CPF Keeps OA Interest Rate At 2.5%

Source : The Business Times, August 14, 2008

Concessionary rate for HDB mortgage loans remains 2.6%

THE Central Provident Fund Board (CPF) will continue to pay 2.5 per cent interest per annum for members' savings in their Ordinary Account (OA) from Oct 1 to Dec 31.

Savings: The interest rate for the Special, Medisave and Retirement accounts (SMRA) for October to December will be announced next month

CPF said that although its computed interest rate derived from the rates of major local banks for the period May 1 to July 31 works out to be 0.74 per cent per annum, the higher rate of 2.5 per cent will be paid because that is the minimum specified under the CPF Act.

The Housing and Development Board (HDB), meanwhile, has announced that the concessionary interest rate for HDB mortgage loans, pegged at 0.1 of a percentage point above the CPF interest rate for the OA, will remain unchanged at 2.6 per cent per annum from Oct 1 to Dec 31.

The interest rate for Special, Medisave, and Retirement accounts (SMRA) for October to December will be announced next month.

The prevailing CPF interest rate for SMRA is 4 per cent, based on the 12-month average yield of the 10-year Singapore Government Security plus one per cent.

To help members adjust to this floating rate, the 4 per cent floor for the SMRA rate will be maintained for the first two years, as earlier announced.

An extra one per cent interest will continue to be paid on the first $60,000 of a member's combined balances, with up to $20,000 from the OA.

The extra interest from the OA will go into members' Special or Retirement accounts to enhance their retirement savings.

Greenspan Sees US House Price Bottom In 2009: WSJ

Source : The Business Times, August 14, 2008

NEW YORK - Former Federal Reserve Chairman Alan Greenspan predicts US house prices will begin to stabilise in the first half of next year, the Wall Street Journal reported on Wednesday.

Mr Greenspan: 'Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world's mortgage-backed securities'

Mr Greenspan also offered a novel suggestion to bolster the housing market - increase the number of potential home buyers by admitting more skilled immigrants.

'Home prices in the US are likely to start to stabilize or touch bottom sometime in the first half of 2009,' he said in an interview with the Wall Street Journal, reported on the newspaper's website on Wednesday.

But Mr Greenspan cautioned that even at a bottom 'prices could continue to drift lower through 2009 and beyond.'

An end to the decline in house prices, he explained, matters not only to American homeowners but is a necessary condition for an end to the current global financial crisis.

'Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world's mortgage-backed securities,' he said. 'We won't really know the market value of the asset side of the banking system's balance sheet - and hence banks' capital - until then,' he said.

Mr Greenspan's forecast rests on two pillars of data.

One is the supply of vacant, single-family homes for sale, both newly completed homes and existing homes owned by investors and lenders. He sees that 'excess supply' - roughly 800,000 units above normal - diminishing soon.

The other pillar is a comparison of the current price of houses - he prefers the quarterly S&P Case-Shiller National Home Price Index because it includes both urban and rural areas - with the government's estimate of what it costs to rent a single-family house.

As other economists do, Mr Greenspan essentially seeks to gauge when it is rational to own a house and when it is rational to sell the house, invest the money elsewhere and rent an identical house next door.

In the past, Greenspan's crystal ball has been, at best, cloudy, the Wall Street Journal noted. He didn't foresee the sharp national decline in home prices. But recently released transcripts of Fed meetings do record him warning in November 2002: 'It's hard to escape the conclusion that at some point our extraordinary housing boom...cannot continue indefinitely into the future.'

Mr Greenspan is currently promoting his book, the paperback version of which is to be issued next month with an epilogue. -- REUTERS

US Foreclosure Filings Surge 55%

Source : The Business Times, August 14, 2008

WASHINGTON - The number of homeowners stung by the dramatic decline in the US housing market jumped last month as foreclosure filings grew by more than 50 per cent compared with the same month a year ago, according to data released on Thursday.

Nationwide, more than 272,000 homes received at least one foreclosure-related notice in July, up 55 per cent from about 175,000 in the same month last year and up 8 per cent from June, RealtyTrac Inc said. That means one in every 464 US households received a foreclosure filing last month.

Irvine, California-based RealtyTrac monitors default notices, auction sale notices and bank repossessions. More than 77,000 properties were repossessed by lenders nationwide in July, the company said.

Nevada, California, Florida, Arizona, Ohio, Georgia and Michigan had the highest foreclosure rates. Foreclosure filings increased from a year earlier in all but eight states.

The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing US economy has left financially strapped homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't refinance into an affordable loan.

As foreclosures soar, banks and mortgage investors are also facing a pileup of foreclosed properties on their books and are cutting prices dramatically.

RealtyTrac noted that it had more than 750,000 foreclosed homes in its database of properties for sale, equal to about 17 per cent of the 4.5 million US homes that were up for sale in June.

To speed up the disposition of the 54,000 foreclosed properties it owns, Fannie Mae is opening offices in California and Florida and is considering selling those properties in bulk to investors. 'I do not think this is a time to be holding onto (foreclosed properties) hoping for a better day,' Fannie Mae Chief Executive Daniel Mudd said last week.

It remains to be seen how much the government's intervention will stem the housing crisis. President Bush last month signed sweeping housing legislation that aims to prevent foreclosures by allowing homeowners to swap their mortgages for more affordable loans, but only if their lender agrees to take a loss on the initial loan.

The bill is projected to help about 400,000 households.

The number of foreclosures 'could start to stabilise as early as the first quarter of next year if the government program gains any traction,' said Mr Rick Sharga, RealtyTrac's vice president for marketing. 'That's really the unknowable right now.'

Even with government help, nearly 2.8 million US households will either face foreclosure, turn over their homes to their lender or sell the properties for less than their mortgage's value by the end of next year, predicts Moody's Economy.com.

In the RealtyTrac report, the Cape Coral-Fort Myers area in Florida was the metro area with the highest rate of foreclosure, followed by three California cities: Merced, Stockton, and Modesto.

Las Vegas ranked fifth. -- AP

CityDev Profit Down 15%, To Raise Funds For Buys

Source : The Business Times, August 14, 2008

City Developments suffered a 15 per cent fall in quarterly profit on poor property sales but said it may issue up to $1 billion (US$712 million) in debt to build an acquisitions war-chest despite the global economic slowdown.

Mr Kwek: 'The group has very little unsold residential stock, a healthy balance sheet and locked-in profits yet to be recognised'

CityDev, Southeast Asia's second-biggest property developer by market value, said it may issue Islamic debt in a notes programme and sell hotels to boost its financial prowess to make acquisitions.

'The current slowdown in the economy is different from the Asian Financial Crisis of 1997. The group has very little unsold residential stock, a healthy balance sheet and locked-in profits yet to be recognised,' CityDev Executive Chairman Kwek Leng Beng said in a statement.

CityDev, 37 per cent-owned by Kwek's family, reported net profit of $165.2 million in the April-June period, down from $194.4 million reported a year ago as property sales slumped in the first half of this year.

The company said the planned $1 billion debt deal would be Singapore's first Islamic unsecured financing arrangement and aimed at tapping new markets and investors.

Its 53-per cent owned hotel group Millennium & Copthorne will also look at the sale of hotel assets, many of which were bought at a low cost and have since appreciated in value, CityDev said.

M&C, which in June sold the Millennium Seoul Hilton Hotel to Kangho AMC for $628 million, last week posted first half pretax profits of 58.4 million pounds, up 9.2 per cent but below market expectations as it warned of slowing growth at its Asia hotels.

No quarterly estimates were available but CityDev is expected to post a 1.8 per cent rise in full-year to December 2008 earnings to $738 million from $725 million last year, according to the average of 15 analysts polled by Reuters before Thursday's results.

Poor sales
Singapore's developers have been hit by poorer sales as concerns about the economic outlook caused a steep drop in sales volumes, while some analysts predicted home prices to fall up to 40 per cent over the next three years.

But analysts had expected earnings for CityDev to hold steady this year as it books income from sales made during a four-year Singapore property boom, and as its mass market residential projects continued to sell well this year.

CityDev said it will release for sale the rest of its Singapore mass market residential project Livia due to strong response, but could hold off on launching its high-end projects to maximise its profits.

Rival Keppel Land reported last month a 16.4 per cent drop in quarterly profit, while CapitaLand, Southeast East's biggest developer, saw its earnings dip 44 per cent, hit by slower sales and lack of one-off gains.

Shares of City Developments are down 25 per cent so far this year, underperforming the 19 per cent drop in the broader Straits Times Index . Rival developer CapitaLand lost 19 per cent, while Keppel Land fell 41 per cent. -- REUTERS

Inflation Should Be Main Focus For S'pore: IMF

Source : The Business Times, August 14, 2008

WASHINGTON - Containing mounting inflation pressures should be a priority for Singapore's authorities as economic activity is slowed by a global downturn, the International Monetary Fund said on Wednesday.

IMF board directors appeared divided over whether Singapore should further tighten monetary policy given rising inflation

'Against this background, ensuring that inflation expectations remain well anchored is a policy priority,' the IMF said in an annual evaluation of Singapore's economy.

IMF board directors, however, appeared divided over whether Singapore should further tighten monetary policy given rising inflation or wait and allow recent interest rate tightening to first feed into the economy.

IMF staff said the Singapore dollar 'remains weaker than the level implied by long-term fundamentals.' 'Given the downside risks to growth, many (IMF) directors favoured maintaining the current policy mix in the short term, with the authorities remaining ready to modify the policy stance going forward if necessary,' IMF board directors said in a statement.

'A number of other directors favoured the staff's view that a further degree of rebalancing of the macroeconomic policy mix toward a somewhat tighter monetary stance and a looser fiscal policy would be desirable. ... Directors agreed that, over the medium term, a broader reorientation of the policy mix is desirable,' the IMF said.

Singapore's central bank has aggressively tightened monetary policy since October to tackle inflation caused by surging oil and food prices.

The IMF forecast Singapore's economy would slow to 4.5 per cent this year and next from 7.7 per cent in 2007 as exports have been affected by a global economic downturn.

The IMF said turmoil in global credit and financial markets has had a limited impact on Singapore's financial system.

Credit spreads have widened, equity volatility has risen, and banks have incurred trading-related losses, including on structured credit products. Yet none of these developments have had systemic implications so far, it added. -- REUTERS