Singapore office rents stabilising: CityDev

SINGAPORE (Reuters) - City Developments (CityDev) (CTDM.SI), Southeast Asia's second largest developer, said on Tuesday that Singapore office rents have begun to stabilize and it had raised prices for some of its residential projects.

"We are quite optimistic the (residential) market is recovering well and we think there is lots of steam in this recovery," Group General Manager Chia Ngiang Hong said at the Reuters Global Real Estate Summit in Singapore.

Chia said office rents have begun to stabilize after falling sharply in the fourth quarter of 2008 and first three months of 2009 as supply remained relatively tight, but most landlords still expect rents to moderate slightly downwards.

He added there were many office projects in the pipeline although most would only enter the market in 2011 and 2012.

"The office is very sensitive to economic conditions so once the economy improves, the pick-up will be very fast."

Private home sales in Singapore have soared since February after a weak performance in 2008, mirroring developments in Hong Kong and China where residential markets have also recovered despite the weak economic outlook.

Chia said CityDev has launched about 500 homes for sale since January, nearly double the 260 units it planned to sell in the first half of 2009. The firm also raised prices at some of its projects by 2-8 percent because of strong demand.

According to government data, the number of units transacted in Singapore hit 1,668 units in May, just shy of the all-time high recorded in August 2007.

Chia said property sales in Singapore in the five months to May have already exceeded the 4,000-plus units sold last year, and the total for 2009 should cross 10,000 units, a figure usually associated with years when the sector was booming.

Merrill Lynch, which has a "buy" rating on CityDev, said in a report this week that Singapore's residential market has surpassed expectations and that it now expects a "short and sharp V-shape recovery."

CityDev is traditionally regarded as the best proxy to the Singapore property market, as it has the largest residential landbank among listed developers and owns offices and shopping malls.

The firm, which also has projects across the region as well as a 53 percent stake in London-listed hotelier Millennium & Copthorne (MLC.L), posted a 50 percent drop in net profit in the first quarter of 2009.

Chia said spot office rents tended to fluctuate widely, but CityDev's revenues were relatively stable as leases were typically for a minimum period of three years.

For instance, if the firm were to rent out its flagship Republic Plaza building in Singapore's central business district at current market rates, its rental income would probably be slightly higher despite the sharp drop in spot rates over the past year.

(Reporting by Kevin Lim; Editing by Dhara Ranasinghe)