Tag Archives: Developers

Property news spotlight

In today’s papers, some of the articles caught my eye. One is that of property stocks which were considered undervalued. The stocked mentioned includes Reits and real estate developers. These stocks in fact take up 2/3 of the undervalued stocks in Singapore. Some investment experts recommended to be selective in the current uncertain market moods, to choose selected offshore focused S-Reits (eg FCT, Keppel DC Reit and A-Reit) and developers (eg WingTai and UOL).  Other under valued property stocks (above $1B capitalisation) mentioned include OUE, Yanlord, Perennial, Ho Bee Land, Hongkong Land, Wheelock, United Engineers, Guocoland and others. It could be a opportunity to buy these stocks at a low but do note the risks involved.  It could also be a good chance to note the properties under these companies as one may be able to get a better bargain than usual.

On the real property aspect, Shunfu Ville at Bishan is going for another shot at the lull collective market, after failing to find a buyer at last year’s tender. The minimum price according to JLL is $688 m or $750psf ppr. Each owner could potentially bag $1.92m if the deal goes through. The intention to put back into the market may be boosted by the recent sale at Siglap GLS site which was sold at $624.18m.

Normanton Parka also did not attract any buyers despite some interest from 2 developers.  The reserve price is $840m or $605 psf ppr for the leasehold property site at Kent Ridge Park.

At Vivocity near Sentosa/Keppel area, MCT is embarking an asset enhancement initiative to strengthen its F&B offerings in a bid to further boost the mall’s appeal. MCT’s other assets includes Harbourfront, PSA building and Mapletree Anson. The occupancy rate for its overall portfolio is 98.4%.

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Poor new homes sales in Dec 2014

Developers sold just 230 private homes in the lull festive-cum-vacation month of December – down from the already-dismal 423 units moved the month before and marking a low not seen since early 2009 at the tail end of the global financial crisis.

One reason for the poor sales stemmed from developers holding back launches and scaling back their marketing efforts, preferring to strategise for 2015 instead. As a result, a measly 53 units were released in the primary market, 94 per cent fewer than the 863 units launched in November.

The other reason, of course, was the continued weak market sentiment; buyers were waiting on the sidelines for better price offers from developers and more attractive project launches, said Knight Frank’s head of Singapore research Alice Tan.

Actually, going by a year-on-year comparison, December 2014’s new home sales was on par with the 259 units sold the year before, figures released by the Urban Redevelopment Authority on Thursday indicated.

December’s figures brought the full-year tally to about 7,380 homes sold and 7,750 units launched; this was half the 14,950 units sold and 16,040 units launched in 2013 – and a sign of the sustained impact of the property-cooling measures and loan curbs.

These figures exclude executive condos (ECs), a public-private housing hybrid. Including ECs, however, developers sold 406 units last month, less than a third of the 1,278 units sold in November. But November’s relatively high number came because a throng of three ECs (Bellewoods, Bellewaters and Lake Life) were launched that month, compared with just one (The Terrace) launched in December.

Including ECs, a total of about 8,960 units were sold in 2014, out of the 10,260 units launched.

About 2,500 EC units were launched last year, after a long drought induced by the 15-month period imposed on developers before they can put units on sale.

This year, analysts are expecting developer sales of 7,000 to 10,000 units. Prices of private homes are forecast to drop by 5 to 8 per cent after a full-year decline of 4 per cent in 2014.

OSK-DMG analyst Ong Kian Lin sketched out what he called a continuing “three-party catch-22 situation” among home buyers, developers and the authorities: “Home buyers are holding back in anticipation of a surge in physical completions in 2015 to 2016 and prospective price declines. Developers are dragging launches, with an eye on the government stepping in to reverse some of its anti-speculation measures.

“From the authorities’ perspective, without a significant drop in property prices, it will be difficult to justify easing the cooling measures; prices are only slightly off – down 4.9 per cent – from their peak in Q3 2013.” (At the Q3 2013 peak, prices were 62.3 per cent up from the market trough in Q2 2009.)

Mohamed Ismail, chief executive of PropNex, said much will still depend on developers finding the right pricing strategy to match the current sentiment.

Ong Teck Hui, national research director at JLL, said the property market may improve in 2015 as buyers attempt to time their purchases with the government’s easing of measures:

“Many see 2016 as a possibility, perhaps even late 2015, by which time prices are likely to have corrected by more than 10 per cent. This could result in more buyers re-entering the market in the later part of the year, enticed by lower prices and before measures are eased.”

UBS Asia-Pacific investment office head Tan Min Lan believes that easing may come only in 2016, when prices have fallen by a cumulative 15 per cent after “manageable” price declines over three years.

She told reporters on the sidelines of the bank’s annual investment conference: “At the same time, nominal wages have started to pick up, so your price-to-income ratio would have gotten back to a more sustainable trajectory.”

Chia Siew Chuin, director of research and advisory at Colliers, added that last year’s moderation in transaction volume and prices are better aligned with the slower rate of economic growth of 2.8 per cent in 2014. “This is an indication that the market is being steered from a state of excess exuberance in the not-so-distant past towards greater stability and sustainability.”

Developer sales are expected to pick up, with upcoming launches of highly-anticipated, large projects such as Sims Urban Oasis and NorthPark Residences in the first quarter.

http://business.asiaone.com/news/poor-new-home-sales-december-sum-placid-2014-market

Hiap Hoe snaps up unsold condo units

TWO bulk purchases of units on the top floors of Skyline 360° at St Thomas Walk and Signature at Lewis condominiums have raised eyebrows over the basement pricing – and the fact that the developer itself has bought them.

Listed developer Hiap Hoe swept up remaining units at both luxury developments through a wholly-owned company last month, disclosures filed with the Singapore Exchange showed.

Units on the highest floors of a project almost always command a premium, yet the pricing is lowest for any level in the projects.

HH Residences, a unit set up in April, had snapped up five units at the 61-unit Skyline 360º condo in River Valley for $35 million from Bukit Panjang Plaza, another Hiap Hoe subsidiary.

This works out to $1,574 per sq ft (psf) based on a total area of 22,238 sq ft – well below the low pricing of $1,630 psf for a 2,131 sq ft unit sold in August 2009, caveats lodged with the Urban Redevelopment Authority showed.

A 4,015 sq ft penthouse unit on the 35th floor had set a record high for the condo in April 2012 when it sold for $10.07 million – or $2,508 psf. The units in the bulk deal were a 6,523 sq ft “super penthouse” on the 36th floor and four other 3,929 sq ft penthouses on the 31st to 34th floors.

HH Residences also picked up two penthouses on the 12th and highest floors of a smaller freehold project, Signature at Lewis, in Lewis Road. The units were bought for $7 million – or $1,071 psf – from another Hiap Hoe unit, Guan Hoe Development. One unit is 3,444 sq ft while the other is 3,068 sq ft.

The pricing falls below the lowest price of $1,227 psf set in January 2010, for a 1,841 sq ft unit.

Hiap Hoe told SGX the acquisition was “in connection with an internal restructuring exercise” but declined to elaborate when contacted by The Straits Times.

Penthouse units, particularly those in the posh districts, have lost their shine.

Buyers have shied away from the sizeable price tags that come with the large units given stringent mortgage rules and the additional buyers’ stamp duty (ABSD).

Market watchers said that while such deals are not unprecedented among local developers, it is not a common practice either.

Developers that have made similar moves include City Developments, which bought 44 units at Cliveden at Grange from joint-venture partner Wachovia for $2,956 psf on average in December 2012 – a discount of about 20 per cent from what Wachovia paid in 2007.

A recent bulk deal for 12 apartments at Grange Infinite, another luxury condominium in the city centre, was made at an average of about $2,100 psf.

The sale included 11 four-bedders ranging from 2,560 sq ft to 2,700 sq ft and a penthouse of 6,039 sq ft.

An ABSD of 15 per cent was likely to be levied on the bulk deals, so experts said that could have resulted in a smaller net discount for Hiap Hoe. Also, the discounts might not lead to lower stamp duties, which are typically based on property valuations, but they would still lower the overall cost of buying the units.

Skyline 360º got its temporary occupation permit on Sept 28, 2012, while Signature at Lewis was completed on Oct 3, 2011, said Hiap Hoe. Fines are imposed if a developer fails to sell all the apartments in a project within two years of completion, under Qualifying Certificate rules.

However, Mr Donald Han, managing director of Chestertons, pointed out that it is within reason and a routine practice for developers to offer discounts for large units and bulk purchases, especially in a falling market where few are willing to stump up huge sums of cash.

“It makes sense to apply the same discount for bulk deals to a related party,” he said

Developers’ pessimism deepens in Q2 Rising construction costs, inflation, interest rates seen roiling market

http://www.businesstimes.com.sg/premium/singapore/developers-pessimism-deepens-q2-20140723

DEVELOPERS are more pessimistic about the property market in the coming six months, citing rising cost of construction, inflation, and interest rates as factors that will likely have an adverse impact on market conditions.

The NUS-Redas Real Estate Sentiment Index Survey’s Future Sentiment Index – which measures sentiments towards the market outlook over the next six months – fell to 3.4 in Q2 compared with 3.9 in Q1.

A score under five indicates deteriorating market conditions while scores above five indicate improving conditions.

Meanwhile, the Current Sentiment Index slipped marginally, from 3.7 in the last quarter to 3.6.

Taken on a year-on-year basis, the Composite Sentiment Index (which measures overall sentiment) was weaker at 3.5 in Q2 compared to 4.5 previously.

Looking ahead into the next six months, the key potential risks are rising inflation/interest rates as identified by 75.4 per cent of respondents and rising cost of construction (63.1 per cent).

Equally worrying is the excessive supply of new property launches and a slowdown in the global economy, which were identified by 53.8 per cent of respondents.

However, 31.7 per cent of developers surveyed said that they expect moderately more residential launches in the coming six months, while 29.3 per cent said that they expect residential launches to hold at the same level.

In terms of unit price change, 26.8 per cent of them anticipate that residential prices will hold in the next six months, up from 26.3 per cent in the previous quarter. Majority of developers still expect unit prices to be moderately less (63.4 per cent compared with 64.8 per cent previously).

Of the various property sectors, prime and suburban residential sectors were the worst performing segments according to the survey.

The prime residential sector showed a current net balance of -72 per cent and a future net balance of -69 per cent; while the suburban residential sector showed a current net balance of -63 per cent and a future net balance of -65 per cent in Q2.

The current and future net balance percentage is defined as the difference between the proportion of respondents who have selected positive options and the proportion who selected negative options.

On the flipside, office was the best performing sector, with a current net balance of +41 per cent and a future net balance of +32 per cent.

In light of the high transaction cost and high property prices, 77.8 per cent of respondents said there will likely be strong outflows of investments into overseas real state markets in the coming 12 months.

These markets include the United Kingdom, Australia, and Malaysia.

Developers negotiate price cuts in Singapore and China

http://www.property-report.com/developers-negotiate-price-cuts-in-singapore-and-china-35219

Ying Yi Chua for The Wall Street Journal

Chinese and Singaporean developers are contemplating bigger price cuts in an effort to attract more homebuyers as domestic residential markets start to cool down.

In China, where home sales reached a recording-setting USD1.31 trillion last year, there is an increasing concern from developers to meet sales targets as many companies only achieved less than 30 percent of their sales projections to date, according to Reuters.

“The market is very weak now, price cuts and promotions are very normal,” Simon Fung, chief financial officer of Greentown China, told Reuters. Fung’s company last week distributed cash coupons to existing clients who are looking to buy a new home.

A number of China-based developers have also started offering free renovation or free parking space packages to lure new investors in a move that is expected to continue throughout the third quarter.

The secondary home market in Hong Kong, which reported a sluggish first quarter in the luxury residential segment, was also slow-moving last week, The Hong Kong Standard reported. Several developers slashed prices over the weekend to attract more buyers, including Sino Land, which drew some 15,000 enquiring buyers in its Mayfair by the Sea I development, where units are being sold at about 20 percent lower than market rates.

In Singapore, where sales of luxury condominiums dropped by more than 60 percent in Q1 2014, year-on-year, based on data provided by property consultancy DTZ, some developers are still undecided if they would be willing to offer discounts or special promotions.

“Buyers are becoming more discerning with their purchases and are quite price-sensitive,” Chua Yang Liang, head of research at JLL Singapore, told The Wall Street Journal. A spokesperson at CapitaLand declined to comment on specific price changes in its Zaha Hadid Architects-designed d’Leedon development, whilst GuocoLand announced that there had been no price cuts in its Soo K. Chan-designed Leedon Residence property at this time.

Meanwhile, one high-end developer, Ho Bee Land, reportedly decided to rent out some units in its Sentosa development rather than pursue selling them in order to maximise profit in this investment climate, CIMB Bank analyst Tan Xuan was quoted in Singapore Business Review last April.

– See more at: http://www.property-report.com/developers-negotiate-price-cuts-in-singapore-and-china-35219#sthash.r3qmzHJO.dpuf

Ying Yi Chua for The Wall Street Journal

Chinese and Singaporean developers are contemplating bigger price cuts in an effort to attract more homebuyers as domestic residential markets start to cool down.

In China, where home sales reached a recording-setting USD1.31 trillion last year, there is an increasing concern from developers to meet sales targets as many companies only achieved less than 30 percent of their sales projections to date, according to Reuters.

“The market is very weak now, price cuts and promotions are very normal,” Simon Fung, chief financial officer of Greentown China, told Reuters. Fung’s company last week distributed cash coupons to existing clients who are looking to buy a new home.

A number of China-based developers have also started offering free renovation or free parking space packages to lure new investors in a move that is expected to continue throughout the third quarter.

The secondary home market in Hong Kong, which reported a sluggish first quarter in the luxury residential segment, was also slow-moving last week, The Hong Kong Standard reported. Several developers slashed prices over the weekend to attract more buyers, including Sino Land, which drew some 15,000 enquiring buyers in its Mayfair by the Sea I development, where units are being sold at about 20 percent lower than market rates.

In Singapore, where sales of luxury condominiums dropped by more than 60 percent in Q1 2014, year-on-year, based on data provided by property consultancy DTZ, some developers are still undecided if they would be willing to offer discounts or special promotions.

“Buyers are becoming more discerning with their purchases and are quite price-sensitive,” Chua Yang Liang, head of research at JLL Singapore, told The Wall Street Journal. A spokesperson at CapitaLand declined to comment on specific price changes in its Zaha Hadid Architects-designed d’Leedon development, whilst GuocoLand announced that there had been no price cuts in its Soo K. Chan-designed Leedon Residence property at this time.

Meanwhile, one high-end developer, Ho Bee Land, reportedly decided to rent out some units in its Sentosa development rather than pursue selling them in order to maximise profit in this investment climate, CIMB Bank analyst Tan Xuan was quoted in Singapore Business Review last April.

– See more at: http://www.property-report.com/developers-negotiate-price-cuts-in-singapore-and-china-35219#sthash.r3qmzHJO.dpuf

Ying Yi Chua for The Wall Street Journal

Chinese and Singaporean developers are contemplating bigger price cuts in an effort to attract more homebuyers as domestic residential markets start to cool down.

In China, where home sales reached a recording-setting USD1.31 trillion last year, there is an increasing concern from developers to meet sales targets as many companies only achieved less than 30 percent of their sales projections to date, according to Reuters.

“The market is very weak now, price cuts and promotions are very normal,” Simon Fung, chief financial officer of Greentown China, told Reuters. Fung’s company last week distributed cash coupons to existing clients who are looking to buy a new home.

A number of China-based developers have also started offering free renovation or free parking space packages to lure new investors in a move that is expected to continue throughout the third quarter.

The secondary home market in Hong Kong, which reported a sluggish first quarter in the luxury residential segment, was also slow-moving last week, The Hong Kong Standard reported. Several developers slashed prices over the weekend to attract more buyers, including Sino Land, which drew some 15,000 enquiring buyers in its Mayfair by the Sea I development, where units are being sold at about 20 percent lower than market rates.

In Singapore, where sales of luxury condominiums dropped by more than 60 percent in Q1 2014, year-on-year, based on data provided by property consultancy DTZ, some developers are still undecided if they would be willing to offer discounts or special promotions.

“Buyers are becoming more discerning with their purchases and are quite price-sensitive,” Chua Yang Liang, head of research at JLL Singapore, told The Wall Street Journal. A spokesperson at CapitaLand declined to comment on specific price changes in its Zaha Hadid Architects-designed d’Leedon development, whilst GuocoLand announced that there had been no price cuts in its Soo K. Chan-designed Leedon Residence property at this time.

Meanwhile, one high-end developer, Ho Bee Land, reportedly decided to rent out some units in its Sentosa development rather than pursue selling them in order to maximise profit in this investment climate, CIMB Bank analyst Tan Xuan was quoted in Singapore Business Review last April.

– See more at: http://www.property-report.com/developers-negotiate-price-cuts-in-singapore-and-china-35219#sthash.r3qmzHJO.dpuf

Is it time to review the cooling measures?

According to an article in BT this month, property developers have collectively paid up to $55.1 million in extension fees for unsold units in their private condo projects since 2012. They could potentially fork out another $80.7 million to extend the sales period for another year if they do not sell their inventory by year-end,

24 condo projects, consisting primarily high-end ones, are still not fully sold two years after receiving their temporary occupation permits (TOPs) between 2010 and 2012, the study showed.

“Foreign developers” under the Residential Property Act (RPA) —  developers with non-Singaporean shareholders or directors — need to obtain QCs to buy private land for new projects. Thus the QC rules apply to all listed developers. Few developers exempted from the rules include privately owned Far East Organization and Hoi Hup.

As QCs allow developers up to five years to finish building a project and two more years to sell all the units, the heat is on developers to clear their stock by the deadline.

To extend the sales period, developers pay 8 per cent of the land purchase price for the first year of extension, 16 per cent for the second year and 24 per cent from the third year onwards. The charges are pro-rated based on unsold units over the total units in the project.

Such fees drove luxury residential player SC Global to delist from the Singapore Exchange last year after sales slowed significantly due to the government’s property cooling measures.

Analysts warn that more extension charges will kick in. The charges paid up so far are just the tip of the iceberg as projects built from land acquired during the 2006-2007 en bloc fever have just crossed a seven-year mark, they say.

“More developers are caught between a rock and a hard place” as they have to decide whether to pay the extension charges or cut prices to move the units, said SLP International executive director Nicholas Mak.

If they pay for extension charges, there is also the question of whether they can recover these costs later on, he said. This is why some developers of luxury projects are resorting to selling the units in bulk to mega investors.

OrangeTee’s study of the 24 projects excluded three projects whose land costs could not be determined. It tracked sales of projects through caveats lodged, which it conceded could be lower than actual sales.

At the end of the first quarter of this year, there were 10,295 unsold units in the Core Central Region (CCR), 8,089 in the Rest of Central Region (RCR) and 12,433 in the Outside Central Region (OCR).

Based on URA caveats, there are 71 unsold units in Wheelock Properties’ Scotts Square that TOP-ed in 2011 and 16 unsold units in Wing Tai’s Helios Residences, which also TOP-ed in the same year.

“As unsold inventory builds up, there will likely be more bargains in the market if developers want to avoid paying penalties to extend the sales period, especially high-end developers who have already paid premium prices for their lands,” Ms Li said.

The study excluded the fees that developers need to pay to extend the completion of projects beyond five years, as they can typically extend without paying the charges “based on technicalities”.

Even in a more optimistic scenario where developers manage to sell 20 per cent of the remaining units for the rest of this year, further extension charges to be paid by developers by end-2014 will amount to around $68.3 million.

Some market watchers noted that the QC rules should mark a distinction between larger and smaller projects, given that it takes a longer time to move all the units in large projects in a difficult market as the current one.

Century21 chief executive officer Ku Swee Yong said that demand for high-end projects had been hit hardest by higher additional buyers’ stamp duty (ABSD) since January 2013 and a borrowing cap under the total debt servicing ratio (TDSR) since June last year.

Even if a developer decides to set up an investment company to buy the units and rent them out, the company could be hit by a 15 per cent ABSD and is restricted by a loan-to-value limit of 20 per cent.

While there is good reason for having QC rules to regulate foreign participation in the housing market, these rules were in place before the ABSD and TDSR. “It is about time we review these measures,” Mr Ku said.

http://www.btinvest.com.sg/dailyfree/unsold-homes-big-drag-developers-coffers-20140607/