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He predicts rise to be over 2 to 3 years, pulling rest of the market up

LUXURY home prices may still be a shade off their peak in 1996, but they are set to achieve dazzling new heights soon, said property tycoon Kwek Leng Beng.

He predicted that, amid strong foreign demand, posh projects will all hit prices of $3,000 per sq ft (psf) - a record so far attained only by St Regis Residences, the ultra- exclusive condominium developed by his own City Developments (CDL).

‘I believe definitely that all the high-end developments will cross $3,000 psf. in the next two to three years,’

Mr Kwek told The Straits Times in an exclusive interview.

This will bring prices of St Regis up to a new all-time high of $3,500 psf, he added.

And when the upcoming integrated resorts at Marina Bay and Sentosa are completed, home prices in Sentosa could be pulled up to $1,700 or $1,800 psf in just one or two years, said Mr Kwek. He heads Hong Leong Group and CDL, South-east Asia’s second-largest developer.

The most expensive Sentosa condos so far are at CDL’s Oceanfront, which is almost completely sold - only eight units are left - at prices of above $1,400 psf.

Mr Kwek also said that as luxury home prices rise, they will pull up the rest of the market, which has been in the doldrums for about six years.

He anticipates that the mid-tier market - homes priced between $800 and $1,300 psf - will ‘correspondingly move up next year’.

Foreign demand may be the initial driver of this property recovery, but he believes that local home buyers will soon follow suit.

Justifying his bullish assessment of the market, Mr Kwek said he is ‘very confident’ because ‘the Singapore Government has proven that it reacts very fast to crises’.

‘People always ask me, is there going to be a relapse in the property market, but I don’t think this will happen,’ he said.

‘London recovered very quickly from the bombings last year, and bird flu we’ve had before, it takes less than one year to recover. So the market shouldn’t be too affected by these.’

On a more practical note, Mr Kwek also pointed out that building and development costs have been increasing steadily and it is only a matter of time before developers start raising prices of their projects to match.

The costs of building materials have jumped about 30 per cent over the last year, while construction costs have risen between 6 per cent and 8 per cent in the same period.

Also, the rates for development charges - fees that developers have to pay the Government to enhance the value of a site - have already gone up by up to 38 per cent, making it more expensive for developers to buy plots of land on which to build homes. fiochan@sph.com.sg

Source : Straits Times - 11 Sep 2006

THE Straits Times reported that a new national standard for property managing agents has been introduced (’New yardstick to assess condo managers’; ST, Sept1) to make them more professional and reduce disputes between them and owners.

I was very impressed to note that the new standard lays out in clear terms the circumstances in which owners can terminate the services of an agent without a general meeting of condo owners.

However, I have some reservations on the procedure of execution to terminate services of the managing agent (MA). The decision to terminate or not rests solely with the current management corporation (MC) after the annual general meeting (AGM). The composition of MC may be only four to seven members though the laws limit it to a maximum 14.

The following paradoxes will throw some light on the effectiveness of the new standard when the laws do not encompass the MAs to ensure no breach of fiduciary duty on the job.

Firstly, how can dissatisfied owners terminate the services of the MA when the decision rests with a few members of the MC? Who is beholden to whom? What can dissatisfied owners do?

The MA can serve three-year terms while the MC needs to be re-elected every year. In the meantime, the performance review of the MA never appear in the agenda of AGM or the last-quarter meeting of MC to consider renewal. It seems to run on autopilot.

Currently, MAs do not even bother to conduct a survey among all residents during the year to gauge their rating. Residents do not receive monthly meeting minutes but only invoices for quarterly contributions and the sinking fund. Is this practice healthy?

Secondly, The Building Maintenance and Strata Management Act came into effect on April 1 last year. The new Act is under the purview of the Ministry of National Development. The Commissioner of Building Control, Building and Construction Authority administers the legislation.

Nevertheless, the non- interfering attitude of the authority does not lend credence to the protection of unwary owners under the Act. This piece of legislation should not stay on no-man’s land forever.

Thirdly, a vacuum does exist when the authority depends on the integrity and competency of fewer than 130 MAs which handle nearly a billion dollars a year in the industry while making the MC responsible for the audited accounts involving many million dollars in transactions within each condominium.

The Commissioner of Building Control is the ideal candidate to fill this vacuum and should set up a department to process and vet the audited accounts and also the suitability of members of MCs and the credentials of MAs after they take office.

In other words, members of MCs and MAs are made accountable to all subsidiary proprietors for their actions in managing condo funds. The cardinal rule is to prevent abuse and waste.

Source : Straits Times - 11 Sep 2006

Such investment properties can give average rental yields of above 10% - more than double that of an average residential unit

IF YOU are among the lucky ones to have made a small fortune selling your home in a collective sale, you may be wondering what to do with your newfound wealth.

Instead of taking the conventional route and reinvesting the money in another new residential property or two, you may do well to consider the unusual alternative of putting your money in a coffeeshop instead.

These properties can give average rental yields of above 10 per cent - that is more than double the rental yield of an average residential unit.

The rental yield is the percentage of the property’s original purchase price that is returned as annual rent.

Homes generally fetch rental yields of 3 per cent to 4 per cent, but some coffeeshops can boast yields of as much as 14 per cent.

One such property is currently up for sale in Ang Mo Kio at a price of $4 million.

The 12-stall coffeeshop pulls in a monthly rental of $45,000, which puts its annual yield at about 14 per cent.

One reason coffeeshops are able to fetch such good rental returns is that they are divided into several stalls.

And these stalls can be individually rented out for a larger combined yield than a single residential unit, say property agents.

Many coffeeshop owners also manage the drink stalls themselves, thus adding to their income as these stalls usually have the highest profit margins.

Also, coffeeshop properties are relatively rare, which adds to their allure as an investment option.

There are about 1,600 coffeeshop properties in Singapore, but right now only about 20 of them are on the market, said Mr Eric Cheng, senior division director of PropNex Realty.

He added that they can generally be classified into two tiers according to their cost, which is mainly based on location - those in Housing Board hubs tend to fetch higher prices - as well as other factors such as size and the number of stalls.

At one end are smaller properties costing less than $2.5 million, while the rest can fetch more than $3.5 million.

The most coveted locations for coffeeshops are Geylang, Bishan and Ang Mo Kio, said Mr Cheng.

He added that these properties ‘make better investments than residential assets because they take a shorter time to break even - 10 to 15 years, as compared to 20 years or more for homes’.

Other coffeeshops on the market currently include a 3,800 sq ft property in Clementi.

The asking price for that is $4.2 million in return for a total of $26,000 a month in rent from its seven stalls.

Another one in Geylang, with nine stalls on 3,600 sq ft of space that yields a total of $57,000 monthly, has a price tag of $5.5 million.

For a smaller investment, a five-stall coffeeshop in Jalan Besar is going for $1.89 million.

The 3,000 sq ft property pulls in $10,200 in rent monthly.

However, Mr Cheng cautioned that would-be buyers should keep in mind that most coffeeshops are 99-year leasehold properties, with many being more than 20 years old.

Source : Sunday Times - 10 Sep 2006

Prospective buyers can no longer use CPF savings to buy commercial properties

A RECENT rule change that stops people using their Central Provident Fund (CPF) savings to buy commercial properties has claimed an unexpected victim.

The fledgling market for small office, home office (Soho) apartments has been hit, with 80 per cent of prospective buyers at one development walking out the minute they realised their CPF savings cannot be used for the purchase.

Soho units, which allow buyers to live and work within the same space, are approved for office use and usually come furnished with kitchens and bathrooms.

They were designed to encourage city living and the few projects with Soho units are mostly downtown, such as Far East Organization’s Central above Clarke Quay MRT station.

But a Soho development being built in Joo Chiat Road by Shining Holdings has seen an initially strong demand almost completely vanish, after the change in CPF rulings took effect on July 1.

When it first sold The Modules in May, 25 of its 48 units were snapped up within a few weeks. But in the more than two months since July 1, only three have been sold, said marketing agent OrangeTee.

It added that this is mainly due to the CPF Board phasing out the Non-Residential Property Scheme in July.

The board said the scheme - introduced in 1986 to allow members to enhance their CPF returns by investing in property other than homes - is no longer relevant as members can now invest their savings in property funds rather than directly in shops and offices.

But this means potential buyers who could have used CPF savings for the down payment and monthly instalments on a Soho unit must now fork out funds for both in cash.

‘On average, about 80 per cent of people who walk in to ask about the project turn around and walk out after they find they can’t use CPF to buy the units,’ an OrangeTee agent told The Straits Times.

Soho apartments in prime districts are still selling well, as they attract buyers who do not have to rely on CPF funds.

Southbank near Lavender MRT station sold all 60 of its Soho units after July 1, said marketing agent Knight Frank.

As for Far East’s Central, few units have been sold this year as marketing has been temporarily halted. Thus it could not gauge the impact of the CPF changes.

But property experts said that, looking ahead, the new rule may dampen the Soho market, which is relatively new.

‘The ruling would probably affect singles and young couples with no kids who plan to use Soho units as their primary home,’ said a consultant.

The impact on the Soho market is likely to be greatest in developments away from the city but not many developers plan to build Soho units away from the city.

Mr Nicholas Mak, director of research and consultancy at Knight Frank, said the ruling ‘appears to go against the grain of trying to encourage entrepreneurship’, as Soho units allow buyers to use their office space as homes.

‘To the extent that it curbs demand for Soho apartments, it will also give developers less incentive to build such units, which may lead to less supply in the already small Soho market,’ he said.

The market is not likely to grow soon. Two developers that had been planning projects with a Soho component now say they will not sell such units.

CapitaLand’s Selegie Complex will have Soho units, but they will be leased rather than sold, the firm said yesterday.

United Engineers also said last year that it would include 160 Soho units at its upcoming Vista Xchange at one-north.

But it has clarified that the units - now reduced to 60 - will be ‘Soho-style’ homes and not actually zoned for commercial use.

fiochan@sph.com.sg

Fledgling market SOHO units, which allow buyers to live and work within the same space, are approved for office use and usually come furnished with kitchens and bathrooms.

They were designed to encourage city living and the few projects with Soho units are mostly downtown, such as Far East’s Central above Clarke Quay MRT station. The impact on the Soho market is likely to be greatest in developments away from the city but not many developers plan to build Soho units away from the city.

Source : Straits Times - 8 Sept 2006

TWO sites that housed the Bedok Cinema building and Changi Cineplex could soon make way for a small shopping mall.

Located near the Bedok MRT station, they are expected to be jointly put up for tender by the end of the month, market sources said.

They said the sites, which have a remaining lease of about 70 years and a combined land area of about 33,078 sq ft, could be sold for about $50 million.

The price includes a development charge, the purchase of state land and a premium to upgrade the lease to a fresh 99 years.

There is a strip of state land dividing the plots and another strip by the side - over 9,000 sq ft in total - that can be bought to boost the size of the combined site.

A commercial development on such a site could be built to a gross floor area of about 120,000 sq ft, or a plot ratio of three.

At that size, a new mall would be roughly equal to the size of Rivervale Mall in Sengkang.

The Bedok town area does not have a multi-storey shopping centre.

The Straits Times understands that Knight Frank will be handling the tender, but it has declined to comment.

A few developers are said to be keen on the sites, including property giant CapitaLand.

Whoever wins the tender may not want to include a movie house in the mall because cinema operators typically pay low rents, market sources said.

After operating for about 20 years, the three-hall Changi Cineplex - which faces New Upper Changi Road - closed in June 2000 because of poor attendances. It is owned by Shaw Organisation.

Cathay Organisation owns the Bedok Cinema next to it, which used to screen Hindi movies from 1996 until early this year. The screenings were moved to Jade Cineplex.

In the past, old cinema buildings have mostly been sold or leased to churches.

Source : Straits Times - 8 Sept 2006