A monster in the making?



A monster in the making?


By Chua Mui Hoong


THE push by the Housing Board to get private-sector developers to build and sell HDB flats was always a bold but risky move.


When it was first announced in March 2005 in Parliament, the proposal drew only muted responses from parliamentarians.


Nearly three years on, the Design, Build and Sell Scheme (DBSS) has gained acceptance. Under this scheme, private companies develop and sell the flats, but only those who fulfil the Housing Board’s income and other criteria can buy the flats.


It has won buyers’ support, with over 6,000 applicants for 616 flats for the first project in Tampines launched in October 2006.


The second project at Boon Keng launched on Jan 5 attracted over 1,100 applicants on Day 1 of its launch despite average prices of $520 psf, high by public housing standards.


Buoyed by the positive response, HDB has set aside four more plots – in Bishan, Simei, Toa Payoh and Bedok – for privately developed public housing.


The DBSS may appear to be a success, given the enthusiastic market response.


But is it?


From a public policy perspective, there is a risk of the DBSS becoming a monster of the market’s doing. It is timely to take stock of where the scheme is heading.


Some issues need to be addressed.


The first is whether the new breed of DBSS flats – public housing featuring condo-style finishes – can be considered ‘public housing’. This has been aired in The Straits Times and The Sunday Times.


But to me, this is mere semantics. Whether you call such flats ‘public housing’ or ‘hybrid housing’, the fact is that it has the same ownership and income restrictions as Housing Board flats. To that extent, it’s clearly ‘public housing’.


But it’s not ‘public housing’ if you think public housing means highly subsidised HDB flats.


Some Singaporeans may baulk at this suggestion, but I think it is perfectly acceptable to have ‘public housing’ devoid of public subsidies.


An analogy from health care suffices. Public hospitals here offer a range of services to patients: from highly subsidised C-class wards to less subsidised B-class wards, to A-class wards which are charged at full cost with no government subsidy. Patients choose according to their means and desired comfort level.


It is no bad thing if public housing evolves likewise, allowing people to choose flat sizes according to their means and desired comfort level. At the top end, those who want public housing with plush finishes can have them – without state funds to subsidise their penchant for trimmings.


The other pertinent issue about DBSS is affordability. With prices at City View@Boon Keng averaging $520 psf, and three-bedroom units heading north of $700,000, concern has been raised about whether public housing remains affordable.


Here, it’s critical to keep an eye on the big picture: the total supply of HDB flats available.


In other words, to keep flats affordable, HDB will simply have to make sure there is ample supply of low-cost, subsidised flats to cater to those who need it, even while it offers high-end flats with costlier finishes. So DBSS flats with condo-style finishes should not constitute the majority of public housing.


In November 2007, HDB announced that there would be a supply of 7,000 new flats available from then to June 2008.


Another 3,200 flats will be built under the DBSS and executive condominium schemes. In other words, ‘hybrid’ or high-end ‘public housing’ flats will make up about 30 per cent of the new flats. That still leaves 70 per cent of traditional, subsidised HDB flats.


The Ministry of National Development (MND) and HDB will have to figure out if a 70-30 per cent mix of subsidised and high-end public housing is the right mix at this time. If not, it will have to recalibrate supply.


So HDB will have to manage the supply of new HDB flats, and make sure prices for subsidised flats are affordable.


Beyond that, those concerned about affordability should note that there are other HDB flats to choose from, which are quite a bit lower in price than those spanking new flats at Boon Keng.


In October, new four-room HDB flats in Telok Blangah went on sale for $308,000 to $402,000. Assuming sizes of about 1,000 sq ft, that works out to about $300-$400 psf – for new flats close to the city.


Further away from town, new HDB four-room flats can be bought in estates like Yishun and Sengkang for prices of below $200 to about $250 psf.


Five-room resale flats near the Boon Keng area – at Kallang and Whampoa – went for a median price of $423,000 in the third quarter of 2007. Assuming an average flat size of 1,200 sq ft, that’s $353 psf – much less than City View@Boon Keng’s average selling price of $520 psf.


In fact, some analysts have warned would-be buyers who think they can sell the flats for a big profit several years down the road that the potential upside is limited, given the already high prices.


The above back-of-the-envelope calculations suggest that DBSS flats are fetching a high premium in prices above new and resale HDB flats.


Back in 2005, before the first batch of DBSS flats was launched at Tampines, one analyst predicted that such flats would get 10 per cent more than resale flats in the vicinity. The reality today is that the premium is closer to 50 per cent.


Simple logic tells us the premium is being paid by buyers. But who’s benefiting?


The HDB may benefit from higher land tender prices. But probably the biggest beneficiaries are the developers themselves.


A quick look at the numbers is instructive. In January 2006, the first DBSS plot at Tampines was sold for $113.65 psf per plot ratio (ppr). The developer estimated break-even cost at about $240 psf. The units were eventually sold at $300 psf – 25 per cent higher than break-even cost.


The second land plot at Boon Keng was sold for $233.74 psf ppr to Hoi Hup. Analysts calculated a break-even price of $400 psf. Units there are being sold for $520 psf ppr – 30 per cent higher than estimated break-even cost.


The third plot of land in Ang Mo Kio was sold in November 2007 for $212 psf ppr to Greatearth, a unit under United Engineers. Units have not been launched yet – but if the first two projects are anything to go by, this developer will be gunning for similar profit margins.


Question: How desirable is it for developers to be making such profits on even high-end public housing?


The above tour of the DBSS landscape throws up some interesting policy dilemmas.


When public housing is built by the private sector, what is the role of the Government in such a market? MND Minister Mah Bow Tan has said in Parliament that the Government does not want to step in to set prices. But there may be other ways to regulate this new market segment.


The Government will have to try to balance the interests of home-buyers and developers in some ways.


One thing policy-makers cannot do is sit on their hands and point to the robust demand in today’s market as proof that the DBSS is a success. The judgment of the market today can hide problems that erupt years later.


Caveat emptor is a good maxim for private transactions in the private market; it does not hold 100 per cent for public goods like housing, especially when policy innovations constantly create new and unpredictable market segments.


In such an environment, the onus is on policy planners to take a hard look at the DBSS and see if there are looming dangers.


If the market turns and negative equity results on DBSS flats, the mess will be in the Government’s court in any case.


Provided teething problems are tackled, the DBSS continues to hold great potenial as a way to involve the private sector in public housing development while giving consumers more housing choices.


Three years after its inception, it is timely for MND to do a stock-take of the DBSS and prevent it from becoming a monster of the market’s making: with runaway prices, panic demand laced by unrealistic expectations of capital gains, and ever-rising developers’ profits.


Source: Straits Times

Cheap living in Asia draws foreign retirees

Cheap living in Asia draws foreign retirees


Property investors are, however, taking big risks: analysts


(JIMBARAN, Indonesia) Go Daimon is 41 and without a grey hair, but the employee of the Tokyo Stock Exchange dreams only of retirement.


He already knows how it will be paid for – by ‘baby boomers’, children from a post-war birth spurt now on the cusp of retirement, who will seek villas like the one he snapped up in Bali two years ago.


Now worth more than double the US$45,000 he paid, the two-bedroom villa and plunge pool in Bali’s only self-proclaimed retirement resort is rented for US$70 a night for about two-thirds of the year, mostly to elderly Europeans fleeing the cold.


With the first US baby boomers due to get their first social security cheques in February, and rapidly ageing and increasingly affluent populations in many developed nations, several Asian countries are stepping up marketing campaigns to attract investments from retirees.


Asia‘s lure of cheap living and sun is strong, especially at a time when developed nations fear the surge of retirees will buckle their health and pension systems.


But property analysts say that investors are taking big risks, although returns can compensate.


Few dream resorts stack up as solid investments for typical second-home buyers, who are in their 50s and keen on some returns in the run-up to retirement.


Mr Daimon gets 65 per cent of the income from renting his villa – the developer takes the rest – giving him an annual investment return of about 22 per cent.


‘Right now, the profit is so-so, but in the future I expect much more,’ he said. He hopes that a new spa and planned Balinese cooking classes would help push up occupancy and rents. ‘If I’m lucky, I’ll retire when I’m 55.’


The Thai island of Phuket, with its golf and beaches, has seen land prices in many areas shoot up five-fold in three years.


But although foreigners can own apartments, they must set up firms technically owned by Thai nationals if they want land, a tenuous legal loophole that politicians have been eager to close.


In Bali, villas are usually sold on 25-year renewable leases to skirt a law against foreign ownership. And with seafront villas going for US$700,000, rental yields are often low.


‘You talk to these people in the finance industry and they dream about having a house on the beach,’ said Tim Murphy, whose firm, Intellectual Property, has sourced US$200 million worth of property for clients in Hong Kong and Singapore in two years.


‘But then suddenly the left side of the brain kicks in, and they worry about rental yields and liquidity. People are really conflicted about whether to go for the retirement aspect or the investment aspect.’


Mr Murphy, a 37-year-old former executive at British insurer Prudential and owner of more than 100 properties, said that the main requirements for a good investment are secure land title, a liquid market, a favourable tax regime and the ability to borrow against a property to magnify returns.


‘Malaysia ticks all the boxes’, with Langkawi becoming particularly popular among Middle Eastern investors, while Vietnam is exciting because of its fast economic growth, he said.


To lure retirees, the Philippines cut retirement visa fees last year. It wants to attract a million foreign retirees by 2015.


Thailand‘s ‘elite card’ targets wealthy visitors who might retire in the country. In return for a US$30,000 one-off fee, a member receives a lifetime of priority at immigration, golf memberships, health checks and spa treatments.


Malaysia, which lets foreigners own freehold property, overtook Australia as the most favoured foreign retirement destination for Japanese this year, according to a recent survey.


Japan is likely to become a major exporter of retirees as it struggles to support pensioners.


The proportion of its population aged over 65 is expected to double to 40 per cent by 2055. But with an average US$100,000 in the bank, a Japanese pensioner can buy a two-bedroom apartment in central Kuala Lumpur.


Mr Daimon admitted that his investment in Bali ‘was a kind of gamble’, with the villa development just a field of white limestone when he first saw it. ‘But I trusted the developer and his story, and it paid off,’ he said. – Reuters


Source: Business Times

Industry players feel pinch of rising hotel rates

Industry players feel pinch of rising hotel rates


They are a concern for leisure travel sector; the going may get tougher for Mice operators also




(SINGAPORE) The average daily hotel room rate for 2007 is expected to have hit a record $200. And although 2,000 new rooms will be added this year, there will be no let-up in rising rates.


For 2008, consultancy firm HVS International tips a 15 per cent year-on-year rise in the average room rate (ARR) to $230, then a further 13 per cent rise to $260 in 2009.


But these increases are lower than that last year. According to the Singapore Tourism Board (STB), the ARR rose 23 per cent year on year between January and November 2007. For the month of November, it hit a record $226.


In comparison, the ARR for the same period in Hong Kong was $221.80. And the estimated ARR for Shanghai (which HVS notes was comprised of mostly high-end hotels), was $277.


Pressure on room rates will likely ease with new supply. For 2008, HVS reckons government land-sale sites could yield more than 4,600 rooms. But the actual number will depend on the take-up of such sites – and their cost.


HVS managing director David Ling said: ‘As demand for the economy and mid-tier segments is expected to surge, the land-sales programme for hotel projects should be tailored to locations that encourage developments of this type. Such sites are likely to be outside the prime area due to land costs.’


STB has been encouraging the industry to develop a range of options to add to the hotel mix to cater to different markets.


STB director (travel and hospitality business) Caroline Leong said: ‘In terms of hotel room rates, while we are seeing a record in Singapore, we are actually just keeping up with market rates in Asia. Also, prices are determined by demand.’


Industry players will be monitoring room rates closely.


Chan Brothers Travel executive (marketing, communications) Jane Chang said: ‘Rising rates are a concern for the leisure travel sector as it becomes increasingly difficult to source rooms at competitive prices.’


Chan Brothers also has a meetings, incentives, conference and exhibitions (Mice) arm, and on the upside, Ms Chang said: ‘Despite the increase in rates, bookings remain high as demand for corporate travel continues to grow.’


A tour operator who spoke on condition of anonymity bemoaned the skew towards the Mice sector. Many Singapore hotels now prefer to take corporate bookings, he said.


‘I believe top-notch hotels earn up to 60 per cent of their revenue from corporate travellers. Five years ago it was the reverse.’


Also in Singapore, accommodation can eat up as much as 26 per cent of a package-tour budget, the operator pointed out. ‘Spending one night in Singapore is equivalent to spending two to three in Bangkok or Denpasar.’


While he expects more hotel rooms and budget airlines to bring costs down, he said: ‘At the moment the number of packages we book has been decreasing and our margins are slimmer.’


Even for Mice operators, the going may get tougher.


Dilys Yong, immediate past-president of the Singapore Association of Convention and Exhibition Organisers and Suppliers, and president of Mice organiser HQ Link, said: ‘The quoted average room rate for 2007 is bearable for exhibitors and average trade visitors, but not budget trade visitors. However, the fact is that during the run-up to big events, room rates are even higher than the quoted average rate due to a shortage of rooms.’


As such, Ms Yong says that while the forecast 2008 average room rate is still ‘bearable’, actual rates will be higher.


Budget Mice visitors will find it virtually impossible to get a room, as Ms Yong reckons affordability in this segment is limited to $120 per night.


Inbound travel depends partly on the strength of the economy in the traveller’s home country, and SA Tours marketing and communications manager Ruth Lim noted: ‘There is an influx of leisure tourists to Singapore at this point as generally, these economies are rather robust.’


Until six months ago, SA Tours did not have an inbound leisure travel arm, but Ms Lim said: ‘Our inbound tourism clientele base has been steadily increasing.’


Source: Business Times

Construction demand could set new record

Construction demand could set new record


Analysts estimate $24 billion worth of contracts were inked in 2007




(SINGAPORE) Construction demand in 2007 exceeded official estimates and is likely to have hit $24 billion, analysts said.


At present, the official forecast for last year’s construction demand is $19-$22 billion. But in just the first ten months of 2007, construction demand hit $18.5 billion. In addition, several major contracts were also awarded in the last two months of the year.


‘A ballpark estimate suggests that contracts awarded could have reached $23 billion for the whole of 2007,’ said Citigroup economist Kit Wei Zheng. CIMB-GK economist Song Seng Wun is slightly more bullish – he expects construction demand for last year to come in at $24 billion.


Singapore‘s construction sector has once again emerged as a major growth driver, after being in the doldrums for about eight years following the Asian Financial Crisis of 1997/98.


Last August, industry regulator Building and Construction Authority upped its construction demand forecast for 2007 from its earlier estimate of $17-$19 billion.


There is also a sense that this year, construction demand will exceed the previous peak of $24.4 billion seen in 1997.


‘The construction sector is expected to remain a key driver to GDP growth in 2008,’ said Kim Eng’s research team. ‘The combined construction budget of the two Integrated Resorts amounts to over $12 billion and there is burgeoning demand from the residential property segment.’


Citigroup, for one, predicts that the pipeline of future contracts will likely remain large, supporting construction growth well into the second half of 2008 and 2009. ‘Given the synchronised supports from the integrated resorts, residential and commercial property boom and infrastructure projects, construction demand could well exceed the previous 1997 peak this year,’ said Citigroup’s Mr Kit.


Apart from the two IRs and infrastructure projects, the large pipeline of residential projects could yield between $12-15 billion of contracts awarded over the next two years, he said.


OCBC Investment Research analyst Serene Lim also pointed out that the government intends to raise the value added of Singapore’s energy industry to $34 billion in 2015 – an increase of about 70 per cent from current levels. The initiatives include probable plans to build an oil refinery with a capacity of 150,000 barrels per day, a liquefied natural gas terminal and biodiesel production plants, she said.


A recent report by construction cost consultancy Rider Levett Bucknall says that Singapore is on the upturn of the construction activity cycle, having recently emerged from a trough.


Analysts are also bullish on the prospects of construction firms in 2008.


‘The going will continue to be good for local builders as they enjoy strong order books and margins expansion,’ said Kim Eng Research.


Source: Business Times

Centre making a name as a church hub

Expo, the way to go


Centre making a name as a church hub


Monday • January 14, 2008


Alicia Wong



IT HAS always been a venue for conventions and exhibitions, one of the top in the region. But strange as it may seem at first glance, this same site looks to be South-east Asia’s hub for churches as well.


Whether attending youth rallies, outreaches or weekend services, a sizeable number of church-goers have religiously flocked to one of the few places that can accommodate their numbers — the Singapore Expo.


Which says as much for the Expo as it is a sign of the growing numbers attracted to churches in Singapore and their subsequent need for space.


It is “one of the busiest and most popular venues for church events,” said a spokesperson.


Each weekend, as many as 27,000 church-goers head for the Expo, and could contribute to as many as 90 per cent of its visitors on a non-event weekend.


From 2005, three of its 10 multi-purpose halls have been leased to two churches every weekend.


The City Harvest Church (CHC) holds three services on Saturdays and Sundays at hall 8 for its 17,000-strong congregation. The Faith Community Baptist Church (FCBC) rents the Max Pavilion and hall 9, drawing about 10,000 attendees over the weekend.


When Today visited FCBC’s youth service, parked cars lined the roads leading to the Max Pavilion. The auditorium was about half-filled but the remaining seats, yet to be filled, were reserved.


Smaller-sized Bethesda Community Church, which has held its Sunday services at the Expo for the last seven years, occupies about half of the total conference and meeting rooms at the centre.


CHC’s executive pastor Reverend Derek Dunn said his church chose the Expo for its large hall size and long-term availability. “There isn’t another venue with more than 10,000 sq m of floor area that could offer that to us,” he said.


CHC had “maximised” usage of its Jurong West building and needed more space for its English-language service.


Expo officials would not reveal lease or rental costs but a regular user of the centre told Today the daily cost for the use of an empty 10,000-sq-m hall could start from about $50,000.


A hefty sum to pay to worship in airconditioned comfort?


Perhaps, but the tithe and donations from worshippers undoubtedly help foot the bill.


The CEO of a medium-sized company told Today she contributes 10 per cent of her monthly salary — about $1,000 — every month.


Mr David Chew, 56, who attends FCBC with his wife and three children, said the move to Expo was “practical”. FCBC has held many smaller services at Marine Parade in the past.


FCBC provides shuttle buses from Simei MRT startion, he added, to make it easier to travel to the Expo.


Mr Jonah Wang, 26, an FCBC member who spends about an hour travelling to the Expo from Yishun, said the distance was “not an issue”.


“My spiritual family is here,” he said referring to his church at the Expo.


According to the Expo spokesperson, CHC and FCBC each hold about five additional annual events annual and other churches, including New Creation, hold a total of about 15 events at the Expo.


The Catholic Archdiocese Youth Centre (CAYC) held its youth rally at the Expo last year.


Citing economical pricing as one reason, CAYC’s youth coordinator Edwyn De Souza, said CAYC also chose the Expo because of its big bus bay.


Members of the various congregations also liked the Expo’s relatively isolated location as it reduced distraction and the halls being on “ground-level made it safe and convenient for the elderly, the handicapped and children”, the Expo spokesperson said.


Church-goers, by their sheer numbers, also served as a draw for event organisers planning to use the Expo to stage exhibitions, she said.


Miss Ng Xuehua, 19, told Today she would visit exhibitions at the Expo after attending FCBC’s Mandarin service, “especially if it was an IT fair”, while Mr Calvin Hue, 53, said car exhibitions and computer fairs attracted him.


The Expo plays host to about 700,000 to 800,000 visitors on a weekend when events are held.


Can Singaporeans expect more churches to hold their services at the Expo?


Cornerstone Community Church will be hosting its second event at the Expo this month.


A church official said: “As it is, there is a shortage of medium to large facilities in Singapore, halls that can hold 2,500 to 5,000 people will be in great demand.”


One mega-church, New Creation Church, however, has chosen another way to house its large congregation — it will be moving to an integrated lifestyle hub at one-north in three years.


Now holding its Sunday services at Suntec City’s the Rock Auditorium, it attracts a congregation of over 15,000 and many members have to be “directed to our overflow rooms where they can follow and participate in the service via simultaneous telecast on projection screens”, a church official said..


Source: Today Newspaper

Condo’s residents want to stop repeated en bloc efforts, will seek Prof Jaya’s help

‘How many times more?’


Condo’s residents want to stop repeated en bloc efforts, will seek Prof Jaya’s help


Monday • January 14, 2008


Ansley Ng



YET another attempt to put Bayshore Park (picture) on the en bloc market has been nipped by poor attendance, and residents who are not interested in selling are fed up with the repeated efforts.


They now want to consult Law Minister Prof S Jayakumar — who is also their Member of Parliament (MP) — during a Meet-The-People session.


The meeting on Saturday to form an en bloc sales committee for the East Coast condominium could not proceed as a quorum of 30 per cent was not fulfilled.


This is the second time an attempt to start an en bloc movement in the 1,100 unit Bayshore Park has been thwarted.


Last September, a group called for a meeting to form a committee to sell the estate but had to disband after objection from other residents on legal grounds.


A group of opposing residents had sent a lawyer’s letter to the old committee challenging its constitution and its validity under the amended Land Titles (Strata) Act, tweaked in September last year to improve transparency and balance competing interests.


At least 30 per cent of the 21-year-old estate’s sole proprietors have to be present in order for the extraordinary general meeting (EOGM) to go ahead for any en bloc push to proceed.


Bayshore Park is one of the most prominent properties along the East Coast and developments at the 21-year-old condominium — which is more than 1 million sq ft in size — is keenly watched by marketing agents and developers alike because of its prime seafront location and vast land area.


Saturday’s poor turnout was due to an inconvenient location, said a resident who is a member of the group leading the en bloc charge. Because of space constraints, the meeting was held at Bedok Community Centre instead of inside the estate.


More than 20 per cent of sole proprietors had turned up and some did not make it in time for the 2pm deadline, said the resident, who declined to be named.


Despite the setback, he told Today another meeting would be called within four to six weeks.


Residents against selling their homes were happy that another attempt at en bloc has failed but are concerned that there is nothing to stop another bid to call for an en bloc EOGM.


One resident, who declined to be named, said: “It is clear that the level of interest only belongs to one group of hardcore people who want to sell. But under current laws, it appears that there is no end to it.”


Every time an extraordinary general meeting is called, the estate ends up forking up to $10,000 in postage and logistic charges to host the meeting, he said.


The resident added that those against selling the estate want clarification on how many en bloc EOGMs can be called within a short period of time.


Mr Donald Han, managing director of property consultancy Cushman and Wakefield, said that if pro-en bloc groups repeatedly try despite failures, they will have to work harder on the ground to get more support each time.


“There is nothing to stop them from setting up the general meeting. But if they keep doing it, people might get tired and they might get less support,” said Mr Han.


Source: Today Newspaper