May 6, 2010
Who really gains from runaway property prices?
Many will benefit, but too quick a surge can cause anxiety
By Fiona Chan
WHEN data released last month showed that the prices of private homes and HDB resale flats continued to rise in the first quarter of the year, the dismay from some people was palpable.
Online, netizens griped about property being priced out of their reach. In Parliament, MPs asked if the Government could do more to help home seekers.
Singapore's ongoing property boom appears to be downright unpopular - and not just among those yet to buy their homes. Why might that be so? After all, as the theory goes, higher prices benefit not only home sellers making a profit, but every home owner whose property is appreciating in value.
In Singapore, land of the highest home ownership rate in the world, this should mean that apart from a small group of home seekers being priced out of the market, the large majority of the population gains whenever home values go up.
Property developers have also always maintained that some level of froth is good for the property market. The president of the Real Estate Developers' Association of Singapore (Redas), Mr Simon Cheong, has said that speculation is unavoidable and not all bad.
'In any market...there is always the element of speculation, which I think is healthy,' he said in an interview in 2007.
The executive director of Hong Kong's Cheung Kong Holdings, Mr Justin Chiu, told reporters here in March that he likes property bubbles as they draw in more buyers and make the market more active.
But is it really true that rising home prices present more pros than cons for the majority? The short answer: Not if prices are surging sharply, and not if a significant proportion of home owners are aspiring to upgrade.
To be sure, a housing boom is incontestably better for home owners than a slump. When home prices plunge by so much that your property is worth less than the loan you took to pay it, you basically cannot afford to sell it even if you really need to.
But this does not mean that all home owners can afford to sell their houses in a boom either. Those with only one home can afford to sell only if they are willing to downgrade to a cheaper property, or move further from the city centre. Otherwise, whatever profit they get from selling in a high market will be wiped out from buying just as high, if not higher.
Suburban homes have an implied price cap as their main target market is Housing Board flat upgraders and first-time home buyers. But high-end homes in the prime areas have less of a limit, thanks largely to the well-heeled foreigners now firmly entrenched in the property scene.
All things being equal, this means that if your Upper Bukit Timah condominium rises in price by 10 per cent, chances are that condo prices in the posher Bukit Timah area will go up by 20 per cent, putting a spanner in the hopes of upgraders.
Today's home owners also worry about tomorrow's prices: They fear that if property values rise unceasingly, their children will never be able to afford a home.
So, who benefits from a runaway housing market? Investors clearly do: Those who own more than one home and can cash out. Higher home prices also usually mean higher rentals, so investors seeking rental yields love booms.
Also in this category are the property traders and speculators - those who have bet that prices will go up.
But because there are no publicly available figures on how many Singapore residents own more than one home, it is hard to gauge how dominant this group is.
Developers are also an obvious beneficiary of a boom. But to the extent that a sudden spike in home prices could trigger cooling measures by the Government, steeply rising prices may also portend uncertainty and instability in the real estate sector, making it less attractive to investors and property developers.
Of course, the Government itself gains when property values soar, from higher stamp duty and property tax collections, which are based on property values. When luxury home prices hit one high after another in 2007, stamp duty takings reached a record $3.8 billion.
Another advantage of a property boom is the impact on the wider economy. A rising housing market lifts the real estate and business services sectors. High prices also send a signal that a country's property sector is desirable, speaking well of its fundamentals and growth prospects.
It is no coincidence that property prices are highly correlated with gross domestic product. In rankings of cities with the highest home prices, thriving financial centres such as London, New York and Tokyo often dominate.
High home prices also have an indirect effect on the economy. Just sitting on a quickly appreciating asset makes people feel more secure about their finances and more willing to spend.
This so-called wealth effect should be magnified in a country like Singapore, where 90 per cent of the population own their homes. But a 2004 study by two National University of Singapore professors questioned this assumption, and instead found that the wealth effect is 'very much absent' in Singapore.
A key reason could be because Singapore, as both a city and a country, offers few options for home owners to realise their higher wealth by cashing out of their city homes and moving to cheaper quality homes in the suburbs, said Professors Tilak Abeysinghe and Choy Keen Meng.
There is also a lack of financial instruments such as reverse mortgages that allow home owners to convert the savings locked up in their houses to consumption of non-housing goods and services.
The professors argued that sharp escalations in house prices should be avoided here as, far from creating a wealth effect, they produce a negative 'price effect': As people anticipate further rises in home prices, they cut back on spending.
Rising home prices also increase the financial burdens of Singaporeans in the form of higher downpayments and monthly instalments, they said.
So, while high property prices benefit many, the truth is that a market that is too buoyant can create the opposite effect and cause anxiety even among home owners. This may be mere perception, but helps explain why the current unhappiness over high prices seems to extend beyond first-time home buyers.
The upshot of all this is that while falling home prices claim the most casualties, steeply rising prices can hurt as well.
Ultimately, home prices should be viewed like inflation: Best when rising at a slow and steady rate.
Property traders, speculators, developers and all those pushing the boundaries with significant price hikes would do well to keep that in mind.
Thursday, May 6, 2010
ST Forum : Estate agents shouldn't work with moneylenders
May 6, 2010
Estate agents shouldn't work with moneylenders
I REFER to Monday's report, 'Realty firms halt lending activities'.
As reported, there are currently some real estate agencies and agents who are licensed moneylenders. Although the moneylending business is typically constituted as a separate legal entity, the individuals behind it are essentially the same as those of the real estate group.
At present, there is no prohibition against a real estate agent holding a moneylender's licence and vice versa. However, when either scenario occurs, the likelihood of collusion between the credit companies and estate agents becomes real.
Already, the report mentioned 'black sheep' moneylenders cum estate agents who have abused the trust of cash-strapped HDB sellers and exploited them. The sellers who had hoped for a breather were smacked with exorbitant interest rates and possibly robbed of the lion's share of their sales proceeds in other 'hidden costs'.
Singapore Accredited Estate Agencies (SAEA) urges estate agencies and agents who are licensed moneylenders to exercise caution and ethical conduct in their professional relationships with their clients who are HDB sellers. Although legal, it is not advisable for the two businesses to mix.
We do not support the practice of estate agents working with moneylenders and referring their clients to them for introducer's fees or to take advantage of their clients' financial plight.
Estate agents should not introduce HDB sellers to moneylenders for a fee as this is not within the ambit of their job and the real estate brokerage service rendered. In fact, estate agents who do so stand in potential breach of fundamental ethical obligations to their clients and may be perceived as lining their own pockets rather than acting in the interests of their clients.
SAEA will not hesitate to act against such agents should they be accredited.
Instead, according to the HDB resale checklist for sellers, estate agents should, among other duties, help HDB sellers work out their estimated sales proceeds before selling, and upon resale, sellers must discharge their outstanding mortgage loan and refund the Central Provident Fund (CPF) monies used to buy the flat with interest to their CPF accounts. Estate agents should also advise sellers to plan for their next home before they sell their flat, and should the sellers wish to buy another HDB flat, they will need to know if they are eligible for an HDB or bank loan.
If HDB sellers are in dire financial need, there are other avenues of help to which estate agents can refer their clients so they do not lose the roof over their heads.
Dr Tan Tee Khoon
Chief Executive Officer
Singapore Accredited Estate Agencies
Estate agents shouldn't work with moneylenders
I REFER to Monday's report, 'Realty firms halt lending activities'.
As reported, there are currently some real estate agencies and agents who are licensed moneylenders. Although the moneylending business is typically constituted as a separate legal entity, the individuals behind it are essentially the same as those of the real estate group.
At present, there is no prohibition against a real estate agent holding a moneylender's licence and vice versa. However, when either scenario occurs, the likelihood of collusion between the credit companies and estate agents becomes real.
Already, the report mentioned 'black sheep' moneylenders cum estate agents who have abused the trust of cash-strapped HDB sellers and exploited them. The sellers who had hoped for a breather were smacked with exorbitant interest rates and possibly robbed of the lion's share of their sales proceeds in other 'hidden costs'.
Singapore Accredited Estate Agencies (SAEA) urges estate agencies and agents who are licensed moneylenders to exercise caution and ethical conduct in their professional relationships with their clients who are HDB sellers. Although legal, it is not advisable for the two businesses to mix.
We do not support the practice of estate agents working with moneylenders and referring their clients to them for introducer's fees or to take advantage of their clients' financial plight.
Estate agents should not introduce HDB sellers to moneylenders for a fee as this is not within the ambit of their job and the real estate brokerage service rendered. In fact, estate agents who do so stand in potential breach of fundamental ethical obligations to their clients and may be perceived as lining their own pockets rather than acting in the interests of their clients.
SAEA will not hesitate to act against such agents should they be accredited.
Instead, according to the HDB resale checklist for sellers, estate agents should, among other duties, help HDB sellers work out their estimated sales proceeds before selling, and upon resale, sellers must discharge their outstanding mortgage loan and refund the Central Provident Fund (CPF) monies used to buy the flat with interest to their CPF accounts. Estate agents should also advise sellers to plan for their next home before they sell their flat, and should the sellers wish to buy another HDB flat, they will need to know if they are eligible for an HDB or bank loan.
If HDB sellers are in dire financial need, there are other avenues of help to which estate agents can refer their clients so they do not lose the roof over their heads.
Dr Tan Tee Khoon
Chief Executive Officer
Singapore Accredited Estate Agencies
ST : Demand for office space in Asia rising
May 6, 2010
Demand for office space in Asia rising
Region's rental market bottoming out; Q1 rents slid just 0.1%
By Joyce Teo
OFFICE rentals slid again across Asia in the first quarter of the year, albeit by a whisker, even as the economic recovery gained pace, according to a new CB Richard Ellis (CBRE) report.
But the good news is the market finally seems to be bottoming out in the region, including Singapore where rents are now almost 60 per cent below their peak.
Overall, office rents in Asia slid 0.1 per cent in the first quarter, a much milder fall than the 1.9 per cent in the previous quarter, it said.
'With an increasing number of companies putting in higher real estate budgets to support their overall regional corporate expansion plans, office leasing activity is expected to turn robust in the first half of 2010 and lead rentals out from the downward cycle,' said CBRE Research Asia executive director Andrew Ness.
Already, first-quarter demand for office space was 'robust' in Asia's major commercial centres as firms are now more willing to commit to space at the current rentals, CBRE said.
The report said firms are taking advantage of office rents generally having been lower for over a year in most markets. Some are taking the chance to upgrade to Grade A facilities.
At the same time, overall business sentiment was buoyed by the continued upswing in the regional economy.
The labour market has also tightened, with the jobless rate clearly falling in most markets as larger firms announce recruitment plans, said CBRE.
The overall office vacancy rate in Asian cities fell 0.8 percentage point quarter-on-quarter to 11.8 per cent in the first quarter, it said. Top quality or Grade A offices did better than those in the Grade B market as tenants looked to upgrade to nicer premises and lock in leases with favourable terms while conditions still permit.
First to record rental growth were cities in Greater China, CBRE said. Beijing, Shanghai, Guangzhou, Hong Kong and Taipei all posted quarter- on-quarter growth.
For instance, in Hong Kong, demand is growing amid limited new supply. In fact, rents in the territory's central region surged 9 per cent in the first quarter, the highest rise of all main office districts in Asia, it said.
A report by Colliers International on Monday said Singapore could enjoy spillover demand from Hong Kong, where an office supply crunch is expected to lead to a double-digit percentage jump in office rents this year.
The Republic was still the third most expensive office centre, with Tokyo and Hong Kong in No. 1 and No. 2 spots, respectively, it had said.
CBRE said office rents here shrank for the sixth straight quarter even as the economy powers ahead. But the rate of fall was marginal. Rents appear to be stabilising amid rising demand and the brighter economic outlook.
'We're seeing a very decent level of office leasing activities,' said CBRE's executive director of office services, Mr Moray Armstrong, yesterday. Office rents look increasingly set to rise despite huge impending supply, he said. Rents in better quality buildings are already moving up, but older buildings may take a little longer, he added.
In the first quarter, prime rents fell 0.7 per cent quarter-on-quarter to $6.70 per sq ft a month, and have now shrunk by 58.4 per cent since peaking in the third quarter of 2008.
joyceteo@sph.com.sg
Office rents in Singapore shrank for the sixth straight quarter, says a CB Richard Ellis report, but rates are stabilising amid rising demand. -- ST PHOTO: ALPHONSUS CHERN
Demand for office space in Asia rising
Region's rental market bottoming out; Q1 rents slid just 0.1%
By Joyce Teo
OFFICE rentals slid again across Asia in the first quarter of the year, albeit by a whisker, even as the economic recovery gained pace, according to a new CB Richard Ellis (CBRE) report.
But the good news is the market finally seems to be bottoming out in the region, including Singapore where rents are now almost 60 per cent below their peak.
Overall, office rents in Asia slid 0.1 per cent in the first quarter, a much milder fall than the 1.9 per cent in the previous quarter, it said.
'With an increasing number of companies putting in higher real estate budgets to support their overall regional corporate expansion plans, office leasing activity is expected to turn robust in the first half of 2010 and lead rentals out from the downward cycle,' said CBRE Research Asia executive director Andrew Ness.
Already, first-quarter demand for office space was 'robust' in Asia's major commercial centres as firms are now more willing to commit to space at the current rentals, CBRE said.
The report said firms are taking advantage of office rents generally having been lower for over a year in most markets. Some are taking the chance to upgrade to Grade A facilities.
At the same time, overall business sentiment was buoyed by the continued upswing in the regional economy.
The labour market has also tightened, with the jobless rate clearly falling in most markets as larger firms announce recruitment plans, said CBRE.
The overall office vacancy rate in Asian cities fell 0.8 percentage point quarter-on-quarter to 11.8 per cent in the first quarter, it said. Top quality or Grade A offices did better than those in the Grade B market as tenants looked to upgrade to nicer premises and lock in leases with favourable terms while conditions still permit.
First to record rental growth were cities in Greater China, CBRE said. Beijing, Shanghai, Guangzhou, Hong Kong and Taipei all posted quarter- on-quarter growth.
For instance, in Hong Kong, demand is growing amid limited new supply. In fact, rents in the territory's central region surged 9 per cent in the first quarter, the highest rise of all main office districts in Asia, it said.
A report by Colliers International on Monday said Singapore could enjoy spillover demand from Hong Kong, where an office supply crunch is expected to lead to a double-digit percentage jump in office rents this year.
The Republic was still the third most expensive office centre, with Tokyo and Hong Kong in No. 1 and No. 2 spots, respectively, it had said.
CBRE said office rents here shrank for the sixth straight quarter even as the economy powers ahead. But the rate of fall was marginal. Rents appear to be stabilising amid rising demand and the brighter economic outlook.
'We're seeing a very decent level of office leasing activities,' said CBRE's executive director of office services, Mr Moray Armstrong, yesterday. Office rents look increasingly set to rise despite huge impending supply, he said. Rents in better quality buildings are already moving up, but older buildings may take a little longer, he added.
In the first quarter, prime rents fell 0.7 per cent quarter-on-quarter to $6.70 per sq ft a month, and have now shrunk by 58.4 per cent since peaking in the third quarter of 2008.
joyceteo@sph.com.sg
Office rents in Singapore shrank for the sixth straight quarter, says a CB Richard Ellis report, but rates are stabilising amid rising demand. -- ST PHOTO: ALPHONSUS CHERN
BT : $140m expansion to increase R&D space at The Biopolis
Business Times - 06 May 2010
$140m expansion to increase R&D space at The Biopolis
To be completed in 2013, expansion will add 46,000 sq m to total 310,000 sq m
By NISHA RAMCHANDANI
BIOMEDICAL research and development hub The Biopolis will undergo a $140 million expansion which will boost its total R&D space to some 310,000 square metres - a move aimed at meeting the increased demand for biomedical R&D space.
According to developer JTC Corporation, the expansion plans will add about 46,000 sq m to The Biopolis and is slated for completion in 2013.
The expanded Biopolis will also incorporate energy-efficient laboratory designs, which will translate to reduced energy consumption as well as higher savings for tenants where operational costs are concerned. Some of the measures that JTC will implement include more accurate sizing of laboratory equipment to reduce energy wastage, solar control and glazing for laboratory spaces to reduce heat gain, better lighting selection to reduce maintenance and running costs as well as the incorporation of natural ventilated spaces to reduce the building's cooling load.
'In the upcoming expansion of The Biopolis, sustainability will be taken a step further with . . . energy-efficient lab design. Some of the sustainable lab design strategies . . . will be more practical and cost- effective in nature,' JTC said. The Biopolis has been purpose-built for public and private biomedical research institutes and organisations.
In 2009, Singapore's biomedical sciences manufacturing output rose 2.5 per cent year-on-year to $20.7 billion, while total employment climbed 7.2 per cent to 13,174. Singapore aims for the sector to hit a manufacturing output of $25 billion by 2015.
Meanwhile, total business spending stood at $700 million last year while fixed asset investments (FAI) were $1.2 billion.
Located at one-north, The Biopolis is currently in Phase 3 of its development. By end-2010, Phase 3 will add 41,500 sq m of space to the biomedical hub for R&D laboratories and supporting offices.
Phase 1 of The Biopolis (a 185,000 sq m seven- building development) is fully occupied, as is Phase 2, which comprises a cluster of two buildings spanning 37,000 sq m.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
The Biopolis: The research and development hub at one-north has been purpose- built for public and private biomedical research institutes and organisations
$140m expansion to increase R&D space at The Biopolis
To be completed in 2013, expansion will add 46,000 sq m to total 310,000 sq m
By NISHA RAMCHANDANI
BIOMEDICAL research and development hub The Biopolis will undergo a $140 million expansion which will boost its total R&D space to some 310,000 square metres - a move aimed at meeting the increased demand for biomedical R&D space.
According to developer JTC Corporation, the expansion plans will add about 46,000 sq m to The Biopolis and is slated for completion in 2013.
The expanded Biopolis will also incorporate energy-efficient laboratory designs, which will translate to reduced energy consumption as well as higher savings for tenants where operational costs are concerned. Some of the measures that JTC will implement include more accurate sizing of laboratory equipment to reduce energy wastage, solar control and glazing for laboratory spaces to reduce heat gain, better lighting selection to reduce maintenance and running costs as well as the incorporation of natural ventilated spaces to reduce the building's cooling load.
'In the upcoming expansion of The Biopolis, sustainability will be taken a step further with . . . energy-efficient lab design. Some of the sustainable lab design strategies . . . will be more practical and cost- effective in nature,' JTC said. The Biopolis has been purpose-built for public and private biomedical research institutes and organisations.
In 2009, Singapore's biomedical sciences manufacturing output rose 2.5 per cent year-on-year to $20.7 billion, while total employment climbed 7.2 per cent to 13,174. Singapore aims for the sector to hit a manufacturing output of $25 billion by 2015.
Meanwhile, total business spending stood at $700 million last year while fixed asset investments (FAI) were $1.2 billion.
Located at one-north, The Biopolis is currently in Phase 3 of its development. By end-2010, Phase 3 will add 41,500 sq m of space to the biomedical hub for R&D laboratories and supporting offices.
Phase 1 of The Biopolis (a 185,000 sq m seven- building development) is fully occupied, as is Phase 2, which comprises a cluster of two buildings spanning 37,000 sq m.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
The Biopolis: The research and development hub at one-north has been purpose- built for public and private biomedical research institutes and organisations
BT : $38m price for 2 adjacent bungalows in Meyer area
Business Times - 06 May 2010
$38m price for 2 adjacent bungalows in Meyer area
Buyer likely to build apartment block on the 24,002 sq ft freehold plot
By KALPANA RASHIWALA
TWO adjacent bungalows in Margate Road off Meyer Road are said to have been sold for a total of $38 million.
The buyer is understood to be a low-profile boutique property investor that is likely to build a block of apartments on the combined freehold site of 24,002 sq ft. The plot can accommodate up to a 24-storey development of 55-60 apartments averaging about 850 sq ft.
The $38 million translates to a land price of $1,023 per sq ft of potential gross area including an estimated development charge (DC) of $13.6 million. This is close to the $1,047 psf per plot ratio (psf ppr) including DC that is said to have been paid for neighbouring 10, Margate Road in late 2007.
Soilbuild Group Holdings, which bought that property, later amalgamated it with the adjacent Margate Mansions to form an enlarged plot it is now redeveloping into Meier Suites. Soilbuild's land cost for the entire site was reported as $987 psf ppr.
Market watchers point out that the $1,023 psf ppr land price for the latest transaction, which involves 6 and 8, Margate Road, is close to what Chip Eng Seng paid recently - slightly over $1,000 psf ppr - for 16 freehold terrace houses in Fort Road.
However, that purchase is still subject to obtaining outline planning permission for a new development, as well as approval from the authorities to buy some state land for amalgamation with the property.
Cushman & Wakefield brokered the sale of 6 and 8 Margate Road through an expression-of-interest exercise that is said to have drawn more than five bids. The bungalows are being sold to the highest bidder.
No 8 Margate Road is being sold by Bian Guan Realty, while No 6 is being sold by the Estate of Tan Lai Choon.
The site is zoned for residential use with a 2.1 plot ratio - the ratio of maximum potential gross floor area to land area.
Assuming the new owner uses the balcony allowance of an additional 10 per cent gross floor area, the unit land price would be lowered to $954 psf ppr. Based on this, the breakeven cost for a new apartment project could be around $1,500 psf, analysts say.
Next door, Soilbuild sold units at Meier Suites, which comprises three and four-bedroom apartments, at prices ranging from $1,200 to $1,549 psf in February and March, according to monthly developer sales stats released by the Urban Redevelopment Authority.
In a separate transaction, a consortium said to include Soilbuild is said to have recently signed a deal to buy 23, New Industrial Road for $24 million. The freehold site houses an old industrial building that is likely to be redeveloped.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Margate Road bungalows: The combined site can accommodate up to a 24-storey development of 55-60 apartments averaging about 850 sq ft
$38m price for 2 adjacent bungalows in Meyer area
Buyer likely to build apartment block on the 24,002 sq ft freehold plot
By KALPANA RASHIWALA
TWO adjacent bungalows in Margate Road off Meyer Road are said to have been sold for a total of $38 million.
The buyer is understood to be a low-profile boutique property investor that is likely to build a block of apartments on the combined freehold site of 24,002 sq ft. The plot can accommodate up to a 24-storey development of 55-60 apartments averaging about 850 sq ft.
The $38 million translates to a land price of $1,023 per sq ft of potential gross area including an estimated development charge (DC) of $13.6 million. This is close to the $1,047 psf per plot ratio (psf ppr) including DC that is said to have been paid for neighbouring 10, Margate Road in late 2007.
Soilbuild Group Holdings, which bought that property, later amalgamated it with the adjacent Margate Mansions to form an enlarged plot it is now redeveloping into Meier Suites. Soilbuild's land cost for the entire site was reported as $987 psf ppr.
Market watchers point out that the $1,023 psf ppr land price for the latest transaction, which involves 6 and 8, Margate Road, is close to what Chip Eng Seng paid recently - slightly over $1,000 psf ppr - for 16 freehold terrace houses in Fort Road.
However, that purchase is still subject to obtaining outline planning permission for a new development, as well as approval from the authorities to buy some state land for amalgamation with the property.
Cushman & Wakefield brokered the sale of 6 and 8 Margate Road through an expression-of-interest exercise that is said to have drawn more than five bids. The bungalows are being sold to the highest bidder.
No 8 Margate Road is being sold by Bian Guan Realty, while No 6 is being sold by the Estate of Tan Lai Choon.
The site is zoned for residential use with a 2.1 plot ratio - the ratio of maximum potential gross floor area to land area.
Assuming the new owner uses the balcony allowance of an additional 10 per cent gross floor area, the unit land price would be lowered to $954 psf ppr. Based on this, the breakeven cost for a new apartment project could be around $1,500 psf, analysts say.
Next door, Soilbuild sold units at Meier Suites, which comprises three and four-bedroom apartments, at prices ranging from $1,200 to $1,549 psf in February and March, according to monthly developer sales stats released by the Urban Redevelopment Authority.
In a separate transaction, a consortium said to include Soilbuild is said to have recently signed a deal to buy 23, New Industrial Road for $24 million. The freehold site houses an old industrial building that is likely to be redeveloped.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Margate Road bungalows: The combined site can accommodate up to a 24-storey development of 55-60 apartments averaging about 850 sq ft
BT : Asian office and investment property strong in Q1: CBRE
Business Times - 06 May 2010
Asian office and investment property strong in Q1: CBRE
But deals slip in Greater China, with sentiment hit by govt cooling policies
By UMA SHANKARI
OFFICE and investment property markets across Asia remained buoyant in the first quarter of 2010 as investor sentiment stayed positive, CB Richard Ellis (CBRE) said yesterday.
In the investment market, the steady flow of small and medium-size transactions seen in the second half of 2009 continued to feed through into this year.
Total direct real estate investment in Asia jumped 215 per cent year on year to US$16.5 billion in Q1 - from a low base in Q1 2009 when activity was muted.
Despite the strong year-on-year growth, transaction volume slipped in China, Hong Kong and Taiwan quarter on quarter.
This dip in Greater China was because investors turned cautious after government policy changes to cool rapidly rising prices.
Elsewhere in Asia, Japan, Korea and Singapore saw a strong rebound in investment activity quarter on quarter, with the volume of transactions in these markets rising 45, 32 and 24 per cent respectively.
Throughout Asian investment markets, transactional activity was largely driven by domestic investors, who accounted for 72 per cent of total volume. But the US$12 billion of transactions completed by domestic investors was US$2.1 billion lower than in Q4 2009 - signalling a rise in cross-border investments.
The rising proportion of cross-border activity in Q1 2010 was partly due to the return of international real estate funds, CBRE said.
'The quarter saw both opportunistic and core international institutional investors return to Asian real estate markets, attracted by signs of a sustained recovery,' said Andrew Ness, executive director of CBRE Research Asia.
'At the same time, well-capitalised Asian Reits and sovereign wealth funds resumed the portfolio expansion they halted during the most severe period of the global economic downturn, and their return was marked by a rising level of acquisitions in Japan and Singapore.'
In the office sector, a recovery in demand was reflected by growth in net absorption for the region overall - it was 31 per cent higher in Q1 2010 than Q4 2009.
Most cities surveyed recorded positive absorption of space, and the overall vacancy for Asian cities declined 80 basis points quarter on quarter to 11.8 per cent.
Rents continued to fall - but more slowly. CBRE's data shows overall office rents in Asia fell 0.1 per cent in Q1 - much less than the previous quarter's 1.9 per cent decline.
Mr Ness said office leasing activity is expected to turn robust in the current first half and lead rents out of the downward cycle as more companies boost real estate budgets to support overall regional expansion plans.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Robust rebound: Japan's quarter-on-quarter property investment activity jumped 45 per cent, while Korea and Singapore saw the volume of transactions rise 32 and 24 per cent respectively
Asian office and investment property strong in Q1: CBRE
But deals slip in Greater China, with sentiment hit by govt cooling policies
By UMA SHANKARI
OFFICE and investment property markets across Asia remained buoyant in the first quarter of 2010 as investor sentiment stayed positive, CB Richard Ellis (CBRE) said yesterday.
In the investment market, the steady flow of small and medium-size transactions seen in the second half of 2009 continued to feed through into this year.
Total direct real estate investment in Asia jumped 215 per cent year on year to US$16.5 billion in Q1 - from a low base in Q1 2009 when activity was muted.
Despite the strong year-on-year growth, transaction volume slipped in China, Hong Kong and Taiwan quarter on quarter.
This dip in Greater China was because investors turned cautious after government policy changes to cool rapidly rising prices.
Elsewhere in Asia, Japan, Korea and Singapore saw a strong rebound in investment activity quarter on quarter, with the volume of transactions in these markets rising 45, 32 and 24 per cent respectively.
Throughout Asian investment markets, transactional activity was largely driven by domestic investors, who accounted for 72 per cent of total volume. But the US$12 billion of transactions completed by domestic investors was US$2.1 billion lower than in Q4 2009 - signalling a rise in cross-border investments.
The rising proportion of cross-border activity in Q1 2010 was partly due to the return of international real estate funds, CBRE said.
'The quarter saw both opportunistic and core international institutional investors return to Asian real estate markets, attracted by signs of a sustained recovery,' said Andrew Ness, executive director of CBRE Research Asia.
'At the same time, well-capitalised Asian Reits and sovereign wealth funds resumed the portfolio expansion they halted during the most severe period of the global economic downturn, and their return was marked by a rising level of acquisitions in Japan and Singapore.'
In the office sector, a recovery in demand was reflected by growth in net absorption for the region overall - it was 31 per cent higher in Q1 2010 than Q4 2009.
Most cities surveyed recorded positive absorption of space, and the overall vacancy for Asian cities declined 80 basis points quarter on quarter to 11.8 per cent.
Rents continued to fall - but more slowly. CBRE's data shows overall office rents in Asia fell 0.1 per cent in Q1 - much less than the previous quarter's 1.9 per cent decline.
Mr Ness said office leasing activity is expected to turn robust in the current first half and lead rents out of the downward cycle as more companies boost real estate budgets to support overall regional expansion plans.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Robust rebound: Japan's quarter-on-quarter property investment activity jumped 45 per cent, while Korea and Singapore saw the volume of transactions rise 32 and 24 per cent respectively
BT : Gains soar for condo subsales at Sentosa Cove
Business Times - 06 May 2010
Gains soar for condo subsales at Sentosa Cove
Only one subsale so far this year has resulted in a loss - of $167,000
By KALPANA RASHIWALA
(SINGAPORE) Increases in property prices on Sentosa Cove, especially since the start of this year, have buoyed gains from subsale deals in the location.
The average gain per unit from subsales of condos in the upscale waterfront housing district from January to April this year has almost doubled to about $1.4 million from about $762,000 in Q1 2009.
Savills Singapore's analysis of URA Realis caveats as at May 3 shows that the most profitable subsale deal among condos on Sentosa Cove since the start of 2009 yielded a profit of slightly over $3 million. That subsale took place in March this year. In fact, six of the 11 subsales since the beginning of 2010 have generated a gross profit (sale price less purchase price) of at least $1 million apiece.
Only one subsale so far this year has resulted in a loss, of $167,000.
Savills' director of investment sales and prestige homes Steven Ming says that generally, those who sold Sentosa Cove condos in the subsale market this year after holding them for at least three years were the ones who reaped profits of about $800,000 or more. 'Opportunistic buyers who purchased in 2009 and sold within the same year made smaller gains ranging from about $100,000 to $754,000,' he adds.
Mr Ming notes that all 11 condo subsales this year have been at The Oceanfront @ Sentosa Cove, which received Temporary Occupation Permit (TOP) in March 2010. Nine of the 11 sellers had bought their units in 2006. 'They have witnessed the volatility of the market and took the opportunity to sell into strength or are already very satisfied with the tidy returns against their purchase prices.
'Moreover the units at Oceanfront are likely to have been bought on Deferred Payment Scheme and the need to fully fund the purchase kicks in when the project gets TOP. This could also have motivated some owners to divest their units rather than assume the burden of any additional mortgages,' he adds.
Savills' study showed that the proportion of subsale deals resulting in gains has also been higher from Q3 last year than in first half 2009, reflecting the surge in overall private home prices. In addition to the sanguine property climate, market watchers also singled out the opening of the integrated resorts (IRs) as boosting foreign interest in high-end properties.
Savills' analysis shows that foreigners including permanent residents have picked up about 41 per cent of the condos transacted in the subsale market since the beginning of last year.
'Most of the housing developments on Sentosa Cove are being completed, so you start to appreciate the whole environment better - the waterfront community and lifestyle, you can see yachts passing by, and the water has a very calming effect,' says DTZ executive director (consulting) Ong Choon Fah. 'The old concerns about Sentosa Cove being a giant construction yard with road congestion have faded away or are being addressed by the Sentosa Cove management.'
Savills found caveats for a total of 113 subsale deals for condos at Sentosa Cove since the start of 2009; it matched caveats for previous transactions for 103 of these properties, and used the price difference between the two to work out gains or losses for these units.
The firm's analysis also showed a total of eight caveats lodged for subsales of landed homes on Sentosa Cove since the start of 2009 and it found previous caveats on five of these. All five subsale deals were profitable. The bungalows were held for at least two years and the subsale gains ranged from $436,960 for a house at Paradise Island transacted in the subsale market in June last year to $5.7 million for a villa on Coral Island that was subsold in December last year.
Mr Ming reports that anecdotally, a good number of buyers, especially from mainland China, have been buying luxury properties in Singapore. 'This is particularly so for landed homes on Sentosa Cove, since this is the only place where foreigners who are not Singapore permanent residents are allowed to buy landed homes. Prices of such bungalows are already pushing $2,000 psf of land area and more. Demand appears sustainable and prices are likely to head northwards over the next 12 months. Many bungalow owners bought their land parcels at $400-800 psf and even with building costs, they stand to make good gains ahead,' he explains.
Among condo subsales, the most profitable deal involved a 13th-floor sky suite at The Oceanfront, which was bought in July 2006 for about $7 million and sold for slightly over $10 million in March this year. BT understands that the 5,038 sq ft unit was picked up by an Indian citizen, Nalinkant Rathod. A person with the same name, who is also a citizen of India, is president director at Indonesia-listed Bakrie & Brothers.
However, the most expensive subsale condo deal during Savills' study period was for a two-level penthouse sky villa in the same development that was subsold at $11.5 million in June last year. Its seller is believed to have reaped a profit of about $700,000 based on a previous caveat in February 2007 at $10.8 million.
The biggest subsale loss of almost $1.18 million was also chalked up for a unit at Oceanfront. It was bought in October 2007 for $5.5 million and sold last November for $4.3 million.
Subsales refer to secondary-market transactions in projects that have yet to receive Certificate of Statutory Completion. This can take place three to 12 months after TOP.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Gains soar for condo subsales at Sentosa Cove
Only one subsale so far this year has resulted in a loss - of $167,000
By KALPANA RASHIWALA
(SINGAPORE) Increases in property prices on Sentosa Cove, especially since the start of this year, have buoyed gains from subsale deals in the location.
The average gain per unit from subsales of condos in the upscale waterfront housing district from January to April this year has almost doubled to about $1.4 million from about $762,000 in Q1 2009.
Savills Singapore's analysis of URA Realis caveats as at May 3 shows that the most profitable subsale deal among condos on Sentosa Cove since the start of 2009 yielded a profit of slightly over $3 million. That subsale took place in March this year. In fact, six of the 11 subsales since the beginning of 2010 have generated a gross profit (sale price less purchase price) of at least $1 million apiece.
Only one subsale so far this year has resulted in a loss, of $167,000.
Savills' director of investment sales and prestige homes Steven Ming says that generally, those who sold Sentosa Cove condos in the subsale market this year after holding them for at least three years were the ones who reaped profits of about $800,000 or more. 'Opportunistic buyers who purchased in 2009 and sold within the same year made smaller gains ranging from about $100,000 to $754,000,' he adds.
Mr Ming notes that all 11 condo subsales this year have been at The Oceanfront @ Sentosa Cove, which received Temporary Occupation Permit (TOP) in March 2010. Nine of the 11 sellers had bought their units in 2006. 'They have witnessed the volatility of the market and took the opportunity to sell into strength or are already very satisfied with the tidy returns against their purchase prices.
'Moreover the units at Oceanfront are likely to have been bought on Deferred Payment Scheme and the need to fully fund the purchase kicks in when the project gets TOP. This could also have motivated some owners to divest their units rather than assume the burden of any additional mortgages,' he adds.
Savills' study showed that the proportion of subsale deals resulting in gains has also been higher from Q3 last year than in first half 2009, reflecting the surge in overall private home prices. In addition to the sanguine property climate, market watchers also singled out the opening of the integrated resorts (IRs) as boosting foreign interest in high-end properties.
Savills' analysis shows that foreigners including permanent residents have picked up about 41 per cent of the condos transacted in the subsale market since the beginning of last year.
'Most of the housing developments on Sentosa Cove are being completed, so you start to appreciate the whole environment better - the waterfront community and lifestyle, you can see yachts passing by, and the water has a very calming effect,' says DTZ executive director (consulting) Ong Choon Fah. 'The old concerns about Sentosa Cove being a giant construction yard with road congestion have faded away or are being addressed by the Sentosa Cove management.'
Savills found caveats for a total of 113 subsale deals for condos at Sentosa Cove since the start of 2009; it matched caveats for previous transactions for 103 of these properties, and used the price difference between the two to work out gains or losses for these units.
The firm's analysis also showed a total of eight caveats lodged for subsales of landed homes on Sentosa Cove since the start of 2009 and it found previous caveats on five of these. All five subsale deals were profitable. The bungalows were held for at least two years and the subsale gains ranged from $436,960 for a house at Paradise Island transacted in the subsale market in June last year to $5.7 million for a villa on Coral Island that was subsold in December last year.
Mr Ming reports that anecdotally, a good number of buyers, especially from mainland China, have been buying luxury properties in Singapore. 'This is particularly so for landed homes on Sentosa Cove, since this is the only place where foreigners who are not Singapore permanent residents are allowed to buy landed homes. Prices of such bungalows are already pushing $2,000 psf of land area and more. Demand appears sustainable and prices are likely to head northwards over the next 12 months. Many bungalow owners bought their land parcels at $400-800 psf and even with building costs, they stand to make good gains ahead,' he explains.
Among condo subsales, the most profitable deal involved a 13th-floor sky suite at The Oceanfront, which was bought in July 2006 for about $7 million and sold for slightly over $10 million in March this year. BT understands that the 5,038 sq ft unit was picked up by an Indian citizen, Nalinkant Rathod. A person with the same name, who is also a citizen of India, is president director at Indonesia-listed Bakrie & Brothers.
However, the most expensive subsale condo deal during Savills' study period was for a two-level penthouse sky villa in the same development that was subsold at $11.5 million in June last year. Its seller is believed to have reaped a profit of about $700,000 based on a previous caveat in February 2007 at $10.8 million.
The biggest subsale loss of almost $1.18 million was also chalked up for a unit at Oceanfront. It was bought in October 2007 for $5.5 million and sold last November for $4.3 million.
Subsales refer to secondary-market transactions in projects that have yet to receive Certificate of Statutory Completion. This can take place three to 12 months after TOP.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : UK construction expands at fastest pace since Sept '07
Business Times - 06 May 2010
UK construction expands at fastest pace since Sept '07
(LONDON) UK construction expanded at the fastest pace in more than two-and-a-half years in April on increased demand for homes and commercial property.
A gauge of building activity, based on a survey of purchasing managers, jumped to 58.2 from 53.1 in March, Markit Economics and the Chartered Institute of Purchasing and Supply said in an e-mailed statement yesterday.
April's reading is the highest since September 2007. Results over 50 indicate expansion.
'It's encouraging to see the construction sector show signs of recuperation for the second month running and suggests that the whole UK economic recovery has real substance,' David Noble, chief executive officer of CIPS, said in the statement.
'Though the industry is moving in the right direction, we mustn't be lulled into complacency as growth is coming from a very low base and operating conditions are still very difficult.'
UK construction shrank for the two years through February and building companies are still cutting jobs, the report showed.
A measure of new orders advanced to its highest level since October 2007, while a gauge of homebuilding showed the fastest growth since August 2007, Markit said. Commercial construction posted growth 'only marginally lower' than the housing industry, CIPS and Markit said.
Taylor Wimpey Plc, the UK's second-largest homebuilder by volume, said on April 29 that its prices in Britain increased about 9 per cent in the first four months of the year as the market improved.
The house builder said it had achieved 74 per cent of its targeted annual sales in the UK\. \-- Bloomberg
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
UK construction expands at fastest pace since Sept '07
(LONDON) UK construction expanded at the fastest pace in more than two-and-a-half years in April on increased demand for homes and commercial property.
A gauge of building activity, based on a survey of purchasing managers, jumped to 58.2 from 53.1 in March, Markit Economics and the Chartered Institute of Purchasing and Supply said in an e-mailed statement yesterday.
April's reading is the highest since September 2007. Results over 50 indicate expansion.
'It's encouraging to see the construction sector show signs of recuperation for the second month running and suggests that the whole UK economic recovery has real substance,' David Noble, chief executive officer of CIPS, said in the statement.
'Though the industry is moving in the right direction, we mustn't be lulled into complacency as growth is coming from a very low base and operating conditions are still very difficult.'
UK construction shrank for the two years through February and building companies are still cutting jobs, the report showed.
A measure of new orders advanced to its highest level since October 2007, while a gauge of homebuilding showed the fastest growth since August 2007, Markit said. Commercial construction posted growth 'only marginally lower' than the housing industry, CIPS and Markit said.
Taylor Wimpey Plc, the UK's second-largest homebuilder by volume, said on April 29 that its prices in Britain increased about 9 per cent in the first four months of the year as the market improved.
The house builder said it had achieved 74 per cent of its targeted annual sales in the UK\. \-- Bloomberg
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : Australia's building approvals up in March
Business Times - 06 May 2010
Australia's building approvals up in March
Interest rate hikes fail to dampen housing demand
(SYDNEY) Australian homebuilding approvals rose in March at the fastest pace since 2002, a sign that housing demand hasn't been dampened by the central bank's world-leading round of interest-rate increases.
The number of permits granted to build or renovate houses and apartments gained 15.3 per cent from February, when they dropped a revised 2.7 per cent, the Bureau of Statistics said in Sydney yesterday.
The median estimate of 22 economists surveyed by Bloomberg News was for a 0.8 per cent gain.
The Reserve Bank of Australia boosted the benchmark lending rate on Tuesday for the sixth time in seven meetings, pushing borrowing costs to what Governor Glenn Stevens described as 'average' levels.
The moves are partly aimed at preventing a property bubble after housing prices surged 20 per cent in the 12 months through March.
Yesterday's report is 'encouraging and a good leading indicator for employment, particularly for workers in the construction industry,' said Michael Turner, an economist at 4Cast Ltd in Sydney, whose prediction of a 6 per cent gain in approvals was the closest of the analysts surveyed by Bloomberg.
Still, home-building approval figures are 'highly volatile,' Mr Turner said. 'You'd imagine there have been one or two large projects' approved in New South Wales and Victoria, Australia's most populous states.
The Australian dollar rose to 91.02 US cents at 12.12 pm in Sydney from 90.89 cents just before the report was released. The two-year government bond yield was unchanged at 4.90 per cent.
Approvals fell more than 8 per cent in the first two months of this year after Prime Minister Kevin Rudd reduced grants on Jan 1 to first-time buyers of new homes to A$7,000 (S$8,800) from as much as A$21,000.
Home-loan approvals declined in February for a fifth straight month, dropping 1.8 per cent to 50,287 from January, a report showed on April 12.
Rising house prices, inflation and a forecast mining boom triggered by surging Chinese demand for Australian exports of iron ore and coal, were among reasons Governor Stevens increased the overnight cash rate target on Tuesday by a quarter point to 4.5 per cent.
Policy makers have moved the benchmark rate by 1.5 percentage points from a half-century low of 3 per cent in early October, adding about A$3,600 a year to repayments on an average A$300,000 mortgage.
Mr Stevens said on Tuesday that the bank's increases represent a 'significant adjustment', a signal that policy makers may refrain from moving again next month, according to all 24 economists surveyed by Bloomberg News after the decision.
Approvals to build private houses rose 0.5 per cent to 9,779 in March from February.
Approvals for apartments and renovations advanced 59.9 per cent to 4,558.
Australia's services industry also expanded in April for the first time in five months, according to an index published yesterday by Commonwealth Bank of Australia and the Australian Industry Group.
The gauge gained 3.4 points to 52.3 from March\. \-- Bloomberg
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Australia's building approvals up in March
Interest rate hikes fail to dampen housing demand
(SYDNEY) Australian homebuilding approvals rose in March at the fastest pace since 2002, a sign that housing demand hasn't been dampened by the central bank's world-leading round of interest-rate increases.
The number of permits granted to build or renovate houses and apartments gained 15.3 per cent from February, when they dropped a revised 2.7 per cent, the Bureau of Statistics said in Sydney yesterday.
The median estimate of 22 economists surveyed by Bloomberg News was for a 0.8 per cent gain.
The Reserve Bank of Australia boosted the benchmark lending rate on Tuesday for the sixth time in seven meetings, pushing borrowing costs to what Governor Glenn Stevens described as 'average' levels.
The moves are partly aimed at preventing a property bubble after housing prices surged 20 per cent in the 12 months through March.
Yesterday's report is 'encouraging and a good leading indicator for employment, particularly for workers in the construction industry,' said Michael Turner, an economist at 4Cast Ltd in Sydney, whose prediction of a 6 per cent gain in approvals was the closest of the analysts surveyed by Bloomberg.
Still, home-building approval figures are 'highly volatile,' Mr Turner said. 'You'd imagine there have been one or two large projects' approved in New South Wales and Victoria, Australia's most populous states.
The Australian dollar rose to 91.02 US cents at 12.12 pm in Sydney from 90.89 cents just before the report was released. The two-year government bond yield was unchanged at 4.90 per cent.
Approvals fell more than 8 per cent in the first two months of this year after Prime Minister Kevin Rudd reduced grants on Jan 1 to first-time buyers of new homes to A$7,000 (S$8,800) from as much as A$21,000.
Home-loan approvals declined in February for a fifth straight month, dropping 1.8 per cent to 50,287 from January, a report showed on April 12.
Rising house prices, inflation and a forecast mining boom triggered by surging Chinese demand for Australian exports of iron ore and coal, were among reasons Governor Stevens increased the overnight cash rate target on Tuesday by a quarter point to 4.5 per cent.
Policy makers have moved the benchmark rate by 1.5 percentage points from a half-century low of 3 per cent in early October, adding about A$3,600 a year to repayments on an average A$300,000 mortgage.
Mr Stevens said on Tuesday that the bank's increases represent a 'significant adjustment', a signal that policy makers may refrain from moving again next month, according to all 24 economists surveyed by Bloomberg News after the decision.
Approvals to build private houses rose 0.5 per cent to 9,779 in March from February.
Approvals for apartments and renovations advanced 59.9 per cent to 4,558.
Australia's services industry also expanded in April for the first time in five months, according to an index published yesterday by Commonwealth Bank of Australia and the Australian Industry Group.
The gauge gained 3.4 points to 52.3 from March\. \-- Bloomberg
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : Industrial land deals worth 1b yuan for Tianjin Eco-City
Business Times - 06 May 2010
Industrial land deals worth 1b yuan for Tianjin Eco-City
By CHAN YUPING
SINO-SINGAPORE Tianjin Eco-City Investment and Development Co Ltd (SSTEC) has signed three more industrial land deals worth more than one billion yuan (S$203.9 million) in investments in the Eco Business Park and the Eco Industrial Park.
Tianjin House Construction Development Group Co Ltd, one of China's largest eco-building-materials companies, plans to invest 300 million yuan to develop energy-efficient buildings in the Eco-Business Park to house China's first sustainable housing R&D institute.
Keppel DHCS, a wholly owned subsidiary of Keppel Integrated Engineering, plans to develop and operate a district heating and cooling system in the same park. And Sichuan Neautus Traditional Chinese Medicine plans to invest 500 million yuan for the processing and distribution of Chinese herbal slices.
Yesterday, SSTEC also announced strategic collaborations with three leading eco-technology companies including Hitachi Group and Singapore Technologies Electronics (ST Electronics). Its collaboration with ST Electronics will allow for the development of eco-solutions for intelligent building management and energy saving systems.
Commenting on the steady stream of investors into the Eco City, SSTEC chief executive officer Goh Chye Boon said: 'This will complement the eco development needs of Tianjin Eco-City and create high quality job opportunities to draw new residents into the Eco-City.'
SSTEC has also signed a nine billion yuan agreement with Sunway City Bhd (SunCity), one of Malaysia's top developers, to develop an integrated LOHAS (Lifestyles of Health and Sustainability) community.
This joint development, which includes premium waterfront villas, mid- to high-rise apartments, schools and retail malls, will have a gross floor area of more than 0.7 million square metres and a capacity for nearly 5,000 households. It will also include unique features such as hydroponic gardens, green houses for organic farming, green spas and youth parks. Sunway has indicated earlier that the estimated pricing for the SunCity houses in the Tianjin Eco-City will be about RM500 (S$215) psf.
SSTEC is a 50:50 joint venture between the Chinese consortium led by Tianjin TEDA Investment Holding Co Ltd and the Singapore consortium led by the Keppel Group.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Industrial land deals worth 1b yuan for Tianjin Eco-City
By CHAN YUPING
SINO-SINGAPORE Tianjin Eco-City Investment and Development Co Ltd (SSTEC) has signed three more industrial land deals worth more than one billion yuan (S$203.9 million) in investments in the Eco Business Park and the Eco Industrial Park.
Tianjin House Construction Development Group Co Ltd, one of China's largest eco-building-materials companies, plans to invest 300 million yuan to develop energy-efficient buildings in the Eco-Business Park to house China's first sustainable housing R&D institute.
Keppel DHCS, a wholly owned subsidiary of Keppel Integrated Engineering, plans to develop and operate a district heating and cooling system in the same park. And Sichuan Neautus Traditional Chinese Medicine plans to invest 500 million yuan for the processing and distribution of Chinese herbal slices.
Yesterday, SSTEC also announced strategic collaborations with three leading eco-technology companies including Hitachi Group and Singapore Technologies Electronics (ST Electronics). Its collaboration with ST Electronics will allow for the development of eco-solutions for intelligent building management and energy saving systems.
Commenting on the steady stream of investors into the Eco City, SSTEC chief executive officer Goh Chye Boon said: 'This will complement the eco development needs of Tianjin Eco-City and create high quality job opportunities to draw new residents into the Eco-City.'
SSTEC has also signed a nine billion yuan agreement with Sunway City Bhd (SunCity), one of Malaysia's top developers, to develop an integrated LOHAS (Lifestyles of Health and Sustainability) community.
This joint development, which includes premium waterfront villas, mid- to high-rise apartments, schools and retail malls, will have a gross floor area of more than 0.7 million square metres and a capacity for nearly 5,000 households. It will also include unique features such as hydroponic gardens, green houses for organic farming, green spas and youth parks. Sunway has indicated earlier that the estimated pricing for the SunCity houses in the Tianjin Eco-City will be about RM500 (S$215) psf.
SSTEC is a 50:50 joint venture between the Chinese consortium led by Tianjin TEDA Investment Holding Co Ltd and the Singapore consortium led by the Keppel Group.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : Cash-hungry US states selling their buildings
Business Times - 06 May 2010
Cash-hungry US states selling their buildings
But there's no rush as some fear low bids, outrage over sales to foreigners
(NEW YORK) IS it better to rent or to own? The default answer for a long time - when real estate's horizon seemed limitless - was to own. Lately some individuals and businesses have decided that maybe owning isn't always better, especially when you have other pressing needs for cash, such as paying off your creditors.
Now the idea has spread to some states with serious debt problems.
In January, the state of Arizona concluded a deal to sell to investors ownership stakes worth a total of US$735 million in several state-owned office buildings, arenas and other properties - including the buildings housing both chambers of the State Legislature. Arizona will lease back the property from its new landlords, among them the mutual fund giants Fidelity and Vanguard, for 20 years, after which ownership will revert to the state.
Arizona is planning another, smaller round of real estate sales in June. For fiscal 2011, which begins in July, the state is estimated to have a deficit of US$3 billion.
Although it has been drowned out by hotter issues, such as the uproar over the state's new immigration law, some Arizona politicians have sought to make an issue of the sale-leaseback.
Dean Martin, the state's treasurer and a candidate for the Republican nomination for governor this fall, has derided the sale as a one-time gimmick used to circumvent the state's debt limit and avoid the hard choices he says he believes Arizona needs to make about what he calls 'unsupportable spending'. 'How many times can you sell the state capital?' he said.
Mr Martin said he wanted to repackage the state's debt as bonds and use some of the proceeds to buy back the buildings. 'Who wants to make a long-term investment in a state that is renting its Capitol buildings?' he has been asking on the campaign trail.
Last month, California received sale-leaseback bids on a portfolio of 7.3 million square feet of office space in 11 state-owned buildings.
The Golden State Portfolio includes buildings in Los Angeles and Sacramento, as well as the San Francisco Civic Center, where the state Supreme Court sits. The deal had been expected to yield about US$660 million in revenue for the state, after US$1.1 billion in expected proceeds were used to pay off construction bonds.
California's deficit for 2010-11 is about US$20 billion.
Kevin Shannon, a vice-chairman of the commercial real estate firm CB Richard Ellis, which is managing the auction for the state, said he believed that the state would take in more than expected once it analysed the bids and completed a deal, which is expected to happen by mid-May.
Mr Shannon said the auction had produced more than 300 bids. 'There's been a lot of press about this being a fire sale,' he said, 'but we're in a competitive bidding situation.' He said demand for the properties had been greater than expected.
As with Arizona's leaseback, the California auction has become a political football. The state Legislature was almost unanimous in approving the plan a year ago. More recently, however, two members of state real estate boards whose approval was necessary for the sale to proceed, say they were abruptly dismissed by Governor Arnold Schwarzenegger because they opposed the deal. They have told reporters that they believe it would cost the state more in rent money than it would raise. A state Assembly committee is reviewing the matter.
The view that the deal doesn't make economic sense has been seconded by others, including the state's independent Legislative Analyst's Office, which has called the sale 'bad budgeting practice'. The leaseback continues to enjoy the support of the governor.
'The governor doesn't believe the state should be in the real estate business,' said Erin Shaw, a spokeswoman for the California Department of General Services, which manages the state's property holdings. Governor Schwarzenegger said recently that he would not approve a sale if bids were too low. Previously the state shelved a proposed sale of the Orange County fairgrounds when bids came in lower than expected.
Besides Arizona and California, only Connecticut is conducting a sale of state office buildings. Connecticut, however, is seeking bids for straight-out purchases of buildings it regards as surplus rather than sale-leasebacks. The comparatively modest properties, which include the Litchfield Jail and the Bristol Armory, have so far attracted little attention.
Gordon F DuGan, the chief executive of W P Carey and Co, a real estate investment company that specialises in corporate sale-leaseback deals, said that if the California sale went well, other states might follow. Mr DuGan said, however, that he had not heard of any great interest in such future deals from either prospective buyers or sellers.
W P Carey has made a bid for some of the California properties, which Mr DuGan does not expect will be accepted. (The state has said it prefers bidders for the entire package.)
Mr DuGan said bidding for the California property appeared stronger than he had expected, particularly considering that, unlike other sale-leasebacks, the California deal requires buyers to pick up the cost of services such as waste hauling and security. He said that structure made the deal more appealing to bidders that, unlike his company, had big operations units.
The risk of drawing unwanted headlines by selling state property may be one reason the idea has yet to take hold in other states that are short on money. A few years ago, a spurt in the sale of state and city-owned infrastructure, such as highways and bridges, ended amid outrage that some of these properties were being sold to foreign investors.
Another reason for the absence so far of a rush to such deals may be relatively modest proceeds for states. Dan Fasulo, chief of research at Real Capital Analytics, which tracks commercial real estate markets, said in an e-mail: 'There are many states that look at things like this during a crisis, but at the end of the day, the amount of money raised from such activities is a laughable amount when viewed from the context of the overall budget shortfalls.' - NYT
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Up for sale: A cyclist passing the state office building that houses the California attorney general and the state justice department in downtown Sacramento, California, recently
Cash-hungry US states selling their buildings
But there's no rush as some fear low bids, outrage over sales to foreigners
(NEW YORK) IS it better to rent or to own? The default answer for a long time - when real estate's horizon seemed limitless - was to own. Lately some individuals and businesses have decided that maybe owning isn't always better, especially when you have other pressing needs for cash, such as paying off your creditors.
Now the idea has spread to some states with serious debt problems.
In January, the state of Arizona concluded a deal to sell to investors ownership stakes worth a total of US$735 million in several state-owned office buildings, arenas and other properties - including the buildings housing both chambers of the State Legislature. Arizona will lease back the property from its new landlords, among them the mutual fund giants Fidelity and Vanguard, for 20 years, after which ownership will revert to the state.
Arizona is planning another, smaller round of real estate sales in June. For fiscal 2011, which begins in July, the state is estimated to have a deficit of US$3 billion.
Although it has been drowned out by hotter issues, such as the uproar over the state's new immigration law, some Arizona politicians have sought to make an issue of the sale-leaseback.
Dean Martin, the state's treasurer and a candidate for the Republican nomination for governor this fall, has derided the sale as a one-time gimmick used to circumvent the state's debt limit and avoid the hard choices he says he believes Arizona needs to make about what he calls 'unsupportable spending'. 'How many times can you sell the state capital?' he said.
Mr Martin said he wanted to repackage the state's debt as bonds and use some of the proceeds to buy back the buildings. 'Who wants to make a long-term investment in a state that is renting its Capitol buildings?' he has been asking on the campaign trail.
Last month, California received sale-leaseback bids on a portfolio of 7.3 million square feet of office space in 11 state-owned buildings.
The Golden State Portfolio includes buildings in Los Angeles and Sacramento, as well as the San Francisco Civic Center, where the state Supreme Court sits. The deal had been expected to yield about US$660 million in revenue for the state, after US$1.1 billion in expected proceeds were used to pay off construction bonds.
California's deficit for 2010-11 is about US$20 billion.
Kevin Shannon, a vice-chairman of the commercial real estate firm CB Richard Ellis, which is managing the auction for the state, said he believed that the state would take in more than expected once it analysed the bids and completed a deal, which is expected to happen by mid-May.
Mr Shannon said the auction had produced more than 300 bids. 'There's been a lot of press about this being a fire sale,' he said, 'but we're in a competitive bidding situation.' He said demand for the properties had been greater than expected.
As with Arizona's leaseback, the California auction has become a political football. The state Legislature was almost unanimous in approving the plan a year ago. More recently, however, two members of state real estate boards whose approval was necessary for the sale to proceed, say they were abruptly dismissed by Governor Arnold Schwarzenegger because they opposed the deal. They have told reporters that they believe it would cost the state more in rent money than it would raise. A state Assembly committee is reviewing the matter.
The view that the deal doesn't make economic sense has been seconded by others, including the state's independent Legislative Analyst's Office, which has called the sale 'bad budgeting practice'. The leaseback continues to enjoy the support of the governor.
'The governor doesn't believe the state should be in the real estate business,' said Erin Shaw, a spokeswoman for the California Department of General Services, which manages the state's property holdings. Governor Schwarzenegger said recently that he would not approve a sale if bids were too low. Previously the state shelved a proposed sale of the Orange County fairgrounds when bids came in lower than expected.
Besides Arizona and California, only Connecticut is conducting a sale of state office buildings. Connecticut, however, is seeking bids for straight-out purchases of buildings it regards as surplus rather than sale-leasebacks. The comparatively modest properties, which include the Litchfield Jail and the Bristol Armory, have so far attracted little attention.
Gordon F DuGan, the chief executive of W P Carey and Co, a real estate investment company that specialises in corporate sale-leaseback deals, said that if the California sale went well, other states might follow. Mr DuGan said, however, that he had not heard of any great interest in such future deals from either prospective buyers or sellers.
W P Carey has made a bid for some of the California properties, which Mr DuGan does not expect will be accepted. (The state has said it prefers bidders for the entire package.)
Mr DuGan said bidding for the California property appeared stronger than he had expected, particularly considering that, unlike other sale-leasebacks, the California deal requires buyers to pick up the cost of services such as waste hauling and security. He said that structure made the deal more appealing to bidders that, unlike his company, had big operations units.
The risk of drawing unwanted headlines by selling state property may be one reason the idea has yet to take hold in other states that are short on money. A few years ago, a spurt in the sale of state and city-owned infrastructure, such as highways and bridges, ended amid outrage that some of these properties were being sold to foreign investors.
Another reason for the absence so far of a rush to such deals may be relatively modest proceeds for states. Dan Fasulo, chief of research at Real Capital Analytics, which tracks commercial real estate markets, said in an e-mail: 'There are many states that look at things like this during a crisis, but at the end of the day, the amount of money raised from such activities is a laughable amount when viewed from the context of the overall budget shortfalls.' - NYT
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Up for sale: A cyclist passing the state office building that houses the California attorney general and the state justice department in downtown Sacramento, California, recently
BT : Chinese crackdown may end: Macquarie
Business Times - 06 May 2010
Chinese crackdown may end: Macquarie
(BEIJING) China is likely to reverse policies cracking down on the property market because they will put the nation's 8 per cent economic growth target for this year at risk, Macquarie Securities Ltd said yesterday.
'Ironically, it is the very effectiveness of the property market measures that undermine their credibility,' Hong Kong-based economist Paul Cavey said in an e-mailed report. 'Current policies towards property can't be sustained.'
Measures could be reversed in the fourth quarter, when the government has evidence that the market has cooled, Mr Cavey said. Chinese officials intensified their campaign against property speculation after record price gains in March, helping to drive a decline of 10 per cent in the Shanghai Composite Index in the past month.
The government's tools have included a ban on loans for third-home purchases and higher mortgage rates and downpayment requirements for second-home purchases. The central bank has also raised banks' reserve requirements, pulling money out of the financial system.
'A big slowdown of property still seems inconsistent to us with 8 per cent growth, and so we would expect policy to reverse,' Mr Cavey said.
Property prices across 70 cities rose 11.7 per cent in March from a year earlier, the most on record. A slump could lead to bailouts for Chinese banks, Fitch Ratings said yesterday.
'If we do see a pretty serious correction in the property market, banks' balance sheets will likely be severely impacted and this could at some point necessitate bailouts,' Charlene Chu, a senior director in Fitch's financial institutions ratings team here, said on a conference call.
'The problem is there is a very high indirect exposure to the property market, mainly through corporates who have taken out loans and used that money for property investments or developments of their own,' Ms Chu said.
Advances for property purchases at the 19 Chinese banks Fitch covers make up about 25-30 per cent of their total lending, she said. Bad loans won't significantly deteriorate this year, although they could be a concern next year, Ms Chu added.
China's real estate market is a cause of 'serious concern', Jonathan Cornish, a Fitch senior director on the company's financial institutions ratings team for North Asia, said on the same conference call. Loans growth in China is projected to remain 'strong' at 7-8 per cent this year, he said\. \-- Bloomberg
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Chinese crackdown may end: Macquarie
(BEIJING) China is likely to reverse policies cracking down on the property market because they will put the nation's 8 per cent economic growth target for this year at risk, Macquarie Securities Ltd said yesterday.
'Ironically, it is the very effectiveness of the property market measures that undermine their credibility,' Hong Kong-based economist Paul Cavey said in an e-mailed report. 'Current policies towards property can't be sustained.'
Measures could be reversed in the fourth quarter, when the government has evidence that the market has cooled, Mr Cavey said. Chinese officials intensified their campaign against property speculation after record price gains in March, helping to drive a decline of 10 per cent in the Shanghai Composite Index in the past month.
The government's tools have included a ban on loans for third-home purchases and higher mortgage rates and downpayment requirements for second-home purchases. The central bank has also raised banks' reserve requirements, pulling money out of the financial system.
'A big slowdown of property still seems inconsistent to us with 8 per cent growth, and so we would expect policy to reverse,' Mr Cavey said.
Property prices across 70 cities rose 11.7 per cent in March from a year earlier, the most on record. A slump could lead to bailouts for Chinese banks, Fitch Ratings said yesterday.
'If we do see a pretty serious correction in the property market, banks' balance sheets will likely be severely impacted and this could at some point necessitate bailouts,' Charlene Chu, a senior director in Fitch's financial institutions ratings team here, said on a conference call.
'The problem is there is a very high indirect exposure to the property market, mainly through corporates who have taken out loans and used that money for property investments or developments of their own,' Ms Chu said.
Advances for property purchases at the 19 Chinese banks Fitch covers make up about 25-30 per cent of their total lending, she said. Bad loans won't significantly deteriorate this year, although they could be a concern next year, Ms Chu added.
China's real estate market is a cause of 'serious concern', Jonathan Cornish, a Fitch senior director on the company's financial institutions ratings team for North Asia, said on the same conference call. Loans growth in China is projected to remain 'strong' at 7-8 per cent this year, he said\. \-- Bloomberg
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : South Koreans' foreign property purchases sharply down in Q1
Business Times - 06 May 2010
South Koreans' foreign property purchases sharply down in Q1
(SEOUL) South Koreans' purchases of overseas property declined during the first quarter from three months earlier as investor sentiment remained sluggish despite steadily improving global economic conditions, data showed yesterday.
According to the data provided by the Ministry of Strategy and Finance, South Koreans purchased a total of US$58.7 million worth of land, houses and other property in foreign countries in the January-March period - sharply down from the US$85.1 million tallied during the fourth quarter of 2009.
The sharp quarter-on-quarter reduction is attributable to sluggish sentiment among investors, who remain reluctant to venture out to purchase expensive assets amid lingering global economic uncertainties, reported Yonhap news agency.
Bolstered by the government's move to ease related regulations, South Koreans' investments in overseas property had been growing sharply until the world was hit by the financial crisis in late 2008.
In 2003, local citizens bought a total of US$3.6 million worth of overseas property, but the amount jumped to US$743.5 million and US$1.17 billion in 2006 and 2007, respectively, according to the data.
The global financial crisis and resulting economic downturn worldwide, however, dampened market sentiment. Property transactions halved to US$514 million in 2008 and further declined to US$223 million last year, the data showed\. \-- Bernama
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
South Koreans' foreign property purchases sharply down in Q1
(SEOUL) South Koreans' purchases of overseas property declined during the first quarter from three months earlier as investor sentiment remained sluggish despite steadily improving global economic conditions, data showed yesterday.
According to the data provided by the Ministry of Strategy and Finance, South Koreans purchased a total of US$58.7 million worth of land, houses and other property in foreign countries in the January-March period - sharply down from the US$85.1 million tallied during the fourth quarter of 2009.
The sharp quarter-on-quarter reduction is attributable to sluggish sentiment among investors, who remain reluctant to venture out to purchase expensive assets amid lingering global economic uncertainties, reported Yonhap news agency.
Bolstered by the government's move to ease related regulations, South Koreans' investments in overseas property had been growing sharply until the world was hit by the financial crisis in late 2008.
In 2003, local citizens bought a total of US$3.6 million worth of overseas property, but the amount jumped to US$743.5 million and US$1.17 billion in 2006 and 2007, respectively, according to the data.
The global financial crisis and resulting economic downturn worldwide, however, dampened market sentiment. Property transactions halved to US$514 million in 2008 and further declined to US$223 million last year, the data showed\. \-- Bernama
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
CNA : HDB launching 2 residential sites in Punggol and Yishun
HDB launching 2 residential sites in Punggol and Yishun
By Mustafa Shafawi | Posted: 05 May 2010 1141 hrs
SINGAPORE: The Housing & Development Board (HDB) is launching two residential sites for sale by public tender.
The sites in Punggol and Yishun will yield some 1,215 units.
The Reserve List sites were successfully triggered for public tender two weeks ago.
The Punggol site is designated for Executive Condominium housing development, while the site in Yishun is for condominium housing.
These sites are just two of eight sites that have been successfully triggered from the Reserve List.
There are another 10 sites on the List which can potentially yield 4,280 homes still available for sale.
Together with the 2,925 dwelling units in the Confirmed List that are tendered or being put up for tender, the first half Government Land Sales Programme could potentially yield 10,550 housing units.
The government says it's the highest since the Reserve List / Confirmed List system started in 2001.
- CNA/il/jy
By Mustafa Shafawi | Posted: 05 May 2010 1141 hrs
SINGAPORE: The Housing & Development Board (HDB) is launching two residential sites for sale by public tender.
The sites in Punggol and Yishun will yield some 1,215 units.
The Reserve List sites were successfully triggered for public tender two weeks ago.
The Punggol site is designated for Executive Condominium housing development, while the site in Yishun is for condominium housing.
These sites are just two of eight sites that have been successfully triggered from the Reserve List.
There are another 10 sites on the List which can potentially yield 4,280 homes still available for sale.
Together with the 2,925 dwelling units in the Confirmed List that are tendered or being put up for tender, the first half Government Land Sales Programme could potentially yield 10,550 housing units.
The government says it's the highest since the Reserve List / Confirmed List system started in 2001.
- CNA/il/jy
ST : Boon Lay Way site attracts 14 bids
May 5, 2010
Boon Lay Way site attracts 14 bids
Keppel Land puts in top bid of $303m for plot next to Lakeside station
By Joyce Teo
MORE than a dozen eager developers have vied for the right to build homes on a choice residential plot at Boon Lay Way, next to Lakeside MRT station.
The red-hot tender attracted a whopping 14 bids - including all the industry heavyweights - with the top three coming in well above analysts' expectations.
Keppel Land (Mayfair) put in the top bid of $499 per sq ft per plot ratio (psf ppr), or $302.98 million.
This was about 15 per cent above the No. 2 bid of $433 psf ppr, or $263 million, from China firm MCC Land (Singapore).
Qingdao Construction (Singapore) came in third, with a bid of $256.78 million, or $422.9 psf ppr.
Property experts had earlier tipped a wide range of possible bids, from as low as $260 psf ppr to $420 psf ppr. They had largely expected the units to sell for below $800 psf.
Other bidders included MCL Land, Far East Organization, Sing Holdings, Allgreen Properties, GuocoLand and Ho Bee Investment. Property giant CapitaLand's Cove Residential put in the lowest bid of $273 psf ppr, or $165.8 million.
The successful bidder will be announced at a later date, said the Urban Redevelopment Authority.
The 99-year leasehold plot is about 1.61ha, and could yield about 525 units.
Property experts estimate the break-even level of units on the site at $800 psf to $850 psf, based on the top bid.
This is already above average transaction prices of most condominiums in the vicinity, such as Caspian and Parc Vista.
Caspian has been selling for $650 psf to $800 psf in the subsale market in the past four months, while units in The Lakeshore have been sold at a slightly higher $680 psf to $900 psf, according to CBRE Research.
Its executive director, Mr Li Hiaw Ho, said: 'Assuming the residential market continues its present state of activity and growth, the future project on this site could fetch an average price of $900 psf to $950 psf by early next year.'
He is projecting a possible break-even level of $830 psf to $850 psf for the project.
Mr Li said the Boon Lay Way location will attract upgraders from nearby private and public housing estates as well as employees from surrounding industrial employment centres and Nanyang Technological University. Key attractions are that it is close to Lakeside MRT station and enjoys an unblocked view of Jurong Lake, among other attributes, he said.
DTZ's head of South-east Asia research, Ms Chua Chor Hoon, said: 'The strong tender results reflect the growing popularity of the area.
'Sites that are close to MRT stations are still popular. This one is more so because plans for Jurong regional centre are starting to take shape.'
The site is near the Jurong Lake District, which is to be transformed into a world-class leisure destination, as well as Jurong Gateway, which is earmarked to become the largest commercial hub outside the city centre.
Still, even allowing for the site's many attributes, the tender had attracted a surprisingly high number of bids, indicating that developers in Singapore are still very hungry for development sites, especially those located near MRT stations, said Ngee Ann Polytechnic real estate lecturer Nicholas Mak.
'For a suburban development site, there is a significantly high number of condominium developments around the subject site, which could contribute to the potential supply of resale units,' he said.
But top bidders did not appear to be deterred by this, which shows they are very confident of attracting buyers, he said.
He said the strong demand among developers for land in Boon Lay is also a signal to the Government that it should include another major condo site in this area in its next land sales programme.
The Boon Lay Way site was launched for public tender in late March, together with two other sites.
It was on the confirmed list, whereby sites are put up for sale according to a fixed schedule of dates, regardless of developers' interest.
joyceteo@sph.com.sg
Boon Lay Way site attracts 14 bids
Keppel Land puts in top bid of $303m for plot next to Lakeside station
By Joyce Teo
MORE than a dozen eager developers have vied for the right to build homes on a choice residential plot at Boon Lay Way, next to Lakeside MRT station.
The red-hot tender attracted a whopping 14 bids - including all the industry heavyweights - with the top three coming in well above analysts' expectations.
Keppel Land (Mayfair) put in the top bid of $499 per sq ft per plot ratio (psf ppr), or $302.98 million.
This was about 15 per cent above the No. 2 bid of $433 psf ppr, or $263 million, from China firm MCC Land (Singapore).
Qingdao Construction (Singapore) came in third, with a bid of $256.78 million, or $422.9 psf ppr.
Property experts had earlier tipped a wide range of possible bids, from as low as $260 psf ppr to $420 psf ppr. They had largely expected the units to sell for below $800 psf.
Other bidders included MCL Land, Far East Organization, Sing Holdings, Allgreen Properties, GuocoLand and Ho Bee Investment. Property giant CapitaLand's Cove Residential put in the lowest bid of $273 psf ppr, or $165.8 million.
The successful bidder will be announced at a later date, said the Urban Redevelopment Authority.
The 99-year leasehold plot is about 1.61ha, and could yield about 525 units.
Property experts estimate the break-even level of units on the site at $800 psf to $850 psf, based on the top bid.
This is already above average transaction prices of most condominiums in the vicinity, such as Caspian and Parc Vista.
Caspian has been selling for $650 psf to $800 psf in the subsale market in the past four months, while units in The Lakeshore have been sold at a slightly higher $680 psf to $900 psf, according to CBRE Research.
Its executive director, Mr Li Hiaw Ho, said: 'Assuming the residential market continues its present state of activity and growth, the future project on this site could fetch an average price of $900 psf to $950 psf by early next year.'
He is projecting a possible break-even level of $830 psf to $850 psf for the project.
Mr Li said the Boon Lay Way location will attract upgraders from nearby private and public housing estates as well as employees from surrounding industrial employment centres and Nanyang Technological University. Key attractions are that it is close to Lakeside MRT station and enjoys an unblocked view of Jurong Lake, among other attributes, he said.
DTZ's head of South-east Asia research, Ms Chua Chor Hoon, said: 'The strong tender results reflect the growing popularity of the area.
'Sites that are close to MRT stations are still popular. This one is more so because plans for Jurong regional centre are starting to take shape.'
The site is near the Jurong Lake District, which is to be transformed into a world-class leisure destination, as well as Jurong Gateway, which is earmarked to become the largest commercial hub outside the city centre.
Still, even allowing for the site's many attributes, the tender had attracted a surprisingly high number of bids, indicating that developers in Singapore are still very hungry for development sites, especially those located near MRT stations, said Ngee Ann Polytechnic real estate lecturer Nicholas Mak.
'For a suburban development site, there is a significantly high number of condominium developments around the subject site, which could contribute to the potential supply of resale units,' he said.
But top bidders did not appear to be deterred by this, which shows they are very confident of attracting buyers, he said.
He said the strong demand among developers for land in Boon Lay is also a signal to the Government that it should include another major condo site in this area in its next land sales programme.
The Boon Lay Way site was launched for public tender in late March, together with two other sites.
It was on the confirmed list, whereby sites are put up for sale according to a fixed schedule of dates, regardless of developers' interest.
joyceteo@sph.com.sg
ST : STC set for property expansion
May 5, 2010
STC set for property expansion
MAINBOARD-listed Straits Trading Company (STC) is on the lookout for suitable acquisitions in a bid to expand its property business.
Chief executive officer of the firm's property arm, Mr Eric Teng, told The Straits Times that STC was looking for opportunities to purchase existing residential, office and retail property in Singapore, Malaysia, Australia and Britain.
'Our property arm has a strong focus on lifestyle, and we will be developing properties such as strata-landed residential homes,' he said at the official opening of the Straits Trading Building yesterday.
The 28-storey tower which was completed in November last year took two years to build and is located on the same site as the previous 21-storey building, itself completed in 1972.
The development, which has a lettable area of about 160,000 sq feet, has achieved 95 per cent occupancy.
STC's real estate assets also include four developed bungalows and five plots of bungalow land in Cable and Nathan Roads, the 38-unit Gallop Green condominium, and a tract of land close to one million square feet in Butterworth, Penang.
'Just as the old Straits Trading Building had to make way for this new building, the Straits Trading Company has had to evolve, transform and reinvent itself to fit into the new business landscape,' said STC executive chairman Chew Gek Khim.
Guest-of-honour Teo Chee Hean, Deputy Prime Minister and Minister for Defence, unveiled a commemorative tin ingot to officially open the new building.
STC, the Tan Chin Tuan Foundation and 34 business partners donated more than $330,000 to three adopted charities and the Straits Times School Pocket Money Fund to mark the building's official opening.
JESSICA CHEAM
DPM Teo (centre) and STC's Ms Chew Gek Khim presenting a donation to the ST School Pocket Money Fund to Mr Peter Khoo of SPH at the opening of the Straits Trading Building yesterday. -- PHOTO: STRAITS TRADING
STC set for property expansion
MAINBOARD-listed Straits Trading Company (STC) is on the lookout for suitable acquisitions in a bid to expand its property business.
Chief executive officer of the firm's property arm, Mr Eric Teng, told The Straits Times that STC was looking for opportunities to purchase existing residential, office and retail property in Singapore, Malaysia, Australia and Britain.
'Our property arm has a strong focus on lifestyle, and we will be developing properties such as strata-landed residential homes,' he said at the official opening of the Straits Trading Building yesterday.
The 28-storey tower which was completed in November last year took two years to build and is located on the same site as the previous 21-storey building, itself completed in 1972.
The development, which has a lettable area of about 160,000 sq feet, has achieved 95 per cent occupancy.
STC's real estate assets also include four developed bungalows and five plots of bungalow land in Cable and Nathan Roads, the 38-unit Gallop Green condominium, and a tract of land close to one million square feet in Butterworth, Penang.
'Just as the old Straits Trading Building had to make way for this new building, the Straits Trading Company has had to evolve, transform and reinvent itself to fit into the new business landscape,' said STC executive chairman Chew Gek Khim.
Guest-of-honour Teo Chee Hean, Deputy Prime Minister and Minister for Defence, unveiled a commemorative tin ingot to officially open the new building.
STC, the Tan Chin Tuan Foundation and 34 business partners donated more than $330,000 to three adopted charities and the Straits Times School Pocket Money Fund to mark the building's official opening.
JESSICA CHEAM
DPM Teo (centre) and STC's Ms Chew Gek Khim presenting a donation to the ST School Pocket Money Fund to Mr Peter Khoo of SPH at the opening of the Straits Trading Building yesterday. -- PHOTO: STRAITS TRADING
ST : Red flags over China's hot property market
May 5, 2010
Red flags over China's hot property market
But Beijing is actively taking steps to prevent the economy from overheating
By Gabriel Chen
IS CHINA'S economy overheating and headed for a crash?
A growing number of experts are flagging this possibility, and the Chinese government has been actively moving to pre-empt any such calamity, amid double-digit economic growth.
For instance, the People's Bank of China has raised the reserve requirement ratio - the proportion of lenders' deposits that must be kept at the central bank - three times since the start of this year. This cuts the funds available for lending.
Down payment and mortgage rates for some home buyers have been hiked. New apartment purchases are now limited to one per family. And commercial banks have been asked to suspend third-home loans.
Analysts say these measures are a signal that Beijing is growing concerned. After all, it was the fallout from the United States real estate market crash that brought the world's largest economy to its knees and set off the global financial crisis.
In late December, Chinese Premier Wen Jiabao made a widely publicised comment that 'property prices have risen too quickly'.
Housing prices have risen further since then. While poor data makes it tough to be sure about trends, Chinese house prices in the big cities are generally up about 12 per cent compared to a year ago.
Dr Marc Faber, publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong that China's economy may crash within a year.
'The market is telling you that something is not quite right,' Dr Faber said. 'The Chinese economy is going to slow down regardless. It is more likely that we'll even have a crash some time in the next nine to 12 months.'
Dr Faber is not the only China bear out there. Former Morgan Stanley star economist Andy Xie has cautioned China's property market is a massive bubble. 'The longer the bubble lasts, the more damage it will do to the economy,' Mr Xie said last month.
But optimists counter that Chinese growth is broad-based enough to more than offset risks associated with the bursting of any asset bubbles that are forming in areas such as property.
Mr Joseph Tan, the Singapore-based chief economist for Asia at Credit Suisse Group, said China's growth has not depended only on the red-hot property sector.
Growth has also been driven by the solid recovery in exports, improvement in private consumption, as well as infrastructure and retail spending. 'Even if China's property market crashes - which I find it hard to accept - I don't see it shaving off more than three percentage points of China's GDP,' Mr Tan said.
Mr Thomas Kaegi, UBS director of wealth management research, said that in certain segments of the Chinese property market, there is cause for concern, where prices have run ahead of fundamentals. However, the run-up is mostly in major cities, and in certain property segments, he noted.
Chinese consumers as a whole, he reckons, are also not overstretched. 'If you look at affordability issue on a countrywide basis, incomes have risen more or less in line with property prices, so I fail to see the case for a countrywide property bubble in China,' he added.
Still, the measures taken by Beijing so far have impacted market sentiment. The Shanghai Composite dived 7.7 per cent last month, the biggest decline since January. It has slumped 13 per cent this year, the world's third-worst performer.
'Chinese markets are down because of policy tightening. Policymakers are pulling at regular intervals, and focusing on the property sector,' said Barclays Wealth Asia strategist Manpreet Gill.
So what next? Veteran investor Jim Rogers told The Straits Times the real estate bubble developed in China is going to pop, but it is unclear whether the economy winds up in a crash or a soft landing.
Others think that the best way to deflate the property bubble is through an interest rate hike.
Mr Xie has said China has to raise interest rates steadily if it wants to achieve a 'soft landing' from the property bubble - if possible, by 2 percentage points this year, another 3 percentage points next year, and more rate hikes in 2012.
gabrielc@sph.com.sg
--------------------------------------------------------------------------------
Optimists counter that Chinese growth is broad-based enough to more than offset risks associated with the bursting of any asset bubbles that are forming in areas such as property... Growth has also been driven by the solid recovery in exports, improvement in private consumption, as well as infrastructure and retail spending.
Red flags over China's hot property market
But Beijing is actively taking steps to prevent the economy from overheating
By Gabriel Chen
IS CHINA'S economy overheating and headed for a crash?
A growing number of experts are flagging this possibility, and the Chinese government has been actively moving to pre-empt any such calamity, amid double-digit economic growth.
For instance, the People's Bank of China has raised the reserve requirement ratio - the proportion of lenders' deposits that must be kept at the central bank - three times since the start of this year. This cuts the funds available for lending.
Down payment and mortgage rates for some home buyers have been hiked. New apartment purchases are now limited to one per family. And commercial banks have been asked to suspend third-home loans.
Analysts say these measures are a signal that Beijing is growing concerned. After all, it was the fallout from the United States real estate market crash that brought the world's largest economy to its knees and set off the global financial crisis.
In late December, Chinese Premier Wen Jiabao made a widely publicised comment that 'property prices have risen too quickly'.
Housing prices have risen further since then. While poor data makes it tough to be sure about trends, Chinese house prices in the big cities are generally up about 12 per cent compared to a year ago.
Dr Marc Faber, publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong that China's economy may crash within a year.
'The market is telling you that something is not quite right,' Dr Faber said. 'The Chinese economy is going to slow down regardless. It is more likely that we'll even have a crash some time in the next nine to 12 months.'
Dr Faber is not the only China bear out there. Former Morgan Stanley star economist Andy Xie has cautioned China's property market is a massive bubble. 'The longer the bubble lasts, the more damage it will do to the economy,' Mr Xie said last month.
But optimists counter that Chinese growth is broad-based enough to more than offset risks associated with the bursting of any asset bubbles that are forming in areas such as property.
Mr Joseph Tan, the Singapore-based chief economist for Asia at Credit Suisse Group, said China's growth has not depended only on the red-hot property sector.
Growth has also been driven by the solid recovery in exports, improvement in private consumption, as well as infrastructure and retail spending. 'Even if China's property market crashes - which I find it hard to accept - I don't see it shaving off more than three percentage points of China's GDP,' Mr Tan said.
Mr Thomas Kaegi, UBS director of wealth management research, said that in certain segments of the Chinese property market, there is cause for concern, where prices have run ahead of fundamentals. However, the run-up is mostly in major cities, and in certain property segments, he noted.
Chinese consumers as a whole, he reckons, are also not overstretched. 'If you look at affordability issue on a countrywide basis, incomes have risen more or less in line with property prices, so I fail to see the case for a countrywide property bubble in China,' he added.
Still, the measures taken by Beijing so far have impacted market sentiment. The Shanghai Composite dived 7.7 per cent last month, the biggest decline since January. It has slumped 13 per cent this year, the world's third-worst performer.
'Chinese markets are down because of policy tightening. Policymakers are pulling at regular intervals, and focusing on the property sector,' said Barclays Wealth Asia strategist Manpreet Gill.
So what next? Veteran investor Jim Rogers told The Straits Times the real estate bubble developed in China is going to pop, but it is unclear whether the economy winds up in a crash or a soft landing.
Others think that the best way to deflate the property bubble is through an interest rate hike.
Mr Xie has said China has to raise interest rates steadily if it wants to achieve a 'soft landing' from the property bubble - if possible, by 2 percentage points this year, another 3 percentage points next year, and more rate hikes in 2012.
gabrielc@sph.com.sg
--------------------------------------------------------------------------------
Optimists counter that Chinese growth is broad-based enough to more than offset risks associated with the bursting of any asset bubbles that are forming in areas such as property... Growth has also been driven by the solid recovery in exports, improvement in private consumption, as well as infrastructure and retail spending.
BT : KepLand bid tops tender for Lakeside plot
Business Times - 05 May 2010
KepLand bid tops tender for Lakeside plot
Unit places bid of $498.98 per sq ft of potential gross floor area
By KALPANA RASHIWALA
IT WAS an interesting tender result yesterday for a 99-year leasehold private condominium plot near Lakeside MRT Station, with two listed property groups in the Temasek stable emerging at both ends of the table of bidders.
A unit of Keppel Land placed the top bid of $498.98 per square foot of potential gross floor area while a unit of CapitaLand was the lowest bidder. Its bid of $273 psf per plot ratio (psf ppr) was about half of KepLand's bid.
The highest offer from KepLand was significantly above market expectations and 15.2 per cent higher than the second highest offer, from a unit of Metallurgical Corporation of China.
Yesterday's tender, conducted by Urban Redevelopment Authority, drew a total 14 bids, reflecting developers' continuing hunger for land.
Analysts' estimates of the breakeven cost for a new condo project based on KepLand's bid price range from $800-870 psf. A property developer, who reckons KepLand will break even at at about $870 psf, guesses that the developer would be eyeing an average selling price of about $1,000 psf.
While that exceeds current pricing in the area, further price appreciation could allow KepLand to achieve such a price level by the time it is ready to launch the project next year, especially if it adopts the tried-and-tested industry formula of building a greater proportion of smallish units to achieve a higher per square foot pricing.
The 1.6-hectare plot can be developed into about 525 units, according to an earlier release by URA but this figure would increase if KepLand opts to build a higher number of small units.
According to CB Richard Ellis, over the past four months, subsale units of The Caspian next door have been transacted at $650-800 psf. Resale units at The Lakeshore condo nearby have been trading at $680-900 psf.
'This location will attract upgraders from the nearby private and public housing estates as well as employees from the surrounding industrial employment centres and Nanyang Technological University,' CBRE executive director Li Hiaw Ho points out.
While the site tendered yesterday currently enjoys unobstructed views of Jurong Lake, this is not guaranteed in future as there is a state site just in front of it. 'When developed, it could block views at least on the lower levels of the proposed condo on the plot just tendered,' said a market watcher.
For KepLand, it will mark its first acquisition of a pure residential site in Singapore in six years.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
KepLand bid tops tender for Lakeside plot
Unit places bid of $498.98 per sq ft of potential gross floor area
By KALPANA RASHIWALA
IT WAS an interesting tender result yesterday for a 99-year leasehold private condominium plot near Lakeside MRT Station, with two listed property groups in the Temasek stable emerging at both ends of the table of bidders.
A unit of Keppel Land placed the top bid of $498.98 per square foot of potential gross floor area while a unit of CapitaLand was the lowest bidder. Its bid of $273 psf per plot ratio (psf ppr) was about half of KepLand's bid.
The highest offer from KepLand was significantly above market expectations and 15.2 per cent higher than the second highest offer, from a unit of Metallurgical Corporation of China.
Yesterday's tender, conducted by Urban Redevelopment Authority, drew a total 14 bids, reflecting developers' continuing hunger for land.
Analysts' estimates of the breakeven cost for a new condo project based on KepLand's bid price range from $800-870 psf. A property developer, who reckons KepLand will break even at at about $870 psf, guesses that the developer would be eyeing an average selling price of about $1,000 psf.
While that exceeds current pricing in the area, further price appreciation could allow KepLand to achieve such a price level by the time it is ready to launch the project next year, especially if it adopts the tried-and-tested industry formula of building a greater proportion of smallish units to achieve a higher per square foot pricing.
The 1.6-hectare plot can be developed into about 525 units, according to an earlier release by URA but this figure would increase if KepLand opts to build a higher number of small units.
According to CB Richard Ellis, over the past four months, subsale units of The Caspian next door have been transacted at $650-800 psf. Resale units at The Lakeshore condo nearby have been trading at $680-900 psf.
'This location will attract upgraders from the nearby private and public housing estates as well as employees from the surrounding industrial employment centres and Nanyang Technological University,' CBRE executive director Li Hiaw Ho points out.
While the site tendered yesterday currently enjoys unobstructed views of Jurong Lake, this is not guaranteed in future as there is a state site just in front of it. 'When developed, it could block views at least on the lower levels of the proposed condo on the plot just tendered,' said a market watcher.
For KepLand, it will mark its first acquisition of a pure residential site in Singapore in six years.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : The necessary evil of inventory
Business Times - 05 May 2010
MONEY MATTERS
The necessary evil of inventory
There is a carrying cost but that's the price to pay if the goal of policy makers is to have stable prices
By JOSEPH CHONG
IMAGINE the following announcement: 'Due to an administrative oversight, HDB has discovered 10,000 unsold completed apartments. The Housing Board intends to sell these gradually over the next three years.' What would the impact be on HDB resale prices?
I posed this scenario and question to quite a few on April 1 recently and the answer was quick and unanimous - it would stabilise HDB re-sale prices. The recent triumph surrounding the announcement that HDB had managed to sell 31,000 completed flats and had no more unsold inventory is misplaced. I believe it is a policy error not to carry any unsold inventory.
It should be official policy for HDB to always carry a minimum of unsold inventory. Without ready inventory to sell, HDB would not be able to meet any sudden surges in housing demand or compensate for demand misestimates.
Inventory and spare capacity are a necessary evil if the goal of policy makers is to have stable prices across various markets. Indeed, we see this in fiscal and monetary targeting across the world daily.
For example, central bankers and markets around the world watch the unemployment rate very closely. We want a rate as close as possible to NAIRU but not zero. NAIRU is the Non-Accelerating Inflation Rate of Unemployment. That is, a steady state unemployment rate above which inflation would fall and below which inflation would rise.
NAIRU in the US is estimated to be about 5 per cent. If unemployment falls too low, it invariably leads to a spiralling jump in prices and eventually a bust in the economy as interest rates rise to quench inflation. Yes, there is carry cost of having unemployed people but the cost of a recession is far worse.
This also applies to the argument from HDB that unsold flats have a carrying cost. What is good for HDB may be bad for the wider Singapore economy. Without the stabilising effect of unsold ready-to-stay inventory, volatile housing prices carry a far bigger cost for the economy. In any event, unsold flats can always be sold to reflect their holding costs. In an upturn when demand surges, these should still fly like hot cakes.
Indeed, evidence of this stabilising effect of unsold inventory can be seen in 2005 to 2007. Despite a surging economy then, HDB resale prices moved up more modestly than private property. Indeed, I would argue that carrying unsold inventory intentionally would also allow HDB to influence to some extent private property prices.
Oil as example
A very good example of the stabilising effects of spare inventory is Opec, in particular Saudi Arabia. Spare production capacity (inventory stored underground) of about 5 million barrels per day or about 6 per cent of global demand has allowed Opec to keep prices at around US$80 per barrel. Prices shot up to US$140 per barrel in 2007 because Opec ran out of spare capacity. And the markets knew that.
In business, we would love to carry zero inventory but this is not possible as demand surges cannot be predicted with absolute certainty. Even build-to-order firms such as Dell carry inventory! If we have nothing to sell when demand picks up, business goes to the competition. Here again, the cost of losing business outweighs the cost of carrying inventory.
Unfortunately, the topic of inventory and spare capacity is often poorly reported or analysed in the financial media. It is however crucially important. Changes in inventory affect the measurement of true GDP growth and corporate profits. Misunderstand this and you may end up investing in property or your business on fall premises.
For example, the US reported 'sterling' GDP growth of around 5.6 per cent for 1Q 2010. See chart from Moody's Economy.com which shows this impressive trajectory. Unfortunately, the breakdown of data shows that more than 3.5 per cent from this 5.6 per cent comes from re-stocking. That is, final demand, which is the true level of growth, was only 2 per cent.
Indeed, this is affirmed by other data points. Currently, US real retail sales (ex-autos and gasoline) are growing at about 2 to 2.5 per cent annually.
When demand started to recover in the second half of 2009, US firms did not ramp up production because they were uncertain of the future. They sold from existing inventories. Now that things have stabilised, inventory has to be re-built because the shelves are nearly empty.
Unfortunately, the latest ISM data shows that the pace of inventory rebuilding is far greater than the pace of new orders - meaning that production has to be throttled back in the second half of 2010. I expect US GDP growth to taper off to 2.5 per cent by the end of 2010 - the level of sustainable final demand.
The big jump in Singapore's 1Q 2010 GDP numbers, led by manufacturing, is very likely due to this re-stocking in the US. Once the US is through re-stocking, Singapore's GDP will taper off as well. Therefore, it is premature for any hikes in CPF.
Does it make sense to stipulate a wage increase for labour just because companies are re-stocking? I thought growth through productivity was all about growing one's wages from higher skills and global relevance.
The author is CEO of financial adviser New Independent. He welcomes feedback at josephchong@ni.com.sg. This article is for information only. Readers should seek independent advice before making any investment decisions
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Have more to spare: Without the stabilising effect of unsold ready-to-stay inventory of HDB flats, volatile housing prices carry a far bigger cost for the economy
MONEY MATTERS
The necessary evil of inventory
There is a carrying cost but that's the price to pay if the goal of policy makers is to have stable prices
By JOSEPH CHONG
IMAGINE the following announcement: 'Due to an administrative oversight, HDB has discovered 10,000 unsold completed apartments. The Housing Board intends to sell these gradually over the next three years.' What would the impact be on HDB resale prices?
I posed this scenario and question to quite a few on April 1 recently and the answer was quick and unanimous - it would stabilise HDB re-sale prices. The recent triumph surrounding the announcement that HDB had managed to sell 31,000 completed flats and had no more unsold inventory is misplaced. I believe it is a policy error not to carry any unsold inventory.
It should be official policy for HDB to always carry a minimum of unsold inventory. Without ready inventory to sell, HDB would not be able to meet any sudden surges in housing demand or compensate for demand misestimates.
Inventory and spare capacity are a necessary evil if the goal of policy makers is to have stable prices across various markets. Indeed, we see this in fiscal and monetary targeting across the world daily.
For example, central bankers and markets around the world watch the unemployment rate very closely. We want a rate as close as possible to NAIRU but not zero. NAIRU is the Non-Accelerating Inflation Rate of Unemployment. That is, a steady state unemployment rate above which inflation would fall and below which inflation would rise.
NAIRU in the US is estimated to be about 5 per cent. If unemployment falls too low, it invariably leads to a spiralling jump in prices and eventually a bust in the economy as interest rates rise to quench inflation. Yes, there is carry cost of having unemployed people but the cost of a recession is far worse.
This also applies to the argument from HDB that unsold flats have a carrying cost. What is good for HDB may be bad for the wider Singapore economy. Without the stabilising effect of unsold ready-to-stay inventory, volatile housing prices carry a far bigger cost for the economy. In any event, unsold flats can always be sold to reflect their holding costs. In an upturn when demand surges, these should still fly like hot cakes.
Indeed, evidence of this stabilising effect of unsold inventory can be seen in 2005 to 2007. Despite a surging economy then, HDB resale prices moved up more modestly than private property. Indeed, I would argue that carrying unsold inventory intentionally would also allow HDB to influence to some extent private property prices.
Oil as example
A very good example of the stabilising effects of spare inventory is Opec, in particular Saudi Arabia. Spare production capacity (inventory stored underground) of about 5 million barrels per day or about 6 per cent of global demand has allowed Opec to keep prices at around US$80 per barrel. Prices shot up to US$140 per barrel in 2007 because Opec ran out of spare capacity. And the markets knew that.
In business, we would love to carry zero inventory but this is not possible as demand surges cannot be predicted with absolute certainty. Even build-to-order firms such as Dell carry inventory! If we have nothing to sell when demand picks up, business goes to the competition. Here again, the cost of losing business outweighs the cost of carrying inventory.
Unfortunately, the topic of inventory and spare capacity is often poorly reported or analysed in the financial media. It is however crucially important. Changes in inventory affect the measurement of true GDP growth and corporate profits. Misunderstand this and you may end up investing in property or your business on fall premises.
For example, the US reported 'sterling' GDP growth of around 5.6 per cent for 1Q 2010. See chart from Moody's Economy.com which shows this impressive trajectory. Unfortunately, the breakdown of data shows that more than 3.5 per cent from this 5.6 per cent comes from re-stocking. That is, final demand, which is the true level of growth, was only 2 per cent.
Indeed, this is affirmed by other data points. Currently, US real retail sales (ex-autos and gasoline) are growing at about 2 to 2.5 per cent annually.
When demand started to recover in the second half of 2009, US firms did not ramp up production because they were uncertain of the future. They sold from existing inventories. Now that things have stabilised, inventory has to be re-built because the shelves are nearly empty.
Unfortunately, the latest ISM data shows that the pace of inventory rebuilding is far greater than the pace of new orders - meaning that production has to be throttled back in the second half of 2010. I expect US GDP growth to taper off to 2.5 per cent by the end of 2010 - the level of sustainable final demand.
The big jump in Singapore's 1Q 2010 GDP numbers, led by manufacturing, is very likely due to this re-stocking in the US. Once the US is through re-stocking, Singapore's GDP will taper off as well. Therefore, it is premature for any hikes in CPF.
Does it make sense to stipulate a wage increase for labour just because companies are re-stocking? I thought growth through productivity was all about growing one's wages from higher skills and global relevance.
The author is CEO of financial adviser New Independent. He welcomes feedback at josephchong@ni.com.sg. This article is for information only. Readers should seek independent advice before making any investment decisions
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Have more to spare: Without the stabilising effect of unsold ready-to-stay inventory of HDB flats, volatile housing prices carry a far bigger cost for the economy
BT : Fed transcripts stoke debate on interest rates
Business Times - 05 May 2010
Fed transcripts stoke debate on interest rates
They may also fuel discussion on Fed's role in housing crisis
(WASHINGTON) In 2004, the US Federal Reserve began a slow and steady march towards higher interest rates, a quarter-point at a time. Many economists have questioned whether the Fed's deliberate approach to tightening monetary policy, from exceptionally low rates in the aftermath of dot-com bust in 2000, allowed a dangerous housing bubble to develop.
On Friday, the Fed released 917 pages of transcripts of discussions among policymakers in 2004 that may provide new fodder for the debate on the Fed's role in the housing crisis, according to economists who have begun to study the materials.
Fed chairman Ben Bernanke has argued forcefully that lax regulation - in particular, a failure to rein in the growth of exotic mortgages and the accompanying decline in underwriting standards - was to blame for the bubble, not the Fed's setting of short-term interest rates.
Transcripts of the Federal Open Market Committee's eight meetings in 2004 - released on Friday under a Fed policy providing for annual release of the transcripts after a five-year lag - have offered support to both camps' claims.
The transcripts show that in early 2004, officials at the Fed, then led by Mr Bernanke's predecessor Alan Greenspan, faced a situation similar to the one they confront today.
Following the dot-com bust, the central bank had lowered its benchmark interest rate to an exceptionally low level - one per cent by June 2003 - as the economy muddled through what turned out to be a brief recession. For months, the Fed had been saying that interest rates would remain low for 'a considerable period'.
By January 2004, members of the committee hinted that an interest-rate increase was on the horizon. In May, that hint became a strong signal and in June, the Fed began a series of steady, incremental rate increases - 17 in total - that brought the signature fed funds rate to 5.25 per cent by June 2006.
Mr Bernanke, then a governor of the Fed, argued against dropping the 'considerable period' language, but his argument did not prevail at first.
'A good rule of thumb is to try to look as if you know what you're doing even if you're not entirely sure,' Mr Bernanke said at the January meeting, adding that the bond markets were not convinced that economic conditions merited a rate increase.
'I would rather wait until March and the presumption that we will see at least one good payroll number by then,' he said.
At the March 2004 meeting, the transcripts show, several Fed officials expressed strong concerns about housing.
'A number of folks are expressing growing concern about potential overbuilding and worrisome speculation in the real estate markets, especially in Florida,' said Jack Guynn, then the president of the Federal Reserve Bank of Atlanta.
'Entire condo projects and upscale residential lots are being pre-sold before any construction, with buyers freely admitting that they have no intention of occupying the units or building on the land but rather are counting on 'flipping' the properties - selling them quickly at higher prices.'
Later in that meeting, Mr Bernanke said the Fed was ill-equipped to try to identify asset bubbles, much less prick them. 'The history of using the monetary policy instrument rate for correcting financial imbalances is a very chequered one, to say the least.'
In the June 2004 meeting, Stephen Oliner, a Fed researcher, cautioned that housing prices appeared to be out of line.
'I don't want to leave the impression that we think there's a huge housing bubble,' Mr Oliner said. 'We believe a lot of the rise in house prices is rooted in fundamentals. But even after you account for the fundamentals, there's a part of the increase that is hard to explain.'
At that meeting, Mr Bernanke supported Mr Greenspan, saying it was best for the Fed to be 'embarking on a programme of gradual rate increases but remaining alert and ready to adjust in response to incoming information'.
By November 2004, with the tightening several months under way, policymakers were still uncertain about how to interpret the run-up in the housing market. Gary Stern, then president of the Minneapolis Fed, said that at a meeting the bank sponsored on housing activity, 'there was little overall concern about a bubble in house prices and little anticipation of a major correction in house prices in the near term'.
Henry Chappell, an economist at the University of South Carolina, said the transcripts demonstrated uncertainty above all.
'I'm not one to blame too much of what happened with the panic, crisis and recession on monetary policy,' Mr Chappell said. 'My feeling is the Fed can't control the price of housing. What it controls, over a long time frame and somewhat indirectly, is the average level of prices in the economy.' - NYT
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Fed transcripts stoke debate on interest rates
They may also fuel discussion on Fed's role in housing crisis
(WASHINGTON) In 2004, the US Federal Reserve began a slow and steady march towards higher interest rates, a quarter-point at a time. Many economists have questioned whether the Fed's deliberate approach to tightening monetary policy, from exceptionally low rates in the aftermath of dot-com bust in 2000, allowed a dangerous housing bubble to develop.
On Friday, the Fed released 917 pages of transcripts of discussions among policymakers in 2004 that may provide new fodder for the debate on the Fed's role in the housing crisis, according to economists who have begun to study the materials.
Fed chairman Ben Bernanke has argued forcefully that lax regulation - in particular, a failure to rein in the growth of exotic mortgages and the accompanying decline in underwriting standards - was to blame for the bubble, not the Fed's setting of short-term interest rates.
Transcripts of the Federal Open Market Committee's eight meetings in 2004 - released on Friday under a Fed policy providing for annual release of the transcripts after a five-year lag - have offered support to both camps' claims.
The transcripts show that in early 2004, officials at the Fed, then led by Mr Bernanke's predecessor Alan Greenspan, faced a situation similar to the one they confront today.
Following the dot-com bust, the central bank had lowered its benchmark interest rate to an exceptionally low level - one per cent by June 2003 - as the economy muddled through what turned out to be a brief recession. For months, the Fed had been saying that interest rates would remain low for 'a considerable period'.
By January 2004, members of the committee hinted that an interest-rate increase was on the horizon. In May, that hint became a strong signal and in June, the Fed began a series of steady, incremental rate increases - 17 in total - that brought the signature fed funds rate to 5.25 per cent by June 2006.
Mr Bernanke, then a governor of the Fed, argued against dropping the 'considerable period' language, but his argument did not prevail at first.
'A good rule of thumb is to try to look as if you know what you're doing even if you're not entirely sure,' Mr Bernanke said at the January meeting, adding that the bond markets were not convinced that economic conditions merited a rate increase.
'I would rather wait until March and the presumption that we will see at least one good payroll number by then,' he said.
At the March 2004 meeting, the transcripts show, several Fed officials expressed strong concerns about housing.
'A number of folks are expressing growing concern about potential overbuilding and worrisome speculation in the real estate markets, especially in Florida,' said Jack Guynn, then the president of the Federal Reserve Bank of Atlanta.
'Entire condo projects and upscale residential lots are being pre-sold before any construction, with buyers freely admitting that they have no intention of occupying the units or building on the land but rather are counting on 'flipping' the properties - selling them quickly at higher prices.'
Later in that meeting, Mr Bernanke said the Fed was ill-equipped to try to identify asset bubbles, much less prick them. 'The history of using the monetary policy instrument rate for correcting financial imbalances is a very chequered one, to say the least.'
In the June 2004 meeting, Stephen Oliner, a Fed researcher, cautioned that housing prices appeared to be out of line.
'I don't want to leave the impression that we think there's a huge housing bubble,' Mr Oliner said. 'We believe a lot of the rise in house prices is rooted in fundamentals. But even after you account for the fundamentals, there's a part of the increase that is hard to explain.'
At that meeting, Mr Bernanke supported Mr Greenspan, saying it was best for the Fed to be 'embarking on a programme of gradual rate increases but remaining alert and ready to adjust in response to incoming information'.
By November 2004, with the tightening several months under way, policymakers were still uncertain about how to interpret the run-up in the housing market. Gary Stern, then president of the Minneapolis Fed, said that at a meeting the bank sponsored on housing activity, 'there was little overall concern about a bubble in house prices and little anticipation of a major correction in house prices in the near term'.
Henry Chappell, an economist at the University of South Carolina, said the transcripts demonstrated uncertainty above all.
'I'm not one to blame too much of what happened with the panic, crisis and recession on monetary policy,' Mr Chappell said. 'My feeling is the Fed can't control the price of housing. What it controls, over a long time frame and somewhat indirectly, is the average level of prices in the economy.' - NYT
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
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