years,’ says Mr Sedgewick, who heads the department created just last September to tap the overseas property investment market. San Francisco’s Millennium Tower was built by New York-based Millennium Partners, which holds some Ritz Carlton franchises in the US. The developer had approached Savills to market the property in Asia, says Mr Sedgewick.

The weak US dollar and lower home prices are contributing to the foreign buying spate, especially as there’s now some stability in the market, he says. ‘For investors, this potentially can mean a 20 to 30 per cent capital growth in the next few years.’

The pound’s current low is definitely the reason for the boom in London property sales in Singapore this year, says Stephen Ho, associate director of Colliers’ International’s projects team. ‘The current 2.1 exchange rate is the biggest draw now, with high-end properties costing about 15-20 per cent less than they did in 2007,’ he says.

Prices are creeping up, according to him. But Colliers is still seeing a ’steady flow of good buyers’, rather than the kind of frenzied buying four or five years ago.

Developers are approaching international property agents, and Colliers expects to hold about three exhibitions a month in its bid to represent international developments at asking prices of £pounds;500-£pounds;800 psf in general, in mid-high to high-end projects.

Mr Ho’s advice for would-be buyers is that they should be familiar with the area they’re thinking of buying into. Colliers, for example, mainly markets projects in established locations, rather than regeneration areas in London.

Location, location and location is definitely the mantra when buying overseas, says Doris Tan, managing director of DST International Property Services which specialises in selling London property.

‘With the booming international property market now, buyers have to be very careful about what they’re buying,’ says Ms Tan. A check with the newspaper this week showed some four to five London projects advertised daily, for example. ‘Like all things, location is the most important as the properties in prime locations will come out alright when the economy picks up again,’ she says. ‘Cheap doesn’t mean good.’

International selling activity picked up at the end of last year, says Ms Tan, with some projects, like the Central St Giles development marketed here last week, launching here instead of in London.

DST will also launch some New York property here, but a key drawback is capital gains tax and various other taxes in the US real estate market which the UK does not impose. ‘That said, this is still a good time to consider investing in New York property, but one has to be prepared to hold it for five years or so,’ says Ms Tan.

Who are the buyers? Agents are seeing a wide range – from first-time investors to parents who have children studying in London or US cities. ‘About half are Singaporeans, followed by Malaysians and Indonesians and then about 5 per cent expatriates,’ says Colliers’ Mr Ho.

In London – by far the favoured and familiar market for Singaporeans – the majority buy as an investment, while the rest are mainly parents who buy properties for children studying or working there.

‘Buyers include those who have made money from Asian property so they’re now looking for another place to invest,’ says Mr Ho.

Source: Business Times, 13 Mar 2010

ASIAN buyers of luxury real estate may be raising their profiles in New York and London by picking up luxury homes at eye-popping prices, but they haven’t been neglecting the property markets closer to home either.

While property prices in more mature Asian markets such as Singapore, Hong Kong and Thailand are still some way from their historical highs – courtesy of the beating they took due to global financial crisis – they have been moving up in tandem with stock markets, and attracting interest from individuals in the upper end of the high net-worth range.

‘The very affluent go where they choose to,’ says William E Heinecke, chief executive of Thai conglomerate The Minor Group, which among its diverse interests is a key player in the hospitality and lifestyle industries, with hotels, resorts and residential properties throughout the region. ‘A lot of people come to Thailand for the weather,’ he says. ‘As a result, if you can afford it, you have homes where you spend time.’

Minor launched its first high-end residential property project in 1995 at the Four Seasons Residences in Chiang Mai. Its growing portfolio of luxury developments includes The Estates Samui in Koh Samui, and the high-rise St Regis Residences in Bangkok is slated for completion next year. Prices for its various properties range between US$2 million and US$6 million.

Mr Heinecke says that Indian and Chinese nationals, who may have domicile in key major cities around the world, have emerged as strong players in the mega-luxury bracket, but traditional buyers from other Asian countries as well as Europeans and Americans are also active in the region. ‘As long as people have money and lifestyle is important, they are going to continue to buy in great locations,’ he says.

He adds that a significant new trend involves branded luxury residences which are located within a hotel property and can be part of the rental pool, commanding rates of several thousand dollars a night. ‘When owners visit their properties once or twice a year, it makes sense to have them professionally managed,’ says Mr Heinecke.

Mr Heinecke says that the quality at the luxe end of the market continues to improve, and there is also no shortage of high-end properties and people who are willing to buy them.

‘The bar continues to go up, and competition raises the bar,’ he says.

The luxury investment bar continues to go up as well in Singapore, where the recent launch of hotel and property developer YTL Corporation’s Kasara – The Lake collection at Sentosa Cove has yielded a highly positive result. The boutique development’s 13 villas have all been sold, at prices ranging from S$14 million to over S$25 million.

Of the buyers, seven were foreigners from Asia while six were locals. In general, there are several types of high-end buyers, says Kemmy Tan, director of international real estate at YTL Singapore.

Asian buyers are typically from Hongkong, Indonesia, Malaysia and China, with an increasing number of expatriate Indians as well. ‘American buyers may hold US passports but may not be living in the US, or they may be in places like Hongkong and have some interest in Asia,’ says Ms Tan. At the peak of the market, there were also investors from places such as Ireland. ‘When they invest, they invest with a longer-term view.’

Despite – or even because of – its restrictions on foreign ownership, Singapore has long been a significant target for investors. ‘They are property investors who own homes in key cities,’ she says. ‘If values are expensive in their home countries and Asia looks attractive, they will come here – these are definitely people with multiple homes in different cities and resorts.’

Buyers of properties in resort destinations are different from those who buy in Sentosa Cove, says Ms Tan. ‘They buy in Phuket and Bali for the resort lifestyle – those who buy here want the best of both worlds. They might have business interests and they want the comfort of city living. For wealthy investors, especially during the financial crisis, they are looking for good buys in ’safe’ locations.’

The proportion of foreign investors versus locals has increased tremendously in the past few years, she adds. And the good news is there is still some upside.

‘Real estate has always been a good hedge against inflation,’ says Ms Tan. ‘For luxury property, we are at least 10 to 15 per cent below the peak, so there’s room to move up.’

Elsewhere in Asia, there have been recent reports of a US$45 million riverfront mansion on the market in Shanghai’s financial district – an indication of the real estate boom in China. If those kinds of prices look a little scary, then there are always less heated up markets like Taiwan, where analysts report that foreign investors make up less than one per cent of the property market. Where opportunities go, of course, the money will always follow.

Source: Business Times, 13 Mar 2010