Saturday, November 29, 2008

Recession? New Outlets, Malls Still Opening

Source : The Business Times, November 29, 2008

Retailers remain upbeat and are thinking of new ways to pull in shoppers

THE recession may have induced a round of belt-tightening, but industry players are still investing in new outlets and even opening new malls.

Sports chain Nike, for example, opened its $5 million flagship store in Orchard Road's Wisma Atria yesterday.

The 8,000 sq ft store is Nike's first flagship store in South-east Asia and the first here operated and owned by the brand itself. Till now, Nike stores have been opened with local partners.

NTUC FairPrice is opening another hypermarket, and a third retail mall is coming up in Tampines, which already has Century Square and Tampines Mall.

Nike's country marketing manager here, Mr Glenn Heng, said the sportswear giant had wanted to open a flagship store for some time, but the right location was not available. The opportunity came four months ago when Topshop closed its Wisma Atria outlet. It was too good a chance to pass up, said Mr Heng, who added that, despite the gloomy outlook, 'we are still quite positive'.

The increased interest in sports here, along with Singapore's clinching of the bid to host the first Youth Olympic Games, will only help the brand, he said.

Retailers hoping to sow some seeds for growth during this downturn include the biggest supermarket chain here, FairPrice, which will open its third hypermarket in Jurong Point next month and at least two more outlets next year.

FairPrice managing director Seah Kian Peng said: 'Even in the downturn, our customers will still need essential items for their daily needs.'

Mall owner AsiaMalls, which reopened the refurbished Liang Court this month and will open the Tampines 1 mall in March, remains confident of attracting shopper traffic to its malls. The group's assistant general manager Stephanie Ho said 'tactical promotions' which reward spending and reach out to target shoppers were the way to go.

Tampines 1 has secured 90 per cent of its tenants, including first-time entrants to the suburbs Topshop and Promod.

Orchard Central has signed up 60 per cent of its tenants, while Mandarin Gallery, which is being renovated, has signed up half.

A spokesman for Overseas Union Enterprise, which owns Mandarin Gallery, said: 'Leasing activities are still active as there are smart retailers who see downtimes as opportunities to get good space at viable rents.'

Mall owners who have snagged these retail tenants are working more closely with them to offer promotions and organise mall events to beat the effects of the economic slump. Far East Organization's deputy director of retail management Susan Leng said the yet-to-open Orchard Central will be open till 11pm daily to 'cater to tourists on tight schedules and true-blue shopaholics'.

Malaysian Growth Slows Sharply

Source : The Business Times, November 29, 2008

(Kuala Lumpur)MALAYSIA'S economic growth slid sharply in the third quarter to its slowest pace since mid-2005 as the global slowdown started to hit and the central bank said that it was ready to cut rates again if needed.

Annual gross domestic product growth slowed to 4.7 per cent in Q3, data showed yesterday, down from 6.7 per cent in the second quarter, and just above a 4.5 per cent increase forecast in a Reuters poll.

Earlier this week, data showed growth cooling in the Philippines and Thailand, and the World Bank forecast a sharp slowdown in China next year, while Japan posted a larger-than-expected fall in industrial production yesterday.

Malaysia's central bank governor, Zeti Akhtar Aziz, said that interest rates, cut this week to 3.25 per cent from 3.5 per cent, were not restricting bank lending, though she said that the central bank was ready to act again.

This week's rate reduction was the first in five years.

At a press conference, Ms Aziz said that Malaysia would not slip into a recession in 2009, and she forecast that inflation would drop to less than 3 per cent in the second half of 2009, down from 7.6 per cent in October, the latest month for which data is available.

The Malaysian government, which cut its growth forecast to 3.5 per cent from 5.4 per cent, has announced a US$2 billion stimulus package to boost the domestic economy so as to offset weakening exports. -- Reuters

Jurong East 'White' Site Joins Reserve List

Source : The Business Times, November 29, 2008

But market watchers say that like the Bukit Chermin site, it is not likely to be triggered anytime soon

FOR the second day running, the Urban Redevelopment Authority has made available for application a reserve list site in an attractive location, despite the inopportune timing.

Its latest offering is a 1.9-hectare 'white' site next to Jurong East MRT Station. At least 30 per cent of the 1.15 million square foot maximum gross floor area must be set aside for office use and the rest for additional office use or other uses permitted under the white site zoning such as commercial (like retail and entertainment), hotel and residential uses.

The 99-year leasehold plot is the first sale site being offered in URA's Jurong Gateway precinct since Singapore's planning authority unveiled plans for the Jurong Lake District earlier this year.

On Thursday, URA went ahead with the scheduled release of a plum hotel site at Bukit Chermin on hilly terrain overlooking the coastline.

Market watchers yesterday gave the Jurong East site the same verdict that they did for the Bukit Chermin site - it's not likely to be triggered anytime soon.

'Given the current uncertain business environment, it's unlikely there will be any interest in the Jurong East site. There's also difficulty in getting funding. Investors would rather go for completed, income-generating assets that can give immediate returns than to embark on a fresh development with higher risks,' DTZ executive director Ong Choon Fah said.

Market watchers also note that substantial office supply is expected to be completed from 2010.

Colliers International director Tay Huey Ying: 'It's unlikely the Jurong East site will be triggered for launch until the market picks up significantly. The land parcel is quite attractively located next to an MRT station and in an area within a growth centre.'

URA said: 'Given its strategic location, it is vital that the proposed development on the first sale site in Jurong Gateway is a well-designed landmark development with appropriate quality.

'Hence, the design of the proposed development will be reviewed by a Design Advisory Panel (DAP), chaired by URA.

'The DAP will work with and guide the development team in the design of the development after the tender has been awarded.'

Reserve list sites are launched for tender only upon successful application by a developer with an undertaking of a minimum bid acceptable to the state.

The tender for the Jurong East site will be awarded on the basis of land price.

S'pore Faces Years Of Slow Growth After Recession: PM

Source : The Business Times, November 29, 2008

Recovery will not depend on its own measures but state of US economy

SINGAPORE is likely to face several several years of slow growth after the current recession, Prime Minister Lee Hsien Loong said yesterday.

CRISIS CONTROL - PM Lee speaking to business leaders at the ENADE fair in Santiago, Chile; the current financial crisis involves the entire world and the magnitude is the worst in more than 60 years, he told reporters

Painting this glum picture amid the global financial crisis, he said that recovery for Singapore will not depend on its own measures but the state of the US economy.

Mr Lee explained how the current crisis differs from others that he has experienced - first in 1985, when Singapore's soaring costs required tough medicine; and then in 1997 when the Asian financial crisis hit.

This time around, the crisis involves the entire world and the magnitude is the worst in more than 60 years, he told Singapore reporters in the Chilean capital of Santiago as he wrapped up a week-long trip to South America.

'Imbalances have been built up over the past five to seven years - the balance of payments; deficits; the surpluses in Asia; the budget deficits in America; the borrowing and excessive consumption by US consumers,' he said.

'To get back to growth, we cannot go back to where we were before, which is - Asians lend money to Americans, Americans borrow money to spend. So how do we get back to the model where savings and consumption are in balance?'

Now that the American consumer is not spending as 'extravagantly and profligately' as before, those from other countries - be it China, India, or from Europe - will have to 'take the slack', said Mr Lee.

With many Singaporeans keenly awaiting the coming Budget, which has been brought forward a month to January, Mr Lee said that it is important to manage people's expectations realistically.

He made clear why the government is not keen to reduce the Goods and Services Tax. What will be more effective, he said, is to maintain the current 7 per cent rate and use the revenue in a targeted way, such as by helping businesses feeling the impact of the crisis.

'You cannot look at individual revenue items, but the overall package,' he said. 'Where is the government getting its money, where is it spending the money? The balance - are we putting assistance into the system, or are we running a big surplus during a time when the economy cannot afford to run a surplus?'

Mr Lee also ruled out any cuts to the CPF scheme 'in the immediate term' as there were more practical ways to reduce business costs. Slashing the CPF rate now would send too pessimistic a signal, he said. 'Then everybody takes fright and shrinks back. It would make things even gloomier.'

He recalled how, back in 1985, then-prime minister Lee Kuan Yew explained in his National Day Rally speech why Singaporeans had to 'take the medicine' to combat the downturn at that time. This included a hefty 15 percentage point cut in the employers' share of the CPF as a crucial way to bring down business operating costs.

Singapore's cost structure that year was way out of line with those of other Asian economies such as Korea, Hong Kong and Taiwan, said Mr Lee. 'That year in 1985, there were no goodies. Not one. People listened carefully, they understood the issues. The medicine worked.'

In the coming Budget, there will be 'a bit more sugar coating' on the pill, he said. There will be assistance for needy families, and the middle-income group - commonly known as the 'sandwich class' - will not be neglected.

Regardless of how the crisis pans out, the government will not lose sight of the over-riding priority - keeping people in jobs, reducing business costs and maintaining the country's competitiveness.

'That's what we have been doing this year and that will be the focus for the Budget,' said Mr Lee. 'At the end of the day, the situation will pass. Asia is dynamic with opportunities, and we must still be with Asia. During this downturn, we must do all we can to prepare ourselves and emerge in that position.'

Santiago was the final leg of Mr Lee's visit, during which he attended the Asia-Pacific Economic Cooperation summit in Lima, Peru, before heading to Sao Paulo and Brasilia in Brazil for bilateral talks. He returns home today.

Property Exposure Of Banks Well Below Limit

Source : The Business Times, November 29, 2008

MAS does not expect sliding real estate market to affect lenders as their loan portfolios are generally well diversified

EVER since the market gathered steam in 2005, property-related loans have grown steadily. In fact, they were the key drivers of non-bank loan growth over the past two years, according to the Monetary Authority of Singapore (MAS), which released its Financial Stability Review yesterday.

Now, as a chill settles over the market again, concerns are being voiced over banks' exposure to the property sector. Brushing aside these worries, the MAS said that the overall property exposure of banks stands at just 18 per cent, well below the regulatory limit of 35 per cent. Of course, some banks may be closer to the threshold. 'Most banks' property exposures were well below the limit, with a few banks' property exposures closer to the limit,' MAS said.

Home loans are not included in the regulatory limit as they are typically very low risk. They accounted for 28.4 per cent of non-bank loans.

Banks' exposures to building and construction (B&C) firms are generally well-diversified with no bank having exposures concentrated in any particular property firm, it said. Lending to the B&C sector accounted for 18 per cent of total domestic banking unit (DBU) non-bank loans in September 2008. The asset quality of B&C loans has remained high, with the non-performing loan (NPL) ratio remaining low at less than one per cent.

'Going forward, the NPL ratio of B&C loans is expected to rise, given the economic downturn and ongoing corrections in the property market,' MAS said.

However, it does not expect this to affect the financial soundness of the banks as their loan portfolios are generally well diversified.

MAS said that the leverage ratio of the property sector has remained at almost the same level as before the Asian financial crisis, at around 60-80 per cent.

'Generally, the small property developers are more highly geared than the large property developers, with the small developers' debt to equity ratio at 76 per cent, compared to the large developers' 62 per cent in Q2 2008,' it said.

While there has been a substantial moderation in the interest coverage ratio since Q2 2007 for both small and large property developers, their earnings are still more than adequate to cover their interest liabilities in Q2 2008 with earnings at about 8.6 times of interest expense, it said.

On housing loans, the MAS said that they 'typically turn in low single-digit NPL ratios and have a low risk profile with 75 per cent of housing loans accounted by owner-occupied residential properties'.

In addition, Singapore banks' mortgage exposures are currently in the form of direct loans. Unlike in the US, there has been no securitisation of mortgages and repackaging into complex products, which had contributed to lax lending standards and the mispricing of risk, it said.

It added that the growth of property-related loans has tapered off recently, reflecting falling home demand and property transactions.

Friday, November 28, 2008

Lend Lease Makes Progress In Leasing Of Orchard Mall

Source : The Business Times, November 28, 2008

LEND Lease says it has found over 50 per cent of the retailers it needs for 313@Somerset Orchard Road.

Lend Lease development director Michael Kenderes would not reveal expected rents, but he said Lend Lease has 'agreed terms' with these retailers and expects to sign letters of offer early next year.

313@Somerset is one of three new malls opening on Orchard Road next year. Targeted at the mid-market segment, the mall has 294,000 sq ft of net lettable area with about 180 retail and F&B outlets.

Mr Kenderes did not reveal the names of any retailers but said that it had undertaken surveys and focus groups to arrive at the mall's positioning. 'It's not going to be all things to all people,' he added.

As a part of 313@Somerset's USP (unique selling position) Lend Lease will be focusing on service standards and will open a $1 million Retail Training and Employment Centre to provide retail training to the employees of its retailers. Mr Kenderes said that this was prompted by 'the retail industry's need for skilled workers geared towards service excellence'.

Lend Lease says it will fund around 60 per cent of the training centre and expects to seek additional funding through various government agencies.

Already six months into planning, Lend Lease is working with the Singapore Workforce Development Agency on obtaining course accreditation and expects to train about 1,000 employees a year. So far, it has about 600 potential trainees.

The training centre will focus on the Customer Centric Initiative programme developed by Spring Singapore.

Priority will be given to 313@Somerset's retailer's employees but additional space will be opened up to anyone interested.

The training programme will also be free.

Already, tenant Charles Wong of Charles & Keith is happy about being able to save on its business costs. Mr Wong said that his company spends about $20,000 on training a year. 'This will help to save cost, especially for SMEs for whom training is not top of mind during a downturn,' he added.

Mr Kenderes said that in Singapore alone, the training centre is expected to save over $3 million in potential savings from hiring costs, training costs and downtime.

The centre is expected to be fully operational by mid-2009.

URA Releases Reserve-List Hotel Site For Application

Source : The Business Times, November 28, 2008

Market watchers don't see any takers until at least mid-'09

THE Urban Redevelopment Authority (URA) yesterday released for application through the reserve list a plum hotel site at Bukit Chermin flanked by Keppel Club and the Reflections at Keppel Bay condo project.

Despite the site's attractive location in hilly terrain along the coast, some market watchers do not expect takers to emerge until mid-2009 at the earliest, given the grim property investment climate.

Any eventual bids for the 60-year-leasehold plot will be assessed under a dual-envelope system, taking into account concept and land price. The 3 ha plot is expected to yield about 50-70 hotel rooms/ villas.

The plot was initially on the second-half 2008 confirmed list but was moved to the reserve list late last month.

Jones Lang LaSalle Hotels executive vice-president Chee Hok Yean said it is difficult to pin down the site's value because of a combination of substantial construction costs expected for the project, the tight funding market and higher returns sought by potential investors given the current situation in the hotel business as operating profits trend down.

The site may be triggered for launch by investors towards second-half 2009, Ms Chee said. 'At least business sentiment should be a lot clearer by then.'

Cushman & Wakefield Singapore's managing director Donald Han also puts the earliest trigger date for the site at mid-2009. Hopefully by then, too, construction costs will have come down, which might also entice investors to apply for the site's release, he said.

URA said: 'The release of the site for a distinctive lifestyle hotel development will enhance the attractiveness of the Southern Waterfront and Southern Ridges.'

With panoramic views of Keppel Harbour, the plot, which has a maximum permissible gross floor area of 107,639 sq ft, is envisaged to be developed into a lifestyle hotel, URA said.

The site includes four pre-war black-and-white bungalows that are now leased for housing but will have to be restored and adapted for new uses by the successful tenderer. New buildings with panoramic views towards the harbour can be built, interspersed with the exiting bungalows, to create a unique development, URA said.

Developers interested in bidding for the site can make an application to URA accompanied by an undertaking to bid a minimum price. If this price is acceptable to the state, the plot will be launched for tender. Tenderers have to submit their concept proposals and bid prices in two separate envelopes. The concept proposals will first be evaluated against criteria including business and development concepts.

At the second stage, the price envelopes of proposals with acceptable concepts will be opened and the site will be awarded to the tenderer with the highest bid among those with acceptable concept proposals.

Jurong East Reserve Site Available For Application

Source : The Business Times, November 28, 2008

Urban Redevelopment Authority on Friday made available for application a 'white' site next to Jurong East MRT Station through the reserve list.

The 1.9 hectare site can be developed into a maximum gross floor area of about 1.15 million sq ft, of which at least 30 per cent must be set aside for office use and the rest for additional office use or other uses permitted under the white site zoning such as commercial (for example, retail and entertainment), hotel and residential uses.

The 99-year leasehold plot is the first sale site being offered in URA's Jurong Gateway precinct since URA unveiled plans for the Jurong Lake District earlier this year. Jurong Gateway is the commercial hub of the Jurong Lake District.

'Given its strategic location, it is vital that the proposed development on the first sale site in Jurong Gateway is a well designed landmark development with appropriate quality. Hence, the design of the proposed development will be reviewed by a Design Advisory Panel (DAP), chaired by URA. The DAP will work with and guide the development team in the design of the development after the tender has been awarded,' URA said.

Under the government's reserve list system, a site will only be put up for tender if the developer's indicated minimum bid price in his application is acceptable to the government. When the site is put up for tender, a tender period of about 16 weeks will be allowed before tender closes.

The tender for the Jurong East site will be awarded on the basis of land bids.

CityDev's M&C's Sale Of Hilton Seoul Is Off

Source : The Business Times, November 28, 2008

City Developments' London-listed hotel unit Millennium & Copthorne Hotels (M&C) announced on Friday that the agreement for the disposal of Millennium Seoul Hilton to Kangho AMC Co has been terminated with immediate effect.

The buyer was unable to finalise its financing arrangements by the extended completion date of Nov 28.

The sale, announced in June this year, was to have been for about 580 billion Korean won (around S$767 million at the time.

On Sept 19, 2008, M&C announced that Kangho had asked the company for an extension of the completion date originally scheduled on Sept 30, 2008, whilst it finalised the terms of its financing arrangements. On Sept 29, 2008, M&C announced that the company and Kangho had agreed, among other things, to the amendment of the completion date of the disposal from Sept 30, 2008, to Nov 28, 2008.

'M&C today announces that while the company was ready, willing and able to complete the disposal, Kangho has, in the current difficult financial markets, been unable to finalise its financing arrangements and, consequently, the remainder of the purchase price remains unpaid,' M&C said in its statement.

The agreement for the disposal has therefore terminated with immediate effect.

Following the termination of the disposal, the Millennium Seoul Hilton will continue to be managed by the M&C group.

Gov't Has Important Role In Property Market: Mah

Source : The Business Times, November 26, 2008

The Government has an important role in ensuring the long-term stability and smooth functioning of the property market, said Minister for National Development Mah Bow Tan at the Real Estate Developers' Association of Singapore's (Redas) anniversary dinner tonight.

'Let me first highlight why the real estate sector is important to us,' Mr Mah said.

Mr Mah's comments comes in the wake of public queries over the government's role in the property market, with some wondering if the land prices should be left to market forces.

Mr Mah said there are mainly 3 key reasons.

'First, it is a major economic sector in Singapore. The real estate services and construction sectors together accounted for about 9.6 per cent of overall GDP and 13 per cent of total employment in Singapore in 2007. Second, the health of the property market affects other major sectors of the economy. Third, as a country with the highest rate of home-ownership of more than 90 per cent, the property sector is where most of us have invested our hard-earned lifelong savings.'

The Government will do whatever is within its means to help all the various economic sectors in Singapore cope with the current crisis and mitigate the impact on businesses, Mr Mah said.

For the property market specifically, the Government will ensure that the supply of land released for development is well calibrated and sufficient to meet demand over the medium to long term. It will also give developers the flexibility to activate Government Land Sales supply according to market demand by using a pre-dominantly market-led approach through the use of the Reserve List.

The authorities will also provide detailed real estate information to enhance market transparency and allow informed decision-making by market players, and will put in place policies that ensure that systemic risks to both the demand and supply sides are minimised, thus safeguarding the overall health of the property market, Mr Mah added.

Finally, the Government will also guard against irrational market behaviour such as excessive speculation that is not in sync with economic fundamentals, Mr Mah said.

Crisis Bites Deeper Into Asia

Source : The Straits Times, Nov 28, 2008

TOKYO - ASIAN economic giants Japan and India on Friday revealed fresh damage from the global financial crisis, which has battered international trade and consumer spending.

Japan slipped deeper into recession with factory output tumbling 3.1 per cent and consumer spending dropping 3.8 per cent in October, official data showed.

The figures were 'stunningly bad,' said Societe Generale's chief Asia economist, Glenn Maguire.

'Japan's industrial activity is set to worsen in the near-term, perhaps by an unprecedented degree, as exports to the US have plunged over the past year,' he warned.

Rising economic powerhouse India said its economic growth slowed to 7.6 per cent in the third quarter of 2008, from 7.9 per cent in the second.

While it was still a respectable performance at a time when many developed economies are in recession, the slowdown in India highlights the extent to which the US-born financial crisis has spread around the world.

There was also bad news from South Korea, where industrial production fell 2.3 per cent in October in a sign that the export-driven economy is slowing faster than expected.

Investors mostly managed to look beyond the gloomy news, hoping that interest rate cuts and stimulus spending would eventually turn things around.

Tokyo ended up 1.7 per cent in light trade after Thursday's Thanksgiving holiday in the United States, while Seoul rose 1.2 per cent and Sydney jumped 4.3 per cent. But Shanghai finished with a loss of 2.4 per cent as investors took profits after the previous day's strong gains.

The main Bombay Stock Exchange opened 1.4 per cent lower Friday, a day after being forced to shut down due to a coordinated attack by gunmen across the city, which left at least 130 people dead.

While some analysts believe stocks are now looking cheap, others see little prospect of a recovery in the current climate of fear and gloom over the global economy.

European markets got off to a lacklustre start. The London FTSE 100 rose 0.15 per cent at the open while the Paris CAC 40 slipped 0.29 per cent and the Frankfurt DAX was flat.

The region continued to feel the fallout from the financial crisis.

Britain's Royal Bank of Scotland said the government would end up with a 57.9 per cent stake in the bank after a share issue to raise funds to help it cope with the financial crisis.

A survey showed consumer and business confidence in the European Union slumped in November to the lowest level in 23 years in the face of the looming recession.

General Motors' boss in Europe wrote to staff telling them that the troubled US automaker needed to cut European costs aggressively if it was to survive as vehicle markets slump.

In the once-booming steel industry, ArcelorMittal said it could slash up to 9,000 jobs across the group worldwide through voluntary redundancies.

British retail group Woolworths, which employs 25,000 people, said it was close to bankruptcy.

With developed nations focused on efforts to boost their own recession-ridden economies, the World Bank urged donors not to abandon poor countries hit by the financial crisis.

Developing countries 'find themselves at the mercy of a crisis not of their making,' World Bank President Robert Zoellick said ahead of a UN development conference this weekend.

'A retreat to protectionism or economic nationalism by developed countries will hurt them even further,' he added. -- AFP

Malaysia To Escape Recession

Source : The Straits Times, Nov 28, 2008

KUALA LUMPUR - MALAYSIA is likely to escape a recession next year and post a modest growth despite the global financial crisis due to strong consumer demand and public spending, the central bank said Friday.

Ms Zeti (pictured) said since Malaysia was not hit by such problems, the economy will enjoy growth and not face 'a risk of a recession.' The government earlier this month announced a 7.0 billion ringgit (S$3.02 billion) stimulus programme and warned growth would slow substantially in 2009. --PHOTO: BH

'We expect to have positive growth next year,' central bank governor Zeti Akhtar Aziz told reporters.

Malaysia's top trading partner neighbouring Singapore and Asia's largest economy Japan are already in a recession.

Ms Zeti said if the global financial crisis does not worsen, Malaysia would post a growth of 3.5 per cent in 2009.

'Domestic demand has become the engine of growth. Our financial system is not facing the financial stress. We have ample liquidity in the system.

'We have no large scale retrenchments. We are creating jobs. We are in an economy where there is no asset burst,' she added.

Ms Zeti said since Malaysia was not hit by such problems, the economy will enjoy growth and not face 'a risk of a recession.' The government earlier this month announced a 7.0 billion ringgit (S$3.02 billion) stimulus programme and warned growth would slow substantially in 2009.

The spending package, reaped from savings on reduced oil subsidies, is to be spent on 'high-impact' projects including roads, schools and low-cost housing.

Earlier Ms Zeti announced Malaysia posted a slower growth of 4.7 per cent in the third quarter amid a 'sharp deterioration in the global economic and international financial environment.'

The central bank revised upwards second quarter growth to 6.7 per cent from 6.3 per cent. Malaysia posted 7.1 per cent growth in the first three months of 2008.

Zeti said Malaysia would register economic growth of 3.5 to 4.5 per cent in the fourth quarter while for the whole year it would post five to 5.5 per cent growth.

'We said the next 12 months will be a challenging period. Despite that we expect our growth (this year) to be five to 5.5 per cent,' she said.

Ms Zeti also said Malaysia had at its disposal a string of measures to sustain strong consumer demand, which will be introduced if there is a major economic downturn among its Asian neighbours and the world.

'This would relate to fiscal and other measures to attract foreign direct investments. It could also include monetary policies. A wide range of measures will be implemented if the global economic situation worsens.

'The objective is to contain the impact on our economy. It is to ensure there is access to financing,' she added.

Ms Zeti said inflation had peaked at 8.4 per cent and would moderate next year.

'In the second half of 2009, it will fall below 3.9 per cent.' -- AFP

组屋房地产税不变 私宅可能得付更多

Source :《联合早报》November 28, 2008


财政部发言人回复本报询问时说,以今年至今的市场情况来说,明年的组屋年值(annual values)应该调高。




















Thursday, November 27, 2008

Punggol BTO Flats In Hot Demand

Source : The Straits Times, Nov 27, 2008

IN THESE leaner economic times, the cheapest public housing option for newly-wed couples has been three times subscribed.

The Housing Board's latest Build-To-Order (BTO) flats, Punggol Arcadia, closed yesterday with 2,344 applications for just 750 units. The final update will be made today at 2pm.

The overwhelming response 'demonstrates that there is still a high demand for public housing', said the chief executive of property consultancy PropNex, Mr Mohamed Ismail.

HDB launched Punggol Arcadia, at the junction of Punggol Place and Punggol Field, two weeks ago.

Buyers could choose from 120 three-room, 465 four-room, and 165 five-room flats. The flats cost between $181,000 and $211,000 for a three-room unit, between $268,000 and $327,000 for a four-room unit, and between $356,000 and $416,000 for a five-room unit.

The prices represent an increase of 7 to 8 per cent from those at neighbouring Punggol Sapphire, another BTO project HDB launched six months ago.

PropNex noted that the median price for the flats was 'only a few thousand dollars below that of Punggol resale flats'.

This means buyers still want new flats, otherwise they could easily opt for a resale flat where they would not have to wait to move in, and can enjoy grants of up to $70,000.

According to HDB data, only 262 applications were received on the first day of application. Yet, yesterday's results mean less than 40 per cent of applicants will get a flat.

'Given these results, we can expect to see the HDB resale market continue to do well for the whole year with overall 14 per cent growth,' said Mr Ismail.

He added that demand for three- and four-room flats will not wane in the slowing economy, but 'there may be more cautious sentiments where five-room flats are concerned'.

Mah Sees Softening Of Property Prices

Source : The Straits Times, Nov 27, 2008

Future movements will depend on how industry adjusts to conditions

PROPERTY prices will inevitably soften and demand will weaken amid slower economic growth, National Development Minister Mah Bow Tan said yesterday.

Private housing prices fell 2.4 per cent in the third quarter, and further price movements will 'depend on the severity of the economic slowdown'.

Mr Mah was speaking at the 49th anniversary dinner of the Real Estate Developers' Association of Singapore (Redas) at the Shangri-La Hotel.

He said future price movements will also depend on the 'ability of the industry to make adjustments in response to the changes in economic conditions'.

Meanwhile, Mr Simon Cheong, Redas president and chief executive of upscale residential developer SC Global Developments, said he expects construction prices to ease off with the trend of falling oil prices and easing inflation.

'Current pressure on construction services (will) begin to moderate once the lag in demand kicks in with a slowdown in new commitments by developers,' he said.

Mr Mah also addressed recent moves by Redas to present market analysts with other sources of market data after they had drawn bearish conclusions about the industry recently.

Redas had said the analysts' findings were based on official numbers from the Urban Redevelopment Authority (URA), which they felt are too general. Reports said the industry body met property analysts from local and foreign research firms two weeks ago to advise them that URA data may not give an accurate picture of specific sections of the market.

Mr Mah said the Government has a vital role in guarding against 'irrational market behaviour, such as excessive speculation, that is not in sync with economic fundamentals', to ensure the long-term stability and smooth functioning of the property market.

Mr Cheong agreed: 'The market is at best currently fragile and nervous. Market stability is important to prevent a widespread decimation of asset values...Redas will do its best to work closely with the Government to provide timely market feedback to facilitate a timely and effective response that the property market needs.'

But there are limits to what the Government can and should do, said Mr Mah. For one thing, it cannot work against market forces and try to prop up property prices artificially.

Mr Mah explained: 'Such efforts are not sustainable and will not be beneficial to the health of the property market in the long run. Any measure seen to be knee-jerk or excessive might even weigh market sentiment down further...It is in our interest to ensure that the property prices move in line with economic fundamentals as it affects home ownership, asset values, retirement savings and other sectors of the economy.'

But Mr Cheong said: 'Only with confidence will demand return to the market.' He advised Redas members to 'take this opportunity to do our house cleaning, improve our product and get ready for the next upturn'.

'Pricing alone does not lead to sales volume. Sentiment and confidence lead to sales volume.'

Serangoon Central To Get Mega Shopping Mall

Source : The Straits Times, Nov 27, 2008

$1.3b centre, about twice the size of suburban malls here, is expected to be completed by 2010

IT IS full steam ahead for a $1.3 billion mega shopping mall being built at Serangoon Central - in defiance of the current gloomy times.

Construction firm Low Keng Huat was yesterday awarded a $295 million contract to build the mall and the firm is grabbing the contract with both hands.

Its chief financial officer, Mr Chin Yeok Yuen, said private contracts of such a scale are 'hard to come by' these days as many developers have delayed projects in light of the slowdown.

Developer Gold Ridge, a special purpose vehicle made up of mainly institutional investors from the United States and Europe, is confident of the project's long-term success.

Ms Victoria Sharpe, the chief executive of Pramerica Real Estate Investors (Asia) which is advising the investors, said the mall has tremendous potential to be developed into an iconic retail centre serving Singapore's north-east.

It is also strategically located in the heart of Serangoon with its large residential population and numerous schools.

The yet-to-be-named six-storey mall - which sits above Serangoon MRT station and the upcoming Serangoon Circle Line station - will be integrated with the stations and a new bus interchange.

It will boast a 24-hour zone with shops, food and beverage outlets, a 10-screen cineplex, a 60,000 sq ft hypermarket and a 10,000 sq ft gourmet supermarket. Also, SAA Architects has conceptualised a 'green necklace' along the exterior of the eco-friendly building. This involves a series of lush green spaces. There will also be a landscaped sky terrace and an internal roof garden.

A new 16-bay bus interchange will take up part of the mall's ground floor. The mall will have a total net lettable area of slightly more than 618,000 sq ft. That will make it bigger than Ang Mo Kio Hub, a suburban mall that is also linked to a bus interchange and an MRT station.

'Suburban malls are usually about 300,000 to 400,000 sq ft in size. This one is big and will be more exciting as it can accommodate more concepts, activities and experiences,' said property consultancy Knight Frank's head of retail, Ms Sherene Sng.

Gold Ridge plans to include a department store that may occupy up to 60,000 sq ft, as well as a 500-seat food court. There will be more than 400 specialty shops. The firm is investing $1.3 billion, including land cost, in the project. It had successfully tendered for the site in March this year, with a bid of $800.9 million or $850 per sq ft per plot ratio.

The existing shopping centre portfolio of Pramerica Real Estate Investors (Asia) includes Tiong Bahru Plaza, Century Square and upcoming Tampines 1.

The weak economic outlook is expected to hit retail sales but suburban malls with high traffic may fare better than some prime downtown malls. Said Ms Sng: 'Suburban mall rents will remain fairly resilient, going ahead. If they were to fall, the decline will not be as great as the fall in rents in prime areas.'

Builder Low Keng Huat yesterday said it had been awarded the construction contract for Serangoon Central Mall, which comprises the mall and bus interchange. The project is expected to be completed by October 2010.

The total value of the firm's ongoing construction projects, including Serangoon Central mall, is about $900 million as of yesterday, it said in its statement.

Guthrie Consultancy Services is the project manager, retail consultant and marketing manager for the mall. The mall will eventually be held by two or possibly several funds managed by Pramerica.


Coming up

WHAT'S planned for the mall:

More than 400 specialty shops

A 10-screen cineplex A hypermarket, a gourmet supermarket and a department store

A 500-seat food court

A 24-hour zone with shops as well as food and beverage outlets

A new 16-bay bus interchange will take up a portion of the ground floor of the shopping centre

Reserve-List Hotel Site At Bt Chermin Now Open For Application

Source : The Business Times, November 27, 2008

Urban Redevelopment Authority on Thursday released for application through the reserve list a hotel site at Bukit Chermin. The 3-hectare site is being offered on a 60-year leasehold tenure.

'The release of the site at Bukit Chermin for a distinctive lifestyle hotel development will contribute to and further enhance the attractiveness of the Southern Waterfront and Southern Ridges,' URA said.

Located along a beautiful coastline with panoramic views of Keppel Harbour, the plot, which has a maximum permissible gross floor area of 10,000 square metres, is envisaged to be developed into a distinctive lifestyle hotel.

In addition to accommodation facilities, the proposed hotel development is planned to include offerings of lifestyle programmes and services that will cater to discerning international visitors, URA said.

'This will add value and strengthen the appeal of Singapore as a premium tourism destination,' Singapore's planning authority added.

Developers interested in bidding for this site may make an application to URA accompanied with an undertaking of their minimum bid.

If this price is acceptable to the state, the site will then be launched for tender. The tender will be evaluated under a dual-envelope system.

Tenderers are required to submit their concept proposals and tender prices in two separate envelopes.

The concept proposals will first be evaluated against a set of criteria including business and development concepts.

At the second stage, the price envelopes of proposals with acceptable concepts will be opened for consideration and the site will then be awarded to the tenderer with the highest bid among those with acceptable concept proposals.

The site includes four black and white bungalows.

Property Transactions With Contract Dates Between Nov 10th - 15th, 2008

New York Home Prices See Steep Decline

Source : The Business Times, November 27, 2008

(NEW YORK) The economic crisis is finally crashing New York's real estate party, forcing the city's residents to start sharing the rest of the country's pain.

Feeling the heat: It is the end of a chapter in the storied annals of Manhattan real estate, with some brokers advising sellers of apartments in the area to slash their asking prices by 10 per cent to 15 per cent compared with prices on similar properties

And with so much of the city's financial well-being and its citizens' psyche invested in both Wall Street and the prices of its homes, the decline is triggering fears of a return to the dark days of the 1970s and 1980s. At its worst that triggers images of trash piling up on the streets and a higher crime rate.

In a few pockets of the city, prices have already fallen as much as 30 per cent from their highs, according to some brokers, and the declines will spread to other areas by January as job losses mount and as bankers come to terms with vanishing, or at least diminishing, bonus cheques because of the financial mayhem of the past year.

'There's going to be even more supply, people are going to have to drop their prices even more,' said Elaine Clayman, a broker at the high-end realty group Brown Harris Stevens, which has operations in the Hamptons and Palm Beach as well as New York.

She is already advising sellers of Manhattan apartments to slash their asking prices by 10 per cent to 15 per cent compared with prices on similar properties, and will not work with sellers who overprice. 'It's just going to be a bad relationship. I don't need that.'

It is the end of a chapter in the storied annals of Manhattan real estate. Until about three months ago, the real estate industry was issuing calming noises and pointing to figures that showed the average price of an apartment in Manhattan was still climbing.

'New York was an oasis,' said Bob Toll, chief executive of Toll Brothers Inc, the largest US luxury builder, which has projects in Manhattan and Brooklyn. 'New York had its own separate market.'

Now, Toll is saying layoffs in the financial sector, 16,000 from securities companies in October alone, means that New York has lost some of the advantage it had.

'In another market, this apartment would be gone,' said broker Maureen Smith as she walked up the sunny stairs of a US$799,000- priced one-bedroom duplex in an Upper West Side high-rise.

Two years ago, Lynna Gott, Ms Smith's partner, sold a similar unit in the building for US$860,000. Ms Smith was there last Sunday afternoon to show the apartment, but traffic is thin, Ms Gott said. 'It's a slow season,' Ms Smith said. 'But it's also the market.'

Inventory is piling up because of the falling numbers of sales, and the move by some people in financial distress to put their homes on the market. A strong dollar is also damping foreign demand.

Manhattan's October listings were up 37.3 per cent compared with last year, said Jonathan Miller, president and CEO of appraisal firm Miller Samuel.

While the median price of a Manhattan apartment, US$928,263 in the third quarter, still rose 7.4 per cent compared with a year earlier, that might not hold true in the fourth quarter, Mr Miller said. Today's typical apartment is often worth less than it was a year ago.

The latest Standard & Poor's/Case-Shiller home price indices released on Tuesday showed that prices in the larger metropolitan New York area fell an annual 7.3 per cent in September. That was before the worst of the stock market meltdown in October.

Prices in parts of the city have been sliding rapidly. In Harlem and East Harlem, areas that had been gentrifying quickly, they were down 20 per cent in the third quarter from a year earlier to an average US$440,000, according to Miller Samuel.

In the areas of Hamilton and Morningside Heights, which are in and just south of Harlem, the drop has been an even steeper 30.1 per cent to US$397,500 median price for co-op apartments and condominiums.

Even the average price in Soho and Tribeca, two of New York's toniest neighbourhoods, fell 21 per cent to US$1.9 million.

And while some neighbourhoods have seen prices hold up or even rise that may be deceptive, said Jed Cohen, a vice-president at brokerage Cooper & Cooper. More and more developers are paying closing costs, which can amount to 6 per cent of the sales price. For tenants, landlords are often paying the broker's fee and up to two months' rent, Mr Cohen said.

'I'm encouraging all of my clients at this point, 'Hey, make an offer'. Some landlords are more desperate than others,' Mr Cohen said. -- Reuters

US Commercial Property Sales To Fall 70%

Source : The Business Times, November 27, 2008

Value of such deals will slump to US$142b this year, says research firm

(SEATTLE) The value of US commercial real estate sales this year will fall to US$142 billion, 70 per cent less than last year's record US$467 billion, as the economy slows and borrowing costs rise, according to Reis Inc, a New York-based real estate research firm.

Office, apartment, retail and industrial property transactions totalled US$110 billion through the third quarter, Reis said in its capital markets survey. Sales are slowing as 2008 draws to a close, likely resulting in a yearly total of less than the implied annual rate of US$147 billion if the pace through nine months were to continue, said Reis chief economist Sam Chandan.

'The credit crisis has proven recalcitrant and has spilled over to the real economy,' Mr Chandan said on a conference call on Tuesday.

Property values fell as the global credit crunch caused financing to become scarce and boosted borrowing costs. Office building prices declined 15.4 per cent in the third quarter from their peak, and were down 1.8 per cent from the second quarter, Reis said. Apartments declined 17 per cent from the high and fell 3.7 per cent from the second quarter.

Retail property prices dropped 7.3 per cent from the peak and 0.8 per cent from the second quarter. Industrial properties such as warehouses fell 10.6 per cent from the high and 2 per cent from the prior quarter, Reis noted.

Commercial mortgage delinquency and default rates will increase in 2009, said Mr Chandan. The recession will result in rents and occupancy 'differing significantly from expectations in underwriting in 2006 and early 2007' when landlords took out loans for the properties, Chandan said.

While commercial mortgage delinquency rates 'are on a par with the residential sector' and defaults remain low, 'the performance of properties will be insufficient to cover debt service and escrows are being drawn down' as a result, Mr Chandan explained. 'As those gaps increase and escrows begin to evaporate, the potential for distress increases in markets across the country.'

As the end of this year approaches, demand to refinance loans will rise, Mr Chandan predicted. 'We expect an imbalance will emerge between demand for refinancing and availability if new sources don't emerge over the next year,' he said.

'We're in the middle of deleveraging,' he added. 'That has the potential to depress values below' what properties generate in rental income. -- Bloomberg

Abu Dhabi Moves To Revive Housing Market

Source : The Business Times, November 27, 2008

(ABU DHABI) Abu Dhabi deepened efforts to stave off economic damage from the credit crisis yesterday, launching a government- backed lender to revive the housing market as major Dubai developers were reported to halt sales.

The lender, called Abu Dhabi Finance, would back mortgages to the emirate's top three developers as a first step, and would extend its reach countrywide into the United Arab Emirates (UAE), the new company said in a statement.

The UAE suffered a direct hit from the credit crisis after lending to its booming real estate sector dried up and property prices plunged, forcing the government to create a rescue vehicle called Emirates Development Bank that would serve to consolidate and absorb finance firms under pressure.

Leading banks have cut off consumer lending to some customers and the country's biggest lender, Amlak, has stopped underwriting new mortgages due to the credit crisis.

The new company would be a joint venture between Mubadala - the government development agency - Abu Dhabi Commercial Bank, Aldar Properties, Sorouh Real Estate and the Tourism Development and Investment Company.

'The company aims to play a major role in helping Abu Dhabi meet its long term goals of sustainable economic growth by financing the growing demand for real estate,' the company said.

Mubadala Development is an investment vehicle owned by Abu Dhabi, the dominant emirate within the seven-member UAE and holder of most of its oil reserves.

Separately, newspaper Emirates Business reported that two Dubai developers, state-owned Nakheel and Limitless, which is controlled by government- owned Dubai World, would halt property sales until Dubai's real estate market improves.

Earlier this week, Dubai announced that it will pull back on its building spree in light of the financial crisis, according to Mohamed Alabbar, a Dubai government official and chairman of Emaar.

The paper also said that Dubai-based developer Emaar had moved to ease the impact of the credit crisis by loosening restrictions on the resale of properties, allowing investors to sell before paying Emaar 30 per cent of the property value, a newspaper reported yesterday.

Previously, properties purchased off-plan - or before they are built - could only be resold once 30 per cent of the agreed price had been paid. -- Reuters

Frankurt Office Property Market Seen Softening

Source : The Business Times, November 27, 2008

But it won't be as bad as London given smaller bank job loss

(FRANKFURT) The office property market in Frankfurt, Germany's banking capital, looks set to soften but is likely to hold up better than London, Europe's top financial centre, mainly because fewer bankers are losing their jobs.

Property yields are expected to rise less in Frankfurt than in London, and rents, which generate crucial cash flow for real estate investors in times such as these when properties are hard to sell at a profit, will fall less, industry watchers say.

Thanks to its lower volatility, Frankfurt offices will play a key role for long-term institutional investors such as insurers, pension funds and sovereign wealth funds - all of which are expected by analysts to increase their real estate exposure as part of a more diversified asset allocation mix.

The return on real estate as an asset class was negative to the tune of 30 per cent in January-October, broadly on a par with the S&P 500 US equities benchmark.

Real estate has been hit by falling commercial property prices, lack of access to deal financing, rising re-financing costs, higher vacancy rates and lower rents, investment bank Morgan Stanley said in a report.

Financial firms worldwide have slashed over 150,000 jobs in the current crisis with the drain the most pronounced in New York and London.

Last month, the Centre for Economics and Business Research estimated that London would have lost 28,000 financial-sector jobs by the end of this year, and a further 34,000 in 2009.

'The crisis is also hitting Frankfurt . . . but the impact is quite moderate compared to London,' said Carsten Ape, head of Frankfurt office rentals at property consultancy CB Richard Ellis (CBRE).

In Germany, the biggest finance sector job cut announcement to date has come from Commerzbank, which plans to axe 9,000 positions in the wake of its takeover of Dresdner Bank. About 2,500 will be outside Germany.

Deutsche Bank, the country's top bank, is expected to sack about 900 traders, with most of those layoffs in London and New York.

Frankfurt may not have lost many banking jobs yet, but its office property market took an indirect hit last month when real estate fund managers KanAm pulled out of a deal to buy a skyscraper under construction in the heart of the city.

Swiss bank UBS, which is cutting 7,500 jobs, has signed up as the main tenant of the OpernTurm office tower. KanAm said that its fund did not want an increased rental exposure to banks as the financial market turbulence was making the outlook for the sector uncertain.

Fewer buyers usually translate into lower prices, which move in the opposite direction to yields.

'In a worst-case scenario, you might still see a lot of pressure on prices in Germany,' said Olivier Elamine, chief executive of Alstria Office, which manages a portfolio of 90 properties in Germany valued at about 1.9 billion euros (S$3.7 billion). -- Reuters

HK's Mortgage Loans Drop 40% In October

Source : The Business Times, November 27, 2008

(HONG KONG) Hong Kong mortgage loans fell for a third month in October as banks tightened lending amid an economic slowdown and a freeze in global credit.

Banks in Hong Kong approved some HK$13.7 billion (S$2.7 billion) of new mortgage loans last month - 40 per cent less than a year earlier, figures from the Hong Kong Monetary Authority (HKMA) show. Loans fell 5.9 per cent from September, the central bank said yesterday.

Hong Kong home prices have slumped at least 22 per cent from their March peaks, according to Centaline Property Agency, and the number of people whose homes are worth less than their outstanding mortgages more than doubled in the third quarter. The collapse of Lehman Brothers in September deepened the global credit crunch, pushing the Hong Kong interbank lending rate to its highest in almost a year on Oct 13.

'Rising unemployment will spread to other industries in Hong Kong, dealing a bigger blow to the economy and the property sector,' Citigroup analysts Tony Tsang and Marco Sze said in a Nov 18 report.

The outlook for mortgage lending may worsen as unemployment rises. HSBC Holdings, which has the biggest bank network in the city, this month cut 500 jobs in Asia and said that most of these would be in Hong Kong as the economy slows.

The proportion of new loans approved at more than 2.5 per cent below the best lending rate almost halved to 51.7 per cent in October, from 94 per cent a year earlier and 83.1 per cent in September, HKMA figures show.

The so-called best lending rate is 5 per cent at HSBC, Hang Seng Bank and BOC Hong Kong (Holdings). The benchmark lending rate at Standard Chartered and Bank of East Asia is 5.25 per cent.

Hong Kong's economy this month entered its first recession since the outbreak of the deadly Sars epidemic in 2003 as the global financial crisis cut exports and spending cooled, forcing the government to lower its full-year growth forecast.

Gross domestic product shrank a seasonally adjusted 0.5 per cent in the third quarter from the previous three months, the government said on Nov 14. The measure fell 1.4 per cent in the second quarter. The decline was more than the median estimate of a 0.2 per cent drop in a Bloomberg News survey of six economists.

The number of homeowners with apartments worth less than the mortgages they borrowed - negative equity - almost doubled in the third quarter to an estimated 2,568 cases worth HK$6 billion, the HKMA said.

The number of negative equity loans is still about 98 per cent less than the peak of 106,000 cases at the end of June 2003, when the city's economy was battling the effects of the severe acute respiratory syndrome outbreak.

Still, not all the news is gloomy. Hong Kong existing home sales posted a fourth consecutive weekly gain last week as falling prices lured buyers who have previously shunned the city's property market.

Transactions at 10 of Hong Kong's biggest private apartment projects rose to 44 in the week ended Nov 23, from 39 a week earlier, according to figures compiled by Centaline, one of the city's biggest real estate agencies. Home prices have fallen 22.4 per cent since reaching a near 10 year-high in March, according to Centaline figures. -- Bloomberg

Occupancy Costs Fall In S'pore: CBRE

Source : The Business Times, November 27, 2008

But survey finds Republic is world's 9th most expensive office market

The republic is still one of the most expensive places in the world to do business in, even though office occupancy costs here have dropped, the latest survey by CB Richard Ellis (CBRE) shows.

As in the firm's previous survey in May, Singapore was the world's ninth most expensive office market, though occupancy cost dropped to US$135.13 per square foot per year from US$139.31 in May.

In CBRE's November 2007 survey, Singapore posted the world's biggest 12-month increase in office occupancy costs. But in the May 2008 survey, it dropped to third place. And in the latest ranking, it is 13th.

Occupancy costs here rose 27.8 per cent in the 12 months to November 2008, down from 86 per cent in the 12 months to May 2008. CBRE's chief global economist Raymond Torto said that globally the rate of change is generally slowing, and in some markets the pricing direction is down. 'Our current perceptions are greatly affected by the current economic malaise.' he said. 'We tend to forget how fast rents and occupancy costs were rising over the past 12 months. The turn in rent trajectory will provide some relief to occupiers and angst to owners.'

Abu Dhabi in the United Arab Emirates (UAE) registered the fastest-growing office occupancy costs in CBRE's November 2008 Survey. Costs there jumped 94.6 per cent in the past 12 months.

'The rise in occupancy costs in the UAE has reflected market fundamentals - limited supply of quality office space and high demand from international firms, primarily law firms, financial institutions and real estate and construction companies planting a footprint in the UAE,' CBRE said. Ho Chi Minh City in Vietnam, which registered the fastest-growing occupancy costs CBRE's May 2008 ranking, fell to second spot in the latest survey. Costs there rose 51.4 per cent in the past 12 months.

London's West End and Moscow remain the world's two most expensive office markets. Hong Kong's CBD, Tokyo's Inner Central District and Mumbai's Nariman Point round out the top five.

Redas Urges 3-Way Plan To Boost Confidence

Source : The Business Times, November 27, 2008

Real Estate Developers Association of Singapore (Redas) president Simon Cheong called last night for a three-way action plan involving developers, financiers and the government to shore up confidence in the property market.

The plan would involve moderating new supply, supporting demand and introducing fiscal measures to help ease funding for the industry, Mr Cheong said.

'For the real estate market to ride out the storm created by the global credit crisis, two imperatives stand out,' he said. 'First, market stability is important to prevent widespread decimation of asset values. And second, confidence must be shored up by keeping credit markets functioning.

'Only with confidence will demand return to the market. Pricing alone does not lead to sales volume. Sentiment and confidence lead to sales volume.'

Mr Cheong was giving the president's address at Redas's 49th Anniversary dinner, the theme of which was 'Living In a World Class Sustainable City'.

The event at Shangri-La Hotel was well attended, with even Redas patron Kwek Leng Beng, executive chairman of Hong Leong Group, making an appearance. Before the dinner, Redas top brass held private talks with National Development Minister Mah Bow Tan, who was guest of honour at the function.

In his speech, Mr Cheong shied away from specifying what measures developers would like the government to introduce to help the property market.

But property consultancy Knight Frank's managing director Tan Tiong Cheng made a few suggestions. 'Tax concessions affecting the property market could help reduce business costs and provide relief to developers immediately, yet leave the government flexibility to withdraw the measures when the market improves,' he said.

He suggested the authorities reinstate the deferment of stamp duty payment to the date of issue of Temporary Occupation Permit for properties under development. At present, buyers have to pay stamp duty within 14 days of their option to purchase being accepted.

The government should also revert to the formula of calculating development charges based on 50 per cent of appreciation in land value, instead of the current 70 per cent.

And property tax exemptions for vacant land, land under development and completed industrial and commercial buildings would help cut the cost of doing business and provide relief to developers so they don't have to rush construction of new projects, given weak demand, Mr Tan said. He also called on the authorities to consider reviewing the stamp duty rate, which now peaks at 3 per cent.

Last month, the Ministry of National Development (MND) announced a halt in state land sales through the confirmed list until first-half 2009. Mr Tan suggested MND could go further and announce a freeze on confirmed-list land sales for the next two years.

'This would provide a psychological booster and create more confidence and stability in the market, so banks and sellers don't panic,' he said.

He also suggested extending the CPF Housing grant available to first-time buyers of executive condos (ECs) and resale HDB flats to private home buyers. 'If necessary, minimum holding conditions could be imposed for private home buyers taking the CPF grant, which is what happens for ECs,' he said.

Limits To What Govt Can Do, Says Mah

Source : The Business Times, November 27, 2008

It cannot dictate to banks on loans or work against market forces on property

National Development Minister Mah Bow Tan told developers yesterday 'there are limits to what the Government can and should do' to ensure the long-term stability and smooth functioning of the property market.

Toast to the future: (from left) Simon Cheong, president of Redas; MND Minister Mah; Kwek Leng Beng, Redas's patron, at its 49th anniversary

'For instance, we cannot dictate to banks that they should extend loans to companies or individuals with weak financial standing,' he said.

'We also cannot work against market forces and try to prop up property prices artificially. Such efforts are not sustainable and will not be beneficial to the health of the property market in the long run.'

Speaking at the Real Estate Developers Association of Singapore's 49th anniversary dinner at the Shangri-La Hotel, Mr Mah said any action the Government takes must be carefully calibrated.

'Any measure seen to be knee-jerk or excessive might even weigh market sentiment down further,' he said. 'It is in our interest to ensure that property prices move in line with economic fundamentals, as this affects home ownership, asset values, retirement savings and other sectors of the economy.'

But he gave the assurance that the Government will keep a close watch on the situation and will not hesitate to take further measures if necessary.

Last month, the Ministry of National Development (MND) suspended Government Land Sales through the confirmed list until the end of first-half 2009.

Since then, MND has received various suggestions from Redas and other stakeholders on how to help the property sector. 'We will study these suggestions as we continue to monitor the property market closely,' Mr Mah said yesterday.

He also told developers that with slower economic growth 'it is inevitable that demand will be lower and (property) prices will soften'. The official private home price index slipped 2.4 per cent in the third quarter from Q2.

On a more upbeat note, Mr Mah said the committed pipeline of major projects secured in the past few years will create a steady stream of job opportunities and sustain capital spending in the economy in the next few years.

'At Marina Bay alone, we have invested close to $5.7 billion in infrastructure and we will continue to invest to support the future growth of Marina Bay and to enhance connectivity with the existing city,' he said.

The Government will also continue with several key infrastructure and housing projects to support medium to long-term economic growth and social needs, as well as to rejuvenate older estates. Mr Mah stressed the importance of the real estate sector.

First, real estate services and construction together accounted for about 9.6 per cent of overall GDP and 13 per cent of total employment in Singapore in 2007.

Second, the health of the property market affects other major sectors of the economy. 'Third, as a country with the highest rate of home ownership of more than 90 per cent, the property sector is where most of us have invested our hard-earned lifelong savings,' Mr Mah said.

'Our economic prospects in the medium term and our fundamentals remain strong. I urge you to continue building up capabilities within the industry and use this period to strengthen your competitive advantages so you are well prepared to capitalise on opportunities that may emerge when the current economic uncertainties subside.'

Wednesday, November 26, 2008

Moody's Cuts MI-Reit's Ratings; Review For Possible Downgrade

Source : The Business Times, November 26, 2008

Moody's Investors Service has on Wednesday downgraded Macarthurcook Industrial REIT's ('MI-REIT') corporate family rating ('CFR') to Ba2. The rating remains on review for possible downgrade.

'The downgrade reflects Moody's views that MI-REIT is not likely to meet the scale and diversity targets that were built into its original rating when it was first assigned ', says Kathleen Lee, Moody's lead analyst for the trust.

'As a result MI-REIT shows high levels of asset and tenant concentration, more consistent with a Ba2 rating,' adds Lee.

'In addition, the trust has an outstanding sale & lease-back arrangement with a call and put option in respect of 4A International Business Park (entered into since August 2007) which if completed by end-December 2009, on fully-debt financed terms, would result in a material weakening of its credit metrics', continues Lee.

'There also remains considerable uncertainty as to how this acquisition will be funded if the put option is exercised by the vendor,' she added.

'The rating remains on review for downgrade primarily reflecting ongoing concerns surrounding MI-REIT's significant refinancing risk with 91% of its total debts, or S$201 million, falling due in April 2009, amid very challenging credit markets conditions', says Ms Lee.

'The absence of available committed facilities and the REIT's lack of extensive relationships with banks have significantly constrained MI-REIT's liquidity profile and increase the risk of further downgrades' adds Ms Lee.

Moody's acknowledges that MI-REIT's rating continues to be supported by its steady revenue streams supported by a relatively long lease maturity profile and adequate lease deposits that partially mitigates the trust's low asset diversification and moderate tenant concentration.

The review will continue to focus on:

1) MI-REIT's progress in securing committed financing to meet its debt maturities in April 2009 as well as the final contracted terms & conditions once refinancing is raised, and

2) the funding plan for the committed acquisition. The ratings could decline rapidly if material progress on securing committed financing for its April 2009 debt maturities is not made over the course of the next 2 months.

Headquartered in Singapore, MI-REIT is a real estate unit trust that was formed primarily to own and invest in a diversified portfolio of industrial properties. The company reported total assets of approximately S$568 million and gross revenue of $12.4 million for the first quarter ended 30 September 2008.


Source :《联合早报》November 26, 2008






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Tuesday, November 25, 2008

Asian Property Markets On Investors' Radar

Source : The Business Times, November 25, 2008

Top picks are Japan, Australia, China, HK and Singapore

(HONG KONG) Asia's battered property markets are starting to attract strong interest from investors, with Japan, Australia, China, Hong Kong and Singapore among their top picks in the region.

Property fund manager LaSalle Investment Management, which raised a US$3 billion fund in August, expects Hong Kong and Singapore to recover first from the financial turmoil.

Said regional director David Edwards: 'We are seeing a decline in values throughout the region. There are properties that are being sold at much lower prices than the market's perception of their values.'

ING Real Estate plans to double its investments in Asia to US$1 billion, with most of its investors in Europe wanting to diversity into the region, said the firm's Asia-Pacific managing director, Nicholas Wong.

ING invested mostly in China and Japan, he said, and was now marketing a US$750 million fund to build Chinese housing. Several Asian markets were already 30-40 per cent off their peaks, he said.

And a Reuters poll last week found that analysts believe that Hong Kong and Singapore prices are set to fall by at least a fifth in the next year.

'Most of our clients are from the UK and Europe and traditionally, they invest only at home,' Mr Wong said. 'Now, they want global exposure and most of them want to go to Asia for diversification.'

With Hong Kong, Japan and Singapore in recession, Asian developers are battling falling demand and tighter credit, even after efforts by central banks to encourage lending by slashing key rates.

In Hong Kong, the de facto central bank has lowered its base rate twice in the last month, while in China, monetary authorities have cut borrowing costs three times since mid-September.

'The risk of bankruptcies are still higher throughout Asia and most financial institutions are not out of the woods yet,' said Kelvin Lau, economist at Standard Chartered Bank. 'That's why overall lending conditions have not yet returned to normal.'

In Japan, more than 400 small and medium-sized developers have gone out of business this year as the residential market slowed and as credit dried up. But the tough environment is not stopping property investors from prowling the region for bargains.

'The present environment is incredibly difficult. As a business, we are taking a cautious approach. But we are still looking,' said LaSalle's Mr Edwards.

LaSalle has so far invested US$10 billion in Asia and nearly half the amount is in Japan, he said. The company is also keen on Australia and China, he added.

Other investors were optimistic that some property segments would recover soon. China's ailing housing market, for instance, may stabilise in about six months and recover in two years, before most other Asian countries, said Cheng Soon Lau, managing director at Invesco Real Estate Asia.

Invesco is planning to invest directly in China, Japan, Hong Kong and Singapore, buying office blocks and building housing.

Managers of securities funds are becoming less worried that investors will withdraw money, according to Chris Reilly, director of property for Asia at Henderson Global Investors. 'Right now, there is really not much redemption,' he said. 'The cycle of redemption was more severe in the last 2007 and early 2008, the period when retail investors are quite scared.' - Reuters

British Business Spaces At Record Low Values

Source : The Business Times, November 25, 2008

Retail premises among the hardest hit as businesses struggle to pay rents

COMMERCIAL property in Britain has hit its lowest point in more than 20 years as capital values slump and the economic downturn puts pressure on business rents.

No letting up: Tenants are increasingly facing insolvency as the credit crunch in Britain rips through corporate balance sheets

Retail premises are among those hardest hit as Britain's economy heads for a sharp contraction, with businesses struggling to pay rents and in turn forcing down the value of properties.

Last month alone, commercial property prices dropped by a record 4.3 per cent compared with September, with the market overall falling by a staggering 28 per cent from a June 2007 peak.

Figures from the Investment Property Databank (IPD) have shown that in October, prices for retail, office and industrial property suffered their biggest monthly drop in 22 years.

'We have seen a pretty dramatic drop off in capital values in the commercial property sector,' explains Ed Stansfield, property economist at Capital Economics. 'What's happened is the economic outlook has taken a big hammering over the last nine months . . . and it's pushing capital values down.'

The fallout from the downturn has taken a toll on the country's biggest commercial property companies, including British Land, Capital & Regional (C&R) and Great Portland Estates.

British Land announced last week that the value of its property portfolio has slumped by more than £1 billion (S$2.28 billion) in the past six months.

C&R has warned that its tenants are facing mounting pressure from the financial crisis while Great Portland Estates, which owns numerous properties in London, said that demand from tenants looking for substantial space had dropped sharply.

Tenants are increasingly facing insolvency as the credit crunch in Britain rips through corporate balance sheets. Against this backdrop, C&R said that it has doubled its provisions for tenant defaults to £1.5 million.

Capital Economics expects the commercial sector to continue its decline for some time, with an anticipated floor of 45 per cent below the mid-2007 peak.

'We think the economy is headed for the worst recession since the 1980s, if not the post war period,' Mr Stansfield said. 'It's going to be pretty widespread.'

According to the IPD, the retail property sector has been hardest hit in terms of monthly falls in capital values, dropping by 4.7 per cent last month.

Property consultant CB Richard Ellis has also tracked a substantial decline in commercial property values, reporting that these had dropped by 4.6 per cent last month.

The CB Richard Ellis Monthly Index suggests that prices have dropped 17.6 per cent in the year to date, as prices are put in line with the gloomy economic outlook for Britain.

According to the property consultant, overall property rents fell 0.5 per cent last month. In Central London however, the figure was 2.5 per cent.

'More companies are exercising break clauses in leases,' says Mr Stansfield. 'They are also re-negotiating rents or moving to get lower rents.'

He said that London had long been considered overpriced, hence the steeper decline in values.

Cognita Wins Site To Set Up School

Source : The Business Times, November 25, 2008

Group runs more than 45 schools in UK and Spain

education group Cognita has been awarded a state site at the former Upper Serangoon Secondary School, to set up an international school.

This is the first time that a Request-for-Interest (RFI) exercise has been conducted to award state land sites for foreign system schools (FSS).

Cognita plans to set up the Stamford American International School, offering a US-based curriculum. It expects its first intake next September, with an initial 600 students. This will eventually expand to 2,500 students, easing the tight supply of FSS places offering American-style education.

Based in the United Kingdom, Cognita owns and operates over 45 independent schools in the UK and Spain.

It acquired the Australian International School of Singapore last year, and recently set up its Asian Regional Headquarters in Singapore.

The RFI exercise, which started in mid-August, saw proposals being assessed based on a matrix of factors.

These include quality of project, ability to meet market demand and investment commitment such as the ability to begin classes in academic year 2009.

'Singapore Land Authority (SLA) will work closely with Cognita to assist them to ensure that they can kickstart their operations and redevelopment plans quickly,' said Teo Cher Hian, SLA's director of Land Operations (Private).

Mr Teo added that despite the current economic climate, SLA still sees sustained demand for state properties for international schools.

To date, 19 international schools are using state properties as campuses.

New Mall In Serangron Central

Source : The Straits Times, Nov 25, 2008

Serangoon Central will have a new mall come end-2010.

Designed as an eco-friendly mall, the yet-to-be-named mall will be set amidst lush garden enclaves and landscaped sky terraces. -- PHOTO: GOLD RIDGE

The six-storey mall will be the epicentre of the integrated transport hub comprising a new 16-bay Serangoon Bus Interchange and the Serangoon MRT station.

It will offer a range of shopping and entertainment features, such as a 24-hour retail and food and beverage zone, a 10-screen cineplex. games arcade, pet lovers' enclave and unique balcony dining establishments. There will also be a 500-seat food court, a 60,000 sq ft hypermarket and a 50,000 sq ft department store.

Designed as an eco-friendly mall, the yet-to-be-named mall will be set amidst lush garden enclaves and landscaped sky terraces.

Gold Ridge - which counts institutional investors from USA and Europe as shareholders - is the developer and Pramerica Real Estate Investors (Asia) is the investment manager for the mall investors.

Total investment in the project is estimated at $1.3 billion.

Germany Is In Recession

Source : The Straits Times, Nov 25, 2008

FRANKFURT - THE German economy is in recession with the world's leading exporter falling victim to the global financial crisis, final figures from national statistics service Destatis showed on Tuesday.

Corporate investment has suffered in turn from a sharp decline in business confidence. -- PHOTO: AFP

Europe's biggest economy contracted by 0.5 per cent in the third quarter, more than expected, following a contraction of a revised 0.4 per cent in the second quarter, meeting the technical definition for a recession of consecutive quarterly negative growth.

The figure released on Tuesday matched Destatis' preliminary number for gross domestic product (GDP) provided on Nov 13.

Although Destatis noted slight improvement in domestic demand, that 'was counteracted by a highly negative trend of net exports,' it said.

The world's leading exporter has been hit by weakening activity in its major markets while domestic consumption has remained at low levels.

Corporate investment has suffered in turn from a sharp decline in business confidence.

A panel of top economists that advised the government has warned that growth would come to a halt next year, and estimated that economic activity would expand this year by 1.7 per cent.

UniCredit Markets chief German economist Andreas Rees commented that 'the latest GDP components offered a bitter foretaste of what lies ahead for German companies and consumers alike in 2009.

He expected the German recession to last until mid 2009.

'Moreover, we do not want to put lipstick on a pig,' Mr Rees added.

'There is no upside, but a lot of downside risk to our forecast. Accordingly, we expect the German economy to shrink 0.9 per cent (or more) in 2009 which would be the worst performance since the 1950s.' -- AFP

China Growth To Slow

Source : The Straits Times, Nov 25, 2008

The World Bank predicts China's GDP to slow to around 7.5% in 2009.

BEIJING - CHINA'S growth will slow to 7.5 per cent next year - the lowest rate since 1990 - as the global financial crisis takes a greater toll on the world's fourth-largest economy, the World Bank said on Tuesday.

China's downturn - signs of which emerged in the third quarter - will worsen in the first half of 2009 as exports weaken, World Bank economist Louis Kuijs said as the bank issued a quarterly economic report. -- PHOTO: BLOOMBERG

The multilateral lender cut its forecast for 2009 growth from 9.2 per cent but said Beijing's multibillion-dollar stimulus plan will help smooth the sharp edges of steep declines in global and domestic demand. It expects 9.4 per cent growth this year.

China's downturn - signs of which emerged in the third quarter - will worsen in the first half of 2009 as exports weaken, World Bank economist Louis Kuijs said as the bank issued a quarterly economic report.

The country has been relatively unaffected by the global crisis so far because its banks are healthy and exports are strong but 'we will see that impact intensify in 2009,' Mr Kuijs said.

Conditions should improve later in 2009 but any firm forecast was difficult amid the global turmoil, he said.

Beijing's stimulus plan announced on Nov 9 should help to shield China from the global downturn by buoying growth and employment, said the World Bank's China representative, Mr David Dollar. The US$586 billion (S$888 billion) plan calls for injecting money into the economy through spending on construction, tax cuts and aid to the poor and farmers.

'We are confident that China has the tools to keep its growth rate at a healthy level and most importantly to create about the number of jobs it needs,' Mr Dollar said.

Beijing announced the stimulus after China's growth slowed to 9 per cent in the latest quarter from 11.9 per cent last year. The unexpectedly sharp downturn alarmed communist leaders, who worry about job losses - especially in export industries, which have been hit hard by weak global demand - and possible unrest.

If China's growth next year falls to the World Bank's projected 7.5 per cent, it would be the weakest since 1990's 3.8 per cent rate and just below the 7.6 per cent reported in 1999.

The World Bank forecast is in line with projections by investment banks, which have cut their China outlook several times as global conditions worsened.

Mr Kuijs said Beijing has room to cut interest rates further and needs to take additional steps to stimulate growth as spending by consumers and companies weakens.

'We feel that confidence and fundamentals for the private sector have weakened quite a bit over the past half-year. We are less optimistic about private sector consumption than we were a half-year ago,' he said.

Weaker export prospects and a sharp downturn in real estate sales have made private companies reluctant to expand and hire new workers, Mr Kuijs said.

Mr Dollar and Mr Kuijs said Beijing's promise of more spending on social programmes and aid to the poor countryside should help to boost growth. The stimulus is meant to boost consumer spending, but analysts say the key to doing that will be to ease the financial worries of Chinese families, which save heavily to pay for health, schooling and retirement.

'Our view is that additional money put into rural health and education and rural minimum income support program would be effective fiscal stimulus and would help to improve the quality of life in the countryside,' Mr Dollar said.

He also said Beijing is talking with the World Bank about providing financing for loans to other developing countries.

Mr Dollar said the talks were at an early stage and he could not give any other details.

'The World Bank group is talking to China about ways in which it could contribute some additional financing to the World Bank group that would help developing countries. But that's at an early stage,' he said.

'It would involve China directly or indirectly lending money to other developing countries.'

British Prime Minister Gordon Brown and other leaders have appealed to Beijing to use part of its US$1.9 trillion in reserves to help expand a loan fund for countries hurt by the financial crisis.

China has promised to cooperate with international efforts but has yet to say whether it will offer financial help. -- AP