URA figures ease fears of housing glut

 

Only 8,538 new private homes to be ready in 2010 – down from 11,788 in 2nd-quarter forecast

WORRIES about an oversupply of private homes are receding after the release of government figures that, for the first time, offer a detailed geographical breakdown of new homes in the pipeline.

It was the second straight quarter that the Urban Redevelopment Authority (URA) had lowered its forecast of home completions for 2010 and beyond.

The URA now expects only 8,538 homes to be ready in 2010 – down substantially from the 11,788 homes that it had forecast in the second quarter. Earlier, in the first quarter, it had forecast a whopping 17,545 homes.

In all, its forecast for the number of uncompleted homes in the pipeline dropped to 67,463 units in the third quarter, from 71,643 units in the second and 74,208 units in the first.

The lower supply figures would ease downward pressure on rentals, said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.

Earlier, concerns were building as the supply numbers remained high even as the market slowed considerably this year and the financial turmoil raged on.

The URA now expects to see 16,145 private homes completed in 2011, down from 19,559 in the second quarter.

And home completions in 2012 and beyond 2012 are now at 16,742 units and 13,565 units respectively, compared with 14,179 and 10,826 previously.

Savills Singapore’s director of business development and marketing, Mr Ku Swee Yong, said the lower URA completion figures are a result of developers deferring projects due to the slow take-up rates of new homes and high construction costs.

The delays in completion dates were expected, given insufficient construction resources, completion delays in collective sales and delayed launches, he said.

Since the market turned quiet at the start of the year, many developers have delayed launches.

In the first nine months of this year, developers launched 5,401 private homes for sale – just 44 per cent of the total launches in the same period last year, said Knight Frank.

In the same period, they sold a total of 3,845 private homes, which is only 29 per cent of the sale figures in the corresponding period last year.

Yesterday, for the first time, URA released more detailed pipeline supply data, breaking down supply by the three main regions and expected year of completion. The Straits Times proposed such a breakdown in a commentary last month.

The URA made this information available separately on its website.

The data showed that there is a pipeline supply of 23,008 private homes in the core central region which includes districts 9, 10 and 11, down from 24,582 in the second quarter.

Supply in city-fringe areas such as Bukit Timah, Newton and Toa Payoh, rose to 19,736, from 19,053 in the second quarter.

As for the suburban areas, the pipeline supply fell slightly to 23,678 units, from 23,934 in the previous quarter.

According to the new URA data, just 733 homes in the core central region would be ready this year, down from the 2,363 expected in the second quarter.

While the drop next year is not dramatic, considerably fewer high-end homes will come to market from 2010 onwards.

Coming up

Number of private homes expected to be completed:
In 2008: 2,440
In 2009: 10,033
In 2010: 8,538
In 2011: 16,145
In 2012: 16,742
After 2012: 13,565
Total 67,463
SOURCE: URA

Straits Times – 25 Apr 2008

Private property prices, rents fall

 

URA’s private-home price index down 2.4% in Q3; industrial property prices, rents make gains

OFFICIAL data released yesterday confirmed that the private property market has started sliding backwards, while analysts tried to work out how much of its recent gains it would eventually give up.

Price and rental indices for private homes, offices and shops fell in Q3 over the preceding quarter – for the first time since the market bottomed in 2004. Industrial property prices and rents still managed to register quarter-on-quarter gains in Q3, albeit at a slower pace than the increases reported in Q2.

Urban Redevelopment Authority’s (URA) price index for private homes declined 2.4 per cent in Q3 over the preceding quarter, more pronounced than the 1.8 per cent drop indicated in a flash estimate earlier this month.

The Q3 private-home price index is still 8.3 per cent higher than a year ago, leading some analysts such as JPMorgan’s Chris Gee to say the official price indices are lagging market expectations. ‘If you wanted to close a condo sale today, you’d expect the price to be around 20-30 per cent lower than last year’s peak.’

Between the trough in Q1 2004 and the peak in Q2 this year, URA’s price indices appreciated 68 per cent for offices, 58 per cent for private homes and 39 per cent for shop space. The question is how much of these gains will be surrendered during this downcycle and how long the slump will last.

The optimistic view is that about half the gains could be lost in a downcycle lasting until end-2009.

Some pessimists suggest the downturn will drag for around two to three years, and see prices easing back to the previous trough, that is, all the gains will be lost. ‘Although the Singapore economy is much broader-based today than a few years ago, financial services was a key driver of recent economic growth and had a disproportionate impact on the high-end residential and prime office markets. So if the financial industry tanks, the impact will be greater on these two property segments,’ said an analyst with a US bank.

A property industry veteran said: ‘This property slump will be much worse than the one during the Asian financial crisis; this time, we have a global crisis. We still don’t know what the entire suite of knock-on effects will be. Right now, it’s consumers lacking confidence. Failures may come from many other sources, some of which will be unexpected. The downtrend has begun and is not expected to reverse any time soon.’

URA’s data showed that developers sold 1,558 private homes in Q3, up 2.2 per cent from 1,525 units in Q2. The 3,845 private homes developers sold in the first nine months of this year are about a quarter of the 14,811 units they sold for the whole of last year.

A property analyst pointed out that an even more alarming trend was the decline in resale transactions of private homes, which have slipped from a high of 7,776 units in Q2 2007 to 1,974 units in Q3 this year.

‘Resale transactions are sometimes seen as a proxy for the level of genuine demand, whereas the primary market tends to attract more investment/speculative demand and the subsale market is an even more direct proxy for the level of speculation,’ the property analyst from the US bank said.

The number of private-home subsales islandwide fell 10.8 per cent quarter on quarter to 462 in Q3. Subsales accounted for 11.6 per cent of total private housing transactions in Q3, down from a 12 per cent share in Q2.

In the Core Central Region, subsales made up 24.1 per cent of total transactions in Q3, an increase from a 22 per cent share in Q3. The rising subsale share in the region was on the back of a 29 per cent drop in developer sales in Q3.

Meanwhile, URA’s Q3 price indices for non-landed private homes fell 2.7 per cent quarter on quarter in Core Central Region, 2.4 per cent in Rest of Central Region and 1.5 per cent in Outside Central Region (OCR).

The official price indices for office and shop space declined 3.9 per cent and 0.3 per cent respectively in Q3. The all-industrial property price index rose 0.9 per cent.

The public housing market continued to buzz, with Housing & Development Board’s resale flat price index rising 4.2 per cent quarter on quarter in Q3.

Colliers International director Tay Huey Ying said that developers’ sales failing to keep pace with launches led to a surge in the stock of launched but unsold private homes in uncompleted projects to 3,570 units in Q3, almost 30 per cent higher than Q2’s 2,755 units and more than double the recent low of 1,658 units in Q2 2007.

Knight Frank director Nicholas Mak expects the decline in private home prices and rentals to persist. ‘With the slowdown in the private residential market, it is anticipated that developers could sell between 4,900 and 5,400 units in 2008, which would be only about one-third of the primary market sales last year,’ he added.

Business Times – 25 Apr 2008

MM Lee Kuan Yew sees 3-5% Asia growth as world recovers

 

China and India’s growth momentum may spill over to the rest of Asia in the next three to five years

DRIVEN by China and India, Asia will still see annual growth of 3-5 per cent as the world economy recovers in the next three to five years, says Minister Mentor Lee Kuan Yew.

‘It (the 3 per cent to 5 per cent growth) isn’t bad in this condition,’ he said yesterday at the Singapore Human Capital Summit conference.

Employers should use the down-time to build up the skills and knowledge of their workers for the upturn in the economy, he said. ‘You’ve got to be optimistic and realistic enough that this will recover – when? I don’t know.’

The government will push on with the continuing education and training of workers, Mr Lee said.

In the absence of ‘malfunctioning’ in the banking system, he sees the global economy restored – in an upbeat scenario – in 3-5 years to the growth path it was on before it was derailed by the financial crisis.

Asia excluding China and India will, meanwhile, do better than other regions, as it continues to post economic growth of 3-5 per cent a year.

The International Monetary Fund’s growth forecast is 5-6 per cent, but that includes China and India.

According to Mr Lee, while growth in China and India may ease, the two economies are large enough to have growth momentum of their own, with spillovers for the rest of Asia.

While China and India offer Singapore growth opportunities, Mr Lee said they also pose a big challenge to it.

‘We have to decide where is our future, assuming China and India will (continue to) grow,’ he said. ‘We have to accept that what we do they will do as well, if not better.’

So what is it that Singapore can do that China or India cannot do, at least in the next 20-30 years?

Singapore’s comparative advantage over China and India is its system, Mr Lee said. ‘They can have the individuals to catch up with us but they can’t catch up with our system so easily.’

In particular, he cited Singapore’s system of laws and fair play, its meritocracy and patent laws.

He also said that in a globalised world of greater mobility and competition, the ability to attract and retain talent is the key to economic success.

Singapore has won and lost talent, but its important that it ‘wins more than it loses’, he said. ‘Without foreign talent, Singapore would not be where it is today.’

The US has also done well because of foreign talent, Mr Lee noted. But the issue of foreign talent is politically dicey and political leaders must convince their electorate ‘why you need foreign talent to give that extra boost’.

Business Times – 25 Oct 2008

Singapore gets top marks in UN World’s Cities Report

 

The United Nations (UN) gave Singapore top marks in its latest report on the state of the world’s cities, and has said it is keen to deepen its collaboration with Singapore as a knowledge hub.

The UN also called on cities to take on pro-growth policies that support the poor and strengthen infrastructure. It said all these can make a difference when it comes to sustainable living.

The UN said people’s consumption and lifestyle patterns, and not urbanization, are to blame for climate change. To solve the problem, cities need to use less fossil fuel, maximise recycling and have a well-planned transport network.

Singapore, which set up an inter-ministerial committee on sustainable development in February, has been highlighted for its low per capita car ownership.

With its greening policy, Singapore has also been singled out as a country that absorbs more carbon dioxide than it emits. Another achievement is that Singapore is the only country with no slums.

Director of Monitoring and Research at UN-HABITAT, Banji Oyelaran-Oyeyinka, said: “Obviously, (the) government has taken pro-active steps over a long period of time because it has to be sustained.

“One of the problems you find in most countries is they actually start well, but you need constant investment, sustained effort (and) visionary leadership to sustain those kinds of actions.”

The latest UN report by UN-HABITAT, the agency working to boost the liveability of cities, studied 245 cities. The report is a lead-up to the UN World Urban Forum in Nanjing, China in November.

It noted another worrying concern of rising sea levels, and Southeast Asia in particular is at the highest risk due to its low elevation.

Singapore has said in parliament in September that it has taken measures in terms of building requirements on reclaimed land and drainage infrastructure. A two-year study to understand the specific implications of climate change, including rising sea levels, is also expected to be ready in 2009.

Director of Centre for Liveable Cities, Andrew Tan, said: “Moving forward, I would say that having achieved the level of environmental quality we have in Singapore, there is still a need for us to maintain these efforts.

“It’s necessary for Singaporeans to be proud of what they have achieved, but at the same time, to know that sustained efforts is required.”

The UN has lauded the 43-year-old city state as a model city. However, experts cautioned that as all cities progress, they will no longer be measured just by their level of economic, social and environmental progress.

Cities like Singapore will also have to look at its inclusiveness and its quality of life. Related to this, the report said cultural assets too should be protected to nurture the soul of the city.

Channel NewsAsia – 24 Oct 2008

Lower profits for property developers expected

 

They may have to write down their assets and make provisions

HURT by slowing sales, increasing difficulty in obtaining credit and under pressure to cut home prices, most developers here are expected to announce lower earnings during the current reporting season.

Analysts do not have high hopes for the property sector.

‘We can expect to see some drop-off (in earnings) as the rate of launches has fallen off compared to 12 months ago,’ said Kim Eng Research analyst Wilson Liew. Keppel Land will report its earnings today.

On Friday last week, GuocoLand, which has been dogged by negative news all year, reported a net loss of $2.8 million for its first quarter ended Sept 30, compared with a net profit of $27.7 million a year earlier.

It attributed the poor result mainly to an unrealised mark-to-market foreign exchange loss.

The chief concern now is that tighter credit and declining capital values in all sectors may force companies to write down their assets and make provisions for land acquired at high prices.

This happened during the crises of 1998 and 2001.

DBS Vickers analyst Adrian Chua, who recently downgraded six property stocks including CapitaLand, City Developments and Ho Bee Investment, said asset devaluation is a concern.

Deutsche Bank analysts Gregory Lui and Elaine Khoo similarly expect continued earnings downgrades on weak sales and average selling prices (ASPs) and the risk of provisions.

‘We believe CapitaLand and Allgreen face greater risk of land bank provisions this time around, followed by Wing Tai and City Developments,’ the analysts said.

‘Keppel Land has not bought anything in Singapore over the past two years, but offshore investments might be riskier.’

All developers except City Developments, which reflects investment properties at cost, also face the risk of revaluation losses against investment properties, analysts have said.

Another area of concern is overseas exposure, which could affect top lines. At GuocoLand, for example, group revenue fell 20 per cent to $153.1 million from a year ago due mainly to lower revenue recognised from development projects in China.

Analysts are split on the effect of weak property markets abroad.

Some say this will lead to falls in revenue, while others believe fundamentally sound developers are now being punished by investors for going overseas.

In an Oct 16 report, Goldman Sachs acknowledged that the real estate market outlook is deteriorating at home and overseas – in markets such as China and Vietnam – for Singapore developers.

‘However, we think the market has been too punitive on well-capitalised players with strong overseas operational track records such as CapitaLand and Keppel Land,’ said analysts Leslie Yee and Paul Lian.

Business Times – 22 Oct 2008

Property sub-sales net $95 million profits

 

Third-quarter showing still strong but market will soften soon: Experts

PRIVATE home prices may have slid in the third quarter but the sub-sale market was still going strong.

Ninety-six per cent of owners who resold an uncompleted home between July and last month pocketed profits from the deals, according to new data by property consultancy Savills Singapore.

These transactions, officially known as sub-sales, occur when you buy a home and resell it before it is built. They are used as a proxy for property speculation because the owner resells the home without ever living in it.

Only 12 sub-sale transactions out of the 306 that Savills analysed in the quarter incurred a loss, amounting to just under $1 million of red ink. The rest made a total of $95.1 million in gains, Savills said.

This continues the trend in the first half of the year, when 97 per cent of such deals turned in profits. But the profits seen in the third quarter were considerably narrower as home prices started softening more quickly.

Profitable sub-sellers made an average of $323,420 in the third quarter, but this was skewed upwards by a single large deal: a whopping $6.7 million profit from the sale of a 63rd-storey penthouse at The Sail @ Marina Bay.

Excluding this sale, the average gain was $301,784 – almost 40 per cent lower than the average gain in the first half of the year. It works out to an average profit for each seller of about 30 per cent over the purchase price.

Still, ‘to be able to achieve such gains in a year when the property market has gone into a standstill is highly commendable’, said Mr Ku Swee Yong, director of business development and marketing at Savills Singapore.

But in case would-be speculators become tempted by these gains, other consultants noted that the bulk of these deals probably occurred before the Sept 14 collapse of United States investment bank Lehman Brothers, which caused the financial crisis to take a sudden turn for the worse.

‘The real estate market typically lags behind the stock market by six months or more, so we will probably start to see the real effect early next year,’ said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

‘These profitable sub-sale transactions took place before the market hit the skids. It is extremely risky to go and speculate in the market right now.’

Most sellers who made a profit in the third quarter had originally bought their units in the last two years and benefited from the sharp run-up in prices in the period, said Mr Ku. While values have weakened somewhat this year, they are still generally higher than in 2006.

Sellers who held on to their units for a longer time before reselling them in the third quarter made more gains, Savills’ data showed. Even those who had bought a unit as late as this year and offloaded it in the third quarter made an average gain of $98,600.

If they had sold the unit in the first half of the year, however, they would probably have doubled their gain.

The biggest profits of more than $1 million each were for units at The Sail @ Marina Bay, St Regis Residences and Cairnhill Residences.

On the flip side, sub-sale losses for the quarter averaged $76,820 for each loss-making deal. A unit at Watermark Robertson Quay chalked up the biggest loss of $207,552, while units at Soleil @ Sinaran, 8 @ Mt Sophia and One Amber were also sold at losses of more than $100,000 each.

All the losses were for units that had been bought last year or this year, according to Savills’ data. Sub-sellers who had bought their units at the peak of property fever, between June and September last year, bled the most.

‘In any case, there are always desperate sale cases even during good times,’ Mr Ku noted.

The Sail @ Marina Bay had the largest number of sub-sales in the quarter – 19 – with each deal netting its seller an average profit of $1.1 million. There was one loss, of $62,890, for a second-floor unit.

Other projects with more than 10 sub-sales included Parc Emily in Dhoby Ghaut, Park Infinia at Wee Nam, Riveredge in Tanjong Rhu and The Esta in Marine Parade.

But the profits were not just confined to developments in the prime districts.

At Casa Merah in Tanah Merah, 10 sub-sales yielded an average profit of $100,351, while Atrium Residences in Geylang saw four sub-sales with an average gain of $54,556.

Straits Times – 22 Oct 2008

Construction demand set to fall: Mah

 

Govt may inject public projects that have been deferred if need arises, but care over timing essential

THE construction sector here must be prepared to face tough and challenging times ahead as demand is expected to decline, said Minister for National Development Mah Bow Tan yesterday.

‘The construction sector will also not be spared the turmoil of the financial markets and weakening economic climate,’ said Mr Mah, who was speaking at the Singapore Contractors Association Limited (Scal) anniversary dinner last night. ‘While the domestic construction demand this year is estimated to reach between $27 billion and $32 billion, it is expected to decline as we go forward.’

Mr Mah also said that industry regulator Building & Construction Authority (BCA) has been monitoring the industry situation closely. ‘From the feedback BCA has gathered from developers, contractors and professionals in recent weeks, we have not seen any disruption or slowing down of work progress due to the crisis so far,’ he said. ‘Progress payments of projects have remained prompt and stable.’

Mr Mah’s assurances come as the industry has been hit by negative news, with several projects being pushed back due to high construction costs and a resources squeeze.

In view of the expected economic downturn, there have been suggestions that the government should inject some $4.7 billion worth of public projects that had been deferred earlier to ease demand. Such measures have been adopted in previous economic crises.

In response to this, Mr Mah said that the government will certainly do that if the need arises. However, the timing must be considered carefully, he said: ‘Doing so now, when the availability of skilled manpower, equipment and other resources is still constrained, will not help. It will only drive the already high construction costs up.’

Mr Mah also called on builders to exercise greater prudence in managing their financial resources and watch out against over-extending themselves on business risks. At the same time, they should also redouble their efforts to improve their productivity and upgrade their capabilities, so as to be better placed to leapfrog competitors and exploit future growth opportunities, he said. In particular, a greater emphasis on manpower development is needed, he said.

Business Times – 22 Oct 2008

Lawyers can’t hold money from clients

 

Law Society agrees to proposal to protect public from rogue lawyers

AFTER years of wrestling with the problem of lawyers running off with their clients’ money, a decision has been made to bar them from holding such funds.

The Chief Justice disclosed this in a recent speech to lawyers, adding that only the details needed to be ironed out.

The Law Society, which has tried several ways to protect clients’ funds parked with lawyers, particularly those made in the course of property transactions, has finally ’seen the light’, said Chief Justice Chan Sek Keong.

He did not go into the mechanics but one possible idea has been to entrust clients’ funds to the Singapore Law Academy, which is already doing something similar for housing developers.

It appeared that the Law Society leadership took some convincing.

The problem of rogue lawyers led to the Chief Justice appointing a committee chaired by Appeals Court judge V.K. Rajah early this year to resolve the issue.

Replying to queries, a Law Society spokesman said it told the committee that the current practice of lawyers holding clients’ funds is a ‘critical and practical step’ in the conveyancing process.

Typically, conveyancing lawyers hold between 5 and 9 per cent of the cash value of a property deal for about three months on the seller’s behalf.

This is the time needed for the buyer to make various checks to verify that the property is genuinely owned by the prospective seller.

The spokesman said having the money with the lawyers meant they could forward the amounts when due. Payment delays could incur interest as a penalty.

But, to instil public confidence, the society was agreeing to the committee’s proposal. The spokesman stressed that the society was asked only about money for property deals. Besides such deposits, lawyers are also entrusted with funds for commercial transactions and settlements.

Speaking at the society’s annual dinner and dance earlier this month, the CJ said the society had taken a ‘brave decision’ in agreeing to the proposal.

The problem of lawyer defalcations has concerned the profession for decades, but has drawn more attention recently in the wake of heightened property prices.

Moves to stem such criminal practices have always been contentious, with small legal practices and sole proprietors baulking at the cost of increased safeguards.

The most recent step to strengthen safeguards was to require two signatories to withdraw amounts of more than $30,000 from clients’ accounts.

But the moves did not stop six lawyers from fleeing with more than $29 million over the last five years.

‘Lawyers collectively should have felt extremely embarrassed, if not ashamed, by The Straits Times report that six out of the top 10 fugitives for this kind of offence were lawyers,’ said CJ Chan.

Lawyers contacted wondered about the practicality of removing the ability of lawyers to hold on to clients’ money, but expect the issue to be clearer when details are known.

Noting that ‘the devil is in the details’, Senior Counsel Kenneth Tan said that while large amounts could be entrusted to another party, ’small amounts such as for lawyer disbursements and expenses for convenience and efficiency are better paid directly to lawyers’.

The 671 small firms are likely to be more affected by the move than the 98 medium- and large-sized firms.

Lawyer Amolat Singh said small firms would require more time to retrieve such funds for disbursement if they are parked elsewhere.

Sole proprietor Rajan Chettiar welcomed the impending move. It would cut costs as he would not need to maintain a bookkeeper, he said. Not having to safeguard the accounts also means ‘less stress and tension’.

While he too welcomed the move, lawyer R.S. Bajwa, who also runs his own firm, said: ‘It is very sad that a very small minority have brought about this to a majority of lawyers.

‘It is a very extreme measure to take away a trust account from a lawyer.

Senior Counsel Cavinder Bull sounded sanguine: ‘In principle, this sort of change is not going to cripple the legal profession and we should move with the times.’

COLLECTIVE SHAME

‘Lawyers collectively should have felt extremely embarrassed, if not ashamed, by The Straits Times report that six out of the top 10 fugitives for this kind of offence were lawyers.’ – Chief Justice Chan Sek Keong

Straits Times – 22 Oct 2008

Over 2,000 homes for Q4 launch?

Expect more high-end and mid-range launches before the year ends

DEVELOPERS, looking to clear their stockpiles of unsold homes before the economy takes a turn for the worse, could launch more mid-range and high-end projects before the end of the year.

And for projects that have already been launched, anecdotal evidence shows that developers have already started to cut prices in order to move unsold inventories.

Data compiled by CBRE Research shows that some 34 properties with a total of 2,012 units may be launched before 2008 draws to a close. Of these, some 10 projects with a total of 1,104 units are in Singapore’s core central region (CCR), while another 13 projects with some 718 units are in the rest of central region (RCR). Developments priced mid-range and above are usually in the CCR and RCR.

The launches could go ahead even as appetite for higher priced homes remains weak. In September, developers put up 258 units for sale in the CCR. But just 70 homes were sold in the region – a take-up rate of 27 per cent. The RCR fared slightly better with a take-up rate of 61 per cent. Some 370 homes were launched and 224 were sold there.

Developers could have pushed out homes in the CCR – even with the current sluggish demand for high-priced homes – in order to move stocks before prices fall even further, analysts said.

“With the uncertain economic outlook, the increase in launches of higher-priced CCR properties is no indication of improving sentiment and it could be an attempt by developers to clear stocks in CCR in anticipation of further weakness in the property market,” said OCBC Investment Research analyst Foo Sze Ming.

Some could also be selling to generate cash. “Take-up is poor but as long as the developers sell a few units, they will be able to generate cash-flow for interest rate expenses and also start construction,” said Ku Swee Yong, director of marketing and business development at Savills Singapore.

Anecdotal evidence also shows that in order to sell, some developers are now accepting lower prices. Far East Organization’s listed unit Orchard Parade Holdings and Wing Tai sold eight units in Floridian in September, after registering no sales since February. But the sales came as the median transacted prices fell 16.8 per cent from $1,735 per square foot (psf) in January to $1,443 psf in September.

Similarly, some units at Madison Residences along Bukit Timah Road were sold at median prices of $1,801 psf – 10 per cent lower than a year ago. Viva in Thomson Road and Park Infinia in Wee Nam Road achieved $1,555 psf and $1,501 psf – about 5 per cent less than comparable projects early this year, CBRE noted. But even then, demand remained weak. Among the developments priced mid-range and above, there were only 10 projects that achieved sales of over five units for the month of September. A key driver of demand in the high-end and mid-range residential market has been growth in migrants due to strong job creation in Singapore. With this trend slowing, the demand for pricier homes is affected, analysts said.

The increase in new launches and weak take-up rate in September saw the number of launched but unsold properties increase by 10.1 per cent month-on-month to 3,903 units. “With properties in CCR and RCR contributing to the bulk of this increase, we do not foresee a pullback in unsold inventory level, especially with weaker sentiment towards higher-price properties,” noted OCBC’s Mr Foo. “Coupled with the weak macro outlook and tighter credit condition, we think more developers are likely to follow suit with price-cutting.”

But the fact that there are some sales at lower prices is encouraging, analysts said. “It shows that there are some potential buyers out there who are waiting for the right price to enter the market,” said Nicholas Mak, director of research and consultancy at Knight Frank.

Looking ahead, the mass market is likely to get support from HDB upgraders since the HDB resale market is going strong, analysts said. But other potential buyers are expected to wait on the sidelines – which could prove to be bad news for sellers of high-end and mid-range properties.

One potential source of buyers is those with handsome gains from collective sales who have yet to find suitable long-term replacement homes, said Tay Huey Ying, Colliers’ director for research and advisory. “Some of them who have opted to reside in public flats are waiting for an opportune time to re-enter the private home market and are keeping a vigilant watch on private home price movements,” she said.

Business Times – 18 Oct 2008

Singapore IRs – Dicing with a downturn

With so much riding on Singapore’s IRs, can they beat a global slowdown?

REACHING deep into the earth and also soaring above it, Singapore’s two integrated resorts (IRs) approach their moment of truth. Just over a year back, when the skies above them were clear, they were set ambitious targets.

Each was primed to bring in $2.7 billion – 0.8 per cent in all – as value-add contribution to Singapore’s gross domestic product. Between them, they were expected to add 50,000 jobs to the economy by 2015.

What could go wrong? This was 13 months ago and Macau had just made headlines for achieving US$10 billion in gaming revenue, propelling it ahead of glitzy Las Vegas.

Then came the surge in construction costs that raised the amount being pumped into the Marina Bay and Sentosa IRs to US$10.5 billion – a 20 per cent hike above initial plans. For the IRs to reach their financial targets, they would have to recoup these extra billions through higher revenues. But 15 months before casino doors are thrown open, it looks as if even meeting revenue targets would be an achievement.

Already, Singapore’s in a technical recession and it is likely to stay with us for several quarters. The US and Europe are staring at their bleakest outlook in decades. Even China, previously thought to be immune to the meltdown, has seen its tycoons get trimmed. The average billionaire on Hurun’s 2008 China Rich List now has US$2.4 billion of personal wealth, down from US$3.6 billion the year before.

Macau, meanwhile, is bleeding. So what does the future hold for Singapore’s IRs?

Macau’s loss, ironically, could be Singapore’s gain. For the first time in three years, Macau’s casino revenue fell last month from the 52.5 per cent average growth achieved in the first eight months of 2008.

This has everything to do with the curbs imposed on mainlanders visiting Macau. From once a fortnight, the frequency of these visits was cut to once a month from June 1, then once every two months from July 1 – and now once every three months from Oct 1. Macau tourism operators reckon the curbs could slash the number of mainlanders joining package tours to Hong Kong and Macau by 10 per cent.

So where will Chinese gamblers – especially the high-rollers – go for their kicks? Las Vegas is very far away. But Singapore – just three hours from Hong Kong – is not. And it could emerge as their destination of choice when the IRs at Marina Bay and Sentosa open by 2010.

The IRs are going all out to lure big spenders from China and elsewhere, says Andy Nazarechuk, a gaming industry expert and dean of the University of Nevada Las Vegas campus in Singapore. ‘High-rollers in Las Vegas spend anywhere between US$50,000 and US$150,000 for their vacation at such resorts,’ he says. ‘The revenue generated from this group here will be high, which is why the investors are building these IRs.’

But can the China tide alone lift the worry clouds around Singapore’s IRs?

Resorts World (RW) spokesperson Krist Boo does not want to single out China as Sentosa’s big bet. ‘We have an unparalleled sales and distribution network in Asia and are confident of delivering the numbers. We are in 18 cities – Jakarta, Kuala Lumpur, Bangkok, Shanghai, Mumbai and Tokyo, just to name a few.’

Resorts World is sticking to its forecast of 15 million visits in the first year. According to Ms Boo, Asians still take holidays when times are not so good but favour nearby destinations to save on airfare. This could swing the pendulum in RW’s favour, she says. ‘We are confident the visitors will come. We are building a destination that Asia has never had – six hotels, Universal Studios Singapore, the world’s largest oceanarium, a water park, maritime museum and spa.’

Tourists are expected to account for about 60 per cent of visits and locals the rest.

Marina Bay Sands, too, is sticking to its forecast that it will turn a profit the minute it opens. ‘We expect to be profitable from day one,’ says George Tanasijevich, its general manager and vice-president of Singapore development. ‘Our expected payback time-frame remains at five to eight years.’

That, however, may be easier said than done. The Singapore Tourism Board itself is not confident of achieving this year’s target of 10.8 million visitors. And even if visitor numbers do pick up, it remains to be seen whether they will spend as freely as initially expected. For while the IRs have spread their bets to markets all over the world, their problem is that almost each of these markets has sunk in unison. The Shanghai index has fallen 69 per cent from its peak in October 2007 and hit a 22-month closing low in September this year. Mumbai has not fared much better.

‘While locals will be excited about the IRs initially, over time, the tourists will be the main market,’ says Dr Nazarechuk. And that is where the problem lies.

The immediate outlook for the IRs also hinges on how well airlines perform, according to Jonathan Galaviz of Globalysis, a Las Vegas-based boutique travel and leisure consultancy. ‘A significant risk when the IRs open will be the health of the airline industry. If capacity to Singapore is reduced substantially, it will jeopardise the performance of the resorts.’

On their part, the IRs are betting on Singapore’s resilience. ‘Our MICE-driven business model serves to mitigate the effects of a challenging economy,’ says Mr Tanasijevich.

Nevertheless, confidence is hard to pin down in uncertain times – as the principal players behind the two projects know. Las Vegas Sands has seen its share price slump from a peak of US$144.15 last year to just US$11.83 now. Genting International has weathered the storm better, falling from S$0.72 last year to S$0.39 now.

Analysts, meanwhile, have cut back their projections on how much the IRs here will contribute to GDP, and expect the number to remain between 0.3 per cent and 0.5 per cent between 2010 and 2015.

The IRs would give a lot for a glimpse of blue skies now.

Business Times – 18 Oct 2008