Hopes Of A Quick Turnaround In Property Market Fizzling Out

Source : Channel NewsAsia, 22 April 2009

Hopes of a quick turnaround in the property market here are fizzling out.

Property consultancy DTZ said the probability of a full recovery in the Singapore property market by the end of this year is low.

Singapore skyline

In a research report issued on Wednesday, DTZ predicted there is only a 0.1 per cent chance that the Singapore office rental market will recover by year-end.

The residential market here is not faring much better, with only a 0.9 per cent probability of recovery by the third quarter and a 5.8 per cent chance by the end of the year.

DTZ said the Singapore residential market has a better chance of bottoming by mid 2010 and stage a gradual recovery from then onwards.

It also expects the office market to lag the residential market in staging a recovery.

Factors that DTZ used in its forecast include Singapore's stock market index and the cumulative unsold inventory held by developers. - CNA/yb

Recovery Expected Only After Mid-2010

Source : The Straits Times, April 23 2009

PROPERTY MARKET: STAY OUT?

Experts say housing market will rebound after stock market does.

BUYERS snapping up homes in recent weeks may be jumping into the market way before it has reached the bottom, according to new research.

Real estate consultancy DTZ is tipping a gradual property market recovery only from the middle of next year. The firm bases its view on a new report from its Asia forecasting unit.

ST PHOTO: ALPHONSUS CHERN.

This shows how a slump, or recovery, in the stock market is always mirrored in the property market, but only after one or more quarters.

Or to put it more bluntly: The housing market will not recover until at least one quarter, or even a year, after the stock market recovers.

And as any stock market investor knows, the Straits Times Index (STI) is well down from its 2007 peak, even though it has risen slightly recently.




















'The STI reflects people's view of the economy so its recovery will really depend on clear signs of an economic recovery,' said DTZ's senior director of consulting and research Chua Chor Hoon.

Experts have long noted that a recovery in the stock market typically precedes an economic recovery, with a recovery in the property market after that.

'It's all co-related in one way or another. The stock market is usually the earliest indicator but it's not hard and fast... its timing might be off,' said Daiwa Institute of Research analyst David Lum.

Last week, the Government said it expects gross domestic product to contract by 6 per cent to 9 per cent this year, well up on an earlier forecast of a 2 per cent to 5 per cent contraction. DTZ's study also underlined the high levels of unsold stock held by developers - another drag on prices and an eventual recovery.

The report indicated that the residential market thus has a higher chance of bottoming out only by mid-2010 and then staging a gradual recovery.

Mr Lum said the property market has already started to correct so anyone who bought recently would not have purchased at the peak.

If prices fall further, these people will not be happy, but they would have been comfortable with the price levels they bought into and will not be overstretched as they would have thought about their purchase, he added.

DMG & Partners Securities investment analyst Brandon Lee believes the mass market segment would have bottomed out at around $550 psf to $600 psf so recent buyers may not have much to worry.

Those who bought prime homes, however, may have gone in too early. Mr Lee sees the property market bottoming out only in the first half of next year.

'Crises in the past have lasted for six to eight consecutive quarters and we are only half way through,' he said.

'Further, equity markets are still volatile and prices have not reached the bottom for prime properties. Interest in prime property remains very subdued.'

The property market remains largely weak, even though recent sales of new private homes brought a glimmer of hope to the market. First-quarter new private home sales hit 2,660 units, representing 62 per cent of all new private homes sold during the whole of last year.

Whether it was pent-up demand, discounted levels or other factors, sales did reach very high levels given the recession.

But most sales were in the mass market segment, which consultants tip to be the best-performing sector this year.

Demand for prime and high-end homes remains sluggish.

'Since when does a 'rebound' in one segment signal a recovery for the entire market?' asked Chesterton Suntec International head of research and consultancy Colin Tan.

'The greatest danger we face now is complacency...If it were an ordinary recession, I can understand why we are starting to call this period of optimism the first signs of a recovery, but it is not,' said Mr Tan.

'The recovery cycle will be like no other. There will be further twists and turns.'


Unsold stock rising

THE DTZ report highlighted another indicator: unsold stock of new housing held by developers.

It observed that the Straits Times Index has, since 1993, been leading the Urban Redevelopment Authority's non-landed residential price index by one to four quarters.

Historically, the level of unsold stock - which has risen to around 21,000 units since the third quarter of 2007 - has preceded the property market price recovery by two to 12 quarters, said Ms Chua Chor Hoon, DTZ's senior director of consulting and research.

IMF Sees No US Growth In 2010

Source : The Straits Times, April 22, 2009

WASHINGTON - THE IMF unveiled a darker outlook for the US economy on Wednesday than just three months earlier, forecasting a deeper recession in 2009 and no growth at all in 2010.

The International Monetary Fund sharply downgraded its outlook for the world's biggest economy, predicting a decline in output of 2.8 percent for all of 2009 and zero growth for 2010.

The latest figures in the IMF's semiannual World Economic Outlook report were cut from the IMF's January update by 1.2 percentage points for 2009 and 1.6 points for 2010. The forecasts are far more pessimistic than those from the US Federal Reserve, White House, congressional experts and many private economists.

'Despite large cuts in policy interest rates, credit is exceptionally costly or hard to get for many households and firms, reflecting severe strains in financial institutions,' the IMF report said. 'In addition, households are being hit by large financial and housing wealth losses.'

US gross domestic product (GDP) fell at an annualized pace of 6.3 per cent in the fourth quarter of 2008 and the IMF noted that 'recent data suggest another substantial drop in the first quarter of 2009.'

'There have been some tentative signs of improving business sentiment and firming consumer demand, but employment has continued to fall rapidly - 5.1 million jobs have been lost since December 2007 - pushing the unemployment rate to 8.5 percent in March.'

The IMF report said the US central bank has cuts its base rate to virtually zero, effectively exhausting its main tool of monetary policy and is now using unconventional methods to stimulate the ailing economy.

The IMF cited both 'upside' and 'downside' risks to its forecast. It said that the economy could recover more quickly if financial conditions improve but also cited a 'potential for further intensification of the negative interaction between the real and financial sides of the economy.'

'The housing sector could continue to deteriorate, further declines in asset values could increase insolvency problems for banks and further reduce credit availability, deflation could raise real debt burdens, and demand from other economies could fall more than anticipated,' the report noted.

It said the most pressing policy issue is 'to restore the health of the core financial institutions' and to 'break the cycle of falling asset prices, rising losses in financial institutions, and tighter credit.' -- AFP

Modest Recovery For Asia In '10

Source : The Straits Times, April 22, 2009

BEIJING - ASIAN economies could see a modest recovery next year, boosted by stronger export demand and stimulus spending, the International Monetary Fund said on Wednesday.

Trade-driven Asia has been hit harder than expected by the worst global downturn since the 1930s, though many economies are stronger than they were during the region's 1997 financial crisis, the Washington-based IMF said in a report.

'A modest recovery is projected in 2010, underpinned by a pickup in global growth and a boost from expansionary fiscal and monetary policies,' it said.

Japan, the region's economic giant, should eke out 0.5 per cent growth in 2010 after shrinking by 6.2 per cent this year, according to the IMF. It said South Korea, Taiwan and other newly industrialized economies were forecast to grow by 0.8 percent following a 5.6 per cent contraction this year.

Growth for China, India and other emerging economies is forecast to rise to 5.3 per cent after falling to 3.3 per cent this year, the IMF said. The 185-nation group advises governments on development and provides loans for balance of payments problems.

But the IMF also cautioned that Asian economies face risks if global demand weakens further and said they can do more to reduce reliance on exports by boosting domestic consumption.

'A key concern is that a deeper or longer recession in advanced economies outside Asia will reduce external demand even further, with negative repercussions for exports, investment and growth,' it said.

The main challenge will be to 'achieve a sustained reduction in the region's reliance on exports as a source of growth,' the IMF said. Though China, Japan and others have launched stimulus plans, it said, 'there is scope to do more to bolster domestic demand in a number of economies' that can afford it.

Asia had been expected to suffer less from the global crisis due to its strong banks and lack of exposure to US mortgage debt that hurt Western institutions, but was hit hard by the collapse of trade, the IMF said.

China has shown signs of recovery, with March factory output and auto sales improving, helped by Beijing's 4 trillion yuan (S$883 billion) stimulus. But economists warn any rebound could be hurt if trade declines further. China's growth is forecast to rise to 7.5 per cent in 2010 after falling to 6.5 per cent this year - half of 2007's 13 per cent rate. -- AP

Severe Recession Ahead

Source : The Straits Times, April 23, 2009

IMF ON WORLD ECONOMY

WASHINGTON - THE International Monetary Fund on Wednesday forecast the global economy will contract a punishing 1.3 per cent this year because the financial crisis is proving more entrenched than expected.

The International Monetary Fund forecast the global economy will contract a punishing 1.3 per cent this year because the financial crisis is proving more entrenched than expected. -- PHOTO: REUTERS

'The global economy is in a severe recession inflicted by a massive financial crisis and acute loss of confidence,' the IMF said in its semiannual World Economic Outlook (WEO) report.

The IMF warned the outlook was 'exceptionally uncertain,' with risks weighing on the downside, in its assessment that the world economy was sliding into 'the deepest post-World War II recession by far.'

It was the third time the IMF has slashed its 2009 world growth estimate this year. In January, the multilateral institution saw growth of 0.5 per cent, but by March it had forecast a contraction of between 0.5 per cent and 1.0 per cent.

According to IMF economists, the global economic and financial crisis will hammer the advanced economies the hardest, with their gross domestic product (GDP) - a measure of a country's goods and services output - shrinking at an annual rate of 3.8 per cent this year.

Emerging market and developing countries would generate weak growth of 1.6 pe rcent.

The spreading downturn, stemming from a dramatic escalation of the global financial crisis last September following the collapse of US investment bank Lehman Brothers, would affect countries representing three-quarters of the global economy, it said.

'Underlying the downgrade to the current forecast is the recognition that financial stabilisation will take longer than previously envisaged, given the complexities involved in dealing with bad assets and restoring confidence in bank balance sheets, especially against the backdrop of a deepening downturn in activity that continues to expand losses on a wide range of bank assets,' the 185-nation institution said.

The grim report came as finance chiefs gather in Washington for this weekend's meetings of the IMF and its sister institution, the World Bank.

The IMF predicted a slow recovery next year, with the rate of contraction expected to 'moderate' from the second quarter onward. -- AFP

Horizon Towers - Failed Deal Gets Owners $1.5m

Source : The Straits Times, April 22, 2009

HORIZON Towers owners may reap some $1.5 million from a failed en-bloc deal which in turn could help pay their legal bills.

HORIZON Towers owners may reap some $1.5 million from a failed en-bloc deal which in turn could help pay their legal bills. --PHOTO: ST

The sum represents the interest earned on the $50 million deposit paid by the would-be buyers when the $500 million deal was inked in 2007.

The deposit was paid when the initial option to purchase and sales pacts were signed. The deal was made between the condominium's sales committee on behalf of the majority owners, and property developer HPL and two partners.

The en-bloc deal derailed early this month after a handful of objectors fought all the way to the Court of Appeal, which ruled for them. The $50 million deposit is understood to have been returned to the would-be buyers. But the deal provided for the interest to be given to the sellers, probably including the minority objectors. Not all contracts spell out how to deal with the interest earned on the 10 per cent deposit from the option to purchase and sales agreements, which in this case was substantial, said lawyers.

But today's sales-savvy sellers are likely to insist the interest goes to them if a sales bid falls through, said lawyer Philip Fong. In disbursing the money, the sales committee would have to include the minority objectors, as the the Court of Appeal decision made clear the sale contract applied to all owners, said Mr Fong, a partner of Harry Elias Partnership.

It is not clear how far $1.5 million will offset legal costs, which have not been totalled up. Horizon Tower sales committee member Mamata Kapildave Dave, 40, said yesterday no decision had been made yet on how the 210 owners would deal with the $1.5 million while the court assesses legal fees.

The total costs in the long-standing case would include lawyers' fees for the initial 17-day Strata Titles Board hearings, two High Court appearances and the final Court of Appeal session.

A total of 173 majority owners have already paid some $2.6 million, or $15,000 each, while a group of three minority owners are reported to have coughed up some $1.5 million in lawyers' fees.

Meanwhile, lawyers from Allen & Gledhill, representing the failed buyers, are going to court today about a suit that has been brought against the sales committee. The suit was filed in 2007 and sought a declaration that the sales committee had allegedly not done all it could to make sure the sale went through.

According to court documents filed, the suit also sought damages for alleged breach of contract. It has been in abeyance since February, pending the outcome of the Court of Appeal's judgment, which was delivered earlier this month.

'They can either go ahead with the suit, amend the suit or drop it altogether,' said Ms Mamata.

'We are on the horizon, and there is sunrise and there is sunset.We hope in good faith everything goes right.'

Home Prices To Fall More

Source : The Straits Times, April 22, 2009

BUYERS snapping up homes in recent weeks may be jumping into the market way before it has reached the bottom, says new research.

BUYERS snapping up homes in recent weeks may be jumping into the market way before it has reached the bottom, says new research. --PHOTO: CDL

Real estate consultancy DTZ is tipping a gradual property market recovery only from the middle of next year so people buying now could be spending more than they need to.

The firm bases its view on a new report from its Asia Forecasting unit. This shows how a slump - or recovery - in the stock market is always mirrored in the property market, but only after one or more quarters.

Or to put it more bluntly: the housing market will not recover until at least one quarter or even a year after the stock market recovers.

And as any stock market investor knows, the Straits Times Index is well down on its 2007 peak, even though it has gone up slightly recently.

'The STI reflects people's view of the economy so its recovery will really depend on clear signs of an economic recovery,' said DTZ's senior director, consulting & research, Ms Chua Chor Hoon.

Experts have long noted that a recovery in the stock market typically precedes an economic recovery, with a recovery in the property market after that.

'It's all corelated in one way or another. The stock market is usually the earliest indicator but it's not hard and fast... its timing might be off,' said Daiwa Institute of Research analyst David Lum.

DTZ's study also underlined the high levels of unsold stock held by developers, another drag on prices and an eventual recovery.

DMG & Partners Securities investment analyst Brandon Lee sees the property market bottoming out only in the first half of next year.

Read the full story in Thursday's edition of The Straits Times.

Whiff Of Revival In Northeast US Home Market

Source : The Business Times, April 23, 2009

But strong recovery some way off despite increased interest as buyers still finding it hard to get mortgages

(SOMERVILLE, Massachusetts) After one of the worst slumps in memory, the housing market in the Northeast United States is stirring to life with more buyers on the prowl and bigger crowds at home showings. But few are in a rush to buy and many of those willing to spend find it hard to get mortgages, suggesting a strong recovery is still some way off and those hoping for a swift return to the go-go days will be disappointed.

Looking up: Factors such as low prices, low interest rates and a new-homebuyer tax credit may turn the tide

Many home-buyers are like 26-year-old Jessica Doctoroff, who is taking her time as she hunts for her first home in the densely populated neighbourhoods around Somerville, a middle-class Massachusetts city that neighbours Boston.

After years of renting and living with roommates, the insurance manager wants her own home and is ready to buy. She's viewed about 20 condominium apartments since February and has seen plenty of bargains get even better. One two-bedroom apartment had its price cut by US$25,000 and another was reduced just 10 days on the market.

'I don't feel like there is a rush,' she said after viewing a 1,177 sq ft two-bedroom apartment priced at US$499,000. 'There's a lot more people coming out to look at these places, that's true, but there's a lot more property on the market.' Massachusetts was one of the frothiest markets in the boom.

In the first quarter of 2000, the state ranked first in the pace of year-on-year house price rises in the country. And from 1995 to 2004, home sales notched double-digit growth.

But the recession is hammering the region. Home sales fell by 11 per cent year-over-year in February in Massachusetts, 15 per cent in neighbouring Rhode Island, 22 per cent in Maine and 26 per cent in Connecticut, according to the Federal Reserve's 'Beige Book' survey of economic conditions released last week.

Home prices fared even worse. The median price of a home in those four states plus New Hampshire fell 17 per cent or more year-over-year, including a 26 per cent drop in Rhode Island where the unemployment rate has scaled double digits.

Real-estate brokers agree those numbers are dismal but say several factors may turn the tide - from low prices to low interest rates and a new-homebuyer tax credit. Mother Nature also could help as warmer weather and sunshine draw bigger crowds to home showings after an unusually cold winter.

Expectations are high for a spring thaw in sales. 'It's definitely getting better,' said real-estate broker Stephen Bremis of Bremis Realty Inc in Somerville. Attendance at the home showings he organises has nearly doubled since February. He sold two houses in three days last week. He said buyers are responding to a drop in interest rates that has pushed the national average on a 30-year fixed-rate loan to around 4.85 per cent, the lowest on record, along with a tax credit of up to US$8,000 for qualified first-time buyers, part of the federal housing rescue plan passed in February. Some banks are also offering unprecedented incentives, like money for closing costs to unload foreclosed properties.

Brokers point to other positive signs such as a rise in Massachusetts condominium sales and prices in February compared to the previous month, according to the Fed's Beige Book.

'It's likely that we have seen or are very close to seeing the bottom in home sales. But that's very different from saying there is going to be a meaningful pickup in sales,' said David Berson, chief economist of mortgage insurer PMI Group. He cites an index of housing affordability calculated by the National Association of Realtors that jumped in January to its highest since tracking began in 1970.

'If you look at all the recessions for which we have housing data - and that goes back into the 1960s - home sales have bottomed and started to move up always before the official end to the recession,' he said. 'Before you can run you have to walk. And home sales bottoming is an important precondition for the housing market overall to recover. And I think that is where we are now.' But for many, the credit crisis has made getting a mortgage harder than ever as banks demand larger down payments and more liquidity. And condominium sales have been slowed by new rules that make it hard to get conventional loans unless 70 per cent of the apartments in a building are at least under contract to be bought.

'It used to be really difficult to find some buyers. And now there may be more buyers, but they are having a whole new battery of challenges, mainly financing,' said Marc Charney, president of Charney Real Estate in Wellesley, Massachusetts. 'So even if you have somebody who is ready, willing and able to buy, that doesn't mean much,' he said. 'The appraisers are also under such new scrutiny. That's another big factor.' In the housing boom of the 1990s, an appraiser valued homes based on sales transactions in the same neighbourhood going back six months. Many lenders tightened that during the recession, narrowing the timeframe for appraisals to three months.

The experiences of brokers in Massachusetts are echoed in other parts of the US Northeast.

'A lot more people are coming to shows. But they are taking a lot longer to make a commitment,' said Carol Tangorra of brokers Schweppe Burgdorff in Upper Montclair, New Jersey. -- Reuters

Property Transactions With Contract Dates Between April 6th - 11th, 2009

Dubai Home Prices May Slump 70% From Peak, Says UBS

Source : The Business Times, April 23, 2009

Falling demand, bank mortgage lending may prompt developers to merge

(DUBAI) Dubai house prices may slump as much as 70 per cent from their peak late last year as demand drops and banks fail to resume mortgage lending, prompting mergers, UBS AG said.

Credit squeeze: House prices in Dubai have slumped at least 25 per cent since their peak, and apartments have tumbled 39 per cent, UBS said. Falling property prices now raise the prospect of rising loan defaults

'We are still in relatively early stages of the property down-cycle in United Arab Emirates,' Saud Masud, a Dubai-based analyst at the Swiss bank, wrote in a report to clients dated Tuesday.

'We believe risk-reward profiles are not yet compelling for investors to consider market re-entry, hence continued price declines are expected.'

Economic growth in Dubai, the second-biggest of seven states that make up the UAE, slumped after the worst financial crisis since the 1930s hurt its property, financial services and tourism industries.

The economy may contract 2 per cent to 4 per cent this year, Standard & Poor's Ratings Services said in a report last month.

UBS downgraded Emaar Properties PJSC, the UAE's biggest developer, and Union Properties PJSC to 'sell' from 'neutral' as first-quarter results 'will be disappointing'.

House prices in Dubai have slumped at least 25 per cent since their peak, and apartments have tumbled 39 per cent, UBS said.

Dubai's majority expatriate population may drop 8 per cent this year and a further 2 per cent in 2010 as residents lose their jobs and leave within 30 days in accordance with the emirate's visa laws, the Swiss bank said.

Property prices in Dubai quadrupled in the five years to September 2008, helped by new laws allowing foreigners to own property and a growing expatriate workforce.

Falling property prices now raise the prospect of rising loan defaults.

Property loans of UAE banks, including mortgages, stood at 172.74 billion dirhams (S$70.92 billion) at the end of 2008, or 17.8 per cent of gross domestic product, the central bank said.

Dubai may see 'significant consolidation among its key developers in addition to smaller less visible ones,' UBS said.

The analyst started Abu Dhabi-based Sorouh Real Estate Co with a 'sell' recommendation and cut Aldar Properties PJSC to 'neutral' from 'buy'. -- Bloomberg

Two Signals Speak Volumes About Condo Prices

Source : The Business Times, April 23, 2009

Study by DTZ finds STI and developers' stock to be reliable guides to turning points

THE Straits Times Index and cumulative unsold inventory held by developers have been found to be reliable indicators preceding major turning points for private apartment and condo prices in Singapore, according to a study by DTZ.























The STI has been observed to lead the Urban Redevelopment Authority's non-landed private residential price index by one to four quarters since 1993.

For instance, the STI peaked in the third quarter of 2007 - nine months before the URA's index peaked in Q2 2008.

Similarly, the cumulative unsold inventory of non-landed private homes - with sales licences - held by developers has peaked or bottomed between two to 12 quarters ahead of turning points in the URA's index.

DTZ also devised an internal risk assessment model to estimate the probability of future major turning points in the Singapore residential market.

It showed the risk of entering a correction phase has escalated considerably since Q2 2008.

The property consulting group said: 'Our assessment indicates that the probability of a full recovery by the end of 2009 - for the office and residential property markets in Hong Kong, China and Singapore - remains low.' DTZ added: 'Our internal model also indicates that the Singapore residential market has a higher chance of bottoming by mid-2010 (than by end-2009) and staging a gradual recovery from that point onwards.'

Both the Hong Kong and Singapore office markets have a lower probability of recovering by end-2010 than the residential markets in these two cities, as the office sector is more closely correlated with economic growth than the residential sector, DTZ reckons.

Asked whether the recent stockmarket rally will presage a recovery in home prices in Singapore, DTZ senior research director Chua Chor Hoon said: 'It's too early to say if the stockmarket rally will be sustained. A lot will hinge on when the economy recovers.'

Capitala Defers UAE Projects

Source : The Business Times, April 23, 2009

(ABU DHABI) Property developer Capitala, a joint venture of Abu Dhabi's Mubadala and Singapore's CapitaLand, said on Tuesday it was holding off on new projects and would offer more lower-end housing.

'We will defer any new launch until sentiment returns to the market,' Peter Wilding, deputy CEO, told Reuters on the sidelines of a property exhibition here, where Capitala is based.

'Demand is still there, but there is no positive sentiment at the investor level and occupier level. People are waiting and watching, but we are confident of the future because of the demand curves,' Mr Wilding said, adding the Abu Dhabi market was faring better than others in the region during the downturn.

'There is far too much high-end products, and there is stronger demand for more affordable housing products,' he said.

'There is a requirement to diversify our product offering.' - Reuters

Weaker Demand Hits Ascott Reit

Source : The Business Times, April 23, 2009

ASCOTT Residence Trust (Ascott Reit) posted a 23 per cent year-on-year drop in distributable income for the first quarter ended March 31, 2009 - from $14.2 million to $10.8 million.













In terms of distribution per unit (DPU), the fall is 24 per cent - from 2.33 cents in the corresponding quarter the year before to 1.77 cents. No distribution was declared for Q1 as Ascott Reit makes distributions to unitholders on a half-yearly basis.

Gross profit for the quarter fell 16 per cent to $19.9 million, while revenue registered an 8 per cent decrease to $42.1 million. The trust attributed the lower revenue to the weaker demand for serviced residences in China and Singapore, along with increased competition in Beijing and Shanghai.

The group's serviced residences in Singapore took a 27 per cent hit in revenue from $9.2 million to $6.7 million year-on-year with revenue per available unit (RevPAU) falling 33 per cent from $251 to $169 year-on-year.

'This decrease was due to lower occupancy as a result of reduction in demand from business travellers,' the group said yesterday. 'However, the performance of Indonesia, Vietnam and the rental housing business in Japan continues to be relatively stable,' said Chong Kee Hiong, chief executive officer of Ascott Residence Trust Management.

The group expects a maximum of $96 million to be due for refinancing in December. According to Mr Chong, Ascott Reit has already initiated discussions with banks to secure refinancing ahead of maturity.

While the group expects to remain profitable for 2009, it said that operating profit will be lower compared to the year before.

The counter closed half a cent lower yesterday, at 46.5 cents.