Property Market Sentiment Softens

Source : TODAY, Weekend, April 26, 2008

Supply of homes, vacancy rates up, but buyers discouraged by high prices

THE lacklustre property market seen in the first quarter of this year is likely to persist, with developers expected to launch more projects in the months ahead, increasing the supply of new homes even as buyers stay away.

The prices of homes in both the private and public sectors rose at a much slower pace in the first quarter while the volume of transactions remained thin.























Private home prices rose 3.7 per cent in the first quarter, according to the Urban Redevelopment Authority (URA), lower than its earlier estimate of 4.2 per cent and well below the 6.8-per-cent rise in the previous quarter.

Developers sold 762 private residential units in the quarter, the lowest number of transactions since Sars-stricken 2003.

The URA data released on Friday for the full three months were an update from its April 1 estimates, which were based on transactions in the first 10 weeks of the quarter.

“This is quite a marked difference and it shows that in the last two weeks of the quarter, there has been some evidence of price cutting in the market,” said Mr Donald Han, managing director of real estate firm Cushman and Wakefield.

The vacancy rate for completed private residential units rose 6.3 per cent, up from 5.6 per cent in the previous quarter, the URA data showed. With more supply in the market, there is added pressure to reduce prices.

“If the vacancies continue rising at this rate, the market will definitely turn this year. Prices will peak for sure,” said Mr Colin Tan, head of consultancy and research at Chesterton International.

Among the projects to be launched in the coming months are the Marina Bay Suites and Duchess Royale on Duchess Avenue. They add on to developments such as The Verte at Telok Kurau and Waterfront Waves at Bedok Reservoir Road that were launched in the first quarter.

Foreigners — who have been a key catalyst in the 30-per-cent jump in private home prices last year — are increasingly being discouraged by high asking prices.

This is especially so amid the continued uncertainty over the United States economy and the fallout from the sub-prime mortgage crisis.

Kuwait Finance House, which last December took an option to buy 97 units of the luxurious Goodwood Residence condominium for $818 million from Guocoland, has decided not to go through with the purchase.

The lacklustre real estate market in Singapore and the region has affected the performance of listed property firms.

Keppel Land reported a 7.6-per-cent fall in property sales to $273.1 million in the first three months of the year due to the increasingly cautious sentiment.

Mr Ku Swee Yong, a director at property consultancy Savills, said that until global stock markets show clear signs of a recovery, investors would remain wary of putting their money in real estate. He noted that banks here had not been selling many home loans this year.

“Other parts of consumer expenditure are still going strong, it’s just that property is taking the brunt of it,” said Mr Ku.

For the office sector, rentals increased at a slower rate of 7.3 per cent, down from 10.9 per cent in the previous quarter.

The URA said there was a total supply of 16 million sq ft in gross floor area of office space at the end of the first quarter.

Since last July, the Government has made available land on short-term leases for transitional office sites to meet the high demand for such space.

Mr Han said that the pace of office rental increase would continue to moderate for the rest of the year.

Mr Nicholas Mak, a director from Knight Frank, said that despite this moderation in pace, rentals will still rise by 15 to 20 per cent this year as “demand for office space is still healthy”.


RESALE TRANSACTIONS FOR HDB FLATS DOWN 6 PER CENT

The public housing market is also showing nascent signs of waning.

The number of resale transactions of Housing and Development Board (HDB)flats fell 6 per cent to 6,360 in the first quarter of the year from 6,750 in the previous quarter. Meanwhile, the HDB Resale Price Index rose 3.7 per cent from the previous quarter, down from 5.7 per cent in the fourth quarter of last year.

“HDB flat buyers were resisting the rise in resale prices,” said assistant vice-president of property agency ERA Eugene Lim.

The median cash-over-valuation (COV) for resale transactions was $21,000 in the first quarter, slightly lower than the previous quarter’s $22,000. The COV is the difference between the actual transacted price of the flat and its valuation. It cannot be paid from a loan or from savings in the Central Provident Fund.

“We saw the resale market hitting resistance level in the fourth quarter last year as HDB flat buyers do not have or are not willing to part with so much cash. This resistance carried through to the first quarter,” said Mr Lim.

“Very often, the deal cannot be closed or takes much longer to close because of unrealistic sellers demanding high COV,” he added.

Also, with more new flats coming on stream, some demand will be removed from the resale market. Buyers who can afford to wait up to three years for the completion of the flats may prefer to buy new flats directly from the HDB as this often involves a very small or no immediate cash outlay.

For His Daughters, He Fought En Bloc Battle Alone

Source : TODAY, Weekend, April 26, 2008

IT HAS been his home for about 30 years, one he bought with his late parents. His two daughters attend school close by and they have pleaded with him not to sell the apartment.

His is a familiar dilemma for minority dissenters caught up in en bloc deals across Singapore. Some have, like him, fought determinedly to cling to their homes.

But in one respect, 52-year-old business consultant Ken Lee has gone where none has yet.

Single-handedly, he has taken his case against the $202-million sale of Airview Towers to the authorities and won it twice. Each time, the father of two, who has had no legal training, represented himself.

Then on Thursday came a reversal of fortune that left him bewildered.

After both the Strata Titles Board (STB) and the High Court threw out the sale of the drab, 100-unit estate on River Valley Road — on a technicality — the Court of Appeal overturned the lower court's decision and threw the case back to the STB.

He has also been ordered to pay his opponents' legal costs for the STB, High Court and Court of Appeal hearings. Today understands this amount, to be decided in court, could be anywhere from $150,000 to $300,000.

"I am confused and disappointed, but I will take it in my stride," Mr Lee told Today.

During an hour-long chat on Friday at a cafe, Mr Lee — who was initially reluctant to be interviewed — seemed guarded and declined to be photographed.

Mr Lee, who travels frequently for work, had bought the apartment at Airview Towers some three decades ago. He now lives there with wife and two daughters, who are in Secondary 1 and 4.

He told Today his decision to fight the en bloc sale was partly about fulfilling a vow to his children.

"They said: 'Papa, if you sign, we'll throw rotten tomatoes at you.' They know I am keeping my promise to them," he said. "For me, it's a home. I lived there with my parents for a long time before they passed on."

A pragmatist, he had originally decided that if 80 per cent of the owners agreed to the sale, he "wouldn't go against it, since that is the law".

And so sure was he that this consent would be obtained that he shopped around for a new home and bought a "replacement unit" in April last year, which he renovated. He is now leasing out the new place.

So, why did he lodge an objection? Because he felt the proper application process "had not been followed" (see box).

Why not rally the other minority dissenters behind his cause?

"I don't rope people. If they come and support, I am thankful," he said.

Mr Lee said he has not decided if he would engage a lawyer for the next STB hearing, saying that it would add to his legal costs should he lose again.

So far, he says, he has experienced no animosity from the other residents, many of whom — like Mr Lee — have already bought new homes.

Many neighbours are still friendly, he said, although there were a few "unhappy that their plans were not working out".

Had the sale gone according to plan, they should all have moved out this month.

Said Mr Lee: "If they had done everything properly, this is the time everyone would be shaking hands and saying their goodbyes."

THE Airview SAGA

Last July, Mr Lee filed an objection to the sale, saying due process was not followed.

The sale committee had applied for the estate to go en bloc after the legal quota of 80 per cent of signatures was attained. Listed property player Bukit Sembawang, which won the site tender, was planning a 36-storey condominium project.

But then Mr Lee found that two of the units had changed hands during the one-year period given for residents' assent to be garnered – and the new owners had not signed the collective sale agreement in time.

The STB voided the en bloc application as the two new owners could not be included in the consensus that had expired; their consent was needed for the sale to proceed. The majority owners appealed, but the High Court dismissed their case on the same grounds.

On Thursday, the Court of Appeal overturned that decision – ruling that the order of sale would apply as long as 80 per cent of signatures in assent were garnered within 12 months. This is to avoid the deal being complicated should owners change their minds and transfer ownership.

The plaintiffs are represented by Senior Counsel Harry Elias, Foo Soon Yien and Toh Wei Yi of Harry Elias Partnership.

His 27-Year Affair With Numbers

Source : TODAY, Weekend, April 26, 2008

Straight-talker Dr Tony Tan has never been afraid to air contrarian views on the country's economy

CRYSTAL ball-gazing is a risky business. Miss the mark and it's egg on your face. Hit the bullseye and acclaim follows.

Of course, whether there is a reaction at all can depend on who you are and whether people even remember what you'd said.

With Dr Tony Tan Keng Yam, people remember. They will recall the former Deputy Prime Minister's ominous words earlier this week, when he said the world could be facing the worst recession in 30 years.

Media agencies flashed the pronouncement coming from a man who is now No 2 at the Government of Singapore Investment Corporation (GIC), a major sovereign wealth fund. When the news reached economists' ears, they said the prognosis was too bearish.

Three days later, the newsmaker put in qualifiers.

"Let me state clearly that this is not GIC's forecast for the global economy. It is a scenario which GIC is considering," Dr Tan, 68, who has been GIC's deputy chairman and executive director since retiring from politics in 2006, said in a statement Today received on Friday.

To be precise, it was the gloomiest of three scenarios on the investment firm's radar. One, optimistically, sees the end of the credit crisis and no recession anywhere. The second scenario is a mild US recession and no world recession, while the third is a deep, prolonged global recession.

"In light of the current fluid and uncertain times, the probability of the pessimistic scenario, while not the highest, has risen to a level that warrants serious consideration by GIC," he said, on why he highlighted the scenario during GIC's Staff Conference on Monday.

Dr Tan and his oft-surprising economic talk go a long way back. In his 27 years in politics, he would regularly offer his take on the economy's pulse, even when his portfolio did not include trade or finance.

He also came to be known as having an independent mind, confident enough to air opinions contrary to those of his Cabinet colleagues. One of those watersheds was in 1985.

Singapore was buckling under a global slowdown and a domestic burden: The Government's high-wage policy aimed at moving the labour-intensive industries towards high-tech activities had made the island an unattractive place to do business.

A rescue team was despatched in April 1985. Mr Lee Hsien Loong, then the Minister of State for Trade and Industry, led a committee to dish out remedies including tax breaks. Still, the recession raged on.

In December, Dr Tan — the Minister for Trade and Industry — proposed the unthinkable: Slash employers' Central Provident Fund (CPF) contribution rate, then set it at 25 per cent.

This was resisted initially by many, including Mr Lee.

But cool-headed calculation prevailed and the employer's CPF rate tumbled to 10 per cent in February 1986. The pro-business move was credited with saving the economy and prompting a rethink of CPF as a macroeconomic tool.

"That was brave and correct," says Mr Charles Chong, who served as a rookie Member of Parliament at Sembawang constituency under Dr Tan from 1988 to 1991.

"He was never hesitant to express views that deviated from the mainstream."

Such as in 1999.

Dr Tan publicly called Government scholarships "silly", because employers are forced to hold positions for a scholar, who might turn out to be unsuitable for the job or unwilling to join them after his studies.

Why not give out tuition loans instead, he suggested.

No, came the reply from then-Prime Minister Goh Chok Tong and Mr Lee, the other Deputy PM at the time.

A deviating prognosis

Behind Dr Tan's refreshing views, say those who know him, is his private-sector background.

Before standing for elections in 1979, this nephew of the late Tan Chin Tuan — OCBC's long-time chairman — was the local bank's general manager for 10 years. The stint must have sharpened Dr Tan's keen interest in financial matters and attuned him to the concerns of commercial businesses.

In fact, on wide-ranging matters, Dr Tan could "quickly distil the main issues", said Mr Chong.

One of his passions was scrutinising the economic forecasts of the Ministry of Trade and Industry (MTI). There were times when he stated, on record, his own prognoses — and they would differ from those of the ministry.

In August 1997, for example, he said that while the MTI had predicted full-year growth to be 5 to 7 per cent, the turmoil in Asia's currency markets might result in "slower growth" for the whole region.

Three days after he spoke, the MTI upgraded its forecast range to 6 to 7 per cent because of a rebound in the manufacturing industry.

On how Singapore's economy should evolve, Dr Tan had myriad ideas, some of which involved using words that flew over the head of the layman.

"Sawtooth economy", "growth discontinuity" and "creative destruction" have all been bandied about by the politician, who was once a university lecturer and has a Master's in Operations Research and a doctorate in Applied Mathematics.

'Look after the downside …'

Today, he chairs the National Research Foundation and Singapore Press Holdings.

"He is a very good but serious speaker. Tony Tan never entertains you. He tells you what the problem is," former Prime Minister Goh said in 2001 during the General Election.

Mr Lee Kuan Yew, the country's first Premier, was so impressed that his top-choice successor was actually Dr Tan, who turned down the offer.

In 1995, Dr Tan was called out of retirement. After two other heavyweights, Mr S Dhanabalan and Mr Yeo Ning Hong, resigned in 1994, Mr Goh requested that he return to strengthen the Cabinet.

Dr Tan agreed and rejoined as Deputy Prime Minister and Defence Minister, saying he would participate in decision-making on trade, industry, banking and other areas of the Singapore economy — even though they were not his primary portfolio.

As GIC's No 2, Dr Tan continues to watch the economy. His stated philosophy is: "If you look after the downside, the upside will look after itself."

It's redolent of his cautious demeanour — one that, political commentator Seah Chiang Nee argues, is "necessary in today's Singapore, when everyone's talking about renewal. You need an old hand to come and sort of introduce a jolt of reality sometimes".

Bush Says US Economy In Slowdown

Source : AsiaOne, Apr 26, 2008

WASHINGTON - PRESIDENT George W. Bush said the United States economy is in a slowdown but tax rebates that will start hitting consumers' bank accounts next week should help.

Mr Bush spoke as a measure of consumer confidence hit a 26-year low.

'It's obvious our economy is in a slowdown,' Mr Bush said on Friday in urging taxpayers to contact the federal government about their eligibility for rebates amounting to as much as US$600 (S$817) per adult and US$300 per child, depending on their income.

'The money's going to help Americans offset the high prices we're seeing at the gas pump and the grocery store and it will also give our economy a boost to help us pull out of this economic slowdown,' he added.

Top Democrats in Congress, however, said the rebate cheques may not be enough to spark a recovery and a second stimulus package may be needed.

'The strain of the economic downturn on middle- and low-income families demands, in my view, consideration of a second stimulus package,' House of Representatives Speaker Nancy Pelosi told reporters in Washington.

Ms Pelosi, a California Democrat, declined to say whether she was making any progress in talks with the Bush administration on additional legislation. She has suggested new spending on infrastructure projects, increased food stamps and expanded unemployment benefits - measures that were left out of the US$152 billion (S$207 billion) stimulus package swiftly passed in February.

US Treasury Secretary Henry Paulson said on Thursday he was willing to listen to Ms Pelosi's ideas to further aid the economy in connection with arranging a vote on the Bush administration's proposed Colombia free-trade agreement.

Mr Paulson also said in an interview that the Treasury had accelerated its schedule for distributing the rebate payments to start on Monday from a previous planned start in early May after tax returns were processed.

He said Americans would receive nearly 7.7 million Americans direct deposit payments next week, with US$50 billion in rebates flooding into the economy by the end of May.

Distribution of more than US$100 billion in rebate payments would be largely complete by the end of June.

Mr Bush said the first paper rebate checks would be sent out on May 9. He urged Americans to file their tax returns with the Internal Revenue Service to ensure that they receive a cheque.

Mr Bush has said the US economy is experiencing a slowdown, but not a recession against a background of rising unemployment as well as increasing energy and food prices and continued declines in home prices in many areas.

Gloomy sentiment
But the Reuters/University of Michigan consumer sentiment index on Friday showed a sour mood among Americans, hitting its weakest level in 26 years amid heightened worries over inflation and housing.

The April gauge fell deeper into recessionary territory, to 62.6 from 69.5 in March. As a result, Americans are increasingly likely to use their tax rebate to reduce debt or build savings, rather than spend on big-ticket items that would bolster economic activity.

Consumers worried about future living standards were reining in spending, the survey group said in a statement.

'Although the tax rebate will boost spending temporarily, the global rise in food and fuel prices, the declines in home values, and changes in credit conditions are likely to persist for some time and lengthen the period of stagnation in consumption,' the group said. 'Coupled with weaker job and income growth, these factors have the potential to cause deeper cutbacks in consumption than now anticipated.'

The survey group said the data now points towards the likelihood of a relapse in spending later in 2008 and continuing into early 2009.

'Whatever the American people do with these cheques will benefit the economy, whether they're buying products, whether they're helping to pay their gas bills, or whether they're paying off their credit cards, putting more liquidity back into the market, said House Republican Leader John Boehner of Ohio.

'The American people are bright. They'll figure out how to spend this money the best way possible.' -- REUTERS

Waiting For The Opportune Moment Pays Off For Frasers

Source : The Business Times, April 26, 2008

FRASERS Hospitality only opened for business in Japan last month - seven years after the Singapore-based serviced residence owner and management company started spreading its wings overseas.

During those years, Frasers - a wholly owned subsidiary of food and beverage company Fraser & Neave, which has branched aggressively into property development - has acquired more than 5,000 apartments in Asia, India, Europe, Latin America and Russia.

But the late start in Japan was a question of timing, according to Frasers chief executive Choe Peng Sum.

'We believe the timing is still ideal for us to enter Japan,' he said. 'Even international hotels have just recently surfaced in Tokyo - Peninsula, Mandarin Oriental, Four Seasons, Ritz Carlton and Conrad. In fact, the trend has been that the newer five-star international hotels are now starting to enjoy high occupancy, as opposed to existing hotels.'

Occupancy at Frasers' Fraser Place Shinjuku in Tokyo, which is in its first month of operation, is 'greater than expected', according to Mr Choe.

'Although we have been to Japan since 2004, getting the right project with the right project size and the right location, with the right partners and conditions, takes time,' he said. 'To have a close to 200 apartments in Shinjuku, giving the business a good economy of scale, was indeed a wait worth waiting for.'

Some 175 units in the East Tower of Fraser Place Shinjuku have been open to guests since March. Another 209 units in the West Tower are due to be ready in June.

'We are close to signing a property in Osaka, looking at Yokohama, and also a second property in Tokyo, which together will make Frasers Hospitality the largest international serviced residences player in Japan,' Mr Choe said.

Explaining Frasers' foray there, he said: 'Japan is an attractive market. There is growing demand for premium serviced residences as a result of investments by foreign and Japanese companies. Both are making frequent inter-city travel. Demand for serviced residences exceeds supply.'

But land, despite the decline in prices in recent years, remains very expensive, Mr Choe pointed out.