NEWS & VIEWS Update by ERA Research & Training Division Wednesday, 23 October, 2013 RESIDENTIAL MARKET Space crunch? More roads may be built underground Singapores Central Business District, new Marina Bay Downtown and its future southern waterfront district may be linked by an extensive underground road network beyond 2030. The plan being studied by the Land Transport Authority (LTA) will see traffic zipping about unobtrusively beneath the surface in a series of subterranean ring roads. Such roads, which free up surface space and improve the liveability of urban areas, are found in cities such as Brussels, Stockholm, Madrid, Paris, Hamburg and Boston. Singapores plan is seen as part of a larger one to accommodate a growing population, and it dates back to the 1980s. Then in 1996, the LTA envisioned 30km of two- to four-lane roads forming a pair of concentric rings under the city centre. It revisited the idea in the recently released 2013 Land Transport Masterplan, but added that the so-called Singapore Underground Road System (Surs) will now be more extensive. We are now studying how Surs can serve new developments in the Marina Bay area and the new southern waterfront city that will extend from Keppel Channel to Pasir Panjang Terminal, a spokesman said. But until exact development plans for these two districts are clearer, he said, the scale and alignment of the underground roads remain conceptual. Experts said going underground is inevitable. Dr Park Byung Joon, head of the urban transport management programme at SIM University, said intense development is expected for the new downtown areas. Thus, building roads on the surface may not be desirable due to the limited supply of land. Elevated roads may also mar the visual appeal and perceived prestige of a district, he said. Noise is another consideration. The only option left is an underground road network, he said. He noted that it will be very expensive to build, but the benefits may be justifiable. Observers said the long gestation of such a network - at least 50 years from concept to implementation - held a high cost, as many areas in the city had to be safeguarded. The term refers to reserving space for a major infrastructure project to avoid conflicting demands in the future. But retired traffic engineer Joseph Yee, 68, who was involved in early Surs studies, said: The cost of not safeguarding is higher. Safeguarding ensures that property acquisition is kept to a minimum, for instance. Going underground is not entirely new to Singapore. The 12km Kallang-Paya Lebar Expressway, which opened in 2008, is largely underground. The Marina Coastal Expressway, slated to open by the year end, is the first to have a stretch going under the seabed. Source: The Straits Times –16 October 2013 Consultants, agents ease the way into Iskandar Developers, agents and consultants are laying on regular talks and guided excursions across the Causeway so increasingly keen investors can learn about real estate opportunities in Iskandar. The options - they range from basic introductory seminars to property clubs for the savvy - are a response to the growing numbers of Singapore-based buyers venturing into the area. Some investors are already clued in on the basics and want to get down to the business of finding homes they can buy. These are more likely to go straight to developers, most of whom run regular excursions to Iskandar for potential customers. Developer Mah Sing, for example, holds such trips every weekend. A lot of the people we get are already very knowledgeable about Iskandar, some even know more than our own salespeople, said a spokesman. Most of them are interested in viewing our project in Medini, The Meridin @ Medin i, as it is near EduCity and many people are keen on EduCity. Medini is an area of Iskandar being developed into an urban township consisting of luxury condominiums, hotels, hospitals and EduCity, an education centre that has drawn international universities. Then there are those in between - savvy investors who already know a lot about Iskandar but may not be keen to buy just yet. Property clubs are the way to go for this group. These are run by real estate agents or consultants who organise talks and trips in their free time. The talks are often free, and in return the agent gets to amass a group of potential clients. There is no data on how many such clubs exist, but industry players say they are increasingly common. Source: The Straits Times –16 October 2013 Uneven showing in Sept launches as developers jostle for buyers Developers private home sales surged 65 per cent to 1,246 units in September from 756 units in August - though the figure was slightly less than half the 2,621 units transacted in the primary market in September last year. The figures exclude executive condominium (EC) units. Based on preliminary figures, developers have sold 2,484 private homes in the third quarter - the weakest showing since Q4 2009, when 1,860 units were sold. This shows the total debt servicing ratio (TDSR) framework introduced in late June has bitten the private housing sector deeper than previous cooling measures. A closer look at the latest figures from the Urban Redevelopment Authority (URA) also revealed an uneven performance among the seven new projects (excluding EC developments) that were launched last month. While Sky Vue near Bishan MRT Station and Thomson Three on Bright Hill Drive enjoyed strong take-up (units sold to units launched in the month) of above 80 per cent, the other five only managed take- up rates ranging from 9-45 per cent. The five were: Alana in Sunrise Terrace; Belgravia Villas on Ang Mo Kio Avenue 5 (both strata landed projects); The Glades condo next to Tanah Merah MRT Station; The Skywoods on Dairy Farm Road; and Onze@Tanjong Pagar. With many constrained by the new rules, the pool of potential buyers has shrunk, so developers have to jostle harder for buyers. Developers sold 482 units in July and 756 in August. Septembers top-selling project was CapitaLands Sky Vue condo, with 433 units sold at a median price of $1,401 per square foot. UOL Group and Singapore Land last month found buyers for 264 units at Thomson Three at a median price of $1,362 psf. Keppel Land moved 89 units at The Glades at $1,518 psf median price. ECs (a public-private housing hybrid) continued to do well, with 412 units sold in the primary (that is, developer sales) market last month - or 83 per cent of the 495 units launched in the same period. The best seller was Hao Yuan Developments Sea Horizon in Pasir Ris, with 317 units transacted at a median price of $818 psf. In August, developers moved 726 EC units; the figure for July was 112. Inclusive of ECs, developers sold 1,658 homes last month, up from 1,482 units in August and 594 units in July. Eugene Lim, key executive officer at ERA Realty, notes that ECs are aimed at the first-timer and upgrader market. They will continue to see good demand as buyers are not affected by loan quantum limits as long as they can fit within the TDSR framework. Buyers also do not need to pay additional buyers stamp duty (ABSD) if they qualify for remission. Moreover, when an HDB upgrader buys an EC unit directly from a developer, his existing HDB monthly mortgage payments are not factored into TDSR calculations as current rules require such buyers to sell their HDB flat within six months of the EC projects completion. Based on preliminary figures, developers sold 12,434 private homes (excluding ECs) in the first nine months. Property consultants expect the year to end at 14,000-16,000 units. Last year, developers sold a record 22,197 private homes in addition to 4,499 EC units. Analysts note that the $1,401 psf median price for Sky Vue last month reflected in yesterdays data is 11.5 per cent lower than the $1,583 psf median price for the next-door Sky Habitat in its maiden month of launch in April 2012. Developers have generally been launching new projects at the lower end of their earlier expectations and are including a higher ratio of smaller units to keep the lump sum affordable. An industry player observed that with the exception of a few projects, developers and contractors seem to be compromising on quality to keep a lid on costs and allow for more attractive pricing. A developer told BT that prices of its projects on the market are now 3-8 per cent below the 2011/2012 peak. We have less pricing power for big developments with a high proportion of unsold units, and more pricing power in small projects with just a few unsold units. In the Core Central Region, the price drop could be more - around 8-10 per cent, he added. Source: Business Times –17 October 2013 HDBs net deficit up 80% in last FY before govt grant The net deficit of the Housing and Development Board (HDB) increased 80 per cent in the last financial year (FY2012/2013), to $797 million from $443 million. This was before a $1.04 billion government grant it received in the same financial year. In its annual report released yesterday, HDB said the higher deficit stemmed from a larger deficit for its Home Ownership segment. The category covers the development and sale of flats to eligible buyers under the various home ownership schemes for public housing. The number of flats sold this year stood at 10,533, which was 2,016 units fewer than last year. HDB recorded a gross loss of $231 million on sales in FY2012/2013; it also disbursed $178 million in CPF housing grants to eligible buyers of resale flats. Meanwhile, more flats were built in the last financial year compared with the one prior, as HDB ramped up its building programme. HDBs chief executive officer, Cheong Koon Hean, noted that a total of 72,737 dwelling units were constructed in the last financial year - up 27.75 per cent from the 56,938 units built the year before. This has not only served the purpose of meeting the needs of various groups of home buyers, but has also helped in rebalancing the supply and demand situation. The challenge ahead is to ensure smooth completion and delivery of the new flats, given the large volume and resources involved, said Dr Cheong. In 2012, HDB launched 27,084 flats under the Build-To-Order (BTO) system - the largest BTO supply in a year since the system was introduced in 2002. Just as new units have been built, older estates have also seen rejuvenation, said HDB chairman James Koh Cher Siang. He highlighted several ongoing programmes to upgrade existing facilities or to provide new ones altogether - including Punggols enhancement as a waterfront town. Said Mr Koh: As the HDB building programme is being ramped up and despite the immense pressure this exerts on the building industry, we must ensure timely delivery of our flats without compromises on the quality. Source: Business Times –17 October 2013 Is freehold property better than 99-year? There are generally two types of property tenure in Singapore: 99-year leasehold and freehold. We consider 999-year leasehold to be the same as freehold, because their difference in value is negligible. Freehold properties hold a few advantages over their leasehold counterparts - higher en-bloc potential, slower pace of depreciation and no restrictions on the use of Central Provident Fund for home purchases. In recent years, new leasehold condominiums seem to have dominated the market. The proportions of new leasehold and freehold condominium sales stand at 95 per cent to 5 per cent respectively as of first half of 2013. In contrast, back in 2006 and 2007, around 70 per cent of new sales were freehold. This could be attributed to the ramp-up of the government land sales programme in recent years and the tightening of en- bloc rules in October 2007. Proponents of freehold properties might argue that the price appreciation of freehold properties always outstrips that of their leasehold counterparts. This is because leasehold properties will depreciate over the course of their lease. In order to find out how properties with different tenures but similar attributes perform over time, we picked Southaven I and Southaven II for illustration. Both projects were developed by the Ho Bee Group and share similar attributes such as location, product quality and facilities. Both projects were also launched for sale in 1995, but completed two years apart. The price gap between Southaven I and II seems to have widened from only 8 per cent at its launch in 1995 to 18 per cent in 2013. But this price trend alone is not conclusive due to uneven and thin transaction volumes. The attributes of units sold in the same year were also not comparable. But it gives a good glimpse of how two projects with different tenures located right next to each other fare over time. If we are to look at the broader market, freehold condominiums might not always enjoy superior price appreciation over their leasehold counterparts. Our analysis of the freehold and leasehold indices over the last three property cycles shows that out of the three upcycles, the freehold index only outperforms the leasehold index over one cycle between Q3 2006 and Q2 2008. This is the period just before the global financial crisis when the en-bloc frenzy reached all-time high in terms of number of deals and transaction values. During this upcycle, freehold properties moved up 54 per cent, outperforming leasehold properties which only appreciated 39 per cent. For the other two upcycles, en-bloc activities were fairly muted with fewer deals and much lower transaction values. We can thus infer that en-bloc potential plays a key role in determining the price performance of leasehold and freehold properties. Interestingly, during the subsequent downturn, freehold condominiums also lost 27 per cent of their value compared to 24 per cent for leasehold condominiums. Upon analysing the downcycles, we observed that regardless of tenure, the higher the price appreciation during the upturn, the greater the fall during the downturn. This was what happened to leasehold properties during the dotcom crash between Q3 2000 and Q2 2002. The prices of leasehold condominiums gained 46 per cent as compared to a milder 38 per cent for freehold condominiums. However, leasehold condominiums fell almost twice as much as their freehold counterparts when the general market went into a slump after the dotcom crash. In the landed segment, the performance of terrace houses seems to paint a different picture. Freehold terrace houses have outperformed the leasehold ones in all periods except for the downturn during dotcom crash. In good times, they perform better than leasehold ones and in downturns, they also seem more resilient. This could be because of the restrictions on foreigners owning landed properties in Singapore. So, which is better, freehold or leasehold? Based on the analysis, the answer depends on whether one is buying a landed or non- landed property. If buying a landed property, historical data shows that freehold might be a better choice. If one is buying a leasehold non-landed property in the current upcycle, given the challenging en-bloc market, leasehold could help to lock in more percentage gains if it is bought and sold at the right time. Indeed, property values are influenced by multiple factors. However, if we assume all else being equal, freehold properties will always command a premium over their leasehold counterparts. Source: Business Times –17 October 2013 Northstar to expand ERA brand in region with franchise rights Private equity company Northstar Group has completed its purchase of the franchise rights to expand the ERA Real Estate brand in the Asia-Pacific region. The rights, acquired from Hersing Corporation, will give Northstar access to 18 countries in the region, including Australia, China, Indonesia and Japan, the company said in a statement yesterday. Demand for real estate in Asia Pacific will increase this year as economies get stronger and younger populations support domestic demand and lure investment, according to the Organisation for Economic Cooperation and Development. Northstars managing partner Ashish Shastry said: (We) are pleased to be able to grow the brand across a region where the real estate sector offers significant potential. While the company said it was too early to comment on specific plans, it sees significant upside in the regional markets for the ERA brand and will begin exploring opportunities to expand the business to countries in the region where ERA has no presence at the moment. ERA has around 600 offices and 12,500 salespeople operating in Brunei, China, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam. Northstar, which also bought the Singapore franchise rights to the ERA brand, plans to relist ERA as a pure play real estate brokerage firm on the Singapore Exchange (SGX). The initial public offering might happen even sooner than the three-year time frame if market conditions are favourable, the company had said earlier. Northstar is unable to disclose the value of the acquisition as it is bound by confidentiality clauses, though BT understands that a $130 million deal was inked. ERA Singapore CEO Jack Chua will be responsible for managing the ERA franchise in the region. Source: Business Times –17 October 2013 4 mixed-use projects set to hit the market soon Singapores fast-changing skyline is set for another significant reworking with four major projects in prime downtown locations on the drawing boards. They include what will become the Republics tallest building when it is constructed. Progress of all four mixed-use projects is gathering pace, as developers prepare to market residential, office, retail and hotel space in the next few months. Leading the pack is M+S, a 40:60 joint venture firm formed by Temasek Holdings and its Malaysian counterpart Khazanah Nasional. They are developing two upcoming integrated projects - DUO and Marina One. Giving an update on the progress of both, M+S chief operating officer Kemmy Tan told The Straits Times that marketing for the residential component of DUO will start within this month while its commercial units will be marketed by December. DUO, located between Ophir Road and Rochor Road, is next to the Malay heritage conservation district of Kampong Glam. With a gross floor area (GFA) of 1.73 million sq ft, DUO will be the largest integrated development in the Bugis and City Hall area. The development will comprise a 49-storey residential block with 660 units, ranging from studio and one- to four-bedroom apartments to penthouses. Sitting on top of the upcoming Bugis MRT station on the Downtown Line, it will also have a 39-storey commercial tower with a retail gallery, offices and a five-star hotel. Boasting about 500,000 sq ft of office space, DUO will have floor plates of about 30,000 sq ft each - the largest in the Bugis office segment. Ms Tan added that the firm is in talks with about five operators for its five-star hotel. She declined to disclose prices of residential and commercial units, as they are under review by the board. Marketing for the residential portion of M+S other mixed-development, Marina One, will start next year, after development approvals have been obtained. About twice the size of DUO, Marina One spans more than 3.67 million sq ft of GFA. The project in Marina Bay will feature two 30-storey office towers, with two floor plates of about 100,000 sq ft - one of the largest in Asia. There will also be two 34-storey residential blocks housing 1,042 apartments and 140,000 sq ft of retail space. It will be the only development in the Marina Bay district to have a significant pocket - 65,000 sq ft - of green space at its heart. The combined development value of DUO and Marina One is $11 billion. Two other mixed-development projects slated to hit the market by the end of the next quarter are GuocoLands Tanjong Pagar Centre and City Developments (CDLs) South Beach. Tanjong Pagar Centre, set to be the tallest building in Singapore at 290m, will have a residential component named Clermont Residence. Its units will be launched by the end of the year, said GuocoLand. The project will also feature a 38-storey office building named Guoco Tower, 100,000 sq ft of retail space and a 202-room luxury business hotel managed by its hotel subsidiary glh. The hotel, named Clermont Singapore, will be operational by 2016. The marketing of retail space at South Beach, to be located between Raffles Hotel and Suntec City, will start in the first quarter of next year. Developed by a joint venture between CDL and the IOI Group, indicative rentals are expected to fall between $9 and $10.50 per sq ft. The development will have a total GFA of 1.6 million sq ft. It will also blend four historic buildings - three former army blocks and the Non-Commissioned Officers Club built in 1952 - with two newly-built towers. A 29,000 sq ft private club will also be built. CDL said it is not in a rush to launch South Beachs 190 residential units, but it expects foreigners to be among its buyers as recent property cooling measures have curbed locals buying appetite. Source: The Straits Times –17 October 2013 GCB on Leedon Road up for sale A Good Class Bungalow (GCB) at the Leedon Road-Belmont Road junction is being put on the market through an invitation for expressions of interest. The guide price for the original two-storey colonial-style bungalow, which has a land area of about 43,926 square feet, is about $1,700 to $1,800 per square foot (psf) on land area. The freehold site, which is zoned for residential use and is within the designated prime GCB area of Belmont Park, has a swimming pool and a large garden. Enjoying dual frontages, its immediate neighbours include other GCB estates such as Victoria Park, Leedon Park, and Cornwall Gardens. Recent transactions of GCB land in the vicinity include a site at Second Avenue, which was sold for around $1,800 psf, and a separate plot at Belmont Park, which was acquired for about $1,500 psf. Based on the land area of 43,926 sq ft, the plot could potentially be subdivided into a pair of new GCBs of about 22,000 sq ft each. The property is close to amenities and recreational activities at Holland Village which is about 600 metres away, as well as Dempsey Hill and the Orchard Road shopping belt which are about a five to 10 minutes drive away. Nanyang Primary School, Raffles Girls Primary School, St Margarets Secondary School and Hwa Chong International School are also within convenient reach. The expression of interest will close on Nov 8 at 3pm. Source: Business Times –18October 2013 4,800 private homes may go on sale by year-end New private residential launches could be back in full swing from this month to the end of the year as developers release some of the pent-up supply. A bumper crop of about 4,800 new units from 17 launches could go on the market from now till December, consultants estimated. This is much higher than the 3,342 new units put on sale in the third quarter, though it is still below the 5,564 units launched in the years first three months. There were 76 new projects launched in the first nine months of this year. At these projects, 12,033 out of the 15,172 units available had been released for sale as of Sept 30. Developers intending to launch their projects by the end of this year are running out of time. However, even if developers were to push out all of those projects before Dec 31, the supply of new units this year would still pale in comparison to last years figures. The total number of new units in the first nine months this year was 13,357, according to Urban Redevelopment Authority data. Adding 4,800 more units in the final three months of this year would bring the figure up to 18,157 units, which would still be far fewer than the 21,657 new units released last year. Projects that have gone on the market this quarter include Nine Residences as well as The Venue Residences and Shoppes. The 99-year leasehold Nine Residences in Yishun Avenue 9, part of a mixed development by Chip Eng Seng, released 100 units earlier this month at an average price of $1,070 per sq ft (psf) and sold 60 on launch day. The project has 186 units. The Venue Residences and Shoppes, a 99-year leasehold mixed development by City Developments (CDL) in Tai Thong Crescent, began preview sales yesterday. The project has 266 apartments and 28 strata retail units. A CDL spokesman said it had moved about 65 per cent of the 50 homes released for preview sale as at 5pm yesterday, at an average price of $1,380 psf. Hong Leong Holdings will also launch the 396-unit The Inflora at Flora Drive next weekend. The expected average selling price for the 99-year leasehold project is $900 psf, according to agents. Apart from these projects, consultants reckon that 14 more could go on sale before the end of this year. One of them is the 99-year leasehold DUO Residences in Bugis by M+S, which is expected to launch early next month. Others include SingLands 99-year leasehold project Alex Residences at Alexandra View and the freehold The Creek in Bukit Timah by Chiu Teng. DUO Residences is expected to sell at above $2,000 psf, Alex Residences at $1,500 to $1,700 psf and The Creek at $1,500 to $1,600 psf. Source: The Straits Times –19 October 2013 Mega-project coming up in Kampong Glam The historic Malay district of Kampong Glam has long been a crowd-puller, with a colourful mix of hipster cafes and indie boutiques on Haji Lane and Kandahar Street. The area, popular with yuppies and students alike, is set for some added vibrancy when Khazanah Nasional and Temasek Holdings latest offering hits the city centre. Named DUO, the major mixed development by joint-venture firm M+S will be the largest in the Bugis and City Hall areas. It will have residential, commercial and hotel components in its vast 1.73 million sq ft of space. M+S chief operating officer Kemmy Tan said the public can expect DUOs retail offerings to mimic those of Kampong Glam. With retail space of about 60,000 sq ft, the company is looking to attract tenants with niche and boutique concepts. I imagine that the eclectic vibe of Kampong Glam will influence the retail mix, Ms Tan said. To embrace its surroundings, M+S has incorporated pedestrian walkways and plazas into DUOs design, instead of having a traditional big box concept. The firm engaged renowned architect Ole Scheeren to carve out separate spaces to distinguish the projects different components. For instance, 660 residential units will be housed in a 49-storey block, while offices, retail units and a five-star hotel will be in a separate tower, which will be 39 storeys high. Were here to complement the area rather than create something out of context, said Ms Tan. For the residential component, marketing will start within the next month, while leasing activity for commercial units will commence by the end of the year, she said. DUO is expected to be completed in 2017 and will be managed by CapitaLand and UEM Land Holdings. Source: The Straits Times –19 October 2013 SkyPark Residences tops 2013s electronic applications for ECs THE 506-unit SkyPark Residences received 1,604 applications - more than three times the number of units available - at the close of e-applications on Sunday. The executive condominium (EC), which is located in Sembawang, drew applications from upgraders islandwide; a higher proportion of applicants hailed from Housing and Development Board (HDB) estates in Sembawang, Yishun, Woodlands, and Ang Mo Kio. Based on enquiries received, most of the applicants seem to be looking for bigger units, particularly the four-bedroom, five-bedroom, and maisonette units, said the developers, JBE Holdings and Keong Hong Holdings. SkyPark Residences offers a total of 28 five-bedroom maisonettes which are 1,772 sq ft and offer double-volume ceiling height in the living and dining spaces, making it the EC with the highest number of maisonettes. The project also offers a range of three-bedroom to five-bedroom configurations. Based on the number of applications received, SkyPark Residences garnered the highest number of e-applications for an EC so far this year, inching out Sea Horizon in Pasir Ris, which received a total of 1,500 e-applications (for 495 units) in August. SkyPark Residences will open for bookings on Nov 16. Source: Business Times –22 October 2013 Pacific Star to launch condo at Iskandar soon Singapore-based Pacific Star is the latest developer to gear up for the investment hot spot Iskandar. The firm said it will be launching the first phase of its luxury condominium project there in the next two months. Known as Puteri Cove Residences, it is in Puteri Harbour, the areas answer to Singapores Keppel Bay - and is midway between the Causeway and the Second Link at Tuas. The project, which Pacific Star is co-developing with another Singapore-based real estate firm DB2 Group, is five minutes from the newly opened Puteri Harbour Customs, Immigration and Quarantine (CIQ) Centre. Ferry services between Iskandar and Indonesia have begun. At the launch of the first phase, Pacific Star and DB2 will be releasing 330 units from Tower One of the project. These will include apartments ranging from 680 to 1,750 sq ft, with one, two and three bedrooms. The average launch price will be about RM1,360 (S$534) per sq ft. Pacific Star chief operating offier Glen Chan said: We have received extremely strong interest from Singapore-based buyers, and also buyers from Malaysia, Indonesia, China and Japan. Singaporeans make up more than 70 per cent of the inquiries, close to three times more than the number of Malaysians. Most of the interested buyers have cited a budget as high as RM2 million, and the majority of them prefer one- and two-bedroom apartments ranging between 600 and 900 sq ft. Mr Chan noted that prices in Puteri Harbour are still much lower than those in Singapore and in similar waterfront areas in Penang, where they have exceeded RM1,500 psf. Puteri Cove Residences will have three high-rise towers comprising a mix of studio, one- to four-bedroom units and penthouses. There will also be four low-rise blocks of Soho (small office home office) apartments and loft units, on top of a mall. These blocks face a waterfront promenade of eateries, gourmet grocery stores, convenience stores, clinics, and other businesses. Source: The Straits Times –22 October 2013 Prices of studio and other flat types not comparable: Khaw Comparing studio apartments to other flat types is akin to equating apples to lemons, said National Development Minister Khaw Boon Wan in Parliament yesterday. This is because studios are tailored specifically for the elderly, and are kept affordable so buyers can monetise after right-sizing, he added. He was responding to queries from Workers Party chief Low Thia Khiang, who asked if studios were becoming too expensive as an option for the elderly. The price range in Julys Build-To-Order exercise for Bukit Merah studio units was between $113,000 and $163,000 each. In 2003, studios sold for between $47,800 and $71,700. The latest prices are higher than those for the Sengkang two- room units sold in the same July exercise; they went for between $76,000 and $124,000 each. Mr Khaw said he read comments on social media comparing the studios and two-room units, but argued that studios were still reasonably priced. They are comparing apples with lemons. Some studios were in very popular locations, versus two-room flats in non-mature estates. And of course there must be a price difference to reflect this, he said. The studios come in two sizes - 35 sq m and 45 sq m. They are sold on 30-year leases, have elderly friendly features such as non- slip tiles, and most are located in mature towns. Mr Khaw also assured the House that the authorities will inject greater flexibility in selling the studios. Dr Intan Azura Mokhtar (Ang Mo Kio GRC) had called for more leeway to be given to those under 55 years of age - the minimum age requirement for studios, while Mr Hri Kumar Nair (Bishan-Toa Payoh GRC) asked for leniency for those who can qualify for one, but have their equity tied up in their current flat. Mr Khaw noted that the Housing Board would generally look at each case based on its merits, and exercise flexibility under extenuating circumstances. He also replied to Mr Gan Thiam Poh (Pasir Ris-Punggol GRC), saying about 300 couples - comprising a citizen with a foreign spouse - had bought two-room BTO units since such couples were first allowed to in July. Meanwhile, Acting Minister for Manpower Tan Chuan-Jin revealed that the Central Provident Fund Board is working with the National Development Ministry to study more options to help buyers with pre-existing health conditions who are not covered by the Home Protection Scheme. This mortgage-reducing insurance helps with repayments should disaster strike. Since 2011, about 1.3 per cent of all applications were rejected due to serious pre-existing medical conditions. Source: The Straits Times –22 October 2013 Couple sue developer over condo floor area A couple has sued a developer claiming they had been misled into buying an executive condominium (EC) with a floor area of 167 sq m when in fact the unit had a floor area of only 147 sq m. The penthouse unit at Blossom Residences in Bukit Panjang has a second-floor rooftop terrace over the first floor except the living and dining area, which has a high ceiling of 4.2m. The 20 sq m area in question is the empty space not taken up by the rooftop terrace. The couple, who paid $56,050 for an option to purchase the $1.1 million unit, have sued condo developer Grand Isle Holdings, a subsidiary of City Developments Limited (CDL), for damages. Mr Toh Her Chiew, 42, an IT manager and Madam Ling Mee Chow, 43, an accountant, are seeking more than $1 million for the lost opportunity to buy another EC as their income now exceeds the $12,000 eligibility ceiling. However, the developer maintains that there was no misrepresentation on its part. As a reputable developer, it takes a serious view of the allegations and will vigorously defend these claims, said a CDL spokesman in a statement. The developer notes the couple had under-declared their combined income by $370 when applying to buy the EC. CDL says its marketing agent had highlighted to the couple that the unit came with a high ceiling over the living and dining area; this was also reflected in the sales brochure. The developer says the option to purchase signed by the couple clearly stated the area of 167 sq m included the air-conditioner ledge, roof terrace and void. An eight-day hearing into the case is scheduled to start on Wednesday in the High Court. In September 2011, the couple visited the sales gallery for the EC, planning to upgrade from their five-room HDB flat. They decided to buy the penthouse unit, paid $56,050 as the booking fee and signed an option to purchase. About two months later, the couple complained. They say they learnt about the void space only after going through documents that were sent to them together with the sales and purchase agreement. The couple decided not to exercise the option to purchase. As per their agreement, the developer refunded them 75 per cent of the booking fee, which came to about $42,000. In their lawsuit, the couple allege that the sales agent, hired by the developer to market the condo, had misrepresented to them that the unit had a built-in area of 167 sq m. The couple, represented by Mr Vijay Kumar Rai, say that the agent hid or omitted to mention the existence of the void space, which made about 12 per cent of the units total area unusable. The developer, represented by Senior Counsel Ang Cheng Hock, says the agent did not use the term built-in area but told the couple the size of the unit was 167 sq m, which was true. CDL is now seeking the return of the $42,000 which it had refunded to the couple, on the grounds that they had falsely declared their income. Source: The Straits Times –22 October 2013 8,700 shoebox units for resale from now to 2017 At least 8,700 shoebox units are expected to hit the resale market between now and 2017, as the Sellers Stamp Duty (SSD) lock-in period approaches expiry. While this figure is more than double the current completed shoebox residential stock of 3,472 units, signs in the market suggest that demand for such resale units remains relatively resilient amid a slow-moving overall resale market. This figure, revealed in the latest report from the Singapore Real Estate Exchange (SRX), is predicated on a first wave of at least 805 resale units - comprising units bought between Aug 30, 2010 and Jan 13, 2011 - and a second wave of at least 7,910 units entering the market from 2015 to 2017. It also assumed that the first wave of units would be sold in the fourth year of acquisition, which attracts a 4 per cent SSD. This is a reasonable assumption given that these units have, on average, achieved capital gains of around 30 per cent over the three-year SSD lock-in period, as shown by the SRX Property Index, which should overcome the SSD disincentive, noted SRX. As a proportion of the total number of units transacted in the overall resale market, the proportion of shoebox units transacted in the resale market has been steadily increasing, from about 0.4 per cent in the first nine months of 2009 (of 10,019 units transacted), to about 2.5 per cent this year (of 5,550 units transacted). Indeed, part of the shoebox resale trend is attributable to the substantial number of new shoebox homes sold between 2009 and August 2010, which totalled some 2,239 units. On the supply side, assuming that units sold in 2009 have since received their Temporary Occupation Permit (TOP), there are some 10,076 units that have been sold and will be ready for occupation between now and 2016. Including 2013s annualised sales figures, some 10,674 units are expected to receive their TOP in coming years. This translates to an average of 2,668 shoebox units being completed annually, between 2014 and 2017. On the demand side, while the number of non-citizens entering Singapore has averaged 71,500 per annum historically, this dropped to 60,200 last year. Using 2012s figure as a guide - given the more stringent controls over the admission of foreign workers in the past year - and adopting an ultra-conservative assumption that only 30 per cent of them are employment pass (EP) holders with a family of three, the number of EP head of households comes to 6,020 persons. Source: Business Times –23 October 2013 COMMERCIAL MARKET HDB calls time on assignment of tenanted business space The Housing & Development Board (HDB) yesterday acted to curb rising operating costs and speculation in its rental commercial and industrial properties - a move that market watchers said will lead to a more level playing field for genuine businesses seeking space in those sectors. The board said it has introduced a two-stage plan to end the practice of assignment where tenants can pass on their tenancy to a new party for a one-time fee. It added that it currently has 8,000 commercial tenants and 10,700 industrial tenants, and sees an average of about 500 cases of assignment for each group every year. The new rule came after the agency noted rising average assignment fee and tendered rent in the past few years for these premises, which can contribute to higher operating costs that may be then passed on to residents and consumers. Assignment may also encourage unhealthy speculation, HDB said. The intention for assignment fees had been to facilitate the exit of tenants that need to close down their businesses and minimise disruption. HDBs commercial units generally cater to two types of businesses: retail/service trades and eating houses. The average tendered rent has increased 21 per cent from last year to $7.90 per square foot (psf) currently. Assignment fee averages $144,000 now, a 66 per cent surge year on year. As for HDB industrial properties, comprising mainly food, motor workshop and light industrial developments, the average tendered rent has risen 40 per cent since last year to about $2.60 psf. The average assignment fee for clean and light activities is about $35,000 while the fee for more popular units such as food factories and motor workshops has been transacted for as high as $100,000 to $150,000. One industrial deal was cited where the assignment fee was some $500,000. HDB said it chose to disallow assignments to preserve the original intent of the premises to serve the needs of residents and consumers within HDB estates. Analysts believe speculative activity can creep in through the tender process (see chart). End-users may face unfair competition from investors or speculators who bid with the intention to re-assign them later for profit through the assignment fee. This is notable as the rents at these HDB premises are about 20 to 30 per cent lower than market rates, and enjoy strong footfall, analysts said. Each round of assignment also presents new speculative possibilities, they added. That is set to change. HDB will disallow assignments for all new commercial and industrial tenancies from tomorrow. Tenants who wish to shutter their businesses must return their premises to HDB for a re-tender. Existing tenants get a three-year reprieve. They will be allowed to assign their shops or industrial premises up until Oct 15, 2016 (they can also choose to return the premises to HDB within this time). But new tenants taking over from them cannot assign the properties. Shop tenants can still sublet up to half of their premises if they want to scale down operations, with the caveat that they can have only one sub-tenant. Consultants mostly welcomed the policy changes. Eugene Lim, key executive officer at ERA Realty, said it closed a loophole with regard to speculation. The termination of assignments brings HDBs practices in line with those at other government agencies and private landlords, it said. Last March, the Ministry of Environment and Water Resources banned subletting and assignment of tenancies for hawker and wet market stalls. Separately yesterday, HDB said it will increase the supply of HDB shops in tandem with the ramping up of public housing development by building four neighbourhood centres in Punggol, Hougang and Sembawang over the next five years. Details will be announced later. Source: Business Times –15 October 2013 Nam Cheong to buy office space at Suntec Tower Three for $30.3m Offshore vessel builder Nam Cheong is buying office space at Suntec Tower Three to house its Singapore corporate office for a price of about $30.3 million. In a regulatory filing yesterday, it said its wholly owned subsidiary Nam Cheong Offshore has been granted an option-to-purchase (OTP) for three office lots (units #41-01 to #41-03) at Suntec Tower Three from an unrelated party: Vista Realty. The total floor space to be purchased is about 10,097 square feet and the property will have a lease that runs until Feb 29, 2088. Nam Cheong expects to use the premises for its corporate office in Singapore, after existing leases at the three lots expire between Sept 14 next year and Jan 15 in 2016. The consideration of $30.3 million accounted for the current market conditions, location of the premises and property prices in the surrounding area, Nam Cheong said. No valuation report was commissioned for the acquisition. Nam Cheong Offshore has paid the option cost of about $303,000 and is expected to exercise it by paying a deposit of $2.7 million by 4pm on Friday. These two payments work out to 10 per cent of the purchase price of the property, with the remaining 90 per cent to be paid within 10 weeks of exercising the option. The acquisition will be funded through internal resources, and is not expected to have any material impact on the consolidated net tangible assets and earnings per share of the company for the current financial year ending Dec 31. Source: Business Times –15 October 2013 Plum school site in Swiss Club area up for subleasing New and existing players in the foreign school arena looking for a long-term investment in a flagship Singapore campus will soon be able to bid for a 26-year lease for a property surrounded by international schools and near Good Class Bungalow (GCB) areas. The German European School Singapore (GESS) has launched a tender for a 26-year sub-lease on its main campus at 72 Bukit Tinggi Road in the Swiss Club locale. The minimum reserve price is set at $39 million, which translates to $415 per square foot on the existing gross floor area of 93,969 sq ft for the campus. Situated near the former Turf Club grounds, the 130,216 sq ft site is zoned for educational institution use under the Urban Redevelopment Authoritys (URA) Master Plan 2008. The schools enrolment has been on the rise and has outgrown its current premises. Besides the Bukit Tinggi premises, GESS operates a campus on a short-lease site on Jalan Jurong Kechil in the Bukit Batok area. Selling a long sub-lease for the Bukit Tinggi premises to another educational institution will help the school to fund development of a new campus in Upper Bukit Timah which is expected to be ready in 2017 and which will replace the current two locations. GESS is currently in talks with the Singapore authorities for allocation of the site for the new campus. The sub-lessee will not be allowed to redevelop the site. The existing buildings and facilities can support an enrolment of up to 800 students. The property includes seven low-rise blocks, carpark lots, a basketball court, playground and a forum. Two of the blocks were completed in the mid-1980s while the remaining buildings were added in 2000. The tender will close on Nov 18. The 26-year lease period is expected to begin on Aug 1, 2018, after GESS has begun operating at its new location. Payment for the lease will also be staggered. After forking out an initial 10 per cent deposit when the contract is awarded (probably some time later this year or early next year), the sub-lessee will pay another 10 per cent on each anniversary of the contract date with the balance to be paid on completion of the lease sale, which is expected in 2018. Market watchers reckon GESS is selling a 26-year lease term on the Bukit Tinggi property probably because it expects to be awarded a 30-year lease term for its new site in Upper Bukit Timah by the Singapore authorities. Currently, GESS has a 68-year balance lease term out of a 100-year lease it was granted in 1981 on the Bukit Tinggi property by an entity understood to be linked to Swiss Club Singapore. That entity holds a 999-year leasehold interest (from August 1878) on the site granted by the state. GESSs two existing campuses have a combined enrolment of more than 1,500 students aged between 18 months and 18 years. The junior school campus on Jalan Jurong Kechil is for pre-primary and primary school students. It is on land leased from the Singapore Land Authority (SLA) on a 3+3+3 years lease which is due to expire in 2017. The Singapore authorities have informed GESS that no long-term lease can be granted for this location, according to information on the school website. The main campus on Bukit Tinggi Road, for secondary students and kindergarten kids, has reached its maximum capacity of 800 students and is not large enough for GESSs entire and still-growing student population. Since 2009, GESS has been working with the Economic Development Board (EDB) on finding a sustainable long-term solution post-2017. It is currently negotiating with the Singapore Government for the allocation of a site in Upper Bukit Timah to build a new school to host its entire student population in a single campus that will be ready in 2017. We are not allowed to mention the location till the final approval by EDB/URA is given, said a GESS spokeswoman. Source: Business Times –22October 2013 20th storey of Peninsula Plaza for sale at $21m An entity linked to a Taiwanese shipping company has put up for sale the 20th level of the 30-storey Peninsula Plaza in North Bridge Road, with an indicative price of around $21.3 million or $2,500 per square foot on total strata area. The floor comprises six strata units ranging from about 990 square feet to 1,776 sq ft and adding up to 8,514 sq ft. Interested buyers may submit bids for individual units or the whole floor. Peninsula Plaza is a 999-year leasehold property. The Taiwanese company occupies two of the six units on Level 20 and is looking for larger premises to either purchase or lease in the old or new financial districts. It has leased out the remaining four units - three under a single tenancy that ends in May 2016 and one leased out to another tenant until March 2015. Peninsula Plaza is next to the upcoming Capitol project, which will include a plush hotel, luxury residences, a mall and the historic Capitol Theatre. It is also a stones throw from City Hall MRT station. Based on URA caveats data, a 1,044 sq ft office unit on Peninsula Plazas seventh floor changed hands at $1,980 psf or $2.07 million in March this year while a nearby unit of 355 sq ft transacted at $2,415 psf or $858,000 in February this year. Last December, three neighbouring units on Level 17 - one was a 1,001 sq ft unit and the other two, 1,485 sq ft each - changed hands at $1,880 psf. At Springleaf Tower in Anson Road near Tanjong Pagar MRT station, the entire Levels 14-16 and 18-20 transacted this year at $2,200-2,220 psf and $2,280-2,320 psf respectively. Springleaf Tower has a remaining lease term of about 82 years. An expression of interest exercise is conducted that will close on Dec 3. Source: Business Times –22October 2013 2 clusters of commercial property go on sale Two clusters of commercial property went on sale yesterday. The first was a group of five freehold shophouses on Upper Bukit Timah Road. The investment holding firm owner is seeking between $26 million and $27.5 million for the lot. The two-storey shophouses have a combined area of 10,259 sq ft and an existing total floor area of 16,377 sq ft. They are at 826/A to 834/A Upper Bukit Timah Road and can be used for commercial purposes on the ground floor and residential use on the second floor. The shophouses can also be redeveloped into a purely residential. The price works out to $933 to $987 per sq ft (psf) based on the approved residential gross floor area. Alternatively, it comes up to $1,102 to $1,163 psf based on the approved mixed commercial-residential gross floor area. Separately, the 20th floor at Peninsula Plaza was also put on the market at an indicative price of $21.3 million yesterday. The entire floor is owned by a shipping firm. There are six strata units with a combined area of 8,514 sq ft that comes with a 999-year leasehold tenure. The unit sizes range from 990 sq ft to 1,776 sq ft. The price tag of $21.3 million works out to about $2,500 psf based on the total area. The sixth floor of Peninsula Plaza was put up for sale in August at a price of over $32.5 million for a total area of 13,014 sq ft which also translates to about $2,500 psf. It has not been sold. The agents are inviting expressions of interest for both clusters of properties. Potential buyers are to indicate their interest for the shophouses by Nov 28 and for the Peninsula Plaza strata units by Dec 3. Source: The Straits Times –22October 2013 INDUSTRIAL MARKET Two industrial plots in Joo Koon up for sale A couple of industrial plots in Joo Koon with room for additional gross floor area (GFA) development has been put up for sale at guide prices between $7.5 million and $10 million. The two plots are located at 9 Joo Koon Road and 20 Joo Koon Crescent. They are zoned for Business 2 use with a plot ratio of 1.4 each. Both sites are within walking distance of Joo Koon MRT station and are served by the Ayer Rajah Expressway or Pan Island Expressway. They are the latest industrial properties put up for sale or transacted in recent weeks. Last week, 158 Gul Circle was put up for sale. Industrial plots sold this month include 5 Loyang Drive and Guang Ming Industrial Building. Every company has different reasons for selling. For example, the tender for 158 Gul Circle happened because the company felt the plot was too big. The owner of 9 Joo Koon Road decided to sell as it did not find the location suitable and had found a new space. As for 20 Joo Koon Crescent, the owner realised it did not need the asset after buying the company that previously held it. Tenures for new industrial Government Land Sales sites are either at around 22 years or capped at 30 years. The plot at 9 Joo Koon road has a balance lease of 31 years. It has a GFA of 23,266 square feet (sq ft), with potential for another 31,496 sq ft of GFA. The guide price is around $7.5 million for this 39,116 sq ft plot currently housing a single-storey standard factory with a mezzanine level. As for 20 Joo Koon Crescent, it has a remaining lease of 43 years. GFA is currently 40,500 sq ft, and another 21,766 sq ft of GFA can be added. The guide price for this land parcel, which comprises a two-storey production and warehouse compound with a mezzanine office level on a plot of 44,476 sq ft, is about $10 million. The sales of these two properties will be done by an expression of interest, and will close at 3pm on Nov 5 for 9 Joo Koon Road and 3pm on Nov 7 for 20 Joo Koon Crescent. Source: Business Times –17 October 2013 Far East puts in bullish bids for industrial plots Far East Organization has placed what have been seen as bullish top bids for two 30-year leasehold industrial plots in Gambas Crescent, about 700 metres from Sembawang MRT Station. Its bids were about 50 per cent higher than the respective second highest bids for each land parcel. Strata sub-division will be allowed for new projects on the sites, with the minimum strata size set at 150 sq metres (1,614.59 sq ft) gross floor area. BT understands the property giant could be looking at both sale and rental of industrial units in the proposed developments. Bidding through Grow- Tech Properties, Far East offered about $44.78 million or $137.90 per square foot per plot ratio (psf ppr) for Parcel 1, which has a site area of nearly 129,900 sq ft. This was 48.5 per cent more than the next highest bid of $92.85 psf ppr from Hock Lian Seng, which is developing the Ark @ Gambas next door. Parcel 1 drew six bids. Grow-Tech bid about $46.33 million or $127.19 psf ppr for the 145,710 sq ft Parcel 2. This translates to a 54.4 per cent premium to the next highest bid of $82.36 psf ppr from Eco-I Pte Ltd, a newly-minted company understood to be linked to Jian Huang Construction. Parcel 2, which garnered nine bids, is located next to the future North-South Expressway. A property consultant said the top bids were above his expectations of $95-110 psf ppr. His comment was based on the $136 psf ppr that Hock Lian Seng paid in 2011 for its Ark@ Gambas plot, which has 60-year land tenure - double that of the two latest plots. He estimated Far Easts breakeven cost at around $270-300 psf. Prices at Ark@Gambas, comprising nearly 300 strata ramp-up factory units, are in the range of $380-430 psf currently. Close to 200 units have been sold, he added. Like the Ark@Gambas site, the latest two land parcels are zoned Business 1 (which typically allows light and clean industrial use) with 2.5 plot ratio (ratio of maximum gross floor area to land area). Source: Business Times –18 October 2013 Industrial property in south a hit with investors THE proximity of industrial property in the southern part of the island to the central business district (CBD) has made it popular with investors and businesses. Areas like Bukit Merah, Commonwealth and Queenstown have long lured buyers thanks to their good MRT connections and the short drive to the city. But rent in these city fringe areas is higher than that in other popular industrial estates in the suburbs. Industrial properties in these areas are zoned B1 - limited to clean and light industries - so they have attracted tenants looking for an alternative to the CBD. But tenants who do not need buildings with a posh-looking facade might not be keen on property there due to the higher rent. Average rents of freehold and leasehold industrial properties across Bukit Merah, Commonwealth and Queenstown are $2.80 per sq ft (psf). Higher rents also mean that much of the interest in the area has been driven by industrialists with products higher up the value chain, analysts noted. For example, local fashion labels started setting up operations and warehouses in Bukit Merah about a decade ago, while Commonwealth and Queenstown have also been home to car showrooms, Mr Lim said. Analysts also noted that rental yields are attractive. Gross rental yields for a 99-year leasehold industrial unit in the vicinity are about 5.4 per cent. Central Link had the most page views of any industrial property in the area on the STProperty portal last month. The 99-year leasehold building in Bukit Merah has about 60 years left on its lease, with an average asking price of $772 psf, according to STProperty data. Recent transactions of industrial property in the south include a unit at E-Centre @ Redhill that sold at $727 psf last month, according to Urban Redevelopment Authority data. Source: The Straits Times –19 October 2013 JTC to oversee collection of data on industrial property JTC Corporation will take over from the Urban Redevelopment Authority (URA) as the government agency overseeing the collection and dissemination of data on industrial property. Trade and Industry Minister Lim Hng Kiang said yesterday that a change is needed as the industrial property market becomes more diverse and complex. We need to channel more dedicated efforts and resources to gathering and analysing statistics in this sector to improve market transparency and stability, he added. Mr Lim was speaking during the second reading of the Jurong Town Corporation (Amendment) Bill, which was passed by Parliament. JTC has been chosen to take on the role as it is the main government body that looks after the industrial property market. Currently, URA collects and analyses data across various segments of the property sector, including residential and commercial, and does not focus solely on the industrial market. With JTC taking over, Mr Lim said, the access to timely and detailed data will allow JTC to better ensure sufficient supply and stability in the industrial market. Rising in support of the Bill yesterday were Pasir Ris-Punggol GRC MP Gan Thiam Poh and Nominated MP Teo Siong Seng. Both urged Mr Lim to see to it that JTC will continue to ensure there is sufficient industrial land for businesses, especially small and medium-sized enterprises. Mr Lim said JTC continues to provide land for industrialists to build their own factories, though warehousing and multiple-user factory space is now provided mostly by the private sector. Specifically, for the multiple- user factory segment, JTCs market share fell from 60 to 70 per cent in the 1970s to about 20 per cent in 2008. The drop is due to the Industrial Government Land Sales Programme, which sees active participation from the private sector. Source: The Straits Times –22 October 2013 *ERA News & Views is for ERA’s internal circulation and educational use only. Commercial copying, hiring, lending is strictly prohibited.*
Posted on: Wed, 23 Oct 2013 17:04:30 +0000
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