S'pore Inflation To Stay High, Cool In H2: MAS

Source : The Business Times, April 29, 2008

Singapore's central bank said on Tuesday that inflation would cool to an average 4 per cent in the second half of 2008, after it hit a 26-year high above 6 per cent in the first six months of the year.

In its twice-yearly Macroeconomic Review, the Monetary Authority of Singapore (MAS) said its economic growth target of 4-6 per cent this year was intact and was based on a gentle downturn in the United States' economy.

But it warned trade-dependent Singapore could be considerably hit by a more widespread slowdown.

'Inflation will stay high in 2008 due to a confluence of external and domestic factors, although it should moderate somewhat in the second half,' it said in its report, available on its website.

'However, there are upside risks to global oil and food prices. Even if these prices were to level off, upward pressure on wages and rentals, reflecting domestic capacity constraints, are likely to remain.'

Reacting to the inflation threat, Singapore's central bank earlier this month tightened monetary policy by allowing a rise in the Singapore dollar, its main policy tool.

The market is looking for clues on whether policy could be tightened yet again at the next review in October. The Singapore dollar has risen 5.4 per cent against the US dollar since the start of the year.

'The April monetary policy decision provides affirmation that the exchange rate path is consistent with the prevailing macroeconomic conditions in the economy,' the MAS said in its review on Tuesday.

It also said that gross domestic product growth would likely weaken over the next two to three quarters.

'This baseline forecast is predicated on a mild US downturn for 2008. However, if there is a more widespread decline in global and regional economic activity, Singapore's GDP growth will be more significantly affected.'

First-quarter GDP growth came in unexpectedly strong, running at an annualised seasonally adjusted rate of 16.9 per cent, and economists said the data had calmed fears that the weakness of the US economy would drag on Singapore, giving the central bank room to tighten policy.

Manufacturing accounts for about a quarter of economic output and the republic would be hit by any global economic downturn because of its heavy reliance on exports to Europe and the United States.

The MAS also pointed out that the cost of doing business in Singapore, a base for international companies and their families in Asia, had risen.

It said the unit business cost index for the manufacturing sector - which measures changes in the cost of producing one unit of manufacturing output after accounting for productivity changes - rose 4.5 per cent in the fourth quarter from a year ago, the seventh straight quarter of growth and the most rapid rate of increase since the fourth quarter of 2001.

This mainly reflected a sharp rise in unit labour costs as well as government rates and fees. -- REUTERS

Genting Stops Talks With S'pore Sports Hub Consortium

Source : The Business Times, April 29, 2008

KUALA LUMPUR - Genting International announced on Tuesday that it has discontinued discussions with Singapore Sports Hub Consortium in relation to the proposed construction of a hotel in the Singapore Sports Hub.







Its managing director Justin Tan Wah Joo said in a statement this was because the company has been informed that the Singapore Sports Council has decided not to have a hotel in the Singapore Sports Hub at this point of time.

'The subject matter of this announcement is not expected to have any material impact on the consolidated net tangible assets and earnings per share of the company for the financial year ending Dec 31, 2008,' he said.

Genting had announced the start of discussions on Jan 21 this year. -- BERNAMA

Older UK Homes Weather Market Strains Better

Source : The Business Times, April 29, 2008

Personal finance website expects property prices to fall 20% this year

(LONDON) Houses bought four years ago or more are best placed to weather the property market downturn, research shows.

Personal finance website Fool.co.uk expects property prices to tumble 20 per cent this year, taking the average British property value to £153,400 (S$416,000) from £196,000 - the same level as spring 2004 levels.

That means that, on average, people who have bought since then will be sitting on a capital loss.

House-hunt: Home prices have been falling monthly since the end of last year as the credit squeeze has exacerbated affordability pressures after a decade-long boom

Not all, however, will face negative equity, as some will have taken out a mortgage of less than 100 per cent or more of the purchase price.

'It is vital to differentiate between capital loss and negative equity,' said David Kuo, head of personal finance at Fool.co.uk.

'While a capital loss is beyond the control of homeowners, mortgage borrowers can overcome negative equity by reducing the size of their outstanding mortgage compared to the value of the property.'

He added that falling house prices were not 'disastrous', as they would narrow the gap between the value of a property and those further up the housing ladder, making up-sizing more affordable.

The West Country is most vulnerable to a property downturn, while those in Scotland and Ireland are the least so, the figures show, as prices there have more than doubled in the past four years, compared to a 20 per cent increase nationally.

House prices have been falling on a monthly basis since the end of last year as the credit squeeze has exacerbated affordability pressures after a decade-long boom.

The downturn appears to be gathering pace. Halifax, Britain's biggest mortgage lender, said house prices fell last month at their fastest pace since 1992 when the country was in the grip of recession.

The Bank of England unveiled an ambitious plan this week to swap banks' hard-to-trade mortgage assets for government securities in a bid to cushion the economy from the global credit squeeze.

It has also cut interest rates three times since December.

Its scope to deliver further rate cuts, however, is being limited by rising price pressures. -- Reuters

Biggest Drop In 3 Years In British House Prices

Source : The Business Times, April 29, 2008

(LONDON) UK house prices fell the most in more than three years in April as a dearth of credit and concern that the property slump is deepening deterred prospective homebuyers, Hometrack Ltd said in a statement yesterday.

Sign of the times: House prices in London, home to 1-in-8 of the British population, fell 0.7% in April

The average cost of a home in England and Wales dropped 0.6 per cent - the most since December 2004 - to £173,100 (S$468,300), the London- based research company said in a statement. Prices declined 0.9 per cent from a year earlier.

A surge in borrowing costs has prompted banks to withdraw their best mortgage offers, worsening the housing decline. Falling home prices are sapping consumer confidence and held economic growth to the slowest pace since 2005 in the first quarter.

'Weak confidence is effectively resulting in a 'buyers strike',' Richard Donnell, director of research at Hometrack, said. 'The current downward pressure on prices will only start to be reversed once there is a turnaround in buyer confidence' that will 'revolve around greater stability in the financial markets and an improved economic outlook'.

The report is based on a survey of 3,500 real estate agents and surveyors, calculating average values using judgments of achievable prices rather than sale prices alone. Prices fell in all 10 of the regions Hometrack follows. East Anglia and the West Midlands led declines, with a 0.8 per cent drop. Prices in London, home to 1-in-8 of the UK population, fell 0.7 per cent.

The findings add to evidence that the housing slump is deepening. House prices declined 2.5 per cent last month, the most since 1992, according to HBOS Plc, the largest UK mortgage lender. The Royal Institution of Chartered Surveyors' measure of sentiment in the UK housing market fell to the lowest since records began in 1978.

Mortgages approved by banks fell 46 per cent in March from a year earlier to the lowest level since 1997, the London-based British Bankers' Association said last Wednesday. The Bank of England is due to publish estimates of mortgage advances by all lenders today at 9:30am in London.

Falling property prices make Britons feel less wealthy and reduce the amount of equity owners can tap for spending. A threefold increase in home values over the past decade has helped the UK economy expand for 63 quarters.

The slump has put the economy on course for its worst performance in 16 years, with the International Monetary Fund predicting growth of 1.6 per cent this year. Growth was 0.4 per cent in the first three months of the year, the Office for National Statistics said last Friday.

The Bank of England, backed by the Treasury, last Monday offered to swap around £50 billion in government bonds for mortgage-backed securities in an effort to kick-start lending.

Higher money-market funding costs are making lenders reluctant to pass on three Bank of England interest rate cuts since last December to homeowners. Royal Bank of Scotland Group Plc and HSBC Holdings Plc have led writedowns among UK banks on securities tied to US sub-prime mortgages. Losses worldwide total almost US$309 billion. -- Bloomberg

Berlin Property Market Holds Huge Investment Potential

Source : The Business Times, April 29, 2008

But for it to materialise may take a long time

(BERLIN) Frank Roszak, a good-humoured Berlin butcher with a friendly smile, bought a spacious 10-room house in a pleasant suburb just west of the German capital for US$1.3 million about 16 years ago.

Two years ago he put the two-storey house with its leafy 1.5 hectare garden on the market for 500,000 euros (US$790,000).

It has been months since the last prospective buyer left - without making an offer.

His is not a tale of suddenly slumping house prices: It is the property market in Berlin. Other cities may be smarting from softening prices but Berlin, like many parts of Germany, never had a boom and has long been a veritable black hole for investors and a nightmare for homeowners.

'Berlin is a metropolis with provincial prices,' said Christine Schaefer, a property analyst at DZ Bank in Frankfurt.

Of course, there are some advantages to this: There is no turmoil from the broad market slump and talk at dinner parties rarely centres on real estate. Also, as real estate agents and some economists note, it gives the market huge potential.

'Isn't it better to buy into a market that's come down for a decade than invest in a market where the party's over?' said Tobias Just, a real estate analyst at Deutsche Bank.

One problem: to realise that potential looks like taking a very long time. Hopes rise, but the market does not.

As real estate values in countries including Britain, Spain and the United States spiralled higher in the last decade, in Germany's biggest city and the former Communist east prices for new houses and apartments fell by an average of one per cent per year. Prices for existing houses and apartments fell 2 per cent per year, according to banking data.

The situation is only marginally better in the more populous and prosperous west, where housing prices have risen by an annual average of less than one per cent in the last decade.

Many factors have weighed on German prices: relatively weak economic growth, a shrinking population, a traditional low rate of home ownership and cheap rent, generous pensions, risk-averse banks, high closing costs, and - completing the circle - the poor rate of return.

Noting prices in some cities such as Munich have risen steadily if unspectacularly, Mr Just said that the future for weak spots may not be as dim as the past - especially in Berlin where unemployment is gradually retreating, the oversupply of housing is slowly shrinking and economic growth is picking up.

At Lehman Brothers, the real estate team issued a report in March entitled Finally the comeback of Berlin? which - sceptically - highlighted an above-trend rate of rent increases of almost 10 per cent over the past four years in the city.

But the fundamental drivers for a market upturn are hard to find in Bohemian Berlin.

While cheap housing has attracted tens of thousands of students, overall the population has remained stagnant at 3.4 million. It has become the home of thousands of artists, actors, film-makers, musicians and even poets delighted to find such cheap places to live and work in.

Yet there is hardly any industry left - many big companies such as Siemens moved away after World War II and during the Cold War. The banking industry resettled in Frankfurt. Also, many government jobs stayed in Bonn.

The unemployment rate in Berlin is 15 per cent, nearly double the national average, and income levels are below average.

On top of that, just 13 per cent of Berliners own their own homes - well below an already low German rate of 40 per cent.

The high level of public-owned housing and accompanying low rents - and high vacancy rates - also depress property prices.

There was an ephemeral rise in the days immediately after the fall of the Berlin Wall in 1989, but even the federal government's move back to Berlin in 1999 - creating some 20,000 jobs - failed to halt the price erosion.

Another false dawn has been foreign bargain-hunters.

Thousands have come - from Britain, Ireland and Scandinavia - to snap up homes at what appeared to be breathtakingly cheap prices. Some agents have taken English courses to cope with the undiminished demand from abroad.

Despite this, the prices are still breathtakingly cheap. -- Reuters