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09 July 2013

Singapore property market will 'stay healthy'
Cooling measures will leave impact but market won't crash: OCBC chief

Source: Straits Times | Money
By Rachael Boon

THERE will probably be a correction in property market prices but a crash is unlikely, said OCBC Bank's chief executive officer, Mr Samuel Tsien.

Part of the reason for its resilience is because the Singapore market holds a certain appeal to investors, he said.

Still, rising interest rates and cooling measures will have an impact, Mr Tsien told The Straits Times at the sidelines of a major China forum at the Shangri-La Hotel yesterday.

"As a result of the different measures imposed by the Government in making sure that speculative demand has been removed, there will be a slowdown in market activities," said Mr Tsien.

"I don't think there will be a crash in the market. There will be some downward adjustment to prices but that is healthy in the long term."

The Government has instituted seven rounds of property cooling measures since 2009, with the latest round in January.

Other moves aimed at reducing the froth in the markets include lowering limits on loans and raising stamp duties.

The measures have worked to stabilise prices.

In the three months to June 30, prices for mass-market apartments rose 3 per from the previous quarter.

But prices of homes in the city centre dropped 0.2 per cent in the second quarter, after growing 0.6 per cent in the first.

More recently, the central bank put new curbs on loans to prevent borrowers from becoming over-leveraged.

The outlook for interest rates is that they will likely rise in the next two years.

The United States Federal Reserve has indicated that it will start to slow the pace of its monetary stimulus programme and eventually raise interest rates.

The normalisation of rates will help OCBC, said Mr Tsien.

He also feels that the bank, as well as others, will benefit from normalising interest rates, as "it's going to be beneficial to banks with a significant amount of Casa (current account, savings account) balances".

This is true for OCBC, as its "Casa balances represent about 51 per cent of our total deposits".

Casa accounts combine savings and checking accounts to encourage consumers to save with banks.

A higher Casa ratio would mean that a bank has access to a cheaper source of funds, because it pays out less interest on Casa and can lend at a higher rate.

"That will benefit OCBC Bank because lower-yielding deposits or zero interest rate deposits will be able to make some money as a result of the rising interest rates, by lending that money out to the market."

Mr Tsien also took questions over the bank's risk management practices, especially regarding the interest rate setting processes.

Last month, OCBC was among the banks here to be censured by the Monetary Authority of Singapore (MAS), and most were told to set aside extra funds to be parked at MAS at zero interest rates.

The amount that OCBC Bank has to deposit as additional reserves is between $700 million and $800 million.

Mr Tsien said that the impact is not significant, as it relates to the opportunity to earn interest on the amount.

He added that the bank has introduced a series of new checks to tighten the rates submissions process.


"As a result of the different measures imposed by the Government in making sure that speculative demand has been removed, there will be a slowdown in market activities... There will be some downward adjustment to prices but that is healthy in the long term."

- OCBC Bank's chief executive officer Samuel Tsien

Prime office space rents up for first time since 2011
Occupancy rates also continue to rise in Raffles Place, Marina Bay: Report

Source: Straits Times | Money 
By Rachael Boon

RENTS of top-grade office space in Raffles Place and Marina Bay increased for the first time in seven quarters while occupancy rates continued to rise there, signalling that a recovery in the segment may be afoot.

Average monthly gross rents of premium-grade office space in these areas climbed 2 per cent in the three months to June 30 to $9.60 per sq ft (psf) from the previous quarter, according to Colliers International's latest quarterly research report yesterday.

This was the first rise in rentals for such office space since a sustained period of decline that began in the fourth quarter of 2011.

Mr Marcus Loo, Colliers International executive director of office services, said: "Office buildings located in the Raffles Place and New Downtown (downtown Marina) micro-market have continued to draw interest from tenants."

As the development of Marina financial district and supporting road and public transport infrastructure picked up pace, demand rose in the quarter, he added.

But in the broader Central Business District (CBD), the average monthly gross rent of both premium and Grade A office space was $8.42 psf during the second quarter, relatively unchanged from $8.41 psf in the previous quarter.

Mr Loo noted that as tenants still favoured better-quality office space, landlords were able to either maintain or increase rents in the CBD.

While office rents were stabilising in the broader market during the quarter, Mr Loo said the recovery is more encouraging in premium-grade developments.

This was reflected in the occupancy rate for top-grade office space in Raffles Place and downtown Marina, rising to 93.5 per cent in the second quarter from 90.2 per cent in the previous quarter - the fifth consecutive quarter that it has risen.

Demand for the prime office space came mainly from financial and business service companies, said Colliers International.

Among them were National Australia Bank and Swiss Reinsurance Company, which committed to take up space at Asia Square Tower 2.

Occupancy rates in most of the other parts of the CBD also rose during the quarter, except those for the city fringe and Beach Road area, which fell slightly.

Separately, a DTZ Research report also released yesterday showed that the level of activity from foreign investors in the local property sector surged in the second quarter.

Foreign investment activity jumped to $1.4 billion from a mere $200 million in the first quarter, driven by Asian investors who accounted for 80 per cent of the total. Among the deals involving foreign players were Qingjian Realty (South Pacific) Group from China winning the tender for two Government Land Sales sites, and Australian developer Lend Lease selling its stake in Jem mall in Jurong East.

Meanwhile, another report from Knight Frank showed that total property investment sales plunged 30.3 per cent to $10.3 billion in the first half of this year from a year earlier, due to a sharp decline in private investment sales.