Wednesday, January 23, 2008

Hard Choice For Lippo With Surprise Bid For Robinson Stake

Source : The Straits Times, Jan 23, 2008

Indonesian group can either sell its shares, keep them or submit a counterproposal

LIPPO Group, the No. 1 shareholder of Robinson & Co, seems to be caught between the devil and the deep blue sea in the face of a surprise offer from Dubai- based Al Futtaim.

Lippo president and Robinson deputy chairman Stephen Riady told The Straits Times the offer was unexpected. Lippo is evaluating the offer and its options, he said.

In 2006, Lippo created a stir at Robinson and its loyal customer base with a bold $203 million purchase of a 29.9 per cent stake in the 150-year-old retailer.

The old guard at Robinson's board was squeezed out, as the Indonesian group sought to make its mark. Now, the boot might be on the other foot.

Mr Riady did not spell out Lippo's options in addressing the offer, but market watchers say the group has three main choices: sell the shares, keep them or make a counterbid.

Selling may make sense. Some observers note Lippo has built up a name in the property sector - developing various condominiums and redeveloping two properties near Collyer Quay. It bought $681 million in collective-sale sites last year. Retail-wise, however, the jury is still out on Lippo.

Robinson has expanded to Kuala Lumpur and brought in new brands, but these have not been runaway successes. Lippo also has not done much to capitalise on its Robinson stake to promote its own Indonesian retailer, Matahari, or vice-versa.

Certainly, Lippo has heavy commitments on the property front. The $537 million cash offer from Dubai works out to $160 million for Lippo - a sum that may well come in handy.

One thing, however, may hold Lippo back from accepting Al Futtaim's offer: It would be absorbing a loss.

In 2006, it bought its stake from OCBC Bank and Great Eastern Holdings for $7.90 a share.

The offer is $6.25. Adjusted for dividends received since it took its stake, Lippo would stand to get about $7.68, which would still fall short of what it paid less than two years ago.

So, if Lippo just sits tight, Al Futtaim will need to cross the 50 per cent threshold without its help. It already has 23.19 per cent in the bag, pledged by Silchester International, Aberdeen Asset Management Asia and Tecity.

Robinson's shareholders, though, include many retail investors, making it more tedious to amass a large percentage quickly.

If Al Futtaim fails to cross 50 per cent, it will not have to buy the 23.19 per cent from the investors and everything returns to status quo - good news for Lippo.

The only fly in the ointment is that in such rocky markets, investors will be tempted, as $6.25 is still 40 per cent better than the share price just before the offer was made.

If so, Lippo could very easily go from being a controlling shareholder to being No. 2, with very little say in Robinson's affairs. As Lim and Tan Securities put it, Lippo could end up 'locked in'.

The third strategy could see Lippo making a counterbid if it really wants to keep Robinson.

The irony would be having to fork out a few hundred million dollars to control a company it is already controlling, having spent only $200 million.

Of course, if Lippo is sure that Al Futtaim is dead set on Robinson, it could put in a higher bid. Al Futtaim would have to raise its bid, allowing Lippo to exit gracefully, with a profit, no less.

Asian Markets Slump For Second Day

Source : TODAY, Wednesday, January 23, 2008

Investors may emerge to pick up bargains following US rate cut

INVESTORS across Asia stared in disbelief as stock markets yesterday haemorrhaged for a second day running on fears that a recession in the United States might plunge the world into its worst financial crisis in decades.

The fears prompted the US Federal Reserve to slash its federal funds rate target by 0.75 percentage point to 3.5 per cent in an emergency move to forestall the world’s largest economy from sliding into recession.

Billionaire investor George Soros said the world was facing the worst financial crisis since World War II and the US was threatened with recession.

In an interview published by the Austrian daily Standard yesterday, Mr Soros said that in recent years, politics has been guided by misunderstandings stemming from what he called “market fundamentalism” - the belief that free and unfettered markets provide the greatest possible equity and prosperity and that any interference will diminish social well-being.

The stock market rout was sparked off after US President George W Bush’s proposed US$145-billion ($208-billion) fiscal stimulus package, announced last Friday, failed to placate nervous investors. Investors were not convinced that the measures, largely consisting of tax cuts, will stimulate enough spending to avert a recession in the US, which in turn would weigh on the rest of the world.

Monday saw many global stock indexes suffer their biggest one-day slump since the Sept 11, 2001 terrorist attacks in the US, and any hope of bargain hunters emerging to curtail the slide quickly evaporated yesterday as selling momentum continued to overwhelm Asian markets.

“Most of your gains you make in a year, you lose in one day. If you’re caught in the market, you lose your pants. Now, cash is king,” said Mr Robin Lim, 43, a seafood trader in Singapore.

In Singapore, the ST Index fell 50.6 points, or 1.7 per cent, to close at 2,866.55 yesterday. This followed a 6-per-cent plunge on Monday. “Singapore’s economy is extremely tied to the US,” said Mr Tan Teng Boo, who helps manage US$300 million at i-Capital Global Fund.

But following the US rate cut, some investors may emerge to pick up bargains after valuations fell more than 17 per cent since the start of the year.

Japan’s Nikkei-225 index yesterday plunged a further 5.7 per cent to 12,573.05, marking a decline of 17.9 per cent in the benchmark for the world’s second-largest economy since the start of the year.

In China, the Shanghai Composite Index ended yesterday down 7.2 per cent at 4,559.75. Adding to the selling pressure were fears that the Bank of China (BOC) might announce a large writedown on its US$8-billion portfolio of US sub-prime mortgage securities.

But the BOC said after the market closed that it expected after-tax profit for fiscal year 2007 to rise from the previous year, after considering a provision for the sub-prime portfolio.

But amid all the panic in the last two days, there are fundamental factors to consider.

Citigroup Investment Research analyst Elaine Chu noted that total outflows from Asian funds, from mid-December to last week, have only been US$3.4 billion. That’s smaller than the outflows during market corrections in the summer of 2006 and March last year, she noted. - Agencies

HDB May Offer 6,000 Flats In H1

Source : The Business Times, January 23, 2008

SOME 6,000 housing board flats are expected to be offered for sale in the first half of this year, Parliament was told yesterday.


Minister of State for National Development Grace Fu said this matches the sales pace seen in the same period last year.

For the whole of 2007, HDB sales programme offered 13,000 flats - more than double the 5,700 flats sold in 2006.

Ms Fu was responding to questions about HDB’s planning parameters and had cited those figures to illustrate the flexibility in the government’s building plans.

For instance, if the HDB sees high subscription rates in a certain area, it would also increase the supply of flats in that area.

Ms Fu also stressed that it is ‘difficult to predict with precision what the actual demand is in a three-year time frame’. For this reason, the build-to-order (BTO) scheme helps prevent an excess supply of flats. Under BTO, construction will proceed only if booking for a sizeable number of the flats has been confirmed.

Yesterday, Ms Fu also urged first-time flat buyers to check out information on flats supply in different locations, and to consider factors like the chances of success in the balloting exercise, the waiting time, and their budget before deciding on a location.

Record 20 Bids For Jalan Sultan Site

Source : The Business Times, January 23, 2008

$14.8m is top offer for parcel with 17 shophouses

A RECORD 20 bids have been received in the Urban Redevelopment Authority (URA) public tender for a site including 17 two-storey conservation shophouses at Jalan Sultan.

The URA said that this was the highest number of bids it has received for a public tender in at least 10 years.

The 15,200 sq ft Reserve List site was put up for public tender after an unnamed bidder last November committed to place a minimum bid of $7.8 million.

The highest bid received by the URA - $14.8 million - exceeds this by about 90 per cent.

The $14.8 million bid was from Chiu Teng Estates Pte Ltd, which is in the construction, development and property management business. The price works out to $973.63 psf of site area, or about $870,000 per shophouse.

The second highest bid, $13.61 million, was from Brilliant-1 Investments Pte Ltd, followed by KMC Holdings Pte Ltd’s bid of $12.8 million.

Colliers International executive director of investment sales, Ho Eng Joo, said that as the top three bids varied only by about $1 million, it is fair to assume that the prices were ‘fair market value’. Mr Ho had himself earlier estimated the site could fetch a top bid of around $14 million.

Estimating that the potential developer will have to pump in another $500,000 in renovation and restoration costs, the cost for each shophouse unit could rise to $1.3 million.

Based on this, Mr Ho expects that the potential developer will possibly seek a monthly rental of between $5,000 and $7,000 per shophouse unit.

Separately, the URA said that it will not award the tender for a transitional office site at Aljunied Road/Geylang East Avenue 1 because the only bid it received, Mezzo Development’s $7.8 million (or a unit land price of $38.35 per square foot per plot ratio), was too low.

Three transitional office sites have been awarded so far. However, demand for these sites has been on the wane, with some property consultants saying that the sites may no longer be relevant.

URA said: ‘The government is evaluating the market response to the recent tender and the demand for transitional office sites. URA will continue to release more sites if there is demand for such short-term office space.’

Straits Trading Launches 28-Storey Office Tower

Source : The Business Times, January 23, 2008

A NEW 28-storey Grade A office tower at 9 Battery Road has been launched by Straits Trading Company through its subsidiary Straits Developments.

The Straits Trading Building, which is intended to be completed by the third quarter of next year, will have about 160,000 square feet of lettable office space. It replaces the old Straits Trading Building, which was built in 1972 on the same site and redeveloped into the present tower in 2006 with a slightly higher plot ratio.

Calvin Yeo, director of commercial leasing at Colliers International, the marketing agent, said it was asking for about $18 per square foot in rent. Colliers has been marketing the building to multinational corporations especially those in the financial sector, business services and professional services. Mr Yeo said pre-launch interest has been strong.

‘Though large financial institutions represent the bulk of recent growth in demand for office space in the current market, we are also observing strong demand for premium office space from multinational companies who are mid-sized users,’ he said.

The new building features two double-storey open air gardens, and roughly 8,300 sq ft of office space per floor for a maximum of two tenants.

The designer, Team Design Architects, is studying plans to build solar panels on the roof, as well as solar-powered air conditioning for the top floors, said director Loke Kwong Yoon.

The green features will add less than 5 per cent to the development cost, he added.

The construction cost is now put at $60 million, according to Straits Trading Company president and chief executive Norman Ip.

Straits Trading Company, which had its corporate headquarters in the old building, is likely to return to the new one and take up the top floors.

Recession In US, Europe Could Shake Asia, Singapore

Source : The Straits Times, Jan 23, 2008

Region still relies heavily on world’s biggest markets, say economists

A RECESSION in the United States and Europe would badly hurt Asian economies, including Singapore’s, which still rely heavily on these two export markets for growth, according to economists.

Indeed, analysts at Lehman Brothers believe economic growth in Singapore could slump to as low as 2.5 per cent this year, if the worst-case scenario of a recession occurs. The official forecast is for growth of 4.5 per cent to 6.5 per cent.

Economists said yesterday that while the region’s economies have managed to stand on their own feet in recent years, their fortunes are still closely tied to external conditions.

Most economists are maintaining forecasts for a more benign slowdown, but they concede that risks of a severe downturn are on the rise.

‘We are probably only one shock away from the US economy tipping into a recession,’ said Lehman chief global economist Paul Sheard.

‘One thing that we will be thinking about the next week or so: Are we seeing that one shock now hitting the US economy in the form of this equity market meltdown that is unfolding this week?’

Global share prices have crashed since the start of the year and are accelerating their declines amid rising fears that a US recession may send the world economy into a tailspin.

Earlier theories that Asia’s booming economies are plotting their own destinies and escaping this plight are dissipating fast.

‘We don’t really buy the decoupling idea in its strong form,’ said Dr Sheard, adding that it is very unlikely that demand from Asia and other emerging markets can offset a slowdown in the US and Europe.

Singapore is especially vulnerable, given its small and open economy, said Mr Robert Subbaraman, who heads Lehman’s economic research for Asia, excluding Japan.

He believes overall Asian growth this year could fall by 4.5 percentage points from last year’s 8.7 per cent, if the rest of the world goes into recession. Singapore’s growth could come down to between 2.5 per cent and 3 per cent, he said.

For the moment, Mr Subbaraman is still hoping that aggressive US interest rate cuts will avert a recession to support a 5.3 per cent growth in Singapore and a 7.6 per cent expansion in the region.

This scenario, however, brings risks of an overheating economy, as foreign capital inflows drive up inflation to form possible asset bubbles in the region, he warned.

United Overseas Bank economist Ho Woei Chen said a US recession would hit Singapore’s export sector very hard.

‘Although exports to China have increased, enddemand is largely still in the US,’ he said.

Citigroup economist Chua Hak Bin said a 1-percentage-point reduction in US growth would cut Singapore growth by 1.7 percentage points.

He said a contraction in the US and Europe could lower Singapore growth from his current forecast of 5.6 per cent to between 3 per cent and 4 per cent. ‘Ultimately, manufacturing will be hit, as well as trade-related services such as wholesale and transport.’

Barclays economist Leong Wai Ho, though, is much more sanguine.

He tips Singapore growth at 6.5 per cent this year, purely on the strength of the domestic economy.

‘We already expect exports to contribute very little to growth,’ he said, pointing out that last year’s strong growth came amid a weak export performance.

Instead, private consumption, fuelled by record tourist arrivals and investments in the construction sector, should provide a buffer.

Projects, like the integrated resorts, are highly unlikely to be disrupted, while the record new manufacturing investments that Singapore won last year will provide support, Mr Leong said.

‘We have never entered a US recession from such a strong position. We are going into this with good quality, broad-based growth.’

Closely tied fortunes

Economists are quickly scrubbing earlier theories that Asia is decoupling from the United States economy. They now concede that while the region’s economies have managed to stand on their own feet in recent years, their fortunes are still closely tied to the economic well-being of the US and Europe.

Singapore is especially vulnerable, according to one senior economist. Economic growth in the Republic is tipped to slump to as low as 2.5 per cent from an official forecast of 4.5 per cent to 6.5 per cent.

Barclays economist Leong Wai Ho, though, is unperturbed. He tips growth at 6.5 per cent, saying Singapore will be facing a possible US recession with ‘good quality, broad-based growth’.

British House Prices Fall In January

Source : The Business Times, January 22, 2008

UK house prices declined for a third month in January, reviving interest among prospective buyers after a slump in viewings late last year, Rightmove plc said.

The average asking price fell 0.8 per cent to £230,428 ($647,908) from December, compared with a 3.2 per cent drop the previous month, Britain's most-used property website said yesterday. While the annual price gain slowed to 3.4 per cent, the lowest since 2005, the average time for a house on the market declined and Internet traffic on Rightmove's site picked up.

'Enough sellers seem to have dropped their prices to encourage potential buyers to look in larger numbers, suggesting we might see a more active market at this lower price level,' said Miles Shipside, commercial director of Rightmove, in a statement.

'Now is a good time for bargain hunters to press those committed winter sellers for a deal.' The UK's decade-long property boom withered in October as higher borrowing costs and forecasts for slowing economic growth deterred buyers. The Bank of England cut its benchmark interest rate for the first time in two years in December and economists predict another reduction next month.

The average time on the market for a property fell to 95 days in January from a record 98 days in December. Realtors reported greater interest from buyers and Rightmove's website received 20 per cent more visitors in the first two weeks of 2008 than in the same period a year ago, yesterday's report showed.

'The first signs of recovery are there,' Bob Jones, a real estate agent at Intercounty in Bishop's Stortford, a town in Hertfordshire close to Stansted Airport, said in an interview. 'People are beginning to look again now, whereas in the three months up to Christmas viewings had dried up.'

In London, prices rose 3.6 per cent to an average £398,476 after a 6.8 per cent drop the previous month. Asking prices advanced in all but two of 32 boroughs, while time on the market reached a record 94 days this month, Rightmove said.

'While we expect the London market to be more buoyant than the rest of the country in 2008, it remains to be seen if these higher asking prices can be achieved on top of last year's rises,' the report said.

December was the worst month for the housing market since the aftermath of Britain's last recession in 1992, the Royal Institution of Chartered Surveyors said recently. HBOS plc, the country's largest mortgage lender, said that prices dropped in Q4, the first three-month decline since 2000.

British consumers, with total debt of £1.4 trillion, are struggling with higher loan costs after contagion from the United States sub-prime-mortgage collapse froze lending between banks. The average rate offered by lenders on a mortgage for 95 per cent of the price of a property, fixed for 24 months, rose to 6.53 per cent in December from 6.44 per cent, the Bank of England said recently.

The decline in property values has contributed to a drop in consumer spending. Retail sales unexpectedly fell 0.4 per cent in December, the most in 11 months, the statistics office said on Jan 18.

The economy is still creating jobs after the fastest expansion in three years in 2007. Unemployment fell to the lowest since 1975 in December and jobs growth in the quarter through November was the strongest in a decade. 'Affordability should continue to improve as average wages rise and interest rates fall,' Rightmove said yesterday. It predicts that average house prices will be unchanged this year after almost tripling in the past decade. -- Bloomberg

Fed Cuts Rates In Emergency Move

Source : TODAY, Wednesday, January 23, 2008

But this won't dispel bear's shadow over loss-ridden markets

WITH the world staring down the throat of what billionaire investor George Soros called its worst financial crisis yet, and its biggest economy driven to possible recession by fallout from sub-prime mortgage losses, the United States Federal Reserve yesterday slashed interest rates by 75 basis points — the biggest cut in 23 years.

The central bank lowered the federal funds rate target to 3.5 per cent from 4.25 per cent, the policy-making Federal Open Market Committee (FOMC) announced, in its first such emergency move since Sept 2001.

Policymakers were not scheduled to meet to set rates until Jan 29-30. The FOMC said it took the action yesterday "in view of a weakening of the economic outlook and increasing downside risks to growth".

It was a move some commentators said smacked of panic, but perhaps, panic that was called for.

"While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate," the committee said.

The FOMC also lowered the discount rate by 0.75 percentage point to 4 per cent.

The emergency measure helped stem major losses in the Dow Jones Industrial Average (DJIA) after trading resumed following the long weekend.

US markets were closed on Monday to mark Dr Martin Luther King's birthday. At press time yesterday, the DJIA was down 260.77 points, or 2.14 per cent, at 11,838.53, after the futures contract had indicated a decline of as much as 5.3 per cent earlier.

But despite yesterday's rate cut — the largest single shift in interest rates since November 1994 — questions remain as to when the global crisis of confidence will end.

That's a US$300-billion ($430-billion) question, according to the Organisation for Economic Cooperation and Development, which said there might be that much in losses sitting in the market for collateralised debt obligations, which include the infamous US sub-prime mortgages.

So far, the tally of losses from Wall Street is about US$100 billion — so, the end to the stock market woes may yet be several hundred billion dollars away.

And the potential for exposure to these bad investments to turn up in unexpected places now hangs like a Sword of Damocles over the world's markets.

Until investors know where most or all of the remaining bad debt in the world resides — or until they have priced in the potential for this to turn up anywhere — the market's crisis of confidence is likely to continue.

"Many investors appear to believe the write-downs are far from over," said Lehman Bros' chief regional equity strategist Paul Schulte.

Yesterday's inter-meeting rate cut was the first since Sept 17, 2001, when the Fed lowered borrowing costs in the aftermath of the terrorist attacks — that was the third emergency reduction in a year which saw the last US recession.

Last Thursday, Fed chairman Ben Bernanke warned in testimony to Congress that the US economic outlook had worsened and "the downside risks to growth have become more pronounced". Still, he said, the Fed wasn't forecasting a recession this year.

US retail sales fell last month, unemployment rose and housing markets are mired in the worst slump in 16 years. Homebuilders in the US broke ground on the fewest homes since 1991, according to the Commerce Department. Building permits — a sign of future construction — declined by the most in 12 years, suggesting the housing slump will deepen.

US Treasury Secretary Henry Paulson called yesterday's rate cut by the Fed "very constructive" and a "confidence builder". He said it was a sign to the rest of the world that the US central bank is "nimble". — Agencies

Straits Trading Pumps In S$60m For Construction Of New Building

Source : Channel NewsAsia, 23 January 2008

Singapore-listed Straits Trading Company is pumping in some S$60 million to build a new building.

It will be developed on the site of the old Straits Trading Building and is expected to be completed in 2009.

Agents for the New Straits Trading Building said they see strong demand for premium mid-sized office space.

A new 28-storey Straits Trading Building will rise in the heart of Singapore's financial district.

There will only be two tenants per floor, with about 8,400 square feet for a typical column free office.

This may be small compared to an average of 18,000 square feet for offices at the Marina Bay Financial Centre.

However, the marketing agents said that there will be demand from multinational companies and financial institutions that want to locate near Raffles Place.

Calvin Yeo, Director, Commercial Leasing, Colliers International, said, "Unlike the new supply that is coming up in the new downtown, Straits Trading Building will meet the demand for tenants requiring a prime office address...there are no new developments coming up in Battery Road and this would be an opportunity for tenants requiring that premium address."

Rentals would likely be at S$18 per square foot.

That is comparable to other buildings nearby such as 6 Battery Road.

The new building will also have unique design features such as two open air sky gardens and concierge services for tenants.

Norman Ip, CEO, Straits Trading, said, "I won't say it's really super luxurious, it's more practical in raising the standards, because I think people's expectations all have gone definitely we aim for better quality."

Construction is expected to be completed by the third quarter of 2009. - CNA/ms

Govt Rejects Aljunied Site Bid; Offers Flood Jalan Sultan Plot

Source : The Straits Times, Jan 23, 2008

THE Government has decided not to sell a short-term office site in Aljunied because the sole bid that came in last week offered too low a price.

This decision follows a recent string of lower-than-expected offers for state land and is the first time since 2001 that the Urban Redevelopment Authority (URA) has rejected bids for a government-owned site.

Demand for some commercial land, however, appears to still be going strong. A state parcel at Jalan Sultan, reserved for office or hotel use, received 20 offers when its tender closed yesterday, the URA announced.

The top bid came from Chiu Teng Estates. It offered $14.8 million, or $973.60 per sq ft (psf) of gross floor area, almost double the lowest bid, from NYP Holdings, of $8 million.

The Jalan Sultan site, comprising 17 two-storey conservation shophouses that have to be restored, also got offers from Fragrance Group, Hotel Royal and Hind Lifestyle.
This compares to the single bid for the Aljunied office site, submitted by Mezzo Development, at $7.8 million - just $38.37 psf of gross floor area.

Property consultants say the market may have reached a saturation point for transitional office sites, introduced last year as a quick relief to the office space crunch.

Any development built on these short-term sites is likely to be completed only next year or in 2010, when they will have to compete with a slew of new office space set to come onstream, they added.

One such building is the new $60 million Straits Trading block in Battery Road. The 28-storey building is expected to be completed late next year and could fetch high rents of $18 psf, analysts estimate.

Average rents of Grade A blocks in Raffles Place are now $16.64 psf, said Colliers International. The old Straits Trading building fetched rents of $7 psf.

Mainboard-listed Straits Trading, which owns the building, brushed aside worries that it would be affected by a possible office oversupply that could emerge after 2010.

'If there's an oversupply, our building will be out before that,' said president and chief executive Norman Ka Cheung Ip.

CapitaLand In Ventures For Indian Malls Worth $2b

Source : The Straits Times, Jan 23, 2008

CAPITALAND is expanding its presence in India's fast-growing retail sector by investing in 15 malls worth more than $2.1 billion.

The malls, spread over 14 cities, are to be spun off into a property trust after their completion - between next year and 2011.

CapitaLand will achieve this by partnering two Indian real estate players in separate joint ventures, Singapore's largest property developer said yesterday.

One is a 50:50 partnership with Bangalore-based Prestige Group for seven malls in south India.

The second is with Advance India Projects, a Delhi-based developer. CapitaLand will hold more than 60 per cent in the venture to develop and manage eight malls in north India.
Together, the 15 malls will yield 11.1 million sq ft of lettable area.

CapitaLand's portion of the investment will come up to about $1 billion. This will be funded through its US$600 million (S$865.2 million) CapitaRetail India Development Fund, in which CapitaLand has a 45 per cent stake, the group said.

This follows its 2006 investment of US$75 million in an Indian mall property fund set up by retailer Pantaloon. The fund now owns six malls across India.

Separately, CapitaLand's retail trust yesterday said its distribution per unit (DPU) for the fourth quarter last year was 30 per cent higher than forecasts and a 14 per cent increase from the year before.

CapitaMall Trust's distributable income for the quarter ended Dec 31 was $39.1 million, while DPU was 2.34 cents. This brings its full-year DPU to 13.34 cents, from 11.69 cents the previous year.

Full-year net property income rose 8.8 per cent to $220.9 million.

Net asset value per unit was $2.21 as at Dec 31, from $1.87 the previous year.

Unitholders can expect to receive their fourth-quarter distribution on Feb 28.

Condo-Style Flats To Be Limited

Source : The Straits Times, Jan 21, 2008

THE pricey condo-style flats that have been in the news lately will remain the minority of public housing units, with the Government pledging on Monday to continue providing affordable homes.

The 616-unit Premiere@Tampines by Sim Lian Land, drew almost 6,000 applications for its two-, four- and five-room flats. -- PHOTO: SIM LIAN LAND

Its assurance came as high-end flats in Boon Keng launched by private developers recently were going for as high as $727,000 for a five-room flat.

The flats come with interior layouts and fittings more commonly seen in private condominiums, such as bay windows in bathrooms, large balconies and built-in wardrobes.

Buyers are also concerned with the soaring prices of resale Housing Board flats which shot up 17.4 per cent last year - the highest in a decade - and the higher- than-valuation prices - by as much as $100,000 - which sellers in coveted districts are demanding.

National Development Minister Mah Bow Tan, addressing these concerns in Parliament on Monday, explained that high-end flats - built under the Design, Build and Sell Scheme - 'serve to fulfil the needs of a niche segment of the HDB market - those with higher aspirations and who can afford a higher price'.

Under the programme, developers are free to design and price the flats as long as they work within the rules of public housing.

This means they have to sell flats to families earning no more than $8,000 a month - the limit for households buying public housing.

The first such project, the 616-unit Premiere@Tampines by Sim Lian Land, drew almost 6,000 applications for its two-, four- and five-room flats which are sold from $138,000 to $450,000.

The second, the 714-unit City View @ Boon Keng by Hoi Hup Sunway Development, drew about 3,500 applications for three- to five-room flats. Prices ranged from $349,000 to $727,000.

The City View prices had prompted some to question if they were affordable to those earning $8,000 a month.

Nominated member of parliament Eunice Olsen asked if the income ceiling could be raised for such flats.

Why It's Difficult For HDB To Predict Demand

Source : The Straits Times, Jan 23, 2008

THE Housing Board cannot accurately predict demand for HDB flats years down the road.

However, it will be flexible and boost the supply of flats when needed, Minister of State for National Development Grace Fu said yesterday.

MEETING DEMAND: The HDB's building plan will be flexible and it will boost the supply of flats when needed. -- ST FILE PHOTO

She gave this assurance in response to a question from Madam Cynthia Phua (Aljunied GRC), who wanted to know how long newly married couples can expect to wait for a new flat.

With rising property prices and surging demand for HDB flats, some young couples have reportedly had to postpone their customary wedding ceremonies because they could not get a flat in time.

Madam Phua also noted that the HDB seems to face a problem of 'excesses': Three years ago, it had 10,000 excess flats. Now, it has 27,000 applicants for more than 4,000 flats.

She asked if the ministry would consider providing data on the potential supply of flats over the next three years, to help young couples plan.

In response, Ms Fu said it would be difficult to 'predict with precision' demand for HDB flats over a three-year time frame.

'There are certain market forces that affect supply, demand of public housing vis-a-vis private housing, for example, that are not possible to predict with accuracy,' she said.

Ms Fu pointed out that while demand far outstrips supply in popular projects like Telok Blangah Towers, that is not the case in others.

For example, first-time flat owners have a one in two chance of getting a flat in upcoming projects in Sengkang and Punggol.

She advised buyers to carefully consider their budget and how long they are prepared to wait before making a decision on which project to apply for.

She also assured MPs that the supply of flats will be adjusted when necessary.

Last year, for instance, the HDB offered 13,000 flats for sale, more than double the number in 2006.

This year, it expects to offer about 6,000 flats in the first half of the year.

'Our building plan has flexibility and where we see there's a high subscription rate, we will increase the supply of HDB flats,' said Ms Fu.

Lehman Says Asia Not Likely To Suffer Downturn Over Next 2 Years

Source : Channel NewsAsia, 22 January 2008

Asia is not likely to suffer a downturn over the next two years if the US does not fall into a full blown recession, Lehman Brothers forecast in its outlook for 2008.

Investors all across Asia may be nervous about the outlook for the US economy, but the financial services firm is taking a positive stance.

Lehman Brothers' global chief economist Paul Sheard said, "A lot of people, of course, are focusing now on the risk of a recession in the US. We do think the risk is quite high; we would put it at around 40 per cent. And that's a lot higher obviously than a normal year where it's probably just a five or six (per cent) chance that the economy could slip into recession."

But he expected the worst to be averted.

"The monetary easing from the Fed and the other fiscal policies that are likely to be implemented may help the economy to skirt recession. But it's a close call if the economy would be hit by another shock or a couple of shocks that could certainly tip the economy into recession," he said.

The firm said it expects Asian economies, excluding Japan, to grow 7.5 per cent as a whole this year, down one point from 2007.

Although a recession in the US could shave that expansion by some 4.5 percentage points this year, Lehman Brothers is taking a bullish view for now.

Robert Subbaraman, Lehman Brothers' chief economist for Asia (ex-Japan), said: "I would say that Lehman Brothers has an overweight position on Asia-ex-Japan and that we are bullish on the region for the medium-term perspective.

"So (for) medium-term, the equity market in Singapore and in Asia should do well. Singapore's in a very good position to be a hub, a service centre to India and the other Southeast Asian economies which should be very positive for Singapore in the medium term."

The financial services firm is predicting the Singapore economy to grow 5.3 per cent this year, in line with the government forecasts. - CNA/ac

URA Commercial Site At Jalan Sultan Draws 20 Bids

Source : Channel NewsAsia, 22 January 2008

Chiu Teng Estates has put in the top bid of S$14.8 million for a 99-year leasehold commercial site at Jalan Sultan.

This works out to S$10,480 per square metre per site area.

It is also just S$1.2 million more than the second highest bid.

The tender attracted 20 bids in all.

Meanwhile, the Urban Redevelopment Authority has decided to reject the only bid submitted for the transitional office site at Aljunied Road and Geylang East Avenue 1.

It said the bid of S$7.8 million or S$413 per square metre of gross floor area was too low. -CNA/vm

CapitaLand To Invest Over S$1b In 15 Malls In India

Source : Channel NewsAsia, 22 January 2008

CapitaLand is investing over S$1 billion in 15 malls across India through two joint ventures with Indian companies.

The venture will be fully funded by the CapitaRetail India Development Fund, which is 45 per cent owned by CapitaLand.

CapitaLand said it plans to duplicate its China strategy in India, which is to focus first on the gateway cities, including Mumbai, New Delhi and Bangalore, and then venture out.

CapitaLand CEO Liew Mun Leong said, "We have already formed a fund in Singapore which will invest (in malls) in India... and this fund will be used to invest in the funds in Asia."

The 15 malls will have an asset value of more than S$2.12 billion and a total lease area of over 11 million square feet, about 220 times that of Tampines Mall.

Being the largest retail property landlord and manager in Singapore, CapitaLand said the two joint ventures will give it immediate presence and scale within India, with 15 retail or predominantly retail projects across 14 cities.

One of its partners, the Prestige Group, will give it greater access to South India while the other, Advance India Projects, will help it expand in the northern part of the country.

CapitaLand plans to exit the investments through a real estate investment trust.

The property developer, which has been successful in spinning off its assets into REITs, also said it may list in India, Singapore or London.

One of its sponsored REITs, CapitaMall Trust, reported a distributable income of S$39 million for its fourth quarter on Tuesday, and is proposing to pay out 2.34 cents a unit.

Senior analyst David Lum at Daiwa Institute of Research said, "I think a 14 per cent year-on-year growth is very impressive for a mature REIT… I think the results showed there is underlying growth."

"There's still a lot of room for asset enhancement, a lot of room for acquisitions and probably in a very shaky market, CapitaMall might be able to acquire some properties at a decent price. So I think the drivers for last year will remain for this year, and I think it's not too demanding to look for double digit growth in CMT's results again," he added.

CapitaMall Trust said it might exceed its asset target of S$8 billion by 2010. - CNA/ac

Steady Climb, Not Sprint

Source : The Electric Newpaper, January 21, 2008

Prices Still Likely To Rise But…

Buy now or wait? House hunters unsure which way prices will go

WITH a possible recession looming in the US, and the injection of more HDB flats and private properties into the market this year, will property prices take a breather or even head south?

Those scouting for a house now will want that to happen.

Take communications manager Mah L C for example. For this 31-year-old, hunting for a flat has been a trying exercise for the last three months.

Ms Mah is getting married in March to a financial adviser.

The couple’s combined income has busted the $8,000 ceiling for subsidised housing, which means their options are limited to the HDB resale market or private housing.

But in today’s market, if you’re not cash-rich, you can forget about the HDB resale market given the high cash-over-valuation (COV) premiums sellers are asking for.

That’s the cash difference between the property’s valuation and the asking price.

Ms Mah, who is currently living in a four-room HDB flat with her parents in the central area, wants to buy an HDB flat near her parents for convenience.

She said: ‘Ideally, we’ll like to buy a new flat but we can’t because we bust the ceiling. But in the resale market, the premiums (COV) that sellers are asking for are just crazy. In the central area, be prepared to pay at least $50,000 above valuation.

Ms Mah said they’ve viewed other resale HDB flats in the central area, all with high COVs.

So the couple is now thinking of renting a flat first.

Some may say they are choosy but they have since given up their home search and are thinking of renting instead.

She said: ‘Rents may be high but it’s better than forking out such a huge cash outlay. We may perhaps rent for a year or two and wait for prices to stabilise or drop.’

This wait-and-see strategy is a gamble on property prices dipping in the next two years.

Barring any unforeseen external events, a price drop in the property market is quite unlikely, said industry watchers.

The general consensus is that property prices are likely to still head upwards, but at a more gradual pace.

ERA assistant vice-president Eugene Lim explained that the property market is driven by internal and external events.

Internal factors such as the demand and supply of homes, and excessive speculation will affect prices.

Mr Lim added that the Government is trying to contain the situation by supplying more flats and providing enough housing for everyone.

National Development Minister Mah Bow Tan announced last November that 7,000 new flats will be launched for sale in the next few months.

Said Mr Lim: ‘In order for the prices to drop, the supply must outstrip demand. But demand is expected to go up because the population is increasing. Economically, we’re stable and this will generate more confidence and more jobs.

‘Yes, more new flats will be released but it’s not meeting immediate needs and one must wait for at least three years for these flats to be built.’


He doesn’t foresee a supply glut in the property market, even though more new private properties will also be completed in the next few years.

Mr Lim, however, thinks sellers would be more realistic about their pricing in the next few months.

And even if the US slips into a recession, it may not necessarily affect us in a big way like it did in 2001, which was centred on the IT industry, according to a report in The Business Times earlier this month.

A recession this time will not be IT-industry-specific and the Singapore economy is now more diversified and resilient, with domestic demand growing strongly, helped by large projects such as the integrated resorts (IR).

Continued strong growth in China and India will also help provide a cushion, according to that report.

Certainly, the upcoming IRs and Formula One will translate into more visitors and also more demand for housing here, said Chesterton International’s research director Colin Tan.

He said: ‘If you’re buying a place to live in, buy something you can afford so that there’s no fear of defaulting on your mortgage.

‘Property is a cycle. The question is when you want to exit the market? If you exit during the bull run, you’ll be fine.’

For those unwilling to fork out a premium for a place today, they can always rent a place but make their money grow by investing.

Said Mr Tan: ‘Hedge yourself by buying blue-chip property stocks. If the market is good, your stock value will increase.

‘If the market is bad, you’ll be able to take advantage of weak prices (by buying a property).’

Raise Or Not To Raise?

Source : TODAY, Tuesday, January 22, 2008

MPs debate whether to up $8,000 ceiling for DBSS buyers

THEY are public housing flats designed, built and marketed by private developers, costing as much as $700,000 - which begs the question: Should not the $8,000 income ceiling for prospective buyers be raised?

Taking up the issue of Design, Build and Sell Scheme (DBSS) flats in Parliament yesterday, Nominated Member of Parliament (NMP) Eunice Olsen said: “When the income ceiling of $8,000 was set by the Housing and Development Board (HDB), there was no DBSS and no DBSS prices. Shouldn’t the income ceiling be commensurate with the increase in prices?

“In the event of a downturn, these buyers may not be able to afford their mortgages. As only private housing is not afforded any insulation by the Government from market fluctuations … does this change how we view public housing?”

MP (Marine Parade GRC), Dr Ong Seh Hong, similarly asked about the rationale for “the shift from providing affordable housing” to the $700,000 DBSS flats in Boon Keng, even as the income ceiling remains fixed.

And with prices of new and resale HDB flats rising, fellow Marine Parade MP, Dr Muhammad Faishal Ibrahim, asked about the Government’s plans to ensure home ownership stays affordable for lower income families.

In response to all three, National Development Minister Mah Bow Tan pointed to the need for “a wide range of housing options” to meet varying needs and aspirations “if we want public housing to remain relevant and attractive”.

So, even as the HDB is providing higher-end options such as DBSS, it has also, in recent years, introduced two- and three-room flats targeted at lower-income households.

“The HDB is not shifting its mission; neither is it abandoning its role of directly providing the standard HDB flats,” said Mr Mah.

Indeed, DBSS flats constitute a small part of the total public flat supply, catering for niche HDB buyers “with higher aspirations and who can afford a higher price”.

And as DBSS is for this select group, there are no plans to raise the $8,000 income ceiling. If this were done, richer home-hunters might join the queue, resulting in DBSS flats being “priced higher instead of becoming more affordable”, he argued.

Meanwhile, the Government remains committed to providing affordable public housing for families with more modest means.

Last year, the income ceiling for the Additional CPF Housing Grant was raised from $3,000 to $4,000 and the grant quantum for the various income tiers increased by $10,000.

Since it was introduced in March 2006, the additional grant has benefited more than 4,600 households.

Still, Mr Mah acknowledged, rising resale flat prices are a concern and the HDB is monitoring the situation.

Those who find it too expensive or cannot afford the Cash-Over-Valuation “should seriously consider postponing their purchase or applying for a new HDB flat instead”, he advised, adding: “For many Singaporeans, buying a property is the single most significant investment they make in their lives. It is wise to be careful and patient.”

Upgrading Costs Too Much For Some, Says MP

Source : TODAY, Tuesday, January 22, 2008

The makeover of their homes is welcomed, but would the weight on the wallets of the low-income be too much?

Member of Parliament (MP) Cynthia Phua of Aljunied GRC raised this concern yesterday as Parliament debated proposals to usher in new upgrading programmes for public housing. The objective - repair works on ceiling leaks, for example, to spruce up ageing homes - was not in question.

Even Opposition MP Chiam See Tong added his support for the Home Improvement Scheme announced by Prime Minister Lee Hsien Loong at last year’s National Day Rally - while asking for his residents to get their due turn to be selected.

But, as three MPs spoke on the issue, the biggest worry was that homeowners’ share of the bill, between 5 and 12.5 per cent, would be too much for some.

“I therefore appeal to the (National Development) Ministry to create some air pockets for the lower-income residents before they suffer from hypoxia because of rising inflation,” said Mdm Phua.

She asked the Housing and Development Board (HDB) to absorb the quantum for smaller units and a lower co-payment for four-room flats or bigger.

In reply, Minister of State Grace Fu said there would be repayment schemes to make the renovation process affordable. But she added that the scheme was not a substitute for routine maintenance and practical repairs for which HDB lessees have to be responsible.

In reply to a request by Mr Liang Eng Hwa (Holland-Bukit Timah GRC) for the Government’s upgrading schemes to be extended to private estates, Ms Fu said such Government surpluses would be kept for public housing.

As for Mr Chiam’s request, he was told that Potong Pasir’s turn would come - eventually. - Zul Othman

Asian Markets Crash While US Totters - Recession Fears Hit Home In Plunges Reminiscent Of Post-9/11 Debacle

Source : The Business Times, January 22, 2008

It was blood on the floor across Asian bourses yesterday as investors dumped stocks amid intensifying fears of a US economic meltdown.

This, despite President George W Bush last week announcing a massive US$145 billion stimulative tax relief plan and Federal Reserve boss Ben Bernanke stating that more interest rate cuts were in the works.

But all this fell on deaf ears of panic-stricken investors.

The result: a series of institutional programme selling and waves of margin calls which resulted in the most intense one-day rout across Asian bourses in recent memory.

Singapore’s recently revamped Straits Times Index (STI) plunged a massive 6.03 per cent to end at its lowest levels since March 2007 at 2,917.15 points as bellwether stocks and blue chips took a beating. It was its steepest single-day fall since the September 2001 New York bombings, when it had fallen 7.47 per cent.

In Hong Kong, the Hang Seng also posted its worst one-day fall since the same tragedy, as it plunged 5.49 per cent to 23,818.86 - its lowest close since last September. And in Tokyo, the Nikkei 225 sank 3.86 per cent to 13,325.94, while Mumbai’s BSE Sensex 30 plunged 7.41 per cent to 17,605.35 points.

The same depressing scenario was played out in Seoul, Kuala Lumpur, Jakarta, Sydney and elsewhere.

And as Asian investors licked their wounds after a massive beating, European bourses started the day in similar vein in negative territory.

Analysts attributed the selldown to intensifying fears of a US economic recession, brought about by knock-on factors from the widening sub-prime crisis.

That had prompted President Bush to unveil his US$145 billion tax plan over the weekend - which many had hoped would help calm nerves and stabilise markets.

‘Letting Americans keep more of their money should increase consumer spending,’ he declared.

But many in the market now say the plan was too little, too late.

‘We are just seeing the beginnings of what could be a downward spiral which could take months to flatten out,’ said a European fund manager who spoke anonymously on account of the bank’s internal compliance requirements. ‘The real crunch-time could come some time during the middle of this year, when the US adjustable rate mortgages come up for review. That could hit the wider US housing market, especially if banks start tightening up.’

Others noted that this was a long overdue correction, with the markets having largely recovered in November and December, after being hit last July and August.

And even while the US economy comes into focus, new fears are emerging about a massive economic slowdown in the euro- zone, no thanks to a sharp appreciation in the euro which is already hurting exports.

Meanwhile in China, there are fears that Chinese banks which have until now remained largely silent about their sub-prime exposure could now start unveiling losses. Some market insiders reckon large players like Bank of China have substantial exposure, which could come to light in the coming weeks.

Meanwhile, the flight to cash has already started across Asian markets and looks likely to continue for the foreseeable future.