HDB prices likely to go up as unsold flats dwindle

1,600 apply online for 489 flats offered in balloting/walk-in sale yesterday

THE number of unsold Housing and Development Board (HDB) flats is getting smaller, with prices expected to go up.

HDB put up 489 flats in the North and West zones for sale yesterday through its Bi-monthly Combined Balloting/Walk-in sale exercise, and at the end of the day, over 1,600 online applications had been received.

The number of flats offered, however, is significantly smaller than in previous sale exercises.

In April, 1,269 flats were offered in the North and West zones, with 1,172 sold, reflecting a take-up rate of 92 per cent.

In June, 992 flats in the North-east zone were offered and 892 were sold – a take-up rate of 97 per cent.

A spokesman for HDB said: ‘HDB has managed to clear a significant part of its stock of unsold flats; fewer unsold flats are now avail- able for sale under HDB’s Bi-monthly Combined Balloting/Walk-in sale exercises.’

HDB said that it would continue to inject the balance stock from the Built-to-Order (BTO) and Balloting Exercises, and make them available for sale under the bi-monthly sale exercises.

‘However, the total flat supply offered under these exercises is not expected to number into the thousands as it did in the past, given the gradual reduction of the stock of unsold flats,’ said HDB.

HDB would not say if prices have been increased but added: ‘In pricing HDB flats, one major consideration is the affordability of flats. In addition,

HDB also takes into consideration factors such as changes in their market value, arising from factors such as buyer demand and prevailing conditions in the resale markets and, individual attributes of the flats.’

HDB also suggested that buyers look to the resale market, ‘if they are unable to find a new flat that suits their needs and preferences’.

The backlog of unsold flats was estimated at 9,000 in 2006.

Propnex CEO Mohamed Ismail believes that this has dwindled to less than 2,000 units.

Interestingly, Mr Mohamed believes that the previous glut of unsold flats came about because the value of resale flats had dropped to below valuation in the last slump.

Resale prices have, however, been rising, with the latest resale price index registering an increase of 6.5 per cent in Q3 ‘07, quarter-on-quarter.

And ERA Singapore assistant vice-president Eugene Lim believes that the ‘push down’ effect from the private market could price some buyers out.

These price-sensitive buyers will have to wait for the supply of about 4,500 new HDB flats offered under the BTO system, or the 1,500 units through the Design Build Sell Scheme, over the next six months.

Still, Mr Lim does not believe that there is a supply crunch at the lower end of the property market. ‘People are

looking for value though,’ he added.

UOL unit is top bidder for hotel site

It bids $253m for Upper Pickering plot with plan including Soho units

UOL Group subsidiary Hotel Plaza plans to develop small office, home office (Soho) units as well as a 350-400 room hotel on a choice plot at Upper Pickering Street, for which it emerged as the top bidder at a tender yesterday, UOL Group chief operating officer Liam Wee Sin said yesterday.

Hotel Plaza’s top bid of $253.2 million or $805 per square foot of potential gross floor area was 21 per cent higher than the next highest offer of $209 million ($664 psf per plot ratio) from a unit of Park Hotel Group.

The highest of the nine bids at yesterday’s state tender for the hotel site was also at least 40 per cent higher than the prices paid for two hotel sites along Tanjong Pagar Road awarded recently, CB Richard Ellis noted.

Market watchers suggest UOL/Hotel Plaza’s scheme to include Soho units may have given it the edge in outbidding the other contenders at yesterday’s tender. Besides Park Hotel unit Park Plaza, other bidders were:

• City Developments’ unit Glades Properties ($201.8 million);

• Hiap Hoe Superbowl JV ($185 million);

• Hotel Properties’ unit Op Investments ($161.08 million);

• Ho Bee Investment & Multi Wealth Singapore ($153.53 million);

• Amara Holdings & Garden City Hotel Holdings ($151.89 million);

• AAPC Hotels Singapore ($150 million);

• and Soilbuild Group Holdings ($128.82 million).

  Analysts estimate that UOL/Hotel Plaza’s all-in investment in the project (including land and construction) may be around $400 million. The longish plot, with a frontage of about 200 metres along Upper Pickering Street, is right across the road from Hong Lim Park and diagonally opposite One George Street.

  ‘We’re likely to build the hotel on the side closer to One George Street while the Soho tower will be on the other stretch of the plot facing Chinatown Point and Furama,’ Mr Liam said yesterday evening when contacted by BT.

‘The Soho tower may be about 16 to 20 storeys high and will have about 120-150 units, mostly studio units of about 60-80 sq metres (646 to 861 sq ft) each. We may sell the Soho units or just decide to keep them for lease.

‘The hotel is likely to be 16 storeys high and will have about 350-400 rooms. Hotel Plaza will most likely flag it as a Parkroyal. In fact, this will be the flagship Parkroyal hotel in Singapore when it is completed around 2011,’ Mr Liam said.

However, hotel industry watchers pointed to the possibility that the group has the option of targeting a higher tier of the market and flagging the new property as a Pan Pacific hotel, since UOL recently bought this brand.

Industry observers said the Upper Pickering Street site is probably one of the choicest plots allowed for hotel development to have been released by Urban Redevelopment Authority in recent years other than the former NCO Club site in Beach Road.

Hotel Plaza owns two other hotels in Singapore – Parkroyal hotels at Beach Road and Kitchener Road – while UOL directly owns 100 per cent of The Negara on Claymore and has an interest of about 30 per cent in Marina Centre

Holdings, which has stakes in the Pan Pacific, Oriental and Marina Mandarin hotels here.

 

Source: Business Times 11 Oct 07

Office block flipped 3rd time over past year

Dapenso Building sold for $120m, double December’s price tag of $58m

(SINGAPORE) The Dapenso Building, a nine-storey office block in Cecil Street, seems to have changed hands three times in the past year, with ownership recently passing to home- grown property outfit KOP Capital under a deal said to have valued the building at just below $120 million.

This is about double the $58 million the property was sold for in December last year, which itself was more than twice the sum it sold for previously.

KOP Capital declined to confirm the cost of its recent acquisition, which it said it effected by purchasing shares in East Coast (Cecil) Investment Pte Ltd, which took control of Dapenso Building in June this year.

KOP managing director Ong Chih Ching told BT her company plans to spend about $80 million on additions and alteration works at Dapenso Building, adding about four-and-a-half storeys that will result in a 14-storey building with a roof terrace, two basement carparks and a net lettable area of about 113,000 sq ft, which KOP will lease out.

‘This will be a stylish office development, inspired by the Louis Vuitton outlet in Omote-Sando in Tokyo,’ she said.

The plot is zoned for commercial use with an 11.2 plot ratio.

KOP’s all-up investment of about $200 million works out to almost $1,770 psf based on the proposed net lettable area of 113,000 sq ft. Work will start in Q1 next year and is expected to take about 15 months.

Ms Ong, a lawyer by training, runs KOP with her fellow shareholder and executive director Leny Suparman. A third shareholder, another lawyer, is a silent partner.

In August, a KOP Capital-Hwa Hong joint-venture bagged URA’s maiden transitional office site next to Newton MRT Station. Since then, Dubai Investment Group has joined the consortium, taking a 45 per cent stake, leaving Hwa Hong and KOP with 50 and 5 per cent stakes respectively, according to an announcement by Hwa Hong last week.

The all-up investment in the project is expected to be about $90 million and the four-storey office development, with about 150,000 sq ft net lettable area, is expected to be ready in the second half of next year.

KOP also has an equal joint venture with Emirates Tarian Capital, a unit of Emirates Investment Group, which is developing two luxury residential projects in Singapore – the 58-unit Ritz Carlton Residences in Cairnhill on the former Horizon View site, and a 56-unit project on the former Hotel Asia site in Scotts Road. The latter project will feature two carpark lots housed within each apartment.

Ritz Carlton Residences is slated for launch next month while the Scotts Road project will come on the market early next year.

Ms Ong says KOP is keen on more projects in the residential and office sectors in Singapore. ‘We shall continue to look for more office blocks that we can upgrade to trendy, boutique offices, but we’re also interested in investing in bigger office towers in the CBD that may not require much sprucing up,’ she said.

Earlier this month, KOP bought East Coast (Cecil) Investment Pte Ltd, a company formed in June this year by Alvin Ng and Kim Seng Holdings to purchase Dapenso Building, for $96 million from Remarkable Investment.

Remarkable, believed to be linked to Hong Kong investors, bought the building in December last year for $58.4 million from Hotel Royal, which bought it in 2004 for $27 million from Bank Negara Indonesia.

 

Source: Business Times 11 Oct 07

Rising rents are now a business challenge

Demand and supply mismatch has caused office rentals in the CBD to skyrocket

OFFICE rentals in the Central Business District (CBD) have been climbing relentlessly as a result of the demand and supply mismatch. Conversion of buildings for residential use and the redevelopment of ageing office blocks such as Ocean Building and Overseas Union House further exacerbate the office supply crunch.

The high demand for office space, which is propelled by financial institutions and business services, continues to drastically outpace new supply. During the first half of this year, supply of office space decreased by about 290,000 sq ft due to the conversion of office space for other use. As a result, the market could not keep up with the 1.29 million sq ft of new demand.

The islandwide occupancy rate for office space rose to a 10-year high of 92 per cent, while Grade A office space in the CBD stood at an almost full occupancy rate of 99 per cent.

In a bid to ease the current office supply crunch, the government has came up with ’stop-gap supply-side’ measures such as disallowing the conversion of office space for other uses until the end of 2009, releasing more land for office development under the Government Land Sales programme, as well as offering vacant government buildings for lease as offices.

As most of the major office developments such as Marina Bay Financial Centre (MBFC) will only be ready from 2009 onward, the demand-supply imbalance will continue for the time being. Rental hikes for better quality office space are expected.

Those that are feeling the heat are the smaller and medium-sized companies – both local and multinational corporations (MNCs). They have been leasing prime office space in the CBD area and are caught out by the spike in rentals. To them, coping with rising rentals represents a genuine business challenge.

Despite escalating rentals, foreign investment banks continue to snap up large office floor plates for expansion or relocation of their global operations hub. These financial institutions are eager to set up new offices in Singapore to meet the demands of Asia’s unprecedented growth in wealth management. One example is Standard Chartered Bank, which signed one of Singapore’s largest office-leasing deals in April. It leased about half a million sq ft of office space, equivalent to 24 floors at MBFC that is slated for completion in 2010.

Major office projects under development and expected to be up in the market in 2007 and 2008 include VisionCrest, Wilkie Edge, 200 Newton and Merrill Lynch Harbourfront, which is already fully leased.

Amid the current office property boom, one can still find cost-effective commercial rental options.

The Singapore Land Authority (SLA) has been releasing vacant state properties and putting them up for lease as offices. A few successful bidders have refurbished the existing sites for renting out to corporate office users. The current rental for these space ranges between $4.00 and $8.50 per sq ft (psf).

Closer to the CBD, 150 Cantonment Road and 341 River Valley Road are expected to be ready for occupation in the final quarter of this year. 150 Cantonment Road has a smaller floor plate of about 6,800 sq ft per floor, while 341 River Valley can cater to tenants which need floor plates of about 50,000 sq ft.

Another spot of interest is the former ITE Pasir Panjang site at 991 Alexandra Road. This site, largest of all the properties released by SLA, can be converted into eight modern low-rise office blocks ranging from one to four storeys and offices ranging from 5,000 sq ft to 41,000 sq ft. Capitalising on the size, the successful bidder, Richzone, plans to create a self-sufficient office environment, complete with cafe and gym, decorated with a lush landscape that is different from a typical city office. This property will be ready for occupation in the first quarter of 2008.

On the other hand, some companies have decided to renew their contracts at higher rents. To cope with expansion, they have to rearrange their office space by reducing the size of workstations and/or decreasing filing space.

Others opt for relocation, even though it is a less preferred choice, in which a number of them split their operations - the main office remains in the CBD while operation personnel are relocated to the fringe areas or regional centres.

Wrapping up, rising office rental is a by-product of a buoyant economy. Operating costs are certainly higher as a consequence but so are more opportunities to generate revenue. At the end of the day, the effects of the existing office supply crunch are only short-term and they will ease as developments begin to come on stream. In the meantime, companies can help themselves by exploring all possibilities, and the good news is that cost-effective rental options are not lacking.

 

Source: Business Times 11 Oct 07

En bloc site goes on sale for $2,800 psf ppr

WESTWOOD Apartments, the first luxury collective sale site to be launched after the recent changes to collective sales rules and the US sub-prime crisis, has an indicative price tag of $488 million.

This works out to $2,800 per square foot per plot ratio (psf ppr) for the 62,179 sq ft site on Orchard Boulevard.

Marketed by Savills Singapore, its director of investment, Steven Ming, believes the price reflects the site’s proximity to Orchard Road and the surrounding luxury residences such as the St Regis Residences, Parkview Eclat, and Orchard Residences which have seen prices transacted in excess of $4,000 psf in recent months.

The site can be built up to 20 storeys and yield around 69 units of condominium apartments of 2,500 sq ft, added Mr Ming.

If the indicative price is achieved, Westwood Apartments could set a new benchmark price for collective sales here.

The present record holder is The Ardmore, acquired by SC Global in June for $262 million or $2,337 psf ppr.

Savills Singapore is also marketing Welkin Mansions in River Valley. Director of investment projects, Suzie Mok, expects the 26,000 sq ft site to fetch $1,800 psf ppr. This works out to be around $130 million.

The site can be built up to 36 storeys and yield about 48 units of around 1,500 sq ft.

Another unusual site that has been put up for sale is Northshore Bungalows in Ponggol.

The existing development comprises 20 units of bungalows and two plots of bungalow land with swimming pool and a clubhouse.

The 129,585 sq ft site has a plot ratio of 2.1 and is zoned for 2-storey bungalows.

Marketed by United Premas Ltd, Northshore Bungalows has an indicative price of $92.4 million, excluding development charges of $14 million.

United Premas reckons that the site can potentially accommodate about 72 units of resort-style strata titled bungalows which can be built up to two storeys with an attic, a basement and two basement car park lots.

 

Source: Business Times 11 Oct 07

World’s wealthy still eyeing property

They are undeterred by the market turmoil triggered by the US sub-prime crisis

(GENEVA) The wealthy have lost none of their appetite for property despite the market turmoil triggered by the sale of risky sub-prime mortgages in the US, according to some of the world’s top private bankers.

Clients of wealth managers are, however, on the lookout for the next big areas of growth and want products that will enable them to reduce their exposure to any one property or market.

‘We’re seeing heavy levels of investment in property in Hong Kong (and) throughout Asia,’ said Peter Flavel, global head of private banking at Standard Chartered. ‘You can’t get office space in Singapore, you can’t get it in Dubai.’

Speaking at the Reuters Wealth Management Summit, Mr Flavel said there was a ‘group of Asians that love real estate’ and that their ardour showed no sign of fading. ‘They’d see the situation in America as specific to America and the situation in the UK as specific to the UK,’ he added.

Samir Raslan, head of Citibank’s wealth management operations in central and eastern Europe, Middle East and Africa, said his clients also remained alive to potential opportunities in world real estate markets.

‘We haven’t seen any change in our clients,’ he told the summit held at Reuters offices here.

Nicolas Cagi Nicolau, global head of structured product solutions at SG Private Banking, said demand so far in 2007 had been particularly strong.

In Ireland, where fortunes have been made on the back of the country’s decade-long property boom, a fast-cooling domestic market and recent global market turmoil may have had a short-term impact, but investors’ love of property is intact.

‘All that we may be seeing is that people are just waiting to see what may well happen either domestically or internationally, but the appetite for further investment is undoubtedly there,’ said Mark Cunningham, managing director of Bank of Ireland Private Banking.

He said his main problem was persuading Ireland’s growing ranks of self-made millionaires to diversify into assets other than real estate. ‘The first love has always been property and will continue to be property for a lot of these people.’ In Spain, which like Ireland is experiencing a rapid cooling in its property market, the wealthy remain committed to real estate, although not necessarily in their own country.

Daniel de Fernando, head of asset management and private banking at Spain’s BBVA , said a new product offering clients a chance to invest in the Mexican property market had proved particularly popular. ‘People are asking us for more ideas on that front,’ he said of a fund bought into by 60 people within two weeks of its launch at a minimum investment of 2.5 million euros (S$5.2 million) each.

In the Netherlands, property also continues to be popular, according to Bernard Coucke, deputy chief of private banking at ING Groep. ‘On the contrary, more and more programmes are being set up, not only in residential but also commercial. Why? Because, for instance in the Netherlands, demand is high . . . and I think it will continue to go up.’

For some rich investors, however, there is a growing belief that other assets can offer better returns.

‘I think that the appetite for real estate is decreasing a lot,’ Paolo Molesini, head of private banking at Italy’s Intesa Sanpaolo said of a country where up until now the wealthy have held about 70 per cent of their assets in property.

‘Property costs a lot and gives you a very, very low revenue . . . There is no equilibrium from the price of the asset and the earnings that you can get out of it.’ Mr Molesini said his clients were looking to invest in foreign property, particularly in Germany, eastern Europe and Paris.

 

Source: Reuters (Business Times 11 Oct 07)

Office sector booms Down Under

Regional centres like Canberra, Hobart, Perth and Brisbane have taken off

WHAT do the office markets of Perth, Brisbane, Canberra and Hobart have in common with Moscow, Warsaw, Barcelona, Tokyo and Singapore? They are all experiencing acute low office vacancy rates not seen since the beginning of the century and the momentum built up over the last few years does not seem to be slowing down.

While the major office markets of Sydney and Melbourne have seen a more subdued take-up of office space in their central business districts (CBDs), the real boom stories in Australia have come from the regional centres of Canberra, Hobart and especially Perth and Brisbane.

Office vacancy rates throughout Australian CBD’s now stands at 4.3 per cent according to the Property Council of Australia and 6.0 per cent in suburban office markets, but these figures mask the historic lows being experienced in the resource boom cities of Brisbane and Perth.

The rapid expansion of the Chinese and Indian economies has made Australia the place to go for natural resources and that means the states of Queensland and Western Australia are not able to get the coal, iron ore, lead and copper out of the ground fast enough or onto the ships quickly enough. This has led to a mass movement of people from around the world to work in the mines, processing plants and offices. Not withstanding the boom in the mineral sector, the wider Australian economy has had 16 years of continual growth.

With the prices of natural resources at historic highs, mining and engineering companies have been pouring investment into their facilities in order to capitalise on the boom and that has led to an increase in demand for office space in the cities closest to their assets. The vacancy rate in Perth is now below one per cent, which means that any new arrivals in the city looking for space are going to be disappointed.

Supply won’t improve soon

In Brisbane the picture is much the same with vacancies at 1.2 per cent in the CBD and space in the city fringe is going fast. The supply of office space for both cities is not going to improve any time soon as the next phase of construction will not deliver any new significant product until 2008/9. This low vacancy rate has had a subsequent effect on rents with CBD rents in Brisbane rising by about 70 per cent in 2007 alone.

While Sydney has lagged Perth and Brisbane in terms of take-up, all the major cities are on the same construction cycle. With financial services in particular driving the demand for space in Sydney, we could soon see vacancy rates down below 5 per cent within the next year, with much of the new stock coming onstream in the next year or so already precommitted. Current vacancy rates are at their lowest since July 2001. Melbourne has seen a much more modest increase in take-up figures and this is expected to plateau in the next few years as refurbished space starts to come back onto the market. As such, rental growth has been much more subdued with Perth and Brisbane both surpassing the levels seen in Melbourne and Sydney.

Canberra has seen vacancy levels drop due to the expansion in the governmental sector. Despite new buildings being added to the overall stock, the insatiable appetite has seen vacancy levels only 0.1 per cent above that of Brisbane.

Hobart has always had a small office sector and, as such, vacancy levels are traditionally lower than those in other Australian cities, and they have been below 4 per cent since January 2005.

There is no doubt that the landlords in Perth and Brisbane have waited a long time for this explosion in the office sector, and this may very well prove to be a once-in-a-lifetime opportunity. Investors are naturally very interested in these markets. However, sourcing opportunities are proving to be difficult as existing landlords cash in on the hot leasing market.

Australia has also benefited from an increase in immigration which has enabled the economy to continue on its positive upswing. Average gross domestic product (GDP) growth over the last 16 years has been approximately 3.7 per cent a year which, together with the quality of life factors, has made Queensland and Western Australia very attractive places to live and work.

 

Source: Business Times 11 Oct 07

City office mart seen riding out forecast job cuts

But if redundancies are higher, supply overhang could lead to recession: players

(LONDON) The City of London is set to lose enough jobs next year to empty its landmark ‘Gherkin’ skyscraper twice over, putting pressure on the office market in this global financial hub.

The industry expects prices and rents to fall, but consistent tenant demand suggests that the market in the capital’s main financial district will survive such a slowdown. Deeper job cuts, though, could spell trouble.

Britain’s Centre for Economics and Business Research (CEBR) foresees 6,500 London financial service sector redundancies in 2008. Based on industry estimates of between 100 and 150 square feet per employee, available office space could surge by as much as 975,000 sq ft, increasing pressure on City property prices and rental income growth.

‘The loss of 6,500 jobs will naturally slow down the market . . . but the supply side is still tight enough to stomach such an eventuality,’ said Alastair Hilton, partner at property services firm Cushman & Wakefield.

The City has capacity of about 58 million sq ft, equivalent to over 100 times the floor space of the so-called ‘Gherkin’, a distinctive 180-metre tower completed in 2004.

Industry figures put the City-wide vacancy rate at 10.7 per cent.

Players say that if job losses escalate beyond the expected level, an overhang of supply could tip the district into a more severe commercial property recession.

And with more than half a dozen developments due to spring out of London’s crane-filled skyline by 2010, they accept that the market has entered its most risky phase.

Mr Hilton said that banks were unlikely to vacate great swathes of space even after the layoffs as many took a contra-cyclical view to maintaining presence in the supply-constricted Square Mile.

But take-up has slowed sharply in recent weeks, as would-be tenants delayed decisions amid financial market volatility. Data from property services firm Ingleby Trice Kennard showed that occupiers took up a total of 230,000 sq ft in the City of London in September against August take-up of 420,708 sq ft, leaving around 6.2 million sq ft of offices empty.

While the glut of space is putting pressure on rental and capital growth, Mr Hilton said, investors were reassured by the fact that much of the current nine million sq ft development pipeline was already pre-let, in contrast to the early 1990s when the City office market collapsed under the burden of around 18 million sq ft of unoccupied space.

Developer Land Securities recently announced a City pre-let of 120,000 sq ft to law firm Kirkpatrick & Lockhart Preston Gates Ellis, despite concerns about a deteriorating global economy.

City development programmes or acquisition drives to coincide neatly with an upturn in occupier demand has always been a gamble, but Duncan Owen, chief executive of City Landlord Invista Real Estate Investment Management, said that tenants were still queuing up for quality accommodation.

‘We’re negotiating 83 lettings across our London portfolio right now. Not one of them even looks like it might fall through and all of them are at business plan rental increases,’ he said.

Mr Hilton said that the loss of 10,000 jobs would seriously threaten rental growth, the profitability of several developments and office investment yields – already vulnerable as UK commercial property sector prices fall.

 

Source: Reuters (Business Times 11 Oct 07)

Dubai to build US$11 billion waterway around downtown

(DUBAI) Dubai will spend US$11 billion on a waterway longer than the Panama Canal to encircle the downtown area and expand waterfront property available for development.

Limitless LLC, a unit of government-owned Dubai World, will start building the 75-kilometre waterway in December.

It will be the largest construction project by the emirate, which has undertaken mega-projects such as the Burj Dubai, the world’s tallest building, and waterfront homes on palm-tree-shaped manmade islands.

The Arabian Canal, which will reach a width of 150m, will involve digging one million cubic metres of earth every day over the three years it will take to complete.

‘This will be longer than the Panama Canal and on par with it in terms of engineering challenges,’ Limitless development manager Ian Raine said on Tuesday.’We are bringing waterfront into the desert, allowing development to go ahead that otherwise wouldn’t happen.’

As many as 10 international contractors will be needed to tackle the project, he said. The developer is in talks with ’several’ international companies and a few of them have gone through pre-qualification, he said without providing names.

Britain’s Balfour Beatty is the only contractor to have completed a major waterway extension in Dubai, having acted as main contractor on the Dubai Creek Extension project, which aims to extend the creek through the Business Bay development currently under construction.

Other international contractors already operating in Dubai include Carillion and Laing O’Rourke.

Waterfront Space Dubai, which has about 72km of natural coastline, plans to extend the total waterfront space by more than 500km as it adds to its coastline and digs out desert inland.

 

Source: Bloomberg (Business Times 11 Oct 07)

UK’s Local Shopping Reit eyes takeovers

It intends to use its tax-efficient status to boost portfolio

(LONDON) The Local Shopping Reit, Britain’s first specialist start-up real estate investment trust (Reit), says it is hunting for corporate acquisition opportunities to boost its retail property portfolio.

In a trading update yesterday, the company – which buys neighbourhood and convenience retail properties in urban areas – said it would continue to use its tax-efficient Reit status to help secure corporate acquisitions that increased the size and value of its portfolio most efficiently.

Since its admission to the London Stock Exchange on May 2, the company has bought 150 properties in 106 separate transactions for £47.8 million (S$143.2 million), bringing the total size of its portfolio to 633 assets.

This includes the £14.6 million of properties acquired when Local bought the entire share capital of privately owned Gilfin Property Holdings in August.

‘Our Reit status means we are well-placed to offer competitive prices and tax- efficient solutions to private property owners with an unrealised capital gains position,’ joint chief executive Nick Gregory said.

The company said the instability of the market was likely to provide greater opportunities in the current financial year.

In the period since its flotation, Local Shopping Reit said it had let 29 vacant properties and carried out 65 rent reviews, which increased its rental income by £417,097.

‘For the past two-and- a-half years, we have been focused on building the size of the portfolio. Now that we have turned our attention to asset management, we are beginning to see the rewards through good levels of rental growth,’ Mr Gregory said.

The company said it had a long-term debt facility of £120 million from HSBC which could be used to finance acquisitions.

 

Source: Reuters (Business Times 11 Oct 07)

UK developer confidence down

(LONDON) British commercial development activity experienced a modest increase in September but developer confidence has fallen to its lowest point since May 2003, data showed yesterday.

UK property services firm Savills said developers were still struggling to regain optimism in the wake of credit market turmoil, with 20 per cent of respondents predicting a drop in retail and leisure construction activities.

Nonetheless, overall activity rose gently in September with a positive net balance of 5.4 per cent of UK commercial developers surveyed reporting an increase in activity, compared with plus 4.9 per cent in August. September data showed further growth of private sector construction, particularly for new-build projects, but levels of development activity in the South East (excluding London) tailed off at the quickest pace since Savills started to collate the data in March 2003.

The average net balance of respondents reporting growth during the third quarter fell to plus 8.9 per cent growth against plus 18 per cent in the second quarter 2007.

 

Source: Reuters (Business Times 11 Oct 07)

HK cutting taxes to shore up financial centre status

Income tax dips to 15%, corporate tax, 16.5%; gap with S’pore rates widens

(HONG KONG) Hong Kong’s government will cut income and corporate taxes by one percentage point to help protect the city’s position as an Asian financial centre in its high-stakes race with Singapore.

Salaries tax will be cut to 15 per cent and profits tax to 16.5 per cent in 2008-2009, chief executive Donald Tsang said in his annual policy address yesterday, his first since being elected to a five-year term in March.

The reduction will widen the gap with Singapore, which in February announced a cut in its corporate tax rate to 18 per cent from 20 per cent to lure more financial-services and technology companies. Singapore’s top income tax rate is currently 20 per cent.

Mr Tsang had pledged in his election campaign to cut the standard rate of salaries tax and profit tax to 15 per cent within five years.

‘We will consider further profits tax relief if our economy remains robust and our public finances stay sound,’ Mr Tsang said yesterday.

Hong Kong’s corporate tax rate is currently 17.5 per cent, while its salaries tax is 16 per cent. The city’s economy in the three months ended June 30 climbed 6.9 per cent from a year earlier after gaining a revised 5.7 per cent in the previous quarter.

Mr Tsang, who has said that his long-term goal is to preserve Hong Kong’s status as Asia’s top financial centre, also said that the government plans 10 major infrastructure projects in the next five years that will create 250,000 jobs and add HK$100 billion (S$18.9 billion) to the economy annually.

The plans include building an expressway linking Hong Kong with the southern Chinese cities of Guangzhou and Shenzhen, Mr Tsang said. Financing arrangements for a bridge linking Zhuhai city with Hong Kong and Macau are also being finalised, he added.

The city will also spend HK$20 billion to complete a direct road link between Shenzhen and Hong Kong’s airport.

Traffic growth at Hong Kong’s port, the world’s second busiest container port last year, has slowed because of competition from mainland ports.

The Hong Kong government also plans to build a new rail line in southern Hong Kong Island. The line, which will cost more than HK$7 billion, is scheduled to begin operations before 2015.

Mr Tsang said that the city may also start building a line linking Shatin in the New Territories to Central, the downtown business district, in 2010.

In addition, Mr Tsang said that rates for property owners totalling some HK$2.6 billion would be waived for the final quarter of the fiscal year.

 

Source: Bloomberg (Business Times 11 Oct 07)

Upper Pickering hotel site attracts record bid

A HOTEL site at Upper Pickering Street has drawn strong interest from developers, with the highest bid being a record one for such a property.

Nine bids had been submitted when the tender closed yesterday.

The top bidder – mainboard-listed Hotel Plaza – put in a price of $253.2 million for the 6,959 sq m site. Given the gross floor area of 29,227 sq m, this works out to about $805 per sq ft per plot ratio (psf ppr).

Hotel Plaza is developer United Overseas Land’s hotel arm.

Hotel Plaza’s bid was 21 per cent higher than the second-highest bid of $209 million, or $664 psf ppr, placed by Park Plaza.

The record bid is at least 40 per cent higher than the prices paid for two hotel sites on Tanjong Pagar Road that were awarded recently, said CBRE Research’s executive director, Mr Li Hiaw Ho.

In June, a hotel site on Tanjong Pagar Road and Gopeng Street was awarded to Carlton Properties for $123 million, or $573 psf ppr.

A month later, the Urban Redevelopment Authority (URA) awarded a hotel plot on Tras Street to businessman Chng Gim Huat of the CGH Group for $97.1 million, or $562 psf ppr.

‘The prevailing optimistic mood in the hotel and tourism markets could account for the record-high prices submitted for the Upper Pickering Street site,’ said CBRE’s Mr Li.

The 99-year leasehold site, launched for sale by the URA on July 18, is located in an ideal spot – at the junction of New Bridge Road and Upper Pickering Street and at the edge of the Central Business District – to cater to business travellers, said Mr Li.

Besides Hotel Plaza and Park Plaza, there were seven other bidders, including Hiap Hoe Superbowl and Ho Bee Investment.

Hotel Plaza currently owns and operates the 350-room Plaza Parkroyal, the adjoining The Plaza and the 337-room Grand Plaza Parkroyal Hotel, among others.

The group also has interests in hotels overseas.

The URA said yesterday that the bids will be evaluated and that the decision on the award will be made later.

 

Source: The Straits Times 11 Oct 07

MAS to let S$ strengthen faster to cool rising inflation

Local currency may hit $1.40 against the greenback by end of next year

INFLATION concerns have taken centre stage, after a surprise move by the Monetary Authority of Singapore (MAS) to curb rising pressure on consumer prices.

Amid rosy economic news on the local economy. the central bank said yesterday it will allow the Singapore dollar to strengthen at a slightly faster pace, as inflation may rise faster than previously predicted.

This is the key tool the MAS uses to combat inflation, which can cause major headaches if it gets out of control.

Economists said the adjustment will help keep business costs competitive by softening price hikes of imported goods and services.

They added that local manufacturers should not lose out much in competitiveness, as Asian currencies are strengthening across the board.

But economists added that other measures may be needed to cool the local property and labour markets.

‘I thought they would do it next year but clearly, inflation has breached the MAS’ comfort zone,’ said Citigroup economist Chua Hak Bin.

The MAS statement, which coincided with advance data of the economy’s third-quarter performance, sent the local currency to a new 10-year high against the greenback.

As government estimates of growth came in at 9.4 per cent, beating market forecasts, the Singdollar rose 0.5 per cent to $1.4649.

Currency experts, deciphering the MAS’ brief comments on its policy tweak, said the local currency may hit $1.40 to the United States dollar by the end of next year.

Consumer prices have been rising strongly, driven by a robust domestic economy, increasing world oil and food prices, and a July hike in the goods and services tax (GST).

‘Domestic price pressures are expected to persist due to heightened supply constraints,’ said the MAS.

‘Externally, oil, food and other commodity prices will remain firm into next year.’

The MAS now expects price levels to rise between 2 per cent and 3 per cent next year, up from a previous prediction that inflation would not exceed 2 per cent. Prices will rise faster in the first half – by 3.5 per cent – and should ease after that.

For this year, the MAS has bumped up its inflation forecast to between 1.5 per cent and 2 per cent, up from between 0.5 per cent and 1.5 per cent.

With this in view, the MAS is increasing the slope of the Singdollar’s trading band slightly, while keeping a policy to allow a modest and gradual rise of the trading limits.

The central bank said it is neither re-centring the trading band nor changing its width.

‘This policy stance will remain supportive of economic growth, while capping inflationary pressures and ensuring price stability over the medium term,’ said the MAS.

UBS currency strategist Nizam Idris noted that the slope change – the first announced by the MAS – was the most tempered adjustment of the three variables.

‘It says that they are still uncertain about the short term and, therefore, don’t want to have an immediate impact as a re-centring of the policy band would have.

‘I think the market and the MAS have been surprised by how easy it’s been for retailers to pass on the GST hike to consumers,’ said Mr Nizam.

Analysts said further monetary tightening and non-monetary measures may be needed next year.

Citigroup’s Dr Chua said non-monetary measures may be needed to cool the labour and property markets.

RISING PRICES

‘Inflationary pressures have picked up amid buoyant domestic economic conditions and the recent rise in global oil and food prices.’

MAS, which will let the Singapore currency strengthen at a slightly faster pace in view of the rising pressure on consumer prices in the Republic

Hong Kong cuts corporate tax rate to 16.5%

HONG Kong will trim corporate and salary tax rates by one percentage point next year to 16.5 per cent and 15 per cent, respectively, as it moves to stay competitive against cities like Singapore.

The tax cuts will cost the Hong Kong government HK$5 billion (S$951 million) annually.

With the corporate tax rate expected to be cut further to 15 per cent in the years ahead, analysts believe that Hong Kong will remain attractive to investors as a gateway to the giant mainland market.

The new cuts will bring taxes closer to pre-2003 levels. Hong Kong raised corporate and individual tax rates, which were 16 per cent and 15 per cent, respectively, in 2003, when the government ran a deficit amid a poor economy.

The cuts were announced by Chief Executive Donald Tsang in his first policy address since he was re-elected to a five-year term in March.

In his speech, Mr Tsang also announced plans to roll out 10 mega infrastructure projects and relax the criteria for schemes to attract more talent to the city.

The moves were aimed squarely at promoting economic development in the territory.

Mr Tsang said as much in his speech, emphasising economic development as the territory’s ‘primary goal’.

He added: ‘The reason is simple. Without economic prosperity, people cannot make a decent living, and all visions are just empty talk.’

Analysts, however, were less willing to bet on this strategy.

They said concerns such as pollution and the higher cost of living meant that the tax cuts would not pose an immediate threat to Singapore, which cut its corporate tax rate from 20 per cent to 18 per cent in February.

On the competition between Hong Kong and Singapore, one analyst said the global investment pie was big enough for both cities.

But Singapore will remain the focus of South-east Asian investment, said Mr Paul Chow, a tax partner at Grant Thornton.

He added that Singapore has an edge over Hong Kong in some aspects. ‘The cost of living is higher in Hong Kong – and not getting cheaper. Singapore has a better education system and, so, is more conducive to families with school-going children,’ he said.

However, others pointed out that a comparison could be skewed because Singapore implements a goods and services tax while Hong Kong does not.

Yesterday, when asked by reporters whether the annual HK$5 billion tax giveaway would adversely affect the government, the 63-year-old leader said: ‘I have confidence in Hong Kong, and its future as a part of China.’

The reductions will kick in in the 2008/09 financial year.

Calls for tax cuts have been growing on the back of healthy budget surpluses, which are forecast to exceed HK $55 billion this fiscal year. Hong Kong posted a surplus of HK$1.2 billion for the first five months of the 2007/08 financial year – overturning a deficit of HK$21.1 billion in the same period last year.

Mr Tsang also said property tariffs will be waived up to HK$5,000, for the final quarter of the 2006/07 year.

These details, analysts noted, highlighted the importance of his address yesterday, given that these are typically announced only in the Financial Secretary’s budget speech early in the year.

 

Source: The Straits Times 11 Oct 07