Showing resilience

INTEREST rates are high, the economic outlook is uncertain, and malls may be subject to further technological disruptions.

Against this backdrop, Frasers Centrepoint Trust inked a deal to divest mall Changi City Point in Singapore for S$338 million to an unrelated third party. The divestment consideration is at a 4 per cent premium to the property’s independent valuation as at end-July.

Based on the divestment consideration, the historical net property income yield is around 4.3 per cent, which may not cover borrowing costs. Perhaps, the Changi City Point transaction shows the appetite of investors for big ticket property transactions here as well as their confidence on leasing demand and capital appreciation over the long term.

Meanwhile, Singapore’s office property market continues to demonstrate resilience. IOI Central Boulevard Towers, which is located in the Central Business District (CBD), has secured a commitment for about 40 per cent of its 1.26 million square feet of net lettable area of office space. Advanced negotiations are ongoing with occupiers in the fast-moving consumer goods, asset management and legal sectors for another 20 per cent. IOI Central Boulevard Towers is scheduled to receive its Temporary Occupation Permit in the first quarter of 2024.

Separately, IO Properties Group is understood to have appointed Marriott International to manage the hotel in its Marina View project in the CBD.

Condominiums and Housing and Development Board (HDB) flats continued to see healthy leasing demand in July, with both rents and rental volume rising during the month. Condo rents here rose 1.1 per cent from the previous month, based on flash estimates from SRX and 99.co. Rents rose 21.6 per cent from a year ago. 

Still, there is much caution on the outlook for private homes here. A recent quarterly survey conducted by the Institute of Real Estate and Urban Studies at the National University of Singapore found property players have turned much more negative on the outlook for the prime residential sector.

Could caution on the part of housing developers translate to a weak response to the tender by the Urban Redevelopment Authority for a private housing site at Lentor Central in the Yio Chu Kang area that closes on Sep 12? 

In The Level Ground, I wonder if having an auction process can improve price discovery for sale of land parcels by the state. I also argue that selling the latest Lentor Central site for a much lower price per square foot per plot ratio than other sites sold in the vicinity can have positive effects. If land costs are lower, developers may have leeway to be more flexible in setting the selling prices of new homes.

Housing developers could continue to be cautious in buying en bloc sites here. In Singapore, the government has cut land betterment charge (LBC) rates for non-landed residential use. However, most market watchers do not expect this to provide a fillip to the residential collective sale market, reports my colleague Kalpana Rashiwala. Developers pay an LBC for the right to enhance the use of some sites or to build bigger projects on them.

In Singapore, buying a subsidised flat from the HDB has often been the first step in building wealth through homeownership for locals. But recent public housing policy changes may mean that buying a prime-location HDB build-to-order flat is not a great wealth builder, argues my colleague Yong Jun Yuan. Locals may just need to get used to the idea that homes are more for living and not investment.

Looking beyond Singapore, much attention is being paid to whether China’s housing market will recover. Weakness in the housing market can be a major drag on the world’s second-biggest economy. However, there may be glimmers of hope.

Beleaguered Chinese property giant Country Garden’s deal with creditors for an extension on onshore debt payments brought the developer and China’s crisis-ridden property sector some much-needed respite early this week.

Over the last weekend, home sales in Beijing and Shanghai soared following mortgage relaxations. This is an early sign that government efforts to cushion the housing slowdown are helping. 

Nonetheless, stress in the China property sector is inflicting pain on some investors here. Local-listed Dasin Retail Trust, which owns malls in China, said it received a notice declaring that an event of default has occurred under its onshore syndicated term loan facility of up to 400 million yuan.

Another local-listed trust with China exposure, EC World Real Estate Investment Trust, saw its units suspended from trading effective Aug 31, amid financing woes.

Major Chinese developers were once known for their ambitious growth plans, undertaking large and risky projects. Across the Causeway, Country Garden’s mega Forest City project, which was aimed at middle-class Chinese buyers, is weathering scant sales. Forest City houses around 9,000 people, way below its 700,000 target.

Undoubtedly, the hospitality sector has been a star performer this year among the various property sectors here. And more good days are on the cards for hospitality players.

Singapore’s Formula 1 (F1) Grand Prix will see a “slight drop” in capacity this year, but many other activities “will make up for it”, Second Minister for Trade and Industry Dr Tan See Leng said on Sep 3.

The event, which will take place from Sep 15 to 17, is expected to draw about 250,000 spectators – down about 17 per cent from 2022’s record high of 302,000 attendees. Some 10,000 seats have been added at several sites, to partially make up for the Bay Grandstand’s closure, as part of the redevelopment of The Float at Marina Bay.

As hotel owners here cash in on the F1 event, don’t forget to keep an eye out for whether Red Bull’s reigning two-time world champion Max Verstappen can win his 11th consecutive race in Singapore.