A check with developers by The Straits Times found that most are ready to meet the deadline on Friday.

But they report a frenzy of activity as developers, lawyers and architects rush to tie up loose ends given the tight deadline of just one month since the changes were announced.

Developers say that while they do not anticipate major challenges in complying with the new rules, the sales process will become much more complicated.

There will be an increase in paperwork, especially for projects with units left unsold at the time of the change.

They will need two versions of sales and purchase agreements and options to purchase – one for sales before May18 and another set after. Each will have different contractual obligations.

This means that even if a few units in a launched project are unsold, the developer must use the new versions of the purchase documents mandated by the Urban Redevelopment Authority (URA) for all sales from Friday onwards.

The URA made changes to its Housing Developers Rules last month, requiring developers to give more information in writing on the project and unit to buyers before the option to purchase is issued.

This first phase of changes to ensure that ‘what you see is what you get’ requires developers to provide a drawn-to-scale project location plan and site plans. They must also give a unit floor plan and a breakdown of a unit’s floor area by spaces such as bedrooms, balconies and bay windows.

Other new requirements include getting the consent of home buyers before making changes such as adjustments to a unit’s layout.

A CapitaLand Residential Singapore spokesman said the firm has been adopting many of these best practices and does not anticipate major challenges in complying with the new rules.

‘We will work with our various project consultants to compile and present the required information in the clearest and most concise manner possible, whether in the form of text or diagrams, so as to help our home buyers make better informed decisions.

‘We believe this is a positive move that will enhance the attractiveness of the Singapore property market to both local and foreign home buyers, so we are fully supportive of it,’ he added.

One privately held developer, however, flagged the tight deadline as one of the key challenges in complying with the new regulations.

‘We have quite a number of projects that are affected and many of these projects are handled by the same consultants, so it means they have to work extra hard to meet the deadline,’ it said.

Another mainboard-listed developer, which declined to be named, noted that certain rules are not clearly defined, leaving some ambiguity as to what exactly they apply to.

For instance, developers have to notify home buyers about ‘substantive changes’ to the common property in a project, but what constitutes ‘substantive’ is unclear. Positive improvements to the project could also possibly be held hostage by a single difficult buyer unless he chooses to forgo his purchase.

Mr Lee Liat Yeang, a partner at Rodyk & Davidson’s Real Estate Practice Group, noted that these rules are also applicable to executive condominiums and Design, Build and Sell Scheme projects.

‘Due to the special nature of such projects, developers and lawyers have spent extra time liaising with the regulatory authority HDB on the specific changes to be made to the option and sales and purchase agreement formats to be used for these projects.’

Mr Lee added that industry players feel the preparation time given for the new rules to be implemented is too short, especially since they are also applicable to projects which have been partly sold before this Friday.

esthert@sph.com.sg

Source: The Straits Times © Singapore Press Holdings Ltd

Designers, artists and trendy media types rub shoulders with students on a budget who pillage hall breakfasts for lunch via sandwich bags. A secret vegetarian restaurant in a Taiwanese Buddhist temple housed in a Victorian church-like building does not quite fight for the same clientele as high-end Japanese diner Roka two minutes’ walk away.

Film director Guy Ritchie is revamping two houses for a home on a fine Georgian square, while hospital staff go about their everyday business next door, knowing that home is a five-minute walk away in subsidised council housing.

Welcome to Fitzrovia, an otherwise historic district whose name has come into being only about 60 years ago. Nestling in a patch north of the famous Oxford Street thoroughfare and south of the regenerating Euston precinct, Fitzrovia is said to be bookended in the west by the stately townhouses of Baker Street and in the east by literary Bloomsbury.

But where Fitzrovia begins and ends still remains in dispute today, even as major property developers and investors such as Exemplar and Aviva are busy pounding foundations of luxury apartments in the heart of the district, next to rows of Georgian and Victorian buildings that still house age-old pubs and traditional English trades.

‘It’s a village with a very mixed demographic,’ says local historian Ken Titmuss, who gives regular walking tours of the area.

‘That’s what is so attractive about the area. There are so many different communities of workers, students, tourists. What’s really interesting is that many people still do live here and make it their home.’

Fitzrovia has a history that incorporates the poor and rich, the distinguished and plebeian. The name itself comes from one 18th-century nobleman Charles Fitzroy, who had rented out small tracts of land in the area to farmers, and gave his name to a conglomerate of distinguished Georgian houses surrounding a private park now called Fitzroy Square.

In the 1940s, poet Dylan Thomas is said to have coined the term Fitzrovia. Drinking in the Fitzroy Tavern pub on Charlotte Street, he had allegedly proclaimed to his writer friends who meet regularly there: ‘We are in the Fitzroy Tavern, we are now Fitzrovians.’

Although not as well known as Bloomsbury, Fitzrovia has its fair share of literary, academic and artistic connections. Charles Dickens, John Constable, George Bernard Shaw, Karl Marx, Arthur Rimbaud and Virginia Woolf each had lived and worked in the area at various points of their lives.

On the same square where Ritchie has set up home, the English author Ian McEwan also has a residence. In fact, his award-winning novel, Saturday, is set in the exact location.

Today, Fitzrovia’s intellectual connections continue in the form of an evolving demographic of students who sit out their tertiary education in university halls of the area appended to institutions such as University College London (UCL), the London School of Economics and the School of Oriental and African Studies.

In 1996, two undergraduates in UCL’s Ramsay Hall (Maple Street) decided to take a historic break from their Greek, Latin and astronomy studies to jam on guitars in a tiny hostel room. The result was an artistic collaboration better known to the world today as the iconic Britpop act, Coldplay.

But Fitzrovia has other, older claims to musical fame. On Charlotte Street, a 1970s building masks the site of the old Scala Theatre which, before it burnt down in 1969, played host to The Beatles in their first film, A Hard Day’s Night.

At the faux-gothic pub The King And Queen on Foley Street, a once unknown Bob Dylan sang his earliest songs to privileged audiences at a 1962 folk club meeting. On Margaret Street, a speakeasy venue once hosted the likes of The Who, Elvis Costello and Jimi Hendrix at the cusp of their careers.

‘There are many strong musical connections in the area,’ Mr Titmuss explains. ‘Many important musicians of today began their careers here.’

Today, music, alcohol and conversation continue to live on in pop-up clubs and gigs serving every niche.

A Nordic bar is tucked away in an eerie cobbled street (Newman Passage), students continue to present the next big thing post-Coldplay in the underground bars of Great Titchfield Street and London’s Okinawan diaspora strum their lutes after Saturday rehearsals in homey Japanese restaurants dotting the area (Wells Street, Goodge Street).

The multicultural aspect of Fitzrovia is not only a function of London’s larger cosmopolitan development as an international city, but also related to the fact that historically, the area has not been owned by a single landlord.

Rather, it has been carved up slowly by different social classes: first by the gentry, then by farmers, followed by tradesmen, poorhouses, office workers, students, graffiti artist Bansky and, more recently, a trendy set of designers, architects, fashion industry pundits and media companies.

Major media and design groups such as TimeOut, Dennis, MTV, Nickelodeon, CNN, Make Architects, Arup and Saatchi & Saatchi have set up offices in the area.

Restaurateurs and property developers have also been quick to jump in on its expanding potential, targeting not only a tourist market but also a changing demographic of local residents.

Mr Gavin Sung, a director at global estate agent Savills, which is launching high-end residential complex Fitzroy Place around the world this month, says the latest residents of Fitzrovia might well be Chinese and South-east Asian investors taking advantage of profitable exchange rates and the village- within-a-city’s central location to snap up second homes for their children.

‘The attraction of Fitzrovia is that it’s in the middle of everything – the universities, businesses, shopping, museums. But it’s also a place where people can and do live.’

Indeed, the area’s already diverse mix of longer-term residents has been campaigning for the retention of unique features of the buildings, even as they have also welcomed new faces and economic injections into their neighbourhood.

In 1970, local residents successfully campaigned for more housing in the area to prevent the dilution of community spaces amid the encroaching of offices and businesses.

Today, tough zoning and conservation laws keep alive the unique profile of Fitzrovia as a living, eating, working, studying and partying hub.

Graphic designer Harriet Miller, who has lived and worked in the area for more than six years, puts it this way: ‘We’re right in the middle of central London here and it’s full of noise, colour and traffic. I have access to everything I want.

‘But you have alleyways and underground cafes and all these cute little stores, it’s like a pocket of secret space hidden in plain sight.’

stlife@sph.com.sg

WHAT TO SEE

The ugly BT Tower on Howland Street is actually worth a visit, if only because it was the symbol of central post-war London for the longest time, on account of its then skyscraping height of 177m.

It is officially not in use now, but came to life last year on the eve of Prince William’s wedding to Kate Middleton, when a message from its famous blinking tower cheekily proclaimed on behalf of BT: ‘Go on, Will, give her a ring.’

If tracking down literary and historic sites is your thing, Fitzrovia is chock-a- block with plaques and stories commemorating glamorous ex-residents. Look out for these on Cleveland Street, Foley Street, Charlotte Street and others.

Keep your eyes peeled for a rat looking up at the famous words: ‘If graffiti changed anything, it would be illegal’ on a nondescript wall on Clipstone Street.

Yes, Banksy has struck Fitzrovia and its enterprising residents have glass- plated his mark here, just in case fellow artists decide to add their stamp alongside it.

WHAT TO EAT

High-end: Fancy-schmancy raw fish in a nouveau Japanese setting is served in the swanky and crowded Roka at 37 Charlotte Street (tel: +020-7580-6464, www.rokarestaurant.com)

Exquisite northern Spanish fare presented in the embrace of gorgeous blue-and-white porcelain tiles in underground dens can be found at Navarro’s at 67 Charlotte Street (tel: +020-7637- 7713, www.navarros-tapas-london. co.uk).

If you want British fare, check out the new Riding House Cafe at 43 Great Titchfield Street (tel: +020-7927-0840, www.ridinghousecafe.co.uk ) with its fresh cuts of beef, fish and poultry.

Mid-range: They are almost seedy- looking but pull their punches, Japanese- style, if the constant throng of Fitzrovia’s authentic salary men outside their doors are proof of anything.

Check out Yoisho Izakaya at 33 Goodge Street (tel: +020-7323-0477) and bar-grill Soho Japan at 52 Wells Street (tel: +020-7323-4661, www.sohojapan. co.uk ).

If you want British food, there is always fish and chips at The Chippy at 38 Poland Street (tel: +020-7434-1933) and Gigs at 12 Tottenham Street (tel: +020-7636-1424).

Cheap: Students will know this one – freshly baked and huge pizzas for £3.50 (S$7) at Italian Coffee Company at 46 Goodge Street (tel: +020-7580-9688, icco.co.uk).

WHERE TO STAY

Feeling flush? Then the first ports of call should be the Charlotte Street Hotel (15-17 Charlotte Street, tel: +020- 7806-2000, www.firmdale.com/london/ charlotte-street-hotel) and Sandersons (50 Berners Street, tel:+020-7300- 1400, www.sandersonlondon.com ), where you can do celebrity-spotting while munching on your breakfast eggs made to order.

Otherwise, there are three-star outlets, budget guesthouses and hostels at Hallam Street (No. 12, tel: +020-7580- 1166, www.hallamhotel.com ) and Bolsover Street (YHA at 104-108, tel:+087-0770-6144; or Nos. 20-28 Grange Fitzrovia, tel: +020-7636-5085, www.grangehotels.com/hotels-london/grange-fitzrovia-hotel/location.aspx).

Source: The Straits Times © Singapore Press Holdings Ltd.

So far, the majority of property counters have posted a double-digit percentage decline in their earnings for the period, with some such as SC Global Developments plunging from a profitable $72.8 million for Q1 last year to a loss of $10.0 million for the first three months of 2012 on the back of lower sales and higher expenses.

However, most analysts and developers have pointed out that weaker development revenues and declining margins in a number of players – including SC Global – stemmed from the sector’s adoption of IFRS 115, which clarified the accounting recognition of revenue and costs of pre-completed properties, as opposed to a decline in their core performance, soothing the impact of the otherwise lacklustre results.

That aside, companies such as CapitaMalls Asia (CMA) were still deemed to have not met the mark this season, according to some analysts.

Highlighting that the street has probably “baked in overly optimistic assumptions” for CMA’s FY12 earnings, OCBC analyst Eli Lee commented: “CapitaMalls Asia reported 1Q12 Patmi (profit after tax and minority interests) of $66.8 million, up 36.1 per cent year on year mainly due to revaluation gains of $30.7 million on three Japanese malls.”

However, after excluding these gains, Mr Lee pointed out that CMA’s quarterly results failed to impress, due to a spike in its operating expenses and a slower-than-expected ramp-up at its new malls.

But not all the eggs from the same basket are necessarily bad, note analysts, as three concur that other players such as UOL continue to look relatively compelling from a valuation standpoint.

For one, Donald Chua, property analyst at CIMB Research, continues to remain positive on UOL despite its sharp fall in net profit for the quarter.

Sharing his view on the property developer, Mr Chua said: “(UOL’s) lower development revenues in 1Q12 were expected on the completion of several projects in 2011… What came in strongly were property investment rents (up 7 per cent year on year) and hotel revenues (up 22 per cent year on year). In particular, hotels in Singapore, Australia, Malaysia and Yangon saw growth, including revenue streams from the Parkroyal Melbourne Airport hotel acquired in April 2011.”

Mr Chua added that positive rental reversions this year could also give an added spin to the group as a “fair bit” of UOL’s renewals in Novena and United Square are approaching soon.

Likewise, Adrian Chua from UBS Investment Research is also bullish on UOL and sees the opportunistic deployment of capital by the group in subsequent periods as one of its key catalysts going forward.

Yesterday, Wheelock Properties also unveiled its quarterly performance, which unfortunately showed less-than-impressive numbers with earnings dropping a whopping 75 per cent from last year to $13.1 million as at end March 2012.

Notably, the softer net profit came on the back of a weaker topline of $26.1 million (down 75 per cent) following the completion of Scotts Square in Q3 last year and fewer units sold in developments such as Scotts Square and Orchard View during the period.

Wheelock’s borrowings also rose from $160 million in 1Q11 to $273 million in 1Q12 to finance acquisitions and construction costs at Ardmore Three – the group’s 84-unit luxury development along Ardmore Park.

Looking at the big picture, nothing much has changed for the sector as a whole as the tone continues to be a cautious one at best, as economic data continues to augur poorly for the property players ahead.

In particular, the residential segment seems to be facing the most flak as many fear a potential vacancy overhang against a build-up of physical completions and an anticipated fall in immigration levels ahead, said CIMB’s Mr Chua, who feels maybe it might be time for investors to look for greener pastures (such as real estate investment trusts) to invest their funds in.

Source: Business Times © Singapore Press Holdings Ltd

A check with developers by The Straits Times found that most are ready to meet the deadline on Friday.

But they report a frenzy of activity as developers, lawyers and architects rush to tie up loose ends given the tight deadline of just one month since the changes were announced.

Developers say that while they do not anticipate major challenges in complying with the new rules, the sales process will become much more complicated.

There will be an increase in paperwork, especially for projects with units left unsold at the time of the change.

They will need two versions of sales and purchase agreements and options to purchase – one for sales before May18 and another set after. Each will have different contractual obligations.

This means that even if a few units in a launched project are unsold, the developer must use the new versions of the purchase documents mandated by the Urban Redevelopment Authority (URA) for all sales from Friday onwards.

The URA made changes to its Housing Developers Rules last month, requiring developers to give more information in writing on the project and unit to buyers before the option to purchase is issued.

This first phase of changes to ensure that ‘what you see is what you get’ requires developers to provide a drawn-to-scale project location plan and site plans. They must also give a unit floor plan and a breakdown of a unit’s floor area by spaces such as bedrooms, balconies and bay windows.

Other new requirements include getting the consent of home buyers before making changes such as adjustments to a unit’s layout.

A CapitaLand Residential Singapore spokesman said the firm has been adopting many of these best practices and does not anticipate major challenges in complying with the new rules.

‘We will work with our various project consultants to compile and present the required information in the clearest and most concise manner possible, whether in the form of text or diagrams, so as to help our home buyers make better informed decisions.

‘We believe this is a positive move that will enhance the attractiveness of the Singapore property market to both local and foreign home buyers, so we are fully supportive of it,’ he added.

One privately held developer, however, flagged the tight deadline as one of the key challenges in complying with the new regulations.

‘We have quite a number of projects that are affected and many of these projects are handled by the same consultants, so it means they have to work extra hard to meet the deadline,’ it said.

Another mainboard-listed developer, which declined to be named, noted that certain rules are not clearly defined, leaving some ambiguity as to what exactly they apply to.

For instance, developers have to notify home buyers about ‘substantive changes’ to the common property in a project, but what constitutes ‘substantive’ is unclear. Positive improvements to the project could also possibly be held hostage by a single difficult buyer unless he chooses to forgo his purchase.

Mr Lee Liat Yeang, a partner at Rodyk & Davidson’s Real Estate Practice Group, noted that these rules are also applicable to executive condominiums and Design, Build and Sell Scheme projects.

‘Due to the special nature of such projects, developers and lawyers have spent extra time liaising with the regulatory authority HDB on the specific changes to be made to the option and sales and purchase agreement formats to be used for these projects.’

Mr Lee added that industry players feel the preparation time given for the new rules to be implemented is too short, especially since they are also applicable to projects which have been partly sold before this Friday.

esthert@sph.com.sg

Source: The Straits Times © Singapore Press Holdings Ltd

[SINGAPORE] After going into deep freeze since the additional buyer’s stamp duty (ABSD) was introduced on Dec 8, resale transactions of completed private homes snapped back to life in March. The recovery was partly disguised amid the first quarter figures, weighed down by dismal volumes in January and February.

In fact, Savills Singapore’s analysis shows that resale volumes for March have recovered to levels seen before the ABSD kicked in. The turnaround was sudden, as the resale market had remained jittery even while buyers were returning to property launches in the first two months of the year.

However, since March, agents say that some of the eye-popping per square foot (psf) prices achieved at new launches have helped to jumpstart interest in the secondary market for completed properties, where prices look more attractive.

Savills’ analysis of URA Realis caveats data shows 1,142 resale deals for private homes (excluding ECs and en bloc sales) done in March – double the 565 caveats for February and more than three times January’s volume of 314 transactions. The March number also exceeds December’s volume of 776 and November’s 981.

“Given that the average monthly resale volume for 2011 was 1,166 transactions, the March numbers show that resale volumes have recovered back to pre-ABSD levels,” said Savills Singapore research head Alan Cheong.

The March 2012 resale volume is still 23 per cent below the 1,480 caveats lodged in March 2011.

The final tally for March 2012 could rise as more caveats stream in over the next few weeks. Savills’ analysis, based on caveats captured by URA Realis as at April 24, also showed 332 resale transactions being done so far this month.

Savills commented: “The pace of resales in April is still healthy. Agents are still conducting frequent viewings and enquiries. Barring any new property cooling measures or external shocks, resales should remain robust for the next few months – given the current low interest rate environment, liquidity and increasing population scenario, among other factors.”

The weak performance in the first two months dragged down the volume of resale deals of private homes for Q1 this year to 2,021, a decline of nearly 25 per cent from 2,688 in the preceding quarter and a year-on-year drop of 42.3 per cent from 3,503 units in Q1 2011.

“When the ABSD was imposed on Dec 8, 2011, new home sales practically froze in the following weeks. Subsequent to the successful launch of Watertown and Parc Rosewood in January, resale buyers took a while to fully absorb the fact that the property market still has legs. Only in March did they put pen to paper,” said Mr Cheong.

Agents report that high prices achieved for 99-year leasehold suburban launches like Watertown in Punggol (with median prices of about $1,340 psf in February and March) and Sky Habitat in Bishan, which marked a new record for the suburban condo market based on an average price said to be about $1,650 psf after taking into account the initial 3 per cent discount given to all buyers – have helped to stir interest in the resale market and in projects launched earlier that are still being marketed by developers.

Archipelago, a five-storey, 99-year condo facing Bedok Reservoir Park, is going at about $1,000 psf on average.

Compared to Sky Habitat, resale prices for some completed freehold properties in the prime districts would appear attractive to some buyers, say agents. For example, a 990 sq ft ground floor unit at One Jervois changed hands for $1,515 psf (reflecting an absolute price of $1.5 million) in March, while a 947 sq ft unit on the third floor of Jervois Regency sold for $1,361 psf (about $1.29 million) in April.

A 12th floor unit of 2,250 sq ft at Residences@ Evelyn changed hands at $1,609 psf in March, while a 2,508-sq ft fourth floor unit at Chelsea Gardens at Walshe Road sold for $3.8 million, which works out to $1,515 psf.

David Neubronner, director of residential project sales, Jones Lang LaSalle, said: “Completed freehold properties at Meyer Road and in Districts 10 and 11 priced at $1,500-1,600 psf represent good values for owner occupiers.”

Although psf prices are higher for new launches, absolute price quantums are generally bigger for older completed projects as units are mostly larger.

“Buyers of resale properties may be a different group than those buying in the primary market; they could be better heeled,” suggests an agent.

Credo Real Estate executive director (residential) Manjit Gill says the company has seen an increase in enquiries and requests for viewings of completed properties in the resale market, particularly those in the vicinity of new launches.

“While psf prices are lower in the resale market, buyers would have to make full payment of the purchase price upon completion of sale (usually in three months) whereas if they buy a unit from a developer in a newly launched project, progress payments can stretch over the three years or more that it takes to complete the project,” he adds. Lower psf prices in the resale market may also be due to the age of the project and its facilities.

Source: Business Times © Singapore Press Holdings Ltd.

THE Jade Towers residential project in Upper Serangoon has been sold in a collective sale for $106.3 million – making it one of the largest en bloc deals inked this year.

Roxy Residential, a wholly owned subsidiary of mainboard-listed Roxy-Pacific, paid $807 per sq ft per plot ratio (psf ppr) for the 92,412 sq ft freehold site of 72 apartments. There is no development charge.

Marketing agent Savills Singapore said each owner will get gross proceeds of about $1.48 million, or $1,016 psf per strata area. This is about 40 per cent higher than the $700 psf to $750 psf price tag if the units were sold individually.

The Lew Lian Vale site off Upper Serangoon Road can accommodate up to 171 apartments, each at about 753 sq ft – about half the average size of the flats there now.

The breakeven cost is estimated to be between $1,200 psf and $1,250 psf, Savills added in a statement yesterday.

Ms Suzie Mok, its senior director of investment sales, noted that Jade Towers is the first pure residential collective sale exceeding $100 million since the introduction of the 10 per cent additional buyer’s stamp duty in December last year.

The measures require developers to build and sell all units on a site within five years or face the additional stamp duty.

‘Despite a slowdown in the number of pure residential collective sale transactions, sites offering strong locational attributes and priced right will continue to draw interest from developers,’ she said.

‘District 19 is fast catching up in popularity with the Telok Kurau residential enclave in District 15.’

Subject to confirmation, a rectangular freehold plot nearby could be redeveloped along with the site, bringing the total gross floor area to 131,702 sq ft.

Roxy-Pacific said in a separate statement that the sale, which is subject to Strata Titles Board approval, will be financed by internal funds and bank borrowings.

It is not expected to have a material impact on its consolidated earnings and net tangible assets per share of the company for the current financial year, it added.

Earlier this month, a smaller low-rise residential plot nearby – comprising Bartley Grove Apartments and three adjoining terraces – was also sold for $810 psf ppr.

The biggest collective sale deal inked this year was for mixed-use estate Tai Keng Court last month. Owners received $161.1 million for the freehold plot at the junction of Jalan Lokam and Upper Paya Lebar Road, which is $1,109 psf ppr.

Source: The Straits Times © Singapore Press Holdings Ltd

THE Housing Board may be relooking its policy of releasing official cash-over-valuation (COV) figures of resale HDB flats, according to top executives of some property companies.

They say the board has signalled through its actions and in private conversations its intention to stop publishing these figures altogether, a move that would put the final nail in the coffin of a measure that is criticised for pushing up prices in the resale market.

In the past year, the HDB had moved to hold back several types of COV data, such as the nationwide median and the proportion of resale flats sold above valuation.

Last June, the Council for Estate Agencies began penalising agents who, in their advertisements, promise to get a specified amount of COV.

And earlier this month, at a closed- door session with bosses of property companies, a senior HDB executive expressed the inclination to do away with publishing the COV figures, those at the meeting told The Straits Times.

COV is the amount a buyer pays over and above the valuation of an HDB resale flat. As it must be paid in cash, it has a significant impact on affordability.

Currently, the HDB publishes the COV by flat type and the town where it is located.

With COVs stable, realtors like Mr Eugene Lim believe it is ‘the best time’ to hold back this last measure.

Mr Lim, who is key executive officer at ERA Realty, explained that in a bull market with COVs soaring, not having an official figure to refer to will intensify the escalation of cash premiums, as figures will be tossed around willy-nilly by agents.

COVs have now dropped one-third from their 2011 peak to average around $25,000 to $30,000, said realtors.

The fall is due largely to an aggressive set of measures to cool the property market, and rules being tweaked to let more people buy new flats from HDB.

In fact, calls have grown from realtors over the past few months for the HDB to get rid of its COV figures.

These figures put agents under pressure in a softening market, because sellers tend to take them as a base for the cash premium they desire regardless of the individual peculiarities of their property, said Mr Lee Sze Teck, senior manager of research and consultancy at Dennis Wee Group.

‘Publishing COVs makes sellers think it is a benchmark below which they won’t sell,’ added C&H Properties key executive officer Albert Lu. ‘This is not healthy.’

And since realtors can no longer advertise based on the cash premium they can get for sellers, the HDB should similarly de-emphasise COVs in the resale market entirely, Mr Lu added.

PropNex chief executive Mohamed Ismail, however, does not see the concept disappearing overnight, even if HDB ceases to provide the figures.

Buyers and sellers will still seek the information from their agents, he said, adding: ‘What HDB is trying to do is break the mental model of sellers asking for minimum COV.’

SLP International Property Consultancy’s head of research, Mr Nicholas Mak, said that large property firms would like HDB to stop publishing official figures as this would leave their data as the only source of COV information.

His view is that if HDB ‘starts to censor COV information, it will just go underground because the demand is there’.

He added: ‘It’s like saying let’s not have sex education and therefore kids won’t be having sex. But what they will do is just learn the wrong things from their friends.’

rchang@sph.com.sg

Source: The Straits Times © Singapore Press Holdings Ltd

THE inflation monster can be a tough one to slay. Fortunately for Singapore, government policies have worked to contain cost increases for much of the city state’s history.

Since 1980, there have been only four years in which prices rose by more than 4 per cent on average.

Three of these peaks – in 1980, 1981 and 2008 – were due largely to imported inflation as oil and food prices soared.

The fourth peak was last year, when inflation hit 5.2 per cent. This time though, experts are of the view that a large part of the problem is made right here in Singapore.

What they mean is that rents, and prices of homes, cars and labour are high and look set to stay that way for a while, because demand has outstripped supply. It is a classic case of ‘too much money chasing too few goods’, as economists are wont to say of inflation.

On the ground, there are accounts of businesses and households struggling to cope.

After rents more than doubled at the Irene Nursing Home, managing director Irene Ong felt she had no other choice but to raise rates for new patients by $100 to $1,400 a month, and charge her existing 50 elderly patients $50 more.

It is a similar story at Asia Medic, a Singapore-listed health screening service provider.

In anticipation of having to pay higher salaries, the company raised its prices for basic services, such as radiology tests, at the start of the year.

By the end of this year, it will raise them one more time, says chief operating officer Jonathan Tan.

As salaries of its 60 nurses and other health-care service staff go up, Mr Tan says the medical centre will have no choice but to keep raising prices to its customers if it wants to remain profitable.

‘We have to increase our prices to keep up with inflation. Inflation is usually 2 to 3 per cent, but now it is looking as though it may even hit 6 per cent, quite astonishing. It is almost like putting in additional GST,’ he says.

The high cost of living also makes Singapore less attractive to those who are thinking of taking up jobs here, and even to overseas Singaporeans thinking of returning.

Trader Leon Tham, 29, who is based in New York and back here for a visit, says: ‘The cost of a car here is astronomical compared to that in the United States. And the price of a condo in Singapore might soon be more expensive than a similar one in New York. It is becoming very unaffordable even by global standards.’

How Singapore got here

FROM 2005 to 2010, Singapore’s population swelled rapidly due to large inflows of foreign labour.

Those were also years of strong economic expansion, which in turn propelled increases in real incomes, not just for those at the top but also households in the middle and at the bottom.

From 2006 to last year, Singaporean workers’ real median incomes rose by 13 per cent, or 2.5 per cent every year.

For those in the bottom 20 per cent, real median incomes rose by 11 per cent, or 2.2 per cent each year.

But it now looks like there is a price to pay for that growth spurt, argues Mr Manu Bhaskaran, chief executive at Centennial Asia Advisers.

‘A major reason for inflation is the payback for the factors that drove or were associated with the period of high growth in 2005 to 2010,’ he says.

‘These are the rapid growth of population and corresponding demands placed on the supply side of the economy such as infrastructure, road space, housing, which then drive up prices; excessive growth of foreign workers which has now necessitated restrictions, which are driving up wages and so driving up prices of labour-intensive services; and the overly rapid growth of the car population, which now forces a clawback in certificates of entitlement (COEs) and so forces prices of cars up,’ he adds.

Small and medium-sized enterprises (SMEs) have also complained of rising rents after JTC Corp began divesting its flatted factory space to real estate investment trusts and private developers in 2005.

Ang Mo Kio GRC MP Inderjit Singh says ‘the Government has responsibility here, because the demand and supply imbalance was caused by planning issues’.

He adds: ‘This was created internally because of our rapid population increase. So in housing, or transport, the pressure is to be expected.’

Typically, Singapore has kept inflation in check through the use of its exchange rate.

As a city state, it imports the bulk of its inflation through higher energy prices, or more expensive food items and raw materials. When prices get too high, the Monetary Authority of Singapore (MAS) makes the Singapore dollar strengthen, therefore making imported products relatively cheaper.

The trade-off is that exports become more expensive, which could hurt businesses and slow economic growth.

So far, the fine balance struck between keeping prices stable, without stemming economic growth, has proven successful. Inflation has averaged below 2 per cent in the previous decade, while economic growth averaged 6 per cent.

But things are changing. Singapore is facing a new reality of slower growth and higher inflation.

Last year, inflation hit 5.2 per cent while the economy expanded by 4.9 per cent. If the crystal ball-gazing experts are right, this year will be the second straight one in which price rises exceed the pace of economic growth.

And the gap could widen this year, with inflation as high as 4.5 per cent while economic growth hovers between 1 per cent and 3 per cent.

In the past 30 years, Singapore’s inflation has exceeded the pace of economic growth only six times. For four of those six times – 1985, 1998, 2001 and 2009 – Singapore was in an economic recession, and inflation was low.

What has caused the change? One factor is monetary policy in Western developed countries. They are keeping interest rates near zero in order to boost their anaemic economies, causing a raft of foreign money to flow to this part of the world and pushing up asset prices, especially in the property market.

This changed environment calls into question the effectiveness of Singapore’s use of the exchange rate as an inflation-fighting tool, going forward. Some economists have pointed out that the exchange rate policy was not designed for the prolonged low interest rate environment that Singapore is in now.

It could be Singapore’s most serious macro-economic stability issue since the 1970s, when inflation was highly volatile, they say.

Singapore moved to an exchange rate monetary policy regime formally in 1981, the last time inflation averaged 8.5 per cent.

What do these changes mean for Singaporeans?

Mr Inderjit Singh is worried about the impact of current high prices and slower growth on middle- and lower-income groups.

Their wages are not increasing by the same amount as prices, he observes, ‘so every year, their purchasing power is declining’.

‘We are going through a very tough time. It is not a good sign. We have to show that when you work hard, you can afford good housing, a better quality of life,’ he adds.

Bank of America Merrill Lynch economist Chua Hak Bin warns that Singapore may be ‘losing its low inflation reputation’.

It is part of the MAS’ mandate to ensure price stability, he notes.

‘With inflation at 5 per cent, there is the danger of inflation expectations becoming persistently high. So workers and unions demand higher wage increases, regardless of productivity increases, and as a result< it compounds a wage-price spiral. That is the kind of vicious circle that central banks try to avoid.’

What can be done

ONE suggestion that has been making the rounds is for Singapore to adopt an interest rate regime for its monetary policy instead of the current exchange rate.

There is merit to that argument.

As Singapore manages its exchange rate, it allows market forces to move interest rates. This has resulted in interest rates here following that of the United States.

The US has kept interest rates at near zero in order to boost liquidity and get its economy out of the current rut. As a result, the Singapore Interbank Offered Rate (Sibor), a commonly used benchmark rate for home loans, has hovered near an all-time low of 0.4 per cent.

Raising interest rates here would effectively cool the property market, as loans would become much more expensive.

Holland-Bukit Timah GRC MP Liang Eng Hwa, who is deputy chairman of the Government Parliamentary Committee for Finance, Trade and Industry, says: ‘A strong Singdollar actually helps to fuel domestic inflation, because it attracts capital, and pushes up asset prices further. I’m not convinced that we can tackle domestic inflation without using interest rates.’

But Citigroup economist Kit Wei Zheng disagrees, saying the interest rate solution sounds better than it really is.

‘Interest rates can be effective in bringing down property price issues, but there are a lot more objectives than just bringing down property prices. CPI and GDP are still much more sensitive to exchange rates. So while the exchange rate may have lost some of its potency, it is still relevant.’

Mr Kit also wonders: ‘Had the exchange rate not been allowed to strengthen, would inflation be even higher now?’

Those in his camp have argued that the current low global interest rate environment will not last indefinitely.

At some stage, the advanced economies will recover and the major central banks will raise interest rates again. Singapore’s interest rates will then also rise, and mortgage loans will become more expensive. The current distortions will then be less of an issue.

Also, the structure of the economy has not changed fundamentally such that interest rate is now more important than the exchange rate when firms and households make their saving, spending, and investment decisions.

Mr Yeoh Lam Keong, vice-president of the Economic Society of Singapore, has a more radical idea.

He says that what Singapore might need is a bout of slow growth to ease the tightness in the labour market. Singapore’s unemployment rate is currently at a 14-year low of 2 per cent.

Mr Yeoh says: ‘Singapore appears to be caught in a classic wage-price spiral. And the classic policy recommendation is to raise the unemployment rate, above the inflationary unemployment rate, and that means a period of sub-par growth and could even mean a slip into recession.’

But it seems unlikely at this stage that the Government will overhaul its monetary policy regime, or take the politically unpalatable option of allowing unemployment to shoot up.

What is more likely is for the Government to ramp up supply where it can, so as to catch up with demand, and use targeted anti-inflationary tools, known as macro-prudential measures, to cool demand in specific sectors.

It is already doing so in housing. Since last year, it has ramped up its public housing building programme.

It has also rolled out several cooling measures, including a 10 per cent additional buyers’ stamp duty for foreigners buying homes.

And it is releasing more land for factory space, with the aim of moderating industrial rents.

However, when it comes to cars and manpower, supply-boosting measures are unlikely.

Singapore is in the midst of restructuring its economy to reduce its reliance on foreign labour. As measures to slow the inflow of foreign workers take effect, wages will go up. But productivity improvements that enable companies to produce more with fewer workers may take time to put in place.

This process will feed inflation but the Government is unlikely to reverse it for that reason.

Similarly for cars. To fight congestion, a decision has been taken to reduce the annual rate of growth of the vehicle population from 1.5 per cent to 0.5 per cent from August.

That could see COE prices – already at a 20-year high – soar past $100,000 in the next few months, warns Dr Chua.

Given current levels of inflation, he believes the Government should consider spreading out the reduction over a longer period.

‘Then at least some of the sharp increases we have seen in private transport hopefully won’t continue to spike upwards,’ he says.

Dr Chua also suggests that the Government consider relaxing its stance on how long an owner must occupy a Housing Board flat before renting it out.

‘Perversely some of the property measures in December may have contributed to foreigners stepping away from buying property, and supporting rental demand. That may mean rents will continue to face upward pressure,’ he says.

Mr Singh suggests that the Government come up with an inflation relief package to help Singaporeans offset the increase in prices.

Nominated MP Tan Su Shan is calling for more inflation-linked bonds in which retail investors can put their savings, to beat inflation without taking on too much risk.

Most experts predict that the rebalance in supply and demand will only come two to three years down the road. In other words, there could be some economic pain ahead before the country sees some relief from rising costs and prices.

‘The Government knows what to do to make things comfortable,’ Mr Singh says, adding: ‘Unfortunately it cannot happen overnight.’

chanckr@sph.com.sg

Additional reporting by Matthias Chew

PAYBACK FOR HIGH GROWTH

“A major reason for inflation is the payback for the factors that drove or were associated with the period of high growth in 2005 to 2010.”

Mr Manu Bhaskaran, economist and CEO of Centennial Asia Advisers

Source: The Straits Times © Singapore Press Holdings Ltd

ARMED with a sizeable war chest and backed up by one of the region’s wealthiest men, property veteran Pua Seck Guan now wants to play with the big boys in the Chinese property market.

About 70 per cent of his new real estate investment vehicle’s funds will be invested in China, with the other 30 per cent to be focused on Singapore, Mr Pua, 48, told The Straits Times.

Perennial Real Estate Holdings, as the firm is called, has a target capital size of $500 million.

The firm, which counts Wilmar chief executive and chairman Kuok Khoon Hong among its key investors, will target mixed-use projects near transport links in ‘good second-tier cities and potentially some first-tier cities’.

Each project is likely to cost a few hundred million dollars.

The developments are likely to have office or retail space as the major component and those with residential units will be considered, but with some caution.

Mr Pua, who left CapitaLand to set up his own firm in November 2009, declined to reveal what types of projects he will be looking at here, only stating that any project has to be something that ‘creates value’.

The firm’s rate of return is expected to be more than 15 per cent for projects in China, while those in Singapore are expected to get returns of 12 per cent to 15 per cent.

The company is already primed for the big league.

Its investor base is impressive, led by Mr Kuok, 62. The palm oil tycoon is the nephew of ‘sugar king’ Robert Kuok. Forbes magazine estimates that his net worth was $3.5 billion last year.

About $400 million of the new firm’s capital is cash that it can spend. Mr Pua notes that this gives it ‘firepower and, with leverage, we can do a fair bit’.

He also dismisses concerns that China might face a hard landing, but noted that the softening market and tighter capital controls provide opportunities to acquire projects at ‘attractive prices that would not be available in a very good market’.

‘Why would I bother whether the market goes down 10 or 20 per cent? That is irrelevant to me. You worry only if you are buying at market prices, but we are buying our projects at very attractive prices,’ he added in an interview last Friday.

He has had much experience roping in big-time investors to back his plans. Osim International founder Ron Sim joined in when Mr Pua acquired Chijmes.

His other projects here include Chinatown Point and the historic Capitol site.

But he is not overstretched, the former chief executive of CapitaLand Retail said, pointing out that he used to do a lot more.

His staff strength mirrors the rapid expansion of his business – Perennial Real Estate has grown from six staff members at the start to more than 50 now.

This time, he has set his sights farther afield, and in Mr Kuok, he seems to have found the ideal partner.

He said he first met Mr Kuok about two years ago at a casual dinner with a mutual friend. They met again in a meeting set up by bankers last June to discuss business opportunities and both found they were bullish on China.

‘I shared with him what we are doing and he understands the market. He knows that commercial properties (in China) are very underpriced, mainly because few people know how to and want to do it,’ added Mr Pua.

Mr Kuok has built up many contacts and relationships with government officials and business partners in China over the years, which can be tapped in areas like obtaining planning approvals or financing, Mr Pua said.

‘I pride myself in knowing how to do business in China, but he is a real master. He likes China and he enjoys dealing with the Chinese and very importantly… knows how to leverage on their strengths,’ he added.

Both businessmen meet every few weeks but Mr Pua said that the relationship is a long-term partnership based on trust.

‘He leaves it to me as to which project I want to pursue… I asked him if he wanted to second some of his people to me since he is investing a large sum of money, but he said no,’ he added.

Mr Kuok will hold a 49.5 per cent stake in the joint venture vehicle while Mr Pua will take 20 per cent. The rest will be held by other investors.

The joint venture vehicle will take a 49 per cent interest in Mr Pua’s company, Perennial Real Estate, while Mr Pua will keep 51 per cent.

Perennial Real Estate also has a 78 per cent interest in the trustee manager of mainboard-listed Perennial China Retail Trust (PCRT), a business trust holding shopping malls in China.

Mr Pua, who is executive chairman of Perennial Real Estate, said the deal also benefits the unit holders of PCRT as the newly established firm can also embark on joint ventures with the trust or pass a pipeline of malls to it.

esthert@sph.com.sg

MAKING GOOD BUSINESS SENSE

‘I shared with him what we are doing and he understands the market. He knows that commercial properties (in China) are very underpriced, mainly because few people know how to and want to do it.’

Mr Pua Seck Guan, on how he and Mr Kuok Khoon Hong were both bullish on China

Source: The Straits Times © Singapore Press Holdings Ltd.

OFFICE landlord CapitaCommercial Trust (CCT) posted a 3.4 per cent rise in first- quarter distributable income to $53.9 million, thanks to higher interest income and a slide in trust and interest expenses.

The increase came despite a fall in gross revenue for the period ended March 31.

This resulted in a distribution per unit to investors of 1.9 cents, up 3.3 per cent on the distribution per unit in the same quarter a year earlier.

Based on Thursday’s closing price of $1.245 per unit, CCT’s distribution yield works out to 6.1 per cent.

Gross revenue dipped by 3.9 per cent to $87.4 million as a result of a lower occupancy rate, as well as office rents that were signed being lower than expired rents.

However, the trust’s net property income was unchanged at $69.9 million as a result of lower property expenses.

CCT management team chairman Richard Hale said: ‘We are pleased with the trust’s performance in the first quarter of 2012 even in the midst of economic uncertainty. Having completed all refinancing for 2012, the trust’s balance sheet is further strengthened.’

Mr Hale pointed out that the acquisition of prime office building Twenty Anson, which was completed last month, will contribute income for a full quarter starting from the current second quarter this year.

He also noted the trust’s 40 per cent interest in CapitaGreen, an office tower being developed on the former Market Street carpark site, as a growth opportunity for CCT.

CapitaGreen broke ground in February this year and is expected to be completed by the fourth quarter of 2014.

Chief executive Lynette Leong noted that CCT had successfully refinanced a $570 million loan – that had been due on March 16 and secured on Capital Tower – with unsecured facilities from banks.

‘CCT’s gearing at 30.5 per cent is still at the low end of our target range, giving us good headroom for future investment opportunities,’ said Ms Leong.

Despite the trust’s positive growth, CCT reported that the near- to medium- term outlook remains highly uncertain.

It said in a statement: ‘While progress in sovereign debt negotiations and long-term refinancing operations carried out by the European Central Bank have helped to ease liquidity constraints, market confidence remains fragile.

‘As a result, the demand for office space is expected to remain subdued.’

CCT is managed by CapitaCommercial Trust Management, an indirect wholly owned subsidiary of real estate group CapitaLand.

Source: The Straits Times © Singapore Press Holdings Ltd.