Published August 15, 2008

One man's panic is another's bargain...

CDL chief points to some good buys as panic-sellers offload, but he's not alarmed

By KALPANA RASHIWALA
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(SINGAPORE) City Developments Ltd (CDL) executive chairman Kwek Leng Beng yesterday acknowledged that there have been some cases of high-end property buyers resorting to panic-selling in the secondary market. These are people who'd bought their units during the early stages of the property boom

Mr Kwek: The high-end homes sector will pick up when credit mess is over

'It is not as alarming as what some people think. Just bear in mind, because of a couple of transactions, these few swallows do not make a summer,' he told analysts and journalists at a briefing to announce CDL's second quarter results.

In some cases, these desperate sellers are offloading their units at prices that may be 20-30 per cent below current market values, providing attractive bargains for astute property investors, Mr Kwek said.

'There are what I call bargains because some buyers, towards Temporary Occupation Permit or even before TOP, just want to get out as long as they make $100 psf profit.

'As an example, there were some projects launched at $2,200 psf. Then (the price) went up to $3,400-3,500 psf. Today there are some people who have gotten so frightened, they will sell off at $1,700 psf. That is the time, if you are smart enough, you can pick up (a bargain)! Buying property is not short term. Buying property is medium to longer term.'

High-end home prices are in a period of consolidation after a sharp escalation. 'What has gone up in a straight line will also come down,' as Mr Kwek put it.

'My key advice to you is as long as you can service your instalment and with the (current) cost of construction so high, how can you be worse off than during the bad times in '96 and '97? If you are smart enough to pick up (a property) when some people want to commit suicide, you just pick (it) up cheap - keep it, rent it, stay - there's your chance.'

Saying he was not too worried about the current consolidation, he added: 'This is the time you should buy. This is not the time you should get out, unless of course circumstances dictate that you should get out.'

Regaling his audience with an anecdote, Mr Kwek said: 'For example, The Sail @ Marina Bay, we started selling at $900 psf, and the price went up to $3,000 psf-plus. The other day, somebody told me that his friend, a broker, said there's one unit, ninth floor, $1,800 psf. He asked me: 'Do you want to buy?' I said: 'Which unit? I want to check. I am going for a meeting. When I come back, we'll talk about it.' By the time I came back, the whole thing was gone.'

The high-end residential sector will recover 'when the sub-prime crisis is over and the integrated resorts are in operation', Mr Kwek said. 'You'll have a lot of high rollers coming in. They come in, they like Singapore - very clean, things get done. We have a lot of (positive) attributes but we're always taking them for granted.'

Mr Kwek, who is also chairman and managing director of Hong Leong Finance, said that although 'we don't have Freddie Mac and Frannie Mae' here, Asia will be hit to some extent by the sub-prime crisis. 'However, our banks are well capitalised. Monetary Authority of Singapore is monitoring closely.'

He also recalled Minister for National Development Mah Bow Tan's comments that 'they don't want to see property prices going (up) in a straight line nor do they want to see it going down in a straight line. So I am confident they are monitoring the whole situation'.

Much of CDL's land bank, even in the high-end, was acquired at relatively cheap cost. 'As an example, for the Lucky Tower site (at Grange Road), if I were to launch my project tomorrow at $2,500-$2,600 psf, I can still make very healthy profit compared to Cliveden (nearby) which we sold at $3,750 psf. It's a question of whether I want to let go at $2,500 psf or whether I should keep it.

'Don't forget if you go ahead and construct, you incur two sets of interest costs - on land and construction. By the time the market improves, the (unit) sizes and the design may be outdated, so you cannot maximise the profit from that. It's better to keep the land and wait for a better opportunity before you sell.

'I'm sure some (other) developers feel the same way. I will guarantee you many of these people will not go ahead with construction,' Mr Kwek said.

CDL, in its results statement, also cited other reasons why a feared oversupply of new private home completions may not materialise. Tight bank financing is making developers more cautious in their land purchases. The sharp hike in construction costs means developers who delay their launches may hold back their construction plans as well. Given tight construction resources, contractors may continue to find it hard to complete projects on schedule.