Are markets headed for BIGGER TROUBLE?

Are markets headed for BIGGER TROUBLE?

 

What is happening to the world’s financial markets?

 

By Larry Haverkamp (Doc Money)

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18 March 2008

 

What is happening to the world’s financial markets?

 

US shares dropped like a rock on Friday. Today, Asian markets are expected to follow.

 

The story began last Tuesday when the US central bank (the Fed) said it would help commercial banks by loaning them money.

 

Large withdrawals by depositors could have been a disaster. It was a relief that problem was resolved.

 

Then, on Friday, the Fed said it would do the same for investment banks like Goldman Sachs, Merrill Lynch, Lehman Brothers and Bear Stearns.

 

Wow. The Fed hasn’t used such drastic medicine since the 1960s. The time before that was in the great depression of the 1930s. Are things really so serious?

 

LEVERAGE CAN BACKFIRE

 

Investment banks make riskier deals than commercial banks. They sell re-packaged home loans. They also set up funds to trade stocks and bonds, mostly with borrowed money.

 

Borrowing is called ‘leverage’. It boosts risks as well as returns. Indeclining markets, like now, the losses get magnified.

 

Some funds and investment banks may have taken on too much risk. There are reports of 30 and 40 times leverage. It means they used $1 of investors’ money to borrow $40 from banks and invest it.

 

True, leverage can earn a fortune. But it can also turn around and bite you.

 

Consider this: If a $40 investment declines by one per cent, the loss is 40 cents.

 

But that small decline of 40 cents translates into a 40 per cent loss of the initial $1 investment.

 

When it happens, the bank which loaned the $40 would make a ‘margin call’.

 

It would say, ‘We are very sorry but the $1 you invested is no longer sufficient.

 

‘Markets are falling and your $1 will be wiped out soon. You have 24 hours to put up more money. If you don’t, we will sell off your investments at a loss.’

 

The fifth largest investment bank, Bear Stearns, owned funds which ran into this kind of problem. That was the root of its cash crisis.

 

Last week, Bear Stearns said it had US$17 billion ($23.4b) in cash so no one should worry.

 

It didn’t work. Traders reasoned if Bear Stearns declared bankruptcy, their money would be stuck for months, as legal proceeding dragged on. They withdrew billions of dollars on Wednesday and Thursday.

 

On Friday, Bear Stearns had insufficient cash to meet further redemptions. So, it called the US Central Bank (Fed) and said, ‘We are sorry but withdrawals are so heavy that if we open for business, we will run out of money. So, we will not open tomorrow.’

 

BIG TROUBLE

 

It was a shock. The Fed knew it had to do something. Selling of Bear Stearns’ assets would have decreased the value of securities across the board. Losses could be enormous.

 

So, the Fed arranged to loan the firm all the money it needed. The irony is the Fed offered the same credit facility to commercial banks on Tuesday. Then, markets celebrated, thinking the credit crisis had been solved. The US Dow index rose 416 points.

 

On Friday, when the identical deal was extended to investment banks, the Dow index fell 195 points. Shares of Bear Stearns dropped 50 per cent.

 

This time, markets feared that financial institutions were failing. An unending series of bailouts might be needed.

 

Should we expect a downward spiral of collapse, rescue, collapse, and rescue? We haven’t seen that since the great depression in the 1930s.

 

Everyone says such a possibility is unlikely.

 

True, but one year ago, everyone considered it impossible.

 

 

——————————————————————————–

 

When will it end?

 

THE futures market indicates a 90 per cent chance of a 1 per cent cut in US interest rates when the Central Bank meets tomorrow.

 

Will it be enough to turn the US economy around?

 

Who knows? Our best predictor is the stock market, and it is a far from perfect.

 

 

 

——————————————————————————–

Source: The New Paper

Landlords look for bargains in US housing market

Landlords look for bargains in US housing market

 

Rental market looking up as mortgage rates rise

 

(LOMBARD, Illinois) The US housing crisis and credit crunch may end the American dream of property ownership for millions of people, but for landlords seeking bargain investment properties the market is looking up.

 

‘There will be a lot of product hitting the street in the coming months and it should be pretty cheap,’ said Mike Bacza, watching the bidding at a foreclosure auction last month in this western suburb of Chicago. ‘This year I expect I’ll buy at least two multi-family units in a decent neighbourhood.’ The 48-year-old union carpenter is not ready to purchase today, but observes from the back of a large crowded conference hall where hundreds of people – most of them investors – are looking to snap up one of some 170 foreclosed homes.

 

‘I’m on a reconnaissance mission,’ Bacza said, jotting down bids. ‘I want to know what’s selling and for how much.’ Building contractor Chad Blankenbaker seeks foreclosed homes to ‘flip’ – buying at well below market value, refitting then selling them at a hefty profit. ‘I’m shocked at how low the prices are here,’ he said. ‘There’s so much inventory that no one has to fight to buy anything.’ Around the country the housing crisis represents both a business opportunity for landlords and a huge shift in the rental market.

 

During the property boom, mortgage rates were low and people could buy a home with little or no money down, so there was no incentive for many Americans to rent.

 

‘The US rental market was nearly flat between 2000 and 2005,’ said Ken Fears, an economist at the National Association of Realtors. ‘Some landlords were so desperate to get tenants that we saw cases where they would offer three months free rent and other promotions to fill vacancies.’

 

‘Now mortgage rates have risen and it’s harder to gain access to credit, allowing landlords to jack up rents for the first time in years,’ he added.

 

What is good news for small-time landlords, however, may not be good for publicly traded US real estate investment trusts as the extra supply is expected to push prices down.

 

Some real estate analysts also worry that many landlords will turn their units into government-subsidised rental housing and stifle the rebirth of some US inner city areas.

 

For many people, the housing market is all bad news now. The Mortgage Bankers Association (MBA) said on March 6 that in the fourth quarter of 2007 a record 0.83 per cent of US home loans entered the foreclosure process. The US mortgage delinquency rate of 5.82 per cent was the highest since 1985, the MBA said. Officials added that they didn’t expect foreclosures to peak until mid to late 2008.

 

Dave Webb at Texas-based firm Hudson & Marshall, which held the auction in Lombard on behalf of lenders, said he expects business will be brisk all year, nationwide.

 

‘Last year we sold 7,000 units, in ’08 we should sell 15,000,’ he said. ‘If we had the capacity we could do 40,000.’ Even markets like Chicago, which has not experienced the same boom-and-bust intensity of states like Florida or California, have seen many foreclosed homes hit the market.

 

According to real estate data company RealtyTrac, Chicago was the 30th ranked US city for the percentage of homes with foreclosure filings in 2007. In absolute terms, its 73,469 filings put it in fourth place.

 

Auctions are often the last resort for lenders to offload foreclosed properties they could not sell using real estate agents. At the Lombard auction, most prices were around 60 per cent to 70 per cent off the list price – itself well below market value. Projection screens showed photos of properties boarded up in inner city areas, but there were also many higher-end houses in wealthy suburbs.

 

‘There’s no emotion here,’ said real estate agent Greg Fisher, looking around the conference hall. ‘These investors know what to bid, what it will cost to get these properties into reasonable shape and what to sell or rent them for.’ The lack of easy credit following the credit crunch means that there will be no shortage of renters in most markets.

 

‘The housing crisis has removed the ability of people to get out of the rental market and onto the property ladder,’ said Van Johnson, president of the Georgia Association of Realtors. John Vranas of Vranas & Chioros Realty Group, which owns rental properties throughout the Chicago area, said the ‘rental market has been firming since the first quarter of last year’.

 

‘We’re now seeing normal vacancy rates of 3 per cent to 5 per cent compared with double digits during the property boom.’

 

BMO Capital Markets analyst Rich Anderson said he expects that ‘an unprecedented flow of rental properties hitting the market could be a negative for multi-family Reits over the next few years’.

 

He said the influx of properties could especially be a ‘thorn in the side’ for Reits like Apartment Investment and Management Co and Camden Property Trust with exposure to hard-hit areas like Florida, Texas or California. — Reuters

 

Source: Business Times

Investment sales could hit $25b this year: CBRE

Investment sales could hit $25b this year: CBRE

 

This would be about half of the record $54.5b of deals done last year

 

DESPITE the current subdued mood, property investment sales this year could be substantial – about half of the record $54.48 billion clocked last year, CB Richard Ellis estimates.

 

It bases the estimate on a tally of $5.91 billion of investment sales deals struck in the first two-and-a-half months of this year.

 

‘Assuming Q1 2008 ends with $6 billion, the full-year figure could be around $24-25 billion. That would still be the third most active year on record, after $54.48 billion in 2007 and $30.59 billion in 2006,’ says CB Richard Ellis executive director (investment properties) Jeremy Lake.

 

Investment sales are seen as a gauge of major players’ confidence in the sector’s mid- to long-term prospects.

 

CBRE’s definition of investment sales includes those with a value of at least $5 million, comprising government and private sales, buildings and land, strata and en bloc. It also includes change of ownership of real estate via share sales.

 

Mr Lake reckons momentum this year will be generated by the sale of income-producing completed properties like malls, office blocks and industrial buildings, as well as the sale of sites through the Government Land Sales Programme, while the collective sales market has stalled.

 

‘Continued strong growth in Asia, coupled with Singapore’s position as a financial services hub and popular business destination for MNCs, will help maintain a healthy level of investment activity in the Singapore property market,’ CBRE said in a report issued yesterday.

 

CBRE’s analysis shows the private sector made up 55 per cent or $3.27 billion of the $5.91 billion investment sales deals sealed in the first two-and-a-half months of 2008.

 

Land sales by the public sector contributed the remaining 45 per cent or $2.64 billion.

 

The biggest land deal so far this year was the award of a hospital site at Novena Terrace/Irrawaddy Road to Parkway Holdings for $1.25 billion ($1,600 per square foot per plot ratio).

 

Splitting deal value by sectors, CBRE said the residential sector accounted for $2.23 billion or 38 per cent of total investment sales.

 

‘Compared with the heightened investors’ interest in en bloc acquisition witnessed in 2007, investors’ demand for private residential land continued to be lukewarm in the first quarter of 2008,’ it said.

 

‘Developers are no longer as keen to acquire more sites compared to last year as most of them have built a relatively strong inventory of freehold residential sites from the robust collective sales market in 2007.

 

‘Developers have already taken the cue to act cautiously. The buying of sites has been so far limited to specific choice sites since the response to recent new launches has been subdued.

 

‘In addition, the release of more affordable 99-year leasehold residential sites by the government for sale in the first half of 2008 may sway some buying interest away from prime freehold residential sites in the private sector.

 

‘The only successful collective sale deal in Q1 08 was Ban Guan Park, which was acquired by Link THM Holdings for $31.10 million ($870 psf per plot ratio).’

 

The office sector accounted for 34 per cent or $2.01 billion of investment sales so far in 2008, on the back of big transactions like Hitachi Tower for $811 million or $2,901 psf, Singapore Power Building ($1.01 billion or $1,820 psf) and One Phillip Street ($99.02 million or $2,749 psf).

 

‘Going forward, strong office demand and potential for further rental escalation would lead to more acquisitions of office properties in 2008.’ CBRE said. ‘The sustained influx of foreign investors should continue to lead to steady activity in the office investment market.’

 

Source: Business Times

MGPA says S’pore office demand underestimated

MGPA says S’pore office demand underestimated

 

Republic on new curve and will take capital market share from Tokyo, HK

 

By KALPANA RASHIWALA

 

MACQUARIE Global Property Advisors (MGPA), which has invested about $4.5 billion in Singapore real estate in the past 18 months, is optimistic about market prospects and reckons demand for office space is underestimated.

 

Singapore is a primary market and we like it,’ chief executive (Asia investments) Simon Treacy told BT in a recent interview. ‘We’re looking to invest in all sectors – residential, office, retail.’

 

Mr Treacy does not share the concern in some quarters that Singapore may face an over-supply of office space post-2010 because of the completion of several major projects.

 

‘You can’t look at the future of Singapore by looking at the rear-vision mirror,’ he says. ‘Singapore has moved into a different gear. It’s got a more robust economic platform and there are new demand drivers that this market hasn’t seen before.

 

‘Wealth creation is one of those sectors that will continue to flourish very quickly. Even if Singapore picks up 10 per cent of Switzerland‘s wealth industry, there will be very significant growth in the size of the sector in Singapore.’

 

Another reason the office market will continue to experience strong take-up is that ‘Singapore’s capital markets will grow more than what could be expected by looking at previous trend lines’, Mr Treacy says.

 

‘It’s now on a new curve. I think Singapore is going to take market share (in the capital markets) from Tokyo, Hong Kong.

 

‘I see Singapore as being almost the jewel in the Asian crown at the moment. We like the corporate governance, the shifting of gear over the past couple of years to really make Singapore operate at a very different level.’

 

MGPA-managed funds were the biggest real estate investors in Singapore last year. Their acquisitions here to date include two land parcels at Marina View bought at Urban Redevelopment Authority land sales, 8 Shenton Way (formerly known as Temasek Tower), 12 floors of Springleaf Tower, which MGPA has since sold for a handsome gain, units at 8 Napier condo near the Botanic Gardens, and the Cascadia development in Bukit Timah.

 

Mr Treacy notes that prime-grade Singapore office rents are expected to appreciate between 10 and 25 per cent this year after last year’s 80-90 per cent hike.

 

‘I think businesses this year will be more careful over their decisions, but over the medium term, the average rent and take-up will be stronger and there will be ongoing rental growth in this market,’ he says.

 

‘It’s important to point out that the sectors that are growing in Singapore are those that require international-grade office space and environments to attract the quality people, particularly expatriates, who are going to be required to fuel the growth in this economy.’

 

On prospects for the Singapore residential sector, he says: ‘It’s going through an interesting growth phase because there’s a strong influx of expatriates. We’ve also got a lot of Singaporeans returning to live and work in the country. And you’ve got a generally positive workforce that’s wanting to get ahead and move upstream. Affordability still seems to be in check. So fundamentally, the outlook is still quite solid.’

 

As for MGPA’s likely target investments in the housing sector, Mr Treacy says: ‘We target sweet spots. That might change over time, but we certainly see good demand for top-end, best-of-class residential. We also see demand at the top end of the mass market like Cascadia. Again, it’s all about location, location, location.’

 

He acknowledges the current sub-prime jitters but views these as ‘disruptions that will bring opportunities’, saying: ‘We think the economies that are well thought-through, and with good governance, will be the ones that will float through to the top quickest.’

 

Viewing Asia as the world’s economic growth engine, MGPA particularly likes Singapore and Hong Kong for their transparency, maturity and growing capital markets.

 

MGPA is a private equity real estate fund management company that is 49 per cent owned by Macquarie Bank of Australia and 51 per cent owned by MGPA senior management including Mr Treacy. It has more than US$10 billion of assets under management and operations in Asia and Europe.

 

Overall, MGPA’s leverage on a regional basis is ‘quite conservative’ at about 60 per cent.

 

On Marina View land parcels A & B in Singapore, Mr Treacy says there are no current plans to team up with joint-venture partners to develop them. Both plots have minimum stipulated office components and plot B also has a minimum hotel component.

 

‘We’ve closed the purchase of the sites with debt from banks, including major Singaporean banks,’ he says.

 

8 Shenton Way is being spruced up in phases to create more retail space and a new drop-off area, as well as upgrades to the lobby and entrance to Tanjong Pagar MRT Station.

 

‘It’s a long-term investment,’ Mr Treacy says when asked if MGPA plans to sell the asset.

 

Asked whether MGPA has reached its allocation limit for Singapore real estate, he says: ‘We have lots of allocation for the right investments’.

 

Source: Business Times

Commercial units, residential site up for sale

Commercial units, residential site up for sale

 

By UMA SHANKARI

 

SEVEN adjoining commercial units in Singapore Shopping Centre and a residential development in District 11 were put up for sale yesterday.

 

Colliers International will auction the commercial units on the third storey of the shopping centre in Clemenceau Avenue.

 

The seven units will be offered together and the asking price is in the region of $1,300-$1,500 per square foot (psf) – which works out to some $5.1-$5.9 million in all.

 

The units are offered with vacant possession and 99-year leasehold tenure with effect from May 1, 1948. The total floor area is 3,916 sq ft, with individual sizes ranging from 409 sq ft to 828 sq ft.

 

‘The successful bidder could choose to lease the units, which are suited for commercial schools or backroom office operations,’ said Grace Ng, Colliers International’s auctioneer. ‘We foresee these units commanding a potential yield of about $7.50-$8 psf.’

 

Alternatively, the buyer could sell the units individually at a later stage as they have separate titles, Ms Ng said.

 

‘Given the tight supply situation in the office sector, this is a rare opportunity for investors and owner- occupiers to acquire a sizeable commercial space in a well-located development,’ she added.

 

The auction is scheduled for March 26 at The Amara Hotel

 

Separately, Newman & Goh said yesterday that Pastoral View, a freehold residential site in District 11, is up for collective sale with an indicative price of $95 million – which works out to $996 psf per plot ratio (ppr), including an estimated development charge of about $400,000.

 

Located at the junction of Bassein Road and Akyab Road, the site covers 34,193 sq ft and has a 2.8 plot ratio, giving it a maximum gross floor area of 95,739 sq ft.

 

The site can be redeveloped up to 36 storeys from its current 10 storeys.

 

‘This ideal site is at the heart of the Novena lifestyle hub, yet nestled in an exclusive private enclave,’ said Jeffrey Goh, head of investment sales at Newman & Goh. ‘It will reap extraordinary benefits from the future growth cluster around Novena MRT station, making it a vibrant and desirable location for local and foreign home buyers – especially surgeons and medical executives working in the vicinity.’

 

The collective sale tender is expected to close at 3pm on April 16.

 

Source: Business Times

New home sales slump to 9-month low in Feb

New home sales slump to 9-month low in Feb

 

URA sees slowest sale of 170 units since start of its data releases in June ’07

 

By ARTHUR SIM

 

(SINGAPORE) The number of new homes sold by developers dropped to just 170 units in February – the lowest since the Urban Redevelopment Authority (URA) began releasing monthly sales data in June 2007.

 

And CB Richard Ellis executive director Li Hiaw Ho estimates that new home sales could be just 700-800 units for the first quarter of 2008 – even lower than the 894 units sold in the fourth quarter during the Asian financial crisis in 1997.

 

In an analysis of the data released yesterday, Jones Lang aaLaSalle (JLL) said, however, that prices were comparatively stable.

 

The firm’s head of research (South-east Asia) Chua Yang Liang said that using the ‘lowest median prices’ category of the URA data, median prices declined 0.7 per cent for units sold in the Core Central Region (CCR) and 5 per cent in the Outside Central Region (OCR) on a month-on-month basis.

 

For units sold in the Rest of Central Region (RCR), the lowest median price increased 14.2 per cent from $765 psf in January to $874 psf in February.

 

Colliers International said 107 units were launched in the RCR and 64 were taken up. In the CCR, 31 units were launched and 35 were sold, while in the OCR, 205 were launched and 71 were sold.

 

Colliers International director of research and consultancy Tay Huey Ying pointed out that although the units launched in the RCR accounted for 60 per cent of all new units launched in February, the number of units sold in the OCR accounted for a much smaller 42 per cent of all purchases.

 

On the other hand, while the number of new units launched in the CCR accounted for only 9 per cent of all units, sales accounted for a much larger 21 per cent of all units sold.

 

‘On a deeper analysis, it is estimated that the sales take-up of new units launched in the month of February was strongest for CCR and weakest for OCR,’ Ms Tay said.

 

She also noted that sales of new units launched in the CCR improved from an estimated 53 per cent in January to 58 per cent in February, while sales in the OCR are estimated to have declined significantly from 49 per cent in January to just 22 per cent in February.

 

‘This could indicate the resilience of demand for high-end and luxury properties even in the wake of global economic and financial sector uncertainty,’ she said.

 

Another concern could be the increasing number of new homes ready for sale that have not been launched. At end-December 2007 there were 4,000 such units. But the number has since swelled to more than 6,500 units from 92 unlaunched projects.

 

Ms Tay said that assuming the US recession is ‘mild and short-lived’, market activity could pick up towards the end of 2008 or early 2009. ‘Based on this scenario, developers may launch a total of some 6,500 to 7,500 units in 2008,’ she said.

 

However, if the US falls into a prolonged recession, she reckons 5,000 to 5,500 units could be launched, with the mass-market likely to continue to dominate new launches.

 

With developer sales falling, the secondary market appears to be taking up some of the slack.

 

According to a DTZ Debenham Tie Leung report, the volume of developer sales of non-landed freehold and leasehold homes fell a sharp 60 and 74 per cent respectively in Q4 2007 quarter-on-quarter. However, secondary market freehold and leasehold transactions fell 47 and 43 per cent respectively for the same period.

 

Foreigners bolstered sales figures. URA said that they accounted for 31 per cent of all non-landed secondary market transactions in 2007.

 

Source: Business Times

URA mulls over monthly index on private home prices

URA mulls over monthly index on private home prices

 

By KALPANA RASHIWALA

 

(SINGAPORE) The Urban Redevelopment Authority (URA) is mulling over the possibility of releasing the price index for private homes, at least for non- landed properties, on a monthly basis instead of just on a quarterly basis as it does currently, BT understands.

 

When contacted, a URA spokeswoman said: ‘We are studying the possibility. We will let you know when a decision has been made.’

 

In the meantime, URA will issue the flash estimate for the Q1 2008 private home price index on April 1, as usual, the URA spokeswoman added.

 

Market watchers gave mixed reactions to the idea of URA releasing its private home price index every month. Some say this would complement the monthly developer sales data, while others suggest that the idea may not be such a good thing in today’s quiet market.

 

‘There may not be enough launches and property transactions to compute an index monthly in a quiet market,’ said a seasoned property consultant. ‘If the market turns, it may not be a good idea to keep reminding people every month that the index is going down or the volume of transactions is falling. That may accelerate the decline. It’s psychological.’

 

But some players argued that this move could complement URA’s monthly release of developers’ sales data.

 

‘The developer sales data shows a median price, which may not be reflective of the market since it depends on the type of units (including how they face and whether they have private enclosed spaces/ roof terraces) sold in a development in a particular month. Whereas the formula for a price index is more rigorous than a simple median price and provides a more accurate picture of actual price trends in the market,’ says Colliers International’s director of research and consultancy Tay Huey Ying.

 

She reckons that because an overall price index will be based on both primary and secondary market transactions, the volume of transactions should be enough for a monthly computation.

 

Currently URA publishes developers’ private home sales data for each month in the middle of the following month on its website. However, if the authority decides to go ahead with issuing the price index for private homes on a monthly basis, it is likely that both information releases will be at the same time to avoid confusing the public, market watchers suggest.

 

They also say that if URA decides to go monthly with its price index, they would not be surprised if the Housing & Development Board also broadcasts its resale flat price index on a monthly basis.

 

Source: Business Times

Crisis may be the worst since WW2: Greenspan

Crisis may be the worst since WW2: Greenspan

 

It will end when US home prices stabilise, he says

 

(LONDON) The current crisis rocking the markets and global economy could turn out to be the worst since World War II, former US Federal Reserve chairman Alan Greenspan said in remarks published yesterday.

 

‘The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the Second World War,’ Mr Greenspan said in a Financial Times commentary.

 

‘It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities,’ he said, referring to the meltdown in the US sub-prime home loan market and subsequent massive losses for the banks holding the debt instruments.

 

‘The crisis will leave many casualties,’ he said. His remarks come after Bear Stearns, the fifth largest US investment house, collapsed on Friday and was taken over by JPMorgan Chase for a fraction of its value only a week ago.

 

At the weekend, the Fed also announced a series of emergency measures intended to ease the credit crunch and calm nerves as investors fled to apparent safety in the euro and commodities such as oil and gold, which hit record highs again yesterday as stock markets in Asia and Europe tumbled.

 

‘Particularly hard hit will be much of today’s financial risk-valuation system, significant parts of which failed under stress,’ said Mr Greenspan, whom some have criticised for contributing at least in part to the current crisis by being too lax on monetary policy whilst head of the Fed.

 

Mr Greenspan recognised that changes would have to be made as a result of the crisis but he argued that they should not compromise the abiding principles of free competition.

 

‘In the current crisis, as in past crises, we can learn much, and policy in the future will be informed by these lessons. But we cannot hope to anticipate the specifics of future crises with any degree of confidence,’ he said.

 

‘Thus it is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulation not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition.’ – AFP

 

Source: Business Times

New home sales nosedive in Feb

New home sales nosedive in Feb

 

Only 185 out of 343 units sold, down from 328 in January, but prices are holding steady

 

By Fiona Chan

 

SALES of new homes slowed almost to a standstill last month, delivering another blow to the already-weak housing market here.

 

Property developers yesterday said they sold only 185 new units in February, about half of the 343 they launched in the month and well down from the 328 sold in January.

 

This anaemic performance, coupled with the continuing quietness of the market this month, prompted some experts to predict that new home sales this quarter could hit one of the lowest levels ever seen here.

 

‘The current weak market sentiment is likely to stay, which means that the total number of new homes sold in the quarter may be 700 to 800 units,’ said Mr Li Hiaw Ho, executive director of CB Richard Ellis Research.

 

He said this could be worse than during the Asian financial crisis, when just 894 new units were sold in 1997’s last quarter. Only Sars in 2003 saw fewer new homes sold: 427.

 

In contrast, developers sold 14,811 new homes in the exuberant boom last year, or an average of 3,700 homes each quarter.

 

Property consultants say they were not surprised by last month’s feeble numbers, given the Chinese New Year holiday and the snowballing global financial crisis originating from the United States.

 

But even as some admitted the contraction was ‘worse than expected’, they stressed the silver lining: home prices are still holding steady.

 

At Hong Leong Holdings’ Aalto in Jalan Kechil, two units were sold for a median price of $2,619 per sq ft (psf), up from the median $2,078 psf fetched by three units in January.

 

‘There are strong fundamentals to support home prices,’ said Mr Chua Yang Liang, Jones Lang LaSalle’s head of South-east Asia research.

 

‘En bloc sellers have to look for housing and they are cash-rich. We still believe in the ‘remaking Singapore‘ story and with more foreigners coming in, property prices are likely to hold in the coming months.’

 

But market confidence will ‘remain shaky’ until the extent of the US recession can be measured, said Ms Tay Huey Ying, director of research and consultancy at Colliers International. She expects market activity to remain lacklustre until June.

 

At some projects, prices have started to dip slightly. At Ritz-Carlton Residences in Cairnhill, only one unit was sold last month at $4,140 psf. None was sold in January, but five were taken up in December for between $5,053 and $5,146 psf.

 

The best performer last month was the Cosmo condominium in Guillemard Crescent, where 41 out of 45 units were sold, mostly within the first week of its launch, for between $1,048 psf and $1,152 psf.

 

Source: Straits Times

Only one collective sale done so far this year

Only one collective sale done so far this year

 

This is a marked fall from about 25 done in the same period last year

 

By Joyce Teo

 

SOME residential estates are still pushing for a collective sale but they face a tough market in which such transactions have almost completely dried up.

 

Just one small deal has been sealed so far this year, dramatically down from about 25 in the same period last year, property consultants said.

 

The sole deal was Link (THM) Holdings buying freehold Ban Guan Park in Holland Road for $31.1 million earlier this year, with plans to build landed homes.

 

The escalating United States sub-prime mortgage crisis and a jittery stock market have caused many property players to scurry to the sidelines.

 

In the months ahead, there will be very few, if any, collective sale launches and deals, said property consultants.

 

They are in no hurry to launch, given that developers have built up ample land banks for now and sales are slow.

 

CB Richard Ellis’ (CBRE’s) executive director of investment properties, Mr Jeremy Lake, said the firm is working on two to three projects but has nothing planned for the collective sale market in the first half.

 

After that, it will ‘play it by ear’, he said. ‘To a large extent, the market has ground to a halt.’ He added that the firm has declined to take on some very large collective sale sites.

 

Credo Real Estate managing director Karamjit Singh said the firm has plans to relaunch one or two collective sale sites at lower prices in the second quarter. If owners are not prepared to lower their prices, the firm is advising them to wait for the market to recover.

 

Some estates continue to work towards a sale, with the intention of going to market towards the end of the year, property consultants said.

 

Chiltern Park‘s sale committee is asking owners to each contribute $200 towards a fund to facilitate a collective sale.

 

Some others just want to go to market when they are ready.

 

‘A lot of owners fail to understand the market has turned severely,’ said an industry source. ‘When your estate is not in the price range developers are excited about, it defeats the purpose of marketing it.’

 

Yesterday, Pastoral View near Novena MRT Station was put up for collective sale at a guide price of $95 million – slightly under $1,000 per sq ft.

 

The 52-unit freehold development obtained the minimum 80 per cent approval from owners before rules were amended last October. They had waited, unsuccessfully, for the 18-unit One Akyab next door to join the sale, so that they could offer a bigger site.

 

‘The market is slow but two overseas developers have expressed interest in the site,’ said the head of investment sales at marketing agent Newman & Goh, Mr Jeffrey Goh.

 

In a report yesterday, CBRE said Singapore‘s investment property sales market was ‘surprisingly active’ so far this year, with $5.91 billion deals registered, despite the uncertain global economy. Public land sales, such as the $1.25 billion sale of a hospital site in Novena, made up the bulk of investment sales to date.

 

Investment activity in the residential sector slowed considerably in the first quarter this year, contributing $2.23 billion to date in transacted value. This includes good-class bungalow sales and forms 38 per cent of total investment sales.

 

‘Developers are no longer as keen to acquire more sites compared to last year, as most of them have built a relatively strong inventory of freehold residential sites from the robust collective sales market in 2007,’ said the CBRE report.

 

The release of more affordable 99-year leasehold sites by the Government may sway some buying interest away from private prime freehold residential sites, it added. ‘The investment sales market is likely to see a challenging year in 2008.’

 

Source: Straits Times