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Some of the latest increases are the biggest in 6 years

Significant increases in development charge (DC) rates to enhance land use could affect collective sales and the rejuvenation of the old Central Business District, property consultants say.

Some of the increases - announced yesterday - are the biggest in six years. Leading the hikes are rates for non-landed residential use, which are up by an average of 9.3 per cent from today. Landed DC rates are up 4.8 per cent on average.

The average DC rate for commercial use has gone up 5.9 per cent, and that for hotel use 1.6 per cent. Industrial DC rates remain unchanged, according to a Jones Lang LaSalle analysis.

For non-landed residential use, actual increases by location range from 1.5 per cent in the Nassim area to a whopping 37.5 per cent on Sentosa.

The rate increase for many prime districts - the hotbed for collective sales - varies from about 7 per cent in Oxley and Leonie Hill/St Thomas area to 19 per cent in the Ardmore/Draycott area.

Some industry observers are especially taken aback by the Chief Valuer’s decision to raise non-landed residential DC rates for much of the Central Business District by 20 to 33.3 per cent. Such a steep hike could discourage owners of ageing office blocks to redevelop them for residential use.

JLL’s regional director and head of investments Lui Seng Fatt noted yesterday that the significant DC hikes follow a recent increase in private-sector rejuvenation plans to redevelop old office blocks into housing projects - for example, NatWest Centre and 1 Shenton Way.

And CB Richard Ellis executive director Soon Su Lin said: ‘The authorities should weigh the overall objective of urban renewal of an area where some of the buildings are 30 years old against a tax on redevelopment.’

DC rates - revised every six months, on March 1 and Sept 1 - are widely tracked in property circles because they reflect values and affect the breakeven costs of developers seeking to redevelop sites.

DC rates are specified according to use across 118 locations throughout Singapore.

As for the impact of DC rate rises on collective sales, JLL’s Mr Lui said: ‘A 10 per cent rise in DC rates in the prime districts translates to a roughly 6 per cent increase in breakeven cost for a redevelopment. Someone has to pay for the lunch. It depends on who has more bargaining power.

‘In a rising market, there’s a good chance that the cost will be passed on to the eventual buyers of the end-units in the new project. But if en bloc sale sites continue to increase until the market is flooded and developers have more choice of sites, part of the DC rate hike may have to be partly absorbed by the land sellers.’

Commercial DC rates have gone up most in the vicinity of the two prime Orchard Road sites sold by the state recently. At Orchard Turn, the rate has been raised 24.2 per cent. And for the former Glutton’s Square site, it has gone up 25 per cent.

The rate for the World Trade Centre area - with coming attractions like Vivocity mall and the nearby Sentosa integrated resort - has been raised 25 per cent. And in the New Downtown location - home to the Business & Financial Centre and Marina Bay integrated resort - the rise is 22.9 per cent.

JLL’s analysis shows that Sentosa led the rate hikes for landed and non-landed residential use, with gains of 29 per cent and 37.5 per cent respectively. This is not surprising given the ever-increasing prices being achieved for bungalow and condo sites at Sentosa Cove.

Source : Business Times - 1 Mar 2006

FAR East Organization (FEO) clinched another redevelopment site yesterday, bringing the number of sites it has bought to four in the first two months of this year.

The latest transaction is an en bloc sale of a low-rise residential development in Pasir Panjang called Pacific Court. At $27.2 million, the deal is modest compared with FEO’s other acquisitions, but signals a confidence in the overall property market nonetheless.

The other sites FEO bought include Amberville in Katong ($183 million), Angullia Mansion, off Orchard Boulevard ($120 million) and Glutton Square at Somerset ($421.1 million).

The Pacific Court site has a plot ratio of 1.4 and can be built up to five storeys with a maximum gross floor area (GFA) of 89,190 sq ft. Including the development charge, the price of the site in terms of its maximum GFA is $377 per square foot per plot ratio. Breakeven cost for a new residential development is expected to be around $670 psf.

Jones Lang LaSalle handled the sale. Its regional director and head of investments Lui Seng Fatt said he was amazed by the speed at which the deal was struck. ‘Pacific Court hit the record as the swiftest successful en bloc transaction in Singapore. It took just two months for the owners to decide on commissioning the sale by tender to awarding the tender to Far East Organization,’ he added.

The 32 apartment unit owners of Pacific Court will each get about $850,000, about an 80 per cent premium over the current market price.

Source : Business Times - 1 Mar 2006

The returns may tempt you to jump on the bandwagon, but agents’ fees and possibly development charges could take a fat chunk out of your profits

AS FEVER over collective sales continues to spread, many home owners are rushing to put their estates up for collective sale to capitalise on this craze.

At least 15 residential sites have been launched for collective sale since the start of the year, with at least nine successful transactions already completed.

However, even as home owners turn more bullish about their asking prices, property consultants warn there are various costs involved in such sales that they should be aware of before putting their homes on the collective sale market.

For any collective sale, the highest costs lie in the development charges and differential premiums, which could amount to tens of millions of dollars.

These costs are usually borne by the buying developer and are not included in an estate’s collective sale price.

Nevertheless, resident sellers do have to deduct certain fees and charges from the sale price, which could amount to about 2 per cent of the gross proceeds, or about $20,000 for a unit that fetches $1 million in a collective sale.

The bulk of these costs comes from the fees charged by marketing agents, which could range from 0.2 per cent to 1.5 per cent of the sale price, said Mr Ong Beng Kheong, an executive director of property consultancy Savills Singapore.

‘The amount of fees that agents receive will depend on the complexity of the project as well as the type of development and the number of units involved,’ he said.

These fees usually comprise valuation fees, basic investigation costs such as title searches and legal requisitions, and marketing costs for the collective sale site including advertisements, said Colliers International’s director of research and consultancy, Ms Tay Huey Ying.

Each seller will also have to fork out money for legal fees, which could be quoted either as a lump sum per unit or as a percentage of the overall sales price, said Mr Ong.

‘This could be anywhere from 0.15 per cent to 0.2 per cent for larger projects, whereas for smaller projects, it could range from $1,000 to $2,500 per unit,’ he said.

The other major cost that sellers would have to bear is the cost of an application to the Strata Titles Board for the proposed collective sale.

This fee is about $1,000 and will also cover notices in newspapers as well as a valuation report, said Mr Jeremy Lake, the executive director of investment properties at CB Richard Ellis.

However, out-of-pocket costs are not the only matter to take into consideration when deciding to put a property up for collective sale, say consultants.

One of the most crucial issues in any collective sale is the employment of a good marketing agent. When choosing an agent, the seller should take several factors into account, such as the agent’s fee, marketing plan, track record, level of experience, and current workload.

Sellers should ‘consider the number of number of successful collective sales handled by an agent, the scale of the deals, as well as the experience of the marketing team’, said Ms Tay of Colliers.

‘Take into consideration the number of collective sales currently undertaken by the agent at any point in time.

‘This may be an important consideration as it will give an indication of the agent’s ability to undertake a new collective sale deal,’ she added.

Source : Sunday Times - 26 Feb 2006

SINGTEL has sold one prime residential land plot to an Australian property developer for $30 million and sources say it is close to selling a second site to a local buyer for an undisclosed amount.

It confirmed yesterday it had sold its former telephone exchange facility located at 859, Old Holland Road to Brisbane Development for $29.8 million.

However, the telco is still ironing out technical details of the sale of its 50, West Coast Road property, measuring 215,951 sq ft and occupied by a disused warehouse. The site is expected to fetch between $32 million and $34 million, according to market-watchers.

A local buyer is understood to have won the site tender. The deal should be finalised in the next few weeks.

SingTel had said earlier that the sale of the two properties is in line with its strategy to free up cash that can be used in its telecommunications business and for new investments.

Brisbane Development’s acquisition of the 87,086 sq ft site at Old Holland Road marks its first foray into the residential property market in Singapore.

It is ‘understood to be planning to redevelop the site into as many as 28 to 30 luxurious strata semi-detached houses with facilities such as basement carpark, swimming pool and security’, said Mr Karamjit Singh of Credo Real Estate, which handled the tender sale.

Source : Straits Times - 24 Feb 2006

AFTER announcing the sale of its Old Holland Rd property yesterday for $29.8 million, Singapore Telecom is expected to put its Dunearn Road training centre on the market soon for about $95 million.

The centre, next to Raffles Girls’ Primary School and on the corner of Dunearn and Hillcrest roads, is now occupied by SingTel Academy.

It includes two 11-storey tower blocks, a few shorter buildings and a swimming pool.

The 256,486 sq ft site comprises two land parcels - one with about 85 years of its lease remaining and the other with 75 years.

The successful bidder will have to pay the state almost $40 million - one premium to top up the lease to 99 years, and another to change the site’s use from ‘utility’ to ‘residential’.

The expected $95 million price of the site plus the near-$40 million upgrading payment to the state works out to a unit land price of almost $380 psf of potential gross floor area.

Provisional approval has been granted for two storey, strata-title landed terrace houses with attics and basement carparks, with a 1.4 plot ratio - the ratio of potential gross floor area to land area. This is expected to yield about 160 such houses.

Market watchers say the successful bidder could instead apply to the authorities to develop a five-storey condo with a 1.4 plot ratio, as this would still be in keeping with the surrounding low-rise residential character.

Jones Lang LaSalle is said to have been appointed marketing agent.

The property should generate strong interest given its proximity to good schools - Raffles Girls’ Primary and Nanyang Girls’ High are both within a kilometre. This should create a sizeable pool of ‘captive buyers’ for the project - and hence the site.

As for the freehold site at 859 Old Holland Rd site, the $29.8 million sale price works out to $513 psf for a net land area of 81,400 sq ft after road widening and inclusive of a $12 million development charge.

The buyer, who was the highest bidder during the tender, is Brisbane Development Pte Ltd, a company fully owned by Bestwise Pte Ltd, whose ultimate shareholders include Indonesia’s Tjugito family, linked to the Eagle Indo Group.

Brisbane plans a cluster housing project designed by SCDA Architects, comprising up to 30 semi-detached homes with facilities such as a swimming pool and basement parking.

The breakeven cost is estimated at $2.1 million per house, and Brisbane could expect to sell the homes for about $2.5-2.9 million in a year’s time. Credo Real Estate brokered the sale of the site.

Eagle Indo group deve loped the Enterprise Industrial Building along Sims Avenue in 1995 and owns the 50,000 sq ft at Delta House on Alexandra Rd, bought more than 20 years ago.

Some time over a year ago, Bestwise bought four floors in John Hancock Tower - now known as 6 Raffles Quay - for about $750 psf of net lettable area.

The Tjugito family also has property interests in Australia, including a stake in the recently completed 53-storey Riparian Plaza in Brisbane’s CBD, comprising offices and residential penthouses overlooking the Brisbane River.

Market watchers are also waiting for SingTel to award another site - at 50 West Coast Rd. As with 859 Old Holland Road, the tender for this site closed in November last year.

BT understands the highest bid received for the West Coast plot could be close to $30 million - about $220 psf per plot ratio inclusive of a premium to top up the lease to 99 years and a change-of-use premium.

Source : Business Times - 24 Feb 2006