NEWS & VIEWS Update by ERA Research Thursday, 4 September, 2014 RESIDENTIAL MARKET Lease buyback: 75% of elderly HDB households can benefit Three in every four elderly HDB households can benefit from the enhanced lease buyback scheme (LBS), up from 35 per cent previously. But a huge jump in take-up rates of the scheme is unlikely, said Minister for National Development Khaw Boon Wan on Wednesday. Other enhancements to the LBS, which will also kick in from April next year, are aimed at offering households greater flexibility on the length of lease to retain and the amount of proceeds to be received in cash upfront - issues that naysayers of the scheme have earlier picked at. Mr Khaw said that he expects the take-up rate for the enhanced scheme to increase by a few hundred or thousand, but not jump by tens of thousands. Many residents that he spoke to in his Sembawang GRC hailed the LBS enhancements a good idea but expressed that they will not tap the scheme now as they are financially supported by their children or have passive income from subletting a room. But it does not matter whether it is a thousand or ten thousand. The scheme is there and we will make sure that it will be implemented the way we have described it, Mr Khaw said. The scheme has seen a low take-up rate since its inception in 2009, when it allowed elderly households in three-room or smaller flats to retain a 30-year lease and sell back the remaining to HDB. The sales proceeds are used to top up their CPF Retirement Account (CPF RA), which can in turn be used to buy annuity plan. So far, only about 800 households have signed up for the scheme, of which some 340 households joined only after some enhancements were made in 2013. According to MND, Singapore is in a sweet spot for the enhanced LBS given that 80 per cent of the 290,000 HDB flats owned by seniors aged 55 years and above are fully paid-up and sitting on net equity. Besides extending the scheme to four-room flats, the government is raising the household income ceiling from S$3,000 to S$10,000. Households joining the scheme can also choose the length of the lease to retain, up to 35 years, based on their age and preferences, instead of having one standard 30-year lease. Instead of topping up their CPF RA to the full age-adjusted Minimum Sum, joint flat owners need to top up to only half of their Minimum Sums. This allows joint owners to receive more cash upfront, but still subject to a cap of S$100,000. But Mr Khaw urged the elderly to exercise prudence with the excess cash proceeds - a point that he also stressed in his blog on Wednesday. While these enhancements are good, I do worry about some elderly spending unwisely away the substantial cash proceeds, he blogged. For example, many overseas properties are being marketed here. There are bound to be disappointments and even losses. The elderly have the option of voluntarily using these cash proceeds to top-up their CPF RAs or their spouses CPF RAs, Mr Khaw said. ERA Realty key executive officer Eugene Lim noted that while the pool of eligible households is expanded, this is unlikely to cause a dent to the supply of resale flats in the market. There remains a prevailing mindset among the elderly that the HDB flat is an asset that they wish to bequeath to the next generation, he said. Mr Khaw told reporters that the scheme is continually reviewed to stay relevant to its targeted beneficiaries as their preferences and life expectancies change over time. He also conceded that any changes in HDB resale prices could temporarily affect the schemes demand, since the value of the lease is calculated based on prevailing market value. But there are bound to be market upturns and downturns within a 30-year lease period, he said, adding that this is a long term scheme. Source: Business Times – 4 September 2014 COMMERCIAL MARKET Samsung Hub floor sold at S$3,225 psf The entire 18th floor of Samsung Hub has been sold at S$3,225 per square foot - the highest for an entire office floor in the 30-storey office tower in Church Street in the Raffles Place area. The building is popular among office investors due to the long tenure of the site - 999-year leasehold. Samsung Hubs 18th floor, which has just been transacted, comprises six strata units adding up to 13,132 sq ft, resulting in a total quantum of slightly over S$42.35 million. The entire space is being sold to a single buyer, said to be an Asia-based group involved in the oil and gas business, among others, looking to occupy the space, as existing leases run out in phases starting later this year. The psf pricing surpasses the S$3,030 psf at which the entire 14th floor in the building was sold earlier this year by Arch Capital Management. Church Street Holdings is a partnership between Buxani Group and a group of investors advised by Seychelles-based Capital Management Group. When contacted, Buxani Group CEO Kishore Buxani confirmed the sale. Our holdings in Samsung Hub have been a good long-term investment for us, and we have been happy to hold on. For Level 18, I was actually approached by a few agents with attractive unsolicited offers. After careful review of all the offers, we decided to divest based on advice from our independent adviser. However, as I am still positive on the Singapore commercial real estate market, I will look to redeploy the proceeds to invest in other opportunities here which could generate even higher returns for us. Mr Buxani is also a director of Church Street Holdings, which acquired six office floors in the building - Levels 16-21 - from OCBC in 2007 for S$1,560 psf or S$122.4 million. Including the latest transaction, it would have sold four of these floors. Last year, the company divested Level 17, comprising six strata units transacted individually at between S$3,126 psf and S$3,500 psf (the top end was for an 883-sq ft unit). The average price achieved for the whole floor totalling 13,132 sq ft was S$3,210 psf. Hence what is noteworthy is that the S$3,225 psf at which Level 18 is being sold, on an entire floor basis, is even higher than the average psf price for the six separate units sold on Level 17 last year. Church Street Holdings sold Samsung Hubs 16th floor in late-2012 for S$3,000 psf and 20th floor in late-2011 for S$2,800 psf. Market watchers suggest one factor that could have aided the latest transaction in Samsung Hub is the minimum S$2,800 psf asking price for three strata half-floor units (of 5,000-plus sq ft each) at the next-door Prudential Tower, which is on a site with slightly over 80 years balance lease. Two of the units are on the 11th floor and the other is on the 16th floor of the 30-storey building. Source: Business Times – 4 September 2014 Office revamp in Spore offers high returns Singapore has emerged fourth in a recent report that found that the city-state offers investors some of the most attractive returns for minor office building refurbishment investments at 7.53 per cent. It is one of the top three Asian cities in the ranking, with Shanghai beating it to third place and Hong Kong, which ranked seventh. The report, done by Arcadis - a leading global asset design and consultancy firm - considers both major and minor refurbishment projects in 15 cities across the world and ranks them by the best expected net rental income return. According to the report, minor building refurbishment aims to extend the life of an office asset by up to five years, while major refurbishment aims to do so by 15-20 years. There are many older office assets in Asia that have not received sufficient investment and which are now failing to realise their full potential, explained William Taam, Arcadis executive director and Asia financial institutions sector lead. This is also the reason why Shanghai, Singapore and Hong Kong offer investors attractive returns for minor office building refurbishment. However, Asian markets, including Singapore, might be risky for investors looking to reap returns for refurbishment projects due to the high volume of new office buildings making these markets very competitive. Singapore has also seen a tide of offices moving away from its traditional central business district to places nearby such as Marina Bay. Mr Taam suggests that to cope with such competition, investors need to ensure that the building refurbishments made are aligned to support business and brand strategies of its occupiers. Buildings also need to reposition themselves through minor refurbishing to avoid becoming obsolete, prevent existing tenants from leaving and to attract new tenants. For Asian investors looking for opportunities outside their region, European cities London, Warsaw and Madrid are a good bet for attractive returns on major as well as minor office building refurbishment investments. Source: Business Times – 4 September 2014 Indonesian tycoon Tahir picks up 12 Grange Infinite units Indonesian tycoon and philanthropist Tahir is understood to be the buyer in the recent bulk transaction of 12 units at the completed, freehold Grange Infinite project. The transaction is said to have amounted to S$70-plus million. The deal comprises 11 four-bedroom apartments ranging from around 2,560 sq ft to 2,700 sq ft each and a junior penthouse of 6,039 sq ft on the 20th level of the 36-storey freehold project. The acquisition by Mr Tahir is said to price the apartments in the region of S$2,050 per square foot on average and the penthouse at around S$1,950 psf. The 12 units were sold vacant. Grange Infinite, a 36-storey condo development completed in 2011, is next to the Indian High Commission on Grange Road. Market watchers suggest more bulk transactions of luxury condo units in Singapore could materialise as sellers are now generally more willing to lower their price expectations and negotiate. In some instances, sellers could be fund management outfits wishing to exit for a variety of reasons - including the end of the fund life, or a decision to divest their holdings in the Singapore residential market and switch to other investments, noted a seasoned property consultant. On the other hand, developers of high-end residential projects would be more inclined to hold on to their prices for as long as they can, he added. The seller of the 12 Grange Infinite units is the Asia Dragon Fund (ADF), managed by ARA. Talk in the market is that the transaction is being effected through the sale of shares in two overseas incorporated companies: one holding the 11 apartments and the other, the junior penthouse. Following the bulk sale of the 12 units, ADF is left with just one unit in Grange Infinite - a super penthouse on the 36th level spanning across 9,462 sq ft which ADF again holds through a separate corporate vehicle. A potential buyer may hence choose to again make an acquisition through the sale of shares in the company. The official asking price for the unit is said to be S$26 million, reflecting $2,748 psf, although market watchers expect the deal to be near the $2,000-2,100 psf level. Among other things, the unit comes with a pool and has spectacular views in addition to five bedrooms. The 13 units are out of an original 53 that ADF had acquired back in 2008 in the 68-unit project from its developers, Chip Eng Seng and Citadel. ADFs purchase price of S$388 million worked out to an average price of S$2,600 psf. ARA later released the units for sale to individual buyers, offloading 40 units at below S$3,000 psf on average, according to a recent BT report. Mr Tahir has scaled up his real estate holdings in Singapore over the past few years. His property portfolio includes office buildings such as 135 Cecil Street and ABI Plaza (formerly known as RCL Centre) along Keppel Road in addition to investments in residential units in developments such as One Shenton, St Regis Residences and Four Seasons Park. Mr Tahir is the founder and chairman of the Mayapada Group, an Indonesia-based conglomerate with interests in the banking, retail, property and healthcare businesses. He has a stake in Singapore-listed MYP Ltd. Born to working-class parents in Surabaya, Mr Tahir came to Singapore for his education, earning a business degree from the then-Nanyang University. Along with investing in Singapores property market, he is also known to be involved in numerous philanthropic deeds. One of the latest is setting up scholarships at Singapore Management University. He has also given a total of S$33 million to the National University of Singapore and set up a million-dollar trust fund in June with the Singapore Table Tennis Association. Mr Tahir is a son-in-law of Indonesian magnate Mochtar Riady. Source: Business Times – 4 September 2014 *ERA News & Views is for educational use only.
Posted on: Thu, 04 Sep 2014 09:08:59 +0000
Trending Topics
Recently Viewed Topics
© 2015