News Update - 24 Jan 2013

RESIDENTIAL MARKET

No U-turn as clock ticks for developers

The authorities are standing firm on the rule that all units in projects with any foreign ownership must be sold within two years of the project receiving its temporary occupation permit (TOP), even as developers lobby the government to extend the timeframe.

Last year, the Real Estate Developers' Association of Singapore (Redas) submitted a proposal to extend this two-year period.

According to the Ministry of Law, however, "the disposal period remains as two years after the developer has achieved the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) for the project, whichever is earlier".

The ministry has received 17 applications to extend the disposal period since 2011, of which six developers have paid extension charges.

Projects with less than a year to move their units include Wheelock Properties' Scotts Square which has 71 units unsold, Lafe Development's Residences at Emerald Hill which has 21 units unsold, and Keppel Land's Reflections at Keppel Bay, which has 243 units unsold as at December last year.

SC Global Development's 66-unit The Marq on Paterson Hill, 241-unit Hilltops, and 88-unit Martin No 38 too feature on the list.

That being said, the developer - the first to announce that it would have to pay $5.5 million in extension charges for The Marq - may potentially sidestep some of these charges, following a successful privatisation bid by chairman and chief executive Simon Cheong.

This is because under the Residential Property Act (RPA), the residential projects of all developers, except those which are fully owned by Singapore citizens, fall under Qualifying Certificate (QC) conditions, one of which is that all units in a project must be sold within two years after the project receives its TOP.

That Mr Cheong is now able to privatise the company means he can potentially apply to the Singapore Land Authority (SLA) for an exemption.

"In general, if a foreign company becomes a Singapore company as defined under the RPA, it can apply to SLA for a Clearance Certificate to purchase residential properties henceforth," said the Ministry of Law.

"SLA will determine if the applicant company meets the requirements for a Singapore company under the RPA. If an application is made, SLA will also determine if the Qualifying Certificate(s) issued for the purchase of residential land when the applicant was a foreign company would be cancelled."

If units are not sold within the stipulated two-year period, foreign developers have to fork out pro-rated extension charges based on the proportion of unsold units, of 8 per cent, 16 per cent, and 24 per cent of the property purchase price for the first, second and third extra years respectively.

The extension charges weigh heavy, particularly on the high-end market which has been languishing with slow sales and prices that are still below their peak.

This segment was dealt a fresh blow earlier this month, when the government announced the seventh round of cooling measures. Specifically, the additional buyers' stamp duty (ABSD) imposed on foreigners and non-individuals purchasing any residential property, will be raised from 10 per cent to 15 per cent.

While most projects will still have to comply with the QC terms, some projects could potentially be granted a one-time extension on the project completion period. Developers, specifically those who responded to the government's call in 2008 and deferred the redevelopment of property purchased through a collective sale and rented out the property to alleviate the rental housing supply crunch, could be be granted a one-time extension, commensurate with the period of tenancy.

According to the Ministry of Law, about 20 properties under qualifying certificate holders could benefit from the extension. Projects which qualify include City Developments' project on the former Lucky Tower site in Grange Road, and GuocoLand's Leedon Residence.

No charge will apply to extensions granted under the new rule which was announced by SLA in December last year.

Source: Business Times –24 January 2013

 

ABSD hike may see more investing in property SPVs

 The significant jump in the additional buyers' stamp duty (ABSD) for corporate entities has made it more compelling for them to buy shares in special purpose vehicles (SPVs) that own properties, rather than purchase apartments directly.

At least two such potential deals have been advertised in the last two days. On Tuesday, there was an advertisement in The Business Times for the sale of 36 units at Goodwood Residence, through an SPV that owns the apartments.

Yesterday, 21 Anderson was put on the market, Royal Oak Residence, with a similar arrangement as one of the available purchase options.

Transaction of real estate through SPVs is not a new phenomenon. But the government's latest move to raise the ABSD to a hefty 15 per cent from 10 per cent for corporate entities has made it more compelling for companies to consider this route.

This is because the ABSD applies only when investors buy the units of a development directly. But it does not apply when the transaction is through the sale of shares in companies, even if they own real estate.

Corporate entities were one of the groups that were the hardest hit by the ABSD, which was raised to a hefty 15 per cent over a week ago. When the ABSD was first introduced at end 2011, these buyers had to pay an ABSD of 10 per cent. ABSD comes on top of the 3 per cent buyer's stamp duty.

Source: Business Times –24 January 2013

 

21 Anderson put up for sale for $250-260m

21 Anderson, Royal Oak Residence, a freehold residential property within the Ardmore Park vicinity is up for sale, with an indicative pricing of $250-260 million.

The 10-storey freehold residential development comprises 34 units with a strata area of 85,552 sq ft and land area of 49,048 sq ft. Currently, close to 100 per cent of the units are leased out.

"While the vendor is selling the asset, potential investors may also consider acquiring shares in the company that owns the property, thereby realising Additional Buyers' Stamp Duty (ABSD) savings.

The opportunity to acquire an income-generating freehold residential property within the Ardmore Park vicinity is rarely available.

Situated at the fringe of the Ardmore Park residential enclave, 21 Anderson is located within a short distance of the Orchard Road shopping belt, and close to a number of schools including Raffles Girls' School, Anglo-Chinese School and the Chinese International School.

The development underwent major refurbishment works which were completed in 2009. Units in this development are accessed through private lift lobbies and have amenities which include concierge services, a swimming pool, tennis courts, gymnasium, a BBQ area and a children's playground.

The expression of interest exercise is scheduled to close at 3pm on Feb 28.

Source: Business Times –24 January 2013

 

KepLand mulls over cutting home prices if market falls

The boss of property developer Keppel Land has flagged a possible cut to its home prices if the market falls away in response to the Government's recent cooling measures.

"We will monitor the market... If the market comes down and we can't sell our projects, then we'll have to cut prices," said recently installed chief executive Ang Wee Gee.

He was speaking at a briefing yesterday, where the firm announced a 39 per cent decline in full-year net profit to $838.4 million a year earlier.

The drop in full-year earnings was largely because of a record net profit for full year 2011 due to a one-time gain from its $480.3 million sale of its stake in Ocean Financial Centre.

Excluding gains from divestment and revaluation, the firm's net profit was $451.5 million for the full year.

This is 61.4 per cent higher than the $279.7 million net profit excluding divestment and revaluation gains in 2011, Keppel Land said in a statement.

A strong performance from property trading helped to cushion the net profit decline. Net profit from this segment shot up 68.5 per cent to $323.9 million for the year.

Keppel Land cited stronger earnings from projects such as Reflections at Keppel Bay and Marina Bay Suites.

Mr Ang, who took the reins at the start of this year, said at the briefing that a 622-unit condominium it is developing in Sengkang, The Luxurie, has only eight unsold units left.

The Luxurie accounted for the bulk of the 430 residential units Keppel Land sold in Singapore last year.

Mr Ang also disclosed that Keppel Land was in the midst of designing a residential site at New Upper Changi Road next to Tanah Merah MRT and design work for another site at Keppel Bay was "at an advanced stage".

It would "monitor the market closely for a suitable time" to launch those two projects, Mr Ang said.

About half of the developer's total assets are in Singapore and 35 per cent are in China, where Keppel Land sold 1,650 homes last year.

Source: The Straits Times –24 January 2013

 

COMMERCIAL MARKET

Drop seen in office space leasing, majority looking for smaller units

Office leasing activity should slow in the coming six months, with demand to be dominated by tenants with smaller space requirements.

Gone are the days where you have major space takers that look at 15,000, 20,000 square feet (sq ft) and above in terms of their take-up.

This can be attributed to two key trends in finance over recent quarters: some of the banks moving their back office operations to suburban regions, and caution about bottom lines given the slowdown in the economy.

Prime rents in Central Business District (CBD) areas are expected to fall 0.5 per cent in the first quarter of this year compared with the previous quarter amid this continued softness. This follows a 0.4 per cent decline in the fourth quarter of 2012.

Demand for serviced offices will stay strong as tenants try to lock in rents at current rates. Serviced offices come fully fitted out and offer flexibility in the form of monthly renewals instead of a usual minimum tenure of two years.

Tenants are keen to explore options with fitted out space which will provide significant cost savings.

The opening up of the legal sector means more foreign law firms will be looking to set up shop here.

Both these groups of potential users are expected to be in for smaller offices of between 1,000 and 5,000 sq ft.
Source: Business Times –24 January 2013