every owner of  high rise flats, apartments  bOUght  aIr ? ? ? ?

tIme  tO  sEll  all  ? ? ? ?

hIgh  rIse  prOpertIes  ? ? ? ?

befOre  market  cOllapse  ? ? ? ?

Stock Calls

CityDev

$11.76 | Sell

All green

$1.13 | Neutral

UBS downgrades City Developments from Neutral, cuts price target to $10.96;

it also downgrades Allgreen Properties from Buy and cuts target to $1.13 from $1.33.

UBS says investors are underestimating the impact of the Government’s efforts to concurrently increase residential land supply and dampen housing demand. House tips a 30-per-cent fall in transaction volume and a decline of up to 10 per cent in mass market home prices by the end of next year. Cites slowdown in growth of Singapore permanent residents and sharp increase in new supply of HDB flats as risks to values.

Notes number of PRs rose 1.5 per cent from the beginning of this year to June, versus 11.5-per-cent gain for the whole of last year, and a 7.4-per-cent rise annually over 2004 to 2008.

The great Carrefour bunfight When a dozen customers are jostling at the till trying to buy the same packet of cornflakes it probably means the price is too low.

KeviN Brown

Supermarket chain’s South-east Asian sell-off defies growth potential

When a dozen companies are scrambling to buy the supermarket, it probably means someone is selling an asset they ought to be holding onto.

This is the message from an extraordinary corporate bunfight going on in Southeast Asia, where Carrefour, the world’s second-biggest retailer, has attracted a field of significantly more than 10 bidders for the sale of 61 supermarkets in Thailand, Malaysia and Singapore.

The bidding frenzy raises a number of questions, not least why Mr Lars Olofsson, Carrefour’s relatively new chief executive, is so keen to bale out of a region in which the company invested US$150 million only three years ago.

Mr Olofsson has said little, hinting only that he wants to concentrate on markets where Carrefour is either the market leader or a strong contender to become so. That would include China, where the group is a leading foreign presence, but not South-east Asia.

Yet Carrefour is woefully under-represented in the world’s fastest growing region, with only 7.8 per cent of consolidated net sales in Asia compared with 79 per cent in Europe. The Asian proportion will decline further with the sale of the South-east Asian stores, which account for 15 per cent of regional sales.

This seems an odd way to improve the company’s growth prospects — a point that Mr Olofsson recognised when he coupled the announcement of disappointing first half results with enthusiastic talk of opening stores in Russia and India.

It is hard to see the logic of simultaneously pulling out of one part of Asia and starting from scratch in another, except as a way of defusing pressure for better short-term results from big shareholders such as Mr Bernard Arnault, chairman of LVMH, and Mr Thomas Barrack, chairman of Colony Capital, the private equity group in the United States.

To that extent, the strategy might work.

But Mr Olofsson’s critics might be less impressed if they considered the scale of the opportunity that Carrefour is handing to someone else.

Like most of Asia excluding Japan, South-east Asia has returned to blistering economic growth after a short downturn.

Thailand has reported year-on-year growth in gross domestic product of 9.1 per cent for the second quarter, following 8.9 per cent in Malaysia and 17.9 per cent in Singapore.

The Asian Development Bank is forecasting 8.1 per cent for emerging east Asia as a whole this year and 7.2 per cent next year.

The International Monetary Fund is projecting GDP growth in the advanced economies of only 2.6 per cent this year and 2.4 per cent the following year.

But it is not just the background environment that contrasts so sharply with Carrefour’s European base. Beneath the headline figures, Asia’s renewed growth is being driven by two fundamental changes that point to above average prospects for retailers.

The first is that the recovery largely reflects a big rise in domestic consumption, marking a significant departure from the traditional export-driven model.

This shows up strongly in retail sales, currently rising at about 15 per cent year on year — double the pre-crisis rate, according to HSBC’s Asian Real Retail Index.

The signs are everywhere — from the iPhone4 selling like hot cakes in Hanoi to the glossy television ads featuring Taiwanese supermodel Lin Chi-Ling that are helping Mercedes-Benz break sales records in China.

Asia is already the biggest and the fastest growing market for products such as mobile communications devices and personal computers.

But the long-term outlook is even more enticing. The United Nations is forecasting that 140,000 people a day — that’s right, a day — will flock to Asia’s cities over the next 40 years, creating large-scale retail demand in addition to the effects of rising incomes.

Significantly, many of the bidders for Carrefour’s assets are Asian companies — supermarket operators such as Singapore’s Dairy Farm and private equity firms such as Malaysia’s Navis Capital — which are experiencing the consumption boom first hand.

The big exception is Tesco, the world’s third-largest retailer by sales and the market leader in Thailand, which has clearly seen an opportunity to entrench its position.

In the very short term, the bidding scramble is good for Carrefour.

Its hopes for a price tag of US$800 million to US$1 billion, initially regarded as optimistic by European analysts, now look achievable.

But the sale might come to be seen as a big strategic mistake. Carrefour will release a relatively small sum for investment elsewhere.

Another company — probably Tesco — will lay the foundations for decades of profitable growth. Tesco says it is keen not to overpay. Carrefour can hardly ask enough.

(c) 2010 The Financial Times Limited

SME lender is Japan’s first bank failure in 7 years

TOKYO

The Financial Services Agency (FSA) has told the bank it cannot do any business for at least three days and must make efforts to protect existing depositors, the agency said in a statement.

Japanese media said the FSA is likely to let the bank go under and will only refund depositors a maximum of ¥10 million ($160,000). This would be the first time that a cap on deposit insurance had been used in Japan, since it was acted in 2002 after a slew of banks went bankrupt with the bursting of the economic bubble in the 1990s.

The bank specialises in providing banking services for small and medium sized businesses. It may report a negative net worth of ¥150 billion, the

Banking shares were mixed in Tokyo trade on Friday; the benchmark Nikkei Index was up 1.90 per cent.

Also on Friday, Japan approved a US$11 billion ($15 billion) stimulus package aimed at helping the export driven economy tackle deflation and the impact of a surging yen.

The previously announced plan, approved by the Cabinet of Prime Minister Naoto Kan, includes initiatives aimed at boosting consumption and creating employment for graduates. It is also intended to provide investment in green industries and offer support for small business.

The fresh stimulus package of ¥915 billion will be financed by reserve funds and is expected to lift the country’s gross domestic product by about 0.3 per cent, creating around 200,000 jobs.

The plan also specifies a strong yen as “a problem that cannot be unaddressed”, stating that the government “will take determined action, including intervention, when needed”.

Revised data on Friday showed that Japan’s gross domestic product grew by an annualised 1.5 per cent in the April-June quarter, well above an initial estimate of 0.4 per cent. — The private Incubator Bank of Japan (IBJ) was reported on Friday to have been ordered to halt operations and will file for bankruptcy yesterday, in what would be Japan’s first bank failure in seven years, officials said.Nikkei Business Daily reported.AFP

Chow House            YY Wong                                         101,749              983             NA

DBS Towers 1 & 2  OUE                                                883,000              986              NA

property@mediacorp.com.sg

About two years ago, following the collapse of Lehman Brothers and the deepening global financial crisis, property analysts were pessimistic about the Singapore office market amid concerns over weak demand and a supply overhang.

CONTINUED IMPROVEMENT IN OFFICE DEMAND EXPECTED

The Singapore economy is tipped to expand at a blistering rate of between 13 and 15 per cent this year.

Owing to the vigorous economic expansion, net absorption for office space rose from a negative take-up of about 237,000 sq ft last year to a positive 635,000 sq ft over the first six months of this year. As of June this year, overall island-wide demand for office space has returned to pre-financial crisis levels.

With the resumption of strong hiring within the financial, insurance, real estate and professional services sectors and the influx of new occupiers into the market, we foresee total net office demand to hit 2 million sq ft this year.

MANAGING OFFICE SUPPLY

Having achieved a turnaround in office rents, the next stage for office rental recovery is sustainability. To ensure sustainable growth in office rents, demand and supply imbalances have to be kept in check.

Over the past year, about 2.15 million sq ft of office space was taken out of the pipeline, greatly alleviating the supply overhang.

In addition, with a potential conversion of 0.84 million sq ft of existing office space to residential and hotel uses, the 7 million sq ft of new office stock, to be completed between this year and 2012, looks increasingly manageable.

On top of that, 41 per cent of the stock in major new office buildings has been precommitted and another 15 to 20 per cent are under earnest negotiations to let.

We are confident that these projects will continue to be well received and absorbed in the coming quarters while older prime grade buildings will remain attractive to replacement and existing tenants at competitive rates.

RENEWED INTEREST IN GOVERNMENT LAND SALES SITES

In fact, the limited supply pipeline in 2013 and beyond has raised concerns of a potential supply gap. Coupled with the growing confidence within the office market, interest in the Government sales of sites has been renewed since early this year.

The transitional office site in Mohamed Sultan Road drew three aggressive bids, with the top bid coming from Link (THM) Holdings at $17.19 million, which far exceeded the sole bid of $4.65 million received in 2008. The bid price was 84 per cent higher than the trigger price of the site.

Subsequently, the Government land sale of the white site in Jurong Gateway Road attracted six bidders. With a winning bid of $748.89 million or $649.60 per sq ft per plot ratio, Lend Lease plans to develop a commercial mixed development with about 30 per cent of the gross floor area (108,000 square metres) allocated to office use.

In order to cater to the future growth of the business community, the Government has also set aside three land parcels with office components under the 2H2010 GLS Programme in Tanjong Pagar, the Jurong Lake District and Paya Lebar Central.

The keen interest to develop office projects also shows that the participants of Singapore’s office market are maturing in their development decisions.

Traditionally, office projects are embarked upon only when there is a supply crunch, such as during the economic upswing in 2007.

But due to the cyclical nature of the economy and office rents, these faced the possibility of meeting with an economic downturn upon completion.

Likewise, there were hardly any developers that adopted a contrarian strategy by starting office projects during the Sars-stricken watershed year 2003, even as prices were attractive. This led to a supply crunch in 2007 when the economy finally picked up.

The developers’ interest this year, which is the early stage of a confirmed economy recovery, shows that they are striving to minimise potential mismatch in demand and supply.

They are keen in developing office space before an economic boom, with an eye to completion at an opportune time to meet future demand.

PROMISING PERFORMANCE OF THE OFFICE CAPITAL MARKET

Since the onset of the global crisis in 2008, we have not seen many transactions involving distressed owners offloading their assets.

SIngapore office market

$/sq ft/month             Peak   TROUGH  Q2 2010  Peak-To-Trough

                                             (Q1 2010)                      Change %

Raffles Place Grade A       19.47        7.52             7.99        

Overall Prime           15.56        6.72             7.02         -

Raffles Place Prime  17.79        7.25             7.63         -

Shenton Prime          12.34        5.76             5.95         -

City Hall Prime        15.18        6.67              7.03         -

Orchard Prime         14.24        6.76              7.09         -- 61.4% 56.8% 59.2% 53.3% 56.1% 52.5%

 * * * * * * * *

Building Name  Nett Lettable Area   Location     Pre-Commitment

2010

MB FC Tower 2             1.03        Marina Boulevard     100%

Tokio Marine Centre      0.14        McCallum Street         90%

2011

Ocean Financial Centre  0.85         Collyer Quay              63%

50 Collyer Quay             0.41         Collyer Quay              22%

One Raffles Place           0.35         Raffles Place              —

2012

MB FC Tower 3             1.30         Raffles Place              55%

Asia Square Tower 1      1.26         Marina View              —

2013

Asia Square Tower 2      0.78         Raffles Place              —

Instead, sellers are holding on to their improved financial positions as buyers seek in vain for investment grade properties at rock-bottom prices.

However, we observe that more transactions are taking place now and buyers are more willing to raise their offers to match the anticipated future performance of the office sector.

In recent months, several major office buildings like StarHub Centre, Chow House and DBS Towers 1 and 2 have changed hands.

Total investment sales ($5 million and above) amounted to $2.7 billion in the first eight months of the year, which is three-fold the investment volume concluded last year.

MARKET OUTLOOK

Despite the euro zone sovereign debt crisis and fears that the American economy may slip into a double-dip recession, the robust economic performance in Singapore bodes well for the office market.

We believe that the office market is staging a vigorous comeback with rental growth of about 10 per cent for the second half of this year and 15 to 20 per cent next year as landlords push asking rents upwards on the back of positive sentiment and healthy precommitment levels gained in new buildings.

The increase in leasing interest will be underpinned by companies undergoing corporate expansion beyond reinstating the business functions that were trimmed during the recession.

The expansion is also likely to be broad based — from corporate giants to small and medium sized businesses. The increase in rentals will also stir investment sales, uncovering opportunities for investors.

The writer is a research analyst for the Asia-Pacific region at Cushman and Wakefield.

Companies began slashing jobs while corporate real estate decisions were put on hold, resulting in an immense slowdown in leasing activity. Since then, prime rents across all sub-locations within the Central Business District have corrected more than 50 per cent from the peak. Last year alone, prime rents tumbled by a staggering 44 per cent.

Nevertheless, rents of office space saw a sturdy turnaround in Q2 this year, supported by consecutive quarters of positive demand since Q4 last year. The improvement in demand was largely driven by the economic recovery in Singapore and the Asian economies since end last year, with companies actively looking for space to cater for expansions.

Prime rents grew 4.5 per cent in Q2 this year from the previous quarter, putting a halt to the downward trajectory after seven quarters of declines.

Looking ahead, the office sector is likely to outshine the other property sectors as business confidence continues to improve and companies re-initiate their expansion plans.

The market of the places we work in ...

More office transactions are taking place and buyers are also willing to raise their offers to match promising performance of the office sector

Lee Peiying

property@mediacorp.com.sg

Having achieved a turnaround in office rents, the next stage for office rental recovery is sustainability. To ensure sustainable growth in office rents, demand and supply imbalances have to be kept in check.

Will they under perform the STI ?

If you believe the former, then you will end up thinking home prices will rise nearly as fast as incomes in the long run and that houses today are not terribly overvalued. If you view housing is a staple, though, prices will rise more slowly — with general inflation, as food tends to.

Malaysian  properties  are  good  for  residence

KL  is  good  location  for  investment

JAPAN  properties  are in DEPRESSED  STATE

cannOt  recOver

as  lOng  as

YEN  is  hIgh

and  Interest  Is  near  ZERO

A $2 million dream ...

Landed property within reach if buyers know where to look

Ephraim Seow

ephraimseow@mediacorp.com.sg

SINGAPORE

Those who are serious about purchasing a landed property should start with $2 million as a realistic budget to work with, property experts said.

“A year ago, especially in the earlier part when the downturn was at its worst, you might still be able to afford a semi-detached house in prime areas for under $2 million.

Now, this is a lot harder,” said ERA Asia-Pacific associate director Eugene Lim.

Instead, those with $2 million budget can now opt for 10 to 15 year-old inter-terrace houses, defined as those within a row of terrace houses. Such properties offer ample space with land areas of between 1,500 and 1,600 sq ft, as well as a built-up area of close to 2,000 sq ft.

“These will not come with facilities like swimming pools but buyers can make up for it through a country club membership.

It can be a good trade off since they don’t have to maintain the facilities,” said Mr William Wong, managing director at RealStar Premier Property.

Of the 259 freehold landed properties sold for less than $2 million from January to August this year, 247 were terrace houses, 11 were semi-detached houses and one was a detached house, according to data from the Urban Redevelopment Authority (URA).

In comparison, around 31 semi-detached houses and 2 detached houses were bought during the same period last year.

Market experts said that as a guide, terrace houses located in the central region would cost some $2 million to $2.6 million, a semi-detached house would cost above $3 million and a bungalow would be more than $5 million.

But if buyers look east, they may find some good buys.

“If the buyer is flexible with the location, they can afford a corner terrace house in the East. These would have more space for landscaping,” said Mr Lim.

At under $2 million, some terrace houses in the East offer a land area of 1,600 sq ft to 1,700 sq ft, property market observers said.

These will have built-up areas of 2,000 to 2,500 sq ft, able to accommodate three large bedrooms or four smaller ones.

And if the buyer is fine with a 99-year lease, they could also opt for terrace house at $1.3 million or a semi-detached house for $1.6 million to $ 1.8 million, said Mr Lim.

For instance, a terrace house at 17 Sea Breeze Road in Tampines was sold at $1.8 million, which works out to $503 psf. Built in 1993, the property has an area of about 3,574 sq ft.

Another recent transaction was for the semi-detached house at 157 Bedok Road, sold at $833,333 or about $259 psf.

It 3,218 sq ft unit was built in 2004.

Property experts said with the recent cooling measures, buyers may be able to pick up good deals as sellers may become more amenable to negotiation.— With property prices hovering near record highs, can some home buyers still realise their dream of owning a landed property?

Prospective buyers shout ‘bingo’ when allocated a block of land by lottery

KARRATHA

Now he and his 40 employees cannot build homes quickly enough in the remote Western Australian mining town where demand for land is so hot that the government organises lotteries to select buyers.

“During ballots people would literally yell out ‘bingo’ if they got a block of land because instantly they knew they had made A$100,000 ($122,400),” Mr Eaton, 43, said as he monitored workers at a building site in the town of 20,000 people.

“They would build a house on it and their profit would go up to A$250,000,” he added.

The housing shortage in a region that’s one of the world’s biggest suppliers of iron ore and natural gas is driving up costs for resource companies such as Chevron Corp and BHP Billiton as they mine raw materials to feed China’s industrialisation.

Chevron, the second-largest American oil company, was forced to lease a seven year-old cruise liner, the

Karratha means “good country” in the language of the local indigenous people.

It is the biggest town in the arid northwestern region of the Pilbara and has a median house price of A$775,000, 49 percent higher than Sydney’s. A four-bedroom home in the fly-ridden, cyclone-prone outpost rents for about A$10,000 a month — triple the average apartment in Manhattan.(Western Australia) — Property developer Paul Eaton moved to Karratha 10 years ago with a fledgling business.MS Finnmarken, to house 350 workers at its A$43 billion Gorgon gas project.

MINING CENTRE

The Pilbara, a region 20-per-cent bigger than California with only 45,000 people, generates 23 per cent of Australia’s merchandise exports.

Karratha, about 1,500km north of the state’s capital Perth, is one of the world’s remotest locales, making homes twice as costly to build as in the nation’s major cities, as each brick, roof-tile and sheet of plasterboard must be shipped thousands of kilometres.

The other main town in the region is Port Hedland, the centre of BHP and Rio Tinto Group’s iron ore operations.

Like Karratha, its property prices are booming, giving it a mean housing price of A$908,000, according to Real Estate Institute of Western Australia figures. That compares to A$520,000 in Sydney, according to property researcher RP Data.

“The region has gone ballistic,” said Ms Dianne Gilleland, regional manager at the Master Builders Association.

“Logistically, it’s very expensive to build houses in the Pilbara. Tradesmen don’t have anywhere to stay. There are a few caravan parks; hotels charge whatever they like. To even book into a hotel is tough.

Prices will rise for a long time.”

FLY IN, FLY OUT workers

The mining and energy companies house most of their staff — known as “fly in, fly out” workers as they reside in cities such as Perth and Sydney when not on-site — in permanent self-contained units known as Dongas. Due to a shortage of these, other companies are forced to rent hotels or houses. That is bad news for the towns’ non-resources workers, who earn about a third of the miners’ wages.

“Some people who have lived in Karratha and Port Hedland all their lives working in low- to moderate-income jobs can’t afford to live there anymore,” said Ms Bronwyn Kitching, chief executive officer of Shelter WA, a non-government organisation dedicated to improving housing opportunities for lower- and middle income workers in the state.

Other workers, especially in the service industries, cannot afford their own rooms and are forced into “hot-bedding”, where they pay rent for a bed that is taken by another worker as soon as they wake up, she said.

PLAYING CATCH-UP

Western Australia Premier Colin Barnett, who labels his state “the Saudi Arabia of natural gas”, is aware of the problem. His government is planning to turn Karratha and Port Hedland into sustainable cities with populations of about 50,000 by 2035, complete with new marinas and shopping centres.

“We have a Catch-22 situation where we need housing but the people that build the houses can’t afford to live here,”said Mr Chris Adams, general manager of the government’s new Pilbara Cities initiative.

“There is massive demand for housing and community facilities and the supply is just not there. We’re fixing up the supply end but at the same time demand keeps growing. We’re always playing catch up.”

INHOSPITABLE CLIMATE

The Pilbara — named after pilbarra, an aboriginal word for mullet — is the main resource centre of Western Australia, a state about four times the size of France that accounts for 62 per cent of the nation’s mineral production, 75 per cent of natural gas and 64 per cent of crude oil and condensate, according to state government figures.

Mining and petroleum production in the state was worth more than A$60 billion last year and the state has about A$170 billion worth of projects in the investment pipeline over the next five years.

The Gorgon project on Barrow Island, off Karratha, holds more than 40 trillion cubic feet of gas and will supply 8 per cent of current global liquefied natural gas capacity, Chevron said last year. It is the company’s largest project. The LNG that Gorgon will produce will help elevate Australia to second among global suppliers of the fuel from sixth now, according to BP.

CYCLONES, LAND CLAIMS

Visitors to Karratha, which arose from the arid moonscape and scrub terrain less than a half-century ago, would be forgiven for thinking it an unlikely place for a housing boom.

Temperatures often soar above 40°C in the summer. Cyclones buffer the region from November to April, further adding to building costs as homes must be made cyclone-proof.

Meanwhile, land releases are constrained due to claims by the region’s aboriginal population and reticence to allocate land to housing when it may have minerals underneath.

All of that adds up to a “perfect storm” constraining the supply of new homes, according to Karratha real estate agent Phil Hodnett. Properties that 10 years ago were selling for A$160,000 are now approaching A$1 million, he said.

“The world wants more and more of what we have here in terms of natural resources and every other day there’s new stuff found,” he said. “The game just keeps going on.” Bloomberg

The mining boom which has hit Western Australia has created an unprecedented shortage of accommodation in Karratha and the surrounding area, resulting in home prices that are 49-per-cent higher than Sydney’s. AFP

Properties that 10 years ago were selling for A$160,000 are now approaching A$1 million, said Karratha real estate agent Phil Hodnett.