Demand For And Prices Of Public Housing Flats Expected To Stay Resilient

Source : Channel NewsAsia, 10 November 2008

The demand for and prices of public housing flats are expected to remain fairly resilient despite the economic downturn. Market watchers said this applies to both resale and new units.

HDB flats (file picture)

Close to 9,000 people have visited the Natura Loft showflat since it was launched for sale on October 31.

Its developer, Qingjian Realty, has already received 500 applications, mostly for four-room units there. But only 480 units are being offered, and these are going for between S$450 and S$570 per square foot.

Sales will close on November 15 and Qingjian expects demand for the new flats to be robust. Natura Loft is the Housing and Development Board's fourth condo-style public housing project.

Similarly, interest for public resale flats has not slowed. Property agents said the number of viewings for resale units jumped by 15 per cent in the last six weeks.

Eric Cheng, executive director, HSR Property Consultants, said: "I did an interview with one of the consumers, they were sharing with me that 'In today's market, I don't know how long my job will last, so to safeguard, I would rather go for subsidised (a) house, that is HDB, because how low could HDB go, HDB houses always will have a valuation to support the base value of the units'."

Market watchers expect prices of resale flats to grow by about 4 per cent in the fourth quarter, slightly slower than the third quarter - which saw a 4.2 per cent growth.

ERA real estate agency projects price growth in the HDB resale flats segment to be at between 15 and 17 per cent for the whole of 2008. And it also said it is going to be a buyer's market for now, due to the challenging economic conditions.

Eugene Lim, associate director, ERA Asia Pacific, said: "Most of the buyers will start their negotiations at below valuation... by and large, most of the deals are pretty realistic nowadays, and cash over valuation very rarely will be more than S$40,000 to S$50,000. ... the days of S$100,000 or S$120,000 cash over valuation... are over."

Market players said the outlook for Singapore's property sector may be hazy in the short term, but the prospects still look bright beyond 2010. They said that is because Singapore has plans in place that will help to create jobs and boost the economy. - CNA/ms

Price Fall 'Unlikely To Dent Economy'

Source : The Straits Times, Nov 11, 2008

Sector's downturn manageable, says Citibank report

PRIVATE home prices are on a downslide, but their decline is unlikely to have a major impact on the economy, according to a new report by Citibank.

More than 80 per cent of Singaporeans live in public housing anyway, which is still on a price uptrend, it said. HDB resale prices rose 4.2 per cent in the third quarter, while prices of apartments, condominium units and landed homes fell 2.4 per cent. This was the first decline in four years.

Even private home dwellers who see their property values dip are unlikely to cut back on spending, said the bank. Real estate wealth here is illiquid compared to other countries - meaning it cannot be easily converted to cash - so a fall in home values will have little effect on how much consumers spend.

Citibank economist Kit Wei Zheng estimated that a drop of 15 per cent in the prices of private homes could knock 0.4 to 0.6 percentage point off economic growth.

This would be due largely to lower construction investments as developers delay projects to wait out the downturn, rather than because home owners feel poorer and spend less, he said.

While 'not negligible', the effect of falling private home prices on the economy is 'not particularly large'.

'A housing downturn confined to the private residential segment should be manageable,' said Mr Kit, adding that a slump in exports and financial services would have a more significant drag on Singapore's economy, currently in a technical recession after two straight quarters of negative growth.

Singaporean home owners are often described as 'asset rich, cash poor', because they cannot or are unwilling to unlock the value of their property, Mr Kit noted. If they could do so, they would be able to turn the value of their homes into cash for spending.

Unlike in bigger countries, Singapore has no 'cheap' suburbs where people can buy a similar or even better house and sell their existing one in the city for capital gains, he said.

Singaporeans also tend to have a 'psychological reluctance' to realise the value of their property by downgrading to a smaller, cheaper home.

In countries like the United States, financial instruments such as reverse mortgages allow home owners to get cash for their homes even while they are living in them, added Mr Kit.

With real estate here so illiquid, home prices are not directly related to consumption spending. In fact, the Citibank report says this relationship could be reversed in Singapore: Lower home prices could mean that aspiring home buyers have more money to spend.

Of course, a property downturn also means fewer home sales, which would hit economic growth more than a fall in home prices, Mr Kit said.

A drop in property transactions would eventually lead to a decline in business services, among other things.

Falling Home Prices May Cut GDP Growth

Source : The Business Times, November 11, 2008

However, analysts continue to see strong demand for HDB flats

A 10-15 per cent fall in overall housing prices could shave 0.4 to 0.6 of a percentage point off annual GDP growth due to lower construction investments alone, according to Citigroup.


















Using information from four previous studies, Citi analyst Kit Wei Zheng concluded that a 10-15 per cent fall in home prices means that overall construction investments - which make up 11 per cent of GDP - could fall by between 16 and 24 per cent from baseline after a period of five years, or roughly 3-5 per cent per year.

This would reduce GDP growth by about 0.4-0.6 percentage point each year.

'This impact, while not negligible, is not regarded as a catastrophic outcome, and probably pales in magnitude to the export and manufacturing downturn,' said Mr Kit.

Similarly, OCBC economist Selena Ling thinks a fall in private home prices - and subsequent fall in residential construction demand - will not have too large an impact on GDP. 'There will definitely be some impact,' she said.

'But right now, the construction industry is driven more by commercial and industrial projects. Private residential projects make up just one part of construction demand.'

CIMB-GK economist Song Seng Wun said: 'Some of the slack in private residential construction activity could be taken up by an increase in public sector demand.'

Private residential construction investments account for about one-fifth of total contracts awarded, and contributed around 13 percentage points to the overall 64.7 per cent growth in contracts awarded in the first three quarters of this year.

In contrast, public construction projects, including HDB projects, comprised 34 per cent of total contracts awarded and contributed 33 percentage points to growth in contracts awarded. They accounted for more than 50 per cent of overall growth.

Looking ahead, Citigroup property analyst Wendy Koh expects a further 25 per cent decline in the high-end residential segment. Prices in the mid-market could fall another 15 per cent, while the mass market could start to see a decline of 5-10 per cent.

The direct impact of falling private housing prices on private consumption spending - and therefore GDP - is also likely to be small, Citigroup said. For one, as housing assets are mostly illiquid in Singapore, wealth effects are largely absent.

Lower private home prices may in fact increase household discretionary incomes for spending on other items.

In addition, less than 20 per cent of Singapore's population lives in private housing and therefore public house prices are probably more relevant for consumption, Mr Kit said.

'Public residential construction demand has actually surged, given that public housing demand has remained robust so far,' he said.

'Nonetheless, we cannot rule out a fall in public residential construction demand going forward, if HDB prices start to plateau as well.'

Demand for HDB flats remains strong and prices are still on the uptrend. But a slowdown is expected, which could lead to lower public residential construction demand and have its own impact on GDP, analysts said.

Sands Holds Macau Project

Source : The Straits Times, Nov 11, 2008

# To suspend Macau construction
# Posts net loss of US$32.2 million
# 14 US cent loss a year ago
# Expects to announce US$2 billion bond sale

LOS ANGELES - CASINO operator Las Vegas Sands, which warned last week it was in danger of violating loan agreements, said on Monday it would suspend construction in Macau as it copes with a lack of financing options.

Sands attributed the smaller loss to increases in operating income and an income tax gain, partially offset by an increase in interest expense and a decrease in other income. -- PHOTO: REUTERS

Sands also reported a narrower third-quarter net loss and said it expects to shortly release details of a US$2 billion (S$3 billion) bond sale.

'We have elected to significantly slow the pace of our development activities on the Cotai Strip (in Macau)... as we focus our current efforts on maximising our cash flow and our returns on invested capital from our existing properties in Macau,' Chief Operating Officer William Weidner said in a statement.

Majority-owner Chairman and Chief Executive Sheldon Adelson, speaking on a conference call, said the Macau government may act to help find financing for the projects.

The company also said it would suspend work on the St Regis luxury-condominium project in Las Vegas and would focus on the casino components at its Bethlehem, Pennsylvania development.

It still expects the Marina Bay Sands project in Singapore to open next year.

The Las Vegas-based company posted a net loss of US$32.2 million (S$48.2 million), or 9 US cents a share, compared with a net loss of US$48.5 million, or 14 US cents a share, in the year-earlier quarter.

Sands attributed the smaller loss to increases in operating income and an income tax gain, partially offset by an increase in interest expense and a decrease in other income.

After adjusting for one-time items, Sands said it earned 2 US cents a share in the quarter, well short of the 11 US cents a share expected by analysts, as compiled by Reuters Estimates.

The company said net revenue rose 67 per cent to US$1.11 billion, close to the US$1.16 billion expected by analysts.

Sagging US consumer spending power has hurt business in Las Vegas, where Sands operates the Palazzo and Venetian resorts, as well as the Sands Expo and Convention Centre.

The company operates two casinos in Macau, where officials have recently restricted travel from mainland China, and has several more projects underway there as well as in Singapore and Bethlehem, Pennsylvania.

The company said in its US Securities and Exchange filing on Monday that if it is unable to raise additional capital in the near term, it would need to consider further suspending portions, if not all, of its remaining global development projects.

The casino operator has also filed a shelf registration with regulators that would allow it to sell securities.

Shares of Sands, which have plummeted from a 52-week high of US$122,96, closed on Monday at US$8.00 on the Nasdaq only to fall in after hours trade to US$7.45. -- REUTERS


CapitaLand not in talks with Sands

PROPERTY developer CapitaLand said on Monday it has not held any talks with Las Vegas Sands over its Singapore casino-resort project, but will explore opportunities to invest in distressed assets.

The statement came after brokerage firm CIMB said in a report on Monday that CapitaLand, Southeast Asia's biggest property firm, and the Singapore government may take over the casino-resort if Las Vegas Sands fails to avert loan defaults.

Local newspapers have reported that Las Vegas Sands had held talks with the Singapore government about the project, which is targeted to open at the end of 2009.

'CapitaLand wishes to clarify that no discussion has transpired between itself and Sands,' it said in a statement.

'In the present continuing global recessionary environment, it is strategically watching the situation and studying opportunities related to distressed companies or assets, in Singapore and other core markets,' CapitaLand said.

CapitaLand is 40 per cent owned by Singapore sovereign wealth fund Temasek Holdings.

Last week Las Vegas Sands affirmed its commitment to the Marina Bay project in Singapore as investors became concerned about its fate after the casino operator's auditor said there are doubts about the company's ability to continue as a going concern -- THOMSON REUTERS

US In 'Serious Recession'

Source : The Straits Times, Nov 11, 2008

Survey of economists sees US facing long, deep recession.

WASHINGTON - THE US economy is entering 'the steep part' of what could be the worst recession since World War II, said a member of the panel that gauges American recessions and expansions.

'There's a chance it'll be the worst post-war recession,' Mr Jeffrey Frankel said. -- PHOTO: THOMSON REUTERS

Mr Jeffrey Frankel, part of the business cycle dating committee at the Cambridge, Massachusetts-based National Bureau of Economic Research (NBER), said in a Bloomberg Television interview on Monday: 'We're in for a pretty serious recession.'

'There's a chance it'll be the worst post-war recession,' he said.

In October, the US lost 240,000 jobs in the 10th straight monthly decline. The unemployment rate jumped to 6.5 per cent, the highest since 1994, the Labour Department said last week. Bloomberg reported that national and regional manufacturing and industrial production shrank to recessionary levels in October.

Fellow NBER committee members Martin Feldstein, a Harvard University professor, and head of the eight-member panel Stanford University economist Robert Hall, have said the US is in a recession.

Professor Hall said in an interview last week that the committee needs more data on gross domestic product before making a recession call.

The US economy shrank at a 0.3 per cent annual rate last quarter, the most since the 2001 downturn, advance Commerce Department figures showed on Oct 30. The department will publish a revised estimate on Nov 25, with a third revision coming in December. The fourth-quarter GDP release is scheduled for late January.

'We're just going into the steep part of it now,' Mr Frankel said. 'We're a little puzzled whether to say that it started last December, because that's when employment peaked, or whether it started in, let's say, October, because that's when the economy really went into a nosedive.'

The NBER panel defines a recession as a 'significant' decrease in activity over a sustained period of time. The decline would be visible in GDP, payrolls, production, sales and incomes, according to the group.