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PROPERTY people and investors are beside themselves cheering on the rising demand for upper-end homes. Even after making allowance for the disproportionate impact on price data of luxury developments such as St Regis Residences and Sentosa Cove, the flow-on recovery in other market bands is pleasingly indicative of a healthy economy.

Against the 7.7 per cent average price gain in the second quarter for the luxury segment, the URA’s overall private home index rose 1.6 per cent quarter-on-quarter - not that big a gain to make home-owners do a jig, but decent. But for monitoring degrees of social impact, all eyes should be on the HDB resale price index. For the Government, if not for developers, too rapid an assumed asset-value improvement should sound alarm bells as it could bring on unduly exuberant buyer behaviour. People are hung-up on property despite declining yields. T

he HDB resale figure for Q2 rose by a shade over 1 per cent - again, not much, but it was the strongest showing in two years. This is where the significance lodges. Rising value in HDB assets being a social goal, it is an inherent weakness that upgraders could be influenced more by expectations of capital gain (after which, cash out to downgrade) than the instinct of purchasing a home for permanent shelter.

There are two related trends intending upgraders should absorb :

the appreciable number of CPF members aged 55-plus still paying off mortgages, and the flat market in suburban condominiums compared with better addresses a notch below the prime districts.

Two in 10 CPF members aged 55 and older owning HDB flats, or 25,000 persons, are still in debt. The majority of these are loosely speaking insolvent as the loan service exceeds their monthly contributions. They have years left before retirement, as the CPF Board notes (Forum, Home Page 16), but this is a supposition of indeterminate risk as boom-bust cycles come at shorter intervals.

The upshot is that improving property values can induce this broad middle-income group to take a gamble on bigger HDB flats and condos. As the flat suburban condo curve shows, there is no gold to be picked up, unlike two decades ago.

They could fall deeper into debt. The take-off in high-end values can be a conversation piece but not be mistaken for a sectoral yardstick. For most of the working population, the watchword is the same: Buy what you can afford, not what you want to have.

Source : Straits Times - 7 Jul 2006

But few want to be left out of the game with likely boom in - tourism

HOTELIERS are caught in a dilemma over the Government’s latest land sales programme which has made available a range of new hotel sites across the island.

On one hand, some fear that if all the sites are snapped up, there could be a repeat of the mid-80s room glut which led to a sharp fall in occupancy rates and prices.

But few hoteliers want to be left out of the game so they are eyeing each other to see who bids for what and how aggressively they do so.

‘It’ll be alarming if a lot of the recent sites are triggered and completed in two to three years. Rates will be even lower,’ said a major hotelier who declined to be named.

The spark for this latest round of jitters was the move to make available eight new sites that can be used for hotels. These were in addition to three hotel sites released in the first half of the year.

Nerves went up another notch last week when the Government launched the Collyer Quay site for sale, stating that at least 40 per cent of its gross floor area must be for a hotel.

‘It is very possible that if all the released hotel sites are completed at the same time, it may lead to a situation of oversupply,’ said Singapore Hotel Association’s president, Madam Kay Kuok.

‘However, if the corresponding projected visitor arrivals materialise in tandem with the new supply of rooms, this situation may not arise.’

The sites are being released to meet an anticipated tourism boom that could see arrivals double to 17 million and receipts jump to $30 billion by 2015.

Singapore has about 37,000 hotel rooms, but could see a further 10,000 rooms in four to six years, industry sources said.

There is also rising optimism with hotels enjoying improved room rates.

But while average occupancies have risen to 85 per cent last year from 67 per cent in 2003, hoteliers say there is no risk of a room shortage.

There is not yet a need for more rooms unless hotels are ‘consistently running at a 80 to 90 per cent occupancy rate’, said Amara Holdings’ chief executive Albert Teo.

In fact, what the industry fears most is a glut of rooms which will hit rates, already low by global standards.

Hospitality consultant HVS International said that a five-star hotel room costs an average $213 a day here, compared with $215 in Bangkok and $346 in Hong Kong.

‘We are First World in terms of cost, but not First World in terms of room rates,’ Mr Teo said.

Yet despite high operational and investment costs, there appears to be keen interest in the new sites. Hoteliers see that growth prospects are good in the mid- to long-term, said HVS managing director David Ling. ‘There are opportunities for the three- to four-star hotel players,” he said.

Industry players say the key is in the timing. ‘If the 10,000 new rooms are completed over four to five years, then it will be ok,’ said the unnamed hotelier.

The completion must be ‘gradual and in tandem’ with the rise in tourist arrivals, said Hotel Phoenix general manager Noel Hawkes.

The hotel sites are on the reserve list so the land is put up for sale only if a developer commits to a minimum bid. And developers, being ‘rational investors’, may not take up the sites simultaneously, said Madam Kuok.

‘The experience of the oversupply in the mid-80s is still fresh in the minds of most of us in the hotel industry.’

Source : Straits Times - 7 Jul 2006

Buyers drawn to Cantonment Rd condo’s $600-$700 psf price tag

MAPLETREE Investments’ one-off venture into residential property development, The Beacon in Cantonment Road, is almost sold out - just three weeks after launch.

The Beacon

While there has been little marketing fanfare since the preview on June 17, as of yesterday just eight of the 124 units were left, said chief operating officer Tan Boon Leong.

One reason for the strong interest could be its price.

The units are selling for $600-$700 per square foot (psf), which is attractive for an area that is effectively part of the Central Business District.

For instance, the nearby Icon by Far East Organisation is reportedly selling for about $1,200 psf.

Mapletree’s core business is integrated development and capital management, and Mr Tan told BT the property development venture is unlikely to be repeated soon.

The company decided to develop the project itself after a tender for the land drew unsatisfactory offers.

‘The whole exercise was part of a process to extract optimal value from Mapletree’s non-core assets.’

Market watchers may best remember the site - opposite the Housing Board’s premium The Pinnacle@Duxton - as the location of the old Singapore Portworker’s Union House.

Mapletree inherited the 3742.5 sq m site from the then-Port of Singapore Authority, and in September 2004 invited about 70 developers to bid for it. The firm decided to develop the project itself after a tender for the land in September 2004 drew offers that were not satisfactory.

But the highest offer was below what Mapletree considered fair value, and so it decided to develop the site itself.

The move seems to have paid off - BT understands that the company has made a respectable profit from the venture.

Development of The Beacon started in the first quarter of this year.

The site was originally zoned for part-civic and community use and part-residential use, and had an original lease of 92 years.

Mapletree paid $11 million to top up the lease to 99 years, convert the site to residential use and increase the plot ratio to 3.5. The site has a maximum gross floor area of 13,098 sq m.

The Beacon has 124 units in a 24-storey tower - mostly two-bedroom units of between 807 and 1,109 sq ft.

All four penthouse units have been sold, as well as smaller units on the lower floors.

The eight units left are all on the upper floors, and asking prices for these are higher.

Property consultancy CB Richard Ellis is marketing the homes.

Source : Business Times - 7 Jul 2006

First large site slated for mixed landed housing in 12 years

Finland Gardens, a 48-unit freehold condominium development off Siglap Road, is the latest offering on the en-bloc market The site is unique: it is the first large redevelopment site slated for mixed landed housing to be offered in more than a decade.

If the deal goes through, it would mark the first collective sale of a large condominium project for mixed landed development in 12 years,’ said Karamjit Singh, managing director of Credo Real Estate, which has been appointed to market Finland Gardens. ‘It appears that the last such condominium sold for mixed landed properties was Changi Heights, back in 1994.‘ 

Finland Gardens has a land area of 98,309 square feet, comprising 48 units of walk-up apartments housed in two 3-storey blocks. Under the 2003 Master Plan, the site is slated for 3-storey mixed landed houses.

Said Mr Singh: ‘Under this zoning, the developer of the site could choose to build a combination of conventional terraces, semi-detached, and detached houses, as well as strata terraces, strata semi detached houses and strata bungalows.

Credo expects $50-$55 million for the site, which works out to about $509-$559 psf. Under that price range, units will be sold for between $900,000 and $1.2 million - which will give the 48 owners an average collective sale premium of 75 per cent, said Credo.

According to the property consultancy, the site could accommodate as many as 44 strata semi detached and terrace houses, in addition to 10 conventional semi-detached and nine terrace houses. The estimated development charge payable for this is $1.3 million, said Credo. The firm cited a study it conducted, which showed that out of the 86 transactions of private residential redevelopment sites above $10 million over the last 12 months, only two were for mixed landed properties.

‘With the dearth of supply, it can only result in price escalation for mixed landed,’ said Mr Singh.The tender closes at 2.30pm on Aug 8.

Source : Business Times - 06 Jul 2006 

Interest for the property is keen, asking price may be $200m: - Sources

THE owners of the InterContinental Singapore at Bugis Junction are seeking buyers for the 409-room five-star hotel, which is said to be priced in the region of $200 million.

The 99-year leasehold hotel is 90 per cent-owned by CapitaLand and Keppel Land, with British-based InterContinental Hotels Group (IHG) holding the rest.

The indicative price for the InterContinental is based on an estimated investment cost of $500,000 per room, which market watchers say is the benchmark price for a five-star leasehold hotel here.

Interest in the InterContinental - which is operated by IHG - is believed to be ‘keen’, with sources pointing to regional hoteliers and international funds as likely buyers. Foreign players have expressed interest in Singapore’s recovering hotel sector over the past year.

Hong Kong’s Park Hotel Group, which bought the freehold Crown Hotel on Orchard Road for $300 million in June last year, is one such contender, as is Indonesia’s Lippo Group, which acquired the Meritus Mandarin Hotel on Orchard Road in May.

United States fund Colony Capital has also been mooted as a possible buyer, with its high-profile purchase last year of Raffles Holdings’ hotels, including the historic Raffles Hotel, for $1.7 billion.

Sources said IHG is likely to stay on as the InterContinental’s operator after the sale, which may make the hotel less attractive to owner-operators looking to rebrand the property as their own.

As such, institutional investors like LaSalle Investment Management and Lehman Brothers, which in 2004 bought Hotel New Otani on River Valley Road - now Novotel Clarke Quay Hotel - may be more interested in buying the hotel, said sources.

Talk of the InterContinental being sold surfaced as early as last year, when CapitaLand and Keppel Land took full control of Bugis City Holdings, the company that owns almost all of Bugis Junction, comprising a mall, an office tower, and the hotel.

Market watchers said at the time that the two property giants were likely to sell InterContinental as the hotel did not dovetail with their core property development businesses.

Since then,the retail portion of Bugis Junction has been bought by CapitaLand’s property fund CapitaMall Trust, while the office component has been absorbed into Keppel Land’s office trust, K-Reit Asia, earlier this year. This leaves only the hotel. Neither CapitaLand nor Keppel Land owns any other hotels in Singapore, although the latter has stakes in other hotels in the region, including two in Myanmar and at least three in Indonesia.

Jones Lang LaSalle was appointed the exclusive marketing agent for the InterContinental sale last month, a sign that CapitaLand and Keppel Land are now stepping up marketing activities for the hotel deal.

The Straits Times understands the 16-storey hotel, which opened in 1995 with an estimated building floor area of 495,054 sq ft, was unsuccessfully put up for sale on at least one other occasion.

But property consultants said that favourable market conditions, such as an improving hotel sector, may help seal the deal this time.

‘Market sentiment is now stronger and hotel performance - in terms of rates, occupancy, and therefore revenues - has been going up in the last two years,’ said Mr David Ling, managing director of hotel consultants HVS International Asia.

‘Given these factors, there should be should be reasonable interest in the InterContinental as it’s a five-star hotel in the city centre and an international-quality product.’

Source : Straits Times - 6 Jul 2006