Business Times: UK house prices fall in September

October 9, 2007
UK house prices fall in September
Concerns raised over outlook for consumer spending

(LONDON) House prices in Britain unexpectedly fell for the first time since December last month, according to HBOS plc’s Halifax house price survey last Thursday, in a firm sign that the property market is coming off the boil.

Rising interest rates and a global lending squeeze have been expected to weigh on house market sentiment in Britain and the latest decline in prices will encourage the view that interest rates could fall in the coming months.

Halifax said house prices fell 0.6 per cent, down from a downwardly revised 0.3 per cent gain in August and well below forecasts for a 0.4 per cent increase.

‘This could well prove to be the beginning of the end for the boom in the UK housing market,’ said George Buckley, chief UK economist at Deutsche Bank.

Nonetheless, the annual three-month rate of house price inflation remains in double digits at 10.7 per cent, although that was below expectations for a 11.1 per cent rise and down from 11.4 per cent last month. The average house price fell to £198,500 (S$595,479).

‘September’s price fall is consistent with the normal behaviour of the market during a slowdown. A mixed pattern of monthly price rises and falls is a typical feature of a more subdued housing market,’ said Martin Ellis, Halifax chief economist. Halifax said the annual rate should decline further in the coming months but noted that the British economy looked strong.

Many economists also argue that Britain’s housing market is not yet on the verge of collapse. ‘We currently believe it is unlikely that annual house price inflation will turn sharply negative, given that a lack of supply means that vendors in many areas still have some pricing power,’ said Howard Archer, an economist at Global Insight.

However, falling house prices on a monthly basis raise concerns over the outlook for consumer spending, especially as a global lending squeeze grips financial markets and fuels fears of a broad economic slowdown. ‘Since house prices gains have stalled, we believe it is highly likely that spending growth will also hit the wall in the months ahead,’ said Alan Clarke, an economist at BNP Paribas.

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Straits Times: China to build world’s first eco-city off Shanghai coast

Oct 9, 2007
China to build world’s first eco-city off Shanghai coast
By Jessica Cheam

ALL energy will be renewable, and there will be no petrol-fuelled cars or landfills as everything will be recycled.

Welcome to Dongtan in China, the world’s first eco-city project and the subject of an inaugural lecture series held by the National Development Ministry yesterday.

The lecture by Mr Peter Head, director of British engineering firm Arup Associates, which is behind the project, outlined the high environmental standards envisioned for the city off the coast of Shanghai, which expects to host some 400,000 inhabitants eventually.

Besides its recycling and clean energy features, organic food will be produced in compact spaces with nutrients extracted from waste, and roads are planned for walking or cycling, not driving, said Mr Head.

Construction of the 8,600ha eco-city is being driven by the Shanghai Industrial Investment Corporation and is expected to start next year.

Mr Head also spoke of the challenges that existing cities face over sustainability, particularly in relation to Singapore.

It prompted some lively debate among the 400-strong audience, which included industry players, academics and civil servants.

Among the issues were questions about how Singapore, as a First World country, could also aspire to become an eco-city.

Mr Head said Singapore’s vision as a sustainable city is in the right direction.

‘But perhaps a more integrated approach, such as getting public, private and non-government organisations to work more together on issues like waste management, is needed,’ he added.

The National Development Ministry’s permanent secretary, Mr Tan Tee How, ended the session by acknowledging that there were no immediate solutions, but some inspiration can be gleaned from the Dongtan eco-city project.

The lecture was the first in the series, entitled Sustainable Development And Competitiveness Of Cities. A ministry spokesman said the event will now be held at least once a year.

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Business Times: Retail rents rise in Q3 but retail sales at a high

October 9, 2007
Retail rents rise in Q3 but retail sales at a high
Some shops expand even as rents rise, others more sensitive to psf sales By ARTHUR SIM

(SINGAPORE) Rents for shops on Orchard Road may have increased by another 12 per cent in the third quarter to $44.30 per square foot (psf) per month, but retailers are unfazed, especially as the latest figures show that the second quarter of this year saw the strongest sales for 10 years.

According to a report by property consultancy Knight Frank, retail sales value (excluding motor vehicle sales) in the second quarter hit a 10-year high of $8.15 billion.

The figure for the quarter was also an improvement on the previous interim high of $7.8 billion seen in the final quarter of last year.

Not surprisingly then, rising rents in the Orchard Road vicinity as well as the Marina area, where rents increased by 3.7 per cent quarter-on-quarter (q-o-q) to an average $28.90 psf per month, are not upsetting retailers too much.

Knight Frank director (research and consultancy) Nicholas Mak says: ‘With the planned revitalisation of the Orchard area,
retailers are optimistic that their retail sales figures are able to offset the increase in rentals.’

Knight Frank also expects full year figures to hit a record high, pointing out that at end-July 2007, total sales figures already stand at $18.4 billion compared to $29.5 billion for the full year of 2006.

Nash Benjamin, the CEO of FJ Benjamin, which owns Guess, Gap and Celine here, has noticed that rents have been rising but he says: ‘The bottom line is whatever rental you pay must finally be relative to the business, otherwise tenants will not be able to invest. We are fortunate that most malls we work with have a good understanding of this principle.’

With space getting more expensive, retailers are becoming more sensitive to rentals on a per square foot basis too.

Steven Goh, spokesman for the Orchard Road Business Association, believes the situation is not so much that retailers are prepared to pay higher rents for a prime space but more that they have become more savvy in measuring how ‘productive’ their businesses are.

‘For instance, a restaurant that was 2,500 sq ft before may streamline its operations to 2,000 sq ft because it gives the
optimum return of $100 worth of sales on a per square foot basis, which can justify the rental,’ he explains.

Another example Mr Goh gives is that of fashion boutiques, which on average, must make between $120-$150 psf in sales. And the concern is not so much about rent. ‘The pressure is actually to find new concepts,’ he says.

Perhaps a sure sign that retailers and their landlords are doing well is when a shop decides to expand, even when rents keep rising.

High-end leather goods retailer Tod’s, in the equally high-end mall Paragon, has just moved into bigger and better premises with frontage on Orchard Road, increasing its store size by about 50 per cent.

Patrina Tan, deputy general manager of marketing at Paragon, says it does not discuss rents but does concede that all landlords do see the expiry of an existing lease as an opportunity to review rent levels. ‘Rentals are always relative,’ she adds.

She also reports that the sentiment among the tenants at Paragon is definitely ‘positive’.

The outlook for the future remains good too despite close to 2 million sq ft of retail space scheduled to be completed by next year. And at Knight Frank, Mr Mak says he does not expect demand to decrease either.

For the rest of the year, Knight Frank expects occupancy to increase by about one percentage point q-o-q. This will bring islandwide occupancy to between 93 and 94 per cent and Orchard Road occupancy to about 95.8-96.5 per cent.

Knight Frank also expects rentals for prime retail space to increase 15-20 per cent year on year, with capital values rising by 10-15 per cent.

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Business Times: Subsales picking up after lull as sellers temper their demands

October 9, 2007
Subsales picking up after lull as sellers temper their demands
Lock in profit if margin is good, some agents advise
By KALPANA RASHIWALA

(SINGAPORE) After a lull of about six weeks, activity seems to be picking up in the subsale market on the back of the stock market rally and more reasonable demands from sellers.

‘It’s not as good as before sub-prime but much better than during the subprime, from mid-July to mid-August,’ said CB Richard Ellis executive director (residential) Joseph Tan.

‘There have been definitely more inquiries and there’s been more response to ads. Whether this will lead to more subsale volume is hard to say,’ he added.

Jerrytan Residential Pte Ltd executive director Jason Tan too has seen a ‘mild pick-up’ in subsales of condos in Districts 9 and 10 in the past couple of weeks or so ever since the stock markets in the US and Singapore started rising again.

ERA Realty Network divisional director Andrew Soh too has seen more subsale deals in the last two to three weeks in the Sentosa Cove and Marina Bay locations. A unit at Oceanfront condo at Sentosa Cove was sold for $2,550 per square foot in the subsale market two weeks ago, reaping the seller a handsome profit of over $2 million as he had purchased the unit (also in the subsale market) in September last year for $1,750 psf.

Jerrytan Residential’s Mr Tan says: ‘Sellers are lowering their expectations after the reality check provided by the sub-prime stock market crash. But they’re still making healthy profits as they may have bought the units a little while ago.’

For instance, the owner of a unit at The Grange recently sold his 2,300 sq ft apartment in the subsale market for about $2,500 psf or a total of about $5.76 million, against his original purchase price of about $1,450 psf from the developer around July 2005. His net profit after factoring in agents’ fees, stamp duty and legal fees would be around $2.2 million.

In some instances, the spur to sell in the subsale market and take a profit now is that the projects may be receiving Temporary Occupation Permit (TOP) within the next year and those who bought their units on deferred payment schemes from the developer, paying only 20 per cent of the purchase price so far, will soon have to pay up another 65 per cent of their purchase price.

‘Our advice to these investors is that if there is a good margin from their investment, they could lock in their profit now. They can always reinvest in another property,’ Mr Jason Tan says.

‘Buyers picking up units through the subsale market are also starting to feel more confident again, after the stock market’s
recovery. They’re prepared to hold the properties as a mid- to long-term investment but are also eyeing the possibility of selling much sooner, when the projects receive TOP. The outlook is still good, as there will be limited supply of completed brand-new developments in Districts 9 and 10 over the next six to 12 months,’ he added.

However, ERA’s Mr Soh sounds more cautious. ‘Supply in the subsale market is more than demand. I may be wrong but I think the high-end residential property clock is at 9 o’clock. My advice is to take a profit now and not be too greedy. Supply in the subsale market is greater than demand. It’s tough to find buyers in the subsale market now, unless you go overseas.’

Colliers International’s analysis of caveats captured by the Urban Redevelopment Authority’s Realis system shows that the months of May, June and July saw the most subsale activity in the first eight months of 2007, with more than 600 such deals in each of these three months.

The Sail @ Marina Bay, Citylights, Icon and The Lakeshore, were the most widely traded projects in the subsale market in the May-July period with 151, 93, 90 and 68 transactions respectively.

However, subsales fell drastically by more than 50 per cent to just 299 transactions in August. ‘Usually, caveats are lodged upon the option being exercised, so a slowdown in subsales from mid-July would only be reflected in the caveats about two weeks later, starting August,’ says the firm’s director of research and consultancy Tay Huey Ying.

She forecasts that subsale activity will stage a rebound.

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