Property sales test price ceiling

 

Buyers have been flocking to private apartments priced below $800,000 in recent months. Some may fork out a bit more, but with the economy still in the doldrums, most start getting cold feet when prices reach $1 million to $1.5 million.

According to property consultancy DTZ, units selling for $600,000-plus to $800,000 were the most popular from January to April. In DTZ’s analysis of 4,401 caveats captured by the Urban Redevelopment Authority’s Realis system, 1,515 or 34 per cent were lodged for apartments in this price range.

Of these 1,515 caveats, 92 per cent were for units outside prime districts 1, 4, 9, 10 and 11. And 93 per cent were for units of less than 1,400 sq ft.

Projects where plenty of recently released units were in the sweet price range include Double Bay Residences in Simei, MiCasa in Choa Chu Kang and Waterfront Waves in the Bedok Reservoir area, DTZ said.

For instance, 95 of 171 caveats lodged for Double Bay Residences (56 per cent) involved units priced from $600,000-plus to $800,000.

Savills (Singapore) has reached a similar conclusion from its own study of caveats – units below $800,000 have been most popular in the outside central and rest of central regions.

Even in the core central region, it has been possible to find smaller units for less than $800,000 – and buyers favour them. At The Mercury near River Valley, for instance, 27 of 38 caveats lodged (71 per cent) were for units priced below this level.

Anecdotally, buyers at recent launches seem to be more concerned about overall cost – smaller units with higher per sq ft (psf) prices have been selling faster than larger units with lower psf prices in some cases.

Savills’ research and consultancy associate director Priya Sengupta said tighter credit means buyers consider the affordability of units in absolute and psf terms.

‘Psf price acts as an impetus to generate interest and keenness or affinity to a certain location or a certain development, whereas quantum comes into play during the buying decision,’ Ms Sengupta said.

Based on DTZ and Savills’ studies, buyer resistance generally sets in at $1 million to $1.5 million. DTZ noted that only 16 per cent of the 4,401 caveats lodged from January to April were for units costing $1 million-plus to $1.5 million, while a mere 5 per cent were for units costing $1.5 million-plus to $2 million.

With high-end property stirring in the past few weeks, could the resistance level be on the way up? Data is not available because it takes time for caveats to be lodged and captured.

But according to Knight Frank’s director of research and consultancy Nicholas Mak: ‘It appears so because more people are exploring the market.’

Still, he laced his observation with caution: ‘This is often (due to) a bit of spillover from the stock market, which can be fairly volatile. It is also based on the expectation that the Singapore economy is going to recover year-end or so – but the government is not of the opinion.’

Announcing Singapore’s first-quarter GDP figures recently, the Trade and Industry Ministry said there are still no decisive signs of recovery.

Of course, buyer resistance is unlikely to apply as far as the ultra-rich are concerned. DTZ’s data shows 4 per cent of caveats in January to April were lodged for units worth more than $2.5 million. These include caveats for three apartments at Ardmore Park each worth more than $5 million. There were also caveats for 23 Gallop Gables units priced from $2.5 million to $4 million.

Source : Business Times – 1 Jun 2009

 

Private home sellers raise asking prices

PROPERTY market sentiment appears to have improved fast and furious, judging by the prices being asked by some individual sellers – though observers suggest they are being somewhat optimistic.

These sellers may be taking their cue from the stock market, experts said. Asking prices for some properties that have just been completed or are close to completion have jumped significantly in recent months.

The improvement follows strong data for new private home sales, which have crossed the 1,000-unit mark for three months in a row since February, after a period of severe stagnation.

Property experts said the recent strong rally in the stock market has given quite a lift to property market sentiment.

Still, lower prices have also played a part in stronger sales. Some recent launches have done well after developers finally cut their asking prices.

For instance, Parc Centennial in Kampong Java Road is now sold out, after developer EL Development relaunched the 44 remaining units at an average price of $1,175 per sq ft (psf), about 20 per cent lower than last year’s average price.

But individual sellers are tending to raise, not lower, prices. For instance, some sellers of high-floor units at Marina Bay Residences are advertising their properties at $2,000 psf or more – regarded by analysts as a key resistance level for many buyers.

Some recent classified advertisements in The Straits Times for Cosmopolitan in River Valley show asking prices of $1,380 psf to $1,395 psf, compared with asking levels of about $1,250 psf earlier in the year.

In late February, an ad for RiverGate units displayed prices of $1,118 psf to $1,399 psf. But last week, some ads for RiverGate, at Robertson Quay by the Singapore River, offered units at prices starting from $1,380 psf, with one ad even offering two three-room units at $1,900 psf.

Some sellers, with an eye to the longer term, are actually withdrawing properties from the market, sensing an uptick in sentiment. ‘We are seeing some sellers changing their minds to sell, seeing that the market is rising,’ said Savills Residential director Phylicia Ang.

HSR Property Group executive director Eric Cheng said the property market has performed beyond expectations in the past three weeks, but is starting to slow a tad as sellers retreat and wait for better prices.

A 31-year-old house-hunter, who is scouting for his first home, said two out of his three property viewing appointments near East Coast Road a week ago were cancelled almost at the last minute because the sellers decided to withdraw from the market. And over the weekend, his agent failed to get him any viewing appointments in the same area for the same reason.

Ms Ang said individual sellers face fewer risks by testing higher prices in the market. ‘If I don’t like the price, I can always withdraw,’ she said.

Still, market sentiment has moved up very fast. ‘It’s the ‘too good to be true’ scenario now,’ she said.

But one thing is for sure: There are buyers out there with cash and there is clearly demand for projects that are seen as good value, experts said.

Compared with the situation three months ago, sellers are more willing to negotiate prices today as there are more keen buyers, said Mr Cheng.

Just three days ago, a deal for a 2,150 sq ft UE Square unit in River Valley was closed nearly on the spot at slightly more than $1.8 million, as it worked out to an attractive level of below $850 psf, he said.

In general, even though there are still desperate sellers around, some sellers may be asking for about 5 per cent higher than the prices three months ago, Mr Cheng said. ‘You can see more sellers asking for a bigger premium, but no one will buy if you price your property too high. One high-price caveat does not reflect the price of the development,’ he added.

Market sentiment has improved, but it is still early days as short-term fundamentals have not exactly corrected, said PropNex chief executive Mohamed Ismail.

‘If the sellers start to increase their prices in anticipation of higher levels, they may kill the deal,’ he added. ‘We saw that in 2007 when prices were rising. Many sellers were not contented with their offers, so many deals did not materialise.’

He said sellers can ask for high prices, but the key is whether the banks are willing to match those asking prices.

‘It is no point if your own optimism is not matched by the valuation. That is the valuers’ view of the current market, taking into account the better sentiment.’

To sum up, said Mr Cheng, there are still more sellers than buyers.

Source : Business Times – Jun 2009

 

High-end property starting to move

Interest in the top end of the property market appears to be slowly picking up from near non-existent levels.

Several investors have trickled back to the resale property market, taking the chance to pick up posh apartments at prices mostly below $2,000 psf, or way below what was quoted last year.

One such unit at the 55-unit The Ladyhill that cost no less than $6.5 million has just been sold to a Korean investor.

The price for the freehold apartment works out to $1,700 per sq ft – which was the average price of the first 20 units sold at the condo’s 2000 launch.

Prior to this deal, only two caveats had been lodged for the property in the past 12 months. Both were done at higher levels – one was for a bigger unit in July last year at $2,149 psf or $9 million, and the other was for a 3,283 sq ft unit for $2,193 psf or $7.2 million last November.

Consultancy Cushman & Wakefield, which brokered the latest deal, said the volume of top-end deals is not quite there yet but interest is certainly slowly picking up.

Buyers are looking for good value, said property experts.

Resale deals are slowly being done because some sellers are more willing to be flexible and there is limited supply in the market, they said.

Developers are still lying low where top-end launches are concerned, said Savills residential director Phylicia Ang.

Indeed, few developers of high-end developments want to sell at today’s prices, said Cushman’s managing director Donald Han.

They would rather wait for the right time to launch as going to market now would require them to cut their price levels by a significant amount, he said.

Government data compiled by Cushman & Wakefield shows that six deals – each worth more than $5 million – were done last month, up from three deals in March.

It is a slight improvement from the dismal levels last November (zero deal) and December (one deal). Before the downturn got worse, such deals numbered 21 and 43 in May and June last year.

While high-end prices have not stabilised, there may not be a repeat of some very low price levels registered in recent months, experts said.

‘Just about three months ago, you could get an Ardmore II unit at less than $1,800 psf. At that time, you couldn’t see the daylight in the market,’ Ms Ang said.

Indeed, a mid-floor Ardmore II unit was sold for only $3.375 million or just $1,668 psf in February while a high-floor unit went for $3.6 million, or $1,779 psf in March, according to caveats lodged.

Caveats lodged last month show four deals done from $1,600 psf to $1,917 psf.

At the 2006 launch of Ardmore II, apartments were sold for an average price of about $2,300 psf, or between $4.2 million and $5.5 million per unit.

At the nearby 330-unit Ardmore Park - long associated with posh living – no deals were registered in the first three months of this year.

Caveats lodged show that three deals were done last month at $1,976 to $2,184 psf, below the deals of $2,635 to $2,791 psf in June and July last year.

Come the second half of the year, Mr Han said he expects to see more resale activity in the upper end of the market for deals worth $5 million and above.

Top-end launches, however, may not surface this year.

‘If you’re talking about the high-end market, as in those priced above $2,000 psf, there won’t be any launches until the market improves,’ said a consultant who declined to be named.

‘If you go above $2,000 psf today, these buyers will disappear.’

Source : Sunday Times – May 2009

S’pore home prices slide down the ladder since 2008

FROM around the top of the heap to near the bottom of the pile in just 12 months!

A year ago, Singapore was ranked as the fourth best-performing market in the world under Knight Frank’s Global House Price Index based on the first-quarter’s year-on-year price change. This week, it emerged as the third-worst in a table that listed a total of 46 markets.

The house price index for Singapore slipped 23.8 per cent in Q1 2009 over the same year-ago period. And with the index declining 16.2 per cent quarter-on-quarter in the first three months of this year, Singapore emerged as the second worst-performing market based on a quarter-on-quarter ranking, compared with its ninth position a year ago.

Knight Frank’s index for Singapore was pegged to the official Urban Redevelopment Authority’s price index of non-landed private homes in the Core Central Region.

Israel was the top performer over the 12-month period ending Q1 2009, recording price growth of 10.9 per cent, followed by the Czech Republic with a 9.9 per cent increase. The worst performers were Latvia, Dubai and Singapore with declines of 36 per cent, 32 per cent and 23.8 per cent respectively.

On a quarter-on-quarter comparison, Dubai posted the worst performance with a fall of 40 per cent, followed by Singapore.

Hong Kong, saw its Q1 ranking (based on a year-on-year comparison) slip from third spot last year to 40th position, with a price drop of 15.7 per cent. United Kingdom was ranked 42nd on an annual-change comparison (the price slide was 16.5 per cent) while the US was in 43rd position with a 16.9 per cent decrease.

India made it to the top 10 list; it was ordered fifth with a 5.1 per cent year-on-year price appreciation in Q1 2009.

The percentage changes are calculated in local currency terms and are hence not affected by fluctuations in exchange rates.

‘There is sporadic evidence of buyers snapping up relative bargains. However, of those buyers in a position to move, many are still waiting for clearer signs that markets are approaching the bottom of the cycle,’ Knight Frank said.

Fourteen of the 46 markets covered by the index had not reported Q1 data at the time of the writing of the report.

‘The latest data suggest some easing in the plight of markets. On a quarterly basis, 48 per cent of the countries from whom we received Q1 data reported a drop in prices, compared to 88 per cent in our Q4 2008 index.

‘On an annualised basis, 48 per cent of countries also showed a fall in values compared to 77 per cent in Q4. Given the high proportion of ‘absentees’ for Q1, however, it would be potentially misleading to jump to too many hasty conclusions, although over half had shown annual and/or quarterly price falls at the last time of reporting. Nonetheless, the shorter-term future direction of most underlying economies suggests that the world’s residential markets are likely to continue to suffer for some while,’ Knight Frank’s report said.

The consultancy’s director of research and consultancy in Singapore, Nicholas Mak, said that while there has been a pick-up in private home sales lately (with developers managing to inch up prices for better-selling projects), a sustained price recovery will hinge on an improvement in the jobs market. ‘If expats are not coming into Singapore, the strength of the rental housing market will be affected and that will, in turn, affect investment demand for residential properties,’ he added.

A developer said: ‘While we are seeing price stability in the mass-market segment, I think the high-end sector will not stabilise until the perception of DPS-buyers defaulting clears away’.

The government scrapped the Deferred Payment Scheme (DPS) in October 2007.

The 30 to 40 per cent slide in high-end residential prices, coupled with more cautious bank lending to property investors, could mean that some DPS-buyers may not complete payments for units bought during the 2007 peak. A surfeit of such properties making their way back to the market could depress prices. While developers could take legal action against local buyers, they may have a harder time pursuing foreign buyers, especially companies registered in the world’s tax havens.

Source : Business Times – May 2009

Is property becoming king again?

 

EVERYBODY wants to believe that the light at the end of the tunnel of the current economic crisis is now discernible. And why not? After almost two years of persistently gloomy news, it is certainly time for a change, even if most economic indicators say otherwise.

One of the places in which this optimism is reflected is the property market. Earlier this month, the Urban Redevelopment Authority released data revealing that developer sales in April hit over 1,200 transactions, following two consecutive months of exuberant sales. Indeed, the developer sales for the January-April period with 3,867 units sold now represents almost 90 per cent of all developer sales in 2008 (4,382 units). And unlike earlier months, the transactions in April were done across various market segments, which could suggest a broad base recovery.

Yet, the last time we checked, the Singapore government had revised its GDP forecast downward, unemployment had risen, and exports had fallen. And while there is persistent talk of ‘green shoots’ of recovery, even if one buys into the rhetoric, what is curious is that the property market appears to have jumped the gun. Yes, the stock market has recovered somewhat of late, but at least for the last week, property stocks have outperformed the overall market.

So is it blind optimism that is driving the property market? Some believe that these buyers are just following the herd. Property prices of new homes have begun to moderate downwards and while new homes are still by no means cheap, some argue that buyers are afraid of ‘missing the boat’. But can this really be a concern? After all, as has been well reported, there is expected to be a glut of new housing supply next year.

One reason could be that investors are buying into forecasts, now coming in thick and fast, of an economic recovery next year. Therefore they don’t want to lose out on the discounts being offered now, even at the risk of having to hold on to their new properties for a longer time in the future before the recovery really gets underway and the market turns decisively.

Another plausible reason for the surge in sales could be that fixed deposit rates have fallen to near five-year lows, inducing many to move their savings into property instead – which implies that as the deflationary environment abates, property is replacing cash as king.

Whatever the reason, the ongoing surge in property transactions certainly warrants some study. Singapore is unique in many ways, but if the property market here is an anomaly, it would be useful to know why – if only to help the market function more efficiently and help those who really need a home to get a clear picture of where property prices are headed.

Source : Business Times – May 2009

Gradual rise in home prices seen

PRIVATE home prices in most sectors could start to rise gradually this year but high-end property will stay in the doldrums until later next year, according to tycoon Kwek Leng Beng.

Mr Kwek – executive chairman of the Hong Leong Group – said there are many cash-rich buyers waiting for the right time to buy.

‘Every time the market turns, some people would get caught out,’ he added.

The key question that many buyers are asking is: Has the market turned?

Urban Redevelopment Authority data shows that 1,207 new private homes were sold in April, making it the third consecutive month that sales have crossed the 1,000-unit mark.

It is a level reminiscent of the boom period and one that some analysts believe is unlikely to be sustained for long.

But Mr Kwek, who was speaking to The Straits Times on the sidelines of a recent hotel investment conference, feels that these levels of sales can be maintained ‘if the world economy stabilises’.

‘Confidence is the quick key to recovery. When you have confidence, you will invest,’ he said.

Mr Kwek said developers are sometimes wrong but the key is to be more often right than wrong.

He also reiterated that property is an investment over the medium to long term, anywhere from three to 10 years.

Developers got the market message this year and have cut prices to meet buyers’ expectations, following a stand-off that saw just 100-plus units sold in January.

‘If you’re listed, you’ll have to sell something. Otherwise, every quarter, you have no sales,’ said Mr Kwek.

Some developers have actually started to raise their asking prices slightly from their adjusted lows.

The strong sales so far this year have largely prompted two foreign investment houses to turn more positive on the residential market.

A recent UBS report points out that the sales momentum has been stronger than expected, with the possibility of higher prices in the second half of this year and next year.

It had already in a late April report called a ‘buy’ on the property sector, saying that demand from domestic upgraders – not foreign buying – will jump-start the recovery, as with previous recoveries in the 1990s.

Goldman Sachs has also projected a 5 per cent gain in Singapore private home prices next year, reversing its earlier tip of a 10 per cent fall.

‘We think the alignment of developers’ asking prices and buyer expectations would be key for generating sustainable demand,’ said the UBS report.

Nevertheless, not all are optimistic about the market.

‘This wave of purchases, once it’s over, won’t come back until the economy has recovered and embarked on its way up,’ said a property fund manager who declined to be named.

The pent-up demand is coming mostly from owner-occupiers or small investors and these people usually cannot afford to buy more than one unit, he said.

‘Foreigners are still leaving Singapore. When there are not enough real users for all the supply, prices will continue to fall.’

What is happening now in the real estate sector could be similar to the bear rally some analysts foresee for the stock market, he said, adding that the only good news is that mass-market prices are likely to hold at current levels.

Unlike high-end prices, which have fallen at least 35 per cent to 40 per cent from their all-time peak, the mass and mid-market sectors have had falls that are much less steep.

The price fall in high-end homes – which shot to more than $5,000 per sq ft during the boom from around $1,800 psf – is thus steeper, he said.

Average high-end prices may dip to around $2,300 psf, which is still higher than pre-boom levels.

Mr Kwek said the Hong Leong Group – which includes listed Hong Leong Finance, developer City Developments, Hong Leong Asia and London-listed Millennium & Copthorne Hotels – will hold off high-end home launches for now, preferring to start building first.

City Developments, the developer behind projects such as The Sail @ Marina Bay, has in its pipeline The Quayside Isle Collection in Sentosa Cove, a 99-year leasehold enclave where values have more or less collapsed.

High-end home prices were to a large extent boosted by foreign buying. ‘Foreigners will slowly come back but not so soon,’ said Mr Kwek.

The Indonesians, he said, are very slowly returning. Although the trend is barely discernible, it is a change from the previous downturn where they had all but disappeared.

Still, he cautioned against comparing prices with levels done a decade ago: ‘Ten years ago and now, Singapore has changed. Fundamentals are good.’

The country will soon benefit from two integrated resorts, for instance.

‘Worldwide, it is the worst downturn ever. But you see the amount of stimulus around. You can’t see the effects immediately. It will take some time,’ he said.

---

MAIN INGREDIENT

‘Confidence is the quick key to recovery. When you have confidence, you will invest.’- Mr Kwek, on the recent improvement in property sales

Source : Straits Times –  May 2009

Analysts upgrade property stock calls

Private residential prices now expected to rise next year

PROPERTY analysts now expect private home prices to climb again next year – a turnaround from previous forecasts that they would continue to slide into 2010 – as there is now a sense that the residential market has hit bottom.

And amid this new- found optimism, analysts’ recommendations on several property stocks have been upgraded.

The residential price index chalked up its worst-ever quarterly decline of 14.1 per cent in Q1 2009, according to official figures from the Urban Redevelopment Authority.

‘A bottom has been established for the housing market, as price cuts have catalysed latent demand and accelerated inventory clearance, in our view,’ said Deutsche Bank analysts Gregory Lui and Elaine Khoo in a note yesterday.

With this in mind, analysts now expect to see the residential price index move up in 2010 – or even as early as the second half of this year.

UBS Investment Research, for one, said in a recent report that there is a possibility of higher prices in H2 2009 and 2010.

‘We think it suggests prices are stabilising and could potentially rise 5-20 per cent in 2010, versus our assumption of flat pricing for 2010,’ UBS Research analysts Michael Lim and Regina Lim said in a May 19 note.

Likewise, Goldman Sachs is now projecting a 5 per cent gain in private home prices next year, reversing its previous forecast of a 10 per cent fall in 2010.

‘The recent pick-up in transaction volumes in the primary residential market is a harbinger of price stabilisation being just around the corner, in our view,’ the bank said in a May 12 report.

Price increases could already be on the way – recent reports have indicated that developers are already raising prices of select units by 2-5 per cent where demand seems resilient.

The price creep is difficult to ascertain, UBS said, but it estimates that up to six months ago, early-bird discounts were a permanent feature for new launches. ‘Developers have since limited the discount duration to the initial launch,’ it said. ‘We think this is a positive development, though unexpected, and suggests a high probability of a meaningful recovery in H2 2009.’

The drop in prices in Q1 meant that transaction volume showed a significant increase. More than 1,200 homes were sold each month in February, March and April – after just 108 homes were sold in January.

‘In our view, the strong momentum suggests buyer confidence is returning and could provide the next wave of momentum for developer stock prices,’ said UBS. And developers are in stronger positions after inventory clearance this year and cash calls, noted Deutsche Bank.

UBS’s analysts issued a ‘buy’ call on City Developments. ‘We believe City Developments would be a key beneficiary as it has the largest market share in residential sales volume in Singapore, and its share price is strongly correlated to resale transactions,’ said the bank’s analysts.

Goldman Sachs likewise upgraded CityDev to ‘buy’ from ’sell’.

Deutsche Bank also yesterday upgraded two developers from ‘hold’ to ‘buy’ – Keppel Land and Allgreen Properties.

However, while upbeat on the residential sector, analysts said the outlook for the office sector is less rosy. Deutsche Bank, for one, expects vacancies to approach 17 per cent in 2012. While the rental decline will decelerate sharply in H2 2009, any recovery is likely to lag, the bank said.

Source : Business Times – May 2009

Property investors going back to basics

THE property investment landscape has changed significantly because of the global financial crisis, speakers at a panel discussion said yesterday.

For a start, investors are going ‘back to basics’, said Blake Olafson, director and head of the Asia real estate group at international investment bank Arcapita.

For example, pension funds that used to invest in riskier asset classes are now beginning to redirect their investments into less risky assets, he said.

Agreeing that the industry is going back to basics, John Evans, managing director of Tractus Asia, said: ‘Looking at it from a global economic perspective, the Asian real estate market had become a market where everyone was trying to get in, everyone was becoming a property developer.’

Mr Olafson and Mr Evans were speaking at Cityscape Asia, an annual real estate exhibition and conference aimed at investors.

The ‘back-to-basics’ approach includes a focus on making existing assets work harder.

‘There’s a lot more emphasis around true asset management, a shift towards hiring third-party facilities managers, and much more effort is going into tenant retention strategies,’ Mr Olafson said. ‘Before the downturn the focus was on building development, now asset management has become a lot more important.’

Players in the industry are going back to their core competencies and this, combined with tighter credit conditions, is driving a ‘flight to quality’ and a focus on assets that generate cashflows from day one, he said. ‘There is liquidity, but it is being driven towards good quality projects.’

Panellists agreed that liquidity is beginning to return to the Asian market, although banks are still very selective about which projects to back.

Speakers were also quizzed about when they expect real estate markets to emerge from the current slump. In response, the panellists said there was no way to put a timeline to recovery.

‘Everyone is trying to tell where the bottom is,’ said panellist Stuart Labrooy, chief executive of Malaysia’s Axis Reit Management. ‘I think the full effects of the recession have not reached Asia yet.’

Property valuations should start to bottom out in Asia in the second half of 2009, he said.

More than 3,000 real estate developers, investors and regulators are expected to attend Cityscape Asia, which focuses on all aspects of real estate development, on May 19, 20 and 21.

Source : Business Times – May 2009

Interest absorption greasing market – selectively

Is the interest absorption scheme (IAS) helping to grease home sales?

The answer seems to be yes, if there is no price premium charged by developers for the IAS. However, if developers charge more in exchange for interest absorption, then the buyers’ profile may decide whether they opt for IAS, industry players say.

Generally, buyers in projects targeted primarily at owner occupiers, such as suburban, mass-market condos prefer to buy on normal progress payment scheme (NPS) rather than IAS, under which they may pay only the initial 20 per cent with no further payments until the project is completed.

For example, slightly over a quarter of those who bought 626 units at Caspian near Jurong Lake since its release in February and 100 units at Waterfront Waves in the Bedok Reservoir area relaunched at lower prices since March have opted for IAS.

At Double Bay Residences in Simei, the proportion of IAS buyers is said to be higher, at 40-50 per cent. At Mi Casa in Choa Chu Kang, no buyer has opted for IAS. Those who bought on IAS in these projects paid 2 or 3 per cent more for their units. The thinking is that mass-market home buyers are usually more price sensitive and prefer NPS if it costs them less, say property pundits.

Projects that have drawn investors may see more buyers inclined to opt for IAS even though there is a price premium. Here, again, the quantum of premium may matter.

For instance, Frasers Centrepoint, which is charging 2 per cent more under IAS for Martin Place Residences, has found that 75 per cent of those who picked up the 80 units in the condo over the weekend opted for IAS. On the other hand, only 5 per cent of buyers of the 109 units that CapitaLand sold since last Friday at The Wharf Residence (nearby) chose IAS. This could be due to the heftier premium of 5 per cent for IAS.

However, some observers suggest another reason: Wharf Residence could have drawn a fair number of short-term investors.

With IAS, buyers have to immediately sign up for a housing loan (even if they don’t need to make a drawdown until much later). And they will have to pay a penalty if they redeem their loan early.

‘So short-term buyers in an investment grade project may prefer to opt for NPS to avoid being tied down to a loan and having to pay a penalty to the bank for early loan repayment,’ explains Knight Frank executive director Peter Ow.

Agreeing, EL Development managing director Lim Yew Soon told BT that feedback from some buyers who chose NPS for its Illuminaire On Devonshire project (despite the group not charging any price premium for IAS) indicates that they did not intend to hold their units till the project was completed.

The penalty for early loan redemption is typically said to about 1.5 per cent of the loan quantum. ‘So it may be a deterrent for smaller speculators,’ as Mr Lim suggests. However, this may not be a serious issue for deep-pocketed investors eyeing bigger gains.

‘Investors are taking advantage of IAS, which is the old DPS (deferred payment scheme) all over again, except that you have to talk to the banks earlier. Essentially IAS, like DPS, provides a financial option on the real estate market. By paying just 20 per cent of the value of the property, you can take a (bet) that property prices will appreciate by when it’s time to pay up,’ said a property analyst.

Under IAS, buyers have to sign up at once for a home loan. This is unlike DPS, where they could wait much later, closer to the project receiving Temporary Occupation Permit, when they have to pay the bulk of the purchase price to the developer.

Still, some like Mr Ow argue that IAS does not encourage speculation. ‘Whether speculation kicks in depends on the stage of the market. In today’s condition, only the very brave will come in to speculate.

‘IAS involves obtaining a bank loan approval upfront and banks are cautious about granting loans to property investors. It is quite unlikely banks will approve mortgages for those buying multiple units in a project.’

Others point out the current buying flurry does not stem from IAS. ‘The buying interest seems spurred by positive sentiments about the market as people are drawn to buy/upgrade due to reasonable prices,’ a spokesman for Far East Organization said.

Source : Business Times – May 2009

Opportunities for property investors

THESE are troubled times, and the global real estate sector has borne the brunt of the sub-prime fallout.

But now the property world is turning its attention to Asia as investors are hoping that 2009 will be the year to begin picking up undervalued assets ahead of economies in the region emerging from the global financial crisis, say the organisers of Cityscape Asia.

The annual real estate exhibition and conference – which is being held in Singapore from today until Thursday – comes amid talk of ‘green shoots’ of recovery for the Singapore and global economies.

Cityscape Asia focuses on all aspects of real estate development.

The real estate investment market in the Asia-Pacific region and the rest of the world saw a further contraction of market volume in the first quarter of 2009 against the backdrop of the global financial turmoil and the sustained problem of a credit crunch. However, analysts are beginning to see opportunities as the world and Asia rides out the crisis.

‘Established firms, family enterprises and individuals with cash reserves, limited debt and an appetite for risk are expected to be among the first to begin searching the Asian market for bargains in the coming months,’ said Graham Wood, group exhibition director of Cityscape.

This year’s Cityscape Asia will examine topics relevant to the downturn such as surviving the global financial crisis, the future for real estate funds, and markets to invest in for long-term growth and returns.

But long-standing topics such as Asian real estate investment trusts (Reits), green investments and the retail scene in Asia will also be explored.

More than 4,000 top deal-makers from leading developers, banks, institutional investors and investment authorities, as well as senior officers from the foremost private equity funds and investment advisory firms will gather in Singapore over these three days to discuss key issues and investment opportunities.

This year, more networking functions and face-to-face interaction have been factored in to ensure that delegates have ample opportunity to conduct real business at Cityscape Asia. Participants could well walk away from the conference with signed deals.

Cityscape Asia is an extension of the successful Cityscape Dubai exhibition, which has grown to include Abu Dhabi, India, Saudi Arabia, Russia, the United States and Latin America.

The Singapore conference will focus on Asia. It will discuss and debate the recovery, opportunities, and the strategies adopted by leading real estate investment and development firms across Singapore, Malaysia, the Philippines, Thailand, Vietnam, Hong Kong, Indonesia, China and India.

In its recent inaugural Asia-Pacific investment market overview report, Colliers International said that opportunities remain in the region for investors. ‘Although the regional real estate investment market in Q1 2009 was relatively quiet and despite the fact that the market will continue to be challenged by the economic environment for the rest of 2009, we believe there are still potential investment opportunities in the region in the coming quarters,’ said Piers Brunner, Colliers’ chief operating officer for Asia.

Real estate investment yields in the Asia- Pacific region have gone up further by 25-75 basis points in the first quarter of the year as investors held back from entering the real estate market, Colliers said. This should make investing more attractive now compared to a few quarters ago.

One market that will be much debated at this year’s Cityscape Asia is China. ‘In current times, the brightest light glows in China with the economy seeing a huge inventory adjustment,’ said DTZ in April.

In the first quarter of 2009, mainland China’s residential property sector staged a recovery of sorts, with transactions in some cities rebounding to levels not seen in years. However, the recovery did not spill over to the commercial sector as office markets in the major cities remained sluggish with fewer transactions amid declining rents and prices. A recovery in China could do much to help property markets in the rest of the region, analysts said.

Cityscape Asia also incorporates a host of ‘mini events’ designed to create business opportunities, such as developer project showcases, interactive discussion forums and investor roundtables.

Developers and other stakeholders from Europe and the US will be at Cityscape Asia looking for Asian investors. In its May bulletin, Citi Private Bank said that it expects to see a new global consumerism marked by a thrifty West and an affluent East, which should see investment flow from the East to the West.

Just one example – Philippe Chaix, director of La Defense, the prime office district of Paris, will be in Singapore during the conference to discuss the future of business property in the French capital, specifically, what it means for Asian investors.

London is also expected to get its share of attention. Asian interest in London properties is growing on the back of a devaluation in the pound, market watchers say. For example, the value of the British pound has fallen about 30 per cent against the Singapore dollar since December 2007. With London property prices down by about 15 per cent from their peak, Singaporean investors could reap savings of about 45 per cent off prices if they choose to invest in London.

Source : Business Times – May 2009