MARKET UPDATES

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Foreign firms in Hong Kong surrendering more office space

Multinational companies surrendered more office space in Hong Kong last quarter as the economy deteriorated amid the pandemic, pushing the city's vacancy rate to the highest in 15 years, according to Cushman & Wakefield. Foreign companies made up of 61 per cent of the total surrender of office stock in the second quarter, up from 47 per cent in the previous quarter, the property agency said in a briefing with reporters on Tuesday (July 7). Cushman didn't name any of the firms vacating space. "There's no particular area or one type of industry, it's fairly widespread, "said Keith Hemshall, head of office services in Hong Kong at the firm."That really is a result of cost-cutting and retraction of head count." Tenants gave up a total of 949,000 sq ft of floor area in the first six months of 2020, up from 646,000 sq ft in the six months prior. The rate of surrender jumped 55 per cent in the second quarter from the first, to 577,000 sq ft. The recent introduction of the national security law has also triggered worries that the legislation will harm Hong Kong's status as an international financial hub. The government announced on Monday that it could freeze and seize property assets under the new law if the owner is suspected of being linked to an offence endangering national security. Office availability, which indicates the amount of vacant space and areas that will be available in the next 12 months - climbed to 10.7 per cent at the end of June, the highest in 15 years, the firm said. The surrendering trend is set to continue across the board, said John Siu, managing director in Hong Kong. "A lot of companies cut jobs as the economy worsens, so firms will be cautious when it comes to office demand, "said Siu."Companies' expansion plans will be postponed or even cancelled, while the chance of downsizing becomes high." In contrast, some financial companies and tech giants from mainland China have recently signed up for more floors in the city. CMB International Capital Corp, China Minsheng Banking Corp and Orient Finance Holdings expanded their office space in the Central hub in the past three months, while ByteDance and Alibaba Group Holding leased additional area to accommodate their growing business needs. The property firm expects office rents to fall by 20 per cent in 2020 in Central as a result of diminishing demand. The district has the world's most expensive office rents, averaging US$313 (S$437) per sq ft, topping New York's Midtown and London's West End, data from Jones Lang Lasalle show. Demand for office space is also set to suffer in the post-pandemic world, with more interest in home office arrangements and lease flexibility, the agency said.

Source: Straits Times
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Springleaf Tower office floor up for sale with guide price of more than $26m

SINGAPORE (THE BUSINESS TIMES) - An entire office floor on level 22 of Springleaf Tower is up for sale via expression of interest with a guide price in excess of $26 million, sole marketing agent Savills Singapore said on Monday (July 6). The renovated office floor has a strata area of about 10,527 sq ft and will be sold on a vacant possession basis. It comes with exclusive use of the lift lobby, pantry and restrooms. Springleaf Tower was completed in 2002. It is located in Singapore's central business district (CBD), at the heart of the Tanjong Pagar sub-market. Savills said that it is one of the very few strata office developments which command Grade A specifications. The property has around 100m of prominent road frontage in Anson Road, with direct underground, sheltered access to Tanjong Pagar MRT station. Savills added that Springleaf Tower consistently has a high occupancy rate. The office floors are"always tightly held"by a very small number of owners, it noted. Each office floor in the building comes with specifications such as a column-free layout, raised flooring, full-height windows and variable refrigerant flow air-conditioning, which allows for independent floor operation. Mr Galven Tan, Savills Singapore deputy managing director of investment sales and capital markets, said:"Against the backdrop of tight strata office supply in the CBD, we believe that this offering is a good opportunity for both owner-occupier and investor to purchase a premium-grade strata office floor." He added that Tanjong Pagar is the CBD gateway to the planned Greater Southern Waterfront, one of the key focus areas of the Urban Redevelopment Authority in the coming years. The expression of interest exercise will close on Aug 13 at 3pm.

Source: Straits Times
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Private home prices slide further in second quarter amid circuit breaker

But gentle decline of 1.1% points to some resilience: Analysts Prices of private homes slipped for a second straight quarter as the full brunt of a two-month-long circuit breaker was felt by the market. The Urban Redevelopment Authority (URA) price index for private homes declined 1.1 per cent in the second quarter, according to flash estimates out yesterday. This was the biggest quarterly decline since the third quarter of 2016, when prices fell 1.5 per cent. The second-quarter decline followed a 1 per cent dip in the first three months of the year, marking the first quarterly decline in a year, a trend not helped by show galleries being suspended until June 18. Landed homes led the drop in the second quarter, with prices down 2.7 per cent quarter on quarter, while the non-landed segment fell 0.6 per cent. Analysts noted that the gentle decline in the second-quarter price index amid the shutdown points to a fairly resilient market. But private home prices could drop around 5 per cent this year, in line with the expected contraction in Singapore's economy. This could be the first year of decline since 2016, when values sank 3.1 per cent, noted Ms Tricia Song, head of research for Singapore, Colliers International. But prices are not likely to fall as much as the 25 per cent plunge recorded in the 12 months to June 30,2009, amid the global financial crisis, she added. She said price increases in the past few years have been more sustainable and the Government has reacted quickly with fiscal stimulus and support during the outbreak. The 0.6 per cent fall in non-landed property prices in the second quarter was due to various discounts offered in the light of economic uncertainty amid the outbreak, analysts said. URA said non-landed home prices in the core central region slipped 0.1 per cent in the second quarter compared with a 2.2 per cent drop in the previous quarter. This could be due to discounts given at certain completed projects: 38 Jervois recorded 13 caveats in the second quarter at a median price of $2,058 per sq ft compared with one unit sold at $2,492 psf in the same quarter last year. In the city fringe or rest of the central region, prices shed 1.9 per cent after dropping 0.5 per cent in the earlier quarter. Prices in the suburbs or the outside central region were unchanged, against a drop of 0.4 per cent in the first quarter of this year. Analysts attributed the price resilience in this area to relative affordability and a lack of new supply. Popular projects such as Treasure At Tampines, Parc Clematis and The Florence Residences continued to attract buyers. New non-landed home sales in the outside central region fell 17 per cent in the second quarter compared with a drop of 67 per cent in the core central region and a 31 per cent fall in the rest of the central region, JLL Singapore's senior director for research and consultancy Ong Teck Hui said. URA flash data also showed that prices of landed homes fell 2.7 per cent in the second quarter of this year, after slipping 0.9 per cent in the first. "Transaction volumes of landed properties plunged 58 per cent in the second quarter, more than the 49 per cent drop for non-landed homes, Mr Ong said. But there are signs of green shoots in new non-landed home sales. Caveats as of yesterday show developers sold 618 private homes (excluding executive condominium units) last month, up 34 per cent from 461 in May, and more than double the 264 units in April, Ms Song noted. Resale transactions, on the other hand, were flat month on month at 180 units last month. A slew of new projects expected to launch this month may lead to price competition among developers, Mr Desmond Sim, CBRE head of research, South-east Asia, said. "While we might see a short-term resurgence in new sales volume, current economic conditions will continue to weigh on buyers' purchases. Larger units with higher quantum of above $2 million are likely to take the brunt, "he added.

Source: Straits Times
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Singapore private home prices weaken further with 1.1% drop in Q2: URA flash data

Prices of private homes slipped for a second straight quarter as demand was suppressed during the nearly two month-long circuit breaker period. Flash estimates from the Urban Redevelopment Authority (URA) on Wednesday morning (July 1) showed its overall price index for private residential properties declined 1.1 per cent in the second quarter from the previous three months. This comes after private home prices dropped 1 per cent in the first quarter of 2020, their first quarterly decline in a year. "Last quarter, show flats were closed while house viewings were barred during the circuit breaker period. As a result, buyer demand was suppressed which will have a negative impact on home prices, " said Ms Christine Sun, head of research and consultancy at OrangeTee & Tie. "However, it is too early to conclude that this is the beginning of a sustained period of price declines. We should be cautious in interpreting price dips in a volatile market, particularly when sales volume is low, " she said. Prices of non-landed properties shed 0.6 per cent quarter on quarter in Q2 2020 after dipping 1 per cent in the previous quarter. Giving a breakdown by region, the URA said that prices of non-landed homes in the prime areas or core central region slipped 0.1 per cent in Q2 2020, a smaller rate of decline compared with the drop of 2.2 per cent in the previous quarter. In the city fringe or rest of central region, prices shed 1.9 per cent after dropping 0.5 per cent in the previous quarter. In the suburbs or outside central region, prices were unchanged, against the drop of 0.4 per cent in the earlier quarter. URA's flash data also showed that prices of landed properties fell 2.7 per cent in the second quarter of this year, after slipping 0.9 per cent in the first quarter. Based on URA caveat data, the number of resale transactions inked in Q2 2020 is about a quarter of what has been sold in Q2 2019. Similarly, the number of new home sales transacted last quarter is about half of what was sold in Q2 2019, OrangeTee & Tie said. Ms Sun, however, noted:"There is sporadic evidence of 'green shoots' in certain market segments and some buyers were snapping up relatively good bargains in the market over the past few weeks. Therefore, the price trends could be distorted by some of these properties or special-priced units." "We should observe the property market for a few more quarters to ascertain if prices have bottomed. That said, prices of homes may remain soft in the coming months given the macroeconomic uncertainties, "she added. Ms Sun said she expects private home prices to weaken by 3 to 5 per cent for the whole of this year. URA's flash estimates are compiled based on transaction prices given in contracts submitted for stamp duty payment and data on units sold by developers up till mid-June. The statistics will be updated on July 24,2020, when the URA releases its full set of real estate statistics for Q2 2020.

Source: Straits Times
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Hong Kong private home prices rise 1.9% in May, fastest pace in over a year

Hong Kong private home prices gained 1.9 per cent in May, their fastest pace of growth in more than a year, helped by low interest rates and pent-up demand as the economy gradually picked up after the Covid-19 outbreak. May's gain comes after April's revised 0.1 per cent fall, government data showed yesterday. Home transaction volumes continued to recover last month, set to reach the highest since May last year, realtor Centaline said. But property agents do not expect a strong pick-up in prices to the end of this year as a weak economy and political tensions weigh on one of the world's most expensive property markets. Bankruptcy filings in the city rose to a 17-year high in May, as the pandemic dealt a heavy blow to businesses after months of social unrest. China's plan to impose national security law in Hong Kong has sparked a fresh round of escape plans among residents, but the local home market has so far been largely resilient. In the luxury home segment, property consultancy JLL said momentum built up in May after a muted period since Christmas, with the number of transactions valued over HK$50 million (S$9 million) rising 61 per cent from April. China's plan to impose national security law in Hong Kong sparked a fresh round of escape plans among residents, but the local home market has so far been largely resilient. It attributed the recovery to monetary easing in most regions and the stabilisation of Covid-19 across Greater China.

Source: Straits Times
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Hong Kong home prices rise at fastest pace in 13 months in May

Hong Kong private home prices gained 1.9 per cent in May, their fastest pace of growth in more than a year, helped by low interest rates and pent up demand as the economy gradually picked up after the Covid-19 outbreak. May's gain comes after April's revised 0.1 per cent fall, government data showed on Tuesday (June 30). Home transaction volumes continued to recover in June, set to reach the highest since May 2019, realtor Centaline said. But property agents do not expect a strong pick up in prices through the end of 2020 as a weak economy and political tensions weigh on one of the world's most expensive property markets. Bankruptcy filings in the city rose to a 17-year high in May, as the coronavirus pandemic dealt a heavy blow to businesses following months of social unrest. China's plan to impose national security law in Hong Kong as early as Tuesday has sparked a fresh round of escape plans among residents, but the local home market has so far been largely resilient. In the luxury home segment, property consultancy JLL said momentum built up in May after a muted period since Christmas, with the number of transactions valued over HK$50 million (S$8.99 million) rising 61 per cent from April. It attributed the recovery to monetary easing in most regions and the stabilisation of Covid-19 across Greater China.

Source: Straits Times
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Dual-envelope tender launched for Jalan Anak Bukit site

The Urban Redevelopment Authority (URA) on Tuesday (June 30) launched a "dual envelope" tender of a choice site at Jalan Anak Bukit for a landmark residential and commercial development with a bus interchange to help rejuvenate the Beauty World area. The 3.2 hectare site in Upper Bukit Timah can yield 865 private housing units, which can be flats or serviced apartments, or a combination of both. Of the maximum gross floor area (GFA) of 96,551 square metres,5,000 sq m must be used for the bus interchange, while a maximum of 20,000 sq m can be for commercial use, of which up to 7,500 sq m can be for shop and restaurants. The parcel is the last of three confirmed list residential sites under the government land sales (GLS) programme for the first half of this year. The Government last week announced a reduced supply of private homes from confirmed GLS sites for the second half of 2020 to take into account the economic fallout from the Covid-19 pandemic. For the Jalan Anak Bukit site, URA wants a "distinctive development and identity marker for the Beauty World precinct", which it envisions as a green urban village that will be a centre of community life and southern gateway into Bukit Timah's nature attractions. The development on the site must be lushly landscaped and provide residents and visitors with a seamless underground connection to nearby Beauty World MRT station on the Downtown Line, as well as pedestrian-friendly networks to bus-stops and the surrounding nature attractions and well-designed public spaces. Aiming for a quality and landmark development, URA has called for a dual-envelope tender for the site with bidders required to submit their concept proposals and tender prices in two separate envelopes. In the first stage, the concept proposals will be evaluated against a set of criteria specified in the tender. In the next stage, the shortlisted proposals will then be assessed on price only. In view of the Covid-19 situation, developers have been given a longer period of nine months to submit their bids for the 99-year leasehold site, with the tender for the site closing at 12 noon on March 30 next year. While shopping malls in the area such as Beauty World Plaza, Beauty World Centre and Bukit Timah Shopping Centre, are mostly strata-titled and somewhat outdated, the precinct is undergoing some rejuvenation with the completion of the Coast-to-Coast trail, upcoming completion of the Rail Corridor and Rifle Range Nature Park and new public and private development projects such as the upcoming new Bukit Timah Community Building, as well as The Linq@Beauty World mixed-use development on the site of the former Goh and Goh Building. Tricia Song, head of research for Singapore at Colliers International said the site has the potential to become an iconic landmark and requires a substantial investment. As such, she expects larger and experienced developers to be interested, who are likely to form partnerships to combine their strengths and share the risks. "We expect buoyant interest, with at least seven to 10 concepts proposals, and land bids to be $1.1 to 1.3 billion or $1,050 to $1,250 per square foot (psf) per plot ratio, " said Ms Song. With the tender's closing date nine months out, market sentiment could also have improved, she said. Currently, there are ample new residential launches nearby, with over 1,000 available units, of which less than half have been sold, she noted. As of end-May, Daintree Residences has sold 108 out of 327 units at an average price of $1,665 psf since its launch in July 2018 while Mayfair Modern has moved 68 of 171 units at prices averaging $2,015 since its launch in April 2019.

Source: Straits Times
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Far East Orchard sells 62% of launched Woods Square office units

Mainboard-listed hotel operator and property developer Far East Orchard on Friday (June 26) said it has sold 62 per cent of the 208 office units launched for sale in Woods Square, and recognised $4.3 million in its share of the profit from the development as at March 31. Woods Square is an integrated office development at Woodlands Regional Centre jointly developed with parent company Far East Organization and Sekisui House. It obtained its temporary occupation permit (TOP) in February. All the office units at Tower 1 of Woods Square are for sale, while office units at Tower 2 and retail units are for lease. The development has achieved"healthy leasing for its retail units", Far East Orchard said. The company was responding to shareholder questions submitted in advance of its annual general meeting - to be held by electronic means - on Friday afternoon. Last year, it announced that Far East Management had purchased three office units at Tower 2 for an aggregate area of 6,796 square metres. Revenue and cost of sales for units sold are recognised upon TOP, the developer said. Both Far East Management and Far East Orchard are members of Far East Organization, Singapore's largest private property developer. Apart from Woods Square, Far East Orchard said the redevelopment of Westminster Fire Station in London is ongoing and expected to be completed in 2021. The company is planning to convert the former fire station into a mixed-use development comprising residential apartments and a restaurant. It added that it is"closely monitoring the pandemic and political situation before considering the sale launch". "We will consider delaying the launch of Westminster Fire Station until confidence in the market returns, "the company said, adding that the project team is working towards the revised deliverables for completion. Shares of Far East Orchard were flat at $1.01 as at 11.35am on Friday.

Source: Straits Times
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Koh Brothers sells 22% of its Holland Village luxury condo

Firm's subsidiary KBEE also gets nod from SGX to spin off its unit Oiltek Construction, property and engineering firm Koh Brothers Group (KBG) said it has sold 22 per cent - or 15 of the 69 units - of its freehold luxury residence Van Holland as of Wednesday. These include the 10 units moved during the Holland Village condominium's launch weekend in January.

Source: Straits Times
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Koh Bros sells 15 of 69 units in Van Holland luxury condo, unit spin-off gets SGX nod

Construction, property and engineering firm Koh Brothers Group (KBG) said it has sold 22 per cent - or 15 of the 69 units - of its freehold luxury residence Van Holland as of Wednesday (June 24). This includes the 10 units moved during the Holland Village condo's launch weekend in January. KBG has built a 360-degree virtual tour of various units in Van Holland, or a digital sales kit with interactive features, to overcome the"difficulties presented"amid the Covid-19 outbreak, it noted in a bourse filing. That said, KBG expects a negative impact on its business and the group's financial results for the current financial year ending Dec 31,2020, in view of the pandemic and any unforeseen circumstances that may arise from that. It added that the group remains"financially prudent and maintains operational agility to conserve essential resources to prepare for the post-pandemic recovery process". Located on the site of the former Toho Mansions, which was sold en bloc in March 2018 for $120.4 million, Van Holland offers a mix of unit types and sizes ranging from 495 sq ft to 1,991 sq ft and is expected to be ready for move-in in March 2023. Separately, Koh Brothers Eco Engineering (KBEE) disclosed that the Singapore Exchange (SGX) has no objection to the proposed spin-off of its unit Oiltek, although KBEE is reviewing the situation in view of the Covid-19 pandemic and market sentiment. KBG has a 77.29 per cent stake in KBEE as at March 19,2020, according to KBEE's latest annual report. In January this year, KBEE said it plans to spin off its indirect subsidiary Oiltek and list it either on SGX's Catalist board, or on Bursa Malaysia's ACE Market. KBEE has about an 80 per cent stake in Oiltek, while Oiltek's wholly-owned subsidiary Oiltek Nova Bioenergy will be spun off for the proposed listing as well. The proposed listing will also include Oiltek Nova Bioenergy, a subsidiary of Malaysia-based Oiltek. These companies are involved in the business of building edible oil refining plants and provide its services to clients across 32 countries. In a regulatory filing on Wednesday, KBEE said it is"not too concerned"about project cancellations or defaults by clients due to Covid-19, as its clients are primarily government agencies or government-linked entities. Meanwhile, KBG's proposed dividend has been reduced to 0.25 cent from 0.4 cent, whereas KBEE's proposed dividend has been reduced to 0.02 Singapore cent, from 0.05 Singapore cent. In the light of this, the shareholders of both companies had asked if the proposed director fees and management remuneration could be similarly reduced"in the spirit of alignment of interest". KBG and KBEE separately said that they have implemented a headcount freeze and that executive directors, management and staff have taken a pay cut with effect from April this year. As at 10.25am on Thursday, shares in KBG were trading flat at 16.6 cents, while shares in KBEE were trading at four cents, down 0.1 cent or 2.4 per cent.

Source: Straits Times
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