Singapore is Asia's most liveable city

SINGAPORE has risen six places in a global ranking of cities with the highest quality of living, overtaking cities such as Paris in France and Honolulu and San Francisco in the United States.

At 26th place, the Republic also surpassed all its Asian neighbours to be the region's best performer in the latest Worldwide Quality of Living Survey by human resource consultancy Mercer.

As the icing on the cake, Singapore also topped Mercer's list of cities with the best infrastructure in the world. It proved superior in various areas, including electricity and water supply, telephone and mail services, public transport, traffic congestion and range of international flights from local airports.

Although it is often taken for granted, infrastructure 'has a significant effect on the quality of living experienced by expatriates', said Ms Cathy Loose, Mercer's Asia Pacific global mobility leader.

The development of Marina Bay and Sentosa Cove as new waterfront living areas appear to have boosted Singapore's position in the rankings.

'Singapore already has excellent housing, but now its new ocean-front and seafront living options have allowed the ranking to move even higher,' said Mr Derrick Kon, Mercer's Singapore global mobility leader.

He added that the 'high-quality houses and apartments' that are available for rent and the 'excellent selection of appliances and furniture' for residents definitely helped elevate Singapore's quality of life.

The other factor that contributed to Singapore's higher ranking is the presence of 'many good schools' in the city, said Mr Kon.

'Singapore has always had a lot of good schools and international schools, but now there are also more private schools offering university degrees,' he said.

'If expatriates come here with their children, this is one area they would be looking at, and in Singapore they would have a lot of options, with international programmes and university programmes.'

Singapore's strong position in quality of life rankings such as these could stand the nation in good stead in the current financial crisis, said Mr Mark Ellwood, managing director of Robert Walters, another human resource consultancy.

With companies looking to cut costs, many are reducing the number of international assignments and localising their expat compensation packages where possible, which means not giving out the 'hardship' allowances or benefits that are offered to expats who have to live in cities with a lower quality of life.

'There is perhaps less of an argument these days that Singapore is a hardship posting, so you don't have to give many expat benefits in terms of additional bells and whistles,' said Mr Ellwood.

Singapore is the only Asian city on the top 100 list that managed to increase its ranking this year, with the rest largely maintaining their previous positions.

China's capital, Beijing, moved up three places from 116 to 113 due to public transport improvements stemming from the Olympic Games last year, but Bangkok in Thailand and Mumbai in India both dropped in the rankings amid worsened stability and security.

Globally, the Austrian city of Vienna overtook Switzerland's Zurich to boast the best quality of life this year. European cities continued to dominate the top positions in the ranking, amid a sprinkling of Canadian and American cities.

Mercer publishes this list annually to help multinational companies determine an appropriate amount of compensation for expatriates sent to work in difficult locations.

The Straits Times - Fiona Chan

Developers meet valuers in search for common ground

Developers last week held a meeting with valuers amid recent complaints in some quarters that conservative valuations have derailed some home sale deals as potential buyers could not secure the required loan quantum from banks.

BT understands that the valuers disagreed with the developers that their valuations had been too conservative, and that it was the banks that were just not lending.

'Generally, if there are transactions, we'll match (with valuations). It's the banks that are more cautious about lending to certain profiles of borrowers like investors, especially if they are foreigners,' a valuer told BT.

The valuers also raised issues that they had been facing in recent months, such as a dearth of comparable transactions, and explained the methods that they use to arrive at valuations in such situations.

'We explained that some banks require valuers to look at three comparable transactions, and how we generally do not take into account outlier transactions that may perhaps reflect 'depressed' prices,' another valuer said.

Sources say that the meeting was amicable, drawing more than 20 valuers and heads of property consulting groups and the executive committee members of the Real Estate Developers Association of Singapore led by its president, Simon Cheong.

When contacted, a Redas spokesman said: 'We wanted to better understand issues that valuers may have in their day-to-day valuation and what else the profession may need from developers to enable them to give (as) updated and relevant (a) valuation as possible.

'The discussions were general in nature and discrepancies in valuations in some instances were highlighted and analysed. Valuers shared with us some of the constraints they are facing such as the lack of or insufficient comparable sales data and other issues.

'The session was fruitful as it helped us understand one another better and we agreed to look into areas where communication and interaction could be improved upon.'

A property consultant told BT that he found it odd that the same banks that were willing to give a 75 per cent or 80 per cent loan on a high-end residential unit when it was priced at $2,000 psf (thus assuming an exposure for about $1,500 to $1,600 psf) are now reluctant to give even 50 or 60 per cent loan when the property is going for a much lower price of $1,200 psf (which works out to $600-720 psf exposure for the bank).

'It's particularly difficult for foreign buyers, even PRs in some instances, to get loans for investment properties. Banks are more willing to lend to Singaporeans buying residential properties for owner occupation.

'Some of the bigger banks should take the lead and be more proactive in lending to property buyers, not just for entry-level but also luxury homes, given that spot prices have already come off about 40 per cent.'

Agreeing, another valuer said: 'We provide the valuations. It's up to the banks whether they want to lend, and how much. It's a commercial decision for them.'

Giving his take on the challenges facing the profession, a senior valuer said: 'We have to be as level headed as possible and (assign) a sensible value. Valuers play a very important role in the financial system and economy, as we're marking everybody's asset values.'

This was the first time Redas has met valuers as a group, at least in recent years, and this follows its maiden meeting in November with analysts in stockbroking research houses covering the sector.

Redas also holds regular dialogues with government agencies such as Urban Redevelopment Authority, and Building and Construction Authority. 'Such dialogues provide learning opportunities for Redas and promote better understanding across the industry leading to a healthy property market,' the association's spokesman added.

The Business Times - Kalpana Rashiwala

Premium for HDB resale flats in sharp fall

BUYERS are increasingly reluctant to pay a premium for HDB flats, going by fast-falling cash-over-valuation (COV) figures from the Housing & Development Board yesterday. The median COV for resale transactions dived a stunning 73 per cent from $15,000 in Q4 2008 to $4,000 in Q1 2009.

In fact, the median COVs for five-room and executive flats were both zero dollars in Q1 2009. Just a quarter ago, buyers paid median cash amounts of $11,000 and $12,000 on top of valuation for five-room and executive flats respectively.

'The sharp drop in COVs is due to increasing public resistance to paying above what are already higher valuations,' said PropNex chief executive officer Mohamed Ismail.

According to HDB, the proportion of flats that changed hands above valuation fell in Q1 2009 to 62 per cent of all resale transactions, from 85 per cent in Q4 2008.

ERA Asia-Pacific noted that more higher-value HDB resale flats are being sold below valuation - for $30,000 to $50,000 less in some cases. 'In coming quarters, we are likely to see more and more larger flats sold at or below valuation as the harsh economic conditions hit home,' said ERA associate director Eugene Lim.

Stricter loan-to-value ratios could have contributed to the trend. 'Banks are becoming more conservative and there have been cases where buyers are offered only 70 per cent loans instead of the usual 80 per cent,' Mr Lim said.

The cooling economy has also turned some home-seekers away from five-room to four-room flats, he noted. And as a result, prices of larger flats may face downward pressure.

On the whole, HDB's resale price index slid 0.8 per cent in Q1 2009 from Q4 2008, shrinking more than the flash estimate of minus 0.6 per cent released early this month. This is the first time the index has shrunk after growing more than 30 per cent over nine straight quarters.

Property consultants expect resale HDB flat prices to drop 5-10 per cent for the whole year, with larger flats accounting for more of the fall.

Nevertheless, 'we do not expect the decrease in HDB resale prices to dent upgrader demand for private property, because the rate of price fall of HDB resale flats is still smaller than that of private homes,' said Knight Frank's director of consultancy & research Nicholas Mak.

Three to four-room flats should enjoy greater demand, consultants reckon. As PropNex's Mr Mohamed observed, buyers are still willing to pay COV for these flats.

HDB data also shows a rising proportion of resale flat applications involving smaller flats.

Three- and four-room flats accounted for 69.8 per cent of applications in Q1 2009, compared with 67 per cent in Q4 2008.

There were 6,446 resale transactions in Q1 2009, 4.2 per cent more than in the preceding quarter. 'HDB resale transactions typically increase when times are bad,' said ERA's Mr Lim.

But with HDB building more new flats, some demand may shift, he added.

HDB said yesterday that it plans to launch another 2,400 build-to-order flats over the next six months, of which about 1,000 will be three-room and smaller flats.

The Business Times - Emilyn Yap

The worst may be yet to come

IS THE worst over? Investors seem to think it is. Confidence that the crisis is winding down has been mounting. But the right answer to the question depends on what 'worst' is meant. Appropriate replies include: probably, yes but so what, not yet, probably not, and let's hope so.

The worst of the credit squeeze is probably over. True, loan losses are still increasing. But the official aid is massive: minimal policy interest rates, ample liquidity supplies, capital injections and implicit loan guarantees.

The aid from above has helped push dollar interbank borrowing rates down in the last six weeks. The cost of insuring against corporate failure in the credit default swap market has also fallen by 0.5-0.7 percentage points to about 1.9 and 1.6 per cent annually for the main US and European investment grade CDS indexes. Improving bank credit has contributed to this trend. Better credit all round means more loans will be refinanced, so fewer companies will go under than would otherwise be the case.

The big official liquidity push also gives investors more cash to put into the markets. The additional buying power may account for some of the sharp increase in oil and equity prices. There have also been tentative signs of revival in the junk bond and IPO markets. To some extent, the mood is following the money.

It may be due to government help or it may just be the passage of time, but another worst that has probably passed is in the pace of economic decline. The huge sudden drop in activity after the collapse of Lehman Brothers last September has already become something of a business legend. If the decline had continued at that pace, economies would be back to the Stone Age in a few decades.

It's not going to be that bad. Globally, exports are down 30 per cent since last July, according to Lombard Street Research. But the pace of decline is moderating. Similarly, US housing starts, which have declined by 75 per cent since the 2006 peak, may have reached their low.

The balance of indicators still suggests GDP is falling in most developed economies, but at a much less dramatic rate than a few months ago. When the economy is only declining at a moderate pace, some measures typically suggest that growth is returning - the much talked-about 'green shoots' - but more show further decline. That seems to the case now.

Inventories complicate the picture. A sharp decline in global demand led to an even sharper reduction of inventories as retailers and manufacturers cut back. As the inventories are rebuilt, production will most likely pick up faster than consumption.

So yes, all in all the economy isn't shrinking as rapidly as it was. But so what? It's still shrinking. On that yardstick, therefore, the worst isn't yet over.

Now look at another measure of 'worst': unemployment. Even when growth does return, recovery is likely to be anaemic. It will take time to absorb the excesses built up during the credit boom, from houses in the US to too many Chinese factories making cheap goods.

What's more, it's not as if all that private-sector debt has gone away. The rise in savings rates in the US and elsewhere isn't going to be a one-quarter wonder. This means that the peak in unemployment could easily be two years away.

And will that then be the end of the pain? Probably not. The crisis will leave government balance sheets shot to pieces. The best case scenario is that the authorities manage to suck all their fiscal and monetary stimulus out of the economy safely once economic growth has bottomed out. Then all that the world will suffer is high taxes and slow growth.

But there is a risk that this outcome proves too unpopular and that the authorities instead take the current fad for 'quantitative easing' to the extreme - and just print money to finance their deficits. The outcome would then be inflation.

An inflationary outburst might even lead to another sort of financial crisis - a loss of confidence in key currencies. That could be worse than anything seen up to now.

Can such a dire outcome be avoided? Let's hope so.

The Business Times - Edward Hadas

Secondary market buzzes as prices fall

(SINGAPORE) The pick-up in private home sales by developers has spilled over to the secondary market. Falling prices are greasing the flow.

Caveats have been lodged for 1,063 private homes in the resale market in the first three months of this year, up 11.7 per cent from the preceding quarter. In the subsale market, 384 caveats were lodged in Q1 2009, reflecting a 44.4 per cent increase from the Q4 2008 figure, according to Savills's analysis of caveats captured by the Urban Redevelopment Authority's Realis system.

Resales and subsales refer to secondary market transactions. Subsales involve projects that have yet to obtain Certificate of Statutory Completion while resales relate to projects that have received CSC. CSC is typically obtained anywhere from three to 12 months after the project receives Temporary Occupation Permit (TOP).

The average prices of resale and subsale transactions at the most popular projects in Q1 2009 were generally lower than in the preceding quarter as well as the same period last year.

City Square Residences, the most popular subsale project in the first three months of this year with 41 units, saw an average price of $804 psf, down 5 per cent from the $845 average subsale price in Q4 2008 and 15 per cent below the $947 psf average subsale price seen in Q1 2008.

Average prices for 11 of the 12 most popular subsale projects in Q1 this year fell between one and 14 per cent from the preceding quarter. The exception was Clementiwoods Condo, where eight subsale deals were done at an average of $664 psf in Q1, some 5 per cent higher than in the previous quarter but down 7 per cent from the same period a year ago.

Compared with Q1 last year, average prices for all 12 top-selling subsale projects in Q1 2009 fell between 4 per cent (Centris) and 36 per cent (The Cosmopolitan).

As for resale transactions, the 11 hottest developments saw quarter-on-quarter price declines ranging from 4 per cent (for The Lakeshore) to 19 per cent (Bayshore Park) in Q1. The Lakeshore was the most popular resale project in the first quarter, with 27 units changing hands, followed by Costa del Sol, with 11 units.

Savills Singapore head of research Priya Sengupta noted that the 11 most popular resale projects in Q1 were all in the mass and mid-tier sectors. 'Amid the economic uncertainties, affordability remains a key consideration for home buyers/investors; 100 of the 113 deals in the 11 most popular resale projects in Q1 were at below $1 million,' she said.

Resale activity for high-end projects was limited. 'This could be attributed to the price disparity between sellers and buyers as the latter expect further downward price adjustment in the near future, as well as the stricter home loan criteria in terms of loan-to-value ratio, especially for investors,' Ms Sengupta said.

Mass and mid-tier projects also saw more subsale transactions than high-end projects. Much of the subsales activity in Q1 surrounded projects that have either received TOP recently or are close to receiving it. For instance, City Square Residences, The Esta, The Sail Marina Bay, The Cosmopolitan and Rivergate have received TOP in 2008/2009, while One Amber and The Centris will get TOP soon, Savills said.

Market watchers said that this could be because many specuvestors who bought on deferred payment schemes (DPS) may be inclined to offload their units as the TOP date approaches, when they have to pay up the bulk of the purchase price to developers.

However, CB Richard Ellis executive director Joseph Tan pointed out that regardless of whether buyers opted for DPS, private housing projects are typically a hive of activity around the time they receive TOP, drawing buyers who want to move in themselves or to rent out immediately.

He also attributed the increase in subsale and resale transactions in Q1 to 'prices being at fairly reasonable levels now', with the stock market rally improving sentiment.

Mr Tan said that whether the buzz in the secondary market continues will depend on the stockmarket. 'So long as the Straits Times Index remains fairly stable, it will give comfort to investors that the property market is close to bottoming out, given the price correction in the past 12-15 months,' he added.

According to DTZ's figures, which are based on resale prices, the average freehold luxury condo and apartment price of $1,880 psf in Q1 this year marks about a one-third drop from the peak of $2,800 psf in late 2007/early 2008.

The most expensive subsale deal (in terms of psf price) in Q1 this year was a 29th floor unit at Orchard Residences that changed hands for $2,579 psf. In absolute dollar quantum, the most expensive subsale deal was an 11th floor apartment at The Tate Residences at Claymore Road, which sold for $5.93 million ($1,850 psf).

As for resale transactions, the top grossers were a 10th floor apartment at Richmond Park at Bideford Road which sold for $2,199 psf and a 25th floor unit at Four Seasons Park at Cuscaden Walk that fetched $6.5 million ($1,701 psf)

The Business Times - Kalpana Rashiwala

Two signals speak volumes about condo prices

THE Straits Times Index and cumulative unsold inventory held by developers have been found to be reliable indicators preceding major turning points for private apartment and condo prices in Singapore, according to a study by DTZ.

The STI has been observed to lead the Urban Redevelopment Authority's non-landed private residential price index by one to four quarters since 1993.

For instance, the STI peaked in the third quarter of 2007 - nine months before the URA's index peaked in Q2 2008.

Similarly, the cumulative unsold inventory of non-landed private homes - with sales licences - held by developers has peaked or bottomed between two to 12 quarters ahead of turning points in the URA's index.

DTZ also devised an internal risk assessment model to estimate the probability of future major turning points in the Singapore residential market.

It showed the risk of entering a correction phase has escalated considerably since Q2 2008.

The property consulting group said: 'Our assessment indicates that the probability of a full recovery by the end of 2009 - for the office and residential property markets in Hong Kong, China and Singapore - remains low.' DTZ added: 'Our internal model also indicates that the Singapore residential market has a higher chance of bottoming by mid-2010 (than by end-2009) and staging a gradual recovery from that point onwards.'

Both the Hong Kong and Singapore office markets have a lower probability of recovering by end-2010 than the residential markets in these two cities, as the office sector is more closely correlated with economic growth than the residential sector, DTZ reckons.

Asked whether the recent stockmarket rally will presage a recovery in home prices in Singapore, DTZ senior research director Chua Chor Hoon said: 'It's too early to say if the stockmarket rally will be sustained. A lot will hinge on when the economy recovers.'

The Business Times - Kalpana Rashiwala

Recovery expected only after mid-2010

BUYERS snapping up homes in recent weeks may be jumping into the market way before it has reached the bottom, according to new research.

Real estate consultancy DTZ is tipping a gradual property market recovery only from the middle of next year. The firm bases its view on a new report from its Asia forecasting unit.

This shows how a slump, or recovery, in the stock market is always mirrored in the property market, but only after one or more quarters.

Or to put it more bluntly: The housing market will not recover until at least one quarter, or even a year, after the stock market recovers.

And as any stock market investor knows, the Straits Times Index (STI) is well down from its 2007 peak, even though it has risen slightly recently.

'The STI reflects people's view of the economy so its recovery will really depend on clear signs of an economic recovery,' said DTZ's senior director of consulting and research Chua Chor Hoon.

Experts have long noted that a recovery in the stock market typically precedes an economic recovery, with a recovery in the property market after that.

'It's all co-related in one way or another. The stock market is usually the earliest indicator but it's not hard and fast... its timing might be off,' said Daiwa Institute of Research analyst David Lum.

Last week, the Government said it expects gross domestic product to contract by 6 per cent to 9 per cent this year, well up on an earlier forecast of a 2 per cent to 5 per cent contraction. DTZ's study also underlined the high levels of unsold stock held by developers - another drag on prices and an eventual recovery.

The report indicated that the residential market thus has a higher chance of bottoming out only by mid-2010 and then staging a gradual recovery.

Mr Lum said the property market has already started to correct so anyone who bought recently would not have purchased at the peak.

If prices fall further, these people will not be happy, but they would have been comfortable with the price levels they bought into and will not be overstretched as they would have thought about their purchase, he added.

DMG & Partners Securities investment analyst Brandon Lee believes the mass market segment would have bottomed out at around $550 psf to $600 psf so recent buyers may not have much to worry.

Those who bought prime homes, however, may have gone in too early. Mr Lee sees the property market bottoming out only in the first half of next year.

'Crises in the past have lasted for six to eight consecutive quarters and we are only half way through,' he said.

'Further, equity markets are still volatile and prices have not reached the bottom for prime properties. Interest in prime property remains very subdued.'

The property market remains largely weak, even though recent sales of new private homes brought a glimmer of hope to the market. First-quarter new private home sales hit 2,660 units, representing 62 per cent of all new private homes sold during the whole of last year.

Whether it was pent-up demand, discounted levels or other factors, sales did reach very high levels given the recession.

But most sales were in the mass market segment, which consultants tip to be the best-performing sector this year.

Demand for prime and high-end homes remains sluggish.

'Since when does a 'rebound' in one segment signal a recovery for the entire market?' asked Chesterton Suntec International head of research and consultancy Colin Tan.

'The greatest danger we face now is complacency...If it were an ordinary recession, I can understand why we are starting to call this period of optimism the first signs of a recovery, but it is not,' said Mr Tan.

'The recovery cycle will be like no other. There will be further twists and turns.'

Unsold stock rising

THE DTZ report highlighted another indicator: unsold stock of new housing held by developers.

It observed that the Straits Times Index has, since 1993, been leading the Urban Redevelopment Authority's non-landed residential price index by one to four quarters.

Historically, the level of unsold stock - which has risen to around 21,000 units since the third quarter of 2007 - has preceded the property market price recovery by two to 12 quarters, said Ms Chua Chor Hoon, DTZ's senior director of consulting and research.

The Straits Times - Joyce Teo, Property Correspondent

URA Woodlands site available

THE Urban Redevelopment Authority yesterday released detailed sale conditions for an industrial site at Woodlands.

Developers interested in buying the site can now apply to URA for it to be put up for tender. The plot, which is being offered from the reserve list, is at the junction of Woodlands Industrial Park E5 and Woodlands Avenue 4.

The site area is 2.5 ha and the gross plot ratio is 2.5. The lease period is 60 years. The site is being made available despite the depressed global economy and trade continuing to put downward pressure on the rents and capital values of industrial properties.

The investment market for industrial properties is not faring any better, with only one transaction above $5 million in Q1 this year, data from CB Richard Ellis (CBRE) shows. Against this background, demand for the Woodlands site is unlikely to be strong, analysts reckon.

'In such as weak market, even if there is interest, the price will not be very high,' said Knight Frank's head of industrial business space Lim Kien Kim. Bernard Goh, director for industrial and logistics services at CBRE, said: 'If there is a bid, the price is likely to be below expectations because of how the market is.'

Traditionally, demand for industrial properties in Woodlands has been weak, said Mr Lim. He expects bids in the range of $25-30 per sq ft per plot ratio.

Industrial rents are falling due to a slowdown in demand for industrial space. Consolidation and downsizing is the order of the day, and expansion is the exception rather than the norm, CBRE said in its Q1 2009 industrial report.

According to CBRE, monthly rent for hi-tech space fell 3.3 per cent quarter on quarter to $2.90 psf in Q1. Average monthly rents for ground and upper-floor factory units fell $0.10 psf quarter-on-quarter to $1.45 psf and $1.20 psf respectively.

The Business Times - Uma Shankari

New showflats pull in crowds

THOUSANDS of people flocked to check out some of the new housing developments on sale over the weekend, scenes more reminiscent of a boom, not a recession.

As one industry watcher told The Straits Times: 'The mass market is still moving. If you price it correctly and reasonably, people will still buy.'

The hottest ticket in town was clearly the Parc Lumiere project, which drew an astonishing 6,500 visitors over the weekend.

Buyers had begun queueing last Friday before its viewing period started on Saturday, with 829 people eventually in the line for flats in the estate, which is being developed under the Design, Build and Sell Scheme (DBSS).

There was no balloting for the project: Just turn up and book.

Developer Sim Lian Group said it has already sold 306 units out of a total of 360. All the four-room flats, priced between $378,000 and $425,000, have been sold.

Only the low-floor five-room flats are left. The five-roomers are priced from $462,000 to $575,000.

'After going through Premiere Tampines, we thought we would try another way of selling. When you do it by ballot, a lot of people just try for fun. A lot who were keen didn't get the chance to book,' said Sim Lian executive director Diana Kuik.

But some potential buyers felt the walk-in selection sale method, essentially a first-come, first-served sale, was inconvenient. One said the sale came at too short a notice for him to take leave to queue. A parent said her son had been waiting for the project but was travelling in Europe.

Sim Lian said it has had feedback from happy buyers, including a pair of siblings happy to get a unit next to each other.

The second DBSS project, The Peak Toa Payoh, also had a busy weekend with 1,711 applications lodged as of 6pm yesterday for the 1,203 units.

This project by developer Hoi Hup Sunway is being sold by ballot, with applications open until next Tuesday.

About 22,500 people had visited the showflat from last Wednesday until it closed yesterday, said Ms Kellie Liew, executive director of projects at HSR Property Group, the marketing agent for The Peak. More than half of the applicants are interested in the five-room flats, with about 30 per cent looking at the four-roomers, she said.

In the private home market, the freehold The Arte in Jalan Datoh attracted about 1,000 people over the weekend, said developer City Developments (CDL).

The average price at the 336-unit project - which boasts relatively large flats - is $880 psf, with most units going for under $2 million each.

CDL said it sold another 20 units over the weekend for $30 million, bringing total sales to 170.

'The sales volume indicates that buyers have greater confidence in the property market and in the future of their investment,' said CDL group general manager Chia Ngiang Hong.

'This reinforces CDL's view that the current market is now attracting savvy but cautious investors.'

A large number of buyers have private home addresses, he said, with many saying they want to invest in another property or to move into a 'new and upscale residence'. CDL said it has extended the interest absorption scheme to these buyers.

Two other large projects that were launched last month also saw encouraging sales.

A further 22 apartments were sold at the 457-unit Mi Casa condominium in Choa Chu Kang in the past week, bringing total sales to 202 units. Prices hovered around $635 psf.

More than half of the 646 units at Double Bay Residences in Simei have been sold. This was the best-selling project last month, with 264 units being bought.

About 60 per cent of the 68-unit Verdure in Holland Roadhas also been sold since its preview more than a week ago.

The Straits Times - Joyce Teo, Property Correspondent

20 units of The Arte sold over weekend

CITY Developments Ltd (CDL) sold 20 units at The Arte at Thomson over the weekend. This takes total sales since the property's official launch to 170 units, with last weekend's sales fetching a total of $30 million.

'The sales volume indicates that buyers have greater confidence in the property market and in the future of their investment. This reinforces CDL's view that the current market is now attracting savvy but cautious investors,' said Chia Ngiang Hong, Group general manager of CDL.

Buyers' interest was also evidenced by the strong turnover of over 1,000 visitors at The Arte's showroom over the weekend.

Among other factors, these prospective buyers were drawn by the property's location and proximity to a MRT station, according to a CDL release.

The Arte is located within the Thomson area with convenient connections to the City and the expressways. It is also a short walk from Toa Payoh MRT station.

Priced at $880 psf on average, the freehold project comprises two 36-storey towers and will be completed in 2012. Most of the 336 units available are going for under $2 million.

Buyers can opt for CDL's interest absorption scheme (IAS), which allows them to defer the bulk of their purchase until The Arte's completion on the condition that they take up a housing loan at the point of sale.

A majority of buyers of The Arte have private home addresses and many say they want to invest in another property or to move into a new and upscale residence.

Singaporeans' renewed interest in private property saw the sales of 2,660 private homes in the first three months of 2009, which is about 62 per cent of total new home sales in 2008, according to the CDL release.

The Business Times - Zhang Yi Ting

DPS buyer with 20 units at The Fernhill drags feet on payment

A China investor that bought 20 units at MCL Land's The Fernhill condo has failed to pay roughly $30 million that became due when the project received Temporary Occupation Permit recently.

MCL sent the notice seeking payment to buyer Concordia Overseas Pte Ltd 14 days ago. By the due date yesterday, the payment had still not been made, BT understands.

This development on the deferred payment scheme (DPS) - which was scrapped in October 2007 - is being closely watched.

Under the Sale and Purchase Agreement (SPA), MCL will now wait for another 14 days and if the payment is still not made by then, the developer can serve a 21-day notice on Concordia to repudiate the SPA. After that, if there's no payment, MCL would be entitled to treat the 20 per cent paid so far by Concordia as forfeited and resell the units.

Concordia, controlled by Hong Kong resident Chan Ki, who has developed commercial buildings in Shanghai, had bought all 25 apartments in The Fernhill in January 2007 at $1,410 per square foot.

It flipped five of these units to foreigners at an average price of nearly $2,200 psf later the same year. JTResi brokered both sets of deals for the five-storey freehold project at the corner of Orange Grove and Fernhill roads.

Concordia bought the units from MCL on DPS, and paid an initial 20 per cent of purchase price in 2007. The 20 units it still holds were purchased for nearly $47 million and it was asked to pay another 65 per cent - around $30 million - after the project received TOP last month.

In case there is a hitch in receiving the payment, analysts say, MCL Land is pretty well covered, as it can walk away with the 20 per cent downpayment from Concordia. Its 'breakeven cost' so to speak on the 20 units would be $1,128 psf ($1,410 psf sale price to Concordia less the 20 per cent collected so far).

Based on recent transactions at Gallop Gables on Farrer Road and The Verdure on Holland Road, MCL should easily be able to sell the units individually for more than that sum. An average resale price of $1,250 or so could mean another round of profits.

BT understands that MCL did not extend DPS to the buyers of the five units who picked up their apartments from Concordia in the subsale market. They have been making normal progress payments to MCL.

While MCL is on a firm footing, other developers who sold their projects on DPS at peak prices in 2007 and early 2008, may have reason to worry in case buyers do not pay up once the projects are completed in the coming months.

This is because the values of many such units could be down more than the 20 per cent initial payment and the developer would be out of pocket if it were to treat the SPA as being repudiated. Such developers may have to sue buyers for specific performance - complete the SPA at the contracted price.

But some developers may agree to a payment extension or restructuring for local buyers in hardship.

Developers may find it tough to take legal action against foreign buyers domiciled offshore who walk away from purchases. 'The practical thing to do may be to treat the SPA as repudiated, take possession of the units and try to resell them or lease them out. Once you go down the route of suing defaulting buyers for specific performance, it will be some time before you can take possession of the units,' a developer said.

In case The Fernhill units end up being resold by MCL, the price could have implications for neighbouring projects. The price benchmark may hit DPS buyers in these projects who have yet to secure a loan. Even those that have secured loans may be affected as the bank may now assume a lower value for the properties and ask borrowers to top up more equity.

Some analysts said that the latest development at Fernhill may be a sign of things to come as more projects are completed. The situation of multiple unit buyers, especially if they are foreigners, will be keenly watched.

The Business Times - Kalpana Rashiwala

HDB's Lease Buyback Scheme

How the HDB scheme works?

Who qualifies?

• Singaporeans who own three-room or smaller HDB flats where the remaining mortgage is $5,000 or lower.
• They must be aged 62 or older, have a household income of $3,000 or less and owned the flat for at least five years.
• They must not own or have owned a larger property. Also, they must have received only one housing subsidy.

What they get?

• A monthly payout that can range from $470 to $800, depending on their age and the flat's market value.
• A $10,000 subsidy: $5,000 in cash and $5,000 towards the Central Provident Fund annuity.
• If the owner dies before his remaining lease runs out, his family gets a refund of the balance and the unused annuity.

200 sign up for HDB's Lease Buyback Scheme

DRAWN by the promise of an income for life, caretaker Adali Sadap, 74, was one of several Ang Mo Kio residents who signed up for the HDB's Lease Buyback Scheme yesterday.

About 200 elderly Singaporeans in all have taken up the offer since its launch last month, Prime Minister Lee Hsien Loong said at a roadshow pitching the scheme to his constituents.

Those who qualify will sell to the Housing Board (HDB) the tail-end of their lease at market rate, and the proceeds will be used to buy an annuity from the Central Provident Fund Board.

This annuity could give Mr Adali and his wife, who is 69, a total of about $600 a month throughout their life.

'I consulted my family, and they all feel the scheme is beneficial to us,' said the father of 11 who bought his three-room flat in 1981 for $21,900.

It is now worth $248,000, he said, adding that he makes about $600 a month as a mosque caretaker.

The rise in value of HDB homes over time was also noted by Mr Lee in his speech at Nanyang Polytechnic to some 1,000 elderly constituents.

He said the Lease Buyback Scheme was possible because of Singapore's highly successful home ownership programme.

'Even now, in an economic downturn, everybody not only has a roof over their heads, but a property which has appreciated in value over the years,' he noted.

Indeed, some owners of larger HDB homes have asked to be included in the scheme, which is only for owners of three-room or smaller flats.

The Government could consider it later, said Mr Lee, adding that for now, it wants to focus on those who need the scheme most.

The HDB estimates that about 25,000 households qualify for the scheme now.

Around 2,800 are in Ang Mo Kio GRC, and another 800 are in neighbouring Yio Chu Kang, said the Prime Minister.

But he advised the families not to rush into the scheme, saying it was but one option of unlocking their flat's value while keeping a roof over their heads.

'We are not pushing this scheme on residents,' he said, explaining that it was part of the national effort to help the elderly enjoy life in their sunset years without a heavy burden on their shoulders.

Other options to consider include selling or renting their flat and living with their children or renting out a room.

A three-room flat could rent for $1,500 a month, even now, while a room could yield $500 to $600 a month: 'Not bad,' noted Mr Lee.

He urged residents such as retiree G. Yap, 69, who lives alone, to take their time. 'One day, if you need to do it, the scheme will still be there,' he said.

Madam Yap, whose two children live abroad, said: 'I may have to move to an old-age home later, so maybe I should have more cash in hand.

'I have to do my maths first, but it is an attractive scheme.'

Yesterday's session was an HDB effort to explain the scheme, and it has spread the word to about 80 per cent of eligible households. The first group of successful applicants can expect to get the first cash payout next month.

The Straits Times - Zakir Hussain, Political Correspondent

Condo sub-division without tears

THE Urban Redevelopment Authority has said that when processing applications to sub-divide apartments, it is guided by whether sub-division will change the character of a development and diminish the amenities of other people living there, such as families.

The authority was responding to a follow-up report in The Business Times after the recent case of Grangeford condo, where a master tenant sub-divided 140 apartments into 600 smaller units with a layout resembling a dormitory.

URA told BT earlier this week this is not allowed because the site is zoned for residential use only, and that it and other government agencies will take enforcement action against any party responsible for any unauthorised use and for not complying with requirements.

Some industry observers say that owners of apartments in other developments have carried out similar sub-divisions, though on a much smaller scale than at Grangeford.

URA outlined three scenarios.

In the first scenario, which it has encountered over the past two to three years, there have been a few cases where a handful of apartments were converted into a larger number of mini-apartments.

'These are essentially smaller, but independent residential apartments with self-contained facilities like kitchen, living room and bathroom,' a URA spokeswoman said.

'Where the conversions were able to comply with planning requirements, URA followed up with the owners and they obtained approval from URA.

'For those that were not able to comply with planning and other technical requirements, URA followed up and took enforcement action.'

Such conversions require planning approval from URA and consent from the development's management corporation.

In the second scenario, apartments are split into a dormitory-style layout. The split units are essentially bedrooms, without their own kitchen, toilet or living room.

URA approval is needed for a change of use from residential to non-residential use - for instance dormitory or boarding house use. As a rule of thumb, URA will not approve such a conversion in a residential area, the spokeswoman said.

BT quizzed URA about a third scenario, in which an apartment is not sub-divided but is sub-let to several unrelated tenants. For example, several students might join forces to rent an apartment.

The URA spokeswoman said that sub-letting for residential use on a unit basis is allowed, but URA may have concerns if this is done on a large scale.

'It goes back to the fundamental considerations of whether such a sub-letting exercise will change the character of the development or cause disamenities to, say, families living there,' the spokeswoman explained.

Apartment sub-division is becoming an important topic, especially for developers who bought entire residential projects in Singapore's prime districts through collective sales during the property bull-run from 2006 to 2008 and have had to defer redeveloping these properties because of the massive slide in the value of high-end homes.

Developers also face the burden of footing the property tax bill, with the annual value (AV) of the property based on 5 per cent of the freehold market value of the land.

Following representations by developers last year, the Inland Revenue Authority of Singapore (IRAS) agreed in September to a different basis for assessing AV for en-bloc properties where developers have changed their intention by renting out apartments instead of redeveloping the site.

The property tax for such properties will be based on the estimated total annual rent that can be fetched by all the apartments in the development - provided at least 25 per cent of the apartments have been leased on tenancies of at least a year, and on an arm's length basis, to parties not related to the developer. Also, there must not be any provision in these tenancy agreements to evict tenants within the tenancy period.

Let's take the case of Grangeford. Assuming the 193 apartments fetch an average monthly rent of $4,000, the AV would be $9.3 million ($4,000 x 12 months x 193). Based on the 10 per cent property tax rate, the property tax bill would be $930,000.

This is much lower than if Grangeford's AV was assessed at 5 per cent of the estimated freehold market value of the land.

The site had a remaining lease of 66 years when Overseas Union Enterprise bought it in 2007 for $625 million. Let's assume the freehold value of the site today is about $520 million, taking into account lower property values. The AV would be 5 per cent of this, or $26 million, and at 10 per cent property tax rate, OUE's tax bill would be $2.6 million.

Given the credit crunch, developers are looking for creative ways to conserve cash. Hence, the advent of a master tenant willing to lease all or many apartments in an en-bloc development bought during better times is welcome news - as it allows the developer to qualify for the more favourable AV formula if at least a quarter of the apartments are leased to the master tenant for minimum period of one year.

Given the tough market for the high-end residential sector, it would be an uphill battle for a developer to try to find tenants for individual apartments. Also, some tenants may want short-term leases of a few months, so that would not comply with the condition of a minimum one-year lease set by IRAS. A master tenant willing to sign a longer lease of one or two years solves this problem for developers.

These were probably some of the considerations that OUE weighed for Grangeford when it signed a two-year master lease with Ideal Accommodation for 170 apartments with effect from Jan 1, 2009. Of these 170 apartments, Ideal split 140 apartments into a total of 600 units. In the process, most of the units have been left with unventilated corridors and without access to rubbish chutes. The former kitchen and living room areas have been boarded up to create new units. Tenants of some units have to share toilets.

'Once a developer brings in a master tenant, there is the possibility that it may lose some control of the environment and ambience,' says DTZ executive director Ong Choon Fah.

'When the environment becomes different - a lot of en bloc properties that developers can't develop now are in prime locations and very desirable residential areas - it may create social issues. It's not just as far as families in apartments in the developments are concerned, but also families living in the surrounding area who may have the perception that the neighbourhood is no longer the same because of transient neighbours.'

The Business Times

City-fringe units not a sure bet

Values for city-fringe homes are typically thought to hold up better than those in the suburbs, but the fall in prices in the first quarter means that this belief may no longer hold true, at least temporarily.

These homes are in areas which are not attractive to institutional investors and are also not within the reach of many HDB upgraders.

In view of these dynamics, the question is whether the areas still present good buys.

The city-fringe areas are what the Urban Redevelopment Authority (URA) terms RCR, or rest of central region. They are sandwiched between the core central region (CCR) - which comprises districts 9, 10, 11, Sentosa and the Central Business District - and the outside central region (OCR).

RCR areas include Paya Lebar, Geylang, Amber Road, Lavender, Toa Payoh, Tiong Bahru and Telok Blangah.

URA data shows that last year, prices of non-landed properties in the city centre, city fringe and suburban areas fell by 5.6 per cent, 4.7 per cent and 2.9 per cent, respectively.

But first-quarter flash estimates show that prices of city- fringe flats slipped by 17.2 per cent - more than the 15.2 per cent drop for city centre flats and the 7.5 per cent fall for suburban ones.

Price

The price index reflects the rate of growth for each region, said Ms Jacqueline Wong, head of residential at Jones Lang LaSalle.

That the RCR experienced the steepest first-quarter price drop based on the flash estimates may just imply that the region is undergoing a greater price correction as prices might have been inflated during the property market boom, she said.

In terms of pricing, RCR pales in comparison to CCR as the latter's branding and location are better, she said.

It is thus fair to say that RCR is 'a poorer cousin to CCR', added Ms Wong.

In some parts of the RCR nearer to the city, developers tend to leverage on prime areas when they sell their projects, said Chesterton Suntec International's Mr Colin Tan.

He said: 'It'll be a discount from prime areas rather than a premium over suburban areas.'

But a price correction is happening now in the RCR, as with other areas.

'At the moment, it is probably perceived as overpriced. Investors may want to wait for it to come down to a more realistic level,' said Mr Tan.

Prime beats RCR

In general, where investors are concerned, prime areas are the best, experts said.

'If you can afford it, buy prime. Depending on the type of properties you buy, there is a better chance for capital appreciation when the market recovers,' said Knight Frank's Mr Nicholas Mak.

'If you cannot, buy a property near an MRT station farther away or in the suburbs if your objective is to cash out.'

Mr Tan said a price recovery, when it comes, will be quicker in an established area like Orchard.

The RCR has quite a few new residential areas, so it may take time for the value in these areas to rise, he said.

City centre properties generally enjoy 'unrivalled prestige, exclusivity and locational advantage', and are hence extremely popular with expatriates, particularly those with higher budgets, said Ms Tay Huey Ying, director for research and advisory at Colliers International.

As prices of these properties have eased substantially from their stratospheric levels in 2007, they would certainly be worthwhile investments for those who can afford it, she said.

A mixed bag

Nevertheless, the RCR is not a write-off, experts stressed.

'Properties in RCR will, however, continue to be attractive to those who remain priced out of the high-end market, or those with a lower risk appetite,' said Ms Tay.

'The RCR is definitely an area not to be forgotten,' said Ms Wong.

February and March sales data has proven that RCR projects such as the sold-out Alexis at Alexandra Road and The Arte at Thomson Road are in strong demand, she said.

'In terms of the leasing market, developments in RCR remain popular among tenants as they are more affordable compared to those in prime areas,' said Ms Wong.

The good thing about RCR is that there is a higher probability that the properties are freehold, Mr Mak said.

Condos in the suburbs next to MRT stations tend to be 99-year leasehold properties.

But unlike the case in most suburban estates, not many RCR projects are near MRT stations.

'The RCR is a mixed bag. For instance, there is Tanjong Rhu which is quite popular and not too far north, and there is Geylang, an area that some people will not touch with a 10-foot pole.'

The Straits Times - Joyce Teo

Remaking goes on in good times and bad

THE Urban Redevelopment Authority (URA) will begin this year a new round of reviews for Concept Plan 2011, a blueprint that maps out the long-term vision for Singapore's physical development.

URA's review, which will be done with various ministries and government agencies, will examine Singapore's land use and infrastructure needs to cater to an increased population and also the changing profile of its resident population and economy.

The Concept Plan review's 'ultimate aim must be to ensure that we will continue to have a good quality living environment in Singapore, one that will take into account the needs of not just the young, but also of the old, and a growing population which will consist of people from many, many different parts of the world', said National Development Minister Mah Bow Tan.

As part of Concept Plan 2011, URA will also actively seek views from the public, Mr Mah said in his keynote speech at the URA Corporate Plan Seminar yesterday.

He also highlighted that one of Singapore's key strengths is its long-term integrated planning approach. 'Few cities in the world have a holistic planning framework like ours . . . ,' Mr Mah said. He cited a case in point. Despite the dismal economic climate when URA started planning the development and infrastructure for Marina Bay, just before the start of the last downturn in 2000, the government remained focused on building up Marina Bay. 'And because we planned ahead, we were able to attract foreign investments into the Bay when the economy started to pick up and then when it boomed,' Mr Mah said.

He also also stressed that efforts to remake Singapore must continue in both good and bad times if the island is to be a key node in the network of global cities. It was as a result of forward planning, and effective and consistent implementation that a new Singapore city is taking shape fast. He painted a picture of the 'new iconic signature skyline' emerging at Marina Bay. The double helix bridge, Art Park, Gardens by the Bay and new waterfront promenade will be progressively completed by 2011. Then, there are the Marina Bay Sands Integrated Resort and the first phase of Marina Bay Financial Centre which will be operational by 2010. The government has invested nearly $5.7 billion in infrastructure works in Marina Bay so far and will continue to pump in more money to support its future growth and boost connectivity with the existing city, Mr Mah added.

The prime Orchard Road shopping belt is also being rejuvenated with new malls. Singapore will have a new generation of regional commercial districts, such as Jurong Lake District. And the island will become an even more exciting playground with a wider range of leisure and recreational options. Singapore's park connector network will be tripled to 300 km over the next five to 10 years, joining up into a continuous loop around the island. URA is also developing scenic walks along Singapore's coastline.

The Ministry of National Development and URA will be launching a programme called 'My New Singapore' to encourage Singaporeans to rediscover Singapore.

'The programme will comprise a series of events and activities which will reach out to Singaporeans. We invite everybody to see the new developments and visit new leisure destinations. We will show Singaporeans the plans that we have for their neighbourhoods, bring them to see the new Marina Bay, let them enjoy the parks and park connectors. And I hope that when Singaporeans rediscover Singapore, they will realise what a special little city we have, and perhaps, we will love our city even more,' Mr Mah said.

He even suggested Singaporeans may want to shop, eat and sightsee in Singapore. 'Perhaps during this downturn, it is timely for Singaporeans to take time to get to know our city better. Enjoy what we have to offer here in Singapore, and maybe save a little bit of money at the same time.'

URA will hold the 'My Endearing Home' roving exhibition at major malls between May and August this year to present Singaporeans a chance to learn about plans for their immediate neighbourhoods and for the city, and 'discover that there is much to treasure on our island'.

A Marina Bay Festival will be held in the later part of 2010 that will showcase the waterfront promenade and new developments to both locals and foreign visitors.

NParks will also press on with its efforts to green Singapore and conserve the island's natural heritage.

The Business Times - Kalpana Rashiwala

Simei condo-style flats: No balloting

A NEW condo-style estate being launched by the Housing Board will allow buyers to secure a flat on the spot and not have to join a ballot like for other Design, Build and Sell Scheme (DBSS) projects.

Parc Lumiere at Simei Road will have 120 four-room flats and 240 five-room units. The four-roomers, of 1,012 sq ft each, are priced at between $378,000 and $425,000. The five-roomers range from 1,152 sq ft to 1,195 sq ft and are priced at between $462,000 and $575,000. The average price is $425 per sq ft (psf).

The walk-in selection sale starts with a viewing period from tomorrow for buyers to check out the showflats and enquire about eligibility. Booking on a first-come, first-served basis starts next Tuesday. The executive director of developer Sim Lian Group, Ms Diana Kuik, said the booking date may be brought forward if there is strong interest.

Parc Lumiere will have eight 12-storey blocks and an elevated landscape deck. Like other DBSS projects, it offers condo-style fittings such as bay windows and balconies, built-in wardrobes and kitchen cabinets. But unlike condominiums, DBSS projects do not have facilities such as pools and barbecue pits.

The Peak @ Toa Payoh, a DBSS project with 1,203 units, was launched on Wednesday for sale via the balloting system. Buyers have until April 28 to apply.

DBSS projects are public housing and so are subject to rules for new HDB flats. For instance, only those who earn $8,000 or less a month can buy them.

Because DBSS homes are sandwiched in a narrowing price gap between private condominiums and HDB flats, experts have cited a $500,000 price point as the resistance level for such homes.

Real estate company PropNex's chief executive Mohamed Ismail Gafoor said there may be some buyer resistance for the Parc Lumiere five-roomers.

Other DBSS projects like Natura Loft in Bishan and Park Central in Ang Mo Kio still have units available for sale.

Recent DBSS projects take into account peak HDB prices because the developers had bought their land when the market was still fairly strong, Mr Ismail said. Sim Lian bought the Simei site last June for $137 psf of potential gross floor area.

Mr Ismail said four- and five-room flats in Simei are now valued at around $350 psf. If buyers do not mind an older flat, they can get a five-room unit nearer the Simei MRT station for the price of a four-room DBSS flat, he said.

Ms Kuik said Sim Lian should be able to complete Parc Lumiere by the first half of 2011. The developer was behind Singapore's first DBSS project, the 616-unit Premiere @ Tampines, which drew nearly 6,000 applications in late 2006.

The Straits Times - Joyce Teo

Home sales set to rise in 3 to 12 months: CDL

PROPERTY developer City Developments (CDL) said yesterday that it expects increasing numbers of homebuyers to enter the market in the next three to 12 months.

Its optimism stems from the sale of more than 80 per cent - or 150 units - of its newly-launched development, The Arte at Thomson. CDL has put 180 units of the 336-unit project on sale.

It said The Arte was 'a record breaker of sorts', being one of the few large projects launched in the global economic meltdown 'that has tasted success'.

CDLs' statement comes on the heels of newly released data that showed 1,220 new private homes sold last month, just shy of the 1,332 units sold in February.

This makes two consecutive months with more than 1,000 units sold - the first time it has happened in a year.

First-quarter private home sales have hit 2,660 units - about 62 per cent of all of last year's new home sales.

It has led some to speculate that the market has indeed turned a corner.

CDL said that 'after absorbing news of forecasts of a steep decline in GDP growth for 2009, the upbeat in sales volume could mean that there is greater confidence that a turnaround is in sight - with a steady rise expected in the property market within the next three to 12 months'.

But analysts maintain that this level of buying may not be sustainable.

Knight Frank director of research and consultancy, Mr Nicholas Mak, has estimated that only 6,000 to 7,000 new private homes are expected to be sold this year, unless the Singapore economy and employment market improve significantly.

However, CDL's group general manager, Mr Chia Ngiang Hong, said that recent launches have shown that 'buyers are still willing to spend when they see value and see a good deal'.

Developers, prompted by the challenging economic conditions, have lowered selling prices - by between 5 to 25 per cent - and these factors have contributed to larger transaction volumes, said CDL.

The Straits Times - Jessica Cheam

Two insurance firms launch rent protection scheme

AS disputes between landlords and tenants hot up, two insurance companies have launched a rent protection insurance scheme to shield residential landlords from rental income losses.

Said to be the first in Singapore and Asia, the product from Jardine Lloyd Thompson (JLT) and QBE Insurance makes up for up to 12 months of lost rent (capped at $100,000) in several events, such as the tenants defaulting on payments or real estate agents absconding with rents collected.

The insurance also covers other administrative costs such as legal fees incurred in evicting tenants.

At 15 per cent of one month's rent, premium for the rent protection insurance is affordable, said JLT business development director Gerard Lee.

'Landlords and real estate agents . . . have commented that it is being introduced at the right time in Singapore.'

The insurers noted a rising number of landlord-tenant dispute claims.

According to data they sourced from the Small Claims Tribunals of the Subordinate Courts of Singapore, there were 1,137 such cases in 2008 - 70 per cent more than a year earlier.

And feedback from the real estate industry indicates that most disputes do not even reach the tribunals, the insurers highlighted.

As Dennis Wee Group director Chris Koh said, it is hard to take some tenants to task if they have simply disappeared.

With market conditions deteriorating, the insurers also felt that rent protection insurance would come in handy.

Institute of Estate Agents president Jeff Foo observed that rent defaults have increased significantly from nine months ago, and such cases would hurt landlords that rely on rental income for mortgage payments.

The new product will be distributed through real estate agents, who will get a referral fee. Coverage applies for entire tenancy periods of up to 24 months, and landlords have to bear deductibles in some cases.

Rent protection insurance has spawned premiums of over A$30 million (S$32.5 million) in Australia, JLT said.

'We believe that this product will find comparable success in Singapore and in Asia.'

The Business Times - Emilyn Yap

Sweet deals to keep tenants from fleeing

Commercial landlords are fighting to retain prized tenants, with some choice buildings in Raffles Place said to be offering even single-digit rental rates.

According to industry sources who declined to be named due to the sensitivity of deals, rents below $10 per square foot have popped up in lease renegotiations for buildings such as OUB Centre and Equity Plaza. Some tenants in Singapore Land Tower have also received offers of around $7 psf, they said.

Such asking rents in the heart of the business district would have been rare during the property boom. But with firms consolidating or holding back on growth after the financial crisis broke, office demand has 'weakened considerably', said DTZ in an April 1 report.

Also, 'more shadow space is emerging as companies scale down their workspace and sublease excess space' and this trend could continue, it said.

As recently as end- 2008, the average monthly rent for Grade A space was still $15 psf. This fell 18 per cent to $12.30 psf at the end of March, said CB Richard Ellis. In the same period, the average monthly rent for prime office space also dropped 19 per cent to $10.50 psf.

'Competition to retain tenants is on,' Cushman & Wakefield Singapore managing director Donald Han commented.

Few landlords responded when BT asked about rents in their buildings. One which did - CapitaCommercial Trust (CCT) - said that signing rents for its Grade A offices are in the double-digit range. The trust owns several properties such as Six Battery Road.

A Keppel Land spokeswoman said that there are 'single-digit rental rates for some buildings and double-digits for others' across Keppel Land and K-Reit Asia's office portfolios, which include Equity Plaza and a one-third interest in One Raffles Quay.

She added that the age and non-regular layout of Equity Plaza could have led to single-digit rentals in some cases, but the property did secure double-digit rates in January.

To be fair, sources said that rents under $10 psf are still under negotiation in many cases. 'It doesn't mean there have been transactions,' one pointed out.

Also, industry observers believe that only some existing tenants can benefit from these rates - these would be firms renting large spaces, taking up long leases or those with good corporate profiles.

Still, the low rents offered are putting pressure on new projects hoping to draw tenants away, sources said. They now have to propose better deals to convince companies to bear the costs and hassle of relocation.

Cushman & Wakefield Singapore estimates that around 2.4 million square feet of office space will come onstream in 2009, with more arriving thereafter. Projects taking shape include the Marina Bay Financial Centre, which Keppel Land is developing with Hongkong Land and Cheung Kong (Holdings)/ Hutchison Whampoa.

There is already talk that asking rents at the upcoming Straits Trading Building (next to Singapore Land Tower) have reached single-digit levels. Reports in the effervescent days of January last year noted that the development could fetch rents of $18 psf.

The 28-storey building is expected to receive its temporary occupation permit (TOP) in November and around 25 per cent of space has been pre-committed. According to The Straits Trading Company, asking rents range from $10 to $12 psf depending on contract terms.

Of course, rents do not tell the whole story; landlords are also giving out other incentives to retain tenants. 'We start to see more creative packaging of deals,' said Knight Frank director of business space (office) Agnes Tay. 'Some deals can involve a higher transaction price but include more rent-free months to bring down the average cost.'

A CCT spokesman also shared: 'If tenants are prepared to renew for a longer term, we would be able to offer more rental concessions.

'Tenants will also be able to save additional costs expected to be incurred if they relocate - namely, reinstatement cost for the existing space, fitting out of new premises, business disruption, moving costs, etc.'

Lower rents and more concessions will give businesses here some cost relief. As Savills noted in February, Grade A office rents in Singapore are likely to be about 20 per cent cheaper than in Hong Kong by end-2010.

As rents shot up here in 2006 and 2007, Grade A office rents actually surpassed those in Hong Kong in H2 2007 and early 2008. As an example of the rapid rise of the property market then, reports note that monthly rents at One Raffles Quay were once $4 psf when leasing began in 2004; they have since gone up severalfold.

The Business Times - Emilyn Yap

Home sales remain strong

THE bumper private property sales recorded in February were no fluke.

For a second straight month, home hunters defied the weakening economy to buy more than 1,000 units last month.

Property consultants say buyers are attracted to what they regard as good buys in the moderately priced mass market.

Still, they warn that these strong buying levels are probably not sustainable.

Last month, property developers sold 1,220 new private homes, just shy of the 1,332 units sold in February.

It was the first time in over a year that the market has seen two consecutive months with more than 1,000 units sold. Sales for both months were a stunning contrast to the dismal 108 in January.

Another striking figure: First-quarter new private home sales hit 2,660 units, representing 62 per cent of all new homes sold during the whole of last year.

February sales - boosted mainly by two new launches Alexis and Caspian - were the highest since August 2007.

Figures compiled by the Urban Redevelopment Authority also showed 832 new housing units were launched last month, compared with 1,072 units in February and just 204 units in January.

Most units sold last month were in the mass market, along with a few city-fringe small-format apartments at condominiums such as Domus and The Mercury.

HDB upgraders were the hottest group of buyers. CBRE Research said that last month alone, they bought 550 to 600 units at mass market projects such as Caspian, Double Bay Residences, Kovan Residences, Livia, Mi Casa and The Quartz at median prices of $610 per sq ft (psf) to $740 psf.

A survey of first-quarter caveats lodged for this market segment indicated an average price of $695,000, said CBRE Research executive director Li Hiaw Ho. 'This is probably a good time for HDB home owners to upgrade to private property as the price gap between private properties and HDB resale flats has narrowed.'

Said Colliers International director for research and advisory Tay Huey Ying: 'Developers have lowered their price expectations for new launches and generally cut prices of unsold units. Buyers are biting as there is pent-up demand.'

The top three sellers in March were Double Bay Residences, Mi Casa and The Arte. About 85 per cent of units sold last month were priced below $1,000 psf, said PropNex chief executive Mohd Ismail.

The high-end showed some life with 70 units launched and some sales, including one Orchard Scotts unit at $2,220 psf.

But overall, only 100 prime units were launched in the first quarter, or just 4.7 per cent of all units launched, well down from the 39.4 per cent of all units launched in the fourth quarter last year.

Knight Frank director of research and consultancy Nicholas Mak said this was partly due to the retreat of foreigners from the luxury market.

Preliminary data suggests foreign deals stood at 16.8 per cent in the first quarter - a level last seen when Sars badly hit the market in 2003, he said.

Market analysts say it is a good start to the year, but they do not expect the strong buying to continue long-term.

'In the short term, this rate of buying can continue provided developers lower or maintain their prices,' Chesterton Suntec International's research and consultancy head Colin Tan said of March sales.

But in the long term, it is not sustainable, he said. 'The last time the market sold so many new units (14,811 units) was in 2007. That was when the deferred payment scheme was available. And it has since caused indigestion in the top end of the market.'

Unless the Singapore economy and employment market improve significantly this year, only 6,000 to 7,000 new private homes are expected to be sold, said Mr Mak.

He said healthy demand for mass market homes is likely to continue only as long as average HDB resale prices do not fall by more than 7 per cent year on year.

'Many in the mass market segment are buying now and banking on their future earnings to service their loans as they are afraid of missing the boat,' said Mr Mak.

The Straits Times - Joyce Teo, Property Correspondent

The Peak piques interest of 4,500 potential buyers

POTENTIAL buyers yesterday thronged the showroom for The Peak @ Toa Payoh, a new project built under the Design, Build and Sell Scheme (DBSS).

Four thousand five hundred viewers turned up at the showroom at yesterday's launch, said Ms Kellie Liew, executive director of projects at HSR Property Group, the marketing agent for The Peak.

Most were keen on four- to five-room flats, citing location and HDB grants as factors influencing their decision.

Ms Cerise Chiew, 24, a teacher, hopes to buy a five-room unit. 'I can get a first-timer HDB grant. Toa Payoh is quite a good location and, if you want to sell in the future, you can get a higher price.'

Service crew member Sharon Ye, 26, was looking at four- and five-room units for her cousin. She said DBSS projects trumped private properties, as owning a private property meant losing out on many benefits, like Public Utilities Board bill rebates and town council subsidies.

Salesman Sam Tan, 38, was considering applying for a four-room flat to be near his mother. He is also eligible for a first-timer grant. He said he would pick a DBSS unit over one in a condominium since he would not use condo facilities, such as a swimming pool or a gym, but would still have to pay maintenance fees.

A few property hunters drew a comparison with Natura Loft, a DBSS project in Bishan, saying prices at The Peak were lower and the location more accessible. But some were not as convinced, including businessman Richard Lim, 37. 'I'm not going to buy because the room size is very small. I can get a 99-year condo unit for about the same price but bigger.'

Interested buyers have until April 28 to apply for the 1,203 available units.


The Straits Times - JOANNA SEOW

Timing's everything for upgraders

IN THE midst of Singapore's worst recession, people are still buying property.

Private condominium sales reached a recent high of 1,323 units in February - the highest since the 1,731 units sold in August 2007, which was the peak of the recent property bull run.

And though official figures are not yet available, the buying frenzy seems to have continued into March.

According to a recent report by DTZ Research, seven out of 10 buyers in the first quarter of this year are HDB upgraders.

This is a jump from the 48 per cent registered in the fourth quarter last year, and the highest number since the 86 per cent achieved in the second quarter of 2002.

HDB upgraders are home buyers with HDB addresses looking to move up the property ladder. They typically buy into mass-market condos, usually in the suburbs.

Experts say the recent brisk sales indicate a 'pent-up demand' in the market, especially from buyers who held back during the recent property boom, when prices skyrocketed in 2006 to 2007.

They also point to a unique phenomenon that occurs in a property boom-and -bust cycle where the gap between the price of HDB resale flats and mass market condos has narrowed to an all-time low.

Private property prices fell a quarterly record of 13.8 per cent in the first quarter of this year, compared with the marginal 0.6 per cent drop for HDB resale flats.

This means that HDB flat owners own an asset that has appreciated to more or less record value, at a time when the prices of mid-tier condos have dropped to affordable levels.

Now, the jump from public to private home ownership has always been a tantalising proposition.

But is this really the right time for an HDB upgrader to buy?

The answer, say property experts, depends on two things - when the condo unit the upgrader is buying will be completed, and what view he takes of the Singapore property market over the next couple of years.

Let me explain.

Unlike an investor who is buying for rental yield, the HDB upgrader typically moves out of his HDB flat and into his new condo unit. This means that he sells his flat only when the new condo unit is completed and ready for occupation.

Therefore, it makes the most sense for an upgrader today to buy a completed unit - because he can sell his flat now for a relatively high price and buy the new private condo unit on the cheap.

The problem is that there aren't many completed suburban developments on the market. Most new condos approaching completion today are in the prime districts, which were the focus of the property boom two years ago.

And the handful of suburban developments that are close to completion aren't that attractively priced, so the HDB upgrader isn't getting that good a deal on them.

The fact is: The cheapest suburban condo units today are those being sold 'off plan', meaning that they will be completed only two or three years later.

For HDB upgraders who buy these types of condo units, the fact that they can currently can get a good price for their HDB flats is moot, because they will sell their flats only two or three years down the road.

That brings me to the second point that HDB upgraders must consider before signing on the dotted line.

What will the global economy and the Singapore property market look like in two or three years' time, when these projects are due for completion?

Home buyers today can no longer rely on the now-defunct deferred payment scheme introduced in 1997. This allowed buyers to pay a 10 or 20 per cent downpayment, and defer taking a bank loan until the project was completed.

Developers have replaced this with the 'interest absorption scheme'. Here, the buyer also pays an initial 20 per cent downpayment and defers the rest until the property is completed.

But the big difference now is that the minute buyers commit to a property, they have to take a loan with a bank which the developer has selected. The developer then foots the bill for the buyer in interest payments to the bank during the construction period.

This arrangement carries new risks for the home buyer.

Firstly, if a developer goes under, it will no longer be able to pay the regular interest payments and the bank will go to the buyer for these payments.

This seems quite an unlikely scenario in Singapore as developers who offer this scheme generally have the financial muscle to ride out the tough times. Still, the risk of this happening is higher with smaller developers.

Secondly, the bank reserves the right to revalue a property at any point during the construction, or when the project is completed.

So if the property market heads further south, a bank may revalue properties downwards. This means that it will likely reduce the sum it had earlier agreed to lend to the buyer, who will then have to stump up a hefty sum of cash to make up the difference.

On the one hand, experts say banks are unlikely to revalue properties as long as buyers are able to make the monthly payments. Unlike high-end properties where prices could crash in as little as three months, prices of suburban units are less volatile, say analysts.

But on the other hand, if the market really crashes, HDB upgraders could be hit by a double whammy. They will have to fork out more cash to top up their loans at a time when the values of their resale flats would most likely have crashed along with the general market. And if they back out of buying the new flat, they will lose a 20 per cent deposit.

In the worst-case scenario, they could be saddled with two mortgages for properties, both in negative equity.

Such an optimistic gamble on the future is not for the faint-hearted nor the financially prudent, especially when unemployment is hitting a record high.

But if an HDB upgrader truly has the financial strength to hold on to his properties indefinitely for the long term, it could be a gamble that will pay off when the market finally recovers.

These are sums that one must do carefully, no matter how beautiful and attractive floor plans and showflats now look.

The Straits Times - Jessica Cheam