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Thread: Home prices could slip with oversupply expected: Kwek

  1. #1
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    Default Home prices could slip with oversupply expected: Kwek

    http://www.businesstimes.com.sg/arch...-kwek-20130807

    Published August 07, 2013

    Home prices could slip with oversupply expected: Kwek

    By Kalpana Rashiwala


    [SINGAPORE] Kwek Leng Beng, executive chairman of City Developments, says that unless the global and domestic economies rebound strongly and curbs on foreign buyers for private residential property sales are reviewed, the group expects some oversupply in the Singapore residential sector from next year onwards.

    "The group would rather err on the side of caution in its land replenishment strategy," CDL said.

    Generally, private home prices could drop like 5 per cent from now till next year assuming all the cooling measures remain intact, he said during the group's second quarter results briefing.

    "I don't believe for a moment the market will collapse, but I believe it can go down. I believe the government is astute enough that by 2015 or thereabouts, it may possibly remove some of the (cooling) measures - because 90.2 per cent of Singaporeans own property and it is not their intention to crash the market."

    Rather, the authorities' goal is "not to allow prices to keep on going up and up all the time. I think that's good".

    Mr Kwek also said that the group expects "stronger headwinds" in the second half of this year with the latest round of cooling measures, referring to the implementation of the Total Debt Servicing Ratio (TDSR) framework effective June 29.

    He reckons that interest rates in the region will not go up soon as that will be at the expense of economic recovery. That said, he acknowledged that "transaction volume for private residential sales is beginning to be more measured and prices in general are expected to be moderated for the mass-market segment, due to the tightening of bank borrowings".

    Buyer psychology far outweighs supply and demand fundamentals, he stressed. "My observation is that as property prices move upwards, more people want to buy in. Conversely, as prices start declining, people become fearful and cautious in buying property. This 'herd instinct' may distort market perception and all industry stakeholders should consider this paramount factor in their decision making."

    In its results statement, CDL noted that investment sentiment, particularly among foreign buyers in Singapore's high-end residential segment, has not recovered due to the punitive additional buyer's stamp duty which the authorities have said is a temporary cooling measure.

    "So the sophisticated (foreign) investors have patience to wait and in the meantime, have gone to London, New York, Paris," said Mr Kwek. Compared to some of the prices being achieved in overseas markets, prices here are "peanuts", added Mr Kwek.

    In the mass market, buying interest has remained healthy due to abundant liquidity in the market and low interest rates, though the latest TDSR framework has made borrowing more difficult, the group said.

    Commenting on the recent high bids for EC sites, the group said this reflects the limited land bank that developers have and the high liquidity in the market. "The EC segment is the least affected by the cooling measures as it is specially catered to a select group of eligible genuine home buyers with pent-up demand," said the group.

    During the briefing, Mr Kwek, 72, also addressed succession planning at the group.

    "We have many of the family members who are experts in real estate. Because you all have rated me as high profile, they are all being suppressed unreasonably," he said, drawing laughter from the audience. "So don't worry about succession planning. If I am not around, somebody always will be around. Just like a gun slinger. Today, I am the best. Tomorrow... a younger person is a better shooter than me. There are plenty of people around."

  2. #2
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    Default 'Suicidal' now to bid hard for sites, says CDL chairman

    http://www.straitstimes.com/archive/...irman-20130807

    'Suicidal' now to bid hard for sites, says CDL chairman

    Published on Aug 07, 2013


    A LEADING developer warned yesterday of price falls and land that is so costly it would be "suicidal" for firms like his to bid hard for sites in order to grow their land bank inventories.

    City Developments (CDL) executive chairman Kwek Leng Beng said that while he does not expect a crash, prices could still dive by as much as 5 per cent over the next 12 months.

    He told a results briefing that the seven rounds of cooling measures as well as new curbs on lending introduced in June are putting pressure on values.

    Mr Kwek added that the Government could remove some cooling measures in 2015 if the market remains under pressure.

    His caution extends to adding to the firm's land bank, mainly due to what is known as the qualifying certificate. This requires new homes to be sold within two years of being completed. Unsold units cannot be rented out.

    "I don't think (CDL can build up more land banks) if the qualifying certificate is there," he said. "It will be suicidal to keep on tendering land at high prices just because you want land banks."

    To highlight CDL's strategic approach to land-banking, he cited its winning bid for the land now being used to build the Echelon condominium.

    The firm's offer was 9 per cent higher than the next bidder, Mr Kwek noted, and "everyone laughed at us, but we had every reason to do so because we believed the surrounding plots would come up".

    Those sites were eventually sold to bidders at prices higher than what CDL paid.

    While Mr Kwek was cautious about the future, the firm posted a set of robust numbers for the second quarter yesterday.

    Net profit soared 48 per cent to $203.8 million on the back of a 1.8 per cent rise in revenue to $801.6 million over the same period last year.

    Rental properties contributed the highest earnings due to the gain recognised from the disposal of 100G Pasir Panjang and other industrial facilities.

    These properties were leased out and held for long-term investments before they were sold.

    Property development also accounted for a sizeable portion of the group's earnings. Profit was booked in for pre-sold projects such as Cube 8, 368 Thomson and joint-venture projects such as The Palette and Bartley Residences.

    Earnings from the hotel segment were affected because of subdued demand and higher competition in parts of Asia, as well as the refurbishment of its subsidiary, Millennium & Copthorne Hotels, which resulted in a temporary loss of 181,000 room nights.

    Earnings per share for the quarter were 21.7 cents, up from 14.4 cents a year earlier, while net asset value per share climbed to $8.30 from $8.03 as at Dec 31.

    On Monday, the board declared a tax-exempt (one-tier) special interim ordinary dividend of eight cents per ordinary share to be paid on Sept 5.

    CDL shares closed down two cents at $10.68 yesterday.

    RACHEL SCULLY

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