Tuesday, September 2, 2008

World's Super-Rich Moving Into Cash: HSBC

Source : The Business Times, September 2, 2008

They're pulling out of stocks, bonds, structured products

(GENEVA) Many of the world's wealthiest people have moved their money out of stocks and bonds and into cash, the head of HSBC's Swiss private banking unit said yesterday.

'The first half of 2008 has seen a notable change in client expectations and investment choices,' said Peter Braunwalder, chief executive of HSBC Private Bank (Suisse), the British-based bank's main affiliate catering to the ultra-rich.

'Faced with inflation worries, volatile asset prices and sudden changes in exchange rates, a majority of investors have reduced their transaction volumes in equities, bonds, and structured products,' he told a news briefing in Geneva.

This was particularly true for clients from Asia, whose demand for complex investment tools such as equity derivatives has 'drastically decreased' in response to recent financial market upheaval, said Mr Braunwalder.

'Concurrently, most clients increased their cash allocation and, for some, their leverage,' he added.

Investors worldwide have been scrambling to find a safe place for their savings this year in the face of a global economic slowdown, a credit crisis that has spooked markets, and an energy price spike spurring concerns about inflation.

Alexandre Zeller, who will replace Braunwalder as HSBC Private Bank (Suisse) chief on Oct 1, said that concerns about inflation would dominate many investing decisions ahead.

'My worry is that a lot of liquidity has been injected in the markets by central banks to solve the (credit) crisis,' the former head of Banque Cantonale Vaudoise said, raising concerns about how that liquidity will be removed from the market, and whether interest rates would have to rise as a result.

HSBC Private Bank (Suisse), rated AA by Standard and Poor's and Aa3 by Moody's, has been more shielded from recent banking sector woes than its larger Swiss rivals UBS and Credit Suisse.

But the Geneva-based bank said the first six months of 2008 were necessarily arduous in light of 'the most difficult financial markets for several decades'.

'Record levels of volatility across asset classes and markets have made clients more hesitant to move their assets between financial institutions,' it said.

Assets under management decreased by 13 per cent to 23.8 billion Swiss francs (S$30.8 billion) compared to December 2007, due both to unfavourable markets and the drop of the US dollar against the Swiss franc.

Net new money flows were 6.9 billion francs in the first half, with most funds coming from Europe, the Middle East, and Asia, the HSBC unit reported.

Mr Zeller said he considered that inflow 'substantial' and stood by the bank's goal to grow assets under management by 60 per cent over the next three years.

'I think this is something that we can achieve,' he said. -- Reuters

Alpha To Put US$1.2b In Asian Properties

Source : The Business Times, September 2, 2008

ALPHA Investment Partners, the fund management unit of Singapore's No 3 developer Keppel Land, said its new fund will invest US$1.2 billion into Asian retail, residential and hospitality property by 2011 despite a global slowdown.

The group, which closed the Asia Macro Trends fund in July, now has five Asia-focused funds with S$3.9 billion in property assets under management.

Mr Loh: Prefers investing in market conditions, like now, where there is less capital chasing assets

'Our strategy is not premised on the fact that Asia has decoupled. We have a eight to 10 year horizon and from what we can see, the region will do well in the medium to long-term,' Alpha managing director Loh Chin Hua told Reuters in an interview yesterday.

'It is very much a play on increasing affluence of Asian economies and domestic consumption, and the increase in flow of capital and trade within Asia,' Mr Loh said.

The new fund has set an internal rate of return of 16-18 per cent and has so far invested US$41 million in a hotel near South Korea's Incheon Airport, and US$30 million in a stake to build a Hong Kong hotel with an unlisted local developer.

'It's assets like these that we think will do well despite the poor economic conditions,' Mr Loh said, adding that the Korea hotel already provides a yield higher than the projected 17.3 per cent.

Mr Loh, who led the Government of Singapore Investment Corp's London- based Europe real estate division before he helped found Alpha in 2003, said he is more prudent about the office and logistics sectors as these have already seen strong growth.

The poor economic and credit conditions, ignited by the US sub-prime mortgage crisis, provide an opportunity to invest as there is less competition for good assets, said Mr Loh.

'There could be some dislocations in the short term, but we see it as opportunities rather than a threat. I would rather be investing in market conditions like these where there is less capital chasing assets.'

Asia's developers are also more willing to accept property funds as equity partners for their projects, Mr Loh said, as other sources of financing become more expensive after banks turned increasingly prudent about lending.

Alpha's earlier funds include one focusing on Asia-listed securities such as real estate investment trusts, or Reits, and a Japan-focused fund.

Mr Loh declined to reveal how many more funds Alpha plans to launch or give a target for assets under management, but said he expects fund flows to Asia to grow strongly due to heightened interest from US and European pension funds.

'We would expect their allocations to Asia real estate to increase. And within Asia, we are also seeing sovereign funds from countries like South Korea and Japan starting to look outside their domestic markets.'

Income from Keppel Land's fund management business, which comprises Alpha and property trust K-Reit Asia , nearly tripled to S$9.4 million for the six months to June 2008, compared with S$3.4 million a year earlier.

Asia's top developers, such as Cheung Kong , CapitaLand and Mitsui Fudosan, have also set up property fund management units in recent years, for the fee income and to tap new funding sources for growth. -- Reuters

KL, S'pore Iron Out Differences On Pedra Branca Vicinity Fishing

Source : The Business Times, September 2, 2008

Both nations can do traditional fishing half a nautical mile off rocky outcrop

MALAYSIA and Singapore have agreed that traditional fishing by both countries will continue beyond 0.5 nautical mile off Pedra Branca, Middle Rocks and South Ledge.

The agreement came after Malaysia protested at Singapore wanting to claim an exclusive economic zone around Pedra Branca - a rocky outcrop east of Singapore, which the International Court of Justice awarded to Singapore in May.

A joint statement issued yesterday by Singapore and Malaysia said the second Malaysia-Singapore Joint Technical Committee (MSJTC) Meeting on the Implementation of the ICJ Judgment, which made the traditional fishing agreement on Aug 20, agreed also to set up a Sub-Committee on Maritime & Airspace Management and Fisheries. The sub-committee also met on Aug 20.

On Aug 18, Malaysia said it had given Singapore an 'official warning' over territorial claims surrounding South Ledge.

The move came a month after Singapore said its maritime territory around Pedra Branca extended for up to 12 nautical miles and claimed an exclusive zone around the island. That meant Malaysia would have limited access to the waters around Middle Rocks, which fall within the zone.

While the ICJ confirmed Singapore's ownership of Pedra Branca and handed nearby Middle Rocks to Malaysia, it ruled that South Ledge belongs to whoever owns the territorial waters it sits in.

Yesterday's joint statement said both sides at the Aug 20 meeting 'reiterated their commitment to honour and abide by the ICJ's judgment and fully implement its decision by continuing the discussions pursuant to the previous MSJTC Meeting' on June 3.

According to the joint statement, the Aug 20 meeting reviewed the work of the Sub-Committee on Joint Survey Works and agreed the sub-committee should continue talks to finalise technical preparations relating to a joint hydrographic survey.

It was also agreed that the Sub-Committee on Maritime & Airspace Management and Fisheries continue to discuss other issues relating to maritime and airspace management.

Both sides are 'very pleased with the progress' made by MSJTC and agreed that it meet again in the middle of this month.

UK's Brown To Unveil Housing Market Support Plan

Source : The Business Times, September 2, 2008

LONDON - British Prime Minister Gordon Brown will unveil plans on Tuesday to boost the country's slumping housing market as he launches a fight back after nearly a year trailing in the opinion polls.

With consumer confidence crumbling in the face of the credit crunch and rocketing energy bills, his ruling Labour Party is some 20 points behind the opposition Conservatives and on that showing would easily lose the next general election.

The government said the housing package would help vulnerable families struggling with mortgage payments avoid losing their homes and bring forward funding for new social housing from existing budgets.

The government and property developers also plan to offer five-year interest-free loans for some first-time buyers - both to help people move into affordable homes and support the house building industry.

A government source said those measures would cost about 1 billion pounds (US$1.8 billion). Full details will be announced by Mr Brown and Communities Secretary Hazel Blears on Tuesday morning.

Mr Brown's planned relaunch comes after a summer which kicked off with speculation he could soon be ousted as Labour leader and ended with data showing the British economy failed to expand in the second quarter of 2008.

That was the first quarter the economy has not grown since a recession in the early 1990s, ending Mr Brown's ability to boast of uninterrupted growth since Labour took office in 1997.

Data on Monday showed that the number of new home loans approved in July fell for the 12th consecutive month and the government may consider tinkering with an unpopular tax on home purchases, known as stamp duty.

The government may offer homebuyers the option of paying the tax at a later date or perhaps cut the rate of stamp duty for homes of a certain value, or for first-time buyers.

Mr Brown also plans later this week or next to look at ways to help households cope with the rising cost of fuel bills, perhaps by asking utility firms to pay money into a voluntary fund that could be used to make poor households more energy efficient.

The prime minister is hoping for an economic rebound to boost his popularity in time for the next election. But he must also resolve the dissent within his own party and questions over whether he is the right person to lead Labour.

While speculation of an imminent leadership challenge has waned, there will still be a lot of focus on the prime minister's speech to his party's annual conference later this month.

'We've got our work cut out. The coming 12 months will be the most difficult 12 months the Labour Party has had in a generation,' finance minister Alistair Darling said an interview published on Saturday.

'We've got to rediscover the zeal which won three elections, and that is a huge problem for us at the moment. People are pissed off (angry) with us.' -- REUTERS

Credit Crisis, Food Prices Plague Economy Midterm

Source : The Business Times, September 2, 2008

BUENOS AIRES (Argentina) - The US credit crisis has not hit bottom and world food prices have not yet peaked, making continued financial volatility likely in the midterm, central bankers and international economists said on Monday.

'It's likely that the market adjustment process will continue for a considerable period of time, and there is significant uncertainty about its impact on the economy,' European Central Bank vice president Lucas Papademos told a Buenos Aires forum that drew experts from more than 30 countries.

Trade and investment flows have linked world economies, allowing US economic troubles to spread and dashing hopes of the financial 'decoupling' some thought would protect emerging economies, US Federal Reserve Board Governor Randall Kroszner said.

More than US$500 billion in sub-prime related losses by many of the world's biggest banks is drying up credit and slowing growth, prompting policy makers to cut interest rates in a bid to boost economic activity. But rising food and energy prices also are driving inflation worldwide - making those interest rate cuts increasingly complicated.

Turkey's Central Bank president Durmus Yilmaz said he expected food prices to keep climbing for the rest of the year, as increased food production fails to keep pace with swelling demand from China and India. Food price hikes accounted for 70 per cent of all inflation in Turkey last year, up from just 10 per cent in 2006, Mr Yilmaz said.

In Argentina, Central Bank president Martin Redrado stressed that volatile world markets, and not Argentine economic policy, pose the biggest risk to growth.

The US$47.2 billion in foreign currency reserves Argentina has accumulated since its historic 2001 default are helping it withstand economic shocks from abroad, he said.

Still, 'until the real estate market reaches its bottom, we won't see any reduction in financial market volatility,' he said. -- AP

Aust Rate Cut A Relief For Homebuyers

Source : The Business Times, September 2, 2008

CANBERRA - A cut in Australia's benchmark interest rate is a relief for homebuyers, Prime Minister Kevin Rudd said on Tuesday, but was only a beginning. 'This interest rate decision is welcome, but it is not a day for celebration.

Interest rates took a long time to rise, they will take a long time, a long time to come back down, and the road will be a very uneven one,' Mr Rudd told Australia's Parliament on Tuesday.

The Reserve Bank of Australia cut its benchmark cash rate by 25 basis points to 7.0 per cent on Tuesday, the first fall in Australian interest rates since December 2001. -- REUTERS

Europe Economy Hardhit, Britain Shrinking, US Feeble: OECD

Source : The Business Times, September 2, 2008

PARIS - Europe's economy is slowing harder than predicted and Britain is nearer recession than the other big countries of a region where the economy is close to flat on its back, according to OECD forecasts published on Tuesday.

The US economy, where the current economic downturn in the industrialised world began, did better in the second quarter but is also seriously weakened by a housing downturn that is still unfolding, the Organisation for Economic Co-operation and Development (OECD) said.

'Financial market turmoil, housing market downturns and high commodity prices continue to bear down on global growth while at the same time evolving rapidly,' the Paris-based agency, one of the world's main public forecasters, said in a statement.

'OECD short-term forecasting models point to weak activity through the end of the year,' said the OECD, which nonetheless chose not to use the word 'recession' to describe the situation in any of the countries it spoke of.

The OECD raised its annual forecast for US growth from one it had published in June, to 1.8 per cent from 1.2 per cent, while it cut a previous prediction for the euro zone to 1.3 per cent from 1.7 per cent, and for Japan to 1.2 per cent from 1.7 per cent.

For the Group of Seven (G7) leading industrialised nations as a whole, its annual growth forecast for 2008 was 1.4 per cent, unchanged from the projection it made last June.

For the second half of 2008, Britain was the only one of the G7 industrial powers forecast to contract in both the third and fourth quarters - the general benchmark in economics being that a two consecutive quarters of shrinkage is a recession.

OECD chief economist Jorgen Elmeskov said that, recession or not, Britain was basically stagnating, mainland Europe was doing only marginally better and the United States was also looking sickly even if it got a mid-year lift from the pump-priming efforts of the government and central bank, which has cut interest rates.

'I think the distinction between being or not being in recession is a bit for the birds,' Mr Elmeskov said in an interview.

'Is a small decline in GDP really that much worse than a small increase? - I think not.'

Britain leads race to bottom
Giving its view on the slowdown right now and how it might unfold in the coming months, the OECD said its forecast models suggested US growth of 0.9 per cent in the second quarter and 0.7 per cent in the final quarter, each time versus the previous one.

They are annualised figures, which basically means something close to the real quarterly growth number multiplied by four, as is the routine way of reporting quarterly changes in gross domestic product in the United States.

For Japan, the OECD forecast third-quarter GDP growth of 2.4 per cent and 1.4 per cent, for the euro zone 0.4 per cent and 0.8 per cent, for Britain -0.3 per cent and -0.4 per cent and for Canada 0.8 per cent and 2.0 per cent.

Mr Elmeskov said the OECD had been surprised by the size of the drop in second-quarter Japanese GDP and expected a rebound of sorts there, notably given what was looking like a healthy rise in exports in the early stages of the third quarter, notably to China.

'Japan benefits from being located in the right neighbourhood,' he said.

Among the three biggest economies of mainland Europe, the OECD saw German GDP of zero and 0.1 per cent in the third and fourth quarters, France at 0.2 per cent and 0.6 per cent and Italy at zero and 0.6 per cent respectively.

The OECD acknowledged that its quarterly forecasts were subject to sizeable margins of error, especially in the case of Japan, where Mr Elmeskkov noted that GDP estimates tended to bounce around the most.

He said that the basic message as far as the OECD was concerned was that the economy of the G7 club of industrialised nations was very weak.

'Continued financial turmoil appears to reflect increasingly signs of weakness in the real economy, itself partly a product of lower credit supply and asset prices,' he said in a statement accompanying the new forecasts.

Thumbs up for central banks
The monetary policies being pursued by central banks at the moment were appropriate in current circumstances, the OECD said, referring primarily to the United States and euro currency zone where the European Central Bank (ECB) sets rates for 15 countries.

The Federal Reserve has slashed US interest rates while the ECB's last move was a rise.

Mr Elmeskov defended the ECB's more restrictive strategy in the interview with Reuters.

'The ECB has been faced with a continuous tendency for updrift in inflation, not just something that's arisen over the past five or six months as the oil price spiked.

'There's inflation momentum there that needs to get out of the system.

'In some sense you can say that with a mandate to preserve price stability what can you do as a central bank? You have to accept some degree of slack in the economy in order to bring inflation back to what you define as price stability.' -- REUTERS

Chip Eng Seng Wins $156m HDB Deal

Source : The Business Times, September 2, 2008

Construction and property group, Chip Eng Seng Corporation said on Tuesday its subsidiary, Chip Eng Seng Contractors (1988) Pte Ltd, has been awarded a design and build contract worth $156 million (US$110 million) by the Housing & Development Board (HDB) in Punggol West, Singapore.

The Singapore-public housing contract entails the design and construction of residential buildings with a carpark and community facilities.

Preparation and complete design, submission and obtaining DC approval, including other preparation work will take seven months and is expected to commence in September 2008.

Upon the approval from HDB, construction work will commence. The construction phase is for a 30 months period.

At 0719 GMT, the stock price rose to $0.265 with 378,000 shares changing hands.

Is Estate Duty Truly Resting In Peace?

Source : The Business Times, September 2, 2008

Millionaires who die sans estate planning pose a challenge to rationale for its abolition

THE government introduced a Bill in Parliament last week to abolish estate duty with effect from Feb 15, 2008. Estate duty presents a nice counterpoint between two branches of economics - public finance and the nascent discipline of behavioural economics.

Rich legacy: Tan Chin Tuan Mansion has a 20-storey condominium atop the old building. There were no obvious spikes in death duty collection around the time of Mr Tan's death in late-2005, a possible hint at the late banker's meticulous estate planning.

Estate duty has a long history in Singapore. It was established by the colonial government in 1929. It is actually an inheritance tax and has been widely regarded by public finance economists as one of the most efficient ways for the government to collect revenue.

The government's leading source of revenue is income tax. The major downside of income tax is that it discourages people from working harder. By contrast, the possible disincentive effect of estate duty is to persuade people to live longer.

Until February, estate duty was levied on all estates in excess of exemptions of $9 million for residential property and all other assets for $600,000. Legislators, scholars, and concerned citizens had called for the discrepancy in exemptions between residential property and other assets to be rationalised. Prime Minister Lee Hsien Loong accepted this in principle.

Then, in this year's Budget, Finance Minister Tharman Shanmugaratnam decided to abolish real estate duty entirely. Minister Tharman remarked that estate duty affected 'our middle and upper-middle-income estates disproportionately compared to wealthier ones'.

The Minister's implication was that the very wealthy could use trusts and other legal mechanisms to avoid estate duty. This view was supported by various tax experts.

At this point, it is useful to apply behavioural economics to public finance. Behavioural economics originated with Herbert Simon, economist and psychologist, who famously observed that individuals are subject to bounded rationality. Their decision-making is subject to limited information, cognitive skills, and thinking resources. The lesson from behavioural economics is that individuals are subject to systematic biases in their decision-making.

Revenue statistics show that, contrary to popular belief, not all wealthy people plan their estates perfectly so as to avoid estate duty. In the figure opposite, the vertical bars show estate duty collections in millions of dollars a month.

Over the period 2000-08, the average monthly collection was $11.4 million. However, there were several quite clear spikes in collections. There are two possible explanations for these spikes.

Either a disproportionate number of people died in those particular months. Or one or several persons with immense wealth died and left estates of high value - many millions of dollars more than $9 million in residential property and $600,000 in all other assets.

Let's consider the first possible explanation. In the figure, I also show the number of deaths in thousands on a monthly basis (the blue dots). Unlike estate duty collections, deaths in Singapore have been quite stable at about 1330 per month. In particular, there were no obvious death waves that could possibly account for the spikes in estate duty collections.

So, the only possible explanation of the spikes in estate duty collections is that some rich people had not planned carefully enough to avoid estate duty. Consequently, they (or more precisely, their beneficiaries) had to pay estate duty.

The graph reveals four particular spikes in 2004, including collections of $108.4 million, $63.1 million, $97.9 million, and $114.4 million in March, June, September, and October 2004 respectively.

Consider the highest spike of $114.4 million. Suppose that it was due to a single estate. Subtracting the average monthly collection of $11.4 million, the estate duty payment was $103 million. On a rough calculation, at a 10 per cent rate of estate duty, the estate must have been worth $1.03 billion. The second-highest spike of $108.4 million would have been due to an estate worth only slightly less.

Evidently, two or more multi-millionaires who died around 2004 did not minimise estate duty in the way that tax experts had supposed.

Scanning the obituary pages, it is possible to speculate who might have been responsible for such a large payment of estate duty. Financier and hotelier, Khoo Teck Puat, died in February 2004. He was the richest person in Singapore. Besides controlling major assets in Singapore, he was the largest shareholder in Standard Chartered Bank. The late banker's fortune was reputed to be worth billions of pounds sterling.

The late tycoon was famously secretive. After his death, it became known that he owned substantially more of three listed companies - Goodwood Park Hotel, Hotel Malaysia, and Central Properties - than he had declared. The revelation led an investigation by the Commercial Affairs Department.

It is interesting to contrast the late financier with another banker. Tan Chin Tuan died in November 2005. Nicknamed Mr OCBC, he ran the Oversea-Chinese Banking Corporation for many years. He owned or controlled large blocks of shares in listed companies including OCBC, Great Eastern Life, and Straits Trading.

However, there were no obvious spikes in estate duty collection around the time of Mr Tan's death. The closest was $29.7 million in May 2006, which seems trivial relative to the late banker's wealth. So, probably, the famously meticulous Mr Tan had undertaken very careful estate planning.

It would almost seem axiomatic that people would do their best to avoid taxes. Yet, at least two multi-millionaires who died around 2004 did not do so. With their fabulous wealth, they definitely had sufficient resources to engage lawyers, establish trusts, etc. But they did not do so. Only the taxman knows their identities.

The great claim of behavioural economics is to have identified the direction of systematic biases in individual decision-making. Singapore's experience with estate duty poses a rather challenging question for behavioural economics: How to explain why some multi-millionaires planned carefully for their death and why others did not? It also poses a bit of a challenge to Finance Minister Tharman's rationale for abolishing estate duty.

The writer is the Lim Kim San professor of business policy, and professor of information systems and economics at the National University of Singapore. The opinions expressed here are personal.

UK House Prices See Their Steepest Fall Since 2001

Source : The Business Times, September 2, 2008

End to property slump still some way off: research firm Hometrack

(LONDON) UK house prices fell by the most since at least 2001 in August as economic growth stagnated, and an end to the property slump is 'still some way off', according to Hometrack Ltd.

Falling value: A couple browsing at the window of an estate agent in Didcot, Oxfordshire. The average cost of a residential property in England and Wales slipped 5.3 per cent from a year earlier to £167,000

The average cost of a residential property in England and Wales slipped 5.3 per cent from a year earlier to £167,000 (S$428,700), the London-based research company said in a statement yesterday. That's the biggest annual drop since the index started seven years ago.

Prices fell 0.9 per cent from July.

'A recovery in the housing slump, even back to zero monthly growth, is still some way off,' said Richard Donnell, director of research at Hometrack.

'It is confidence over the outlook for job prospects and the wider economy that is fundamental to any sustained turnaround in market conditions.'

Nationwide Building Society and HBOS plc reports show that the UK has entered its steepest property market slump since the early 1990s.

The Bank of England kept the benchmark rate unchanged in August as it weighed the fastest inflation in a decade against the threat of a recession.

The Royal Institution of Chartered Surveyors yesterday called for the government to take measures to revive the market for bonds backed by home loans in order to spur mortgage lending. The government should allow investors to swap the securities for Treasury bills with the Bank of England, RICS said in a statement.

Property values fell in each of the nine regions in Hometrack's survey. In London, they dropped 1.1 per cent from July. The average time for a home to stay on the market rose to 11.3 weeks from 11 weeks, and the amount of the asking price achieved in sales fell to 90.7 per cent from 90.9 per cent.

'When the market turns, it can take as long as 24 to 36 months for prices to reach realistic levels,' Mr Donnell said. 'We are now well into this process.'

House prices in Britain declined 10.5 per cent from a year earlier last month, the most since 1990, Nationwide said on Aug 20. HBOS said on Aug 7 that prices declined the most since 1983.

The flagging property market adds to signs that the UK may be entering its first economic contraction since 1992 after growth stagnated in the second quarter.

For manufacturers, orders fell to the lowest in three years, and companies expect a further deterioration, a separate report published yesterday by the EEF engineering lobby group showed.

Inflation accelerated to 4.4 per cent in July, more than twice the central bank's target, making the Bank of England reluctant to cut interest rates to shore up the economy.

Societe General SA and Bank of America Corp predict that the central bank will start lowering interest rates by the end of this year.

The next interest rate decision is on Thursday. All 61 economists in a Bloomberg News survey expect no change this month. -- Bloomberg

UK Mortgage Approvals Fall To Lowest Since 1999

Source : The Business Times, September 2, 2008

(LONDON) UK mortgage approvals fell for a 12th month to the lowest since at least 1999 in July as financial institutions curbed lending and the property slump deepened.

Banks granted 33,000 loans for house purchase, compared with 35,000 in June and the fewest since comparable data began nine years ago, the Bank of England (BOE) said in London yesterday. Economists predicted 35,000, according to the median of 27 estimates in a Bloomberg News survey.

Home-loan approvals are at less than a third of the level a year ago as Britain teeters on the brink of a recession. BOE policy makers will probably keep the key interest rate at 5 per cent this week as they battle the fastest inflation in more than a decade while Prime Minister Gordon Brown announces a package of measures to shore up the economy.

'The data are still showing a very gloomy picture,' said Matthew Sharratt, an economist at Bank of America Corp in London. 'There's no signs of a bottoming out in the housing market.'

The value of home loans rose to £3.23 billion (S$8.3 billion) in July from £3.14 billion in June. The figure is down from £9.35 billion in July 2007.

Hometrack Ltd said yesterday the average cost of a residential property in England and Wales slipped 5.3 per cent from a year earlier in August. A recovery in prices is 'still some way off', said Richard Donnell, director of research.

The slump has led to a collapse in support for Mr Brown since he took over from Tony Blair 15 months ago and reduced the popularity of the ruling Labour Party to the lowest since it took office. Labour trailed behind the opposition Conservative Party, led by David Cameron, by 20 percentage points in recent opinion polls.

Mr Brown will hand UK local government authorities money to buy homes, a person familiar with the plan said last week, as part of a package to prevent the economy entering its first recession since 1991. Chancellor of the Exchequer Alistair Darling said in a Guardian newspaper interview on Aug 30 that the UK is facing 'arguably the worst' economic crisis for the last 60 years.

Financial institutions are still reluctant to lend to one another almost a year after housing market turmoil in the US led to a freeze in interbank lending. Bank losses from the collapse of the US sub-prime mortgage market now exceed US$500 billion.

UK gross domestic product stagnated in the second quarter, ending the nation's longest stretch of economic expansion in more than a century.

Risks of a deeper slump in growth and in house prices prompted policy maker David Blanchflower to call for a lower in benchmark borrowing costs.

He said on Aug 28 that his prediction of a 30 per cent drop in house prices may now be 'a fairly optimistic number', and that 'we need to see a substantial fall and probably quite quickly', in rates.

A majority of the nine-member rate-setting panel probably won't heed his call at their Sept 5 decision as inflation accelerates. Record commodity prices helped push the consumer price index to 4.4 per cent in July, more than double the 2 per cent target.

UK inflation expectations for the year ahead are also feeding risks of further price gains. Consumers' forecasts rose to 4.4 per cent in August, Citigroup Inc said on Aug 29, citing a poll by YouGov plc.

All 61 economists in a Bloomberg News survey expect the bank to leave the key rate at 5 per cent for a fifth month. - Bloomberg

Upcoming Malls To Offer Japanese Food Concepts

Source : The Straits Times, Sep 2, 2008

SUBURBAN and city fringe malls are usually dull on the food front but they are being forced to spice up their menus to lure a new generation who know their sashimi from their satay.

What were once treats found mainly in Orchard Road outlets are now being served from Tampines to Jurong as malls fight to give themselves an edge.

Scheduled to open late next year in Little India, City Square Mall will feature three foodcourts, one of which will have a Japanese theme. PHOTO: CDL

City Square Mall, which is slated to open late next year in the Little India area, will have three foodcourts, including one that is Japanese-themed.

Called ishi mura, the Japanese foodcourt by the firm behind the Suki Sushi and Sakura buffet restaurants will take up about 7,000sq ft of the mall.

Another mall to put its culinary cards on the table is the upcoming Tampines 1, which has signed a Japanese food hall as an anchor tenant.

The mall, which is expected to open in March, will be offering authentic Japanese cuisine in a gourmet street setting, said a statement from AsiaMalls Management, which will run the centre.

Its deputy general manager, Ms Stephanie Ho, said suburban malls have to offer more food choices to meet the higher expectations of shoppers.

'Competition is fierce in Tampines. There are a lot of foodcourts and in the HDB areas, there are a lot of food places. So having just another foodcourt in Tampines 1 does not make sense,' said Ms Ho.

Knight Frank deputy managing director Danny Yeo said suburban malls are hedging their bets, boasting trendier restaurants and more higher-priced options while retaining the usual fast food eateries and other low-priced outlets.

'Generally, in Singapore, more and more food and beverage tenants are going into the shopping malls,' said Mr Yeo.

'Around 10 to 15 years ago, when you went into a shopping mall, you would have found 10 to 15 per cent of the space allocated for food outlets. Nowadays, that has increased to as much as 20 per cent of the space.'

Or more. City Square Mall, which is aimed at the mid-income shopper, will devote 25 per cent of its 450,000 sq ft of net lettable area to more than 50 food and beverage outlets.

City Developments yesterday announced that close to 70 per cent of the eco-themed mall, which is twice the size of Junction 8, has been taken up.

Nearly half of the space will be taken up by nine anchor tenants, including a 23,000 sq ft Kopitiam foodcourt and an 11,000 sq ft Banquet foodcourt.

'We want to ensure that it's a food haven,' said City Square Mall's senior manager, Ms May Then.

Much of the demand is coming from young people and families who are eating out more often as they work late and have no time to cook, said Mr Yeo. Naturally, more food outlets will spring up in malls to cater to them.

Ms Ho agreed: 'People want to be able to hang out at a nice cafe near their place and not have to go to Orchard Road.'

She said Coffee Club and Toast Box have recently set up shop at Tiong Bahru Plaza and even Hougang Mall boasts a Cafe Cartel.

Japanese cuisine is clearly seen as a crowd-puller. Jurong Point, which opened last month, has an Osaka food street in the basement.

The food hall in Tampines 1 will have 10 counters of Japanese food, with some taken up by established restaurant names such as Botejyu, Yoshimi, Hokkyokusei, Aoba and Toku Toku Tei. These are traditional food establishments set up in Japan as early as the 1920s.

Their fare is mostly familiar to local Japanese food fans. Botejyu, for example, is famous for its Osaka okonomiyaki, or Japanese pancake, while Yoshimi from Hokkaido serves soup curry. Hokkyokusei, set up in 1923, serves Japanese omelette rice.

Japan Foods Holdings, which is behind the chain of 14 Ajisen Ramen stores here, is bringing these operators in and will be operating the food hall.

With people becoming more affluent, increasing numbers are willing to spend more on food, said market watchers.

Customers welcome new concepts and for retailers, they offer them the chance to generate more revenue if done well, said Mr Yeo.

'Over the years, with asset enhancement in the major malls, you see more new retail concepts and they are mostly food and beverage ones,' said Ms Then.

Some 70% Of Space Let Out At City Square Mall

Source : The Business Times, September 2, 2008

It has also secured nine anchor tenants and will open in Q4 of next year

SINGAPORE'S first eco- friendly mall - City Developments' City Square Mall - is close to 70 per cent let and has secured nine anchor tenants.

The mall will open in the fourth quarter of 2009.

The developer yesterday disclosed the anchor tenants which together will occupy about half of the total lettable space in the 700,000 square foot mall.

City Square Mall: It will have more than 250 shops and is touted as the first eco-friendly mall in S'pore

They are Metro, NTUC FairPrice, Best Denki, Kopitiam, MindChamps PreSchool, Amore Fitness & Boutique Spa, home furnishings company V.Hive, Popular bookstore, and halal food court operator Banquet.

Another 20 per cent of space has also been let out. CityDev said it will unveil these non-anchor tenants later.

Rents at the mall are close to market rates, said CityDev's group general manager Chia Ngiang Hong. In general, suburban malls fetch about $8-$15 per square foot per month (psf pm) on average, although rents at some prime suburban malls can hit $40 psf pm.

Mr Chia said CityDev is optimistic that it will achieve its target of attracting at least 1.3 million visitors a month to the mall.

'We believe that the buying sentiment of the heartland population will always be there (even in an economic slowdown),' he said.

The mall is targeting both Singapore and middle-income tourist shoppers.

With over 250 shops, the $200 million City Square Mall will be one of the largest malls in Singapore. It is also touted as the Republic's first eco-friendly mall and will boast 'green' features such as eco-restrooms that save water and electricity and an eco-roof that will harness solar power and rainwater.

It is projected to reduce its energy usage by about 39 per cent compared with designs using standard industry codes.

In line with this, anchor tenants will also be encouraged to look at green features.

Metro, the largest anchor tenant with some 56,000 sq ft of space, will run a 'family-friendly store in the suburbs for suburban shoppers', said Wong Sioe Hong, managing director of Metro (Private) Limited.

NTUC FairPrice - the second-largest tenant with some 26,000 sq ft of space - will open its pilot eco-friendly supermarket with a host of green features. These include dedicated checkout lanes for shoppers with reusable bags and motion-sensor lighting in the store office and storeroom.

While most mall operators are moving away from signing up anchor tenants, City Square Mall is sticking to the format, said Corinne Yap, CityDev's deputy general manager for marketing and leasing.

'We feel very strongly that the mall needs to be anchored with strong tenants,' she said. This allows the developer to get better rentals from the rest of the tenants, she added.

Govt Waives Building Premium On Lease Top-Ups

Source : The Business Times, September 2, 2008

Little impact seen as only a handful of applicants incur cost in past year

The government will waive the building premium when a lease extension is granted with immediate effect. But as tantalising as this may sound, the impact is likely to be minimal.

Fewer than 30 developments have sought lease extensions in the past year, says the Ministry of Law. And only a 'handful' have incurred the building premium.

The building premium is based on the value the Chief Valuer puts on a building sitting on the land with an expiring lease and is payable if a lease extension is sought.

It is separate from the land premium, which is based on the value the Chief Valuer puts on the land the building sits on.

There is no change to the land premium.

The building premium does not apply if a building is demolished. Only the land premium - as in most collective sale deals - applies.

In a statement released yesterday, the government said it decided on the building premium waiver because 'this will encourage lessees to continue to invest in the upkeep and improvement of the property'.

DTZ senior research director Chua Chor Hoon said: 'This is good news for lessees. It seems illogical that one has to pay a building premium for a building one built on the site. It's like a double charge. This will reduce the cost of extending a lease.'

But the building premium is thought to be only a fraction of the land premium - more often referred to as the differential premium.

Knight Frank director (research and consultancy) Nicholas Mak said: 'The building premium makes up a small part of the taxes compared with development charges or the differential premium.'

And according to him: 'If the amount waived is too small, it may not encourage building owners to upkeep or improve their property.'

As such, Mr Mak believes the properties most likely to be affected are industrial units on short leases and leasehold conservation properties because they cannot be torn down.

The waiver was actually introduced in 1997, when it only applied to the extension of short-term industrial and institutional leases. It will now apply to the extension of leases on all types of property.

But the impact on other types of property is expected to be limited, says Cushman and Wakefield managing director Donald Han: 'I don't think there will be a lot of residential properties affected by this, except for those on short-term lease tenure like at Riffle Range, which has some 30-years left of its lease remaining.'

The extension of a lease is also not a given, he noted: 'I think government may consider extending leases on short term basis, but this must be in line with socio-economic and overall planning considerations.'

Part Of Lease Extension Levy Waived

Source : The Straits Times, Sep 2, 2008

Building premium waiver will boost upkeep of ageing property

A LEVY that property owners had to pay the Government when they extended a lease on state land has been axed.

The so-called 'building premium' is being waived with immediate effect, said the Law Ministry yesterday.

The move gets rid of a potential hindrance to owners keen to upkeep, improve or redevelop an ageing property nearing the end of its lease.

It will help owners of industrial land, which tends to have shorter leases, and conservation properties but will have little effect on residential sites.

The Government has been charging both a land premium and a building premium when extending a lease.

'The charging of these premiums was based on the common law principle that both land and buildings would revert to the landlord at the end of the lease,' said a statement from the Law Ministry.

In the past, the Chief Valuer, who decides the premiums, had computed the building premium, if applicable, into the land premium. This made it unclear how much of the building premium makes up the land premium.

It is understood that only owners of a handful of sites, including industrial properties and conservation shophouses, have had to pay the building premium upon lease extension.

In general, the Government's policy is still to allow leases to expire without extension because it needs to reallocate land to meet fast-changing socio-economic needs. It will consider lease extensions only on a case-by-case basis.

Industrial properties are likely to benefit more from the levy waiver. Residential en bloc sites are not affected. Under redevelopment, the estate sold en bloc is torn down so no building charge is payable even if the site's 99-year lease is extended.

There is no building premium payable when leases are renewed on vacant land.

Yesterday's move is not entirely new. In 1997, the Government waived the building premium for short-term or 30-year-old industrial and institutional leases on the recommendation of the Committee on Singapore's Competitiveness, said the Law Ministry.

The latest waiver applies to all types of land, including longer industrial leases and residential properties.

It said the decision was made to encourage 'lessees to continue to invest in the upkeep and improvement of the property' when a lease extension is granted.

Previously, if an owner was granted a lease extension, he could opt not to redevelop the property if there was only a few years left on the lease.

He would be able to avoid paying a building premium if he let the lease run out and redeveloped the property only when the new lease started.

The waiver will give the owner no reason to hold back on redevelopment plans.

The waiver will please some owners of conservation shophouses, said Knight Frank's director of research and consultancy, Mr Nicholas Mak.

Rising construction costs could make it worthwhile for some owners to upkeep their buildings instead of tearing them down for redevelopment, he said.

Overall, waiving the building premium is expected to affect only a small group of owners, market watchers say.

'It's about urban renewal but in Singapore, the strategy is to demolish and rebuild,' said Mr Mak. Also, market watchers say most buildings are not built to last forever, particularly those on leasehold sites.

'Properties generally become obsolete after 30 years,' he said. 'Factories, for instance, may become obsolete within a shorter period because of changing technology and changing manufacturers' needs.'

The question of lease renewal will be a big issue nearer to 2070, when most of the leases on Singapore's 99-year leasehold land will expire, Mr Mak added.

Waiver aimed at lessees of state land

# What is a building premium?

It is a charge payable by an owner when he extends the lease on state land.

The amount is determined by the chief valuer but not disclosed as it is computed into the land premium.

The premium is calculated based on the building's condition. Lessees tended to let properties run down until the leases expire in the hope of paying less when they extend their lease.

# Why waive it?

It is to encourage lessees to continue to invest in the upkeep and improvement of a property when a lease extension is granted so they will not let the site run down.

If a building premium is payable, lessees will not be motivated to upkeep, improve or redevelop a property.

It is not meant as an incentive but rather removes a factor that may have discouraged improvement work.

# What's the impact?

The waiver is expected to have minimal impact as few people will be affected, although lessees of long-term industrial land are among those likely to benefit.

In general, the Government will allow leases to expire without extension. It will consider lease extensions on a case-by-case basis. For instance, it may allow extensions for conservation properties to give as incentive for lessees to carry out major conservation works.

Now, Deferred Payments With A Twist

Source : The Business Times, September 2, 2008

Credit-worthy buyers offered loans with no interest and instalment payment until TOP

deferred payment scheme may have been banned, but something strikingly similar is doing the rounds to help developers sell their properties.

The interest absorption scheme (IAS) and the zero instalment scheme allow the buyer to make a 20 per cent downpayment - and then pay nothing until the temporary occupation permit, which may still be up to three years down the road.

Maybank, OCBC Bank and United Overseas Bank (UOB) are currently offering the scheme. Standard Chartered Bank is launching it soon, according to Dennis Khoo, its general manager of lending. Interestingly, DBS Bank has decided to stop offering such schemes.

The deferred payment scheme was banned by the government last October to dampen excessive speculation. It was offered by buyers and you did not even have to qualify as a borrower to buy property worth millions of dollars - as long as you had funds for the downpayment.

Under the new schemes, the buyers have to sign up to a bank loan for the property. 'The buyer has to be credit-worthy,' said Nicholas Mak, Knight Frank's director of research and consultancy. Once the creditworthiness is established, the buyer pays nothing more till TOP. During that period, it is the developer that pays interest to the bank, under the IAS.

Some small projects such as Chepstow Ville and Lynwood Grove are practically sold out after resorting to the IAS. However, the developer of another project who asked not to be named said the IAS has not helped his sales and he thinks it is the pricing that could be critical.

DBS Bank used to offer a zero instalment home loan scheme until TOP to buyers. The results were not always clear-cut. At the preview period of the 724-unit Livia, 160 units were sold in early July when DBS Bank offered a zero instalment home loan scheme. Subsequently, sales at the Livia slowed down and by end-July, it had sold 301 units, according to the latest data from the URA.

DBS said that the bank no longer offers the scheme. 'We had targeted the HDB upgraders on a project-by-project basis,' said Koh Kar Siong, DBS' head of deposits and secured loans. Some observers say such schemes could come back to bite the banks if the value of the properties fall. Last month, Citi analyst Wendy Koh said she expects a 20-30 per cent price correction for high-end properties from their recent peak, and reckons the mid-tier is likely to decline 10-20 per cent.

Said Helen Neo, Maybank Singapore head of consumer banking: 'Our credit assessment policy has always been to ensure that the buyer has the capacity to repay. It boils down to repayment capability.'

Kevin Lam, UOB head of loans, said the assessment of the customer is key. 'If the profile of the customer is good for a regular loan, he is good enough for this.' He also noted that the risks to the developer is lower with the IAS because the bank will disburse the loan to the developer according to the progressive payment schedule during construction. 'Unlike the deferred payment scheme, the developer gets no money from the buyers during the construction period.'

Gregory Chan, OCBC Bank head of secured lending, noted: 'Under the interest absorption scheme, the bank will not be exposed to additional risk as loan applicants are assessed based on their ability to repay both the principal and the subsequent instalments.'

Developers Starting To Preview Projects

Source : The Straits Times, Sep 02, 2008

With Hungry Ghost month over, condo projects being launched to test market

NOW that Hungry Ghost month is over, property developers are starting to line up project previews and launches to test the market.

Keppel Land released a new high-rise tower block at its Reflections at Keppel Bay on the weekend, putting up a third of the block's 83 units for sale in Singapore and
Hong Kong.

An artist's impression of Reflections at Keppel Bay. Units in a new tower block there were released for sale over the weekend. -- PHOTO: KEPPEL CORP

About 10 apartments have been sold since Saturday, at an average of just over $2,000 per sq ft (psf). Prices range from $1,500 to $2,300 psf, depending on the floor and the view.

A two-bedroom apartment on a low floor would cost about $1.5 million, according to property agents. Reflections has a total of 1,129 units in six high-rise tower blocks and 11 low-rise villa blocks.

Also on the weekend, Far East Organization invited interested buyers to its showflat for Miro in Lincoln Road, which sources say will be launched in about two weeks.

The freehold 85-unit development is priced at around $1,700 per sq ft (psf) on average, they said. Prices start at about $1.6 million for a one-bedroom studio loft of 990 sq ft.

Also available in the 32-storey tower are two-bedroom units of 1,302 sq ft and three-bedroom lofts at more than 1,600 sq ft.

A boutique project at nearby Moulmein Road starts previews this weekend with plans for a launch next Monday.

Mulberry Tree has 32 freehold units and a 'retro-style' facade, said an agent marketing the development. Indicative prices have been set at $1,300 to $1,500 psf. They start at less than $700,000 for the smallest apartment.

Agents said the two-bedroom flats, of about 710 sq ft each, would cost around $900,000. The project is forecast to be completed at the end of 2011.

Developer Hong Fok is expected to preview its Concourse Skyline in Beach Road later this month. Prices are likely to range from $1,600 to $2,000 psf, with two-bedroom units priced upwards of $1.8 million, The Straits Times understands.

The 360-unit development is slated to be completed in 2013.

Tat Aik Group has also started to preview its Nathan Residences, which will be developed on the former Nathan Court in Nathan Road.

Sales are expected to start this week, with prices in the region of $2,000 psf, said marketing agents. One-bedroom units will start at $1.2 million and two-bedroom apartments are likely to go for $1.6 million.

Pedra Branca: New Joint Panel Formed

Source : The Straits Times, Sep 2, 2008

SINGAPORE and Malaysia have set up a new sub-committee to deal with maritime, airspace and fishing matters around Pedra Branca, Middle Rocks and South Ledge.
Both sides will also finalise over the next few weeks technical preparations for a joint survey of the area.


That will pave the way for eventual discussions on how to delimit the territorial seas there.

Both sides yesterday provided an update on issues relating to the enforcement of the International Court of Justice (ICJ) judgment on sovereignty over the three maritime features.

The update followed the second meeting of the Joint Technical Committee on Aug 20 at Malaysia's seat of government in Putrajaya.

In May, the ICJ awarded Pedra Branca to Singapore and Middle Rocks to Malaysia. It also ruled that South Ledge belonged to whoever owns the territorial waters it sits in.

The three features in the Singapore Strait are located some 40km east of the Republic's main island.

At the latest meeting, both sides agreed that the new sub-committee on maritime and airspace management and fisheries should continue to hold discussions in the following weeks.

They also gave the go-ahead for fishermen to continue with their traditional fishing activities in waters beyond 0.5 nautical miles off the three maritime features.

The joint press statement issued yesterday, by Malaysia's Foreign Minister Rais Yatim and Singapore's Foreign Minister George Yeo, reiterated both countries' commitment to 'honour and abide by the ICJ's judgment and fully implement its decision'.

The Joint Technical Committee, co-chaired by Malaysia's Foreign Ministry secretary-general Rastam Mohd Isa and Singapore's Permanent Secretary for Foreign Affairs Peter Ho, is due to meet again in the middle of this month in Singapore.

淡滨尼30公顷树林 计划发展成生态公园

Source : 《联合早报》Sep 2, 2008












这片树林与淡滨尼越野脚踏车道(Tampines Mountain Biking Trail)隔着淡滨尼12道遥遥相对,所以国会议员们建议把树林发展起来,形成一个有连贯性的休闲设施,方便居民使用。淡滨尼越野脚踏车道也是青奥运的比赛场地之一。