A good analysis of Singapore property from a writer Qiaofeng from Channelnewsasia
Quote:
Experts say Grade A office rentals to continue rising in 2008 By Pamela Almeda, Channel NewsAsia Posted: 22 February 2008 0054 hrs

SINGAPORE : Rentals of Grade A offices in Singapore are expected to continue rising this year. According to property consultant Savills, average office rentals here may even nudge above that of Hong Kong's, currently the highest in the region. They added that Singapore's office property sector will continue to remain buoyant despite worries over the US sub-prime crisis. "Even in the current environment which is rather uncertain, we noticed that the financial services community is continuing to grow in Asia. And we noticed this in HK and in Singapore, so demand remains very strong here. That is going to continue to push up rents in the grade A office market," said Simon Smith, Deputy Managing Director, Savills Valuation and Professional Services. Savills is expecting prime office rents in Singapore to jump by 15-20% this year, down from the 90% jump in 2007. Vacancy rates for offices hit as low as 0.2% late last year. Savills said Singapore is attractive to overseas investors looking at the office property sector in the region. Robert McKellar, CEO (Asia Pacific), Savills Asia Pacific said: "Office is primarily very attractive. Of course, (there are) very few assets for sale and that makes it very difficult for any overseas investor to get access to stock. Nevertheless, if the opportunity arises, then definitely we'll go for a secure investment in Singapore. "For example some of the German open-ended funds that are increasingly wanting to have a bigger slice of the Asian real estate markets; they see Singapore as an attractive market because of the fact that its lots are risk-free. "They are looking to have a base from which to invest into the region, and (it's) ideal for them, acquiring an asset in Singapore which is risk-free, which has stabilised market, strong economy and low taxation." Meanwhile, another property consultant CB Richard Ellis (CBRE) is estimating that about 10.1 million square feet of new office space in Singapore will be completed by end of 2012. Some 67% of the supply coming into stream within the next three years is expected to be Grade A office space. This means a doubling of prime office space. CBRE said monthly rentals for prime office space averaged S$15 per square foot from October to December of last year, up 92% on year. It is expecting these to average S$17 per square foot by the end of the year. Meanwhile, luxury residences will also see prices jumping between 8-12% in 2008. - CNA /

Who to believe? Savills and CBRE...says Supply is catching up with demand and they say Office rentals will still rise.... as much as 15-20% this year.... CitiGroup....Wendy Koh .. plays contrarian ....... and says Supply will exceed demand... and cites oncoming demand averaging 3.2 m sq ft per year....... Who to believe? Careful study of the CitiGroup figures reveal they are using historical demand of 1.5 m sq ft per year....... So they are using historical demand to compare with future projected supply....Somehow the logic ......just don't jive...... but the report by CitiGroup seems to carry weight........ An update of current demand and a projection of future demand will be more enlightening.......


Quote:
Oversupply Looms In Singapore Office Sector: Citigroup 28/11/2007 It downgrades two stocks with key exposure to sector - KepLand, CityDev. Singapore is in danger of seeing an oversupply of office space from 2010 onwards, Citigroup is warning. The bank’s research unit has also downgraded two Singapore stocks with significant exposure to the office market here - Keppel Land and City Developments. ‘The market is underestimating the potential supply of new office space in 2010 and beyond, in our view,’ said Citigroup analyst Wendy Koh in research report dated Monday. ‘Based on our estimates, occupancy rates are likely to peak in 2008-09 and decline thereafter with the impending supply.’ Since May 2007, six new sites with a total gross floor area of 5 million sq ft have been awarded amidst fears of an office space crunch. These sites could add some 3 million sq ft of new office space in 2010-11, Citigroup estimates. Altogether, on average, 3.2 million sq ft of new supply could hit the market from 2010-12, the bank said. This compares to a historical average demand of 1.5 million sq ft per year. Supply estimates could rise even further with more government land sales in the first half of 2008, Citigroup said. All this will mean that buildings in core Central Business District will be competing for tenants. Key projects that are scheduled to be completed in 2010-12 include Marina Bay Financial Centre, the redeveloped Ocean Building One Financial Centre and the South Beach Road and Marina View land parcels. In response, Citigroup downgraded its ratings on office landlords Keppel Land and City Developments. Keppel Land was downgraded to a ’sell’ from a ‘hold’, while CityDev was rated a ‘hold’, from a ‘buy’ previously. ‘Going forward, we expect Keppel Land to face keen competition while marketing the remaining space at the Marina Bay Finance Centre and One Financial Centre,’ Ms Koh said. She cut KepLand’s revalued net asset value (RNAV) estimate to $7.83 (from $8.85) and target price to $6.26 (from $8.97). For CityDev, Citigroup cut its RNAV estimate to $14.47 from $15.28 and target price to $15.90 from $18.00 to reflect lower capital values of office buildings. Other analysts however said that all the new projects coming onstream will not cause an oversupply - rather, they will ensure that supply catches up with demand. ‘I think that there will be significant pent-up demand for office space that will only be satisfied when supply hits the market in 2010-11,’ said Moray Armstrong, CB Richard Ellis’ executive director for office services. This pent-up demand means that demand in 2010-11 will be significantly higher than the historical average, Mr Armstrong said.

Source: Business Times

Looking at CitiGroup's figures..... one wonders if URA and SLA..... are releasing too much supply...... and are missing the total supply picture? Or are they deliberately planning for the higher supply...... given that they are in touch with current projected demand? So Is City Dev.....Kepland......a BUY ing opportunity or a SELL...... U decide..... I was reading Capitaland' 2007 FY report and they have CBRE's figures.... in their report.... I have gleaned some figures from the Capitaland report released today… Source: URA, CBRE & CapitaLand Research (Jan 2008) • Average annual supply ('93-'07)…………….1.14 mil sq ft • CBRE projected annual take-up for 2007-2012 ..... 1.6 mil sq ft • Some future supplies have already been pre-committed, e.g. 1.6 mil sq ft in 2010 (MBFC) So lets look at the Overall picture..... Supply and Demand Forecast Figures by CBRE………taken from the report....
………….. … ….Supply………………….Demand……………Diff
 2007 ……….- 0.5* mil sq ft …………...0.9*…..……….-1.4
 2008………… 1.0 mil sq ft ……………...1.6………..…...-0.6
 2009………… 1.4 mil sq ft ……………….1.6…….…....….-0.2
 2010………… 2.7 mil sq ft …………… 1.6+1.6**………-0.5
 2011………….3.8 mil sq ft………………. 1.6………..…...+2.2
 2012………….1.1 mil sq ft ………….... 1.6……..…..…..-0.5
Total…………...8.4mil sq ft…….…....8.9……….…….-0.5

*Estimates from graph read-off **1.6 m sq ft pre-committed in MBFC So we see supply trying to catch up with demand until 2011...when supply exceeds demand....... then a reversion back in 2012..... Note these are estimates...and properties .....due to long gestation and construction periods ...have huge lag effects.... Nevertheless..... the whole scenario depends on the outlook....... that one has for the government globalistion plans for Sg The Remaking of Singapore into global city.... are U optimistic.....? - Will current growth in our efforts to be a regional financial centre pan out.....? - Will current trends like the Open Skies Treaties lead to better air connectivity and hence enhance Sg desirability as a regional centre.... - Will the Quality of living.....IRs...F1...YOG....Sg Flyer... New Botanic Gardens.....Enhanced by vibrant arts and entertainment scene...think Collyer and Boat Quays..... and Museums...lead to a higher desirability for expats to stay put..... and more HNWIs to relocate here....? For now CBRE is still projecting 10-15% rental growth and Savills ...see previous article by BT ...is projecting rental growth of 15-20% for prime office space... ...which will underpin capital values.....and Savills is saying German open ended funds...outlook on demand for ownership of Office properties are still strong.....showing high pre-commitment interests in future projects.... So maybe.... the Office Property scene is not as dour as CitiGroup......is projecting....... in its contrarian take on the Sg Office mkt.....

Happy Chinese New Year - Good Food

May the year of the Rat bring health and prosperity to everyone :)

I went over to my in-laws place on the 2nd day.

We went to "Fei Cui" Crystal Jade at Pegarang - Sungei Ringit.

The good food include Lobster (with herbs), Hor fun, and Fish(Assam and fried/baked).

I remember just before reaching there, go right (at the slight Y diversion road), right again , coming to Shell then turn left.

Investments Strategy

Wallstraits forum has a thread about investment strategy.

I think this is mine.

I will consider mine as Growth Investing (Certain level of Moat) taking into account Macroeconomics environment coupled with short term trading.

Now the macro environment is bad and will get worse.
1) There was already a bull run from 2003 to 2007 (5 years)
2) The property bubble in the US has burst (It is in the news)
Someone will say if it is in the news, the share price has already discounted it. However I feel that is the tip of the iceburg and will be a self fulfilling prophecy making the housing market spin into the downturn, as from the peak it only drop about 1 year. It is still long way off. At least 1.5 - 2 years.
3) The CDOs in the finanicals are weapons of mass destruction. This will cause at least 1-2 major banks to crash.
4) The US property crash, the financial crash and after China olympics, investments in China will slow. Property markets in UK, Spain, Ireleand will also crash. The India economy which is highly dependant on the textile industry (about 50%) will also slow. China stock market is a bubble. I have heard stories that as there are many people playing the stock market, the company who employ them will hire someone full time so that the employees can concentrate on working.

What is my investment strategy now ? I guess cash (95%). I have made more than 7 times (600%) my investments from 2003. I was already cautious last year. This time is the 3rd time I am making the call that the downturn to be true.

Money can be made in the best times. In the worse times, I do not have the confident to make correct judgement calls. It is the best to stay in cash, and play my short term play.

Jan 2008 Investments

Was around 35 % vested going into the New Year. With China Milk and SMRT my big counters.

But the last day I saw Dow dropping heavy. Jia Luk, looks like it was a foreboding warning for me. I quickly pared down my holdings on the opening of 2008 to 14%. Looks like my hand itchy is getting me into trouble.

As expected, Dow continued dropping the next 2-3 weeks from 13200 to 11800+.

STI dropped from 3400+ to 2780+ about a drop of 20+%. I was already itching to go in, but I was waiting for Dow to drop before buying the next day. Monday was a US holiday you see, and STI drop 6% on Monday and about 5% on Tuesday but recovered to about 1.5%.

Well, helicopter Bernake in the early morning cut interest rate by 75 basis points to 3.5%, limiting losses to Dow. The next 1-2 weeks Dow rebounded to 12800, having 4 out of 5 days positive. STI also rebounded to 3100.

I tried to enter UOB the next day as I expected limited downside. little expect as the banks staged a late rally the day before, UOB after 1 hour + dropped into the red. I panicked and quickly cut of, sustaining losses (17.06 to 16.86). This shows that emotions is still running and affecting me. I should just wait out at least 1 week. It rebounded to a high of 18.6+...sigh.

Lesson learnt, control emotions , wait for 1 week at least. (Short covering, + oversold position. Any stable news will surge upwards)

Portfolio down by 1.3 % as compared to STI down more than 10 %.