Good class bungalow sales in first half pass $1b mark, and demand unlikely to flag: Report

THE priciest homes just keep getting pricier, with the values of upmarket, prime-area bungalows rocketing this year, and sales totalling more than $1 billion in the first six months.

And just to underline the boom in what are called ‘good class bungalows’, a Nassim Road house sold in April for $43.5 million, that is $1,800 psf and just shy of the record $1,899 psf set in 2007 for a plot along the same road, according to a Savills Singapore report.

The most expensive bungalow sold this year in terms of overall price was a sprawling Leedon Park plot that went last month for a whopping $59.4 million, or $1,419 psf.

Good class bungalows tend to be big and exclusive, and are arguably Singapore’s most coveted landed homes.

They typically sit on plots of at least 1,400 sq m, or 15,070 sq ft, and can be found in 39 prime gazetted areas such as Nassim Road.

In the first half of this year, sales of good class bungalows reached about $1.12 billion, which is about 81 per cent of the value done last year, said Savills.

There were 54 deals done in the first six months, compared with 24 in the same period last year, it said.

Prices have continued edging higher on the revived demand from well-heeled buyers, added Savills.

The average price of good class bungalows rose from $928 psf in the first quarter to $1,082 psf in the second and is now 36 per cent higher than a year ago.

‘This year we are seeing more demand from ultra-rich, new citizens and PRs in the market, which could possibly have resulted in the higher volume and prices,’ said the firm’s director of prestige homes and investment, Mr Steven Ming.

An agent who declined to be named added: ‘Some new citizens from China are still looking for good class bungalows.’

He said the market has quietened down a bit recently as the gap between buyers’ and sellers’ price expectations widens.

CB Richard Ellis director (luxury homes) Douglas Wong said: ‘Good class bungalow prices have continued to rise since 2007 and through the global financial crisis. Owners’ expectations are still high due to the limited supply.’

Some sellers have been asking for higher prices after hearing talk of a Cluny Road bungalow achieving a record price of slightly over $2,000 psf, agents said.

Buyers may be sitting on the sidelines but they are likely to come back to market soon when they realise that prices are not going to fall, Mr Wong said.

The managing director of RealStar Premier Property, Mr William Wong, said he has already seen some local investors returning to the good class bungalow market recently.

But foreign buyers are few and far between. They need special permission and must be permanent residents to own landed property.

Foreigners who are not permanent residents can buy landed homes in Sentosa Cove, subject to government approval.

In recent years, the typically smaller landed homes in the 99-year leasehold gated residential enclave have also seen exceptional prices.

Average prices of Sentosa Cove bungalows rose 55 per cent to $1,959 psf in the second quarter over the same period a year ago, said Savills.

In the first half, there were 35 caveats lodged for bungalows in Sentosa Cove compared with 36 for all of last year, it said.

Just over half of this year’s bungalow caveats were lodged by Singaporeans.

China accounted for 10 deals, the largest of the foreign buying contingent.

But Mr Ming said that good class bungalow prices are looking more attractive than the prices of leasehold Sentosa Cove bungalows.

He added that good class bungalow prices may rise by a further 5 to 10 per cent this year, given the more robust economic recovery and the fact that the buyer base has expanded.

Source: Straits Times, 20 Jul 2010

SINGAPOREANS who qualify for highly subsidised public rental flats but sublet them illegally will soon face tougher penalties.

National Development Minister Mah Bow Tan yesterday announced changes to existing legislation giving the Housing Board the same punitive powers over public rental flats that it has over sold HDB flats.

Currently, when rental flats are sublet illegally, the HDB’s only recourse is to take back the flats and bar the tenants from renting for a fixed period.

However, experience showed that was not a sufficient deterrent and stiffer penalties were needed to keep rental flats for the truly needy, Mr Mah told Parliament.

The vast majority of those who sublet rental flats had alternative accommodation, and were abusing the highly subsidised monthly rentals of up to $60, he said.

In 2008, the HDB terminated the tenancies of 221 residents for illegal subletting.

The number of such cases has come down due to warnings against the practice, he added.

Last year, there were 170 cases. The first six months of this year saw 63 cases.

Source: Straits Times, 20 Jul 2010

(LONDON) Asking prices for British homes fell for the first time this year in July, lowering the annual rate of growth to 3.7 per cent from 5 per cent in June, property website Rightmove showed yesterday.

Rightmove blamed the weakening on a rise in the number of homes coming up for sale, which had allowed buyers to gain the upper hand.

‘The number of new mortgages being approved each month is less than half the number of new sellers,’ said Miles Shipside, Rightmove’s commercial director. ‘Conditions are ripe for a strong buyers’ market in the second half of 2010.’

Rightmove said the supply of properties coming up for sale was up almost 50 per cent compared with the same period last year while many buyers were still struggling to get mortgages. It predicted that asking price gains of around 7 per cent in the first half of this year would be wiped out by falls in the second half as a public spending squeeze and a weaker economic outlook weigh on confidence. — Reuters

Source: Business Times, 20 Jul 2010

(BEIJING) A typical Beijing flat costs about 22 times average incomes in the city, state media said yesterday, highlighting the challenge China faces providing affordable housing amid a property boom.

A 90-square-metre apartment in Beijing cost 1.6 million yuan (S$325,331) last year, the China Daily said, citing an independent report. That compared to an average household disposable income of around 71,000 yuan in 2009, according to city figures. The report was completed by the Beijing University of Technology and the Social Science Academic Press.

It said the building of low-cost, government-subsidised housing had failed to meet demand and called on policy-makers to increase the supply of land for such projects.

Authorities in China have issued a slew of measures in recent months aimed at preventing the property market overheating and causing a bubble that could derail the world’s third-largest economy. Chinese property prices in June fell 0.1 per cent from the previous month, their first monthly fall since the first quarter of 2009, according to official data. — AFP

Source: Business Times, 20 Jul 2010

(SEOUL) South Korea said yesterday it will unveil measures aimed at boosting housing transactions on Thursday, sending shares of home builders higher.

The Ministry of Land, Transport and Maritime Affairs confirmed measures aimed at ‘normalising housing transactions’ would be discussed at a weekly emergency economic meeting to be chaired by the president on Thursday.

House prices have been rising over a year but sales transactions have been shrinking partly because of strict restrictions on mortgage borrowings imposed in recent years.

Ko Heung-kil, the chief of the ruling Grand National Party’s policy committee, told a meeting of senior party members earlier in the day that the government was preparing to announce measures aimed at boosting home transactions.

Mr Ko’s comments had sent the construction industry sub-index 2.9 per cent higher, even as the the broader index fell 0.4 per cent.

It was not clear if the measures would be aimed at helping boosting sales transactions of existing homes or new homes or both.

Apartment prices across South Korea set their first weekly fall in 16 months last week, data from the country’s largest lender, Kookmin Bank, showed on Friday.

Home prices grew 3 per cent in June from a year earlier, above the annual consumer inflation rate of 2.6 per cent for the month but slowing for a second consecutive month, Kookmin Bank data showed.

But an index from the bank that measures activity in home transactions fell last month to an 18-month low of 0.2 from 0.3 in May and from as high as 1.3 set in September 2009.

South Korea has on several occasions imposed strict limits on the maximum amount of mortgage loans that home owners can borrow on the basis of the market prices of the homes or borrowers’ annual income.

Local media and some politicians have demanded the restrictions be eased, but financial authorities have repeatedly said they would not loosen them drastically, mainly out of fear that already high household borrowing could flare up again. — Reuters

Source: Business Times, 20 Jul 2010

Sun Hung Kai may put up another 50 apartments for sale this week

(HONG KONG) Sun Hung Kai Properties Ltd, the world’s biggest developer by market value, will put another 50 luxury apartments up for sale in Hong Kong after buyers snapped up all 92 flats in a first batch put up for sale over the weekend.

The company sold the apartments at its Larvotto project at an average of about HK$40 million (S$7.1 million) per unit, bringing in about HK$4 billion in revenue, Sun Hung Kai said in a press release.

The new batch may go on sale in the middle of this week, it said, adding that their average sale prices may be 2 per cent higher.

‘The price is reasonable for properties of this quality,’ Eva Yeung, an agent at Centaline Property Agency Ltd who bought a HK$47 million unit on behalf of a Hong Kong-based client, said outside the project’s showroom at the International Financial Centre building in the Central business district on Saturday.

Ms Yeung said the luxury property market in Hong Kong will be supported by the lack of supply and increased demand from Chinese buyers. That may counter Hong Kong government efforts to curb a 38 per cent surge in home prices since the beginning of 2009 amid concerns that housing is becoming unaffordable.

About 20 per cent of the buyers over the weekend were from mainland China, Sun Hung Kai said.

‘Demand has exceeded supply,’ Victor Lui, an executive director at Sun Hung Kai’s agency arm, said in the press release. ‘All of the units were sold within the first few hours after sales began.’

Sun Hung Kai fell 0.3 per cent to HK$111.50 at the close of trading in Hong Kong yesterday. The Hang Seng Property Index that tracks the performance of seven Hong Kong developers dropped 0.4 per cent.

Sun Hung Kai and partners Kerry Properties Ltd and Paliburg Holdings Ltd last week said they were putting the apartments in the Ap Lei Chau district up for sale for between HK$15,811 per square foot and HK$22,500 psf, a record for the district.

Second-hand units in Bel-Air, a luxury project in the nearby Pokfulam district, are selling for ‘similar prices’ to Larvotto, according to Buggle Lau, chief analyst at property agency Midland Holdings Ltd. New developments in the area will probably sell at a minimum of HK$15,000 psf, he said.

Luxury residential prices in the Island South district, which includes Repulse Bay and Stanley areas, grew 2.5 per cent in the second quarter, after rising by nearly 35 per cent in the previous nine months, according to property consultant Knight Frank LLP.

Luxury homes are those at least 1,000 square feet (93 sq meters) or costing at least HK$10 million.

Apartments at Larvotto, which has 715 units, will be around 1,500 to 2,500 sq ft. Larvotto is the name of the main public beach in Monaco.

Hong Kong developers sell units in developments in batches instead of offering them all at once to gauge demand and take advantage of rising prices.

The authorities have introduced rules on new home sales and are investigating cancelled sales at a Henderson Land Development Co luxury apartment project.

Henderson last month cancelled 20 transactions at its project in the Mid-Levels district, including the one the company claimed would fetch a record HK$88,000 psf, prompting lawmakers to call for an investigation.

The Legislative Council on July 12 held its first special meeting to discuss the collapsed sales, which were worth HK$2.67 billion, according to Henderson.

Since last year Hong Kong has raised the requirement for downpayments on luxury homes and cracked down on misleading marketing by developers, including the use of show flats, after officials expressed concern that prices were rising too fast. – Bloomberg

Source: Business Times, 20 Jul 2010

The draw: low crime rate, family-friendly and homeland nearby

Indian national Nikhil Engineer, seen here with wife Mansi and their children Neal, four, and Rhea, one, came here to be nearer relatives in India and because Singapore is a good place to raise their children. He is on an employment pass but plans to apply for PR soon.

# Bulk of Indian nationals are work permit holders

# Number of professionals rising

# Surge in firms owned by Indian expatriates

# Boom in businesses and services catering to them

# Growth in domestic cricket league

FOREIGNERS from India now form almost a quarter of the 1.79 million foreigners and permanent residents (PRs) who currently live here.

The number of Indian nationals living and working here has now crossed the 400,000 mark, according to the Indian Embassy.

Two years ago, the number stood at around 200,000.

Although the bulk of them are work permit holders with jobs in the construction or marine sectors, a rising number are professionals, said Mr Bernard Menon, centre manager of the Migrant Workers Centre, a non-governmental organisation that provides assistance to foreign workers on employment-related issues.

Industries such as engineering, information technology and finance are among the areas where Indian nationals are making a name for themselves, said Mr Vasanth Kumar, the Indian Embassy’s first secretary.

Many are also striking out on their own once they arrive here.

The Singapore Indian Chamber of Commerce and Industry (SICCI) has seen a surge in the number of companies owned by Indian expatriates, from around 1,500 in 2006, to 3,000 today.

Said an SICCI spokesman: ‘Their businesses mainly lie in information technology, finance, trading, and food and beverage.’

A boom in businesses and services catering to Indians has also resulted.

The Global Indian International School, for example, now has 4,000 students – four times the number it had five years ago. Indian nationals make up 90 per cent of its students.

In Little India, about 20 per cent more grocery shops and restaurants have popped up in the past five to 10 years to cater to growing demand, said Mr Raja-kumar Chandra, chairman of the Little India Shopkeepers and Heritage Association.

Indian nationals are also making an impact on the playing field.

The Singapore Cricket Association said its domestic league has grown from 36 teams in 2007 to about 90 now.

Mr Dharmichand Mulewa, the association’s general manager, said many of the new teams are made up of Indian expats.

However, not just the cricket league is growing. Across Singapore on weekends, stumps are as common a sight on playing fields as goal posts.

There were 1.79 million foreigners and PRs in Singapore last year, up from 1.04 million in 2000. The Immigration and Checkpoints Authority does not provide a breakdown on the number of foreigners here by nationality.

However, National University of Singapore sociologist Gavin Jones, who researches population and development issues, believes Chinese and Indian nationals, as well as Malaysians, Indonesians, Filipinos and Bangladeshis, form the largest groups of foreigners and PRs here.

‘Most new PRs in recent years have come from Asian countries, and it is generally accepted that the Chinese, Indians and Malaysians are prominent among these,’ said Professor Jones, when asked to explain.

Indian associations such as the Indian Women’s Association and SICCI told The Straits Times that Singapore is gaining popularity as a destination of choice among Indian immigrants because it offers a business- and family-friendly environment, has a low crime rate and is just a short flight from India.

A large proportion of the Indian immigrants here come from Tamil Nadu, said Mr Nikhilesh Gupta, president of the Bengali Association Singapore. Apart from proximity, language is a key reason they make tracks for Singapore.

‘Tamil is an official language here, and it gives them a kind of connection to Singapore, in terms of feeling more at home,’ he explained.

Some who left India for other countries have also found their way here.

Mr Nikhil Engineer, 34, who left London with his family to work in Singapore two years ago, is one such example.

He said he came here to be nearer relatives in India and because Singapore is a good place to raise his two young children.

The vice-president of product control at Credit Suisse said: ‘It is the easiest place to settle down in; everything is straightforward.’

Asked if he planned to stay here permanently, he added: ‘That’s the plan. It would be tough to adjust to another place because Singapore tends to spoil you.’

Source: Straits Times, 20 Jul 2010

THE Urban Redevelopment Authority (URA) has launched a 3ha site at Kaki Bukit Avenue 4 for tender under the confirmed list.

The plot, with a 2.5 plot ratio, is being offered on 60-year-leasehold tenure and is designated for Business 2 use, which means it can be developed for various uses such as light and general industry, warehousing, utility or telecommunications.

The tender for the land parcel will close on Sept 14.

Colliers International director (industrial) Tan Boon Leong expects the site to fetch bids of $60-$70 per square foot of potential gross floor area, or $48.5 million to $56.5 million.

The unit land price is below the $105 per square foot per plot ratio (psf ppr) fetched for a 30-year-leasehold Business 2 plot at Kaki Bukit Road 2 sold by the government in August last year.

‘The earlier site was better located, in the main thoroughfare of the Kaki Bukit industrial area. It was also much smaller at about one hectare and a lower plot ratio of 1.0, resulting in the gross floor area of 115,384 sq ft, compared with 807,833 sq ft for the latest plot. For these reasons, I expect the latest site to fetch a lower unit land price despite its longer leasehold tenure.’

Mr Tan also believes that the confirmed-list site at Kaki Bukit Avenue 4 will fetch lower bids than a 3.5ha Business 1 site at Ubi Road 1 that was launched for tender in June and whose tender will close on Aug 11. The 60-year-leasehold plot, with 2.5 plot ratio, may fetch bids of $80-$90 psf ppr, he forecasts.

‘It enjoys a choice location, about 200-300 metres from Tai Seng MRT Station,’ Mr Tan notes.

The Ubi site was released under the confirmed list of the government’s first-half 2010 industrial land sales programme.

The second-half confirmed list has three sites. Besides the Kaki Bukit Avenue 4 plot which has just been released, a site at Yishun Street 23 and another plot at Old Toh Tuck Road will be launched for sale in August and October this year respectively. Both are zoned for Business 2 use.

In addition, the reserve list will offer seven industrial plots in locations such as Woodlands, Tuas View, Kaki Bukit, Ang Mo Kio, Pioneer Road North, Ubi and Serangoon North.

While the government releases sites on the confirmed list according to a pre-stated schedule, it launches sites on the reserve list only upon application by developers.

Source: Business Times, 20 Jul 2010

THE credit loss risks of Singapore banks would be limited even if an asset bubble were to form, Standard & Poor’s Ratings Services said yesterday.

Singapore banks’ heavy exposure to home loans and the strong climb in property prices in the past year have raised many questions, including the credit loss risks that banks face, it noted in a report. However, ‘a high savings rate and low household debt support borrower repayment ability when collateral values fall’, said Standard & Poor’s credit analyst Ivan Tan.

Negative equity (when the loan amount exceeds valuation of the home) by itself, is not a sufficient condition for default, he added.

Standard & Poor’s said that its view was based on the reasonable level of housing affordability, sound borrower repayment ability, low loan-to-value ratios, the government’s measures to cool the market, and mortgage rates turning upward. Mortgages represent the single largest industry exposure for Singapore banks, at about 25 per cent of loan portfolios.

The risk of financial losses to banks would increase if affordability declines, which could occur if property prices continue climbing or if household incomes slip, the rating agency said.

‘We believe an unabated increase in property prices is unlikely, given the government’s past willingness to implement cooling measures,’ Mr Tan said.

On the other hand, household incomes can fall sharply for a few reasons: job loss in a recession is the most common factor. Nevertheless, the rapid economic recovery has led to an improvement in the unemployment rate to 2.2 per cent as of March 2010, almost back to pre-crisis levels.

In February 2010, the government lowered the ceiling for home loans to 80 per cent of valuation – one of the steps that it took in trying to rein in the market.

‘We believe Singapore banks seldom extended loans of more than 80 per cent of valuation even before the loan ceiling was lowered,’ said the report.

‘Banks are beginning to price in higher risk premiums by raising home loan rates . . . The higher home loan rates will counterbalance the returns from property investments. This, in turn, helps reduce the likelihood of a speculative bubble and limit the risk of credit loss for banks.’

Last week, Standard & Poor’s affirmed its rating on the three Singapore banks, citing the lenders’ strong financial profiles and prudent management strategies.

S&P kept its long-term rating for DBS at AA-/Stable, United Overseas Bank (UOB) at A+/Stable, and OCBC Bank as A+/Stable.

The banks’ short-term ratings stand at DBS with A-1+, UOB with A-1, and OCBC with A-1.

Source: Business Times, 20 Jul 2010

It buys office, retail space in Sydney building for A$120 million

K-REIT Asia has acquired office and retail space at 77 King Street in Sydney, Australia, for A$120 million (S$145 million).

The trust announced the move yesterday – as well as improved results for the second quarter ended June 30. Boosted by recent acquisitions, net property income (NPI) jumped 49 per cent from a year back to $18.4 million. This raised distributable income to unit-holders 26 per cent to $22 million.

Distribution per unit (DPU) was 1.64 cents, falling 38 per cent from 2.64 cents a year ago as the unit base expanded due to a $620 million rights issue last November.

Adjusting for the rights issue, DPU in Q2 last year would have been 1.32 cents. Based on this, DPU would have risen 24 per cent year-on-year.

K-Reit’s latest purchase at 77 King Street comes hot on the heels of two other deals. It bought a 50 per cent stake in 275 George Street in Brisbane early this year, and an additional 29 per cent interest in Singapore’s Prudential Tower late last year.

77 King Street is in Sydney’s central business district and is owned by Kingvest Pty. K-Reit bought an 18-storey office block with 130,394 sq ft of space, and part of a retail component with 16,856 sq ft of space.

Rents at the property are around A$570 per sq metre a year – at the lower end of market rates – but the seller will provide K-Reit with an NPI guarantee of up to A$4 million for six years. The leases also come with fixed annual rental escalations.

The space will be fully leased by the time the acquisition is complete in Q4. Key tenants include CapGemini Australia and Fitch Australia.

K-Reit will fund the purchase with equity from its rights issue and debt. Its aggregate leverage at June 30 was 15.2 per cent, and is expected to rise to 20.4 per cent after the Sydney deal is done.

For the first half ended June 30, K-Reit’s NPI surged 40 per cent year on year to $32.3 million. Distributable income to unit-holders rose 20 per cent to $39.8 million.

DPU was 2.97 cents, down 41 per cent from five cents a year ago – also because of the rights issue. Adjusting for that, DPU last year would have been 2.49 cents, reflecting a 19 per cent year-on-year rise.

For the period Jan 1 to June 30, unit-holders will receive a distribution of 2.97 cents on Aug 26.

The chief executive of K-Reit’s manager, Ng Hsueh Ling, is upbeat. The Singapore office market is likely to have ‘passed the trough’ and the Reit has seen more sign-ons, she said at a briefing yesterday.

As at June 30, K-Reit’s portfolio occupancy rate was 97.9 per cent, up from 96 per cent a quarter earlier.

But the portfolio’s average gross monthly rent dipped slightly to $8.19 psf from $8.30 psf. According to Ms Ng, this was the result of a lease restructuring. K-Reit had negotiated for the extension of some leases and offered slightly lower rents in return, so lease expiries would be spread out better.

Source: Business Times, 20 Jul 2010