Friday, August 1, 2008

Developers Report Drop In Revenue

Source : The Straits Times, Aug 1, 2008

TWO property developers have reported a drop in second-quarter revenue, saying poor sentiment in the property market has led to lower sales - a trend that is likely to continue for the rest of the year.

Allgreen Properties yesterday posted a 39.1 per cent drop in revenue to $74.1 million for the three months to June 30. Net profit fell 36.5 per cent to $17.2 million.

It said continuing weak market sentiment was due to the US sub-prime issue, escalating oil prices and inflationary pressure. It expects this to persist in the second half, resulting in lower profits, but believes it will stay profitable for the year.

Allgreen's earnings per share for the quarter slipped to 1.08 cents, from 1.74 cents a year earlier. Net asset value eased to $1.38 as at June 30, from $1.40 as at Dec 31.

Meanwhile, MCL Land's revenue plunged in the second quarter to US$353,000 (S$482,000), from US$133.5 million last year. But the group's net profit rose 45 per cent in the quarter to US$3.2 million, thanks to a write-back. Earnings per share rose 43 per cent to 0.86 US cents, while net asset value per share inched up to US$1.45 as at June 30, from US$1.42 as at Dec 31.

MCL Land expects the completion of Mera Springs and The Esta in the second half to boost its overall performance.

PropNex Expands Into Auction, Management

Source : The Business Times, August 1, 2008

It'll focus on private homes, commercial realty for auction

REAL estate firm PropNex is adding auction and management consultancy services to its repertoire in a bid to diversify its revenue stream, it said yesterday.

PropNex's auction division, set up three months ago, will conduct its first auction in September. The firm will focus on private homes and commercial properties, said PropNex chief executive Mohamed Ismail.

Mr Ismail: PropNex has 38% market share in the public housing market, and 33% of the private home secondary market

And to provide a comprehensive suite of real estate services to its clients, PropNex will begin providing management services.

The firm bought Oracle Property Consultants Pte Ltd two months ago and set up its own unit to address the growing demand for professional property management services. Some properties in PropNex's portfolio include The Ladyhill and 1 Moulmein Rise.

The firm currently earns more than 80 per cent of its income from brokering residential sales. According to Mr Ismail, PropNex has 38 per cent market share in the public housing market, as well as 33 per cent of the private home secondary market.

The other 20 per cent of the revenue comes from the firm's commercial, investments and project marketing divisions.

But in three years' time, Mr Ismail hopes that brokering residential deals will account for just 50 per cent of revenue as the firm grows its other business segments, including the new auction and management divisions.

PropNex saw its revenue grow to $28 million in Q2 2008, from $24 million a year ago. For the whole of 2007, revenue came to $108 million, up from $60 million in 2006.

The firm made news recently when it announced that it was firing about 2,800 agents who have been with the firm for over a year, but did not record a single transaction.

The move, said Mr Ismail, was part of PropNex's attempts to clean up a largely unregulated industry.

Yesterday, PropNex also unveiled several other new initiatives to boost self-regulation.

Among other measures, all PropNex agents will now have to sign up for compulsory professional indemnity insurance and new agents will have to take a proficiency test.

IMF Expecting Gradual 2009 US Recovery

Source : The Business Times, August 1, 2008

But it urges more action to ease economic turmoil

(WASHINGTON) The International Monetary Fund said on Wednesday that the United States is poised for a gradual economic recovery in 2009, but urged more action to ease the housing crisis and financial turmoil.

'The housing correction and the broader financial sector turmoil of recent months have weakened household demand and credit conditions,' the IMF said in its annual review of the world's largest economy.

The IMF board of executive directors praised the US authorities' 'decisive and swift policy response' to the colliding shocks from the worst housing slump in decades and the broader financial turmoil of recent months, as well as higher energy prices.

'With added headwinds from oil prices, the US economy will be notably weaker but still register positive growth in 2008, and will recover only gradually in 2009,' the IMF said.

The IMF reaffirmed its growth forecasts of 1.3 per cent in 2008 and 0.8 per cent in 2009, released in the July 17 update of its April World Economic Outlook report.

Although short-term inflation expectations have risen 'somewhat' on surging commodity prices, price pressures are expected to be contained as commodity prices peak and demand wanes.

'Housing prices are continuing to fall, and there is a risk that such prices could move significantly below equilibrium, with important macroeconomic consequences,' the IMF said.

Directors advised the US government to 'be prepared to widen support for housing and, if serious dislocations reappear, for financial markets'. 'The housing boom has revealed multiple weaknesses in the current regulatory system,' it said. A senior IMF official said the assessment took into account a broad housing rescue bill signed by President George W Bush on Wednesday.

The official criticised the new law's measure that provides public funds to allow lenders to voluntarily reduce the amount of an outstanding mortgage in order to reduce preventable disclosures as not going far enough. 'The decision of lenders is completely voluntary. The question is are there sufficient incentives to do so,' the official said.

The 185-nation institution also recommended the US take up a financial reform that 'could include further consolidation and specialisation of regulatory institutions'.

The IMF strongly endorsed the Federal Reserve's actions to ease credit, but counselled that 'monetary policy should stay on hold for now, unless economic and financial conditions deteriorate further'.

However, if inflationary expectations spiral, 'the bias should be towards a decisive tightening once recovery is established and financial conditions ease'. The Fed is widely expected to hold its key short-term interest rate at 2.0 per cent at its Aug 5 meeting. -- AFP

CapitaLand Quarterly Profits Seen Sharply Lower

Source : The Business Times, August 1, 2008

Slower sales, absence of one-time gains cited; CityDev seen holding steady

South-east Asia's biggest property developer, CapitaLand, should report sharply lower quarterly profits as home sales slowed, and as it is unable to repeat large one-off gains recorded a year ago.

But earnings for its main rival City Developments, Singapore's No 2 developer by stock market value, are expected to hold steady as it books income from strong mass market sales during the four-year property boom.

CityDev, unlike other Singapore developers, does not book revaluation gains as profit unless the property is sold.

A worsening economic outlook has led to a steep drop in home sales volumes, with some analysts predicting home prices will fall by up to 40 per cent over the next three years.

'CapitaLand and other developers are finding market conditions this year tougher than expected,' said Nomura analyst Tony Darwell, who sees the price of luxury apartments falling 32 per cent by 2010.

Analysts do not give quarterly estimates for Singapore property firms because it is hard to predict when they will book profits from their various projects.

CapitaLand is expected to post a 64 per cent drop in full-year to December 2008 earnings to S$1.02 billion from S$2.8 billion last year, according to the average of 16 analysts polled by Reuters Estimates. Its 2007 results had been boosted by US$1.1 billion in one-off revaluation gains.

'There were very substantial revaluation gains which gave the second quarter a substantial boost last year. There won't be much of that this year,' said JPMorgan analyst Chris Gee, adding that contributions from Australia and China will also be weaker.

AustraLand, 54 per cent owned by CapitaLand, reported a 79 per cent plunge in earnings this week and announced a rights issue to raise up to A$557 million.

CapitaLand has committed to subscribe to A$302 million in the issue, which could boost its stake in AustraLand to 70 per cent.

'This highlights risks of possible asset writedowns, especially developers with regional exposure . . . and further funding needs going forward, especially for CapitaLand's Reits,' said Credit Suisse analyst Tricia Song.

CapitaLand had in the past years spun off its assets into real estate investment trusts such as CapitaMall, CapitaCommercial and Ascott Residence, but there are concerns that such trusts may face financing problems due to the global credit crunch.

CityDev is expected to post a 1.8 per cent rise in full-year 2008 earnings to S$738 million, according to analysts polled by Reuters, with earnings supported by demand for its mass market residential projects launched earlier this year.

'We favour CityDev as the mass market segment is still resilient. Mass market sales are predicated on economic drivers and we're still seeing continued GDP growth in Singapore,' said DBS Vickers analyst Adrian Chua.

Keppel Land, Singapore's third-biggest property developer by market value, posted on Wednesday a 16.4 per cent fall in quarterly profit, reflecting a decline in property sales in Singapore and abroad.

CapitaLand shares have dropped around 10 per cent so far this year amid a global equity market selloff fuelled by worries about slowing economic growth and the US sub-prime mortgage crisis. CityDev shares lost about 20 per cent in the same period. -- Reuters

Paulson Sees US Economy Still Growing This Year

Source : The Business Times, August 1, 2008

WASHINGTON - US Treasury Secretary Henry Paulson said on Thursday he expects 'moderate' growth in the US economy this year and some stability returning to the housing market in a matter of months.

Mr Paulson: 'While our economy faces substantial difficulties that will continue to be a drag on growth in the short term, it is important to remember that our long-term fundamentals are strong'

The top US economic official made his comments after data showed a 1.9 per cent growth pace in the second quarter lifted by an economic stimulus plan and exports, but with some analysts still worried about a possible recession.

'While our economy faces substantial difficulties that will continue to be a drag on growth in the short term, it is important to remember that our long-term fundamentals are strong,' he said in a Washington speech.

'Recognising the challenges ahead of us, I expect our economy to continue growing this year although at a moderate pace. We are making progress although not in a straight line; housing continues to be at the heart of our economic challenges and remains our most significant downside risk.'

Housing market
Mr Paulson was relatively upbeat on prospects for a recovery in the battered housing market after the worst slump in decades.

He said the market will be helped by the recently enacted housing rescue package aimed at helping homeowners refinance and adding liquidity to the sector, but suggested there appears to be some light at the end of the tunnel.

'Foreclosures and existing home inventories are likely to remain substantially elevated this year and next and home prices are likely to decline further on a national basis,' he said.

'The key question is, 'When will the correction be largely behind us?' While home price adjustments will continue for some time, and certainly well beyond the end of the year, I believe we can move through the bulk of the correction in months rather than years.' -- AFP

CapitaLand Plans Condo Launch

Source : The Business Times, August 1, 2008

CapitaLand plans to launch in second-half 2008 a freehold condo named Urban Resort with about 70 units on the Silver Tower site in Cairnhill. The average price will definitely be above S$3,000 psf, CapitaLand Residential Singapore CEO Patricia Chia told reporters after the group announced Q2 net earnings.

'I will be quite disappointed if it's below S$3,000 psf,' CapitaLand Group president and CEO Liew Mun Leong said.

The property giant has also sold 11 of the 40 units released so far at Latitude at Jalan Mutiara in the River Valley area at an average price of S$2,400 to S$2,500 psf. Over at Tong Watt Road, it has sold close to 30 of 80 units released recently at The Wharf Residence; prices range from S$1,500 to S$1,900 psf.

The project has a total 127 units. Latitude comprises 127 units in total.

CapitaLand leads a consortium that will redevelop Farrer Court. -- KALPANA RASHIWALA BT NEWSROOM

Global Slowdown May Put US In Recession: Greenspan

Source : The Business Times, Aug 1, 2008

WASHINGTON - FORMER US Federal Reserve Chairman Alan Greenspan said on Thursday that a slowing global economy may push the United States into recession, though it is not yet in one.

Mr Greenspan: 'We're right on the brink and I would be more surprised if we didn't (have a recession) than if we did, given the financial state'

'I think the data at this stage in the United States are not ... suggesting recession,' Mr Greenspan said in an interview on CNBC television. But he added: 'We're right on the brink and I would be more surprised if we didn't (have a recession) than if we did, given the financial state.'

Mr Greenspan said companies were controlling inventories effectively and that 'at this stage, I think they are the major reason why in the very short term we're fending off inflationary pressures.'

However, he noted that with jobless claims rising and growth overseas slowing, it would be hard for the United States to avoid slipping into recession.

He also said the government had no choice other than to broker the emergency sale of failing investment bank Bear Stearns, but the Treasury Department, not the Fed, should have backed the transaction.

'That is a fiscal policy operation - essentially something that should have been set up in the Treasury Department,' M r Greenspan said.

'What we should not do is have the central bank involved in its balance sheet,' he said, adding: 'That balance sheet is the creator of the monetary base and if you allow major fluctuations in that base as a result of other-than-monetary-policy reasons, I think you're taking undue risks with the notion of the stability of the financial system and very specifically the Fed's control of inflation.' -- REUTERS

CapitaLand Profit Falls 44%, Positive On Outlook

Source : The Business Times, Aug 1, 2008

CAPITALAND, South-east Asia's biggest property developer by market value, posted a 44 per cent drop in quarterly net profit as property sales slowed and it had no big one-off gains, but it said the outlook was positive.

'Despite the cautious market sentiments, we have a positive outlook as our business units are competitively positioned and geographically diversified,' CEO Liew Mun Leong said in a statement.

CapitaLand, 40 per cent-owned by Singapore sovereign fund Temasek Holdings, earned S$515.2 million ($376.9 million) in April-June, down from S$912.6 million a year ago, when earnings were boosted by unrealised fair value gains in its assets.

Excluding one-offs, net profit for the 2007 second quarter was S$267.2 million.

The economic gloom has triggered a steep drop in the number of home sales, with some analysts predicting house prices will fall by up to 40 per cent over the next three years.

'In such a challenging time, when many companies in the countries we operate in are unable to raise funds, we continue to be able to access the capital markets in view of the group's strong reputation and good financial standing,' Chairman Richard Hu said in the statement.

CapitaLand said it was on track in preparing its first Malaysian retail real estate investment trust (Reit) for launch this year, bringing the number of its listed Reits to six.

CapitaLand earlier this month borrowed US$1.5 billion to fund a residential project in Singapore that it plans to launch for sale in the first half of 2009, in a joint venture with Morgan Stanley Real Estate, Wachovia, and Singapore's Hotel Properties.

For 2008, CapitaLand is expected to post a 64 per cent drop in earnings to S$1.02 billion from S$2.8 billion in 2007, according to the average of 16 analysts polled by Reuters. The 2007 results had included S$1.1 billion in revaluation gains.

CapitaLand earned 61 per cent of its income from Singapore in 2007, while Australia and New Zealand contributed 12 per cent and China added 23 per cent. But analysts are expecting weaker contributions from its Australia and China businesses this year.

No plans to privatise Australand
CapitaLand Chief Executive Liew Mun Leong said his company has no intention to privatise its Australian unit AustraLand.

Speaking to reporters at a results briefing on Friday, he said AustraLand is planning to expand into industrial and logistics properties in Asia, areas where it will not be competing with its parent.

AustraLand, 54 per cent-owned by CapitaLand, earlier this week reported a 79 per cent fall in earnings and announced a rights issue to raise up to A$557 million (US$526 million).

CapitaLand has committed to subscribe to A$302 million in the issue, which could boost its stake in AustraLand to 70 per cent.

Shares of CapitaLand fell 21 cents or 3.7 per cent to S$5.49 in morning trade. -- REUTERS

CapitaLand Expects Flat Property Market For Rest Of Year

Source : The Straits Times, Aug 1, 2008

Half-year net profit is down 50% from last year.

PROPERTY giant CapitaLand expects the property market in Singapore to stay flat for the rest of the year, even as it prepares to launch three new condominium projects in the coming months.

'For outlook... it'll probably be very flat,' said the group's chief executive, Mr Liew Mun Leong at a results briefing on Friday.

Prices in general will be 'quite flat', with a correction seen in the high-end segment, he later told journalists.

'Demand is still very good for the mass market. In the mid-range, there are still good signs of take-up and prices are still holding well.'

While prices in the high-end segment have fallen after many buyers shied away, CapitaLand said it still prefers to focus on high-end homes.

'High-end volume will slow down, prices will not hit $5,000 per square foot but it will still be above $3,000 psf,' said Mr Liew.

'As I keep on saying, it is still higher than pre-Asian financial crisis prices.'

Prices of high-end homes hit a high of $2,400 psf during the 1996 peak.

'Demand is still there. People who sold their homes en bloc still have to buy,' said Mr Liew.

Against this backdrop, CapitaLand is planning to release two projects in River Valley - the 127-unit Latitiude in Jalan Mutiara and the 186-unit The Wharf Residence in Tong Watt Road.

It will also launch the 70-unit Urban Resort in the former Silver Tower site in Cairnhill.

Pre-launch sales have started at the two River Valley projects. CapitaLand said it has sold 11 out of 40 units in Latitude at an average of $2,400 to $2,500 psf, and 'close to 30' of 80 units at The Wharf at $1,500 to $1,900 psf.

US Economy Picks Up In Second Quarter

Source : The Straits Times, Aug 1, 2008

1.9% growth a modest spurt amidst steepest slump in housing since 1981

WASHINGTON - THE US economy, which shrank during the closing months of last year for the first time in six years, hurt by the steepest slump in housing since 1981, bounced back to record modest growth this year.

Growth resumed in the first quarter of this year, with gross domestic product (GDP) rising at a 0.9 per cent rate that accelerated to 1.9 per cent in the second quarter as government stimulus payments began to flow, reported the US Commerce Department yesterday.

The first-quarter GDP figures helped the US economy avoid back-to-back quarters of decline that would have met a popular definition of recession.

The Commerce Department also sharply revised its estimate for fourth-quarter performance to show that GDP had contracted 0.2 per cent - rather than grown 0.6 per cent as previously reported.

It was the first three- month period in which GDP shrank since during the last official recession in the United States, when growth contracted by 1.4 per cent in the third quarter of 2001.

Following the report, Wall Street opened lower, with the Dow Jones Industrial Average falling 90.46 points, or 0.78 per cent, to 11,493.23.

The Commerce Department issued benchmark revisions covering a three-year period, 2005-2007, that showed the economy on a consistently deeper and declining trajectory than was previously recognised.

GDP grew 2.9 per cent in 2005 instead of 3.1 per cent, 2.8 per cent rather than 2.9 per cent in 2006, and 2 per cent in 2007 instead of 2.2 per cent as previously reported, it said.

Before the department's report, the International Monetary Fund on Wednesday said the US economy is in unchartered waters, with growth likely to be below potential through the middle of next year before slowly recovering.

With US home prices falling sharply across the country and dragging down the economy, the IMF said monetary policy should remain on hold for now, even though inflation concerns are rising.

'Concerns about activity would need to be much more pronounced to justify a more accommodative stance,' the IMF said in a report outlining its consultations with the US Treasury and the Federal Reserve.

At the same time, it said: 'The case for a pre-emptive hike in policy rates, as markets now anticipate, is...unclear.'

The IMF also said the US dollar's decline has moved the currency closer to medium-term equilibrium, but the fund's staff estimated that its value is still somewhat on the strong side. -REUTERS

Close shave

REBOUND: The US economy has recovered from a plunge caused by the housing slump. -- PHOTO: AFP

# The first-quarter gross domestic product figures have helped the US economy avoid back-to-back quarters of decline that would have met a popular definition of recession.

# Last year's final quarter was the first three-month period in which GDP shrank since during the last official recession, when growth fell by 1.4 per cent in the third quarter of 2001.