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Daily Archives: 1 Sep 2009

Ripe for an asset price bubble

Posted on 1 Sep 2009 | Comments Off

QUEUES can once again be seen at condo launches – a sight that may surprise many, given that the effects of the world financial crisis will last long after countries emerge from the recession.

Are the queues a sign of the start of a new asset price bubble? Will we learn from our mistakes? What can policymakers do to pre-empt future crises?

Sadly, the root cause of financial crises is in our genes. We are genetically coded to survive and to seek a better life for our offspring. In economic terms, this means consuming some resources now and accumulating the rest for a better future.

While the relentless pursuit of wealth may be individually rational, it can become collectively destructive. The role of a government is to put in place a system that can mitigate the destructiveness by constraining the actions of individuals and businesses.

Going back to the condo frenzy, I can understand why people would line up even after being burned by the market recently. Who would want to miss the boat? The price may soon be out of one’s reach if one doesn’t jump in now. Continue reading →

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Posted in Property Market / Real Estate

Tagged Singapore Property, Singapore Real Estate

6 floors of Prudential Tower being sold

Posted on 1 Sep 2009 | Comments Off

K-Reit said to be buying space at about $1,550 psf of net lettable area.

IN a deal that could help benchmark office values in the Raffles Place area and smooth the way for more office investment transactions, a property fund is said to be selling six floors at Prudential Tower for about $1,550 per square foot or about slightly over $100 million.

Back in the fold: KepLand group is buying back the property at a lower price than what it sold the space for 13 years ago — FILE PHOTO

The buyer in the deal being stitched together is believed to be listed K-Reit Asia, which already owns 44.4 per cent of the strata area in the 30-storey building at the corner of Church and Cecil streets.

Prudential Tower is on a site with a remaining lease of about 85 years. Jones Lang LaSalle is said to be brokering the latest sale involving net lettable area (NLA) of about 67,000 sq ft.

As at the end of last year, K-Reit’s existing space at Prudential Tower was valued at $224 million, or $2,066 psf based on 108,436 sq ft NLA.

So the price of $1,550 psf that K-Reit is expected to pay for its latest acquisition of six floors is about 25 per cent lower than the end-2008 valuation on its existing space.

Some market watchers described the latest pricing as ‘not unreasonable’. Continue reading →