Sunday, December 7, 2008

M'sia Bans Hillside Projects

Source : The Sunday Times, Dec 7, 2008

KUALA LUMPUR - MALAYSIA'S prime minister Abdullah Ahmad Badawi has banned hillside developments after a weekend landslide in suburban Kuala Lumpur killed four people and forced thousands to evacuate.

Hillside developments are now banned, following the latest disaster which bured 14 houses at an upmarket estate. -- PHOTO

'I am sure this will incur the wrath of individual land owners and developers but enough is enough,' Mr Abdullah said, according to Sunday's Star, ordering current projects to be frozen while soil tests are carried out.

'Future projects will also not go on to prevent any further worsening of the soil conditions at the hilly area,' he told the daily after a series of landslides in northeastern Kuala Lumpur.

The latest disaster hit early on Saturday, burying 14 houses at an upmarket estate, cutting off access for thousands of residents and disrupting water, electricity and phone lines.

Among the four dead was a 20-year-old who was found by his father buried under the rubble still clutching a mobile phone, the Star reported. One person is reportedly still missing.

Police ordered 3,000 to 5,000 residents living nearby to evacuate their homes.

The landslide occurred after days of heavy rains in the area, which is prone to slippages. In 2006 four people were killed and 43 homes destroyed in a nearby suburb.

And in 1993 a landslide triggered by heavy rains caused a 12-storey condominium tower to collapse, killing 48 people.

'Malaysians never want to learn from past experiences. They want good views while developers only seek to profit... no one takes safety and soil stability into consideration,' the prime minister said.

'We will be courting more tragedies if we do not care and protect hillsides,' he said. -- AFP

One missing after four die

KUALA LUMPUR - MALAYSIAN agencies were still searching for one person on Sunday in the wake of a landslide near the capital that killed four people, forced thousands out of their homes and cut electricity supplies.

The landslide struck in an affluent suburb north of Kuala Lumpur early on Saturday morning, flattening 14 houses. It happened just over a week after two sleeping sisters were killed by a mudslide nearby and after two other slides in the capital.

Some residents packed their belongings into cars and headed for temporary housing as the rubble was being cleared, while others struggled to get supplies to their families after tents were set up to distribute emergency supplies.

'We had to use a small little path to come out. It's all blocked,' said Ngu Siong Ho, 52.

'Our cars and everything are trapped inside. We are considering to go and stay with a friend,' he said.

Shifting earth temporarily halted the search effort which the police said had involved a thousand emergency personnel on the 10 acre site in Selangor state near Kuala Lumpur.

'We have stopped work right now because there is earth movement and it is not safe,' Selangor police chief Khalid Abu Bakar told a press briefing on the site.

State electricity company Tenaga Nasional said in a statement that progress restoring power had been slowed due to rain and earth movements and that four of 16 transformers the slide affected had been put back online. State news agency Bernama reported 1,500 houses were without power.

Green campaigners have repeatedly criticised the building of houses on the steep forested hills near Kuala Lumpur. When the opposition won Selangor in March's election it banned construction on slopes with more than a 25 per cent incline.

Construction has boomed in recent years in the state, the most affluent in this Southeast Asian nation of 27 million people.

The worst disaster was in 1993 when 48 people died in the collapse of a tower block on a site 1.5 kilometres from Saturday's slide.

Action by the federal government has not materialised however, and developers continue to apply pressure to build.

'Even as recent as last month, developers were insisting that they had the right to develop hill slopes and some had told a couple of ExCo (state executive council) members that they were planning to sue us,' Elizabeth Wong, a Selangor state executive council member in charge of environmental matters, said on her website -- REUTERS

Not All New Flats Are Created Equal

Source : The Sunday Times, Dec 7, 2008

With the HDB resale market heading south, some new flat buyers may see a paper loss

It used to be that one could never lose out buying a new HDB flat from the Government.

It was a sure-win bet to a better life for many as they sold their flats for windfall gains after five years, as allowed under HDB rules, and upgraded to newer or bigger and nicer homes.

This, however, may no longer be the case these days.

New HDB flats are subsidised and priced below those of resale flats in the same area. But there has been a shift in the market cycle, and the HDB resale market is seen heading south because of the current recession.

'This is more or less the peak for HDB flat prices,' said C&H Realty managing director Albert Lu.

The Housing Board has said new flat prices fall when the market goes down and vice versa, since these are priced at a discount to the market. This will be the subsidy that buyers enjoy.

While new flats have always been a safe bet, some who bought or are buying them now may find themselves with a paper loss soon.

The situation is similar to that in the previous 1996 peak. Back then, those who bought new flats in the new town of Sengkang found themselves 'under water' a few years later, said Mr Eugene Lim, an associate director of ERA Asia Pacific. The prices they paid were higher than those of resale flats in the area.

Experts say that as the HDB resale market slowly inches down, this scenario may present itself again. 'Those who buy new flats when resale prices are high may have a higher probability of losing out,' said MrLeong Sze Hian, president of the Society of Financial Service Professionals.

'In contrast, those who buy when resale prices are low may have a higher probability of a price appreciation. So, maybe a balanced cost-approach pricing may be better instead of market subsidy.'

The balanced cost-approach is based on pricing the cost of building the flats. It will give rise to more stable prices that reflect inflation and wage increases, he explained.

Buyers of new build-to-order flats will have to wait about three years, by which time the market may have changed completely.

They may end up in a position where their new flat's price is similar or higher than resale prices, MrLu said.

Experts, though, are quick to add that it will be only a paper loss, if any. 'If you don't sell your flat, you will not see any loss,' explained ERA's Mr Lim. 'There is a downside risk to buying a new flat, but it is very small.'

In any case, buyers of new flats have to occupy their units for at least five years before they can sell them. Many often continue to live in them for years after that, experts say.

In the next five to 10 years, if the world economy strengthens, the next peak for HDB flat prices may be higher than where they are right now, said Mr Lu.

There is, therefore, the possibility of a capital appreciation, but any gains will likely be smaller than before, since today's buyers are paying a lot more for their HDB flats.

'It's no longer the $100,000 to $200,000 types of gains that were easily attainable in the past,' said Mr Lim.

Mr Lu said that for those seeking a new flat to live in, it would not really matter when they buy. If they were to buy high and sell low, they would also be able to buy a replacement home at a low price, he pointed out.

Ultimately, new HDB flats remain the cheapest form of housing in Singapore.

Still, buyers have to work out their sums first.

Regardless of the economic situation or any potential capital appreciation gains, the key is to buy a flat that one can afford, experts advise.

URA Plan Draws Strong Interest

Source : The Straits Times, Dec 6, 2008

THE Master Plan 2008 - an ambitious blueprint setting out Singapore's physical development for the next 10 to 15 years - has attracted plenty of attention from the public.

Its exhibition received more than 200,000 visitors over the past six months, and about 300 submissions have been made - 80 per cent of them online - according to the Urban Redevelopment Authority (URA) yesterday.

The feedback ranged across several aspects of the plan, which was unveiled in May by National Development Minister Mah Bow Tan.

It contains ambitious schemes to transform Jurong East, Kallang and Paya Lebar into sub-metropolitan hubs of offices, hotels, education and entertainment centres, parks and homes.

Some of the feedback included calls for the allocation of space for activities in Paya Lebar Central. The Station Plaza in front of the Paya Lebar MRT station and the plaza space next to the civic centre at Geylang Serai were cited as possible venues.

Feedback on the Leisure Plan was generally positive, including comments from members of the public that they were excited about the 150km round-island route, added the URA. Suggestions were also made on ways to enhance Jurong Lake District to improve transport with people movers and river taxis.

The URA said it would study the suggestions and is 'working with other agencies to see how we can incorporate (the public feedback) in our plan'.

The Master Plan was gazetted - or made official - yesterday. It can be viewed at the URA Centre in Maxwell Road.

Don't Buy, Don't Sell

Source : The Straits Times, Dec 6, 2008


Sit tight and wait for recession dust to settle, say financial and real estate experts in a survey

PROPERTY investors here might feel like cutting and running but the best advice is to sit tight and hold on, according to a PricewaterhouseCoopers (PwC) report.

The report, now in its third year, asked about 180 experts from across the region - in fields from real estate to banking and property development - for their strategies on whether to hold their investments, buy more or sell.

Mr Stephen Blank, senior resident fellow of finance at the research firm Urban Land Institute, a co-publisher of the report, described the mood: 'Interviewees say that we are in a wait-and-see mode, and everyone's sitting on the sidelines waiting for the dust to settle.'

About 65 per cent of those polled urged investors in Singapore real estate to hold on to their investments in the hotel sector and in rental apartments.

'Visitor numbers have been slipping, and in 2009, the hotel sector might not perform as well as 2008,' said Mr Nicholas Mak, director of consultancy and research at Knight Frank.

'Nevertheless, the mid-term outlook is still positive due to the many new offerings in the tourism and Meetings, Incentives, Conventions and Exhibitions (Mice) market, which resulted in the relatively high hold calls.'

Other sectors here, namely office, retail and industrial/distribution, each attracted hold recommendations from at least 50 per cent of those surveyed.

This was up on last year, when the hold recommendations varied from 29 per cent in the office sector to 48 per cent in the industrial/distribution sector.

The strongest buy recommendations came from the industrial/distribution sector, with 34.8 per cent of respondents urging investors to plough in more cash.

Mr Colin Tan, director of research and consultancy at Chesterton Suntec International, said: 'The industrial sector is pretty diverse. Pockets of industries are doing well. This will help cushion the decline for the industrial sector.'

But there was a strong recommendation to steer clear of the residential rental sector, with only 11.6 per cent of respondents suggesting that now is the time to buy.

'There are many owners whose units are completing in the coming 12 months. As supply outstrips demand, there will be intense competition, which will drive rents down,' Mr Tan said.

The report also stated that the moment of truth has yet to arrive in the Asia-Pacific, indicating more gloom to come.

'The biggest threat to Singapore, other than the squeeze on credit, is the seemingly generous pipeline of development projects which may be completed during a period of sagging interest from foreign investors,' said Mr David Sandison, tax partner of PwC.

'Apart from this, local players in retail and office space are also seeking to cut costs by downsizing and relocating to more affordable parts of the island.

'Acceleration of government infrastructure projects and other measures aimed at buoying the economy should, however, be sufficient to stabilise the market.'

There was one bright spot in the report: Singapore maintained its second position from last year among 20 Asia-

Pacific cities for investment prospects. Tokyo was first.

Best Asia-Pac Property Bets

Source : The Business Times, December 6, 2008

TOKYO, Singapore and Hong Kong have emerged tops in the Asia-Pacific in a recent ranking of cities with the best property investment prospects for 2009.

They were placed first, second and third respectively as investors shifted their attention from emerging cities to mature markets, the survey by America's Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC) showed. Shanghai, which was ranked first in last year's survey, fell to fifth place this time around. Beijing fell from sixth to 12th place and Ho Chi Minh City from eighth to 13th.

Survey respondents said 2009 is the time to be 'picky about markets and partners', ULI and PwC said in the report, which was released here yesterday.

In recent years, many investors who had been elbowed out of deals in major Asian cities by core funds or highly leveraged private equity players sought refuge in secondary locations or products in an effort to find value. In today's environment, however, investors are again focusing on prime assets in major locations.

At the same time, projects in secondary markets or even in less well-positioned prime areas are more likely to run into problems, especially as slowing growth lowers demand for commercial properties.

Respondents were also asked to rate cities according to their riskiness. Tokyo, Singapore and Sydney were the three markets seen as least risky.

But Singapore was ranked seventh for development prospects and has to reconcile itself to slower growth and less demand, the report said. Bangalore, Ho Chi Minh City and Mumbai were ranked the top three cities for development prospects.

In Singapore, the strongest buy and hold recommendations were for the hotel sector - 65 per cent of respondents advised holding, 24 per cent recommended buying and only 9 per cent suggested selling. The residential rental sector was also a strong 'hold' (65 per cent). But 23 per cent recommended selling and only 11 per cent advised buying.

Singapore's office sector was rated a 'hold' by 54 per cent of respondents, while 23 per cent advised buying and 21 per cent recommended selling. For the industrial/distribution property sector, 52 per cent of respondents gave 'hold' recommendations, 34 per cent advised buying and 13 per cent said 'sell'.

The survey, based on 180 respondents ranging from global investors, property developers and brokers, looked at the investment and development prospects of 20 metropolitan markets in the Asia-Pacific region.

'Asia shares the same liquidity crisis that the rest of the world is facing,' said Stephen Blank, ULI's senior resident fellow for finance. 'Financial institutions - whether international or national, regional or local - are reluctant to extend credit as deleveraging reduces balance sheet lending capacity.'

And for Singapore, besides the credit squeeze, another problem is the seemingly generous pipeline of development projects which may be completed during a period of sagging interest from foreign business investors, said PwC tax partner David Sandison.

S'pore May Face 'Worst Quarter' In Early 2009

Source : The Straits Times, Dec 6, 2008

First quarter economic output expected to shrink by 7% to 8%

SINGAPORE could face its worst quarter of economic contraction early next year in year-on-year terms, an economist has warned.

Dr Chua Hak Bin, head of equity research at financial giant Citigroup, said yesterday that next year's first-quarter economic output could shrink by 7 per cent to 8 per cent compared with the first quarter this year.

He was speaking at the Singapore Press Club's seminar on the financial crisis held at Singapore Press Holdings' News Centre in Toa Payoh North.

'The worst quarter of contraction we have faced has been minus 6.5 per cent during the tech bust. But we are likely to see minus 7 to 8 per cent in the first quarter next year. This would be the single worst contraction ever,' he said.

Dr Chua was using year-on-year figures; Singapore has suffered worse quarter-on-quarter contractions.

He also predicted that Singapore could suffer five straight quarters of contraction, again in year-on-year terms. The Republic has never had more than four consecutive negative quarters and suffered three during the Asian financial crisis.

The economy here shrank by 0.6 per cent in the third quarter. Dr Chua said five quarters - that is another four quarters including the current quarter - is his worst-case scenario and would be caused by further weakness in the regional economies such as Malaysia and Indonesia as the crisis moves closer to home.

'It's not too hard to imagine our neighbourhood also falling into a recession, which also questions whether Singapore can hold up,' he said.

For those countries, oil constitutes the bulk of their trade, but with plunging oil prices - it has now fallen below US$44 a barrel - as well as commodity prices in general, the risks to those economies have escalated, Dr Chua said.

Global demand for exports such as Singapore's has taken a beating, and the Republic's exchange rate has not weakened dramatically. Therefore, it is hard to see Singapore exporting its way out of recession, he said.

But he said the Singapore dollar is likely to see further weakening to $1.60 to $1.65 against the US dollar in the next six months. It is now trading at $1.52.

However, there is some light at the end of the tunnel. Debt levels among Singaporeans are not high, he said, and the Republic, as a net importer, will find some relief from lower oil prices.

The country is also in a better position to use fiscal policy to help the economy. He said some $3 billion to $4 billion could be used in the upcoming Budget to support a substantial cut in both corporate and personal income tax rates.

The Government may also restart $4.7 billion worth of deferred construction projects that will create jobs and stimulate the economy, he added.

Mr Manu Bhaskaran, head of economic research at the Centennial Group, who also spoke at the seminar, echoed similar sentiments when he predicted that the global economy would get a lot worse before things got better.

He said that there would be a lot more corporate bankruptcies with iconic names going down and also more bad news coming out of China as it faced problems of its own financial system as well as weakness in underlying demand.

'There will be a much worse downturn than what many have forecast. The next six months are going to be particularly painful. By the end of next year, we could see many economies with bad deflation,' he said.

He predicted a recovery in late 2010 and said Asia will do better post-crisis than the rest of the world.


'The worst quarter of contraction we have faced has been minus 6.5 per cent during the tech bust. But we are likely to see minus 7 to 8 per cent in the first quarter next year. This would be the single worst contraction ever.'

Dr Chua Hak Bin, head of equity research at financial giant Citigroup

PM Does Not Eexpect Global Depression

Source : The Straits Times, Dec 6, 2008

Instead, he sees a long downturn, then years of slow growth

PRIME Minister Lee Hsien Loong does not foresee a global depression despite the current financial storm sweeping the world.

'I think that global depression is not on the cards. Governments have learnt the lesson of the 1930s and they will not repeat the same mistakes,' he said.

'So this is not the end of the world.'

Still, it could be a long downturn followed by several years of slow growth, he said, during an hour-long forum with members of the Foreign Correspondents' Association.

'The recession, to the best of the experts' judgment, may last a year, maybe if we're lucky, three-quarters (of a year),' he noted.

'But the likely to be weaker than from previous recessions and we must be prepared for several years of slow growth.'

Mr Lee, however, noted that experts had been wrong many times before and they could be wrong again.

In a speech before the question- and-answer session, he noted that events had turned out worse than expected.

'Governments are improvising, making policy on the fly, venturing into uncharted territory, throwing every possible measure into the mix to try and restore confidence, restore stability, maintain employment and get growth going again,' he said.

Such swift action by countries such as the United States and China to counter the recession could prevent the world from sliding into a depression.

China's 4 trillion yuan (S$886 billion) stimulus package is 'a plus for the rest of the world', he said, but its impact is also marginal.

In the US, President-elect Barack Obama has assembled the 'strongest possible economic dream team'.

'But even with the best team and the best policies, it's not possible to turn things round overnight,' he said.

That is because it takes time to change habits. The Americans have to save more, consume less, and invest more in infrastructure, while Asian countries have to continue to save but also consume more.

'It will be some time before the world goes back to sustained growth again.'

Meanwhile, Singapore, which has suffered recession in the second and third quarters of this year, is taking steps to help workers and businesses cope, with a training programme and easier access to loans.

These measures precede the Budget next month. 'The most important thing we should try to do is to keep our businesses afloat and keep our people in jobs,' he said.

Lower-income families can look forward to aid in the Budget, Mr Lee added.

Economist Choy Keen Meng from Nanyang Technological University agreed with Mr Lee, saying that a long-lasting depression can be averted as policymakers worldwide produce a coordinated response and the right fiscal policies.

He said Singapore needed a 'substantial stimulus' Budget package, with cash handouts and rebates to encourage people to spend.

Singapore Faces Its Longest Recession: Analysts

Source : The Business Times, December 6, 2008

THE current recession here will last till at least the middle of 2009, making it Singapore's longest recession ever, according to Chua Hak Bin, Head of Equity Research, Citigroup. Speaking at a forum organised by the Singapore Press Club yesterday, he added however that there could be a few silver linings for Singapore.

At the same forum, Manu Bhaskaran, CEO of economic consulting and advisory firm Centennial Asia Advisors, painted a gloomy outlook for the economy, noting that trade financing has been badly affected, with shipping rates falling over 90 per cent from their peak. This would have a significant impact on Singapore's trade-dependent economy, he noted. Monetary and fiscal easing by governments around the world, while appropriate, would take around 12 months to start having positive effects, he said. 'But we need more demand right now,' he added.

In the local context, Mr Bhaskaran pointed out that banks are being extremely cautious about approving loans, and thus foreign investors - even if they are interested in coming into Singapore - might have problems getting the funding they need for projects here. Many large projects have already been postponed, and more are likely to suffer the same fate, which would put further downward pressure on growth. He added that the IMF's forecast of 2 per cent growth for Singapore next year was 'highly optimistic'.

Mr Chua pointed out that up to 60 per cent of the world - China and India being the exceptions - is now in recession, which points to the slowest global growth since the global recession of 1981. He pointed out that in the US, asset values are still dropping, with housing prices set to fall about 33 per cent from their peak before bottoming out. He estimated this would happen by around the end of 2009.

With the sharp cutbacks in spending by Americans as well as Europeans, Asia would inevitably be affected. There would also be downward pressure on some Asian currencies, including the Singapore dollar, he said, which could go to 1.60-1.65 to the US dollar next year.

However, not all is gloomy for the Singapore economy, according to Mr Chua. The dramatic fall in the price of oil - from a high of over US$147 a barrel in July to less than US$50 at present - has benefited Singapore, which is a net importer of oil. Cheaper oil has led, for instance, to lower electricity prices, a trend which Mr Chua projected would continue next year.

Furthermore, Singapore is in a much better fiscal position than many countries to respond to the crisis, he felt.

Mr Bhaskaran called for greater global co-ordination in dealing with the crisis. Asian countries also need to coordinate more, he said, adding that Asean is the best platform for this. 'That is why China, Japan and Korea come to Asean, because they cannot do it themselves,' he pointed out.

Mr Chua and Mr Bhaskaran were guest speakers at the forum on 'The Global Financial Crisis: How Will It Play Out?' held at the SPH auditorium. The forum was moderated by BT's Associate Editor Vikram Khanna.