BT : Chip Eng Seng buys A$20m site in Melbourne

Business Times - 16 Mar 2010

Chip Eng Seng buys A$20m site in Melbourne

By EMILYN YAP

CHIP Eng Seng Corporation has extended its footprint overseas with the purchase of a A$20.2 million (S$25.8 million) site in Melbourne.

The deal is considerable when it is seen against the property and construction firm's net profit of $75.3 million for FY2009.

The land parcel is located at Mackenzie Street, in the eastern part of Melbourne's central business district, and spans around 20,000 sq ft. Chip Eng Seng plans to build a 32-storey tower on the site, with 350 residential apartments and other amenities such as shops.

This site marks the company's third development project in Australia. It had earlier completed a commercial building and a residential project in Adelaide.

'With the stabilising world economy, we believe that this is an opportune time for us to expand our development property portfolio,' said Chip Eng Seng executive chairman Lim Tiam Seng.

'Melbourne represents a great opportunity as the city is currently experiencing a shortage in supply even as the population continues to increase.'

Chip Eng Seng does not expect the project in Melbourne to have any material impact on its net tangible assets and earnings per share for the current financial year ending Dec 31. It will be funding the site purchase using internal funds and bank borrowings.

As at end-2009, the company had cash and cash equivalents worth $76.1 million and a net debt to equity ratio of 0.15.

Mr Lim expects Chip Eng Seng's cash position to strengthen further when its joint development projects, The Parc Condominium in the West Coast area and City Vista Residences near Cairnhill, receive their temporary occupation permits this year.

'This puts us in an excellent position to pursue opportunities in Singapore and the region, as well as allow us to tender competitively for construction pro-jects,' he said.

Chip Eng Seng's most recent property launch was that of Oasis@Elias in Pasir Ris. The company has been bidding for land at state tenders in the last few months in a bid to top up its residential land bank.

The counter closed unchanged yesterday at 39 cents.

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.



Mr Lim: 'With the stabilising world economy, we believe that this is an opportune time for us to expand our development property portfolio.'

ST : Canadian school's new campus to open in 2011

Mar 16, 2010

Canadian school's new campus to open in 2011

International school's new partner puts stalled plans back on track

By Jennani Durai

THE Canadian International School (CIS) here has unveiled the partner financing its new $140 million campus in Jurong West.

It is Singapore-based private education provider Knowledge Universe, which has more than 350,000 students in its institutions worldwide, including 8,500 in its 41 institutions here, which are mostly preschools.

The injection of funds will give Knowledge Universe a majority stake in CIS, the founders of which will continue to manage the school while retaining a significant equity stake, said CIS founder and managing director Thomas Tang.

The new campus can accommodate up to 3,300 students when it reaches full capacity in 10 years.

Spread over 43,000 sq m, it will have state-of-the-art classrooms, sporting complexes, outdoor play facilities, as well as a performing arts and fine arts centre, an auditorium and a media centre.

Estimated to be completed by August next year, the new campus will consolidate the school's current Toh Tuck, Bukit Tinggi and Kampong Bahru campuses. The school's East Coast campus in Tanjong Katong will stay put, as it was recently renovated.

The school, which is not funded by the Canadian government, has 1,900 students across its campuses now.

The new campus almost could not materialise, a victim of the global financial crisis. The school ran into difficulties raising funds, and construction stalled in October 2008.

It was supposed to have opened in February last year, and when it became clear this was not going to happen, parents were thrust into uncertainty, unsure about whether they should keep their children there.

Ms Elizabeth Duke, whose sons are in Grades 3 and 5 in the school, said: 'I know parents who have moved their children out, which affects me because my sons lose their friends.'

CIS head Glenn Odland said the school cast around for potential partners, and picked Knowledge Universe after rigorous evaluation.

'We decided that Knowledge Universe offered the best fit for our school and our community,' he said.

Mr Tang said both parties have been thoughtful and prudent in considering how the partnership should be structured to ensure maximum benefits for the students.

The unveiling of Knowledge Universe as the school's partner comes nine months after CIS said it had secured financing from a partner it did not name.

Dr Odland said: 'As a school, we recognise that many members of our community have experienced anxiety as a result of the delays in the Jurong project, and we are extremely pleased that we can now move forward.'

Ms Duke said she hoped that parents who were uncertain would now be persuaded to keep their children in CIS.

Referring to the August 2011 opening date, she said it was just one more school year away, which 'will be tolerable to parents, and we'll be able to maintain our strong community'.

jennanid@sph.com.sg

BT : Banner Q1 on the cards as new homes keep on selling

Business Times - 16 Mar 2010

Banner Q1 on the cards as new homes keep on selling

Strong momentum continued through February and more launches are expected this month

By UMA SHANKARI

(SINGAPORE) The number of new private homes sold in January and February 2010 has already outstripped that for the whole of Q1 2009, official data shows.

Developers sold 1,196 units in February - down 19 per cent month-on- month from the 1,480 units sold in January 2010 - according to the Urban Redevelopment Authority (URA). Analysts attributed the slowdown to the Chinese New Year.

But sales over the two months still work out to 2,676 units - slightly more than the 2,552 homes sold in Q1 2009 and a significant jump from the 1,841 homes sold in Q4 2009.

The number of units launched also hit 2,587 in January and February, which has also exceeded the levels seen in Q1 2009 and Q4 2009.

Analysts predict that another more than 1,000 new homes could be sold in March - which means that the take-up for Q1 2010 is likely to top 3,600 units.

'As the strong sales momentum in January and February continues into March, new home sales in the first quarter of 2010 could reach 4,000 units. Especially with two more new launches at Sentosa Cove expected in March,' said Li Hiaw Ho, executive director of CBRE Research.

DTZ expects the take-up in Q1 2010 to be between 3,400 and 3,800 units, while Jones Lang LaSalle's (JLL) estimate is for 3,500 units.

Sales in March are expected to hold up in spite of the introduction of two new policies to curb speculation in the private residential market introduced by the government in late February - a seller's stamp duty for those who buy a residential property and sell it within a year and a reduction in the loan-to-value limit on housing loans from 90 per cent to 80 per cent.

'Interest in properties has yet to wane, as judged by strong showflat turnouts,' observed DMG & Partners analyst Brandon Lee, who visited the showflats of Cheung Kong Holdings' The Vision and Sing Holdings' The Laurels over the weekend.

'Buyers were undeterred despite the recent slew of government policies, as evidenced by healthy take-ups of 60-80 per cent and the 20-30 per cent price premiums achieved over nearby completed projects.'

Sing Holdings said yesterday that it has sold 133 of the 179 units released at the 229-unit The Laurels in the Cairnhill area as of Sunday. All four penthouses and one-bedroom units have been taken up, and the price for 'typical units' ranges from $2,800-$3,200 psf.

In a separate update, Cheung Kong Holdings said that 160 apartments in the 295-unit The Vision were sold by end-Sunday. Two to four-bedroom units went for around $1,000-$1,200 psf.

Encouraged by the strong take-up in the first two months of the year, developers are expected to launch more units and projects in what is left of March.

'With the government monitoring the market closely, it would also be in the interest of developers to proceed with their launches instead of at a later date when prices may come under pressure if more market cooling measures were introduced,' said Tay Huey Ying, Colliers' director for research and advisory.

In particular, City Developments' 228-unit The Residences at W Singapore and Ho Bee Investment's 151-unit Seascape (both on Sentosa Cove) are highly anticipated.

Some developers are rolling out more units in already-launched projects.

Hong Fok Land is understood to have launched the second phase of units at the 360-unit Concourse Skyline on Beach Road. A total of 171-units (out of 200 launched) were sold as at end-February, with two units transacting during the month at a median price of $1,818. However units in the second phase, which come with a water-view, are going for more than $2,000 psf each, sources said. The developer is also absorbing the stamp duty on selected units to a bid to boost sales.

In February, there was also a preference for cheaper units. According to Colliers, only 643 properties, or 54 per cent of the total number of homes sold, went for more than $1,000 per square foot (psf) in February. This contrasts with the 1,118 units sold in the same category in January, which accounted for 76 per cent of all sales during that month.

'The impact of the (new government) measures was probably marginal during the month given that the policies only took effect on February 20,' said Chua Yang Liang, JLL's head of research for South-east Asia and Singapore.

But he cautioned that the take-up rate (the number of units sold divided by the number of units launched) could be hit somewhat over the rest of 2010.

The star performer in February was MCL Land's The Estuary, a mass-market project in Yishun which was launched after the government measures were announced. The 386 units sold (at a median price of $757 psf) from this project alone accounted for nearly one-third of the sales in February. In second place was Far East Organization's Altez in Enggor Street with a take-up of 150 units and a median price of $1,817 psf.

But interest remained for luxury projects. Seven units above $3,000 psf were sold in February, compared to only one in January. These included four units from UOL Group's Nassim Park Residences at a median price of $3,202 psf. Analysts noted that the URA price index is likely to register an increase in Q1 based on the higher-value projects sold in the quarter.

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.

BT : Malaysia may raise interest rates to avert asset bubbles

Business Times - 16 Mar 2010

Malaysia may raise interest rates to avert asset bubbles

(KUALA LUMPUR) Malaysia's central bank said it may increase interest rates further to avert asset bubbles and discourage risky investments by people seeking better returns, even as inflation will likely remain 'modest' this year.

'We will review the conditions at our next monetary policy meeting and work toward further normalizing if necessary,' Governor Zeti Akhtar Aziz said in an interview last Friday with Bloomberg Television in Kuala Lumpur.

'Inflation will continue to be modest and therefore it would not prompt us towards tightening, but that does not preclude that we will continue to normalise interest rates.'

Malaysia raised its benchmark interest rate from a record low to 2.25 per cent this month, becoming the second Asian country to boost borrowing costs as the region leads a recovery from the global slump.

The ringgit faces 'upward pressure' as regional trade rebounds and the central bank increases rates before the US, Europe and Japan, according to Franklin Templeton Investments.

The Malaysian currency is Asia's best performer this year, gaining 3 per cent against the US dollar. The central bank wants to prevent 'financial imbalances' that could undermine the economy's recovery from last year's recession, Ms Zeti said.

'There is no compelling evidence of asset bubbles in Malaysia based on current indicators,' Suhaimi Ilias, chief economist at Maybank Investment Bank in Kuala Lumpur, said before the interview.

Still 'the risk is there if the interest rate is kept very low for an extended period as money searches for returns to beat inflation that is creeping up.'

China has started draining excess cash from the economy to prevent asset bubbles. Australia and Vietnam have raised borrowing costs as inflation accelerates, and the Philippine central bank last week pared back a lending programme for banks.

Keeping interest rates too low for too long may lead to the 'mispricing of risks' by those who anticipate borrowing costs will stay low, as well as create asset bubbles, Ms Zeti said.

While the central bank doesn't expect to see bubbles forming 'on the horizon', there are signs that people are buying higher- yielding assets 'that pose significant risks', she said.

Bank Negara Malaysia will monitor the strength of the economic recovery in deciding whether interest rates need to rise further, the governor said. Current borrowing costs are still 'very supportive' of economic growth, Ms Zeti said.

The level at which rates are considered to be 'normalised' would depend on the strength of the recovery, she said, adding that inflation won't be 'a factor' in 2010 even after taking into account possible increases in fuel and power prices.

The central bank, whose policy team next meets in May, raised its overnight policy rate from 2 per cent on March 4, the first increase in almost four years, saying the economy's recovery is 'firmly established'.

Malaysia's gross domestic product expanded 4.5 per cent last quarter after contracting the previous nine months. Exports surged by the most in more than 11 years in January.

'We expect growth to improve from the levels we have seen in the fourth quarter,' Ms Zeti said. 'Certainly the first half of the year, all the signs are pointing to stronger growth' as domestic demand and investment recover, she said.

JCY International, a Malaysian supplier of hard-disk-drive components for Seagate Technology and Western Digital, said last month it plans to spend 182 million ringgit (S$76 million) in the financial year starting Oct 1, 2010 to increase its capacity amid rising orders.

Inflation of about 2 per cent would be considered 'modest', Ms Zeti said. Malaysia's consumer prices rose for a second month in January, climbing 1.3 per cent from a year earlier from an average 0.6 per cent in 2009.

Should price gains accelerate further to 3 per cent, for example, 'we would begin looking at what are the sources of inflation because if it was demand-induced then' the central bank would look at 'tightening' monetary policy, Ms Zeti said.

Ms Zeti refrained from raising interest rates in 2008 when consumer prices rose as much as 8.5 per cent in July and August amid soaring oil and commodity prices, saying inflation wasn't driven by higher demand and would ease as global growth slowed.

Malaysia's policy makers aren't 'inflation targeters', she said last week.

The Malaysian ringgit has climbed 2 per cent since the central bank's decision to raise rates this month, making it Asia's best-performing currency outside Japan during the period.

The currency's appreciation has reflected Malaysia's strengthening 'fundamentals', Ms Zeti said.

'We have seen this level before and we are not concerned,' she said. 'We have allowed our exchange rate to be market determined and we are there to ensure orderly market conditions. Our export sector has never relied on the exchange rate to gain competitiveness.'

Ms Zeti, who said previously Malaysia will consider allowing the ringgit to be traded overseas once the country has a more developed foreign-exchange market, said in the interview the central bank has formed a task force involving the financial and banking industry to work toward developing the country's foreign-exchange market 'with a view to internationalising' the ringgit.

'Once that market has become more vibrant and with the products and services being offered in terms of the forward market and so on, and in terms of hedging instruments, then we'll look at internationalising the currency,' she said. 'Right now we don't have a time frame.' - Bloomberg

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.

ST : Strong new home sales in Feb despite CNY, cooling measures

Mar 16, 2010

Strong new home sales in Feb despite CNY, cooling measures

By Joyce Teo

PROPERTY buyers showed few signs of easing off last month and snapped up 1,196 new private homes - more than industry experts had expected for a month many thought would be quieter.

The robust figures follow from a bumper January, when 1,480 private units were sold - a number that trumped the miserly 481 shifted in December, and helped prompt government measures to pre-empt a property bubble.

Sales in January and February hit 2,676 units, already well up on the 2,596 sold in the first three months of last year, with March numbers yet to come.

CBRE Research executive director Li Hiaw Ho said yesterday: 'As the strong sales momentum in January-February continues into March, new home sales in the first quarter of 2010 could reach 4,000 units.'

Already, Cheung Kong (Holdings) at the weekend sold 160 units of The Vision in the west coast at $1,000 to $1,200 per sq ft.

Last month's sales serve to underline that the property resurgence is more resilient than some had thought.

PropNex chief executive Mohamed Ismail said the figures were 'impressive' considering the Chinese New Year holiday typically marks a quieter month. February is also the shortest month, and market cooling measures took effect on the 20th of the month.

The strong performance is 'testament to the underlying strength of demand for homes by both owner-occupiers and investors', said Colliers International's director for research and advisory, Ms Tay Huey Ying.

'Purchasers appear to be largely unfazed by any short-term corrections the market may see due to potential future government measures as they are confident of their ability to ride through it to benefit from price appreciation,' she said.

Developers launched 1,161 units last month compared with 1,426 in January, according to Urban Redevelopment Authority data out yesterday.

The bulk of last month's sales were for projects located in prime or suburban districts.

Suburban home sales totalled 563 units, up 32 per cent from January.

One project - The Estuary in Yishun - contributed to most of that number, with 386 units selling at a median price of $757 psf.

CBRE Research said the condo's strong showing could be because it was the only new mass-market type project launched in the Yishun area in several years.

Altez in Tanjong Pagar and Waterscape at Cavenagh also did well, selling mostly one- and two-bedroom units, it said.

Overall, sales of city-fringe and prime projects dipped last month, although seven units priced above $3,000 psf were sold, up from one in January.

Four units at Nassim Park Residences went at a median price of $3,202 psf, two at Orchard Residences sold at a median price of $3,547 psf and one at Seven Palms in Sentosa Cove attracted $3,318 psf.

'February sales have come down a little, but it is still high. Still, further measures won't be likely unless prices continue to rise unabated,' said Jones Lang LaSalle's head of research for South-east Asia, Dr Chua Yang Liang.

If that happens, a fine-tuning of the current cooling measures and possibly the introduction of a capital gains tax may be possible, he said.

While the seller's stamp duty introduced last month could reduce new sales by another 5 per cent to 10 per cent this month, its impact is likely to be on speculators in the sub-sales and resale market, said Dr Chua.

Experts expect sales and launches to stay above the 1,000-unit mark this month.

'Home prices are likely to register an increase based on the higher-value projects sold in the quarter,' said CBRE's Mr Li.

Colliers International's Ms Tay said: 'Buyers are likely to continue to lock in their purchases for fear of being priced out of the market if prices continue to climb.'

joyceteo@sph.com.sg



Crowds thronged the public launch of The Estuary condo in Yishun. It sold 386 units last month at a median price of $757 psf. --ST PHOTO: NG SOR LUAN

ST : Private property launches: they're still... HOT, HOT, HOT

Mar 16, 2010

Private property launches: they're still... HOT, HOT, HOT

Buyers pack showflats for mass market and prime projects

By Esther Teo

SALES of private property kept sizzling over the weekend as buyers, undeterred by the rainy weather and recent government policies to cool the market, packed showflats.

Demand was strong for mass market and prime projects, with buyers especially keen on The Laurels, an upmarket 229-unit project in Cairnhill Road.

Developer Sing Holdings has sold 135 of the 179 units so far, with around 40 - comprising mostly two-, three- and four-bedders - going over the weekend and two more taken up yesterday.

More than 90 units had already been sold at private previews for business associates and former Hillcourt Apartments owners, where the development now sits.

Prices at the project ranged from $2,800 to $3,200 per sq foot (psf).

All four penthouses have also been bought, for between $8 million and $10 million each, and the 45 one-bedroom units are also gone, a DMG & Partners report said.

'We had a good mix of buyers with strong take-up rates across the different unit sizes. Mostly two- and three-bedroom units are left but we have no plans to release the remaining 50 units yet,' the spokesman said.

DMG & Partners property analyst Brandon Lee said turnout for The Laurels preview was healthy, with 20 to 40 people in the showflat at any one point.

Locals made up a good proportion of the buyers, although there were some Indonesians as well, the Sing Holdings spokesman said.

Mr Lee expects 30 to 50 units to be retained for future launches so as to ride on continued rising prices within the high-end segment.

The Vision at West Coast - marketed as a high-end project in a suburban location - was also popular.

As of yesterday, 160 out of the 295 units in the Cheung Kong Holdings development had been sold, including the 100 that went during the initial preview.

This is in spite of record prices - from $1,000 to $1,200 psf - for a mass market project.

The Vision, a 99-year leasehold condominium located across the road from West Coast Park, has 281 apartments and 14 strata terrace units. It is next to Blue Horizon, where units in the resale market have gone for $764 to $841 psf this year.

UOB Kay Hian analyst Vikrant Pandey said the strong demand for The Vision served to reinforce positive views about the sustainability of the property market's recovery, with turnout strong despite Sunday's rain.

He expects demand to remain strong for other upcoming launches.

'We believe the turnaround in the property segment is well supported by favourable demand-supply dynamics, high liquidity and a low interest rate environment,' Mr Pandey added.

Tiong Aik's Coralis near Marine Parade has also seen strong sales, with more than 50 out of its 127 units taken up at its weekend preview in Raffles Hotel. Prices were between $1,350 and $1,550 psf. It is expected to be launched this weekend.

Coralis is a freehold condominium featuring one-bedders as small as 495 sq ft and penthouses of up to 3,089 sq ft.

Mr Dennis Yong, head of special projects at HSR International Realtors - a co-marketing agent of the project - said strong demand was seen mostly from local people with the 'perspective of home ownership'. Investors made up only about 20 per cent of buyers, he said.

Mr Yong expects continued demand in the next two to four weeks as there is still genuine demand from home buyers.

But he tips prices to continue increasing, given developers' depleting landbanks and that new site tenders are attracting high bids.

'Developers are not in a rush to sell. They can still push up their prices to maximise their value and to increase the average price of each unit,' he said.

'They are not sure how high to price their units, (so) every four to five units sold, they adjust their prices again.'

City Developments has said it plans to launch the 228-unit Residences at W Singapore Sentosa Cove this month while it hopes to release a 429-unit project in Chestnut Avenue next month. A spokesman said that while it has not launched any new projects as yet, there has been buying interest.

Local developer Hiap Hoe Group will preview its 61-unit Skyline 360� at St Thomas Walk and its 48-unit Treasure on Balmoral - a luxury development costing at least $4 million per unit - at Raffles Hotel this weekend.

CB Richard Ellis executive director of residential services Joseph Tan said he has seen 'decent sales' even for some of the ongoing projects such as Centennia Suites in Kim Seng Road over the past weekend.

'Sales are still okay even for the older launches...All (projects) are moving, some are faster, some are slower but even if sales are slower, it could be the marketing strategy of the developer. Prices might still go up and with a developer having a depleting landbank, it is not in its interest to sell fast,' he said.

esthert@sph.com.sg



THE LAURELS IN CAIRNHILL ROAD
135 out of 179 units sold, with about 40 sold over the weekend

ST : Property market: When is hot too hot?

Mar 16, 2010

Property market: When is hot too hot?

Keeping people guessing when Government will step in may be best cooling measure of all

By Fiona Chan

PROPERTY developers may have heaved a sigh of relief on March 8 when the Government signalled there would be no more measures to cool the housing market - 'for now'.

But any comfort they took from that would have been cut short when National Development Minister Mah Bow Tan added what has become his signature catch phrase: 'We will monitor the market closely.'

He told Parliament: 'If there are signs that the market will overheat again, we are ready to introduce additional measures to stabilise the market.'

The words in themselves are not new. The Government has often assured home buyers that it will keep a close eye on the market and go in if necessary.

The problem is that it is now unclear what the Government considers an 'overheated' market - and when it will decide to intervene.

After all, when it announced measures to cool the private property market last month, the move came as a shock to property developers and home sellers.

Cooling measures had been introduced just five months earlier in September, when the Government removed the Interest Absorption Scheme and rolled out a huge supply of land.

More importantly, the property market last month seemed nowhere near the feverish heights of 2007 or even last year.

Sales of new homes were only just starting to recover after the September measures, while prices were rising at a slower pace than before.

So, why did the Government decide to cool the market last month?

Traditionally, there are three triggers for intervention: property speculation, prices and sales.

The key catalyst is usually speculation, but it was apparently not the main reason last month. The Government acknowledged that the overall level of speculation in the market was lower than at the height of the property boom.

This was backed up by an analysis by DTZ Debenham Tie Leung, which found that sub-sales - the main measure of speculation - fell to a three-year low last year. Sub-sales are when people buy new apartments and resell them quickly even before they are built.

But perhaps the Government could have started measuring speculation in another way: The number of apartments bought and then resold within a year, whether or not they have been built.

Still, sceptics noted that even if these transactions had risen, that may not have been evidence of real speculation. Private home prices surged by 24 per cent in the second half of last year, likely persuading even genuine home owners to cash in for a quick profit.

So, the Government was more likely to have intervened based on the second and third factors: A jump in prices and sales.

Indeed, it said in its statement that private home prices, which rose 7 per cent in the fourth quarter despite the cooling measures, had rebounded faster from its trough than in previous slumps.

But this in itself does not mean that the price rally is unfounded or unsustainable. The entire economy recovered faster than expected, partly because not many jobs were lost in last year's recession.

This helped to explain the quick property rebound: As most home owners kept their jobs, fire sales were rare.

At the same time, the economic uncertainty brought the booming market to a standstill. This prompted home seekers to rush in - many of them genuine buyers who had been priced out of the 2007 boom - and propped up home prices.

The Government also cited a sharp spike in new home sales in January as a reason for its measures last month.

But while sales tripled in January from the month before, this was only the first rise since July last year, and came on the heels of three months of slow sales - hardly a sign of excessive exuberance.

All this adds up to questions about whether the Government has fundamentally changed its approach of market interference.

In the past, the Government has preferred to stay out of the market as much as possible, waiting until a bubble has definitively built before going in to burst it, often with plenty of advance warning.

Even when it intervened 'pre-emptively' in September last year, it came after seven consecutive months in which developers had sold more than 1,000 new units each month.

But now, the Government seems to be signalling it will take a more active approach and intervene at the smallest - and earliest - sign that froth is beginning to build up.

And it will watch not just activity in the property market itself, but also broader economic trends - rapid growth, for instance, or low interest rates - that could spur on speculators and build a bubble.

It may have been no coincidence that the Ministry of National Development released its cooling measures on the same day the Ministry of Trade and Industry raised its 2010 growth forecast for the Singapore economy and warned of asset price bubbles in the region.

While it would be too extreme for property players to now nervously eye economic growth as a harbinger of cooling measures, it certainly seems many more factors than showroom crowds must be taken into consideration these days.

Then again, it may not matter what the Government actually takes into account when determining a bubble - only that these factors are kept a secret.

That way, a certain level of uncertainty will be introduced into the market - a clever and more permanent way to temper speculation.

Of course, there is also another possible reason the Government seems to be coming down insistently on private property: The fact that opposition politicians have made housing an election issue.

On March 5, the Government introduced cooling measures in the HDB market as well, making it clear it wants home prices to ease or, at least, stop rising.

Whether these measures will work remains to be seen.

But DBS property analyst Adrian Chua sees it this way: If the measures work, prices fall, and if they do not, the Government may intervene until they do.

Or, then again, it may not.

The fact is, no one knows - which is ultimately the most effective cooling measure of all.

fiochan@sph.com.sg

CNA : Analysts expect strong interest in executive condo developments

Analysts expect strong interest in executive condo developments
By Hoe Yeen Nie | Posted: 15 March 2010 2211 hrs

SINGAPORE : Executive condominiums (ECs) are back in the spotlight, amid a buoyant property market. They come with finishes similar to a private condominium, but are priced more affordably.

Analysts expect strong interest for two new developments to be launched at the end of the year. But they also caution buyers against being too hasty.

When the Eastvale executive condominium in Pasir Ris was launched, units were going for about S$400 per square foot. A recent sale went for S$600 per square foot, comparable to similar private properties in the area.

Executive condominiums were launched in the mid-1990s, and Eastvale was one of the first projects. They cater to the needs of the "sandwiched" class - buyers who could not afford private properties, but whose household incomes exceed the income ceiling set by the Housing and Development Board (HDB).

Now 15 years on, calls by the "sandwiched" class for more affordable housing are growing, and housing authorities said executive condominiums will form 10 per cent of new flats built this year.

For first-time home buyers, they can apply for a S$30,000 housing grant, as long as monthly combined incomes do not exceed S$10,000. And after a period of 10 years, they can sell them in the private property market.

In line with HDB rules, these units are first subject to a five-year Minimum Occupation Period, after which they can be sold only to Singaporeans and Permanent Residents (PRs).

With interest rates remaining low, it sounds like a good deal. But with a economy recovering, analysts cautioned that interest rates could head higher.

Colin Tan, head of Research & Consultancy at Chesterton Suntec International, said: "Because of all the various government stimulus spending, interest rates have been kept artificially low for quite a long time.

"With a low interest rate environment, it's easy to put money down and meet the mortgage instalments. But when interest rates double or triple, you expect your mortgage to be doubling or tripling. So the question is, are you able to sustain that."

Analyst Mohamed Ismail of Propnex said that while such developments perform well in the resale market during boom times, resale prices tend to go down much faster than similar private properties when the market hits a snag.

Tan agreed, saying it is hard for ECs to shake off their image as the "poorer cousin" of private condominiums. One reason is because developers may compromise on the quality of finishes in order to meet the budgets of buyers.

So if the private property market is subdued, as it was in the post-SARS years, then between an executive condominium and a private one, buyers would be more willing to fork out for the latter.

Chua Yang Liang, head of Research (Southeast Asia) of Jones Lang LaSalle, said the increase in executive condominium projects may not impact greatly on the private property market as EC buyers are a select group of buyers, most likely the "sandwiched" class.

He said entry-level mass market private home prices have averaged S$800 per square foot in recent months, and the executive condominiums will have to be priced lower.

"Going by the recent transactions, it's averaging about S$550 to S$650 psf, so pricing in that market would be around that region - S$550, S$650, and S$750 psf, that kind of range," said Chua.

- CNA /ls

CNA : URA launches Yishun industrial land parcel for sale by tender

URA launches Yishun industrial land parcel for sale by tender
By Mok Fei Fei | Posted: 15 March 2010 1314 hrs

SINGAPORE: An industrial site in Yishun has been launched for sale by public tender.

The Urban Redevelopment Authority (URA) said the land parcel has been made available for sale through the Reserve List system since 2007. Under the system, a site would be released for sale only if a bid with an acceptable minimum price is received.

Last month, URA announced that it had received an application from a developer to put up the Yishun site for tender. The developer has committed to bid at least S$11.5 million for the site.

The land parcel has an area of about 1.4 hectares and a maximum gross plot ratio of 2.5. It can be developed for a variety of uses under "Business 1" zoning.

The site will have a lease period of 60 years. The tender will close on April 13.

- CNA/sc

BT : Renting self-storage space a brisk business

Business Times - 15 Mar 2010

Renting self-storage space a brisk business

Customers get to store anything from furniture to company records on a monthly basis

By FELDA CHAY

(SINGAPORE) You know that something has got to give when you move into that shoebox-sized apartment that cannot hold all your beloved ornaments, books, paintings and shoes - or if it could, would require you to climb over hills of clutter just to get into bed.

But fret not, there's a solution. Just turn to companies that offer spaces for rent, where individuals and businesses can store items that they want or need to keep, but do not have the space at home or in the office to do so.

And judging from the brisk business that self-storage companies are doing, residents and firms here seem to be lapping up the concept - which first swept into Singapore in 2003.

At Storhub Self Storage, a pioneer of the local self-storage industry, revenue has shot up from $900,000 when it started in 2003, to $13.4 million in 2009 - a staggering 14-fold jump in seven years. Its net profit has also been steadily increasing. From a loss of $1.4 million when it started, it has bounced into the black, making a net profit of $2.4 million for 2009.

Another self storage company, Extra Space Self Storage, has seen its revenue and net profit quadruple since it opened in 2007, says its chief executive Michael Hagbeck.

Further proof that self-storage firms are doing solid business here: Since 2003, at least five firms boasting about 20 facilities offering storage spaces have sprung up, where one can store anything from furniture to personal collections of wine and company records.

Storhub, for one, has opened four other outlets in areas such as Toa Payoh, Kallang and Tampines since opening its first shop in Changi in 2003. Its director, Jack Chua, says that one more outlet in Tampines would be opened in the third quarter, offering about 1,500 units of space for rent.

Monthly rates range from $64 for its smallest space of eight sq ft to $3,382 for its biggest, 1,308 sq ft.

The booming business stems from the attractive package offered by these firms. They offer varying storage areas to suit the needs of clients (accompanied, of course, by varying costs), leasing contracts that can be as short as a month, security infrastructure such as having security guards that watch over all the storage units in one outlet, and access to units 24/7. Those that offer wine storage provide temperature and humidity-controlled space.

The advantage offered by such businesses is summed up nicely by Angus Miller, chief executive of Big Orange Self Storage Singapore, which entered the market three years ago. 'The beauty of self storage is that it is a month- to-month kind of thing. We offer the flexibility to grow with them or shrink with them.'

This, he says, offers players in the industry an edge over warehouse operators, which offer a fixed space area and longer leasing contracts that give clients less flexibility to swap between different unit sizes to suit their changing needs.

Such a concept is especially useful to enterprises that use the space to store their inventory of goods, says Mr Miller. Companies can choose to move between sizes as they sell their products and therefore need less storage space, or increase stocks and require a bigger store.

These storage spaces have also gained popularity among individuals. At Extra Space, 80 per cent of its clientele are individuals, while the remaining 20 per cent are businesses.

Says Mr Hagbeck: 'The individuals are primarily people who have valuable things (monetary as well as sentimental value) that they want to keep, but just don't have space for in their homes, or who want to declutter down to a more zen-like lifestyle.

'There are also people moving house or renovating who need temporary storage or Singaporeans moving overseas for a while and who have sold or rented their house.'

Extra Space's storage units have been used by individuals to keep anything from guitar, manga (comics) and wine collections, to items such as paper prayer money - which Mr Hagbeck says is commonly stored at its facilities. It has even built a storage unit specially for a customer who wanted to store a Harley Davidson.

Monthly rates range from $50 to $1,500, for space of 16 sq ft (the size of a closet but half the height) to 500 sq ft (the size of a studio apartment).

Similarly, Storhub's Mr Chua has seen many individuals who turn its spaces into homes for their personal collections. 'I've seen a store full of Hello Kitties,' says Mr Chua. Another client had rented 40 square foot of space to keep her shoes - turning the store into a makeshift walk-in closet for footwear. Sports cars, too, have found their way into such storage units, adds Mr Chua.

The wide variety of uses for self-storage spaces have led the industry here to continue powering ahead despite the economic downturn. Storhub, for one, saw its net profit for FY2009 top that of 2008, while Extra Space has seen revenue double in 2009 from 2008.

The booming business, says Mr Hagbeck, stems from a combination of reasons such as rising consumerism, scarcity of space resulting in the purchase of smaller homes and convenience.

'As people acquire more, they collect more stuff which, because they have spent good money on, are reluctant to part with.

'Boris Johnson, the mayor of London, likens self-storage users to the pyramid builders - wanting to preserve their belongings for the ages!'

With the tills ringing, it is no wonder then that many of these firms are subsidiaries of large firms that want a cut of the meaty business.

Storhub, for one, is under Hersing Corporation, which deals in real estate and property management. Another self-storage company, Lock+Store Self Storage, is a subsidiary of real estate firm Mapletree Investments. SingPost has also moved into the business with Self Storage Solutions, which was launched in February last year.

Time then, to move into the business of self storage - not only because of how lucrative the industry appears to be, but also because it allows you to save that much treasured collection that no family member adores - but you.

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.

ST : Govt to offer more exec condos this year

Mar 15, 2010

Govt to offer more exec condos this year

Move is to meet housing needs of sandwiched group: Mah Bow Tan

By Esther Teo

MORE executive condominiums (ECs) will be built this year to meet the housing needs of the 'sandwiched group', said National Development Minister Mah Bow Tan yesterday.

This group refers to couples who do not qualify for new Housing Development Board (HDB) flats because their combined monthly income exceeds the $8,000 cap, but who may find private property too expensive.

Mr Mah, who was a guest on Channel NewsAsia's programme Talking Point aired last night, said that ECs will make up about 10 per cent of the approximately 12,000 new flats to be built this year.

Dr Lim Wee Kiak, the MP for Sembawang GRC, and Ngee Ann Polytechnic real estate lecturer Nicholas Mak were the other guests in the show hosted by Channel NewsAsia managing director Debra Soon.

'It is well-designed, has good location, it is something that will have all the amenities and at the same time you can enjoy the grant... That is the reason why we will be putting more ECs on the market,' Mr Mah said.

He added that since the HDB caters to about 80 per cent of the population with incomes ranging from the low to the upper-middle, ECs will be one housing form that the Government will keep tabs on.

'We have recently let out two tenders. And if there is a market and there is a demand, we will let out more,' he said.

ECs come with condominium facilities but have initial sale restrictions similar to those for public housing. They become a private property fully only after a decade.

They were introduced in 1995 to bridge the gap between public housing and private apartments, aimed at Singaporeans who could afford more than an HDB flat but might find private property out of their reach.

The gross monthly household incomes of buyers of new EC units cannot exceed $10,000.

Responding to a question by Dr Lim that the aggressive bidding of the two recently closed EC tenders in Sengkang and Yishun might push up EC prices, Mr Mah said that developers are mindful of the monthly income cap of buyers and thus would not bid too excessively.

PropNex chief executive Mohamed Ismail told The Straits Times after the show that with these two sites expected to yield 905 units, he expects to see at least one more site offered this year. There could even be two more ECs if the demand for these initial projects are strong, he added.

Rising public housing prices have been a hot topic among Singaporeans. Early this month, HDB raised the minimum occupation period for resale flat buyers to three years, up from as little as one year, to cool speculative demand for HDB flats.

Asked if the measure was too mild, Mr Mah said it was a calibrated move to remove some froth caused by speculative demand. It was not meant to crash prices or curtail genuine demand from home buyers.

Several suggestions to meet buyers' demand for flats were offered during the 45-minute talkshow. Mr Mak suggested reexamining the buyer's selection process to assess why so many first-time applicants rejected their flats while Dr Lim asked if the differential in the pricing of less attractive units compared to the more desirable ones is big enough.

Mr Mah emphasised the unique role that HDB had to play - catering to different segments of income groups, to provide both home-ownership and eventually a source of retirement income.

Despite buyers' unhappiness over rising prices, the public housing market is generally best left to market forces, Mr Mah added. But he also promised that first time buyers of new HDB flats will not be priced out of the market.

esthert@sph.com.sg

ST : Developer offers to absorb stamp duty

Mar 15, 2010

Developer offers to absorb stamp duty

Unusual move in a hot market; experts see it as bid to boost flagging sales

By Esther Teo

THE property market may still be sizzling, but at least one property developer here is offering a carrot which has not been seen in more than a year to entice buyers and boost sales.

The incentive - stamp duty absorption - is usually deployed by nervous developers during market downturns, but is now on offer at the 360-unit Concourse Skyline on Beach Road.

The deal, which can save homebuyers about 3per cent of the price, has been used extensively during market slumps.

However, industry experts say it has not been used since 2008, except on a one-off case-by-case basis.

They say the developer which has advertised the offer, Hong Fok Land, may be trying to ameliorate the effects of recent anti-speculative market-cooling measures unveiled by the Government.

However, some suggest the move may simply be a bid to counter slow sales at the project.

The offer at Concourse Skyline applies to selected units till April17. Hong Fok said the promotion was timed to coincide with the slated opening of the city leg of the Circle Line that same day. It draws attention to the development's accessibility and convenience, a spokesman said.

Stamp duty absorption is similar to the interest absorption scheme which was abolished by the Government last September as part of market-cooling moves.

Under the interest absorption scheme, buyers had to take out a bank loan at the time of purchase but the developer absorbed interest payments until the project's completion.

Property consultants The Straits Times spoke to were unaware of any similar offers being made openly - and said buyers should not hold their breath waiting for more to be touted.

Most said this was likely to be a unique case. The market is still hot, with sales and prices rising, so it is unlikely other developers will follow suit.

Buyers have needed no prodding, with sales of new private homes by developers rising to 1,476 units in January - three times as high as the previous month and the highest level since August last year.

Some property experts said, however, that this unusual move could be aimed at improving poor sales at Skyline.

They said the developer was 'too optimistic about its pricing' - which ranged from $1,500 to $1,800 psf - when it was first launched in September2008.

It was the same month that US investment bank Lehman Brothers collapsed, sparking the global financial crisis.

While 68 units were sold within the first month after the launch, sales have since tapered off to an average of about eight a month over the past 16 months.

A total of 170 units had been sold as of January this year, according to the Urban Redevelopment Authority's website.

Ms Tay Huey Ying, director of Colliers research and advisory, said absorbing stamp duty was a developer's way of enticing homebuyers.

In the past, developers had rolled out gimmicks such as renovation allowances and vouchers for electrical appliances in a bid to boost flagging sales.

Said Ngee Ann Polytechnic real estate lecturer Nicholas Mak: 'These measures (by the Government) are expected to shave off about 1,000 homes sold yearly...So offering absorption of stamp duty might be a way for developers to increase sales.'

Chesterton Suntec International research and consultancy director Colin Tan said that absorbing stamp duty would lower a buyer's costs without bringing down valuation prices, which is a key market indicator cited by developers.

The 'uncommon move', said Mr Steven Tan, executive director of

OrangeTee's residential division, might be to encourage homebuyers to revisit the showflat, since newer launches have served as stiff competition.

Colliers' Ms Tay added that the absorption scheme would cushion the expense of those who might be thinking of selling the property within a year of purchase.

Last month, a seller's stamp duty was introduced to deter short-term speculators. It requires sellers to pay a levy of about 3per cent if they offload a property within a year of purchase.

Hong Leong Holdings' Aalto in Jalan Kechil, near Meyer Road, which first started sales in August 2007, has also seen slower sales with only 118 of its 196 units sold as of January.

However, when contacted, Hong Leong said it would not be absorbing stamp duty for that project.

Concourse Skyline is a 99-year leasehold project consisting of one- to four-bedroom apartments and penthouses. It is expected to be completed in 2013.

esthert@sph.com.sg

BT : Interest rates: easy does it

Business Times - 15 Mar 2010

THIS WEEK'S TOPIC
Interest rates: easy does it

How do you see Singapore's interest rates moving over the rest of the year? How will higher interest rates affect the economy, and your industry and organisation in particular?

Reto Isenring
Managing Director
VP Bank (Singapore) Ltd

SINCE we do not expect rate hikes in the US, the Eurozone or Japan, the upward pressure in interest rates is mainly coming from neighbouring countries. However, their tightening of the monetary policy will be gradual.

Rising interest rates are definitely sure signs of economic expansion; and despite the rising costs of doing business, it also creates a positive investing environment for the private banking sector. However from an organisational perspective, the challenge is that while interest rates are gradually returning to pre-crisis levels, companies are now faced with higher labour cost due to inflation.

The Singapore government's call to mobilise the nation to increase productivity is a great strategic move where it will offset the higher labour cost, and will continue to position the country to attract foreign investments.

Bill Foo
CEO
ANZ Singapore

INTEREST rates are likely to rise gradually in the second half of 2010 as the economy recovers to pre-crisis levels, and global interest rates begin to rise on monetary tightening in major developed economies.

Borrowing costs will rise as banks pass on part of the increase in cost of funds. Companies that are traditionally more dependent on bank financing (eg SMEs) are likely to experience greater increases in average borrowing cost. Higher mortgage rates will also reinforce efforts to curb speculative activities in the housing market.

Banks' balance sheets should remain resilient in 2010, given the strong capital positions and adequate liquidity in the banking system. Overall, although interest rates are likely to move up, feedback from our customers indicate that the year has started on a positive note with signs of a strong recovery.

JY Pook
Vice-President and Managing Director
FICO Asia-Pacific

AUSTRALIA has already increased rates, and I expect Singapore to follow suit, eventually. However, we expect the interest rate adjustments to be in sync with market requirements and mindful of market sentiments. I don't expect it immediately as the economic recovery is very fragile.

Globally, interest rate modification changes the borrowing patterns. Higher rates may result in increased defaults or may require deeper understanding of customers to lend more to them, and lower interest rates may result in increased borrowing due to lower costs of borrowing. In either case, we help banks - our customers - understand the signs of default, delinquency and creditworthiness of their customers, helping them manage their risks better.

Jackie Cheng
CEO
Hisaka Holdings Ltd

OTHER countries are likely to follow suit in increasing their interest rates to keep the economy balanced. However, with such a move, business costs as well as operational costs will increase mainly for companies which have high borrowings.

The economy can be influenced easily by interest rates. When interest rates are high, people do not want to take loans out from the bank because it is more difficult to pay the loans back.

It goes the same for our industry as we are in a capital intensive industry - if companies in our industry take up more loans from banks, it also means that it would not be easy to pay back the principal as interest rates are also much higher than before.

That's why, at Hisaka, we operate with a very low gearing, not wanting factors such as an increase in interest rate to affect our business operations.

Sharon Lim
Executive Director
Pacific Time Pte Ltd

SINGAPORE'S interest rates may well head north for the rest of the year. Rising interests rates from the key economies due to inflationary pressures could well trigger a similar rise locally. This will definitely put a lot of pressure on the luxury retail and distribution industry in which we operate. The interest rate itself directly impacts availability and cost of working capital - particularly for highly geared players.

Other accompanying factors could pose a bigger problem. Retail rentals rising in tandem with the interest rates, together with wage inflation pressures, would result in higher operating costs. A weaker property and stock market resulting in lowered consumer confidence would torpedo any demand-led recovery. This 'scissors effect' in terms of rising costs and weakening demand will mean a tougher time for most retailers.

Sim Giok Lak
Chairman
Zicom Group Ltd

WITH the world's economies on the mend and recovery evident (although with uncertainties in some quarters), excess liquidity is now breeding inflation. If this is left unchecked, it may lead to a potential bubble precipitating a new crisis. Rapid fixed asset formation, particularly, leading to inflated property values has become pervasive in the Asia-Pacific region, primarily driven by low cost funds.

The global economic recovery is having a strong push effect on commodity prices as evidenced by recent reports of a potential 50-100 per cent increase in the price of iron ore from Australia, leading to a potential resource boom that will give rise to a job squeeze and a resurgent inflationary trend in Australia. The Australian Fed acted in anticipation of this. Basically, resource-rich countries such as Malaysia would feel the same effect, hence Malaysia's reaction.

Interest rates have an immediate impact on the currency values of a country, and can act to control the inflationary trend of a country. Singapore cannot avoid increasing its interest rates to be in line with this global trend, and I would expect to see gradual rate increases within the next six months.

As this is a global trend, I would not expect this to impact against the Singapore economy. Our borrowings are low, so we do not expect any increase in interest rates to impact us significantly.

R Dhinakaran
Managing Director
Jay Gee Enterprises Pte Ltd

THE recovery in the global economy is still in the nascent stages and much remains to be seen in this quarter after the traditional highs of the festive months.

Singapore's economy, while showing signs of recovery, is also working on several fronts now, including better utilisation of resources, productivity improvement etc. A rate increase at this moment will add undue pressure on local companies which are trying hard to focus on long-term goals.

An increase in rates may trigger companies to look at short-term efforts which may have detrimental effects on the recovery and employment levels, besides undoing more than a year's hard effort in building the country towards long-term sustainability using measures such as continuous training and development.

An increase in rates from Australia is more an exception than the beginning of a global high interest rate regime as Australia was the only major country to have registered growth in the first half of 2009.

The commodity and natural resources boom has yet to show any sign of reduction; and as the majority of produce and exports are from Australia, the situation is starkly different from other consuming economies especially service oriented ones such as Singapore.

In the event of any immediate increase in rates in Singapore, we will have more inflow of monies from overseas - which may again trigger inflationary trends that have only recently shown some signs of calming down. Therefore, it would be more appropriate for rate hikes to follow confirmed signs of recovery across different sectors of the economy over the year than an immediate increase.

Lim Soon Hock
Managing Director
Plan-B ICAG Pte Ltd

MOST primary dealers see a Fed rate hike this year, especially in the second half. Being an open economy, I expect Singapore to follow suit, in the footsteps of Australia, Malaysia and possibly other economically vibrant countries, such as Hong Kong and China, when they take similar actions.

I base my view on the fact that we are seeing more signs of a recovery in the labour market and the easing in financial conditions, which should improve economic growth. The unemployment rate fell from 3.4 per cent in Q3 2009 to 2.1 per cent in Q4, reiterating most economists' views that the labour market in Singapore has stabilised.

 Businesses obviously would not like to see any hike in interest rates as this will increase the cost of capital - and hence business cost - especially when large sums are involved, for example, in capital expenditure, project financing or infrastructural developments.

To attract more deposits, financial institutions will have to raise the interest rate in a buoyant economy to compete not just locally, but with others in the region as well.

At the macro-level, any excess credit growth relative to GDP growth will need to be prudently tightened to prevent the economy from going out of control through increasing its leverage.Â

Dora Hoan
Group CEO
Best World International

WITH the easing of the economic situation throughout the world, there is a trend of increasing interest rates in anticipation of higher inflation. However, there should be a careful determination of whether the economy is strong enough to withstand an interest rate hike. I foresee that corporate profits over the next several quarters will remain feeble while high unemployment will persist for some time.

Increasing interest rates, being the main determinant of investment on a large scale, would not augur well with Singapore's stance to support business recovery in order to protect jobs first and foremost.

Hikes in the interest rate, a key ingredient in the cost of capital, will significantly impact companies and governments. Globalising companies in particular require debt financing for expansion and capital projects. An interest rate hike will hit hard on businesses just recovering from a slump.

An increase in interest rates will also affect prices in other financial markets as well as the buying power of consumers and their ability to climb out of debt incurred during tougher times, therefore the impact will be far-reaching.

On the whole, recovery will be gradual, and the inflation rate will not need a major tweak for the time being. I believe therefore that factors weigh heavily in favour of keeping the interest rates low - which we hope is what we will see happening in Singapore until the economic rebound is solid enough to withstand such a move.

Loi Pok Yen
Group CEO
CWT Limited

THERE is a saying that behind every bad borrower, there is a bad lender. Easy money coupled with abnormally low interest rates is a toxic and potentially fatal combination in the long run.

At some point, rates will start normalising. Thus, there will certainly be rate hikes coming but I expect it to be measured for fear of derailing whatever recovery is anticipated. For the rest of the year, I expect and hope that rates will remain low.

David Leong
Managing Director
PeopleWorldwide Consulting Pte Ltd

SINGAPORE interest rates will remain fairly stable with a possible pre-emptive modest rise in the short term since the US rate is likely to stay low for a while. Asian central banks typically follow the Fed in interest rate setting though with a lag effect.

The growth momentum in Asia outstrips those in US and Europe but despite this, the central banks in Asia are unlikely to pursue any aggressive normalisation of domestic interest rates independent of those pegged by the Fed.

 In the short to mid-term view, there are two temporary depressants to any possible rate hike. The first depressant is that the world economy is still beset with uncertainties in Europe and the US. The second depressant is the uneven effects of stimulative policies employed to promote recovery - their sudden withdrawal may cause steep drop in capital and consumer spending. The recovery momentum is already showing signs of a slowdown, and any spike in interest rates can shift the axis of the spinning recovery to bring growth to a halt.

 An interest rate hike will likely shift demands of capital and consumer purchases to a lower gear. The flow rate of hot money will also likely be slowed down, bringing assets prices - especially property prices - to realistic levels. Fiscal spending is expected to wane as a growth driver.

At this juncture, it is better for Singapore to maintain a low interest regime to grow the economy out of the woods confidently before any contemplation of a rate hike. Q3 2010 should be a good time for an interest rate rethink - not now. Singapore can have the last laugh.

David Low
CEO
Futuristic Store Fixtures Pte Ltd

WITH Australia and Malaysia leading the pack, it is only a matter of time that other countries will follow suit. Domestic interest rates react to both domestic monetary policy announcements and external forces.

Historically, Singapore's interest rates have moved in tandem with that of the US, and I believe that this trend will stay. With recovering global economy, interest rates in the US will move up gradually over the next two to three years, and I see Singapore's interest rates moving up from Q3 onwards along the line of 25 basis points quarterly.

An appreciation in interest rates will certainly moderate consumer spending, especially affecting sales of big-ticket items which will impact economic growth. It can be a vicious cycle without closely monitoring the correlation of the two.

In general, we are still well protected in a low interest rate environment, and the gradual raise will likely pose a minimal impact on the economy at the rate it appreciates.

Futuristic Store Fixtures is a retail industry-driven business with an export focus so our business is very much affected by how other countries' monetary policies play out, especially in the West.

With interest rates increasing gradually and positive retail sentiments, our industry will register slow but promising growth compared to the last two years which saw drastic dips.

Liu Chunlin
CEO
K&C Protective Technologies Pte Ltd

MY personal view is that interest rates should not go up, as that would tighten credit at a critical time when business costs are already rising because of the foreign worker levy and the soon-to-be removed Jobs Credits.

Moreover, the economy is just recovering and is possibly fragile - particularly against a background of a knock-on effect from the sovereign debt crisis already engulfing Greece and threatening some other EU countries. We cannot afford stagflation - when inflation eats into the economy and businesses find their growth stifled.

Teng Yeow Heng Michael
Managing Director
Corporate Turnaround Centre Pte Ltd

I ANTICIPATE that interest rates should start to rise in Singapore in tandem with the global trend this year. How fast and how high they may rise will depend on the rate of increase in spending and inflation as well as the rate of the recovery of the economy.

From a wider economic perspective, raising the interest rate should have the impact of increasing interest payments and hence decreasing cash reserves for many companies. If these companies subsequently cut back cash expenditure such as in advertising, training and consultancy expenditure, this will reduce income in my industry and company.

A change in interest rates will affect our business in several ways. My company has taken loans, so an increase in interest rates will mean higher repayments, thus reducing profits. Also, if my business wants to borrow money to expand the premises, then I am less likely to go ahead with the project when interest rates increase. Furthermore, my customers are going to find that they are more attracted to saving than to spending if interest rates go up and will be less likely to borrow money to spend as well. This will reduce sales for our business.

Tan Kok Leong
Principal
TKL Consulting

SINGAPORE'S current interest rates, measured in terms of one-month and three-month inter-bank rates, are at the lowest in decades.

As Asian countries pick up growth in GDP after the global financial crisis, one could expect the rate of interest to rise probably by half a percentage point within this year - which is a good sign of economic recovery and a compliance to the global trend of tightening monetary policy.

The rise in interest rates should not have any adverse impact on the stock market, property market and businesses because it is for a better financial order.

Joshua Yim
CEO
Achieve Group

SINGAPORE'S interest rates will naturally go up incrementally, in pace with the improved economy. And the confidence of the economy is reflected by our industry - the recruitment and manpower industry - because we see our customers' business confidence return in their appetite for hiring people. In fact, we are already seeing a lot of confidence with regard to hiring for various industries.

On the other hand, when interest rates go up, less 'free money' is available and this may not be as favourable because there will be higher barriers to business as the cost of borrowing goes up.

As an industry player, I believe that there will be a lot of changes in my industry because a hike in interest rates will mean that the economy is doing well so companies will start hiring. Now, we are going into a cycle where the economy is better, especially in the Asia-Pacific region.

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.

TODAY ONLINE : Alternative flat-booking system?

Alternative flat-booking system?

05:55 AM Mar 15, 2010

by Esther Ng

If about half the applicants offered a Built-To-Order flat reject it, is there something wrong with the system?

Ngee Ann Polytechnic real estate lecturer Nicholas Mak thinks a longer list of flats could be offered to home seekers, which they could bid or ballot for. That means paying more for a choice flat.

Unlike the BTO, private home buyers can choose more than one unit if the one they want has been bought, he said.

National Development Minister Mah Bow Tan said there is already a price differential between flats on high floors and low floors, those with a good view and those without one.

"Could we widen that differential? Sure we could, and I think HDB continuously looks at that," he said.

"(But) there are cases where people rejected flats not because it is not priced low enough but simply because they have their minds and their eyes set on a particular flat."

On the lead time of three years for BTO, Mr Mah said it was no different from the private property market and that there is a buffer of 5,000 to 6,000 flats annually, for which home buyers could ballot.

Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved

TODAY ONLINE : The Pinnacle a Talking Point

The Pinnacle a Talking Point

05:55 AM Mar 15, 2010

by Esther Ng

SINGAPORE - It is now a highly-prized HDB development.

But the Pinnacle at Tanjong Pagar might not have been built if National Development Minister had not won over his colleagues in the Cabinet.

With the prime land slated for residential development, "the question facing us was whether we should have built private property - that means tender out the land for private property - or built HDB", Mr Mah revealed last night on Talking Point, a news analysis programme on Channel NewsAsia.

Mr Mah "convinced" his fellow ministers of the need to rejuvenate the area - "that we continue to have younger people moving into that area and that HDB owners are still able to live in a relatively expensive area in downtown".

While one viewer had found it "unbelievable" that Pinnacle flats were being sold between $500,000 and $600,000, Mr Mah said it was a question of location and of the Housing and Development Board (HDB) catering not just to the low income.

"Our housing (income) ceiling goes all the way up to $8,000, which is, by any standards, upper-middle income, and that's why we have to build many different varieties of flats, and the Pinnacle is one of them," said Mr Mah.

HDB will also build more executive condominiums - now about 10 per cent of flats built - if demand goes up.

But the majority of flats will still be three-, four- and five-roomers in non-mature estates. And "we make sure we don't overbuild because once you overbuild, you'll make flat prices in future go down, and that's not what we want", he said.

Public housing prices was one of the key issues in the special 45-minute show, hosted by Channel NewsAsia's chief editor Debra Soon, which also featured Member of Parliament Lim Wee Kiak (Sembawang GRC) and Ngee Ann Polytechnic real estate lecturer Nicholas Mak.

High cash over valuation (COV), in particular, has been a bane to some home buyers, especially those with ample Central Provident Fund (CPF) money but not cash, said Dr Lim, who wondered if the valuations given by private valuers to HDB need to catch up with the market.

But COV could also act to "retard" price growth, Mr Mak told MediaCorp, "since most buyers have limited cash to pay for the COV".

"If the valuation of the flat is growing at a slower rate, the rate of growth of resale prices can decelerate," he explained after the show.

As to whether valuations are moving too slowly, Mr Mah said the time gap has been "shortened considerably" to a "matter of weeks".

A more fundamental question is whether Singaporeans want the government to control resale flat prices, said Mr Mah.

"When people talk about controlling COV ... they're talking about dampening prices, they're saying let's ban COVs," Mr Mah told Dr Lim, who asked for "a little bit more" in grants to those who buy resale. "If we control resale flat prices, we're actually moving away from the free market, which fundamentally would not be in the interest of homeowners."

On the recent measures to curb speculative demand in the resale market - increasing the Minimum Occupation Period from one to three years - Mr Mah said that it was not a "blunt instrument" as Mr Mak felt, but "very calibrated, very measured".

While some people might want the Government to do more so that prices fall faster, Mr Mah stressed that only a specific group of people who are not buying for home ownership and the long term were being targeted.

"You can call it speculation - some people can say they just want to buy short term, some people want to buy for rental yield," he said.

While the numbers in this group are small, they are starting to grow, so HDB raised the hurdle for them.

As to why HDB owners are allowed to buy private property, Mr Mah said, "This is an upgrading opportunity I think all Singaporeans would like to have. They would like to see their lifestyles improve."

According to Dr Lim, there is "grumbling on the ground" about people buying HDB flats and not living in them.

To which Mr Mah said the HDB would "take drastic action" against those who exploit the rules.

"When you hear of those cases, you let us know," he said, two days after the HDB announced it had repossessed one flat for unauthorised subletting, following a tip-off.

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