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He points to 7-year cycle, so current phase could run till 2012 or beyond

The property bull may keep on running until 2012 or even beyond, says Hong Leong Group executive chairman Kwek Leng Beng. Foreigners will keep pumping money into high-end housing. And businesses looking to get in on Singapore’s fast-developing hub status will send office rents ‘through the roof’.

‘I believe that at least for the next few years, barring unforeseen circumstances, the boom is sustainable,’ Mr Kwek told BT in a recent interview.

‘If you believe in the seven-year property cycle, we will have a boom until 2012. Our economy, having been restructured, is strong and poised for growth even beyond that,’ he said. ‘I won’t be surprised that we may be witnessing the biggest real estate boom in the history of Singapore.’

He added: ‘If you follow the seven-year property cycle, there’s still a lot of steam left, because we are only in the second year (of the high-end residential recovery). Mid-tier private home prices will move in sympathy, but the percentage rise is unlikely to be as high as in the luxury tier.

‘If you are a strong believer of seven years, then I think it can go on from 2005 to 2012. But I personally believe it will extend longer. The US (property recovery) has gone on for 14, 15 years. Australia, also 14 to 15 years, 16 years, UK has gone on more than 10 years.’

The residential sector will be underpinned by a continuing influx of high net worth investors, says Mr Kwek, who is also executive chairman of listed City Developments.

And the office sector will be fuelled by limited supply in the short term and by strong demand as the various government efforts to promote Singapore as a hub for financial services and wealth management, healthcare, education and hi-tech research, bear fruit.

‘A lot of analysts think we’ll have enough supply of offices by 2010, but I don’t think so,’ he said. ‘Just look at the rate at which we are going and able to attract businesses, especially in the financial industry and wealth management. They want a piece of the action in this part of the world. How can you have enough offices? It takes four to five years from planning to completion of a high-rise office building. I see that this is a place where office rents will go through the roof.’

Office rents did not go up for the most part between late-1996 and mid-2004. ‘This must not be overlooked when we talk about rising rentals now,’ he said.

But Mr Kwek does point out some caveats in his bullish predictions - an unexpected Sars-type disaster, a terrorist attack, the reintroduction of trade barriers and government intervention in the real estate market.

‘In general, governments may introduce measures that are designed for a soft landing but which actually can turn out to be a hard landing,’ he said. ‘In Singapore I think the authorities will only intervene to prevent excessive speculation, and in so doing they will bear in mind that Singapore has become a global city.’

Mr Kwek believes the current property cycle is unlike any Singapore has seen previously because the economy has been restructured and has emerged leaner and stronger.

Also, a vast amount of money is being invested, such as at Marina Bay with its huge integrated resort, botanic gardens and other infrastructure. ‘I can visualise the potential of this place,’ he said. ‘Singapore will be a bustling global city, a place to live, work, play.’

According to Mr Kwek, Singapore is starting to attract ‘cosmocrats’ - an emerging group of globe-trotting super-rich people who are flush with cash and are buying the best properties from London and Paris to New York and Hong Kong. ‘We are just beginning to see them in Singapore,’ he pointed out. ‘To them, if you talk about yield, they’ll laugh at you. Yield is of no concern to them.’

Mr Kwek reckons luxury home prices here are not over the top, pointing to historical data as well as international comparisons. The average highest-done residential price in Singapore recently is about $3,300 per sq ft, which is still about 40-50 per cent below the equivalent figures in London, New York and Hong Kong, he said.

This means there is room for growth in Singapore luxury home prices, and by 2012 the gap could narrow to about 10-12 per cent. During the previous bull run, the highest price achieved was about $2,200 psf, Mr Kwek noted. ‘At 6 per cent interest rate (and this includes inflation, which is not big in Singapore), after 10 years, you know what should be your selling price? $3,400 psf. At 7 per cent, we should be selling $3,900 psf today.’

Source : Business Times  - 8 May 2007

The Ardmore has joined the list of collective sale sites with asking prices of $2,000 psf per plot ratio (psf ppr) and above.

The Ardmore

Knight Frank, which is marketing the 42,565 square foot freehold site at 6 Ardmore Park through an expression-of-interest exercise, says the asking price is $221.8 million, which works out to $2,000 psf ppr including an estimated $16.6 million development charge.

The site is zoned for residential use with a 2.8 plot ratio - the ratio of maximum potential gross floor area to land area - and a 36-storey height limit.

The successful developer can build a project with 42 units averaging 3,000 square feet each, according to Knight Frank.

The closest benchmark in the area is the $1,650 psf ppr achieved for Anderson 18 in March, when City Developments and Wing Tai placed a $477.7 million joint bid for the 112,097 sq ft freehold site.

The highest unit land price achieved so far for residential land is still for The Parisian at Angullia Park, which was clinched by Overseas Union Enterprise for $1,735 psf ppr late last year.

However, that has not stopped en bloc sale owners asking for $2,000 psf ppr or even more.

Last month, Elizabeth Heights, a freehold development in the Cairnhill area, was launched for collective sale with a price tag as high as $2,100 psf ppr.

And the owners of the 99-year leasehold Grangeford Apartments have set a ‘guide price’ of $2,016 psf ppr, which includes an estimated $97.8 million payable by the site’s new owner to the state to restore the site’s remaining 66-year lease to 99 years.

Expressions of interest for The Ardmore close on June 12.

Source : Business Times  - 8 May 2007

FIRST Real Estate Investment Trust (First Reit) has agreed to acquire a nursing home at 51 Lentor Avenue.

The price was not revealed in its statement released yesterday but is understood to be around $12 million.

The 148-bed nursing home will be leased back to its current owner, Sphere Investment.

The leasehold property, with a gross floor area of about 3,000 square metres, is on about 2,500 sq m of land.

First Reit, which is part of Indonesia’s Lippo Group, acquired three properties here for a total of $38.2 million earlier this year. It was listed on the Singapore Exchange in December 2006.

Ronnie Tan, chief executive of First Reit manager Bowsprit Capital Corporation, said there are no immediate plans to enhance the latest property, though there is some potential to maximise unused plot ratio.

First Reit will continue to look for opportunities in Singapore and Asia, he said. ‘We have to continue to grow.’ Dr Tan expects to announce more acquisitions in the current second quarter of the year.

In January, he said First Reit plans to double the size of its portfolio to $500 million within three years and raise it to $1 billion within five years.

At the time of listing, the Reit comprised three healthcare properties and a hotel in Indonesia worth a total of $257 million.

Source : Business Times  - 8 May 2007

Developers should offer units, pay rental to owners who do not agree to en bloc sales

Letter from Paul Armstrong

It is evident from the articles and letters in Today regarding en bloc sales that this phenomenon has already become a serious bone of contention. I fear that unless some strong urgent action is taken, it will soon get out of hand.

A great many of the majority owners agree to sign the Collective Sales Agreement purely on the basis that they stand to receive a large sum of money — much more than some have ever dreamed of.

They have given little thought to what they can buy with that money, or what it will mean with regards to where they might have to move to.

All of a sudden, they will find themselves having to move to another district with which they are not familiar, perhaps far from their children’s schools and other facilities like markets, shops, MRT and access to public transport. But that will be their problem. They have agreed to the sale and must face the consequences.

But what about the minority owners who didn’t want to move?

Bearing in mind that Singapore’s population is rapidly ageing, there are many such owners who are now old, for whom such a move is going to create problems.

The reply from Ms Radha S Khoo of the Ministry of Law, to the letter from Ms Lucy Huang (”No time to dilly-dally”, May 4) makes it very clear that in effect, minority owners have absolutely no legal recourse.

While this may be in accordance with the law, it seems to be a very unfair law, and I wonder if sufficient consideration was given to the plight of the minority owners when this law was passed.

It has been suggested that developers provide for an exchange deal — a new unit in the redeveloped estate in exchange for the one being demolished.

This may sound like a fair deal, but as the en bloc sale comes about because the developer wants to build a great many more units than were there originally, the new units are almost certain to be smaller than the original ones.

Where one originally had a nice relatively unobstructed view, the new one will probably be cheek by jowl with its neighbours and the view gone.

My wife and I were subjected to an en bloc sale a few years ago, and were offered an exchange unit that would be the same size as the original one. We declined, but one of our neighbours accepted.

After the new development was completed, she invited us to view her new apartment. Yes, it was the same size, but not by any means the same shape.

Where the original had virtually no wasted space, the new one had many little nooks and crannies that were not usable, and the rooms were all much smaller.

And the neighbouring unit was so close that you could open the window and shake hands with the occupant.

I would like to make a suggestion. If developers would agree to offer exchange units to those who did not sign, it would probably be an acceptable solution.

However, since there would be no monetary benefit to the owners, the developers, who stand to make a lot of money out of the new development, particularly with the ever increasing prices of property, should be prepared to offer them alternative temporary accommodation or a rental allowance until the new units are ready.

Making this a part of the law may well be the answer to providing minority owners with a more equitable and legally binding solution.

Source : Today - 8 May 2007

Property frenzy may be caused by baseless sentiment

Letter from Steve Ngo

I refer to the letter, “A lesson worth remembering” (May 7) by Mr Lim Boon Hee, and I absolutely agree with his views. In particular, I fully support his belief that “with the kind of salaries that average Singaporeans earn, such prices are not sustainable”.

The economy may be doing well, but that is not filtered down to all sectors, and does not translate to every Singaporean being prosperous.

All the bullishness is just sentiment. If we are shopping according to our sentiments, then why are people risking hundreds of thousands — beyond what they can afford — to “invest” in properties? It’s somewhat of a dream if anyone thinks that they can depend on rental yield to pay for their mortgage.

It appears that the property market’s bull run is artificial but this is not surprising.

A few years ago, I viewed a suburban condominium and the sales person told me that there were only few units left. Recently, it was advertised that they still have quite a number of choice units left.

I don’t know exactly how the property business works but I certainly would not be surprised if the developers themselves “buy” the properties — hence creating the impression that there are no more units left — and put the units up for sale again later.

We cannot expect the Government to extend its control over everything, which is why I would like to reiterate Mr Lim’s view asking Singaporeans to practice self-restraint and not be ruled by greed.

Each of us has a role to play in preventing the property market from spiralling out of control, to the extent that prices become unaffordable.

Source : Today - 8 May 2007