It will also lower the quality of living in the neighbourhood.

That’s what residents in two HDB estates believe. The residents in the vicinity of Block 885 in Tampines Street 83 form one group, while those around Blocks 475 and 476 in Pasir Ris Drive 6 form the other.

They are up in arms over new rental flats that are being built near their homes. A 14-storey block of 234units will be built in Tampines, and a 12-storey block of 220 units in Pasir Ris.

Some also fear that the flats would house foreign workers or be sublet illegally.

But will the presence of a rental block really affect the value of the other flats around it?

Over at Wellington Circle in Sembawang, two rental blocks - Block 511 and 512 - sprouted up last year without any complaints from residents.

A check showed that the HDB flats in that area - especially those directly opposite the rental blocks - did not dip in value.

Three five-room flats in a block directly opposite one of the rental blocks were sold for between $360,000 and $390,000 last November.

According to resale prices on HDB’s website, the prices were comparable to those of similar flat types in that estate which were located further away from the rental blocks.

Standing at 14 storeys each, the rental blocks at Sembawang look new.

A rental flat resident, who wanted to be known only as Madam Maduna, told The New Paper they looked like condos.

Some of the residents living next to the rental blocks in Sembawang said they had no problems with the rental blocks being built there, and that their home prices have not been affected.

Resident Gian Hon, 65, said he does not understand the fuss in Pasir Ris and Tampines.

The retiree has been living at Block 510 in Sembawang for six years with his wife and five children.

He said: “This estate has always been quiet; we haven’t had any trouble.”

Another Sembawang resident, who wanted to be known only as MrChan, echoed his sentiments. The retiree in his late 70s does not mind his new neighbours.

He said in Mandarin: “The rental residents keep mostly to themselves; they don’t really bother us. These poor people need somewhere to live too.”

The Sembawang estate was quiet and serene when The New Paper was there yesterday.

The rental blocks are furnished with the amenities that newer, regular HDB flats have, such as a communal rubbish chute and lifts that stop at every floor.

One rental resident, who wanted to be known only as Mr Leong, said: “My three kids go to schools in the area, so it is very convenient for them.”

This 46-year-old said he had to sell his old flat and move in last month after his business ran into some problems. He pays about $90 a month to rent his one-room flat.

Property watchers also told The New Paper there is no cause for concern for those living near rental blocks.

ERA Asia Pacific associate director Eugene Lim said that while there may be a stigma attached to living near rental flats, it’s not proven that other flat-types located near such flats command a lower premium compared to others in that estate.

He said: “The old concept of rental flats may be that they are run-down and not well-maintained, so obviously other flat values in that area may be affected somehow.

“But if these blocks are well-managed and well-maintained, there should be no issues.”

Mr Lim noted that a buyer looking to buy a flat will also evaluate the neighbourhood. And if it is a mixed neighbourhood, that may affect their buying decision.

“I don’t think there’ll be any downward pressure on HDB prices there (in Pasir Ris and Tampines) unless the rental block is a dump,” he added.

At Mei Ling Street in Queenstown, there is an old HDB rental block, Block 151, that dates back to 1968, but it is nestled among some of the most expensive flats in Singapore.

An executive apartment diagonal to the rental block was sold for $755,000 last October, among the highest for executive apartments sold in that area, according to resale figures on HDB’s website.

Mr Eric Cheng, CEO of ECG Property, said some new rental blocks could look even better than existing blocks in an estate, especially if the facade is well-designed.

And the valuation of a flat does not take into account the rental flats in an estate.

Mr Cheng said: “There’s no cause for concern if the town council maintains the estate and block well.

“If you look at the Serangoon Gardens dormitory, the residents there had earlier complained that the prices of their properties will drop.

“But the valuation of the houses there are comparable to others in that estate located further away from the dormitory.”

This article was first published in The New Paper.
By Desmond Ng

The background: Resale flat prices rose by 3.9 per cent in the last quarter of last year, or by 8.2 per cent in the year. From 2007 to 2009, prices have gone up nearly 40 per cent.

Young couples complain that prices are rising beyond their reach. All manner of folk are being blamed for the rise in prices: foreigners, permanent residents, rich private-property owners who buy HDB flats for rental income, or people who ‘flip’ HDB resale flats within a year. The HDB will have its work cut out coming to grips with this issue.

But actually, what exactly is the issue? Are rising HDB resale prices an issue?

Surely not to the majority of 880,000 or so households who already own an HDB flat, to whom rising flat prices means rising asset values.

Rising prices are an issue to new households and those with no roofs over their heads. Who are they? The 25,000 couples who marry each year. Also, over 7,000 couples in a year file for divorce, which means some 7,000 ex-spouses may be searching for a new home. In 2008, nearly 80,000 people were granted PRs and another 20,000 were conferred citizenship. Presumably, many among them will want to buy a home.

All in, that’s about 132,000 people a year who may be looking for a home. Of these, about 10,000 may get a subsidised new HDB flat. About 20 per cent may go for private property. That still leaves about 95,600 people who may be eyeing an HDB resale flat.

But only a fraction of them will actually buy a resale flat, since some would already own homes, or may decide to rent or live with others. The total number of resale transactions last year was 37,205, an increase of 31 per cent over 2008.

The overall picture suggests rising demand for HDB resale flats spurred in part by immigration. PRs own less than 5 per cent of HDB flats, but last year 20 per cent of resale transactions involved them.

But if one looked at the issue rationally, high resale prices is not a Singaporeans versus non-citizens issue. In fact, old citizens should cheer PRs for boosting demand, and other PRs and new citizens should rue them for the same reason.

Is it speculation that is driving HDB resale flat prices up? HDB rules now allow a buyer of a resale flat to sell it after one year, if he did not take advantage of any government grant in buying it. The flat can be rented out after three years.

The public discussion on the ’speculative’ element in resale flats throws up two possibilities: one, some people are buying and selling HDB flats for profit, or ‘flipping’ as it is called; or that some people are buying HDB flats with the sole purpose of renting them out.

Is there evidence of ‘flipping’? Property agents have said there is hardly any. In its review, HDB should track and make public the number of people who churn resale flats for a profit from say, above 12 months to 18 months. If there is evidence of such a trend, and there are grounds to think such transactions are causing a bubble in resale flat prices, then HDB should indeed tighten the rules to weed out such short-term profit-driven demand.

(Declaration: I own an HDB resale flat I hope to sell one day at a price higher than what I paid for it - like the other 879,999 HDB flat owners.)

What of the charge that some people are buying HDB flats for rental income?

Actually, this is patently the case - and rightly so. HDB’s 2008/09 annual report states there were 22,754 flats that were sublet. No one knows how many more flats are being sublet illegally. A number of HDB flat owners will also be renting out some bedrooms for income.

HDB flats may be built for owner-occupation - hence, the eligibility criteria on citizenship, formation of family, income limits, and the five-year time bar before they can be sold.

But HDB flats after five years are bought and sold like any other commodity, with buyers concerned about investment value, resale potential, potential rental income and financing costs.

The HDB resale market has been gradually freed up over the years. Right now, an HDB flat makes for a decent investment. A four-room flat in Clementi has a median price now of $415,000 and can fetch $2,000 a month in rent - a gross yield of 5.78 per cent, much higher than bank deposits.

Rather than frown on such returns, we should acknowledge that good rental yields speak well of the health of the resale market. An HDB resale flat buyer who does not get a government grant or take up a subsidised HDB loan, gets no subsidy for his purchase. If he is prepared to abide by HDB rules and lives in the flat for three years before letting it out, there is little justification to deny him the income.

The way I see it, rising resale flat prices reflect genuine pent-up demand spurred by high levels of immigration. They do not seem to be driven by speculative frenzy. Those priced out of the market may find it emotionally satisfying to finger PRs or speculators as scapegoats than to acknowledge that the market is moving faster than one’s income and savings can keep up with.

It is important for HDB to respond appropriately to what appears to be a short-term spike in demand, which should resolve itself, since the flow of foreigners will slow. It should not over-react by tightening the rules.

Spooking the HDB resale market will dampen the private property market and cause a fall in asset values of HDB households, affecting their sense of wealth and their sense of retirement security.

This article was first published in The Straits Times.
By Chua Mui Hoong

Home seekers can look forward to another 1,000 BTO flats in Sembawang and Sengkang next month. This pace of release is in line with HDB’s plans to offer around 7,000 BTO flats in H1 2010, and 12,000 BTO flats for the whole year.

Robust demand for public housing has spurred the launch of more new flats. Last month, HDB’s offer of 1,291 new BTO flats in Choa Chu Kang and Hougang was more than five times subscribed, with 7,077 applications pouring in. Subscription rates were particularly high for the four-room flats available.

PropNex foresees continued strong demand for flats. The two new BTO projects - Punggol Crest and Treegrove @ Woodlands - could be ‘well oversubscribed by at least six times each’, it said. Applications will close on Feb 24.

Punggol Crest at Punggol Place will offer 750 standard flats, of which 36 per cent or 270 will be four-roomers. There will also be 240 two-room flats and 240 three-room flats.

Punggol Crest will be near the Punggol MRT and LRT stations, bus interchange and the future Punggol Town Centre. In its immediate vicinity will be the the Tampines Expressway, a proposed mosque and secondary school.

Buyers can expect to pay $247,000 to $301,000 for a four-room flat at Punggol Crest. According to HDB, the price of a comparable four-room resale flat in the vicinity would be $330,000 to $377,000.

Over at Woodlands Avenue 7, Treegrove @ Woodlands will have 784 premium flats. These are units which come fitted with floor finishes.

Of these, 47 per cent or 372 units will be four-roomers. There will also be 192 studio apartments and 220 three-room flats.

Treegrove @ Woodlands will be next to 888 Plaza and near Causeway Point. It will also be mid-way between Woodlands MRT station and Admiralty MRT station.

A four-room flat at the estate would go for $228,000 to $288,000. HDB notes that the price of a comparable four-room resale flat in the area would be $305,000 to $371,000.

PropNex CEO Mohamed Ismail expects the take-up rate for Punggol Crest to be higher as it offers a smaller number of units. ‘Punggol residents can also look forward to greater asset appreciation in about 10 years’ time, when the Punggol Master Plan reaches fruition,’ he added.

From recent resale transactions involving four-roomers in Punggol, PropNex also observed that ‘the median resale price is inching upward, so the market is still buoyant, compared to the last quarter’.

HDB has launched 2,825 new BTO flats in January and February. It will release more flats monthly in the next few months.

This article was first published in The Business Times.
By Emilyn Yap

But Grade A office rents in Singapore suffered the biggest fall in 2009 across all Asia-Pacific markets tracked. Rents here slid 46.2 per cent from Q4 2008, Colliers says in its latest Asia-Pacific office market overview.

Rents fell 24.2 per cent year on year in Hong Kong and 19.5 per cent in Tokyo.

‘Because of the steeper fall in Singapore, the gap in rents between Singapore and Tokyo and Hong Kong widened to 88.5 per cent and 46.7 per cent respectively in Q4 2009,’ said Colliers’ director of research and advisory Tay Huey Ying.

In Q4 2008, rents in Singapore were 32.1 per cent lower than those in Tokyo and just 7 per cent shy of Hong Kong.

On the other hand, the cost of occupying Grade A office space in Singapore versus cities such as Sydney, Ho Chi Minh City, Perth, Mumbai and Delhi has narrowed. Occupancy costs in Singapore were 30.3 to 115.1 per cent higher than those in these cities in Q4 2008, but the difference has fallen to 3.1 to 29.1 per cent in the past year.

‘This has greatly increased the competitiveness of Singapore vis-a-vis the rest of the region,’ said Ms Tay. ‘With the Asia-Pacific leading the world out of recession, the competitive office rents in Singapore are now a compelling reason to invest or locate operations here.’

In general, office leasing markets across Asia-Pacific are bottoming out. The pace of rental decline narrowed to less than one per cent quarter on quarter in Q4 2009.

Colliers attributed this to strong rents in cities such as Hong Kong and Chengdu, where the supply of new space remained tight and demand increased.

In Singapore, office leasing activity increased in Q4 2009 as businesses started to prepare for the upturn. Rents declined just 0.4 per cent from Q3.

Looking ahead, average office rents in the region are expected to grow again towards the end of 2010, Colliers said.

This article was first published in The Business Times.
By Uma Shankari

Grade A office occupancy costs in Singapore fell to US$53.78 (S$76) per sq ft per year in the fourth quarter of last year, down about 46 per cent from US$97.30 psf in the same period in 2008, said Colliers International’s latest Asia-Pacific office market overview.Costs are projected to stabilise at US$53.19 psf this year.

Hong Kong, which saw yearly Grade A occupancy costs fall 24.2 per cent from US$104.14 psf to US$78.92 psf, registered the next highest fall in office rents. The same costs in Tokyo slipped to US$101.39 psf, down from US$128.50 psf a year ago.

‘We are now much cheaper than Hong Kong,’ said Colliers International’s director of research and advisory Tay Huey Ying. ‘A year ago, though we were also ranked third, we were not that far off from Hong Kong and Tokyo.’

The gap in rents between Singapore and the top two most expensive cities - Tokyo and Hong Kong - has since widened to 88.5 per cent and 46.7 per cent respectively, from 32.1 per cent and 7 per cent previously, said the report.

‘With Asia-Pacific leading the world out of recession, the competitive office rent in Singapore now offers businesses a compelling reason to invest in or locate their operations here,’ said Ms Tay.

This article was first published in The Straits Times.
By Joyce Teo

‘The fair value writedown and impairment charge are non-cash items,’ OUE said in a statutory filing with Singapore Exchange.

‘Notwithstanding the above, the board wishes to inform that the group’s business and operations continue to have a positive contribution to the group,’ it added.

OUE in its statement did not identify the properties involved in the writedown and impairment charge. BT understands the development property that suffered an impairment charge was Grangeford Apartments at Leonie Hill Road while the investment property written down would probably be OUB Centre at Raffles Place.

It had slipped into the red for Q2 2009 due mainly to recognition of impairment losses for two residential development properties, The Parisian and The Grangeford. For the first nine months of last year, OUE posted a net loss of $27.4 million, against a net profit of $45.8 million for the previous corresponding period.

In October last year, the group sold the former Parisian site at Angullia Park for $283 million to China Sonangol Land.

According to some analysts, many of OUE’s other assets are also on the market – including 50 Collyer Quay, an 18-storey office development on the former Overseas Union House site; Mandarin Orchard hotel and Mandarin Gallery along Orchard Road; and Grangeford Apartments.

When contacted, OUE’s chief executive Thio Gim Hock said: ‘We are not actively looking for buyers; it’s more a case of us receiving unsolicited offers, mostly initiated by property brokers.’

‘However, if we receive offers too good to refuse for any of our assets, we’ll consider selling. We’re not sentimental about our properties,’ he added.

For 50 Collyer Quay, the group’s priority for now is to actively look for tenants. The office block is expected to receive Temporary Occupation Permit in Q4 this year, according to Mr Thio.

‘We’re in the process of signing up a few tenants,’ Mr Thio said, declining to elaborate further. BT reported in October last year that law firm Drew & Napier was in discussions to lease space at 50 Collyer Quay. It is currently at Ocean Towers.

50 Collyer Quay, which will have about 400,000 sq ft net lettable area, could be worth about $900 million, some property consultants suggest. The lease on the site has been topped up to a fresh 99-year term.

OUE is controlled by the Riady family’s Lippo group and Malaysian tycoon Ananda Krishan Tatparamandan.

On the stock market yesterday, the counter ended nine cents lower at $9.

This article was first published in Business Times.

CapitaMalls Asia (CMA), owner of the riverfront food and beverage development, announced yesterday that the cash sale to CMT was in line with its strategy of recycling capital to reinvest elsewhere.

CMA chairman Liew Mun Leong said there was a need to revamp the firm’s portfolio to free up capital for new opportunities, such as Asia’s shopping mall sector, which had ‘tremendous growth potential’.

‘The sale further strengthens CMA’s investment strategy of acquiring new malls for higher returns. We continue to focus on expanding our presence in Singapore, China, Malaysia, Japan and India,’ he added.

The price agreed represents a 2.3 per cent premium over the valuation of $262 million made at the end of last year.

CMA chief executive Lim Beng Chee said Clarke Quay’s growth potential was best realised through CMT.

CMT - which is managed by external manager CapitaMall Trust Management Limited (CMTML), a wholly-owned subsidiary of CMA - said yesterday that it had the financial flexibility and capacity to fund the transaction that is targeted for completion by July.

CMTML chairman James Koh said the purchase of Clarke Quay, which sees more than a million local and overseas visitors per month, would allow CMT’s unitholders to capitalise on the growing lifestyle and entertainment demand.

‘Since the completion of its major refurbishment in late 2006, Clarke Quay has been successfully repositioned as one of the top entertainment zones in Singapore,’ he added.

The acquisition will increase CMT’s asset size to $7.6 billion, cementing its lead as Singapore’s largest Reit by asset size and market capitalisation.

CMTML chief executive Simon Ho said the opening of the integrated resorts is expected to boost tourist arrivals, and the improving economy, together with rising consumer confidence, would boost discretionary consumer spending.

‘Clarke Quay increases the number of properties we have catering for discretionary consumer spending, and enables us to ride on the long-term remaking of Singapore as Asia’s leading convention, exhibition, leisure destination and services centre,’ he added.

He noted that some current leaseholders were paying below-market rent and there was potential for rent hikes when leases are due for renewal.

CMA subsidiaries - CapitaMall Trust Management and CapitaLand Retail Management - will continue to act as Clarke Quay asset manager and property manager respectively, with Clarke Quay remaining in CapitaMalls Asia’s portfolio.

This article was first published in The Straits Times.

To buy landed property - bungalow, semi-detached house, terrace house and town house, whether freehold or leasehold - PRs need to apply for a permit from the Singapore Land Authority (SLA). They will be assessed on their economic contributions - qualifications, expertise and investments here.

PRs cannot sell their landed property within three years of buying it. After three years, they may sell it to a Singaporean or another PR, who has to seek SLA’s permission for the purchase. PR owners of landed properties are also not allowed to rent them out under the Residential Property Act. Offenders are liable to a maximum fine of $5,000 or a jail term capped at three years, or both.

PRs are allowed to buy resale HDB flats - but not new flats - without housing and mortgage subsidies.

Resale HDB flats bought without a CPF housing grant and with a bank loan can be sold one year from the date of purchase. To sub-let the whole flat, the PR must have lived in it for three years.

Owners of HDB flats are allowed to sub-let rooms if they own a three-room or bigger flat. There is no minimum occupation period for renting out rooms. Owners have to adhere to the number of tenants allowed by the HDB.

No prior approval from HDB is required for the sub-letting of rooms. But with effect from tomorrow, flat owners who sub-let rooms have to register with the HDB within seven days of doing so.

This applies to all, not just PRs. Those who illegally sub-let entire flats may have their units taken back by the HDB or may have to pay a fine of $1,000 to $21,000.

This article was first published in The Straits Times.
By Irene Tham

They question the current relevance of trust structures and point to Britain and the United States, which have shaped Reits to run along company law principles.

Reits are investment instruments listed on the Singapore Exchange that allow small investors a relatively cheap way to invest in property. They typically own properties of a particular type, such as shopping malls or medical facilities, and earn income from rent. Unitholders receive regular payouts similar to dividends.

Ms Lee Suet Fern and Ms Linda Foo, writing in a special issue of the Singapore Academy of Law Journal published last week, suggest the current trust framework underpinning

Reits here may not be suitable in future. Ms Lee is senior director of Stamford Law, where Ms Foo also works.

They argue that a corporate structure would also cut the liability for unitholders in the event of insolvency, compared with the trust structure.

In Reits, corporate taxes are minimised if most taxable income is distributed to unitholders. This makes Reits a high-dividend yield play relative to other asset classes such as shares or property unit trusts, said an industry source.

As of last October, 21 property-related investment trusts with a market value of about $26 billion were listed here. In making out the case for corporatisation, the authors point to the US practice in which more than 70 per cent of Reits are constituted as state law corporations.

British policymakers also mandated the corporate form for Reits and eschewed the unit trust option entirely.

In contrast, Reits here are organised mainly as unit trusts, a form of collective investment scheme. But among other things, Reits in Singapore are administered by trustees as well as managers, with each bearing different roles and requirements.

A corporate form would remove this division of roles and the potential overlaps and conflicts from ‘multiple masters’. It would also better protect creditors in the event of an insolvency of a Reit or its trust.

The authors argue that the regulation of Reits here shares many features with that of companies. They concede there may be a serious tax disincentive in transforming Reits into companies, but point to the examples of the US, Britain and Australia where ‘the governance of Reits may be aligned with company law principles without withdrawing tax transparency’.

‘Ultimately the authorities will have to discern the appropriate balance between market development and the protection of investors and creditors,’ they wrote.

Industry sources said the article is timely as the global credit crunch last year showed up difficulties for Reits, and corporatisation held potential benefits.

Financial adviser Roy Varghese said that in a unit trust, the manager picks the securities and the trustee has specific legal duties outside of investment management.

‘Within a Reit, the lines can be blurred. The unitholder of a Reit will be better served if there is no potential conflict of interest or overlapping of functions,’ he said.

‘It also makes sense that corporatising the structure will help in injecting cash flow in the operations of the real estate fund, given that Reits are viewed as a source of passive income for unitholders.’

This article was first published in The Straits Times.

The 15-year leasehold site has an area of about 0.62 hectare and a maximum permissible gross floor area of about 9,200 square metres.

The minimum price for the site is S$9.33 million.

Since October 2008, the land parcel was made available for sale through the Reserve List System. Under the system, a site would be released for sale only if a bid with an acceptable minimum price is received.

Two weeks ago, URA said it had accepted an application from a developer to put up the site for sale.

In October 2008, URA had rejected a sole bid for the Mohamed Sultan site as the price offered was deemed to be too low. Back then, RSP Architects Planners & Engineers had put in a bid of S$4.65 million.

The site was subsequently placed on the Reserve List. The current tender for the site will close on March 18.

This article was first published in Channel NewsAsia.
By Mok Fei Fei