Saturday, August 13, 2011

The MRT divide for private home prices

KWEK Leng Beng, executive chairman of major property player City Developments, has a thing or two to say about price trends in the Singapore market.
Over the next six months, he said, developers may adjust downwards launch prices of private housing projects that are not located near MRT stations by about 5 per cent if they wish to move units, amid greater buyer caution.

However, developers of projects that are well located, close to MRT stations, should be able to hold prices or even marginally increase them by 1-3 per cent, he said.

'I believe the market will not crash unless of course the worldwide scenario is so bad . . .'

He made these comments after announcing CDL's second-quarter results. The group posted a 17 per cent year-on-year increase in net profit to $220.9 million for Q2 2011.

Besides how acutely the economic situation in the US and Europe pans out and its impact on Singapore, price movements for private homes will also depend on local competition. 'If in the vicinity, there are three or four developers selling at the same time, you will definitely have to consider reducing the price if you want to get out earlier.'

Asked about the impact of a potential recession here triggered by events in the US and Europe on Singapore condo prices, Mr Kwek said: 'I do not believe that it will impact a lot unless interest rates go through the roof . . . At the moment, the market is full of liquidity, interest rates are so low, and there is a lack of alternative investments.'

He also said he does not envisage an oversupply in 2013-2014 as predicted by some analysts, as 'I don't think (the government) will come up with new measures to destabilise the market' given the uncertain environment, following Standard & Poor's downgrade of US credit rating and the worsening of Europe's sovereign debt crisis.

'I think the government is more concerned about public housing and the new (National Development) Minister has taken positive action,' Mr Kwek added.

He said global cooperation among governments as seen during the Lehman debacle can once again help to stabilise markets - although 'this time I believe it will take a little bit longer ... it is a little bit harder'.

'Everything is overblown. That is human nature. Just like property, the higher property prices go up, the more you want to buy, I guarantee you. The lower it goes, the more scared you are,' he quipped.

Mr Kwek also revealed in a media interview that CDL's hotel arm Millennium & Copthorne Hotels (M&C) is on the lookout for acquisitions, especially in key gateway cities in the West. 'I am waiting for Spain, certain parts of US - like Washington DC, Miami and San Francisco. In Asia I think we need to look at other parts like Vietnam.

'If the opportunity comes, we have the financial power to do so.'

In addition, M&C plans to upgrade some of its existing hotels to enable them to charge higher room rates. 'I am going to spend big money in some of these key gateway cities including Paris, where we own Millennium Opera Paris near Galeries Lafayette.'

In Tokyo, M&C will spend a total of $230 million developing a 325-room hotel in the Ginza district on a site bought last month.

On succession planning, Mr Kwek reiterated that the group has many experienced and capable people, including his brother Leng Joo (who is CDL's managing director), cousins, and the next generation including Mr Kwek Leng Beng's son Sherman, 35, who is chief executive of CDL China, and Mr Kwek Leng Joo's elder son Eik Sheng, who heads CDL's corporate development department.

'I am not averse personally to getting an outsider to come and run the company ... if my relatives or my son cannot perform.'

The 70-year-old said: 'I love working. I would like to work as long as possible; if not, I can become an adviser because of my years of experience - if my mind is sound.'

He also revealed that his younger son Kingston 'is not interested to work with me for the time being at least'. He is more keen on the bio-tech and oil and gas sectors.

While the Republic may see a technical recession, 'I think Singapore is in good stead provided we don't disturb the government too much by complaining (so much). When you have to listen to too many complaints, then you become less focused on what you want to do ... We hope government will listen to constructive suggestions and feedback and at the same time having heard so (much from) so many people, it must exercise, as in the past, its leadership quality. We cannot please everybody'.

'If we continue to welcome foreigners ... and we become more prosperous because government and private sectors work closely, there are a lot of gains to be had. But if we keep on arguing .... we cannot progress very much. We have to be realistic and pragmatic.'

He also stressed the importance of continuing to attract businesses from overseas to anchor in Singapore.

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