Smaller homes take lion’s share of sales

Home-seekers have gotten hungrier for apartments in recent months but have yet to work up a hearty appetite for large units.

Across many property launches, studio apartments and two-beddersremain most popular, reflecting continued price sensitivity on the buyers’part. They are generally ’still not as ambitious’, says DMG & Partners property analyst Brandon Lee.

At NTUC Choice Homes’ Trevista in Toa Payoh where 550 units have been launched, the majority of units left are three and four-bedders. Many buyers went straight for the two-bedroom units when the project’s preview began some two weeks ago.

GuocoLand saw the same trend when it launched Sophia Residence in the Dhoby Ghaut area. ‘All one and two-bedders were snapped up as soon as they were launched,’ says a GuocoLand spokesman. The project also has three and four-bedroom units.

Anecdotal evidence also points to a preference for smaller homes at projects such as Viva and Ascentia Sky. In another instance, the 70-unit Airstream at St Michael’s Road – where most units measured 625 sq ft in size or smaller – sold out last month.

Aiding the trend, some developers caught sight of homeseekers’ shrinking pockets as the downturn came and reconfigured their projects to offer a bigger number of smaller units.
Although prices for smaller homes tend to be higher on a per square foot (psf) basis, they still work out to be lower in absolute terms. At Trevista, for example, prices of 4-bedders start from $850 psf or $1.448 million. But those of 2-bedders start from $880 psf or $770,000, drawing buyers wary of making huge financial commitments.

As Savills Residential director Phylicia Ang notes, many buyers in today’s market are first-time private home owners or HDB upgraders who have an ‘affordability threshold’.
Property consultancy DTZ’s recent analysis of caveats proves this further – as much as 78 per cent of private residential transactions in Q2 2009 involved apartments costing less than $1.5 million.

It has become more challenging to market larger units in such an environment. An agent who declined to be named says that penthouses are particularly hard to sell when most budgets stay below $1.5 million. His strategy is to promote them to foreign investors from countries such as Indonesia. Nonetheless, the market for larger apartments is far from dead. ‘Seasoned’ buyers or investors would still consider bigger units, says Ms Ang.

Keppel Land’s Madison Residences has attracted its share of buyers and is 65 per cent sold. The project comprises only three and four-bedders with sizes ranging from 1,464 sq ft to 4,047 sq ft, at an average price of about $1,700 psf on the interest absorption scheme (2 per cent more than the normal progressive payment scheme).

Keppel Land International general manager for marketing Albert Fooattributes this to the site’s prime freehold address and proximity to topschools and the upcoming Stevens MRT.
Unique features may also make larger units more attractive. GuocoLand says that four-bedroom units at Sophia Residence are ’selling very well’ because they can be rented out in two components – as studios and three-bedders with their own entrances.

Some expect larger units to gain favour in the next few months.
‘With the recovery of the economies, we could see more funds and institutional buyers forming the next wave of demand for the larger units in prime locations,’ says the GuocoLand spokesman.

DMG & Partners’ Mr Lee also expects more foreigners to enter the local property market as economies improve and the integrated resorts open, driving greater demand for larger units

Source : Business Times- 14th Sep 2009

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Genting Singapore in $1.6b cash call

CASINO developer-operator Genting Singapore is turning to its shareholders to raise $1.63 billion in the second biggest rights issue here so far this year. Unveiling the major cash call yesterday, Genting said its $6.59 billion Resorts World at Sentosa (RWS) is ‘on track, both in terms of project costs and timing, for a soft opening in early 2010′.

The proceeds ‘will strengthen the company’s financials and put us in a strong position to tap strategic opportunities’, said Genting Singapore’smanaging director Justin Tan.

However, analysts suggest the funds will also come in handy after earlier cost overruns at the RWS, one of Singapore’s two integrated resorts. The company is offering shareholders one rights share for every five existing shares held at cost of 80 cents apiece. The offer price represents a 32.8 per cent discount to Tuesday’s closing price of $1.19 when it was last traded – a record high. The stock has rallied 70 per cent since the start of July.

This is the second time Genting has sought funds from shareholders in the past two years or so, after it raised about $2 billion in a rights issue in August 2007. Genting Singapore is a unit of Malaysian gaming giant Genting Berhad, which owns 54 per cent of Genting Singapore and has pledged to subscribe to one billion rights shares.

Mr Tan said support from banks had been very encouraging despite the uncertainty in the capital markets. About 60 per cent of the proceeds will be used to fund future acquisitions and investments. The funds may also be used to enter joint ventures, strategic collaborations or alliances ‘in areas related to its principal business in the leisure, hospitality and gaming sectors, as and when such opportunities arise’, it said in a statement to the Singapore Exchange.

The remaining funds will be used as working capital, which includes repayment of bank borrowings. The company probably took advantage of the sharp run-up in stock prices to get some money into the kitty,’ said OCBC Research analyst Carey Wong. ‘We see it as an insurance move to cover cost overruns of (RWS) and interest repayments of its huge debt and convertible bonds.’

There have long been concerns about cost overruns for the project. Genting has lifted cost estimates for the resort twice – in November 2007, the price tag for the resort was raised from $5.2 billion to $6 billion due to higher construction costs. Then in February this year, it raised the figure to $6.59 billion. The potential cash infusion of $1.63 billion will ease some pressure from interest payments, given that it is sitting on a $4 billion syndicated loan, analysts said.
Of Genting’s rights issue two years ago, about half, or some $1.19 billion, was used to finance the integrated resort. It also got a $4 billion syndicated credit facility in April last year to finance the resort.

Genting’s latest cash call came as something of a surprise, given that it said in its last statement that additional funding would come from operating cash flows when the complex opens next year. Genting Singapore, Britain’s No. 1 casino operator, may be looking to expand its Asian footprint. Market observers say potential investments on the radar could be Philippines’ Subic Bay, as well as in Macau.

Its parent, Genting Berhad, tumbled 30 Malaysian cents, or 4.18 per cent, to RM6.87 in Kuala Lumpur after the announcement.

Earlier in May, the Lim family which owns the Kuala Lumpur-listed flagship firm stunned the market by selling its entire 9 per cent stake in Genting Singapore for $615 million.
It was offloaded to institutions in a private placement at about 72 cents a share, representing a 16 per cent discount to the previous day’s closing price of 86.5 cents.

DBS Bank and CIMB Bank are arranging the offer. The issue will be fully underwritten by the two banks, as well as JPMorgan, RBS, CLSA, Deutsche Bank, HSBC and UBS.

The provisional allotments of rights shares may be accepted, and applications for excess rights shares may be made commencing from Sept 28 to Oct 12.

CapitaLand mounted the biggest rights issue so far this year, raising $1.84 billion in an offer announced in February.

Source : Straits Times – 10th Sep 2009

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Don’t overlook mortgage insurance

RECENTLY, my client Mr Wong called me for mortgage insurance advice. He had just bought a semi-detached house for close to $2 million. He took a loan of $1.2 million over 15 years, and was looking for a mortgage reducing term insurance that will pay off his mortgage in case of his death or total and permanent disability (TPD) while the loan is not fully paid.

Mr Wong told me that he will never forget the time that he and his younger siblings lost their family home when his father died of a heart attacksome 30 years ago, leaving his mother struggling to raise the four of them.

Certainly, he does not want this to happen to his homemaker wife and three children. ‘When I pass away, the last thing that I would want to put my family through is to also lose the roof over their heads,’ he said.

In Singapore, mortgage insurance is not made compulsory for privateproperty owners and those who are not using CPF to pay their monthly HDBhousing loan repayments. However, the Home Protection Scheme, or HPS, ismandatory for HDB/HUDC flat owners who service their mortgage loans with CPF funds.

Many private property owners baulk at mortgage insurance eitherbecause of inertia or misconception that it’s an unnecessary cost. Withoutmortgage insurance coverage, however, life could be a lot harder financiallyfor the family if things go wrong.

Over the past years, there have been newspaper reports on households having to surrender their private properties because the sole breadwinner passed away without mortgage insurance coverage. As such, I always advise my clients who own private properties to have mortgage insurance to protect their homes and families.

As the name implies, mortgage insurance safeguards your home and family against the unexpected, so that they will not be burdened with mortgage repayments or face the possibility of losing their home. It is available on a single or joint-life basis. If you and your spouse jointly own the home, you may want to consider a joint-life mortgage policy which pays out on the ‘first death’.

You can decide how long you want the policy to cover you, but most people have it to run concurrent with their mortgage.

The premium will increase with the mortgage size and the length of your term. In addition, age, gender and whether you smoke are big factors in determining how much you pay. Smokers pay a lot more than non-smokers, simply because they are more likely to make a claim. For example, based on the quotation from a local insurer, Mr Wong will need to pay around 40 per cent more if he were a smoker.

Most of the mortgage insurance plans are reducing coverage whereby the sum assured decreases annually and the rate of reduction depends on the mortgage interest rate and the policy term.

Some of the common benefits and features:

Total and permanent disability (TPD) coverage up to age70. The policyholder will receive the sum assured in instalments or a lump sum up to $2 million upon diagnosis of TPD;

Single or joint-life coverage is available for joint homeowners;
Premium payment termusually stops a few years before the end of policy term, while you continue to enjoy the coverage;

Option to add waiver of premium rider so all future premiums will be waived upon diagnosis of one of the 30 critical illnesses;

Mortgage insurance does not normally cover criticalillness, which means that in the event of a critical illness such as cancer,you will still need to pay the monthly mortgage repayments. Therefore, you may need to buy a separate policy for critical illness cover;

Most plans will not cover any disability caused by riot, civil commotion and terrorist activities.
Buying a home will likely be the largest undertaking you make in your lifetime, so protecting it should be a key part of your overall financial plan. Mortgage insurance will ensure that your dependants will not have the financial worry of trying to find the mortgage repayments or having to sell the property or downsizing in the event of your untimely death.

If you are looking for a mortgage insurance policy, do shop around as premium rates and features offered can vary greatly from insurer to insurer.

The writer is a Certified Financial Planner practitioner.The views expressed are his own

Source : Business Times – 10th Sep 2009

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URA’s Serangoon Ave site likely to draw strong bids

URBAN Redevelopment Authority yesterday launched the tender for a 99-year condo plot at Serangoon Ave 3. Market watchers expect top bids to be towards the upper band of the range of prices they predicted two weeks ago when URA first revealed it had received a successful application forthe site, which was in the reserve list.

The revision follows the strong showing at Tuesday’s state tender for a condo plot at Dakota Crescent, which drew 13 bids. URA said yesterday it has awarded the land parcel to UOL Development (Novena) Pte Ltd, which placed the highest bid of about $329 million or $508 per square foot per plot ratio (psf ppr).

URA also announced an Oct 7 closing date for the tender of the latest plot at Serangoon Ave 3, next to Lorong Chuan MRT Station and near Australian International School.

A fortnight ago, property consultants polled by BT generally predicted top bids for the plum site to be in the $350-450 psf ppr range, with resulting breakeven costs of about $700-850 psf and target selling prices of $800-1,100 psf on average.

Yesterday, DTZ executive director (consulting) Ong Choon Fah predicted the highest offer for the land parcel will probably be towards the $450 psf ppr mark.

Colliers International executive director (investment sales) Ho Eng Joo too is betting that the winning bid will be around the $400 psf ppr level, or the higher end of the $350-$400 psf ppr price band he predicted earlier.

However, most consultants said they are not expecting run-away prices for this site. Knight Frank chairman Tan Tiong Cheng points to greater competition from nearby existing private housing stock for a new condo on the Serangoon Ave 3 site compared with a new project on the Dakota site.

Also, a condo project in the Serangoon area will appeal more to families and therefore have a bigger proportion of larger units. This will also put a cap on the per square foot pricing that its developer will be able to charge buyers.

This is unlike UOL’s strategy for the Dakota plot, where at least half of the units will be smaller two-bedroom units, which will allow it to push for a higher psf selling price.

Next Thursday (Sept 17), URA will close the tender for another plot – a commercial and residential plot at the corner of Yio Chu Kang and Seletar roads. ‘Those who missed on the last couple of tenders will become sharper in their pricing for the next few land tenders,’ says Knight Frank’s Mr Tan.

Since July 20, the government has announced the successful trigger of four sites in the reserve list. The first, a condo plot at Chestnut Ave, was bought by Hong Leong Group for $280 psf ppr.
Market watchers expect developers to make successful applications for the release of further sites on the government’s reserve list for the current half.

‘The mass-market is where the confidence is right now; there are many developers who have not secured sites in this segment,’ says Credo Real Estate managing director Karamjit Singh.
Despite the government last week raising the ‘definite possibility’ that it will restart confirmed list land sales from first-half next year, property consultants believe some developers will still press on with making applications to release more sites from the H2 2009 reserve list.

‘If they like something on the current reserve list, why wait? After all, they don’t know what sites will be in the H1 2010 confirmed list,’ said DTZ’s SE Asia research head Chua Chor Hoon.
Confirmed list sites are launched according to scheduled dates; reserve list sites are released only upon successful application by a developer with an undertaking to offer a minimum acceptable price.

Some market watchers expect that when government restarts the confirmed list, it will be ‘very calibrated’.BT understands that developers continue to urge the government not to revive the confirmed list, arguing that the reserve list is working well. However, analysts point out that it takes a longer time for a reserve list site to make it to the market as someone first has to make a successful application. ‘If no one triggers a site, it can sit on the backburner,’ says DTZ’s Mrs Ong.

‘The confirmed list is pretty much in your face. There is greater certainty.It’s a faster time to market,’ she adds. ‘The psychological message thatthe government sends out by restarting the confirmed list – of ensuring therewill be sufficient supply of land for private housing development – can also be quite powerful.

Source : Business Times – 10th Sep 2009

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Punggol Spectra launched by HDB

THE Housing and Development Board yesterday launched Punggol Spectra under the build-to-order (BTO) system, following strong interest in the recent BTO project, Punggol Residences.
Punggol Spectra will offer 1,142 units, comprising 301 with two rooms, 285 units of three rooms and 556 with four rooms.

Located on Punggol Central, Punggol Spectra is within walking distance of Oasis LRT station and Tampines Expressway is just a short drive away, offering good connectivity to the rest of Singapore, HDB said. The precinct has commercial facilities such as shops, an eating house and a supermarket. The future Punggol Town Centre is minutes away. Educational institutions such as Horizon Primary School and Punggol Secondary School are also nearby.

Prices at Punggol Spectra range from $89,000 to $109,000 for the two-room flats, $151,000 to $179,000 for three-room flats and $234,000 to $293,000 for the four-room flats. These prices are lower than those for similar flats in the market, making them affordable for first-time buyers, HDB said.

Based on the income of flat applicants in the first half of this year, HDB expects first-time buyers will need to use only 20-26 per cent of their monthly household income to meet their housing loan commitment.

Source : Business Times – 1 Sep 2009

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Koh Brothers wins $58.9m HDB contract

CONSTRUCTION company Koh Brothers Group has clinched a $58.9 million contract from the Housing and Development Board (HDB) to build the second part of Punggol Waterway – a 4.2km waterway that will be connected to Sungei Punggol.

In January, Koh Brothers won a $144.6 million contract from the HDB for the construction of the first part of the waterway.

The latest contract brings Koh Brothers’ order book to more than $579 million.
Construction of the second part of the waterway is set to start this month and is expected to be completed by the end of next year. Other ancillary works are expected to be completed by the fourth quarter of 2011.

The latest deal is not expected to have a positive material impact on the group’s financial performance for the year ending Dec 31, 2009.

Chief executive Francis Koh said that the company will continue to pursue public infrastructure and government building projects over private construction projects.

‘Our past record shows that public projects carry more certainty in terms of payment compared with private projects,’ said Mr Koh.

Koh Brothers announced last month that net profit surged to $4.4 million in the first half of the year ended June 30, 2009, from $0.5 million for the corresponding period a year earlier. The improvement was on the back of a 17 per cent increase in revenue to $138.6 million.

The group attributed the higher revenue to the good performance of its construction and real estate divisions.

A construction, property development and specialist engineering solutions provider, Koh Brothers now has ‘more than 40 subsidiaries, joint-venture and associated companies spread over Singapore, China, Indonesia, Malaysia and Vietnam’.

Koh Brothers shares closed down 1.8 per cent yesterday at 27 cents

Source : Business Times – 1 Sep 2009

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Indonesia ready to lease out islands

JAKARTA: Foreigners cannot own land in Indonesia. However, to boost tourism, the local authorities are inviting them to lease available islands across the sprawling archipelago.
On Sunday, Mr Ismeth Abdullah, governor of Riau Islands province, said he welcomes overseas investors who wish to manage islands in his province.

Bordering Singapore and Malaysia, the province is made up of 1,795 islands, of which only 394 are inhabited.

Mr Ismeth told The Jakarta Post that the presence of foreign investments has raised revenues for the province. He cited the popular Nikoi Island resort, located 21/2 hours away from Singapore by ferry and speedboat.

The province’s Investment Coordinating Agency usually takes about a month to issue leasing permits to investors, in line with government regulations, he added.

Separately, the head of Gorontalo province’s Investment Coordinating Board told The Jakarta Globe that a Singapore-based investor was keen on leasing three islands off North Sulawesi that boast a panoramic view.

Mr Rustamrin Akuba said the provincial government was currently reviewing the proposal.
The two men’s comments came days after a ruckus erupted over an alleged advertisement on the Canadian website www.privateislandsonline.com offering to sell three islands off the coast of West Sumatra to foreigners. This was reported by local media, which said the website was hawking Macaroni, Siloinak and Kandui – part of a group of 70 islands known as the Mentawai islands – for between US$1.6 million (S$2.3 million) and US$8million.

Many Indonesians were up in arms over the reports, with legislators lambasting the government for its lax attention to the country’s assets.

West Sumatran governor Gamawan Fauzi denied last Thursday that any of the Mentawai islands were for sale. A website check also found that Macaroni, Siloinak and Kandui referred to resorts located on three different islands that are popular with surfers.

Mr Gamawan told reporters that the resorts were run by a partnership of local and foreign businessmen, but the management wanted to sell their shares now because of an ‘internal problem’.

Mr Aji Sularso, a director-general at the Maritime Affairs and Fisheries Ministry, confirmed that the islands were still owned by Indonesia, adding that it was not possible for foreigners to own islands.

‘It is not supported by any regulation,’ he told The Jakarta Post.

Indonesia’s estimated 17,000 islands hold vast potential for maritime tourism, from diving to surfing to beach resorts. Only 5,000, though, have been named to date. The government has said it will set aside six billion rupiah (S$858,000) to determine the exact number of islands and register them as the country’s assets with the United Nations.

While he did not elaborate, Mr Aji said he anticipated a loosening of regulations with regard to coastal areas and remote islands, so that those areas could be put to ‘better use’ for the community and local government.

He did point out, however, that the government was getting only 600 million rupiah in tourist receipts from the Mentawai region each year.

‘This amount is too small, since Mentawai has some of the most beautiful waves in the world, and these are worth much more than that.

Source : Straits Times – 1 Sep 2009

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