Wednesday, June 25, 2008

CapitaLand Buys 62% Of M'sian Mall For US$183m

Source : The Business Times, June 25, 2008

Southeast Asia's largest property developer CapitaLand said on Wednesday it had paid $250 million (US$183 million) for 62 per cent of a retail mall in Malaysia.

CapitaLand chief executive Pua Seck Guan said the latest acquisition puts the Singapore-listed firm on track to set up its Malaysian retail real estate investment trust (Reit) by end of this year.

'Together with the earlier acquisitions of Gurney Plaza and Mines Shopping Fair, the three assets collectively amount to a total asset size of approximately $840 million,' Mr Pua said in a statement.

The retail space in the Sungei Wang Plaza mall is located in the popular Bukit Bintang retail belt in the Malaysian capital of Kuala Lumpur and includes parking lots.

The mall has close to 100 per cent occupancy and sees more than 24 million visitors annually. -- REUTERS

Sembawang, Woodlands To Get Cycling Paths

Source : The Straits Times, June 25, 2008

7.4km of tracks will run alongside existing footpaths and cost $2.8m

CYCLISTS and pedestrians in Sembawang and Woodlands will each get their own space from May next year.

These two estates will be provided with 7.4km of cycling tracks. They will run parallel to the existing footpaths linking residential areas to the Sembawang and Admiralty MRT stations.

The cycling tracks will be between 1.5m and 2m wide and cost $2.8 million.

Keeping cyclists on a separate path is a step up from what the Land Transport Authority, the Traffic Police and the Tampines grassroots organisations have been contemplating in the past year.

A trial letting cyclists and pedestrians share footpath space in Tampines has recently ended and a decision on whether separate cycle paths should be built in the estate is expected soon.

Surveys have indicated that both cyclists and pedestrians there seemed generally in favour of the idea of sharing the footpaths in order to get cyclists off the busy roads.

The initiative in Sembawang and Woodlands was the result of feedback from residents, who wanted to minimise accidents and conflict between cyclists and pedestrians.

Mr Hawazi Daipi, an MP for Sembawang GRC, said that the two estates were going ahead with building the cycling tracks because a 'considerable' number of their residents got around the neighbourhood on bicycles. This includes foreign workers living in the dormitories there.

Three in four cyclists killed on the roads in the first three months of this year were foreigners. The Traffic Police have stepped up a safety education programme targeting them.

The committee coordinating the facilities in Sembawang, Woodlands and Yishun has lined up talks and seminars for residents and foreign workers on the responsible use of the cycling tracks.

Signs and speed-regulating strips will also be installed.

Besides those who commute on wheels, recreational cyclists will also be provided for. A park connector running along Sembawang Way will be built by 2010.

A Cohesive Nation, Thanks To The HDB

Source : The Straits Times, June 25, 2008

NEW YORK - IN SOME countries, an apartment can be the heart of the family, or just a place to store� clothes and a bed. In others, it is the unattainable dream, a symbol of security as far away as the moon.

In Singapore, a 48-year-old programme has turned home ownership into a formidable tool to create cohesive communities and fuel economic expansion.


'The housing programme is a key pillar for continued economic growth,' says Mr James Koh Cher Siang, chairman of the Housing Board.

'The underlying philosophy is nation-building, to root the population in Singapore and its future.'

That far-reaching vision was honoured by the United Nations on Monday during a day-long celebration of public-service innovations.

The HDB was one of 12 organisations recognised by the United Nations Public Administration Network (UNPAN), and the only one from Asia singled out for what is, effectively, a lifetime achievement award for excellence. Nearly 190 organisations from 39 countries entered the three public-service award categories.

The HDB, along with social programmes from Rwanda (improving community health and education), the United States (curbing juvenile delinquency and family violence) and Brazil (teaching building trades for historic preservation to unemployed youth), was cited for improving transparency, accountability and responsiveness in public service.

...TO CONDO-STYLE FLATS: The HDB's home-ownership programme won recognition from the United Nations for providing quality housing. -- ST FILE PHOTOS

'Singapore's home-ownership programme has provided quality housing for more than 80 per cent of the people and helped more than 95 per cent of them to own their homes,' said UN Undersecretary-General for Economic and Social Affairs Sha Zukang, who presented the awards on Monday.

'The awardees are an inspiration for all of us in their ability with ingenuity, creativity and commitment to improve transparency, accountability and responsiveness in public service.'

In a statement issued in Singapore yesterday, National Development Minister Mah Bow Tan congratulated the HDB and said that the award was 'a tribute not just to HDB, but also to the Singapore people because the home-ownership programme is very much a part of our lives today'.

It is a success story that goes back almost half a century, to the days when many Singaporeans lived in kampungs.

A government initiative to develop affordable housing changed people's lives dramatically, putting families into basic high-rise homes with sanitation and clean running water.

With government commitments of land, money and enabling laws, the HDB built 50,000 flats in the first five years.

As the programme grew, the designs became more varied and ambitious: homes were larger, more pleasant and cost more.

Housing estates featured conveniences like transportation, shops, childcare and recreation. Soon, it was not just a question of affordability, but desirability.

'As time progressed, people's aspirations changed, they wanted quality housing,' Mr Koh told The Straits Times on Monday. 'They had more money, they wanted different kinds of flats, from smallest to the largest.'

With their upgraded fixtures and amenities, he added, the HDB flats rival private condos for sophisticated buyers.

Today, 80 per cent of Singaporeans live in HDB homes, the dream of owning them made possible by a combination of subsidies and access to their Central Provident Fund savings to pay for their flats.

This kind of stability and success is both a beacon and a taunt to countries struggling to cope with housing shortages and runaway prices.

'My government cannot possibly undertake something like that,' said a Brazilian diplomat, after listening to HDB deputy director Lily Wong's brief presentation on the housing programme. 'We do not have the money, the foresight, the land, the harmony. I cannot imagine trying to re-create this in Rio. Our slums are too large.'

The world is in something of a housing crisis: slums are spreading like a shadow across Latin America, Africa and Asia, devouring rural areas and extending cities far beyond their capacities.

The US economy is roiled by a mortgage crisis; major cities including Moscow, Copenhagen, Hong Kong, Tokyo and New York have a near-zero vacancy rate, especially for affordable homes.

UNPAN officials noted that the winning programmes should introduce new concepts to tackle widespread problems.

Singapore's presentation sparked envy in many in the small audience, but also a touch of wistfulness.

'I guess if you started with a clean slate, such a programme would be possible,' said a European delegate. 'Maybe they could replicate this in East Timor but I don't know where else.'

In fact, housing officials from India and China - sprawling countries with masses packed into teeming cities - have sought out Singapore's HDB for advice, HDB chief executive officer Tay Kim Poh told The Straits Times.

UN Deputy Secretary-General Asha-Rose Migiro praised the winners, who this year hail from Australia, Brazil, India, Jordan, Rwanda, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Tunisia and the United States.

'Your exemplary initiatives should inspire all governments around the world - at all levels - to strive for excellence in public service,' she said.

'While the private sector and civil society play a fundamental role in the development process, it is governments that have the main role to steer development efforts and provide the necessary conditions for a stable, peaceful and prosperous society.'

Cheung Kong Holdings Keen On Singapore

Source : TODAY, Wednesday, June 25, 2008

MR LI Ka Shing’s Cheung Kong Holdings, Asia’s second-largest developer by market value, said it is keen to invest in Hong Kong, China and Singapore as the region’s property market is undergoes a “small consolidation”.

Prime offices and industrial parks offer investment opportunities because of economic “fundamentals” in the region, Cheung Kong’s Executive Director Justin Chiu said at a property conference in Singapore yesterday. He said he doesn’t expect “significant” price declines in the next 18 months.

Added Mr Chiu: “We’re just at the low tide of the economic cycle. When we clear the sub-prime issues, :I’m fairly confident Asia will come back.”

Property developers are seeking more investments to meet rising demand in China and India, the two fastest-growing major economies in the world. China’s economy is forecast by the World Bank to expand by 9.8 per cent this year, even though gains in home prices slowed.

“Across all three markets in the world — America, Europe and Asia — the best prospects, in my view, are for Asia right now,” said Mr Sameer Nayar, head of real estate finance at Credit Suisse. “It is just because you are talking about half the world’s population and most of the world’s :growth in gross domestic product is coming from Asia.”

Mr Chiu said that residential developments may be riskier because they are more dependent on the domestic economy. Home prices in Singapore are easing after rising to record highs last year as a global credit squeeze damped demand, while Hong Kong’s home sales fell for a second month as prices cooled.

Sales by value of residential units in Hong Kong slumped 31.1 per cent in May from a year earlier to HK$26.3 billion($4.6 billion), the biggest drop in 19 months, after falling 30.1 per cent in April.

China’s home prices rose 9.2 per cent in May, the slowest gain since September 2007. New home prices increased 10.2 per cent last month from a year earlier. — Bloomberg

The Bigger You Are, The Better You Weather The Storm

Source : The Business Times, June 24, 2008

WHAT a difference a year makes.

Last year, euphoria ruled asset markets. After a moribund three years which saw Singapore property values dive by some 45 per cent, the market sprang to life in 2007, fuelled by the robust stock market and supported by a slew of new infrastructure initiatives - most notably the integrated resort (IR) development plans. Property prices surged some 28 per cent last year.

But all that is history now.

Latest data shows that prices for some property transactions in the sub-sale market have declined almost 40 per cent from last September's levels. And although new home prices are still holding up amid only 2,100 new units launched to date, a potential glut of new supply next year could put pressure on new home prices.

Not surprisingly, property stocks have been hit.

And the turbulence facing the industry has sparked the inevitable rumours about who might be impacted most.

One company which is being closely watched is high-end property developer SC Global Developments.

With its properties priced at $4,000 per square foot per plot ratio (psf ppr) and above, speculation is rife that the company is caught between a rock and a hard place. Not surprisingly, SC Global's stock price has dived into a seemingly inexorable decline, losing some two-thirds of its value since last October to close at $1.26 yesterday.

Weighing down sentiment on the stock is market talk that the company is struggling under a huge overhang of unsold apartment units and grappling with a huge debt burden.

Indeed, SC Global started the year with almost 1.1 million sq ft of unsold property - primarily at The Marq on Paterson, Hilltops, The Ardmore and The Beachfront Collection @ Sentosa. More critically, the company had debts of some $1.2 billion, almost double the $700 million it had a year earlier.

And its debt/equity ratio was almost three times.

Not exactly comforting numbers.

But looks can be deceiving. And SC Global is not just any developer.

The company, which has over $60 million in cash in its coffers, is a niche player catering to a high-end, globally mobile, jet-setting class which is relatively price-insensitive and discriminating.

Over the past half-year, the company has managed to sell some 200,000 sq ft of its land bank - mainly at The Marq @ Paterson and Hilltops - for over $700 million.

If SC Global exercises its option to prepay its debts from sale proceeds, the company would be left with a net debt of some $500 million against a remaining land bank of 900,000 sq ft. The resulting debt-land bank ratio of some $555 psf ppr is not exactly an insurmountable problem for a company like SC Global.

Seen from another angle, this could be a breakeven price of sorts for the company should it want to be completely debt-free (not that SC Global will ever sell any of its luxury units at such bargain basement prices, though).

In fact, the company has completely recouped its costs at The Marq with the sale of 40 per cent of the units there. So proceeds from every additional unit sold in the future will go straight to its bottom line.

But all this does not change the depressing macro picture for the property sector here, where there is still significant downside risk to valuations.

Still, as Merrill Lynch noted recently, SC Global has only two property assets that are at risk of impairment in the current downcycle: the Sentosa Beachfront Collection and The Ardmore. But the investment house noted that the average book value of these assets would have to dive by two-thirds, from $2,141 psf ppr to $824 psf ppr, 'to be of any real threat to SC Global's survival' - an outcome which is highly unlikely.

Recent evidence suggests that despite the current slowdown, the luxury segment seems to have held up pretty well, with some 50 new apartments in the over $10 million price range being snapped up this year. This number could double by year-end.

Meanwhile, Fitch Ratings believes that residential receivable transactions have not been impacted by the softening of the local residential market. Fitch - which applies market value decline (MVD) assumptions of between 48 per cent and 58 per cent to the transactions depending on the property location - dismisses the possibility that the current stress scenario will develop into anything similar to that which existed during the Asian financial crisis.

The bottom line? Not all property players are equal. Some, like SC Global, have a premium land bank, cater to a niche market, and have the ability to sit on their land bank for a while. These players will ride out the current turbulence better than others.

Woodleigh Site Draws Six Fairly Low Bids

Source : The Strait Times, June 25, 2008

THE tender for a Woodleigh Close residential site attracted plenty of interest, but the bids were all on the low side.

Six hopefuls lined up for the 1.08ha, 99-year leasehold site with Frasers Centrepoint lodging the top bid of $87.68 million, or $270 per sq ft (psf) of gross floor area.

This falls well below expectations of at least $350 psf and reflects the market's subdued state.

Hoi Hup Realty was the second highest bidder with an offer of $82.82 million or $255 psf.

A joint venture between Hong Leong Holdings unit Kingston Development and TID offered $81.18 million or $250 psf.

The other bids for the site near the Potong Pasir MRT station ranged from $74 million to $81 million.

CBRE Research executive director Li Hiaw Ho said: 'While the six bids submitted for the site reflects fairly good interest, the lower quantum of prices is a reflection of a more tentative mood in the residential market and rising construction costs.'

Mr Ku Swee Yong, Savills Singapore's director of marketing and business development, said: 'The bids are lower than expected because of higher construction costs, as well as the shorter and more expensive credit lines extended to developers.'

Frasers Centrepoint aims to build about 300 high-rise condominium units on the site.

Based on the top bid, the estimated breakeven cost of the new project will be around $650 psf to $700 psf, said Mr Li.

He added that the new apartments could go for $800 psf to $850 psf, considering that nearby units in freehold Blossoms@Woodleigh have been sold in the resale market at an average price of $840 psf this year.

Also, units in Casa Meya, a new freehold project in Potong Pasir estate featuring mostly small units of around 800 sq ft, went for around $910 psf, said Mr Li.

But a market watcher said Frasers Centrepoint may be hoping to sell the new apartments for up to $900 psf.

城市发展卖首尔酒店 税前盈利4亿2500万

Source :《联合早报》 June 25, 2008

城市发展子公司千禧国敦酒店集团(Millennium & Copthorne Hotels),以约5亿7000万美元(7亿7720万新元),脱售位于韩国首尔的首尔希尔顿千禧酒店(Millennium Seoul Hilton)的全部股权。买方是英国的Kangho AMC公司。




这也是千禧国敦酒店集团自2004年以6亿7500万美元,脱售美国纽约广场酒店(Plaza Hotel)的50%股权以来,最大笔的脱售协议。







世界房地产投资亚洲大会 长江实业与力宝负责人:亚洲房产价格不会显著下跌

Source : 《联合早报》June 25, 2008

长江实业(Cheung Kong)执行董事赵国雄和力宝(Lippo)集团总裁李棕认为目前是买入亚洲房地产的好时机,未来一年至18个月,我国和亚洲区房地产价格将“稍微整合”,但不会显著下跌。

两人昨天为“世界房地产投资亚洲大会”(Real Estate Investment World Asia)发表演讲时提出以上看法。









另一名主讲人高盛(Goldman Sachs)投资银行部亚洲房地产主管兼董事经理斯米高)则说:“环球信贷紧缩危机长久持续的机会非常低。有一天,当我们回顾2008年的时候,一定会认为是投资亚洲房地产的好时机。”




MapletreeLog To Raise Some S$607m Through Rights Issue

Source : Channel NewsAsia, 24 June 2008

Mapletree Logistics Trust is planning to raise nearly S$607 million through a renounceable rights issue.

It is issuing about 831 million rights units at 73 Singapore cents each, representing a 21.4 per cent discount to MapletreeLog's volume weighted average price on June 24.

Unit holders will get three rights units for every four units held.

The net proceeds will be used to finance or refinance the acquisition of certain properties by MapletreeLog, to repay bank borrowings and for working capital.

MapletreeLog said the rights issue will strengthen its balance sheet, reduce its aggregate leverage significantly to about 38 per cent and give it flexibility to pursue yield-accretive acquisitions.

Mapletree Investments, the sponsor of the trust, said it will take up its full entitlement of 30.16 per cent of the rights issue. - CNA/vm

US Home Prices Continue Downward Spiral In April

Source : Channel NewsAsia, 24 June 2008

WASHINGTON: Home prices in major US cities continued a downward spiral during April compared with property values a year earlier, a closely-watched survey said on Tuesday.

Home prices in some cities endured record-low annual price drops in the year to April as the troubled US property market remained in a deep rut more than two years after the collapse of a multi-year boom, according to the Standard & Poor's/Case-Shiller Home Price Indices.

"There might be some regional pockets of improvement, but on an annual basis the overall numbers continue to decline," said David Blitzer, chairman of the S&P Index Committee.

The survey showed that the worst-hit metropolitan areas remain the cities of Las Vegas, Nevada, and Miami, Florida. Both cities rode a building boom before the housing bubble fizzled out in early 2006.

Prices in the casino hub of Las Vegas have slumped 26.8 percent in the year to April while values in Miami have tumbled 26.7 percent over the same period.

The price index, a measure of property prices in 10 major metropolitan areas, showed a record decline of 16.3 percent in the 12 months to April as the housing market's woes showed few signs of abating.

The survey showed that home prices in Chicago; Cleveland, Ohio; and Denver, Colorado remained under pressure, but values in the three cities showed "some improvement" compared with price declines in March.

Patrick Newport, an economist with Global Insight, said further home price declines could be on the way, but he said that other surveys tracking the housing market are not as bleak as the latest S&P/Case-Shiller survey.

"Unfortunately, all methods devised to measure house prices have shortcomings, and it is impossible to state with any precision how much house prices are actually falling nationally or locally," Newport said.

Some cities are weathering one of the worst downturns in US home prices in recent decades relatively well.

On a monthly basis, the report showed that Charlotte, North Carolina, and Dallas, Texas, were the only two cities to enjoy two straight months of price increases during April.

Economists say that lacklustre economic growth, a credit crunch squeezing the financial markets and rocketing energy costs have also dented housing demand. - AFP/de

Asia's Real Estate Market Remains Optimistic: Grace Fu

Source : The Straits Times, June 24, 2008

THE outlook for Asia's real estate market, including Singapore's, remains optimistic, notwithstanding the recent shake-up in the global financial markets and rising inflation, said Senior Minister of State for National Development Grace Fu on Tuesday.

'Indeed, Asia's macroeconomic fundamentals are much healthier compared to a decade ago. Progress has been made to its banking systems while corporate balance sheets have also improved,' said Ms Fu

Asia will continue to be resilient and the growth momentum across the region can withstand the challenges posed by the current financial and economic uncertainties, she said.

In her upbeat address to the Real Estate Investment World (REIW) Asia Conference 2008 at the Raffles City convention centre on Tuesday morning, Ms Fu said Asia still offers a diverse range of investments that can match different interests and risk appetites.

"Indeed, Asia's macroeconomic fundamentals are much healthier compared to a decade ago. Progress has been made to its banking systems while corporate balance sheets have also improved," said Ms Fu.

"Stronger external positions are also seen in most Asian countries, with current account running surpluses, large foreign reserves and diversifying exports.

'In fact, some analysts are of the view that Asia is looking more attractive now amidst the current economic uncertainties in the US and Europe. There is a good basis for this optimism about Asia."

�Asia's share of the global GDP has almost doubled from 19 per cent in 1980 to 36 per cent today. This will rise to 45 per cent by 2020, according to the Asian Development Bank.

S'pore an ideal investment location

Ms Fu highlighted Singapore as an attractive location for investments for two key reasons - its strong economic fundamentals, and the quality living environment it offers for locals and global talents alike.

Leveraging on the growth in the region, she said the outlook for Singapore is promising, with its growth forecast for the medium term expected at 4 per cent to 6 per cent.

"What makes Singapore increasingly attractive is also its quality living environment. The liveable environment in Singapore - clean, green, healthy and safe - has served as a key competitive advantage for companies located here in their global talent attraction efforts," she told the delegates.

Mercer Human Resource Consulting has ranked Singapore as the city with the best quality of life in Asia, excluding Australia and New Zealand in 2007 and this year.

Singapore, she added, is putting in place new plans to further support future growth and sharpen our attractiveness as a magnet for investments and new businesses.

These development plans will open up many opportunities in Singapore's real estate market, from the provision of quality homes, to new hotel, leisure and retail investment and development opportunities.

Frasers Centrepoint Trust Puts In Top Bid Of S$88m For Woodleigh Site

Source : Channel NewsAsia, 24 June 2008

Frasers Centrepoint Trust has put in the top bid of nearly S$88 million for a residential site at Woodleigh Close. The price works out to S$270 per square foot per plot ratio.

The next highest bid came from Hoi Hup Realty at about S$83 million. The lowest bid of S$74 million was put in by Sim Lian Land.

The Urban Redevelopment Authority received six bids in total when the tender closed on Tuesday.

The site at Woodleigh Close was launched for public tender on April 29.

The 99-year leasehold parcel spans nearly 10,800 square metres, with a maximum gross floor area of some 30,200 square metres.

Property consultants CB Richard Ellis said based on the top bid of S$270 per square foot plot ratio, the estimated breakeven cost of the new project is around S$650 to S$700 per square foot.

It expects the units to be sold between S$800 and S$850 per square foot. - CNA/ac

Foreign Developers Remain Upbeat About Singapore's Property Sector

Source : Channel NewsAsia, 24 June 2008

Foreign developers are upbeat about Singapore's property market, and despite signs of a slowdown, they see opportunities for growth.

Although the government may be releasing fewer sites for sale under the Confirmed List, one of the largest property developers in Hong Kong is viewing the latest government land sales list with great interest.

Cheung Kong Holdings is interested in the white site at Jurong East Street 13, placed for sale on the government's land sales programme for the second half of the year.

Justin Chiu, executive director of Cheung Kong, said: "It's a good location because the environment is good. Jurong could make itself to be one of the major business centres of Singapore.

"I've already asked my team in Singapore to study the location and to come up with some recommendations. Definitely we're looking to expanding into Jurong area."

He added that the general cooling in the local property market is a necessary price correction given the increases over the past three years.

Mr Chiu said: "If you look at (the) property market as whole in (the) past two, three years, I'd say prices went up too fast. So we expect some correction anyway in two years' time.

"So I'd say this slight correction is actually a consolidation of (the) market, which will build a much stronger, solid base for future growth."

Lippo Group also said it will continue to invest in Singapore, on top of its current focus on emerging markets.

"We like emerging markets. (We) put-two thirds of our money in emerging markets, one-third in developed markets like Singapore and Hong Kong," Lippo Group's President Stephen Riady revealed during a panel discussion at the 7th Annual Real Estate Investment World Asia 2008 conference.

At the conference, regional property bigwigs discussed the state of Asian realty, but not all were for Asian properties.

Yu Lai Boon, group chief investment officer of Dubai World, said: "Our point of view is that when you have corrections, that's where a new golden era arises. Instead of emerging markets in Asia, my point of view is the US."

Despite the current housing slump in the US, he said investors in the Middle East are looking seriously into the American and European market now, for the next golden era. - CNA/ac

Will The Fed Repeat Its 1970s Blunder?

Source : The Business Times, June 25, 2008

FORGET the US housing collapse, the 'credit crunch' and - in isolation - higher oil prices. The real economic me-nace may be resurgent inflation, which is the broad rise of most prices. To understand why, some history helps.

The US government's worst domestic blunder since World War Two was the unleashing of high inflation: in 1960, annual inflation was 1.4 per cent; by 1979, it was 13.3 per cent. This terrified Americans, who feared falling living standards. It also destabilised the economy, causing harsher recessions that culminated with 10.8 per cent unemployment in 1982.

Americans don't want to go there again, and Federal Reserve chairman Ben Bernanke has been insisting that we won't. In a recent speech, he argued that the economy today is much different from the mid-1970s. He's right. In 1974, inflation was 12 per cent. Unemployment in the parallel recession peaked at 9 per cent in early 1975. We're not close to that havoc. Unfortunately, Mr Bernanke's comforting analogy is misleading. The question is not whether it's 1975; it's whether it's 1966.

It was then that the inflationary psychology - which later led to so much grief - took hold. Vietnam War spending and the Fed's easy money policies created an economic hothouse. Government officials and most academic economists underestimated the danger. Inflation crept from negligible levels to 3.5 per cent in 1966 and 6.2 per cent in 1969. There are eerie parallels now. From 1997 to 2003, inflation averaged slightly more than 2 per cent. Now it's 4 per cent; some economists soon expect 5 per cent.

Hmm. To be sure, differences abound. Then, we had a classic wage-price spiral. Strong consumer demand allowed businesses to raise prices, which spurred demands for higher wages that companies paid because they needed the workers and could recover the costs through higher prices. In 1959, labour costs rose 4 per cent; firms could offset most of that through efficiencies . By 1968, labour costs were up a less forgiving 8 per cent.

By contrast, today there's not yet a wage-price spiral. Inflationary pressures seem to originate mostly in rising raw materials prices. In 2002, oil was US$25 a barrel; now it's US$135. Corn was US$2.30 a bushel; now it exceeds US$7. Meanwhile, a powerful anti-inflationary force - cheaper manufactured imports - is waning. The weaker dollar and higher transport costs have raised import prices. In the past year, prices for imported consumer goods (excluding autos) are up 3.6 per cent.

The US seems to be hostage to global forces. Economists Richard Berner and Joachim Fels of Morgan Stanley call this the 'new inflation' because it is not easily squelched by domestic policies. Up to a point, that's true.

Although the Fed influences interest rates, it doesn't own oil rigs or cornfields. Long-term price relief for oil involves switching to more fuel-efficient vehicles and increasing worldwide oil production. Removing subsidies for corn-based ethanol would reduce food price pressures.

Still, all large inflations involve 'too much money chasing too few goods', as economist Milton Friedman often noted, and this episode is no exception. The Fed's easy money policies have global effects. Many countries peg their currencies to the dollar and shadow Fed policies. Meanwhile, oil producers and other commodity exporters have been flooded with dollars; in practice, the extra cash allows them to run easy money policies. The result is that, despite the US slowdown, much of the world is booming. Developing countries, now about half the global economy, have been growing at about 7 per cent since 2002.

Higher inflation is a worldwide phenomenon. In China and India, it's about 8 per cent. In Russia, it's 15 per cent.

One antidote to rising raw material prices is for the Fed to reverse its easy money policies. Combating inflation is rarely popular or easy, because it involves slowing the economy - even inducing a recession - to relieve pressures on prices and wages. Unemployment rises. There are usually plausible reasons for waiting. Surely there are now. Housing remains in disarray. More loan defaults could increase bank losses. No matter what the Fed does, there are dangers. Perhaps inflation will spontaneously subside because the economy is already weak.

But similar arguments for delay were made in the 1960s with disastrous results. The resulting inflationary psychology made inflation harder to extinguish. The initial unwillingness to take a modest slowdown or recession led to deeper recessions. There are now signs that we are at a similar juncture. Surveys show that people's 'inflationary expectations', after years of stability, are rising. The Fed is holding its key interest rate at 2 per cent, well below prevailing inflation. In the 1970s, this condition stoked inflation. An indecisive Fed risks repeating its previous blunder. -- The Washington Post Writers Group

Is The Easy Property Money Outside Asia?

Source : The Business Times, June 25, 2008

In the property world, the momentum appears to be with Asia. Funds designed to buy offices in Tokyo or build homes in China and India are sucking up money from Western investors eager to enter a region so far only grazed by the global credit crunch.

But is the easy money to be made elsewhere? Maybe in the ravaged London market, in the United States in a few months if price declines slow, or even in undervalued Asian property stocks rather than in bricks and mortar?

Less attractive glow: Many Asian office markets, like Tokyo's (left), are slowly approaching cyclical peaks, and are then expected to hold steady

At this week's Reuters Global Real Estate Summit, fund managers ING Real Estate and LaSalle Investment Managers, the property arm of British insurer Prudential and Dubai's ETA Star Property Developers all said they were raising new funds this year to invest in Asia.

Hailing strong regional growth and a more mature investment landscape in Asia, where the advent of real estate investment trusts (Reits) has brought more transparency to the murky world of property development, the funds are aimed at pension funds and insurers.

And many investors are buying it.

Property investment in Asia reached a record US$121 billion last year, up 27 per cent from 2006.

While the credit crunch took its toll in Europe and North America in the second half of the year, pushing down global transaction value by 8 per cent from the same period of 2006, investment in Asia surged 22 per cent in the last six months.

Much of the flow from the West to Asia is about balancing portfolios. For example, German open-ended funds such as Union Investment Real Estate and grundbesitz global are starting to buy in Tokyo to diversify away from Europe.

'Among institutional investors, there's incremental appetite for Asia,' said Richard Price, Asia head of ING Real Estate, as he told Reuters about plans for a US$750 million fund for China and another of up to US$500 million for Japan. 'But the question is, as their home markets reprice, will Asia be as compelling?'

Funds raised for Asia are excited about the prospect of Japanese landlords selling offices at discounts and of a potential shake- out among Chinese developers that could release cheap land and unfinished projects.

The credit crunch has made Japanese banks more conservative in their lending for property deals, threatening to soften prices of small and second-grade buildings. Yields on Grade B office blocks have risen by 50-100 basis points in the last year.

In China, government attempts to cool the economy include cutting back loans to developers, who now are starting to struggle for finance because of a dismal market for public share offerings. Firms with little cash on hand and few other funding options will be under pressure to sell assets.

But many Asian office markets are slowly approaching cyclical peaks, and are then expected to hold steady.

Meanwhile, in Britain, office values have slumped 18 per cent from their peak last year, and investors believe they are free from the headaches of red tape, corruption and dodgy land titles of some emerging markets.

'I'd be a buyer of London offices now,' said Asieh Mansour, chief strategist at Deutsche Bank's property investment arm, RREEF.

In Europe, fund managers and analysts are putting their faith in the continent's inflation-linked rental contracts to boost yields, which are already widening because of falling values.

US commercial buildings are also starting to attract interest from around the world, with prices seen dropping a further 10 per cent in the next year after a roughly 5 per cent fall since mid-2007. -- Reuters

Bids For Woodleigh Condo Site Lower Than Estimates

Source : The Business Times, June 25, 2008

Top bid from Frasers Centrepoint is $270 per sq ft per plot ratio

THE tender for a residential site at Woodleigh Close has closed, with the Urban Redevelopment Authority (URA) receiving a top bid of $270 per sq ft per plot ratio (psf ppr).

The 1.08 ha site near Potong Pasir MRT station was launched in April. Earlier estimates by property consultants had put the range of bids at $300-$380 psf ppr.

The top bid of $270 psf ppr or $87.7 million came from Frasers Centrepoint and is just 6 per cent higher than the second highest bid of $255 psf ppr from Hoi Hup Realty.

The lowest bid of $227 psf ppr was from Sim Lian Land and is about 16 per cent lower than Frasers Centrepoint's bid.

Asked if the site will be awarded despite the bids being low, Cushman and Wakefield managing director Donald Han said: 'Based on the today's market, and the fact that the bids were all quite close, I believe the site will be awarded.'

Mr Han said he does not think the bids were opportunistic. 'A developer would have to consider that the market could remain challenging. New projects may not sell as quickly and construction costs have gone up.'

But he believes that 'at the end of the day, there is still money to be made'.

The tender also drew bids from Hong Leong Group, GuocoLand and Hiap Hoe.

Giving a glimpse of developer sentiment, Frasers Centrepoint CEO Lim Ee Seng said: 'If a site is good, there will always be bidders.'

And Mr Lim for one believes that potential over-supply has been addressed by the latest Government Land Sales Programme. 'Most of the sites are on the reserve list,' he said.

In July 2007, Frasers Centrepoint clinched a nearby site at Woodsville Close for $434 psf ppr.

Li Hiaw Ho, executive director at CBRE Research, said that based on the top bid of $270 psf ppr, the estimated breakeven cost of a new project on the Woodleigh Close site will be $650-$700 psf.

He pointed out that in January-June, resale units in the freehold Blossoms changed hands at an average price of $840 psf, while units in Casa Meya, a new freehold project in Potong Pasir estate, were sold for around $910 psf. 'Therefore, it is likely that a new 99-year leasehold project in this location may be able to fetch $800-$850 psf,' he said.

Chesterton International's head of research and consultancy Colin Tan said the bids 'reflect that developers are looking at demand from owner occupiers and genuine buyers' and will have to keep prices 'affordable' accordingly.

Mr Tan also believes that developers are keenly aware of the need to keep 'revenue flows going', in light of lower sales in the current market, 'to pay salaries of their staff in the marketing department'.

Separately, the URA has made residential sites at Sembawang Road/ Canberra Drive and Sengkang West Avenue/Fernvale Link available on the reserve list.

The 25,825 sq m Sembawang Road/Canberra Drive site can be developed into strata landed housing, a condominium or flats, while the 17,000 sq m Sengkang West Avenue/Fernvale Link site is for a condominium.