Source : The Straits Times, Wed, Sep 19, 2007
THE changes proposed to the Central Provident Fund will determine the shape of individuals' retirement planning for years to come. That absolves no one, including younger people still riding the career curve, of the need to study the implications and offer their perspectives. Some provisions are controversial in the risk-sharing asked of CPF contributors, notably with the longevity annuity plan. Not all of the features of the various refinements will be universally popular. The Government should be ready to reconsider alternatives if it is persuaded by the logic of public opinion.
The delayed withdrawal of the Minimum Sum is the most 'tactile' of the proposals as its impact will be felt shortly. Conceptually the deferred enjoyment is tied to the need for Singaporeans to work longer so as to save more. But the law mandating continued employment after the present retirement age of 62 is targeted for enactment in 2012. People will feel better, seeing proof of policy intent, if the employment law is brought forward, say two years before the first deferred withdrawal takes effect in 2012. Employers will have time to adjust to workplace management, and older workers due for the extension will get a measure of how it will affect them. They would want a sense of security, an assurance of the law's workings. This is because economic conditions alone will determine the extent of gainful re-employment, not so much what the law says. In a recession, must a company lay off younger workers to accommodate the over-62s?
Of a different nature is the change in the interest rate regime. Pegging the bulk of one's CPF balance, beyond the Ordinary Account, to the 10-year government bond yield, plus one percentage point, is a variable many people may be uncomfortable with. This is in spite of the extra one percentage point that will be paid on the first $60,000. Fluctuating yields make one feel powerless, unsure if the accumulated assets may not be eroded over time. Members, for sure, prefer to have greater certainty over how their own money is managed and the appreciation it would enjoy over the years.
But the most controversial is the compulsory annuity scheme. It has been suggested that the Government contribute to the pool so as to lower the cost of premiums. Second Finance Minister Tharman Shanmugaratnam yesterday gave a robust response why this wasn't a fiscally responsible idea. The scheme has been referred to a committee to take public soundings. It should consult widely as the notion is revolutionary, quite alien to a good many people.
Wednesday, September 19, 2007
Singapore Awarded Top AAA Credit Rating For This Year
Source : The Straits Times, Wed, Sep 19, 2007
SINGAPORE is the only country in the Asia-Pacific region with an AAA credit rating, global ratings agency Fitch Ratings said yesterday.
After reaffirming the AAA rating for 2007 with a 'stable' outlook, Fitch senior analysts said Singapore was in strong shape despite the new economic risks faced by global and emerging markets today.
The top-notch rating is not expected to be affected by the recent volatility in capital markets, they added.
'Singapore's credit fundamentals are strong across the board,' said Mr James McCormack, Fitch's senior director and head of Asia Sovereign Ratings. 'It's a small economy, but well-diversified. There's a manufacturing centre, petrol refining sector, pharmaceutical industry.
'It's the only AAA that we have in the Asia-Pacific region... the management of public finance on the external side is exceptionally strong, we see no meaningful credit risk or credit issues.'
He was speaking here on the sidelines of the Fitch Ratings Sovereign Hotspots Asia Conference held in Singapore yesterday on the economic risks facing global and emerging markets today, particularly Asia.
Hong Kong, whose economy is more dependent on services, especially financial services, was upgraded from AA- to AA.
Fitch also forecast that Singapore will post economic growth of 7 per cent for both this year and next year.
Will the recent global credit crunch triggered by the troubled United States sub-prime mortgage market affect Singapore's future rating?
Said Mr McCormack: 'It's not going to affect the credit fundamentals, but it definitely will affect growth.
'There's no avoiding that. It's an open economy, depends on trade...and once there's a slowdown in the US, Singapore will feel the effects.'
Mr McCormack said Singapore is the third-most vulnerable economy to a global economic slowdown and continued capital market disruption in the region after Hong Kong and Sri Lanka.
Vulnerable economies are those with higher gross external financing needs, lower external liquidity and growing gross external debt. However, he added that there is 'no cause for concern' as the vulnerability is due to Singapore's open economy.
'Singapore and Hong Kong are extremely open economies, international banking centres, vulnerable to slower global economic growth...but I won't read too much into that. They're not vulnerable from a credit and ratings perspective,' he said.
'The countries in Asia we'll be concerned about are Sri Lanka, possibly South Korea...Indonesia and Thailand.'
LOOKING GOOD
'It's the only AAA that we have in the Asia-Pacific region...we see no meaningful credit risk or credit issues.'
MR MCCORMACK, on Singapore's top-notch credit rating
SINGAPORE is the only country in the Asia-Pacific region with an AAA credit rating, global ratings agency Fitch Ratings said yesterday.
After reaffirming the AAA rating for 2007 with a 'stable' outlook, Fitch senior analysts said Singapore was in strong shape despite the new economic risks faced by global and emerging markets today.
The top-notch rating is not expected to be affected by the recent volatility in capital markets, they added.
'Singapore's credit fundamentals are strong across the board,' said Mr James McCormack, Fitch's senior director and head of Asia Sovereign Ratings. 'It's a small economy, but well-diversified. There's a manufacturing centre, petrol refining sector, pharmaceutical industry.
'It's the only AAA that we have in the Asia-Pacific region... the management of public finance on the external side is exceptionally strong, we see no meaningful credit risk or credit issues.'
He was speaking here on the sidelines of the Fitch Ratings Sovereign Hotspots Asia Conference held in Singapore yesterday on the economic risks facing global and emerging markets today, particularly Asia.
Hong Kong, whose economy is more dependent on services, especially financial services, was upgraded from AA- to AA.
Fitch also forecast that Singapore will post economic growth of 7 per cent for both this year and next year.
Will the recent global credit crunch triggered by the troubled United States sub-prime mortgage market affect Singapore's future rating?
Said Mr McCormack: 'It's not going to affect the credit fundamentals, but it definitely will affect growth.
'There's no avoiding that. It's an open economy, depends on trade...and once there's a slowdown in the US, Singapore will feel the effects.'
Mr McCormack said Singapore is the third-most vulnerable economy to a global economic slowdown and continued capital market disruption in the region after Hong Kong and Sri Lanka.
Vulnerable economies are those with higher gross external financing needs, lower external liquidity and growing gross external debt. However, he added that there is 'no cause for concern' as the vulnerability is due to Singapore's open economy.
'Singapore and Hong Kong are extremely open economies, international banking centres, vulnerable to slower global economic growth...but I won't read too much into that. They're not vulnerable from a credit and ratings perspective,' he said.
'The countries in Asia we'll be concerned about are Sri Lanka, possibly South Korea...Indonesia and Thailand.'
LOOKING GOOD
'It's the only AAA that we have in the Asia-Pacific region...we see no meaningful credit risk or credit issues.'
MR MCCORMACK, on Singapore's top-notch credit rating
Last Condo Site At Sentosa Cove Put Up For Sale
Source : The Straits Times, 18 Sep 2007
THE best of the condominium sites in the wildly popular gated residential enclave of Sentosa Cove was left till last.
And that site went on sale on Tuesday at a reserve price of $964 million or $1,600 per sq ft per plot ratio - the price psf of the potential floorspace.
But property consultants are already expecting bids for the 99-year leasehold site to come in above $2,000 psf per plot ratio, pushing the overall price well over $1 billion.
That would put the eventual selling price of completed condo units at a hefty $3,200 to $3,800 psf - a level that some Orchard Road homes are going for.
'This is an iconic site, the equivalent of the Orchard Turn site for Sentosa Cove,' said Mr Ku Swee Yong of property consultancy Savills Singapore.
This 231,677 sq ft site, called The Pinnacle Collection, is one of two condo land parcels that flank the entrance of the marina leading into Sentosa Cove. It is set to be the tallest development in the enclave, given it has a height limit of 20 storeys.
The other condo developments are more low-rise. Until now, the tallest will be the 15-storey The Oceanfront @ Sentosa Cove, which sits on the other condo parcel flanking the marina entrance.
The newest site also allows the highest density development in Sentosa Cove with a plot ratio of 2.6. That allows for a gross floor area of nearly 602,360 sq ft.
Up to 357 luxury apartments can be built, said Sentosa Cove in a statement.
Despite the reserve price, property analysts feel certain this site will beat the price paid by SC Global in late July for another site at a new Sentosa Cove which set a record of $1,799 psf per plot ratio.
Property consultancy CB Richard Ellis anticipates that this will be the 'most coveted' parcel of all the Sentosa Cove plots.
THE best of the condominium sites in the wildly popular gated residential enclave of Sentosa Cove was left till last.
And that site went on sale on Tuesday at a reserve price of $964 million or $1,600 per sq ft per plot ratio - the price psf of the potential floorspace.
But property consultants are already expecting bids for the 99-year leasehold site to come in above $2,000 psf per plot ratio, pushing the overall price well over $1 billion.
That would put the eventual selling price of completed condo units at a hefty $3,200 to $3,800 psf - a level that some Orchard Road homes are going for.
'This is an iconic site, the equivalent of the Orchard Turn site for Sentosa Cove,' said Mr Ku Swee Yong of property consultancy Savills Singapore.
This 231,677 sq ft site, called The Pinnacle Collection, is one of two condo land parcels that flank the entrance of the marina leading into Sentosa Cove. It is set to be the tallest development in the enclave, given it has a height limit of 20 storeys.
The other condo developments are more low-rise. Until now, the tallest will be the 15-storey The Oceanfront @ Sentosa Cove, which sits on the other condo parcel flanking the marina entrance.
The newest site also allows the highest density development in Sentosa Cove with a plot ratio of 2.6. That allows for a gross floor area of nearly 602,360 sq ft.
Up to 357 luxury apartments can be built, said Sentosa Cove in a statement.
Despite the reserve price, property analysts feel certain this site will beat the price paid by SC Global in late July for another site at a new Sentosa Cove which set a record of $1,799 psf per plot ratio.
Property consultancy CB Richard Ellis anticipates that this will be the 'most coveted' parcel of all the Sentosa Cove plots.
World Housing Markets
Source : Project Syndicate, Sep 19, 2007
Bubble trouble
THE future of the housing boom, together with the possible financial repercussions of a substantial price decline in the coming years, is a matter of mounting concern among governments around the world.
I learnt this first-hand while attending this year's Jackson Hole Symposium in the remote wilderness of Wyoming where, ironically, there are almost no homes to buy. The howls of coyotes and bugling of elk rang out at night. But, by day, everyone was talking about real estate.
This conference has grown to be a major global event for government monetary policymakers, with governors or deputy governors of 34 central banks attending this year. Roughly two-thirds of these countries have had dramatic housing booms since 2000, most of which appear to be continuing, at least for the time being. But there was no consensus on the longer-run outlook for home prices.
Of all these countries, the United States appears to be the most likely to have reached the end of the cycle. According to the Standard & Poor's/Case-Shiller US National Home Price Index, US home prices rose 86 per cent in real, inflation-corrected, terms from 1996 to last year, but have since fallen 6.5 per cent - and the rate of decrease has been accelerating.
That looks like the beginning of the end of the boom, though, of course, one can never be sure. I presented a bearish long-run view, which many challenged, but no one obviously won the argument.
Nevertheless, an outside observer might have been struck by the weight given to the possibility that the decade-long boom might well suffer a real reversal, followed by serious declines.
Weaker standards
THERE seems to be a general recognition of substantial downside risk, as the current credit crisis seems to be related to the decline in US home prices that we have seen.
The boom, and the widespread conviction that home prices could only go higher, led to a weakening of lending standards. Mortgage lenders in the US seem to have believed that home buyers would not default, because rising prices would make keeping up with their payments very attractive.
Also, the boom resulted in some financial innovations, which may have been good ideas intrinsically, but which were sometimes applied too aggressively, given the risk of falling prices. Mortgage- backed securities were urged onto investors for whom they were too risky. As with homebuyers, all would be well, the reasoning went, on the premise that home prices continue to rise at a healthy pace.
At the Jackson Hole conference, Mr Paul McCulley of Pimco, the world's largest bond fund, argued that in the past month or two we have been witnessing a run on what he calls the 'shadow banking system', which consists of all the levered investment conduits, vehicles and structures that have sprung up along with the housing boom.
The shadow banking system, which is beyond the reach of regulators and deposit insurance, fed the boom in home prices by helping to provide more credit to buyers.
Bank runs occur when people, worried that their deposits will not be honoured, hastily withdraw their money, thereby creating the very bankruptcy that they feared. It is no coincidence that this new kind of bank run started in the US, which is the clearest example of falling home prices in the world today.
When home prices stop rising, recent homebuyers may lose the enthusiasm to continue paying their mortgages - and investors lose faith in mortgage-backed securities.
Loose policy
THE US Federal Reserve is sometimes blamed for the current mortgage crisis, because excessively loose monetary policy allegedly fuelled the price boom that preceded it. Indeed, the real (inflation-corrected) federal funds rate was negative for 31 months, from October 2002 to April 2005. The only precedent for this since 1950 was the 37-month period from September 1974 to September 1977, which launched the worst inflation the US had seen in the last century. What then helped produce a boom in consumer prices now contributed to a boom in home prices.
Loose monetary policy is not the whole story. The unusually low real funds rate came after the US housing boom was well under way. According to the Standard & Poor's/Case-Shiller US National Home Price Index, home prices were already rising at almost 10 per cent a year in 2000 - when the Fed was raising the federal funds rate, which peaked at 6.5 per cent. The rapid rise thus appears to be mostly the result of speculative momentum before the interest-rate cuts.
Former Fed chairman Alan Greenspan recently said that he now believes speculative bubbles are important driving forces, but at the same time, the world's monetary authorities cannot control bubbles. He is mostly right: The best thing that the monetary authorities could have done, given their other priorities and concerns, is to lean against the real estate bubble, not stop it from inflating.
Today's fall in home prices is linked just as clearly with waning speculative enthusiasm among investors, which is likewise largely unrelated to monetary policy. The world's monetary authorities will have trouble stopping this fall, and much of the attendant problems, just as they would have had stopping the ascent that preceded it.
The writer is professor of economics at Yale University and author of Irrational Exuberance And The New Financial Order: Risk In The 21st Century.
Bubble trouble
THE future of the housing boom, together with the possible financial repercussions of a substantial price decline in the coming years, is a matter of mounting concern among governments around the world.
I learnt this first-hand while attending this year's Jackson Hole Symposium in the remote wilderness of Wyoming where, ironically, there are almost no homes to buy. The howls of coyotes and bugling of elk rang out at night. But, by day, everyone was talking about real estate.
This conference has grown to be a major global event for government monetary policymakers, with governors or deputy governors of 34 central banks attending this year. Roughly two-thirds of these countries have had dramatic housing booms since 2000, most of which appear to be continuing, at least for the time being. But there was no consensus on the longer-run outlook for home prices.
Of all these countries, the United States appears to be the most likely to have reached the end of the cycle. According to the Standard & Poor's/Case-Shiller US National Home Price Index, US home prices rose 86 per cent in real, inflation-corrected, terms from 1996 to last year, but have since fallen 6.5 per cent - and the rate of decrease has been accelerating.
That looks like the beginning of the end of the boom, though, of course, one can never be sure. I presented a bearish long-run view, which many challenged, but no one obviously won the argument.
Nevertheless, an outside observer might have been struck by the weight given to the possibility that the decade-long boom might well suffer a real reversal, followed by serious declines.
Weaker standards
THERE seems to be a general recognition of substantial downside risk, as the current credit crisis seems to be related to the decline in US home prices that we have seen.
The boom, and the widespread conviction that home prices could only go higher, led to a weakening of lending standards. Mortgage lenders in the US seem to have believed that home buyers would not default, because rising prices would make keeping up with their payments very attractive.
Also, the boom resulted in some financial innovations, which may have been good ideas intrinsically, but which were sometimes applied too aggressively, given the risk of falling prices. Mortgage- backed securities were urged onto investors for whom they were too risky. As with homebuyers, all would be well, the reasoning went, on the premise that home prices continue to rise at a healthy pace.
At the Jackson Hole conference, Mr Paul McCulley of Pimco, the world's largest bond fund, argued that in the past month or two we have been witnessing a run on what he calls the 'shadow banking system', which consists of all the levered investment conduits, vehicles and structures that have sprung up along with the housing boom.
The shadow banking system, which is beyond the reach of regulators and deposit insurance, fed the boom in home prices by helping to provide more credit to buyers.
Bank runs occur when people, worried that their deposits will not be honoured, hastily withdraw their money, thereby creating the very bankruptcy that they feared. It is no coincidence that this new kind of bank run started in the US, which is the clearest example of falling home prices in the world today.
When home prices stop rising, recent homebuyers may lose the enthusiasm to continue paying their mortgages - and investors lose faith in mortgage-backed securities.
Loose policy
THE US Federal Reserve is sometimes blamed for the current mortgage crisis, because excessively loose monetary policy allegedly fuelled the price boom that preceded it. Indeed, the real (inflation-corrected) federal funds rate was negative for 31 months, from October 2002 to April 2005. The only precedent for this since 1950 was the 37-month period from September 1974 to September 1977, which launched the worst inflation the US had seen in the last century. What then helped produce a boom in consumer prices now contributed to a boom in home prices.
Loose monetary policy is not the whole story. The unusually low real funds rate came after the US housing boom was well under way. According to the Standard & Poor's/Case-Shiller US National Home Price Index, home prices were already rising at almost 10 per cent a year in 2000 - when the Fed was raising the federal funds rate, which peaked at 6.5 per cent. The rapid rise thus appears to be mostly the result of speculative momentum before the interest-rate cuts.
Former Fed chairman Alan Greenspan recently said that he now believes speculative bubbles are important driving forces, but at the same time, the world's monetary authorities cannot control bubbles. He is mostly right: The best thing that the monetary authorities could have done, given their other priorities and concerns, is to lean against the real estate bubble, not stop it from inflating.
Today's fall in home prices is linked just as clearly with waning speculative enthusiasm among investors, which is likewise largely unrelated to monetary policy. The world's monetary authorities will have trouble stopping this fall, and much of the attendant problems, just as they would have had stopping the ascent that preceded it.
The writer is professor of economics at Yale University and author of Irrational Exuberance And The New Financial Order: Risk In The 21st Century.
En Bloc Sellers 'Set To Spend Over $4b Buying New Homes'
Source : The Straits Times, Wed, Sep 19, 2007
Savills expects sales to pick up as owners get paid and seek replacement homes
BOOM TIME: Some of the larger projects sold collectively in April to June include Leedon Heights and Farrer Court on Farrer Road. -- ST FILE PHOTO
CASH windfalls will soon be arriving for the hundreds of home owners who sold their property en bloc during the frenzied April to June period.
As they look for new homes, they could pour more than $4 billion into the market by early next year, according to new estimates from Savills Singapore.
The property consultancy said the 'bunching up' of collective sales in the second quarter will yield almost $6.4 billion in total collective sale proceeds.
Most of the amount is due to come in between December and February, which is likely to prompt a pickup in market activity, said Mr Ku Swee Yong, Savills Singapore's director of marketing and business development. Assuming some sellers already have second homes, those who need a new place to live in will have about $4.2 billion to spend, he said.
His calculations showed that about 2,800 units were sold en bloc between April and June, for an average of $2.3 million a unit.
But he estimates that only about two-thirds of the owners will buy replacement homes. Still, this means almost 1,900 units in move-in condition will be needed in the months ahead.
Buyers are likely to seek these homes in areas such as Bukit Timah, Upper Bukit Timah, Clementi, Novena, Upper East Coast and Bukit Panjang, added Mr Ku.
This is because the bulk of the collective sales during the period were in the prime areas of Districts 9, 10, 11 and 15. Together, these cover Orchard, Holland, Bukit Timah, Newton and the East Coast.
Some of the larger projects sold en bloc in April-June include Farrer Court and Leedon Heights on Farrer Road, with more than 900 units between them. All these projects are in District 10, said Savills. In this prime district alone, 1,600 units were sold for $4.3 billion, it added.
'Sellers in Districts 9 and 10 are likely to look for new homes in Districts 11 and 21 - Bukit Timah and Upper Bukit Timah,' said Mr Ku. 'Even if they have money to stay in the centre of town, they may have nothing to buy, as most of the older projects have already gone en bloc in the last two years.'
On the other hand, Bukit Timah and Upper Bukit Timah 'have plenty of projects and not many collective sales', he added.
He expects en bloc sellers to be out in full force buying new homes starting from December, thanks to the record run of collective sales this year - such deals from January to June hit almost $10 billion, according to Savills.
'Almost all such sellers get their money within nine months of the sale,' Mr Ku said, adding that Strata Titles Board sale approval takes about six months.
He added it has proven difficult for some sellers to buy a new home using a bridging loan. 'So most of them won't be able to buy a replacement unit until they actually get money in hand.'
Savills expects sales to pick up as owners get paid and seek replacement homes
BOOM TIME: Some of the larger projects sold collectively in April to June include Leedon Heights and Farrer Court on Farrer Road. -- ST FILE PHOTO
CASH windfalls will soon be arriving for the hundreds of home owners who sold their property en bloc during the frenzied April to June period.
As they look for new homes, they could pour more than $4 billion into the market by early next year, according to new estimates from Savills Singapore.
The property consultancy said the 'bunching up' of collective sales in the second quarter will yield almost $6.4 billion in total collective sale proceeds.
Most of the amount is due to come in between December and February, which is likely to prompt a pickup in market activity, said Mr Ku Swee Yong, Savills Singapore's director of marketing and business development. Assuming some sellers already have second homes, those who need a new place to live in will have about $4.2 billion to spend, he said.
His calculations showed that about 2,800 units were sold en bloc between April and June, for an average of $2.3 million a unit.
But he estimates that only about two-thirds of the owners will buy replacement homes. Still, this means almost 1,900 units in move-in condition will be needed in the months ahead.
Buyers are likely to seek these homes in areas such as Bukit Timah, Upper Bukit Timah, Clementi, Novena, Upper East Coast and Bukit Panjang, added Mr Ku.
This is because the bulk of the collective sales during the period were in the prime areas of Districts 9, 10, 11 and 15. Together, these cover Orchard, Holland, Bukit Timah, Newton and the East Coast.
Some of the larger projects sold en bloc in April-June include Farrer Court and Leedon Heights on Farrer Road, with more than 900 units between them. All these projects are in District 10, said Savills. In this prime district alone, 1,600 units were sold for $4.3 billion, it added.
'Sellers in Districts 9 and 10 are likely to look for new homes in Districts 11 and 21 - Bukit Timah and Upper Bukit Timah,' said Mr Ku. 'Even if they have money to stay in the centre of town, they may have nothing to buy, as most of the older projects have already gone en bloc in the last two years.'
On the other hand, Bukit Timah and Upper Bukit Timah 'have plenty of projects and not many collective sales', he added.
He expects en bloc sellers to be out in full force buying new homes starting from December, thanks to the record run of collective sales this year - such deals from January to June hit almost $10 billion, according to Savills.
'Almost all such sellers get their money within nine months of the sale,' Mr Ku said, adding that Strata Titles Board sale approval takes about six months.
He added it has proven difficult for some sellers to buy a new home using a bridging loan. 'So most of them won't be able to buy a replacement unit until they actually get money in hand.'
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