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THE average capital value of luxury apartments in Singapore has risen 43.5 per cent in the first nine months of this year since the fourth quarter of 2006. At $2,827 psf, the Q3 2007 average luxury apartment cap value has surpassed 1997’s peak level by 59 per cent, according to a report by Colliers International issued yesterday.
In the leasing market, average monthly gross rents of luxury apartments were up 27.9 per cent in the first nine months of the year. The increase was at a faster clip in the third quarter of this year, with a quarter-on quarter gain of 10.2 per cent to $6.86 per square foot a month. This was higher than earlier rises of 7.9 per cent and 7.6 per cent in Q2 and Q1.
‘The supply crunch, coupled with strong demand, continued to contribute to escalating rental growth, a growing concern among the expatriate population in the Republic and the government,’ Colliers noted.
The average cap value of luxury apartments rose 13.3 per cent in Q3 over the preceding quarter to $2,827 psf.
The property consultancy firm predicts that average capital values and monthly gross rents of luxury apartments will rise by up to 10 per cent in the final quarter of the year. But it acknowledged the downside risks in the coming months, including the negative spillover from the US housing market and potential negative oil supply shocks.
‘Nevertheless, the strong economic and demand fundamentals in the Singapore market, coupled with the continuing commitment of the government to maintain Singapore’s attractiveness as a stable market for investments, should lend support to the private residential property market amid cautious sentiments,’ the report added.
Colliers also highlighted the government’s assurance that it would continue to monitor the market and ensure that prices do not run ahead because of a shortage of supply.
Earlier this month, the Urban Redevelopment Authority said that it was reviewing the Government Land Sales programme for the first half of next year and that the government would make available more sites for private residential development through the GLS programme next year if the demand continues to remain strong.
Source: Business Times 13 Oct 07
Cheung Kong Holdings’ Justin Chiu talks to ARTHUR SIM about revealing his wild side in the marketing of the Hong Kong conglomerate’s property developments
MILD-MANNERED businessman by day, and the property-trade equivalent of a rock star by night, Justin Chiu has single-handedly made property launches glamorous affairs in Hong Kong, and some say in Singapore too, attracting the paparazzi frenzy usually reserved for movie stars.
For his elaborate efforts that go towards creating memorable events with each launch, Mr Chiu – an executive director of Li Ka-shing’s Hong Kong conglomerate Cheung Kong Holdings and head of its property arm – is affectionately known in Hong Kong as ‘The man with a 100 faces’.
In a recent incarnation, he dressed as an Arab sheikh to launch one Hong Kong development, simply because, ‘everyone was saying that Middle East investors were coming’. (Units went for $5,300 per square foot, by the way.)
In Singapore, he has at various times led a bevy of beauties while dressed as James Bond and a convoy of Harleys in Easy Rider costume, all in the name of creative marketing.
Amazingly, Mr Chiu, 57, has only been in marketing and property development for 10 years with Cheung Kong.
Before this, there was a four-year stint at Sino Land, and 15 years at Hang Lung Development Co. At these jobs, he was responsible for retail and commercial leasing as well as property management.
So when did he discover his wild side?
Mr Chiu joined Cheung Kong in 1997 and started doing sales and marketing in 2000. It was not the best of times for the property market and he knew he had to create buzz for an upcoming launch or there would be the real possibility that no one would come.
‘I thought what we needed at the time was a spokesperson, or a movie star … a sort of icon,’ he recalls.
Celebrity endorsements are not a new concept, especially in Hong Kong. One only has to think of the many products that Jackie Chan has put his name to.
Mr Chiu, on the other hand, decided to create his own spokesman, and initially he had intended the position for his manager of the sales team. ‘We were launching a seafront development at the time so I told my manager to come dressed as a naval commander.’ Understandably, his manager refused.
Leading by example
So like any good boss, he decided to lead by example, and get into character himself. ‘Anything is better than seeing another old man in tie,’ he says.
The response, from the press at least, was unprecedented. And Mr Chiu’s launch event occupied the covers of the property pages in the local media. A star was born.
‘What we did was a great way of soft selling. People don’t read ads but they do read the news. We also saved money on advertising, and we didn’t need to pay for movie stars.’
Mr Chiu’s instincts about marketing a product were right, a feat made more impressive by the fact that his educational background is founded on staid degrees in sociology and economics. But as he understands: ‘What you study at university does not always relate to what you do for living.’
So far this year, Cheung Kong has earned up to HK$14.6 billion (S$2.8 billion) from the sale of 4,200 residential units. The turnover was more than double that for the same period last year and has already achieved the company’s full-year sales target.
Selling property these days is a lot easier.
And Mr Chiu also does not really need to get dressed up any more, but he still does. ‘The Hong Kong people have come to expect my ’special image’ and reporters even want to know what I will be wearing next,’ he says.
Now, Mr Chiu gets recognised in the streets. And overseas too.
He recalls how once, at the Changi International Airport, his Singapore staff was led to him by a small commotion from tourists shouting: ‘Hey it’s the Cheung Kong guy!’
Another time in a Chinese restaurant in New York, the waiter recognised him from the Chinese tabloids and Mr Chiu was seated immediately.
The going has not always been easy though, even for Easy Rider.
Cheung Kong’s residential forays into the Singapore market began back in 1996 with acquisition by Li Ka-shing of a site in Thomson Road for $130 million. A year later, Cheung Kong bought an East Coast site for the then astronomical sum of about $680 million, 30 per cent higher than the next highest bid. The two purchases came just before the Asian financial crisis.
The developments came under considerable media scrutiny, not least because everyone wanted to know how Li Kashing, Asia’s richest and shrewdest businessman, would get out of this one.
The task of moving units in a stagnant market fell on Justin Chiu and Cheung Kong’s Singapore property arm, Property Enterprises Development. Mr Chiu got creative.
For starters, he devised an incentive scheme for the 390-unit Thomson project – Thomson 800 – something that had not been done before.
Under its Guaranteed Appreciation Plan, Cheung Kong was prepared to offer buyers a 10 per cent capital appreciation in about five years for units at Thomson 800 as well as protecting buyers against price falls of up to 10 per cent. If the valuation increased by less than 10 per cent above the purchase price, the developer would pay buyers the difference.
In essence, it was a kind of discount but unlike other developers who were offering outright money-off, this sounded more like a value-add. Clever.
The Asian financial crisis and its repercussions sent all property markets in the region into a tailspin. Only about half the units of Thomson 800 were sold, with City Developments finally buying the remaining units in 1999.
For the East Coast development – Costa del Sol – the situation was more dire because there were 906 units to move.
Even the help of the bikers on Harley Davidsons could not stir the market, and only a third of the development was sold.
Amazingly, Cheung Kong went on to buy another site, this time in Cairnhill for $370 million, and again the property market dived with the aftermath of the terrorist attacks in the US on 11 September 2001.
The 248-unit Cairnhill Crest was launched in 2004 and Mr Chiu remembers how selling 40 units – after putting on an extravagant launch party with him dressed as James Bond – was quite an achievement at the time.
But even then, Mr Chiu did something that was not often done here, and that was to go direct to his buyers by flying them in from Hong Kong and China.
Following his own advice
Today, properties do frequently sell out within weeks. But then, who can predict property cycles? And how important are they? Mr Chiu says: ‘Whether the market is good or bad, developers must buy land.’
Fortunately, he heeded his own advice.
In 2001, Cheung Kong, together with joint venture partners Keppel Land and Hong Kong Land clinched a site in Singapore’s New Downtown at Marina Bay for $462 million. Many sniggered behind their backs. ‘At the time, everybody was saying that it was too risky,’ remembers Mr Chiu.
But we all know what happened. The economy turned and the office building, One Raffles Quay (ORQ), went on to become one of the most talked about developments of the time, with all the big financial institutions clamouring to get in.
In July this year, Cheung Kong and Keppel Land each sold one-third stakes in ORQ to their sponsored real estate investment trusts (Reit), Suntec Reit and K-Reit, for $941.5 million each. Incidentally, Mr Chiu is also chairman of ARA Asset Management, which manages Suntec Reit.
In 2005, the same consortium won a tender for a commercial mega-site at Marina Bay to become major stakeholders in Singapore’s new growth story.
Both ORQ and the newly dubbed Marina Bay Financial Centre have gone on to register ‘over 100 per cent profit margin’ for Cheung Kong. Indeed, as Mr Chiu reveals, ‘all our projects in Singapore made money’, although profit margins for the residential developments were considerably slimmer. For Cairnhill Crest, this was about 10-12 per cent.
On a philosophical note, Mr Chiu says: ‘You cannot be winning all the time.’
But because Cheung Kong has very, very deep pockets, it can afford to hold off selling units, such as those at Costa del Sol and Cairnhill Crest, until the property cycle swings up again. The last block of Costa del Sol was sold in August for about $200 million, or $820 psf.
But this is only slightly higher than the launch price in 2000 and you do not need to be an expert to know that property prices are still rising.
Perhaps this is the real lesson here. All developers know that having the resources to hold on to property until prices pick up is the key to survival. Only a certain kind of developer believes that making a killing isn’t everything – even when dressed up as 007.
Source: Business Times 13 Oct 07
Offers flood in for two recently released plots, with top rental offer at five times the guide rent
TANGLIN Village, the latest lifestyle hot spot in town, is drawing massive crowds to its range of newly opened shops and restaurants.
And where consumers and foodies flock, so do business people. They have descended on the prime Dempsey Road enclave in a bid to clinch the remaining pieces of land.
Tanglin Village’s short-term leases – usually for three years, as the land is slated for residential use after 2015 – have not deterred tenants, said the Singapore Land Authority (SLA). It said businesses are confident of reaping most of their investments in the first three years.
Offers have poured in for two Tanglin Village plots released recently, said the SLA, which is managing the development.
A former chapel site at 39C Harding Road drew a record 23 bids when its tender closed last month. The top rental offer was $56,000 a month – five times the guide rent, SLA said.
It was put in by Ponte & Partners, the Singapore-based firm that brought in German brewery Paulaner Brauhaus at Millenia Walk.
The Harding Road property, which has a gross floor area of 4,456 sq ft, is safeguarded for conservation. It sits on a 43,172 sq ft plot.
Most of the other bidders for the site were also from the food and beverage industry, including Da Paolo Ristorante Italiano, Palm Beach Seafood and Select Catering Services.
A second site, at 45 Minden Road, was similarly popular with 15 bidders lodging offers. The highest was $51,000 a month, or more than double the $22,000 guide rent.
It came from the Siam Silk Company, a unit of Thailand’s Thai Silk Company, which was founded by the renowned Jim Thompson.
If it is awarded the 30,631 sq ft property – which has 10,156 sq ft of gross floor area – the firm plans to open a Jim Thompson Thai restaurant and wine bar, said Mr Steve Benhar, corporate counsel for the Thai Silk Company. The eatery will feature private indoor dining and a garden bar.
The strong response to the two sites is testament to how hot Tanglin Village has become in recent months.
A year ago, a building with 13,000 sq ft of gross floor area drew only 11 rental bids – the highest just $23,000 a month. Oosh, an alfresco bar and restaurant, is now operating at the site.
Earlier this year, some 27 sub-tenant businesses faced the prospect of being evicted when their master tenant, Tanglin Warehouse, fell behind in its rental payments to the SLA.
This was averted after Tanglin Warehouse settled the arrears in full.
And things have picked up quickly since then. In the last six months, 25 firms have set up shop in the area, according to the SLA.
Their offerings run a wide gamut, from restaurants and shops to education and entertainment centres. Some tenants even use the space for offices.
The burst of activity has brought occupancy at Tanglin Village to more than 70 per cent, said the SLA’s chief executive, Brigadier-General (NS) Lam Joon Khoi.
‘Tanglin Village tenders so far have attracted a number of entrepreneurs to build their dream businesses,’ he told The Straits Times.
To better serve these tenants and their customers, the SLA intends to review ‘basic infrastructural improvements’, such as road paving, lighting and utilities, BG Lam added.
More tenants, including an international school, are also expected to make their homes in the area soon.
It is also understood that a brewery will open, as well as an Italian restaurant and an outlet for the Long Beach Seafood restaurant chain.
Tanglin Village’s success has spurred the SLA to examine uses for other enclaves such as Keat Hong camp in Choa Chu Kang – a former Singapore Armed Forces camp – and Phoenix Park in Tanglin Road, the former headquarters of the Home Affairs Ministry.
Source: The Straits Times 13 Oct 07
Data shows retailers’ sales rising a mere 1.7% and August trade gap declining
ECONOMISTS have been predicting that consumers would slow their spending but that the damage would be cushioned as American businesses sold more products abroad.
This week, there was evidence that both are starting to happen.
The United States trade deficit fell to US$57.6 billion (S$84.3 billion) in August, and major retailers’ sales at stores open at least a year rose a meagre 1.7 per cent last month from a year earlier, two reports said.
Monthly results can be volatile, and economists caution against reading too much into what could turn out to be mere blips. But taken together, they are indicators of an economy in transition.
The weak housing market is making consumers spend their money more carefully. That, in turn, means that retailers import fewer goods from abroad, lowering the trade deficit.
Simultaneously, the slower US economy and lower interest rates mean that the greenback is less valuable compared with other currencies than it was a few months ago.
That makes US goods cheaper and exporters more competitive than they have been in recent years, creating a source of growth that will ease the pain of the housing crunch.
‘Trade is providing a pretty big offset to the drag of housing,’ said Mr Brian Bethune, an economist with consulting firm Global Insight. ‘It’s not totally offsetting housing, but it is a buffer.’
The gap between what the US imported and exported was US$1.4 billion less than in July – a bigger drop than forecast and the lowest monthly trade deficit in five years when adjusted for inflation, according to the Commerce Department.
Other countries bought more American soybeans, chemicals and steel, and the US imported fewer foreign cars.
The export sector could create a bounce for the nation’s gross domestic product, the broadest measure of how the economy is doing, of which net exports is a major component.
Economists from Bank of America and Morgan Stanley increased their projection for how much US output grew in the third quarter to more than a 3 per cent annual rate.
September retail sales growth of 1.7 per cent is probably not enough to keep up with inflation; analysts expect the consumer price index for last month, to be released next week, to show a 2.8 per cent annual increase.
Some analysts say the disappointing gain is an early hint that consumers are making spending decisions more carefully. Mr Bethune said: ‘It takes a lot more cajoling in terms of discounts and incentives to get them to spend.’
Source: WASHINGTON POST (The Straits Times 13 Oct 07)
