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Thread: BT Property 2007 Supplement

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    Default BT Property 2007 Supplement

    Published March 22, 2007

    Your guide to major projects islandwide


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    Default Stellar time for investment sales

    Published March 22, 2007

    Stellar time for investment sales

    By JEREMY LAKE


    A COLLECTIVE sale market abuzz with activity helped boost total investment sales for 2006 to $29.4 billion, the highest in a decade. And this year will see the same level of activity, with developers eyeing sites across the island, including areas outside the prime districts.



    The collective sale market has, in the past year, seen the likes of foreign funds such as Citadel and Morgan Stanley teaming up with local developers to buy sites. This is not surprising, given that Singapore has proven to be a safe and conducive haven for investments.

    Districts 9, 10 and 11 have traditionally been a popular choice. But non-prime locations are capturing investors' interest, and enjoying a fairly good success rate too. Since the start of the year, large-scale acquisitions seem to be picking up pace too as seen by the sale of Gillman Heights, Minton Rise and Flamingo Valley.

    The shortage of office space and strong office rents have spurred increased investor interest in this sector. The office sector is growing in terms of the number and value of transactions. Private equity groups and foreign funds have been more active than Reits in the office market, with CLSA, MGPA, Alpha Investment Partners and Credit Suisse having shown keen interest in acquiring commercial properties.

    In comparison, the retail sub-sector will record fewer transactions chiefly because of the lack of sellers and the limited stock of retail properties put up for sale. The expected rise in consumer spending and increase in tourist arrivals will continue to make Orchard Road retail sites very much sought after.

    Suburban malls, too, with their critical mass and guaranteed catchment from suburban residential estates, will continue to remain attractive to potential investors. The dynamics in this sector are positive and investors will continue to keep an eye on it for an attractive purchase.

    The hotel sector, too, will see continued interest from investors, given the projected increase in visitor arrivals, the growing MICE industry as well as the rise in room and occupancy rates. Again, like retail assets, there are limited hotels that will be put up for sale and, as such, we expect heightened interest in the hotel sites being launched by the government.

    Purchasers in the industrial investment market continue to be dominated by Reits and will likely remain the main buyers of industrial sites in 2007. The industrial sector presents more yield-accretive options for Reits, with capital values still relatively lower than commercial properties. The Reits would find these attractive as price-competitive opportunities can still be realised.

    The writer is executive director, investment properties, at CB Richard Ellis

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    Default More sellers take auction route

    Published March 22, 2007

    More sellers take auction route

    The offerings at auctions have evolved from the typical mass market property to include more prime properties. And they are attracting international buyers as well, writes GRACE NG


    AUCTIONS are fast gaining acceptance by both sellers and local and foreign buyers as a mode of sale for non-mortgagee properties. In fact, one will be amazed by the wide selection of properties available at auctions.



    Growing popularity: 600 owners chose to sell via auctions last year, a jump of 67 per cent from 2005


    In recent years, the market has seen a growing trend of property owners putting up their properties for sale via public auction. This is very different from the situation a decade or two ago, when vendors were reluctant to take the auction route due to the stigma it had of being the province of financially strapped sellers. Last year, 600 owners chose to sell via auctions, a jump of 67 per cent from 2005.

    An auction sale has the appeal of transparency, with its open system of bidding. In the current buoyant market, many sellers feel that an auction is a quick way to get the most competitive price for their properties. The list of properties for auction is also made available to the public through newspapers and auction house websites about two weeks before the auction.

    With the growing popularity of auction sale, the market is also seeing increased response to auction advertisements. Property buyers - both local and foreign - are flocking to auctions to bid for the property of their choice. Nowadays, it is not surprising to see foreigners, particularly from Malaysia and Indonesia, at local auctions bidding for property.

    Over the years, the offerings at auctions have also evolved from the typical mass market property to include more prime properties. Such properties, which include conservation houses, prime strata-titled commercial properties, good class bungalows (GCB), properties with en bloc potential and luxury homes, are highly sought after due to their location and scarcity.

    Conservation properties

    Conservation properties located at historical areas, such as Boat Quay, Chinatown, Joo Chiat and Little India, are one category of property that investors and home buyers eye for their prime locations and heritage value.

    Just this month, an owner sold a conservation terrace house at Emerald Hill for $4.4 million at an auction. Last year, owners successfully sold shophouses at Dalhousie Road, Joo Chiat and Syed Alwi Road for $2.4 million, $2.95 million and $1.03 million, respectively.

    Strata-titled commercial properties

    There are an increasing number of sellers putting up strata-titled commercial properties for auction. Leveraging on the rejuvenation of Orchard Road, Singapore's most popular shopping corridor, owners are taking the auction route for shop units in developments like Lucky Plaza and Orchard Plaza.

    In view of the current tight office supply and the lack of strata-titled office space available for sale, sellers who put up their prime office space for auction were amply rewarded. For instance, two office units at Suntec Tower were sold for $6.5 million ($832 per sq ft) in April while an office unit at Peninsula Plaza was sold for $1.65 million ($1,111 psf) in November last year. In March, an office unit at Peninsula Plaza was sold by the owner via auction for $650,000 ($1,259 psf).

    Properties with en bloc potential

    An auction sale may be the next best alternative for owners who do not want to wait for the outcome of a potential collective sale. Some examples are units at Tulip Garden and The Beaumont, which were sold for $1.73 million ($650 psf) and $1.38 million (S$1,562 psf), respectively.

    These properties often see good response at auctions as investors are willing to pay top dollar to join the en bloc bandwagon. This has been fuelled by the active en bloc sales market in recent years.

    Good class bungalows

    GCBs with land sizes starting from 15,000 sq ft, generally located within designated areas such as districts 9, 10 and 11, have drawn much interest at auctions. Properties at Gallop Park and Astrid Hill, which were put up for auction last year, were sold for about $7.5 million and $11 million, respectively. More owners are willing to put their GCBs up for auction due to their rising value and limited supply. There are only about 2,500 GCBs in Singapore and prices have climbed by nearly 20 per cent in the past 12 months.

    High-end homes

    With the recent hype over the luxury/high-end residential sector, developers have also taken the auction route in selling their high-end projects. For instance, Sentosa Cove Pte Ltd put up 12 bungalow parcels at Sentosa Cove for auction last year via the partnership of Colliers International and Christie's Great Estates.

    The session was attended by high net worth individuals, both locals and foreigners from Hong Kong, India, Indonesia and Malaysia. It was also the first time that a local auction was broadcast live via satellite to countries like Australia, China and Hong Kong. All 12 parcels were successfully sold - amid competitive bidding - for a total value of $86.34 million, achieving a record price of $1,039 psf.

    Tuan Sing Holdings is another developer which is tapping the international auction scene. The developer will be putting up 12 condominiums at Botanika, a 34-unit luxury development next to the Singapore Botanic Gardens, for auction this year. This is the first time an uncompleted project is being offered for international auction.

    With many unique advantages - including a strategic location, stable government, a competitive workforce and a pro-business environment - Singapore is well-positioned as a global city and the gateway to Asia. In addition, Singapore is evolving into a wealth management and education hub. This, coupled with the increased emphasis on the biomedical, multimedia and tourism industries, has attracted an influx of foreign investors and expatriates, enhancing the appeal of properties here.

    Going forward, while the spectrum of properties being offered at auctions is likely to be much wider, the reach of auction will also extend from the local to the international arena.

    The writer is deputy managing director (agency and business services) and auctioneer at Colliers International



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    Default Hot picks in real estate

    Published March 22, 2007

    Hot picks in real estate

    TERENCE WONG and ALVIN YONG look at where investors can get the best returns


    IT has been quite a year for the Singapore property market, emerging from the gloom and heading into uncharted territory. The spark that started the uptrend can be traced back to late 2004 when foreigners, flush with liquidity, began showing interest in Singapore's high-end property.

    This was boosted by the country's plans for the Sentosa and Marina Bay integrated resorts as well as government efforts to make property more appealing by easing the approval process for foreigners to own land (in the case of Sentosa). Moreover, Singapore's property market had been lagging behind Asian cities like Shanghai, Hong Kong and Mumbai.

    Capitalising on the government's effort to revitalise the property market, developers started acquiring prime land in the core central region (downtown core, Sentosa and districts 9, 10 and 11) in anticipation of rising property prices. It led to a series of en bloc deals in 2005 and 2006 as developers outbid each other to secure prime land.

    This in turn prompted the government to hike the development charge (DC), with the rates for commercial use and office space rising by an average 12 per cent, landed residential use by 6 per cent and non-landed residential use by 14 per cent.

    Reaping rewards

    Savvy investors who saw the glimmer of light in late 2005 as a buy signal are reaping the rewards of their investments. In 2006, the Singapore property equities index rose 67 per cent while the URA property price index for residential and commercial property increased by 10.2 per cent and 17 per cent respectively. Singapore Reits (S-Reits) have also done well, appreciating by more than 40 per cent on average in 2006.

    Given the buoyant outlook, where should investors look for the best returns in 2007?

    Home prices increased by 10 per cent in 2006, with the bulk of the price increase concentrated in the core central region. Prices are expected to rise by a further 12 per cent this year. Residential rents have also risen 14 per cent in 2006.

    While the focus has been on the central region, the mass market could see the filter-down effects this year, for several reasons. First, the strong economy has led to greater job security and rising wages. Coupled with a partial restoration of CPF, demand for mass market projects is expected to rise as middle-income earners, who were most affected by structural changes, will have greater confidence to upgrade their properties.

    Second, following the wave of en bloc deals, people who have sold their homes to developers would be shopping for replacement units. As some of them may be priced out of units in the original area, they would look for homes in outlying areas.

    Third, the government's strategy of attracting foreign professionals into the country is paying dividends. Anecdotal evidence suggests many have decided to call Singapore home, driving up demand for private property. Many Singaporeans are also snapping up projects close to where the foreigners are working, in hopes of fetching rich rentals. This can be seen in the recent launch of One North Residences at One North Research Hub in Buona Vista, which sold close to 80 per cent of the units in three days.

    On the commercial side, the sharp 30 per cent spike in office rentals in 2006 was attributed to the shortage of prime office space. Although the government has released the Business and Financial Centre for development, no new office supply is expected to hit the market till late 2009. This has caused office rentals in the CBD to surge past $10 per sq ft with occupancy hitting 98.4 per cent for Grade A properties.

    With more multinationals from the finance, IT and marine industries relocating to Singapore, demand has risen considerably, while downtown supply has dipped as old commercial buildings are being redeveloped into apartments. As such, the commercial sector will continue to do well for the next couple of years, and new records are expected to be set for Grade A properties. Sub-prime areas will also benefit from spillover demand.

    Pockets of opportunities

    As property recovers, property stocks have seen one of the best runs in recorded history, far outpacing the rise in real estate. While fundamentals are strong and profits should be very healthy, much of the prospects of property developers may already be in the stock price. However, there are pockets of opportunities, particularly in stocks exposed to the commercial sector as well as Reits.

    With the crunch in office supply, commercial real estate landlords will see another stellar year. Given the discrepancy between rental yields of commercial property and the required returns of commercial Reits, value can be unlocked by landlords by selling these properties to existing players or floating a Reit themselves.

    S-Reits outperformed their global peers in 2006 and are likely to see slower growth ahead. Given that it is increasingly difficult for Reit managers to make yield accretive acquisitions, it is likely that there will be some merger and acquisition (M&A) activity among listed players. Smaller Reits like Cambridge Industrial Trust, which typically have more attractive valuations and higher yields, are likely targets for takeover.

    Property is riding high and will continue to see strong interest in 2007. For investors, this should be a good time to invest in well-located mass market projects, particularly those close to the city or MRT stations. Commercial landlords are also expected to enjoy a good run for at least the next two years. Grade A office buildings have already seen record rentals, and this is expected to spill over to the lower tiers. While prospects for property remain bright, property counters may have already priced in much of the good news. As such, investors should not expect the same gains as before and be more selective.

    Terence Wong is chief executive officer, and Alvin Yong, research associate, at SIAS Research Pte Ltd

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    Default In the top league

    Published March 22, 2007

    In the top league

    Nicholas Mak and Michelle Tee look at how Singapore's luxury properties compare with those in other global cities


    As Singapore's high-end homes reach ever higher prices it may be illuminating to see where the city now stands in relation to the major capitals of the world, and what lies in store for these gateway cities in 2007.



    One word encapsulates the phenomenon of record-breaking prices for top-end residential property in major cities including Singapore - globalisation. It has transformed some into global cities, where international business and financial institutions, law firms and corporate headquarters cluster, creating a business environment with buzz.

    As these global cities continue to nurture a growing pool of wealthy local individuals and a sizeable inflow of high net worth international business people, investment bankers, traders and celebrities, the demand and, in turn, prices of high-end luxury residential developments in these cities would usually be the most expensive in that country or region.

    Compared to a year ago, average prices of high-end luxury apartments have seen strong growth of about 10 per cent to 17 per cent in cities like Tokyo, Hong Kong, Beijing and Singapore. The price increase of high-end luxury apartments in London was even more spectacular, surging close to 30 per cent in the past year.

    As such, prices of luxury residential properties in selected global cities now range from a relatively affordable S$350 to S$500 per square foot (psf) in Beijing to S$4,000 to S$6,000 psf in London and Hong Kong. Comparatively, prices of Singapore's luxury properties, which average $2,300 psf, are still some way from the sky-high prices commanded in London and Hong Kong. But they are almost on par with Sydney's and Tokyo's.

    Exclusivity, lifestyle and convenience are found to be the key features of high-end residential developments in global cities. In particular, tie-ups with branded hotels is a gradually growing trend in the luxury market, especially in cities like Singapore, Tokyo and London. This is to better offer residents an array of personalised hotel services. Examples of such joint propositions include St Regis Residences-St Regis Hotel tie-up in Singapore and One Hyde Park-Mandarin Oriental Hotel tie-up in London.

    Notwithstanding this, standard condominium facilities such as swimming pool, landscaped gardens, shared multi-purpose function room, gym, BBQ pit, private carpark spaces and sometimes tennis courts that are commonly provided in Singapore's luxury residential properties are not always offered to residents in other global cities, even in the high-end market.

    London: Priced at a high

    Some of the most expensive homes in the world can be found in London. Given a choice, a significant number of people would like to live in central London, but only a few can afford it.

    On average, freehold luxury homes in London cost about S$6,000 psf to S$7,500 psf. Demand in London is not limited to people working in the city but also foreign home buyers from Europe, South America, the Middle East and Russia. They are attracted by London's prime economic status, strong capital markets, lifestyle as well as favourable tax laws as compared to other European countries.

    Tokyo: The environmentalist

    Reflecting the general eco-friendly culture of the Japanese, developers of residential projects in Tokyo are space conscious even in the high-end segment. Typical units in a luxury development range from 500 sq ft to 1,900 sq ft, with some projects such as Banco Park House and Aksaka Tower Residence offering larger units of up to about 2,800 sq ft. In addition, recreational facilities such as swimming pool, tennis courts, gym and BBQ pits are almost non-existent in Tokyo's residential developments. But some high-end residential developments such as The Centre Tokyo and Aksaka Tower Residence do provide unique facilities like libraries and guest suites, which are not usually found in other global cities' luxury residential projects.

    Average prices of high-end luxury residential units in Tokyo currently range from S$1,400 psf to S$1,800 psf, with some top-end developments such as Chidorigafuchi priced at about S$2,400 psf. But they are still considered reasonable compared to other global financial centres such as London, Hong Kong and New York.

    Hong Kong: Space as status

    Hong Kong's high-end developments are concentrated in areas such as the Peak, Central, Happy Valley and Kowloon Tong. The majority of luxury units such as those found in 8-12 Peak Road and Grosvenor Place are large, at 2,500 sq ft and above.

    Given that high-end projects in these areas can range from S$3,000 psf to over S$4,000 psf, potential home buyers need to have assets in excess of S$10 million to be able to purchase a decent luxury unit in Hong Kong. Swimming pool, clubhouse and private car parking spaces can be found in almost all of the high-end residential projects.

    Beijing and Shanghai: Self-contained

    Given the strong presence of Singapore developers in China's property market, Beijing and Shanghai's high-end residential projects have features similar to Singapore's. One difference is that China's residential projects tend to be on a larger scale to accommodate a bigger population.

    Projects such as Central Park, Park Avenue and Grand Moma Residence in Beijing were constructed in three to four phases with the total number of units in the development ranging from 1,245 to about 1,800. Due to the sheer size of some of these developments, developers have made them self-contained with supermarkets, restaurants, bars and sometimes beauty salons.

    The average prices of luxury condominiums in Beijing range from S$340 psf to S$470 psf. Besides standard facilities such as swimming pool, landscaped gardens, private carpark space and gym, larger-scale projects usually have additional recreational facilities. For example, Central Park in Beijing has a squash room and yoga room while Lakeville Regency boasts an indoor golf driving range.

    Prices of luxury condominiums in Shanghai are among the highest in China, typically ranging from S$650 psf to S$1,000 psf. Currently, Tomson Yipin, located in the Pudong Lujiazui Riverfront Area in Shanghai, is one of the most expensive high-end residential projects in China. The average asking price is S$2,400 psf but to date only three units have been sold since its launch in 2005.

    Sydney: Concierge, concierge, concierge

    Similar to Singapore's Ardmore Park, some luxury developments in Sydney such as Macquarie Apartment and Greenclift also offer homogenous-sized units of three bedrooms or four bedrooms to enhance the exclusivity of their developments.

    Average prices of units in such high-end developments range from S$2,000 psf to S$2,900 psf, a level that is close to Singapore's top-end homes. Landscaped gardens are not usually a feature in luxury developments located in the CBD area but swimming pools, gym, private carpark spaces and concierge services are a must.

    What next?

    While high-end property markets in most of the global cities have already enjoyed a bull run in 2006, they are not expected to see a correction this year, as global economies stay healthy.

    Moreover, with the continual growth in financial services, wealth generation and flow of high net worth individuals across international borders, demand for high-end homes is unlikely to abate in the short term. A more likely scenario is that the rate of price growth will moderate, especially in cities that have already seen record price growth.

    On the whole, Singapore and Hong Kong's high-end residential properties are expected to show the strongest growth in 2007, rising by 15 per cent to 20 per cent while in other cities like Tokyo and London, high-end prices are predicted to grow by a relatively slower 10 per cent to 12 per cent.

    In the case of Sydney, the price growth of high-end residential properties in 2007 is expected to be in the moderate range of zero to 5 per cent as the broader market has been depressed over the past two years and the high-end market had only begun to show signs of bottoming out last year.

    On the other hand, due to the Chinese government's effort to cool the property market in China, the growth rate in Beijing's high-end residential market will slow to under 10 per cent while prices of Shanghai's high-end apartments will likely record negative growth of 3.5-4 per cent in 2007.

    Nicholas Mak is a director and Michelle Tee an analyst at Knight Frank



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