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13 April 2013

13th April 2013, Saturday




Q1 sees economy slip into contraction mode

Source: Business Times

The Monetary Authority of Singapore (MAS) stuck to its policy of allowing its currency to strengthen gradually, even as the central bank trimmed its inflation forecast for the year and Singapore's economy turned in a weaker-than-expected GDP performance by contracting 0.6 per cent in the first quarter.

According to the advance estimates released Friday by the Ministry of Trade and Industry (MTI), the manufacturing sector dragged down overall GDP as expected by shrinking 6.5 per cent year-on-year, widening from a decline of 1.1 per cent in the previous quarter.

Meanwhile, the construction and services sectors helped to somewhat offset the weakness in manufacturing, growing 7 per cent and 1.2 per cent respectively. This compares with growth of 5.8 per cent and 1.7 per cent respectively in 4Q 2012.

The Q1 GDP figure - which came on the heels of 1.5 per cent GDP growth in 4Q 2012 - caught a number of economists offguard, as expectations had generally pointed to a weak but positive figure.

The last time that an actual year-on-year shrinkage was recorded was in 2Q 2009. Since then, there have been several close shaves but revised numbers have regularly tended to push growth into positive territory.

On a quarter-to-quarter basis, GDP declined 1.4 per cent over 4Q 2012, with manufacturing sinking 11.3 per cent largely because of a contraction in output in the volatile biomedical cluster.

The construction sector surged 15.1 per cent from 4Q 2012, bouncing back thanks to a recovery in private-sector building activities while the services sector edged up 1.8 per cent quarter-on-quarter, propped up by finance and insurance, business services as well as other services.

While the economy experienced some consolidation in the first three months of 2013, it should see a gradual improvement for the rest of the year, on the back of a recovery in external demand," MAS said. The government has retained its 2013 GDP growth forecast of one to 3 per cent.

Separately, MAS said in its twice-yearly statement yesterday that it would keep the Singapore dollar on its current path of a modest and gradual appreciation to combat inflation and facilitate the ongoing restructuring, which came as little surprise to economists and analysts who predicted that the central bank would do just that.

However, it also adjusted both its headline and core inflation forecasts for the year downwards by half a percentage point.

Headline inflation has been revised to 3-4 per cent, down from 3.5-4.5 per cent, while core inflation - which excludes accommodation and private transport costs - is expected to register between 1.5 and 2.5 per cent this year, compared with the previous forecast of 2-3 per cent.


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Allgreen to launch 999-year private apartment project

Source: Business Times

Allgreen Properties subsidiary Green Bay is launching RiverBay, a 999-year leasehold private apartment project along Kallang River.

The 41,300 sq ft site is located at 23 Mar Thoma Road, and comprises a single 26-storey apartment building with 147 units. Also part of the development are a six-storey carpark, sky terraces and various communal facilities.

RiverBay's available units include 387 sq ft one-bedders, two- and three-bedroom units ranging from 645 to 957 sq ft, and several penthouses of up to 2,185 sq ft. None of the units have balconies, meaning their listed floor areas are fully functional.

RiverBay is near the Boon Keng, Farrer Park and Potong Pasir MRT stations, and can be accessed by the Pan Island Expressway, Kallang Paya Lebar Expressway and Central Expressway.

In a move to offset the imposition of Additional Buyer's Stamp Duty, Allgreen is offering a 15 per cent discount to early buyers. Prices after the discount are expected to be around $1,200-1,300 psf. A one-bedder will start from $505,000, and a three-bedder from $1.1 million.

Preview sales for RiverBay start on 18 April.


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Condo units shrink with buyers' budgets

Source: The Straits Times

Homes across the board are feeling the squeeze as developers downsize apartments to find ways to keep overall prices within the reach of buyers.

But the shrinking of two- and three-bedroom apartments has started to draw attention too.

A three-bedder at 193-unit Natura at Hillview Terrace, a joint venture between Roxy-Pacific Holdings and Macly Group, for instance, measures just 635 sq ft. The home - smaller than a squash court and slightly bigger than five HDB carpark spaces - caused an uproar when it was launched last year.

The 32-unit Treescape in Telok Kurau also has micro three-bedders starting from 603 sq ft.

Go back a few years and a three-bedroom unit would more likely be 1,500 sq ft in size, while most are now around 1,000 to 1,200 sq ft.

But sizes are changing fast as developers grapple with the opposing pulls of higher land costs and demand for affordable homes to fit buyers' tight budgets. The easiest solution is to build more compact homes, it seems.

For example, one-bedroom units in developments launched in 2008 averaged 678 to 947 sq ft, or 21 to 28 per cent bigger on average than the 538 to 678 sq ft units launched in 2010. The squeeze intensified only in the past year with recently launched one-bedders averaging just 492 to 624 sq ft, about 27 to 34 per cent smaller than in 2008.

Two-bedroom units launched in 2008 averaged 851 to 1,208 sq ft but those hitting the market in the past year measure 734 to 1,069 sq ft.

Similarly, average sizes of three-bedroom units are down by about 20 per cent - from 1,208 to 1,620 sq ft in 2008 to 963 to 1,338 sq ft in the 2012-2013 period.

Developers are downsizing amid acute price pressure from buyers.

Experts say overall prices of up to $1.5 million are the most popular among first-time buyers and second-time investors in the light of the property cooling measures that have tightened loan limits.

Second-time buyers with an existing housing loan, for instance, will be subject to a 50 per cent loan-to-value ratio and must fork out a minimum cash down-payment of 25 per cent under the most recent January curbs.

Some experts add that while the Government has clamped down on developers building shoebox units, the more worrying trend could be the size crunch in the two- and three-bedroom apartment types instead.

The executive condominium (EC) segment, a public-private hybrid, is also facing the same trend. Sizes of two-bedroom EC units have fallen by as much as 19 per cent since 2010, while three-bedroom apartments are now about 8 per cent smaller.


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HDB will be the price-setter: Khaw

Source: The Straits Times

As the chief supplier of homes, the Housing Board should set the price of public housing, rather than take its cue from the resale market.

No longer will HDB let "the tail wag the dog" as it did for decades when it used a market-based approach to price its Build- To-Order (BTO) flats, said National Development Minister Khaw Boon Wan.

This resulted in soaring new flat prices as the resale market spiked 80 per cent over the last six years.

Mr Khaw put a stop to this by "delinking" BTO prices from the resale market after he took over the housing portfolio in 2011.

He dismissed worries that delinking new flat prices from the resale market would mean indefinitely increasing the subsidy that taxpayers give to HDB buyers, as the property market moves in cycles and "what goes up must come down".

HDB pays market rate for its land and construction costs. Hence, when it prices flats below a market rate, it incurs a housing deficit - now in the region of about $1 billion a year, including other costs such as upgrading.

In the wide-ranging interview ahead of housing-themed sessions of Our Singapore Conversation, Mr Khaw also spoke of his plans for the future.

In lieu of the old market-based approach, he favours pricing new flats in non-mature estates at about four times the annual median income of its applicants - 30 per cent lower than the current 5.5 times.

This will be implemented "soon (as) it's not something for the next century", he said.

But how it will be instituted without affecting existing flat owners' asset values, as he has promised, is the tricky part - and what he wants Singaporeans to debate in the national conversation.

A four-year salary cycle is reasonable, he said, because that was what flats cost before the bull run of the last six years. Anything less than that, he noted, might put undue strain on the state.

Mr Khaw lamented that, judging by packed showrooms, it has not "sunk in" for Singaporeans that the era of huge capital gains from property is at an end, with slower economic and thus wage growth in the years ahead.

While property prices have moderated across the board in the past year, "there is still scope to bring (prices) down to minus (growth rates) for some segments", he said.


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Shophouses in Tanjong Pagar draw investors

Source: The Straits Times

Prices of conservation terraced shophouses in Tanjong Pagar have shot up in recent years as new developments in the area give it a fresh lease of life.

Analysts say the investment outlook for shophouses remains bright as the upcoming Maxwell MRT station on the Thomson Line will bring in more crowds.

Shophouses, particularly centrally located conservation ones, appeal to investors because of their high potential for capital appreciation, said an analyst.

Over the past two years, shophouse prices, on average, have grown about 20 per cent each year to an average of $4,981 per sq ft (psf).

There were four shophouse resales within the Tanjong Pagar conservation area in the first three months of this year, according to Urban Redevelopment Authority data. Transaction amounts ranged from $6 million to $25.2 million.

Outside the Tanjong Pagar conservation area, transacted prices of shophouses along nearby roads ranged from $3.7 million for a shophouse on a 818 sq ft site at Tanjong Pagar Road to $14.44 million for a shophouse sitting on a 2,777 sq ft land parcel at Amoy Street.

Prices have been partly pushed up by investors who have been deterred from investing in residential property by recent rounds of cooling measures.

The recent price appreciation has squeezed rental yields.

Rents were $4.67 psf per month on average in the first quarter of last year, but have increased only 7.1 per cent to $5 psf per month in the period from January to March this year.

The rental figures translate to a gross rental yield of 1.2 per cent for the first quarter, compared with 1.39 per cent in the corresponding period last year.

The Tanjong Pagar shophouses are occupied by a mix of companies in the creative industry, food and beverage, professional services and entertainment sectors plus small wedding boutiques.

As these shophouses receive lower shopper traffic than malls, tenants are likely able to pay less rent than mall tenants, meaning there is a limit to how much rents can be raised, an analyst said.

Other disadvantages of the area include the lack of parking space. Apart from the iconic Pinnacle@Duxton development, the Housing Board flats in the area are also small and ageing.

But analysts say the impending rejuvenation of Tanjong Pagar will be a boon to investors.

New high-rise apartments like Altez and Skysuites@Anson are being built, along with a mixed-use development on Peck Seah Street by Guocoland. The Carlton City Hotel is also expected to open later this year.

These will add to the contemporary vibe of the area, which is already known for its many high-rise offices, and is right next to Singapore's financial district.

Farther down the road, one welcome development will be that of Maxwell MRT station, which will be on the planned Thomson Line, set for completion in 2021.

This is expected to draw fresh crowds to the area, including residents from across the Causeway.


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Investment Sales


Another price record beaten at Samsung Hub

Source: Business Times

The buzz continues for strata commercial units.

At Samsung Hub, a 999-year leasehold office tower in Church Street, another record per sq ft price has been set, although for a small strata unit.

The 883 sq ft unit on the 17th floor has changed hands at $3,500 psf.

This busts the previous record in the building, $3,150 psf, that was achieved just last month when Qatar Airways picked up half of the 13th floor or 6,092 sq ft for about $19.2 million.

Besides the $3,500 psf deal, the other four units are being sold at between $3,126 psf and $3,300 psf. The $3,300 psf was for a 1,335 sq ft unit; two units of 2,562 sq ft and 2,992 sq ft each went for $3,200 psf, while a 3,595 sq ft unit is changing hands at $3,126 psf.

The units on the 17th level are being sold by a partnership between Buxani Group and a group of investors advised by Seychelles-based Capital Management Group (CMG). The partnership is now left with one unit of 1,765 sq ft on this floor. Kishore Buxani, managing director of Buxani Group, says he may use this space for his office. Currently his office is on Level 16, and Buxani-CMG sold the whole of that level (13,132 sq ft) last December at $3,000 psf. The partnership still owns three entire levels in Samsung Hub - 18, 19 and 21.

These are part of the six floors it acquired in early 2007 for $1,560 psf.


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