News Highlights Tuesday 11 March 2008

New form of deferred payment – but with a catch
In a bid to tempt home buyers back into a cooling property market, banks are teaming up with developers to bring back deferred payment, or the likes of it. They are resurrecting an older scheme known as interest absorption which also allows buyers to postpone the bulk of their payments on new homes. Only UOB and OCBC Bank offer interest absorption plans with a deferred payment feature. They have tied up mainly with smaller developers and projects such as Cosmo in Guillemard Cresent. Boutique developer Roxy homes will absorb stamp duty for buyers who pick up a unit at its Ambrosia project in East Coast Road this weekend. On a whole, interest absorption schemes shift the risk of buyer default from the developer to the bank.

- The Straits Times, P4




Kuwait fund pulls out of bulk purchase of high-end homes
A Kuwait bank fund that agreed in December to buy 97 units at posh Goodwood Residences for S$818.4 million has let the purchase option lapse. This could be the first time a foreign institutional investor in Singapore has pulled out of such a deal, raising concerns that the property market already hit by the weakening sentiment may be heading into a downturn. The Kuwait fund’s purchase would have been the single-largest purchase of residential units under construction in Singapore, agreeing to buy the units at a median price of S$3,200 psf.

- The Straits Times, H20




Property investors set sights on market trough in US, Europe
Opportunistic investors are pulling back from Asian property because they see more scope for picking up distressed assets in US and Europe. Although private equity firms continue to develop property in India and China, they are more likely to buy buildings on the cheap in the West than in Asia. Because of tight credit and a worsening economy, US commercial estate values could fall by 20 per cent in the next 5 years from their peak last year. London office values have dropped 12 per cent from a peak in the middle of last year, and will be pressured further by forecasts of a 10 per cent decline in rental rates through next year. Mr Bart Coenraads, head of real estate at Fortis Investments states that investors would buy distressed core and refinance it, which would make them good returns. This is mirrored to the economic crisis from 1997-1998 in Asia.

- The Straits Times, H16




Economists trim Singapore Q1 growth forecast to 5.7%
Private sector economists have pared their forecasts of Singapore’s first quarter GDP growth to a median 5.7 per cent, from 7 per cent three months earlier. Economic growth is expected to dip below 5 per cent in Q2 and Q3. The 2008 inflation rate is projected to rise to 5 per cent on average, with some economists seeing it to hit 7 per cent in Q1, with the median forecast a bit lower at 6.3 per cent.

- The Business Times, P1




Kuwait eyes Jurong Island foothold
Kuwait investors are in talks with Jurong Aromatics Corporation (JAC) to take a 10 per cent stake worth US$200 million in the Singapore group’s planned US$2 billion petrochemicals facility on Jurong island. Noor Financial Investment Company, the financial advisor for a Kuwait consortium led by Ikarus Petroleum is leading the talks for the strategic stake. According to JAC director Ewe Ee Foong, financing for the US$2 billion JAC project is in an advanced stage.

- The Business Time, P2




Allco Reit could divest its Aussie assets
Allco Commercial Real Estate Investment Trust (Allco Reit) could divest its interest in its Australian properties which are currently valued at A$482.9 million. If divestment takes place, the capital would be redeployed to higher-growth areas in Singapore and other Asian cities. Its three key properties – China Square Central and 55 Market Street in Singapore, and Central Park in Perth – had a combined value at the end of December of $1.13 billion based on the latest revaluation.

- The Business Times, P5





Ophir-Rochor corridor site to be marketed in France
The Urban Redevelopment Authority (URA) will market the first site in the new Ophir-Rochor corridor at the “Marche international des Professionals de L’Immobilier” (MIPIM), a premier international property event in Cannes France. The site, which is a 2.74 hectare parcel adjacent to Parkview Square, will be launched for sale under the Confirmed List of the Government Property Land Sales Programme in June. The development will have to include a minimum amount of office and hotel space. Depending on market demand, URA will release more redevelopment sites in the Ophir-Rochor area over the next 5 to 10 years.

- The Business Times, P32





All eyes on govt land tenders this month
4 99-year leasehold suburban Government Land Sale site tenders located above the Serangoon Circle Line MRT Station with a potential value of S$500 million are on offer, which close this month. The 269,180 sq ft plot can be developed into an estimated maximum potential gross floor area of about 850,000 sq ft excluding a bus interchange that the successful bidder will have to build. The site can be redeveloped into any combination of commercial, hotel, residential, and sports and recreational use. The next month entails at least 2 interesting offers at state land tenders – a private condo site at Toa Payoh Lorong 2/3, and a 1.56 hectare site in Choa Chu Kang for residential development that comes with the existing Ten Mile Junction mall.

- The Business Times, P32





URA sets aside more land for offices
URA states that the new growth area set aside for a seamless extension of the existing financial district will be more than twice the size of London’s Canary Wharf. Over a span of more than 15 years, the development of the 85-hectare site identified for extension of the existing financial district will see the addition of around 2.82 million square metres of office space. According to URA, office rents soared 56 per cent last year as demand for office space rose by an average of 260,000 square metres per annum over the last 3 years, a 60 per cent increase from the historic average of 160,000 sq m a year.

- The Business Times, P32