The sharp slide in high-end residential property prices is beginning to show up on the radars of serious investors.

From their peaks in the second half of 2007 to the first quarter this year, transacted prices of luxury condos in the prime Orchard Road belt have fallen by about 40 per cent.

This is the steepest islandwide decline in condo prices and the potential buying opportunities that this is opening up are not lost on investors keen on buying multiple units.

Credo Real Estate’s analysis of URA Realis’ caveats shows the average price transacted at St Regis Residences has fallen 38 per cent from $3,411 per square foot in H2 2007 to $2,099 psf in Q1 this year.

At Ardmore II, the average transacted price has slipped 43 per cent, from $3,073 psf in H2 2007 to $1,761 psf in Q1 2009.

Over the same period, Cairnhill Crest’s average price declined 36 per cent to $1,430 psf in Q1 2009.

‘The projects we selected were those that we believed stood as good proxies for their respective locations, and ideally have some history (that is, not launched recently),’ said Credo’s managing director Karam- jit Singh.

‘Transaction volumes were thin in Q1 this year; there were only three luxury projects in the Orchard Road belt with at least two transactions each in the first three months of this year. It’s not an ideal situation, where we would want to pick from a larger basket of transactions. But this study still serves to point towards where the market has been heading,’ he said.

Credo’s analysis also showed that, on average, condo prices in Sentosa Cove in Q1 2009 were about 30 per cent below H2 2007. In the city centre, the average price decline in the same period ranged from 22 per cent (for Icon) to 34 per cent (for The Sail @ Marina Bay).

In what Credo dubs the ‘mid-prime segment’ - covering River Valley, Bukit Timah, Novena/Thomson and Katong - it said average price declines generally ranged from about 20 to 30 per cent. Suburban condo prices generally fell less than 10 per cent.

‘The analysis shows the greater price volatility in the prime districts, which also presents opportunity for greater upside when recovery sets in, compared with suburban condo prices, which tend to move in a more subdued fashion,’ said Mr Singh.

The bigger price drops in the Orchard area have led to a narrowing price gap between the high-end and low-end segments. ‘At some point, not too far from now, buyers will start upgrading from one tier to the upper tier,’ Mr Singh reckons.

‘What the price convergence illustrates is the buying potential of prime properties. It will pay - whether at this point in time or not very far off from now - to bet on prime,’ he added.

The price declines have surfaced on the radars of potential investors - individuals, families and some property funds - who are studying top-notch prime- district projects, with a medium-term investment horizon. ‘Some have capacity to take about 10 units, some 20 units. Some have budgets of more than $100 million,’ according to Mr Singh.

CB Richard Ellis executive director Jeremy Lake said high-net-worth individuals here as well as in a three-hour flight radius from Singapore are among the key players actively looking for property investments here. ‘Some are keen on investing in offices; some in residential - most would go for the high-end, where prices have corrected the most,’ he added.

Mr Singh said acquisitions would be funded largely with equity. ‘Right now, they’re monitoring the big picture - homing in on a good time to make a swoop, which projects, at which prices,’ he added.

Mr Lake adds: ‘Some investors are willing to commit sooner rather than later, compared with a few months ago when everybody wanted to wait and found pricing to be unattractive. Now, some investors think pricing is good enough to go.’

Market watchers say the likelihood of deals being struck will also depend on the threshold of sellers, who could include individuals who are stretched from holding multiple condo units as well as developers of projects with low-cost land or who just want to clear unsold units.

DTZ senior director Shaun Poh says some private bankers are trying to arrange consortiums for high-net-worth clients and are sourcing for property investments of about $20-50 million per consortium. ‘Their main target would be high-end condos; some may also be interested in commercial properties. The banks will also provide financing for the acquisition.The mandate given to these private bankers is to look for opportunities priced 20-30 per cent below current values,’ he said.

However, Mr Singh’s advice is: ‘It’s close enough to the bottom that it makes sense to buy at this stage, rather than buy when it has turned the corner - by which time the number of competing buyers will be greater.’

Source : Business Times - 9 Apr 2009

Click Here To Research On Current Property Market Prices

EL Development will launch its high-end condominium Illuminaire along Devonshire Road this weekend.

Apartments in the 72-unit project will be priced at an average of $1,700 per sq ft.

But because they are small - the entire development consists of one-bedroom and two-bedroom units - the overall quantum buyers will have to fork out will be kept low, said the company’s managing director Lim Yew Soon.

One-bedroom units, which will be 441 sq ft or 463 sq ft, will all cost less than $800,000, Mr Lim said.

And all two-bedroom apartments, which will be 635 sq ft or 721 sq ft, will sell for under $1.25 million.

EL Development decided to go ahead with the launch as ‘we cannot wait indefinitely’, Mr Lim said. ‘We feel the market is slowly moving now.’

Analysts say an estimated 2,100-plus new homes were sold in Q1 - the highest number since the market was hit by the US mortgage crisis in the last quarter of 2007 and more than four times the number of new units sold in Q4 2008.

Despite a pick-up in transactions, luxury apartments are not selling well. Mr Lim said the reason is that most are quite big, which means the amount needed to buy one is quite high. The small units in Illuminaire are ‘more affordable’, he said.

Also on the market soon will be HDB’s design, build and sell project The Peak @ Toa Payoh. A consortium led by Hoi Hup Realty will launch the 1,203-unit project on April 15.

Homes in The Peak will sell for $500-$510 psf on average, said a spokesman for the consortium, which includes Sunway Developments and Hoi Hup JV Development, whose shareholders include Straits Construction and Hoi Hup Realty.

The consortium bought the site from the state for $198.82 million, or $160 per sq ft per plot ratio, in August 2008.

Most flats in The Peak - 802 of them - will be five-room units. There will also be 306 four-room flats and 95 three-room flats. Prices will be ‘affordable’, the spokesman said.

Three-room units will cost from $355,000 to $398,000, four-room units from $468,000 to $582,000 and five-room units from $539,000 to $698,000. There will also be about 24 ‘exclusive’ five-room units costing from $700,000 to $722,000.

The spokesman said the project is expected to be about two to two-and-a-half times subscribed by the time applications close on April 28.

Source : Business Times - 9 Apr 2009

Click Here To Research On Current Property Market Prices

The Inland Revenue Authority of Singapore (Iras) yesterday said it accelerated its annual review of properties to take into account the recent declines in the rental market, and has so far reduced the annual values (AV) of over 100,000 private properties.

A total of 116,200 private residential, commercial and industrial properties were reviewed in the first three months of this year, up from 31,300 properties in the same period last year.

Iras said in a press statement that 99 per cent (115,400) of properties that were reviewed had their AV lowered. This, together with the 40 per cent property tax rebate announced in Budget 2009, will result in the owners of these properties paying 45 to 60 per cent less property tax.

The AV of properties are reviewed yearly by Iras to ensure that they reflect prevailing rental market values for property tax computation.

AV is determined based on the estimated annual market rent the property would fetch if it were let out unfurnished. The property tax rate is 10 per cent of the AV of the property. For owner-occupied residential properties, the rate is 4 per cent.

Of the properties whose AV have been reduced, about 84,900 were private residential properties, while 25,300 were offices and industrial developments.

Iras said some 99 per cent of private residential properties had their AV reduced by between 5 per cent and 20 per cent.

For commercial properties, about 92 per cent of all offices in Singapore had their AV lowered by 10-35 per cent. In the industrial sector, almost all (98 per cent) of the properties assessed had their AV reduced by 5 to 30 per cent.

Iras said yesterday that by Q3 2009, all private properties, including retail properties, would be reviewed.

As for HDB flats, based on current market rentals, their AV should be higher than the existing AV. But with the uncertainties in the HDB rental trends in the coming months, Iras has kept the AV of HDB flats unchanged for 2009. It will however continue to monitor the rental market closely.

Source : Business Times - 9 Apr 2009

Click Here To Research On Current Property Market Prices

Investment property sales shrank in the first quarter of this year to their lowest level since 1998, as fewer transactions of smaller value took place.

According to property consultancy DTZ, sales plunged 58 per cent quarter on quarter to just $153 million in Q1. They were spread over 10 deals, down from 15 in Q4 2008.

The poor Q1 showing is the third-worst ever. During the Asian financial crisis, sales dropped to $107 million in Q1 1998 and as low as $47 million in Q3 1998. Differing price expectations between buyers and sellers are making it difficult to close deals.

Knight Frank’s director of research and consultancy Nicholas Mak said investors are wary because they expect capital values to fall further.

According to DTZ, there is ‘a mismatch in bid-ask prices, hampered by tight credit and expectations of falling rents’.

The residential sector accounted for the largest share or 46 per cent of total investment sales in Q1.

Transactions included the $36 million sale of the four-storey furniture store Le Mercier House on Mohamed Sultan Road.

Two 19th-floor St Regis units also went. But the price was $2,153 per square foot - 21 per cent less than the developer received in June 2006. The office sector made up 34 per cent of Q1 investment sales.

The $27 million sale of Genesis Building in January - the first transaction involving an entire building since August last year - accounted for more than half of sales in this sector.

Investment sales in the industrial sector cooled most, DTZ said. The most significant deal was Premium Automobiles’ $12 million purchase of a showroom site on Alexandra Road.

Major developers, funds and real estate investment trusts were absent from the market in Q1, DTZ said.

All investment sales also took place in the private sector, as government land sales through the confirmed list remained suspended and no reserve sites were triggered.

Although the year got off to a slow start, DTZ’s senior director (investment advisory services & auction) Shaun Poh believes the investment market could pick up closer to year-end, when the economy could improve and lending conditions ease.

‘The market is not short of interested investors with money on hand, looking for prime properties,’ he said.

Knight Frank’s Mr Mak is more cautious about outlook and expects the investment market to stay quiet for the rest of the year. ‘It depends on the length of the downturn,’ he said.

Source : Business Times - 9 Apr 2009

Click Here To Research On Current Property Market Prices

OWNERS could pay up to 60 per cent less property tax after the taxman reduced the value of tens of thousands of sites following the real estate sector’s slump.

The Inland Revenue Authority of Singapore (Iras) recently held its annual review - brought forward in the light of dire market conditions - which found that 99 per cent of assessed properties had their values reduced.

Together with the 40 per cent property tax rebate announced in January’s Budget, owners of these properties will now pay 45 per cent to 60 per cent less property tax.

The values of properties are reviewed by Iras annually to ensure that they reflect prevailing rental market rates for property tax assessment.

Falling property prices and rents had prompted calls for Iras to also reduce property tax in line with market conditions.

The tax authorities reviewed a total of 116,200 properties in the first quarter.

Of the 84,900 private residential sites assessed, 99 per cent had values reduced by between 5 per cent and 20 per cent.

The total reduction in property tax payable for these homes is about 45 per cent to 50 per cent.

Of the 15,600 offices reviewed, 92 per cent had their annual values lowered by between 10 per cent and 35 per cent. This translates to a total reduction of tax liability by 45 per cent to 60 per cent.

And 98 per cent of the 9,700 industrial properties reviewed suffered a loss in value of 5 per cent to 30 per cent, translating to a total reduction of tax liability by 45 per cent to 60 per cent.

Based on current rentals, the annual values of HDB flats ’should be higher than the existing 2009′ ones, but Iras is keeping them unchanged ‘in view of the poor economic conditions and uncertainties in the HDB rental trends in the coming months’.

The taxman said that it would review the values of all private properties, including retail ones, by the third quarter.

Source : Straits Times - 9 Apr 2009

Click Here To Research On Current Property Market Prices

WILL house hunters spend more than $700,000 on a premium HDB flat with some condo-style features in Toa Payoh?

A Hoi Hup-led consortium is about to find out after offering premium five-room flats at its new The Peak project for up to $722,000.

Analysts question whether HDB flat buyers will bite, given that they are constrained by an $8,000-a-month income ceiling and are dealing with a recession.

Next Wednesday, The Peak @ Toa Payoh, boasting 1,203 units in two 42-storey blocks and three 40-storey blocks, will be launched.

The project, at Lorong 1A Toa Payoh, comes under the design, build and sell scheme (DBSS), and offers premium fittings. But unlike private condominiums, these projects do not have facilities such as pools and gyms.

The smallest units - 95 of them - are the 753 sq ft three-room flats. They are priced from $355,000 to $398,000.

The 306 four-room flats of 980 sq ft will go for $468,000 to $582,000.

The next rung up the price ladder are the five-room flats, which mostly go for $539,000 to $698,000, and range from 1,184 sq ft to 1,259 sq ft.

The priciest of the lot are the 24 five-room high-ceiling flats costing between $700,000 and $722,000.

The developer - a group comprising Hoi Hup Realty, Sunway Development and Hoi Hup J.V. Development - said the flats are about $500 per sq ft (psf) to $510 psf on average. A quick calculation shows the price can go up to $594 psf.

A spokesman said The Peak is near Toa Payoh MRT station. And like the earlier City View DBSS project by the same group, The Peak offers an exclusive touch with a card-access security system at all ground-floor lift lobbies.

Buyers will also get large bay windows, Daikin air-conditioning units, built-in kitchen cabinets and wardrobes.

Still, industry watchers note that for the same price, buyers are spoilt for choice in the current market. Experts have said DBSS projects have to be priced lower than private flats as they are essentially HDB flats. They face restrictions such as an income cap, an ethnic quota and a minimum occupation period.

‘Toa Payoh is a mature estate but in the current economy, there will be resistance at above $500,000,’ PropNex chief executive Mohamed Ismail said yesterday.

Resale five-room flats in the area now cost about $450,000 on average while three-roomers go for $260,000 to $270,000 on average, though the latter are more than 30 years of age, he added.

Knight Frank research and consultancy director Nicholas Mak said The Peak’s prices are comparable to those of resale executive condos (EC), which have condo facilities but also face public housing sale restrictions.

For just over $700,000, buyers can buy a private but older 99-year resale condo unit nearby, added Mr Mak.

For the same price as a five-room flat, they can buy a resale EC unit at a more distant location. In the first quarter, 94 EC deals were done at $579,000 on average.

The Peak is the fifth DBSS project. The sixth, in Simei, is expected to be released for sale soon.

Last year, three such projects were launched. City View in Boon Keng, Park Central @ AMK, and Natura Loft in Bishan have since sold the bulk of their units. The latest of the lot, Natura Loft, was launched late last year and has about 30 per cent left to sell, said developer QingJian Realty. Its five-roomers are already half sold, it said.

DBSS projects are now sandwiched in a narrowing gap between HDB resale flat prices and private condo prices.

‘DBSS flats will be relevant again when the gap widens. In the meantime, these developers will just have to do the best they can,’ said Mr Mak.

Source : Straits Times - 9 Apr 2009

Click Here To Research On Current Property Market Prices

INVESTORS are being offered 10 units in the 12-year-old Farrer Road district residential development Gallop Gables at the knock-down price of around $3 million each - complete with a rental guarantee.

The seller is Straits Trading, which has had a year to conduct a strategic review of its assets after Ms Chew Gek Khim’s Tecity group took over as a controlling shareholder.

The firm’s new executive vice-president Eric Teng told The Straits Times the sale is to enable it to invest in distressed assets that may surface locally and regionally - even though the sale itself is being done at a reduced price. ‘This is just our financial discipline. Before you buy something, you should sell something,’ said Mr Teng.

The average sale price per sq ft (psf) is about 23 per cent lower than what Straits Trading was seeking for the units last July.

Gallop Gables is a freehold four-storey 140-unit development near the Botanic Gardens. It has seven low-rise blocks.

For each of the 10 units, Straits Trading is offering a guaranteed rental yield of 7 per cent for two years. It will also absorb the maintenance fee for two years.

The units are fairly big, from 2,800 sq ft to 3,200 sq ft each. The firm said it is offering investors a ‘rare opportunity’ to invest in ‘a solid piece of real estate, with an unprecedented yield of 7 per cent a year or 14 per cent for two years’.

At that kind of yield, the rent should be about $12,000 to $13,000 a month. But right now, the yield for the estate should be only around 4 to 5 per cent, said a property expert who declined to be named.

The firm’s average asking price for the 10 units is $1,156 psf, slightly above the average $1,130 psf registered for two recent deals in the development.

Last July, the firm invited expressions of interest at $1,500 psf, or about $4.5 million each, for 38 tenanted units there. The property market has since deteriorated markedly.

That sale bid had come about three months after Tecity gained control of Straits Trading. Tecity is the parent of a group of investment companies built by the late Tan Chin Tuan, former OCBC Bank chairman - Ms Chew’s grandfather.

He had helped OCBC acquire Straits Trading in the 1950s.

In the 1980s, Straits Trading’s share price was more than $4, almost twice its price between 1995 and 2003. Tecity paid $6.70 a share for Straits Trading.

Yesterday, the shares closed five cents higher at $3.20 each.

In a separate announcement, Straits Trading said Mrs Victoria Tse will be retiring as the senior executive vice-president and group chief financial officer on July 7. She will be succeeded by Mr Eldon Wan, financial controller of Tecity, from yesterday.

It has also appointed Mr Iqbal Jumabhoy, who has more than 20 years of executive management experience, as chief executive of hospitality to oversee its hospitality management arm and hotel assets.

Mr Teng was named executive vice-president of property sales and leasing as well as adviser, corporate communications. He retains his role as adviser to Tecity and CEO of Tan Chin Tuan Foundation.

Mr Teng will oversee the sale of completed residential property owned by the group as well as the leasing of the Straits Trading Building in Battery Road. This office block will be ready by the end of the year and is now about 25 per cent leased.

Straits Trading was founded in 1887. Apart from hotels and property, its other business is in tin mining.

Source : Straits Times - 8 Apr 2009

Click Here To Research On Current Property Market Prices

SINGAPORE continues to be the least corrupt country in Asia but the recession could see a rise in corruption in its private sector, says a Hong Kong-based consulting firm.

This is because with the economy stuck in its deepest recession in years, more businessmen could resort to corruption to make ends meet.

The Political and Economic Risk Consultancy (Perc) made this observation in its latest annual survey of perceptions of corruption in the region.

However, it also noted that the hard times are unlikely to aggravate corruption in the public sector, which is perceived to be low:

‘Foreign investors view Singapore’s ‘clean’ image as an attribute that gives it a competitive advantage over most other countries in the region.

‘Perceptions have been remarkably steady for over a decade, and there is no reason to expect there to be a break for the worse in 2009.’

The survey report, out today, also rated Hong Kong and Japan highly among 14 Asian economies, with Indonesia and Thailand as the most corrupt.

About 1,750 local and foreign executives in the region, Australia and United States were interviewed face to face, by direct mail and e-mail last month.

They were asked for their perceptions of corruption among politicians and civil servants - or political corruption - and to rate the corruption problem in different parts of the system where they lived.

Perc found that within Singapore, the tax authorities were perceived to be the least corrupt, while the private sector received the worst score of 2.0.

But Perc noted that even this was better than scores for other Asian economies. Only the US had a better score of 1.33 on this front.

Professor Neo Boon Siong of the Lee Kuan Yew School of Public Policy said Singapore’s low score suggests private-sector companies resorting to corruption to get business ‘is not likely to be a significant issue’.

‘Integrity and anti-corruption are now widely accepted norms and values in the public sector - this strong ethos will protect it from corruption even in difficult times.’

The Perc report highlighted that what the Singapore Government had done well was to keep the perception of corruption low in the public sector.

It had also fought to maintain the integrity of institutions such as the police and the courts.

Perc however noted that ‘political rivals of the Government do not necessarily agree with these perceptions’.

‘Their argument is that the tactics PAP (People’s Action Party) uses to maintain its dominance over the political system involve excessive interference and favouritism towards a small group of inside elite,’ the report said.

‘However, this is not a view shared by the general population or foreign executives we surveyed.’

Perc also noted that the Government is not cutting back on the size of the civil service in the present crisis, and is stepping up public spending rather than adopting more austere policies.

‘A challenge will be to see that this extra spending is used as it is intended and that individuals with special access do not divert money into their own pockets,’ the report said.

‘However, the Government has good auditing and compliance measures in place to minimise these kinds of abuses.

‘There could well be some mistakes, especially during these difficult times, but if abuses are uncovered there is little doubt that they will be dealt with harshly and publicly.’

The Corrupt Practices Investigation Bureau said recently that on average, about 10 public servants and 100 private-sector employees are arrested yearly for corruption. Offenders face up to seven years’ jail and a fine of up to $100,000.

Perc also observed that civil servants and politicians here are well paid, and in exchange ‘the public expects them to behave beyond reproach when it comes to how they perform their duties’.

‘There is a risk that the high pay in the public sector at a time when private-sector workers are asked to trim their pay or face job losses will cause some resentment that the pain of the recession is not being shared evenly,’ it added.

‘But this is a different issue from corruption, and is likely to be managed by senior executives of state-owned companies and senior politicians accepting voluntary pay cuts to demonstrate their own willingness to share in the pain.’

The Government has said civil servants’ pay is set to drop this year. Salaries of top officials and ministers are forecast to fall by some 20 per cent.

CLEAN IMAGE

‘Foreign investors view Singapore’s ‘clean’ image as an attribute that gives it a competitive advantage over most other countries in the region.’ - Perc, on the country’s reputation in Asia

Source : Straits Times - 8 Apr 2009

Click Here To Research On Current Property Market Prices

THE tightening property market and demand for smaller homes have created a dilemma for the HDB’s design, build and sell scheme (DBSS) - price flats over $500,000 and buyers could stay away.

That price point has been cited as the ‘resistance level’ for home seekers with less cash to spend but a wealth of options in a buyer’s market.

Experts said DBSS homes - public flats designed, built and sold by private developers - are sandwiched in a fast- narrowing price gap between private condominiums and HDB flats.

To move units, these condo-style homes will have to be priced at about $500,000 or less - under an equivalent- sized flat in a private condo - but that may erode any profits for the developers.

‘These are the same people who will buy your resale HDB flat,’ said Knight Frank director Nicholas Mak.

PropNex chief executive Mohamed Ismail agreed: ‘The resistance level of HDB buyers is around the $500,000 level. If they are going to be priced above $450 per sq ft (psf), they may face resistance.

‘Buyers may head for the private market where they can get better value for $500 psf to just below $600 psf.’

Mass-market condos that offer full facilities, such as Rosewood Suites in Woodlands and Caspian in Jurong, have units in that price range. Developers have lowered their prices of some mass-market projects by 20 to 25 per cent while HDB resale prices are also falling, though at a slower pace.

Two DBSS projects are expected to be released for sale this month. The first is a 1,203-unit project in Toa Payoh with three-, four- and five-room flats.

And Parc Lumiere in Simei will have 360 units - 120 four-room and 240 five- room flats. A Hoi Hup-led consortium won the tender for the Toa Payoh site at about $160 psf per plot ratio last August, while Sim Lian won the Simei site at $137 psf last June.

Mr Mak estimated the break-even price of the Toa Payoh project at $430 psf to $460 psf and a bit less at Parc Lumiere - $400 psf to $440 psf.

‘Demand for DBSS flats depends a lot on the price,’ said Associate Professor Sing Tien Foo from the National University of Singapore’s real estate department.

The price has to be much lower than that for private flats as there are restrictions involved, particularly on buyers’ income.

Assuming a buyer has a monthly household income of $8,000 - the ceiling for a DBSS flat purchase - and negligible savings, he could take up an 80 per cent loan over 20 years to buy a DBSS flat costing at most $550,000, he said.

The first DBSS project, launched at the end of 2006 when private condos were moving beyond the reach of many HDB upgraders, was an instant hit.

Five-room units were priced at just $308,000 to $450,000, compared with close to $700,000 and more at the other three DBSS projects. The latest - Natura Loft in Bishan - recently ran big advertisements to market its unsold units.

‘There are pros and cons to buying a DBSS flat. It is good for people who do not want to pay for facilities. Condos have a lot of facilities but you have to pay a higher maintenance fee,’ said Prof Sing.

The problem now is that DBSS flat developers have cost constraints and may not be able to lower their prices to a level attractive to HDB buyers, he said.

These developers rushed into the market during the boom, thinking it was a sure-win product. Their risks are keenly felt now that the market has come down considerably, experts said.

‘At the end of the day, people must remember that DBSS flats are essentially an HDB product,’ said Mr Mak. ‘They will likely go through what ECs (executive condominiums) went through until the market recovers.’

Such condos were very hot at one point before demand slumped. ‘The down market just makes it harder for DBSS to differentiate itself,’ said Prof Sing.

Source : Straits Times - 7 Apr 2009

Click Here To Research On Current Property Market Prices

It was supposed to be Asia’s answer to glitzy Monaco, but plans to remake Sentosa into an island playground where rich foreigners and locals live and play are going to take longer than expected to materialise.

While key hotel projects and the Resorts World at Sentosa integrated resort are largely on schedule, things are not going as well at Sentosa Cove, the stretch of land on the island set aside for mainly residential use.

The plan was for some 2,500 oceanfront villas, waterway bungalows, hillside mansions and upscale condominiums to be built on the 117-hectare site. Earlier projections were that the bulk of the new homes would be ready by 2010.

But industry sources now say fewer than 1,000 homes are likely to be completed by the end of this year, and several developers are expected to delay their projects further.

City Developments, for example, has postponed its $580 million project comprising luxury apartments, shops and a five-star, 320-room Westin Hotel, originally slated to open this year.

One problem is that sales and prices of new homes on the island have dropped sharply in the last two quarters, exacerbated by the number of foreigners leaving Singapore.

Sentosa Cove was popular with foreigners as they could get permission to own land there with relative ease.

‘The bulk of purchasers of luxury homes, both on the mainland and on Sentosa, were foreigners,’ said Tay Huey Ying, director for research and advisory at Colliers International.

Colliers’ data, based on caveats lodged, shows that only one non-landed residential unit in Sentosa was sold in Q4 2008. In the first three months of this year, the number rose slightly to eight.

This is a far cry from transaction volumes at the height of the property boom in 2007. In Q1 2007, some 279 non-landed homes were sold in Sentosa. In Q2 that year, the transaction volume was 243.

Prices have also come down. Colliers’ data shows that the transacted price of non-landed properties at Sentosa Cove averaged $1,318 per square foot (psf) in Q1 2009 - down 45.8 per cent from the peak average of $2,431 psf recorded exactly one year ago in Q1 2008.

It should be noted, however, that these averages are based on small transaction volumes of eight units for Q1 2009, and 33 units for Q1 2008.

Occupancy levels are low too. Even for properties that are completed and fully sold, not every unit is occupied, said Nicholas Mak, director of research and consultancy at Knight Frank. At the fully sold The Berth by the Cove, which obtained its temporary occupation permit in 2006, occupancy is at 93-94 per cent, but market watchers say islandwide, the occupancy levels are much lower.

The picture is, however, somewhat brighter for other new and upcoming developments on the island.

Luxury hotel Capella Singapore, which opened its doors last week, is seeing strong demand - despite the fact that room rates start at $750. ‘Response in our first week has been very positive, with an average of about 70 rooms per night,’ revealed general manager Michael Luible. The hotel has 111 rooms.

Mr Luible acknowledged that the hotel would not escape the effects of the economic slowdown, but pointed out that its guests are high net worth individuals who will continue to travel. ‘We will, of course, monitor the economic situation carefully and plan our strategies accordingly,’ he added.

Resorts World at Sentosa remains on-track for its soft opening, which will see Universal Studios, four of its six hotels as well as the casino ready in Q1 2010.

The four hotels - Hotel Michael, Maxims Tower, Festive Hotel and Hard Rock Hotel - will add about 1,350 rooms to Singapore’s inventory. The rest of the resort, which includes a spa and Maritime Museum, will open progressively thereafter.

Indeed, hopes are now pinned on the integrated resort which is designed to draw in visitors.

According to Suzanne Ho, deputy director of communications for Sentosa, foreign visitor arrivals have dipped since last September, in line with the downward trend of tourist arrivals into Singapore.

The lower visitor numbers are affecting food and beverage operators adversely. Ken Hasegawa, manager of Japanese restaurant Si Bon, reckoned that revenue has fallen by about 20 per cent recently.

Similarly, at Cool Deck, a bar along Siloso Beach, business is slow. Selina Huang, Cool Deck’s assistant manager, attributed the decrease to falling tourist arrivals. Just three months ago, close to 90 per cent of the bar’s clientele were tourists, most of whom stayed at the Rasa Sentosa Hotel. Now, only 40 per cent of patrons are tourists, she noted.

The decrease in demand is prompting some outlets to modify their pricing. Even il Lido Italian Restaurant has cut prices by about 20 per cent on average in response to a 40 to 50 per cent decrease in revenue over the past three months. Its seven-course meal now costs $120 instead of $180, and it has removed some expensive items - such as truffles and caviar - from the menu.

Source : Business Times - 6 Apr 2009

CONSTRUCTION firms that rely heavily on private-sector projects face tough times ahead as more property developers delay building works.

Even public spending recently earmarked for infrastructure work may not be enough to tide contractors over the slump in demand, as 60 per cent of such spending is for specialised civil engineering works which a typical contractor cannot take on.

The Government recently pledged $18 billion to $20 billion for public infrastructure works this year, and another $15 billion to $17 billion each for next year and 2011.

Of the amount, 40 per cent is for building works such as schools, hospitals and museums, said the Building and Construction Authority (BCA).

The other 60 per cent will go to civil engineering contracts such as extending the Downtown MRT Line and the widening of the expressways.

Industry experts told The Straits Times that contractors which build private residential condominiums will feel the full brunt of the global recession - likely to be after next year, when existing projects are completed.

While the private sector contributed an estimated $20 billion in construction demand last year, this is expected to plunge to between $5 billion and $9 billion this year.

Revenue from private residential projects, in particular, is expected to drop from $6.5 billion last year to just $1.7 billion to $2.3 billion this year, said BCA.

Contractors say this figure could be worse come 2010 and beyond, and it looks like the public pie will not be big enough for everyone.

Mr Lim Yew Soon, managing director of a unit of local builder Evan Lim & Co, noted that civil engineering projects are very specialised, which ‘only very few’ experienced contractors can carry out.

The rest of the industry has to fight for the remaining 40 per cent of public building work, if private-sector projects all but dry up.

A check on BCA’s online directory showed three times the number of contractors listed for building works - 2,751 - compared to 975 for civil engineering.

‘A lot of these private projects have been shelved for obvious market reasons,’ said Mr Desmond Hill, president of the Singapore Contractors Association.

‘Credit is tight, and it’s difficult to get financing to build projects, especially if people are not buying,’ he said.

Those who strictly depend on private- sector projects may begin to get worried next year, he added, and this will have a knock-on effect on the smaller specialist sub-contractors.

Keppel Land, for example, announced recently it has deferred the construction of two projects - Marina Bay Suites in Marina Bay and Madison Residences in Bukit Timah - because of the downturn.

Late last year, a City Developments- led consortium deferred construction of the mega development South Beach on Beach Road, while developers such as GuocoLand have postponed redevelopment plans for acquired collective sale sites, and putting them back on the rental market.

‘It’s obvious private-sector work has dried up, there’s no question about it,’ said CIMB-GK Research construction industry analyst Lawrence Lye.

Even companies which have begun foundation works have been told to stop completely, he said. ‘It’s no surprise that everybody will now try to compete for public-sector projects.’

Firms such as Yongnam will survive the recession better as they specialise in civil engineering, and will have plenty of public-sector work, he added.

Mainboard-listed construction firms Lian Beng Group and KSH Holdings, on the other hand, are contractors that have built numerous condominiums and are now turning their eye to the public pie.

KSH Holdings recently had one of its contracts - Madison Residences - put on hold. Its executive chairman and managing director Choo Chee Onn said that currently, 50 per cent of its projects are private, and it expects to bid for more public ones in the future.

Lian Beng’s executive chairman, Mr Ong Pang Aik, has a similar strategy.

Both are A1-grade contractors, a status which allows them to tender for public- sector construction projects of unlimited value.

Mr Hill estimates that construction industry revenue needs to hit $22 billion a year on average to sustain the building sector. If this demand is not there, firms might start to go under and professionals will get laid off or leave the industry, as in the last construction industry bust following the Sars crisis of 2003.

When the market eventually recovers, the industry might find itself short on local manpower, just as it did in the recent boom, he added.

All eyes are now on the market and whether developers will launch enough projects from the massive land bank they accumulated in the run-up to the 2007 property boom to sustain the industry.

CIMB-GK’s Mr Lye said the bigger, fitter contractors are likely to survive the tough couple of years ahead.

Smaller firms are at greater risk. If their order book is small, all it takes is just a few cancelled or delayed projects to sink them, he said.

Source : Straits Times - 6 Apr 2009