REITs eye asset enhancement to boost growth

Posted on 4 Jul 2012 | Comments Off on REITs eye asset enhancement to boost growth

With persistently high property prices in Singapore, Singapore’s real estate investment trusts (REITs) are focusing on asset enhancements to boost their growth.

Any acquisitions that they are looking at will have to be yield accretive.

When Causeway Point completes its refurbishment works by this December, its occupancy rate is expected to improve to 100 per cent.

The heartland mall in Woodlands is part of Frasers Centrepoint Trust’s (FCT) portfolio of assets, which also include four other malls in the suburbs.

FCT said it is focusing on asset enhancement to drive growth.

Chew Tuan Chiong, CEO of Frasers Centrepoint Asset Management, said: “Investors should not expect a big quantum when REITs are buying assets. If you are lucky, it will be accretive. Therefore enhancement will be the most powerful engine for growth.

“We had a pretty good first half. The momentum is there. Barring unforeseen circumstances, the economy continues to hold up, despite the volatility. I think most REITs, including ourselves, are expecting a good year ahead.”

With high liquidity in the market, industry players said REITs are a good hedge against inflation. But on the other hand, other industry players said this could make it hard to acquire assets, particularly office properties, as investors look to strata titled assets, leading to higher asking prices of Grade A office properties.

CapitaCommercial Trust (CCT) said higher property prices and lower office rents pose challenges for new acquisitions.

“There are very few good quality assets to buy. If you find something that is a strategic fit in your portfolio, it is also very important to understand the location, tenancy profile and whether there is going to be an upside potential in the rent reversions,” said Lynette Leong, CEO of CapitaCommercial Trust.

CCT is confident of the prospects of its latest office development CapitaGreen located at the site of Market Street Car Park.

When completed, the tower will inject 700,000 square feet of Grade A office space.

Being the only development to be completed in 2014 in the central business district, CCT is confident that CapitaGreen will be able to attract premium tenants.

Source : CNA – 2012 Jul 3

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Lower COVs driving demand for resale flats

Posted on 4 Jul 2012 | Comments Off on Lower COVs driving demand for resale flats

After falling more than 20 percent in Q1 of this year, cash-over-valuation (COV) figures for resale HDB flats seem to be stabilising and luring buyers back into the market, according to experts.

In Q2, HDB’s resale price index (RPI) climbed 1.3 percent quarter-on-quarter from 191.6 to 194, an indication that flat prices were higher than in the period before.

“The stronger price growth exhibited could be a result of decreasing COVs and increasing valuations in the market,” said Eugene Lim, Key Executive Officer at ERA Realty Network.

“Valuations are catching up with selling prices and median COVs have been reduced to S$25,000 in June 2012. Reduction in COVs encourages buyers to commit to flat purchases resulting in rising resale prices.”

At the same time, transaction volumes grew eight percent to 5,549 from 5,126 in Q1, based on data from ERA.

Industry watchers noted that the climb is due to the increasing number of second-timers opting for resale units instead of Build-to-Order (BTO) flats.

Mohamed Ismail, Chief Executive Officer at PropNex Realty, said: “With the moderation of HDB resale prices in Q1 2012, buyers who did not qualify under the BTO purchase requirements like the singles, permanent residents, HDB upgraders and downgraders, are still purchasing in this market segment.”

The estates that witnessed the highest number of Q2 resale transactions include Yishun (median resale price: S$377,000), Woodlands (median resale price: S$415,000) and Jurong West (median resale price: S$449,000).

Source : PropertyGuru – 2012 Jul 3

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