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Consultants say sale could set new benchmark price

The first residential development at Marina South will go on sale soon, making it possible to actually ‘live, work and play’ there.

The development’s general manager David Martin said yesterday sales of units will start in the fourth quarter of this year. Sizes will range from one-bedroom to penthouses, with a range in between.

The sizes and mix of units will be disclosed later, Mr Martin said. ‘We are continuing to monitor the market while we finalise the specifications of the apartments.’ And as for price: ‘Clearly, this will depend to some extent on the final offering.’

The site for the Business & Financial Centre at Marina Bay (BFC) was bought in July 2005 by a consortium comprising Cheung Kong Holdings, Hongkong Land and Keppel Land.

The BFC is envisioned as the financial centre of Singapore’s new downtown but will have a substantial residential component, estimated to be about a third of the total gross floor area.

The BFC will be built in phases, and in the first phase there will be two office towers and a 428-unit high-end residential block 55-storeys high.

Using the current resale prices for nearby The Sail @ Marina Bay by City Developments Ltd (CDL), the average price for BFC’s residential units could be around $1,500 psf, although its developers are likely to want to add a premium because of proximity to the upcoming Marina Bay Sands integrated resort.

Mr Martin said there has been plenty of interest. ‘The level of enquiry received to date reflects strong demand from international retail buyers and investors who want to share in the expected strong rental and capital appreciation of this development.’

Other developments in the downtown area include The Lumiere by BS Capital on the site of the former HMC Building, The Clift at the Natwest Centre site by Far East Organization and the redeveloped No 1 Shenton Way by CDL.

At BFC, the units will either face Marina Bay or the Singapore Straits.

Savills Singapore head of research Wallace Chu said the BFC units could set a new benchmark price.

On whether the inclusion of one-bedroom units is any indication of the target market, Mr Chu said The Sail also has small units and sold well.

The BFC’s owners could also be looking to break the record for most expensive leasehold condominium. So far, Draycott 8 by Wing Tai Holdings is said to be the most expensive at around $1,800 psf.

On price expectations by the BFC owners, a property consultant told BT a new benchmark could be set. ‘It depends on how fast you want to sell the units. If you set it too high, you will take a longer time to sell the units.’ He also noted that being a ‘mixed development’, the BFC may not appeal to all buyers.

Source : Business Times - 3 Aug 2006

Higher interest rates the main reason, say banks

A YEAR after the Government relaxed rules on lending to let private home buyers borrow up to 90 per cent of the property’s value, only 10 per cent to 20 per cent of all home loan applicants have taken up the full loan quantum.

A check by The Straits Times with seven banks found that the number of home buyers opting for 90 per cent financing packages has not been increasing, even though the property market has been recovering over the last year.

In fact, some banks even say they have seen a fall in take-up rates.

The main reason for this is the higher interest rates charged for these larger loans, say the banks, which together account for the bulk of the home loan market here.

The new rules on property lending were introduced last July to increase the loan quantum from the previous 80 per cent ceiling, which was imposed in 1996 to cool the property market.

Now, property buyers need only pay a down payment of 10 per cent, half of which can come from Central Provident Fund monies.

In the year since, the new rules appear to have benefited mostly new home buyers such as young couples, the banks say.

There has been no drop in demand for the banks’ other home loan packages, suggesting that the 90 per cent financing allows new home buyers - who would otherwise not have been able to afford the down payment on a home - to enter the market.

While there are no publicly-available figures for the number of home loan applicants each year, a rough estimate is the number of homes sold. According to the Urban Redevelopment Authority’s latest figures, about 19,450 homes have been sold in the 12 months ending June 30 this year.

A DBS spokesman said that the percentage of the bank’s customers taking 90 per cent financing ‘remains unchanged’ at an average take-up rate of 20 per cent.

This proportion stands at 15 per cent for HSBC, between 10 per cent and 20 per cent for Standard Chartered Bank, and at 5 per cent for Maybank.

United Overseas Bank would say only that its figures are in line with the market trend, while OCBC Bank declined to reveal any figures.

At Citibank, its business director for secured assets,

Mr Tan Chia Seng, said that while more than a fifth of its home loan applicants opted for 90 per cent financing initially, this has since fallen to less than 10 per cent.

Market watchers say the seemingly low take-up rates are not surprising.

Mr Lui Seng Fatt, regional director at Jones Lang LaSalle, said that 10 to 20 per cent is ‘a reasonable number’.

‘The 90 per cent financing probably only affects some of the borderline cases who need help with their down payments,’ he said. ‘It cannot turn people who have no intention of buying a house at all into home buyers.’

The Monetary Authority of Singapore’s (MAS’) latest financial stability review, which covered data until last December, showed that the proportion of new mortgages with a loan-to-value (LTV) ratio of more than 80 per cent fell from 19.6 per cent last October, to 15.3 per cent in December.

The review also suggested that the rate of take-up of these loans ‘could have been slowed by higher mortgage rates charged by banks’.

A 90 per cent financing package typically costs a mortgage-holder around one percentage point more in interest payments.

Rough estimates from market players have shown that for a private home costing around $400,000, a 90 per cent loan could cost $400 more in repayments each month compared to an 80 per cent loan.

MAS’ figures showed that more than four out of five home buyers who opted for mortgages with LTV ratios of above 80 per cent were owner-occupiers rather than investors, suggesting that the new rules have had little impact on property speculation.

Indeed the banks confirmed that most of their clients taking up 90 per cent financing are younger couples buying homes for their own use.

‘Younger couples or first-time aspiring entrants into the market have gotten in more easily and are forming an increasingly larger pool of younger home owners,’ said Citibank’s Mr Tan.

The change to property financing rules was part of a package of measures introduced last July, which many in the market had expected to raise home sales and demand.

MORE YOUNGER BUYERS

‘Younger couples or first-time aspiring entrants into the market have gotten in more easily and are forming an increasingly larger pool of younger home owners.’MR TAN, from Citibank, on the type of clients who take up 90 per cent financing

BORDERLINE CASES

‘The 90 per cent financing probably only affects some of the borderline cases who need help with their down payments.

It cannot turn people who have no intention of buying a house at all into home buyers.’MR LUI, from Jones Lang LaSalle, on the take-up rate being reasonable

Source : Straits Times - 1 Aug 2006

Company says it has enough for a total built-up area of 8.4m sq ft

CITY Developments Ltd (CDL) has amassed more than four million square feet of land that can be developed into homes and offices. This includes some of the best land in the country such as that of Lucky Tower at Grange Road.

CDL bought four existing developments and bungalows over the past year, the company said in its latest quarterly newsletter in July, and has enough land for built-up area of 8.4 million square feet.

The purchases are Bougainville at Shelford Road for $19 million, Number 21 Swiss Club Road, Lucky Tower at Grange Road for $383 million and a site on Thomson Road for $156.3 million. The plan is to combine adjoining sites CDL already owns and build luxury condominiums, the company said.

On its plan for Lucky Tower, CDL said: ‘Ideally located in one of Singapore’s most prime districts along Grange Road, there is good potential for this generously sized 169,189- square-feet freehold site to be optimally redeveloped into an exclusive upscale 24-storey condominium project.’

CDL, whose launches this year include the upmarket St Regis Residences, The Oceanfront @ Sentosa Cove and Residences @ Evelyn, will be building three developments over the next year or so.

All will be in the prime district. They are Kim Lin Mansion at Grange Road, for which CDL paid $251 million, or $996 per square foot (psf) of potential built-up area in 1999; Boulevard Hotel along Orchard Boulevard, which was closed down in 2000 to make way for a condominium; and Lucky Tower, also at Grange Road, which cost the company $383 million, or $1,134 psf of potential gross floor area, in May this year.

It also said in the newsletter that the market should ‘keep a lookout for No 1 Shenton Way and King’s Centre Plot 3′, next to its Grand Corpthorne Waterfront Hotel in Havelock Road.

Prices of residential property have risen for nine consecutive quarters after declining for four years. In the second quarter, home prices rose 1.8 per cent, the Singapore government said, the biggest quarter-on-quarter increase in six years.

CDL said it is ‘constantly on the lookout to create more value on its current assets’, and that it now has one of the largest land banks among listed property developers here.

CDL shares have risen 5 per cent this year, closing at $8.95 yesterday, 1.1 per cent lower on the day.

Source : Business Times - 1 Aug 2006

SINGAPORE Telecommunications (SingTel) yesterday said it has sold its site at No 50 West Coast Road for $33 million to FCL Loft Pte Ltd, a wholly owned subsidiary of Fraser Centrepoint Properties Ltd.

The site was previously used for bulk cable storage. SingTel has obtained provisional permission for a condominium, with basement carpark and communal facilities.

Chua Sock Koong, SingTel’s group chief financial officer and CEO international, said the sale will help SingTel ‘better utilise capital and free up cash resources that can be redeployed in (its) core telecommunications business as well as in new investments’.

The purchase price was arrived at after considering various commercial factors, including the development potential and location of the property.

The net book value of the site is about $1.7 million, which gives SingTel a gain on disposal of about $31 million.

Source : Business Times - 1 Aug 2006

Their small size might tempt end-users, rather than developers, to make bids

THREE industrial land sites totalling 4.1 hectares are on the latest confirmed list of the Government Industrial Land Sales Programme. They are significantly smaller than the five sites totalling 12.9 ha put on the list for the first half of this year.

The Ministry of Trade and Industry (MTI), which yesterday released the three industrial sites, said that the sites were put on the list ‘in view of the demand for industrial land’.

Market watchers say that reduced number and size of sites on the confirmed list is a prudent move by the government to dispel worries about a glut of industrial space.

Instead, MTI also released another three sites with a combined land area of 10.8 ha on the reserve list - larger than the five sites totalling 8.9 ha put on the reserve list for the first half of 2006.

‘This will let the market drive the demand,’ said Colliers International’s managing director Dennis Yeo.

Sites on the reserve list require a bid - or trigger price - that meet the minimum bid requirements in order for the site to be put up for public tender.

In the process, the trigger price is made public. For sites on the confirmed list, there is no trigger price and bidders can offer whatever they see fit.

By skewing the availability more towards sites on the reserve list, the government ensures that should buyer interest be strong, there are enough sites on the market for developers and end-users to purchase.

However, there is no ‘force-feeding’ of the market, said Mr Yeo.

Market observers believe that demand for the confirmed sites should be good as the economy is improving - which could be seen as a call for more sites to be released.

‘I think it (the three sites) is a good thing, as the market sentiment has picked up,’ said CB Richard Ellis’ (CBRE) director of industrial services Bernard Goh. ‘The sites on the confirmed list are likely to be bought.’

One site in Woodlands Industrial Park, whose tender closed recently, saw eight bids in all by mainly building and construction companies.

This time around, rather than developers snatching up the sites, the small sizes of the three sites on the confirmed list means that end-users might be tempted to make bids. End-users (such as manufacturers) usually require smaller sites.

Perhaps to allow end-users to participate in the bidding process, the sizes of individual sites have fallen over the years.

According to Mr Yeo, in the mid- to late-nineties most sites were typically larger than 5 ha.

The release of the eight sites - both on the confirmed and reserve lists - come as industrial property occupancy rates in Singapore are forecast to continue rising.

According to a recent report by CBRE, average rents for factory space and high-tech space increased by 5.7 per cent to $1.85 per square foot in the first quarter of 2006 - for the first time since 2003.

‘Looking ahead, industrial properties should enjoy higher occupancy rates and moderate rises in rents for the rest of the year, with the investment market showing more activity for the second half of the year,’ said CBRE.

Source : Business Times - 1 Aug 2006