YOU could hear a pin drop in the private homes market at the start of last year. No hype, no launches, no buyers.

Just six months later, it seemed as if all hell had broken loose.

Demand went through the roof, showflats were back on centre stage, buyers were queueing around the block and developers couldn’t believe their luck.

The astonishing surge in interest – it was a recession, after all – sent sales rocketing to 14,725 units last year, just a tad below the 2007 record of 14,811 units.

Turnarounds don’t get much more dramatic than that, but the tumultuous year did more than just get once-fearful buyers rushing back to the market.

It also underlined the huge risks – and rewards – that lie in property development, while igniting an intense Darwinian selection process that sorted out the quick-witted and cashed-up from the slow and complacent.

Property cycles seem shorter nowadays, said property tycoon Kwek Leng Beng.

‘The world moves so fast, you have to adjust your thinking to the new circumstances,’ said the executive chairman of the Hong Leong Group.

Indeed, it was a make-it-up-as-you-go sort of year for developers.

They certainly had no help from conventional wisdom, which dictates that property cycles take about seven years from boom to bust. The Urban Redevelopment Authority’s price index for private homes shows that values were relatively stable from 2000 to the early part of 2007 before a dizzying three-year spell that took the market from boom to bust and back to boom.

In 2007, prices in the high-end sector were largely chased up by foreign demand. Some new prime condominiums sold for more than $4,000 per sq ft – an unprecedented level – but mass-market homes attracted little interest.

But it was the reverse last year, with the mass-market sector under siege as HDB upgraders rushed in, sending prices at some new condos to record levels in their area, while the high-end segment had yet to recover fully.

‘The fluctuations within a cycle are more pronounced these days,’ said the chief executive of the Real Estate Developers Association of Singapore (Redas), Dr Steven Choo.

A CALCULATED GAMBLE

TO MANY of us, property development still seems like a no-brainer: Buy a patch of land, erect posh condo blocks with all the trimmings, sell for vast profits to cashed-up foreigners or starry-eyed locals. How hard can it be?

Well, as last year showed, it can be pretty darn hard. What looks like a licence to print money turns out to be a multi-million-dollar high-wire act of timing, taste, instinct, pluck and luck, according to Dr Choo.

‘It is very challenging. It may seem very glamorous but when you get down to it, it’s actually very tough,’ he said.

‘It does take a lot of experience to stay profitable and ride through the cycles. You must come up with the right product mix, time it right and calculate it right.’

The process starts with the initial land purchase and that is also the most crucial factor: Over-pay, and you can struggle to ever make the deal work, given that the land price can comprise 50 to 70 per cent of total development cost.

Analysts have been warning that developers risk over-paying for land this year as they rush to replenish their land banks.

But even assuming that the plot has been secured at a favourable price, time lag is always an issue, say consultants.

Developers have to work quickly as holding costs – fees, interest charges, taxes and so on – are high.

And once a project gets the green light, there are initial costs for professionals such as consultants, engineers and architects before a labourer even lifts a shovel.

‘Once you buy land, you have to follow through a development timeline. If you buy government land, you have to complete construction within a certain period,’ said Knight Frank chairman Tan Tiong Cheng.

This period is now seven years, after it was extended by a year last year.

This is where timing is vital and when any number of uncertainties can upset even the best-laid plans.

The sale price factored in at the start of the project may not hold up nine months or so down the track when the launch is held.

Construction costs may continue to rise while selling prices fall, as was the case in mid-2008.

And sales figures may not be what developers had hoped for.

And if they cannot sell their units before demand slows, they will be stuck with unwanted flats – possibly for years.

Singapore’s largest private developer, Far East Organization, for instance, still has a few unsold units from Rafflesia in Bishan, which was completed in 2003.

‘From a cashflow point of view, you can sell everything out,’ said the firm’s executive director and chief operating officer of property sales, Mr Chia Boon Kuah.

‘But if you’re fully sold, you can’t participate in the cycle. You need inventory to do so.’

Developers in Singapore have been known to hold on to unsold units for more than a decade, but holding on to a 99-year leasehold mass-market project poses another risk as the tenure runs lower every year.

‘Once the remaining lease gets closer to 80 years, the price depreciation starts to be more apparent,’ said Cushman & Wakefield managing director Donald Han.

During the Asian financial crisis, developers who bought sites at a high in 1996 could not turn a profit as demand waned and prices weakened.

That was after the Government increased land supply for private homes in May 1996 to temper prices, as well as lowered loan-to-value limits to 80 per cent, said a UBS Investment Research report last month.

‘In some cases, developers held the land for up to three to eight years before launching the homes for sale,’ it said.

Of course, it is impossible for any developer to get the timing perfectly right. All sorts of external factors, such as the health of the global economy, can affect property cycles.

When the property market heads south, what developers need are deep pockets.

‘There was nothing much one could do when the market was down. Those developers that did not have holding power undercut to sell,’ said Mr Kwek.

‘Those with financial clout could decide to hold instead because they knew the market was going to return and could wait for it.’

That is one thing that separates the big boys from the tiddlers, who often have limited capital and a hard time convincing nervous bankers to lend to them.

‘If you don’t have deep pockets, and you make a wrong development decision, you can keel over very quickly,’ said an industry observer who declined to be named.

In April 2008, small developer Bravo Building Construction pulled out of three collective sale deals when the market turned sour. The biggest of the deals was the mega $516 million Tulip Garden in Holland Road, which it bought in mid-2007 and for which it had to forfeit its $25.8 million deposit.

That is why alarm bells rang over some smaller listed players, such as SC Global and Ho Bee, around a year ago.

Analysts feared they had borrowed too much to buy land in prime areas where prices were falling fast. The concern was that these smaller firms could go under as they were stuck with the high cost of servicing their bank loans, and unable to launch or shift new high-end units.

Their stock was punished. SC Global shares lost more than 90 per cent of their value, falling from a high of $3.37 in 2007 to just 29.5 cents in March last year. They have since recovered to about $2, thanks to the market turnaround.

The banks got worried too. They started scrutinising the books of developers they had lent to, and looked at their collective loan position.

Credo Real Estate managing director Karamjit Singh said: ‘Because of the banks’ lack of confidence, it became very difficult for land transactions to take place. If anyone could buy land, he would need a lot of cash to cover the bulk of the purchase price. Basically, banks were not prepared to lend.’

To make things worse, developers faced the risk of previous sales coming undone.

The two great fears, said an industry observer, were the possibility of foreigners bailing out of Singapore, and large numbers of defaults from buyers who used the deferred payment scheme.

The scheme allowed buyers to defer paying the bulk of their purchase price until completion of the project.

‘Banks were worried. Everybody was sweating,’ said a property expert who declined to be named.

Many analysts were predicting fire sales and different degrees of defaults, as banks had turned very cautious on lending. Developers held their breath.

Fortunately, the large defaults that many had anticipated did not materialise, though there were some who lost out on their bets.

In February last year, a small developer, Jewel 1, backed out of a planned $44 million en bloc purchase of Cairnhill Heights at the 11th hour. It had bought the site during the collective sale frenzy in 2007, subject to government approval.

Two months later, a China investor made the news for failing to pay $30 million for 20 units at The Fernhill condo when the project obtained its temporary occupation permit. The investor later managed to resell 19 units, albeit at a loss.

Keppel Land also had to grant a six-month payment extension to a buyer who bought 51 units at its The Suites @ Central project.

MOVING FAST

LUCKILY, the global recession – while deep – did not last very long.

Just six months after the financial meltdown, the local property market stirred back to life together with a global rally in stock markets.

The suddenness and improbability of the turnaround caught everyone by surprise.

The pace at which things changed brought home to developers the need to be fast on their feet if they wanted to avoid being caught napping.

Being nimble, and being able to change tack to meet changed conditions, can make the difference between laughing all the way to the bank and crying into your beer.

ECG Property Group chief executive Eric Cheng told The Straits Times: ‘You can’t control the market but you can get a feel of it. So when the market is right, you must get your showflat and permits ready to launch as quickly as possible.’

Developers showed fast footwork last year when they quickly came up with small units to satisfy buyers shy about plonking down large amounts of cash amid a slumping economy and languishing stock market.

EL Development managing director Lim Yew Soon said his company was fortunate to have reacted fast by switching to small units for Illuminaire, when it had originally planned to ride out the year. If the firm had stuck to Plan A, it would not have been able to sell out the project at the price it achieved by switching to small units.

Some smaller developers slashed prices by up to half to move units and generate cashflow, while others offered sweeteners such as stamp duty waivers.

Far East Organization said it cut prices across the board after Lehman Brothers collapsed in September 2008. Prices of mid-end projects went down by 10 to 23 per cent.

But it quickly raised prices when it saw that demand was more resilient and pushed out several projects in the second half, said Far East Organization’s Mr Chia. In the end, the company had a record year.

The financial crisis was unlike anything that had hit the industry before and was more unforgiving on smaller players than big guns like Far East Organization.

‘If the worst-case scenario materialised – that is, the economy had shrunk 10 per cent – many businesses which had expanded during the previous three to four years would have failed,’ said CIMB-GK regional economist Song Seng Wun.

‘Many developers, especially the newer players which jumped into the fray in the high-end sector, or the highly leveraged ones, would have been under severe pressure. They may even have failed.’

The crisis was a sobering event for developers, coming right after the euphoria of 2007.

‘Every cycle will be an eye-opener for the smaller boys. They typically do not have strong holding power like the big boys do,’ said Cushman & Wakefield’s Mr Han.

Yet despite the victims and the bloodletting that occurs in every cycle, the lure of bricks and mortar and the profit they can bring soon work their magic again.

But as ECG’s Mr Cheng cautioned, it’s not a game for learners: ‘Developers must have the courage to buy land when others are not buying, and sell when you feel the market is right. And that’s when experience comes in.

‘Property development is not easy.’

Source : Straits Times – 20 Feb 2010

SENTOSA COVE was like Treasure Island for developer Ho Bee, which surfed on the wave of demand for high-end property at the enclave to make a mint. Then the tide went out.

The financial crisis and the crash in prime real estate suddenly gave the exclusive seafront estate a forlorn air and Ho Bee the look of a firm that had overplayed its hand.

The developer dismissed such concerns back then and it continues to maintain that the enclave will be a winner.

Ho Bee got in early on Sentosa Island, bought aggressively and made piles of money selling the developed units.

But when the downturn hit, that close association with Sentosa meant it quickly fell out of favour with investors.

Ho Bee shares dived to a 52-week low of 27.5 cents each at one point in March last year, but shares have since climbed as high as $1.90 in January.

There seemed cause for concern. Ho Bee, with IOI Properties, bought The Pinnacle Collection, the last condo plot on Sentosa Cove for $1.097 billion or a whopping price of $1,822 per sq ft (psf) of potential gross floor area just before the crisis set in.

Ho Bee chairman and chief executive Chua Thian Poh told The Straits Times he remained confident of the prospects of Sentosa Cove properties throughout the crisis because they are scarce.

But the market and analysts did not share that view. By early last year, Sentosa Cove values had plunged and there was talk of defaults. An agent reportedly said the enclave had lost its appeal.

Data from Colliers International then showed that some non-landed Sentosa Cove properties were sold at an average of $1,318 psf, or 46 per cent below the average of $2,431 psf at the peak in early 2008.

There were also fears of deferred payment scheme (DPS) defaults. Ho Bee completed four projects last year – The Coast, Vertis, Quinterra, Orange Grove Residences – that exposed it to risks from DPS defaults.

‘At the beginning of last year, many people were looking at whether those who bought under the deferred payment scheme could fulfil their obligations to complete their purchases,’ said Mr Chua.

‘Our board was very cautious. We went through a lot of simulations on what was the worst scenario.

‘We talked about a 10 per cent default, 20 per cent default on DPS and even up to 50 per cent default. But we were still very comfortable with it.’

Concerns lingered for a while as consumers had trouble getting financing at one point, said Mr Chua. But the situation turned the corner sooner than expected and DPS concerns evaporated.

Ho Bee said it has had just one default for The Coast in Sentosa Cove and one for Orange Grove Residences.

‘We hope to have more people default so we can then take (the property) back and resell it straightaway at a higher price,’ said Mr Chua with a laugh.

‘Most developers should be quite comfortable during the last six to eight months of 2009.’

While the financial crisis has not flattened Ho Bee as some have feared, it has given it an opportunity to reflect.

‘You focus on… your next step. You have time to think,’ said Mr Chua.

Ho Bee started to explore overseas opportunities at the start of last year, a strategy it used before. It moved to London during the 1996 property peak here to avoid a property bubble that it was convinced would burst.

The bubble did burst and Ho Bee found that its British move was a godsend: Its main income until 2000 came from London.

Things are not that desperate now. Prices have risen. Take Ho Bee’s The Coast condo: Sub-sale deals went for as low as $1,195 psf early last year but has since bounced back to above $2,000 psf, though deals are few.

Its gamble on Sentosa Cove has paid off, although the market has changed much in the past five years, making life harder for developers.

‘Previously, when you bid for land, your margin may be low, but you still have a margin,’ said Mr Chua.

But developers are now bidding for land at forward prices, he said.

‘You look at the Singapore market. Almost every project is an ad hoc project as you can’t have a big land bank.’

Ho Bee had the first mover advantage in Sentosa Cove, ‘but when you build up the market, you have to compete with other developers for the land in Sentosa.

‘Now, you are getting more and more competition in the bidding of land… less margins and more competition… so our next push will be to venture overseas,’ said Mr Chua.

Over the next one to two years, Ho Bee hopes to deploy 30 to 40 per cent of its capital overseas, focusing on residential and mixed development projects.

China is under intense scrutiny. The company is in the midst of a study on jointly developing a residential project in Tangshan Nanhu Eco-City with Yanlord Land Group. It also just acquired a residential development site in Shanghai with the same partner.

‘In China, you can have a big land bank. Land cost is only about 20 per cent to 30 per cent of project cost,’ said Mr Chua. ‘In Singapore, it is about 50 per cent to 70 per cent, so you can’t afford a big land bank here.

‘Hopefully, China will become our Sentosa Cove in two to three years.’

Source : Straits Times – 20 Feb 2010

IT WOULD take a huge leap of imagination to come up with a more incompatible business mix than the one Heeton Holdings had been wrestling with since 2003.

The firm’s chalk and cheese make-up had the glamour, prestige – and risk – of prime property development on one hand and oh-so-last-century but oh-so-safe heartland wet markets on the other.

Irreconcilable business differences of that magnitude led to the inevitable divorce last year when Heeton sold off the wet markets.

The move also marked the completion of the firm’s makeover from old school market landlord to real estate player.

It has been a long time coming. Heeton listed in September 2003, branding itself largely as the first wet market operator on the Singapore Exchange. Its property business was seen as a side line.

While the wet markets contributed just 10 per cent of annual revenue, that became the firm’s defining characteristic.

‘Analysts always asked us about our wet market business,’ said chief operating officer Danny Low.

That distraction was removed last year when the firm sold its five wet markets to supermarket chain Sheng Siong, leaving it free to focus on its growing property business.

‘We knew it (wet markets) was a sunset industry. Our store operators are old. When they retire or pass away, our stores will be empty,’ said Mr Low.

He said Heeton intended to sell the markets as early as two years ago and there were offers but it was all or nothing. ‘There is no point selling one market. If we sell one, we’ll still be a wet market operator.’

Heeton chairman and founder Toh Khai Cheng, who led the firm into the wet market business in the 1990s, said Sheng Siong came knocking last year and they decided to sell.

‘The wet markets offer us a stable yield but they can never take the firm to a new high the way property development can,’ he told The Straits Times in Mandarin.

Mr Toh started out in property development more than 30 years ago and earned the nickname the ‘Sembawang King’ as he was behind numerous projects in that area, including Hong Lim Mansions and Hong Heng Garden.

Heeton’s focus now is mostly on prime, boutique projects. Its latest launch was the 175-unit Lincoln Suites near the Novena MRT station which it is developing with three other developers.

It bought the former Mitre Hotel site in Killiney Road late last year and is preparing to launch a Grange Road project.

‘In prime areas, you can try out new ideas,’ said Mr Low.

‘Otherwise, we’ll end up doing just run-of-the-mill projects. Nobody will remember us.’

Until three years ago, its aim was to focus on just selling. Little thought was put into product differentiation, branding and so on.

But now it is thinking long term, acknowledging that to be a trusted developer you need to show the buyers that you intend to be around for a while.

‘You want your project to not only be able to sell, but also at a premium,’ Mr Low said.

This is why it roped in an Italian architect as well as yoo, the design firm co-founded by popular designer Philippe Starck and developer John Hitchcock, to design its 29-unit Grange Road project.

‘You have to differentiate yourself when you build a brand. For instance, developers used to dangle branded appliances as carrots, but that’s now outdated,’ said Mr Low.

Grappling with changing tastes is one thing, coping with the financial crisis is another. The downturn made it clear that there was no sure way to the bank, although Heeton had recurring income from its investment properties and wet markets to fall back on.

Its Grange Road project has been one victim. The launch has been delayed for more than a year and Heeton may have to lower its price expectations slightly when it finally does hit the market sometime in April to June if the high-end market has yet to truly pick up.

Heeton and its partners also had to delay the launch of Lincoln Suites. They bought the site during the 2007 boom at a record price of $1,449 per sq ft of potential gross floor area for the Newton area.

The downturn forced them to alter their plans for the prime project, including ensuring there were several small units – they comprise 75 per cent of the block – to keep the price quantum low.

Heeton also plans to build mostly small units on the old Mitre Hotel site.

‘These few years, the risks in the market have increased,’ said founder Toh. ‘Land is so expensive now.’

To mitigate the risks, they will continue to venture into the region where markets require a ‘lower investment’ and yet come with ‘lower risk and greater potential,’ said Mr Toh.

Heeton is also building a hospitality arm to give it a new stream of recurring income. It is starting by converting its 39-unit El Centro project in Tanjong Pagar into high-end serviced apartments or a boutique hotel.

Whatever the project, Heeton acknowledges that it needs to provide an edge. If it is building suburban projects, then it wants to offer good quality.

Prime projects mean giving buyers ’something different’, said Mr Low.

‘I didn’t say I will give you a Porsche but I will give you a Mercedes, as we don’t want to shortchange people.’

Source : Straits Times – 20 Feb 2010

DEMAND for Housing Board (HDB) resale flats may ease in the wake of yesterday’s measures to toughen up rules on home lending.

The new regulations have lowered the maximum loan amount a bank can lend – this is known as loan-to-value (LTV) limit – from 90per cent to 80per cent.

That means buyers of private homes and HDB resale flats will now have to stump up a deposit of at least 20per cent of the purchase price, up from 10per cent.

The LTV for those eligible for HDB loans, such as first-time buyers and second-timers who are upgrading, is already at 90per cent and remains unchanged.

This is because there are already HDB measures in place to curb speculation and encourage financial prudence, said the Government yesterday.

For example, there is a minimum owner occupation period of three to five years and a restriction on ownership to one flat per household.

Housing analysts told The Straits Times yesterday that the new rules – they come into effect today – will hit the private property market more than the HDB resale sector, but there will be some impact.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said higher interest rates tended to deter most HDB buyers from borrowing up to 90per cent of the purchase price.

HDB resale homes are also cheaper than private property and there are fewer short-term speculators in the market.

But analysts say the demand for resale flats – which has been red hot and pushing prices to record levels recently – is likely to be tempered.

PropNex chief executive Mohamed Ismail said the segment of buyers that will be most affected are private property owners and permanent residents (PRs) who are not eligible for HDB loans.

The bulk of homeseekers – mostly first-timers and second-time upgraders – qualify for HDB loans and will not be affected.

But for those PRs who have not worked for a long period of time and accumulated enough CPF savings, the new rules may delay their home purchases, said Mr Ismail.

The amount of money paid upfront to a seller over a flat’s valuation – called cash-over-valuation (COV) – may also come down if buyers are less-cash rich and unable to afford high premiums, he added.

The median COV amount paid for HDB resale flats soared to a record $24,000 in the fourth quarter last year.

Resale flat prices have surged about 40per cent in the past three years.

Anxious buyers priced out of the market have pointed to private property owner-speculators and PR buyers as possible factors contributing to the sky-high demand, although the Government maintains that these buyers are a minority and not a significant market force.

A joint statement from the Ministries of National Development and Finance and the Monetary Authority of Singapore said the rules to tighten credit to the housing market were aimed at encouraging greater financial prudence among buyers.

Source : Straits Times – 20 Feb 2010

Seller’s stamp duty and tighter loan limits reintroduced in bid to discourage speculation

THE government yesterday administered another measured dose to cool the resurgent property fever. While mild by themselves, the latest steps could foreshadow more severe therapy if the fever refuses to subside, said industry watchers. And this could plant seeds of uncertainty in an investor’s mind.

It was announced that a seller’s stamp duty (SSD) will be levied on those who buy a residential property from today and sell it within a year. This is aimed at curbing short-term speculation. Also, the Loan-to-Value (LTV) limit on housing loans will be lowered from 90 per cent to 80 per cent.

The SSD applies to all residential properties and residential lands, except for HDB flats. The date of purchase for the purpose of computing the one-year holding period shall be the option exercise date. This raises the possibility that some speculators who have been granted options to purchase residential properties recently but have yet to exercise them may allow their options to lapse – and lose typically 1.25 per cent of the purchase price – rather than face the rule change.

‘True-blue speculators or flippers may fall out and return their options to developers,’ said a market watcher. ‘But specuvestors with the means of raising funding to make progress payments and who see prospects beyond a one-year horizon will likely continue with the purchase,’ he added.

Currently, stamp duty is levied only for the purchase of property, not its sale. SSD will be applied at the same rate as the buyer’s stamp duty – one per cent for the first $180,000 of the consideration, 2 per cent for the next $180,000 and 3 per cent for the balance.

The Inland Revenue Authority of Singapore released an e-tax guide, listing more details including exceptions on the payment of SSD – for instance housing developers when they sell residential properties within a year of purchase, or for an estate of a deceased person when interest in residential property is passed to the beneficiary.

The Real Estate Developers’ Association of Singapore (Redas) said: ‘The introduction of the SSD should not impact adversely activities in the property market. The reduced mortgage cap is also unlikely to have significant impact on genuine buyers and investors. Lending institutions have already been more prudent especially in the aftermath of the global financial crisis.’

The lower LTV ratio on housing loans applies to home buyers granted options to purchase from today and covers all housing loans given by financial institutions for private homes, executive condos, HUDC flats and HDB flats. However, loans granted by the Housing Board for HDB flats will still have a 90 per cent cap as such flats are already subject to other criteria to prevent speculation and encourage financial prudence, the government said.

Redas CEO Steven Choo says the lowering of the LTV ratio is not unexpected. ‘What was unexpected was when the limit was previously raised from 80 per cent to 90 per cent in July 2005.’

Currently, less than 10 per cent of housing loans are granted an LTVs greater than 80 per cent, ‘although there are signs that more housing loans are originating at higher LTV bands’, a joint statement by the Ministry of National Development, Ministry of Finance and Monetary Authority of Singapore (MAS) said. Besides instilling financial prudence among property buyers, the move is aimed at sending a ‘clear signal to financial institutions to maintain credit standards’, the statement added.

Banks’ total outstanding housing loans increased from $79.6 billion at end-2008 to $91.4 billion at end-2009, according to preliminary estimates released yesterday by MAS.

Market watchers note the latest two cooling measures bear some resemblance to tools used by the government in the historic May 1996 anti-speculation measures, which, compounded by the Asian crisis, led to a long property slump. However, the government’s approach now is to administer smaller doses, rather than to prescribe a massive dose that may prove lethal to the market. Previous cooling measures were announced on Sept 14 last year.

‘The government will continue to monitor the property market closely and will introduce additional measures, if required later, to promote a stable and sustainable property market,’ the joint statement read.

Credo Real Estate managing director Karamjit Singh said: ‘We suspect the market would have preferred the latest measures to have been part of last September’s package so that all the measures came out at one go rather than in instalments, as this creates uncertainty about what further measures could be in store. That can be unsettling in the minds of investors and developers.’

Mr Singh also argues while the latest measures may seek to address speculation and overgearing, these are not the real reasons driving up prices. ‘The real reason is a physical supply crunch in the lower end of the housing market – HDB as well as entry-level private.’

Last September, the government scrapped the interest absorption scheme and interest-only housing loans which had been blamed for fuelling speculation, and announced the resumption of confirmed list land sales in the first half 2010.

While those measures had some effect, developers’ private home sales resurged last month. Prices of private homes also continued to increase after the sharp hike in H2 2009, the government noted. ‘Mortgage lending has also increased steadily by around 12 per cent year on year through 2009,’ it added.

Source : Business Times – 20 Feb 2010

THE new rules mean a homebuyer will now have to fork out more of his own money to buy a property, and will reap a smaller profit if he sells it within a year.

Take, for example, a buyer who pays $1million for a home today and sells it in less than a year for $1.1million.

BEFORE THE NEW MEASURES

The buyer could take out a loan of 90per cent of the price – so he could purchase the property with as little as $100,000 as a downpayment.

By selling, he would have made a fast $100,000, less the stamp duty he paid when he bought the property – $24,600 under the stamp duty formula.

That means he would pocket a profit of $75,400.

His return on capital: 75,400/100,000 = 75.4%

AFTER THE NEW MEASURES

The buyer can take out a loan for only 80per cent of the price which means a downpayment of $200,000.

He would have made $100,000 minus his original buyers’ stamp duty ($24,600), and now minus an additional sellers’ stamp duty, of $27,600.

This means a greatly reduced profit of $47,800.

His return on capital: 47,800/200,000 = 23.9%

Source : Straits Times – 20 Feb 2010

CAPITALAND yesterday announced a $5 million donation to children’s charities both in Singapore and overseas this year to kick-start a year-long series of activities as part of its 10th anniversary celebrations.

The donation, which will be distributed through the CapitaLand Hope Foundation (CHF), is also to celebrate its philanthropic arm’s fifth anniversary. This sum alone is equal to the entire amount CHF has contributed to 40 charities in Asia over the past five years.

CHF’s main focus is helping underprivileged children with shelter, education and healthcare needs.

Some other activities that will take place during the real estate conglomerate’s celebrations include a photography competition of any CapitaLand property in collaboration with the National Geographic Channel, a 10th Anniversary Commemorative Book, and an art exhibition by renowned Chinese artist Wang Shuping at the end of this month.

The 350 guests and staff who turned up to join in a lo hei-dinner at ION Orchard last night, hosted by group president and CEO Liew Mun Leong, were treated to a medley of cultural performances.

CapitaLand Group chairman Richard Hu said: ‘Despite a difficult decade for the global economy, CapitaLand has emerged ahead of the curve as a stronger company.

‘The strategy of exporting our real estate value chain overseas has paid off tremendously and the group has been recognised as a trailblazer for Singapore companies expanding abroad. Overseas markets now account for approximately half of our profits.

‘Over the past 10 years, we have generated total shareholder returns of $17 billion for our loyal shareholders.’

Mr Liew said: ‘Since CapitaLand’s formation from the merger of Pidemco Land and DBS Land in November 2000, the company has grown exponentially over the past 10 years into an international real estate company with a presence in over 20 countries.

‘From a $9 billion company at inception, the CapitaLand Group now comprises eight listed companies with a total market capitalisation of $40.3 billion as at end-2009.’

Source : Business Times – 20 Feb 2010