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Thread: Developers turn landlords as property market stays quiet

  1. #1
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    Default Developers turn landlords as property market stays quiet

    http://www.straitstimes.com/Money/St...ry_244216.html

    June 4, 2008

    Developers turn landlords as property market stays quiet

    With projects held back, firms lease out units bought in collective sales

    By Joyce Teo, Property Correspondent


    STAYING ON: The consortium that bought Lincoln Lodge has allowed occupants to keep renting homes for six months from the sale completion date of July 8. -- PHOTO: NEWMAN & GOH

    PROPERTY developers such as Koh Brothers and GuocoLand, which bought collective sale sites during boom times, are now becoming landlords as they wait out the market slowdown.

    They are leasing out apartments they bought to existing occupants as a way to generate some income instead of simply leaving them vacant.

    If the property upswing had continued, these developers might well have moved quickly to tear down the older homes to put up new developments.

    But the sharp slowdown in home sales has put paid to such thoughts for now.

    Market observers say renting is a nimble move given present market conditions.

    For sellers of units in collective deals who have yet to buy a new home, it is a win- win situation as they would have collected their sale proceeds.

    Take, for example, the consortium that bought freehold Lincoln Lodge for $243 million in June last year.

    It has decided to allow occupants to keep renting homes for six months from the sale completion date of July 8, and thereafter on a monthly extension basis.

    'Upon requests by some of the sellers to stay on, and while waiting for approvals, we have decided to grant them this request by extending a lease,' said Mr Francis Koh, Koh Brothers' managing director and chief executive.

    Rents at Lincoln Lodge range from $2,700 to about $4,500 for larger units.

    In the middle of last year, at the height of the collective sale frenzy, Koh Brothers bought the Newton site with Heeton Holdings, KSH Holdings and Lian Beng Group for a record $1,449.30 per sq ft (psf) per plot ratio.

    A Lincoln Lodge seller, who wished to be known only as Mr Tan, welcomed the rental move as sellers had collected sale proceeds in January, and those who had not bought a home could take their time.

    'It's an option...I know someone who negotiated the rent down to $2,500,' he said.

    GuocoLand seems to be the early rental front runner.

    It offered residents short-term leases at Sophia Court in Adis Road last year, followed by Leedon Heights off Holland Road earlier this year. The leases started in March at Sophia Court and yesterday at Leedon Heights. Both last till Jan 31 next year.

    A three-bedroom unit at Leedon Heights costs $2,850 a month, while rents at Sophia Court range from $800 to more than $4,000 a month.

    GuocoLand bought Leedon Heights in April last year for $835 million and Sophia Court in late 2006 for $230 million.

    Renting out units is a way to 'wait out the current quiet in the market', said Knight Frank's director of research and consultancy, Mr Nicholas Mak.

    'If developers were to launch their projects now, it may be challenging for them to reach their target price for some of the projects.'

    Frasers Centrepoint said it may offer short-term leases to the former owners of the 185-unit Flamingo Valley, a freehold site in Siglap Road that it bought for $194 million in February last year.

    'We had 50 owners who wrote to ask us to extend their lease...They haven't found anything suitable,' said the firm's general manager of development and property, Mr Cheang Kok Kheong.

    He said the firm was likely to extend a lease of six months to a year. This would 'give us more time to think about our plans'.

    City Developments (CDL) has said it is still exploring the renting option.

    Renting out apartments bought in collective sales is not new. CDL did so a few years back, when it rented out all 124 apartments in Kim Lin Mansion in Grange Road.

    It had bought it in late 1999 for $251 million, or $996 psf of potential built-up area, but pushed it out for sale only at the height of the property boom last year. It fetched prices of $3,600 psf.

    [email protected]


    Win-win deal

    # Developers lease out units to generate income instead of leaving them empty as they sit out the market slowdown.

    # Sellers of collective sale projects who have yet to buy new homes can stay on in their existing units as tenants.


    TOUGH TARGET

    'If developers were to launch their projects now, it may be challenging for them to reach their target price for some of the projects.'

    MR MAK of Knight Frank, on companies holding out for better prices

  2. #2
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    That is great news for all, construction slowing down, delayed supply, hopefully demand exceeds supply by the time they come online and that should spell well for those invested....

    Everyone happy.....

  3. #3
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    u wait long long, this is clear indication of market coming down soon, please don't influence others...

  4. #4
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    Greedy, chewed off more than they can bite! Gahmen should impose timeframe for them to develop.

  5. #5
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    There's no timeframe for them to redevelop.

    I remember Sugar King Robert Kuok bought the Great World Amusement Park site at Kim Seng in 1979, but left it vacant until 1986 when it developed it into Great World City today.

    I remember going past that vacant land and felt very sad because I liked Great World Amusement Park's joy rides.

    The other is this empty piece of land opposite the current St. Regis Residences which is now housing the St. Regis show room. I don't know which developer it belongs to but it had been lying vacant for around 10 years.

    You can still see part of the undemolished structure and a big hole in the ground collecting water. I ever thought of complaining to NEA about dengue mosquito hazard but later they cleaned up the place to construct the showroom.

  6. #6
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    Quote Originally Posted by Unregistered_2
    Greedy, chewed off more than they can bite! Gahmen should impose timeframe for them to develop.
    Why should the government? These are commericial decisions.

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    Then it is going to affect the rental of my property. I want my rental to rise. So many flats out in the market, how do I get good returns from my investment ha?

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    Quote Originally Posted by Unregistered_2
    Then it is going to affect the rental of my property. I want my rental to rise. So many flats out in the market, how do I get good returns from my investment ha?
    So many? Who told you? Who who miscalculated? And you stupidly believe them?

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    Quote Originally Posted by UnregĄstered
    So many? Who told you? Who who miscalculated? And you stupidly believe them?
    If I can't believe consultants then believe who? They said that rentals will go up because many properties go en bloc and will be torn down. They also said that if would cause rentals to rise. Now Farrer Court, Leedon Heights, etc., etc., also not going to be torn but instead rented out.

  10. #10
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    Quote Originally Posted by Unregistered_2
    Then it is going to affect the rental of my property. I want my rental to rise. So many flats out in the market, how do I get good returns from my investment ha?
    Rentals to fall big time...atleast by 50% soon. People would need to eat rather than pay hefty rents. I suggest you sell them before it crashes too and you are left with negative equity.

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