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WHEN Gillman Heights in Alexandra Road was sold in February, it was the biggest collective sale to date.

But it had taken a whole year for the estate to be sold, and home prices had risen so much in the meantime that some sellers (left) were no longer happy with the sale price.

When they took their case to the authorities, so many people turned up that a bigger room was needed and security guards were brought in for ‘crowd control’.

This year, 109 estates were sold en bloc - most in the first six months - netting more than $13 billion for homeowners.

Despite the opportunity to make tidy profits, many owners, like those at Gillman Heights, felt they did not receive enough proceeds.

The property boom had chased prices up, leaving most of the sellers with no choice but to move to smaller apartments or cheaper locations.

The effects of the en bloc frenzy early this year are still being felt.

The demolition of apartments has led to a shortage of housing in the city and caused rents to spike.

With the cash from collective sales in hand, thousands of displaced families are still house-hunting, driving up prices for suburban apartments and HDB flats.

Source : Straits Times - 29 Dec 2007

Mega deals move some smaller firms and new entrants into new league

THE collective sale euphoria this year has swept in windfalls not only for home sellers, but also for the companies that brokered the sales.

Most property consultancies in Singapore have logged their best-ever year for such deals, pocketing record sums in related fees.

The run of ‘mega deals’ has also catapulted smaller property firms into the same league as the big boys.

Credo Real Estate, for instance, shot to the top of the pack this year by landing the $1.34 billion sale of Farrer Court in Farrer Road.

The local firm, started in 2002, specialises in collective sales. Bigger players like DTZ Debenham Tie Leung and Knight Frank also handle areas such as investment sales and office leasing.

In all, Credo sold $2.17 billion worth of collective sale sites this year. That is 20 per cent more than the next best performer: DTZ with $1.8 billion.

But DTZ also turned in a record year, said Mr Shaun Poh, the consultancy’s director of investments and auctions. ‘In terms of fee income, it was a fantastic year for us, the best year so far.’

The consultancies all declined to reveal how much they had earned from collective sales this year, but Mr Poh helped shed some light.

For smaller projects that sell for less than $50 million, most firms charge 0.75 per cent to 1 per cent of the sale price, he said. Bigger projects worth at least $300 million bring in about 0.5 per cent.

Some firms impose extra charges if they find buyers willing to go well above the reserve price, Mr Poh added.

In third place was Savills Singapore, another relatively new entrant to this segment. It only ‘really got into the business last year’, said investment sales director Steven Ming. It more than doubled last year’s sales with deals such as Tulip Gardens and Westwood Apartments.

Next came Knight Frank, which also had a ‘record year’, with 10 deals totalling $1.2 billion, said investment sales head Foo Suan Peng.

Heavyweight CB Richard Ellis, last year’s number one, weighed in at fifth place with four deals, including the $625 million sale of Grangeford Apartments.

Knight Frank’s Mr Foo said the collective sales market had never been so active. He noted: ‘All kinds of records were broken: sale price per sq ft, sale price quantum, number of transactions, size of development.’

This stellar performance also prompted agencies ‘not traditionally in this market’ to try their luck, he added.

Newman & Goh, which started marketing collective sale sites only in October 2005, was able to gain a solid foothold. ‘It was a great year,’ said investment sales head Jeffrey Goh.

Even agencies better known for individual home sales, such as Dennis Wee Group and Ivy Lee Realty, jumped on the bandwagon.

Dennis Wee helped to sell Tampines Court for $405 million, while Ivy Lee brokered the $131.5 million sale of Hong Leong Gardens in the West Coast. Both deals were done in March.

But even in the midst of popping the champagne, the consultants agree next year’s outlook is rather less rosy.

Continuing concerns over the United States sub-prime mortgage crisis might discourage buyers, while a new set of collective sale rules could obstruct the path for sellers.

Source : Straits Times - 29 Dec 2007

IN REPLY to Mr Alex Cheong’s letter, ‘En bloc sales: Find fairer way to compensate all’ (ST, Dec 17) on the method of distributing sale proceeds to owners in a collective property sale, the Singapore Institute of Surveyors and Valuers (SISV) would like to clarify its guidelines on the various methods of distribution.

As guidelines, they are meant to assist owners in selecting the distribution method suitable for their development. The recommended methods (based on share value, strata area, valuation or a combination of them) have been used in many successful collective sale applications made to the Strata Titles Board. However, the institute appreciates that there could be specific situations, for example, due to some unique or peculiar aspect of the development where the strict application of the guidelines may be viewed by some to be unfair. This is why there can be no single prescribed method of distribution, and the majority owners will have to decide the best method that will be acceptable to all owners.

Mr Cheong suggested an 85 or 90 per cent strata floor area and 15 or 10 per cent share value as a fair method of distribution instead of the fixed 50 per cent for both. We would like to clarify that using 50 per cent area and 50 per cent share value is just a guide based on the various formulations used in past collective sales. Under the law, it is for the owners themselves to choose a method and proportion. In addition, anyone who is aggrieved with the proposed method of distribution may file an objection with the Strata Titles Board.

The issue of the method of distribution is now better addressed with the amendments to the Land Titles (Strata) Act, which came into operation on Oct 4. Under the amended legislation, the collective sale committee has to convene a general meeting for all owners to consider the method of distribution of the sale proceeds.

The Ministry of Law and SISV will continue to work together to further refine the guidelines where necessary.

Janet Han (Ms)
Secretary
Singapore Institute of Surveyors and Valuers

Radha S. Khoo (Ms)
Head, Corporate Communications
Ministry of Law
 
Source : Straits Times - 29 Dec 2007

Everything seems to have come together well for the economy in 2007, says Money editor Ignatius Low as he looks back on S’pore’s robust economic growth, booming property and stock markets, and record low unemployment levels

FOR the majority of working people under the age of 40 - myself included - 2007 is a year that will be difficult to forget.

After all, most of us had joined the workforce in the years just prior to, or immediately following, the 1997 Asian financial crisis.

And the 10 years since 1997 have been one long series of economic busts and false starts.

Every time the economy seemed to pick up, something would happen to stop it in its tracks.

In 2000, it was the dot.com bust. In 2003, it was the severe acute respiratory syndrome.

As Singapore’s policy maestros worked to set a clear course for the economy through all these difficulties, the last 10 years were largely remembered for anaemic wage growth, asset deflation and painful restructuring.

That is why 2007 is special. It is the one year in recent memory that everything seemed to have come together so well.

For starters, the economy roared to life. And it has stayed strong despite earlier warnings that growth will slow in the second half of the year.

After clocking a blistering 8.9 per cent growth in the third quarter, the economy looks to end the year at around the 8 per cent mark, prompting The Economist magazine to recently proclaim Singapore an economic anomaly - a developed country growing at developing country rates.

Unemployment dropped to just 1.7 per cent, which really means full employment. And the tight labour market has sent salaries and bonuses skywards, especially in sectors such as finance and construction, which grew almost 20 per cent in the last quarter.

On the ground, many in my generation looked on in bewilderment as a flood of foreign liquidity sent property and stock prices up, up and up.

Braver opportunists rode the upward wave and were amply rewarded. A friend of mine flipped not one, but three apartments within a very heady six months and laughed all the way to the bank.

Indeed, property was all that anyone wanted to talk about in 2007.

The year had started with upscale condominium Marina Bay Residences setting a record price of $3,450 per square foot (psf) for its penthouse apartments - a ‘crazy’ By April, the record was already $4,000 psf.

By July, $4,000 psf had become ‘common’ after developers sold 72 units in various developments at that price.

Now, the record stands at $5,600 psf - the buyer having forked out more than $28 million for a 53rd-storey penthouse in Orchard Residences above the Orchard MRT station.

The boom has now filtered down to mass-market apartments. Areas as remote as Upper East Coast and Buona Vista are now fetching prices seen in central districts such as River Valley just a couple of years ago.

No wonder a new report by Global Property Monitor ranks Singapore the hottest property market in the world in 2007, after adjusting for inflation.

Record property prices also helped drive a stock market rally in the first half of the year that saw foreign funds pour into Asia, notably the surging Chinese markets.

Dealers and remisiers - as well as the computer system they traded on - could not quite keep up at times as the benchmark Straits Times Index (STI) broke new highs in heavy volume week after week.

For them, as well as others in Singapore, the blistering pace in 2007 often seemed a little too hot to handle.

Rising property prices fuelled a re-development craze in apartments and some 5,700 homes were sold in collective or ‘en bloc’ sales in the first half of the year alone.

In most years, sellers would have been happy to make a profit on their homes. In 2007, however, they found that prices on new, replacement homes had risen even faster than those they sold - forcing them to downgrade to smaller apartments or move to less prime areas.

The ‘en bloc’ removal of so many apartments from the housing market then helped to contribute to an islandwide shortage of homes that pushed rentals up breathtakingly quickly.

As rents effectively doubled for many apartments, expats downgraded to smaller apartments or moved to the suburbs. Moving companies and rental agents reported a banner year.

Fast-paced economic growth also meant rapidly expanding businesses. But with no new office space available in Raffles Place till 2010, there was just nowhere to grow.

A couple of years ago, rents in Grade A offices were stable at about $5 psf. Now, they are pushing levels as high as $15 psf, sparking fresh fears that they are ratcheting up the cost of doing business in Singapore.

Finally, economic theory dictates that higher growth, higher wages and higher rents will all inevitably find their way into higher consumer prices.

So in 2007, Singapore’s inflation numbers burst dramatically out of their typically sedate range of between 0 per cent and 1 per cent. Latest figures for last month show prices rising 4.2 per cent year-on- year, the highest rate of increase in 25 years.

And it looks like higher prices will be here to stay in 2008, with worldwide demand pushing oil prices close to $100US ($145S) a barrel this year and everything from wheat to rice trading at record-high levels.

What goes up must come down. If not, then something has got to give, so there is no doubt the giddy excesses of 2007 will come back to haunt us in 2008.

In Singapore, the stock market has already gone through a serious correction and those who invested in China companies, in particular, have been left licking their wounds.

Policymakers are already starting to battle the ill-effects of inflation on lower-income workers, whose wages will not rise in tandem with prices.

And the Government is also watching the property market closely, and acting to keep homes affordable for the majority of Singaporeans.

In the United States and other global financial markets, the days of cheap credit and easy liquidity have come to an abrupt halt with the sub-prime mortgage crisis. There will be plenty of losses yet to account for in the months ahead.

The year was a huge party 10 years in the making. There were great spectacles to marvel at from afar, but there was also plenty of buzz and excitement on the ground. And its broad-based appeal meant that nearly everyone had a good time.

The party is still on, but as the music starts to wind down as we enter the new year, signs of excess and fatigue are clearly showing.

Will it all come crashing down in 2008? It will take some care and skill to ensure that there will not be too many broken pieces to pick up the morning after.

Source : Straits Times - 29 Dec 2007

1 PROPERTY BOOM

THE property sector waited 10 long years for a proper recovery. This year, new all-time highs were set in so many categories, so often, that people lost count.

The year saw the sale of the most expensive apartment in Orchard Residences (both in absolute cost and per square foot terms), the priciest collective sale (Westwood Apartments in Orchard Boulevard) and the most expensive HDB flat and coffee shop (in Marine Parade and Jurong respectively).

The early boom in luxury properties filtered down to suburban condos and HDB flats. Latest figures show that nearly every single HDB flat sold these days goes at a price above market valuation.

The exuberance of the first six months has given way to a more cautious outlook since the Government stepped in to calibrate the market’s rise.

The removal of the deferred payment scheme, introduction of guidelines on transparency of transacted prices and the release of more land have all served to take the froth off what the Global Property Monitor has termed the world’s hottest property market in 2007.

Market watchers are already tipping 2008 to be a great year for mid-to-low priced homes, but the euphoria that marked most of 2007 will be hard to replicate for many years to come.

2 U.S. SUB-PRIME CRISIS

AT THE start of this year, no one really understood, or cared to understand, the obscure ’sub-prime’ mortgage market.

Now, the chiefs of some of the world’s largest banks - Citigroup, Merrill Lynch and UBS - have lost their jobs because of it.

And banks have been forced to write down a staggering US$50 billion (S$72.6 billion) in losses, with experts estimating another US$200 billion to come.

Economists have been fretting for some time now over when and how the next global financial crisis will occur, and signs of the current implosion emerged in the summer of this year.

Sub-prime lenders had been loaning billions of dollars at low rates to home buyers with dodgy credit histories in the United States and elsewhere.

Banks then repackaged these mortgages with sounder loans into complex securities called collateralised debt obligations (CDOs), selling them to other investors in the financial markets.

As property prices stopped rising and promotional low rates expired, these loans turned sour and CDOs backed by them became worthless.

No one knows how deep the troubles go, and experts warn that the world is only seeing the start of a full-fledged financial crisis.

3 SOVEREIGN WEATH FUNDS

GLOBAL consultancy McKinsey recently hailed them as one of the world’s new ‘power brokers’.

And indeed, the world’s sovereign wealth funds (SWFs) - investment companies and funds owned by governments - have in recent weeks been flexing their financial muscle on Wall Street.

Abu Dhabi Investment Company bought 4.9 per cent of Citigroup for US$7.5 billion and the China Investment Corporation has spent US$8 billion on sizeable stakes in Morgan Stanley and Blackstone Group.

The Government of Singapore Investment Corporation bought up to 9 per cent of UBS for S$14 billion and Temasek Holdings has invested up to US$5 billion in Merrill Lynch.

With Asian governments steadily running surpluses and chalking up reserves, and oil money pouring into Middle Eastern states, some estimate the total size of SWFs will reach US$12-15 trillion by the next decade.

This sort of power is making policymakers in the developed world nervous, and there have been calls for the World Bank and the International Monetary Fund to develop a set of guidelines for the world’s SWFs.

The outcome will be closely watched, not least by Singapore, which is home to two of the world’s ‘Super Seven’ SWFs and has been a prime beneficiary of free and open investment rules thus far.

4 FOREX LOSSES

IN A year that ought to have seen rig builder SembCorp Marine celebrate record high oil prices, the company hit the headlines for all the wrong reasons.

It shocked the corporate sector in October when it revealed that finance director Wee Sing Guan - a 33-year veteran of the company and described as ‘quiet and unassuming’ - was responsible for losses of $439 million following a series of disastrous foreign exchange trades.

The scandal underlined the dangers of companies dabbling in currency trading in a year that saw the US dollar tumble to record lows against major currencies like the euro.

SembCorp Marine was not alone. A week after its announcement, shipbuilder Labroy Marine said it had racked up $209 million in forex losses and was bought by Dubai Drydocks World for US$1.63 billion.

Source : Straits Times - 29 Dec 2007