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Lian Beng to ride wave of housing market recovery

Rio Casa, a 286-unit development has been sold collectively for $ 575 million to Oxley-Lian Beng Venture Pte Ltd.

Singapore-listed construction company Lian Beng Group has positioned itself to take advantage of the recovering private housing market.

According to a report published by CIMB Research on Thursday (18 January), the firm has amassed 1.9 million sq ft of residential landbank here. These include a 20 percent stake each in the redevelopment of two en bloc sites, namely Rio Casa and Serangoon Ville.

Moreover, Lian Beng is expected see greater contributions from its property development arm if prices of private residential properties in the city-state rise significantly.

In FY2017, its construction division accounted for 37 percent of its $ 281.7 million revenue. Property development made up 31 percent, while its concrete and asphalt business comprised 20 percent.

The construction firm is also anticipated to benefit from its 10 percent stake in the Gaobeidian Township project in China, where prices have more than doubled from 4,600 yuan psm in 2014 to 9,800 yuan psm last year, based on data from online property listing portal Anjuke.

In addition, the overall value of Lian Beng’s investment properties has surged from $ 66 million in FY2012 to $ 704 million in FY2017, generating cumulative fair value gains of $ 156 million during the period.

To further take advantage of the improving sentiment in Singapore’s private housing market, the company is considering to spin off its property development arm and list it on the SGX-Catalist board.

This move will not only allow the market to accurately gauge the value of its property development division, but will also enable this business to raise funds independently without using Lian Beng’s finances.

 

This article was edited by Keshia Faculin.

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BCA sees steady improvement in construction market

With the rescheduling of “a few major public sector infrastructure projects”, total construction contracts awarded last year fell below expectations at $ 24.5 billion, reported Channel News Asia citing preliminary estimates from the Building and Construction Authority (BCA).

The value of construction contracts to be awarded in 2018 is expected to stand at $ 26 billion to $ 31 billion, a downward revision from the initial forecast of between $ 26 billion and $ 35 billion.

The downward revision was attributed by BCA to the “continued drag from the significant slowdown in private sector construction demand since 2015”.

Nonetheless, BCA expects private sector’s construction demand to increase from last year’s $ 9 billion to between $ 10 billion and $ 12 billion this year, on the back of a brighter economic outlook as well as improved property market sentiment.

Public sector construction demand is also expected to rise from $ 15.5 billion in 2017 to between $ 16 billion and $ 19 billion in 2018.

Looking ahead, BCA sees the construction market improving steadily in the medium term, with demand forecasted to reach $ 26 billion to $ 33 billion per annum in 2019 and 2020.

It expects demand to improve further in 2021 and 2022 at between $ 28 billion and $ 35 billion.

Taking the lead, the public sector is predicted to contribute $ 16 billion to $ 20 billion per year from 2019 to 2022 in view of the major infrastructure projects expected such as the Changi Airport Terminal 5 and Cross Island Line.

BCA expects private sector construction demand to gradually increase also in the medium term due to the spill-over benefits generated by the city-state’s improved economic performance and the redevelopment of collective sale sites.

 

This article was edited by Keshia Faculin.

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MAS points to risks in the Singapore property market

The recent surge in collective sales poses potential risks to the stability of the local property sector. Hence, market players should proceed cautiously, according to the 2017 Financial Stability Review (FSR) published by the Monetary Authority of Singapore (MAS) on Thursday, 30 November.

“20 residential projects totalling about 2,900 units have been sold through en bloc transactions as of mid-November, up from six in the whole of 2016 and one in 2015. The redevelopment of these en bloc sites (coupled with supply from GLS sites) could potentially add another 20,000 new private housing units. This will more than double the number of unsold units currently in the pipeline within the next one to two years.”

Given that the compound annual growth rate of Singapore’s population has slowed down from three percent between 2007 and 2012 to 1.1 percent in 2012 to 2017 there is considerable uncertainty whether the new supply and the existing vacancies can be fully absorbed by the market.

As of Q3 2017, Singapore’s vacancy level remained elevated at 8.4 percent, with over 30,000 private homes left unoccupied. Although it is slightly lower than the 8.9 percent peak in Q2 2016, it is still higher than the historical average of about 6.5 percent in the past decade.

Hence, MAS is urging developers to take this into account when bidding for land. Likewise, potential buyers should remain prudent when acquiring homes as there is more than enough supply to meet demand. They should also carefully assess their ability to service their mortgage, particularly property investors, as they could struggle to repay their loans if interest rates rise and vacancy levels remain high.

Meanwhile, the central bank revealed that new housing loans have increased to an average of $ 3.5 billion per month over the first ten months of the year compared to $ 2.8 billion in the same period in 2016 due to stronger residential sales.

This article was edited by Keshia Faculin.

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Land sales to hit $14b, a sign of property market resurgence

Pearlbank Apartments in Outram is a 37-storey horse-shoe shaped building that comprises 280 apartments and eight commercial units. (Photo: Colliers International)

More than $ 3.3 billion worth of land deals, including en bloc sales, are expected to be completed in Singapore during this quarter, boosting the total for the whole year to $ 14 billion, reported Bloomberg, citing data from Cushman & Wakefield Inc.

This is the highest figure since 2011, said the property consultancy, adding that this indicates that the city-state’s real estate sector is set to recover significantly by next year.

“Singapore’s residential and office market has passed its inflecion point, embarking on an exciting recovery journey,” said Cushman & Wakefield’s Research Director Christine Li.

“With brighter economic prospects and improved market sentiment in the next two to three years, developers are increasingly sourcing land sites to ride the wave of growth for the rest of the decade.”

Among the top land deals set to be closed in Q4 2017 is the ‘Reserve List’ site in Jiak Kim site formerly occupied by iconic nightclub Zouk. Zoned residential with first-storey commercial use, the site has a maximum gross floor area of 51,231 sq m and can yield 525 houses.

The government is offering the land for a minimum bid price of $ 689.353 million, but Cushman & Wakefield estimates that it could fetch $ 870 million.

Another is the anticipated collective sale of the 288-unit Pearlbank Apartments in Outram for a reserve price of $ 728 million. This translates to a land cost of $ 1,505 psf ppr after factoring in a $ 195 million premium for topping up the lease for the site with a GFA of around 57,000 sq m.

In addition, the 33,358 sq m Reserve List site in Fourth Avenue is expected to yield about 445 homes. The state is selling it for at least $ 448.8 million, but Cushman & Wakefield believes that the winning buyer could get it for $ 505 million.

The public tender for the Jiak Kim and Fourth Avenue sites will close on 5 December, while the Pearlbank Apartments en bloc sale is expected to be transacted by year-end.

Meanwhile, experts from BNP Paribas, Morgan Stanley and UOB Kay Hian forecast that residential prices here could increase by up to 10 percent in 2018.

JLL Singapore’s Research Head Tay Huey Ying is also confident that residential units and Grade A office space in the city-state will remain sought-after by investors next year.

 

This article was edited by Keshia Faculin.

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Rosy outlook for residential market

The outlook for Singapore’s housing market appears bright, according to an article written by Cushman & Wakefield Singapore’s Research Head Christine Li that was posted on TODAYonline.

One main factor fuelling this positive sentiment is the hot en bloc sector, where a total of 18 housing projects collectively worth $ 6.34 billion have been sold so far this year to reach a 10-year high in terms of value.

“This en bloc wave will result in an additional 9,300 new homes injected into the market, going by estimates from the Urban Redevelopment Authority (URA),” she said.

The vibrant situation is also spurring more homeowners to pull their units from the resale market in an attempt to join in the en bloc frenzy.

“Even those with little chance of success are also trying their luck. As a result, there is now a shortage of resale properties on the market — a turnaround from the situation at this time last year, when there were too many (units). This lack of supply will stoke demand and prop up the market.”

The housing market’s promising prospects is also driven by the dwindling supply of units being sold by property developers.

“Our analysis shows that the market has remained in the oversold domain for three consecutive months, with the ratio of units sold over units launched exceeding 100 percent.”

“In fact, this ratio reached an all-time high of 225 percent in the third quarter this year, indicating that developers are selling units faster than they can replenish.”

Hence, home builders will need to acquire land for their future residential projects, otherwise, they would have nothing to sell. Li estimates that there are about 10 developers in need of land despite the strong en bloc sales market.

“As such, we expect the en bloc market to be sustained over the next 12 to 18 months or so, with potentially another 10 to15 sites being transacted during this period.”

Furthermore, transactions in the primary housing market could be propelled by a sharp rise in the number of HDB upgraders who have just met the Minimum Occupation Period (MOP) of five years.

“Based on our estimate, there are around 19,000 of them this year and a further 13,000 next year, a marked improvement from the previous years,” Li added.

 

This article was edited by Keshia Faculin.

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