News Update - 23 Jan 2013

RESIDENTIAL MARKET

Foreigners' share of private home buys seen shrinking in first half

Foreigners' share of private home purchases in Singapore is expected to decline in the first half of this year, given the harsher additional buyer stamp duty (ABSD) rates imposed on them under the recent property cooling measures, say property consultants.

Last year, foreigners who were not Singapore permanent residents (PRs) accounted for just 6.3 per cent of all private home purchases on the island - the lowest proportion since 2003 and a significant drop from the 17.6 per cent share in 2011.

The record low proportion is a reflection of reduced foreign buying interest arising from higher (transactional) cost, with the introduction of 10 per cent ABSD on all residential property purchases by non-PR foreigners starting Dec 8, 2011.

And with the ABSD rate for this group jacked up to 15 per cent since Jan 12 this year.

PRs' share of private home purchases increased from 13.4 per cent in 2011 to 15.8 per cent last year. This is attributed to first-time PR home buyers being spared the ABSD rod last year. However, things have changed. Since Jan 12, PRs have to pay 5 per cent ABSD even on their first Singapore home purchase, and 10 per cent for any subsequent purchases.

Based on caveats lodged, Singaporeans acquired 24,815 private homes last year, up 17.7 per cent from 2011. The number of private homes bought by PRs increased 20.6 per cent to 5,086, while that purchased by non-PRs slipped 63.2 per cent to 2,038.

Despite mainland Chinese overtaking Malaysians as the top foreign buyers (including PRs) of private homes in the fourth quarter of last year with a 24.4 per cent share, Malaysians posted the lion's share on a full-year basis. They accounted for 26.1 per cent of caveats lodged by foreigners last year (including PRs), followed by mainland Chinese (22 per cent) and Indonesians (19.4 per cent).

Although the number of caveats Malaysians lodged declined 3.9 per cent to 1,858 last year, the drop is the smallest among the top four nationalities of foreign buyers. The number of caveats lodged by mainland Chinese buyers slipped 42.1 per cent to 1,570 last year. Caveats lodged by Indonesians declined 22.4 per cent to 1,382, while those from India citizens fell 18.4 per cent to 927.

For Q4 2012, mainland Chinese bought 421 private homes (one more than in Q3) - placing them ahead of Malaysians, with 382 caveats. This put the mainland Chinese share of the foreign buying pie at 24.4 per cent and that for Malaysians at 22.2 per cent in the October-December period.

Among the pool of private homes acquired by foreigners including PRs, the proportion of homes located in the suburbs, or Outside Central Region (OCR), has been picking up in recent years. Last year, OCR accounted for 55 per cent of the 7,124 private homes bought by foreigners, up from a 49 per cent share in 2011 and 39 per cent share in 2010.The trend reflects a shift in foreigners' focus to more affordably priced suburban homes following the ABSD's introduction in late 2011. Furthermore, it predicts this OCR share will rise by up to 5 percentage points this year, given that the high-end market has become relatively less attractive as an investment asset or accommodation choice following the latest round of ABSD rate hikes.

Market watchers also note the larger trend of developers rolling out more projects in OCR over the past few years on sites sold at state tenders. Against this backdrop, the OCR proportion among private homes purchased by Singaporeans has also climbed from 51 per cent in 2010 to 62 per cent in 2011 and 65 per cent last year. This too could rise by up to 5 percentage points in 2013,.

Source: Business Times –23 January 2013

 

Foreign firm to buy CityLife EC stake

The buzz in the executive condominium (EC) market here has attracted another foreign player to dip its toes into Singapore's property market.

Pan-Asian real estate investment company Everview Capital Partners will acquire a 5.5 per cent stake in EC project CityLife in Tampines for $4 million, said one of the EC's developers SingXpress Land in a statement yesterday.

Everview, through a single purpose vehicle, has agreed to buy an 18.4 per cent stake in Catalist-listed SingXpress Land's wholly owned unit SingXpress Property Development (SPDPL).

The unit, in turn, holds a 30 per cent stake in CityLife, in Tampines Central 7. Kay Lim Realty holds another 30 per cent stake, while a wholly owned subsidiary of Amara Holdings holds the remaining 40 per cent.

Mr Chan Heng Fai, managing director of SingXpress Land, said the investment by Everview is in line with its objective to partner with global institutional investors.

"This investment agreement paves the way for future collaboration between Everview and SingXpress Land on real estate developments in Singapore," he added.

The 514-unit CityLife, a private-public housing hybrid, was launched on Dec 29 last year and has seen strong interest, with more than 90 per cent of units sold.

The development is expected to be completed by 2016.

The agreement between both firms comes after a memorandum of understanding was inked between Everview and SingXpress Land on Aug 30 last year.

SPDPL has provided Everview a principal guarantee under which Everview can opt to exercise its right to have its investment amount returned, the statement added.

Everview was established last year and this acquisition marks its first foray into real estate development in Singapore.

Its target markets include China, Japan and some South-east Asian countries.

The firm has a Hong Kong-based management team and is capitalised by a major North American institutional investor.

Mr Wai Tang, managing director of Everview, said the firm is attracted to the EC segment as it targets middle-income Singaporeans seeking quality residences.

"We have faith in the project, the management quality and the integrity of the group," he added.

ECs were created in 1995 to meet the aspirations of the so-called "sandwiched class", who might not qualify for public housing but find private property beyond their reach.

Source: The Straits Times –23 January 2013

 

COMMERCIAL MARKETSBF Center office units see keen interest

Far East Organisation's SBF Center has been receiving keen interest in the weeks leading up to its official launch, as investors continue to flock to the commercial sector in search of better deals.

BT understands that the office space is being marketed from about $3,300 psf of which those within the $3,300-$3,500 psf range have met with keen expression of interest; the medical suites are being marketed at between $3,800 and $4,000.

Specifically, some interest has been garnered for the whole floor plates (office), which are located around the middle floors.

The 99-year leasehold development features 197 offices - 192 smaller strata units ranging from 592-1,442 sq ft and 10,549 sq ft for five floor plate offices - and 48 medical suites of between 614 and 1,345 sq ft up for sale.

Source: Business Times –23 January 2013

 

Ho Bee gets ready to reap fruits of Metropolis project

Property developer Ho Bee Investment's efforts to build a strong base of recurring income will start to bear fruit later this year, with the completion of The Metropolis, its one million sq ft Grade A-specification office project directly linked to Buona Vista MRT Station on the Circle Line.

The development's 23-storey Tower 1 is expected to receive Temporary Occupation Permit around July, to be followed a couple of months later by the 21-storey Tower 2.

Talk in the market is that the first few office leases have been inked. Neptune Orient Lines is believed to have signed up for just over 100,000 sq ft. BT understands that the Singapore Exchange (SGX) too has signed a lease for 85,000 sq ft. The bourse operator is believed to be planning a front/back-end split and is expected to keep its front office operations at SGX Centre in Shenton Way.

Next in line at The Metropolis could be oil giant Shell, believed to be for a 120,000 sq ft lease. Also thought to be seriously looking at becoming a tenant in the development is Procter & Gamble, which may take around 200,000 sq ft or more.

For sure, gym operator Fitness First has signed a lease at The Metropolis. Ho Bee itself will move its offices from Tannery Road to its new Buona Vista development.

In all, about 60 per cent of The Metropolis' net lettable space of 1.05 million sq ft is thought to be currently under negotiations.

Pre-leasing activity for new office developments in Singapore is generally slow at the moment - not surprising given that occupiers such as international banks and financial institutions are more careful about relocating to new buildings to avoid incurring major expenditure amid the uncertain business environment. There is also ample supply of office space in the island, and with rents not predicted to shoot up anytime soon, this tends to be a drag on pre-leasing. So it remains to be seen just when The Metropolis will be fully tenanted.

However, while the supply-demand dynamics of the Singapore office leasing market may be out of Ho Bee's control, one factor clearly in the group's favour is its low development cost for The Metropolis. The group clinched the site at a state tender in 2010 for $410.99 million (or about $342 per square foot per plot ratio). Because Ho Bee managed to lock in a relatively low construction cost for the project, its breakeven could be as low as $750-800 psf.

Big occupiers in The Metropolis can probably expect to pay close to $6 psf in monthly rents - cheaper than around $9 psf in the financial district. Based on the breakeven cost of about $800 psf, Ho Bee's net yield (when the building is fully leased) would be around 7 per cent.

Each year, the development should generate about $75-80 million in rental and carpark revenue (The Metropolis will have some 490 car park lots), going by a back-of-the-envelope calculation. That will result in a regular stream of recurring income which should help the group smooth the ups and downs in its residential property development business.

No doubt Ho Bee will also benefit from a one-time revaluation gain at the end of this year from The Metropolis, assuming office values remain resilient. Right now, a new Grade A-specification office development in that location could be valued at around $1,600-1,800 psf on a whole-building basis, by some estimates. Based on Ho Bee's breakeven cost of around $800 psf for The Metropolitan, the group stands to book a revaluation gain of some $800 million to $1 billion.

Between financial years ended Dec 31, 2007, and Dec 31, 2011, Ho Bee's net earnings have gyrated from $93.1 million to $333 million.

It is this sort of income volatility that the completion of The Metropolis will help to reduce.

On the stockmarket the counter has appreciated about 80 per cent over the past one year, double the gain of about about 40 per cent in the FTSE ST Real Estate index over the same period. The stock is now hovering around $1.90, compared with about $1.06 a year ago.

Source: Business Times –23 January 2013