Source : The Straits Times, Dec 3, 2008
Its open economy among reasons cited by analysts, after group says US in recession since end-2007
SINGAPORE is likely to be the Asian economy that is worst affected by a United States recession, said economists. This is because it is one of the most open economies and has a large manufacturing sector.
They were commenting a day after the National Bureau of Economic Research (NBER) - a private, non-profit research body - concluded that the US has been in recession since December last year.
Unusually, the NBER does not define a recession as two straight quarters of shrinking economic output. Instead, it looks for a decline in economic activity, spread across the economy, and lasting more than a few months. The figures it uses include overall economic output, industrial production, payroll employment, personal incomes, and wholesale and retail trade.
CIMB-GK regional economist Song Seng Wun said that among Asian economies, Singapore and Hong Kong would feel the biggest impact from a US slump, as they are 'the most exposed, most trading-oriented, with the least shelter from domestic consumption'.
He added: 'Singapore also has a slice of manufacturing, unlike Hong Kong. We will get a double whammy from a slump in manufacturing and services.'
DBS Bank chief economist David Carbon said: 'Singapore and Hong Kong are bearing the brunt of the impact in Asia. Singapore is being hit as it is very small and extremely open.'
But he was quick to point out that the impact of a US recession on Asia is less significant than in previous downturns, as 'Asia is now more capable of standing on its own'.
According to IE Singapore, the US is Singapore's third-largest trading partner, with total trade hitting $88.2 billion last year.
Economists identified the technology sector, electronics sector and certain parts of the services sector as those that will be the most severely hit by the US downturn.
OCBC Bank economist Selena Ling said: 'It will be a bumpy ride going ahead for Singapore, especially for manufacturing and export-related industries.
'Moving forward, the services side will feel the impact of a slowdown, as we are talking about job and wage cuts.'
DBS economist Irvin Seah said manufacturing would be the worst hit, with electronics dragging down sectors such as precision engineering.
He added: 'Sentiment-driven sectors such as financial and real estate will be affected by the continued weakness in investor confidence, as will externally oriented services like tourism and hotels and restaurants.'
But Mr Song felt that there could be a silver lining for Singapore in the medium term. He said: 'There is still a lot of money out there looking to capitalise on the downturn. Singapore is seen as an attractive location to set up shop and go on a hunting prowl.'
But for now, it looks like mostly gloom and doom. Economists anticipate the fourth quarter of this year to be the worst for the US, with some predicting as much as a 5 per cent contraction.
Many of them believe the current downturn will be the most severe since the 1981-82 recession.
But some feel that the lower base numbers will provide room for an economic rebound next year.
The best-case scenario? Recovery in the first half of next year, with the end of recession in the second half.
OCBC's Ms Ling said: 'It will probably be a U- or L-shaped recovery. But we are not heading for a Great Depression kind of scenario due to proactive, more aggressive policy responses from the US government.'
However, some were more pessimistic, predicting that this could become the worst economic crisis since World War II.
Mr Jeffrey Frankel, a Harvard University economist who sits on the NBER's committee, told CNBC television: 'This is going to be probably a deep and long recession. It could be the worst post-war recession.'
Recession facts
WHY THE UNITED STATES IS IMPORTANT TO SINGAPORE
# The US is Singapore's third-largest trading partner by country.
# It is also Singapore's largest foreign investor by country.
# The US economy has a vital bearing on investor sentiment here, and affects the financial and real estate sectors.
KEY U.S. RECESSION FACTS
# The National Bureau of Economic Research said the US economy entered a recession in December last year, which would make it the longest contraction since 1982. The last time the US was in a recession was in 2001.
# If the recession lasts for another five months, it will become the longest since the Great Depression.
# The euro region and Japan both fell into a slump in the second quarter of this year, making it the first simultaneous recession in the three regions in the post-war era.
# The US economy shrank 0.5 per cent in the third quarter after expanding 2.8 per cent in the previous three months. Some economists predict that the US economy will contract by as much as 5 per cent in the current fourth quarter.
# Other economies officially in recession: Singapore, Hong Kong, Japan, New Zealand, Ireland, Italy, Germany and Britain.
Thursday, December 4, 2008
Property Slump In China Threatens Global Growth
Source : The Business Times, December 3, 2008
Building sector, the biggest driver of China's growth, employs 77m people
(SHANGHAI) House prices in Shanghai, Shenzhen and Guangzhou are plunging, and the global economy may grind almost to a halt next year because of it.
Ominous: Construction of homes, offices and factories fell at least 16.6% in October after rising 32.5% a year earlier, squeezing an economy that is already reeling from the fallout of recession in the US and Europe
Construction of homes, offices and factories fell at least 16.6 per cent in October after rising 32.5 per cent a year earlier, according to Macquarie Securities Ltd. That's squeezing an economy already slowed by recessions in the US, Japan and Europe that have cut demand for exports. Building is the biggest driver of China's expansion, contributing a quarter of fixed-asset investment and employing 77 million people.
The central bank cut its key interest rate by the most in 11 years last week and the government said 'forceful' measures were needed to arrest a faster-than-expected economic decline. Without more rate cuts and government spending, China is unlikely to contribute the 60 per cent of global growth Merrill Lynch forecasts for next year, further slowing the world economy.
'China is now at the heart of the global slowdown,' said Jim Walker, chief economist at Asianomics Ltd, an economic advisory firm in Hong Kong. 'It means that global growth is probably going to be dragged down close to zero next year.' Mr Walker, voted best regional economist in an Asiamoney magazine brokers' poll for 11 years through 2004 when he worked for CLSA Asia Pacific Markets, estimates China will grow zero to 4 per cent next year, with a 30 per cent chance of a contraction.
In 2005, China vaulted past the UK to become the world's fourth-largest economy, after expansion averaged 9.9 per cent annually for the previous 30 years. GDP has increased 69-fold since Deng Xiaoping began free market changes in 1978. China accounted for 27 per cent of global growth last year.
'The real estate sector has seen a particularly pronounced slowdown,' said Louis Kuijs, a senior economist at the World Bank in Beijing. 'Real estate investment growth is now close to zero.' China's export orders and output shrank in November by the most since records began as the global financial crisis sapped demand for the nation's toys, textiles and computers.
Exports and property together have contributed about half of the expansion in China's GDP, estimates Shanghai-based Andy Xie, an independent analyst who was formerly Morgan Stanley's chief Asia economist.
'That growth is gone,' he said. 'Can the government make it up with something else? It's going to be tough.'
Merrill's forecast of 1.5 per cent global growth next year is based on an 8.6 per cent expansion in China. The prediction on Nov 21 came 12 days after China announced a 4 trillion yuan (S$888.6 billion) stimulus plan, mostly for public works projects.
The government is trying to limit fallout from the slowdown for fear that rising unemployment may lead to social unrest. Police and security guards last week attempted to break up protests by fired workers in Guangdong province.
A second stimulus package to boost consumption may be imminent, the Beijing-based Economic Observer reported on Nov 24. Measures being considered include raising income-tax thresholds, higher salaries for state workers and increased subsidies for low-income groups, the newspaper said, citing people involved in discussion of the plan.
Shanghai house prices fell 19.5 per cent in the third quarter from the previous three months, according to real estate broker Savills. Declines in apartment values are accelerating in Shenzhen and Guangzhou, two of the fastest growing cities in Guangdong province, which produces 30 per cent of China's exports.
Construction will contract 30 per cent next year after expanding 9 per cent in the first three quarters of 2008, according to Macquarie Securities.
'The global financial crisis won't get China to zero per cent growth and neither will recession in developed economies,' said Tao Dong, chief Asia economist at Credit Suisse in Hong Kong. 'If there's a collapse in the property market that might do the job.' - Bloomberg
Building sector, the biggest driver of China's growth, employs 77m people
(SHANGHAI) House prices in Shanghai, Shenzhen and Guangzhou are plunging, and the global economy may grind almost to a halt next year because of it.
Ominous: Construction of homes, offices and factories fell at least 16.6% in October after rising 32.5% a year earlier, squeezing an economy that is already reeling from the fallout of recession in the US and EuropeConstruction of homes, offices and factories fell at least 16.6 per cent in October after rising 32.5 per cent a year earlier, according to Macquarie Securities Ltd. That's squeezing an economy already slowed by recessions in the US, Japan and Europe that have cut demand for exports. Building is the biggest driver of China's expansion, contributing a quarter of fixed-asset investment and employing 77 million people.
The central bank cut its key interest rate by the most in 11 years last week and the government said 'forceful' measures were needed to arrest a faster-than-expected economic decline. Without more rate cuts and government spending, China is unlikely to contribute the 60 per cent of global growth Merrill Lynch forecasts for next year, further slowing the world economy.
'China is now at the heart of the global slowdown,' said Jim Walker, chief economist at Asianomics Ltd, an economic advisory firm in Hong Kong. 'It means that global growth is probably going to be dragged down close to zero next year.' Mr Walker, voted best regional economist in an Asiamoney magazine brokers' poll for 11 years through 2004 when he worked for CLSA Asia Pacific Markets, estimates China will grow zero to 4 per cent next year, with a 30 per cent chance of a contraction.
In 2005, China vaulted past the UK to become the world's fourth-largest economy, after expansion averaged 9.9 per cent annually for the previous 30 years. GDP has increased 69-fold since Deng Xiaoping began free market changes in 1978. China accounted for 27 per cent of global growth last year.
'The real estate sector has seen a particularly pronounced slowdown,' said Louis Kuijs, a senior economist at the World Bank in Beijing. 'Real estate investment growth is now close to zero.' China's export orders and output shrank in November by the most since records began as the global financial crisis sapped demand for the nation's toys, textiles and computers.
Exports and property together have contributed about half of the expansion in China's GDP, estimates Shanghai-based Andy Xie, an independent analyst who was formerly Morgan Stanley's chief Asia economist.
'That growth is gone,' he said. 'Can the government make it up with something else? It's going to be tough.'
Merrill's forecast of 1.5 per cent global growth next year is based on an 8.6 per cent expansion in China. The prediction on Nov 21 came 12 days after China announced a 4 trillion yuan (S$888.6 billion) stimulus plan, mostly for public works projects.
The government is trying to limit fallout from the slowdown for fear that rising unemployment may lead to social unrest. Police and security guards last week attempted to break up protests by fired workers in Guangdong province.
A second stimulus package to boost consumption may be imminent, the Beijing-based Economic Observer reported on Nov 24. Measures being considered include raising income-tax thresholds, higher salaries for state workers and increased subsidies for low-income groups, the newspaper said, citing people involved in discussion of the plan.
Shanghai house prices fell 19.5 per cent in the third quarter from the previous three months, according to real estate broker Savills. Declines in apartment values are accelerating in Shenzhen and Guangzhou, two of the fastest growing cities in Guangdong province, which produces 30 per cent of China's exports.
Construction will contract 30 per cent next year after expanding 9 per cent in the first three quarters of 2008, according to Macquarie Securities.
'The global financial crisis won't get China to zero per cent growth and neither will recession in developed economies,' said Tao Dong, chief Asia economist at Credit Suisse in Hong Kong. 'If there's a collapse in the property market that might do the job.' - Bloomberg
Life After DPS Won't Be Crippling For Developers
Source : The Business Times, December 4, 2008
Study shows they can weather even 20% default rate by buyers under scheme
A NEW report, which looks at the potential impact if buyers who bought homes under the deferred payment scheme (DPS) choose to walk away from their deals, concludes that developers are not likely to be too badly hit even under a 20 per cent default scenario. The report by DBS Group Research captured the impact of defaults in projects expected to get their Temporary Occupation Permit (TOP) in 2009 on developers' earnings, operating cash flow, net gearing and interest cover. For this analysis, analyst Adrian Chua covered two default scenarios: 10 per cent and 20 per cent of all DPS units defaulting. Both scenarios assume the developers do not resell the default units within the year.
'Gearing ratios for the developers do not deteriorate significantly even under a 20 per cent default scenario,' Mr Chua concluded. 'Operating cash flow and earnings would come down (which is a given) but not to the extent where it leads to a negative operating cash flow or loss-making situation. Interest cover continues to be healthy.'
But among the developers, the smaller players would be more impacted in terms of proportional decline in earnings and interest cover, the report concludes. It investigated the impact of defaults on six developers - CapitaLand, City Developments, Ho Bee Investment, Keppel Land, UOL Group and Wing Tai. Allgreen Properties, SC Global Developments and United Industrial Corp were excluded as they have no projects currently expected to obtain TOP in 2009. Wheelock Properties, which did not offer the DPS, was also left out.
The DPS has been a sticking point between analysts and developers. Many analysts have predicted that large numbers of homebuyers could walk away from their purchases once projects obtain TOP, when the bulk of the purchase price is due under the DPS.
Developers dispute this view. Developers DBS Research spoke to have maintained the likelihood of default risk is low, given that speculation in 2006-07 did not reach the property bubble levels of 1995-96, the firm said in the note.
But part of the speculative intention could be masked under the DPS, which was not part of the property landscape back in 1995-96, noted Mr Chua. 'As such, the real speculative activity in the market could become completely apparent only upon TOP of these units,' he said.
In addition, the recent property upcycle also saw active participation by foreign buyers, which adds an additional unknown to the equation: whether these buyers will follow through on their payments upon TOP. The unwinding of global financial markets and the spectre of a prolonged economic downturn and asset devaluation could force these foreign buyers to default on their property purchases here, Mr Chua said.
The research note concluded that while a 20 per cent default is not likely to hurt developers too much, the effect of DPS defaults is just one of a few challenges facing the developers in 2009. Certainly, an asset devaluation scenario in line with declining capital values could potentially bring down developers' book value and correspondingly increase their gearing, the note said.
'We remain cautious over the short term for the residential developers, in light of a lack of catalysts from the physical market and poor economic sentiment,' said Mr Chua.
Study shows they can weather even 20% default rate by buyers under scheme
A NEW report, which looks at the potential impact if buyers who bought homes under the deferred payment scheme (DPS) choose to walk away from their deals, concludes that developers are not likely to be too badly hit even under a 20 per cent default scenario. The report by DBS Group Research captured the impact of defaults in projects expected to get their Temporary Occupation Permit (TOP) in 2009 on developers' earnings, operating cash flow, net gearing and interest cover. For this analysis, analyst Adrian Chua covered two default scenarios: 10 per cent and 20 per cent of all DPS units defaulting. Both scenarios assume the developers do not resell the default units within the year.
'Gearing ratios for the developers do not deteriorate significantly even under a 20 per cent default scenario,' Mr Chua concluded. 'Operating cash flow and earnings would come down (which is a given) but not to the extent where it leads to a negative operating cash flow or loss-making situation. Interest cover continues to be healthy.'
But among the developers, the smaller players would be more impacted in terms of proportional decline in earnings and interest cover, the report concludes. It investigated the impact of defaults on six developers - CapitaLand, City Developments, Ho Bee Investment, Keppel Land, UOL Group and Wing Tai. Allgreen Properties, SC Global Developments and United Industrial Corp were excluded as they have no projects currently expected to obtain TOP in 2009. Wheelock Properties, which did not offer the DPS, was also left out.
The DPS has been a sticking point between analysts and developers. Many analysts have predicted that large numbers of homebuyers could walk away from their purchases once projects obtain TOP, when the bulk of the purchase price is due under the DPS.
Developers dispute this view. Developers DBS Research spoke to have maintained the likelihood of default risk is low, given that speculation in 2006-07 did not reach the property bubble levels of 1995-96, the firm said in the note.
But part of the speculative intention could be masked under the DPS, which was not part of the property landscape back in 1995-96, noted Mr Chua. 'As such, the real speculative activity in the market could become completely apparent only upon TOP of these units,' he said.
In addition, the recent property upcycle also saw active participation by foreign buyers, which adds an additional unknown to the equation: whether these buyers will follow through on their payments upon TOP. The unwinding of global financial markets and the spectre of a prolonged economic downturn and asset devaluation could force these foreign buyers to default on their property purchases here, Mr Chua said.
The research note concluded that while a 20 per cent default is not likely to hurt developers too much, the effect of DPS defaults is just one of a few challenges facing the developers in 2009. Certainly, an asset devaluation scenario in line with declining capital values could potentially bring down developers' book value and correspondingly increase their gearing, the note said.
'We remain cautious over the short term for the residential developers, in light of a lack of catalysts from the physical market and poor economic sentiment,' said Mr Chua.
Govt Releases 10 New Sites For Foreign Worker Dorms
Source : The Business Times, December 4, 2008
MND: Move made to relieve overcrowding from housing shortage
THE Ministry of National Development has announced that 10 new sites will be made available to build temporary foreign worker dormitories.
They comprise three vacant state properties and seven vacant state lands, which could yield around 20,000 bed spaces. The sites are not within close vicinity of public housing.
The dormitories are part of a government effort to provide proper housing for foreign workers while more purpose-built dormitories come on stream over the next few years. The move will help to relieve the current overcrowding in residential premises arising from a shortage of foreign worker accommodation, which could pose public health and fire safety risks.
The vacant state properties are: the former Queenstown polyclinic building, the former CAAS office, and the existing CPG Corporation Airport Development Division. The seven vacant state lands are at Mandai Road, Old Chua Kang Road, Hougang Avenue 3, Seletar West Farmway, Jurong Road Parcel 1, Jurong Road Parcel 2 and Kim Chuan Road. The dormitories on the Queenstown and former CAAS premises will be operational in 3-6 months.
There has been an influx of foreign workers involved in building important infrastructural projects. National Development Minister Mah Bow Tan, referring to the burgeoning foreign worker population here, has said before that Singaporeans must 'be prepared to see them (foreign workers) and share with them our common spaces'.
Meanwhile, MND has consulted the respective advisers and grassroots organisations on each of the temporary dormitory sites over the past two months, and will implement measures to address any issue arising from the dormitory developments.
Furthermore, the Singapore Police Force will adopt the necessary measures to prevent and detect crimes in the neighbourhood. It will also work with community stakeholders to initiate safety and security projects where appropriate.
MND: Move made to relieve overcrowding from housing shortage
THE Ministry of National Development has announced that 10 new sites will be made available to build temporary foreign worker dormitories.
They comprise three vacant state properties and seven vacant state lands, which could yield around 20,000 bed spaces. The sites are not within close vicinity of public housing.
The dormitories are part of a government effort to provide proper housing for foreign workers while more purpose-built dormitories come on stream over the next few years. The move will help to relieve the current overcrowding in residential premises arising from a shortage of foreign worker accommodation, which could pose public health and fire safety risks.
The vacant state properties are: the former Queenstown polyclinic building, the former CAAS office, and the existing CPG Corporation Airport Development Division. The seven vacant state lands are at Mandai Road, Old Chua Kang Road, Hougang Avenue 3, Seletar West Farmway, Jurong Road Parcel 1, Jurong Road Parcel 2 and Kim Chuan Road. The dormitories on the Queenstown and former CAAS premises will be operational in 3-6 months.
There has been an influx of foreign workers involved in building important infrastructural projects. National Development Minister Mah Bow Tan, referring to the burgeoning foreign worker population here, has said before that Singaporeans must 'be prepared to see them (foreign workers) and share with them our common spaces'.
Meanwhile, MND has consulted the respective advisers and grassroots organisations on each of the temporary dormitory sites over the past two months, and will implement measures to address any issue arising from the dormitory developments.
Furthermore, the Singapore Police Force will adopt the necessary measures to prevent and detect crimes in the neighbourhood. It will also work with community stakeholders to initiate safety and security projects where appropriate.
Developers Head Into Crisis With More Cash
Source : The Business Times, December 4, 2008
Gearing improves as developers pare borrowings, increase cash held from divestments
Developers have entered the latest slump in much better shape than they were in during the last property downturn in 2001, a comparison of their cash positions and debt-to-equity ratios then and now shows.
In fact, between the second and third quarters this year, some developers worked to better their gearing ratios. 'Among the larger-cap developers we track, most reported stronger balance sheets at end-Q3 2008,' said OCBC Investment Research analyst Foo Sze Ming.
'On average, the net debt-equity ratio had come down from 0.52 times in Q2 to 0.49 times in Q3. And the improvement was generally attributable to a stronger equity base, paring of borrowings and an increase in cash held from divestments.'
CapitaLand, City Developments and GuocoLand all cut their debt-to-equity ratios in Q3, OCBC's data shows.
The same trend holds true when comparing developers' financial positions at end-2001 and Q3 2008. Data gathered by DMG & Partners on selected developers shows most companies now have smaller debt-to- equity ratios. They also have more cash on hand. 'They are definitely stronger this time around,' said DMG & Partners analyst Brandon Lee.
Singapore's big three listed developers - CapitaLand, City Developments and Keppel Land - exemplify this trend. At end-2001, CapitaLand had $1.9 billion of cash and a gearing of 0.87 times. Now, it has a whopping $4.2 billion in cash and a gearing ratio of 0.51 times. Similarly, City- Dev has increased its cash holding from $701.8 million to $813.3 million and cut its gearing from 0.8 times to 0.46 times. KepLand has also increased its cash holding, from $120.9 million to $663.4 million, and cut its gearing from 1.33 times to 0.54 times.
Property companies are expected to continue to try to improve their cash balances and reduce gearing over the next few quarters. SC Global Developments, for example, recently drew $100 million from reserve facilities to boost cash on hand. But the pace of divestment is expected to slow as buyers get cold feet in the poor economic climate.
Analysts reckon things do not look as bad as feared for developers for another reason - in the Q3 earnings reporting season, much- feared provisions for landbanks acquired at high prices, which analysts had predicted, did not materialise.
Analysts have changed their tune and now expect developers to make provisions only in the second half of 2009, or even later. Some also reckon the provisions could be less than what the market has already priced in.
In 2001 and 2002, several developers, including CapitaLand, CityDev and Keppel Land, made massive write-downs on their Singapore residential landbanks, which hit their results badly. But this time around, the write-offs may be smaller, some analysts say.
Keppel Land was one of the first developers to make provisions in 2001, announcing $455 million of write-downs in the value of its residential landbank in November that year.
But the risk of a landbank write-down in the current downturn is lower for KepLand because the company did not buy any land in Singapore last year and its current landbank is carried in its books at relatively low cost, said OCBC's Mr Foo.
CIMB analyst Donald Chua said: 'We are not seeing provisions yet because prices have not fallen that much yet. Developers are probably waiting to see how the market pans out next year.' In light of this, provisions are unlikely for Q4 unless things take a turn for the worse, Mr Chua said.
In the 2000-2003 property downturn, the residential price index for private homes recorded a quarter-on-quarter drop in Q3 2000. However, the provisions and write-offs only came towards the end of 2001. This time around, the quarter-on-quarter dip in the price index appeared only in Q3 2008, so provisions are only expected around end-2009.
Downward revaluations of investment properties are still expected in Q4 2008 when developers do their yearly valuations. And for many developers, landbank write-downs will definitely take place at some point in time if 'things keep going this way', an analyst said.
Gearing improves as developers pare borrowings, increase cash held from divestments
Developers have entered the latest slump in much better shape than they were in during the last property downturn in 2001, a comparison of their cash positions and debt-to-equity ratios then and now shows.
In fact, between the second and third quarters this year, some developers worked to better their gearing ratios. 'Among the larger-cap developers we track, most reported stronger balance sheets at end-Q3 2008,' said OCBC Investment Research analyst Foo Sze Ming.
'On average, the net debt-equity ratio had come down from 0.52 times in Q2 to 0.49 times in Q3. And the improvement was generally attributable to a stronger equity base, paring of borrowings and an increase in cash held from divestments.'
CapitaLand, City Developments and GuocoLand all cut their debt-to-equity ratios in Q3, OCBC's data shows.
The same trend holds true when comparing developers' financial positions at end-2001 and Q3 2008. Data gathered by DMG & Partners on selected developers shows most companies now have smaller debt-to- equity ratios. They also have more cash on hand. 'They are definitely stronger this time around,' said DMG & Partners analyst Brandon Lee.
Singapore's big three listed developers - CapitaLand, City Developments and Keppel Land - exemplify this trend. At end-2001, CapitaLand had $1.9 billion of cash and a gearing of 0.87 times. Now, it has a whopping $4.2 billion in cash and a gearing ratio of 0.51 times. Similarly, City- Dev has increased its cash holding from $701.8 million to $813.3 million and cut its gearing from 0.8 times to 0.46 times. KepLand has also increased its cash holding, from $120.9 million to $663.4 million, and cut its gearing from 1.33 times to 0.54 times.
Property companies are expected to continue to try to improve their cash balances and reduce gearing over the next few quarters. SC Global Developments, for example, recently drew $100 million from reserve facilities to boost cash on hand. But the pace of divestment is expected to slow as buyers get cold feet in the poor economic climate.
Analysts reckon things do not look as bad as feared for developers for another reason - in the Q3 earnings reporting season, much- feared provisions for landbanks acquired at high prices, which analysts had predicted, did not materialise.
Analysts have changed their tune and now expect developers to make provisions only in the second half of 2009, or even later. Some also reckon the provisions could be less than what the market has already priced in.
In 2001 and 2002, several developers, including CapitaLand, CityDev and Keppel Land, made massive write-downs on their Singapore residential landbanks, which hit their results badly. But this time around, the write-offs may be smaller, some analysts say.
Keppel Land was one of the first developers to make provisions in 2001, announcing $455 million of write-downs in the value of its residential landbank in November that year.
But the risk of a landbank write-down in the current downturn is lower for KepLand because the company did not buy any land in Singapore last year and its current landbank is carried in its books at relatively low cost, said OCBC's Mr Foo.
CIMB analyst Donald Chua said: 'We are not seeing provisions yet because prices have not fallen that much yet. Developers are probably waiting to see how the market pans out next year.' In light of this, provisions are unlikely for Q4 unless things take a turn for the worse, Mr Chua said.
In the 2000-2003 property downturn, the residential price index for private homes recorded a quarter-on-quarter drop in Q3 2000. However, the provisions and write-offs only came towards the end of 2001. This time around, the quarter-on-quarter dip in the price index appeared only in Q3 2008, so provisions are only expected around end-2009.
Downward revaluations of investment properties are still expected in Q4 2008 when developers do their yearly valuations. And for many developers, landbank write-downs will definitely take place at some point in time if 'things keep going this way', an analyst said.
No New Sites For MND's H1 2009 Govt Land Sales Programme
Source : The Business Times, December 4, 2008
Ministry of National Development (MND) has decided not to add any new sites to the Government Land Sales (GLS) Programme for first half 2009.
The H1 2009 slate - comprising entirely reserve list sites, as previously announced - will have a total of 38 sites. These comprise 37 plots that are being carried over from the H2 2008 reserve list slate and the unsold executive condo site at Punggol Road/Punggol Field which had been tendered under the confirmed list of H2 2008.
The sites that will be available in the H1 2009 GLS Programme can potentially yield some 7,920 private homes, 512,000 sq metres gross floor area (GFA) of commercial space and 5,160 hotel rooms.
'The Government will not add any new sites to the GLS Programme for H1 2009,' MND said.
In formulating its policy, the Ministry took into account the current economic uncertainties and noted that the global economic outlook is likely to remain weak in 2009 and this would have an impact on Singapore's economy, including the property market.
Giving an update on land supply outside the GLS Progamme, MND said there will be a reduced supply of commercial space and no new supply of private residential units from Government agencies. The H1 2009 supply from this source will comprise about 40,000 sq metres GFA of commercial space and 240 hotel rooms.
This is smaller than the land supply for 20 private residential units, 143,000 sq m of commercial space and 240 hotel rooms outside the GLS Programme for H2 2008.
Ministry of National Development (MND) has decided not to add any new sites to the Government Land Sales (GLS) Programme for first half 2009.
The H1 2009 slate - comprising entirely reserve list sites, as previously announced - will have a total of 38 sites. These comprise 37 plots that are being carried over from the H2 2008 reserve list slate and the unsold executive condo site at Punggol Road/Punggol Field which had been tendered under the confirmed list of H2 2008.
The sites that will be available in the H1 2009 GLS Programme can potentially yield some 7,920 private homes, 512,000 sq metres gross floor area (GFA) of commercial space and 5,160 hotel rooms.
'The Government will not add any new sites to the GLS Programme for H1 2009,' MND said.
In formulating its policy, the Ministry took into account the current economic uncertainties and noted that the global economic outlook is likely to remain weak in 2009 and this would have an impact on Singapore's economy, including the property market.
Giving an update on land supply outside the GLS Progamme, MND said there will be a reduced supply of commercial space and no new supply of private residential units from Government agencies. The H1 2009 supply from this source will comprise about 40,000 sq metres GFA of commercial space and 240 hotel rooms.
This is smaller than the land supply for 20 private residential units, 143,000 sq m of commercial space and 240 hotel rooms outside the GLS Programme for H2 2008.
HK's Home Sales Dive 79% In Nov
Source : The Business Times, December 4, 2008
(HONG KONG) Hong Kong's home sales fell 79 per cent last month, the biggest drop since at least 1996, as a recession and a falling stock market hurt demand.
The number of residential units changing hands in the city sank to 3,264 last month, according to a Land Registry statement yesterday. That followed the largest drop since November 1999 in October. By value, residential sales fell 87 per cent from a year earlier to HK$9 billion (S$1.8 billion) last month.
A recession in Hong Kong and a 52 per cent plunge in the city's stock market this year have hurt home sales as people curb spending.
HSBC Holdings plc and Bank of China Ltd, the city's two biggest home lenders, have also raised mortgage rates to maintain profitability, adding to pressure on property prices.
Luxury home prices have fallen 17.7 per cent since June, according to realtor, Centaline Property Agency Ltd.
HSBC, the bank with the most branches in Hong Kong, increased its mortgage rates in the city the most since Asia's 1997-98 financial crisis.
The bank will charge 1.5 percentage point below its so-called best rate for mortgages above HK$1.5 million, spokeswoman Louisa Leung said. The discount, down from 2 percentage points, will bring HSBC's home loan rates to about 3.5 per cent, according to Bloomberg calculations. -- Bloomberg
(HONG KONG) Hong Kong's home sales fell 79 per cent last month, the biggest drop since at least 1996, as a recession and a falling stock market hurt demand.
The number of residential units changing hands in the city sank to 3,264 last month, according to a Land Registry statement yesterday. That followed the largest drop since November 1999 in October. By value, residential sales fell 87 per cent from a year earlier to HK$9 billion (S$1.8 billion) last month.
A recession in Hong Kong and a 52 per cent plunge in the city's stock market this year have hurt home sales as people curb spending.
HSBC Holdings plc and Bank of China Ltd, the city's two biggest home lenders, have also raised mortgage rates to maintain profitability, adding to pressure on property prices.
Luxury home prices have fallen 17.7 per cent since June, according to realtor, Centaline Property Agency Ltd.
HSBC, the bank with the most branches in Hong Kong, increased its mortgage rates in the city the most since Asia's 1997-98 financial crisis.
The bank will charge 1.5 percentage point below its so-called best rate for mortgages above HK$1.5 million, spokeswoman Louisa Leung said. The discount, down from 2 percentage points, will bring HSBC's home loan rates to about 3.5 per cent, according to Bloomberg calculations. -- Bloomberg
Mumbai Attack Will Hasten Slide In Property Stocks: JLL
Source : The Business Times, December 4, 2008
(MUMBAI) India's worst terrorist attack in 15 years will accelerate a slide in property stocks that have already plunged this year on investor concern about faltering demand, Jones Lang LaSalle Inc's local unit said.
The attacks last week on Mumbai's luxury hotels, a restaurant, railway station and a Jewish centre will add to costs such as insurance premiums, Mridul Upreti, joint managing director for capital markets at the commercial property broker, said in an interview in New Delhi on Tuesday. At least 195 people were killed and 295 injured in the attacks over 60 hours.
The terrorists' strike is the latest setback to a sector that has already slumped 88 per cent as the rise in property prices and borrowing costs led to a slowdown in demand, Mr Upreti said.
DLF Ltd, India's biggest developer, has said a recovery in the property market in the next six months hinges on lower home-loan rates to lure first-time buyers as the economy falters.
'Last week's unfortunate incidents are going to accelerate the bearish trend,' Mr Upreti said. 'The demand is slowing in the property sector. We have interest rates at a historic high and limited investor demand for property stocks.'
The Bombay Stock Exchange's Realty Index has declined 88 per cent this year, surpassing the 57 per cent drop in the Sensitive benchmark. A five-year rally in property prices and rise in borrowing costs have subdued demand.
DLF has dropped 83 per cent this year. Unitech Ltd, the second largest developer, has fallen 95 per cent.
DLF and Emaar MGF Land Pvt., the Indian unit of the Middle East's largest real-estate developer, are also cutting prices to revive demand. Goldman Sachs Group last month forecast some property prices in India will drop 30 per cent. -- Bloomberg
(MUMBAI) India's worst terrorist attack in 15 years will accelerate a slide in property stocks that have already plunged this year on investor concern about faltering demand, Jones Lang LaSalle Inc's local unit said.
The attacks last week on Mumbai's luxury hotels, a restaurant, railway station and a Jewish centre will add to costs such as insurance premiums, Mridul Upreti, joint managing director for capital markets at the commercial property broker, said in an interview in New Delhi on Tuesday. At least 195 people were killed and 295 injured in the attacks over 60 hours.
The terrorists' strike is the latest setback to a sector that has already slumped 88 per cent as the rise in property prices and borrowing costs led to a slowdown in demand, Mr Upreti said.
DLF Ltd, India's biggest developer, has said a recovery in the property market in the next six months hinges on lower home-loan rates to lure first-time buyers as the economy falters.
'Last week's unfortunate incidents are going to accelerate the bearish trend,' Mr Upreti said. 'The demand is slowing in the property sector. We have interest rates at a historic high and limited investor demand for property stocks.'
The Bombay Stock Exchange's Realty Index has declined 88 per cent this year, surpassing the 57 per cent drop in the Sensitive benchmark. A five-year rally in property prices and rise in borrowing costs have subdued demand.
DLF has dropped 83 per cent this year. Unitech Ltd, the second largest developer, has fallen 95 per cent.
DLF and Emaar MGF Land Pvt., the Indian unit of the Middle East's largest real-estate developer, are also cutting prices to revive demand. Goldman Sachs Group last month forecast some property prices in India will drop 30 per cent. -- Bloomberg
Tokyo Offers Top Investment Prospects
Source : The Business Times, December 4, 2008
It moves up to first place in survey after being rated third in the past two years
(TOKYO) Tokyo takes the top spot for next year's real estate investment prospects among big Asian cities, with many foreign investors seeking opportunities in Japan's beleaguered property market, a survey showed yesterday.
Tokyo moved up to the first place after being rated third in the past two years, while Shanghai dropped to the fifth from last year's top slot, the survey conducted by US research institute Urban Land Institute and PricewaterhouseCoopers showed.
The survey, based on 180 respondents ranging from global investors, property developers and brokers, was conducted between the middle of August and October.
Ho Chi Minh City was ranked the best market for office properties, followed by Tokyo, Mumbai, Shanghai and Bangalore.
Vietnam's former capital city was also rated on top for retail and apartment residential property, the study showed.
The strongest 'buy' and 'hold' recommendations for Tokyo were in the office property sector, where 46 per cent of respondents placed 'buy' and 43 per cent gave 'hold' ratings, said the survey for hundreds of investors, developers and lenders.
PricewaterhouseCoopers' partner Raymond Kahn said in a statement that foreign investors remain interested in Tokyo even under the current weak property market conditions. While some investors are finding opportunities, however, the number of transactions has fallen significantly and there is still some disconnect between buyers and sellers, Mr Kahn wrote.
As for Tokyo's residential property sector, 28 per cent of respondents placed 'sell' with 39 per cent rating 'hold', the survey showed. Offices took top ranking for both investment and development, among property sectors most promising in the Asia-Pacific region, the survey showed.
A Reuters poll of Asia property market last month showed that Tokyo's top-notch grade A office rents and capital values are seen slipping by up to 5 per cent by the end of 2009, but better placed to weather the regional downturn expected to be led by Hong Kong and Singapore. -- Reuters
It moves up to first place in survey after being rated third in the past two years
(TOKYO) Tokyo takes the top spot for next year's real estate investment prospects among big Asian cities, with many foreign investors seeking opportunities in Japan's beleaguered property market, a survey showed yesterday.
Tokyo moved up to the first place after being rated third in the past two years, while Shanghai dropped to the fifth from last year's top slot, the survey conducted by US research institute Urban Land Institute and PricewaterhouseCoopers showed.The survey, based on 180 respondents ranging from global investors, property developers and brokers, was conducted between the middle of August and October.
Ho Chi Minh City was ranked the best market for office properties, followed by Tokyo, Mumbai, Shanghai and Bangalore.
Vietnam's former capital city was also rated on top for retail and apartment residential property, the study showed.
The strongest 'buy' and 'hold' recommendations for Tokyo were in the office property sector, where 46 per cent of respondents placed 'buy' and 43 per cent gave 'hold' ratings, said the survey for hundreds of investors, developers and lenders.
PricewaterhouseCoopers' partner Raymond Kahn said in a statement that foreign investors remain interested in Tokyo even under the current weak property market conditions. While some investors are finding opportunities, however, the number of transactions has fallen significantly and there is still some disconnect between buyers and sellers, Mr Kahn wrote.
As for Tokyo's residential property sector, 28 per cent of respondents placed 'sell' with 39 per cent rating 'hold', the survey showed. Offices took top ranking for both investment and development, among property sectors most promising in the Asia-Pacific region, the survey showed.
A Reuters poll of Asia property market last month showed that Tokyo's top-notch grade A office rents and capital values are seen slipping by up to 5 per cent by the end of 2009, but better placed to weather the regional downturn expected to be led by Hong Kong and Singapore. -- Reuters
Egypt, Brazil Among Top Picks Of Property Tycoon Sam Zell
Source : The Business Times, December 4, 2008
(NEW YORK) Brazil, Egypt, Mexico and China remain some of the best places for property investments as the global financial crisis drags on, real estate mogul Sam Zell said on Tuesday.
Those countries have a shortage of affordable housing and infrastructures that support foreign investment, Mr Zell, chairman of Equity Group Investments LLC, said at a forum in New York sponsored by the University of Pennsylvania's Wharton business school.
Brazil is self-sufficient, has a strong pool of skilled professionals and otherwise unlimited resources, he said. The country also offers scale, he said, citing same-store growth for Equity Group Investments- owned malls of 12 per cent over the past year.
In April, Mr Zell said Brazil's biggest mall operator was seeing retail sales growth of 10 per cent annually.
'If you look at all of the facts, I don't think there is a better environment in all the world than Brazil,' said Mr Zell, who has suggested the country could surpass China in economic might in 30 years.
Similar conditions hold true in Egypt where 'there is an enormous shortage of housing', he said.
In Brazil and Mexico, funding for housing has been unaffected by the turmoil in capital markets that has frozen or dampened housing elsewhere, he said.
Mr Zell said he is also investing in low-cost housing in China, where results have been 'so far so good'. Much of the financial crisis that has taken a toll on confidence stems from demand in the United States and Europe that 'wasn't real', supported by leverage, he said. True demand, such as that seen in Egypt, will have to re-emerge to lead any recovery elsewhere, he said.
'Where is (the market) going to recover? It starts with demand,' he said. 'Where demand overcomes the environment.'
Countries to avoid include Japan, which has a shrinking population, and India, where licensing and 'bureaucracy beyond belief' discourages foreign investment, he said.
He also stays away from Russia where tax authorities could literally steal companies from their owners, and from Turkey, where he fears the authorities could use the press against foreign investors.
In the US, the biggest issue is a lack of confidence that has spread beyond the sub-prime mortgages that triggered the crisis, he said.
A drumbeat of negative news from companies, such as General Electric Co's announcement on Tuesday that fourth-quarter profit would be at the low end of forecasts, adds to the deficit in confidence, he said.
'When you don't have confidence, nothing good happens,' he said. -- Reuters
(NEW YORK) Brazil, Egypt, Mexico and China remain some of the best places for property investments as the global financial crisis drags on, real estate mogul Sam Zell said on Tuesday.
Those countries have a shortage of affordable housing and infrastructures that support foreign investment, Mr Zell, chairman of Equity Group Investments LLC, said at a forum in New York sponsored by the University of Pennsylvania's Wharton business school.
Brazil is self-sufficient, has a strong pool of skilled professionals and otherwise unlimited resources, he said. The country also offers scale, he said, citing same-store growth for Equity Group Investments- owned malls of 12 per cent over the past year.
In April, Mr Zell said Brazil's biggest mall operator was seeing retail sales growth of 10 per cent annually.
'If you look at all of the facts, I don't think there is a better environment in all the world than Brazil,' said Mr Zell, who has suggested the country could surpass China in economic might in 30 years.
Similar conditions hold true in Egypt where 'there is an enormous shortage of housing', he said.
In Brazil and Mexico, funding for housing has been unaffected by the turmoil in capital markets that has frozen or dampened housing elsewhere, he said.
Mr Zell said he is also investing in low-cost housing in China, where results have been 'so far so good'. Much of the financial crisis that has taken a toll on confidence stems from demand in the United States and Europe that 'wasn't real', supported by leverage, he said. True demand, such as that seen in Egypt, will have to re-emerge to lead any recovery elsewhere, he said.
'Where is (the market) going to recover? It starts with demand,' he said. 'Where demand overcomes the environment.'
Countries to avoid include Japan, which has a shrinking population, and India, where licensing and 'bureaucracy beyond belief' discourages foreign investment, he said.
He also stays away from Russia where tax authorities could literally steal companies from their owners, and from Turkey, where he fears the authorities could use the press against foreign investors.
In the US, the biggest issue is a lack of confidence that has spread beyond the sub-prime mortgages that triggered the crisis, he said.
A drumbeat of negative news from companies, such as General Electric Co's announcement on Tuesday that fourth-quarter profit would be at the low end of forecasts, adds to the deficit in confidence, he said.
'When you don't have confidence, nothing good happens,' he said. -- Reuters
Manhattan Awash In Open Office Space
Source : The Business Times, December 4, 2008
Finance firms giving up space as they downsize, picture could get worse
(NEW YORK) Last year, when the New York real estate market was still frothy, large blocks of office space were hard to come by. Not anymore.
More space soon: The concrete core of the Freedom Tower being built, on the site of the World Trade Center. The new building, higher than the Empire State Building, will add to the glut of Manhattan open office space available
Almost 16 million square feet is currently listed as available in large blocks in 68 office buildings in Manhattan, according to Colliers ABR, a commercial brokerage firm. That is nearly double the space available a year ago, both in terms of the number of large office blocks - which in New York usually means 100,000 sq ft or more - and in terms of total square feet.
Those figures are widely expected to go much higher, said Robert L Sammons, the managing director of research for Colliers ABR. He said it was difficult to get a handle on exactly how much space financial companies alone might put back onto the Manhattan office market over the next year or so.
'Honestly, I don't think any of these financial firms knows how this is going to play out,' he said. 'They are trying to figure out how many people they will need on staff, and in some cases how they are going to stay in business.'
Pending layoffs in the financial industry certainly account for some of the space on the market. But there are other factors. Some companies are moving into new headquarters - which were first planned years ago - while others are disposing of real estate that they came into through acquisitions.
By far the biggest increase in availability has been in the sublease market. Currently, at least 16 large office blocks are being marketed for sublease in Manhattan, up from just three listed at this time last year, according to Colliers ABR.
Michael Colacino, the president of Studley, a real estate brokerage firm that specialises in representing office tenants, said the sublet space that had come onto the market recently was attractively priced.
He said some tenants might do better by shopping the sublet market rather than trying to renegotiate a better rent with their current landlords. 'A lot of landlords are still in denial,' Mr Colacino said, 'but the sublease space is priced realistically for the actual market conditions.'
Mr Colacino estimates that the actual rents on deals signed in the last three months are down by as much as 20-30 per cent from the going rents at the end of the summer - to around US$75-80 per sq ft annually in midtown and around US$45 per sq ft downtown.
Among current offerings - including both subleases and direct leases from owners - roughly a quarter of the space in the midtown and downtown office markets became available because a financial company either did not renew its lease or decided to market the space for sublet.
But the picture could become much starker next year. Among large office blocks that brokers expect to hit the market, Mr Sammons estimates that the financial industry will account for roughly one-third of the new space coming on the market in midtown and more than half of the new space downtown.
Lehman Brothers, Merrill Lynch and Deutsche Bank all have leases that Mr Sammons counted among the potential new listings of large office blocks. And that list does not include Citigroup - although the banking giant has announced that it will lay off more than 50,000 employees worldwide - because Mr Sammons said it was too soon to know if Citigroup would give up any large office blocks in Manhattan.
So far this year, brokers say, the main event in midtown has been the completion of One Bryant Park, a 54-storey office tower that recently opened at the corner of 42nd Street and the Avenue of the Americas.
As the main tenant Bank of America moves employees into this new building, it is giving up earlier leases for hundreds of thousands of square feet in other prominent midtown office buildings. -- NYT
Finance firms giving up space as they downsize, picture could get worse
(NEW YORK) Last year, when the New York real estate market was still frothy, large blocks of office space were hard to come by. Not anymore.
More space soon: The concrete core of the Freedom Tower being built, on the site of the World Trade Center. The new building, higher than the Empire State Building, will add to the glut of Manhattan open office space available Almost 16 million square feet is currently listed as available in large blocks in 68 office buildings in Manhattan, according to Colliers ABR, a commercial brokerage firm. That is nearly double the space available a year ago, both in terms of the number of large office blocks - which in New York usually means 100,000 sq ft or more - and in terms of total square feet.
Those figures are widely expected to go much higher, said Robert L Sammons, the managing director of research for Colliers ABR. He said it was difficult to get a handle on exactly how much space financial companies alone might put back onto the Manhattan office market over the next year or so.
'Honestly, I don't think any of these financial firms knows how this is going to play out,' he said. 'They are trying to figure out how many people they will need on staff, and in some cases how they are going to stay in business.'
Pending layoffs in the financial industry certainly account for some of the space on the market. But there are other factors. Some companies are moving into new headquarters - which were first planned years ago - while others are disposing of real estate that they came into through acquisitions.
By far the biggest increase in availability has been in the sublease market. Currently, at least 16 large office blocks are being marketed for sublease in Manhattan, up from just three listed at this time last year, according to Colliers ABR.
Michael Colacino, the president of Studley, a real estate brokerage firm that specialises in representing office tenants, said the sublet space that had come onto the market recently was attractively priced.
He said some tenants might do better by shopping the sublet market rather than trying to renegotiate a better rent with their current landlords. 'A lot of landlords are still in denial,' Mr Colacino said, 'but the sublease space is priced realistically for the actual market conditions.'
Mr Colacino estimates that the actual rents on deals signed in the last three months are down by as much as 20-30 per cent from the going rents at the end of the summer - to around US$75-80 per sq ft annually in midtown and around US$45 per sq ft downtown.
Among current offerings - including both subleases and direct leases from owners - roughly a quarter of the space in the midtown and downtown office markets became available because a financial company either did not renew its lease or decided to market the space for sublet.
But the picture could become much starker next year. Among large office blocks that brokers expect to hit the market, Mr Sammons estimates that the financial industry will account for roughly one-third of the new space coming on the market in midtown and more than half of the new space downtown.
Lehman Brothers, Merrill Lynch and Deutsche Bank all have leases that Mr Sammons counted among the potential new listings of large office blocks. And that list does not include Citigroup - although the banking giant has announced that it will lay off more than 50,000 employees worldwide - because Mr Sammons said it was too soon to know if Citigroup would give up any large office blocks in Manhattan.
So far this year, brokers say, the main event in midtown has been the completion of One Bryant Park, a 54-storey office tower that recently opened at the corner of 42nd Street and the Avenue of the Americas.
As the main tenant Bank of America moves employees into this new building, it is giving up earlier leases for hundreds of thousands of square feet in other prominent midtown office buildings. -- NYT
Developers In China Scramble To Raise Cash
Source : The Business Times, December 4, 2008
(BEIJING) Suffering from a slumping housing market, Chinese developers are scrambling to find new ways to keep the cash flowing in and creditors at bay, with anything from factories to timeshares in their sights.
An oversupply of new apartments in an economic downturn, and the lingering effects of government steps to stamp out rampant property speculation have sent home sales and prices tumbling.
Capital markets are closed, and loans have dried up.
'Banks give you an umbrella when it's sunny and want it back when it's raining,' said Li Xiaodong, chairman of J&J Assets Management, whose US$300 million fund invests with property firms.
'So you have to choose products that are more suitable for the market at the moment,' he advised developers at a conference in Beijing. 'There's money out there, but there's no confidence.'
In a five-year boom, China's developers grew quickly and notched up huge profit margins, often of as much as 50 per cent, as they built on land accumulated cheaply and sold apartments in a fast rising market.
But many who bought land at a 2007 price peak are suffering now, with sales down by as much as half from last year. The country's biggest developer, China Vanke, has slashed prices by a third, and others have gone further. And now they are looking away from housing. Beijing-based Antaeus Group is selling rooms at Hainan island resorts, giving buyers stays of 30 days each year and a share of room rates.
'A lot of movie stars and real estate developers are buying,' said the firm's chairman, Zhang Baoquan. 'We need to survive the winter,' he said of the market downturn. 'But once spring comes, demand will be released.'
Shanghai-listed developer Vantone Estate aims to spend three billion yuan (S$667.2 million) on industrial property in the next couple of years, according to Wu Dongwei, general manager at the unit responsible for the venture.
His first deal, which is still being negotiated, is for a factory in Wuxi that will be bought and leased back to a television maker faced with slowing exports.
'We're trying to diversify,' Mr Wu told Reuters. 'There are a lot of companies that bought a lot of land very cheaply, or for zero because local governments gave it to them,' he added. 'But now is a very bad time, so they're trying to get more cash in and divesting assets.'
Holding investment properties usually produces much lower returns on assets than building homes because equity is tied up for much longer.
But Hong Kong developers have used the tactic well to smooth earnings, in a volatile property market. Office and retail rents are typically renegotiated every three years, while industrial and warehouse property leases can last a decade. -- Reuters
(BEIJING) Suffering from a slumping housing market, Chinese developers are scrambling to find new ways to keep the cash flowing in and creditors at bay, with anything from factories to timeshares in their sights.
An oversupply of new apartments in an economic downturn, and the lingering effects of government steps to stamp out rampant property speculation have sent home sales and prices tumbling.
Capital markets are closed, and loans have dried up.
'Banks give you an umbrella when it's sunny and want it back when it's raining,' said Li Xiaodong, chairman of J&J Assets Management, whose US$300 million fund invests with property firms.
'So you have to choose products that are more suitable for the market at the moment,' he advised developers at a conference in Beijing. 'There's money out there, but there's no confidence.'
In a five-year boom, China's developers grew quickly and notched up huge profit margins, often of as much as 50 per cent, as they built on land accumulated cheaply and sold apartments in a fast rising market.
But many who bought land at a 2007 price peak are suffering now, with sales down by as much as half from last year. The country's biggest developer, China Vanke, has slashed prices by a third, and others have gone further. And now they are looking away from housing. Beijing-based Antaeus Group is selling rooms at Hainan island resorts, giving buyers stays of 30 days each year and a share of room rates.
'A lot of movie stars and real estate developers are buying,' said the firm's chairman, Zhang Baoquan. 'We need to survive the winter,' he said of the market downturn. 'But once spring comes, demand will be released.'
Shanghai-listed developer Vantone Estate aims to spend three billion yuan (S$667.2 million) on industrial property in the next couple of years, according to Wu Dongwei, general manager at the unit responsible for the venture.
His first deal, which is still being negotiated, is for a factory in Wuxi that will be bought and leased back to a television maker faced with slowing exports.
'We're trying to diversify,' Mr Wu told Reuters. 'There are a lot of companies that bought a lot of land very cheaply, or for zero because local governments gave it to them,' he added. 'But now is a very bad time, so they're trying to get more cash in and divesting assets.'
Holding investment properties usually produces much lower returns on assets than building homes because equity is tied up for much longer.
But Hong Kong developers have used the tactic well to smooth earnings, in a volatile property market. Office and retail rents are typically renegotiated every three years, while industrial and warehouse property leases can last a decade. -- Reuters
No New Site For Land Sales
Source : The Straits Times, Dec 4, 2008
THE Government is not adding any new sites to its land sales programme for the first half of next year, given the continuing weak global economic outlook.
The Government is not adding any new sites to its land sales programme for the first half of next year, given the continuing weak global economic outlook. -- ST FILE PHOTO
It is also offering less commercial space. And there will not be any new supply of private home units from Government agencies, outside of the land sales programme.
'The global economic outlook is likely to remain weak in 2009 and this would have an impact on Singapore's economy, including the property market,' said the Ministry of National Development in a statement on Thursday.
This means that there will only be 'reserve list' sites available for sale in the first half of 2009. Such sites will only be put up for tender if a developer indicates interest in it by submitting a minimum bid that the Government finds acceptable.
A total of 38 sites are available on the reserve list, of which 37 are carried over from the reserve list for the second half of this year, and one is the unsold executive condominium site in Punggol. The unsold EC site was from the confirmed list, which meant that it was for outright sale but there was no demand.
At the start of last month, the Government already announced that it will be suspending outright land sales in the first half of next year. It was to stave off the risk of oversupply given the weak property market outlook.
Developers, who prefer the reserve list system as it allows them to adjust supply to meet demand, had cheered the move.
THE Government is not adding any new sites to its land sales programme for the first half of next year, given the continuing weak global economic outlook.
The Government is not adding any new sites to its land sales programme for the first half of next year, given the continuing weak global economic outlook. -- ST FILE PHOTOIt is also offering less commercial space. And there will not be any new supply of private home units from Government agencies, outside of the land sales programme.
'The global economic outlook is likely to remain weak in 2009 and this would have an impact on Singapore's economy, including the property market,' said the Ministry of National Development in a statement on Thursday.
This means that there will only be 'reserve list' sites available for sale in the first half of 2009. Such sites will only be put up for tender if a developer indicates interest in it by submitting a minimum bid that the Government finds acceptable.
A total of 38 sites are available on the reserve list, of which 37 are carried over from the reserve list for the second half of this year, and one is the unsold executive condominium site in Punggol. The unsold EC site was from the confirmed list, which meant that it was for outright sale but there was no demand.
At the start of last month, the Government already announced that it will be suspending outright land sales in the first half of next year. It was to stave off the risk of oversupply given the weak property market outlook.
Developers, who prefer the reserve list system as it allows them to adjust supply to meet demand, had cheered the move.