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More supply but HDB prices will go up: Mah

Board may offer another 6,000 units through build to order scheme

(SINGAPORE) The Housing and Development Board will continue to monitor demand and could offer another 6,000 units through its build-to-order (BTO) system. However, prices are also likely to go up.

Saying that he did not want to ‘fudge the issue’, National Development Minister Mah Bow Tan said: ‘Prices will go up as a result of resale prices going up.’ Mr Mah was speaking at the launch of two new housing projects under the BTO system.

The projects, Segar Meadows in Bukit Panjang town and Compassvale Beacon in Sengkang town comprise a total of 1,162 flats.

Three- and four-room flats (68 sq m-93 sq m) at Segar Meadows will cost between $116,000 and $231,000, while two- to four-room (48 sq m to 97 sq m) flats at Compassvale Beacon will cost between $69,000 and $233,000.

Although the precise formula for fixing prices was not revealed, Mr Mah explained that it would be based on average resale prices rather than the ’spectacular prices’ reported for some flats recently.

Mr Mah also let on that he had received a few letters and e-mails from constituents saying that they had not been successful in getting flats through the BTO system.

But he reiterated that the government was committed to providing a variety of affordable public housing to meet the ‘aspirations’ of first-time buyers and young couples.

To this end, he revealed that 4,800 units have been launched through BTO this year, twice the number compared to 2006.

On affordability, Mr Mah said that the majority of households spent a manageable 20-25 per cent of their monthly household income servicing loans for their flats. He also added that since the implementation of the Additional Housing Grant scheme in March 2006, 4,100 eligible households have benefited from grants amounting to about $50 million.

And demand from first time buyers has been strong. According to HDB, about 92 per cent of those who applied for the 4-room flats for the two BTO launches in August and September and were successfully short-listed within the first 100 per cent flat supply were first timers.

Mr Mah also had this advice for those looking to buy a flat now: ‘If you cannot afford a big flat, then buy a smaller flat. If you can’t get a new flat, then get a resale flat. In life, we make trade-offs all the time.’

To meet the needs of the ’sandwiched class’, Mr Mah revealed that HDB will be making more sites for executive condominiums (ECs) and the Design, Build and Sell scheme (DBSS) available in the first half of 2008.

Up to three EC sites with a total of 1,300 units, and four DBSS sites with a total of 1,900 units are set to go on the reserve list of Government Land Sales Programme for H1 2008.

Knight Frank director (research and consultancy) Nicholas Mak said that the supply of more public housing flats could cool resale flat prices but the impact will be felt next year. ‘It could be a signal that the government will release more sites to control runaway prices in the resale market,’ he added.

Managing new supply and demand will be a tricky job for HDB because it does not want to be stuck with a surplus of flats.

A tight hold on supply could, however, push up prices.

But demand seems stable. Mr Mak points out that so far, demand as measured by the number of applications received for new flats between 2000 and 2007 has ranged from 7,900 to 13,800. This pales in comparison to the 60,000 to 70,000 applications received in the mid-1990’s, he said.

Mr Mak also added that he expects the impact on the private property market to be minimal.

 

Source: Business Times 29 Nov 07

Where high finance meets high living

The new downtown will boast a casino, a financial hub, condos and retail areas

TIRED of Orchard Road? Jaded by Clarke Quay? Finding Robertson Walk just a trifle same-old, same-old? For the Singapore consumer – probably among the most avid in the world – Marina Bay may be the next big thing.

The new downtown will be home to a casino, a financial centre and several sparkling condominiums, so not surprisingly, shops and restaurants are eager for a presence there.

‘The Marina Bay area presents many exciting opportunities for both the business and leisure market,’ said Sulian Tan-Wijaya, general manager of The Fullerton Heritage, which is developing a string of commercial properties along the waterfront.

‘Our development is at the heart of the Central Business District, the Marina Bay Sands casino, the Esplanade theatres, new high-end residences like The Sail and The Clift, and the nearby Civic District,’ she said.

Edgar Huang, manager of marketing services for Esplanade – Theatres on the Bay, said the arts-performance centre expects to see ‘even more buzz in the area, with more people coming to work and live and play here’. The theatres, open since 2002 and famous for their domes that have been likened to durians, are also adjacent to a shopping mall.

David Martin, general manager of Marina Bay Financial Centre (MBFC), which will consist of high-rise office towers as well as retail space, estimates there will be 50,000 people living and working in the ‘immediate vicinity’ of the financial hub from 2011.

Along with the visitors who are sure to flock to the adjacent Sands, ‘we believe this creates a compelling offer to potential retail tenants, and this is also the feedback we are getting from the market’, he said.

Events being held in and around the public areas of Marina Bay will also help draw in the crowds, said the Esplanade’s MrHuang.

‘Marina Bay is also currently host to many celebrations like National Day, the Fireworks Festival and the New Year’s Day celebrations,’ he said.

Upcoming events like the Chingay street parade and the Grand Prix Formula One race, which Singapore will host in September next year, will also attract visitors, he added.

To entice what promises to be a diverse range of consumers, each developer is adopting a slightly different marketing tack.

The Fullerton development, for example, is aiming to be high-end and historical.

‘In addition to the Fullerton Hotel and a new waterfront 100-room luxury hotel, the Fullerton Heritage Precinct will offer a range of chic, trendy and elegant retail and dining experiences,’ said Ms Tan-Wijaya.

‘These include conservation buildings such as The Fullerton Waterboat House, Clifford Pier and Customs House, as well as One Fullerton,’ she said.

One Fullerton will revamp its second floor and offer even more food and beverage outlets, which should attract tourists who visit the nearby Merlion Park, she said.

The Esplanade is pitching itself as a kind of natural retail extension for the arts lover. ‘It’s a lifestyle experience pegged to the arts,’ said Mr Huang.

‘Besides coming here for a show, you can start or end your evening with drinks and food,’ he added. ‘There are many shops closely related to the arts for art lovers, and those unfamiliar with the arts won’t feel out of place either.’

Mr Huang said that business at the Esplanade has been bustling since its inception.

‘It’s been positive here at Esplanade Mall,’ he said. ‘The Esplanade also presents over 70 per cent of our artistic programmes free, which means visitors will always have something to look forward to after a meal or a visit to the shops.’

He said that some of the main attractions of the mall are the food centre Makansutra Gluttons Bay, award-winning restaurant My Humble House and library@esplanade, Singapore’s first performing-arts library.

Not forgetting the small but unusual Tatami Shop – ‘the world’s first tatami furnishings retailer outside Japan’, said Mr Huang.

Suntec City Mall, which welcomed its first customers in 1997, says its retail concept is ‘a little something for everyone’. The shopping centre’s larger tenants include hypermarket Carrefour and fashion retailers Mango, La Senza and Lacoste. It also boasts the gigantic Fountain of Wealth, which attracts visitors from all over the world.

‘Also, Suntec City Mall houses the embarkation point for the many tourists going for the Duck Tours and Hippo tours,’ said Marilyn Tan, investor relations manager at ARA Trust Management (Suntec).

As for the MBFC, Mr Martin said the financial hub aims to be ‘a vibrant and prestigious, yet convenient, shopping and dining precinct for the internationally-minded’.

Retail in the MBFC would address a ‘market gap’ in the central business district for serving the needs of higherincome earners and residents, he said. ‘This group of customers wants much more than what a conventional mixeduse centre offers. MBFC is designed as a place where residents, the office population and visitors can satisfy their everyday needs without leaving the business and financial district.’

Of the development’s 160,000 sq ft of underground retail space, about half will be for shops and the other half for food and beverage, he said. In addition, there will be a restaurant on the 33rd floor of the Tower One office block.

‘MBFC is in talks with a number of leading retail interests to be located within the centre,’ he said. The development will offer dining and entertainment options for ‘a spectrum of tastes’.

Then, of course, there is Marina Bay Sands, which will open in 2009. Its developers, Las Vegas Sands, declined to comment at this stage on the specifics of upcoming shops and restaurants.

Besides the casino, the entire integrated resort, as it is called, will feature three 50-storey hotel towers, linked by a two-acre Sky Garden. Not to mention an Arts and Sciences Museum shaped like a welcoming gesture, and onemillion square feet of ‘integrated waterside promenade and shopping arcade’, according to its website.

Clearly, there will be loads of shopping and dining opportunities there. So hang on to your hats, Singapore consumer – if not your purses.

 

Source: Busines Times 29 Nov 07

Stamford Land in A$220m Sydney project

Site in The Rocks will have apartment tower, terrace homes, retail units

SINGAPORE-LISTED Stamford Land, the hotel and property arm of shipping tycoon Ow Chio Kiat, is planning to build some of Australia’s most expensive homes on the site of two old demolished warehouses and a heritage building.

Mr Ow bought the 99-year leasehold site on Sydney’s The Rocks area fronting Gloucester Street and Cumberland Street for A$22 million in June 2004 and is developing a 30-storey building with 122 apartments, five luxury terraces and commercial and retail space, at a total cost of some A$220 million (S$279 million).

Even before the official launch, 55 per cent of the project is said to have been sold, at an average price of just over A$1,000 per square foot (psf).

The 427 square metre penthouse at The Stamford Residences and The Reynell Terraces is expected to fetch A$14 million, which, according to The Daily Telegraph, will beat the A$12 million paid for another apartment at The Bennelong. This would be just short of the record A$16.5 million paid for three adjoining apartments formerly owned by one of Australia’s richest men, John Symond, who founded lending giant Aussie Home Loans and who in 2004 had a fortune estimated at A$365 million.

The cheapest apartment, a 62 sq m one-bedroom unit, is expected to go for A$645,000, or about S$1,200 psf – high, but way below the $4,000 psf apartments at Singapore’s Orchard Turn are fetching.

A brochure for the project says: ‘This unique development will create history as the last grand residential tower permitted in The Rocks – Sydney’s first neighbourhood.’

According to The Daily Telegraph, The Stamford Residences is the final tower to be approved under the Sydney Cove Redevelopment Authority Planning Scheme. The scheme allowed for a single tower to be built in each of the six blocks south of the Cahill Expressway as a way to provide funding to upgrade other heritage buildings in The Rocks area.

In the past 25 years, the scheme has resulted in the Four Seasons Hotel, Grosvenor Tower, Quay West Apartments, the Shangri-la Hotel and the Cove Apartments.

The Telegraph quoted National Trust of Australia conservation director Graham Quint as saying: ‘We warm to the idea that this is the last large development of this scale and size. You wouldn’t want this encroaching further into the heart of The Rocks . . . This sort of thing is the trade-off to protect the rest of The Rocks . . . The area is becoming glitzier and glitzier but people and tourists don’t want to see something they can in their own country. You don’t want to lose all that character.’

Stamford Land, with a market capitalisation of about $500 million, owns seven of Australia’s best hotels and one in New Zealand. It has also gone into the development of high-end property in the two territories, having developed three luxury residential projects in Sydney – Stamford on Kent, 187 Kent, and Stamford Marque.

Besides The Rocks, it has two other residential projects – The Stamford Residences in Auckland and The Stamford Cosmopolitan in Double Bay – and an office tower in Perth under development.

Mr Ow, Stamford Land’s executive chairman, told BT: ‘Stamford will continue to make its residential developments synonymous with its five-star luxury hotel brand. We are committed to focus on the upmarket end of the housing market throughout the region.’

 

Source: Business Times 29 Nov 07

ING Real Estate plans second China fund

It is also looking to buy and privatise battered Reits in mature markets

(HONG KONG) The world’s biggest property fund manager ING Real Estate plans a second China fund next year, worth about US$700 million, in response to growing enthusiasm for Asian property at a time when Western markets are suffering.

With a global credit crunch depressing activity in European and US commercial property markets, ING Real Estate is pushing further into Asia. But the unit of Dutch financial services firm ING Groep NV is also looking to snap up and privatise battered real estate investment trusts (Reits) in mature markets.

‘On the one hand you see part of the world slowing down, triggered by the credit crunch,’ ING Real Estate chairman and chief executive George Jautze told Reuters in an interview. ‘And then you see another part of the world – China, Japan, and even Australia – where there are lots of opportunities.’

ING Real Estate, which has a global portfolio worth more than 100 billion euros (S$214.4 billion), set up two pan- Asian funds this year worth a combined US$1.6 billion in equity.

A new fund for Japan is in the works for next year, and after spending most of the US$350 million raised at the end of 2006 for residential development in China, the firm plans a follow- up fund about twice that size.

The fund will be marketed in the first half of next year, according to ING Real Estate’s Asia head, Robert Lie, and could invest in some commercial property as well as housing.

But tougher competition among developers, which has led to higher land prices, could mean that investors will have to lower their expectations slightly from the 20 per cent internal rates of return notched up by ING Real Estate’s first China fund.

Mr Jautze said that he expected global property yields to edge up in the next year, as investors find borrowing harder to obtain and more expensive.

Highly leveraged investors have faded away, and without the prospect of huge private equity deals, the US commercial property market has come to a standstill.

Even in Japan’s arena of rock-bottom interest rates, the number of bids for any building has halved to four or five as leverage for deals has fallen to around 60 per cent from 80-90 per cent since the US sub-prime crisis unfolded early this year.

 

Source: Reuters (Business Times 29 Nov 07)

Cheung Kong wins HK$7b MTR property project

(HONG KONG) Cheung Kong (Holdings), the property flagship of tycoon Li Ka-shing, has won a tender from Hong Kong subway operator MTR Corp Ltd to develop a residential project with an investment cost of HK$7 billion (S$1.29 billion).

MTR said in a statement that it would sign a formal agreement with Cheung Kong for the third phase of the Lohas Park project in Hong Kong’s Tseung Kwan O district within the next few weeks.

Property prices in Hong Kong have jumped more than 70 per cent since a trough in 2003, when the Sars respiratory disease ravaged the city’s economy.

Some analysts expect prices to rise another 50 per cent in the next two years because supply of apartments is falling short of demand at a time when Hong Kong is mimicking US interest rate cuts.

But if prices fail to meet those expectations, developers could see their margins squeezed because of soaring land prices at recent auctions.

Cheung Kong could cut costs in its new project as it is also developing the first two phases of Lohas Park, said Charles Chan, the managing director of Savills Valuation and Professional Services.

‘They can duplicate the design and lower labour costs,’ he said.

The first phase of the Lohas Park is selling at HK$5,000-6,000 per square foot, but Cheung Kong could lift prices by as much as 40 per cent for the third phase, Mr Chan said.

‘The third phase could ask for HK$7,000-8,000 a square foot when it is ready for sale three years later,’ he said.

 

Source: Reuters (Business Times 29 Nov 07)

Wharf posts HK$3.12b Q3 profit

Earnings more than double on higher rental income from office and retail properties

(HONG KONG) Wharf Holdings Ltd, the Hong Kong landlord and port operator that owns a pay-television company, more than doubled its third-quarter profit as rental income from office and retail properties rose.

Net income for the three months ended Sept 30 rose to HK$3.12 billion (S$578 million) from HK$1.21 billion a year earlier. Profit in the first nine months of the year was HK$7.55 billion, or HK$3.08 a share, compared with HK

$7.47 billion, or HK$3.05, in the same period in 2006, Wharf said yesterday in a statement to Hong Kong’s stock exchange.

Wharf is investing in Chinese property to tap wealth in the world’s fastest-growing major economy as it seeks to diversify from Hong Kong. Rental profit from the group’s Hong Kong commercial properties, which accounts for 70 per cent of total assets, surged 20 per cent in the first nine months compared with a year earlier.

‘Wharf is a relative latecomer in the China market compared with its peers,’ said Kenny Tang, a research director at Hong Kong-based Tung Tai Securities Ltd. ‘Key for them will be whether they can at least catch up with the big boys in the second-tier cities, where they have been very aggressive in acquiring land.’ The quarterly figures were derived by Bloomberg News by subtracting first-half profit from the nine-month profit released by the company yesterday.

Wharf plans to increase its land bank in China to 100 million square feet, from 70 million square feet now, according to the statement. The company is competing against other Hong Kong developers including Henderson Land Development Co and Cheung Kong Holdings Ltd in acquiring property in the country.

The company, a unit of Hong Kong-listed developer Wheelock & Co, said it will boost investment in China, seeking a 50-50 weighting in assets between the mainland and Hong Kong in the next five years.

The company has bought 14 sites in China since the middle of 2005, it said.

Wharf and its subsidiaries have acquired at least 10 development sites in Chinese cities including Chengdu, Hangzhou and Chongqing between August and November, it said in yesterday’s statement.

Earlier this month the company bought land in the southwestern Chinese city of Chongqing for 7.5 billion yuan (S$1.46 billion) through a public tender held by the city’s municipal government. The project will be jointly developed with China Overseas Land & Investment Ltd.

In October, Harbour Center Development Ltd, a Hong Kong- listed subsidiary, and its partner bought land in Suzhou, a city west of Shanghai.

Wharf currently operates several commercial properties in the country including the Beijing Capital Times Square, Shanghai Times Square and the Chongqing Time Square.

Excluding property revaluation gains, nine-month net income rose 30 per cent to HK$4.02 billion, Wharf said.

Wharf jumped 5.1 per cent to HK$40.55 at the 4pm close in Hong Kong, the biggest daily gain in almost a month.

The stock earlier climbed as much as 7.9 per cent.

Wheelock, the property developer controlled by the family of Hong Kong billionaire Peter Woo, said profit in the six months ended September rose 8 per cent to HK$4.03 billion, with sales gaining 67 per cent to HK$13.9 billion, according to a statement to Hong Kong’s stock exchange today. Its shares surged 8 per cent to HK$24.30.

 

Source: Bloomberg (Business Times 29 Nov 07)

Keppel Land to build 140 Viet waterfront villas

It forms 60-40 joint venture; project’s investment capital seen at US$55.2m

KEPPEL Land will build 140 waterfront villa homes in Ho Chi Minh City, its eighth residential development in Vietnam this year.

In a statement yesterday, Keppel Land said that it had formed a joint venture, through wholly owned subsidiary VN Investment Pte Ltd, with Vietnamese property developer Hung Phu Real Estate Investment Corporation (Hung Phu), to develop a 9.7-hectare site into waterfront landed housing in District 9 of Ho Chi Minh City.

The total investment capital for the project is estimated at US$55.2 million. Upon receiving the investment certificate and obtaining the relevant government approvals, VN Investment will take up a 60 per cent stake in the joint venture company and Hung Phu, the remainder.

Citing reports by The World Bank Group, Keppel Land highlighted that the rate of urbanisation in Vietnam is projected to reach 40 per cent by 2020, up from 23.5 per cent in 2000. This translates into more than 31 million people of the country’s population living in urban areas, compared with 19 million in 2000.

Said Keppel Land director of regional investments Ang Wee Gee: ‘There is growing demand for luxury homes in Vietnam. We will continue to capitalise on Vietnam’s rising property market with premier developments in prime locations.

‘Villa developments, in particular, are limited in Ho Chi Minh City, and demand for villas is expected to be very strong.’

The villa homes are expected to be launched in early 2009 and will be targeted at wealthy locals, expatriate communities and overseas Vietnamese (Viet Kieus).

This latest development follows two recently formed joint ventures to develop luxury villas and condominiums, also in Ho Chi Minh City’s District 9.

To date, Keppel Land has an existing pipeline of more than 25,000 homes in Vietnam.

 

Source: Business Times 29 Nov 07

Trouble looms for a third of UK mortgages

Self-employed and those who move house frequently open to risk

(LONDON) Up to one in three or 5.5 million mortgage holders in Britain could face serious financial difficulties as a result of the US sub-prime crisis and the tougher lending climate it has created, a study showed.

According to a report published by consumer research group Mintel yesterday, people with poor credit records were not the only ones at risk.

Those who are self-employed or had moved house frequently were also in the firing line. ‘The focus over the last few months has very much been on sub-prime borrowers, but they are only the tip of the iceberg,’ Toby Clark, a senior finance analyst at Mintel, said in a statement.

Mintel said 9 per cent of British mortgage holders were classed as sub-prime, while a further 24 per cent were ‘nonstandard’ and relatively high risk because they had irregular incomes.

‘In today’s more conservative lending climate, the unconventional financial situation of these homeowners means that they will now face higher repayments and increased lenders’ fees when remortgaging or moving house,’ Mintel said.

The Council of Mortgage Lenders (CML), whose members accounted for 98 per cent of all UK residential mortgage lending, said Mintel’s figures were too high.

In an e-mail, the CML said preliminary data showed around 5 to 6 per cent of all outstanding mortgages were held by people with blemished credit records, while around 16 per cent of mortgage loans in the last year had been extended to the self-employed.

Mintel said demand for non-standard mortgages – a £125 billion (S$373.1 billion) market – was set to grow as people’s financial circumstances become more complicated due to rising divorce rates and the growing popularity of self-employment, but supply was unlikely to keep up.

Nearly two fifths of the UK adult population, or some 18 million people, probably now qualified as non-standard consumers and that figure was set to rise to 20 million by 2012, Mintel said.

‘But ironically as lenders become increasingly cautious, these non-standard mortgages will become harder to come by, leaving more adults without the finances needed to buy property,’ Mr Clark said.

Based on a survey of almost 2,000 adults, Mintel said one in five who were interested in getting a mortgage in future already foresaw some problems with their applications because of their income, working status or personal circumstances.

That figure could grow in the years ahead if banks become more cautious in their lending.

 

Source: Reuters (Business Times 29 Nov 07)

Segro buys property worth £400m in H2

(LONDON) British property firm Segro plc cautioned about continued weakness in Britain’s property markets, but it bought £400 million (S$1.19 billion) of property in its second half as it took advantage of good buying opportunities. In a trading update yesterday, the firm said financial market turmoil was taking a toll on the UK property market, increasing the likelihood of asset writedowns and reducing the number of active participants in the market.

But it said its pro-forma cash and undrawn debt facilities of £875 million would enable it to take advantage of ‘good buying opportunities’ forged by the market conditions. ‘The UK investment market has seen very few transactions in the second half of the year, with . . . the shortage of credit available to leveraged buyers dramatically reducing the volume of transactions,’ chief executive Ian Coull said.

‘Whilst this will inevitably result in professional valuers writing down the book values of properties, we believe it will create a number of opportunities for well-capitalised companies such as Segro,’ Mr Coull added. Segro shares, which have fallen 45 per cent in the year so far, rose 2.23 per cent to 424.75 pence at 0813 GMT.

The real estate investment trust achieved more than 83,000 square metres of UK lettings in the second half of the year to end-October; an increase of 65 per cent on last year’s levels. It said vacancy levels in the UK and continental Europe were still broadly unchanged from the half-year position at 11.5 per cent and 6 per cent respectively and that 36 per cent of its 394,000 square metre development pipeline had already secured tenants. The firm still saw modest rental growth across its portfolio and its full-year dividend expectations remained unchanged at around 23 pence per share.

 

Source: Reuters (Business Times 29 Nov 07)

Grim US housing outlook in 2008

(CHICAGO) US homebuilders said the housing market probably will weaken in 2008 as foreclosures rise and banks tighten lending standards.

Demand has deteriorated in many markets, limiting the prospect of a rebound in new home sales, chief executive officers for D R Horton Inc and Beazer Homes USA Inc. said on Tuesday at a JPMorgan Chase & Co conference in Las Vegas.

Next year ‘is going to be worse than ‘07 for us and for the industry in general’, said Donald Tomnitz, CEO of Fort Worth, Texas-based D R Horton, the fourth- largest US homebuilder.

The housing slump that began in 2005 has erased about US$36 billion in stock market value for the largest 15 homebuilders this year.

New home sales dropped 23 per cent in the year through September and home delinquencies have reached a five-year high.

The California and Florida housing markets continue to weaken and the Las Vegas market is ’soft’, Mr Tomnitz said.

New home sales in Phoenix will probably get worse in 2008, he said.

Stephen Scarborough, Standard Pacific Corp’s CEO, said at the conference that his company isn’t planning on filing for bankruptcy.

Shares of Standard Pacific have fallen 91 per cent this year on concern the company can’t pay back its debt.

‘There’s no effort on our part and nothing is in process as far as filing for bankruptcy protection,’ Mr Scarborough said. ‘That is not our present intent. We have a multifaceted approach to conserve cash and generate cash,’ he said.

Homebuilders are cutting jobs and trying to reduce their construction costs to boost cash flow to pay off debt. They’re also selling land and writing down property values.

 

Source: Bloomberg (Business Times 29 Nov 07)

US commercial real estate set to take a hit

Traders see bond defaults rising to the highest level since Great Depression

(LONDON) In the bond market, commercial property investors are about as creditworthy as US homeowners with sub-prime mortgages.

‘Commercial real estate is a full-blown bubble that feels very much at a bursting point,’ said Christian Stracke, an analyst in London at CreditSights Inc, a fixed-income research firm. ‘There’s a fairly toxic mix of factors at work.’

The cost of derivatives protecting investors from defaults on the highest-rated bonds backed by properties more than doubled in the past month, according to Markit Group Ltd.

Prices suggest traders anticipate defaults rising to the highest level since the Great Depression, according to analysts at RBS Greenwich Capital in Greenwich, Connecticut.

The seven-year rally in offices and retail properties ended in September when prices fell an average of 1.2 per cent, according to Moody’s Investors Service. More losses are likely because banks are holding US$54 billion of commercial mortgages they can’t sell, data compiled by New York-based Citigroup Inc showed.

Lenders are struggling to sell loans to investors after losses on debt backed by sub-prime mortgages to people with poor credit caused financial markets to seize up in July and August. Bonds with AAA ratings secured by properties ranging from the Sears Tower in Chicago to trailer parks in Delaware yield about 203 basis points more than similar maturity Treasuries, up from 92 basis points on Oct 12, according to Morgan Stanley indexes.

The benchmark CMBX-NA-AAA index of derivatives tied to the safest commercial mortgage securities rose to 102 basis points from 44 a month ago. It costs US$102,000 a year to protect US$10 million of bonds backed by property loans against default, up from US$44,000 a month ago.

Derivatives are contracts whose value is derived from assets including stocks, bonds, currencies and commodities, or from events such as the weather or changes in interest rates.

Sales of debt secured by commercial mortgages tumbled 80 per cent to US$3.9 billion in October from a year earlier, data compiled by Bloomberg show. New securities backed by loans on buildings will fall 50 per cent in 2008 from US$220 billion this year, Moody’s said on Nov 2.

Real estate deals are coming apart at the fastest pace since September 2001, when the US economy was shrinking, because banks are tightening standards for loans, said Robert White, president of Real Capital Analytics, a New York-based research firm.

More than 75 deals have been withdrawn because banks aren’t lending, and that estimate is ‘probably conservative because not all deals that blew up were well-publicised’, said Mr White.

‘The commercial real estate market is imploding,’ said James Ortega, who manages US$150 million at Saenz Hofmann Fund Advisory in Sao Paulo. Mr Ortega has set trades to profit from a decline in property companies’ shares. ‘We’re about to experience a very significant correction.’

Mortgage brokers say traders are overreacting. Defaults are running at 0.4 per cent in the US, below the average of about one per cent over the past 10 years, according to Moody’s. That’s a fraction of the 15.2 per cent of subprime home loans that are at least 60 days in arrears, an index by the New York-based ratings company shows.

The decline in prices of the highest rated commercial mortgage-backed securities mostly reflects a slump in credit markets, not expectations of defaults on loans backing the securities, said Michael Sun, an analyst at Wachovia Corp’s Tattersall Advisory Group in Charlotte, North Carolina, which manages about US$5 billion of commercial mortgage securities.

‘They are, credit-wise, a no-brainer,’ Mr Sun said. ‘Nobody disagrees they are rock-solid credits.’

In Manhattan, the world’s largest office market, the vacancy rate rose to 7.6 per cent in October, the highest in a year, property brokerage Colliers ABR said. Rents rose 1.4 per cent on average to US$64.08 a square foot from September, the second-smallest month-to- month increase since June 2006.

The Bloomberg Real Estate Investment Trust Index measuring the stocks of 126 publicly-traded property companies fell 29 per cent from its peak in February.

Record-low interest rates in the past five years encouraged banks to loosen underwriting standards and caused prices to rise as much as 35 per cent a year.

Banks provided loans that allowed borrowers to pay only interest, not principal, and lenders offered financing that exceeded property values, according to Moody’s. The average loan-to-value ratio reached a record high of 117.5 in the third quarter for mortgages that were turned into bonds, from 90 in 2003, Moody’s said.

Bondholders helped feed demand for loans by purchasing a record US$273 billion of securities backed by commercial mortgages this year, up from US$95 billion in 2004, based on data compiled by Trepp LLC, a New York-based research firm.

Demand has dried up since July, when securities linked to sub-prime home mortgages contaminated credit markets and caused financial institutions to report losses or writedowns of more than US$66 billion.

Citigroup analysts said in a Nov 15 note to clients that derivatives indexes on commercial properties are priced for a ‘meltdown’.

 

Source: Bloomberg (Business Times 29 Nov 07)

COMMENTARY – Life can go on, with or without a home of your own

MARKETING manager Eva Chia accepted her boyfriend’s proposal in the middle of this year, but their joy was short- lived when the hunt for a marital home turned up nothing for months on end.

Their combined income busted the ceiling for subsidised housing but they baulked at the prices of resale Housing Board (HDB) flats and private apartments.

Up until Tuesday, when they finally found a flat, they were prepared to postpone their marriage.

‘What’s the point in getting married when you have to stay in separate homes?’ said Eva, 27, in an e-mail.

The housing crunch has hit operations officer Mohammed Samsudin, 29, and his wife in a different way, but their distress has a similar ring.

They qualify for subsidised housing but fear they will miss out on a new HDB flat because of the immense demand. The couple, who live in a rented room in an HDB flat, are adamant about not having a child until they get a home of their own.

‘Definitely not in a rented room. Only in my own house,’ said Mr Mohammed.

In the minds of these and many other couples, married life – or family life – cannot start without a home of their own.

As the booming market puts some properties out of reach, couples who fail to get new flats in the HDB’s regular ballots argue that the Government is not doing enough to curb speculation.

Some nurse conspiracy theories about rogue housing agents trying to boost the sale of resale flats – and their income – by bumping up demand for new HDB flats with fake applications. Others point the fingers at foreign money, which they say is fuelling runaway home prices.

But others, like Ms Jenny Yap, who wrote to The Straits Times Forum recently charging that these couples are simply being choosy, think otherwise. They want the best home, in the best location, at the best price and gripe when they have to compromise, she said.

Harsher critics label such couples as being spoilt, pointing out that not too long ago, 10-member, three generation families lived in three-room flats, and were none the worse for it.

While it may be true that some couples are too finicky for their own good, many cannot fathom married life without owning a home simply because they have been conditioned along these lines.

Singapore’s housing policy is overwhelmingly weighted towards home ownership, which in turn is heavily hinged on marriage. Married couples are entitled to subsidised home loans, a new HDB flat or a slew of housing grants, as well as the chance to buy condominium-style housing that could be 30 per cent cheaper than private homes.

Married couples are also encouraged to own, instead of rent, through generous aid schemes that help low income tenants buy their first flat.

Only about 48,000 – or 5 per cent – of the 880,000 HDB flats islandwide are rental units for low-income families. As at September, about 16,000 HDB flats were rented out on the open market.

An even more striking fact is that nine in 10 Singaporeans own their homes, compared with less than 10 per cent 40 years ago.

Home ownership is so deeply rooted in the national psyche that some propose marriage by way of asking the other party to apply for an HDB flat together.

Along with this comes a deep sense of entitlement that a new HDB flat – and the chance of trading up for a bigger one a few years down the road – should come along with marriage.

It is an entitlement the Government takes seriously, judging by the reassurances given yesterday by National Development Minister Mah Bow Tan, who announced plans for 7,000 new flats to be launched for sale by ballot in the next seven months.

National Institute of Education professor Ooi Giok Ling says that while Asians tend to place relatively more value on home ownership, the link between marriage and home ownership seems even more prevalent in Singapore.

The contrast is more apparent when attitudes here are compared with those in Europe, Australia or North America, where young people commonly leave home when they go to university or start working.

Many get used to the idea of renting early in life while some with higher incomes buy a modest home on their own.

Prof Ooi said: ‘When they decide to get married, homes and home ownership might not be such a major factor to consider.’

But Singaporeans’ love affair with property is so entrenched that many couples feel their life together cannot start without a mortgage.

To be fair, having your own home does have its upside: You do not have to worry about your landlord raising your rent or throwing you out, and it does provide a more stable environment in which to bring up children. It could also work out to be cheaper too, on a monthly basis.

But danger arises when we start hinging major life decisions on the vagaries of the property market. What does it say about us as a society? What does it say about what we value?

Perhaps it is time to take a step back and get a sense of perspective about what really matters to us. Life can go on, with or without a home of our own.

 

Source: The Straits Times 29 Nov 07

More than 7,000 new flats expected over next 7 months

Over 1,000 flats in 2 projects launched yesterday; 6,000 more to come by next June

NEWLY-WEDS need not worry about not having a new HDB roof over their heads.

More than 7,000 new Housing Board flats will be offered for sale over the next seven months, as well as seven plots of land which could boast another 3,200 units.

To cater to different income groups, flats on the drawing board range from the humble two-room flat to privately-designed estates and executive condominiums.

This increase in flat supply, the biggest in recent years, is expected to ease the bottleneck that has emerged in recent months as buyers, put off by the high prices of private homes and resale flats, turned to new subsidised HDB flats.

Prices of resale HDB flats grew by 11 per cent in the first nine months of this year, while prices of private homes shot up 22.9 per cent.

An indication of the rush for new flats: the HDB recently received almost 8,000 applications for just 400 flats in Telok Blangah and more than 1,600 applications for 516 homes in Punggol.

National Development Minister Mah Bow Tan yesterday made clear the HDB was stepping up flat building ‘in a very major way’.

At 4,800 units, the number of HDB’s build-to-order flats offered by the end of this year is already more than double the number launched last year.

Property agents say the move will also encourage HDB flat sellers to be more realistic about their asking prices.

Mr Albert Lu, managing director of C&H Realty, thinks that prices may drop. ‘But it’s a good thing, as more people will be able to afford flats,’ he added.

Two build-to-order projects were launched yesterday:

• Segar Meadows in Bukit Panjang Ring Road, comprising 412 three- and four-room flats.

• Compassvale Beacon in Punggol Road, comprising 750 two-, three-, and four-room flats.

From next month till June, the HDB will also launch for sale another 6,000 new flats under the build-to-order system, where projects are built only if the majority of flats are booked.

It will also launch for sale four plots of land in Bishan, Simei, Toa Payoh and Bedok for flats to be built and sold by private developers. Another three sites – in Yishun, Jurong, and Sengkang – will be made available next year for development of executive condominiums.

Mr Mah reassured homebuyers – especially those buying their first subsidised home – that there were enough flats as well as a variety of properties to meet their needs.

About 80 to 90 per cent of applicants for each build-to-order project are such ‘first-timers’, many of whom are newly-weds. In the two recent balloting sales exercises, 92 per cent of shortlisted buyers fell into that category.

He urged them: ‘Don’t be too choosy…It’s not possible or realistic for the HDB to offer only new flats in mature estates in the heart of the city.’

The boost in supply buoyed buyers like Ms Affizah Aziz, 40, who turned to the HDB resale market after failing to get a new flat in a recent ballot. The housewife said: ‘I still would like to have a new flat. Its surroundings and atmosphere are much better.’

Mr Mah promised that new flats will remain affordable. Their prices, long pegged to the values of resale HDB flats, will not be affected by a rise in building costs.

He also rejected suggestions that the release of the flats was meant to prevent a property bubble from forming. ‘I don’t see any bubble forming,’ he said. Unlike the private property sector, the HDB market is a much bigger and more stable. ‘The growth we are seeing is a healthy one in the resale market,’ he said.

 

Source: The Straits Times 29 Nov 07

US existing home sales fall to 8-year low

WASHINGTON – SALES of previously owned United States homes fell last month to the lowest level in at least eight years as loan restrictions and the prospect of further price declines deterred buyers.

Purchases dropped 1.2 per cent, more than forecast, to an annual rate of 4.97 million, the lowest since record keeping began in 1999, from a 5.03 million September pace, the National Association of Realtors said.

Sales were down 20.7 per cent from October last year and the median home price fell by the most on record.

Defaults on US sub-prime mortgages have prompted banks to tighten lending standards, while foreclosures add to a glut of unsold properties that is putting pressure on home prices.

Lower property values raise the risk that consumers will curtail spending, making firms more cautious about investing and compounding a slowdown in economic growth, economists said.

‘Credit conditions seem to be getting tighter again, the economy is likely to slow and falling prices may be causing people to wait before buying,’ Mr David Sloan, a senior economist at 4Cast Inc in New York, said before the figures were released. ‘There is plenty of downside left in this market.’

A government report showed last month’s orders for US durable goods fell more than forecast, signalling that businesses are losing confidence the economic expansion will be sustained.

Home resales were forecast to fall 0.8 per cent to an annual rate of 5 million from a previously reported 5.04 million pace in September, according to the median estimate of 70 economists in a Bloomberg News survey.

The median price dropped 5.1 per cent to US$207,800 (S$299,900), the biggest drop on record, compared with October last year.

The number of homes for sale at the end of the month rose 1.9 per cent to 4.45 million.

At the current sales pace, that represented 10.8 months’ supply, compared with 10.4 months in September.

‘If sales were to continue to decline at this rate, it would be a big concern, but we don’t expect major declines going forward,’ said Mr Lawrence Yun, the chief economist at the real estate agents’ group.

After half an hour of trading, the Dow Jones Industrial Average rose 163.48 points to 13,121.92 as investors snapped up shares in banks which they saw as being oversold.

 

Source: BLOOMBERG NEWS (The Straits Times 29 Nov 07)

Westwood Apartments sold for $2,525 psf ppr

WESTWOOD Apartments at Orchard Boulevard has been sold for $435 million or a unit price of $2,525 per square foot per plot ratio (psf ppr), making it the most expensive site to be sold by collective sale to date.

In June, The Ardmore was sold for $262 million or $2,337 psf ppr.

The price achieved for Westwood Apartments is perhaps all the more remarkable as it comes after the US sub-prime crisis rocked markets around the world recently.

Sold to Malaysia’s YTL Corp, the deal was brokered by Savills Singapore. Savill’s director (Investment Sales) Steven Ming added: ‘It’s a good shot in the arm for the market as it has not been as hot as it was in the first half of the year.’

Mr Ming would only reveal that ‘a handful’ of bidders took part in the tender. But he added: ‘That the buyer is a foreign investor shows that foreigners are still optimistic on our market.’

Savills is also marketing another four to five collective sale sites, and Mr Ming says that ‘there is interest from both foreign and local buyers’.

Westwood Apartments did, however, sell for slightly under the indicative price of $2,800 psf ppr when it was put up for tender about two months ago.

Although investors were expected to bid cautiously, YTL group managing director Francis Yeoh said its bid reflects that YTL is ‘bullish on Singapore’.

‘I don’t think the bid was cautious,’ he added.

YTL, which is listed on the Malaysian stock exchange and has a market cap of about US$9 billion, ranks as one of Malaysia’s top 20 companies.

The conglomerate, whose businesses include construction, real estate and energy, has already acquired two Sentosa Cove sites.

The breakeven price for a new development at Westwood Apartments is estimated to be between $3,500 and $3,600 psf.

Mr Yeoh would not say what the expected launch price would be but cited the reported $5,000 psf for Ritz Carlton Residences at Cairnhill (RCR) as a possible benchmark.

YTL is the developer for RCR in Kuala Lumpur, and Mr Yeoh said that Westwood Apartments could also be a branded residence.

Mr Yeoh added that its Lakefront Collection development at Sentosa Cove would be branded as Armani Casa. He also did not rule out another Ritz Carlton Residences here. ‘There can be two in Singapore,’ he said.

The 30-year-old Westwood Apartments sits on a 62,179 sq ft site. It has a permissible plot ratio of 2.8 and has the potential to yield about 43 units of 4,000 sq ft apartments.

 

Source: Business Times 28 Nov 07

United Engineers makes top bid for AMK DBSS site

UNITED Engineers (UE) has emerged as the top bidder for HDB’s latest Design, Build and Sell Scheme (DBSS) site in Ang Mo Kio, the government agency said yesterday.

UE’s bid – which was the highest of five – came in at $134.2 million, or some $212 per square foot per plot ratio (psf ppr).

The amount was higher than analysts’ estimates, who said that the public housing site could fetch between $170 and $200 psf ppr when it was launched.

UE’s bid was 12.8 per cent higher than the second-highest bid of $118.9 million, or $188 psf ppr, which was put in by Chip Eng Seng.

UE’s bid was also 20.9 per cent higher than the lowest bid of $111 million, or $175 psf ppr, put in by Boon Keng Development.

The two other bidders were the Sim Lian Group and a partnership between Straits Construction subsidiary Hoi Hup Realty and Sunway Concrete Products, which is part of the consortium that won the DBSS site in Boon Keng Road earlier this year.

The Ang Mo Kio land parcel has a site area of 180,716 sq ft, with an allowable gross floor area of 632,506 sq ft. It is close to the Ang Mo Kio town centre with its MRT station, bus interchange and the AMK Hub.

The development will target HDB upgraders or en bloc sale downgraders, said analysts, who predict that the take-up for any project coming up on the site should be good because the stock of vacant HDB flats has fallen of late.

UE will be required to build a minimum of 30 per cent of the flats with a floor area of 95 sq m (1,023 sq ft) or less – equivalent to flats of four rooms or smaller.

CBRE Research estimated that the site can yield more than 500 units.

UE’s shares closed 10 cents down at $3.70 yesterday. The company’s stock has climbed 49.8 per cent since the start of the year.

 

Source: Business Times 28 Nov 07

EL Devt to build 200-unit condo in Woodlands

EL Development plans to build a 200-unit mass market condominium on the Woodlands site it won in a government tender, the company’s managing director Lim Yew Soon told BT yesterday.

The project, which will be launched in the third quarter of 2008, is expected to sell for about $600-$650 per square foot (psf), Mr Lim said.

EL Development, which is fully owned by Evan Lim & Co Pte Ltd, trumped seven other bidders for the 99-year leasehold residential site at Woodlands Avenue 2/Rosewood Drive after a government tender closed earlier this month.

The company’s bid was $56 million or $232 psf per plot ratio.

The Singapore Land Authority (SLA) yesterday announced that it is awarding the site to EL Development.

The 172,200 sq ft site has a 1.4 plot ratio, giving it a maximum gross floor area of 241,100 sq ft.

Mr Lim said that the project will consist of mostly 2-bedroom and 3-bedroom apartments. Prices, he said, will be kept ‘affordable’ to target the HDB-upgrader market.

‘We believe that the project will be for HDB upgraders and younger families,’ he said. The company will try to manage the construction costs as it is also a contractor, Mr Lim said.

EL Development also has two other residential sites in its landbank for launch soon – one along Devonshire Road and the other on Kampung Java Road. Both projects will be high-end developments and will be launched in the first quarter of next year, Mr Lim said. Prices for the two sites have not yet been fixed, he said.

 

Source: Business Times 28 Nov 07

Oversupply looms in S’pore office sector: Citigroup

It downgrades two stocks with key exposure to sector – KepLand, CityDev

SINGAPORE is in danger of seeing an oversupply of office space from 2010 onwards, Citigroup is warning.

The bank’s research unit has also downgraded two Singapore stocks with significant exposure to the office market here – Keppel Land and City Developments.

‘The market is underestimating the potential supply of new office space in 2010 and beyond, in our view,’ said Citigroup analyst Wendy Koh in research report dated Monday.

‘Based on our estimates, occupancy rates are likely to peak in 2008-09 and decline thereafter with the impending supply.’

Since May 2007, six new sites with a total gross floor area of 5 million sq ft have been awarded amidst fears of an office space crunch. These sites could add some 3 million sq ft of new office space in 2010-11, Citigroup estimates.

Altogether, on average, 3.2 million sq ft of new supply could hit the market from 2010-12, the bank said. This compares to a historical average demand of 1.5 million sq ft per year.

Supply estimates could rise even further with more government land sales in the first half of 2008, Citigroup said.

All this will mean that buildings in core Central Business District will be competing for tenants.

Key projects that are scheduled to be completed in 2010-12 include Marina Bay Financial Centre, the redeveloped Ocean Building One Financial Centre and the South Beach Road and Marina View land parcels.

In response, Citigroup downgraded its ratings on office landlords Keppel Land and City Developments.

Keppel Land was downgraded to a ’sell’ from a ‘hold’, while CityDev was rated a ‘hold’, from a ‘buy’ previously.

‘Going forward, we expect Keppel Land to face keen competition while marketing the remaining space at the Marina Bay Finance Centre and One Financial Centre,’ Ms Koh said. She cut KepLand’s revalued net asset value (RNAV) estimate to $7.83 (from $8.85) and target price to $6.26 (from $8.97).

For CityDev, Citigroup cut its RNAV estimate to $14.47 from $15.28 and target price to $15.90 from $18.00 to reflect lower capital values of office buildings.

Other analysts however said that all the new projects coming onstream will not cause an oversupply – rather, they will ensure that supply catches up with demand.

‘I think that there will be significant pent-up demand for office space that will only be satisfied when supply hits the market in 2010-11,’ said Moray Armstrong, CB Richard Ellis’ executive director for office services.

This pent-up demand means that demand in 2010-11 will be significantly higher than the historical average, Mr Armstrong said.

 

Source: Business Times 28 Nov 07

Yishun industrial site up for sale

A SITE at Yishun Avenue 6 has been put up for sale for industrial development.

The land parcel is one of the four new industrial sites that were scheduled for release on the reserve list under the Government Industrial Land Sale Programme for the second half of 2007.

The 1.43-hectare site has a plot ratio of 2.5 with a lease period of 60 years. It is zoned for a Business 1 development and can be developed for a range of clean and light industrial and warehouse use, the Urban Redevelopment Authority said.

Savills Singapore director of industrial business space Dominic Peters said that he believes the site could attract bids of about $30 per square foot per plot ratio (psf ppr). ‘Demand is still likely to be strong,’ he said.

In October, an industrial site at Sin Ming Lane was sold for $68.9 million, or about $50 psf ppr. The site was more centrally located and larger.

Mr Peters said that potential bidders could be interested in developing strata-titled units on the Yishun site for sale. Real estate investment trusts (Reits) or developers targeting Reits may be less keen.

According to a Savills report on the industrial sector, Reits were the major players in the industrial market in the third quarter.

Mapletree Logistics Trust acquired six properties for a total of $62.4 million, Cambridge Industrial Trust purchased three properties for $108.5 million and the recently listed MacArthurCook Industrial Reit added two properties worth $109.3 million to its portfolio.

In the first nine months of this year, more than 25 acquisitions were made by Reits, taking the total transaction value to $503 million, up 27.3 per cent year-on-year.

 

Source: Business Times 28 Nov 07

Funds tailor products for the nest egg

(NEW YORK) Wall Street has repeatedly sounded alarms to spur working Americans to save more for retirement, but it has been less interested in helping convert nest eggs to spendable, post-paycheque income.

Of course, mutual funds emphasising dividends have long been available, along with plans for withdrawing principal. More recently, the industry has offered life-cycle funds that become more conservative as investors age. And some companies have been offering advice, like the so-called Monte Carlo calculations, that show the odds of what a given rate of spending will provide for the rest of one’s life.

Yet many investors, even those without traditional pensions, still reach retirement with only the vaguest notion of how to switch from accumulating assets to tapping them to finance their usual standard of living.

Now, however, as the first baby boomers start to collect Social Security cheques, fund sponsors are coming up with a series of new products catering mainly to those who are knocking at the gates of retirement – or are already inside.

‘As you enter the phase where you’re going to be receiving income and drawing down assets, you need a different style of investment,’ said Keith Hartstein, president of the John Hancock Funds. ‘You need a targeted distribution fund as opposed to the accumulation type.’

At least a half-dozen sponsors, including Fidelity Investments and the Vanguard Group, have either begun marketing retiree-oriented funds or have announced plans to do so.

More are undoubtedly on the way, predicted Burton Greenwald, a mutual fund consultant in Philadelphia.

‘It’s a natural evolution,’ he said. ‘All the major fund sponsors will have such products in a short period of time.’

Investors can choose among significantly different approaches. Some retirees will expect a specific monthly payout while others will favour a variable amount, based on what the portfolio generates. Some will want a fund whose principal is depleted by a certain year – say, 2028 – while others will want one that leaves assets for their heirs.

But while some funds offer annuity-like features, and expect to make consistent payouts, none carry an annuity’s contractual guarantee of specific payouts.

One of the first firms off the mark this fall was Fidelity, whose Income Replacement Funds come with a choice of 11 targets, or time horizons, from 2016 to 2036. You specify how big a cheque you want each month to be paid from the portfolio’s earnings from other Fidelity stock and bond funds, supplemented with as much of your principal as is necessary.

If all goes well, your payment will rise each year to keep pace with inflation. The asset allocation of the fund shifts more toward bonds as the years pass. By the horizon date, the fund is liquidated.

Vanguard’s entry, called Managed Payout Funds, is expected to be available in December or January, and is not intended to deplete itself. But whether it can sustain payouts without returning at least some shareholder capital will depend on investment results.

Vanguard will set the payout annually, based on fund performance for the three preceding years: The Real Growth fund expects an initial 3 per cent distribution rate, the Moderate Growth fund a 5 per cent rate and the Capital Preservation fund a 7 per cent rate. Lower payouts imply a greater probability of long-term growth and capital appreciation; Vanguard, unlike Fidelity, will invest in a broad spectrum of asset classes to include commodities, real estate and a new market-neutral fund.

Diversity of assets, with little performance correlation to one another, can aid capital preservation as well as returns.

‘The availability of a distribution service in a fund without having to sign up and move assets and try to figure out where to take them is an attractive vehicle for people,’ said Ellen Rinaldi, a principal in Vanguard’s investment counselling and research unit.

Retirees want access to their money, she added, and unlike annuities, which tie up your principal, mutual funds provide it.

What distinguishes John Hancock’s proposed Retirement Income Portfolio and Retirement Rising Income Portfolio from the Vanguard funds is that the dividend is fixed in dollars and cents. In the Rising Income portfolio, it climbs by the inflation rate each year.

At Charles Schwab, the Premier Income fund, with three share classes and a minimum investment of US $100, was started at the end of October after raising US$116 million during a four-week subscription period. The fund is focused purely on income, not a combination of income and total return, the way some competitors’ offerings are, said Patrick Waters, Schwab’s director of retirement investment products.

Other new offerings tailored for retirees are three funds from the Russell Investment Group with specific payouts for 10 or 20 years. They are to be available early next year.

 

Source: NYT (Business Times 28 Nov 07)

Emerging markets losing lustre

Pictet Asset Management now banking on green investments

A PIONEER in emerging market investments and environmental funds is sounding caution on emerging markets, even as he hails the green theme as the wave of the future.

Renaud de Planta, chief executive of Pictet Asset Management, says emerging markets could underperform mature markets in the near term. In the last four years, emerging markets have delivered stellar returns amid massive inflows as institutions and individuals search for higher yields. ‘Globally, as much as we’re a pioneer and forceful defender of emerging markets investment, in the last few months, we’ve become bearish relative to developed markets.

‘We think the core developed markets of the US, Japan and parts of Europe will outperform the emerging markets over the next two years,’ says Mr de Planta, who is also a managing partner with Pictet & Cie.

The firm looks at a number of metrics in its research, including price earnings and price to book value and price to cash flow multiples, as well as price to capacity which is a proprietary indicator. ‘All the signals tell us that emerging markets are over-extended, but they’re less over-extended in Asia compared with Eastern Europe and Latin America.’

Pictet Asset Management manages a total of US$130 billion in assets. Of this, US$20 billion are in emerging equities. Another US$40 billion are in environment-related investments, including utility and thematic funds like clean energy.

The Singapore office looks after Asian fixed income, and the funds marketing office is based in Hong Kong.

Mr de Planta is convinced that socially responsible investing (SRI) will take root and flourish. So far, while private banks and some retail fund managers are pushing environmental themes like climate change and clean energy, Asian institutions have been cool to funds in the SRI space. One of the most common reservations is that SRI investments will suffer in returns compared with investments without any SRI screen.

Mr de Planta is unperturbed about Asia’s lukewarm response. As for returns, the proof is in Pictet’s pudding. The firm pioneered what it says is the world’s first water fund about seven years ago. On a cumulative basis, the PF (Lux) Water-P Cap fund has returned 61 per cent since inception in 2000 compared with the MSCI World’s minus 4.33 per cent. On an annualised basis, the fund has delivered 6.33 per cent against the MSCI’s minus 0.57 per cent.

The fund has some 4.33 billion euros (S$9.3 billion) in assets.

Earlier this year in May, the firm launched a Luxembourg-domiciled clean energy fund. In about five months up to end-October, the fund has returned 29 per cent against the MSCI World index’s 6.42 per cent. The fund has US $756 million in assets.

‘When we started about 10 years ago we were one of the first with SRI funds. We were convinced it would be a fundamental change which is long-lasting because the environment is being destroyed at an unprecedented pace and the growth of the emerging world makes this even more visible.

‘The solution to environmental destruction and emissions is not only government, but the real business world.

There will be massive investment needs in new air filtration and water filtration technology, fuel efficient cars, alternative energy and so on. Investors are now very sensitive to this.’

Over the past couple of years, the firm has polled 200 institutional investors. About 70 per cent indicated that they wish to allocate assets to SRI or environmental themes. Of these investors, half are likely to invest through thematic funds like water, clean air and energy funds.

Mr de Planta says the question of whether SRI funds suffer in performance is much debated. ‘In the energy sector, if you impose good corporate governance and environmental practice, you do avoid the big accidents. Big chemical companies that are not properly managed and do not invest in safety can have huge disasters that wipe out the company.’ In this respect, Union Carbide with its Bhopal gas leak disaster comes to mind. Poor corporate governance also sank Enron.

In its SRI stable, Pictet offers broad-based and focused funds. For its broad-based funds, it pursues a best-in-class approach where its managers pick the companies which rank the highest in environmental as well as social factors, including how employees are treated and whether the company uses child labour. For the focused funds, the firm screens for companies that are ’significantly active’, deriving 20 to 100 per cent of profits from activities like clean water and energy.

The focused funds, however, are not screened for social or governance factors. ‘If we impose too many constraints, the universe becomes too narrow. We could miss out on interesting companies with leading technologies. They may be young companies and may not yet have the best corporate governance or the most social human resource policies, but they’re on the way towards these goals.’

Meanwhile, in the emerging markets space, the firm is, interestingly, sceptical of the BRIC concept. BRIC spells Brazil, Russia, India and China. First articulated by Goldman Sachs in a 2003 report, the concept has since taken on a life of its own. BRIC, says Mr de Planta, appears to be a marketing concept to simplify the emerging markets for the US public. ‘In the short term it’s self-fulfilling if you promote the theme well. Let’s see in five years if anyone still talks about BRIC.’

One of the screens the firm uses in its emerging markets research is its own proprietary measure, price to capacity, where it examines the production capacity of companies based on interviews and industry reports. The metric can yield insights on the relative attractiveness of a country or currency against the rest of the region and against developed markets.

‘We think emerging market equities at this juncture are over-rated. We’ve seen in history that every time the emerging market metrics exceed the developed markets, it signals a turning point. On the debt side it’s slightly different. This is because the re-rating potential of some currencies in the region is substantial. The recent crisis of the dollar is a catalyst for changes in the currencies.’

 

Source: Business Times 28 Nov 07

China, India seen driving Asia’s wealth market

SG PRIVATE Bank is looking to China and India to drive Asia’s wealth markets, and the sub-prime crisis is a short-term hiccup, says chief executive Pierre Baer.

The firm advises on some US$20 billion in Asian clients’ assets, posting an annual growth of about 30 per cent. It set up its Singapore office in 1998.

‘Despite the recent increases in their stock markets, China and India will be the wealth drivers. This is a structural, fundamental shift in wealth generation that we’ve not seen previously,’ says Mr Baer.

SG Private Bank recently opened its new office at One Raffles Quay, on which it spent millions of dollars – in ‘double-digit millions’ – to renovate. The centre is adorned with a collection of contemporary Asian and Australian art.

The bank employs some 600 staff in the region, of whom half are based in Singapore. It has separate teams to service non-resident Indian clients, as well as non-Asian clients from Europe and the Middle East.

The bank continues to hire, but is ‘elitist’ in its approach, he says. ‘The growth and quality of the financial industry will depend on the quality of its people… We are somewhat elitist in our hiring. We’ve turned down candidates even if they have a book of business because we didn’t think they had all the skill sets required for the long term.’

The bank, he says, does not set product targets, which run against the grain of client advisory. Bankers should be at pains to identify clients’ needs.

SG will set up its own training centres in Hong Kong and Singapore for its career bankers. At the moment, some 110 bankers have been sent to Paris and London to complete a number of training modules.

He says clients are at the moment concerned about volatility, and are tapping structured products to temper that. ‘It is not about how much money you can make but how much you avoid losing. The fear of losing is key.’

SG’s key services include philanthropic and trust advisory. On the alternative front, the bank offers a wine investment fund which has so far attracted some US$40 million in assets.

 

Source: Business Times 28 Nov 07

Bull market in Asia in mature stage

Value investing advisable

THE bull market in Asia ex-Japan equities is in the mature stage, says Markus Rosgen of Citi Investment Research, and he advises investors to switch from momentum investing towards value.

In the value space, Mr Rosgen, Citi’s chief Asian strategist, favours large cap stocks which he says have only just begun to outperform. The sectors with more value support are semiconductor, banks and utilities. Those with the least value are software, healthcare, industrials and the consumer space.

Up till now, the playground for momentum plays has been the mid-cap space, he says in a Nov 19 report. ‘The alpha trade has been to go long mid/small caps and short the index against it as a hedge, effectively shorting large caps. This has stopped working and given them higher ROE, higher margins and the fact that large caps are free cash flow-to-sales positive … will serve them well in this time of increased economic uncertainty’.

In his report, Mr Rosgen debunks the notion that in the Asia ex-Japan equities space, it’s different this time. Asia, he says, is now trading at valuation premiums to the MSCI World index. The last time this occurred was in 1988.

In terms of price-to-book value, Asia last traded at a premium from 1993 to 1995 when Asian ROEs were superior to the developed markets. This time, valuations in Asia are superior but ROEs are inferior.

The decoupling theme, he says, has become a global consensus ‘among a large enough pool of investors to frighten me’. ‘The more recent the investor is to Asia, the stronger the view is held. The longer an investor has been involved with Asia, the higher the degree of scepticism.’

Trade linkages, he says, are stronger after 2000 than at any time over the last 20 years. ‘This makes decoupling hard… Far from rising, consumption share in GDP has fallen as export and investment shares have risen. Nor, regrettably, has the Asian consumer ever behaved counter cyclically. Finally, stock markets themselves are the most correlated they have been over the last 30 years.’

Reviewing the changes in the sectoral composition of Asia ex-Japan markets, he finds that while the weights have changed significantly, the difference in PEs between 1975 and today is just 0.9 multiple points. Over the period, the difference averages just 0.3 PE points.

While investors may believe that valuations have changed dramatically over time, the statistical tests on Asian multiples show that valuations are mean reverting. In addition, buying high PE stocks since 2000 has not led to outperformance. On a 12-month basis, buying stocks with PEs of over 30 times results in negative returns.

‘The bottom line is that we do not deny that things change over time as far as market composition and perception of actual or implied risk; they clearly do. What one finds is that investors have a tendency to over-emphasise or extrapolate changes and thus overpay for the perceived change.’ He adds: ‘… excessive growth expectations are now in the price of Asian equities with 44 per cent implied earnings growth for the region and in excess of 60 per cent for China and India’.

China’s market cap to GDP ratio stands at 123 per cent today. The ratio for Japan in 1990 was 150 per cent, and that of the US in 2000 was 131 per cent. But GDP per capita in Japan in 1990 was 10 times larger than China currently; and in 2000, the US’ ratio was 14 times larger. ‘If China continues to grow nominal GDP at 12 per cent per annum, it would take 20 years to reach the Japanese GDP per capita set in 1990 when valuations were comparable. It would take 23 years to reach the same level of GDP per capita as the US in 2000 when market cap to GDP was similar.’

 

Source: Business Times 28 Nov 07

Bond insurers affected by credit crunch

(NEW YORK) INVESTORS already burned by turmoil from the credit crunch are now worried about unwanted surprises in the industry that insures bonds. In the face of mounting losses in US mortgages, rating agencies are reviewing eight leading bond insurers, which could lead to downgrades. Such a move could ripple across the financial sector, because if a bond insurer is downgraded, most of the securities it has blessed as virtually risk-free are likely to follow. That could spark a new round of sell-offs and writedowns.

‘It would have a domino effect on all of the entities that hold these vehicles,’ said Ed Rombach, a senior analyst at Thomson Financial. ‘They would have to have more write-offs. It’s a vicious cycle.’

Moody’s Investors Service and Fitch Ratings are examining the capital levels and structured debt these firms have insured because they are worried that the deterioration in the mortgage market may expose them to greater losses. Moody’s is expected to finish its review next week. Fitch said that it would complete its review within three weeks. If any company is put on what’s known as negative watch, it would be given a month to increase its capital and have its rating affirmed.

Bond insurers play a critical role in the capital markets because they issue insurance that boosts the credit ratings of more than US$2 trillion in debt securities held in portfolios around the world, including municipal bonds, mortgage-backed securities and complicated debt instruments. The stock prices of leading insurers have been plummeting as investors worry that they may not have enough capital to cover projected losses from securities tied to delinquent mortgage loans. This has put pressure on guarantors to shore up their capital reserves to protect their coveted triple-A ratings. Last Thursday, the parent company of one bond insurer, CIFG Holding, gave it a US$1.5 billion capital infusion. Soon after, Fitch affirmed CIFG’s triple-A rating.

‘The triple-A rating is really the product that they’re selling,’ Thomas Abruzzo, an analyst with Fitch, said in reference to bond insurers in general. ‘They’re selling high financial strength. It’s the highest rating out there and, really, without that rating it’s going to be significantly more difficult to potentially sell your services.’

Jittery times

Just how much of a downgrade would devalue securities these companies insure is unclear, analysts said.

For example, if a company was downgraded to a double-A rating from triple-A, the impact might be minimal, since the spreads, or perceived risk, of owning similar securities with those two ratings may not be that wide.

However, these are jittery times. ‘The people watching this are not going to say, ‘I’m so happy they’re going to be downgraded only to double-A’,’ said Sylvain Raynes, a founding principle of R&R Consulting, a structured-finance consultancy. ‘They’re going to say, ‘This is the beginning of the end.’ And they’re going to want to go before everyone else goes. This is a stampede.’

Any downgrade of a financial guarantor would likely be more than just one notch, said Stanislas Rouyer, senior vice-president of Moody’s financial guarantors team. A downgrade, he said, would need to incorporate not only the reason for the downgrade but also the consequences of the downgrade on the business.

For years, the insurers mostly guaranteed bonds issued by municipalities, public schools and water authorities. Defaults were few, and bond insurers prospered. Triple-A ratings were a given. In recent years, however, many bond insurers have ventured into the business of insuring complicated mortgage securities such as collateralised debt obligations. And with credit markets deteriorating, they have had to write down the value of their insurance contracts on complicated debt and have posted some of their poorest quarterly results in years.

Some veterans on Wall Street are now questioning the viability of their business model. ‘As the credit market continues to weaken, our confidence that the guarantors will survive the credit meltdown is waning,’ Ken Zerbe, an analyst at Morgan Stanley, wrote in a research note this month. ‘At the current stock price, we believe the market is pricing in the loss of their triple-A ratings. Previously, we would have dismissed this as nearly impossible – now we are not so sure.’

The two largest bond insurers, Ambac Financial Group and MBIA, were recently described by Fitch and Moody’s as having moderate to little risk of falling below adequate capital levels. Nonetheless, their shares have fallen by at least half since the beginning of October.

Ambac spokesman Peter Poillon said last Friday that based on where the stock is trading, investors appeared to be doubting the company’s ability to hold on to its triple-A rating. He disagreed with that assessment, saying that the company has sufficient capital to meet the rating agencies’ requirements. ‘We value our triple-A. We know it’s our franchise and we will do anything to maintain it,’ he said.

 

Source: The Washington Post (Business Times 28 Nov 07)

Citi sees likely office space glut by 2010

Other analysts argue that pent-up demand will soak up excess supply

OFFICE space may be in severe short supply now, but Citigroup predicts the tables will be turned by 2010 with even a glut possible.

‘The market is underestimating the potential supply of new office space in 2010 and beyond, in our view,’ said the banking group in a report on Monday.

While rents and prices of offices are skyrocketing due to the supply crunch, Citigroup said the situation is set to change in a few years, because of the slew of commercial sites sold by the Government in recent months.

It noted that since May, six new sites have been awarded that could yield three million sq ft of offices in 2010 and 2011. This is in addition to projects already under way.

It means that in those years, potential new supply could be 3.2 million to 3.5 million sq ft a year, according to Citigroup’s estimates.

Demand over the last few years has averaged only 1.5 million sq ft per year, the report added.

All eyes are now on the Government Land Sales programme for next year, which is due to be announced next month. If more office sites are released, even more supply can be expected.

Recent bids for office sites have already come in below market expectations, reflecting a more cautious longterm outlook among developers.

A Marina View site earlier this month attracted bids 35 per cent lower than those drawn by an adjacent plot just two months before. The site has yet to be awarded to a bidder even though the tender closed two weeks ago.

The Citigroup report also predicted that landlords of the new offices – most will be in the Central Business District – will face keen competition for tenants. Occupancy rates will peak next year or in 2009 and decline after that, it said.

This has led Citigroup to downgrade the shares of two major office owners: Keppel Land to ’sell’ and City Developments to ‘hold’.

But other analysts are sceptical of Citigroup’s forecasts of an oversupply. They say that for now and next year at least, demand for office space will still far outstrip supply.

When the new offices are opened from 2010 onwards, enough pent-up demand will have been built to soak up all the space, said Mr Wilson Liew, an investment analyst at Kim Eng Research.

‘Judging from the current demand, if this trend continues, there shouldn’t be much of an oversupply,’ he said.

‘These two, three years or so, the supply that is coming on stream is way below the average rate, so there will be a lot of pent-up demand.’

Mr Soong Tuck Yin of Macquarie Securities said the average supply of offices between next year and 2012 comes to only 1.7 million sq ft a year.

This drops to 1.4 million sq ft if space that has already been pre-committed – leased by companies even before being built – is excluded.

Another analyst added that in three to five years’ time, Singapore’s two casinos will have been built. And with the Government promoting Singapore as a financial hub, banks will still expand and be in need of prime space.

There may also be a delay in some of the new office space coming on stream, given the current shortage of contractors, he added.’It’s a bit soon to be making these sorts of predictions,’ the analyst said of the Citigroup report.

In the end, it boils down to whether the economy keeps growing, said Mr Winston Liew, senior investment analyst at OCBC Investment Research. ‘The office market is mainly driven by GDP growth. If our GDP continues to grow, demand should not be an issue.’

 

Source: The Straits Times 28 Nov 07

Condo-like housing plot nets $134m bid

A THIRD site earmarked for public housing to be designed, built and sold by private developers has attracted a top bid of $134.2 million.

Greatearth Development placed the bid, which was 13 per cent higher than the one submitted by its closest rival, AMK Development, and well ahead of those of the other three contenders.

Consultants say the higher-than-expected price – it works out at $212.4 per sq ft (psf) per plot ratio – reflects developers’ confidence in the demand for public housing and suburban condominiums. The 1.7ha plot in Ang Mo Kio Street 52 can house about 550 flats in blocks that can reach 36 storeys.

Savills Singapore’s director of marketing and business development, Mr Ku Swee Yong, estimated that the break-even price for the Ang Mo Kio plot would be about $500 psf.

This means the flats can be launched from $580 psf, putting the starting price of a four-room unit at about $560,000.

The first such project, developed by Sim Lian Land in Tampines and launched last year, met with an overwhelming response.

 

Source: The Straits Times 28 Nov 07

RECORD PROPERTY DEAL NO. 1: Paying a premium for ocean views

But analysts say price tag is not typical of HDB market, which is more moderate

IN AGEING five-room HDB flat in Marine Parade has been snapped up for a record price of $750,888 – and all because of its sweeping ocean views.

The buyers, who paid cash, bought the 32-year-old Marine Terrace flat as their retirement home.

They had the field to themselves as the high asking price of $800,000 deterred many prospective buyers.

Agent Francis Ng from HSR Property Group said the couple were the only ones to view the flat.

Mr Ng said the flat has had its walls knocked out to make an expansive living room that takes advantage of the sea view, so there is only one bedroom.

Owner Sally Sim, who lives in a landed property, renovated the flat about two years ago at the cost of just over $80,000.

She kept the property as an extra home that could one day be used as a retirement haven or for her children’s use.

‘But since the market is good, I might as well sell it,’ she said in Mandarin. ‘It’s quite tiring keeping it clean.’

ERA Singapore’s assistant vice-president, Mr Eugene Lim, said: ‘People who buy HDB flats at such record prices are not your typical HDB buyers.

‘They are cash-rich and most of them are looking for unique features, such as a full sea view.’

The Marine Parade flat is about 1,300 sq ft in size, which would put its price at $577 per sq ft (psf).

HDB flats are not usually measured on a psf basis, but pricing it this way does give an idea of how much the property is worth when compared with private housing. Mass market condominiums now cost $650 to $700 psf on average.

Executive flats, which are limited in number, have sold for a bit more but are far bigger in size. Take the seemingly stratospheric price achieved for an executive HDB flat in Mei Ling Street. It went for $755,000 but cost only $474 on a psf basis.

But such deals are certainly are not reflective of the market, which is operating at a more moderate level, said Mr Lim.

HSR executive director Eric Cheng said the market was crazier back in the mid-90s. It is rather calm currently, except for sporadic record deals, he said.

 

Source: The Straits Times 28 Nov 07

Record property deals: $750,888 for 5-rm Marine Parade flat

IN FRESH signs the property market is still pretty hot, an HDB flat has sold for a record $750,888 – and a developer has paid a record price for a collective sale site.

A retired couple yesterday bought the 32-year-old recently renovated flat in Marine Parade. The couple, who declined to be named, have lots of time to enjoy the full 23rd storey sea view.

The wife said: ‘The view is not blocked. There is morning sun and it’s very near the underpass to East Coast Park.’

They have lived abroad, enjoying sea views in previous homes in Germany and Australia.

The last HDB record of $730,000 was set earlier this month – also for a five-room Marine Parade flat with a sea view. Both are on high floors and near East Coast Park with what agents call the ‘X-factor’. An executive HDB flat in Queenstown recently sold for $755,000, but it is newer and nearly 300 sq ft bigger than the record five-room Marine Parade flat. Executive flats are limited.

$435m for Orchard Boulevard condo

A 30-YEAR-OLD condominium at Orchard Boulevard has smashed the record for Singapore’s most expensive collective sale.

Westwood Apartments was sold yesterday for $435 million to Malaysian conglomerate YTL Corp. That is an eye-popping $2,525 per sq ft per plot ratio (psf ppr), including a $4.6 million development charge.

This beats record-holder The Ardmore, a 24-unit freehold property off Orchard Road – sold in June for $262 million, or $2,338 psf ppr.

Owners of the 50-unit condo will each get about $8 million. Owners of two penthouses will get about $17 million each, said deal broker Savills Singapore.

The deal caught the industry by surprise, given the lukewarm response to government land sales and a slowdown of collective sales, recently.

Hot 5-rm sales

$750,888

Marine Parade

$730,000

Marine Parade

$720,000

Kim Tian Place

$710,000

Marine Parade

$700,000

Mei Ling Street

 

Hot en bloc deals

$2,525 psf

Westwood Apartments

$2,338 psf

The Ardmore, Ardmore Park

$1,820 psf

The Grangeford, Leonie Hill

$1,788 psf

Char Yong Gardens, Cairnhill

$1,735 psf

The Parisian, Wheelock Place

 

 

Source: The Straits Times 28 Nov 07

RECORD PROPERTY DEAL NO. 2: High collective sale price catches analysts off guard

THE record collective sale price achieved by Westwood Apartments yesterday has put to rest industry concerns that the red-hot property market has cooled off.

Malaysian conglomerate YTL Corporation paid $435 million for the 30-year-old condominium in Orchard Boulevard, with an additional $4.6 million development charge.

This prices it at a startling $2,525 per sq ft per plot ratio (psf ppr), a level that trumps the freehold The Ardmore, a 24-unit property off Orchard Road that was sold to SC Global Developments in June for $262 million, or $2,338 psf ppr.

Westwood’s owners will each reap about $8 million, with the two penthouse owners getting about $17 million each.

The sale comes after recent government land sales received lukewarm responses, prompting experts to voice concerns of a souring in sentiment.

A condo plot in Enggor Street in Tanjong Pagar, for example, fetched a top bid of $180.8 million, or $717 psf ppr when it closed recently. This was well below the $852 psf ppr achieved by an adjacent plot.

Analysts told The Straits Times they were caught off guard by YTL’s bullish price but added that the prime Westwood location justified the high price tag.

The 62,179 sq ft condo, which has a plot ratio of 2.8 and a 20-storey restriction, could accommodate 43 luxury apartments of 4,000 sq ft each, said Savills Singapore, which brokered the deal.

Knight Frank director for research and consultancy Nicholas Mak said the sale was refreshing as the volatility in global stock markets, coupled with recent government measures to cool the market, have slowed sales.

Other analysts believe the sale is a one-off with demand for collective sales likely to be confined to prime areas such as District 9, 10 and 11.

Chesterton International Property Consultants’ head of research and consultancy, Mr Colin Tan, said negative sentiment is unlikely to affect prime sites.

‘Even if a developer overpaid, it has secured the site. In the long run, it is likely to be in their advantage,’ he said.

Malaysian tycoon Francis Yeoh, who helms YTL, told The Straits Times yesterday that he was in it for the longhaul.

Buying Westwood cements YTL’s entry into Singapore’s top-tier luxury property market.

YTL already owns Sandy Island and the Lakefront Collection at Sentosa Cove.

Dr Yeoh shrugs off the apparent recent real estate cool-down in Singapore, saying wealthy buyers will always demand quality homes, regardless of market sentiment.

‘The question of whether the price paid for the land is reasonable depends on what you do with it,’ he said.

‘There are many people who are still bullish about Singapore’s market.’

Westwood resident Richard Eu, who is also chief executive of the traditional Chinese medicine company Eu Yan Sang, said owners were ‘happy that we managed to get a good price given the recent slowdown’.

The deal took just seven months to complete and is the largest collective sale since new rules kicked in on Oct 4.

Westwood’s owners will each reap about $8 million, with the two penthouse owners getting $17 million each.

 

Source: The Straits Times 28 Nov 07

IPO lifts Indian property baron’s fortune by $6.3b

Shares of Mundra Port & SEZ more than double on debut on back of infrastructure boom

MUMBAI – INDIAN property magnate Gautam Adani has just added US$4.4 billion (S$6.34 billion) to his personal fortune.

His company, Mundra Port & Special Economic Zone (SEZ), more than doubled on its first trading day in Mumbai, boosting the value of his family’s 81.3 per cent stake to about US$8 billion.

Real estate ‘has caught the fancy of investors’, said Mr Jayesh Shroff of SBI Funds Management. ‘We could see many more billion-dollar property tycoons as investors pay a premium to own real-estate stocks.’

India’s 10 richest property investors have more funds than Mr Donald Bren, Mr Donald Trump, Mr Samuel Zell and the next seven wealthiest United States real-estate investors, Forbes Magazine reported.

Mumbai has the world’s second-highest office rents after London’s West End, according to data compiled by real-estate broker CB Richard Ellis. Rents in Mumbai rose 55 per cent in the past year to US$189.51 per sq ft, almost double the costs in mid-town Manhattan, CB Richard Ellis reported.

Mr Adani, 45, is among eight Indian developers whose wealth exceeded US$1 billion each for the first time this year, Forbes reported. A government plan to spend US$500 billion on ports, roads and airports has drawn investors to developers focusing on infrastructure.

Mr Adani’s Mundra Port, India’s largest cargo terminal outside government control, rose as much as 710 rupees to 1,150 rupees on the Bombay Stock Exchange (BSE) and finally ended 521.7 rupees, or 118.6 per cent, higher at 961.7 rupees.

The initial public offering (IPO) raised 17.7 billion rupees (S$642.5 million) this month with shares sold at 440 rupees each. The IPO attracted US$52 billion of bids, 116 times the stock for sale.

‘There was lot of interest from investors since this is the first port and SEZ company to be listed,’ Mr Adani said at a listing ceremony at the BSE yesterday. ‘Infrastructure stocks are in favour right now.’

Mundra Port is about 70km from the airport at Bhuj in the western state of Gujarat. The port can cater to companies including Reliance Industries, which is constructing the world’s biggest refinery in the state.

The port will handle 30 million tonnes of cargo this year, up from about 20 million tonnes last year, Mr Adani said.

A state-backed plan for private companies to build SEZs, or business enclaves with their own power, roads and commercial buildings, is also lifting developers’ shares.

Mr Anand Jain, who is building an economic zone near Mumbai with his school buddy Mukesh Ambani, joined the Forbes list with a US$4 billion fortune after his Jai Corp soared seven- fold this year, giving it a market value of US$45 billion.

Mr Jain’s family members last month reaped US$568 million selling a stake to investors including units of Merrill Lynch, Goldman Sachs and Morgan Stanley. The family still holds about 75 per cent in Jai after the sale.

Source: BLOOMBERG NEWS (The Straits Times 28 Nov 07)

US home prices plunge by record 4.5%

WASHINGTON – HOME prices in the United States fell in the third quarter by the most in at least two decades, as the sub-prime lending crisis caused sales to slump.

Home values retreated 4.5 per cent in the three months ended Sept 30 from the same period last year, the most since records began in 1988, according to S&P/Case-Shiller. It followed a 3.3 per cent drop in the second quarter.

US consumer confidence was also weak, falling this month for the fourth straight month to its lowest in two years, on concerns about rising energy prices and financial market volatility.

The Conference Board said its index of consumer sentiment fell to 87.3 from a revised 95.2 last month, a sharper fall than expected.

The Dow Jones Industrial Average gained 144.69 points after one hour and 45 minutes of trade to 12,888.13.

Source: BLOOMBERG NEWS, REUTERS (The Straits Times 28 Nov 07)

Expat cost of living in S’pore gaining on HK’s

S’pore and Chinese cities move up the ranks due to strong currencies, inflation

(SINGAPORE) The Republic is catching up with Asia’s leading cities in one area it probably does not wish to make strides in – expatriate cost of living.

While some of the region’s most pricey cities became relatively less expensive in the past year, Singapore, along with Beijing and Shanghai, have climbed the rungs in the latest cost of living survey by ECA International.

Singapore is listed as the ninth most expensive city in Asia – behind Seoul, Tokyo, Yokohama and Kobe, as well as Hong Kong, Taipei, Beijing and Shanghai. Worldwide, Singapore ranks 122nd, but that is 10 spots higher than in the 2006 survey.

In comparison, the Japanese cities and Taipei have all dropped in the global rankings in the past year, primarily due to a weaker currency, while Hong Kong stayed put at its 79th spot. This means that the gap is closing between the two ‘traditionally competitive’ locations, Singapore and Hong Kong, says ECA.

Conducted every March and September, the cost of living survey by the Hong Kong-based HR consultancy tracks a basket of 128 consumer goods and services commonly consumed by expatriates in more than 300 locations worldwide.

Multinational firms use the findings as a guide in determining expatriate remuneration packages and allowances.

But the survey excludes significant items such as housing, utilities, car purchases and school fees because, ECA says, expatriate packages usually include separate compensation for these.

Apart from the two-percentage-point hike in the Goods and Services Tax in July and overall rising inflation, the appreciating Singapore dollar is also driving up costs in Singapore ‘in a significant manner’, says Lee Quane, general manager of ECA.

‘While this is good news when sending international assignees from Singapore, those companies who need to send employees into Singapore will now have to apply higher cost of living indices to salaries to guarantee their personnel’s spending power when in Singapore.’

Seoul, Asia’s most expensive city, has climbed one rung in the global rankings to seventh in the latest findings.

Tokyo, on the other hand, has dropped out of the top 10 for the first time, moving from 10th to 13th.

A strengthening yuan against the US dollar, along with soaring oil, food and grain prices, have added to living costs in the Chinese cities, including ’second-tier’ ones. According to ECA, living costs for foreigners in Chongqing, for instance, have risen by 12 per cent, or twice as much as in Beijing.

Luanda in Angola emerged as the world’s most expensive city for expatriates. Two other African cities – Kinshasa and Libreville – also feature in the top 10. European cities, led by Oslo and Moscow, make up most of the top spots.

 

Source: Business Times 27 Nov 07

Riverwalk, Cairnhill Mansion and site next door up for sale

(SINGAPORE) Three prime sites – one zoned for commercial use and two for residential use – went on the market yesterday.

The Riverwalk near Clarke Quay is offered through a collective sale, said property firm Jones Lang LaSalle (JLL) which is marketing the project.

Market watchers reckon that the project could fetch about $700 million or $1,735 per square foot (psf).

The 82,317 sq ft site has a 4.9 plot ratio. It can be redeveloped into a commercial building with a gross floor area of 403,351 sq ft, subject to approval and payment of development charge (DC) of about $3 million and premium for topping up the lease.

The Riverwalk is now zoned for residential and commercial use. It comprises 181 commercial units ranging from 54 sq ft to 20,161 sq ft, 118 apartments ranging from 818 sq ft to 3,821 sq ft and 290 parking lots.

‘The potential purchaser may redevelop the property into a part commercial/part residential development or a Soho development,’ said JLL regional director Lui Seng Fatt. ‘The options available for this site are extensive.’

Elsewhere, Cairnhill Mansion and a separate adjoining site are being offered for sale. Cairnhill Mansion is being offered through a collective sale and the adjoining site is being offered by an individual owner, said Knight Frank, which is marketing both sites.

The guide price for Cairnhill Mansion is $443.6 million. As there is no DC payable, the price works out to $2,800 psf per plot ratio (ppr). The guide price for the adjoining site is $139.4 million. Including a DC of about $16 million, this works out to $2,800 psf ppr. Together, the sites add up to 62,903 sq ft.

The successful developer of the combined sites could build 100 units averaging 2,000 sq ft each, Knight Frank said.

‘Strong demand for high-end, luxury condominium developments coupled with the rosy outlook for the property market, should increase the site’s attractiveness to developers.’

The Cairnhill area, being a stone’s throw from Orchard Road, is attracting super-luxury developments like The Hamilton and Ritz Carlton Residences.

Selling prices for these projects are expected to start from at least $4,000 to $4,500 psf, said Knight Frank.

Recent launches like Hilltops are already achieving prices in the mid to high $4,000s psf, it said.

The tenders for both sites closes at 4pm on Jan 15 next year. The tender for The Riverwalk closes at 3pm on Jan 22.

 

Source: Business Time 27 Nov 07

S’pore launches pushed back as developers gauge sentiment

Some projects being launched overseas first, others struggle to finish showflats

(SINGAPORE) Developers here are holding back residential launches due to poor market sentiment – and in some cases are choosing to launch their projects overseas first as they wait for market sentiment here to recover.

Launches are also being held back as showflats are being delayed amidst a construction squeeze, market watchers said.

Major launches that can be expected over the next few months include City Developments’s Wilkie Studio and The Quayside Collection, Far East Organization’s Floridian and Cairnhill View, GuocoLand’s Goodwood Residences,

the Lippo Group’s Marina Collection and Wing Tai’s Belle Vue and L’VIV.

While several upcoming projects have most of the necessary approvals to launch in place, some of them are being held back in anticipation of a market recovery, BT understands.

‘Currently, we don’t know if Singaporeans will be willing to fork out that kind of money,’ said one developer who has yet to start selling the company’s project in Singapore. However, the luxury condominium in question is already being marketed abroad, with about half of the units sold to foreigners at prices exceeding $2,500 per square foot (psf).

In a recent report, UBS Investment Research also noted that several projects have obtained permission to launch in the past three months, but the launches were delayed due to the weak market sentiment.

‘Some projects with permits to launch in August and September have been held back due to weak sentiments,’ said the investment bank’s research unit in a recent note. ‘We expect these to be launched in late November or early 2008.’

Others point out that while some of the delays can be attributed to the poor market sentiment, showflats for some of the projects are not yet ready.

‘Sentiment is one reason for the quiet market,’ said Ku Swee Yong, director of marketing and business development at Savills Singapore. ‘But even if the market sentiment is good, some developers still can’t launch their projects because the showflats aren’t ready.’

One example is Lippo’s Marina Collection, Mr Ku said. The showflat for the 124-unit project is yet to be completed, he said. The project was supposed to have been launched last month.

Some developers are choosing to launch their projects overseas first. United Engineers, which is developing the 40-unit Sui Generis in the Balmoral area through a joint venture with Japan-based Kajima Corporation, recently said that it has sold 17 apartments via overseas previews in Indonesia and Hong Kong over the past two months.

The Singapore launch, on the other hand, is only planned for next year although the showflat is ready, BT understands.

Similarly, other developers are also waiting for next year to market their projects.

The weaker market sentiment also means that fewer projects are applying for permits to launch.

In October, for example, just three new projects received permits to launch, UBS said – City Developments’s Shelford Suites, Hayden Properties’ Ritz-Carlton Residences and a condominium at Kim Yam Road by Frasers Centrepoint.

However, industry players are confident that the market will recover soon – bringing with it a whole slew of project launches in the new year.

Some projects that went ahead with their planned launches recently did well. At Ritz-Carlton Residences, which started selling over the weekend, take-up was good and prices hit $5,000 psf, sources said.

 

Source: Business Times 27 Nov 07

Two more transitional sites up for tender

Mountbatten and Aljunied sites follow those at Scotts Rd and Tampines

(SINGAPORE) The Urban Redevelopment Authority has launched two transitional office sites at Mountbatten Road and Aljunied Road/Geylang East Avenue 1 for sale by tender.

This follows the recent sale of two transitional office sites at Scotts Road and Tampines for $219 per square foot per plot ratio (psf ppr) and $80.65 psf ppr respectively.

The land parcel at Mountbatten Road has a site area of about 2.12 hectares and can yield a maximum gross floor area (GFA) of 20,000 square metres. It is also next to the future Mountbatten MRT station.

The Aljunied Road/Geylang East Avenue 1 land parcel has a site area of about 1.88 ha and a maximum permissible GFA of 18,885 sq m. The site is adjacent to the Aljunied MRT station. Both sites will be sold on short-term leases of 15 years and are expected to be low-rise developments of about three storeys.

On estimated land prices, Cushman & Wakefield managing director Donald Han said: ‘We are likely to see developers taking a defensive play in terms of pricing.’

He added that this strategy was adopted by developers resulting in lower than expected prices for Tampines Concourse transitional site and the Marina View parcel B tender plot.

Given the Mountbatten site’s attributes, including a regular shape and the prospect of the future Sports Hub nearby, Mr Han expects bids to fall in the range of $140-150 psf ppr.

The Aljunied site is next to the MRT but the site is elongated and Mr Han believes this could be a constraint in terms of building design.

Noting that the neighbourhood is also relatively mixed, he said that bids for the Aljunied site could come to $120-130 psf ppr.

On likely bidders, CBRE Research executive director Li Hiaw Ho said: ‘Given the short tenure and rapidly rising construction costs today, such parcels would appeal to owner occupiers or a tie-up between an investor and an enduser.’

He also pointed out that there could be keen interest in the Aljunied Road/Geylang East Ave 1 parcel due to the existing MRT station and offices in the Paya Lebar micro-market.

Knight Frank director (research and consultancy) Nicholas Mak also highlighted that although the Mountbatten site was closer to the city, the Mountbatten MRT station may only be open between 2010 and 2012.

Adding that there is lack of amenities such as F&B premises, he estimates that the site could attract bids of about $27-28 million while the Aljunied Road site, which is in a relatively more established residential and light industrial area, could attract bids of $30.5-32.5 million.

 

Source: Business Times 27 Nov 07

Lippo sees top Jakarta property value triple by 2014

Group plans to invest up to US$10b in domestic real estate projects by that time

(JAKARTA) Indonesia’s Lippo Group, which runs hospitals and property firms, said it would spend up to US$10 billion on domestic real estate projects by 2014, and expects prime Jakarta property to double or triple in value by then.

The group, which has listed units in Jakarta, Singapore and Hong Kong, expects to benefit from strong economic growth and rising incomes in Indonesia and other parts of Asia, chief executive James Riady told Reuters in an interview yesterday.

‘We are going through an unprecedented period of growth and prosperity, and now there is a supply issue, a great shortage of supply’ of commodities and assets which will drive prices even higher, Mr Riady said.

The Lippo Group has about 70 per cent of its assets in Indonesia, where its listed units include Lippo Karawaci and Lippo Cikarang, two satellite town developments near Jakarta with their own hospitals, universities, malls, housing, offices, even golf courses.

‘Indonesia is lagging behind the rest of Asia. Property in Indonesia is extremely cheap, it’s possibly the best value,’ Mr Riady said.

Kemang Village, which is Lippo Karawaci’s latest residential development in one of Jakarta’s most popular, upmarket districts, has already sold out all 460 units in the first development phase at US$1,400 per square metre, Mr Riady said.

A comparable property in Shanghai would cost US$17,000 per square metre, or US$25,000 per square metre in Singapore, he added.

‘Over the next five to seven years, residential, commercial and retail property in prime locations in Jakarta will double or triple,’ he said.

But, despite a drop in interest rates, property prices in some parts of Jakarta have shown little appreciation, reflecting the city’s poor infrastructure and traffic jams. For many low or middle income Indonesians, it is difficult to obtain a mortgage, whereas wealthy customers simply pay for cash.

Shares of Jakarta-listed Lippo Karawaci, which has a stock market value of US$1.1 billion, have risen 57 per cent this year, beating a 45 per cent rise in the Jakarta index .

They trade at a forward 2008 price-earnings ratio of 22.3 times, compared with 15.3 times for the overall index.

Mr Riady said that the group’s property expansion in Indonesia would be funded mainly from the cash from presales, with the remainder raised from bonds and real estate investment trusts , or Reits.

Lippo has two Singapore- listed Reits, and plans to issue more to free up capital from its portfolio of hospitals, shopping malls and housing.

First Reit, which is backed by Lippo’s Indonesian hospitals, raised US$64 million in its initial public offering (IPO) last year. The shares have fallen 0.7 per cent this year, in contrast to the Straits Times Index which is up 11 per cent.

Lippo-Mapletree Indonesia Retail Trust, a joint venture with a unit of Singapore state investor Temasek Holdings, raised US$356 million in its IPO this month and is backed by Indonesian shopping malls. The shares are trading at 15 per cent below the IPO price.

Lippo group also controls Indonesian retailer PT Matahari Putra Prima, Singapore retailer Robinson & Co, and Indonesian multimedia company PT First Media Tbk, which provides Internet services.

Both healthcare and Internet services offer extremely attractive gross margins, Mr Riady said, of 60 per cent and 65 per cent respectively.

Lippo, which currently has four hospitals, plans to build 15 more over the next five years to meet a shortfall in the country’s medical facilities.

‘Healthcare still has a long way to go,’ mainly because of an acute shortage of doctors and poor training facilities, he said.

 

Source: Reuters (Business Times 27 Nov 07)

Nakheel to buy UK property, set up Reit

Developer sees value in assets, may sell shares in US$700m trust in S’pore in ‘08

(DUBAI) Nakheel PJSC, the Dubai, United Arab Emirates-based developer of the world’s biggest manmade islands, will buy UK real estate investment funds and start a real estate investment trust, or Reit, as it expands into property asset management.

‘UK Reits are trading at a 30 per cent to 40 per cent discount now and that’s a huge opportunity,’ chief financial officer Quek Kar Tung said in an interview in Dubai on Sunday. ‘There’s no Reit market in Dubai yet, so we’ll be looking to build an international portfolio.’

Nakheel plans to start its first US$700 million Reit in the first or second quarter. The company will put homes from its Gardens and International City projects in Dubai into the trust, Mr Quek said. The trust will probably sell shares in Dubai and Singapore, he said.

State-owned Nakheel, which has US$30 billion of projects under way in Dubai, is seeking to diversify its sources of income away from domestic construction projects by expanding overseas and into fund management. A unit of Dubai World, the company has about US$7 billion of assets for its fund venture and will acquire more in January when it takes control of fellow Dubai World company Istithmar Real Estate, according to Mr Quek.

The UK benchmark FTSE All-Share Real Estate Index slumped by 38 per cent this year on falling commercial property values, higher borrowing costs and stricter controls on credit. Land Securities Group plc, the biggest British Reit, on Nov 14 said that it will split itself into three companies after its shares slumped. The stock trades at about 30 per cent below the company’s net asset value, according to Lehman Brothers Holdings Inc.

Dubai properties yield as much as 12 per cent to investors, more than double the yield in Singapore, Mr Quek said.

Listing Nakheel’s first Reit in Singapore would allow the company to take advantage of the Asian city state’s experience in trading land trusts and the ‘low cost of funding’ there, he said.

Since it was founded in 2003, Istithmar has bought New York properties including 280 Park Avenue, 450 Lexington Avenue, W Hotel Union Square and the Knickerbocker Hotel at 6 Times Square. In November 2006 it bought London’s Adelphi building for US$567 million as part of a plan to capitalise on surging demand for hotel rooms and office space in major Western cities.

 

Source: Bloomberg (Business Times 27 Nov 07)

Istithmar to transfer properties to Nakheel

Dubai’s move will create global real estate group with US$52b of projects

(DUBAI) Istithmar PJSC, a Dubai government-owned private equity investor managing US$10 billion, will merge its real estate investments with Nakheel PJSC, another property company owned by its parent.

‘The nature of the real estate assets that we have will be well served by being on Nakheel’s balance sheet,’ Linley Davidson, an Istithmar director, said on Sunday. The combination is expected to be completed by the end of the year.

Since its founding in 2003, Istithmar has bought New York properties including 280 Park Avenue, 450 Lexington Avenue and the Knickerbocker Hotel at 6 Times Square. In November 2007, it bought London’s Adelphi building for US$567 million as part of a plan to capitalise on surging demand for hotel rooms and office space in major Western cities.

Nakheel PJSC has US$30 billion of projects underway in Dubai, including three palm tree-shaped islands, a cluster of islands in the shape of a world map and the Dubai Waterfront development, that aims to extend the emirate’s coastline by 820 kilometres.

Istithmar and Nakheel are owned by Dubai World, a diversified group operating a range of businesses including DP World Ltd.

The merger of the Nakheel and Istithmar real estate units will create a global real estate company with US$52 billion of projects, the Middle East Economic Digest reported. The merger will give Nakheel assets in countries including the UK, the US, South Africa and Singapore, and help its overseas expansion, the London-based weekly magazine said, citing an unidentified Nakheel official.

 

Source: Bloomberg (Business Times 27 Nov 07)

China developer acquiring Spirit World

GUANGZHOU property developer China Yuanbang Property Holdings is acquiring Spirit World Holdings, one of the joint venture partners of its Aqua Lake Grand City project in Nanchang City, Hongjiaozhou for 200 million yuan (S$39 million).

On completion of the proposed acquisition, Spirit World will become an indirect wholly owned subsidiary of the group, which will in turn indirectly hold a 51 per cent stake in New Zhong Yan (Nanchang) Real Estate Development. The latter is another joint venture partner in the Aqua Lake development and holds the development site area of 193,380 square metres, valued at over 400 million yuan.

‘We have confidence in the property market of Nanchang which is growing rapidly. This acquisition will not only enable the group to enjoy more profitability from the sale of properties of the Nanchang project, but also allow the group to reap the gain on the appreciation of the underlying value of the development site,’ said China Yuanbang Property executive chairman Chen Jianfeng yesterday. ‘Furthermore, we will have more control over the cost and quality of the construction,’ he added.

The Aqua Lake Grand City is a mixed property development for the group. It is to be developed in three phases.

The group held its first pre-sales of residential units last month. This saw a strong take-up rate of about 85 per cent with an average selling price of 5,300 yuan per square metre, which is a third higher than the original target selling price of 4,000 yuan.

 

Source: Business Times 27 Nov 07

UK house prices fall in Nov for second month running

Values down 0.2% from October but housing shortage seen limiting declines

(LONDON) UK house prices fell for a second month in November as a jump in credit costs sapped confidence among buyers and sellers, a survey by Hometrack Ltd showed.

The average cost of a home in England and Wales fell 0.2 per cent from October to £175,700 (S$524,400) following a 0.1 per cent drop the previous month, the London-based research group said yesterday. From a year earlier, prices increased 3.6 per cent, the least since July 2006.

Analysts predict the weakest housing market in a decade next year, with borrowing costs at a six-year high and a slowdown in economic growth after contagion from the US sub-prime mortgage market. The central bank signalled this month that the economy may need at least one interest-rate cut in 2008.

‘The fallout from the credit squeeze, along with relatively high interest rates, is resulting in widespread caution among homeowners,’ said Richard Donnell, director of research at Hometrack. ‘It is hard to see the catalyst for any short-term turnaround in market confidence other than interest- rate-cuts early in the new year.’

Property prices fell the most in the East Midlands, where they dropped 0.3 per cent, followed by Greater London’s 0.2 per cent decline. In central London, home values fell 0.5 per cent, Hometrack said yesterday.

Rightmove plc, HBOS plc and the Royal Institution of Chartered Surveyors have also said that house prices fell this month. Sellers should not hesitate to lower the asking price because a more protracted slowdown is on the way, Rightmove, the UK’s most-used property website, said on Nov 19.

Prices may fall next year as a ‘toxic mix’ of higher interest rates, overvaluation and record debt deters property investors, Citigroup Inc predicted on Nov 9.

A housing shortage may limit a decline in values. Construction of new homes stagnated at 148,000 units a year on average between 1989 and 2005, down from a peak of 425,000 in 1968. The economy is also on course to grow at the fastest pace in three years in 2007, buoying demand for property.

‘Values are being supported by a continued tightening in supply,’ said Mr Donnell of Hometrack. ‘But the underlying market conditions remain weak with new buyer registrations down by 26 per cent over the last five months.’

As US sub-prime-mortgage losses spread to Europe, London banks and investment companies may cut jobs and bonuses, which had helped to fuel house prices over the past decade. Workers in the City, London’s financial district, will invest only £2 billion in homes next year, compared with £5.5 billion in 2007, real estate agents Savills plc said on Nov 5.

Britons are shouldering the highest interest rates since 2001 and have amassed record debt of £1.4 trillion. The US sub-prime mortgage slump has also prompted banks to lift mortgage rates, hurting affordability.

Home loans with a fixed rate for two years, the most popular type in the UK, cost an average 6.37 per cent in interest last month, compared with 5.41 per cent a year ago, central bank data showed on Nov 9.

Bank of England deputy governor Rachel Lomax said last week that there are signs that the slowdown in the housing market ‘is gathering pace’. Economists predict that the central bank will cut the benchmark rate in the first quarter, according to the median of 15 estimates in a Bloomberg News survey from Nov 22.

 

Source: Bloomberg (Business Times 27 Nov 07)

Sub-prime crisis takes its toll on European markets

But stability can be expected if the US avoids recession: DTZ

(SINGAPORE) Shockwaves from the US sub-prime mortgage crisis a few months ago are reverberating through the real estate markets of the UK and Europe, with deals shelved or abandoned.

In its European Quarterly 2007 report, DTZ says the volume of transactions could fall at least 15-20 per cent in the third and fourth quarters this year, from record volumes of 48 billion euros (S$102.7 billion) and 53 billion euros in the first and second quarters respectively.

However, if the US avoids recession, stability can be expected.

DTZ group chief executive Mark Struckett says that in the UK other than central London, a price correction in commercial estate market has been underway since the second half of 2006, so the sub-prime fallout is less of a shock.

The current situation is also being ‘accepted by vendors’, he says.

DTZ says the effect so far is not so much the delaying of deals but renegotiation of price with the re-pricing of risk as providers of debt capital become much more risk-averse.

Given upward pressure on yields in many locations, DTZ believes property returns will be heavily dependent on sound occupier fundamentals and effective asset management.

Making a comparison between current market conditions and the period following the Sept 11, 2001 terrorist attacks in the United States, Mr Struckett says that unlike five years ago, ‘occupational demand still looks good’.

In general, DTZ does not expect rental prospects to be substantially undermined by recent developments, though there may be increased downside risk for areas such as London’s West End, where hedge funds and private equity firms are important players.

There could be wider adverse repercussions in the City of London and in Canary Wharf if reduced profitability affects the expansion plans of some banking sector firms.

Even so, Mr Struckett says a slowdown in new developments could lead to a supply shortage in 2010-2011, possibly curtailing any prolonged crisis.

So while debt-driven investors will find it more difficult to make deals add up, DTZ believes a correction in yields in some markets could present attractive opportunities for equity buyers such as life insurance and pension funds which to some extent may have been priced out of the market by highly leverage investors.

Quality assets in prime locations could benefit in a generally more risk-averse market.

DTZ believes a flight to quality is likely to put deals involving secondary locations or older stock most at risk, with investors increasingly willing to pay a premium for covenant strength and reliable rental income.

 

Source: Business Times 27 Nov 07

Cairnhill Mansion up for collective sale

THE Cairnhill Mansion apartment block near the Goodwood Park Hotel, plus an adjoining site, have been put up for collective sale – a transaction that could total nearly $600 million.

The owners of Cairnhill Mansion, which is about 40 years old, want at least $443.6 million for their estate, comprising 60 apartments of 2,024 sq ft each and an 8,525 sq ft penthouse. The freehold block is on a site of 43,103 sq ft.

The adjoining site of 1,800 sq m has a guide price of about $139.4 million.

These price the land at about $2,800 per sq ft (psf) per plot ratio, inclusive of development charge, a level market observers feel may be too high for the area.

It suggests a break-even price of $3,500 psf to $3,600 psf. Last month, units at the luxury development Hilltops at Cairnhill Circle went for a median price of $3,711 psf.

Marketing agent Knight Frank said yesterday that Cairnhill Mansion, which has a plot ratio of 2.8, was earlier granted permission from the Government to raise the ratio to 3.675.

The adjoining site also has a plot ratio of 2.8.

Both sites will be sold by separate tenders, which will close on the same day – Jan 15.

Knight Frank said a developer buying both plots could expect to build about 100 apartments, each of about 2,000 sq ft. Future development there can go up to 36 storeys.

 

Source: The Straits Times 27 Nov 07

Short-term office sites put up for sale to ease crunch

Plots in Aljunied and Mountbatten roads come with 15-year leases

GOOD news for office tenants struggling to find affordable office space in the Central Business District (CBD).

The Government yesterday launched for sale two short-term office sites along Aljunied and Mountbatten roads to ease the office space crunch.

Both plots come with 15-year leases and can house developments of up to three storeys.

The first plot – a 2.12ha site along Mountbatten Road next to the Singapore Association for the Deaf – can take up to 215,278 sq ft of office space.

The other – a 1.89ha site along Aljunied Road just behind the Aljunied MRT station – can house up to 203,276 sq ft of office space.

Consultants expect both sites to draw a good response.

Savills Singapore’s director of marketing and business development, Mr Ku Swee Yong, said the sites would appeal to firms keen to move back-room operations to cheaper spots outside the CBD.

Prime office rents have grown faster in Singapore than anywhere else in the world over the past year, according to a recent report by CB Richard Ellis.

Monthly prime office rental and associated costs shot up 82.6 per cent to $12.60 per sq ft in the 12 months ended Sept 30, it said.

Reacting to the crunch, the Government earlier released two short-term sites along Scotts Road and in Tampines. The first tender was hotly contested, but the other drew just one bid.

Mr Ku blamed the cool response to the Tampines plot on its distance from the CBD.

The two latest sites should get at least five bids each, he predicted.

The tender for the Mountbatten site will close on Jan 9; the Aljunied site, on Jan 16.

Mr Ku estimated the Mountbatten plot could fetch $28 million to $33 million, while the Aljunied site could net $25 million to $28 million.

Mr Nicholas Mak, the head of research and consultancy at Knight Frank, put his estimates at $27 million to $28 million for the Mountbatten plot and $30.5 million to $32.5 million for the Aljunied site.

Meanwhile, mixed development The Riverwalk in the CBD area has been put up for collective sale by tender.

The 0.76ha site, which houses 181 commercial units and 118 apartments, can be redeveloped into a commercial building with a gross floor area of about 403,351 sq ft, said its marketing agent, Jones Lang LaSalle.

This is subject to the authorities’ approval and payment of a development charge – estimated at $3 million – as well as a premium to top up its lease from the existing 72 years to 99 years. This may cost $60 million to $75 million.

 

Source: The Straits Times 27 Nov 07

S’pore ranked 9th most costly Asian city for expatriates

SINGAPORE has risen 10 places in a new global survey of the most expensive places for expatriates to live.

The Republic is closing the gap on higher-priced Hong Kong, which stayed at No. 79 in the survey, conducted by human resources firm ECA International.

Despite the jump, Singapore, at No. 122, is still significantly cheaper for expats than Hong Kong and other key global centres, such as London at No. 10 and New York at No. 48.

Singapore’s rise up the table from No. 132 was the result of rising expat costs such as higher rents, coupled with a stronger Singapore dollar.

In contrast, the Hong Kong dollar, which is pegged to the US dollar, is weakening – offsetting a rise in expat costs.

Singapore is the ninth most expensive Asian city, the survey found. Seoul is the most expensive, at No. 7 in the world. Tokyo dropped from 10th to 13th place, partly due to a decline in the yen.

Top spot went to the African city of Luanda in Angola. Places like this, which are off the beaten track, are more expensive because some expat consumer items are hard to get, and those who want them have to pay top dollar.

The survey compares a basket of 128 consumer goods and services such as groceries, drinks and tobacco, clothing and electrical goods that are commonly purchased by expatriates in more than 300 locations worldwide.

Multinational firms use the survey’s results to help determine how much to pay their staff working overseas.

Living costs for expats are affected by factors such as inflation, availability of goods and exchange rates.

Singapore has seen higher inflation, partly due to a 2 percentage point hike in the goods and services tax to 7 per cent.

Mr Sebastien Barnard, 32, at the British Chamber of Commerce, said living expenses, especially food, have risen. ‘A year ago, lunch for two adults and two children cost about $70, including drinks. But now it’s over $95.’

But the surge in property rents is still the biggest bugbear of expats here.

Mr Mark Brider, 43, head of international personal banking for the Royal Bank of Scotland in Singapore, said: ‘There is a growing number of international people living in Singapore, so the demand drives up rental. My landlord just told me my rent will be raised 80 per cent in March next year.’

Nonetheless, he added, Singapore’s cost of living is still ‘competitive’ and ‘has still not reached the level of Hong Kong’.

The rising Singapore dollar has also pushed up expat living costs, said Mr Lee Quane, general manager of ECA International Hong Kong.

He said Singapore’s rising cost of living is ‘bad news’ for global companies, which have to adjust their expat employees’ pay and allowances to help them maintain their spending power here.

 

Source: The Straits Times 27 Nov 07

It wasn’t me, Greenspan says of housing mess

Sales and price slump not a reflection of Fed policies when he headed central bank

LONDON – FORMER Federal Reserve chairman Alan Greenspan said he has ‘no particular regrets’, and that the deepening slump in the United States housing market is not a result of his policies.

‘Markets are becoming aware of the fact that the decline in house prices is not stopping,’ he said on Sunday. ‘I have no particular regrets. The housing bubble is not a reflection of what we did, as it is a global phenomenon.’

Home prices fell in a third of US cities last quarter, as stricter lending standards caused a 14 per cent drop in sales nationwide, the National Association of Realtors said last week.

Declines in sales and prices signal that the housing slump, which began last year, may extend into its third year, matching the slowdown 18 years ago that ended in the 1991 recession.

The collapse of the US sub- prime market ‘was a shocker because no one expected it’, Mr Greenspan said. ‘It was the weakest link in the international financial sector. The decline in subprime-financed housing starts is over. It went to zero and can’t get any lower.’

Professor Joseph Stiglitz, a Nobel Prize-winning economist, said on Nov 16 that there was a 50 per cent chance the US would slide into a recession after the ‘mess’ left by Mr Greenspan. The retired Fed chairman defended his record in a statement released the same day, saying the criticisms were ‘inaccurate or incomplete’.

After the 2001 recession, the Fed cut its benchmark rate to a four-decade low of 1 per cent. That move, along with a hands-off approach to regulation, has put Mr Greenspan under fire as the bursting of the housing bubble and the sub-prime mortgage crisis threaten to sink the economy.

‘The fact that the Fed funds rate went down to 1 per cent in 2002 was an important part of the latter stages of the housing boom,’ said Mr Bruce Kasman, chief economist at JPMorgan Securities. ‘It wasn’t the only thing, and it wasn’t necessarily a bad thing. In the end, we’re going to look back at what happens next to recognise what the trade-offs were.’

The US dollar’s slump to a record low against the euro may have to be addressed by central bank policymakers, according to Mr Greenspan. ‘Stable prices are necessary for maximum sustainable economic growth,’ he said.

Mr Greenspan, 81, is on a world tour to promote his memoirs.

 

Source: BLOOMBERG NEWS (The Straits Times 27 Nov 07)

Property may be big gainer as real interest rates plunge

Mounting inflation makes it tempting to borrow, but things may change in the long run

(SINGAPORE) Rising inflation may be starting to worry policymakers and the man on the street, but it has had an interesting side effect. It has pushed down the real interest rate dramatically and is expected to drive the property market as buyers and borrowers take on more mortgages, which are costing them very little in real terms.

In fact, real interest rates – which a borrower pays after inflation has been factored in – have fallen sharply as prices climb and could turn negative early next year when inflation is projected to hit a high of 5 per cent, economists said.

Some of the biggest companies – which borrow at wholesale rates – are already enjoying negative interest rates, as inflation since September has risen above the key three-month interbank rate.

Inflation in September was 2.7 per cent but the three-month Sibor or Singapore interbank offer rate was around 2.5 per cent, so real interest rates are in negative territory, according to United Overseas Bank economist Suan Teck Kin.

‘It’s bad for the depositor,’ said Mr Suan.

As OCBC’s Selena Ling put it: ‘There is no free lunch – our savings are also likely fetching a very low if not negative real return currently (calculated by subtracting the inflation rate from the nominal interest rates). The savings rate is about 0.25 per cent, while the 12-month fixed deposit rate is about 0.83 per cent.

But for borrowers, the effect is positive.

‘High inflation is beneficial to the borrower,’ said Standard Chartered Bank economist Alvin Liew. If you borrow $1 now, it will be worth less when you return it in two years.

Inflation jumped to 3.6 per cent in October, the highest since 1991, the Department of Statistics said last week. It is likely that the Monetary Authority of Singapore (MAS) will let the currency appreciate faster to dampen consumer price gains. This, in turn, will lead to more funds flowing to Singapore from investors betting on currency gains, which will keep the pressure on our already low interest rates.

While the three-month interbank rate is expected to remain around 2.5 per cent until the end of this year, some economists expected it to fall to as low as 2.1 per cent early next year before recovering to 2.5 per cent later. Home loan rates typically range from 3 to 4 per cent.

Generally, low interest rates fuel stock market activity. But with people feeling jittery about equities, economists said that many could turn to property to earn higher returns, because putting it on deposit is a ‘losing’ proposition.

Mr Liew pointed out that Singaporeans will have quite a lot of excess cash next year. Recent reports have said that en bloc sales will result in $6 billion swishing around in sellers’ accounts then.

‘One of the key things about high inflation and low interest rates – from an economist’s point of view – is that it will keep the property market robust for the next 12 months,’ he said.

With low interest rates, mortgage credit is cheap and will support the property market, said Citi economist Chua Hak Bin.

Real mortgage rates are probably only slightly positive now, about 0.5-1.0 per cent, compared with about 2-3 per cent three years ago, Dr Chua said. ‘Low real mortgage rates encourage leverage and may drive property prices higher.’

And if the US cuts interest rates aggressively, it may fuel asset inflation, he added.

Citi’s US economics team expects another 100 basis points cut, taking the US federal funds rate down to about 3.5 per cent by the end of Q3 2008, he said.

But all three economists cautioned against over-leveraging given the clouded economic outlook, and they expected inflation to moderate in 2009.

‘Debt servicing/repayment ability as well as degree of leverage of the borrower should be considered together when determining how much one should borrow,’ said Mr Suan. ‘Real interest rate may not be the sole criterion.’

The government is also watching the property market closely, he noted.

DBS Bank spokeswoman Karen Ngui said: ‘Consumers should be mindful that home loans are a long-term commitment and should not just consider the immediate interest rate outlook.’

 

Source: Business Times 26 Nov 07

Firm to sell Malacca Centre retail space

A RETAIL podium at Malacca Centre in Raffles Place has been put up for sale.

The 999-year leasehold property comprises of ground and basement floors and has direct frontages to the main road. The sellers are an investment holding company, said property firm Cushman & Wakefield, which is marketing the property.

The property has a strata titled area of about 5,000 sq ft, said Cushman & Wakefield managing director Donald Han. Market watchers estimate that it could fetch about $24 million, which works out to some $4,800 per square foot (psf).

‘There are a dearth of good retail space and a lack of retail premises for sale in Raffles Place and none offers as prime a retail road frontage or location as this,’ said Mr Han.

Malacca Centre retail podium presents the investor with an attractive cash-on-cash yield potentially in excess of 5 per cent per annum, he said.

The property is sold subject to existing tenancies.

A recent study done by Cushman & Wakefield showed that prime ground and basement retail retail rents and capital values are on the rise in Raffles Place due to the lack of supply.

For strata titled retail units, capital values have risen by 23 per cent since 12 months ago, Mr Han said.

At the nearby The Arcade – which is also strata titled – retail space recently transacted for between $4,900-$5,300 psf, Mr Han said.

Ground floor rents in Raffles Place have risen by 20 per cent in the past 12 months. Average gross rents for Raffles Place ground floor retail is now between $20 to $30 psf, while basement space is fetching between $15-25 psf.

 

Source: Business Times 26 Nov 07

Asia should be on inflation alert: JPMorgan

Countries that let currency strengthen will be better off

(SINGAPORE) Inflation poses a bigger and more immediate threat to countries in Asia than a US economic recession, said a senior equity strategist.

Emerging-market countries that allow their currencies to strengthen in the next 12 months are more likely to see sustained economic growth and escape runaway price inflation later, said Adrian Mowat, chief Asian and emerging-market equity strategist for JPMorgan, in an interview with BT last week.

The JPMorgan view is that there is a roughly one-in-three chance of a brief recession in the United States, with the economy shrinking in the first six months of 2008, then recovering in the second half.

But the economies in Asia have been growing strongly despite weaker demand from the US, where economic growth has been slowing for some time now, he pointed out.

‘I think the real issue for our economies is that they’re growing very rapidly. And if there’s a concern it should be about price stability and inflation.’

So far, central banks in Asia have tended to keep their currencies relatively weak, intervening in order to prevent rapid appreciation, he said.

‘But as we go into 2008, you’ve got the Fed (the US Federal Reserve) cutting interest rates . . . yet we need to push up interest rates to deal with our rapid growth.’

The combination of lower interest rates in the US and higher interest rates and rising price inflation in emerging markets will put greater pressure on central banks in Asia to allow their currencies to strengthen further, he said.

His advice to investors is to favour stocks in markets with strengthening currencies – for now, mainly the Asean countries, mainland China and Hong Kong – as these are more likely to maintain rapid economic growth for longer.

In Singapore, JPMorgan estimates that the Straits Times Index of blue-chip stocks could reach 4,800 points by the end of next year, about 40 per cent above its current level.

Countries which continue to keep their currencies weak would likely see domestic asset prices rising faster in the near term – generating high returns to investors in those assets – but those countries ‘ultimately will end up with an inflation problem that will require higher interest rates and a reduction in growth’, he said.

Others, including senior economists, have also warned that rising price inflation is fast becoming a major risk in emerging markets due to surging food, oil and asset prices.

Philip Poole, HSBC’s chief emerging markets economist, told BT last month that he expects governments and central banks in these countries to step up their fight against inflation, and that investors in emerging market currencies, stocks, commodities and property stand to benefit from the inflationary pressures and the likely policy response in the near future.

Here, too, the latest indicators suggest that inflation is on the rise. According to official data released on Friday, the consumer price index in October rose 3.6 per cent from a year ago, the fastest year-on-year increase in the monthly indicator of consumer price changes since August 1991.

The Monetary Authority of Singapore said last month in its twice-yearly monetary policy statement that it would allow the Sing dollar to strengthen at a slightly faster pace than before to curb inflationary pressures, while maintaining its long-standing official policy of allowing a ‘modest and gradual appreciation’ of the currency.

 

Source: Business Times 26 Nov 07

Malaysian tycoon enters S’pore luxury homes market

YTL Group plans to build top-end marina, residential projects in region

MALAYSIAN tycoon Francis Yeoh, who helms YTL Group, one of Malaysia’s largest listed companies, is intent on an aggressive expansion in Asia – starting in Singapore.

The Republic is the target of the first part of his grand plan to build a series of world-class marinas and residential clusters in coastal areas around Asia.

He wants Asia to be known as the ‘Mediterranean and Caribbean of the East’.

‘Real estate has not seen its full glory yet in Asia,’ Tan Sri Dr Yeoh said in an interview with The Straits Times recently.

‘Wealthy Asians are still paying a lot for not very good homes in the West, when they should be able to find beautiful homes in the East.’

To address this, YTL is now focused on gaining entry into the top tier of Asia’s property markets, starting with Singapore, he said.

YTL, with a combined market worth of about RM28.5 billion (S$12.2 billion), is a conglomerate that spans the construction, property, hotel and utilities industries. It recently teamed up with Malaysian developer LP Worlds to form a joint venture, Genesis-Alliance, which owns two projects at Sentosa Cove.

Genesis-Alliance, in which YTL holds a majority stake, was awarded the 145,442 sq ft, man-made Sandy Island in March for $89.7 million, after it bagged the Lakefront in the northern part of Sentosa Cove for the bargain price of $50.2 million in September last year.

Sentosa will be an important ‘mid-point’ for yachts cruising in Asia in the future, said Dr Yeoh. Hence, the need for a presence in the Republic.

‘Singapore is the centre of the region, like London is the centre of Europe. Its strong infrastructure, private banking sector and cosmopolitan culture makes it an attractive destination.’

YTL’s strategy is to rope in renowned architects and iconic brands to design quality homes, which will then be sold by invitation only to high net-worth individuals around the world.

It already has high-end properties, shopping malls, hotels and resorts in Malaysia, Dubai, Indonesia, Thailand and Europe, including a six-star hotel in St Tropez, France.

Sandy Island’s super-luxurious villas, slated for launch next March, are designed by renowned Armani store designer Claudio Silverstrin.

Each villa, ranging from 6,000 sq ft to 12,000 sq ft and costing more than $12 million apiece, will boast a lush tropical setting, quality interior finishes, a private berth and pool among other exclusive features.

All this is meant to redefine indulgent living in Singapore and Asia. More homes in this style are on the way, he said.

The company is also eyeing Singapore’s prime residential districts to build more of its high-end homes and to gain entry into the top-end of the island’s property market.

‘It’s not too late yet,’ said Dr Yeoh, adding that a slice of the pie is big enough.

‘But as a new kid on the block, to survive, we must differentiate ourselves. And this is where YTL comes in – at the very top of the pyramid.’

The homes YTL builds will be eco-friendly and minimise the impact on the environment, Dr Yeoh added. ‘Asia is a beautiful location. In terms of real estate, I’m looking forward to a very exciting decade ahead.’

 

Source: The Straits Times 26 Nov 07

ME & MY MONEY – Rentals will pay for his retirement

Swiss-born entrepreneur has six properties that can provide 70% of his income after he retires

MR ROBERT Gremli, 63, who hails from Switzerland, will never forget his first impression of Singapore.

‘It was incredibly hot, as if someone had thrown a hot blanket over me in a steam room,” he said. He wondered at the time how anybody could live in such a hot and humid country.

Still, he decided to stay and now, 35 years later, he is a Singapore permanent resident. An entrepreneur, he runs surface coating firm CRC Engineering.

Both Mr Gremli’s father and brother were in the banking industry, so it was hardly surprising that he made his first million, not from his business, but from investing in stock markets worldwide.

‘I was in my 30s. My brother worked for a Swiss bank and got investment tips. For a number of years, we bought warrants on the Japanese stock exchange. I invested a few hundred thousand Swiss francs, and they grew rapidly, topping a million in the space of four years. We sold them before the crash in 1989-1990.’

When it comes to blue chips, he believes in buying and holding for the long haul, which he did till 2003. The blue-chip firms he invested in included Nestle, Sandoz, Credit Suisse, Microsoft and Sun Micro Systems.

Not content with paper wealth, he wanted to liquidate all his shares in 2000, but his bank made the wrong call and talked him out of it. He finally sold all his shares in 2003, after losing half his paper gains.

Still, he was grateful for his profits. ‘Don’t worry about the money you lose, but be happy about the money you make,’ he said.

Looking back, he estimated that his stock portfolio generated average annual returns of about 8 per cent over a 25-year period.

He believes properties are good investments. Currently, he owns six properties: two apartments in London, three houses outside London and an apartment in Singapore, at Pine Grove, where a collective sale is being attempted.

With the exception of one outstanding home mortgage that will be paid off by early next year, all his homes are fully paid for. His retirement plan is to live off the rental income from these homes.

‘I have learnt that over the long term, properties are very good investments. You can’t go in and out daily. Let them appreciate over time,’ he said.

Married for 35 years, he lives in a rented house near the Bukit Timah Nature Reserve with his British wife, four dogs and two cats.

Q Why did you decide to become an entrepreneur?

A I worked for five different companies in Singapore and found that they were, in general, not efficiently run. They offered no long-term career opportunities and when I finally landed a job with a reputable British company, the management decided to sell the Singapore plant to a local company. After five years of hard work, I was made redundant.

That’s when I decided to go out on my own. In 1981, I became a consultant in machine tools and trading. In 2003, I started CRC.

Q What tough times have you faced as an entrepreneur?

A I was fortunate. In my first month of self-employment, I had sufficient work to make a profit. Then I was hired as a consultant temporarily, and I continued my other business activities while on this assignment.

Tough times came when I teamed up with a friend to buy and sell used machine tools. After making heavy losses on purchases that we could not sell, we started to make money. Then, my partner’s attitude changed, and we had to settle our differences in court. I lost $500,000 or more. Don’t do business with friends if you can avoid it!

Q What are your money habits?

A While I was employed, I always put aside at least 20 per cent of my income.

But since I went out on my own in 1981, I have also borrowed money from the bank to enhance the returns on my investments. The machine tool business needed large sums for stock purchases, which we refurbished and then sold on through dealers in the United Kingdom and Australia.

I took most of my money out of the share market and invested it in properties. This has turned out to be very profitable, and I’m holding on to these properties so I can live off the rental income when I retire.

Q What financial planning have you done for yourself?

A My plan is to live off the income from my assets, so that the principal does not have to be touched.

Properties will provide 70 per cent of my income. I purchased a ‘with-profit fund’ or unit trust in 2001 that invests in shares in the European market. It has done poorly so far, but I hope to get a 5 per cent return in the future.

This represents 10 per cent of my assets. The remainder is in fixed deposits in euros and Australian dollars. I also have a yen carry trade, which has added income to my fixed deposits due to the interest differential.

Q What about insurance planning?

A Except for Medisave and Medishield, I have no insurance. My Swiss insurance agent, who lived to be 93, advised me to take out health insurance only if my assets were below a certain size. After that, he said, there was no need to insure, as I could pay for medical bills from my savings. I think he was right.

Q What property investments do you have?A I invested in properties in England in the late 1980s and early 1990s. My first London property, near Sloane Square, was bought for £240,000 (S$717,288) in 1989; now, it’s worth £900,000.

The other property is near Wimbledon, and my houses outside London are in the Cotswolds and Birmingham.

The house in the Cotswolds, bought in 1993 for £180,000, is generating an annual rental yield of 10.7 per cent.

So far, I have sold one apartment in London, for £385,000 in 2003. That was bought in 1991 for £116,000.

My 1,750 sq ft apartment at Pine Grove was purchased in 1999 for $600,000.

Q Moneywise, what were your growing-up years like?

A There were six of us in the family, including two brothers and a sister. My father was a banker who taught us to save and to work for our money. Even as children, we had savings books and we put our pocket money into the accounts. I followed the same practice when I started working.

Some of my friends had cars whereas I rode around on a bicycle. By the middle of the month, they had half a tank of petrol and no cash.

This made it hard for them to please their girlfriends. I had money in my pocket and could offer my girlfriend a ride in a much bigger vehicle, the municipal bus. My upbringing was strict when it came to money, but I have not regretted it.

Q What has been a bad investment?

A I invested about $25,000 in commodities in the 1980s. When I wanted to withdraw my investment, the broker refused to pay me back. I reported him for corrupt practices. After investigators talked to the company, I got $18,000 back.

I did not learn my lesson, so I invested in commodities again. The broker wanted $20,000, which I was not willing to risk. She then proposed that we share the risk: She would put in half and I would put in the other half.

We went ahead. When I decided to withdraw my share, she was unable to pay me. I lost it all, so I reported the case to the police, and they went after her. I put it down to experience and accepted the loss. Since then, I have not invested in commodities.

A much bigger sum was lost through bad advice. I had US$200,000 (S$289,620) worth of WorldCom shares, which my investment adviser had bought without my approval.

When I asked him why, he said it was such a good investment, every client had to have it. He bought my shares at the peak.

When I wanted to sell all my investments, the investment bank’s chief investment strategist talked me out of it.

Then, all the markets started to decline. They never got back to me to advise me to sell. Today, I still have those shares, which are worth nothing.

Q Your best investment to date?

A My best investment in shares was in Sun Microsystems. I invested US$10,000 at US$9 apiece and held them for four years. At the end of 1999, I sold them for about US$87 each and made US$240,000. I then bought myself a secondhand Mercedes for $82,000 and still had a lot of profit left for my next investment.

Q What’s your retirement plan?

A I plan to work as long as I still enjoy it. After that, the plan is to find a successor to run my business while I continue with a reduced workload. Such an arrangement would ensure that no jobs were lost.

My monthly expenses come to about $12,000.

Q And your car is…?

A My car is a silver Mercedes 300 SEL.

 

Source: The Sunday Times 25 Nov 07

How much should you invest in a stock?

By TEH HOOI LING

SENIOR CORRESPONDENT

THE science of numbers has developed quite a bit since June 1955, when a new quiz show called The $64,000 Question made its debut on American television. The show was a hit. It captured as much as 85 per cent of the viewing audience and spawned dozens of copycat shows.

There was even betting on which contestants would win. But the problem was the show was produced in New York and aired live on the East Coast of the US. The telecast, however, was delayed by three hours on the West Coast. A gambler took advantage of the time difference by finding out by phone who the winners were, and then placing his bets before the West Coast airing.

John Kelly, a physicist at Bell Labs, heard about the scam on the news. After some pondering, he was convinced that a gambler with ‘inside information’ could use some of the equations developed by his colleague – Claude Shannon – to achieve the highest return on his capital. Mr Shannon, who created information theory after having realised that computers could express numbers, words, pictures, audio and video as strings of digital 0s and 1s, had developed formulas to deal with the signal noise of long-distance telephone transmission. Mr Kelly saw that the equations could be applied to the problem of a gambler who has inside information, say, about a horse race, and who is trying to determine his optimum bet size.

A gambler gets a tip on a race’s outcome. He could bet everything he’s got on the horse that’s supposed to win. But if the gambler adopts this approach, he will lose everything should the information turn out to be wrong. Alternatively, he could play it safe and bet a minimal amount on each tip. This squanders the considerable advantage the inside tips supply.

In Kelly’s analysis, the smart gambler should be interested in ‘compound return’ on capital. That is, to optimise the long-term growth rate of one’s capital, the gambler – the theory also applies to investors – should vary the wager as a proportion to his overall capital depending on the probability of bet being a winning one, and on the payout of the winning bet.

The Kelly formula or Kelly criterion has become a popular money-management formula for investors, hedge fund managers and economists.

Uncertain events

As the saying goes, the only certainties in life are death and taxes. For everything else, we form some kind of expectations of the outcome based on our experience, or what have been documented by others.

In finance, the expected value is used to account for the uncertain outcome of, say, a project or an investment.

Project A, has 30 per cent chance of making a profit of 20 per cent, 40 per cent of a profit of 12 per cent and 30 per cent of making a loss of 15 per cent. So the expected return is 6.3 per cent (30%x20% + 40% x12% + 30% x -15%).

If there are numerous investment opportunities with that kind of probabilistic outcome, then over a long period of time, the investor will earn an average of 6.3 per cent return per investment, as indicated by the expected return.

However, some investments or gambles are such that there is a one in a million chance of getting a $2.5 million payoff for a $1 bet. But for the other 999,999 times, you lose 100 per cent of your wager.

The expected return is a good 150 per cent. But if one were to bet a significant sum of one’s wealth on this kind of gamble, it is almost a certainty that one would be bankrupted before the big payoff comes along.

According to Kelly’s formula, two numbers should decide how much capital one should allocate to bet on an uncertain event: the probability of the bet being a winning one, and the payout. The formula is this: (Probability of bet being a winning one x (expected rate of return +2) -1) / (expected rate of return + 1).

So if you think that an investment has a 51 per cent chance of returning 20 per cent, then according to the formula, you should put 10 per cent of your capital in that investment. But if the probability of the investment yielding 20 per cent drops to 45 per cent or less, then you should not make any bet at all.

Meanwhile, a stock with half a chance of returning 30 per cent, the wager size should be 11.5 per cent of your portfolio.

This method forces an investor to seriously and thoroughly analyse the potential of a stock. And when he or she comes across a stock whose potential they think is severely unappreciated by the market, then they should have the conviction to commit a sizeable bet on it.

The prerequisite for this kind of approach is that the investor must have deep understanding of a stock and the industry it operates in, and have knowledge of how companies are valued by the market.

In a way, the world’s most successful investor, Warren Buffett, also subscribes to this strategy. He advocates focus investing, and to bet big on high probability events.

There have been studies done that, using Kelly’s formula one can minimise the expected time to reach a fixed fortune.

From the table, it appears that the probability of a favourable outcome carries a much bigger weight in determining how much one should put into an investment.

Disadvantages

The Kelly formula was developed to solve similar problems in gambling where the outcome is either win or lose. And it assumes a 100 per cent loss when the outcome is unfavourable. In the stock market, one rarely lose 100 per cent of one’s investment in a single trade.

Also, a financial investor cannot completely rely on the number suggested by the Kelly formula as it does not take into consideration the possibility of a few available investment options.

In gambling, using Kelly’s formula can produce a rather volatile result. There is a one-third chance of halving the bankroll before it is doubled. According to some literature, a popular alternative is to bet only half the amount suggested, which gives three-quarters of the investment return with much less volatility.

Where money accumulates at 9.06 per cent compound interest with full bets, it still accumulates at 7.5 per cent for half-bets.

And as mentioned, this kind of strategy is applicable to those who know their ways around the stock market. But even for experts, putting 30 per cent of one’s portfolio in a stock with a 60 per cent probability of a 35 per cent return seems rather big a bet. The numbers should at best be used as a rough guide.

And for those who don’t have the time or the inclination to carry out in-depth studies of stocks, a diversified approach is perhaps safer.

The writer is a CFA charterholder. She can be reached at hooiling@sph.com.sg

Source: Business Times 24 Nov 07

Inflation rises with policy posers in tow

Analysts expect swift counter-measures as monthly numbers climb to a 16-year high

(SINGAPORE) The need for further policy action to stem price pressures – sooner rather than later – has grown with an unexpected surge in October’s inflation rate to 3.6 per cent, economists say.

The market consensus estimate was 2.8 per cent. ‘We thought we had a high inflation forecast for October at 3 per cent,’ said HSBC Bank economist Robert Prior-Wandesforde.

In fact, the latest rise in the consumer price index (CPI) has leapt well beyond these estimates. Climbing from a 2.7 per cent third-quarter average (itself a sharp jump from the first six months’ 0.8 per cent pace), it was driven by rising food and oil prices, and is the highest monthly inflation rate since August 1991.

‘I don’t think it’s a one-off (spike) to be ignored,’ said Chetan Ahya, chief economist for South-east Asia and India at Morgan Stanley Asia. ‘The risks of more policy reaction have increased with this latest data. One more month with figures like these may mean that the government needs to move quickly.’ The urgency will be apparent if crude oil prices touch US$120 a barrel, he added.

Most economists believe there will be further monetary tightening via a steeper appreciation of the Singapore dollar at the Monetary Authority of Singapore (MAS)’s next half-yearly policy review in April 2008.

The question, Mr Ahya said, is whether MAS needs to act sooner than April, following its move last month to allow the Sing dollar to rise at a slightly faster pace to help curb imported inflation.

At a media briefing on the Q3 economic data on Monday, MAS deputy managing director Ong Chong Tee said there were no plans for any intermeeting monetary policy review. The current policy stance of allowing the local currency to strengthen gradually and modestly remains appropriate, he said, though economists have asked, in the light of rising price pressures, if the nudge-up was enough. Yesterday, when contacted, a senior MAS official would not comment.

But Morgan Stanley’s Mr Ahya reckons that managing current inflationary pressures calls for the use of not just monetary tools.

While the exchange rate can be employed to deal with ‘tradeable’ inflation in food, transport and other oil-related items, the bigger cost pressures now stem from demand-induced resource constraints in an economy that has been growing above its potential pace, he said.

There is basically a need to slow demand and economic growth, he reiterated.

For the year to October, consumer inflation averaged 1.6 per cent. The 2007 year-round pace is now estimated at about 2 per cent. Next year, it may well hit 5 per cent in Q1 before easing.

Inflation rates of 4-5 per cent would be high against the muted figures of the last two decades. But inflation in Singapore actually ran past 8 per cent in 1980 and 1981, and averaged over 20 per cent during the 1973 and 1974 oil crises.

While MAS has maintained that, even amid the recent CPI uptrend, underlying inflation has remained steady, Mr Ahya said that, with the persistent climb in the headline figure, core inflation will inevitably and eventually pick up too.

Said HSBC’s Mr Prior-Wandesforde: ‘Even if inflation is set to fall in the second half of next year, the worry will be that wage growth will rise higher still, leading to second-round effects on underlying inflation.’ He believes the government will consider additional cooling measures.

‘While denying that the economy is overheating, the government has clearly shown its concerns for the future via the various measures to cool the housing market as well as the delay to several construction projects, an increase in immigration and a contraction in real government spending,’ he noted.

And while there is little Singapore can do about rising energy and food commodity prices, cost pressures from a booming economy also reflect strong consumer confidence, in his view.

‘The fact that retailers have been able to push through virtually all the GST rise and sustain it smacks of strong confidence in the consumer,’ Mr Prior-Wandesforde said. Even with rising inflation, he believes the robust wage growth will be reflected in stronger consumer spending.

‘Notwithstanding concerns about the US economy and a wobbly equity market recently, Christmas should be a good one for retailers,’ he said.

 

Source: Business Times 24 Nov 07

Top Stories for Front Page – Market sticks to singing the US sub-prime blues

STI loses 115 points for the week reinforced by rising oil price and weak US$

LOCAL stock market investors must by now have grown tired of hearing about the US sub-prime mortgage market, collateralised debt obligations (CDOs) and what the US Federal Reserve might or might not do on interest rates.

Unfortunately, like it or not, these have been the main drivers of stock prices for the past month and were again the prime determinants of direction this week.

There was, however, another fluctuating variable to contend with – rising oil price, which this week came within a hair’s breadth of crossing US$100 per barrel for the first time in history.

Combine all of the above with a sliding US dollar – which makes it less likely that the Fed will cut interest rates – and a downward revision by the Fed for its 2008 economic growth forecast and the ‘buy stocks’ story clearly lacks a certain gloss that it used to have.

As a result, the Straits Times Index came under heavy pressure throughout the week, always appearing more likely to fall at any one time than rise.

Despite a short-covering bounce of 13.01 points yesterday to 3,325.89, the index for the week lost 115 points or 3.3 per cent.

Traders have been deserting stocks in large numbers, leaving house traders and proprietary desks to provide most of the daily volume. Yesterday’s session was one of the quietest in recent months with turnover of 1.4 billion units worth $1.53 billion, down from Thursday’s $2 billion.

Wall Street’s Thursday closure for Thanksgiving robbed the market of some direction, resulting in prices trading within narrow bands. As a result, warrants turnover was also down to 565 million units worth $146 million compared with $220 million on Thursday.

Shipping/shipyard stocks have been among the worst hit and volatile, although the same counters were the market’s best performers in October.

STX Pan Ocean, for example, yesterday plunged to $2.60 before recovering to close a nett 3 cents firmer at $2.91, while Cosco Corp, which only a few weeks ago traded above $8, closed yesterday at $5.90.

The fall in blue chips in the meantime has been led by the banks, Singapore Exchange and SingTel. Interest in penny stocks has dwindled, replaced by punting of structured warrants while new listings over the past two weeks have mainly failed to perform.

In assessing the current situation, AMP Capital Investors said ‘while the correction in shares may still have a bit more to run, it is likely we will soon get a decent rebound on the back of improved valuations, pessimism having reached an extreme, the prospect for further Fed rate cuts and positive seasonal conditions around year end’.

AMP added that ‘US economic data was weak and while the minutes from the Fed’s October meeting indicated that its last interest rate cut was a close call, the huge asset writedowns at US banks and the renewed deterioration in credit markets this month mean that the Fed will be forced to cut rates again, with the next move likely to be next month’.

The US Federal Reserve next meets on Dec 11 and investors are hoping for another interest rate cut.

 

Source: Business Times 24 Nov 07

HK billionaire on the hunt for bargains

Now is the time to get back into stocks: Lee Shau Kee

(HONG KONG) Billionaire investor Lee Shau Kee, sometimes nicknamed Hong Kong’s Warren Buffett, said that he spent more than HK$1 billion (S$185 million) in the stock market on Thursday as the first salvo in a HK$10 billion bargain hunt.

‘Now is the right time to get back to the stock market and start buying,’ Mr Lee told a news conference.

The HK$10 billion that Mr Lee is poised to pump into stocks will most likely target his favoured portfolio of 11 companies.

The initial HK$1 billion went into China Life Insurance Co, China Merchants Bank, oil firm CNOOC Ltd, coal producer Shenhua Energy and stockmarket operator Hong Kong Exchanges and Clearing Ltd.

But Mr Lee warned investors that although he was being open about his plans, he was not expecting anyone to follow him and he was not promising speculators would profit by doing so.

‘Gamblers like to complain if they lose their money,’ he said, according to Bonnie Ngan, spokeswoman for his firm Henderson Land.

Mr Lee said Hong Kong’s stock market had fully priced in negative news, such as the fallout from the US subprime crisis, and it was time for investors to hunt for bargains.

He forecast that the benchmark Hang Seng Index, which closed 2.3 per cent down at 26,004.92 on Thursday, would hit 30,000 later this year before climbing to reach 33,000 by Chinese new year, during the first quarter of 2008.

The index hit a high of 31,958.41 at the end of last month, but has fallen steadily since.

 

Source: Reuters (Business Times 24 Nov 07)

CLOSING MARKET REPORT – Wall St lifted higher by retailers, banks

NEW YORK – US stocks rebounded on Friday in an abbreviated session as the start of holiday shopping lifted retail stocks, while progress in a plan to relieve the credit market’s strain aided bank shares.

Shares of JPMorgan Chase, Bank of America and Citigroup all rose more than 2 per cent. The three banks, spearheading an effort to establish a superfund to ease problems in the credit market, are expected to seek support from others in the industry, The Wall Street Journal reported.

Discount chain Target led retailers higher as droves of shoppers turned out – in some cases before dawn – for Black Friday, the official beginning of the holiday shopping season.

Trading volume was thin in the shortened session. US financial markets were closed on Thursday for Thanksgiving. On Wednesday stocks suffered heavy losses on credit market and housing sector worries.

The Dow Jones industrial average was up 181.84 points, or 1.42 per cent, at 12,980.88. The Standard & Poor’s 500 Index was up 23.93 points, or 1.69 per cent, at 1,440.70. The Nasdaq Composite Index was up 34.45 points, or 1.34 per cent, at 2,596.60.

JPMorgan shares rose 3 per cent to US$41.90. Bank of America stock was up 2.4 per cent to US$43.13 and Citigroup stock climbed 3.2 per cent to US$31.70.

Consumers, many with the day off from work, visited stores and shopping centers in search of bargains.

Chains refer to the day after Thanksgiving as ‘Black Friday’ because it once marked the day many retailers turned a profit and went into the black for the year.

Shares of J.C. Penney, which last week cut its forecast for the holiday season, were up 3.1 per cent to US $41.30. Target’s stock jumped 5.7 per cent to US$57.17.

Boeing’s stock rose after the chief executive of Airbus, Boeing’s chief rival, said the weakness of the dollar is ‘life-threatening’ for the European aircraft maker. Boeing shares were up 2.4 per cent to US $89.54.

 

Source: REUTERS (24 Nov 07)

October inflation hits 16-year high of 3.6%

Figure surprises economists, who say Govt may do more to cool economy

CONSUMER prices rose at their fastest pace in 16 years last month as food, housing and transport costs all accelerated their rate of increase.

Inflation hit 3.6 per cent, resuming an upward trend after September’s 2.7 per cent breather.

Yesterday’s figure caught out virtually every economist in town – ‘I almost fell off my chair,’ said DBS Bank’s Irvin Seah – and sent them scrambling to raise forecasts.

Last month’s number beat all estimates in a Bloomberg News survey of economists. ‘We thought we had a high forecast at 3 per cent as the market was at 2.8 per cent,’ said HSBC’s Robert Prior-Wandesforde.

Analysts said the Government may do more to cool the red-hot economy, but the pain of rising living costs will be felt for some time as these measures do not have an immediate effect.

‘This is way beyond market analyst expectations,’ said Mr Seah. ‘We knew inflation would go up. We just didn’t know it would come so quickly.’

Monthly inflation figures going forward are likely to track last month’s figure, as prices seldom fluctuate sharply unless there is a significant change in the economic environment. For instance, noodle prices that were raised last month are unlikely to come down any time soon.

Yesterday’s Department of Statistics figure follows Monday’s new inflation figure from the Monetary Authority of Singapore (MAS).

It forecast inflation to hit 3.5 per cent to 4.5 per cent next year, up from an earlier estimate of 2 per cent to 3 per cent. The figure is expected to be 2 per cent this year.

Inflation is rising across Asia as oil and food prices increase. China, for instance, reported that prices last month rose the fastest in a decade.

In Singapore, a 2 percentage point hike in the goods and services tax in July is bumping up prices even more.

Food costs, which make up the biggest part of the consumer price index, surged as dairy products, eggs, meat and poultry became more expensive. Eating out was 3.2 per cent more costly, too.

Transport and communication, the next big item, rose as spiralling oil prices lifted petrol costs for cars and buses.

High energy prices have also sent electricity rates up twice since July. This and higher rentals bumped up housing inflation to 2.3 per cent.

Health-care costs, which make up just 5 per cent of the index, were up 6.2 per cent.

Mr Prior-Wandesforde said the Government may consider more cooling measures after recent initiatives to dampen the housing market and delay several major construction projects.

If inflation does hit 5 per cent early next year, as suggested recently by Trade and Industry Minister Lim Hng Kiang, the MAS may move to let the Sing dollar strengthen even faster, as it did last month. A stronger local currency can help counter price rises in imported goods.

But these measures take time to kick in, said Mr Seah. He suggested that the Government provide more help to low-income families in next February’s Budget.

But Mr Prior-Wandesforde said help may not come as wage growth may be strong enough to enable the poor to cope with the price rises.

For people like freelance publisher Chiam Choon Yong, it is belt-tightening time. The 44-year-old father of four has been hit by increases in petrol costs – up about 10 per cent to $500 a month – and utility rates – up from $140 a month to $160.

‘We just have to be more economical and stay away from things like seafood and exotic fruits,’ he said.

 

Source: The Straits Times 24 Nov 07

4 office floors at The Arcade put up for sale

ALMOST 18 per cent of The Arcade at Raffles Place comprising four floors have been put up for sale through an expression of interest exercise, and the indicative price range is between $80 million and $90 million.

Based on the indicative price, the unit price for the 32,120 sq ft of space is between $2,500-$2,800 psf.

CB Richard Ellis (CBRE) and Jones Lang LaSalle are advising the owners jointly on the divestment.

CBRE added that the owners are Singaporean.

CBRE director (Investment Properties) Charles Hoon also said that the four strata-titled floors for sale represent a rare opportunity to own commercial space at Raffles Place because most of the office buildings in the area have single owners.

Mr Hoon did say that the original developer of The Arcade still owns about 30 per cent of the building so there is a potential to redevelop the site through a collective sale especially as the existing built-up gross floor plot reflects a plot ratio of about 8 but can be maximised to about 14.

The Arcade is a 20-storey mixed commercial and retail building comprising an office tower and a three-storey retail podium with a total net lettable area of about 118,317 sq ft.

The property is held on a mixture of 999-year and 99-year leasehold interests.

The current yield is about 2 per cent but Mr Hoon said that with leases expiring next year, rental appreciation can be expected.

The lease profile shows that 60 per cent of the current leases will expire in 2008 and the yield can be expected to increase to around 5 per cent.

Existing leases are tenanted out at around $9.20 psf.

Gains from capital appreciation are likely to be higher.

In Q3 2007, CBRE noted that average capital value for prime offices was estimated at $2,900 psf, reflecting an increase of 16 per cent quarter-on-quarter (QOQ) and 114.8 per cent year-on-year, while prime office yields were at 4.32 per cent, up slightly from 4.23 per cent QOQ.

The office sector is still seeing buoyant investment sales. In October, 12 floors at Springleaf Tower (near Tanjong Pagar MRT station) were sold for $225 million representing a unit price of around $2,000 psf.

In August, the entire Chevron House at Raffles Place was sold for $730 million or a record $2,780 psf of net lettable area.

 

Source: Business Times 23 Nov 07)

Koh Brothers buys 2 Shell kiosks for $19.6m

It aims to use one site for condo, other for hotel project

KOH Brothers has bought two petrol kiosks from Shell – one in Bukit Timah and the other in Changi – for close to $19.6 million.

The first site, at 383 Bukit Timah Road, is next to Koh Brothers’ freehold serviced apartment complex, Alocassia Apartment. The site has a strata land area of 13,500 square feet and cost Koh Brothers $13.3 million.

Singapore-listed Koh Brothers bought Alocassia Apartment – a residential and commercial site – in May last year for $30 million.

The company intends to convert the whole site to full residential use and launch a luxury condominium with about 50 units in the third quarter of next year, chief executive Francis Koh told BT.

With the new acquisition, the entire freehold site covers 44,900 sq ft and has a 1.4 plot ratio. The latest purchase brings the price paid by Koh Brothers for the site to $799 per square foot (psf) per plot ratio, including an estimated development charge of $6.9 million.

Mr Koh estimates the project could break-even around $1,250 psf since the company does not plan to tear down the whole building. Luxury apartments in the Bukit Timah area now go for about $1,800-$2,000 psf.

‘Given its prime location, freehold status, proximity to reputable schools and easy accessibility to the city centre, we are confident the site will appeal to home buyers who appreciate the exclusivity and prestige,’ Mr Koh said.

The second site bought by the company – at 80 Changi Road – adjoins its freehold Changi Hotel.

Bought for $6.3 million, the site has a strata area of 8,000 sq ft. The entire freehold Changi Road site now has a total area of 26,400 sq ft.

Mr Koh said the company will look to build a newer, larger hotel on the combined site. Changi Hotel is now a three-storey, 61-room hotel.

Shell’s general manager for retail, Henry Chu, said such sales allow the company to capitalise on the hot property market.

‘The timing of closure and sale of these sites is a commercial decision and is to allow us to take advantage of the buoyant property market to maximise our returns,’ he said.

 

Source: Business Times 23 Nov 07

Topshop to open China store next year

(SHANGHAI) British fashion retailer Topshop plans to open its first China store early next year, following rivals such as Inditex’s Zara and Hennes & Mauritz AB in setting up shop in the world’s fastest growing major economy, sources familiar with the situation said yesterday.

Topshop had signed a deal to rent space in the Shanghai Superbrand Mall in the city’s financial district, said the sources, who declined to be identified.

The mall, in which Zara and H&M already have shops, is managed by a property arm of Charoen Pokphand group, Thailand’s biggest agricultural business conglomerate. ‘Topshop is definitely not coming to China for just one store,’ one of the sources said.

‘It is also looking at many other Chinese cities, such as Beijing and Hong Kong.’ Other sources confirmed Topshop was in talks with several property developers in the former British colony of Hong Kong in the hope of launching Topshop stores in the city next year. Topshop could not immediately be reached for comment.

China’s fashion retail market is booming alongside changing lifestyles and income growth. Retail sales in general are expected to grow about 15 per cent in 2007, analysts have said.

 

Source: Reuters (Business Times 23 Nov 07)

Shimao to shun debt markets for up to a year

(HONG KONG) Shimao Property Holdings Ltd, a developer owned by Chinese billionaire Hui Wing Mau, said it will shun debt markets for up to a year as yields on its dollar bonds rose to a record.

The Hong Kong-listed company doesn’t plan to sell foreign- currency bonds or convertible debt in the next six to 12 months, it said in an e-mail to Bloomberg News.

‘We have strong sales proceeds from pre-sales and we have a big portfolio of investment properties that can help us raise bank loans in China more easily than other pure residential property developers,’ Shimao said in the e-mail.

Investors are asking for record high risk premiums to hold Chinese real estate developers’ bonds as concern that the US economy may enter into recession drives asset managers away from high-risk, high yield debt.

Country Garden Holdings Co, China’s most profitable developer, earlier this month scrapped a plan to raise US$1 billion from its first overseas bond sale.

‘There was quite bit of speculation that other Chinese developers, including Shimao, were thinking about selling dollar bonds,’ said Lawrence Koo, a Hong Kong-based director of credit trading at hedge fund Tribridge Investment Partners Ltd. ‘It would take a bit of pressure off Shimao’s existing bonds if they announce there is no such plan, but it won’t help too much unless other developers also decide not to sell debt.’

The spread, or extra yield, investors demand to hold Shimao’s US$350 million of 8 per cent bonds maturing in 2016 rather than Treasuries widened to a record 590 basis points at 3:53pm in Hong Kong, according to Merrill Lynch & Co prices. A basis point is 0.01 percentage point.

Credit-default swaps on Shimao’s debt were unchanged at 480 basis points, according to Barclays Capital.

That means it costs US$480,000 a year to protect US$10 million of Shimao’s bonds from default for five years.

The debt is rated BB+, one level below investment grade, by Standard & Poor’s (S&P).

The developer plans to increase its land bank to as much as 35 million square metres at the end of 2008 from 21 million square metres, according to the e-mail.

It said it plans to fund the estimated 10 billion yuan (S$2 billion) cost of buying land from planned property sales of 17 billion yuan next year.

Many Chinese real estate developers will be forced to seek other funding avenues for their rapid expansion until credit market conditions stabilise, S&P said in a report on Nov 15.

Small developers with limited capital are likely to find the market conditions too tough to survive while bigger companies will become more reliant on internally generated cash and bank loans until they can tap debt markets, the rating assessor said.

‘The increasing ambition of many developers to aggressively grow, both in size and geographic coverage, creates high execution risks,’ according to S&P.

‘If growth is heavily debt-funded, the financial health of developers will come under pressure.’

 

Source: Bloomberg (Business Times 23 Nov 07)

Japanese Reits likely to be takeover targets

Those trading at less than their net asset value are likely to be bought out

(TOKYO) Japanese real estate trusts and asset managers may be ripe for takeovers after share prices plunged and stricter compliance guidelines raised costs, said property managers including a local real estate executive at Morgan Stanley.

Regulations to boost investor protection went into effect on Sept 30, raising compliance costs which may make it difficult for smaller real estate managers to survive.

Real estate investment trusts (Reits) trading at less than their net asset value are likely to be takeover targets.

‘Consolidation is imminent,’ said Marcus Merner, managing director for real estate at Morgan Stanley Japan Securities Co, at a conference on Wednesday. ‘All the arrows are pointed in the right direction for that to happen.’

The Tokyo Stock Exchange Reit Index has fallen even as land prices advanced.

The index has dropped about one-third in the past six months, eroding gains earlier in the year, after rising defaults of sub-prime mortgage loans in the US prompted some investors to sell stock to make up for losses elsewhere.

Japan may see buyouts of property holders similar to some of those in the US, said Alan Miyasaki, managing director of the Blackstone Group Japan KK.

Blackstone Group LP bought Equity Office Properties Trust (EOP), the biggest US office landlord, for US$23 billion in March, and may have made as much as US$2 billion in profit by selling off properties in EOP’s portfolio, according to Bloomberg calculations. ‘Growth fundamentals in the market place are appropriate to have similar M&A here in Japan,’ Mr Miyasaki said.

Thirty out of 40 Reits listed on the Tokyo Stock Exchange (TSE) trade below their net fixed asset value, according to Bloomberg calculations.

The share declines may have prompted LaSalle Investment Management Inc, a unit of the world’s second-largest commercial real estate broker, to take control of eAsset Investment Corp, the first ever takeover in Japan’s 4.9 trillion yen (S$64.6 billion) Reit market.

LaSalle, a subsidiary of Jones Lang LaSalle Inc, bought the asset manager of eAsset on Nov 19 and plans to expand the trust.

Earlier this month, Goldman Sachs Group Inc and Aetos Capital LLC bought property manager Simplex Investment Advisors Inc for 154.1 billion yen.

Goldman plans to invest about 200 billion yen this year in Japanese property, betting that real estate is short of its peak after a two-year rally.

Tighter regulations under the Financial Instruments and Exchange Law have increased administration costs for compliance standards, and the burden could turn smaller funds into takeover targets, said Yasuhiko Amino,

operating officer and chief marketing officer of Japan at GE Real Estate Corp.

‘The number of opportunities will increase,’ Mr Amino said.

As land prices recover, property values on some companies’ books are increasing at a faster pace than their market worth.

Property assets generated more profit last year for Sapporo Holdings Ltd, Japan’s third-largest beermaker, than its alcohol business did.

Sapporo formed a property alliance with Morgan Stanley on Oct 30 as it seeks to fend off a hostile bid from Warren Lichtenstein’s Steel Partners Japan Strategic Fund, which wants the brewer to sell off its real estate.

Mitsubishi Estate Co and Sumitomo Realty & Development Co, Japan’s second and third-biggest developer by revenue, are among builders that have set up takeover defences this year.

 

Source: Bloomberg (Business Times 23 Nov 07)

India’s retail rents rank 16th most expensive

Khan Market in New Delhi the most costly at 950 rupees psf a month

IN NEW DELHI

INDIA has been ranked the 16th most expensive global retail ‘high street destination’ by a prominent real estate consultant.

According to the report Main Streets Across the World 2007 by Cushman & Wakefield, Khan Market, located near the famous India Gate in New Delhi, is the most expensive retail location in India with rentals of 950 rupees (S$35) per square foot (psf) a month.

Rents at Khan Market, known for its book, music, grocery stores and popular restaurants that are patronised by the diplomatic community in the city, have witnessed an annual growth of 35.7 per cent over the same period last year.

‘Khan Market is the biggest riser in the ranking of the world’s most expensive shopping locations in terms of retail rents, moving up eight places from last year’s 24th position,’ the report says.

New York’s Fifth Avenue held its position as the world’s most expensive shopping destination followed by Hong Kong’s Causeway Bay and Avenue des Champs Elysees in Paris.

‘Retail is going through a revolution in India, although a part of the increase in rents is due to lack of high quality space in the right location,’ Cushman & Wakefield India head (retail) Rajneesh Mahajan said.

India also figures among the world’s top 10 locations that have recorded the biggest rental increase in local currency terms.

Connaught Place, the main commercial and shopping hub of Delhi, is the biggest gainer in Asia and globally second only to Chicago’s East Oak Street, with an annual rise of 87.5 per cent.

Kemp’s Corner in Mumbai has also clocked very high rental growth of over 78 per cent, making it the fourth highest riser.

The rental at Connaught Place was 750 rupees psf a month and Kemp’s Corner was 490 rupees psf a month.

Greater Kailash in South Delhi and Fort/Fountain and Colaba in Mumbai also saw steep rises in rent of over 55 per cent for the first two and over 50 per cent for the third.

High rental in the above-mentioned locations is also attributed to the very narrow scope for expansion, as these areas are located in the heart of the various cities.

However, suburbs such as Noida or Gurgaon, adjoining Delhi, offer very good and cheaper retail options, as space for expansion is not an issue.

 

Source: Business Times 23 Nov 07

CapitaLand sets up $880m India property fund

CAPITALAND, South-east Asia’s biggest developer, yesterday said that it has successfully established its first India private property fund with a fund size of $880 million.

The company first announced the fund – CapitaRetail India Development Fund – in July.

The closed-end private fund has the mandate to invest in retail mall developments in India. CapitaLand holds a stake of about 45 per cent stake in it, with the remaining held by insurance companies, pension funds and corporations.

CapitaLand chief executive Liew Mun Leong said that the fund will allow the company to increase its multi-sector presence in India.

‘We are conscious of the vast opportunities presented by India’s retail real estate market, driven by the country’s strong macro-economic growth and rapid urbanisation,’ he said in a statement. ‘Over time, we expect to deepen our retail and fund management presence in India to become a significant long-term retail real estate player there.’

CapitaLand, which also has similar funds in China, hopes to replicate its successful China retail business platform in India.

CapitaLand’s shares closed unchanged at $6.50 yesterday. The company’s stock has risen some 4.8 per cent since the start of the year.

 

Source: Business Times 23 Nov 07

Australian poll largesse risks high rates, inflation

(SYDNEY) Generous promises from Australia’s two main political parties ahead of tomorrow’s general election have stoked fears that interest rates, already at the highest in a decade, may go up even further than the market anticipates.

Financial markets are pricing in a rate rise early next year, but analysts say investors might have to factor in more increases if the tax cuts and spending promised by the politicians boost demand and add to price pressures.

‘In the run-up to the Federal election, both political parties are running a real risk of eliminating the budget surpluses projected by the Treasury,’ said Stephen Halmarick, co- head of economics and market analysis at Citigroup here.

‘The result could be more upward pressure on inflation and rates. We already expect another rate rise from the Reserve Bank of Australia (RBA) early next year and the risks are slanted to the official cash rate going beyond the 7 per cent that markets are currently pricing.’ The central bank raised the cash rate to an 11-year high of 6.75 per cent this month.

Latest polling suggests the opposition Labor Party will be swept into office, unseating veteran conservative Prime Minister John Howard, who is hoping for a fifth term in office.

In a bid to win back voters, Mr Howard has promised A$34 billion (S$43 billion) in income tax cuts as part of some A$66 billion in election largesse. Labor’s Kevin Rudd, almost as generous, has unveiled a package worth A$59 billion, including A$31 billion in tax cuts. Both are relying on large budget surpluses as Australia rides a commodities boom.

The surplus for 2006/07 was A$17.2 billion, or about 1.6 per cent of gross domestic product (GDP), and the Treasury estimates it will total A$61.4 billion over the next four years, boosted by high revenue at a time of robust domestic growth. GDP grew 4.3 per cent in the year to June, giving 16 years of uninterrupted expansion.

But that is pushing up consumer prices. The RBA raised its forecast for annual underlying inflation to 3.25 per cent for the current quarter and up to mid-2008, up from a 3 per cent forecast.

The RBA, which aims to keep inflation in a 2 to 3 per cent band, cautioned that the economy was showing little sign of slowing despite five rate increases since May 2006, with demand remaining healthy and the jobless rate at a near-33-year low.

Some economists argue that the tax cuts and spending will not come all at once, so they might not be as inflationary as feared.

‘Many of the commitments are spread over five years,’ said Craig James, chief equities economist at CommSec. ‘It’s also important to remember that these are just spending commitments; they haven’t been made as yet, and they could be amended down the line. Further, revenue measures haven’t been announced. That’s for later.’ However, Rory Robertson, an interest rate strategist at Macquarie Bank, said the political parties’ priorities were clear.

‘Both sides of politics have agreed their priority was tax cuts and increased spending,’ he said.

Neither was ’showing much interest in providing real support for the RBA’s efforts to slow demand growth and dampen growing inflation pressures’.

 

Source: Reuters (Business Times 23 Nov 07)

ADB warns sub-prime fallout could get worse

Financial volatility, repricing of credit risk may lead to capital flight: report

IN TOKYO

FALLOUT in Asia from the US sub-prime mortgage crisis, through financial and other channels, may prove heavier than expected, the Asian Development Bank warned in a report published yesterday.

This came as a Bank of Japan Policy Board member cautioned that the impact of the crisis is likely to be longlasting, and is also on the heels of US Treasury Secretary Henry Paulson’s warning that US financial defaults could accelerate next year.

Strong economic growth and improved financial systems, plus limited exposure to US sub-prime mortgages, have helped limit the regional impact from global credit problems, the ADB said. But ‘though there are no signs of widespread problems in emerging East Asia, downside risks to regional economic and financial market trends remain and wider ramifications cannot be ruled out’, it suggested.

Prolonged global financial market volatility, a rise in risk aversion and re-pricing of credit risk could lead to a reversal of capital flows into Asia, Jong-Wha Lee, head of the ADB’s Office of Regional Economic Integration, said in the Bank’s latest Asian Bond Monitor publication.

The ADB called for improved transparency in credit markets through better valuation and accounting of offbalance sheet instruments, strengthening of risk management and enhancing the enabling environment for local currency bond markets. It also urged stronger regional cooperation in monitoring and regulating financial markets and in developing financial institutions’ risk management techniques.

The ADB’s comments echoed the increasing concern being voiced in various quarters about the spreading impact of the sub-prime crisis. Bank of Japan Policy Board member Seiji Nakamura said yesterday that problems were taking longer to settle than expected and that their impact could broaden from here on.

Mr Paulson also cautioned this week that potential US financial defaults would be markedly bigger in 2008 than this year as less creditworthy mortgages are exposed.

The OECD (Organisation for Economic Cooperation) has calculated that some US$890 billion of poor credit quality mortgages will need to have their interest rates reset next year. Cumulative losses in the US$200 billion to US$300 billion range from the mortgage market crisis ’seem feasible’, as a result, it has suggested.

Following a series of write-offs by leading US banks, Japan’s Mitsubishi UFJ Financial Group on Wednesday reported a near 50 per cent drop in first-half profits owing to losses of 24 billion yen (S$320.4 million) on subprime related investments and on its credit card unit.

Other Japanese banks have also declared significant sub-prime related losses this week. Mizuho Financial Group, another of Japan’s three megabanks, booked the largest loss related to recent financial market turmoil. It took 70 billion yen of losses in the first half of the current financial year while the third megabank, Sumitomo Mitsui Financial Group, took losses of 32 billion yen in the first half while indicating that these could rise to 87 billion yen for the full year.

 

Source: Business Times 23 Nov 07

Reception for IPOs cooling as market sentiment dives

Poor debuts by recent listings fail to dampen plans by at least five firms to go public soon

THE investing public’s appetite for new listings has turned sour amid the current stock-market turmoil.

But the recent rocky reception for several initial public offerings (IPOs) has not deterred several more firms from making plans to list soon.

Out of seven new listings over the past three weeks, only two issues – those of China telco Sinotel Technologies and Cacola Furniture – are still trading above their offer prices.

The other five, including big offerings such as Lippo-Mapletree Indonesia Retail Trust and China New Town Development, quickly tanked.

Investors who had believed the IPOs were sure bets for quick riches were left licking their wounds.

Still, the current dip in sentiment is unlike the IPO drought in September, when firms delayed their listing plans altogether. This time, a steady stream of IPO hopefuls is seeking public comment by displaying their preliminary prospectuses on the Monetary Authority of Singapore’s Opera website.

Two firms are poised to list on the Singapore Exchange (SGX). Dynamic Colours, which makes compounded resins and packaging materials, debuts on the mainboard today, while ChungHong, a printed circuit board assembly service provider, starts trading next week.

A check with Opera shows there are at least five more firms planning to launch IPOs soon. These include well known names such as curry-puff maker Old Chang Kee and China shipbuilder JES International.

Two business trusts – Hyflux Water Trust and Altitude Aircraft Leasing Trust – are slated to go public too.

This is despite a rapidly weakening risk appetite. The Straits Times Index has fallen by a staggering 493 points, or 13 per cent, in just three weeks – losing two months worth of gains.

Some traders have expressed dismay at the speed at which some recent IPOs have slipped from grace, as their share prices plunged after listing.

‘It is simply incredible. In October, new listings like Marco Polo Marine and China Oilfield were still registering strong double-digit percentage gains. Then came the great bear market for IPOs in November,’ said a local brokerage remisier, Mr Alan Koh.

This should highlight to retail investors the importance of reading an IPO aspirant’s prospectus before they subscribe to its shares.

China New Town, which fell 25.3 per cent from its 83-cent issue price to 62 cents in one week, was hurt by fears it might face delays getting approval from Beijing for a 1.17 billion yuan (S$228.5 million) project.

‘The company had prominently highlighted this concern as a risk factor; yet, few investors paid attention until it was listed,’ said the dealer.

Similarly, those who had read the Lippo-Mapletree Indonesia Retail Trust document carefully would have noticed it was offering 20 million units for public subscription.

While this was a mere fraction of the 645.5 million shares placed out to institutions, the allocation was far bigger than the usual two to three million shares offered to retail IPO investors.

This would have spared punters, who applied for more than one million shares, the anguish of getting a higher-than-expected allocation of 733,000 shares – and losing a staggering $87,960 per person, as the stock dived 15 per cent on its Monday debut.

But Ms Wong Bee Eng, the chief executive of boutique corporate finance firm Provenance Capital, said a listed firm’s lacklustre debut should not be seen as a gauge of future performance.

‘There is a lot of time and effort involved in getting a company listed. Unless market sentiment is so poor that an issue manager is unable to place out all the shares, a company will still go ahead with its listing plan, even if the initial reception may not turn out to be warm.’

Still going ahead

A check with the Monetary Authority of Singapore’s website shows there are at least five more companies planning to launch IPOs soon, including well-known names such as curry-puff maker Old Chang Kee and China shipbuilder JES International.

Two business trusts – Hyflux Water Trust and Altitude Aircraft Leasing Trust – are slated to go public too.

The current dip in sentiment is unlike the IPO drought in September, when companies delayed their listing plans altogether.

This time, a steady stream of IPO hopefuls is seeking public comment by displaying their preliminary prospectuses on the MAS’ Opera website.

Also, two firms are poised to list on the SGX: Dynamic Colours debuts on the mainboard today while ChungHong starts trading next week.

 

Source: The Straits Times 23 Nov 07

CapitaLand opens business school as CEO launches book

PROPERTY giant CapitaLand has opened its own business school at a heritage building in Sentosa.

Yesterday, chief executive Liew Mun Leong also used the venue to launch a book that is a compilation of nine years of e-mail messages to his staff, written mostly on Sundays.

The developer spent $10 million to renovate the building, which used to house a museum of rare stones. It leased the building earlier this year for a period of 10 years for Climb, short for CapitaLand Institute of Management & Business.

Climb has started offering learning and development programmes for the group’s staff – about 8,900 globally, of whom 1,400 are in Singapore.

Started last year, Climb has six full-time staff and previously conducted its courses at various locations, including hotels.

Mr Liew, who is involved with some of Climb’s programmes, yesterday launched his book, Building People: Sunday Emails From A CEO, with President SR Nathan, who also officially opened Climb.

The book contains some of the e-mail that Mr Liew has written to his staff in past years – an activity which he described in his book as enjoyable and relaxing.

An e-mail sent in 1998 carried the message: ‘Don’t take everything from the table. Leave something for your partners, too.’

Another, sent in 2001 and titled ‘There are no fat CapitaLand executives’, addressed the group’s ‘keep fighting fit’ culture.

Mr Liew ended it with: ‘So get out, you lazy bones and get going. It is all about discipline and then habit… Have fun doing it!’

 

Source: The Straits Times 23 Nov 07

US sub-prime losses may reach $434b, says OECD

Organisation says worst is not over and credit turmoil could wreak more havoc on markets

LONDON – OVERALL losses caused by the United States mortgage market crisis could feasibly hit US$300 billion (S$434 billion), and the broader credit crunch could yet inflict greater damage on equity markets, the OECD said.

‘Thus far, equity investors seem to have shrugged off the negative sentiment that prevailed over the summer, but it may be too soon to draw firm conclusions,’ the Organisation for Economic Cooperation and Development (OECD) said in a report.

‘As adjustments have often occurred in waves, and as higher funding costs take typically several months to have their full impact on companies or consumers, it may well be that the recent correction is only a precursor of a more protracted downturn.’

Financial institutions and policymakers needed to buy time to ensure an orderly end to the trouble which spilled from the US mortgage sector to financial markets globally in July and August, the report said.

The OECD said the super fund being set up by Citigroup, Bank of America and JPMorgan Chase to pool securities of ailing special investment vehicles – thus preventing a further fire sale of these asset-backed securities – was a useful mechanism.

The Paris-based forum said the US housing market downturn had further to run and would continue to depress mortgage-linked debt held by banks, hedge funds and insurance firms.

‘We still have not hit the worst point in resets, delinquencies and ultimate losses on mortgages,’ the OECD said, adding that about US$890 billion of sub-prime mortgages, or poor credit quality loans, will have rates reset next year – and peaking in March.

The OECD report said a hypothetical 14 per cent loss rate on sub-prime mortgages being reset next year could deliver an overall US$125 billion hit to lenders.

Including Alt-A, or ‘near prime’, mortgages, cumulative losses in the US$200 billion to US$300 billion range ’seem feasible’, it said.

The financial sector’s exposure to these losses lies mainly in holdings of mortgage-backed securities repackaged within complex collateralised debt obligations (CDOs) held by hedge funds, banks and bank-sponsored structured investment vehicles.

The OECD said hedge funds held 21 per cent, or US$650 billion, of riskier BB-rated and equity tranches of

CDOs. Banks held just 5 per cent, or US$150 billion, of these.

With mortgage-related assets constituting about 56 per cent of the backing for CDOs, the direct mortgage exposure in these investments could be reduced to US$360 billion for hedge funds and US$90 billion for banks.

Assuming the US$3 billion total CDOs outstanding has been cut over the past six months due to lower prices and asset restructuring, the US$200 billion to US$300 billion estimate of total losses due seems reasonable, the OECD said.

 

Source: REUTERS (The Straits Times 23 Nov 07)

US sub-prime woes ’should not deter Asian bond growth’

ASIAN bond markets must continue to grow and develop, even though it was their relative lack of sophistication that spared them from the worst of the United States sub-prime crisis.

A conference on regional bonds in Singapore yesterday heard that the highly complex financial products used by American and European banks are still not that prevalent in the Republic. Yet it is these same products that are at the heart of the credit mess now.

This has led some observers to ask if Asia should slow the pace of innovation in its bond and credit markets.

But Mr Ong Chong Tee, deputy managing director of the Monetary Authority of Singapore, said: ‘It is important to avoid the mistake of planning only based on the last crisis.

‘Each financial crisis or shock will bring with it unique circumstances and lessons. But in and by themselves, they should not become reasons to dampen market development and growth.’

He was echoing Senior Minister Goh Chok Tong’s remarks at the Barclays Asia Forum earlier this month.

Mr Goh had urged Asian institutions to press on with efforts to develop capital markets and create robust and efficient systems.

Developed financial markets across the world have been shaken by problems in the US housing market, with big-name American and European banks reporting billion-dollar losses on investments linked to poor-quality home loans.

By contrast, banks in the region have been largely unscathed as their exposure, if any, to these complex instruments has been small, said Dr Lee Jong Wha, who heads the Asian Development Bank’s (ADB’s) regional economic integration office.

But Mr Ong stressed that bonds and other capital market products are good alternatives to bank loans for firms.

The heads of the fixed-income sections at various banks told the seminar, which was organised by The Asset magazine and the ADB, that growth momentum has eased for more complex instruments but deals have not dried up.

Standard Chartered Bank’s capital markets global head, Mr Brad Levitt, said Asian currency-denominated bonds have outgrown issues in the US dollar, euro and yen.

 

Source: The Straits Times 23 Nov 07

Jack Investment raises Iluma project cost

Entertainment, retail mall bill to soar to $160m from $100m

JACK Investment, which won the tender to build a retail and entertainment mall on a site opposite Bugis Junction in 2005, has revised its projected total investment cost from $100 million to $160 million.

Project director Lim Swee Teck said that Jack Investment intends to ‘ensure that the final finished product will be of an iconic stature’. The development is now called Iluma.

Mr Lim said that the mall, designed by award-winning architectural firm WOHA, will have high-tech features like a light and media facade and a 27,000 sq ft column-free space on the rooftop dedicated to theme restaurants and concept dining.

Other features will include exhibition and promotional spaces within the mall, as well as a flexible performing space which can seat up to 400 people.

Also confirmed is the vital link-bridge across Victoria Street to Bugis Junction.

Jack Investment also owns Leisure Park Kallang, West Coast Recreation Centre, Woodlands Point and 600@ToaPayoh.

One of the main entertainment attractions at Iluma will be a cineplex, with a capacity for 1,400 seats, which will be run by Jack Investment. This will be a new business for company that will begin with the recently announced sixhall, 830-seat cineplex next to Leisure Park Kallang.

Iluma will be 10 storeys high. Up to 60 per cent of the gross floor area will be dedicated to entertainment uses.

There will be 191,580 sq ft of net lettable area with a total of 150 retail units.

Iluma’s marketing consultant Knight Frank said that the primary target market will be fashion conscious 20 to 30- year-olds.

Knight Frank head of retail Sherene Sng added that entertainment attractions could also include brand-name dance clubs similar to the Ministry of Sound.

She said that rents at Iluma can be expected to range between $10 and $30 per square foot (psf). Currently, top rents at neighbouring Bugis Junction are said to be in the region of $40 psf.

The mall is currently under construction and is expected to be completed in the final quarter of next year.

 

Source: Business Times 22 Nov 07

Hot market smokes out solo land sites

19 single-owner plots worth $1.05b sold this year

(SINGAPORE) With the property market running hot, it is not just collective sales that have ballooned. Over the past two years, more residential land sites owned by single owners were sold as well.

So far this year, 19 residential sites owned by single owners and worth some $1.05 billion in all were sold to developers, data provided by property firm CB Richard Ellis (CBRE) shows.

And in 2006, there were 15 single-owner land sales worth a total of $865 million. By comparison, just four singleowner land sales worth $303 million were done in 2005.

Market watchers say a property market that is strong and active will bring out more sellers – both of the en-bloc variety as well as single owners.

‘Collective sales have hogged the limelight of late, but the single-owner sales have also been very active,’ says CBRE executive director Jeremy Lake. ‘If you look at overall residential sales, you will see that they have gone up too. So single owners are just mirroring the overall market.’

Ku Swee Yong, director of marketing and business development at Savills Singapore, says that in the case of those sites owned by associations or clubs, members who were looking to sell might have been able to convince those who were previously not in favour of selling to change their minds, considering the prices that the properties can now fetch.

‘When the price is better, they (those looking to sell) manage to clear the hurdle,’ Mr Ku says.

The 19 sites sold by single owners this year include a few owned by associations, including one sold by Chui Hui Lim Club. The club sold a Keng Lee Road site to Sim Lian Group for some $115.8 million.

CBRE’s data also shows that this year, while there were a few large single-owner sites that were sold, the bulk of the 19 properties were small – with 10 of them going for less than $30 million each.

Market watchers attributed the increased interest in smaller sites to new players in the property market. These smaller developers generally do not have the resources to bid for en-bloc sites that go for hundreds of millions dollars – the province of the likes of CapitaLand, City Developments and foreign property funds.

‘When the market is good, it will attract new entrants,’ says CBRE’s Mr Lake. ‘And you will find some people who will want to get into the market, but might not be able to afford the big sites.’

Sesdaq-listed Tee International is an example of one new entrant which has been snapping up smaller sites. The company, which has a market capitalisation of $41.5 million, has been in the electrical and mechanical engineering business since 1980. But since the start of the year, Tee has been buying a string of freehold terrace houses and apartments with plans to develop them into luxury ’boutique’ homes.

Among its purchases are three single-owner sites, CBRE’s data shows. Tee acquired two single-owner plots in Cairnhill Circle in July – one for $7.7 million and the other for $5.5 million. It also bought a single-owner property in Thomson Road for $6.9 million in January this year.

Similarly, Eastern Holdings, which publishes magazines, also picked up two small single-owner sites in Grove Drive this year – one for $12.5 million and the other for $10.3 million. The company is also relatively small, having a market capitalisation of about $70 million.

Savills’s Mr Ku says that there are also some high net worth individuals who are buying smaller sites, redeveloping them and then selling them – all within a short span of time – to capitalise on the property market.

These wealthy individuals were also adding to the demand for smaller sites, he says.

 

Source: Business Times 22 Nov 07

Credo Real Estate sells 5 adjacent developments in en bloc package

Five developments with total site area of 74,355 sq ft sold to KSH for $120m

FIVE in one fell swoop – taking collective sales to the next level is Credo Real Estate, which has just managed to sell a package of five neighbouring residential developments to a single developer for $120 million.

The five developments, which are at Mergui Road, off Rangoon Road, are Norfolk Court, Mergui Lodge, Northern Mansion, Mergui Court and The Mergui.

With a total site area of 74,355 square feet and a plot ratio of 2.8, the $120 million price reflects a unit price of $580 per square foot per plot ratio (psf ppr).

It has been sold to KSH Holdings. The publicly listed construction, property development and property management company said in a statement released yesterday that the site has a potential to be developed into a 142-unit development with units averaging 1,250 sq ft.

KSH also said that the acquisition will be financed through internal funds and bank borrowings, and that it is currently negotiating with other investors to form a joint venture to develop the site.

On the challenge of bringing together the owners of five developments, Credo executive director Yong Choon Fah said that it had been looking at the possibility of a combined collective sale for several years.

She also explained that each development had different attributes and that only by combining them could a ‘winwin’ be achieved for all.

The five developments have land areas ranging from 10,061 sq ft to 18,524 sq ft and Ms Yong said that all the home owners have accepted the same unit price.

There are a total of 88 homes and the owners will receive between $906,856 and $1,908,491 each.

The site, which is considered to be in the ‘city fringe’, is estimated to have a breakeven price of about $1,000 psf.

In the immediate vicinity, Pristine Heights is currently selling for between $1,000 and $1,150 psf.

In 2006, Credo marketed Lock Cho Apartments, Comfort Mansion and a four-storey walk-up block for a combined collective sale. They were eventually sold to City Developments Ltd. The latest deal, however, is thought to be the only one to involve five developments.

 

Source: Business Times 22 Nov 07

SINGAPORE INTERNATIONAL – Big market in projects from int’l agencies

S’pore firms can grow their overseas businesses and leverage on the IOs’ facilities

Many Singapore companies do not realise how big the market is for projects awarded by international organisations (IOs) like the Asian Development Bank (ADB) and World Bank. The World Bank and ADB jointly award about US$31 billion of business projects annually through loans, grants and technical assistance programmes to developing countries.

In fiscal 2007, the World Bank committed US$34.3 billion in loans, grants, equity investments and guarantees to its 185 member countries. ADB approved US$7.9 billion of loans and US$241.6 million in grants in 2006.

According to ADB, from January 2001 to June this year, Singapore companies won US$548 million of contracts from ADB-financed projects. In terms of World Bank-financed projects, local firms were awarded just US$158 million in contracts from 2000 to 2007.

Besides these two huge organisations, others like the Inter-American Development Bank, the Andean Development Corporation, the African Development Bank and the various agencies of the United Nations also award contracts for development projects.

These IOs are an additional and viable source of business for Singapore companies. The channel funds to health care, education, transport, water and sanitation, agriculture, public administration and governance, financial sector development and the environment.

Apart from the obvious financial aspect, there are many benefits to be had by partnering and working with IOs.

They are a good way to grow international business through overseas consulting projects, civil works contracts and the supply of equipment and goods. And ventures in developing markets are slightly less risky because IO-funded projects typically come with payment guarantees.

While dipping their feet into overseas markets, companies can also leverage on the IOs’ facilities like political risk insurance and debt/equity project finance. Access to these facilities helps strengthen the value proposition when striking out abroad.

A subsidiary benefit of taking part in such projects is the satisfaction of contributing to the long-term needs of developing countries.

‘International organisations like the ADB and World Bank have established systems and networks to serve the financial and technical needs of developing economies,’ says IE Singapore’s deputy chief executive officer, Chua Taik Him.

‘Singapore’s knowledge and experience in developing its economy, particularly infrastructure development and urban management, are highly relevance to these countries.’

According to IE Singapore’s IO division assistant director G Jayakrishnan, areas in which Singapore companies can participate are bidding for contracts for consultancy work, goods and civil works, as well as in public-private partnership and other projects.

Consultancy and procurement contracts range from providing advice, education, training and health care to urban planning, transport and logistics, infocomm technology, water and environmental management, he says.

But Singapore firms may be unfamiliar with the typical cycles of IO-funded projects and may not have a strong track record if they are new to a market.

Recognising the huge potential of the IO-related market, IE Singapore set up a dedicated International Organisations division in 2004. IE helps in two main areas:

1. First, it raises awareness of opportunities while equipping companies with the knowledge and competencies to partner IOs. IE Singapore, in collaboration with the IOs, organises regular procurement and business opportunities seminars and workshops, said Mr Jayakrishnan. These broad-based outreach activities are supplemented by one-toone company-level advisory sessions that aim to provide in-depth information to companies.

2. Second, IE Singapore identifies IO-related project opportunities and channels these to Singapore-based companies. The referrals are backed up by on-the-ground market assistance and intelligence from IE’s overseas offices.

   IE also helps by raising awareness among IOs of the capabilities, pools of expertise and track record of Singaporebased companies. For example, sector-specific briefings are organised for IOs, at which Singapore companies can present their solutions to IO officials and project team leaders, while the latter give more information about upcoming projects. Programmes to showcase Singapore’s development experience in sectors such as education, water resource management and urban management are also arranged.

   IE is also establishing longer-term institutional partnerships with IOs, like the Asia Training and Research Initiative for Urban Management (Atrium), which it signed with ADB in March. Under this initiative, which focuses on cooperation activities in the areas of urban master-planning, urban transport management, water and environmental management, Singapore will provide up to US$1 million over the next three years, while ADB will complement this with up to US$2 million of ADB-supported technical assistance and loan projects in the various developing countries.

   ‘IE Singapore aims to help Singapore-based enterprises leverage on IOs to participate in international projects and contribute to the growth of developing countries,’ says Mr Chua.

   The IO projects market is large and Singapore companies have unique strengths that enable them to take advantage of it. With the help of IE Singapore, it seems likely their market share will continue to grow.

    

   Source: Business Times 22 Nov 07

Average Grade A office rents here on par with HK

But top rents in HK are 1.8 times higher than in comparable buildings here

AVERAGE island-wide Grade A rents are currently just a shade under those of Hong Kong, but the highest rents achieved by Hong Kong Grade ‘AAA’ office buildings are still about 1.8 times higher than the top rents achieved in comparable buildings here.

A report by Savills reveals that in the CBDs of Hong Kong and Singapore, Grade A rents are now the equivalent of $9.80 and $9.70 psf respectively.

However, top rents in Hong Kong’s Grade ‘AAA’ buildings like the International Financial Centre, Chater House and AIG Tower are closer to $32 psf while those in Singapore’s Republic Plaza, One Raffles Quay and 6 Battery Road are at about $17.50 psf.

Rising business costs have come under scrutiny recently and Savills Hong Kong senior director (research and consultancy) Simon Smith does say that there is the perception that Hong Kong and Singapore are in direct competition to attract businesses for this segment of the property market. However, he added: ‘I have not come across any financial institutions that have chosen to relocate from Singapore to Hong Kong yet.’

Indeed, Mr Smith believes that the financial institutions that are so important to the economies of both cities are more likely to set up offices in both cities to service different markets.

In terms of new supply of office space, Mr Smith does point out that Hong Kong will see some ‘AAA’ space become available next year in areas like West Kowloon where the 2.5 million sq ft International Commerce Centre (ICC) is set to open. The ICC is said to have attracted some major financial institutions already.

In contrast, Savills notes that the recently awarded commercial development sites including those at Marina View and Beach Road are expected to generate a combined 3 million sq ft of office space, scheduled for completion between 2010 and 2012.

But competition actually could come from more unlikely quarters.

Savills’ survey of regional office rents includes the emerging Vietnamese cities of Hanoi and Ho Chi Minh City and already average Grade A office rents in both cities have outpaced those in Shanghai and Beijing (but are still less than Tokyo, Hong Kong and Singapore).

Mr Smith believes that rising rents and 100 per cent occupancies in Hanoi and Ho Chi Minh City are largely due to the shortage of quality buildings in these cities, and hence adds: ‘There is a huge potential there for developers.’

Giving an insight into the pace of development there, he said: ‘Vietnam is much like China was in the 1990s, where companies were running their businesses out of hotel rooms. But when the market matures, rents will settle down.’

Savills believes the outlook for Singapore office sector remains positive, with rents continuing to rise, although at a slower pace for Grade A space due to ‘resistance from tenants’.

‘Demand from multinational companies for offices in suburban areas and high-tech space is expected to increase, especially by those who are more conscious of their bottom-line,’ it said.

 

Source: Business Times 22 Nov 07

Viet firm to raise funds for 11 projects

(HANOI) Saigon Thuong Tin Real Estate Joint-Stock Co, part of the same group as the only bank listed on the Ho Chi Minh City Stock Exchange, will sell bonds and shares this year to raise capital for investments.

The Ho Chi Minh City-based property developer aims to raise funds for 11 property projects, Dang Hong Anh, chairman and general director, said in an interview in Hong Kong on Tuesday. The company will get 2 trillion dong (S$181 million) from a bond sale, and 125 billion dong from selling shares, he said.

‘We have many good opportunities and projects and we need more capital,’ Mr Anh said. ‘The difficulty for an issuer in selling bonds is creating opportunities for use of the proceeds, but Sacomreal has a lot of projects now.’ The company will pay a coupon of as much as 10.5 per cent on the securities, with an ‘interest rate that is still lower than borrowing from a bank,’ Mr Anh said. The company sold 1 trillion dong of 10 per cent five-year notes on Nov 15.

The minimum price for the sale of shares to strategic investors will be 100,000 dong, Mr Anh said. Viet Capital Securities Joint-Stock Co will advise on the sale, he said. ‘Strategic partners need to commit not to sell the shares at least in the next three years,’ he said. ‘They will be expected to provide us support in terms of management, human resources and experience.’ The developer was created in 2004 from the real estate interests of Saigon Thuong Tin Commercial Joint-Stock Bank, or Sacombank, the third-biggest company on the Ho Chi Minh City Stock Exchange. Mr Anh’s father is the chairman of Sacombank.

Sacomreal, which has interests in property development, brokerage and sales, forecasts profit this year will be 192 billion dong, compared with 17.9 billion dong in 2006.

 

Source: Bloomberg (Business Times 22 Nov 07)

World’s most expensive office rentals in London, Mumbai

Singapore rents grew the fastest at 83%, says survey by CB Richard Ellis

(SEATTLE) London and Mumbai tenants paid the most for high-quality offices this year, while Singapore rents grew the fastest as economic growth lured international banks to Asia, said CB Richard Ellis Group Inc, the world’s largest commercial real estate broker.

London’s West End led with average annual rents of US$328.91 per square foot (psf) this month, compared with US$180.80 for the UK capital’s main financial district.

Mumbai had the second-most expensive leases at US$189.51, CB Richard Ellis said in its semi-annual Global Market Rents survey.

Asia’s booming economies drove up demand for financial and computing services in the region, catapulting Mumbai to second spot and fuelling Singapore’s 83 per cent growth in rents.

The US currency’s decline also drove up costs in dollar terms, while a dearth of new space bolstered London rents, CB Richard Ellis said.

‘Markets that moved up that quickly had the highest growth rates based on the economy’ as well as a scarcity of space, said Ray Wong, director of research operations for the Americas for Los Angeles-based CB Richard Ellis.

‘In the most expensive markets, if they’re close to their peak, the expectation for increase is marginal, but other markets, especially resource sectors, are enjoying an increase in demand so they’re going to move up a lot quicker.’

Mumbai’s rents rose 55 per cent, driven by computer related tenants, according to CB Richard Ellis.

Midtown Manhattan was the most expensive North American market, with rents averaging US$100.79 psf, 12th highest worldwide. Downtown New York ranked 46th globally at US$53.47.

Moscow rents jumped 65 per cent after crude oil prices tripled in the past five years, bolstering the economy of the world’s second-biggest exporter of the fuel.

Rents in the oil hub of Edmonton, Canada, rose 43 per cent, the ninth- fastest worldwide, as energy companies leased more space to house expanding workforces, the survey showed. Edmonton did not rank in the top 50 markets by rental prices.

Eighty-five per cent of the 171 cities included in the survey saw rental increases in the year ended Sept 30, according to CB Richard Ellis. This bodes well for investment returns, Mr Wong said.

The survey measures the most expensive rents based on US dollars. Rental growth rates were measured in local currency terms.

 

Source: Bloomberg (Business Times 22 Nov 07)

Lone Star to sell Japanese hotel operator Solare

(TOKYO) Lone Star has hung a for sale sign over its Japanese hotel operator Solare Hotels and Resorts Co Ltd, sources familiar with the matter said, in a deal which could raise 150 to 200 billion yen (S$2.6 billion).

The US investment fund has engaged real estate services firm Jones Lang LaSalle to handle the sale process. Blackstone is believed to be among several parties interested in Solare, the sources said. Lone Star and Blackstone declined to comment.

Lone Star has two ways to cash out; it has paved the way to list a hotel real estate investment trust (Reit) which could include Solare. This would be managed by Star Hotel Reit Management Co Ltd, which Lone Star has recently set up.

But with the Japanese Reit market under pressure amid the US sub-prime mortgage crisis, they may instead seek to sell Solare to a trade buyer or another fund in an auction.

Dallas-based Lone Star took over hotels owned by real estate developer Chisun Co which filed for bankruptcy protection in 2002 and created Solare. Solare now has 55 locations nationwide with a total of 10,823 rooms as at August. The group includes hotels, spas and a ski resort. The firm operates roadside hotels under the Chisun brand and upscale hotels under the Solare Collection banner.

 

Source: Reuters (Business Times 22 Nov 07)

Dubai developer Damac to invest US$5b in India

It will build houses, offices, shops in Mumbai, New Delhi, Hyderabad, Bangalore

(MUMBAI) Damac Properties, a closely held developer based in Dubai, plans to invest as much as US$5 billion in India over the next three years as a booming economy spurs demand for real estate.

The developer will construct houses, offices and shops in the Indian cities of Mumbai, New Delhi, Hyderabad and Bangalore, chairman Hussain Sajwani said. The first project will be started in 12 months, he added.

Soaring office rents and a shortage of apartments are luring developers including Donald Trump Jr and Emaar Properties PJSC to India. The real estate market is set to grow to US$90 billion by 2015 from US$12 billion, according to Moody’s Investors Service.

Demand for property is soaring as the world fastest-growing major economy after China is poised for 9 per cent growth in the year to March 31, following an average 8.6 per cent average rise over the past four years.

India’s 1.1 billion population faces a shortage of 25 million housing units, according to government data. The government is seeking to encourage the purchase of homes by giving tax breaks and ensuring easy availability of bank loans.

‘We plan to meet the funding requirement from our internal resources,’ Mr Sajwani said. Damac has built waterfront luxury projects in the United Arab Emirates and is investing in Saudi Arabia and Egypt.

 

Source: Bloomberg (Business Times 22 Nov 07)

China needs to levy property tax: official

(BEIJING) China should levy a general property tax to discourage speculation and rein in runaway real estate prices, according to a member of the central bank’s monetary policy committee.

Fan Gang’s comments in the latest issue of a Chinese Academy of Social Sciences magazine echo concerns voiced this week by Premier Wen Jiabao that China’s soaring housing market must be brought under control.

‘Realty investors don’t care whether their houses can be rented out or not,’ Mr Fan said in an interview. ‘If a continual and incremental tax is imposed on real estate, investment in the sector will cool down.’

Mr Fan, one of China’s best-known economists, has previously called for an annual tax on homeowners based on the value of their property but had previously said that technical obstacles stood in the way. His latest comments described the reforms as urgent.

‘Demand will continue to expand unchecked if realty investors are not required to pay anything to compensate for the housing price hike,’ he said.

China has adopted a number of measures to cool the real estate sector, such as increasing capital gains taxes on property and tightening land-use rules.

But property prices have resumed their surge, up 9.5 per cent year-on-year in October and even more in major cities, after briefly calming earlier in the year.

Mr Fan, who is also director of the National Institute of Economic Research, added that authorities must crack down on insider trading and illegal loans in the stock markets, or ‘the consequences will be unthinkable’.

However, he was optimistic about China’s potential for stable growth at around 11 per cent a year, saying that the country would continue to benefit from low labour costs, a high savings rate, capital inflows and advances in education and technology.

The challenge, he said, was for China to fix its economic problems from its current position of strength, so that it would be better able to withstand international financial crises.

He also said that the profitability of Chinese businesses was exaggerated because of artificially low resource prices, tiny social security outlays and lax environmental rules.

 

Source: Reuters (Business Times 22 Nov 07)

Bankers bought fewer luxury London homes in past 4 mths

(LONDON) Bankers and money managers purchased fewer luxury homes in central London in the past four months as turmoil in the credit markets escalated, real estate broker Savills plc said.

Purchases of homes costing £2 million (S$6 million) to £4 million by financial services employees declined almost 26 per cent between August and last week, London-based Savills said in a report on Tuesday.

‘We’re going to see a similar picture for at least another six months,’ said Lucian Cook, a director of Savills’ residential research department. ‘There’s a reasonable likelihood’ that the slowdown will deteriorate, he added.

Sales are slowing as bank losses incurred from US$40 billion in writedowns on US mortgage investments have heightened concerns about job cuts and lower annual bonuses. Bonus-earners in London’s financial services industry accounted for more than half the sales of homes this year in this segment of the ‘prime’ central London residential market, Savills estimated.

Since the end of July, the proportion of purchasers employed in finance or business services declined to 44 per cent for the 27 properties in this price bracket sold by Savills. In the first seven months of the year, 60 per cent of the 60 properties Savills agents sold were to bonus-earners.

Companies in the City of London, the British capital’s main financial hub, may cut 6,500 jobs and reduce bonuses by 16 per cent this year, the Centre for Economic and Business Research said last month.

For the past two years, most of the bonus money has been spent on real estate, fuelling demand for homes in neighbourhoods like Chelsea, Kensington and Notting Hill. Prices climbed by about 34 per cent in October from a year earlier.

 

Source: Bloomberg (Business Times 22 Nov 07)

Ascott buys another KL serviced residence

THE Ascott Group is adding another serviced residence in Kuala Lumpur – its sixth property in Malaysia.

The group said yesterday it has signed a conditional agreement to buy a 208-unit serviced residence from HSC Properties (HSCP) for RM112.5 million (S$48.3 million).

The property will be named Somerset Ampang when it opens in the first half of 2010.

Somerset Ampang is in Kuala Lumpur’s ‘Golden Triangle’ – the business, shopping and entertainment district marked by Jalan Ampang, Jalan Sultan Ismail and Jalan Bukit Bintang.

When completed, the serviced residence will be part of an integrated development that will house one of Malaysia’s leading medical, heart and diagnostic centres, HSC Medical Centre. The high-end medical centre will be separately owned and managed by HSCP. It will occupy five levels of the 23- storey development, with amenities such as a medical spa, restaurant and cafe.

Ascott’s deputy CEO for finance and investment Chong Kee Hiong said: ‘Demand for international-class serviced residences, especially in the capital of Kuala Lumpur, is expected to remain strong. Given its excellent location in Kuala Lumpur’s business and lifestyle district, Somerset Ampang will enable Ascott to capture a larger share of the serviced residence market.

‘Somerset Ampang will cater not only to business travellers but also to visitors to the medical centre who require post-treatment accommodation, as well as their families and friends.’

Somerset Ampang’s facilities will include a swimming pool, gymnasium and children’s playground, Ascott said.

Its portfolio in Malaysia will increase to more than 760 units when Somerset Ampang opens. Ascott’s other properties in the country are Ascott Kuala Lumpur, Somerset Seri Bukit Ceylon in Kuala Lumpur, Somerset Gateway in Kuching and two corporate leasing properties in Kuala Lumpur.

‘Somerset Ampang is our second Somerset-branded serviced residence in KL,’ said Ascott’s deputy CEO for operations Gerald Lee. ‘Having more serviced residences in the city enables us to leverage on economy of scale and brand awareness for better operational efficiency and cross-selling. Adding more properties in Malaysia also means that our customers can choose from a wider portfolio.’

The group operates three brands – Ascott, Somerset and Citadines. Its portfolio spans 53 cities in 23 countries, 11 of which are cities where Ascott’s serviced residences are being newly developed.

 

Source: Business Times 22 Nov 07

US commercial property sales down 70% in Oct

But report says the five-year bull run may not be over

(NEW YORK) US office building sales fell 70 per cent in October from a year earlier, yet another sign the credit crunch that began in the US housing market has spread to the commercial real estate market, Real Capital Analytics said on Tuesday.

But the five-year bull run on commercial real estate may not be over, although the participants have clearly changed, the real estate research firm said.

The credit crisis has weighed on US commercial real estate and the office market in particular, making purchases funded nearly all by debt a thing of the past. Even lower-leveraged deals are harder to come by as borrowing rates rise and risk becomes a significant factor in obtaining a loan.

‘The remarkable increase in sales activity, rise in prices and compression of cap rates (the first year’s yield on the property) since 2001 ended abruptly in August,’ the Capital Trends Monthly report said. ‘Since then, the dramatic fall in sales volume, drop in prices and rise in cap rates certainly meets the definition of an inflection point.’

But capital has continued to flow into commercial property, especially globally, and the greater cycle may not be quite over, the firm said.

Sales of significant office properties – those more than US$5 million – fell to US$4.4 billion in October. More than US$14 billion are reported in contract, but only US$4 billion of these have been announced. Sellers have pulled properties off the market when they could not get the price they wanted.

New offerings have exceeded closings 2-to-1 over the past 60 days, the report said.

The credit crisis has meant cash rules again and those loaded with it – foreign and institutional investors – make up more of the buyers. Since the onset of tighter credit, their market share has grown to 38 per cent of purchases from 26 per cent. These buyers generally favour stable, steady cash producing properties in major markets.

The large, highly leveraged buyers, such as private equity players, acquired US$78.5 billion worth of office properties from January to August. But not a single significant acquisition involving those funds have been announced since then.

Real estate investment trusts also have not been active buyers since September. But the report said that may change soon. Some larger players, such as mall owner Simon Property Group Inc and apartment owner AvalonBay Communities Inc, have raised capital by increasing their credit facilities.

Apartments sales in general also have plummeted. Excluding the US$22 billion sale of Archstone- Smith Lehman Brothers Holdings Inc and a fund run by Tishman Speyer, sales fell 50 per cent from a year ago to US$3.3 billion.

The sales of garden apartments were even worse, down 60 per cent.

 

Source: Reuters (Business Times 22 Nov 07)

US credit crunch – will history repeat itself?

IT was about two months ago on Sept 18 that the US Federal Reserve cut its short-term lending rate by 50 basis points to 4.75 per cent, sparking a worldwide rally in relieved stock markets. After a rise that lasted about two weeks, however, the rally then stalled. This was followed by a 25 basis point cut on Oct 30 but again, after a brief spike-up, markets have failed to respond.

Hopes are now high among analysts that the Fed will play saviour once again at its next meeting on Dec 11 – indeed, the futures market is certain that rates will be lowered again.

But given that the two cuts totalling 75 basis points have not provided the necessary stimulus yet, will more cuts really do the trick?

In his book, The Age of Turbulence, former Fed chairman Alan Greenspan wrote about the savings and loan (S&L) crisis of the late 1980s and the related property market crash that led to the closure of several banks and a recession in 1990-1992. The subsequent credit tightening meant that businesses found it hard to get loans and this, in turn, made the recession difficult to overcome.

‘Nothing we did at the Fed seemed to work,’ wrote Mr Greenspan. ‘We’d begun lowering interest rates well before the recession hit but the economy had stopped responding. Even though we lowered the fed funds rate no fewer than 23 times in the three-year period between July 1989 and July 1992, the recovery was one of the most sluggish on record.’

Those words must have an uncannily familiar ring to those who have tracked the current sub-prime crisis.

In its latest quarterly economic projections, for example, the Fed has cut its outlook for 2008 US economic growth to 1.8-2.5 per cent, down from 2.5-2.75 per cent. The downward revision stemmed from a number of factors, ‘including the tightened terms and reduced availability of sub-prime and jumbo mortgages, weaker-than-expected housing data, and rising oil prices’.

Worse, the situation today is potentially more damaging than during the S&L crisis because of the opacity surrounding the collateralised debt obligations market. Bad loans with questionable payment streams were embedded within complicated packages that were then marketed as being of good investment grade.

To further complicate the picture, derivative products are involved, which means the effect of a collapse could be magnified by leverage.

Investors – and central bankers – would therefore do well to note this insight from Mr Greenspan in his book: ‘Historically, societies that seek high levels of instant gratification and are willing to borrow against future incomes to achieve it have more often than not suffered inflation and stagnation.

‘ The economies of such societies tend to run larger government deficits financed with fiat money from a printing press . . . Eventually, the ensuing inflation leads to a recession or worse, often because central banks are forced to clamp down . . . I regret that the US may not be wholly immune to it.’

 

Source: Business Times 22 Nov 07

No deep recession in the US, going by consensus forecasts

WHEN the respected Business Times of Singapore takes a stick to the World Bank’s humble East Asia and Pacific Update (‘World Bank’s analysis wide of the mark’, BT, Nov 20) , I sit up and take notice. What a pity, then, that your editorial, while high on sound and fury, adds little worth to either the facts or valid arguments about the outlook for East Asia. The Business Times seems quite upset that we are projecting a rise in East Asian growth to 8.4 per cent this year. Is your paper really unaware that most of the larger economies have already released GDP growth numbers through the third quarter of 2007 and that the outcome for the year is therefore already pretty much ‘in the bag’.

China grew 11.5 per cent on average in the first three quarters and growth has also accelerated over the course of the year in other large economies like Korea and Indonesia. The fact is that East Asia will have a hard time not growing more than 8 per cent this year.

Turning to next year, we note that the risk of recession in the United States has clearly increased but that the bulk of reputable economic forecasters still forecast an extended period of weak growth in the US and in other major developed economies in 2008 rather than an outright recession. We tend to stick fairly closely to consensus or mainstream forecasts for the developed world and are unable to assume ‘deep recession’ quite as airily as The Business Times. If that, in fact, is how conditions in the developed world turn out next year, then we argue that East Asia could also well be able to maintain its solid performance of recent times. Just look at what has happened in 2007; US GDP and import growth have already slowed sharply and, as would be expected, East Asian export growth has also slowed. But, despite slower exports, East Asian GDP growth has actually accelerated in 2007, because domestic demand growth in the region has picked up, a development related to quite favourable domestic macroeconomic, financial and corporate sector conditions in many countries. This is another among the set of important recent developments that seems to have escaped your newspaper’s attention.

What if the US does go into recession? We have taken the laborious route of looking at some of the historical facts about how East Asia has responded to past recessions, as well as some formal econometric studies of the issue. These suggest that the impact varies a lot across countries and also at different times, depending on what other factors are in play.

The downturn of 2001 was particularly severe because it was combined with a huge recession in global high-tech demand at a time when domestic demand in many East Asian economies was still very weak, in the aftermath of the financial crises. Neither of those conditions applies today. Of course, it is possible that some other combination of factors could cause a more severe downturn in East Asia and so the evolving economic situation in the region has to be closely monitored. But to claim that a recession is inevitable merely because of ‘increased economic integration’ and that past trends should be ignored simply because ‘the world has changed’ – these are surpassingly crude and simplistic assertions.

Milan Brahmbhatt

Lead Author

World Bank East Asia and Pacific Update

The World Bank

Washington, DC

BT’s editor replies: The main focus of our editorial was the World Bank’s projections for 2008, not 2007, which was only mentioned in passing. For next year, we had flagged a ‘possible deep recession’ in the US.

We do not believe we are in disreputable company here. Other forecasters who have indicated this same possibility include Goldman Sachs, which has pointed to the risk of a ’substantial recession’, Prof Joseph Stiglitz (a Nobel laureate and former World Bank chief economist) who said that the US faces a ‘very major slowdown’ and Prof Nouriel Roubini of the Stern School of Business of NYU, widely acknowledged to have been one of the earliest to anticipate the US housing bust, who has, in fact, predicted a hard landing and an outright recession for the US economy – although we have not taken that position.

We also noted that China’s own government has a decidedly less upbeat (and more realistic) view of its country’s future growth prospects than the World Bank’s East Asia and Pacific update.

We stand by our editorial as constituting fair comment.

 

Source: Business Times 22 Nov 07

Lower US forecast again prompts flight to safety

FRIGHT turned to flight once again in financial markets yesterday, when overnight news of a lowered Fed US growth forecast for 2008 spawned yet more painful losses for Asian equities, punished favourite high-yield carry trades, but lifted the euro and Swiss franc to record highs again.

Overnight, it was revealed that the US central bank’s key Federal Open Market Committee or FOMC had lowered its growth forecast for 2008 to a 1.8 to 2.5 per cent target range, compared with an earlier forecast of 2.5 to 2.75 per cent. And by the time Asian stock markets had closed, stock indices like the Straits Times Index and Nikkei had chalked up more painful losses of at least 2.5 per cent each, South Korea’s Kospi was 3.5 per cent worse off, and Hong Kong’s Hang Seng had tumbled more than 4 per cent.

As for the flight to safer destinations, the euro responded by elbowing its way to a fresh post-launch peak of US$1.4856 yesterday, and a new 31-month high of S$2.1519. Against the Swiss franc, another saferefuge favourite, the US dollar plunged to an all-time low of 1.1025 francs in Asian trading. The unit was also lifted to a fresh 18-month high of S$1.3141.

Indeed, the start of higher euro forecasts such as US$1.60 to US$1.70 was already being discussed before the end of Asian trading hours yesterday. An economic adviser to the German government was quoted as saying that the euro could well hit US$1.60, while UK-based research firm IDEAglobal warned in an FX alert that a US$1.6 to US$1.7 euro could not be ruled out if sub- prime mortgage debt problems in the US spread next year to other parts of the US bond market like corporate junk bonds and so-called ‘Alt-A’ debt offerings.

Gold, meanwhile, found its way back above US$800 per ounce with a handsome US$15 jump – as oil continued its almost inexorable climb to the US$100 per barrel mark yesterday. This time, however, such gains were not enough to lift either the Australian or Canadian dollar – due to another heavy sell-off for high-yield carry trade favourites, as risk aversion sentiment continued to mount.

In percentage terms, it was therefore the Japanese yen that finished with the most impressive gains, ahead of a US holiday today and an extended Japanese weekend break starting tomorrow. By the close, it had chalked up handsome gains of more than one per cent each versus the US and Singapore dollars, and recorded even larger gains against erstwhile carry-trade favourites like the trio of Australian, Canadian and New Zealand dollars.

The US dollar was eventually forced past our first key yen support at 108.8 yen to finish 1.5 per cent weaker at 108.62 yen, while the Australian, Canadian and New Zealand dollars ended over 2 per cent worse off each at 95.54 yen, 82.13 yen and 110.65 yen. Against the Chinese yuan, the greenback slipped a further 0.2 per cent to close just a whisker above its post-depeg low of 7.4103 yuan. Closer to home, the greenback rose between 0.5 and 0.7 per cent to close at 9,395 Indonesian rupiah, 928.9 South Korean won and 3.3810 Malaysian ringgit, and ended a more modest 0.2 per cent better at S$1.4498.

 

Source: Business Times 22 Nov 07

Asia must act quickly on monetary cooperation

TOKYO CORRESPONDENT

THE US dollar is on the skids and it is time for Asia to put on its skates with regard to regional monetary cooperation. The connection between the two things should be obvious, although many Asian policymakers (including those in Japan who see themselves as leaders of the pack) continue to utter facile comments to the effect that it would take ‘40 years’ for Asia to catch up with Europe on monetary affairs.

This is complacent and irresponsible nonsense. The dollar is sliding so far and so fast that its future role as a reserve and transaction currency is being called into question almost daily. The euro is becoming the currency of first choice (if not yet last resort) for official and private investors alike, but it cannot carry the burden of diversification by itself for too long.

Asia has a responsibility not just to itself, but also to the rest of the world, to come up with a new regional currency (be it a composite of the yen, yuan and won plus Asean currencies – or whatever) in order to create a new tri-polar world of global currencies. The euro alone cannot be expected to bear the burden of reserve diversification from the dollar or of becoming the preferred denominator for transactions as the use of the dollar declines.

The question that Asian policymakers should be asking themselves as they bask in the illusion that global currencies are other people’s business is, where would they be now if European leaders had not had the vision to conceive of and create a common currency? The answer is, utterly dependent upon a declining dollar.

The dollar was big enough to take over from the pound when the Sterling Area collapsed, but the euro is less able to assume this role.

The Americas, as well as Europe, are ahead of Asia in thinking about the implications of what is happening to the dollar now. And, for a continent that boasts thousands of years of history as Asia does, this is a sad reflection.

The US, Canada and Mexico have at least begun to talk about the possibility of a common currency – the ‘Amero’ – to succeed the declining dollar, while Asia is content simply to dismiss the idea of a common currency as a pipe dream.

Asean has come up with a formal charter of incorporation, or constitution, if you will. This is a first step along the road to formal integration among the 10 countries, and it is a sad commentary on the lack of leadership in other parts of the region that Japan, China and South Korea at least have as yet not even begun marching down the road towards similar integration, let alone being in the vanguard of the movement.

Utterances from East Asian policymakers about ‘market-led’ integration being preferable to government or institution-led integration are lamentably lame and naive.

Markets or business can create production networks across Asia, as they have done already, but they cannot provide the monetary infrastructure needed to support such networks. Nor can they create the kind of monetary integration needed to underpin the intensity of trade and investment transactions that characterise economic relations among nations of this region.

This is another reason why Asia has to get its act together, and quickly, on monetary cooperation instead of treating the subject as though it were fit only for rarified discussion within academic circles.

Instead of contributing to global monetary cooperation, Asia is creating currency wars through its narrow focus on preserving national currencies instead of thinking about a regional currency.

China often seems to be ahead when it comes to intellectual appreciation (or at least articulation) of such concepts. People’s Bank of China deputy governor Wu Xiaoling has pointed out the fact – which should have been obvious to Japan and other Asian nations (as well as to US Treasury Secretary Henry Paulson) – that the yuan has become a proxy for the yen and other Asian currencies in taking the heat for the ‘underpriced’ exports of Asia Inc.

China is merely the sales department for the Asian factory. If this degree of economic and trade interdependence does not argue in favour of the need for exchange rate coordination among East Asian currencies, and eventually for a common currency, it is difficult to see what could.

It is in Asia’s interest to cooperate on monetary matters in order to ensure burden-sharing on a regional basis. And it is equally in the interest of the wider world for Asia as a bloc to share in the burden of global currency transactions. Time to face up to new responsibilities and not just lament the dollar’s decline.

 

Source: Business Times 22 Nov 07

ECs gain appeal as HDB, private home price gap widens

Easing of rules expected to increase demand for exec condos

THE rising property market has brought executive condominiums (ECs) back from the brink of extinction.

These homes – which are halfway between public housing and private condominiums – suddenly looked much more appealing after rules for buyers were relaxed on Tuesday.

Property consultants now expect that more plots for ECs, such as the 2.27ha site placed on the market on Tuesday, will soon be offered.

The main reason: the widening gap between prices of resale Housing Board flats and those of private condos.

ECs, which come with condo facilities but with sale restrictions similar to those for public housing, were introduced in 1995 to bridge this gap.

They became relatively unpopular, however, after the property market plunged a few years later, making private condos more affordable.

In fact, when the first few ECs hit the resale market in 2004 after the minimum five-year occupation period, many were sold at a loss or at breakeven prices. This was because they were booked when prices were at their peak in 1996.

Many people expected Far East Organization’s La Casa in Woodlands to be the last EC project on the market when it was launched for sale in 2005.

‘Mass market condo prices were in the doldrums, making ECs redundant. Today, that’s a different story,’ said Colliers International’s director of research and consultancy, Ms Tay Huey Ying.

Private home prices surged 22.9 per cent in the first nine months of the year – more than twice the rate achieved by resale HDB flats.

Lower-priced ECs are more attractive now because prices of condos in the suburbs – where ECs tend to be sited – have started to move up significantly. In the July- September period, prices of non-landed homes outside the central region rose 7.9 per cent. Consultants expect this growth to continue.

The easing of EC rules is also expected to increase demand from people looking to move from HDB flats. The HDB removed a hurdle for upgraders by scrapping a resale levy payable by EC buyers who had previously bought government-subsidised flats.

Buyers of new EC units are also no longer barred from buying second new EC units or new flats. In addition, the HDB now requires developers to reserve 90 per cent of units for first-time buyers in the first month of sale.

Although ECs still cannot be sold within the first five years and remain out of bounds to foreigners within the first 10 years, the easing of rules has helped ECs shake off their tag as second-rate condos, said Mr Eric Cheng, the executive director of the HSR property group.

Potential buyers include property agent Lester Tan, 27, who has been living with his parents for the past five years since he got married.

He and his wife started looking for a condo about two years ago, but regretted waiting so long to buy one, as prices have shot up.

He said: ‘We heard that the Punggol EC may be launched, and we are quite excited about it.’

Potential upgraders like Ms Elsie Cheng, 31, are also eyeing the future EC in Punggol. The teacher – who lives with her husband, seven-month-old son and maid in a two-bedroom EC unit in Tampines – is looking to move into a bigger EC.

‘Why pay so much for a private condo?’ she asked.

Knight Frank’s head of research and consultancy, Mr Nicholas Mak, said the changes were likely to raise the proportion of upgraders among EC buyers, from an estimated 5 per cent to 10 per cent, to 20 per cent to 25 per cent.

Developers such as Frasers Centrepoint Homes, which built the Lilydale and Quintet ECs, are optimistic. Its chief operating officer, Mr Cheang Kok Kheong, told The Straits Times: ‘The EC will do well in today’s market as a hybrid property – apartments with condo facilities but without private condo price tags.’

He added: ‘As a reflection of the strong confidence and growth potential of the EC market, we expect to see increased competition in this market segment and more developers taking part in upcoming EC land tenders.’

Buyers hoping to make a quick buck from ECs, however, should take heed. ‘The (full) value of the EC will not be realised immediately but in 10 years, subject to the property market being buoyant at that time,’ said PropNex chief executive Mohamed Ismail.

For now, all eyes are on the EC site in Punggol Field. Estimated to be able to fit about 620 homes, it will be put up for tender once a developer commits to a minimum bid that meets the Government’s reserve price.

The EC units, however, will meet only a small portion of the current demand for new homes. In a recent HDB sales exercise, almost 8,000 families applied for just 400 flats in Telok Blangah, while more than 1,600 applied for 516 homes in Punggol.

 

Source: The Straits Times 22 Nov 07

S’pore has fastest-growing prime office rents in the world: Report

It outpaces Mumbai as rents, occupancy costs rise 83% to $12.60 psf a month

PRIME office rents have grown faster in Singapore than anywhere else in the world over the past year, a new report has found.

The rate of increase beat even that in Mumbai, now the world’s second most expensive office market, after London’s West End, according to CB Richard Ellis (CBRE).

But overall, Singapore ranks 11th on the list of worldwide office rentals, which are generally rising quickly.

Rental levels plus other associated costs for Singapore prime office space shot up 82.6 per cent in the 12 months ended Sept 30 to $12.60 per sq ft (psf) a month, said the CBRE’s Global Market Rents report. Apart from lease rates, occupancy costs include expenses for management and basic building maintenance.

In terms of occupancy costs, Moscow posted the second-fastest growth, of 65.4 per cent. Third in line was Mumbai, where occupancy costs grew 55 per cent.

The booming economics of the Asia-Pacific region continue to support strong demand for office space and to drive occupancy costs at a faster rate than in any other region, said CBRE in the report.

In comparing the costs, it looked at the typical achievable rent for a 10,000 sq ft unit in a top-quality building in a prime location.

Of the 171 markets it monitored, 85 per cent recorded growth in occupancy costs.

London’s West End – which registered 41.9 per cent growth – still has the most expensive office space, at US $328.91 (S$476.76) psf a year.

Mumbai came in a distant second, at US$189.51 psf a year. But it is already 5 per cent more expensive than London City, where occupancy costs came to US$180.80 psf a year.

Moscow is ranked fourth most expensive, at US$180.78 psf a year.

To facilitate comparisons across markets, the report based the most expensive rents on US dollars while rental growth was measured in local currency terms.

Singapore is ranked 11th on the world’s most expensive list, at US$102.37 (S$148.39) psf a year.

It came just after Hong Kong, where costs were at US$106.31 psf a year.

At $100.79 psf a year, rents for prime office space in New York’s Midtown have come down. Costs in Tokyo ranged from US$154.56 to US$178.61 psf a year.

As was the case with other key Asian financial centres such as Tokyo and Hong Kong, office vacancy rates remained low in Singapore at 5 per cent or less, said CBRE.

It noted that the uncertainty in global financial markets has had no discernible impact on demand for office space in Singapore.

The companies in Singapore that require larger spaces are largely from the fast-growing financial and insurance sectors. And before year-end, several sizeable bookings by companies in these two sectors are expected, CBRE said.

The report also echoed comments by property consultants about rising tenant resistance to rental hikes as rents are at record-high levels.

Companies are now more prepared to move to cheaper space further out of town to avoid paying high rents.

 

Source: The Straits Times 22 Nov 07

Five estates sold to one buyer in collective deal

FIVE small adjoining freehold apartment blocks near Thomson Road have been sold en bloc to Kim Seng Heng Realty, a subsidiary of listed KSH Holdings, for $120 million.

The construction and property development group said yesterday that the combined site could be redeveloped into a high-rise residential block with about 142 luxury apartments of 1,250 sq ft on average.

It added that it is currently negotiating with other investors to form a joint venture to develop the site.

Credo Real Estate, which brokered the deal, said it is possibly the first time in Singapore that as many as five estates have been successfully combined and sold en bloc to one buyer.

The properties – Norfolk Court, Mergui Lodge, Northern Mansion, Mergui Court and The Mergui – are located near Rangoon Road and Moulmein Road.

They are single apartment blocks sitting on relatively small plots ranging from 10,061 sq ft to 18,524 sq ft.

When combined, they form a land area of 74,355 sq ft, which would permit a gross floor area of 208,196 sqft.

If small pieces of state land in between are thrown in, the developer will have a site of 87,092 sq ft, said Credo’s executive director, Ms Yong Choon Fah.

In any case, three of the developments could not have otherwise been redeveloped on their own. ‘They need each other because there’s a 30m buffer requirement from the expressway,’ said Ms Yong.

This Urban Redevelopment Authority rule would mean that it is impossible for Norfolk Court, Mergui Lodge and The Mergui to be redeveloped individually. But if combined with the other two sites, a bigger development that does not fall within the 30m buffer zone can be built.

The five estates have 88 units in total. Each unit owner will get between $906,856 and $1.91 million.

The $120 million price reflects a price of $580 per sq ft (psf) of potential gross floor area.

After factoring in the cost of the state land in between, the rate could come down to about $540 psf, said Ms Yong.

KSH Holdings’ recent projects include a construction contract for a luxury boutique hotel at Clifford Pier.

 

Source: The Straits Times 22 Nov 07

TAKING STOCK – Bourses buckle across Asia on US, oil worries

ST Index falls 91 points, marking its fourth slump in five sessions

REGIONAL bourses including Singapore suffered a rout yesterday in the face of fresh worries about a slowdown in the United States and record crude oil prices.

The Straits Times Index (STI) plunged 91.07 points, or 2.65 per cent, to end at 3,347.20 – its fourth slide in five sessions.

About 1.83 billion shares worth $2.18 billion were traded, with gainers trailing way behind losers by 176 to 677.

Said CIMB-GK research head Song Seng Wun: ‘It doesn’t take much to knock the wind out of the market’s sails at the moment.

‘Today, it was a continuation of US recession worries, sub-prime fears and high oil prices.’

Earlier, the Federal Reserve slashed its US growth forecast for next year to between 1.8 per cent and 2.5 per cent, down from the 2.5 per cent to 2.75 per cent range forecast in June.

More bad news battered the markets as crude oil continued its charge towards the psychologically significant US$100 mark, hitting a peak of US$99.29 during intra-day trade due to a weakening greenback.

Market players also pointed to Japan’s Nikkei index, saying its early dive had set the scene for a bearish regional trading session.

Said a Singapore dealer: ‘The Nikkei slid quite heavily in late morning trading, which affected regional sentiment.

‘Here, we saw the herd mentality at work, which sparked a selldown.’

The Nikkei dipped 2.46 per cent to 14,387.66 points, while bloodletting on Hong Kong’s Hang Seng Index sent it down by 1,153.02 points or 4.15 per cent to 26,618.19.

Here in Singapore, traders’ fears that Tuesday’s modest recovery was just a ‘dead cat bounce’ – a mild recovery before another fall – were realised.

Singapore Exchange shares led the STI’s decline, as they dived 70 cents to $12.40. That alone accounted for a 10.8-point fall in the index. Dealers said hedge funds were largely responsible for this selldown.

SingTel shares continued their southward spiral as they fell another six cents to $3.72. Investors are concerned about the fallout from an unfavourable ruling by Indonesia’s competition watchdog, but some analysts feel such fears might be overdone.

A Credit Suisse report noted: ‘Concerns over the political and regulatory risk are unlikely to affect short-term or possibly even long-term forecasts. Thus, a further correction could signal a buying opportunity.’

Bank stocks also took a hit, with United Overseas Bank dropping 60 cents to $19. DBS Group Holdings fell 40 cents to $19.20, while OCBC Bank slipped 15 cents to $8.25.

There was no bright debut for Z-Obee Holdings, which managed only 28.5 cents – below its issue price of 34 cents.

Given the volatile times and cautious mood, market experts urge investors to switch from speculative stocks to those with a proven track record and a low price-earnings ratio.

Mr Song added: ‘There are still buying opportunities, despite the uncertain environment. Blue chips, defensive stocks and resource sector counters still continue to be attractive.’

 

Source: The Straits Times 22 Nov 07

Dow down 163 points

UNITED States stocks plunged in early trading on fears that the fallout from credit losses and mortgage defaults will hurt economic growth.

After two hours of trading, the Dow Jones Industrial Average was down 163.14 points or 1.2 per cent at 12,847.

The Standard & Poor’s 500 Index fell by 20.3 points, or 1.4 per cent to 1,419.11 while the Nasdaq Composite Index shed 45.99 points or 1.7 per cent to 2,550.82.

Stocks extended losses after data showing consumer sentiment fell this month to its lowest in two years.

US Treasury Secretary Henry Paulson’s remarks that the number of potential home-loan defaults will be significantly bigger next year also dampened sentiments.

Source: REUTERS (The Straits Times 22 Nov 07)

No resale levy for second-timers buying ECs

NEW executive condominiums (ECs) will be even more attractive now that the resale levy is no longer payable.

The Housing and Development Board imposes the levy on those who sell their first flat to buy another from the board. It is a fixed sum that ranges from $15,000 to $50,000 according to flat type, and $55,000 for ECs.

In a statement yesterday, HDB said: ‘To align the purchase of new ECs with the Design, Build and Sell Scheme (DBSS), second-timers buying a new EC unit from the developer will no longer have to pay the resale levy.’

HDB also said that previously, first-timers who bought new ECs were barred from buying another new EC, HDB or DBSS flat. This bar has now been lifted.

PropNex CEO Mohamed Ismail believes the change will give ‘greater incentive’ to HDB dwellers who aspire to a condominium lifestyle by way of an EC.

Mr Ismail reckons the dropping of the resale levy, coupled with rising HDB resale flat prices, could leave some second-time buyers with up to $100,000 to add to their housing budget, depending on the size of the flat they sell.

He also believes developers could be encouraged to bid for EC sites, as demand will grow.

The government has said it intends to release more EC sites.

The first to be released, after a gap of more than three years since the last EC site was sold in 2004, will be at Punggol Road/Punggol Field.

The 2.27ha site with a plot ratio of 3.0 was put on the reserve list of the Government Land Sales Programme yesterday. And with the dropping of the resale levy, consultants expect interest in the site to increase.

Cushman & Wakefield managing director Donald Han says the last EC site at Woodlands, where La Casa now stands, was sold for $150 per sq ft per plot ratio (psf ppr). Since then, two DBSS sites – launched at Tampines in October 2005 and Boon Keng Road in March 2007 – sold for $114 psf ppr and $234 psf ppr respectively.

Mr Han says EC sites typically fetch more than DBSS sites. And based on the last DBSS site price at Boon Keng Road, but factoring in Punggol’s location and EC site status, he expects the Punggol EC site to fetch $190-$220 psf ppr.

‘We expect strong interest from developers and contractors for this site due to revival of HDB market activity and recent price increases – supported mainly by HDB upgraders and new home buyers,’ he said.

‘In addition, the government has committed its resources to turning Punggol into a major waterfront township and Punggol itself has been a news focal point lately.’

 

Source: Business Times 21 Nov 07

Woodlands residential site surprises with 8 bids

Evan Lim’s top bid of $56m marginally higher than Frasers Centrepoint’s

A 99-year leasehold residential site in Woodlands was found to have drawn a surprising eight bidders when the government tender closed yesterday, with the top bid coming to some $56 million – or $232 per square foot per plot ratio (psf ppr).

Recent government land tenders have drawn only a few bidders each, which market watchers said was a sign of the property market cooling off.

For the 172,200 sq ft site at Woodlands Avenue 2/Rosewood Drive, the top bid was put in by Evan Lim & Co Pte Ltd.

The company just pipped second highest bidder Frasers Centrepoint, which offered $55.5 million – or $230 psf ppr.

Other bidders include Wing Tai and Sim Lian Land. The site has a 1.4 plot ratio – giving it a maximum gross floor area of 241,100 sq ft.

Nicholas Mak, director of research and consultancy at Knight Frank, said that the price was ‘realistic’, although it came in below prior market expectations of $250-$280 psf ppr.

The number of bids was impressive, considering the recent market turbulence, experts said. ‘The bids show that developers are confident of healthy suburban buyer demand,’ said Mr Mak.

Ku Swee Yong, Savills Singapore’s director of marketing and business development, said: ‘Developers still see that there is good demand from the mass market, arising from job growth and rising wages.’

With construction costs for mass market condos estimated at about $300 psf, the break-even price for the site could be around $530 psf, experts said.

This means that apartments in the project could eventually be launched at about $700 psf – higher than what private homes in Woodlands are fetching at the moment.

Separately, the Urban Redevelopment Authority (URA) on Monday awarded a transitional office site at Tampines to City Developments’ unit Glades Properties.

The developer had put in the only bid for the site, offering $10 million, or $81 psf ppr – lower than the $100 psf ppr that most property consultants had expected the 15-year leasehold site to fetch. This led to market talk that the site might not be awarded.

Yesterday, URA also said that an unnamed developer has entered a bid of $187 million for a 3.2ha, 99-year leasehold residential site at Simei Street 4, triggering a public tender which will be launched in two weeks’ time.

The price offered by the developer works out to $235 psf ppr. The site has a 2.3 plot ratio – giving it a maximum gross floor area of 797,400 sq ft.

Market watchers, however, reckon that the plot could fetch more.

‘I think the winning bid could come to $350 psf ppr,’ said Ho Eng Joo, Colliers  International’s executive director for investment sales. Apartments coming up on the site could be launched at about $800 psf, he said.

URA yesterday also awarded the tender for the 99-year leasehold condo site at Enggor Street (Land Parcel B) to Allgreen Properties, which had submitted the highest bid of $717 psf ppr in a public tender.

 

Source: Business Times 21 Nov 07

En bloc millionaires to drive market

If just two-thirds buy homes, they may spend $6b: Savills

(SINGAPORE) Around 5,700 homes were sold through collective sales in the first half of this year and the home owners who will have to look for replacement homes are expected to drive the property market.

A report by Savills Singapore estimates that if just two-thirds of those displaced by collective sales – about 3,900 of them – choose to buy replacement homes, their collective kitty could total $6 billion, representing the total payout to these en bloc millionaires.

Savills director (marketing and business development) Ku Swee Yong does not expect all $6 billion to be spent though. ‘About $4 billion could be channelled into new property acquisitions,’ he reckons.

And developments in the fringe and suburban areas such as Bukit Timah, Upper Bukit Timah, Clementi, Novena/ Thomson, and Upper East Coast will be their targets.

Savills projects that only two-thirds of the en bloc millionaires will be in the market for a new home because it believes many already own second homes, if not more.

Savills’ analysis reveals that of the 2,795 home owners affected by the collective sales in Q2 2007, up to 2,159 owned homes in the prime districts of District 9, 10 and 11.

And Mr Ku reckons that half of these home owners already own at least one other home.

Interestingly, Mr Ku believes that only 20 per cent of the displaced home owners from homes outside the prime districts have second homes. But the number of en bloc millionaires could taper off if collective sales continue to fall. In Q3 2007, only 13 en bloc deals worth about $1.1 billion were done, down from $6.4 billion for 45 sites in the previous quarter.

Yet, en bloc millionaires are also expected to support the already buoyant residential market.

Savills says that assuming that 30 per cent of owners (or their tenants) affected by collective sales require rental accommodation, 974 units would have been needed to meet the demand over the last nine months. Savills added that the situation is expected to worsen in 2008, with some 800 units needed per quarter to accommodate displaced owners (or their tenants).

Savills does expect most demand for rental units to come from an increase in the number of foreigners working here.

Its report highlighted that foreigners working here grew by 14.9 per cent, from 875,500 last year to just over one million thus far, representing the highest year-on-year growth in the last 10 years. ‘With a low unemployment rate and high job creation rate, the number of foreigners working in Singapore is expected to grow sharply,’ it added.

Its analysis of data reveals that average rents of all non-landed residential properties in the prime districts rose by 13 per cent to $3.70 per square foot (psf) a month between Q2 and Q3 in 2007, while high-end residential rents climbed even higher to $6 psf a month.

Savills also noted that rents in Districts 8 and 12, on the fringe of the city, have risen by 35 and 23 per cent respectively to about $1.90 psf a month.

 

Source: Business Times 21 Nov 07

LATEST US DATA – Housing starts up 3% in Oct, permits down 6.6%

Building permits fall to 1.178m unit pace, the lowest level in 14 years

(WASHINGTON) US home construction starts were up 3 per cent in October, the biggest monthly gain in eight months but building permits were down 6.6 per cent to a level not seen in 14 years, a government report yesterday showed.

The Commerce Department said that housing starts set at an annual pace of 1.229 million units in October from a 1.193 million unit pace in September.

It was the biggest monthly increase since February and came after starts tumbled 11.4 per cent the prior month.

Economists were expecting to see a slight decrease in starts to a 1.17 million unit pace from the initially reported 1.191 million pace.

Building permits fell 6.6 per cent in October to a 1.178 million unit pace. That was the lowest level since July 1993 and well below the 1.200 million unit level economists were expecting.

Construction of single-family homes fell 7.3 per cent to the lowest since October 1991 but multi-family home building surged 44 per cent.

Sales of single-family homes are dropping as potential buyers wait for prices to fall even more and some banks make it more difficult to get mortgages.

Demand is declining as fast as construction, preventing builders from trimming inventories and suggesting that the real estate recession will linger into 2008.

‘The meltdown in residential construction will extend for many more months and represents a serious drag on economic growth,’ Robert Dye, senior economist at PNC Financial Services Group in Philadelphia, said before the report.

Permits were forecast to drop to a 1.2 million pace, according to the survey median, with projections ranging from 1.1 million to 1.324 million.

Construction of single-family homes dropped to a 884,000 pace while work on multi-family homes rose to a 345,000 annual rate.

The increase in starts was led by a 21 per cent jump in the Mid-west. Construction rose 8.5 per cent in the Northeast and 5.8 per cent in the West. Starts fell 4.6 per cent in the South.

A report on Monday added to evidence that housing was far from recovery. The National Association of Home Builders/Wells Fargo confidence index held at a record low of 19 in November.

Toll Brothers Inc, the largest US luxury homebuilder, said on Nov 8 that fourth-quarter revenue fell 36 per cent and the cancellation rate rose to the highest ever.

‘We do think that this is worse than it was in ‘88 through ‘90,’ chairman Robert Toll said on a conference call. ‘We can’t predict how long this down period will last.’

Declines in home construction have reduced growth since the start of 2006 and detracted 1.1 percentage points in the third quarter.

Homebuilding will drop at a 22 per cent annual pace this quarter, the most since the last three months of 1981, according to a forecast by economists at Lehman Brothers Holdings Inc.

Foreclosures doubled in September from a year earlier as sub-prime borrowers struggled to make payments on adjustable-rate mortgages, RealtyTrac Inc said on Oct 11.

Rising foreclosures and falling sales are adding to inventories and pushing down prices.

The Case-Shiller index of home prices in 20 major cities declined 4.4 per cent in the 12 months though August, the most since records began in 2001.

 

Source: Reuters, Bloomberg (Business Times 21 Nov 07)

GuocoLand to develop 1st project in Vietnam

The 17.5 ha integrated development will cost US$58 million

GUOCOLAND yesterday broke ground on a US$58 million development in Vietnam – its first project in the country.

The 17.5 ha site will be home to The Canary – an integrated development which will house some 1,200 residential apartments, a hotel, a trendy retail mall and an international school.

GuocoLand said that the first phase of the residential apartments will be launched soon. This will be followed by the development of the first phase of the retail mall.

The entire development is scheduled to be completed in five to six years’ time, the developer said. ‘However, the actual progress will depend on market conditions in Vietnam,’ said Lawrence Peh, GuocoLand’s general manager for Vietnam.

The Canary is located near the Vietnam-Singapore Industrial Park, near Ho Chi Minh City. The project will be the first fully integrated development in Vietnam’s Binh Duong Province, GuocoLand said.

‘When The Canary is completed, it will add vibrancy to Binh Duong Province, which is a leading recipient of foreign direct investment among Vietnam’s provinces,’ said GuocoLand in a statement.

Besides GuocoLand, many other Singaporean developers – including Keppel Land, CapitaLand, Frasers Centrepoint and Allgreen Properties – have of late made forays into Vietnam’s booming property market.

GuocoLand’s shares closed five cents down at $5.20 yesterday. The company’s stock has climbed 128.5 per cent since the start of the year.

 

Source: Business Times 21 Nov 07

Nina’s estate set to go to administrators

Feng shui expert files application to preserve assets of HK$100b estate

IN HONG KONG

THE stage is set in Hong Kong for a feisty probate battle over the fortune of Nina Wang Kum Yu-sum, once Asia’s richest woman, and control of the sprawling Chinachem property empire.

The estate of Ms Wang, who died in April this year, is likely to be put in the hands of court-appointed administrators pending the outcome of what is expected to be a protracted legal fight over her estimated HK$100 billion (S$18.6 billion) fortune.

Feng shui expert and businessman Tony Chan Chun-chuen claims to be the sole beneficiary of the deceased tycoon’s estate and is set to square off with the Chinachem Charitable Foundation, which claims a 2002 will left everything in its name. The foundation is headed by family members of Ms Wang.

This week, Mr Chan made a bid to have independent administrators appointed to preserve the assets of Ms Wang’s estate. The application has been adjourned until Dec 10.

The administrators will establish who owns the shares in the Chinachem companies – one of Hong Kong’s biggest private developers – as well as other types of assets, according to John Lees, director of forensic accountant and corporate restructuring firm John Lees & Associates.

‘They would look after these to make sure the right people are dealing with them … both sides would be putting together a set of orders the court would have to approve,’ he said. Administrators may force the company to put further developments on hold pending the outcome of the court case.

This is not the first time that the assets of Chinachem have come under the spotlight. The group of companies was at the heart of a protracted legal battle between Ms Wang and her father-in-law, following the death of Chinachem founder Teddy Wang The-huei.

Teddy Wang vanished in 1990 at the hands of kidnappers. For the next nine years, Ms Wang insisted that her husband was still alive, until a court finally declared him dead in 1999 upon the wishes of his father, Wang Dinshin.

For the next eight years, Ms Wang and her father-in-law waged a bitter war over the estate of Teddy Wang. Nina Wang stayed at the helm of Chinachem throughout, but was accused by her father-in-law of faking a will to inherit his son’s estate. The will – signed ‘one life, one love’ – contradicted another that the tycoon had made in 1968 which would see his fortune bequeathed to his father.

During the trial, it emerged that the elder Wang had told his son that Ms Wang was having an affair. The court heard that Teddy was so angered by the infidelity that he had made the 1968 will, rescinding an earlier one that split his estate equally between his father and wife.

Although the High Court sided with the father-in-law, Ms Wang won at the top court, also stymieing any criminal proceedings against her. The total legal bill came to HK$562 million, but that was not an end to the affair: it had long been suspected that there were other individuals financing Mr Wang, and he defied a court order to reveal their identities.

Chinese press reports named various property personalities as being behind the litigation. Had Ms Wang lost, the Chinachem property fortune could have ended up in the hands of her rivals.

The elderly Mr Wang described these individuals in the Chinese-language press as ’sympathetic and righteous lenders’, but refused to reveal their identities. In Hong Kong, third parties are barred from funding litigation on another’s behalf.

Ms Wang was ranked as the 154th richest person in the world by Forbes magazine last year. The litigation over her estate has left most of Hong Kong mystified: she battled for so long over her husband’s fortune that many are baffled as to how she herself could have had anything but a watertight legacy.

 

Source: Business Times 21 Nov 07

DIFC eyes US property, telecom, energy assets

Investments could come after dust settles on mortgage crisis: governor

(DUBAI) The Dubai government agency that bought into Deutsche Bank this year said it could invest in US banks, property and other sectors after the dust settles on a mortgage crisis that has cut asset prices.

Banks that have reported losses from defaults on sub-prime, or high-risk mortgages, could be among the targets for DIFC Investments, which is helping drive Dubai’s push to build two of the world’s 10 largest financial institutions in eight years.

‘There are good opportunities and the prices are good, but is this the bottom or is there more downturn to come?’ Omar bin Sulaiman, governor of the Dubai International Financial Centre (DIFC), told Reuters on Monday.

Asked whether the targets could include firms such Citigroup and Merrill Lynch, Mr bin Sulaiman said: ‘Without mentioning names we have a track record of taking stakes in major banks, with the right partners for management.’

Citigroup, the largest US bank, and Merrill Lynch, the world’s largest brokerage, replaced their chief executives after reporting credit market losses of at least US$21 billion between them.

DIFC Investment’s purchases in the United States could include property, telecom, and oil and gas assets, Mr bin Sulaiman said.

Defaults on sub-prime mortgages drove up borrowing costs around the world and prompted banks to shrink from riskier lending, making it more difficult for private equity funds to finance acquisitions.

The collapse of takeover bids, including Qatar’s plan to buy British supermarket chain J Sainsbury plc, and a tumble in stock prices this year has made assets cheaper.

‘The challenge is how low do we look. There are good assets in the US, good opportunities for acquisitions to be identified,’ Mr bin Sulaiman said.

‘The price has to be right and you need to understand the strategy of the organisation and if that aligns with our strategy, the decision is easier,’ he said.

Mr bin Sulaiman leads the financial services strategy of Dubai, which created the DIFC, a self-regulating dollarbased investment zone, to capture banking and other business in the world’s biggest oil-exporting region.

Having turned state companies into the world’s eighth largest airline, Emirates, and fourth largest port operator, DP World, Dubai wants to build two of the world’s 10 largest financial institutions by 2015.

‘It could be through acquisitions or home-grown,’ Mr bin Sulaiman said.

DIFC Investments bought a 2.2 per cent in Deutsche Bank this year to become the fifth biggest shareholder of Germany’s largest bank. The purchase was worth about 1.35 billion euros (S$2.9 billion) at the time the deal was announced in May.

DIFC Investments is looking to invest about US$1.8 billion in an unidentified publicly traded financial services company among the 20 acquisition targets it is evaluating, the agency’s managing director, Bisher Barazi, said in September.

Separately, Dubai International Capital LLC, the manager of US$13 billion for the emirate’s ruling sheikh and coinvestors, plans to buy a US$500 million stake in a publicly traded Japanese company this year.

‘We’re looking at a Japanese-headquartered company we like very much,’ chief executive Sameer al-Ansari said in an interview in Dubai on Monday.

Dubai International will host a group of Asian companies in Dubai next month to discuss investment opportunities, Mr al-Ansari said. Nobuyuki Idei, chairman of Sony Corp’s advisory board, and Eishu Kosuge, chairman of Daiwa Securities SMBC Europe, will speak at the event, according to Dubai International’s website.

Dubai International last month agreed to buy a US$1.26 billion stake in New York-based hedge fund Och-Ziff Capital Management Group LLC. Dubai International aims to raise assets under management to more than US$25 billion by mid-2009, it said in July.

 

Source: Reuters, Bloomberg (Business Times 21 Nov 07)

Sweet collective-sale deal for 15 houses in Balestier

Each owner gets $4m – 2 to 3 times what they would have made if they sold separately

IT TOOK 18 months but the owners of 15 terrace houses in Balestier have pulled off a sweet deal to match some of the collective sales that have been making headlines all year.

They have banded together to sell their properties for $61 million, giving each a payout of about $4 million.

This is two to three times what they would have made for their homes individually and a huge gain for those who bought several years ago.

It is quite a coup given that the deal was trickier than the usual collective sale and the fact that the once roaring en bloc market has cooled considerably since tougher rules were put in place last month.

The quieter market made the sale of the 15 terraces in Jalan Bunga Raya quite an achievement, said Mr Shaun Poh, senior director for investment advisory services and auctions at DTZ Debenham Tie Leung, which marketed the houses.

The mostly two-storey homes are not strata-titled as in a typical condo. This meant every owner had to agree to sell, unlike in a strata development where only 80 per cent of owners have to agree.

While similar deals have been sealed before, getting 15 out of 15 owners to sign the deal ‘was a challenge’, Mr Poh said. ‘If anyone doesn’t sign, that’s it. No deal.’

DTZ worked for about 18 months to collect all the signatures, he said.

The offer proved too sweet to resist for owners such as housewife Virgie Orlino, 47, who was initially reluctant to sell her house, which has been home for about 14 years.

‘We didn’t want to sell, but the rest wanted to sell, so we decided to cooperate,’ she told The Straits Times, adding that the price was ‘not bad’.

For some owners, who bought their homes more than 10 years ago, the payout represents a real windfall.

Retiree Ho Chaw Fu, 70, is ‘very happy with the price’. No wonder: Mr Ho bought his house for $300,000 about 30 years ago.

He may not be alone. Although one or two of the homes – lined up in two rows along a cul-de-sac – appear recently renovated, others look decades-old.

Despite acrimony being the word of the day for many other collective sales, the Balestier terraces deal went quite smoothly, owners said.

One owner, who did not want to be named, said people in the street ‘get along very well’ and were ‘very cooperative’ about the sale. He added that a few were planning to relocate together to another area so they could still be neighbours.

A reason for all this harmony could be the good price the sellers fetched. It works out to $739 per sq ft (psf) of potential gross floor area – a record level for Balestier, said Mr Poh.

The Balestier area has seen keen interest from developers such as City Developments and Soilbuild, which have both picked up projects in the vicinity recently.

The buyers of the terraces are understood to be a Chinese property developer and its Singaporean partner.

They were awarded the properties on the very day the tender closed, which means their bid was fairly strong.

They can build up to 36 storeys on the site, which has a plot ratio of 2.8.

About 56 apartments can be built with an average size of 1,500 sq ft each and may eventually be sold at $1,400 to $1,500 psf.

The developers also get the road itself, which they can keep or use as development land.

A similar deal was sealed last year when owners of some bungalows in Bukit Timah teamed up to sell their properties and developer Simon Cheong bought a group of 16 terrace houses in Cairnhill last year.

 

Source: The Straits Times 21 Nov 07

Waterfront condos coming up at Bedok Reservoir

FOUR condominiums will be built where the former Waterfront View estate in Bedok Reservoir Road used to be.

The first will be launched in the first quarter of next year, said developers Frasers Centrepoint and Far East Organization yesterday.

It will be called Waterfront Waves and have 405 units, of which more than half will be three- and four bedroom apartments. More than 60 per cent of the units will also have reservoir views, the developers added.

The Straits Times understands that the other three condos will also have ‘Waterfront’ in their names and are likely to be of similar sizes.

Together known as the Waterfront collection, the four-condo development is the largest in the area to have a direct water frontage, the developers said. In all, it could have 1,600 units.

The developers are also in talks with the Public Utilities Board about ‘enhancing the neighbourhood’s communal parks and water bodies’.

Although property consultants will not disclose prices for Waterfront Waves, they believe prices may start from $700 per sq ft (psf).

Mr Ku Swee Yong, director of marketing and business development at Savills Singapore, said units on lower floors with no water views could fetch that price.

On higher floors, prices could go up to $850 psf, he added.

Frasers Centrepoint and Far East jointly bought the former HUDC site last year for about $240 psf of gross floor area.

 

Source: The Straits Times 21 Nov 07

Woodlands condo plot draws 8 bids

EIGHT bidders have put in tenders for a residential site near the Singapore American School and right in the middle of the heartland, Singapore’s new real estate hot zone.

Bids for the plot – located between Woodlands Avenue 2 and Rosewood Drive – ranged from $36.4 million to $56 million.

EL Development, a unit of Evan Lim, lodged the top bid.

Frasers Centrepoint came in just behind with $55.5 million, according to a Singapore Land Authority (SLA) statement yesterday.

The narrow gap between the top two bidders reflects the keen interest in the 172,223 sq ft site, which is near the American international school and, thus, in an area popular with expatriate families, said Mr Lui Seng Fatt, regional director and head of investments at Jones Lang LaSalle.

A condominium of up to five storeys with a gross floor area of 241,112 sq ft can be built on the 99-year lease site, which has a gross plot ratio of 1.4, the SLA said. This works out to about $232 per sq ft (psf) per plot ratio, which can translate into a break-even price of about $400 psf for the project, said Mr Lui, adding ‘the project may be able to sell for about $500 psf, depending on the circumstances’.

Analysts noted that the competitive bidding for the Woodlands site contrasted sharply with the lacklustre response to recent public tenders for sites at Enggor Street and Marina View, both located in the more central parts of Singapore.

This confirms ‘the trend that the focus has shifted to the outlying areas, now that the prices in the central districts, including districts 9, 10, 11, have risen significantly’, said Mr Lui.

That theory will get a further test in two weeks, when the Urban Redevelopment Authority (URA) launches a tender for a reserve site at Simei Street 4, which has an area of 3.22ha and is earmarked for residential development with a maximum gross floor area of 74,084 sq m.

The call for bidders was triggered by an application made by a developer who committed to bid at least $187 million for the land parcel.

Also, the URA has awarded the tender for a transitional office site between Tampines Concourse and Tampines Avenue 5 to Glades Properties, the sole bidder with a price of $10 million.

This works out to $868 per sq m for a site with a gross floor area of 11,520 sq m. The land parcel has a 15-year lease.

 

Source: The Straits Times 21 Nov 07

First-time buyers get better shot at executive condos

FIRST-TIME home hunters will soon get increased priority to buy executive condominiums (ECs).

The Housing Board now requires EC developers to reserve at least 90 per cent of units for first-time buyers in the first month of sale. First-time buyers are those who have yet to receive a housing subsidy.

Until now, there was no such requirement.

In another change, families who have previously bought a new HDB flat will no longer have to pay a resale levy – ranging from $15,000 to $50,000 – when they buy a new EC flat.

Both new rules will apply first to ECs expected to be built in Punggol Field.

The Government made the 2.27ha plot available yesterday.

The plot, which can fit an estimated 620 homes, is now on the reserve list, which means that it will be put up for tender once a private developer commits to a minimum bid that meets the Government’s reserve price.

Property consultants say the latest moves by the HDB will raise demand for ECs, while addressing the housing needs of some newly-weds.

The EC scheme, introduced in 1995 to bridge the gap between public and private housing, allows families with monthly incomes of up to $10,000 to buy apartments similar to private condos.

Units come with facilities comparable to those of condos, such as swimming pools. But ownership restrictions apply within the first 10 years.

Eligible buyers can get a $30,000 housing grant for their EC, but they cannot sell it within the first five years, or let a foreigner buy it within the first 10 years.

Due to the restrictions, ECs were a less popular alternative to private housing to the extent that, for a while, the Government stopped offering this type of housing since the last one, La Casa, was launched in 2005 amid a property downturn.

But following a sharp run-up in property prices this year, the Government revived its EC programme to meet rising demands from Singaporeans.

New ECs typically cost 30 per cent less than full-fledged private condos, estimated Mr Lui Seng Fatt, regional director and head of investments at Jones Lang LaSalle.

Yesterday, the HDB also lifted the restriction on EC owners – who had received a housing subsidy – enjoying a second subsidised public housing unit, be it an EC, HDB flat or flat built and sold by private developers under the Design, Build and Sell Scheme (DBSS).

These EC owners can now buy another new EC, or a new flat built by the HDB or private developers, after a 30-month waiting period.

Those who used a housing grant for their first new EC will have to pay a resale levy of $55,000 on their original home if they move into a new HDB flat – to ensure a fair distribution of housing subsidies.

Previously, those who bought a new EC unit were barred permanently from buying a second new EC unit, HDB flat, or flat built and sold by private developers under the DBSS.

The change, with immediate effect, will put EC owners on an equal footing with owners of private properties, as the latter are allowed to buy new HDB dwellings after a 30-month wait from the time they dispose of their homes.

The HDB, in a statement yesterday, said the rule change was to ‘better meet the needs of EC buyers and align the EC policies more closely with public housing schemes’.

Property consultants say the changes are set to boost EC demand at a time when private home prices have quickly risen beyond the reach of many hoping to upgrade from HDB flats.

From January to September, private home prices shot up 22.9 per cent, more than twice the rate of resale HDB flats.

‘The EC will be quite a hot item now,’ said Mr Eugene Lim, ERA Singapore’s assistant vice-president.

Consultants do not expect the changes, alone, to make much of an impact on the current supply of lower cost housing, as there are no other EC plots on the market.

To date, 23 EC projects with about 10,400 homes have been developed and sold by the private sector.

 

Source: The Straits Times 21 Nov 07

GuocoLand looking out for more project sites in Vietnam

It breaks ground on its first development in the country – an $84m integrated complex

HO CHI MINH CITY – SINGAPORE developer GuocoLand Group yesterday broke ground on its maiden development in Vietnam – The Canary – and says it is already on the lookout for further development sites.

The US$58 million (S$84 million) investment in The Canary reflects a high level of investor confidence in Vietnam’s booming economy, said a Singapore agency official at the ground-breaking ceremony yesterday.

The 17.5ha development will boast residential, commercial, hotel and educational facilities. It is the first integrated project to be built by a foreign investor in Vietnam, outside the commercial centre Ho Chi Minh City and the capital Hanoi.

It is being built in affluent Binh Duong province, 17km north of Ho Chi Minh City, near the Vietnam- Singapore Industrial Park (VSIP).

The flagship industrial zone was started in 1996 by a consortium of five Singapore firms led by SembCorp Parks, in a venture with Vietnamese state-owned Becamex IDC.

With a gross floor area of 290,000 sq m, The Canary is expected to yield 1,200 homes, in addition to a shopping mall with 85,000 sq m of retail space, a hotel, an international school and a sports complex. Homes will also face the popular 27-hole Song Be golf course.

Centre director Chiong Woan Shin of IE Singapore’s Ho Chi Minh City office told The Straits Times that the project reflects the level of confidence of Singapore companies.

Construction of the residential area’s first phase is under way and due for completion in 2009.

The two- to four-bedroom apartments, ranging from 85 sq m to 160 sq m, will be targeted at locals and expatriates alike, said Mr Lawrence Peh, general manager of Guoco- Land Vietnam.

GuocoLand’s international investment general manager Ho Sing added that the group is looking for more locations in Vietnam for further projects.

CBRE Vietnam’s managing director, Mr Marc Townsend, said he expected the project to be well-received. ‘With so many people working at the VSIP, it will be time- and cost-efficient to live there,’ he said.

The project will be launched for sale next year. He estimates that the homes will be priced at a premium above US$800 per sq m, or S$108 per sq ft – a price fetched by a residential project nearby.

IE Singapore’s Ms Chiong added that more Singapore companies were venturing into Vietnam.

But fast-rising home prices are also proving to be the bane of ordinary Vietnamese and even some expatriates. This is exacerbated by speculators flipping properties for a quick profit.

Property prices have jumped 50 per cent in Vietnam since the start of this year, and in Hanoi and Ho Chi Minh City, they have tripled.

The result is that owning homes in the cities is far beyond the means of most ordinary Vietnamese. The issue is a hot topic in the country’s legislature.

 

Source: The Straits Times 21 Nov 07

Large yuan revaluation ‘would hurt growth’

SEOUL – A BIG Chinese currency revaluation would invite speculation and damage growth, said Dr Fan Gang, a monetary policy adviser to the People’s Bank of China.

Sharp increases in the yuan’s value would trigger ‘large speculative capital inflows and outflows that will kill China’s growth and financial stability’, Dr Fan, a member of the central bank’s monetary policy committee, said at an investment forum in Seoul yesterday.

Officials from the Group of Seven nations have increased pressure on China to let the yuan appreciate more and take the burden off other currencies. French Finance Minister Christine Lagarde said on Sunday that the yuan causes ‘tensions’.

‘What would happen after a large – say 40 per cent to 50 per cent – appreciation of the yuan? Another request in two years,’ Dr Fan said. He was referring to United States lawmakers’ calls for bigger gains.

The yuan has climbed about 11.5 per cent versus the US dollar since a fixed exchange rate was scrapped in July 2005.

The world’s fourth-largest economy grew 11.5 per cent in the third quarter as record trade surpluses pumped in cash. A stronger currency would make exports more expensive, staunch the inflow of money and ease tensions with trading partners.

The dollar is likely to keep falling, a problem for the yuan, Dr Fan said. Central bank governor Zhou Xiaochuan said yesterday that his country supports a strong dollar.

Source: BLOOMBERG NEWS (The Straits Times 21 Nov 07)

Asian stocks rebound as US dollar steadies

Hedge funds, traders snap up blue chips, hot China plays across Asia on greenback’s gain

REGIONAL stock markets, including Singapore’s, made startling recoveries in late trading yesterday after nosediving early in response to a big drop on Wall Street.

The Straits Times Index (STI) collapsed by 85 points right after the opening bell but finished in positive territory – up 26.55 points at 3,438.27.

The catalyst for the dramatic comeback was a steadying of the greenback against the Japanese yen, alleviating fears of an exodus of funds and sparking a buying spree in Tokyo that spread to the rest of Asia.

Hedge funds and big-time traders snapped up blue chips and hot China plays across the region.

Some dealers attributed the big shift in mood to a rumour that the United States Federal Reserve might consider another rate cut.

Fears are growing that the US may be tipped into a recession by the worsening mortgage crisis.

Market watchers, however, dismissed the rumour as too far-fetched to explain the region’s strong recovery.

‘It has become a no-brainer trading Asian shares. Prices swing in tandem with the movements of the US dollar against the yen,’ said a dealer.

Traders have been reacting to every tiny movement in the foreign exchange market for any possible unravelling of yen carry trades – massive loans taken out by hedge funds in Japan, where interest rates are low, to make huge bets on higher-yielding assets elsewhere.

The STI’s early plunge came as the US dollar shed almost one yen to 109.63 in early trade. Once the currency bounced back to 110.43 yen after lunch, a rally swept across the region.

Market sentiment also got a boost from a rise in US stock futures in Asian trades, fuelling hopes of a rebound on Wall Street. The Dow Jones Industrial Average plunged by 213 points on Monday.

Other Asian bourses saw similar trading patterns. Hong Kong’s Hang Seng Index closed 311 points higher at 27,771 after losing 1,056 points in the morning, while Tokyo’s Nikkei 225 Index rose 169 points to 15,211.52, recovering from a morning loss of 114 points.

Among the biggest gainers in Singapore were badly battered bank stocks and China plays. DBS Group Holdings closed 20 cents higher at $19.60 after plunging to a four-month low of $18.80, while United Overseas Bank rose 40 cents to $19.60.

China plays mostly ended on the upside, led by gains in giant shipbuilders Cosco Corp, which rose five cents to $6.45, and Yangzijiang, which went up three cents to $2.09.

While the rebound brought cheers to traders glum at recent mounting losses, some felt the rebound was too good to be true.

CIMB-GK research head Song Seng Wun said: ‘The market has been sold so hard and for so long that it doesn’t take much effort to get a rebound. But can this last?’

Many traders now fear yesterday’s rebound may turn out to be a ‘dead cat bounce’ – a small recovery like last Wednesday’s one-day rebound.

Many also worry that foreign funds may have used the rebound as an excellent opportunity to get rid of their investments in the region.

A Citigroup report showed that as turmoil engulfed regional markets last week, about US$5.6 billion (S$8.1 billion) of stocks were sold off by foreign investors. Among the worst-hit markets was China, with US$1.1 billion worth of shares offloaded by foreigners.

Other hard-hit markets included Hong Kong, where US$191.1 million worth of shares were sold by funds investing only in Asian stocks, and Singapore, with US$51 million worth of shares offloaded.

UNITED States stocks rose yesterday, rebounding from three-month lows, after a gain in the price of oil boosted energy companies and Credit Suisse Group said shares of Google may reach US$900 next year.

ExxonMobil and Chevron both climbed the most in three months.

Google rallied after Credit Suisse said the most-popular search engine will expand its share of the mobile advertising market.

Benchmark indexes gained even after Freddie Mac, the second-largest source of money for US home loans, said it may cut its dividend and reported a US$2 billion (S$2.9 billion) loss – three times what some analysts had estimated.

The Dow Jones Industrial Average rose 125.27 points, or 1 per cent, to 13,083.71 after two hours of trading. The Nasdaq Composite Index increased 40.24 points, or 1.6 per cent, to 2,633.62.

Crude oil rose for a third day after the US dollar touched a new record low against the euro. The greenback’s 11 per cent slide this year has made oil, metals and other commodities denominated in the US currency cheaper for foreign investors.

 

Source: BLOOMBERG NEWS (The Straits Times 21 Nov 07)

Things get hotter as shrinking dollar goes pop

US dollar’s image losing currency as emblem of extravagance, success

NEW YORK – WHEN people start talking about rappers and supermodels shunning the US dollar, you know there’s a problem.

As the greenback recently hit historic lows against other major currencies, rap mogul Jay-Z released a new video in which he flashed euros, not dollars. It was also widely reported recently that one of the world’s richest supermodels, Gisele Bundchen, opted to be paid in euros because of the dollar’s weak outlook.

Her spokesman denied that the model was spurning the dollar, saying Bundchen was paid in the currency of a job’s location.

Nevertheless, the euro bought an all-time record US$1.4752 earlier this month, and the British pound had also been trading at its highest levels against the dollar since the early 1980s.

The Canadian dollar, often called the ‘Loonie’, reached parity with the US dollar in September for the first time since 1976.

While investors, multinational businesses and travellers have been witnessing the dollar’s slide for years, pop culture is new territory.

Jay-Z’s Blue Magic video seems to have been an attempt to acknowledge the dollar’s decline in an ironic way and to paint the artist as an international superstar who is smarter than those accepting greenbacks.

‘It is probably a particularly good strategy as the ‘image of the dollar’ loses its ‘currency’ as an emblem of extravagance and success,’ Mr Steven Tepper, associate director of Vanderbilt University’s Curb Centre for Art, Enterprise and Public Policy, said in an e-mail.

‘So, you have the combination of a weakening visual icon – the dollar – and a growing international audience that will understand and connect to the image of the euro.’

As for Bundchen, she would not have been the first to favour contracts in other currencies. Others included billionaire investor Warren Buffett and Pimco managing director Bill Gross.

‘Any international business person that is moving assets around the world will want to do as many deals in the strongest currency available, which is certainly not the dollar these days,’ Mr Tepper added.

The dollar’s decline represents expectations that the United States economy will slow relative to other economies. Recent cuts to the Federal Reserve’s key interest rate have also weakened the dollar.

A weaker dollar also makes American goods cheaper and more competitive in foreign markets, tightening the trade deficit. It helps some US companies with operations abroad, whose profit is greater when converted into dollars. But at the same time, a cheaper dollar makes foreign goods and travel more expensive.

Source: ASSOCIATED PRESS (The Straits Times 21 Nov 07)

Rise in US housing starts not sign of rebound for sector

Unexpected 3% rise due to surge in apartments; applications for building permits continue to fall

WASHINGTON – CONSTRUCTION of new homes and apartments in the United States rebounded last month by the largest amount in eight months, but the unexpected increase was not viewed as a signal of a housing turnaround.

The Commerce Department reported yesterday that housing construction rose by 3 per cent last month, the first increase after three months of declines and the biggest advance since a 6 per cent rise last February.

However, all of the strength came in the volatile apartment sector, which jumped by 44.4 per cent.

Construction of single-family homes fell for a seventh straight month, declining by 7.3 per cent last month compared with September.

Analysts believe that housing is likely to remain weak through much of next year as builders struggle with historically high levels of unsold homes and rising mortgage defaults which are dumping even more homes back on glutted markets.

The overall increase left construction last month at a seasonally adjusted annual rate of 1.229 million units, down 16.4 per cent from activity a year ago.

Applications for building permits, seen as a good sign of future activity, fell for the fifth straight month in October, dropping by 6.6 per cent to an annual rate of 1.178 million units. That is down a sharp 24.5 per cent from a year ago.

The rebound in overall construction came as a surprise to analysts who had forecast a drop of 1.3 per cent.

However, the 6.6 per cent slide in permit applications was more severe than the 4.8 per cent fall expected by Wall Street.

Troubles in housing are expected to seriously depress overall economic growth in the current quarter and early next year with some analysts growing more concerned about an outright recession.

Yesterday, Freddie Mac, the second-biggest buyer of US mortgages, posted its largest-ever quarterly loss – US $2 billion (S$2.9 billion) – and said it may cut its dividends to weather ’significant deterioration’ in the housing market.

The US Federal Reserve has cut interest rates twice since September but has signalled that it is not likely to make further reductions unless the economic weakness deepens significantly, because of worries that a surge in oil prices will make inflation worse.

In Europe, shares in UBS tumbled, but then clawed back, on concerns that the Swiss-based bank will suffer more losses due to exposure on assets hit by the US sub-prime mortgage crisis.

In Britain, buy-to-let mortgage lender Paragon Group said it may need to raise £280 million (S$831 million) from shareholders because of difficulty faced in raising funds in the credit crunch, prompting its shares to plunge nearly 40 per cent.

 

Source: ASSOCIATED PRESS, BLOOMBERG NEWS, REUTERS (The Straits Times 21 Nov 07)

Fifteen Balestier terrace houses sold for $61m

Buyer pays $739 ppr, a record for freehold residential land in vicinity

A ROW of 15 terrace houses in Jalan Bunga Raya have been sold for $61 million or an all-up unit land price of $739 per sq ft per plot ratio (psf ppr) – a record for freehold residential land in the Balestier/Novena area.

Before the deal, which was brokered by DTZ, the highest residential land price fetched in the area was around $600 psf ppr.

DTZ said the buyer of the 15 houses is a consortium comprising Chinese developers and local partners. All owners of the houses have agreed to the sale.

The 15 homes have a total land area of 24,058 sq ft. Access to the houses is by Jalan Bunga Raya, which can be alienated by the state for about $7 million, boosting the land area to 32,978 sq ft, subject to approval by the Singapore Land Authority.

A development charge of about $263,000 is also payable. The $739 psf ppr unit land price to the developer includes these two payments it will have to make to the state and based on the enlarged plot size.

Under Master Plan 2003, the site has a 2.8 maximum plot ratio – the ratio of maximum potential gross floor area to land area – and a 36-storey height limit. DTZ estimates the plot can be developed into a new condo with about 56 apartments averaging 1,500 sq ft. ‘The breakeven cost is likely to be $1,150-1,200 psf,’ said DTZ senior director, investor advisory services & auction, Shaun Poh.

Separately, DTZ has put up for sale GMG Building, a 12-storey freehold office block in Robinson Road.

The property is being sold by Robinson Land Pte Ltd, which is currently refurbishing the block. Refurbishment work, estimated to cost about $5-6 million, is expected to be completed and the building ready for occupation around the first quarter of 2008.

‘This prime office building will be sold, completely refurbished and with vacant possession, which would allow investors to take advantage of current favourable office rental rates,’ Mr Poh said.

‘It’s also an excellent opportunity for end-users seeking a corporate HQ with naming rights. The property is expected to fetch about $2,600 psf over the total strata area of 54,832 sq ft, working out to a total amount of $142.6 million.’

Robinson Land, whose shareholders include the Buxani Group of Singapore and some overseas investors, bought GMG Building last year for $48 million or $875 psf of strata area.

Refurbishment work, which started recently, will boost the building’s net lettable area (NLA) to 54,895 sq ft, about 5 per cent higher than the previous NLA. There is not much redevelopment.

The refurbished building is being sold through an expression of interest exercise that closes on Dec 5.

 

Source: Business Times 20 Nov 07

Orchard Road prime rents 4th highest in Asia

ORCHARD Road prime rents have hit US$325 psf per year, making it the world’s 14th most expensive area for shopkeepers. By contrast, annual prime rents for sites on New York’s Fifth Avenue are US$1,500 psf, or US$922 for sites on the Avenue des Champs Elysees, in Paris.

Orchard Road is also the fourth most expensive shopping location in this region – after those in Hong Kong (Causeway Bay – US$1,213 psf/year), Tokyo (Ginza – US$683 psf/year) and Seoul (Gangnam Station – US$431 psf/year).

A report by Cushman & Wakefield (C&W) shows that Singapore’s busiest shopping street did slip one place from its previous 13th position last year but attributed this to the strength of the euro over the Singapore dollar.

C&W’s report tracks retail rents in the world’s top 231 shopping locations across 44 countries. Its data show that annual prime rents increased by 11.3 per cent for Orchard Road while in the top three most expensive locations in New York’s Fifth Avenue, Hong Kong’s Causeway Bay and Paris’s Avenue des Champs Elysees, rents increased by 11.1, 6.97 and 14.5 per cent respectively.

At the fourth and fifth most expensive locations – London’s New Bond Street (US$814 psf/year) and Tokyo’s Ginza – annual rents increased by 20.95 and 4.8 per cent respectively.

Although C&W expects retail rents in Singapore to continue their upward trend, it noted that rents in other cities have increased faster, notably in India. It believes that this will help make Singapore more competitive and maintain its attractiveness as a retail destination in the region.

Rental growth across Asia as a whole increased by 23.8 per cent. C&W head of retail services (Asia Pacific) Sebastian Skiff said: ‘Of particular note is the robust performance in Tokyo driven largely by lack of supply. India saw particularly strong growth, with rents nationally up 53.5 per cent.’

He also noted that Australia, Korea, Singapore‚ and Hong Kong saw solid growth from already relatively high bases.

On the demand for prime retail space, C&W’s global head of retail, John Strachan, said: ‘We are seeing the emergence of a line-up of global shopping destinations, whether Fifth Avenue in New York, Causeway Bay in Hong Kong or Avenue des Champs Elysees in Paris, where retailers are using flagship stores in prestige locations to leverage the value of their brands.’

Globally, Chicago’s Oak Street was the location with the biggest rental increases in local currency. Rents for prime properties doubled in one year.

This was followed by rents in New Delhi’s Ansal Plaza and Connaught Place which saw annual increases of 87.5 per cent while rents in St Petersburg’s Nevsky Prospekt increase by 81.8 per cent.

 

Source: Business Times 20 Nov 07

Ginza Plaza to get $26m facelift

It will be redesigned by DP Architects and renamed West Coast Plaza

FAR East Organization will spend $26 million updating the 16-year old Ginza Plaza shopping mall.

The mall, which will be renamed West Coast Plaza, is expected to be ready for business in the third quarter of 2008.

Vivienne Tan, president of Far East Retail Consultancy, said changing demographics in the West were a key factor in the decision to refurbish the mall.

‘As its original name suggests, Ginza Plaza used to cater to the Japanese expatriate community that lived in the area,’ Mrs Tan said.

‘But now we’re seeing a good number of other nationalities moving in. There is also a growing private residential population,’ she said.

Danny Yeo, director of retail at Knight Frank, which is marketing the mall, said rents at West Coast Plaza will range from $8 to $25 per sq ft per month (psf pm). Before Ginza Plaza was vacated, average rentals were $5-$6 psf pm, Mrs Tan said.

Billed as ‘An Oasis in the West’, West Coast Plaza, which has a net lettable area of 160,000 sq ft, hopes to capture the ‘breezy, easy-going spirit of the West Coast’. The mall has been redesigned by DP Architects.

Far East hopes to attract residents living in the West, who are generally thought to have higher disposable incomes than residents in other parts of Singapore.

A study by Knight Frank showed the West has a higher proportion of private housing (about 30 per cent) than the island-wide residential mix (about 18 per cent). Also, nine or more new private residential developments within 2km of West Coast Plaza are expected to be completed around the same time as the mall, Far East said.

Increased demand for private property and the presence of a more varied expatriate community are thought to be due to a growing number of professionals working in the area, in places such as science hub one-north.

Far East also hopes to attract students from more than 27 educational institutions within 3km of the mall, including students from the National University of Singapore.

 

Source: Business Times 20 Nov 07

Lippo-Mapletree trust falls 3.1% in market debut

(SINGAPORE) Shares of property trust Lippo- Mapletree Indonesia Retail Trust started trade yesterday at 77.5 cents in their Singapore stock market debut, down 3.1 per cent against the issue price of 80 cents a unit.

The units closed yesterday at 68 cents, down 12 cents or 15 per cent from the initial public offer (IPO) price.

Indonesia’s Lippo Group and Singapore’s Mapletree Investments sold 645.47 million shares at 80 cents, raising $516 million in their IPO for a joint property trust.

The Lippo-Mapletree Indonesia Retail Trust is based on around $1 billion worth of properties that comprise seven Indonesian shopping malls and seven retail spaces found in other malls, the prospectus said.

The listing of the Indonesian trust comes after Saizen Real Estate Investment Trust (Reit), which is based on residential buildings in Japan, tumbled 14 per cent in its Singapore market debut on more than a week ago.

Saizen’s sharp fall prompted Japan’s Asia Pacific Land to delay a US$350 million IPO in Singapore.

Mapletree, which is owned by Singapore investment company Temasek Holdings , has a 40 per cent stake in the joint venture that will manage the Indonesian trust.

The Lippo conglomerate, controlled by Indonesia’s Riady family, owns the remaining 60 per cent.

 

Source: Reuters (Business Times 20 Nov 07)

Amber Residences condo a hit

70 units snapped up within hours during private preview at $1,650 psf average

MORE than 70 of the 114 units at Voda Land’s Amber Residences in Amber Road were snapped up within hours during a private preview on Sunday at an average price of $1,650 per square foot (psf), the agency marketing the project said yesterday.

And elsewhere, about 70 per cent of units released at Sui Generis – a condominium in the Balmoral area being jointly developed by Singapore-listed United Engineers (UE) and Japan-based Kajima Corporation – have been sold at an average price of $2,500 per square foot (psf), UE said yesterday.

At the 40-unit Sui Generis, 17 units of the 23 released were sold through overseas previews during the past two months, UE said.

Prices fetched ranged from $2,300 psf to $2,580 psf. About 90 per cent of the units were bought by foreigners during roadshows in Indonesia and Hong Kong, UE said.

‘Given the continued foreign interest in Singapore properties, Sui Generis will tour various cities including Jakarta and Hong Kong,’ said Joseph Tan, executive director of residential at CB Richard Ellis (CBRE), which is marketing the project. Sui Generis will be launched in Singapore early next year.

CBRE said the average price of $2,500 psf is a benchmark for the Balmoral area.

‘Buyers are drawn by the good unit layout and quality of finishes, which explains why the project has achieved a benchmark sale price,’ Mr Tan said.

Sui Generis comprises mostly three and four-bedroom apartments. There are also four penthouses. The project’s name is a Latin expression that means ‘a person or thing that is unique and in a class of its own’.

At Amber Residences, the average price per unit came to $1,650 psf, with choice high-floor units being sold for more than $1,800 psf, said Savills Singapore, which is marketing the project.

‘Following the overwhelming success and strong demand for this unique development, we plan to release a few more units for this coming Sunday’s preview,’ said Phylicia Ang, senior associate director of Savills’ residential division. ‘It will then be followed by an official launch for the remaining units – including choice units – from Dec 1.’

The sales were done by private invitation only and most of the buyers were locals, Savills said.

Amber Residences is made up of a single 21-storey block with mostly two, three and four-bedroom apartments. There are also six penthouses.

The project is possibly the first on the East Coast where all units have a premium finish and fittings usually associated with high-end condominiums, Ms Ang said.

 

Source: Business Times 20 Nov 07

MTI raises ‘08 forecast for ‘hotter’ economy

Easing resource crunch, cyclical downturn will prevent overheating: officials

(SINGAPORE) The Ministry of Trade & Industry has raised slightly its forecast of GDP growth in 2008, but maintains that the economy has not become ‘too hot’.

In a somewhat unusual move, it has upped the 2008 growth forecast by half a point to 4.5-6.5 per cent. For 2007, with the year’s growth pretty much in the bag, MTI has narrowed the forecast to 7.5-8 per cent.

GDP growth in the third quarter has turned out a slower-than-expected 8.9 per cent – lower than the flash estimate of 9.4 per cent, due mainly to weaker manufacturing growth. This brings GDP expansion in the first nine months of 2007 to 8.1 per cent, which spells, going by the official forecast, a slowdown in Q4. But MTI says it expects the growth momentum to continue into Q4 as sustained growth in the EU and Asia offset a somewhat softer pace in the US.

MTI’s forecast for 2008, however, amounts to a ‘moderation in growth towards the economy’s underlying potential rate after four years of abovetrend growth’, the ministry says.

The economy should grow in the upper half of the 4.5-6.5 per cent range next year if – as the market consensus expects – the US economy rebounds in the second half of 2008 from a first-half slowdown, MTI says.

But, if the US sub-prime problems worsen or if oil prices continue to soar, and a sharp, protracted US slump ensues, Singapore’s growth could be nearer the lower end of the forecast.

At a briefing on the Q3 GDP data yesterday, MTI’s second permanent secretary Ravi Menon told reporters that Singapore’s 2008 growth forecast should be intact even if US economic growth slows to about 1.5 per cent next year.

MTI’s forecast also assumes that oil prices will round out the rest of the year at an average US$90 a barrel, and ease to US$80-85 in 2008.

As for the weak US dollar, Mr Menon said the concern, if any, is not so much on any impact on Singapore’s exports, but if it should see a precipitous decline that triggers off massive selloffs in the financial markets and second-round effects on the global economy. ‘It’s one of the wild cards,’ he added.

For now, the key concern here remains centred on rising price pressures, though Mr Menon reiterates the government’s assessment that there is no overheating in the system.

Resource constraints are being eased as supply catches up with demand, he said, citing the release of vacant land and state buildings for lease, and increased land sales in business parks for companies’ backroom operations, all of which should check the rise in office rental costs.

Foreign worker quotas will also be increased to ease the labour bottlenecks in construction.

Not least, a cyclical slowdown in the economy next year will help cool demand pressures, Mr Menon said.

‘Has the economy gotten hotter? Yes,’ he said. ‘Has it got too hot? No.’ Singapore’s short and medium-term economic prognosis remains good, he added.

The Monetary Authority of Singapore’s officials at the briefing also maintained that – apart from the one-off technical effects of the Goods and Services Tax hike and the taxman’s upcoming revision of the annual values of HDB flats, which will boost the consumer price index – underlying cost pressures haven’t gone out of whack.

The underlying inflation rate – excluding housing and private road transport costs – is still expected to average 1.5-2 per cent this year and next.

MAS deputy managing director Ong Chong Tee said its monetary policy stance ‘remains appropriate’ and will be reviewed, as scheduled, next April.

Economists such as Citigroup’s Chua Hak Bin reckon the risk of further MAS tightening is high early next year, as the move to a ’slightly’ steeper slope last month ‘may be too gentle a move’.

Citigroup has raised its 2008 inflation forecast to 3.8 per cent from 3 per cent. It expects CPI inflation to swing from a 5 per cent average in the first half of 2008 to 2.8 per cent in the second half. A 20 per cent rise in imputed rents could drive up headline CPI by 1.5-2 percentage points, Dr Chua estimates.

Merrill Lynch’s Emerging Asia currency strategist, Simon Flint, says he is not concerned about overheating risks here.

‘MAS reacted very quickly to rising price pressures,’ he said, referring to last month’s monetary tightening. ‘They’re being reasonably prudent about inflationary threats. ‘I’m optimistic about sustainable growth,’ he added.

 

Source: Business Times 20 Nov 07

Asia faces the inflation test

As long as economic policymakers act responsibly and transparently, Asia can avoid excessive price increases

By WILLIAM PESEK JR

ASIANS sure are unique; they don’t eat and they don’t use energy. That’s nonsense, of course, yet it’s how some are viewing Asia. Even as prices rise faster in some places than during the 1990s, investors are pushing the ‘core inflation’ argument.

If you strip out the most volatile items, such as food and energy, the rationale goes, Asian inflation looks pretty tame. Oh, it’s only high pork prices, China bulls say. It’s only because crude oil keeps rising, Asia-market enthusiasts retort.

Yet such arguments are taking on shades of denial as 2008 approaches and inflation accelerates. It’s hard to generalise the price environment. After all, Japan, by far the region’s biggest economy, still faces deflation.

In India, Asia’s No 3 economy, pressures have eased this year. And overall consumer prices are growing at a 3 per cent annual rate, or less, in Hong Kong, Malaysia, the Philippines, Singapore and South Korea.

The dat