Singapore Property News This Week #187

Residential

Blackstone waiting 5 years for better returns from Sentosa deal

Blackstone Group, which is taking part in the financing of luxury Singapore properties, is prepared to wait up to five years for better residential transaction prices. Together with Malaysia’s CIMB Bank, both have agreed to finance several property development projects owned by City Developments this week.

Both Blackstone and CIMB will receive a fixed 5% coupon for 5 years and other cash flows from the Sentosa project, as well as proceeds from the sale of luxury residential units on Sentosa. Blackstone is taking advantage of a slowdown in the Singapore housing market following government curbs since 2009, and has accelerated investments in Asia this year. According to Kishore Moorhani, managing director of Blackstone’s Tactical Opporunities Group, the property investor will not be satisfied with just a 5% return on its Sentosa investment and instead, are targeting the long term potential of these residential properties.

The Singapore government has been controlling the property market since 2009. Residential prices fell 0.7% in the 3 months, culminating in a 4% drop this past year. Condo prices in Sentosa are close to their lowest level since 2006 end according to Maybank Kim Eng Securities. Figures from URA shows that some house prices have halved since 2012.

(Source: Business Times)

Increased flat supply leads to increased HDB deficit

The Housing and Development Board’s net deficit increased to S$1.97 billion when its fiscal year ended in March 2014 as it spent more to increase the supply of public flats. In the previous year, its net deficit was S$797 million

The net deficit in fiscal year 2013/2014 was caused by a S$1.93 billion shortfall on its home ownership programme, a result of more BTO projects being awarded and higher development costs.

HDB built 16,900 residential units in FY13/14, 46% more compared to the 11,500 built in the previous year. HDB’s annual deficit is fully covered by government grants. Besides government grants, HDB operations are also funded by government loans as well as bonds.

(Source: Business Times)

Commercial

Increased transparency for retail rental expected soon

Retailers and landlords can expect greater retail rental transparency after the details of the Fair Tenancy Consideration Framework are revealed. This framework consists of three components: data transparency, education and awareness, as well as a mediation process.

Data transparency will make retail rent data transparent, according to Kurt Wee, president of the Association of Small and Medium Enterprises (ASME). ASME proposed greater transparency via availability of more rent details, but full transparency will be difficult to achieve.

Education and awareness consist of making available contract templates, as well as a series of guides which tenants can refer to in the event of uncertainty, as well as helping them understand the terms behind their contracts.

(Source: Business Times)

Watershed year as investment sales slump to S$17-18 billion

Investment sales of property this quarter are at their lowest since the global crisis, with previous year sales reaching S$30 billion. According to Ian Loh, head of investment and capital markets at Knight Frank, this slump can be attributed to expectations of rising interest rates and a persistent lack of confidence caused by the total debt servicing ratio framework introduced in late June 2013.

Desmond Sim, CBRE head of research, Singapore and SEA suggests that the decreased contribution of investment sales deals from the public sector can also be due to a decreased number of residential sites on the confirmed list of Government Land Sales programme this year.

Steve Ming, deputy director at Savills Singapore predicted similar lacklustre performance for 2015 if there continues to be a lack of new market drivers. Ming expects investment sales between S$17-20billion for 2015. However, despite these grim expectations, Ming believes that Singapore remains of interest as a real estate investment destination locally and globally.

The office sector was the bright spot in the market this year, having reached S$4.8 billion, comparable to last year’s performance of just slightly over S$4 billion. However, this trend is not expected to continue in 2015 as few office buildings are available for sale.

Savills’ analysis of 4th quarter data also revealed another potential point for optimism – residential sales from the private sector increased by 50%, hitting S$460 million. In addition, Savills also report a huge increase in private sector sales of industrial properties from S$180 million in the third quarter of this year to S$1.01 billion this quarter.

(Source: Business Times)

Colliers expects increase in Asian property transactions in 2015

Colliers stated in a recent report that real estate transactions in Asia will probably increase in 2015, driven by greater supply that is finally matching the strong demand. One of the primary drivers is the significant number of property funds that are due to expire in 2015, and hence the assets they need to divest will be added to the supply. This coincides with CBRE’s October report titled “The Great Wave of Fund Expiration”, which describes that a batch of 50 funds are expected to terminate in 2015 and 2016.

Another driver is the increase in new developments in several Asian cities according to Colliers. These properties are more attractive due to their excellent accessibility in terms of transport connectivity.

In terms of demand, increased capital will likely be put to work in Asia as investors increase asset allocations in 2015 due to the attraction of increased stock available for sale at decent prices.

For Singapore, Colliers expects to see more transactions in 2015 compared to 2014. In contrast, Singapore institutions and investors will most probably continue investing overseas to diversify their portfolio.

(Source: Business Times)