Market News

27 Feb 2018

CDL-TID joint venture's top bid for Punggol site sets record for EC land

AMID a severe supply shortage in the executive condominium (EC) segment, an EC site in Sumang Walk in Punggol fetched a whopping 17 bids at a state tender that closed on Tuesday. The top bid of S$509.37 million works out to a record to S$583 per square foot per plot ratio (psf ppr). It came from a joint venture between City Developments' fully owned subsidiary CDL Constellation and TID Residential. TID Residential is a fully-owned unit of TID Pte Ltd, which in turn is a joint venture between Hong Leong Holdings and Mitsui Fudosan Co. The top bid was 4.8 per cent higher than the second highest bid of of S$486 million or S$556.26 psf ppr from Qingjiang Realty (Residential); followed by a tie-up between Yanlord Singapore Residential and Soilbuild Group Holdings, which offered S$450 million for the site. Hoi Hup Realty teamed up with Sunway Developments for a S$446.6 million bid. Sing Development, FEC Properties and Changi Properties joined forces, placing a bid of S$431.69 million. Also taking part in the tender was MCC Land (Singapore), which bid S$413.7 million. The lowest bid, from Ho Bee Land unit HB Lombard, was S$373.81 million, which works out to S$427.85 psf ppr. All 17 bids surpassed the previous record price for EC land, which was set in July 2013, for the Lake Life site in Tao Ching Road/Yuan Ching Road near Jurong Lake. The Sumang Walk site's tender was conducted by the Housing & Development Board, acting as land sales agent for the state. A maximum of 820 residential units has been stipulated for the EC project on the Sumang Walk site. The 2.7 ha land parcel is adjacent to My Waterway @ Punggol. ECs are a public-private hybrid form of housing with initial buyer eligibility and resale conditions that are completely lifted 10 years after an EC project has been completed. See Also Executive Condominium Analysts noted that the strong turnout and bids at Tuesday's tender are a reflection of the market being starved for new EC sites for some time. The Sumang Walk site was the only EC plot that was offered for sale in the Government Land Sales (GLS) Programme for the whole of last year. JLL national director Ong Teck Hui commented that the top bid was "stunning", "way above market expectations". It was also 64 per cent higher than the top bid of S$355 psf ppr for the Anchorvale Lane site in August 2016, which was the last EC tender. "The absence of EC land tender for one-and-a-half years, a severely undersupplied market with a paltry unsold stock of less than 1,000 EC units (including the upcoming 628-unit Rivercove Residences along Anchorvale Lane in Sengkang) and a rising private residential market are contributors to the bullish outlook for the EC market among bidders." Last year, developers sold 4,011 EC units. Mr Ong estimated CDL and TID's breakeven cost at close to S$1,000 psf - above recent new EC transactions in the area. "A few transactions at The Vales (in Sengkang) in recent months averaged S$860 psf. There seems to be an assumption that EC prices will rise by more than 20 per cent by the time the project on the subject site is launched." CDL is upbeat about prospects for the proposed project on the Sumang Walk site. Its group chief executive Sherman Kwek said: "We are confident of its success given its excellent location and desirable attributes. Punggol, slated to be Singapore's first Digital District, has an exciting future and we believe this will make the site very compelling to home buyers. "It is also very close to LRT and MRT stations as well as a bus interchange, which is hard to come by for an EC project. Being right next to My Waterway@Punggol, the site also offers the opportunity to create a landmark waterfront residence with pleasant views." If awarded the site, the CDL and TID joint venture will explore a project comprising 13 blocks of 10 to 17 storeys. "To maximise the scenic views, windows will be oriented towards Punggol Reservoir and My Waterway@Punggol. The sizable land area will also allow for generous landscaping," CDL said in a release. This will be CDL's ninth EC project. While Tuesday's tender set a record unit land rate for an EC site, the 17 bids were shy of the 19 bids received in 1997 for a Boon Lay Way site, which was developed into the Summerdale EC project, said Huttons Asia head of research, Lee Sze Teck. For the first-half 2018 GLS Programme, three EC sites will be on offer: a plot in Canberra Link in the Sembawang area through the confirmed list, and two land parcels through the reserve list: one along Tampines Avenue 10 and the other along Anchorvale Crescent in the Sengkang area. Source from The Business Times 27 Feb 2018

08 Feb 2018

Singapore budget not expected to target property upswing

WITH the real estate upturn, calls for the government to lift property cooling measures have tailed-off noticeably. Instead developers and property investors are now keeping their fingers crossed against any new Budget "sticks" that might affect the sector's nascent rebound. Apart from the possibility of revenue-raising tax tweaks that may affect property, the market in general does not expect any Budget measure targeted at the real estate sector, especially since such measures have traditionally been introduced outside of the annual Budget. In addition, market watchers also noted that there are already many anti-speculative measures still in place. Tax-wise, some say the government may once again tweak property tax rates to make them even more progressive. One way is to raise taxes on properties of higher values or non-owner occupied properties. Lim Gek Khim, tax services partner at Ernst & Young Solutions LLP, said: "Higher taxes are inevitable in view of the country's growing spending needs, and tweaking property related taxes might be on the cards." Another area is to extend the additional conveyance duties - introduced in March last year on share transfers in entities primarily holding residential properties - to share transfers in entities holding non-residential properties, she said. Teo Wee Hwee, PwC real estate and hospitality tax leader, noted that any increase in property tax, which is a wealth tax levied on property ownership and not a cooling measure in itself, could still dampen market sentiment to some extent. The impending rise in goods and services tax (GST), which is not aimed at the real estate sector but to broaden the government's tax revenue base, may also result in construction costs rising and hurting the margins of developers if they are not able to pass on the higher costs to home buyers, Mr Teo posited. KPMG head of real estate Tay Hong Beng noted that since total property taxes constituted only about 9 per cent of all tax revenues collected, it is unlikely that any upward adjustments to property tax rates will have a tangible impact on total tax revenues. "If there were any adjustments, it may help to demonstrate that the increased burden of taxes are meant to be progressive toward the wealthier," he said. Given that the last revision to property tax rates took effect on Jan 1, 2015 - some do not expect another revision so soon. Under the previous revision, property tax rates were raised for high-end residential properties, with the largest increases applied to investment properties that are not occupied by their owners. Since Jan 1, 2014, property owners can no longer claim "vacancy refunds" on property taxes for unoccupied properties (both residential and non-residential). As a sign of better times facing the real estate sector, the Real Estate Developers' Association of Singapore (Redas) has chosen not to issue a policy paper or offer comments for the upcoming Budget this time. A year ago, it submitted a wish list to the government and shared its concerns over the murky market outlook at the Redas Spring Festival lunch. Now, the worry among some developers is whether the government will take action later in the year if future land sales and property prices become over-heated. "We are quite certain the authorities will continue to keep a close watch on the property market, and will not hesitate to introduce new or enhanced measures," said Sandra Han, real estate partner at RHTLaw Taylor Wessing LLP. "There is no lack of known options available for consideration and implementation," she added. "A runaway property market will affect sustainability in the long run and be counter-productive to the main budget objective to achieve a sustainable fiscal system." Norman Ho, corporate real estate partner at Rajah & Tann Singapore, felt that further tightening of rules to rein in the property market may not be necessary for now. As long as speculative activities are curbed, renewed interest in home-buying and en bloc sales "should not be artificially prevented". There are other measures in place to prevent over-exuberance, he said. These include the pre-application feasibility study (PAFS) on traffic impact for certain en bloc sites, on top of an existing requirement from the Land Transport Authority for transport impact assessment for sizeable sites. Recently, banks were also told to be prudent on extending loans for land acquisitions. Dentons Rodyk & Davidson senior partner Lee Liat Yeang felt that the government will likely adopt a wait-and-see approach to see whether the increase in land transactions and prices will translate to a spike in residential prices. "A continued increase in interest rates may prove to be of significant dampening effect, aside from any governmental measures," Mr Lee said. "At today's prices, Singapore market still looks reasonable and there is no signs of over-heating or over exuberance in purchases by home buyers." Mr Tay reckoned that if there is any sign of an unsustainable price increase, the government may adopt a more targeted approach to managing demand from certain groups of investors or buyers. For instance, a surge in sales to foreigners may prompt a hike in stamp duties on their purchases under the additional buyer's stamp duty. To temper the collective sales fervour, he proposed setting a higher threshold approval rate from owners of developments between 10 and 20 years old. Currently, developments that are 10 or more years old require a majority approval threshold of 80 per cent to compel the sale of the entire development, compared to 90 per cent for developments of less than 10 years old. But the reality is developments put up for collective sale are seldom less than 10 years old. Mr Tay suggested a fine-tuning on this - by setting a higher threshold of 85 per cent for developments of 10-20 years old. This could act as a dampener for en bloc sites coming to the market and prevent premature tearing down of residential infrastructure. Such calibration will signal the government's intent in reining in runaway prices by refining an existing mechanism, without being seen as over-reacting, he said. Source from The Business Times 8 Feb 2018

07 Feb 2018

Safeguards already in place against en bloc sale of newer projects

THE en bloc fever got an airing in Parliament on Tuesday, with a member of parliament (MP) asking whether the government should consider setting a minimum age for developments seeking to go for a collective sale. In response to the question from MP Lee Bee Wah (Nee Soon GRC), Minister for National Development Lawrence Wong said other safeguards are already in place. For instance, the collective sales framework requires newer developments to achieve higher consent thresholds. The Land Titles (Strata) Act requires buildings under 10 years old to obtain consent from at least 90 per cent of the owners for a collective sale to go through; older developments need to amass 80 per cent consent. Of the 40 developments sold en bloc in the past three years, 13 were under 30 years old at the point of sale. That being said, most of them were more than 20 years old then, and were small developments of under 20 units each. In terms of number of housing units, around 240 units, or 6 per cent of some 4,000 units sold en bloc in the last three years were less than 30 years old. Even after the consent thresholds are reached, the developer that subsequently secures the site has to submit its development plans to the Urban Redevelopment Authority (URA) for approval. Mr Wong told the House: "The URA will go through the plans and look at planning considerations to make sure that height, unit sizes are kept to regulations, and that adequate provisions, for example, are made for parking. "The main objective of the collective sales framework is to give owners the choice of whether to go for redevelopment. "Such redevelopment allows rejuvenation and land-use optimisation in residential developments." There were 27 collective sales of residential redevelopment sites and three involving commercial or industrial redevelopment sites last year, bringing the total collective sales value to S$8.7 billion. This was a stark jump from 2016, when there were only three residential sites sold collectively for S$1 billion. Some consultants believe that the collective sales fervour has already started to ease; a number of public tenders closed recently without concluding a sale. Price gaps between the sellers and the buyers of some sites may be impeding the closing of the deals, said JLL national director for research and consultancy Ong Teck Hui. "Due to the euphoria of recent successful collective sales, new sites going for collective sales tend to be optimistically priced, but having secured sites, many developers would be more measured in their bidding." Source from The Business Times 7 Feb 2018

07 Feb 2018

Pacific Mansion seeks S$938m en bloc price

THE owners of Pacific Mansion have put the River Valley condominium up for public tender with a reserve price of S$938 million or S$1,728 per square foot per plot ratio (psf ppr), said CBRE, their appointed property agent. Built in the mid-1970s, the development is located in River Valley Close on a freehold residential site with a land area of approximately 128,352 square feet. Based on the Urban Redevelopment Authority's 2014 Master Plan, the site has a plot ratio of 2.8 and a height control of 36 storeys. However, the verified existing gross floor area (GFA) is approximately 493,222 sq ft, equivalent to a plot ratio of 3.84, said CBRE. Taking the 10 per cent bonus balconies GFA into account, the maximum allowable GFA for the site is 542,544 sq ft, it added. According to the URA baseline record, no development charge is payable on the maximum allowable GFA, said the agency. As Pacific Mansion is located in the Central Area, the "70 sq m" rule does not apply in the calculation of the maximum number of dwelling units per development, CBRE added. This is a cap on the number of units, based on an average size of 70 sq m GFA for each, in non-landed private housing projects outside the Central Area. Said Galven Tan, CBRE's director of capital markets: "We expect strong interest from developers as this is a rare opportunity to acquire a sprawling freehold site in the River Valley district. Pacific Mansion stands out with superior attributes including its freehold tenure, District 9 address and being within a seven-minute walk to the main Orchard Road shopping belt." "Both local and foreign developers will be keen to evaluate the site which offers the unique opportunity to design an iconic landmark development to add to the central Singapore skyline, next to the upcoming Great World MRT Station." The tender for Pacific Mansion will close at 3pm on March 16. Separately, Fernwood Towers, a 216-unit freehold development in Marine Parade Road, appears set to launch an en bloc sale, according to ERA Realty. The reserve price for the sale of the site has been set at S$688 million or approximately S$1,572 psf ppr, which includes the development charge payable. Built in the 1990s, it has a land area of approximately 148,963 sq ft and is zoned for residential use under URA's 2014 Master Plan. The site has a plot ratio of 3.0 and can be redeveloped up to a GFA of 446,889 sq ft with "some development charge payable", ERA said. Fernwood Towers is located opposite Mandarin Gardens, which announced its first collective sale bid in 10 years on Jan 23 and is also in the proximity of East Coast Park, Parkway Parade shopping mall and Victoria School. Commenting on the prospective collective sale, Jeremy Rikas Chiu, ERA Realty Network's group division director said: "We expect a healthy market demand for the new project at the Fernwood Towers site, given its prime location and rare freehold status. We envisage the development being rebuilt into an upscale condominium project of over 400 units, assuming an average apartment size of 1,000 sq ft." Source from The Business Times 7 Feb 2018

05 Feb 2018

Some en bloc projects running into technical road blocks

WHEN it comes to en bloc sales, the deal's not all sewn up when the site is awarded to a property developer. The long-drawn collective sale process at Tampines Court shows that even after a buyer is found, the transaction can still be plagued with technical issues. The Business Times understands that the sale process has been delayed as Sim Lian Group, the developer awarded the plot of land, awaits its Planning Permission (PP) approval from the Urban Redevelopment Authority (URA). At the same time, Sim Lian is also engaged with the Land Transport Authority (LTA) over its road works proposal to upgrade two existing road junctions, and build a new link to the existing slip road leading to the Pan-Island Expressway. These are mandated works that the developer has been advised by the LTA to undertake, in order for it to increase the number of units built on the site from the current 560 to 2,000, as the existing road infrastructure has limited carrying capacity. To do so, Sim Lian will have to sacrifice about 6-7 per cent of the 702,164 sq ft of land to construct the slip road. Sim Lian was awarded the site last August, and spent the subsequent months in consultations with agencies. It submitted its application for PP last December. According to the URA website, it usually takes 20 working days to assess a development application. BT understands that the evaluation process could take longer depending on the complexity of the development proposal and the site constraints. Meanwhile, residents, worried at the lack of updates about the en bloc process, have been demanding on a Facebook page set up by the collective sales committee to know if the sale is still on, and whether they will still be able to collect their sales proceeds in April this year. Desmond Sim, CBRE Research head of Singapore and South-East Asia, said the technical issues have arisen because the market is now driven, in the latest cycle of collective sales, to intensify the number of dwelling units rather than the plot ratio. "Usually when you increase the plot ratio, you have to pay a development charge, which is a betterment levy paid to the state for it to improve the infrastructure to cope with the increased density. "But now, the market is not driven by an increase in plot ratio, but predominantly by an increase in number of units; some developers do not even increase their gross floor area. That's why the government needs the traffic study, because more units means more cars per development, and that's going to put a lot of pressure on road infrastructure." The current en-bloc cycle also involves many former HUDC developments, where apartments average 1,700 to 1,800 sq ft in size. Some developers are looking to triple, even quadruple, the number of units, by downsizing units to about 750 sq ft on average. The government last November mandated that potential buyers, developers and real estate agencies have to submit a Pre-Application Feasibility Study (PAFS) to LTA assessing the traffic impact of any redevelopment on the neighbourhood and proposing measures to manage traffic demand. Developers need to do this before they submit their development application to the URA. This ruling affected the tender process of Pearlbank Apartments, a four-decades-old condominium in Outram. It has an iconic horseshoe-shaped architecture that residents hope to preserve by garnering the requisite 100 per cent consensus so that the tower can be granted conservation status. Yet at the same time, the residents also hope that a developer can come in to intensify the land use of the plot by building a new tower atop the existing carpark podium, add new communal facilities while improving existing ones, as well as top up the lease (which has about 50 years remaining) and restore the building's facade. The tender, which ended in mid-December, failed to secure any firm bids, although the marketing agent remains in talks with interested developers. Tang Wei Leng, managing director of Colliers International, which is marketing the property, said: "Conservation was one of the concerns flagged by parties interested in the Pearlbank Apartments... However, it was not the main issue. The primary concern had to do with the PAFS that was announced. "It was unfortunate that the announcement of the PAFS was made just weeks before the closing date for the Pearlbank Apartments tender on Dec 19, 2017. "As such, developers who were keen on the site needed more time to understand the new requirements and to assess their implications. For example, developers had to reconsider the number of new units that can be built on the plot and how that might impact pricing." While some in the industry believe the onus is on the sellers to conduct the PAFS to make the land more saleable, residents have been reluctant to spend the sum required - estimated at between S$20,000 and S$50,000 - to conduct the study. In most of the recent en bloc cases, it has rather been the developers that conduct and submit the PAFS to LTA after they have clinched the sites. Ms Tang said in most cases, the marketing agent is not the best party to conduct a PAFS because "developers would have different requirements and it may not be very meaningful to undertake such a study at this stage without detailed redevelopment plans, including the number of units, optimal unit-mix and design concept". Occasionally, there are also one-off, site-specific hurdles that developers encounter in the sites they acquire. For example, in Clementi, SingHaiyi Group, the new owner of the Park West plot, will have to work with the authorities on an above-ground substation located on-site that supplies electricity to not just the condominium but also the neighbouring landed estate. Asked about its plans for the substation, SingHaiyi said: "The purchase of Park West was only transacted recently in January 2018. Hence, it is preliminary to talk about PAFS requirements at this stage. We are still in the midst of drawing up the redevelopment plans. However, we do not foresee the substation to be an issue at all." Market watchers say that SingHaiyi would likely have to build a new substation to ensure continuous supply of electricity to the estate before demolishing the existing one. Amid uncertainties that have resulted from the new PAFS requirement, lawyers representing developers have been adding clauses to their contracts to give clients an exit option should the feasibility study turn up less-than-favourable results. Real estate lawyer and partner at Rajah & Tann, Norman Ho, said: "As the recent PAFS does affect en bloc sites and the developers may end up building fewer units, which thus affects their financial returns, we will provide that if a certain number of units cannot be built, the developers may abort the purchase." But not everything can be buffered against in contractual clauses, he said. "For the building of roads, this is the directive of the authorities to serve the new development, and it may be difficult for the purchasers to agree to have the qualification." It is therefore "not usual" for lawyers to include clauses that allow developers to abort the deal should ancillary infrastructure works prove too extensive. "But this is commercial and it is up to the developers to provide that in the event that they are required to incur expenditure of more than a certain sum, they will have the option to abort the purchase," Mr Ho said. But "in the event that there are a few favourable bids, the sellers may not accept such conditions". To be sure, not every en bloc developer faces these technical problems. For some, the approval process has been smooth-sailing so far. Days after URA announced the PAFS requirement, Oxley Holdings said that its redevelopment proposals of 1,472 units for Rio Casa and 1,052 units for Serangoon Ville, both acquired through collective purchases, had received in-principle approvals from LTA. Oxley chief executive Ching Chiat Kwong said: "So far, we haven't had issues with the authorities." On the delay that some developers may be facing, he said: "There are probably many submissions to these departments, so their replies and approvals may take a little longer. Hence, we need to exhibit more understanding and be patient as well on our part as a developer." Source from The Business Times 5 Feb 2018

01 Feb 2018

Katong Park Towers put up for en bloc sale with S$288m reserve price

KATONG Park Towers has been put up for collective sale with a reserve price of S$288 million or about S$1,165 per square foot per plot ratio (psf ppr), according to Cushman & Wakefield, the appointed agent for the property. The minimal development charge for the site is about S$5.6 million for the additional 10 per cent bonus balcony and an estimated lease upgrading premium of some S$51 million, Christina Sim, director of capital markets at Cushman & Wakefield, said on Wednesday. The residential development sits on a 99-year leasehold residential site with a land area of 13,076.9 sq m (about 140,758 sq ft). It is located at 114A Arthur Road, about 200 m from the future Katong Park MRT Station, which is expected to be completed in 2023. The property is also within a 10 minute drive from the Central Business District (CBD). The site is zoned for residential use under the 2014 Master Plan, with a plot ratio of 2.1 times and a maximum building height of up to 24 storeys. Subject to approval, the site can potentially yield about 388 apartment units based on an average size of 70 sq m per unit, Cushman & WakeField said. The tender will close on March 15 at 3 pm. According to Ms Sim, Katong Park Towers offers a compelling opportunity for the development of an exclusive condominium in an affluent and well-heeled neighbourhood within the charming heritage town of Katong. The site is also within close proximity to Chung Cheng High School, Dunman High School and the Canadian International School. Source from The Business Times 1 Feb 2018

01 Feb 2018

Chinatown Plaza up for collective sale, asking S$270m

CHINATOWN Plaza has been put up for a collective sale with an asking price of S$270 million, said Edmund Tie & Company, the marketing agent for the sale, on Wednesday. The asking price equates to S$1,989 per square foot per plot ratio (psf ppr) of potential gross floor area (GFA) with no development charge payable. The tender exercise closes at noon on March 15. The prime mixed-use redevelopment site at the junction of Craig Road and Neil Road is zoned for commercial and residential use under the 2014 Master Plan of the Urban Redevelopment Authority (URA). It sits on a freehold site with a land area of about 3,154.3 sq m, and is near the Central Business District and the Keong Saik Road area, which is now dotted with food and beverage outlets, co-working spaces and boutique hotels. Edmund Tie & Company said in a statement: "Subject to the authorities' approval, the site can be redeveloped up to its existing gross floor area of 12,610.89 sq m, exceeding the permissible plot ratio of 3.5 times as indicated in the 2014 Master Plan." Swee Shou Fern, senior director of investment advisory at Edmund Tie & Company, said: "The developer-investor can pre-sell the residential units to capitalise on the upturn of the private residential market and hold the invaluable freehold commercial space for investment or as their corporate office. "Given its city-centre location in a popular and vibrant enclave with proximity to MRT stations, the property is also ideal as serviced apartments or a hotel development, subject to planning approval." Edmund Tie & Company disclosed that it is also the marketing agent for the sale of a 1,696.3 sq m redevelopment site in the Geylang neighbourhood. The unnamed owner is putting the property up for tender, and has asked for S$36 million. The site, which occupies the odd numbered lots 1 through 21 along Lorong 18 Geylang and offers a 60 m frontage, is being offered on a 99-year leasehold tenure. The property is in an area that was rezoned in 2015 from residential/institution to commercial/institution under the URA's 2014 Master Plan. The asking price reflects a land rate of S$948 psf ppr for commercial use, with a gross plot ratio of 2.8 times, or S$704 psf ppr for institution use. At a gross plot ratio of 2.8, the site can be redeveloped into an eight-storey development with maximum allowable GFA of 4,749.6 sq m. However, an estimated development charge of S$12.5 million may be payable to redevelop the site for commercial use at that plot ratio. No development charge will be levied if the site is retained for institution use. The property may be developed for restaurants, shops, offices, commercial schools and association premises if approval is obtained from the authorities. The tender closes at 3pm on March 22. Source from The Business Times 1 Feb 2018

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