Redevelopment could yield about 120 units averaging 300 sq ft each
GOLDEN Flower Group, controlled by the family of Indonesian businessman Nico Po, has sold a majority stake in the company that owns a residential site at 55 Devonshire Road. The buyer is an an associate company of Oxley Land.
The deal is understood to have valued the freehold site at about $1,380 per sq ft per plot ratio inclusive of an estimated development charge of under $2 million.
Working backwards, analysts estimate the lump-sum value of the site would be about $50 million for the transaction.
Golden Flower paid $42 million for the site in 2007.
The 13,404 sq ft plot, which is now bare, formerly housed Mayer Mansion, a 10-unit apartment development.
The plot is zoned for residential use with 2.8 plot ratio - the ratio of maximum potential gross floor area to land area - under Master Plan 2008.
Buyer Oxley, which is controlled by Ching Chiat Kwong, was in the news last year when it launched Suites@Guillemard, featuring what is believed to be Singapore's smallest apartment unit at 258 sq ft.
Since then, the authorities have been approving development applications with apartment components only if the apartments are at least 300 sq ft each, according a BT report last October.
Oxley could redevelop the 55 Devonshire site into a new project with about 120 units averaging 300 sq ft.
The sale of 55 Devonshire was done through a private treaty deal brokered by DTZ.
In a separate transaction, Knight Frank last week sold at auction a property comprising six adjoining freehold shophouses in Desker Road in the Jalan Besar conservation area at $10.3 million.
The freehold shophouses have two storeys and attics.
The seller, believed to be Claremont Group, operates a 25-room hotel on the second and attic floors.
The hotel will close as Claremont has undertaken to give the new owner vacant possession of the second floor and attics along with the ground floor of one of the units, which serves as the hotel's entrance and lobby.
The other five ground- floor shop lots are tenanted with leases expiring at various times from year-end to June 2011.
The six shophouses have a combined land area of 6,664 sq ft and a total gross floor area of 11,500 sq ft.
Source: Business Times, 3 Aug 2010
Tuesday, August 3, 2010
S'porean buyer snaps up Ibis on Bencoolen
A subsidiary of Grand Line Int'l has paid over $200m for hotel: sources
(SINGAPORE) Ibis Singapore on Bencoolen, a three-star hotel that opened last year, has been sold for more than $200 million to a Singaporean buyer.
Hospitality group Accor and real estate investor LaSalle Investment Management said in a statement yesterday that they have sold the 538-room hotel. The partners did not disclose the sale price or the identity of the purchaser due to confidentiality obligations.
But sources told BT that a subsidiary of Singapore-based Grand Line International has paid more than $200 million for the property.
According to past reports, Accor and LaSalle put in $145 million to develop the hotel at Bencoolen Street after winning the tender for the site in 2006 in a 30:70 venture. The hotel opened in February 2009.
Accor, which owns the Ibis brand, will continue to manage the hotel under a long-term management contract.
'The sale of the hotel is in line with Accor's 'asset right' strategy where the value of the property is being realised with Accor continuing to manage the hotel with the Ibis brand, under a long-term management contract,' said Michael Issenberg, chairman and chief operating officer of Accor Asia Pacific.
Accor and LaSalle put up Ibis Singapore for sale through a private tender that began in May. The owners decided to formally offer the hotel for sale after receiving a number of unsolicited offers from investors.
Ibis Singapore now enjoys occupancies in the mid-90 per cent range and an average room rate of about $140, LaSalle said. In addition to the comprising 538 guest rooms, the property also has two retail outlets, two food and beverage outlets and 68 carpark lots.
'Singapore lacked quality inventory of economy hotel rooms, despite strong inbound demand from value-conscious travellers in Asia. Although around 80 per cent of travellers fly economy class, some 90 per cent of hotels rooms in Singapore were business or first class, so there was a clear market mismatch which we capitalised on,' said Andrew Heithersay, international director at LaSalle Investment Management.
Ibis Singapore is Grand Line International's first hotel asset in Singapore. BT understands that the company, which used to be in the shipping business, owns some properties in Australia.
Source: Business Times, 3 Aug 2010
(SINGAPORE) Ibis Singapore on Bencoolen, a three-star hotel that opened last year, has been sold for more than $200 million to a Singaporean buyer.
Hospitality group Accor and real estate investor LaSalle Investment Management said in a statement yesterday that they have sold the 538-room hotel. The partners did not disclose the sale price or the identity of the purchaser due to confidentiality obligations.
But sources told BT that a subsidiary of Singapore-based Grand Line International has paid more than $200 million for the property.
According to past reports, Accor and LaSalle put in $145 million to develop the hotel at Bencoolen Street after winning the tender for the site in 2006 in a 30:70 venture. The hotel opened in February 2009.
Accor, which owns the Ibis brand, will continue to manage the hotel under a long-term management contract.
'The sale of the hotel is in line with Accor's 'asset right' strategy where the value of the property is being realised with Accor continuing to manage the hotel with the Ibis brand, under a long-term management contract,' said Michael Issenberg, chairman and chief operating officer of Accor Asia Pacific.
Accor and LaSalle put up Ibis Singapore for sale through a private tender that began in May. The owners decided to formally offer the hotel for sale after receiving a number of unsolicited offers from investors.
Ibis Singapore now enjoys occupancies in the mid-90 per cent range and an average room rate of about $140, LaSalle said. In addition to the comprising 538 guest rooms, the property also has two retail outlets, two food and beverage outlets and 68 carpark lots.
'Singapore lacked quality inventory of economy hotel rooms, despite strong inbound demand from value-conscious travellers in Asia. Although around 80 per cent of travellers fly economy class, some 90 per cent of hotels rooms in Singapore were business or first class, so there was a clear market mismatch which we capitalised on,' said Andrew Heithersay, international director at LaSalle Investment Management.
Ibis Singapore is Grand Line International's first hotel asset in Singapore. BT understands that the company, which used to be in the shipping business, owns some properties in Australia.
Source: Business Times, 3 Aug 2010
Ibis Singapore on Bencoolen sold to private investor
IBIS Singapore on Bencoolen, a three-star hotel, has been sold just 18 months after it opened its doors.
Details were not disclosed but it is understood a Singapore private investor paid a figure above $200 million for it.
The hotel was put up for sale via a private tender in June by joint owners LaSalle Investment Management and French hotel group Accor.
They announced the sale yesterday, but did not disclose the price or purchaser 'due to confidentiality obligations'.
It is the largest Ibis outside Europe, with 538 rooms, two retail outlets, 68 parking spaces, and two food and beverage outlets. The hotel will continue to be managed by Accor under a long-term management contract for its economy brand Ibis.
LaSalle's international director, Mr Andrew Heithersay, said the hotel's occupancy rate is in the 'mid 90 per cent range' and the average room rate is about $140.
An industry expert, Mr David Ling, HVS Asia Pacific managing director, said: 'The room rate is higher than that for the usual economy hotels here. It is the first economy hotel of international standard here and has a contemporary design, so the transacted price would reflect the stronger income position. Generally, international-grade hotels here are expected to trade at a 6 per cent to 7 per cent yield,' he said.
The hotel sale was brokered by Jones Lang LaSalle Hotels. Its managing director of investment sales in Asia, Mr Michael Batchelor, said he could not disclose the buyer's identity but that there was interest not only from Singapore investors but also from groups in Indonesia, Malaysia, Hong Kong and Thailand.
'In 2009, many industry observers felt the market was going to go though a challenging period with the large amount of supply and dwindling arrivals,' he said. 'The complete opposite has happened 12 months on... Singapore is now one of the strongest markets in Asia.'
He said most hotels here are running at 90 per cent occupancy even after 6,000 rooms were added in the past year.
'Around the region, we are seeing a renewed interest in hotels... With hotel profitability returning, hotel values are expected to rise in the future.'
The hotel was 70 per cent-owned by LaSalle via its LaSalle Asia Opportunity Fund II and 30 per cent by Accor.
Source: Straits Times, 3 Aug 2010
Details were not disclosed but it is understood a Singapore private investor paid a figure above $200 million for it.
The hotel was put up for sale via a private tender in June by joint owners LaSalle Investment Management and French hotel group Accor.
They announced the sale yesterday, but did not disclose the price or purchaser 'due to confidentiality obligations'.
It is the largest Ibis outside Europe, with 538 rooms, two retail outlets, 68 parking spaces, and two food and beverage outlets. The hotel will continue to be managed by Accor under a long-term management contract for its economy brand Ibis.
LaSalle's international director, Mr Andrew Heithersay, said the hotel's occupancy rate is in the 'mid 90 per cent range' and the average room rate is about $140.
An industry expert, Mr David Ling, HVS Asia Pacific managing director, said: 'The room rate is higher than that for the usual economy hotels here. It is the first economy hotel of international standard here and has a contemporary design, so the transacted price would reflect the stronger income position. Generally, international-grade hotels here are expected to trade at a 6 per cent to 7 per cent yield,' he said.
The hotel sale was brokered by Jones Lang LaSalle Hotels. Its managing director of investment sales in Asia, Mr Michael Batchelor, said he could not disclose the buyer's identity but that there was interest not only from Singapore investors but also from groups in Indonesia, Malaysia, Hong Kong and Thailand.
'In 2009, many industry observers felt the market was going to go though a challenging period with the large amount of supply and dwindling arrivals,' he said. 'The complete opposite has happened 12 months on... Singapore is now one of the strongest markets in Asia.'
He said most hotels here are running at 90 per cent occupancy even after 6,000 rooms were added in the past year.
'Around the region, we are seeing a renewed interest in hotels... With hotel profitability returning, hotel values are expected to rise in the future.'
The hotel was 70 per cent-owned by LaSalle via its LaSalle Asia Opportunity Fund II and 30 per cent by Accor.
Source: Straits Times, 3 Aug 2010
Monday, August 2, 2010
Ascott unveils its expansion plans
Group to expand its portfolio by over 50% in next five yrs
CAPITALAND'S service residence arm, The Ascott Limited, is expanding its portfolio by more than 50 per cent in the next five years.
The division hopes to contribute more significantly to CapitaLand as it grows - perhaps accounting for as much as 20 per cent of group earnings in future.
Ascott chief executive Lim Ming Yan shared these plans for 'transformational change' with the media, in conjunction with the launch of the group's project - Ascott Huai Hai Road Shanghai. The 278-unit property near the Xintiandi entertainment district is owned by Hong Kong-listed real estate group Lai Fung Holdings.
Ascott now has some 26,000 service residence apartments in its portfolio and it aims to raise this number to 40,000 by 2015.
The target is achievable looking at Ascott's rate of growth, Mr Lim said. This year, the firm will be rolling out about 3,100 apartments. Of these, some 1,600 units across seven properties will be ready in the second half, in countries such as China and Indonesia.
Much of the envisioned growth will come from China. Ascott has just won contracts to manage four Ascott-branded properties in Ningbo, Hangzhou, Suzhou and Guangzhou. The biggest among these will be Ascott Guangzhou IFC, with 314 units, due to open next year.
South-east Asia is likely to be the next fastest growing market for Ascott. For instance, Mr Lim is positive about Singapore's service apartment sector as the country develops as a regional business centre.
Occupancy rates for Ascott's properties in Singapore exceed 90 per cent, and 'we are constantly on the lookout for new opportunities', he said.
India and Europe are also on Ascott's radar. It could enter Italy, Switzerland, Turkey and the east European countries.
While merely taking on more management contracts is a fast way to grow, Ascott will continue to focus more on buying and running properties.
It owns and manages about 67 per cent of its portfolio, and is prepared to invest in key gateway cities, Mr Lim said.
Ascott could obtain capital for growth from private equity funds, such as the Ascott China Fund. It could also sell assets to Ascott Residence Trust for funds to re-invest.
Mr Lim did not say how much the entire portfolio expansion would cost.
But he disclosed that Ascott will invest $50 million to refurbish more than 10 of its properties in Asia and Europe over the next 12 months. This is on top of around $20 million it has put in to renovate some properties such as Somerset Liang Court.
As Ascott grows, it 'can and should be a significant part of CapitaLand', Mr Lim said. On average, it has accounted for some 10 per cent of the group's earnings in the last few years, but it would be possible and 'more meaningful' to raise this to up to 20 per cent, he added.
Source: Business Times, 2 Aug 2010
CAPITALAND'S service residence arm, The Ascott Limited, is expanding its portfolio by more than 50 per cent in the next five years.
The division hopes to contribute more significantly to CapitaLand as it grows - perhaps accounting for as much as 20 per cent of group earnings in future.
Ascott chief executive Lim Ming Yan shared these plans for 'transformational change' with the media, in conjunction with the launch of the group's project - Ascott Huai Hai Road Shanghai. The 278-unit property near the Xintiandi entertainment district is owned by Hong Kong-listed real estate group Lai Fung Holdings.
Ascott now has some 26,000 service residence apartments in its portfolio and it aims to raise this number to 40,000 by 2015.
The target is achievable looking at Ascott's rate of growth, Mr Lim said. This year, the firm will be rolling out about 3,100 apartments. Of these, some 1,600 units across seven properties will be ready in the second half, in countries such as China and Indonesia.
Much of the envisioned growth will come from China. Ascott has just won contracts to manage four Ascott-branded properties in Ningbo, Hangzhou, Suzhou and Guangzhou. The biggest among these will be Ascott Guangzhou IFC, with 314 units, due to open next year.
South-east Asia is likely to be the next fastest growing market for Ascott. For instance, Mr Lim is positive about Singapore's service apartment sector as the country develops as a regional business centre.
Occupancy rates for Ascott's properties in Singapore exceed 90 per cent, and 'we are constantly on the lookout for new opportunities', he said.
India and Europe are also on Ascott's radar. It could enter Italy, Switzerland, Turkey and the east European countries.
While merely taking on more management contracts is a fast way to grow, Ascott will continue to focus more on buying and running properties.
It owns and manages about 67 per cent of its portfolio, and is prepared to invest in key gateway cities, Mr Lim said.
Ascott could obtain capital for growth from private equity funds, such as the Ascott China Fund. It could also sell assets to Ascott Residence Trust for funds to re-invest.
Mr Lim did not say how much the entire portfolio expansion would cost.
But he disclosed that Ascott will invest $50 million to refurbish more than 10 of its properties in Asia and Europe over the next 12 months. This is on top of around $20 million it has put in to renovate some properties such as Somerset Liang Court.
As Ascott grows, it 'can and should be a significant part of CapitaLand', Mr Lim said. On average, it has accounted for some 10 per cent of the group's earnings in the last few years, but it would be possible and 'more meaningful' to raise this to up to 20 per cent, he added.
Source: Business Times, 2 Aug 2010
JTC plans medtech park, new industrial complex
It's also enhancing cluster knowledge, says chief executive
(SINGAPORE) With a long list of new and ongoing projects to look after, JTC Corporation's chief executive officer Manohar Khiatani hardly has time for hobbies.
He would like to pick up golf, but new projects such as a proposed medical technology park and a new complex for the surface finishing sector are keeping him busy.
Mr Khiatani, 50, took over the helm at JTC last October. Prior to that, he was deputy managing director at the Economic Development Board (EDB) where he had spent over 10 years in various other positions including director (Europe) and director (logistics and transport engineering).
Barely a year into his new job, Mr Khiatani is already rolling out new projects. The proposed medical technology (medtech) park is one of his more immediate tasks.
The park will be located on a 7.4 hectare site in the Tukang area and will offer 185,000 square metres of space when it is ready.
JTC plans to develop the park in stages, with the first phase expected to yield 75,000 sq m of space when it is completed by late 2013.
The park will provide basic space which medtech companies can retrofit for their specialised needs. There will also be facilities which firms can share so that starting up can be cheaper and faster. JTC's plan is to create synergy by housing equipment manufacturers, suppliers and other supporting firms together.
A second key project, one which is still being conceptualised, is a complex for companies involved in surface finishing.
These firms use electroplating and other processes to make metal products more durable, and they service the automobile, electronics, telecommunications and many other industries.
As with the medtech park, the complex will have common facilities for tenants. They will be able to share the treatment of industrial waste water, the recycling of treated water and other services. JTC intends to minimise the complex's water usage and carbon footprint.
More projects could be in the pipeline. 'We want to enhance our innovation capacity, particularly in areas such as land intensification and optimisation, energy efficiency and built environment sustainability,' Mr Khiatani says.
But it is not just concrete projects that Mr Khiatani is focused on. He also wants JTC to deepen relationships with industries so that it can build the right facilities for them.
'JTC has to be more than just a landlord,' he says. 'We want to better understand the needs of our customers, the industries they operate in, and work together with them to develop innovative infrastructure solutions.'
JTC restructured its organisation last year to try to achieve this. Business units had been grouped according to property types but they now serve key sectors such as electronics, media, bio-medicals and clean technology.
'We are now developing a deeper understanding of strategic industry clusters,' Mr Khiatani shares. 'With this cluster knowledge, our officers are now able to engage our customers more deeply and holistically. Certainly more so than a normal landlord,' he says.
Source: Business Times, 2 Aug 2010
(SINGAPORE) With a long list of new and ongoing projects to look after, JTC Corporation's chief executive officer Manohar Khiatani hardly has time for hobbies.
He would like to pick up golf, but new projects such as a proposed medical technology park and a new complex for the surface finishing sector are keeping him busy.
Mr Khiatani, 50, took over the helm at JTC last October. Prior to that, he was deputy managing director at the Economic Development Board (EDB) where he had spent over 10 years in various other positions including director (Europe) and director (logistics and transport engineering).
Barely a year into his new job, Mr Khiatani is already rolling out new projects. The proposed medical technology (medtech) park is one of his more immediate tasks.
The park will be located on a 7.4 hectare site in the Tukang area and will offer 185,000 square metres of space when it is ready.
JTC plans to develop the park in stages, with the first phase expected to yield 75,000 sq m of space when it is completed by late 2013.
The park will provide basic space which medtech companies can retrofit for their specialised needs. There will also be facilities which firms can share so that starting up can be cheaper and faster. JTC's plan is to create synergy by housing equipment manufacturers, suppliers and other supporting firms together.
A second key project, one which is still being conceptualised, is a complex for companies involved in surface finishing.
These firms use electroplating and other processes to make metal products more durable, and they service the automobile, electronics, telecommunications and many other industries.
As with the medtech park, the complex will have common facilities for tenants. They will be able to share the treatment of industrial waste water, the recycling of treated water and other services. JTC intends to minimise the complex's water usage and carbon footprint.
More projects could be in the pipeline. 'We want to enhance our innovation capacity, particularly in areas such as land intensification and optimisation, energy efficiency and built environment sustainability,' Mr Khiatani says.
But it is not just concrete projects that Mr Khiatani is focused on. He also wants JTC to deepen relationships with industries so that it can build the right facilities for them.
'JTC has to be more than just a landlord,' he says. 'We want to better understand the needs of our customers, the industries they operate in, and work together with them to develop innovative infrastructure solutions.'
JTC restructured its organisation last year to try to achieve this. Business units had been grouped according to property types but they now serve key sectors such as electronics, media, bio-medicals and clean technology.
'We are now developing a deeper understanding of strategic industry clusters,' Mr Khiatani shares. 'With this cluster knowledge, our officers are now able to engage our customers more deeply and holistically. Certainly more so than a normal landlord,' he says.
Source: Business Times, 2 Aug 2010
Traders see property upside
DATA released by the Urban Redevelopment Authority and the Housing Board last week showed price increases had accelerated across the property sector, from resale flats and private housing to industrial and retail properties.
Rentals are also spiking, as the economy forges ahead strongly.
For the second quarter, private residential rentals registered a 5.9 per cent quarterly growth, while demand for office space rose about 71 per cent to 441,320 sq ft, from 258,334 sq ft in the first quarter.
Traders hope the rental increases mean bumper earnings for property counters going ahead.
In a report, Deutsche Bank said property companies are trading at an average discount of 18 per cent to their revalued net asset value.
'With rising risks for residential, we continue to prefer the office and integrated players and Reits (real estate investment trusts),' the report said last week.
But risks include an economic growth trend reversal and further government tightening measures.
Traders can get exposure to property counters by trading the covered warrants issued by foreign banks. For CapitaLand, Macquarie Bank will list two call warrants and one put warrant today.
One of the new call warrants offers investors the option to buy the mother share at $4.20 till next January, while the other call gives them till next June to buy at $4.30. This will enable a profit if the warrant moves in tandem with any gains made by CapitaLand.
For the put warrant, investors can sell the counter at $4 until next February. Investors stand to gain from any rise in the warrant, if CapitaLand falls in price.
Source: Straits Times, 2 Aug 2010
Rentals are also spiking, as the economy forges ahead strongly.
For the second quarter, private residential rentals registered a 5.9 per cent quarterly growth, while demand for office space rose about 71 per cent to 441,320 sq ft, from 258,334 sq ft in the first quarter.
Traders hope the rental increases mean bumper earnings for property counters going ahead.
In a report, Deutsche Bank said property companies are trading at an average discount of 18 per cent to their revalued net asset value.
'With rising risks for residential, we continue to prefer the office and integrated players and Reits (real estate investment trusts),' the report said last week.
But risks include an economic growth trend reversal and further government tightening measures.
Traders can get exposure to property counters by trading the covered warrants issued by foreign banks. For CapitaLand, Macquarie Bank will list two call warrants and one put warrant today.
One of the new call warrants offers investors the option to buy the mother share at $4.20 till next January, while the other call gives them till next June to buy at $4.30. This will enable a profit if the warrant moves in tandem with any gains made by CapitaLand.
For the put warrant, investors can sell the counter at $4 until next February. Investors stand to gain from any rise in the warrant, if CapitaLand falls in price.
Source: Straits Times, 2 Aug 2010
Sunday, August 1, 2010
Taking the mickey out of home buyers
Prices of small projects and tiny apartments unlikely to hold up well, say experts
Property prices may be strong and on the uptrend.
But not all private homes will appreciate equally in value or be able to maintain their value in bad times.
For example, small projects and tiny 'mickey mouse' units of less than 500 sq ft may be the first to be hit should the market suffer a reversal, experts said.
A lot of risk also hinges on entry price levels, which can be high in boom times, they added.
A property expert, who declined to be named, said smallish developments - some having just 15 to 30 units - have limited appeal.
'These developments do not have full facilities and the road outside is usually very narrow,' he said.
'In the Telok Kurau area, you can sell a unit in a small development for maybe $900 per sq ft (psf) if you are lucky. But nearby, big condominiums such as One Amber or The Seaview can go for $1,200 psf.'
The lorongs in Telok Kurau are often narrow two-lane roads, whereas One Amber and The Seaview are on main traffic ways.
Investors should also do their homework before rushing to invest in 'mickey mouse' apartments of less than 500 sq ft.
These apartments, sometimes called 'bikini units', can work out well if they are located in the city or near an MRT station as single expatriates may be drawn to them, the expert said.
'It becomes a question mark when people start building them in the suburban areas,' he said. 'If investors want to sell or rent them out, there may be some resistance.'
Mr Colin Tan, research and consultancy director of Chesterton Suntec International, said the small apartments are like penny stocks. They have much speculative potential but have little worth otherwise, he said.
Ms Tay Huey Ying, director of research and advisory at Colliers International, said that generally, properties that have comprehensive recreational facilities and sufficient green areas will fare better in terms of rentals and values than apartments that do not.
Investors should also be wary of ageing 99-year leasehold developments, said the expert.
The price gap between a freehold and a leasehold property - which can be marginal in boom times - may widen as the leasehold property ages and its lease shortens.
Ms Tay said it all depends on what investors are looking for.
If they are looking for pure rental income, they can go for 99-year leasehold properties as these can generate more attractive yields than freehold properties, she said.
A freehold property may generate a rental yield of 3 per cent to 3.5 per cent while a leasehold property may offer a slightly higher yield of 4 per cent to 5 per cent.
But if they are looking for capital appreciation, ageing leasehold properties of 40 years and above may see weaker price appreciation compared with their freehold counterparts.
A second expert, who also declined to be named, said: 'There is the danger of facing limited capital appreciation or even losses if you chase new leasehold projects at sky-high prices.'
These high-risk investments are 99-year leasehold projects priced above $1,000 psf, he said.
'In five years' time, you may not be hit if the market is good. But in 20 years' time, the risks rise as the lease would have run down and the condo design will likely become outdated.'
Property experts also point to walk-up apartments, and cluster homes with basements located in flood-prone areas, as potential high-risk investments.
'The design of a walk-up is quite outdated. Many people, especially families with elderly members, do not want to climb three or four flights of stairs to their apartments. But investors buy these for their collective sale potential,' said one.
'Lower-priced properties - but not necessarily cheap properties - in red-light districts or in very inaccessible places' are also high-risk investments, said Mr Tan.
'Don't buy something just because it is cheap or cheaper. Get your priorities right. Buy for the right reasons,' he advised.
Source: Sunday Times, 1 Aug 2010
Property prices may be strong and on the uptrend.
But not all private homes will appreciate equally in value or be able to maintain their value in bad times.
For example, small projects and tiny 'mickey mouse' units of less than 500 sq ft may be the first to be hit should the market suffer a reversal, experts said.
A lot of risk also hinges on entry price levels, which can be high in boom times, they added.
A property expert, who declined to be named, said smallish developments - some having just 15 to 30 units - have limited appeal.
'These developments do not have full facilities and the road outside is usually very narrow,' he said.
'In the Telok Kurau area, you can sell a unit in a small development for maybe $900 per sq ft (psf) if you are lucky. But nearby, big condominiums such as One Amber or The Seaview can go for $1,200 psf.'
The lorongs in Telok Kurau are often narrow two-lane roads, whereas One Amber and The Seaview are on main traffic ways.
Investors should also do their homework before rushing to invest in 'mickey mouse' apartments of less than 500 sq ft.
These apartments, sometimes called 'bikini units', can work out well if they are located in the city or near an MRT station as single expatriates may be drawn to them, the expert said.
'It becomes a question mark when people start building them in the suburban areas,' he said. 'If investors want to sell or rent them out, there may be some resistance.'
Mr Colin Tan, research and consultancy director of Chesterton Suntec International, said the small apartments are like penny stocks. They have much speculative potential but have little worth otherwise, he said.
Ms Tay Huey Ying, director of research and advisory at Colliers International, said that generally, properties that have comprehensive recreational facilities and sufficient green areas will fare better in terms of rentals and values than apartments that do not.
Investors should also be wary of ageing 99-year leasehold developments, said the expert.
The price gap between a freehold and a leasehold property - which can be marginal in boom times - may widen as the leasehold property ages and its lease shortens.
Ms Tay said it all depends on what investors are looking for.
If they are looking for pure rental income, they can go for 99-year leasehold properties as these can generate more attractive yields than freehold properties, she said.
A freehold property may generate a rental yield of 3 per cent to 3.5 per cent while a leasehold property may offer a slightly higher yield of 4 per cent to 5 per cent.
But if they are looking for capital appreciation, ageing leasehold properties of 40 years and above may see weaker price appreciation compared with their freehold counterparts.
A second expert, who also declined to be named, said: 'There is the danger of facing limited capital appreciation or even losses if you chase new leasehold projects at sky-high prices.'
These high-risk investments are 99-year leasehold projects priced above $1,000 psf, he said.
'In five years' time, you may not be hit if the market is good. But in 20 years' time, the risks rise as the lease would have run down and the condo design will likely become outdated.'
Property experts also point to walk-up apartments, and cluster homes with basements located in flood-prone areas, as potential high-risk investments.
'The design of a walk-up is quite outdated. Many people, especially families with elderly members, do not want to climb three or four flights of stairs to their apartments. But investors buy these for their collective sale potential,' said one.
'Lower-priced properties - but not necessarily cheap properties - in red-light districts or in very inaccessible places' are also high-risk investments, said Mr Tan.
'Don't buy something just because it is cheap or cheaper. Get your priorities right. Buy for the right reasons,' he advised.
Source: Sunday Times, 1 Aug 2010
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