Friday, November 21, 2008

S'pore To Post Negative GDP Growth In 2009: Merrill

Source : The Business Times, November 21, 2008

Singapore is now expected to post a negative gross domestic product (GDP) growth in 2009 of minus 0.5 per cent year-on-year, Merrill Lynch projected on Friday shortly after the government release figures confirming a recession in the city-state.

Merrill said its latest forecast was revised from the previous projection of a meager 1 per cent year-on-year rise.

'Looking ahead, Singapore will likely endure another 2-3 quarters of negative growth,' Silvia Liu, Merrill's Hong Kong based economist said in her report.

'History shows that the downward adjustment in growth typically lasts 4-5 quarters during a recession. In other words, the growth trough will unlikely be in sight until sometime in H109,' she added.

Ms Liu said the Singapore export sector, which Merrill had estimate to contribute 60-70 per cent of GDP in value added terms, is feeling the full brunt of the external shock.

Exports of goods and services slowed to 3.7 per cent year-on-year (down from 6.9 per cent y-o-y), with net exports subtracting over 11 percentage points from headline growth.

While the slowdown remains heavily concentrated in the trade related sectors (manufacturing declined 11.4 per cent y-o-y), there are signs that the shocks are increasingly filtered down to the domestic economy.

Ms Liu added that in particular, fixed investment slowed to 13.1 per cent y-o-y in Q308, down from 24.1 per cent y-o-y in Q208, in part driven by the downturn in the residential property market. Private consumption, rising 4.7 per cent y-o-y (versus 5.1 per cent y-o-y in Q208), is nevertheless more resilient.

Early Friday, the Singapore government said the economy shrank at an annualised, seasonally adjusted rate of 6.8 per cent in the third quarter, final government data showed on Friday, confirming the export-dependent country's first recession since 2002.

Upside In China Property S-Chips?

Source : The Business Times, November 21, 2008

WHILE most Singapore property developers are afflicted by the same predicament - over-supply, low confidence - the Chinese property market is as varied as its landscape.

Take property S-chip CentraLand for example.

Listed here in February, the price of Centra- Land shares at IPO is likely to have priced-in various poor economic data at the time. Even so, its IPO offer price of 50 cents has fallen only 4 per cent since, while share prices of most Singapore-based property developers are more likely to have fallen upwards of 60 per cent.

For the third quarter of 2008, revenue amounted to about 277.4 million yuan (S$62.1 million), recognised from delivery to buyers of 997 units of pre-sold retail and office units in its commercial property project, J-Expo in Zhengzhou.

Located in the Henan province, J-Expo is a wholesale commodities building in the heart of Zhengzhou city, located at the junction of the main road and rail network in central China. In a filing with SGX, CentraLand said Zhengzhou city enjoys good traffic and is an important wholesale centre, especially for women's apparel.

Not many would know this about Zhengzhou, much less know where it is. This being so, CentraLand, which is probably considered more 'exotic' compared to other China property S-chips, is not heavily traded.

Less exotic property S-chips like Yanlord, China New Town Development (CNTD) and Sunshine Holdings are traded more heavily. Their share prices have also fallen dramatically, in line with market movements.

Indeed, since the start of the year, Yanlord, CNTD and Sunshine share prices have fallen 80 per cent, 95 per cent and 92 per cent respectively to very low penny values.

But the paradox is that unlike Singapore (and much of the world) some markets in China, where some of these S-chips have projects, are actually seeing property prices recovering.

Citigroup analysts visiting numerous cities made several conclusions recently. They noted that inner cities like Chongqing and Chengdu looked less affected by the export slowdown and global financial crisis, as their economies are more domestic trade oriented.

In Chengdu, Citigroup added that activity has recovered slightly from the period immediately after the earthquake, but more importantly, it also sees a meaningful difference in terms of sales volume and prices versus the period before the earthquake.

Citigroup did not, however, notice meaningful rebounds in transaction prices and volumes in Shenzhen or Guangzhou, 'and the market is still clouded with the wait-and-see attitude of the potential buyers'.

Citigroup said that in Hangzhou, the provincial capital of Zhejiang province, the situation has been deteriorating, adding: 'As one of China's main export and manufacturing driven provinces, Zhejiang has been significantly impacted by the export slowdown and global financial crisis.'

On the other hand, Citigroup considers Shanghai as one of the most resilient in China, especially for projects located in prime locations. 'We don't see any significant price cuts in the high-end/luxury-end residential projects,' it said, adding that in the past two years, there has also been limited new land supplies in the city centre.

Different Chinese cities also appear to have different property cycles. DTZ Research reveals that property prices in Shanghai peaked at the end of 2005 and then plummeted for a year before rising steadily since the end of 2006.

DTZ's Shanghai property price index rose 40 per cent in Q3 2008 compared with the previous trough in Q4 2006. Prices continued to increased by 3 per cent quarter-on-quarter in Q3 2008 and 5.2 per cent compared with Q4 2007.

In Guangzhou and Shenzhen, however, property prices only peaked in Q4 and Q3 of 2007 respectively. While prices have recovered somewhat in Guangzhou - with the DTZ price index rising 2 per cent since the previous trough - Shenzhen prices have fallen 16 per cent since Q3 2007.

More interestingly, Beijing prices have been increasing for four years, registering an 8.1 per cent quarter-on-quarter increase in Q3 2008.

Each city appears to react to different micro-economic factors like land scarcity, high levels of speculation, or even the efficiency of local governments to implement policy changes (curiously, the Chinese government's relaxation on mortgage lending in October has not had an impact on share prices).

As such, finding value in the Chinese property market takes a lot of work. But at the same time, it should help to separate the wheat from the chaff.

Office Space Returns Seen In Year Ahead

Source : The Business Times, November 21, 2008

Savills Singapore reckons that some 450,000 square feet of Grade A office space - or 3.5 per cent of existing space in this sector - could be returned by tenants in the next 12 months.

The financial upheaval in the US and Europe will inevitably lead to consolidation in the financial services industry that could lead to companies shedding excess space, the property consultancy firm said in a report yesterday. This space could make its way into the market either as tenants return it to landlords or try to sub-let it themselves.

Market watchers say that space released by existing tenants will exacerbate the supply glut that is expected to emerge, as almost nine million sq ft of Central Business District office space is completed over the next four years. Of this, at least 80 per cent will be Grade A.

In its report, Savills said that the average Grade A asking monthly rent in Singapore slipped 1.2 per cent quarter-on-quarter in Q3 2008 - the first decline in four years.

The figure fell from a high of $15.10 per square foot (psf) in Q2 this year to $14.92 psf in Q3.

The decline was on a 3.3 per cent drop in asking rent in Tanjong Pagar and a 0.91 per cent drop in the Orchard area. But asking rents held firm in Q3 for Raffles Place, City Hall/Marina Bay and Beach Road/Middle Road. And in Shenton Way, they actually rose 2.2 per cent.

'Many landlords have become more realistic in their asking rents, and are more open to incentives (for example, longer rent-free periods, free car-parking) to attract and retain quality tenants,' Savills said.

It predicts that Grade A office rents are likely to ease 5 to 10 per cent in Q4 this year and a further 15-20 per cent in 2009 as demand weakens.

The average Grade A office capital value slid 4.3 per cent quarter-on-quarter to $2,680 psf in Q3. This is the first drop in three years.

Private Home Rents May Fall 15%

Source : The Straits Times, Nov 21, 2008


Selling prices of top-end units could drop by up to 22% in months ahead

PRIVATE home rents in Singapore are set to drop by up to 15 per cent next year, as the reality of a slowing economy hits home.

Property consultants say landlords are expected to become more flexible, given factors such as ongoing job cuts.

In a report released yesterday, Savills Singapore said the onset of a technical recession, coupled with a weaker employment market and slower expatriate arrivals, will contribute to the fall in rents.

So far, the impact on the local rental market has been limited despite rents beginning to come off their peaks, it said.

'The quarters ahead should, however, see a more entrenched rental decline as demand weakens in the face of a global economic slowdown,' said the report.

Given that the full force of the financial crisis erupted in mid-September, the rental property market has yet to feel the full impact, Savills Singapore said. In terms of top-of-the-market rents, known as prime rents, it expects a fall of 7 to 13 per cent next year.

Another consultancy, Knight Frank, is projecting a bigger fall of 10 to 15 per cent in average islandwide rents next year.

The Urban Redevelopment Authority recorded a 0.9 per cent dip in private home rents in the third quarter, the first fall after 17 quarters of growth.

'Some landlords are already cutting rents to retain tenants. We may see more aggressive cuts by landlords if more multinational companies cut their headcounts,' said Knight Frank's director of research and consultancy, Mr Nicholas Mak.

However, Savills Singapore's associate director of residential sales, Mr Patrick Lai, believes the fall in rents will not be big as there is still stable demand.

'There is still a steady number of expatriates coming in as Asia, particularly Singapore and Hong Kong, is where companies want to be now. To put it bluntly, we are benefiting from the meltdown in other parts of the world,' he said.

However, rents are more negotiable now as tenants have more choice, said Mr Lai.

This quarter, new supply entering the market includes the second tower of The Sail @ Marina Bay with 681 units, the 173-unit St Regis Residences and the 110-unit Paterson Residence, Savills Singapore said.

Next year, landlords in prime areas will have to contend with even more competition as more condos are completed.

Also, most expats are now on local terms, or arrange their own leases, and they usually do not want to use all their rental budget, said Mr Lai.

A property agent specialising in expat rents said she has not completed any rental deals since October.

'Last year, I was busy throughout the year. This year, it started to slow from January. It is so quiet now,' she said.

'Those who have advertised for a few months are willing to lower their asking rents but many others continue to hold on to the same asking levels.'

A renovated 1,650 sq ft unit at Pinewood Gardens at Balmoral Park is now available at $6,000 a month or $3.64 per sq ft - already lower than most other done deals at the development - but a potential tenant is willing to take it at only $5,000 a month or $3.03 psf, she said.

In a separate report, Savills Singapore said it expects prices of high-end and super-luxury homes - which are more vulnerable to the deteriorating global investment climate - to fall 22 per cent from the current quarter until the end of next year. Islandwide, the decline in sale prices over the same period is placed at a smaller 10 to 15 per cent, as mass-market homes catering mostly to upgraders should see a limited price fall.

Rental yields, however, have risen as the fall in rents is smaller than the fall in prices, said Mr Ku Swee Yong of Savills Singapore.

Knight Frank's Mr Mak added: 'Residential rents have moved up very fast in the past three years and they could come down just as fast.'

Savills Sees Over 20% Drop In Luxury Home Prices

Source : The Business Times, November 21, 2008

Announced forecast for period ending 2009 grimmest yet by any consultancy

Savills Singapore is predicting price drops of more than 20 per cent in the next five quarters for high-end and super-luxury private homes.

This would follow declines of 14.3 per cent and 12 per cent respectively for these two segments in the first nine months of 2008 from the peak in Q4 last year.

The forecast is probably the grimmest announced by a property consultancy here - although some rival firms BT spoke to yesterday said that privately, they have similar estimates.

Research analysts at stockbroking houses/banks have already been making downbeat pronouncements, predicting declines of about 30 per cent or more for luxury home prices byl end-2009.

In its report yesterday, Savills said that the high-end and super luxury segments are more vulnerable to the deteriorating global investment climate. The average capital value for high-end (non-landed) residential homes fell to $2,065 per square foot in Q3 2008, 4.6 per cent lower than the preceding quarter and 14.3 per cent below the Q4 2007 peak of $2,410 psf.

In the super luxury league, the average capital value slipped to $3,240.40 psf in Q3, down 5.2 per cent from the preceding quarter and 12 per cent lower than the Q4 2007 figure.

Savills expects mass- market home prices to fall 5 to 8 per cent in the next five quarters - arguing that a price drop in this segment will be cushioned by continued support from HDB upgraders and other buyers picking up private homes for their own occupation.

The fundamentals of the mid-tier and mass-market segments are stronger today than during the Asian Crisis downturn, partly due to Singapore's more open immigration policy, Savills said.

Permanent residents have accounted for 14.3 per cent of private home purchases (excluding ECs) in the first nine months of this year, up from a 12 per cent share in 2004. PRs are likely to become a strong demand driver in the residential market in the coming months, Savills reckons.

Foreigners (including PRs) had 24.8 per cent share of private home purchases (including ECs) in the first nine months of 2008, down from a 25.9 per cent share for the whole of last year but still ahead of sub-20 per cent shares between 2000 and 2004.

In Q3 2008, a total of 4,287 caveats were lodged for private homes (including ECs), covering both primary and secondary markets - 9 per cent higher than the 3,934 caveats lodged in the preceding quarter.

However, the total value of private homes transacted edged up only slightly to $5.68 billion in Q3 from $5.62 billion in Q2.

'The average value of each unit transacted decreased, as evidenced by the very successful sales at mass market projects such as Livia and Clover by the Park. The proportion of transactions in the luxury and super luxury sectors dropped compared with mass market, as rich investors were more cautious about big-ticket purchases,' said Savills' director of marketing and business development Ku Swee Yong.

The average monthly rental value for high-end non-landed homes tracked by Savills contracted for the second consecutive quarter, slipping 3.6 per cent quarter-on-quarter to $5.62 psf in Q3.

This followed a 1.2 per cent drop in Q2. 'For full- year 2008, we expect prime rents to ease 4 to 6 per cent and fall a further 7 to 13 per cent in 2009,' Mr Ku said.

Tenants may now seek more competitive rentals, softening the market.

'So far, the impact on the local rental market has been limited, despite rents beginning to come off their peaks. The quarters ahead, however, should see a more entrenched rental decline as demand weakens in the face of a global economic slowdown,' Mr Ku said.

Savills also said that 10,923 leasing deals were recorded for private homes (excluding ECs) in the July to September quarter this year, the highest Q3 figure since 2000.

The leasing volume for Q3 2008 was up about 20 per cent from the preceding quarter and 25 per cent above the figure in the same period a year ago.

The strong leasing volume may have been contributed by a seasonally active Q3 that coincides with the opening semester of some international schools, as well as displaced tenants from collective sales completed last year, downgrading from high rental units to more affordable ones, and completion of new projects with attractive facilities and competitive rents.

However, Savills expects rental demand drivers to weaken in coming quarters. Savills' residential leasing head Patrick Lai says: 'The inflow of expats is expected to slow down, although we're still seeing an influx of foreign talent into Singapore, particularly in the healthcare, pharmaceutical, R&D and logistics industries.'


Source :《联合早报》November 21, 2008







私人公寓租金市场,这个季度竣工项目,包括滨海舫(The Sail@Marina Bay)剩余的681个单位、瑞吉居(St Regis)的173个单位和巴德申居(Paterson Residences)的110个单位。




Inflation To Ease Next Year

Source : The Straits Times, Nov 21, 2008

INFLATION will continue to ease next year the Ministry of Trade and Industry said.

The forecast for inflation next year was revised down to 1 to 2 per cent from the previous range of 2.5 to 3.5 per cent.

With inflation easing, some economists have raised the possiblity of global deflation. -- PHOTO: URA

Permanent Secretary for Trade and Industry Peter Ong explained that this was due to lower global crude oil prices and and 'lower than expected' HDB property values domestically next year.

Global commodity prices have moderated after shocks earlier this year. Oil hit a peak of US$145 per barrel in July. But towards the end of September, the price of oil had fallen to below US$100 per barrel as global economic conditions worsened. Oil was at around US$49 last night.

The International Monetary Fund's Food price index has also fallen 14 per cent since peaking in June.

Mr Ong said that global oil prices are now expected to average US$60 to US$80 per barrel in 2009 compared to an average of US$100 per barrel in 2008.

HDB property annual values would also be lower than expected in 2009.

Office and shop rentals are also expected to 'come off slightly' and to moderate further Mr Ong said.

While construction has continued to be strong despite the weak economic conditions, the MTI said demand for commerical and industrial space will be affected by the financial crisis.

Construction materials prices and equipment costs are therefore expected to fall next year.

This year's inflation remains unchanged at the estimated 6 to 7 per cent range.

With inflation easing, some economists have raised the possiblity of global deflation.

However, the central bank, for now, does not see that as a likely prospect.

The Monetary Authority of Singapore's executive director Edward Robinson said: 'A significant proportion of inflation is determined by external factors.'

'(Deflation) would require sustained, widespread falls in the prices of global commodities and I don't think, at this stage, that that scenario is relevant.'