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5 Teck Chye Terrace shophouses up for auction

A row of five adjoining shophouses at Teck Chye Terrace will be put up for sale by auction later in January.

Located at the junction of Upper Serangoon Road and Boundary Road, the freehold shophouses sit on a land area of about 7,861 sq ft . The five units have a total floor area of approximately 12,163 sq ft.

Its marketing agent Colliers International said in a statement on Monday (Jan 5) that the shophouses will be sold as an entirety, with an indicative price of S$13 million. This works out to about S$1,069 per sq ft.

Colliers Deputy Managing Director Grace Ng said: “Typically, the average price of a similar suburban freehold shophouse ranges from S$1,300 per sq ft to S$1,500 per sq ft.”

The first storey of all five units have obtained permanent approval for “Shop” use. Each shophouse also has a side staircase for access to the upper storey.

In comparison, Colliers pointed out that a shophouse located at Serangoon Garden Way was sold at S$2,478 per sq ft in March 2014, and another unit at Serangoon Road was sold for S$1,556 per sq ft in February 2014.

Source : Channel NewsAsia – 5 Jan 2015

Shophouse deals down but prices stay resilient

The number and value of shophouse transactions so far this year is roughly half that of last year, as demand has been hit by tightened availability of loans, a compression of shophouse yields and investor interest being diverted to overseas properties.

Prices in choice locations in the Central Business District, however, are still holding given the limited supply and the profile of owners, mostly deep-pocketed investors that are happy to continue renting out their premises if they cannot reap significant capital appreciation.

URA Realis data shows that 101 caveats have been lodged for shophouse transactions so far this year totalling S$548 million, down from 206 caveats adding up to S$1.27 billion in 2013.

In the first half of last year, S$922 million worth of shophouses changed hands; however the onset of the total debt servicing ratio (TDSR) framework in late-June 2013 has caused some buyers to hold back their purchase plans.

Shophouse sales slipped to S$347 milion in the second half of 2013 before easing further to S$277 million in H1 this year and S$271 million so far this half. However, these figures do not include deals involving sales of shares in special purpose vehicle companies that own shophouse assets, since caveats are typically not lodged for such deals. An example would be a S$50 million sale of a row of five shophouses in the CBD this year.

A shophouse in Boat Quay is understood to have been sold recently for S$9.5 million – which has not been caveated.

Owners who want to sell shophouses may have had to clip their pricing expectations, say property agents, but actual transacted prices have been resilient in districts 1 and 2, where the choicest conservation shophouse stock is located, such as Telok Ayer Street, Club Street, Amoy Street, Chinatown, Duxton Hill and Tanjong Pagar.

Despite the decrease in the number of transactions compared with pre-TDSR, shophouse prices have remained resilient and in fact we are still observing an overall increase in capital values in choice locations.

Current transacted prices in districts 1 and 2 in the CBD are in the range of S$2,200 psf to S$2,500 psf of gross floor area (GFA) on average – depending on land tenure – compared with S$1,800-2,200 psf around May or June last year before TDSR.

Transacted prices in Telok Ayer and Chinatown locations are around S$2,500 psf of GFA – surpassing the S$2,000-2,100 psf in Q1 last year.

Prices of conservation shophouses in the Central Area and Little India have held firm – defying analysts’ expectations of a price softening in the aftermath of TDSR and the Little India riot last December.

However, shophouse prices outside the Central Area in places such as Geylang, East Coast and Upper Serangoon have softened about 5-10 per cent (post-TDSR).

Those who are selling shophouses currently are the ones looking to divest a few small shophouses in various locations and replacing them with a bigger investment, for example, a row of shophouses; or some investors who just want to cash out now for retirement reasons.

Even after the TDSR rollout, a few investors have managed to realise attractive gains from shophouses.

For example, a property in Peck Seah Street was acquired in March last year for S$12.2 million and resold four months later (before the completion of the sale) for S$16.8 million before being flipped again in October the same year for S$20.5 million.

Such cases are rare though.

Most of those making sizeable gains have longer holding periods. For instance, a property on Tras Street that was sold two months ago for S$11.15 million had previously changed hands for S$7.1 million in May 2012 and prior to that for S$5 million in July 2010, according to caveats data.

Most shophouses are held by ultra high net worth (UHNW) owners with very good holding power. For them to sell, the values must double or more.  These owners telling agents: “If I don’t get my price, I’ll just rent it out.”

Yields on shophouses have declined as rental increases have not kept pace with the jumps in capital values.

Net yields today are around 2-2.5 per cent on average on commercial shophouses in Districts 1 and 2. In Q1 2013, they used to be 3-3.5 per cent.

The current sub-3 per cent yields are rather unattractive to investors.

A serious seller may have to lower their price expectations to allow the yield to the buyer to be 3-3.5 per cent. Only then will they see interest.

Industry players note that buyers are also factoring in expected increases in borrowing costs.

A common strategy by landlords is to lease out the ground floor to a food and beverage (F&B) outlet or as a showroom, and find office tenants for the uppper floors.

The increase in Grade A office rents has helped to prop up office rents in shophouses.

Landlords try to maximise their rental returns by having one tenant per floor to avoid having to give a bulk discount to a single tenant occupying the whole building.

Investors that acquired shophouses more than five years ago would be able to comfortably service their mortgage from rental collection as their purchase price would be much lower than current values.

But those who bought 1-2 years ago may find that they cannot push up the rental much if the rent at the point when they bought their property was already quite peakish. If they trigger any further increases, their tenants may not find it sustainable to continue business at the location.

Another investor pointed out that it is still possible to spot good investment opportunities.

A lot of shophouses are under-rented; their owners have not spruced up the properties in years. So there is a value proposition here.

By renovating properties, rents go up and hence prices increase.

From the tenants’ perspective, renting space in a shophouse can be attractive.

For instance, the rent for ground floor retail space at Pagoda Street, a location with very high foot traffic, is S$17-18 psf a month – a discount to the S$35-40 psf for ground floor space in an Orchard Road mall.

One investor has leased out an upper-level office floor (of about 1,200 sq ft) in a CBD shophouse at S$8 psf, so that’s about S$10,000 monthly rent.  The occupier is new to Singapore and was previously operating out of a serviced office, paying about S$5,000 a month for a space of about 100 sq ft.

The average shophouse office rent in the CBD of about S$6-6.50 psf a month is lower than the double-digit rents in Grade A office buildings.

Street-level F&B space has been the key driver for growth of shophouse rents.

There has been an influx of cafes and restaurants in conservation shophouses in the CBD for example in the Duxton, Keong Saik and Gemmill Lane locales, for instance, in the past four or five years.

Currently, approval from the Urban Redevelopment Authority (URA) for “eating houses”, the planning term for F&B use, is granted on Temporary Permission of one to three years.

However, there may come a time when, to maintain a mix of trades in the conservation districts, URA may limit approvals for F&B use in shophouses even in the CBD. This could potentially cause a reversal of interest in commercial shophouses.

Another reason for thinning of shophouse transactions is that some property investors have been moving away from the Singapore scene in search of higher yields, say agents.

Still, Singapore shophouses have their attractions.

Funds and UHNW investors, mainly foreigners, are among the buyers. Investors switching from the residential segment, which has been hit by cooling measures, also find commercial shophouses an attractive alternative. There are no restrictions on foreign ownership of shophouses on sites fully zoned commercial.

Despite the already sharp price appreciation, a shophouse investor paying, say, S$2,500 to S$2,800 psf on GFA in the CBD will feel comforted knowing that it is still cheaper than the S$3,000-4,000 psf on average for new strata retail units in city-fringe locations and at least S$3,000 psf for new strata offices in the financial district.

Agents say that prices of shophouses in districts 1 and 2 will continue to be supported by the fact that they are mostly well located – in the business district and near an MRT station.

There is also an increase in demand from end-users looking to buy and occupy a shophouse for their own business instead of leasing it out.

These properties are a limited-edition asset class as they are designed with a distinctive facade, possess a unique charm and are steeped in history.

Shophouses will continue to be highly sought after. Transaction values and volumes are projected to increase about 10 per cent in 2015.

The pricing outlook for districts 1 and 2 shophouses is expected to remain resilient next year. But other areas including Little India (District 8) and non-central locations may succumb to the impact of TDSR and the economic situation.

Adapted from: The Business Times, 13 Dec 2014

Mortgagee sales set to rise in 2015

More properties went under the hammer this year, including more mortgagee sales which consultants reckon is a sign of increased difficulties among borrowers to finance their mortgages.

This is set to rise further next year, they believe.

A total of 529 properties of all types were auctioned and 32 of them were sold at a total value of S$72.5 million. This compares to 488 properties auctioned last year, of which 19 were sold for a total of S$91.6 million.

The number of mortgagee listings surged to 159 from only 32 last year. Among these, 22 properties were sold for a total of S$36.9 million – more than doubling from last year when 10 properties were sold for a total of S$12.6 million.

Residential properties accounted for over 70 per cent of total value of properties sold by the banks to recover their mortgages.

Most market players expect the situation to worsen next year, as borrowers will find it harder to service their loans given rising interest rates and greater difficulty in renting out their units as a substantial number of newly homes stream in next year.

For now, there is “little cause for anxiety”.  The number of mortgagee listings has not reached the levels seen in the 2008 global financial crisis, the 1998 Asian financial crisis and the last market downturn in 2004.

However, there has been a consistent rise in mortgagee sales in the past few quarters.

The government’s stance of retaining the cooling measures may result in further slowdown in various property sectors.

With the expected dip in property values coupled with a weakening leasing market, owners who are heavily leveraged may find it difficult to cover their monthly mortgage payments.

A market watcher is projecting that there will be more mortgagee sales of residential units as well as strata-titled factories.

Those who have bought strata-titled factories in recent years probably bought at a high price, but rents are softening due to some government measures and supply ramp-up of industrial space.

Landed homes, especially semi-detached houses and terraces, are vulnerable to repossession given their huge quantums.

This year, landed homes accounted for 11.9 per cent of mortgagee listings.

Three landed homes were sold under the hammer – Brighton Crescent at S$9.1 million, Eng Kong Drive at S$3 million and Wolskel Road at S$4.31 million.

Non-landed homes still made up the majority 65.4 per cent of the mortgagee listings.

Big-ticket sales that were hammered include a 2,863 sq ft apartment in Draycott 8 off Stevens Road, which sold for S$5 million, and a 2,109 sq ft unit at Orchard Scotts that was sold for S$3.3 million.

While high-end properties in the prime districts have been hit harder by the property cooling measures, shoebox apartments – typically no bigger than 506 sq ft – have lately surfaced in auctions.

Nine shoebox units were put up for mortgagee sales this year, compared to none in the past four years.

Located at various locations like Geylang, Haig Road, Woodlands and Wilkie (Dhoby Ghaut), these units are generally priced below S$1 million.

Investors who are servicing more than one loan may have felt the heat from the increasingly competitive leasing market.

Unless the government curbs on the property market are relaxed, it is expected that the number of properties put up for mortgagee sales will continue to trend upwards to hit 200 in 2015.

Adapted from: The Business Times, 13 Dec 2014

No sign of rethink on property cooling rules

Anyone hoping that property cooling measures will be unwound soon will likely be disappointed, going by signals from the private and public sectors.

One the one hand, developer Hiap Hoe has been forced to buy units at some of its projects, including all 48 at Treasures on Balmoral, in the wake of the plunging demand.

On the other, the Government shows no sign of a U-turn, with various ministers reiterating that prices have yet to fall to any meaningful degree to warrant a rethink.

“We do not expect the prevailing cooling measures will be lifted any time soon,” said a spokesman for Hiap Hoe, which earlier this week sold the Treasures on Balmoral flats to its parent company.

Consultants and developers say that measures addressing financial stability – the total debt servicing ratio (TDSR) – are here to stay. But if the market weakens further, there is expected to be calls for tweaking rules on taxation.

TDSR is a measure targeted at ensuring prudence among citizens as it takes into account all types of outstanding debt; it’s a good measure that will remain.

The idea that cooling measures will be around for a while has been stated by several ministers – most recently Deputy Prime Minister Tharman Shanmugaratnam in October.

He said that “there is some distance to go in achieving a meaningful correction, after the sharp run-up in prices in recent years”.

While Hiap Hoe’s move to buy units at its projects – including Skyline 360° and Signature at Lewis – suggests that it would rather pay the Additional Buyer’s Stamp Duty (ABSD) on these transactions than stump up Qualifying Certificate penalties, it appears to be a rare move for now.

These are different times from the global financial crisis. We are still positive in terms of economic health, and the balance sheets of developers generally remain strong.

Developers are trying to cut holding costs while giving rebates and other incentives to move units but there are no distress sales.

One market watcher suggested revisions for the ABSD levied on Singaporeans and permanent residents purchasing second homes, whether as future homes or as investment.

“The existing TDSR means they would not be going beyond what they can afford…Tweaking some of these measures would be ideal.”, he noted.

Developer CapitaLand said it believed the Government would review measures “in a timely manner.”

“With a resilient economy and policies to support population and economic growth, demand outlook for new homes over the long term remains positive,” a spokesman said.

One analyst suggested that it may also be timely to relook cooling measures for high-end or costlier residential properties, separating them from mass market private property.

“High sales and leasing activity in the high-end residential segment would place Singapore on the world map for investment-grade properties,” he said.

Adapted from: The Straits Times, 13 Dec 2014

Most expect home prices to fall or stabilise: Poll

Most people think the once-soaring property market here has been reined in, according to a recent poll.

Almost three-quarters expect residential prices to stay the same or fall in the next six months, based on the survey by real estate firm ERA Realty and research firm Nexus Link.

Almost four in 10 expect residential property prices to fall in the next six months, while another one-third of respondents expect prices to stay the same.

Only a quarter think prices might rise, with younger people and four-room flat owners most likely to think so.

Despite this cool sentiment, ERA Realty key executive officer Eugene Lim said: “We do not see the results as negative.” The impact of government cooling measures is being felt, but these aim to stabilise prices rather than cause a huge drop, he added.

Property prices had been on the rise since 2009, but started falling in the second half of last year for public flats, and at the start of this year for private units.

In this cooling market, 38.5 per cent of respondents think prices will fall in the next six months. Another 35.6 per cent think they will stay the same.

Expectations are similar for the longer term, with 33.8 per cent and 39.7 per cent expecting prices to be lower or the same in a year’s time, respectively.

The 21-to-34 age group was the only one where more people expected higher prices.

Younger buyers might be less aware of market dynamics as they have limited investment experience, said one market watcher.

Similarly, four-room flat owners were the only group where more people thought that prices would rise rather than fall.

The face-to-face poll was conducted from late September till late October with a representative sample of 500 citizens and permanent residents.

Respondents were also asked about their awareness of property cooling measures. Seven in 10 knew at least one, but less than a fifth were aware of all six.

Two loan curbs were the least known: total debt servicing ratio and the mortgage servicing ratio.

These limit a borrower’s total debt and the share of income that can be used to service a home loan, respectively.

The apparent ignorance of these measures could simply be an issue of not recognising the terms as most people know and understand banks don’t lend as much (now).

The results show that ERA must make sure its salesmen are able to advise sellers and buyers on these “mind-boggling” measures, said Mr Lim.

Respondents were also asked about the lease buyback scheme which lets elderly HDB owners sell part of their lease back to the Government for retirement income. More than seven in 10 had heard about it, but few were keen.

Of those who knew about it, less than a quarter would recommend an eligible relative or friend to take it up. Four in 10 would not, and the rest were neutral.

Adapted from: The Straits Times, 15 Dec 2014

Hiap Hoe Hldgs buys all units at Treasure on Balmoral

Hiap Hoe Group is selling all 48 units in its District 10 project, Treasure on Balmoral, to avoid paying further extension fees under the qualifying certificate (QC) rules.

Its controlling shareholder, Hiap Hoe Holdings (the investment firm of the founding Teo family), has entered into an agreement to acquire all the shares in Hiap Hoe SuperBowl JV Pte Ltd, which owns the properties, for S$72.83 million after accounting for shareholder loans and other liabilities.

This is based on a market value of S$185 million or S$1,789 per square foot (psf) for the 103,439 sq ft project. Hiap Hoe SuperBowl JV is owned by Hiap Hoe Group and its subsidiary SuperBowl Holdings.

The last expression of interest (EOI) launched in July for the project did not draw satisfactory offers, with the highest offer at S$1,750 psf, below the guided price of S$1,850 psf.

The project was first launch in September 2012 at an initial launch price of S$2,044-S$2,375 psf, and received temporary occupation permit (TOP) in November 2012, so the developer has to pay extension fees for unsold units from this November. Some S$5.52 million of fees were paid for a further six months from Nov 2.

In September, Hiap Hoe Group’s unit HH Residences mopped up the unsold units on the top floors of two of the group’s projects – Skyline 360° at St Thomas Walk, and Signature at Lewis – also to satisfy QC conditions.

Adapted from: The Business Times, 9 Dec 2014

Further declines predicted for private home prices and rents in 2015

Prices of private condos could drop by another 5-10 per cent next year, consultants predict, as it looks unlikely that the measures designed to cool down the property market would be tweaked or lifted soon. However, the price tags on new sales could be “stickier” because developers have strengthened their holding power.

A market watcher described 2015 as a buyers’ and tenants’ market. Funds are looking for bargains, and more people are asking to be on the auction mail list.

But so far, developers have refrained from making major price cuts, preferring to sell the better units at higher margins while progressively adjusting prices down to clear the remaining stock over the course of the construction period.

Another analyst said that with the easing of cooling measures unlikely to happen anytime soon, developers may, however, review their pricing to improve sales next year.

In the first 10 months of this year, developers sold 7,449 units in private condos and executive condos – less than half the 18,927 sold last year, and the lowest since 2008’s 4,435, said the URA.

As at last Friday, Hong Leong Group had sold 1,370 residential units here worth more than S$1.4 billion; these were mainly in Coco Palms, Jewel@Buangkok, The Venue Shoppes & Residences, Commonwealth Towers and Bartley Ridge.

Frasers Centrepoint Limited (FCL) sold 217 residential units worth S$270 million as at Dec 7, including its joint venture projects and a good-class bungalow; the figure pales in comparison to last year’s, when it sold 575 units worth S$556 million.

FCL chief executive Lim Ee Seng said that he expects residential prices and transactions to continue to moderate, given that the government is not expected to lift its cooling measures soon.

But it helps that FCL focuses on the mid to mass-market segments, the deepest segments of the private residential market here, he said. A high level of pre-sales has enabled FCL to fund most – if not all – its construction costs from progress payments, he added.

Another market watcher said that potential buyers, including aspiring HDB upgraders, waiting on the sidelines since the total debt servicing ratio (TDSR) kicked in last year, could be the source of “latent demand”. Non-core central regions are likely to hold up better next year.

New project launches in the pipeline include GuocoLand’s Sims Urban Oasis in Aljunied, CapitaLand’s Marine Blue in Marine Parade, Hoi Hup’s Sophia Hills in Dhoby Ghaut and EL Development’s Symphony Suites in Yishun.

An analyst has projected the continuing stickiness of the prices of new sales on the grounds that the projects slated for launch in the first half of next year come from land parcels acquired during the H2 2013 and H1 2014 government land sales (GLS) programmes, among which some were highly priced.

Add to this the fact that developers have beefed up their earnings resilience over the years, having diversified beyond the residential segment and outside of Singapore.

FCL, for one, has taken steps over a decade to spread its growth across asset classes and geographies. Following its acquisition of Australand, the company now holds 60 per cent of its assets outside Singapore, said Mr Lim.

A Hong Leong spokesman said that the office and hotel sectors have emerged “shining stars” for the group, which is now pursuing its overseas platforms and developing funds management products as planned.

Meanwhile, the residential market “has to battle headwinds as sentiment remains subdued, with little signs of the property curbs being tweaked or removed in the near term”, he said. “Transaction volumes and prices have faced downward pressures as homebuyers have maintained a wait-and-see approach.”

Standard Chartered Bank analysts note that unsold units with pre-requisites for sale this year reached a 20-year peak of 23,000 units. Completed but unsold units reached 1,488, against an average of 800 units in the past seven years.

Noting that developers have bought land this year that could yield 10,500 residential units, the analysts said that developers could buy land enough for between 6,000 and 6,500 units through the GLS programme in H1 2015 – a level still deemed too high.

“We think this would be appropriate only if primary sales rose 25 per cent year-on-year to 10,500 units to absorb the excess land supply from 2014.”

In the meantime, developers may decide to rent out unsold units to ride out this period; some may choose to pay extension fees for qualifying certificates to extend their sales period or set up a separate company to buy the unsold units.

A looming supply glut is also expected to hit the rental market hard, with older units likely to be worst-hit. Some market watchers have flagged a “supply shock” that would trigger higher vacancies and compress rental yields.

The leasing market in the core central region (CCR) and outside central region (OCR) could be more challenging next year. While tighter housing budgets of expatriates have put a cap on leasing demand for more expensive units in the CCR, the huge incoming supply in the OCR (where 59 per cent of 64,000 units are under construction) will heighten competition for tenants in that region.

Adapted from: The Business Times, 9 Dec 2014

Resales of apartments, condos up 6.6% in Nov

The latest flash estimates from SRX Property show that 388 non-landed private homes were transacted in the resale market in November, down 22.4 per cent from October but up 6.6 per cent year on year.

SRX Property’s November flash estimate for its non-landed private residential resale price index reflected declines of 1.1 per cent month on month and 3.4 per cent year on year. Since the recent peak in January 2014, the index has eased 6.3 per cent.

Giving a geographical breakdown, SRX Property said the flash estimates show that prices slipped month on month by 1.3 per cent in Rest of Central Region (or RCR, covering city-fringe areas) and Outside Central Region (or OCR, covering suburban areas).

Core Central Region (or CCR, comprising the Downtown Core Planning Area, the old postal Districts 9, 10 and 11, and Sentosa Cove) saw a 0.1 per cent dip.

Since December last year, the price index for RCR has posted the biggest decline of 6.1 per cent, followed by falls of 5 per cent in CCR and 3.7 per cent in OCR.

The overall median Transaction Over X-value (TOX) – an indicator of how much buyers pay over past transacted prices of comparable units – was S$0 in November 2014. This is the first time the figure has turned non-negative since October 2013. In October this year, the median TOX was negative S$4,000.

The X-Value is the estimated value of the unit based on past transacted prices.

SRX Property CEO and co-founder Sam Baker said: “When sales volume is this low, macro-analysis becomes less relevant and individual transactions are more pronounced.

“On the macro level, we can project, with reasonable certainty, that demand will continue to be anaemic and prices will be relatively stubborn until there is a significant change to cooling measures, interest rates, supply, or an external shock, or some combination of the above.

“Until then, the action is at the street level and requires micro-analysis. Fifty per cent of buyers in November paid above the X-Value for their unit and 50 per cent paid below it. This means that not all buyers and sellers are being impacted by the cooling measures in the same way. A good percentage of expert agents and clients are using data to transact the right home at the right price in their particular project or street.”

For districts with more than 10 resale transactions in November 2014, District 9 had the highest median TOX of S$80,000, followed by S$30,000 in District 22 and S$15,000 in District 11. This means that the majority of the buyers in these districts purchased units above the computer-generated market value, SRX Property noted.

At the other end of the spectrum, the lowest median TOX was in District 5 with TOX of negative S$40,000, followed by negative S$20,000 in District 16, and negative S$15,000 in District 19.

“This means that the majority of the buyers in these districts has purchased units below the computer-generated market value,” SRX Property said.

One market watcher said: “Buyers are in no urgency to make a commitment in the resale market unless they need a roof over their head or from an investment angle they are getting a really good deal ie the entry price is discounted and takes into consideration the expected slide in prices in the coming months. Otherwise, from a logical perspective, the transactions will not take place. We can continue to expect a low volume of transactions.”

ERA Realty key executive officer Eugene Lim too said that “in the absence of any tweaks to the current slew of measures and any market shocks, we can expect (the) standoff between sellers and buyers to flow well into 2015”.

He forecast price declines for non-landed private homes to be no more than 8 per cent for the whole of this year. “For 2015, we can possibly expect price declines to continue moderately in the region of 5-8 per cent for the whole year.”

Another property analyst noted that “the secondary market is quite disparate compared with the primary market where developers have a better influence over pricing”.

Some market watchers expect resale prices of non-landed private homes to ease up to 7 per cent next year assuming none of the cooling measures are removed in the second half of the year. “If there is lifting of cooling measures in H2 2015, we could see a price decline of up to 5 per cent for on a full-year basis.”

Any scale-back of cooling measures in the second half of next year would not result in a rapid rise in resale private home prices. “Investors understand there is substantial amount of private residential completions that will intensify leasing competition, while those buying homes for their own occupation would generally prefer to buy a property from a developer offering a better and more modern design than to pick an older, completed property in the resale market.”

Adapted from: The Business Times, 10 Dec 2014