Govt raises inflation forecast, sees peak in H1

Forecast upped to 4.5-5.5% as S’pore feels effect of rising food and oil prices

(SINGAPORE) Singapore’s inflation will get worse before it gets better, the Ministry of Trade and Industry (MTI) said yesterday, expecting inflation to peak in the first half of 2008 before moderating in the second half.

The government raised its full-year forecast for the headline consumer price index (CPI) to 4.5-5.5 per cent, from 3.5-4.5 per cent previously.

Rising food and oil prices globally have filtered through to domestic prices of food and oil-related items here, MTI said.

Last year, Singapore’s CPI grew 2.1 per cent year-on-year after growing by one per cent in 2006. It hit a 25-year high in December when it grew 4.4 per cent year-on-year. It rose 4.1 per cent for the fourth quarter.

MTI second permanent secretary Ravi Menon noted that part of the increase in the headline inflation here was due to the one-off effect of the two percentage-point hike since last July and technical factors like the revision of annual values of HDB flats.

‘We expect inflation to get worse before it gets better,’ he said at a media briefing yesterday. ‘The revised forecast is premised on fairly high inflation rates in the next few months. This is only to be expected given the very low base in the first half of last year.’

While inflation is expected to taper off in the second half during which the effect of the GST hike wanes, a return to the low inflation rates enjoyed in recent years will not happen any time soon as commodity prices are still likely to rise albeit at a slower pace than in 2007, Mr Menon added.

When asked if the Monetary Authority of Singapore (MAS) would be prompted to change its monetary policy stance given the higher inflation outlook, MAS deputy managing director Ong Chong Tee said the current monetary policy stance ‘remains appropriate and the macroecnomic and inflation outlook has been broadly consistent with the planning parameters’.

This policy of a modest and gradual appreciation of the S$NEER policy band has been in place since April 2004. Mr Menon noted that the current inflation outlook has to be viewed in the context of historically low inflation. For the last 40 years, Singapore’s inflation rate averaged 1.5 per cent, excluding the two oil shocks in the mid

1970s and early 1980s. Average inflation for the past 10 years was half that rate at 0.7 per cent due to the weak global demand in the aftermath of the Asian financial crisis, the downswing of the technology cycle and disinflationary impact from the emergence of China and other economies.

After years of low inflation, the world is now returning to ‘a more normal inflation environment,’ Mr Menon said.

But he added that the fact that long-term bond yields remain low and reflect that despite the current spike in inflation, the long-term inflation outlook remains low. And as long as jobs are created and wages grow, the impact of inflationary pressures will be dampened.

A recent report released by the Department of Statistics shows that household income has risen faster than inflation. Average household income from work was 32.4 per cent higher than 10 years ago, while consumer prices rose by a smaller 7.6 per cent over the same period.

Ministry of Manpower divisional director (manpower planning and policy) Jeffrey Wong said he expects employment growth to be sustained into 2008, after adding a record 236,600 jobs in 2007.

 

Source: Business Times 15 Feb 08

Sembawang E&C bags $400m IR contract

SEMBAWANG Engineers and Constructors (SEC) has been awarded a $400 million contract by Marina Bay Sands Pte Ltd to build the Marina Bay Sands integrated resort’s (IR) North Podium comprising the casino, theatres and retail arcade.

But with a construction period of just 15 months, pressure will already be on Singapore’s biggest construction company to start work soonest possible.

Saying that the timeframe is ‘pretty tight’, SEC president and CEO Alwyn Bowden added: ‘The Marina Bay Sands (MBS) North Podium is a fast-track project which will require our dedicated attention.’

In November 2007, SEC was also awarded a $463 million contract for architectural, civil and structural works at the Bayfront MRT station in Marina Bay.

Mr Bowden added: ‘We are especially well placed to handle (the MBS) project as we are also constructing the new Downtown Line Bayfront MRT station in Marina Bay, which will connect directly to the resort’s MICE (Meetings, Incentives, Conventions and Exhibitions) centre.’

The MBS project involves building the substructure and superstructure of the North Podium, and will have four upper levels and a four-storey basement.

Work is expected to start this month and is set for completion in April 2009.

Apart from maintaining a 24-hour construction site, fast-tracking construction will also require coordination with various parties involved who will invariably have inputs. Mr Bowden explained that they have to ‘make sure changes do not impact on construction process’.

On the complexity of the project, and the possibility of delays, he said: ‘We have tried to cover whatever eventuality that may arise.’

As far as equipment and building materials are concerned, Mr Bowden is confident that its supply chain management has sources and prices under control. ‘We have not found materials to be a problem,’ he added.

Mr Bowden could not say how many other construction companies had been in the running for the coveted contract, but he did say that there was ‘an emphasis on price’, when it came to bidding.

However, with construction company services in high demand at the moment, the days of ‘razor- thin margins’ are over.

Mr Bowden added: ‘For construction companies, the volume (of work) means that one can look around and be a bit more choosy.’

 

Source: Business Times 15 Feb 08

Playfair Rd site gets bullish top bid of $142 psf ppr

Sim Lian unit’s offer is whopping 63% above second highest bid

A 60-YEAR leasehold industrial site at Playfair Road has attracted a top bid of $142 per square foot per plot ratio (psf ppr) from Sim Lian Development unit Trio Link Development – a record price for such a site in the Ubi/Paya Lebar/Eunos area.

The tender for the 92,870 sq ft reserve-list plot attracted 12 bids, reflecting growing interest in industrial property as it comes into play amid the breather in residential and office values, says Colliers International director (industrial) Tan Boon Leong.

Sim Lian’s top bid of $33 million, or $142.13 psf ppr, was a huge 63 per cent above the next highest bid of $20.23 million, or $87.13 psf ppr, by Orion-Three Development.

Orion group, which is linked to Indonesian interests, has also been active in state tenders for industrial sites. It clinched plots at Serangoon North Ave 4 and Changi North St 1 in 2006.

Asked about Sim Lian’s aggressive bidding in yesterday’s tender, executive director Ken Kuik said the company had been encouraged by recent demand for strata-titled flatted and ramp-up factories at its Vertex project at Ubi Ave 4/Ubi Link.

‘We’ve sold about 160 of the 200 units released since September last year, achieving an average price of about $330 psf,’ he said.

The eight-storey property has 552 strata-titled units. Sim Lian is developing it on a 60-year leasehold site it won at a state tender in 2006.

Like the Playfair Road site contested yesterday, the Ubi plot is zoned for Business 1, allowing clean and light industrial and warehouse uses.

Mr Kuik said Sim Lian plans to develop the Playfair Road plot into a 13-storey project with strata-titled units for sale.

He noted that the site is just a few minutes’ walk from Upper Paya Lebar MRT Station on the Circle Line.

Colliers’ Mr Tan estimates Sim Lian’s breakeven cost could be around $260 psf, considering the saleable area for such industrial developments can exceed the maximum permitted gross floor area by 15-20 per cent after factoring in features like terraced areas and air-con ledges.

‘This is the first time a 60-year leasehold industrial site is being sold in the area, which traditionally has freehold industrial properties. That may have added to the plot’s attraction,’ he suggested.

Property consultants say the $142 psf ppr that Sim Lian offered for the Playfair plot surpasses the last high achieved in the Ubi/Paya Lebar/Eunos area – $85.50 psf ppr for a 60-year plot at Eunos Link/Kaki Bukit Avenue 1 in 1996.

However, yesterday’s top bid is still shy of the island-wide high of $170 psf ppr achieved late last year for a 30-year leasehold site near Commonwealth MRT Station.

The other bidders in yesterday’s tender were KNG Development, Soilbuild Group, Prosperity Realty (linked to Hotel Royal’s Lee family), HLH Development & Brothers (Holdings), Superbowl Land, See Young Investments, Lian Beng Group unit LB Property, Boustead Projects, Boon Keng Development and  Lim Huay Ren, which placed the lowest bid of $12 million or $51.68 psf ppr.

 

Source: Business Times 15 Feb 08

Slower growth, higher prices and uphill climb ahead

2008 growth forecast cut to 4-6% in shadow of US uncertainty

(SINGAPORE) The Singapore economy will see lower growth and higher inflation this year, but remains wellpoised to ride the upturn when it comes, says the Ministry of Trade and Industry (MTI). Most economists agree.

In view of heightened risks in recent months, chiefly a sharp US slowdown, MTI has shaved its forecast of Singapore’s 2008 GDP growth by half a percentage point to 4-6 per cent, which would be down a few notches from 2007’s revised 7.7 per cent pace.

The previous 2008 forecast in November had already factored in a US slowdown, MTI second permanent secretary Ravi Menon explained at a media briefing yesterday on the 2007 economic results.

But downside risks have since risen. And while it is not known if the US economy is in fact in recession, ‘what we do know is that the US is already experiencing a significant slowdown in growth, and the key uncertainty now is the length and severity of this slowdown’, said Mr Menon.

The new official 4-6 per cent growth forecast captures two scenarios. The

brighter outlook sees – as current conditions suggest, by MTI’s reading – the United States tackling a mild recession in the first half but recovering in the second half on the back of strong fundamentals, and fiscal and monetary stimulus.

Singapore will then likely grow in the upper half of the 4-6 per cent forecast, supported by healthy, if slower, growth in Europe and Japan, and a robust Asia.

But if the US falls into a severe recession brought on by a prolonged credit crunch, with knock-on effects in Europe and Asia, ’sentiment-sensitive and external-oriented’ sectors in Singapore, such as electronics, wholesale trade and financial services, will be hit hardest, said Mr Menon.

Even sectors with more of a regional exposure, such as health care and tourism, will not be totally unscathed. The Singapore economy will then likely grow nearer the 4 per cent end of the forecast range.

‘In either scenario, we’re looking at slower growth this year,’ he said.

Already, GDP growth slowed to 5.4 per cent in Q4 last year – down from Q3’s 9.5 per cent pace, and lower than early estimates of 6 per cent for Q4. On a quarter-on-quarter basis, GDP contracted by 4.8 per cent.

According to MTI, the Q4 slowdown reflected more the plunge in biomedical manufacturing – which fell nearly 30 per cent in Q4 because of cyclical pharmaceutical downtime – rather than any impact from the US.

Asked about the chances of Singapore slipping into a technical recession – if the economy sees a second consecutive negative quarter in quarter-on-quarter terms – Mr Menon said: ‘Most of the simulations we have done don’t show that outcome.’

MTI’s economics and strategy director, Cheang Kok Chung, also declared it ‘quite unlikely’, adding that there is ‘good potential’ for a biomedical rebound in Q1.

In fact, some of the more upbeat private sector economists see a quick rebound in GDP – in the current quarter.

While OCBC Bank’s treasury economist Selena Ling thinks the slowing growth momentum from Q4 2007 ‘could bleed over into Q1 2008′, others such as HSBC’s Prakriti Sofat see the Singapore economy bouncing back strongly in Q1. One reason – she is confident of a pharmaceutical turnaround ‘over the next few months’.

A recent Merrill Lynch report also voiced confidence that the Singapore economy is ‘well-positioned to cope with a US downturn this time’.

And P K Basu, the ever bullish chief economist (Asia ex-Japan) of Daiwa Institute of Research, declares: ‘I see no reason for even one iota of pessimism about the Singapore economy.’

Apart from the pharmaceutical bleed, Q4 was hardly a weak quarter at all, he says, pointing out that the rest of the economy, notably electronics, was ‘accelerating’.

But the ‘most eye-popping number’, Mr Basu said, was the Q4 manufacturing investment commitments of $8.7 billion – that spells jobs and output down the road.

Depending on the pharma sector rebound, he reckons GDP growth could hit 7-8 per cent in Q1.

‘I see no significant downside risk to my 7.4 per cent GDP growth forecast for 2008,’ he tells BT.

MTI – which yesterday also raised its 2008 inflation forecast for Singapore to 4.5-5.5 per cent – would be cheered by such confidence.

‘Growth will be lower and inflation higher, not a great combination,’ Mr Menon said. But the slowdown – after four years of above-trend growth – towards the economy’s underlying potential will help ease supply-side constraints and relieve cost pressures, he added.

Beyond 2008, the economy is well-positioned for any pick-up, he said. ‘Notwithstanding the weakened macroeconomic picture, the economy remains in fundamentally good shape structurally.’

Rising costs – and Singapore’s ever-strong fiscal balances – set the stage for the Budget today. Rebates and other goodies for lower-income households, as well as a cut in the personal income tax rate, are widely anticipated.

 

Source: Business Times 15 Feb 08

US economic outlook has worsened: Bernanke

Fed chief signals that he is ready to lower key interest rate

(WASHINGTON) Federal Reserve chairman Ben Bernanke told Congress yesterday that the United States’ economic outlook has deteriorated and signalled that the central bank is ready to keep on lowering a key interest rate – as needed – to shore things up.

In prepared remarks to the Senate Banking Committee, Mr Bernanke said that the one-two punch of the housing and credit crises has greatly strained the economy. Hiring has slowed and people are likely to tighten their belts further as they are pinched by high energy prices and watch the value of their single biggest asset – their homes – weaken, he warned.

‘The outlook for the economy has worsened in recent months, and the downside risks to growth have increased,’ Mr Bernanke said. ‘To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so.’

Mr Bernanke also said that the ‘virtual shutdown’ of the market for sub-prime mortgages – given to people with blemished credit histories or low incomes – and a reluctance by skittish lenders to make ‘jumbo’ home loans exceeding US$417,000 have aggravated problems in the housing market.

Unsold homes have piled up and foreclosures have climbed to record highs.

‘Further cuts in homebuilding and in related activities are likely,’ Mr Bernanke cautioned.

Given all the dangers facing the economy, the Fed ‘will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks’, he said, indicating that additional rate cuts were likely.

Mr Bernanke said that his forecast is for the economy to continue to endure a ‘period of sluggish growth’. That would be ‘followed by a somewhat stronger pace of growth starting later this year’ as the effects of the Fed’s rate cuts and a newly enacted stimulus package begin to be felt. The US$168 billion package, which includes rebates for people and tax breaks for businesses, was speedily passed by Congress last week and signed into law on Wednesday by US President George W Bush.

Even though Mr Bernanke’s forecast envisions an improving economic picture later this year, the Fed chief said that it was nonetheless ‘important to recognise that downside risks to growth remain, including the possibilities that the housing market or the labour market may deteriorate to an extent beyond that currently anticipated’ or that credit will become even harder to secure.

That is why, for now, Mr Bernanke indicated that the Fed is still inclined to lower interest rates.

Yet, that could change, depending on how the economy and inflation unfold.

‘A critical task for the Federal Reserve over the course of this year will be to assess whether the stance of monetary policy is properly calibrated to foster our mandated objectives’ of promoting healthy employment and economic growth while keeping inflation under control.

Inflation should moderate, Mr Bernanke said. Yet, last year’s steep run-up in oil prices is a reminder that the Fed cannot let down its inflation guard and must keep close tabs on the inflation expectations of investors, consumers and businesses. Those expectations can affect their behaviour, which can affect the economy.

‘Any tendency of inflation expectations to become unmoored or for the Fed’s inflation-fighting credibility to be eroded could greatly complicate’ the Fed’s job, he said.

The troubles in the housing and credit markets threaten to push the US economy into its first recession since 2001 – if it has not fallen into one already.

 

Source: AP (Business Times 15 Feb 08)

Singapore cuts growth forecast to 4% to 6%

Concern over a US recession leads to revision; inflation estimate is raised to 4.5%-5.5%

SINGAPORE has lowered its economic growth forecast for the year but also tipped that consumer prices are expected to rise faster than previously thought.

Concern over a possible United States recession led the Government to trim its growth forecast from an earlier estimate of 4.5 to 6.5 per cent to between 4 and 6 per cent. Last year, the economy expanded by 7.7 per cent.

Its inflation estimate has gone the other way with prices now tipped to rise on average between 4.5 and 5.5 per cent, up from a three-month-old forecast of between 3.5 and 4.5 per cent.

The Ministry of Trade and Industry (MTI) released the revised figures yesterday and raised its concerns about the US economy.

‘Compared to three months ago, there is broad consensus now that the US economy is entering a slowdown,’ said the ministry.

‘The key uncertainty is over the length and severity of this slowdown, which will in turn influence how the rest of the world and key industries are affected.’

The MTI’s new forecast shaves 0.5 percentage point off the estimate made three months ago and reflects the recent welter of bad news from the US.

MTI Second Permanent Secretary Ravi Menon told a news conference that the earlier forecast had already factored in a US slowdown.

But ’since then, the downside risks have increased somewhat… The US is really experiencing a significant slowdown in growth.’

Economists were not surprised at the revision, given the deteriorating global outlook. Many had slashed their Singapore estimates in light of surprisingly weak data out of the US in recent weeks.

The MTI said current conditions suggest that the US will probably enter a mild recession in the first half but recover as the year goes on.

‘Strong fundamentals, coupled with fiscal and monetary stimulus, will help to support recovery in the second half,’ it said.

In this scenario, the local economy should grow in the upper half of the forecast range, said the MTI. But if the US has a more severe recession, growth here will be nearer the lower end of the range.

Electronics exporters and the trading and logistics firms that serve the industry will take the biggest hit, said the MTI, while financial services will be more vulnerable to weaker market sentiment.

The slower growth comes after four years of robust expansion and is still within the economy’s underlying potential growth rate, said Mr Menon.

Singapore should also escape a technical recession, defined as two straight declines in quarter-on-quarter growth. ‘Most of the simulations we have done do not show that outcome,’ said Mr Menon.

Action Economics economist David Cohen said, ‘4 to 6 per cent is realistic. It’s nothing to be embarrassed about.’

On the inflation front, prices are set to rise even faster than the record-breaking pace of recent months, due largely to surging oil and food costs.

Mr Menon said inflation will peak by the middle of the year before moderating.

The Monetary Authority of Singapore (MAS) said its policy of allowing a slightly faster appreciation of the Sing dollar remains appropriate.

Economists said the Government may announce today a more generous Budget to help low-income earners cope with escalating living costs.

This would allow the MAS to focus more on the slowing economy when it reviews its policy stance in April.

 

Source: The Straits Times 15 Feb 08

Economy grows 7.7%, beats expectations

Growth is somewhat dampened by surprise downward revision for fourth quarter

SINGAPORE’S economy grew even faster than expected last year, with a robust 7.7 per cent expansion fuelled by the booming construction and services sectors.

That was a notch up from an earlier estimate of 7.5 per cent – thanks to upward revisions to growth in the first nine months.

There was, however, a sting in the tail of the latest figures, published yesterday by the Trade and Industry Ministry (MTI).

The strong full-year growth was somewhat overshadowed by fourth-quarter figures, which turned out to be weaker than previously estimated.

Economic growth slowed to 5.4 per cent from October to December, said the MTI, lower than the 6 per cent previously estimated and far below the 9.5 per cent recorded in the third quarter.

On a seasonally-adjusted, quarter-on-quarter basis, the economy shrank 4.8 per cent, more than the 3.2 per cent estimated earlier by the Government The downward adjustment surprised economists, who said the final quarter would best indicate prospects for this year.

Already, the fast-deteriorating United States economy has prompted the MTI and other economists to cut their growth forecasts for this year.

‘We think the slowing growth momentum from the fourth quarter could bleed over to the first quarter of this year,’ said OCBC Bank economist Selena Ling.

Last year’s strong growth was powered by the red-hot construction and services sectors. The once-mighty manufacturing sector turned out to be the laggard.

Construction growth hit a record 19.6 per cent, the fastest pace since 1996, while services expanded 8.1 per cent, accelerating from 2006’s 7.5 per cent.

Manufacturing growth, on the other hand, slowed to 5.8 per cent from 11.9 per cent in 2006.

It was a similar picture in the fourth quarter, except that manufacturing growth was an exceptionally dismal 0.2 per cent.

The revised data came a month after advanced estimates for the fourth quarter were published at the start of the year. The early figures were based largely on the first two months of the quarter, so the latest statistics suggested that conditions worsened considerably in December, analysts said.

The adjustment was mainly due to services, which grew 7.7 per cent instead of 8.3 per cent, and manufacturing, which fared even worse than an earlier predicted 0.5 per cent expansion.

‘Financial services have peaked as we have forecast. The industry will likely moderate further. The heady days of high-teens growth are over,’ said Citigroup economist Kit Wei Zheng. He said the fall in financial services growth to 15.9 per cent in the fourth quarter suggested that the industry peaked in the third quarter, when it surged 20.1 per cent.

OCBC’s Ms Ling said manufacturing would remain lacklustre in the current quarter, if not the first half of the year. ‘With the global slowdown story, we do not expect any quick turnaround on the manufacturing front,’ she said.

Still, some economists are not ringing the alarm bells just yet.

HSBC economist Prakriti Sofat said while US growth slowed in the fourth quarter, that was not the cause for Singapore’s weak figures.

Analysts pinpointed the volatile pharmaceutical industry as the main reason for the slowdown.

‘Manufacturing output plunged, largely due to protracted production delays and technical problems at Singapore’s biggest pharmaceutical plant,’ said Barclays Capital economist Leong Wai Ho. ‘Supply bottlenecks were the main cause, not a drop-off in demand.’

Indeed, pharmaceutical’s recent sharp contraction could well set it up for a big rebound in the next few months, said analysts.

More optimistic economists are also looking to resilience in domestic and regional economies.

The construction sector is expected to continue growing robustly, given the strong pipeline of both public and private projects.

Sectors such as tourism and real estate services will be partially shielded from a US slowdown by neighbouring economies, on which they are more dependent, said the MTI.

 

Source: The Straits Times 15 Feb 08

Troubled banks want to transfer some mortgage risks to US govt

New proposal for delinquent borrowers to refinance into loans backed by state

THE United States banking industry, struggling to contain the fallout from the mortgage debacle, is now proposing to move some of the risk for troubled housing loans to the government, The Wall Street Journal reported yesterday.

One proposal, being urgently advanced by officials at Credit Suisse Group, calls for the Federal Housing Administration (FHA), a US government agency, to guarantee mortgage refinancing by some delinquent borrowers, said the paper.

Credit Suisse officials have met senior officials from the Department of Housing and Urban Development, which runs the FHA, and other policymakers to discuss the proposal, it added.

The risk: If delinquent borrowers default on their refinanced loans, the federal government would have to absorb the loss, said the Journal.

Just a few months ago, such a proposal would have been considered unreasonable. But the fact that the plan is receiving serious consideration suggests the level of concern in Washington, as housing problems worsen and efforts to tackle them fall short, said the report.

A plan by banks to rescue bank-affiliated funds that had invested in mortgage-backed securities fell through, while a hotline for troubled borrowers has helped only a small fraction of those in need.

This week, the government announced its latest idea – Project Lifeline – a mortgage-industry plan that would give seriously delinquent borrowers extra time to avoid foreclosure.

The Credit Suisse plan would open the way for nearly 600,000 sub-prime borrowers, many of whom are delinquent on their mortgages, to refinance into loans backed by the FHA, said the Journal.

Around 1.3 million borrowers in the US were either seriously delinquent or in foreclosure at the end of the third quarter, according to the latest figures from the Mortgage Bankers Association.

Credit Suisse said the plan would make US$89 billion (S$126.1 billion) in sub-prime loans eligible for refinancing.

The FHA was created during the Great Depression and provides mortgage insurance for qualified borrowers.

The agency grew less popular during the recent housing boom because credit was widely available, but it has recently rebounded as some credit markets have dried up. Home owners with FHA insurance pay premiums into an insurance fund.

Another bank, JPMorgan Chase, is putting together its own proposal to expand the number of home owners who could refinance into FHA-backed loans, said the Journal.

 

Source: The Straits Times 15 Feb 08

Japan’s growth beats forecasts, but economists remain cautious

TOKYO – JAPAN’S economy grew at double the expected rate in the last quarter of 2007, but some economists saw this as the last hurrah before a slowdown this year.

Strong capital spending and exports helped drive quarterly growth to 0.9 per cent, compared with a forecast 0.4 per cent rise, government data showed yesterday.

The bullish growth – an annual pace of 3.7 per cent compared with a yearly growth rate of just 0.6 per cent in the United States in the October-December quarter – eased investor worries about Japan slipping into a recession, pushing Japanese stocks up 4 per cent.

But economists were less upbeat.

‘The Bank of Japan will likely keep open the option of keeping the current interest rate levels or even rate cuts, as situations have gotten a lot worse since January, and on growing uncertainty about the economy,’ said Mr Yasuhiro Onakado, chief economist at Daiwa SB Investments.

Japanese exports have so far held steady despite the slowdown in the US economy from late last year due to strong demand from elsewhere in Asia and other emerging economies.

The gross domestic product data showed net exports contributed 0.4 percentage point of the 0.9 per cent growth.

Still, as weak US economic data in recent weeks has stoked fears of a recession in America, many economists worry that Japan may not be able to count on exports for much longer.

That, in turn, could curb corporate capital spending, possibly jeopardising the Bank of Japan’s view that strength in corporate activity will spill over to households.

Said Economics Minister Hiroko Ota yesterday: ‘The US economy is slowing down. There is a good chance of Japan’s economic growth slowing temporarily.’

 

Source: REUTERS (The Straits Times 15 Feb 08)

Revision of DC rates expected to be ‘moderate’

Consultants project smaller DC rate rise for residential and commercial use

THE coming March 1 revision of development charge (DC) rates – payable to enhance the use of sites or build bigger projects on them – is generally expected to be more moderate than the past couple of revisions, which imposed steep rises.

That’s because on the whole, land price increases have slowed considerably in the the past few months. And collective sales, which traditionally account for the lion’s share of private-sector land sales, have virtually ground to a halt, property consultants have told BT.

‘We believe collective sale brokers are unlikely to feel inspired by the upcoming DC rate revisions,’ says Jones Lang LaSalle’s regional director and head of investments Lui Seng Fatt.

Most consultants project smaller average DC rate increases for residential and commercial use this time. However, JLL is predicting bigger hikes for industrial and hotel use, as hotel and industrial sites sold at government land sale (GLS) tenders in recent months have fetched top bids significantly higher than the land values implied by current DC rates.

This can be attributed to the shortage of hotel rooms and strong demand for industrial space by office tenants looking for cheaper backroom space, says JLL’s head of research (South-east Asia) Chua Yang Liang.

For non-landed residential use, JLL reckons the average DC rate will go up just about 5 per cent come March 1, compared with the 58 per cent hike that took effect on Sept 1, 2007.

CB Richard Ellis executive director (investment sales) Jeremy Lake also reckons that on the whole, non-landed residential DC rates are unlikely to rise significantly, although there may be hikes in locations where land sales have taken place at prices significantly above values implied by the prevailing Sept 1, 2007 DC rates.

Market watchers point to examples such as Westwood Apartments in Orchard Boulevard, Toho Garden in Yio Chu Kang Road and 15 terrace houses at Jalan Bunga Raya in the Balestier/Novena area.

Agreeing, Credo Real Estate executive director Yong Choon Fah says the increases for such locations could be in the order of 30-40 per cent, while the average islandwide hike will be much smaller at 5-20 per cent.

DC rates – revised every six months, on March 1 and Sept 1 – are listed according to use (for example, non-landed residential, commercial, and industrial) and 118 locations across Singapore.

Savills Singapore director Steven Ming, who predicts a 0-10 per cent rise in the average non-landed residential DC rate, reckons both prime and suburban/mass-market areas will see only moderate increases.

However, bigger rises may be seen in mid-tier locations like Pasir Panjang, Balestier, Upper Bukit Timah, Hillview and Upper Thomson, where condo prices have risen 20-40 per cent in the past six months.

For landed residential use, JLL projects the average increase this time could be 8-15 per cent – again lower than the 11.3 per cent rise in Sept 2007.

Jones Lang LaSalle expects the rates for places like Dunsfold Drive and Binchang Rise in the Bishan/Ang Mo Kio area, Sentosa and Chestnut Drive to increase about 20-25 per cent, as market values of landed properties in these locations are significantly above the values implied by prevailing DC rates.

JLL reckons that after a 42 per cent spike in the average commercial-use DC rate on Sept 1 last year, the rate could still rise a further 30-35 per cent come March 1. However, it believes rates may generally stay put in the central business district (CBD), and expects increases mostly in suburban locations, particularly in the Jalan Sultan and Toa Payoh areas. In the past few months in these areas, commercial GLS sites have been sold at prices more than double the land values implied by prevailing DC rates.

Agreeing, Credo’s Ms Yong sees the islandwide increase in commercial DC rates around 5-15 per cent, with increases mostly outside the CBD.

Market watchers highlight the sharply different top bids for two white sites – with stipulated minimum office components – at Marina View in the CBD sold just three months apart late last year, reflecting how swiftly investor sentiment in the office market turned cautious.

JLL estimates industrial DC rates will appreciate around 30 per cent on average, compared with a 2.2 per cent increase last round. It also expects the average hotel DC rate to go up 30-35 per cent, after a 23 per cent hike last round, pointing out that hotel sites offered under the GLS programme at Upper Pickering Street and New Market Road/Merchant Road have been sold at premiums of 80 and 64 per cent respectively above prevailing DC rate based land values.

The coming round of DC rate revisions will have ‘minimum impact on the already slowing collective sales market’, according to Savills’ Mr Ming.

But for en bloc sites with a significant DC component, and where the reserve price has been fixed by owners, a substantial DC increase will make it even harder to find takers, says Credo’s Ms Yong.

JLL’s Dr Chua reckons owners of properties in fast-changing neighbourhoods like Buona Vista and Telok Blangah – and possibly Paya Lebar and Jurong East, which are earmarked by the government for development into business hubs – will be watching the coming DC rate changes as they may set the tone for potential change-of-use applications.

Potential bidders for reserve list sites under the GLS programme will also be watching the revisions to get a sense of the Chief Valuer’s sentiment before making any applications for these sites to be released, says Dr Chua.

 Source: Business Times 14 Feb 08

Average monthly household income grows at fastest pace in 10 years

But income inequality widens despite govt effort

(SINGAPORE) Income inequality in Singapore widened last year to its most pronounced state since at least the year 2000, with some high-income households enjoying big pay increases while the less well-off saw more modest wage gains, according to a report released yesterday by the Singapore Department of Statistics.

On average, almost everyone is somewhat better off than they were. Among Singapore resident households with at least one working member, average monthly income from work rose 9.1 per cent to $6,830 in 2007, from $6,260 the previous year, the fastest growth in the last decade, the report said.

However, the average was skewed by disproportionately higher income gains for the wealthiest households. The average monthly household income for the top 10 per cent earners rose 10.5 per cent to $20,240, up from $18,310 in 2006.

For the bottom 10 per cent, income from work increased just 3.9 per cent to $1,210, or 1.9 per cent after inflation.

When computed on a per household member level, average income per member for the bottom decile was only $310, up $10 from $300 in 2006. For the top decile, income per household member was $7,940, up from $6,990.

Domestic workers are considered household members, although their wages are not included in the income figures.

The income disparity even among the well-off in Singapore was also large, according to the report. The average household income of the 80th to 90th percentile of earners was $11,190, compared to $20,240 for the top decile.

In 1995, the equivalent figures in nominal terms were $6,990 and $11,190.

The big disparities in income gains resulted in a sharp jump in the Gini coefficient – a statistical measure of income inequality – from 0.472 in 2006 to 0.485 in 2007. The figure has grown every year since it was first computed using the current method in 2000, when the value was 0.442, according to the Department of Statistics.

Gini coefficient was 0.44 in 1990 and 0.47 in 1999, but those figures were computed using a different methodology and coverage, said the department.

Government measures to alleviate the income disparity have failed to narrow the gap.

After adjusting for government taxes and benefits, including last year’s Goods and Services Tax offset package, the Gini coefficient was 0.460 in 2007, still a substantial rise from 2006’s similarly adjusted figure of 0.439.

Most developed countries such as Switzerland, the United Kingdom and Japan, have coefficients of between 0.25 and 0.40, while South American countries like Brazil and Argentina tend to score between 0.40 and 0.60.

However, cross-border comparisons are difficult because each country’s figures may be computed differently.

But the Gini coefficient may underestimate total income and wealth inequality in Singapore as the Department of Statistics used only income from work – wages, as well as business proceeds for the self-employed. Income from dividends, rentals and interest was not included, and such income is likely to accrue more to high earners.

Also, the Department of Statistics only included employed households – defined as households with at least one working member – in its computation of the Gini coefficient, leaving retiree or unemployed households out of the picture.

 

Source: Business Times 14 Feb 08

S’pore world’s 7th most expensive office location

Prime office rents rose 78% last year to US$130.48 psf per annum: report

SINGAPORE has jumped 10 places to become the world’s seventh-most expensive office location.

According to Cushman & Wakefield’s (C&W) report on office occupancy costs, prime office rents rose 78 per cent in Singapore last year. Occupancy costs are now at US$130.48 psf per annum, up from US$954 psf per annum in 2006.

Rental increases here were the fifth highest globally last year, after locations in Turkey and Norway. However, Singapore still ranks below London, Hong Kong, Tokyo, Mumbai, Moscow and Paris in terms of occupancy costs.

London remains on the top of the list, with occupancy costs rising 30 per cent to US$312 psf per annum followed by Hong Kong, with an increase in occupancy costs of 40 per cent to US$238.58 psf per annum.

Paris, which was put in sixth place, registered occupational costs of US$141.57 psf per annum.

C&W executive managing director (South-east Asia) Arsh Chaudhury said that rental growth in Singapore was led by strong demand from the banking and services sectors coupled with limited supply of quality office space.

He said: ‘Whilst the effect of a US slowdown on Asia will be muted, the uncertainty of growth plans of US institutions, especially banks, may possibly result in an easing of demand.’

But he said that C&W expects the upward trend in rents to continue, albeit at a slower pace.

The C&W report compares office occupancy costs in 203 locations in 58 countries. New entries include Kyiv in Ukraine at 16th place with occupancy costs at US$78.22 psf per annum, and Ho Chi Minh City in Vietnam at 17th place with occupancy costs at $75.81 psf per annum.

Of these 203 locations, 79 per cent registered rental growth, 20 per cent showed stable growth and only one per cent experienced a fall in rentals compared to 6 per cent in 2006.

Perhaps also interesting to note is that of the bottom 10 locations in C&W’s list of 58 countries, neighbouring South-east Asian cities took up four spots.

Bangkok took the 58th position, with office occupancy costs at US$26.52 psf per annum, preceded by Jakarta, at 57th position with occupancy costs at US$26.54 psf per annum, Manila in 50th place with occupancy costs at US $33.75, and Kuala Lumpur 49th, with occupancy costs at US$34.39 psf per annum.

Source: Business Times 14 Feb 08

Property trusts may soon debut in India

Move will encourage foreign real estate funds to partake in construction boom

(HONG KONG) India could follow other Asian countries this year in creating a market for real estate investment trusts (Reits), making it easier for investors to buy into the country’s sparkling new office blocks and shopping malls.

The move would encourage foreign property funds, which are keen to join India’s construction boom but are not allowed to own finished buildings.

Reits or domestic funds could buy the assets they develop, offering them an easier way to exit the projects and take profits on their investments.

In December, market regulator Securities and Exchange Board of India (Sebi) issued draft guidelines for Reits, which pay most of the rent from their buildings to investors as dividends.

But people in the industry say that unless tax breaks are also offered by the government in its upcoming budget, a local Reit market would be a non-starter.

The Sebi proposal contained no mention of the kind of tax breaks that kick-started other property trust markets, but it could be fleshed out in the federal budget due on Feb 29.

‘It should’ve happened five years back,’ said Nayan Shah, chief executive of private developer Mayfair Housing Ltd, which wants to create a property trust of rental housing in Mumbai as soon as Reit regulations are in place.

‘Unfortunately, the government was never able to get over its regulations and set up a proper market,’ he said.

Arshdeep Sethi, head of capital markets at developer RMZ Corp, said he expected a market to be up and running within a year, adding that RMZ would also look to sell buildings into a trust.

‘We wouldn’t mind exploring it. It’s an instrument that will be interesting for investors and developers,’ Mr Sethi said.

Property trusts, long established in the United States and Australia, have caught on in Asia in the last five years, with investors enjoying stable yields that are higher than government bonds, and share price rises when rents and property values rise.

However, they have not been immune from global stock market turmoil, with Singapore’s Reit index , for example, dropping 20 per cent in the second half of last year and a further 13 per cent so far this year, in line with the broader market.

Reits would be riskier in India’s immature market, where a three-year building boom sparked by easing of foreign investment rules barely masks crumbling colonial-era infrastructure.

Overbuilding in some areas worries investors. For example, around 50 malls are being built in the New Delhi suburb of Gurgaon. With the information technology industry thriving, around 100 million sq ft of office space is to be built over three years, equal to all the office blocks in Washington DC.

An economy growing at around 9 per cent per year has helped push up Mumbai office rents by a fifth in the last year, but as new developments pop up in India’s main cities, old areas can also quickly go out of fashion.

Reits would help cut risks for property investors in the country by improving information flows – as listed securities they provide a constant stock market valuation of buildings and must divulge rental and other data.

As they hanker for new assets to lift investor returns, Reits would also give foreign funds new buyers for their buildings.

Although rules were eased on inward investment in the construction industry in early 2005, overseas investors are still not allowed to own finished buildings.

The likes of Citigroup, Warburg Pincus and Morgan Stanley have preferred to build and sell housing, but could now be tempted into commercial property.

Office yields are about 9-10 per cent in India.

Lacking a home market, a couple of Indian firms are looking to list Reits in Singapore, with the country’s most valuable developer, DLF Ltd, working on a US$1.5 billion initial public offering scheduled for the second quarter of this year.

As well as having an established Reit market, Singapore is attractive to Indian developers as its 10-year bonds trade at 2.3 per cent compared to India’s 7.5 per cent. So trusts, which need to draw investors with a premium to bond yields, can be sold to investors at higher prices in Singapore than in India. Reits in Singapore and Japan now offer yields of about two percentage points above domestic bonds.

But some analysts expect the Reserve Bank of India to push domestic listings by restricting the sale of more Indian assets into Singapore-listed trusts, in an effort to curb capital inflows that threaten to overheat the property market.

‘It might be too much for the RBI,’ said Param Desai, an analyst at India Infoline. ‘In the near future they might come up with a policy to restrict the flow of assets to Singapore.’

For an Indian Reit market to take root, DLF chief financial officer Ramesh Sanka said the government must waive stamp duty and introduce the tax ‘pass through’ that made Singapore’s US$19 billion Reit market popular.

Trusts there do not pay corporate tax but investors pay tax on dividends at their personal rate.

Sebi’s guidelines stipulated that Reits should pay at least 90 per cent of annual income as dividends and borrow no more than 20 per cent of gross assets, but no mention was made of tax.

 

Source: Reuters (Business Times 14 Feb 08)

New Zealand property prices, sales slip in Jan

(WELLINGTON) New Zealand house prices fell and sales dropped in January as the previously hot market continued to cool, the Real Estate Institute of New Zealand (Reinz) said yesterday. The Reinz national median house price fell 1.4 per cent to NZ$340,000 (S$379,000) from December, but was 4 per cent higher than a year earlier.

Institute members sold 5,186 houses in the month compared with 5,597 the month before, a fall of 7.3 per cent. The figure was down 31.5 per cent on a year earlier, and was the lowest since January 2001.

National President Murray Cleland said the fall in the number of house sales meant lower prices could be expected. ‘Although we would prefer to see the next two months trends first, it is obvious that people need to be prepared for prices to move back in 2008,’ he said in a statement.

The New Zealand housing market had now turned to buyers’ advantage, Mr Cleland said. ‘It is clear from the days to sell and low sales volumes that there is a growing tension between the prices vendors are seeking and what buyers are offering – buyers have been quick to sense that the market is weakening and they are ready to take advantage of that situation.’ The median number of days taken to sell a house rose to 49 days from 36 in December and 38 days a year ago. It was the longest period to sell in eight years.

The Reserve Bank of New Zealand left its official cash rate unchanged at 8.25 per cent last month, saying that the housing market, one of its major inflation worries, was continuing to slow. The latest Reuters poll has most of the 16 economists surveyed expecting no change to rates until later this year.

Prices fell in seven of the Reinz’s 12 regions and rose in five. Prices in Auckland City, the country’s biggest population and commercial centre, fell 6 per cent and by just under one per cent in the capital Wellington.

Government agency Quotable Value reported on Monday that house prices grew 8.9 per cent in the year through January, compared with 10 per cent in December. It was the fifth-straight month that growth in house prices eased.

 

Source: Reuters (Business Times 14 Feb 08)

Global commercial property sales top US$1t mark

(LOS ANGELES) Global commercial real estate sales rose to US$1.04 trillion for the first time last year, driven by Blackstone Group LP’s purchase of Equity Office Properties Trust and land transactions in Asia.

One third of the total was office space, with nearly 1.2 billion square feet of offices worth US$434 billion changing hands, New York-based real estate research firm Real Capital Analytics said in a report on Tuesday.

In 2006, there were about US$700 billion of total global transactions.

Billionaire Sam Zell’s sale of Equity Office for US$39 billion including debt a year ago was the biggest leveraged buyout up to that time.

That deal and Blackstone’s subsequent sale of buildings from the Equity Office portfolio added US$66 billion to last year’s global transactions, Real Capital said in its report.

‘In the US, transaction activity was a record year, but it was all privatisation and massive portfolios,’ Robert White, president and founder of Real Capital, said in an interview.

‘In Asia, development land is where all the dollars are flowing to.’

Office space represented 32 per cent of total sales last year, Real Capital said. The total square footage that sold is equivalent to all of the office space in London, Tokyo and New York combined, the research firm said. With more than US$209 billion in transactions, the US accounted for half of global office sales.

Real Capital identified 114 cities worldwide that each had more than US$1 billion of commercial property sales.

Forty-eight of those cities were in North America, 35 were in Europe and 21 were in Asia. Real Capital limits the size of transactions it tracks to US$10 million or greater, meaning the total size of the global commercial real estate market last year may have been closer to US$1.5 trillion, the company said.

Almost half of all land acquired by developers around the world last year was in China. Land transactions totalled US$50.7 billion in China, more than double the US$25 billion in the US, the next most active country.

Land purchases in China and other parts of Asia were driven by a lack of available buildings in many growing regions, Mr White said. ‘There are really very limited institutional-quality, income-producing assets that are sold in the open market or even exist,’ he said. Commercial property sales slowed in the US and Europe in the fourth quarter of last year as the collapse of the sub-prime mortgage industry spread from the residential market to commercial lending, making it harder for real estate investors to find financing.

Growth in Asia will help make up for this year’s expected drop in transactions in the US and Europe, Mr White said.

‘The US was a little bit more than half of global volume in 2007,’ he said.

‘In 2008, it will most likely be well under half. Emerging markets will continue to grow.’

Worldwide property transactions this year likely will ‘be comparable’ to 2007, Mr White said. ‘It might even be off a little bit.’

Real Capital collects transactional information for property sales and financings and generates reports on capitalisation rates, market trends, pricing and sales volume.

The company compiled the Global Capital Trends report using its database of transactions. The sources of its information vary by country.

Its data partners include Property Data in the UK, Thomas Daily in Germany and HBS-Research in France.

 

Source: Bloomberg (Business Times 14 Feb 08)

Bernanke ‘upbeat’ US will avoid recession

He tells lawmakers the economy may pick up dramatically

(WASHINGTON) US Federal Reserve chairman Ben Bernanke voiced optimism in a closed-door meeting with Republican lawmakers on Tuesday that the United States would avoid slipping into a recession, Senator Charles Grassley said.

‘He was very upbeat about our not going into recession,’ the Iowa Republican said in an interview on Bloomberg Television.

Mr Grassley said Mr Bernanke expects the economy ‘to pick up pretty dramatically’ after growing slowly in the first half of this year. The Fed chairman called the economic stimulus package passed by Congress ‘helpful’ and indicated he’s willing to cut rates further if necessary to aid the economy, Mr Grassley added.

‘I got the sense that he’s ready to move if he needs to move,’ Mr Grassley said, adding that a rise in inflation may not be sharp enough to prevent additional rate reductions.

‘Inflation did come up and it’s going to be a little bit higher than what they like,’ Mr Grassley said. ‘But they believe that it’s nothing that’s going to stop their decreasing interest rates if they need to be decreased.’

Senator Richard Shelby of Alabama, the senior Republican on that committee, described Mr Bernanke as ‘optimistic but guarded’ in Tuesday’s meeting.

Another Senator said Mr Bernanke expects the downtrodden US housing sector to improve by the end of the year.

‘He let us believe that the housing situation should begin to ameliorate by the end of the year,’ said Pete Domenici, a New Mexico Republican.

Homeowners in the US threatened with foreclosure would in some instances get a 30-day reprieve under an initiative the Bush administration announced on Tuesday.

Dubbed ‘Project Lifeline’, the programme will be available to people who have taken out all types of mortgages, not just the high-cost sub-prime loans that have been the focus of previous relief efforts and have contributed to a decline in the US economy.

The programme was put together by six of the largest US financial institutions, which service almost 50 per cent of the mortgages in the US.

These lenders say they will contact homeowners who are 90 or more days overdue on their monthly mortgage payments. The homeowners will be given the opportunity to put the foreclosure process on pause for 30 days while the lenders try to work out a way to make the mortgage more affordable to homeowners.

‘Project Lifeline is a valuable response, literally a lifeline, for people on the brink of the final steps in foreclosure,’ Housing and Urban Development Secretary Alphonso Jackson said at a joint news conference with Treasury Secretary Henry Paulson.

He said the goal was to provide a temporary pause in the foreclosure process ‘long enough to find a way out’ by letting homeowners and lenders negotiate a more affordable mortgage.

 

Source: Bloomberg, Reuters, AP (Business Times 14 Feb 08)

IEA’s demand forecast cut on US slowdown

(LONDON) The International Energy Agency, an adviser to 27 industrialised nations, cut its forecast for 2008 global oil demand because of the slowing US economy and said the underlying trend was ‘even weaker’.

The agency reduced its forecast for demand this year by 200,000 barrels a day to 87.6 million barrels a day. That lowers the annual growth rate to 1.9 per cent, down from 2.3 per cent in last month’s Oil Market Report.

‘The economic environment is clearly paramount,’ the Paris-based agency said yesterday in its report. ‘An economic slowdown has the potential to change the landscape over the next few years: depending on how deep it is and how long it lasts.’

Global growth may slow to its weakest pace since 2003 this year as the US credit crisis spreads through the world’s largest economy, the International Monetary Fund said in its latest economic report. The US economy lost 17,000 jobs in January, the first drop in more than four years.

Global oil demand will be 88 million barrels a day in the first quarter of 2008, 170,000 barrels a day less than last month’s forecast, the IEA said.

‘We are watching carefully the US economy and how other international organisations see the situation,’ IEA executive director Nobuo Tanaka told reporters at an energy conference in Houston on Tuesday. The ‘downward trend is a major reason for this’.

Supply from the Organisation of Petroleum Exporting Countries, whose members produce more than 40 per cent of the world’s crude, will need to average 31.8 million barrels a day this year in order to balance global demand, 100,000 barrels a day more than last month’s estimate, the report said.

Opec, scheduled to meet on March 5, held quotas unchanged at its meeting in Vienna earlier this month.

Officials said the group may cut crude production should slowing economies in the US and Europe threaten energy demand.

Crude prices have averaged more than US$90 so far this month in New York and would have to drop to around US$80 a barrel for Opec to act, Opec officials said last week.

The group pumped 32 million barrels a day in January, according to the IEA. Opec’s installed crude capacity is currently at 35 million barrels a day, an increase of 300,000 barrels a day from last month, thanks to revisions for Angola and Persian Gulf producers, the report said.

Global oil supply averaged 87.2 million barrels a day in January, an increase of about 750,000 a day from December, the IEA said.

New output from Brazil and the assumed recovery of production from December outages in Azerbaijan, Mexico and China led to the increase, according to the report.

Crude oil traded little changed yesterday after IEA made the forecast.

Petroleos de Venezuela SA, the state oil company, cut off sales of crude and fuel to Exxon Mobil Corp in retaliation for the freezing of US$12 billion in assets in a legal dispute.

‘The IEA had been over-estimating demand all over last year,’ said Oliver Jakob, managing director of Swiss firm Petromatrix. ‘They were way above everyone else, and now the slowdown in the US economy is another reason why they have further corrections to make.’

Crude oil for March delivery traded at US$92.89 a barrel, up 11 cents, on the New York Mercantile Exchange at 9.48am London time yesterday. On Tuesday, the contract fell 81 cents, or 0.9 per cent, to US $92.78 a barrel.

 

Source: Bloomberg (Business Times 14 Feb 08)

Survey of economists signals US recession

(NEW YORK) According to Wall Street’s forecasters, the recession of 2008 is now unavoidable. That is, if you read between the lines of their predictions.

In a survey released on Tuesday by the Federal Reserve Bank of Philadelphia, forecasters said on average there was a 47 per cent chance that the economy would shrink in the first quarter of this year.

But the economists surveyed, many working for investment banks or Wall Street research firms, are an optimistic bunch, and every time they have become so worried over the last four decades, the economy has ended up in a recession.

There have been six recessions since 1968, the year that the quarterly survey of economists began. At the start of each one, economists put the odds that the economy would shrink in the current quarter at 40 per cent or more.

At times, the economists have either jumped the gun or said that a recession would last longer than it did.

In late 1979, for example, the forecasters said the economy was already likely to be shrinking; the National Bureau of Economic Research – widely considered the arbiter of business cycles – later said that the recession began in January 1980.

But the recession-probability index – which the Philadelphia Fed calls the Anxious Index – has yet to miss a recession or to signal one that never happened.

Its biggest blemish came in the first quarter of 1988, when forecasters put the odds of a negative quarter at 35 per cent. The economy then continued to grow for more than two years, before entering a recession in the summer of 1990.

In the latest survey, the forecasters also said there was a 43 per cent chance that the economy would shrink in the second quarter of 2008. Every time that reading has risen above 40 per cent, the economy has gone into recession.

 

Source: NYT (Business Times 14 Feb 08)

S’pore is world’s seventh most expensive office market

It jumps 10 spots in global ranking of occupancy costs by property consultancy

SINGAPORE has moved into the global top 10 most expensive office markets for the first time due to a severe office shortage.

A survey of office costs in 203 locations in 58 countries by global real estate consultancy Cushman & Wakefield saw the Republic jump 10 places to seventh spot.

This came after prime rents shot up by 78 per cent, on average, due to the tight supply.

The consultancy found that occupancy costs in Singapore – which include rents and other costs of running an office – hit an annual average of about US$130 per sq ft (psf).

Office rents, the largest component of occupancy costs, rose 40 per cent on average in the world’s top 10 office locations, it said.

Office rental rises in Singapore were also led by strong demand from the banking and services sectors, said Cushman & Wakefield’s annual Office Space Across The World report.

Worldwide, rents climbed by 14 per cent on average, compared with 10 per cent in 2006, it said.

London’s West End – where rents rose 30 per cent last year – remains the most expensive office location in the world, followed by Hong Kong, then Tokyo. Mumbai, Moscow and Paris were next on the ranking.

Another fast-rising Asian centre, Ho Chi Minh City, is now at 17th spot, with occupancy costs at US$75.81 psf a year, ahead of Sydney, Seoul and Shanghai.

The strong performances in India and Vietnam helped the Asia-Pacific region to achieve the strongest regional growth, with rents up 23 per cent over the course of last year.

Of the 203 locations Cushman & Wakefield surveyed last year, 79 per cent showed rental growth.

Singapore registered the fifth-highest increase in office rents in the world. Istanbul’s Levent district registered a 95 per cent rise in office rents, which was the highest annual growth in all locations.

‘Last year saw the fastest level of growth in office occupancy costs in many of the world’s top locations since the turn of the property cycle in 2001, with the strongest demand coming from the financial sector,’ said the firm’s head of business space research and consultancy, Ms Elaine Rossall.

‘We are unlikely to know the full effects of the current credit squeeze on the world’s main office locations until further into 2008.’

But last year’s strong rental growth is expected to ease this year, she said.

In Singapore, the United States sub-prime crisis has affected the expansion plans of some firms.

Last year, up to nine out of 10 companies had expansion plans. ‘But now, we could perhaps see five out of 10 companies looking to expand,’ said Mr Donald Han, Singapore managing director of Cushman & Wakefield.

‘We are still seeing new firms being set up, and these firms in the financial services sector must have a Raffles Place address.’

Office rental increases will be more moderate this year and next year, he added.

Instead of a 78 per cent rise in occupancy costs to US$130.48 psf a year – or about $15.44 psf a month on average – a 20 per cent increase is likely this year, he said.

But recent rental deals done at coveted buildings in Singapore, such as Republic Plaza and Millenia Tower, have already surpassed average levels.

For instance, the asking rents at Centennial Tower are now hovering at around $18.50 psf or more.

In Raffles Place, the asking rents for some prime Grade A office space have crossed the $20 psf mark.

Some tenants have complained that their office rents rose by as much as three times or even more when their leases came up for renewal.

The majority of Raffles Place office buildings are operating at 98 per cent to 99 per cent occupancy, so rents will not come down before a major chunk of supply comes onstream in 2010, said Mr Han.

That is when phase 1 of the huge Marina Bay Financial Centre will be ready.

Because of the steep increases, some bigger space occupiers are moving their non-frontline operations to suburban locations.

Some are reconfiguring their work space to make better use of it, property consultants said.

Others are looking to relocate to fringe areas or industrial locations.

These include the Beach Road corridor, conservation shophouses, business parks and transitional sites, where rentals are generally going at single digits – which is hard to find in Raffles Place.

 

Source: The Straits Times 14 Feb 08

Surging business costs worry Chinese chamber

SURGING business costs, brought on by last year’s increase in the Goods and Services Tax (GST), higher office rents and rising oil prices, are chief among the worries of Singapore Chinese Chamber of Commerce and Industry members.

This was the finding of the chamber’s annual pre-Budget survey sent to all of its 4,000 corporate members in December and last month. It showed that members are hoping this year’s Budget, to be announced tomorrow, will address the issue of the rising costs of doing business.

Respondents believed that increased business costs caused by dearer raw materials such as oil and more expensive manpower, among other factors, had also led to lower customer sales. This caused corporate profits to fall even further.

Looking to the year ahead, respondents expressed fears that escalating taxes, levies and other charges might have an impact on businesses directly.

This would further erode Singapore’s competitiveness, especially when foreign competitors are able to undercut the Republic with lower overheads and labour costs, the chamber said.

On the list of wishes that the companies have is a lowering of government taxes and charges, especially corporate income tax.

‘Personal income tax should be reduced to 18 per cent. As for the corporate income tax, the Government could also consider increasing the ceiling of chargeable income qualifying for tax exemption,’ the chamber said in a statement yesterday.

In order to ensure Singapore continues to excel as a hub for meetings, incentive trips, conventions or exhibitions, the chamber also urged the Government to consider exempting such events from the GST to help local businesses cope with surging rents.

The respondents also called on the Government to relax laws to open up new labour sources.

‘For local enterprises, the respondents hoped that the Government could render more support, such as more assistance schemes for local companies to upgrade and train their workers,’ the statement said.

‘They also called for more pro-enterprise measures so that smaller companies could gain greater access to public projects.’

 

Source: The Straits Times 14 Feb 08

Household incomes up but rich-poor gap widens

THANKS to a booming economy and rising salaries, the average family in Singapore saw its household income rise by 9.6 per cent last year, the biggest increase in at least a decade.

But the rich again got richer in 2007. Higher-income households generally enjoyed bigger pay hikes than lower-income ones, widening the income gap between the rich and poor.

Data published yesterday by the Department of Statistics (DOS) showed that average monthly household income from work last year rose to $6,280, up from $5,730 the previous year.

Much of this was due to strong economic growth and a tight labour market, which drove up just about all salaries last year.

The data comes on the heels of a set of rosy numbers for Singapore’s workers. The unemployment rate is at a 10-year low, while average bonuses paid out are at their highest since 1990.

Even after accounting for inflation, income still grew 7.4 per cent, beating a previous high of 6.2 per cent in 2001 at the height of the dot.com boom.

Citigroup economist Chua Hak Bin said: ‘It’s very encouraging that workers are finally seeing big gains from the economic boom of the past few years.

‘The earlier part of the recovery from Sars in 2003 had benefited companies more, with wage gains being relatively modest in previous years.’

But yesterday’s figures from the DOS also showed that the wages boom was clearly skewed in favour of richer families.

Income per family member in the top 10 per cent income bracket surged 11.1 per cent.

This is compared to 3.3 per cent for the lowest 10 per cent income bracket.

The result is that the Gini coefficient, a widely used measure of income inequality in a country, has gone up to 0.485 from 0.472 – one of the biggest increases in the past seven years.

The DOS acknowledged this yesterday, saying that it reflected ‘higher wage increases for skilled and knowledge workers’.

Economists agreed, positing that the unusually large jump could be due to more top global business executives relocating here.

But they also noted yesterday that a widening income gap is to be expected in a globalised economy. This is because low-skilled workers may not have as much bargaining power even in a tight labour market as companies can easily turn to cheaper foreign labour.

This means the Government will have to help poorer families more as the spoils of globalisation are not equally distributed, they added.

Indeed, economists said that with economic conditions turning south, more help should be announced at tomorrow’s Budget statement as lower-income, lower-skilled workers may be more vulnerable.

Said DBS Bank economist Irvin Seah: ‘I would not be surprised to see many measures at this Budget to alleviate the lower-income families from the escalating costs of living.’

In this vein, the DOS noted yesterday that Government benefits targeting the lower-income, such as the Goods and Services Tax offset package offered at last year’s Budget, helped to narrow the income gap.

If those were taken into account, the Gini coefficient would come down to 0.46, it said.

 

Source: Business Times 13 Feb 08

Construction on MRT Downtown Line starts, ready by 2013

A GROUNDBREAKING ceremony in Chinatown yesterday marked the start of construction of the $12billion, 40-kilometre Downtown MRT line.

The ceremony, conducted by the Land Transport Authority (LTA), took place at the Chinatown station on Downtown Line (DTL) Stage 1. Chinatown is one of six stations on the 4.3km fully underground line, which is scheduled to be completed by 2013. The other stations are Cross Street, Landmark, Bayfront, Promenade and Bugis.

‘The DTL will enable commuters on all existing MRT lines to transfer to the DTL with ease at designated interchanges,’ said LTA chairman Michael Lim.

‘By 2013, the completed DTL1 will link commuters to the exciting developments in Marina Bay, such as the Business Financial Centre and (Marina Bay) Sands Resort, as well as the Central Business District.’

The LTA says DTL1 will run through some of the busiest corridors in the city, easing congestion at major interchanges like Dhoby Ghaut and Raffles Place interchanges.

Five contracts, worth a total of $1.18 billion, have been awarded for DTL1. Two others, for Bugis and Promenade stations, will be awarded by the end of this year.

The DTL will be built in three stages, with Stage 2 to be completed in 2015 and Stage 3 in 2016. When fully completed, the DTL will strengthen the connectivity of the Rapid Transit System network and facilitate direct travel from the north-western and eastern areas of the island to the CBD and Marina Bay.

The DTL is expected to cater to over 500,000 passengers each day when fully operational.

‘The DTL is one of several extensive new rail and road projects that will be a significant boon to Singapore’s transport network, and to the economy,’ Mr Lim said.

The government has committed $20 billion for the DTL, as well as the in-progress Boon Lay Extension and Circle Line. Other plans include the Thomson Line, and extensions to the North-South line and East-West line.

By 2020, Singapore’s rail line will have doubled in length to 278km, said Mr Lim.

 

Source: Business Times 13 Feb 08

Global tech outlook cut on US recession fears

(SAN FRANCISCO) Two leading technology research firms have cut global technology outlook for this year, citing the risk of a US recession.

Forrester Research Inc said it now expects global technology purchases to grow 6 per cent in dollar terms this year, down from an earlier projection of 9 per cent. It expects US purchases of technology goods and services to grow 2.8 per cent, down from a previous forecast of 4.6 per cent.

The revisions assume a mild recession in the United States in the first two to three quarters of 2008, Forrester said on Sunday. The US accounts for about a third of global technology purchases.

‘While it is by no means certain that the US economy will in fact experience a recession, the risks of one are high enough to justify a more conservative outlook,’ Forrester vice-president Andrew Bartels said.

IDC also lowered its global outlook, citing similar concerns. It said on Monday it now expects worldwide IT market growth of 5 per cent this year, down from its previous forecast of 5.5 per cent and off from 2007’s 6 per cent.

‘While there is still debate over the severity and length of a US economic slowdown, we do know that the IT market will not escape unscathed from any significant downturn,’ said Stephen Minton, vice-president of Worldwide IT Markets at IDC.

Within technology, software investment will likely do better than the average, growing 8 per cent globally in 2008 but still down from 11 per cent last year, Forrester said.

 

Source: Reuters (Business Times 13 Feb 08)

Credit crisis spreading far beyond sub-prime loans

Repayments on prime mortgages, credit cards and car loans also affected

(NEW YORK) The credit crisis is no longer just a sub-prime mortgage problem.

As US home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their house payments, car loans and credit cards at a quickening pace, according to industry data and economists.

The rise in prime delinquencies, while less severe than the one in the sub-prime market, nonetheless poses a threat to the battered housing market and weakening US economy, which some specialists say is in a recession or headed for one. Until recently, people with good credit, who tend to pay their bills on time and manage their finances well, were viewed as a bulwark against the economic strains posed by rising defaults among borrowers with blemished, or sub-prime, credit.

‘This collapse in housing value is sucking in all borrowers,’ said Mark Zandi, chief economist at Moody’s Economy.com.

Like sub-prime mortgages, many prime loans made in recent years allowed borrowers to pay less initially and face higher adjustable payments a few years later. As long as home prices were rising, these borrowers could refinance their loans or sell their properties to pay off their mortgages. But now, with prices falling and lenders clamping down, homeowners with solid credit are starting to come under the same financial stress as those with sub-prime credit.

‘Sub-prime was a symptom of the problem,’ said James Keegan, a bond portfolio manager at American Century Investments, a mutual fund company. ‘The problem was we had a debt or credit bubble.’ The bursting of that bubble has led to steep losses across the financial industry.

American International Group said on Monday that auditors found that it may have understated losses on complex financial instruments linked to mortgages and corporate loans.

The turmoil is also stirring fears that some hedge funds may run into trouble. At the end of September, nearly 4 per cent of prime mortgages were past due or in foreclosure, according to the Mortgage Bankers Association. That was the highest rate since the group started tracking prime and sub-prime mortgages separately in 1998. The delinquency and foreclosure rate for all mortgages, 7.3 per cent, is higher than at any time since the group started tracking that data in 1979, largely as a result of the surge in sub-prime lending during the last few years.

The default rate for prime mortgages is still far lower than for sub-prime loans, about 24 per cent of which are delinquent or in foreclosure. Some economists note that slightly more than a third of American homeowners have paid off their mortgages completely. This group is generally more affluent and contributes more to consumer spending and the economy relative to its size.

Unlike sub-prime borrowers, who tend to have lower incomes and fewer assets, prime borrowers have greater means to restructure their debts if they lose jobs or encounter other financial challenges.

 

Source: NYT, AP (Business Times 13 Feb 08

White House does not expect a recession

(WASHINGTON) The White House predicted on Monday that the economy would escape a recession and that unemployment would remain low this year, though it acknowledged that growth had already slowed.

‘I don’t think we are in a recession right now, and we are not forecasting a recession,’ said Edward Lazear, chairman of the White House Council of Economic Advisers.

Presenting the White House’s annual report to Congress on the economy, Mr Lazear acknowledged that the plunge in housing and mortgage markets had yet to hit bottom and that growth would be low in the first half of 2008.

But administration officials are counting on a lift this summer from the US$168 billion economic stimulus package that Congress passed last week and from the Federal Reserve’s recent decisions to reduce shortterm interest rates.

The administration’s forecast calls for the economy to expand 2.7 per cent this year and for unemployment to remain at 4.9 per cent. That is much more optimistic than predictions by many analysts on Wall Street.

Among economists surveyed by the Blue Chip Economic Forecast, a closely watched monthly survey, the consensus prediction is that the economy will expand 1.7 per cent.

Indeed, many analysts contend the US has already slipped into a recession and will get only a temporary lift from the stimulus package.

The report on Monday predicts that business investment growth and job growth are both likely to remain ’solid’ in 2008.

 

Source: NYT (Business Times 13 Feb 08)

Some small property launches but most still hold back

Developers selling projects abroad first before launching them in Singapore

PROPERTY developers are starting to gingerly test the volatile market with a few launches now that the festive season is behind them.

Those dipping their toes into the choppy waters, however, are mostly offering smaller projects away from the prime areas, said property agents.

Home seekers may have to wait a bit longer for major launches, with the earliest set for next month or April.

Meanwhile, developers waiting for the market to regain momentum are selling Singapore projects overseas before launching them locally, said Mr Ku

Swee Yong, director of business development and marketing at Savills Singapore.

‘Developers are still waiting for the stock market here to settle down,’ said Mr Ku.

Savills is dispatching a large sales team to Dubai next week to market Skypark at St Thomas Walk, CapitaLand’s condo on the Silver Tower site in Cairnhill, and the units Kuwait Finance House bought in Reflections at Keppel Bay and Goodwood Residences last year.

For local buyers, one project likely to be launched within weeks is the 47-unit Cosmo at Guillemard Lane.

Prices could be $1,100 to $1,200 per sq ft (psf), said Mr Patrick Oei, associate group director for Huttons Real Estate, which is marketing the project.

Another upcoming launch is that of the 108-unit Verve Residences near Jalan Rajah, with prices likely to range from $900 to $1,100 psf.

These prices are similar to recent transactions in each area, showing that levels are still holding steady.

Homebuyers also picked up a few units in three freehold boutique projects launched in Telok Kurau recently.

One is the 28-unit Costa Este, which is selling at $663 to $980 psf. The others are Palm Galleria and Espira Spring, launched during the Chinese New Year weekend with average prices of $850 to $870 psf.

Generally, smaller projects have done well, even in shaky market conditions, said Mr Oei, citing Casa Fortuna in Balestier and Wilkie 80 in Wilkie Road. Both were sold out within three days of their launches late last year.

The 106-unit Casa Fortuna sold at about $1,000 psf, while Wilkie 80’s 50 units were taken up at $1,500 to almost $1,800 psf, Mr Oei said.

As for bigger projects, the first phase of Waterfront Waves at Bedok Reservoir will be officially launched this weekend. Prices for the 60-odd units still unsold will rise marginally from the current average of $750 psf, said Ms Kellie Liew, a project director at HSR Property Group.

The next brand-new launch may be Frasers Centrepoint’s Martin Place Residences in Kim Yam Road, due next month. Staff previews for the 302-unit condo started last month, at $1,800 to $2,300 psf.

Other launches to look out for include the delayed Marina Bay Suites and Ho Bee’s project at Dakota Crescent.

Not all industry players, though, have high hopes for upcoming launches. ‘The market is really quiet,’ said one agent. ‘Showflat crowds have thinned out to five or 10 people at a time. We’re still placing advertisements, but no telephone calls are coming in.’

 

Source: The Straits Times 13 Feb 08

2007 Budget surplus expected to hit eight-year high

Figure forecast to reach between $4b and $5b on higher tax revenues

THE Government is widely expected to report its largest Budget surplus since the dot.com boom, after a robust economy boosted tax collections last year.

Good corporate profits, strong wage growth and a rip-roaring property market are likely to mean that public revenues exceeded expenditures by between $4 billion and $5 billion, say economists.

This would give the Government considerable leeway to be extra generous with one-off financial aid measures to help the elderly and poor cope with escalating living costs, the experts said.

‘It’s going to surprise on the upside,’ said DBS Bank economist Irvin Seah, who is expecting an overall surplus of $4.28 billion for the fiscal year ending March 31. ‘Due to strong economic growth, tax collections will be higher than expected.’

Finance Minister Tharman Shanmugaratnam will be presenting the Budget to Parliament on Friday. The expected bumper surplus follows economic growth last year, likely to come in at 7.5 per cent.

The final figures for gross domestic product, or economic output, for last year will be announced tomorrow and are expected to reflect estimates published last month.

The Government has recorded, at best, a small surplus in recent years. The last time it achieved a bulging surplus was in 2000 at $4 billion and in 1999 at $4.9 billion.

Standard Chartered Bank (Stanchart) economist Alvin Liew noted that when a fiscal deficit of $690,000 was estimated a year ago, the Government was forecasting growth at 4 per cent to 6 per cent.

‘But actual growth has exceeded their expectations by more than 2 percentage points,’ he said.

CIMB-GK economist Song Seng Wun said the Government’s operating revenues probably jumped by 25 per cent from the previous year, instead of the official 5 per cent forecast.

Economists said personal income tax receipts rose as the strong economy lifted wages and created jobs.

Average bonuses paid out to workers have hit a 17-year high, while the unemployment rate has come down to a 10-year low.

Businesses should also post much stronger earnings such that they will pay more taxes overall despite a cut in the corporate tax rate from 20 per cent to 18 per cent.

Citigroup economist Kit Wei Zheng estimates that combined income tax collections from companies and individuals, which make up almost half of all tax revenues, surged 20 per cent.

Stanchart’s Mr Liew said revenues from the goods and services tax (GST) probably exceeded government projections, too. He noted that the booming economy has allowed consumer prices to rise strongly, probably exceeding government forecasts, which will boost GST receipts.

The experts say the Government should distribute the bulging surplus mainly to individuals who face a slowing economy and rising inflation.

‘The key focus will likely be measures to address the widening income gap and help the lower-income group cope with high costs of living,’ said United Overseas Bank economist Ho Woei Chen. This will likely take the form of one-off help, such as rental and utility rebates for the poor.

Beyond addressing acute challenges, economists said the Government would likely keep an eye on the medium to long term also.

A cut in personal income tax rates to match last year’s reduction in company taxes is widely anticipated to help Singapore attract foreign talent to live and work here.

The Government may also look to further enhance public infrastructure to keep Singapore competitive.

 

Source: The Straits Times 13 Feb 08

Don’t over-stretch yourselves: MM Lee

Financial prudence in periods of boom will enable S’poreans to ride out bad times

MINISTER Mentor Lee Kuan Yew last night urged Singaporeans not to over-stretch themselves financially in a period of boom, so that in the event of bad times, they would be better able to ride out the cycle.

Describing the effect of the property cycle, he warned that property prices go in cycles and will not keep going up all the time.

‘They go up, then they go down,’ he said. ‘So when they go up, don’t believe that it’s going to go up further and further, and you start buying bigger and bigger, and mortgage for bigger and bigger amounts. Because the day it starts to fall, the cycle goes around, you will find yourself with a negative value asset.’

It is by such prudent attitude that the government has refrained from spending the hundreds of billions of dollars of reserves that it has built up over the decades. Pointing to the recent investments made by the Government of Singapore Investment Corp and Temasek Holdings, Mr Lee said the two agencies were able to increase the value of their assets because they hang on in a recession, and sell part of their assets and keep cash when the boom becomes too intoxicating. The strategy ensured that when international banks like UBS, Citigroup and Merrill Lynch needed cash, GIC and Temasek would have the cash to invest in them.

Mr Lee was speaking at the Tanjong Pagar GRC Chinese New Year dinner when he made those comments. The constituency dinner, held at Farrer Park Primary School, was attended by some 1,200 residents and guests.

At the event, Mr Lee also cautioned against failing to plan for old age, saying: ‘The government will not allow anybody to die of starvation, but we are not going to cover you for your indiscretions.’

Along with the guarded tone in his message, he spoke of a bright outlook for Singapore. While the rise in food and energy prices and the widening income gap are causes for concern, he said Singapore can mitigate these problems.

‘But we must press ahead and maximise our chances to break through in the coming five to 10 years to reach a higher quality of development,’ he said. ‘We are now into a period of steady growth and transformation.’

Apart from the massive foreign infrastructure investments Singapore has attracted, the Republic is also spending about $28 billion in new MRT lines and a new expressway. The city centre is undergoing a makeover with the upcoming integrated resorts, the soon-to-be-completed Marina Barrage, and a Formula One night race.

Mr Lee said that Singapore has become successful thus far ‘because we have assumed individual responsibility for our lives’. Without natural resources, the way Singapore has managed to attract investors has been to keep taxes low, and offer a highly efficient, non-corrupt system and an industrial climate where workers, employers and government can work together.

‘And that is the basis on which we have huge investments coming in, because they (investors) know that this system will ensure that there will be no sudden dive down,’ he said.

‘I therefore urge everyone to remember, individual responsibility and family responsibility for each other is the way to go forward and the way to build one of the best cities in the tropics.’

 

Source: Business Times 12 Feb 08

Q4 GDP seen shrinking by 3.4%: poll

But Singapore not expected to slide into recession

SINGAPORE’S economy probably shrank in the fourth quarter by an annualised 3.4 per cent, weaker than an advance government estimate and the first quarterly contraction since 2003, a Reuters poll showed.

The preliminary government estimate suggested the economy shrank an annualised 3.2 per cent in the final three months of 2007. Factory output at the end of the year was lower than expected, after a 4.3 per cent expansion in the third quarter.

Most economists do not expect Singapore to slide into recession – defined as two consecutive quarterly contractions in economic growth – although slower growth will probably prevent the central bank from tightening monetary policy to rein in inflation, which is at a 25-year high.

The slowdown, after four years of booming growth averaging 6.6 per cent, is due to a sharp fall in manufacturing activity as demand for electronics in the United States and Europe dropped in the fourth quarter.

Drug output was also weak at the end of 2007.

‘The fourth-quarter slowdown was due to a contraction in the biomedical sector, but we can expect a rebound in the first quarter,’ said David Cohen, an economist from Action Economics.

‘The biomedical sector would be the least vulnerable to weakness in global demand,’ he said.

Many Asian economies are expected to slow this year on the back of the struggling US economy, the region’s largest export market.

The International Monetary Fund cut its global 2008 growth projection to 4.1 per cent from 4.4 per cent in January because of continuing stress in global credit markets, and it warned that economic activity could slow even further.

Singapore’s economic growth in the fourth quarter is expected to have slowed to 6 per cent from a year earlier, down from 8.9 per cent in the third quarter but in line with the advance government estimate, the poll of 10 economists showed.

For 2007 as a whole, the economy probably grew 7.5 per cent, also in line with the government’s estimate but slightly lower than the 7.9 per cent in 2006.

‘A US recession is likely to deepen the manufacturing and export slump this year, causing GDP growth to slow to 5.6 per cent in 2008,’ said Kit Wei Zheng, a Citigroup economist.

Factory output, which generates a quarter of Singapore’s gross domestic product, unexpectedly fell a seasonally adjusted 4.7 per cent in December as annual drug production fell for the fourth straight month due to lower output of active drug ingredients.

The manufacturing sector grew just 0.5 per cent in the fourth quarter, an advance government estimate showed, braking from 10.3 per cent growth in the previous quarter.

 

Source: Reuters (Business Times 12 Feb 08)

Stanchart joining quest for space in Changi

Bank seeks to build complex of up to 400,000 sq ft to house backroom operations: sources

STANDARD Chartered looks set to be the next financial institution to head out east to Changi Business Park (CBP), which is fast becoming a hub for financial backroom operations.

Already, Citibank, Credit Suisse, DBS and OCBC have either staked their claims on space there, or are in the process of doing so.

As for Standard Chartered, sources say that it is looking to build a complex of between 300,000 and 400,000 sq ft to consolidate its backroom operations currently spread out in locations like Tampines, Bukit Merah and Bras Basah.

It is also understood that the bank expects to increase its headcount when it expands its offices to CBP.

It has already committed to take up over 500,000 sq ft of space at the upcoming Marina Bay Financial Centre.

Industrial and business parks developer Ascendas, which is a subsidiary of JTC Corporation, is said to be the developer of Standard Chartered’s CBP offices.

It will be a built-to-suit building which will be leased to Standard Chartered in a similar way that Ascendas Real Estate Investment Trust (in which Ascendas holds a 60 per cent stake) is developing and leasing to Citibank its new backroom office space at CBP.

Earlier, Citigroup said it would invest $220 million to cover the capital, relocation, rental and operating costs of the new CBP office and will lease the space until 2016 and has an option to extend its lease for another six years.

CBP is a 66.54 ha business park which currently comprises around 60 development plots. JTC revealed earlier that about 50 per cent of these have already been allocated. While it is not clear which plot will be the site for Standard Chartered’s new backroom office, a JTC map of the area reveals that Ascendas has been allocated plots near The Signature, which is also near Expo MRT Station.

Other plans afoot at CBP include a hotel.

While the idea of a hotel was first mooted several years ago, there was little interest from industry players then.

It is understood that interest for a hotel has now been revived with CBP growing to become more than just a business park.

Cushman & Wakefield managing director Donald Han believes that while CBP may not have the critical mass to become a sub-regional town centre, it could become a fringe commercial centre along the lines of Harbourfront or Alexandra Road which Mr Han believes came about through ‘organic growth’.

With more businesses moving to CBP, Mr Han says that the authorities may have to, ‘over time, transform CBP into a fringe centre too’.

Mr Han also believes that in the process, Singapore Expo could be amalgamated to create the critical mass that will sustain support functions like the hotel as well as retail facilities.

For now, however, Mr Han reckons CBP is still ‘a bit disconnected’.

 

Source: Business Times 12 Feb 08

HDB offers 278 flats for sale

By end of yesterday, there were 2,224 online applications

THE Housing and Development Board launched the sale of 278 flats in various towns and estates yesterday. And by the end of the day the units were many times subscribed, with 2,224 online applications received.

Most of the units are four-room flats, plus 64 five-room units and 20 executive flats. They are spread over 13 estates.

Toa Payoh had the largest number of flats available at 119, followed by Tampines with 39 and Bukit Merah with 30.

Cushman & Wakefield managing director Donald Han said: ‘Obviously we’re seeing a better response for mature estates in fairly central locations. These are the first to experience demand and price increases.’

This is HDB’s fifth bi-monthly sales exercise for four-room and bigger flats under the combined balloting/walk-in system. Some 3,350 units have been offered so far.

In the first four exercises, 2,917 of the 3,034 units offered were selected, representing a take-up rate of 96 per cent.

There is also healthy demand for HDB’s build-to-order (BTO) flats. The 698-unit Coral Spring @ Sengkang, launched in September 2007, is about 70 per cent taken up, with just 200 units remaining. ERA Singapore assistant vice-president Eugene Lim said this is ‘not bad’ considering the location.

The strong economy has helped boost BTO and bi-monthly sales. But Mr Lim said increasingly higher asking prices for resale HDB flats are pricing some people out of the resale market. ‘There appears to be a stand-off between buyers and sellers in the resale market at the moment,’ he said, though there is still demand for resale flats.

HDB, which has stepped up its building programme since 2007, will offer 4,500 new BTO flats in the first half of 2008.

Whether this will help cool the resale market – where at the top end a 21st-storey executive flat in Queenstown went for a record $890,000 last month – is uncertain.

PropNex CEO Mohamed Ismail reckons the resale market will remain strong for now.

‘Supply (of flats) through walk-in selection is drying up and BTO flats will take time to build,’ he said. ‘I also believe the first half of 2008 will see people who sold their private flats en bloc earlier start to receive their collective sale proceeds, and some will downgrade to HDB resale flats.’

As such, Mr Ismail believes the resale market could see more than 30,000 transactions this year.

 

Source: Business Times 12 Feb 08

Developer stocks may rise above flat property prices

Goldman says that physical market correction already priced in

(SINGAPORE) Goldman Sachs predicts that private home prices will remain flat this year, but is sticking to its view that Singapore’s strong structural story is driving a sustainable multi-year residential upswing.

The US bank does not expect a repeat of the mid-1996 (anti-speculation) regulatory measures that caused Singapore’s residential market downturn or an economic environment like in 1998, when property prices fell sharply amid negative economic growth and job creation, and an interest rate spike. Goldman Sachs has also upgraded CapitaLand from Neutral to Buy.

‘We argue that the share prices of developer stocks have priced in a severe physical market correction, which we believe is unwarranted.

‘Notwithstanding near- term headwinds, we recommend investors start accumulating Singapore property developer stocks. We believe developer stocks will start trending up to their RNAVs (Revalued Net Asset Values) once investors get comfortable that property markets in Singapore and China are not heading for a severe correction,’ Goldman Sachs said in a report dated Feb 8 and authored by its analyst Leslie Yee.

Even after lowering its RNAVs for Singapore developers, Goldman’s 12-month target prices (set at parity to 2008 Estimated RNAV) offer potential upside of around 28-37 per cent.

Goldman Sachs attributed its lowering of 12-month target prices and valuations to Singapore private home prices staying flat, lower values of listed investments and a lower multiple of 15x (from 20x) for asset management fees.

Although Goldman Sachs assumes zero growth in overall private home prices this year, it acknowledges that prices may increase in the second half of the year.

The property market is currently caught between the negatives of macro concerns over the fallout from a US-led recession on the Singapore economy and equity market weakness, and the positives of strong Singapore domestic growth drivers such as robust job creation and wage growth, Goldman’s report said.

‘We have greatest confidence in the private mid- to mass-market segment, based on our analysis of different key drivers, such as affordability, income growth, population growth, and HDB resale market trends, among others. We believe strong Singapore fundamentals support this segment, which is likely to benefit most from any reduction in mortgage rates.

‘In the prime residential segment, we see a dampener from a fall in speculative activity but would not underestimate the appetite of bulk buyers such as the Middle Eastern funds. We note affordability for the mass market remains strong, while the prime segment should benefit from the rise in the number of people with high incomes,’ it added. Besides the Singapore residential market, other key drivers for developer stocks are the performance of the Singapore office market, the Chinese residential and commercial markets, and real estate investment trusts, the US bank said.

It argues that new office supply here in 2011/2012 can be absorbed without significant negative impact on rental and occupancy rates, and expects capitalisation rates across various property asset classes in Singapore to remain stable.

Goldman Sachs also sees little downside for residential prices in the China market, and has a positive bias on the outlook for Beijing, Shanghai and selected second-tier cities.

As for Singapore Reits, Goldman sees their unit prices rising from current levels over the next six months – given firm property rentals and the possibility of the overhang from primary and secondary equity raisings being removed.

Goldman has lowered its 2008 estimated RNAV for City Developments from $15.80 to $14.70 and for CapitaLand from $8.30 to $7.70.

‘Amidst a more uncertain environment, our top pick is CapitaLand, which we upgrade to Buy from Neutral. With its multiple growth engines, highly regarded management team and low gearing, our Buy rating on CapitaLand is premised on its attractive and resilient valuation which performs well in various stress tests,’ Goldman said.

The US bank is maintaining its neutral rating for CityDev.

 

Source: Business Times 12 Feb 08

Ayala Land bullish on Philippine housing market

(MANILA) Ayala Land, the Philippines’ biggest developer, plans to sell more homes this year, betting that housing demand will shrug off the impact of an economic slowdown in the US, the Philippines’ largest export market.

The company will sell more than the 4,404 lots and condominiums that it sold last year, chief financial officer Jaime Ysmael said yesterday in an interview in Manila. Ayala will offer 5,622 residential properties for sale this year, up from 5,182, he said. He declined to discuss sales and profit forecasts.

‘The domestic market could neutralise the negative effects’ of a US slowdown, Mr Ysmael said. The government last month said that the Philippine economy expanded 7.3 per cent last year, the fastest pace in 31 years.

The US is the source of half the remittances from overseas nationals, which make up a tenth of the Philippine economy. Sales to Filipinos abroad and the families that they support at home make up about a third of Ayala Land’s residential sales, Mr Ysmael said. Many of those customers are Filipinos living and working in the US, he added.

Last Friday, Ayala Land said that its 2007 profit rose 13 per cent to 4.4 billion pesos (S$154 million). Its sales were little changed, at 25.7 billion pesos. The developer said that it would boost capital spending by 60 per cent, to 24.3 billion pesos. About 20-30 per cent of that will fund new projects, Mr Ysmael said.

The company will probably sell more than two billion pesos of bonds this year to pay that amount of debt maturing in the fourth quarter, he added.

Mr Ysmael also said that an Asian property fund co-founded by Ayala Land may invest in Vietnam and expand its investments in China after closing itself to investors.

ARCH Capital Management Co, the fund’s management company, raised US$330 million, compared with the US$200 million targeted when Ayala Land and two partners set up the fund in 2006.

A US or global economic slowdown ‘may close some doors but the deal flow is still quite robust’, Mr Ysmael said. ‘There might be an impact but Asia is big. There are opportunities out there despite the possible slowdown.’

Ayala Land joined with its parent company Ayala Corp and Hong Kong-based Great ARCH Co to set up ARCH Capital Management. The fund is authorised to invest in Asian countries except Japan and the Philippines. ARCH Capital’s projects in Bangkok and Macau, China, comprise a fifth of available funds, Mr Ysmael said.

Source: Bloomberg (Business Times 12 Feb 08)

New Zealand house price growth slows as demand cools

(WELLINGTON, New Zealand) House prices in New Zealand rose at the slowest pace in a year last month as record-high interest rates and rising living costs curbed demand for property.

Prices climbed 8.9 per cent in January from a year earlier, moderating from a 10 per cent increase in December, Quotable Value New Zealand Ltd, the government valuation agency, said in a report released in Wellington yesterday.

A cooling property market will further slow an economy that expanded at the slowest pace in a year in the third quarter.

Reserve Bank of New Zealand governor Alan Bollard raised the benchmark interest rate four times last year to 8.25 per cent, straining the budgets of lower-income homeowners and forcing some property investors to renegotiate finance.

‘Over the course of the year, we will see prices drop on a national basis,’ said Nick Tuffley, chief economist at ASB Bank in Auckland. ‘Sales are slowing but the number of houses on the market is rising, so many sellers are going to have to look at the price they are willing to accept.’

The number of house sales in December slumped 32 per cent to a seven-year low, the Real Estate Institute said on Jan 16.

Mr Tuffley said that people are seeking to sell properties that they had been using as an investment, while buyers are ‘on the sidelines’ because of the increasing cost of home loans.

The average price of a New Zealand house was NZ$390,636 (S$437,500) in January, yesterday’s report showed.

In December, the interest rate on a two-year fixed mortgage was 9.38 per cent, up from 8.18 per cent a year earlier.

The cost of mortgage repayments on a median-priced New Zealand home was about 82 per cent of the nation’s average income in December, a measure of housing affordability that is close to the record low, according to the website interest.co.nz.

‘Higher mortgage interest rates are affecting property owners on low discretionary incomes,’ said Blue Hancock, a Quotable Value spokesman. ‘There are increasing reports from our valuers of properties going to mortgagee sale, with the number of these sales likely to increase.’ Property price growth has already stalled in some parts of the country, Mr Hancock said.

Source: Bloomberg (Business Times 12 Feb 08)

British home repossessions at 8-year high

(LONDON) British home repossessions last year hit their highest level since 1999 and are likely to increase, the Council of Mortgage Lenders (CML) said last Friday.

The trade group said that more than 27,000 homes were repossessed in 2007 and forecast that repossessions would rise to a total 45,000 in 2008 – still far fewer than the 75,000 homes that were repossessed in 1991 at the height of the last recession.

Economists expected a sharp rise this year as the global credit crunch bites.

‘The financial pressure on many home owners is increasing,’ said Howard Archer from Global Insight. ‘It seems certain that repossessions will trend up significantly during 2008, particularly if the economy suffers an extended marked slowdown and unemployment starts rising.’

Separate figures from the government showed that mortgage repossessions in England and Wales rose an annual 6 per cent in the last three months of 2007.

The mortgage lenders said that 13,500 homes were repossessed in the second half of 2007, marginally below the 13,600 in the first half and 10 per cent lower than they had forecast.

But the global economy now appears to be entering the slowdown presaged by the soaring rate of repossessions in the US that led to the dismantling of complicated credit derivatives underwritten by mortgages.

Britain’s economy grew by around 3 per cent last year but is expected to expand by less than 2 per cent this year.

‘The number of repossessions is likely to be higher in 2008 as a result of wider issues in the economy and the mortgage funding markets,’ said Michael Coogan, CML director-general.

 

Source: Reuters (Business Times 12 Feb 08)

Australia’s home loan approvals rise in December

Increased lending shows economy is weathering higher interest rates

(SYDNEY) Australia’s home loan approvals unexpectedly rose in December to a six-month high as jobs growth and wage gains underpinned demand for property.

The number of loans granted to people to build or buy houses or apartments climbed 0.1 per cent to 65,645 from November, the Bureau of Statistics said here yesterday. The median forecast of 21 economists surveyed by Bloomberg News was for a one per cent decline.

Increased lending adds to evidence that the A$1 trillion (S$1.3 trillion) economy is weathering higher interest rates and slowing economic growth in the US, Europe and Japan. The central bank said yesterday that it may need to increase borrowing costs further to curb the nation’s fastest inflation in 16 years.

‘The housing market will remain tight, putting upward pressure on prices and rents,’ said Craig James, Sydney-based chief equities economist at Commonwealth Bank of Australia, the nation’s largest mortgage lender. ‘The central bank is talking tough on the economy about inflation and the need to lift interest rates.’

The Australian dollar traded at 90.18 US cents at 4.38 pm here from 89.75 US cents before the lending report and central bank comments were released. The yield on the five-year government bond rose 10 basis points, or 0.10 percentage point, to 6.6 per cent.

Australia’s economy is in its 17th year of expansion, which is underpinning growth in employment and stoking borrowing demand. The jobless rate is at the lowest in more than three decades as retailers including Harvey Norman Holding Ltd and miners such as Rio Tinto Group hire more workers to expand.

‘Demand for finance has so far proved resilient to the Reserve Bank’s interest rate rises,’ said Bill Evans, chief economist at Westpac Banking Corp here. ‘We still expect rate increases to have some damping impact, particularly with the additional hike in February.’

Reserve Bank of Australia governor Glenn Stevens raised the benchmark interest rate by a quarter point to an 11- year high of 7 per cent last week, adding to increases in August and November.

The bank will raise the rate to 7.25 per cent by June, according to 13 of 24 economists surveyed by Bloomberg last week.

About 90 per cent of mortgages are taken out on a so-called floating rate, which is tied to the central bank’s rate.

A 25-basis-point rate increase adds about A$42 a month to the average A$250,000 home loan, according to the Housing Industry Association.

Westpac boosted its interest rate on home loans by 25 basis points following the central bank’s latest adjustment and Commonwealth Bank of Australia raised its main rate by 30 basis points. National Australia Bank Ltd added 29 basis points.

Australia’s five largest lenders also raised rates by between 10 and 20 basis points in January to recoup funding costs that have been driven up by the global credit squeeze.

Housing affordability in Australia dropped to the lowest level on record in the third quarter, according to an index compiled by Commonwealth Bank and the Housing Industry Association. Mortgage repayments accounted for almost 32 per cent of the average first-home buyer’s income.

There are signs that builders are scaling back projects, with a report last week showing that growth in the construction industry slowed in January.

The total value of lending fell 0.6 per cent to A$22.1 billion in December.

Lending to owner- occupiers rose 0.5 per cent to A$15.6 billion in December, yesterday’s report showed. The value of lending to investors who plan to rent or resell homes declined 3 per cent to A$6.58 billion.

Loans to build new houses slipped 2.1 per cent to A$4.68 billion from November, yesterday’s report showed. The number of loans to buy newly built dwellings declined 3.8 per cent.

 

Source: Bloomberg (Business Times 12 Feb 08)

MEDIA & MARKETING: Newspapers still among top media platforms

Despite hype over Internet, traditional forms of advertising still have edge: Poll

DESPITE the buzz and hype surrounding advertising on social networking and other Internet sites, newspapers still trounced other media as the most effective marketing platform last year.

This is because newspapers and other traditional forms of media still have a far wider reach, said the Fournaise Marketing Group in a recent survey.

The Singapore-based firm is one of the world’s top trackers of marketing effectiveness.

Its Marketing Effectiveness Report for last year, issued earlier this month, contained the results of a poll of more than 3,000 business-to-business and business-to-consumer marketing professionals working for small and medium-sized enterprises as well as larger firms, in Britain, Australia, China, India and Singapore.

Among the key findings was the fact that newspapers still easily beat other media in terms of marketing effectiveness despite the rise of online advertising.

Globally, newspapers ranked third behind direct marketing and public relations in terms of effectiveness in reaching out to target markets, ahead of online e-mail messages, referrals and display ads.

In booming economies such as Singapore, India and China, newspapers topped the list ahead of television and outdoor advertising.

Fournaise chief executive officer Jerome Fontaine said this was not surprising.

‘In markets which are growing fast, companies are still keen to build awareness and interest in their brands.

‘A big draw for established media such as newspapers is the fact that they still have a relatively wide and established reach.

‘Another attraction is that there are avenues for them to be audited externally, unlike many online forms of marketing. This allows marketeers to know precisely what they are getting for their money.’

The report also showed that for every $100 spent on marketing by businesses around the world as they tried to reach out to customers last year, a whopping $65 was likely to have been wasted.

The level of wastage was lower in high-growth centres such as Singapore, it found.

But the problem that marketeers face in getting their message through is universal: lots of media clutter, along with savvy and sophisticated customers and an extremely competitive marketing environment.

The survey concluded that marketeers around the world believe the marketing wastage rate for businesses trying to sell their wares to consumers was a significant 65 per cent. It was a lower 45 per cent for business-to-business firms.

In countries with relatively low economic growth, such as in North America, Britain and Australia, the estimated overall wastage rate is 60 per cent, compared to 40 per cent in countries with higher levels of growth such as Singapore, India and China.

Top 10 platforms

THE most effective marketing platforms of 2007 according to Fournaise’s report:

1. Direct marketing

2. Public relations

3. Newspapers

4. Online e-mail messages

5. Outdoor

6. Online (referrals)

7. Online (display ads)

8. Television

9. Sponsorships

10. Endorsements

 

Source: The Straits Times 12 Feb 08

2,224 in HDB line and it’s only Day 1

A BATCH of 278 surplus Housing Board flats in established towns like Bedok, Geylang and Toa Payoh drew more than 2,200 buyers within hours of going on sale yesterday.

Buyers have until Feb 18 to submit online applications for a computer ballot that will fix their position in the queue to pick a flat. The results will be out on Feb 21.

Yesterday’s ‘apply to buy’ rush will not have come as a surprise given the past response to the HDB’s year-old sales scheme.

A batch of 316 flats offered in outlying towns drew 5,147 applications in December, while about 840 others offered in two prior sales exercises were fully taken up.

The latest batch comprises mainly four-room units, with some five-room and executive flats – all in mature locations with amenities.

‘There will an overwhelming response,’ predicted Mr Albert Lu, the managing director of C&H Realty.

By 5pm yesterday, 2,224 people were in the queue.

The biggest group of units is in Toa Payoh, with 105 four-room and 14 five-room flats on offer. Flats are also available in Jalan Membina in Bukit Merah town and Geylang Serai.

The four-room flats cost $141,000 to $398,000, the five-roomers cost $218,000 to $532,000 and the executive flats, $333,000 to $470,000, depending on location and features of the units.

Demand is expected to come from buyers who want flats urgently but cannot stomach the prices that owners in choice areas are demanding.

Administration assistant Ellis Ang, 26, who plans to get married this year, has struck out in three ballots for a new flat so far.

‘There are a lot of couples like us out there,’ she said.

Unlike build-to-order flats, where construction starts only after most of the units are booked, most of the 278 flats on offer are ready and the rest are expected to be completed by 2011.

The HDB said: ‘Given the overwhelming popularity of new flats in established towns and the limited number of new flats available here, HDB would like to encourage flat buyers to consider flats in non-mature estates as well.’

Increased demand has shrunk the HDB’s surplus stock from more than 10,000 four years ago to about 2,200 at the end of last year.

But it is ramping up the number of build-to-order flats, with about 4,500 new flats offered this way in the first half of this year.

There is ‘ample supply’ of such new flats, it said, pointing out that 200 flats in the 698-unit Coral Spring estate in Sengkang were not taken up when booking ended last month.

 

Source: The Straits Times 12 Feb 08

Stock of surplus flats vanishing fast

Buyers on tight budgets looking for finished flats will be vying for fewer units

THE Housing Board’s offer of 278 surplus flats in mature towns yesterday will be likely to slash its stock of readily available units to less than 2,000, down from 17,500 in 2002.

Surging demand and a shortage of affordable completed property has dramatically cut the surplus supply.

At the end of last year, HDB was estimated to have just 2,200 surplus flats left. The almost 100 per cent takeup rate in previous sales exercises will push this figure down further.

It means that buyers on tight budgets hoping to purchase a completed flat will find themselves vying for fewer and fewer units, with the only alternative being coughing up more cash to buy a resale flat.

Those who were unlucky in ballots or who lack the cash will just have to wait.

Most new HDB flats come under the build-to-order (BTO) scheme. These flats are constructed only when most units are taken up. A person booking a BTO unit today could still have to wait three years or more for his home to be ready.

In the meantime, newly married couples will just have to rent or live with their parents until their new flat is ready, said PropNex chief executive Mohamed Ismail.

The resale prices of HDB flats jumped 17.5 per cent last year, prompting hordes of buyers to try their luck in the queue for surplus new flats, which come at highly subsidised prices.

A batch of 316 flats in Hougang, Punggol and Sengkang drew 5,147 applications, while 840 units offered in other parts of Singapore were all snapped up.

While the Government has committed to offering more flats under the BTO system – 4,500 in the first half of this year – it cannot guarantee that these new flats will be available on the spot.

It learnt a hard lesson in the 1990s when it built too many flats in anticipation of demand that fizzled out fast in the Asian financial crisis.

The subsequent overhang, which numbered 17,500 in 2002, meant that families wanting a flat could simply walk into an HDB branch and pick a ready-built flat on the spot.

In 2005, the HDB even sold about 100 of its older surplus flats on the resale market. This had HDB flat owners fearful that the move could depress the value of their homes.

Those days look set to be over, say property experts.

C&H Realty managing director Albert Lu said that buyers will simply have to choose between waiting for a new flat or paying more for a resale one in move-in condition.

 

Source: The Straits Times 12 Feb 08

A touch of glass for Moulmein HDB flats

RESIDENTS of HDB flats in Cambridge and Owen Roads will be the first in Singapore to get see-through, bubble lifts like those found in hotels and shopping malls.

They will be up and running by next year, said Minister of State (Education) Lui Tuck Yew yesterday at a Chinese New Year dinner for Tanjong Pagar GRC.

These lifts are cheaper to install because they are not enclosed in a concrete shaft. They cost about 25 to 35 per cent less than that of the lifts now found in HDB blocks.

Residents in Buffalo Road in Serangoon will also have such lifts by 2010, said Rear-Admiral (NS) Lui.

The authorities had previously said that by installing shaftless lifts, they could quicken the pace of upgrading so that HDB blocks would have lifts that stop on every floor.

In all, 1,200 HDB homes in the MP’s Moulmein division will gain from lift upgrading in the next two years.

Residents strongly support the programme to improve their lifts, with 85 per cent to 100 per cent of them giving the green light in polls, RADM Lui said at the dinner attended by the GRC’s six MPs, including Minister Mentor Lee Kuan Yew.

Meanwhile, efforts to upgrade private estates have been less successful.

Three submissions last year to the National Development Ministry’s Estate Upgrading Programme were not selected. RADM Lui did not identify the estates.

He plans to approach the ministry’s Community Improvement Programme for funds to do minor improvements to the private estates.

He also disclosed that ‘after much deliberation and some persuasion’, the Government gave more money for the renovation of the iconic Tekka Market, at the corner of Serangoon Road and Bukit Timah Road.

The sum has been raised from $5 million to $12 million for a more thorough make- over, he added.

Beyond the physical improvements, RADM Lui also highlighted the need for more community awareness. He urged the residents to play their part in helping the needy and be more neighbourly.

One resident who is looking forward to the bubble lift is deliveryman Tan Soy Tee.

The 61-year-old lives in a three-room flat on the sixth floor of Block 46 in Owen Road. The lift does not stop on his floor but on the seventh floor.

Daily, he would have to take the flight of steps to and from his home.

He expects to pay about $760 for the lift upgrading, a sum he finds affordable: ‘I earn $1,200 a month and cannot afford it if I have to pay much more than that,’ he said in Mandarin.

 

Source: The Straits Times 12 Feb 08

MM confident S’pore will ride out global slowdown

US troubles won’t hurt Asia for the first time, thanks to investments and region’s resilience

SINGAPORE will do well despite trouble in the global economy, said Minister Mentor Lee Kuan Yew.

And, for the first time, Asia will not tip into recession even though the United States economy is faltering, he said at his annual Tanjong Pagar Chinese New Year dinner yesterday.

But while he registered confidence in Singapore’s prospects, he was also mindful of the widespread worry among Singaporeans over the cost of living.

Speaking in English as well as Mandarin, he noted that economists have forecast that Singapore will still achieve 4 per cent to 6 per cent growth.

‘This is quite remarkable for it will be the first time that when the American economy slows down and reduces imports from Asia, Asia will not go into recession,’ he said.

He cited two main reasons for Singapore being able to ride out the financial disturbances.

One, it stands at the heart of the world’s highest-growth region. Two, the massive investments that are pouring into the island.

On the region’s prosperity, he highlighted the domestic growth momentum in China and India as well as the buoyant economies of neighbours such as Indonesia, Malaysia and Vietnam.

In his Mandarin speech, he said Vietnam will have South-east Asia’s most lively economy in 20 to 30 years.

Among Asean scholarship students here, he noted, the Vietnamese are the most serious, intelligent and reliable.

As for the massive investments here, he noted that the construction industry will be busy for several years building $20 billion worth of new MRT lines, the two integrated resorts and more.

Foreign investors, too, are here. Citing three billion-dollar projects, he said: ‘Huge investments cannot be recovered in a few years but will take decades to get back.’

Mr Lee believes these developments, in the region and at home, can help Singapore ‘mitigate’ its problems.

‘The rise in food and energy prices, and the widening income gap between high and low earners is cause for concern. But we must press ahead and maximise our chances to break through in the coming five to 10 years to reach a higher quality of development.’

He also said that Singapore is into a period of steady growth and transformation that includes the HDB estates.

‘We will not leave our heartlands behind,” he promised, as the 1,200 Tanjong Pagar GRC residents and guests celebrated with yu sheng (raw fish salad) under a white tent at the Farrer Park Primary School.

In the festive crowd was lawyer Michael Chia, 37, who said: ‘It’s comforting to know that Singapore will continue ticking.’

While assuring people about the days ahead, Mr Lee also warned against overreaching in good times and called it ‘a blessing’ that the financial crisis had cooled the property market.

‘Please remember that property prices go in cycles,” he added. ‘So when they go up, don’t believe it’s going to go up further and further and you start buying bigger and bigger homes…”

‘Boom and bust is in the nature of business cycles. You must be able to ride through a recession and emerge the better for it.’

This is how the Government of Singapore Investment Corporation and Temasek have been able to increase the value of its assets, he said, focusing on opportunities present in dark times.

‘In a recession we hang on. As the boom gets too intoxicating, we sell part of our shares and other assets and keep cash.”

So when UBS, Citigroup and Merrill Lynch needed a cash infusion, Singapore invested $22 billion in these distressed international banks.

‘When the share prices of these banks recover that $22 billion investments, it will be worth $50 to S$70 billion.”

 

Source: The Straits Times 12 Feb 08

Firms hope for tax measures that help combat rising costs

Faced with possibility of global slowdown, they call for Budget moves to ease inflation pressures

TAX relief to help businesses cope with spiralling costs is the key item that just about every company in Singapore is clamouring for in this Friday’s Budget.

Companies are unanimous in calling for more government help to combat rising inflation. The wish list ranges from a further cut in corporate tax rates to rebates for transport and rental costs.

Tax experts also hope to see Budget items such as tax exemption for income received by companies from abroad and ‘green’ incentives.

Still, after last year’s sterling corporate profits and a 2 percentage point cut in corporate taxes to 18 per cent, they do not expect a bagful of goodies this year.

But faced with the spectre of a global slowdown, companies are hopeful that the Government will dish out more measures to minimise the pain of rising costs.

‘What is unique about this year’s Budget is that inflation concerns are the dominant theme,’ noted Singapore Indian Chamber of Commerce and Industry (SICCI) chief executive Predeep Menon.

Fears that rising business costs will erode competitiveness in a global market is one of the key issues keeping the 800 corporate members of SICCI up at night, he said.

This was reflected starkly in a recent survey of 556 companies by the Singapore Business Federation about their Budget wish list. Almost 40 per cent of the companies polled hope to see a cut in corporate tax rates, with some seeking a 1 percentage point cut to 17 per cent.

Another 31 per cent of respondents called for tax measures to help cut rental costs, while 16 per cent wanted help in handling steeper operating costs. Other key concerns are transport, utilities and labour costs.

Tax experts and industry players said the Budget is likely to tackle inflation. But rather than sweeping measures to tackle costs across all sectors, the Budget is likely to target specific sectors to relieve cost pressures.

Lowering the levy for foreign workers to help the manufacturing sector could serve as a means to manage rising labour costs, said Mr Edwin Khew, president of the Singapore Manufacturers’ Federation.

Also, the Budget may grant the shipping industry’s wish for an extension of concessions to companies to get tax exemption on gains from the sale of vessels, due to end this year, said Mr Chiu Wu Hong, KPMG executive director, tax services.

Tax rebates on transportation costs may be offered to logistics companies, which are hardest hit by rising oil costs and road taxes.

Singapore companies may get tax incentives to expand in the Middle East or Eastern Europe to diversify their business away from the United States, suggested Association of Small and Medium Enterprises president Lawrence Leow.

Consumer-related and services companies are also hoping for a cut in personal taxes so that consumer demand would not be too severely dampened by inflation.

Mr Roman Scott, economic spokesman for the British Chamber of Commerce Singapore, called for a tiered reduction of the top personal tax rate from 20 per cent to 18 per cent over two years.

Tax experts also called for measures to enhance the tax regime to attract more foreign companies and build up certain key sectors.

Ernst & Young partner for tax services Choo Eng Chuan suggested that the Government consider using fiscal measures such as providing additional tax depreciation on equipment that reduces pollution or saves energy to complement its national policy to make Singapore an eco-friendly hub.

To promote the wealth management sector, a key growth engine of Singapore’s financial hub, Mr Yeo Kai Eng, Ernst & Young partner for GST services, suggested that the Government allow trusts to recover the GST incurred on their business expenses in full.

GST of 7 per cent is currently levied on fund management services or legal services provided to trusts with Singapore trustees and overseas beneficiaries.

Another bugbear plaguing the industry is estate duties. ‘Many other jurisdictions have already abolished it.

May it rest in peace in Singapore,’ said PricewaterhouseCoopers tax partner David Sandison.

Singapore International Chamber of Commerce chief executive Philip Overmyer called for the removal of a tax that companies in Singapore pay on the income they bring in from overseas units.

He noted that other jurisdictions like Malaysia and Hong Kong have done away with this tax.

 

Source: The Straits Times 12 Feb 08

US-linked worries drag Asian markets down

Delayed reaction due to holiday break as recession fears dog investors

ASIAN stock markets were battered yesterday, after a four-day break for the new lunar year failed to dispel the same old fears that have been unnerving investors.

Steep falls on Wall Street last week had a delayed reaction here as markets waited to re-open after the holiday, with a rush for the exits once the opening bells rang.

Singapore’s Straits Times Index (STI) tumbled 63.68 points, or 2.17 per cent – to 2,868.29, its lowest close since Jan 22.

But volumes were relatively low with just 1.08 billion shares worth $1.64 billion traded, suggesting that most investors are seeking safety on the sidelines.

But the STI’s drop was nothing compared to the selldown in India, where the Sensex Index plunged 4.78 per cent, after a much-awaited stock listing made its debut more than 17 per cent below its issue price.

India was joined on a southward spiral by Hong Kong’s Hang Seng Index, which slumped 3.64 per cent, and South Korea’s Kospi Index, down 3.29 per cent.

Markets in Indonesia, the Philippines, Malaysia and Australia were also belted.

JP Morgan Private Bank’s senior portfolio manager, Mr Elan Cohen, said: ‘The weight of negative news in the US last week and the 4 to 5 per cent fall in stocks there factored heavily in Asian markets today.’

Wall Street, racked by recession fears and more subprime red ink, dived 4.4 per cent last week to close at 12,182.13 – down more than 8 per cent for the year.

The already jittery Asian market sentiment was exacerbated by comments from the Group of Seven policymakers who said yesterday that the global economy faces growing threats from a United States housing slump and credit crunch.

The wave of pessimism sent the STI down from the opening bell, with many blue chips taking a hit. Weaker US futures during Asian trading hours pushed the STI further south in the afternoon.

The banks were thumped. United Overseas Bank dropped 58 cents to $17, the day’s fifth-largest loser. DBS Group Holdings lost 36 cents to $16.66, while OCBC shed 16 cents to $7.14.

Property plays were also down. City Developments shed 40 cents to $11.06, Keppel Land lost nine cents to $5.74 and CapitaLand fell 23 cents to $5.45.

Other bruised blue chips included Singapore Exchange, off 47 cents to $8.79, and Singapore Airlines, which retreated 28 cents to $15.18.

The FTSE ST Mid Cap Index lost 1.7 per cent to 752.55, while the China Index plunged 3.1 per cent to 524.54.

But SingTel had a better day, adding a cent to $3.72 due to bullish analyst reports, while Neptune Orient Lines was up 10 cents at $3.20 ahead of its full-year results today.

Analysts warn of more volatility to come but note that the worst may soon be over.

DMG & Partners Securities senior dealing director Gabriel Yap said: ‘The downside could last another one to three months more. We’re already quite close to the bottom.’

 

Source: The Straits Times 12 Feb 08

Write-downs from sub-prime problems could touch $568b

German minister sounds warning as officials await audits from banks

THE bloodbath is not over yet.

Sub-prime-related write- offs may hit US$400 billion (S$567.8 billion) – more than treble the US$130 billion losses that Wall Street banks and other financial institutions have revealed in recent weeks, according to the world’s top finance officials.

Speaking on Saturday after last weekend’s Group of Seven (G-7) meeting in Tokyo, German Finance Minister Peer Steinbrueck said the grouping now feared that write-offs of losses on securities linked to United States sub-prime mortgages could reach US$400 billion.

This is also far bigger than the US Federal Reserve’s estimates for sub-prime losses last year of US$100 billion to US$150 billion.

According to Bank of Italy governor Mario Draghi, the next two weeks will be critical in revealing how much damage the credit crisis has done to the global financial system.

‘The next 10 days to two weeks will be crucial because we are going to have the first audited accounts from financial institutions since the crisis started,’ said Mr Draghi, who is the chairman of the Financial Stability Forum (FSF). The FSF, a committee of international regulators and central bankers, is heading an international inquiry into the crisis.

Some of the world’s biggest banks have already disclosed billions of dollars of bad credits related to the US sub-prime mortgage market collapse, but these are only preliminary estimates, he added.

‘Auditors have become more vigilant’ as the fallout from the sub-prime crisis continues to spread and audited accounts for last year could reveal a grimmer picture, Mr Draghi told The Business Times.

The FSF’s preliminary report at the G-7 meeting warned that ‘there remains risk that further shocks may lead to a recurrence of the acute liquidity pressures experienced last year’, adding that ‘it is likely we face a prolonged adjustment, which could be difficult’.

Mr Draghi also said regulators were ready to force banks to reveal their losses and replenish their equity ratios.

He did not rule out the possibility that governments might eventually need to inject capital into banks, although he stressed that market solutions should take precedence. The FSF will issue its full report on the causes of the credit crisis and ways to tackle it in April.

The G-7 policymakers, in their statement, painted a grim picture, saying the US economy may slow further, eroding global growth, while banks, despite falling interest rates, will tighten credit even further.

While the G-7 did not propose specific measures, European Central Bank (ECB) president Jean-Claude Trichet said countries will do what was necessary, both individually and collectively, to counter a ’significant market correction’.

Economists, however, said the ECB is held back from cutting interest rates by its fears of rising inflation.

‘The problems are going right through all parts of the financial markets and there’s not much the G-7 can do about this,’ Mr Gilles Moec, an economist at Bank of America in London, told Australia’s The Age newspaper.

‘There’s a danger that the downturn will become a self- fulfilling prophecy,’ he was quoted as saying.

 

Source: The Straits Times 12 Feb 08