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Lack of new office space supply in prime areas causes rents to go up

OFFICE rents, which are on a upward trend, show no sign of softening, says Knight Frank in a report on Singapore’s office market. The property consultancy expects office rents to increase in the second half of this year by as much as 10 per cent for Grade A buildings in the prime area, and by 4 to 6 per cent on a islandwide basis.

Knight Frank attributes the expected rise to a shortage of new office supply in the prime Central Business District (CBD) area. ‘With supply staying at stubbornly tight levels in the face of healthy demand, office rents will remain on course to ride the upward trend,’ the consultants say.

‘The second half of 2006 is likely to witness another period of sustained rental appreciation.’

One consequence of the rising rentals is that some firms in the CBD are considering relocating to the fringe areas, the report says.

In the recently concluded second quarter, rentals across all aspects of the office market moved upwards in unison, Knight Frank’s report showed. Grade A office buildings remain highly sought-after.

Average rent levels for Grade A office buildings in Raffles Place grew by 3.8 per cent quarter-on-quarter to $6.10 psf while the nearby Shenton Way and Robinson Road rose by 3.5 per cent to $4.50 psf. Prime office rentals in the Suntec, Marina Centre and City Hall area also witnessed a rise of 4.3 per cent - to $5.50 psf.

The Orchard Road shopping belt continued to command high office rentals at $5.90 psf, 1.0 per cent higher than in the first quarter of the year.

Suburban office rents saw less upward pressure.

Knight Frank says that the outlook for office landlords remains bright as a result of strong demand - due to the rosy economic prospects of Singapore as well as the bullish sentiment in the banking and finance sector.

Increased demand for office space in the second quarter was fuelled by financial institutions. Reuters and Credit Suisse are expanding, and US investment bank Merrill Lynch also decided to set up a major global support operations in Singapore.

‘The wave of new financial institutions setting up back offices and existing ones expanding their operations looks set to continue,’ the report says.

‘With the International Monetary Fund and World Bank meetings ready to be held in Singapore during September, there could be positive spillover effects into the finance sector.’

Source : Business Times - 4 July 2006

But lower-end lags luxury segment as upgrading ability is clipped

The latest official flash estimates show the housing market continued to recover in the second quarter of this year, with bigger price increases posted for private homes and Housing & Development Board resale flats in Q2 than in Q1.

The Urban Redevelopment Authority’s price index for private homes rose 1.6 per cent in Q2 from Q1, after a 1.5 per cent quarter-on-quarter gain in Q1.

The increase for the first six months of this year is 3.1 per cent - which means that earlier forecasts by property consultants for a full-year rise ranging from 4 to 8 per cent are on track. Consultants contacted yesterday said they are maintaining their full-year forecasts.

In the public housing segment, HDB’s resale flat price index rose 1.08 per cent in Q2 from Q1 - the best showing in eight quarters.

ERA Singapore assistant vice-president Eugene Lim attributed the Q2 increase to improving demand for well-located HDB flats, coupled with a trend to upgrade to bigger flats and HDB’s move to slow sales of unsold new flats through the Walk-in-Selection programme.

Click here to view URA’s news release

‘The upgrading phenomenon, which we started to see again about six months ago, took root in the second quarter,’ Mr Lim said.

With the HDB resale index having risen 1.3 per cent in the first six months of this year, he predicts the full-year increase could come in around 3 per cent.

‘While people are starting to buy bigger flats again, they’re also more careful,’ he noted, citing increases in housing loan rates and the impact of various changes to Central Provident Fund rules which effectively restrict the use of CPF savings for property purchase.

Indeed, Knight Frank managing director Tan Tiong Cheng believes the impact of the various announcements relating to CPF made over the past few years is still sinking in.

These include gradually lowering the limit on withdrawal of CPF savings for housing purchases to 120 per cent of the valuation for a property, the reduction in the CPF salary ceiling and, from the start of this month, restrictions on the use of CPF savings for multiple property purchases.

Such factors tend to have more impact on lower-priced properties, buyers of which are more sensitive to pricing and affordability, and have contributed to the emergence of the two-tier market over the past two years, market watchers say.

Lower-end housing - including HDB resale flats and entry-level private housing catering to local demand - has lagged high-end property, which has enjoyed a decent recovery in demand and prices, led by foreign investors attracted by what they see as an undervalued market.

The 1.6 per cent quarter-on-quarter increase in URA’s overall private home price index in Q2 and the 1.08 per cent rise in HDB’s resale flat price index pale in comparison with the 7.7 per cent rise in the average luxury home price in Q2 reported recently by property consultancy group CB Richard Ellis.

Knight Frank’s Mr Tan said: ‘Singaporeans still have a strong desire to upgrade their homes, but their ability to do so has been constrained.’

Besides changes to CPF rules, unprecedented white-collar job losses in the post-Asian crisis era have combined to make Singaporeans cautious when it comes to buying homes, Mr Tan reckons.

‘Since the market peaked in 1996, home buyers have generally not enjoyed a property windfall. The older ones who bought a property then are probably stretched on their investments,’ he said.

‘The younger cohort in their 20s and 30s missed out on the chance to make a windfall altogether. Even to buy their first home, they have to stretch themselves. Upgrading is not a priority.’

Another factor that has clipped Singaporeans’ ability to upgrade is that they have generally not enjoyed big bonuses over the past 10 years.

While observers do not expect the two-tier property market to disappear any time soon, Mr Tan believes that the improving economic outlook - with investments like the two integrated resort/casino projects, the remaking of Orchard Road and Biopolis developments - should translate to better remuneration for Singaporeans, which could in turn improve their ability to upgrade.

Source : Business Times - 4 July 2006

As of December, over 25,000 people above 55 were using CPF to pay off deb

THOUSANDS of older Singaporeans risk running low on retirement savings because they have spent too much on housing.

As of December last year, more than 25,000 people above the age of 55 were still paying off their housing loans with Central Provident Fund (CPF) savings.

Of the active CPF members - that is, those most likely to be working - 22,300 were paying loan instalment amounts that were larger than their monthly CPF contributions.

And 12,800 of them stood to deplete their CPF Ordinary Accounts in less than six months if they lost their jobs and could not make new contributions.

The Ordinary Account is the account into which is paid the bulk of a worker’s CPF contribution.

Money in this account can be used to service housing loans.

These figures mean that of the 140,000 active CPF members over the age of 55 in December, one-fifth had yet to pay off their home loans.

This is a worrying statistic, given that financial advisers say by that stage of life, people should be paring down on their financial commitments.

Mr Leong Sze Hian, president of the Society of Financial Service Professionals, explained: ‘The older you get, the easier it is to get retrenched and the harder it is to get re-employed.’

The CPF Board, which released the figures in response to queries from The Straits Times, cited the example of a 55-year-old woman who bought a four-room resale flat three years ago.

She has wiped out her CPF Ordinary Account and her monthly contribution amounts to just $171.

Yet, she needs to pay $780 a month in home loan instalments.

And she needs to do so for the next 10 years to repay her outstanding loan of $99,000.

Another CPF member who has nothing left in his Ordinary Account is Mr B.G. Siriniwas, 56.

The former security officer bought an executive flat six years ago and was retrenched in 2004.

Unable to keep up his home loan payments, he has sold it off and is downgrading to a smaller flat.

Dr Amy Khor, mayor of Southwest Community Development Council, said she thought many of the older people still servicing their home loans bought bigger homes in the 1990s as they thought that property would keep appreciating in value.

But prices plunged after the 1997 Asian financial crisis and have inched up only recently.

The CPF Board said some home owners made the mistake of using their entire monthly CPF Ordinary Account contributions to pay for housing, leaving no buffer to see them through contingencies, such as a period of joblessness.

Some also failed to factor in possible hikes in mortgage rates.

Others were caught out by recent policy changes to lower CPF contribution rates for older workers.

As a result of CPF cuts announced in 2003, only 27 per cent of the income of someone above 50 to 55, will go into his CPF account, compared to 33 per cent for someone under 50.

The figure drops for those even older.

Housing agent Albert Lu, who runs C&H Realty, advised: ‘Don’t always stretch it to the limit. Always keep some money as a reserve.’

Mr Leong suggested that financially strapped home owners try to use their other assets to pay off as much of their housing loans as possible, if the returns from those assets were lower than their mortgage rate.

The CPF Board, which has been organising roadshows on retirement planning over the past few years, said it will be taking part in a property seminar organised by Singapore Press Holdings and the Institute of Estate Agents in August, where it will urge people to be more prudent on their housing purchases.

tanhy@sph.com.sg

“I will work till my dying day’ MR B.G. Siriniwas, a former security officer, is 56 and has no personal savings.

He also has nothing left in his Central Provident Fund (CPF) Ordinary Account, and reckons that he will have to work for the rest of his life.

The father of a 10-month-old girl bought a new $430,000 executive flat in the north of Singapore six years ago, thinking its price would appreciate.

He took a $340,000 home loan and had to pay $1,600 a month out of his CPF savings to service it. Then, he was earning about $1,700 a month.

Two years ago, he was retrenched and has not been able to find a full-time job since. The family of three lives on his wife’s take-home pay of about $1,400 a month.

The money in his CPF Ordinary Account ran out in February last year.

Desperate, he got the Housing Board to allow him to defer repayment of his loan while he tried to sell his flat. He sold it for about $350,000 last month, at a loss of about $80,000.

Pointing to a wall in his flat, he said: ‘These bricks won’t feed me and my baby.’ Mr Siriniwas and his wife will move to a five-room flat.

Asked about retirement, he said: ‘There’s no way I can save. I will work till my dying day.

‘Young people should plan their finances very very carefully. They shouldn’t take it for granted.’

Source : Straits Times - 3 July 2006

Sources say it has edge over Lippo; both are partnering Westin for hotel component

The race for a hotel, commercial and condo site at Sentosa Cove is said to have narrowed to two contenders - City Developments and Lippo.

The site is expected to be awarded soon and sources are tipping CityDev as the likely winner for the 99-year leasehold site.

Interestingly, sources say both parties are teaming up with the same hotel operator - Westin, which is part of the Starwood Hotels & Resorts group - to operate the 320-room hotel in the proposed development.

Industry observers suggest CityDev’s bid price for the site, which is called the Quayside Collection, could be slightly over $300 million. This works out to around $420 per square foot of the proposed development’s maximum potential gross floor area of 718,588 sq ft.

Market watchers say that the award of the site will mark the return of the Westin brand to Singapore after an absence of over four years. Westin Hotels & Resorts used to manage the two hotels in the Raffles City complex until its contract expired at the end of 2001.

But the Quayside Collection award is not based primarly on price. Proposals are evaluated on the hotel concept, the strength of the prospective hotel operators, positioning and branding of the hotel, development budget and source of capital, as well as the offer price and payment terms and structure, according to information released earlier in a statement on the site.

The land parcel was offered through an expression of interest exercise which closed on April 28. The land parcel comprises a plot for a seven-storey hotel with up to 320 rooms, two plots slated for a three-storey commercial (retail) project with about 61,700 sq ft of gross floor area, and two plots designated for development into six-storey condos with a total of up to 236 units.

The hotel will face the marina at Sentosa Cove and will be the first and only hotel in the upmarket waterfront housing district.

Elsewhere on Sentosa Island, though, there are currently three hotels and resorts totalling 733 rooms. Excluding the latest hotel in the Quayside Collection, another three new hotels/resorts are slated to open between this year and 2008.

The hotel and commercial plots are compulsory components of the Quayside Collection sale. And while the condo plots are optional, their inclusion in the package has been seen as the sweetener to draw bidders to develop the hotel and commercial plots.

After all, the first two condos on Sentosa Cove - Ho Bee’s The Berth by The Cove and Frasers Centrepoint’s The Azure - have sold like hot cakes.

CityDev, too, is not new to Sentosa Cove. The property giant headed by Kwek Leng Beng has teamed up with TID to develop a 264-unit condo in the upscale waterfront housing district on a landmark site gracing the entrance to the Marina Basin. The 15-storey condo - the highest allowed on Sentosa Cove - is expected to be marketed very soon, possibly this month with an average price touted to be $1,300 psf.

This is not the first time CityDev will be partnering Starwood here.

CityDev, Hong Leong Holdings and TID are developing a luxury hotel at Tomlinson Road that will be managed by Starwood under its upscale St Regis brand.

The expression of interest exercise for the Quayside Collection is said to have attracted seven to eight bids. Bidders are said to have included Pontiac Land group and hotel chain Marriott. The initial list of contenders was eventually narrowed down to CityDev and Lippo, sources say.

Source : Business Times - 3 July 2006

Q I AM a permanent resident filing for a divorce from my wife. We are both Malaysians.

We bought an HDB flat in Jurong six years ago. I had paid $4,000 cash as down payment and have been servicing the loan with my CPF savings. The outstanding loan is $70,000.

Do I have to sell the flat after our divorce?

If yes, I understand all the CPF money used for servicing the mortgage has to be returned to my account. Do I need to split the money with my wife?

Is there a fixed period after which I can buy another flat with a new partner?

My monthly basic pay is $1,300. How much would I be expected to pay in maintenance? We have a five-year-old daughter.

Would it be based on my gross salary, including overtime, or just the basic income?

Besides the flat, we have some savings which were kept under separate names - 70 per cent under hers. Would I still need to pay her maintenance using my 30 per cent holding?

A After the Family Court grants a divorce, it decides on marital issues such as maintenance for the former wife and children, division of the matrimonial home and other assets. These are referred to as ancillary matters.

The HDB flat you both own is a matrimonial home. You can either sell it, transfer your share in it to your wife or vice versa.

If you transfer your interest in the home to your wife, the CPF Board requires your wife to reimburse into your CPF account all your CPF monies (including interest) that was used for the purchase of the home and for the servicing of the loan.

There is unlikely to be a substantial profit from the sale of matrimonial homes by divorced couples in the current economic climate.

Once the matrimonial home is sold, any loan outstanding and all levies due to the HDB must be first settled. The balance is then used to reimburse both of your CPF accounts.

Sometimes, there may be insufficient sale proceeds to carry out the reimbursement into your respective CPF accounts.

It is likely that your wife will want you to share with her the net profits from the sale.

You can agree with her on how the proceeds are to be distributed.

In some cases, the former wife may wish to receive the full net sale proceeds towards her claims for maintenance and division of matrimonial assets. Or both spouses can agree on the distribution of the profits.

If your wife agrees to transfer her share in the matrimonial home to you, HDB regulations require you to form a family nucleus in order to own the property.

This could mean that you and your new partner can become co-owners of the flat.

If the flat is sold, you need to consult with the HDB on the purchase of a second flat for you to live in.

On the issue of maintenance for your daughter, both your wife and you have a duty to maintain her.

The court will take into account these factors when assessing the amount of maintenance:

Your income (your basic salary, commission and overtime pay) and your earning capacity;

Your other financial resources;

Both your financial needs, obligations and responsibilities;

The standard of living enjoyed by all three of you before the marriage broke down;

The length of the marriage and both your ages;

Any form of physical or mental disability both of you may suffer from; and

Contributions made by both of you to the welfare of the family, including looking after the family or caring for the family.

You have a duty to maintain your former wife. The Court will consider the above factors, including her income and financial resources when deciding on the amount of maintenance you must pay.

You can pay monthly maintenance or a lump sum. It seems that both of you have divided some monies between yourselves. The money you hold is yours. But your wife may wish to treat it as a matrimonial asset and request that it be dealt with by the court.

If this happens, both of you may want to share your money in any proportion or you can let her keep all of your money as a lump sum maintenance.

I’d advise you both to reach an amicable settlement on the ancillary matters with the assistance of your lawyers, or use the Family Court’s mediation scheme, which is available to all divorce litigants.

Rajan ChettiarRajan Chettiar & CoAdvocates & Solicitors

Advice provided in this column is not meant as a substitute for comprehensive professional advice.

Source : Sunday Times - 2 Jul 2006