Kwek Leng Beng: Property slowdown not widespread

http://www.straitstimes.com/Money/St...ry_268293.html

August 15, 2008 Friday

Kwek Leng Beng: Property slowdown not widespread

Lower prices may be due to panic-selling by a few owners, says CDL chief

By Fiona Chan, Property Reporter


CITY Developments (CDL) chief Kwek Leng Beng is not convinced that the property market slowdown is as widespread as it seems, despite the recent easing in home sales and prices.

The executive chairman of Singapore's second-largest developer said the lower prices may just be the result of 'panic-selling' by a few owners who had bought their high-end homes cheap.

'There is a bit of panic in the market, and what has gone up very high in a straight line will also come down,' Mr Kwek said, referring to how property prices have soared in the last few years. But he added that a few lower-priced sales may not be representative of the overall high-end market.

'Bear in mind, just because of a couple of low transactions, one swallow doesn't make a summer,' he said yesterday at the release of CDL's second-quarter financial results. He added that few buyers so far have defaulted on their purchases.

Mr Kwek also brushed aside concerns about a looming oversupply of homes in the market. He cited higher land and building costs, pressure on the construction sector that may result in completion delays, as well as possible financing difficulties faced by developers who want to build new homes.

CDL yesterday posted a 15 per cent drop in net profit to $165.2 million for the three months to June 30. It said this was due to the absence of a one-off tax credit given last year, without which net profit would actually have risen 0.6 per cent. Revenue inched up 0.7 per cent to $780.8 million.

But Mr Kwek stressed that the current slowdown is 'different from the Asian financial crisis of 1997', saying CDL has 'very little unsold residential stock, a healthy balance sheet and locked-in profits yet to be recognised from its pre-sold residential units'.

Between now and December, the group plans to launch phase 2 of Livia in Pasir Ris, as well as two new projects: The Arte in Thomson Road and The Quayside Collection at Sentosa Cove.

Earnings per share dropped to 17.5 cents in the second quarter, from 20.7 cents a year ago, CDL said. But group net asset value rose to $5.77 as at June 30, from $5.72 as at Dec 31 last year.

The group also said it has signed up all the anchor tenants for its City Square mall in Kitchener Road and is filling up the rest of the space steadily.

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CDL's new debt issue to tap Islamic sources

CITY Developments (CDL) is planning to raise funds through what will be Singapore's first Islamic unsecured financing arrangement.

The developer said it will issue a $1 billion Islamic multi-currency medium-term notes programme. This will allow CDL to tap new markets and investors, including Islamic sources, for possible acquisitions in a slowing economy.

'It is to keep ourselves liquid so we are ready to bottom-fish at any time,' said CDL executive chairman Kwek Leng Beng.

The group said in a statement it is 'optimistic that under this challenging economic situation lies tremendous opportunities'. This deal will give it a 'diversified, alternative and non-traditional financing stream to further enhance its war chest.'

FIONA CHAN

On one hand he is saying prices still can maintain high, yet on the other hand, he is gathering funds to "bottom fish"... actions dun match words leh... clearly he is expecting quite a bit of economic downturn to go through all that trouble to "bottom fish"....

http://www.businesstimes.com.sg/sub/...92389,00.html?

Published August 15, 2008

One man's panic is another's bargain...

CDL chief points to some good buys as panic-sellers offload, but he's not alarmed

By KALPANA RASHIWALA


(SINGAPORE) City Developments Ltd (CDL) executive chairman Kwek Leng Beng yesterday acknowledged that there have been some cases of high-end property buyers resorting to panic-selling in the secondary market. These are people who'd bought their units during the early stages of the property boom.

'It is not as alarming as what some people think. Just bear in mind, because of a couple of transactions, these few swallows do not make a summer,' he told analysts and journalists at a briefing to announce CDL's second quarter results.

In some cases, these desperate sellers are offloading their units at prices that may be 20-30 per cent below current market values, providing attractive bargains for astute property investors, Mr Kwek said.

'There are what I call bargains because some buyers, towards Temporary Occupation Permit or even before TOP, just want to get out as long as they make $100 psf profit.

'As an example, there were some projects launched at $2,200 psf. Then (the price) went up to $3,400-3,500 psf. Today there are some people who have gotten so frightened, they will sell off at $1,700 psf. That is the time, if you are smart enough, you can pick up (a bargain)! Buying property is not short term. Buying property is medium to longer term.'

High-end home prices are in a period of consolidation after a sharp escalation. 'What has gone up in a straight line will also come down,' as Mr Kwek put it.

'My key advice to you is as long as you can service your instalment and with the (current) cost of construction so high, how can you be worse off than during the bad times in '96 and '97? If you are smart enough to pick up (a property) when some people want to commit suicide, you just pick (it) up cheap - keep it, rent it, stay - there's your chance.'

Saying he was not too worried about the current consolidation, he added: 'This is the time you should buy. This is not the time you should get out, unless of course circumstances dictate that you should get out.'

Regaling his audience with an anecdote, Mr Kwek said: 'For example, The Sail @ Marina Bay, we started selling at $900 psf, and the price went up to $3,000 psf-plus. The other day, somebody told me that his friend, a broker, said there's one unit, ninth floor, $1,800 psf. He asked me: 'Do you want to buy?' I said: 'Which unit? I want to check. I am going for a meeting. When I come back, we'll talk about it.' By the time I came back, the whole thing was gone.'

The high-end residential sector will recover 'when the sub-prime crisis is over and the integrated resorts are in operation', Mr Kwek said. 'You'll have a lot of high rollers coming in. They come in, they like Singapore - very clean, things get done. We have a lot of (positive) attributes but we're always taking them for granted.'

Mr Kwek, who is also chairman and managing director of Hong Leong Finance, said that although 'we don't have Freddie Mac and Frannie Mae' here, Asia will be hit to some extent by the sub-prime crisis. 'However, our banks are well capitalised. Monetary Authority of Singapore is monitoring closely.'

He also recalled Minister for National Development Mah Bow Tan's comments that 'they don't want to see property prices going (up) in a straight line nor do they want to see it going down in a straight line. So I am confident they are monitoring the whole situation'.

Much of CDL's land bank, even in the high-end, was acquired at relatively cheap cost. 'As an example, for the Lucky Tower site (at Grange Road), if I were to launch my project tomorrow at $2,500-$2,600 psf, I can still make very healthy profit compared to Cliveden (nearby) which we sold at $3,750 psf. It's a question of whether I want to let go at $2,500 psf or whether I should keep it.

'Don't forget if you go ahead and construct, you incur two sets of interest costs - on land and construction. By the time the market improves, the (unit) sizes and the design may be outdated, so you cannot maximise the profit from that. It's better to keep the land and wait for a better opportunity before you sell.

'I'm sure some (other) developers feel the same way. I will guarantee you many of these people will not go ahead with construction,' Mr Kwek said.

CDL, in its results statement, also cited other reasons why a feared oversupply of new private home completions may not materialise. Tight bank financing is making developers more cautious in their land purchases. The sharp hike in construction costs means developers who delay their launches may hold back their construction plans as well. Given tight construction resources, contractors may continue to find it hard to complete projects on schedule.