Singapore Economy 2.4% growth in Q2 as most sectors slow down Figure is still a little better than estimated but is half of Q1 pace Source: Straits Times / Top of The News ECONOMIC growth in the second quarter came in slightly better than expected but still at only half the pace of the sprightly first three months of the year. Most sectors slowed but the Singapore economy is expected to gradually gain ground in the second half of the year, amid a modestly recovering global outlook. The economy expanded 2.4 per cent in the quarter ended June 30, compared with the same period last year, figures released yesterday by the Ministry of Trade and Industry (MTI) showed. That was a little better than the 2.1 per cent growth figure flagged in initial estimates. But last quarter's growth is well below the 4.8 per cent growth in the first three months. The manufacturing sector - making up a fifth of the economy - was the main drag. Factory output went up 1.5 per cent, a "sharp slowdown" from the 9.9 per cent expansion in the first quarter, the MTI said. This was largely caused by a dip in electronics output and slower growth in transport engineering. A fall in private construction activities amid a tepid property market led to a weaker construction sector, which expanded at a slower 4.4 per cent after growing 6.4 per cent in the previous quarter. The service sector expanded 2.6 per cent in the second quarter, easing from a 3.9 per cent gain in the first quarter. Exports continued to weaken in the second quarter, falling 3.4 per cent as electronics shipments took a hit. The weak showing by electronics has sparked concerns that firms in the industry are buckling under the strain of restructuring and rising business costs. Electronics exports shrank 11.3 per cent last year and another 13.3 per cent in the first half of this year, but this is not a sign that the industry is losing competitiveness, said MTI economics division director Yong Yik Wei. One reason for declining export numbers could be "production fragmentation" - companies carrying out higher value-added work here while outsourcing manufacturing abroad, said Ms Yong. She also pointed to continued output growth in the electronics segment as a sign that the industry remains robust. Sluggish global economic conditions in the first half of the year led to tepid growth for Singapore, but recent data suggests that the world economy is starting to pick up, said MTI permanent secretary Ow Foong Pheng. The United States economy is expected to grow faster in the second half while the euro zone will keep recovering, she added. Economists said a slowdown in the service sector in the current half is likely, given the still-tight labour market. Barclays economist Leong Wai Ho said Singapore's pattern of growth is likely to "reverse", with factories leading growth instead of lagging behind. "We expect manufacturing growth to resume as external demand strengthens, with the service sector continuing to cool on the back of a subdued property market and a marked slowdown in tourism inflows." The slowdown in manufacturing was also partly caused by a "one-off, firm-specific" factor in April, noted OCBC economist Selena Ling. "This, together with a healthy global economic backdrop, may suggest that the slowdown in Singapore's manufacturing sector has bottomed out." The Singapore economy is forecast to grow between 2.5 per cent and 3.5 per cent for the full year. Total trade is projected to grow by 1.5 per cent to 2.5 per cent this year, while non-oil domestic exports are forecast to shrink by between 1 per cent and 2 per cent. -By Chia Yan Min Fall in productivity not a setback, says MTI Source: Today Online / Business SINGAPORE — Labour productivity in the second quarter fell for the first time in a year, hurt by declines in sectors such as construction and business services as well as accommodation and food services, the Ministry of Trade and Industry (MTI) said yesterday. But the 1.3 per cent on-year decline is only temporary and does not indicate a structural setback for the nation’s productivity push, said Ms Ow Foong Pheng, the ministry’s Permanent Secretary. “The economic restructuring towards higher productivity is a long-term effort and figures would fluctuate from quarter to quarter,” she said. “Going forward, how productivity pans out will depend on gross domestic product growth and external conditions … But more importantly, we need to look at what’s happening sector by sector.” In a report MTI released together with its second-quarter economic survey, domestically-oriented sectors — such as construction, retail and food services — saw annualised productivity decline 0.3 per cent between 2010 and last year, far worse than the 2.1 per cent gain recorded by export-oriented sectors. Between April and June, productivity in the construction sector dipped 2 per cent, while accommodation and food services dropped 3.2 per cent. Manufacturing along with finance and insurance were the only two sectors to report gains, at 1.1 per cent and 1.6 per cent, respectively. “Many domestically-oriented sectors are struggling with the tightening manpower supply, with some companies facing problems moving up the value-chain,” the report said. “Excluding these sectors, productivity for the overall economy would have grown by 1.3 per cent per annum, instead of 0.2 per cent per annum.” The latest figures came after Trade and Industry Minister Lim Hng Kiang said in Parliament last week that the restructuring process is far from over even though more companies are tapping the Government’s productivity schemes. “Clearly, more needs to be done. Economic restructuring is a long-term effort. We must continue to press on with our restructuring drive,” he said. Meanwhile, it is still too early to call Singapore’s push for a 2 to 3 per cent annual productivity growth by 2020 a lost cause, Barclays senior economist Leong Wai Ho said.
“The process cannot be assessed on a quarterly basis — the only reliable way to read it is to take a three-year moving average, and the long-term gains have been resilient, bearing in mind we’ve had significant increase in employment over the period,” he said. “We shouldn’t be itching to conclude that the productivity push has hit a setback.” -By Wong Wei Han http://www.todayonline.com/singapore/fall-productivity-not-setback-says-mti Singapore Real Estate Time to review cooling steps, say property players Participants urge caution while buying overseas assets Source: Business Times / Singapore EVEN though the government has reiterated that it is not yet time to lift the property cooling measures, some real estate consultants are calling for a review of the earlier taxes imposed to rein in speculators, which they claim have an inflationary effect. Consultants felt that with the implementation of total debt servicing ratio (TDSR) to cap total borrowings at 60 per cent of gross monthly income, the additional buyer's stamp duty (ABSD) and the seller's stamp duty (SSD) have become less relevant. Speaking at the National Real Estate Congress yesterday, Colliers International managing director Dennis Yeo advocated that the ABSD be lifted for Singapore citizens and the SSD to be scrapped.
"Nobody would question the reason behind the TDSR. But now with TDSR being in place for slightly over a year now, we then have to look at all the other earlier measures that were put in place to see whether they were conflicting or inflationary," he said. "We do not want prices to go out of control, but transaction costs add on to the price of the property." -By Lynette Khoo ‘Tweaks' to property cooling measures worth exploring, say industry players Real estate consultants have singled out the Seller’s Stamp Duty and Additional Buyer’s Stamp Duty as measures worth reviewing.Source: Channel News Asia / Singapore SINGAPORE: While real estate industry players understand the Government’s intention in keeping the property cooling measures intact, it is still worth reviewing the curbs as some may have become “redundant” given how effective the Total Debt Servicing Ratio (TDSR) has been in keeping prices in check. That was the takeaway from a discussion at the annual National Real Estate Congress on Tuesday (Aug 12), where the panelists singled out the Seller’s Stamp Duty (SSD) and Additional Buyer’s Stamp Duty (ABSD) as measures worth reviewing. “No one questions the implementation of TDSR, but it has been in place for a year now, I think the Government should look at the earlier measures and review whether there’s any redundancy,” said Mr Dennis Yeo, managing director of property consultancy Colliers, who was one of the panelists. ERA’s key executive officer Eugene Lim singled out the SSD as a measure that has become unnecessary given that speculative activity in the local property market has declined. The panelists also suggested that ABSD for local buyers be either lowered or removed to allow Singaporeans to own their second properties. “Since TDSR is already preventing people from over-gearing, I don’t think tweaking ABSD for local buyers will cause prices to shoot up again. Developers also have a lot of stock to clear, so prices can’t shoot up,” said Mr Lim. -TODAY/cy TDSR makes older property measures redundant: ExpertsCurbs such as SSD can be lifted since speculative activity has dropped, say panellists at real estate dialogue Source: Today Online / Business SINGAPORE — With the Total Debt Servicing Ratio (TDSR) framework proving effective in keeping housing prices in check, some of the property cooling measures introduced over the past five years may have become redundant, said real estate experts yesterday. At a discussion at the annual National Real Estate Congress, panellists highlighted the Seller’s Stamp Duty (SSD) — imposed in February 2010 and subsequently expanded — and the Additional Buyer’s Stamp Duty (ABSD) — introduced in 2011 and raised in January last year — as measures the Government could review. “I think nobody questions the reason behind the TDSR, but with it being in place for slightly more than a year now, I think it’s time for the Government to start looking at whether some of the earlier measures have become redundant because we have a pretty effective TDSR,” said Mr Dennis Yeo, managing director of property consultancy Colliers. ERA key executive officer Eugene Lim shared this sentiment, saying the cooling measures may be an “overkill” now that speculative activity has been curbed. Figures from the Urban Redevelopment Authority showed that sub-sales accounted for 3.4 per cent of all sale transactions in the second quarter of this year, lower than the 4.6 per cent recorded in the first quarter. “The sub-sales number is actually very low across all types of properties, so there is very limited speculation. It could be an opportune time to review the measures aimed at tackling speculative buying and selling, which is essentially the SSD. Is it necessary anymore at this stage?” Mr Lim said. However, Associate Professor Sing Tien Foo of the National University of Singapore’s Department of Real Estate said the cooling measures continued to act to prevent the formation of a property bubble, a view shared by fellow panellist Seah Seng Choon, executive director of the Consumers Association of Singapore. “We don’t want to see a bubble forming. So, it’s good that the Government wants to slow things down to make sure it doesn’t go out of control and eventually burst, which would cause everyone to suffer, including the genuine buyers. So, it’s important that the measures are in place to ensure financial prudence is maintained,” said Mr Seah. He said the cooling measures paled in comparison with some of those in the region.“The measures here are rather mild compared with, perhaps, Australia, where foreigners are not allowed to buy resale properties … So, I think genuine buyers should not be too affected by the measures. The measures are not to stop people from buying properties,” Mr Seah said.
Still, as more Singaporeans aspire to not only own a home to live in, but also have a second property for investment, it is perhaps timely to lower or remove the ABSD for local buyers, Mr Lim said. “The ABSD is needed to prevent foreigners from buying and driving up prices. But since the TDSR is already preventing locals from over-gearing, I don’t think tweaking the ABSD for local buyers will cause prices to shoot up again. Developers also have a lot of stock to clear,” he added. -By Lee Yen Nee http://www.channelnewsasia.com/news/singapore/tweaks-to-property/1309188.html
http://www.todayonline.com/business/property/tdsr-makes-older-property-measures-redundant-experts Singapore's CBD sees shifting mix of tenants: Jones Lang LaSalle Tech companies such as Google and LinkedIn have been opening new offices or expanding existing ones in the city-state, Jones Lang LaSalle said in an article posted on its website.Source: Channel News Asia / Singapore SINGAPORE: Over the last three years, the global financial firms that dominated 60 per cent of office space in Singapore’s Central Business District (CBD) have given up 500,000 square feet (sq ft) in space. Taking their places are big names from the e-commerce, consumer products and insurance industries, according to real estate group Jones Lang LaSalle. “Ten years ago all anyone wanted was financial houses because they saw them as a growing industry that had the ability to pay,” Mr Chris Archibold, Head of Markets for Jones Lang LaSalle in Singapore, said. “Now any intelligent asset manager wants a bit more of a mix.” IT: THE NEW OFFICE SPACE GRABBERS Tech companies like Twitter, Booking.com and eBay have been opening new offices or expanding existing ones in Singapore, Jones Lang LaSalle said in an article posted on its website. PayPal has placed its international headquarters in the city, while Facebook is looking to double its space and LinkedIn is taking up the 50,000 sq ft of space vacated by Barclays. Google has expanded six times and its Asia-Pacific headquarters now span four floors at Asia Square in Marina Bay. The building, which also houses re-insurers such as Swiss Re and SCOR, has 400 bicycle racks and showers so staff of the search engine operator can bike to work. “You have this very bizarre dichotomy of Citibank bankers in their shiny shoes and guys in flip flops and shorts in the same elevator,” said Mr Hugh Andrew, the head of asset management for Asia Pacific at BlackRock. BlackRock owns the building via one of its funds. LIFESTYLE A DRAW Singapore’s pleasant lifestyle has made it a draw for companies looking to attract top talent, according to Jones Lang LaSalle. For instance, cosmetics company L’Oreal moved many of its Asian operations from Shanghai to Singapore, one motive being the need to retain senior staff who demand higher standards of living and better education for their children. Other companies which have moved to Singapore include General Motors, which moved its Asian headquarters from Shanghai, taking over 30,000 sq ft of space from the Bank of America Merrill Lynch. The insurer Aon is also building its Asia-Pacific hub in Singapore and toy-maker Lego is in the Marina Bay Financial Centre. “For modern companies with young employees, they will want to know answers to questions such as ‘will I be working in a sustainable environment?’” Mr Andrew said. “Twenty years ago, people were just wondering how big their office was going to be, and if it came with a parking space?” - CNA/cy http://www.channelnewsasia.com/news/singapore/singapore-s-cbd-sees/1308074.html Office, retail segments to lure investors Affordable capital values among many pull factors for commercial property Source: Business Times / Singapore LED by rising rents and limited supply in the near-term, investment activities are expected to hold up for office and retail space. The absence of additional buyer's stamp duty (ABSD) and seller's stamp duty (SSD) in the commercial space is also making this segment more appealing to investors. Knight Frank executive director Mary Sai noted that the Singapore retail and office markets are among top picks in Asia for foreign investors, who face heftier ABSD than locals in the residential market. "Robust economic growth, stable government, low unemployment, strength of Singapore dollars, are some compelling pull factors for foreign investors in our commercial properties," she said at the National Real Estate Congress yesterday.
"Another reason why people move over to commercial property is because the absolute sum of capital to be paid is affordable," Ms Sai added, citing the example of Alexandra Central, which had 43 per cent of transactions below S$1 million. The project that was launched in January last year had 98.3 per cent of strata-titled retail space sold out within one day. -By Lynette Khoo http://www.businesstimes.com.sg/premium/singapore/office-retail-segments-lure-investors-20140813 Malls may use tech to track shoppers' habits But some questions raised over possible breaches of privacy Source: Straits Times / Singapore YOU could soon be getting personalised phone alerts based on your shopping patterns in stores or malls for deals that could interest you. Such tracking is being planned and tested by several malls and stores, using location-based technology that tracks shoppers' movements. But while shoppers welcome the idea of getting deals, the thought of being watched so closely may cause some concern about privacy breaches. Property developer Lend Lease said yesterday at a media conference that itplans to use a Bluetooth technology from Singapore firm Sprooki to send targeted alerts to shoppers using an updated version of its 313@somerset shopping app, Tring 313. The personalised marketing could be based on a shopper's profile and how often he or she visits a store. Consumers would find the alerts to be more relevant to them, said 313@somerset's general manager Cheryl Goh. She could not say when tracking tests would start. AsiaMalls Management - which manages shopping centres like Liang Court and Tampines 1 - also said it is "reviewing possible partnerships with telcos and other IT vendors to explore how and what data to collect". This will help it understand changing trends so it can customise and plan relevant promotions and mall tenant mix, AsiaMalls said. StarHub and Wi-Fi provider Y5Zone Singapore confirmed that they are doing trials with malls and retailers to use wireless technologies that can offer insight on shopper behaviour. Mall developers and tech firms said shopper privacy is a priority. Lend Lease said it would be upfront in asking consumers if they wanted to be tracked, when they download or update the Tring app once the tracking feature is ready. M1 and StarHub both said their services for analysing shopper behaviour through wireless technology use anonymised consumer data. Local start-up Bimar, whose customers include malls and retail chain stores, said its tracking technology detects only unique phone signals, not individuals, to estimate shopper traffic, so personal details are not collected. Consumers are more likely to agree to being tracked if they can get something in return, such as discount vouchers, said Associate Professor Archan Misra from the Singapore Management University's School of Information Systems. Despite the carrots, some consumers like electronics engineer Christopher Koh, 37, are wary. "Even if my data is properly handled by the mall and safeguarded, there could be an intentional or unintentional leak of my data through people who have access to it," he said. -By Kenny Chee Real Estate Companies' Brief Strong support for IReit Global's IPO Source: Business Times IREIT Global's initial public offering of an international placement of 156.373 million units to investors outside the US (the placement tranche) and the offering of 11.36 million units to the public in Singapore have received strong support. At the close of the offering on Aug 11, the placement tranche was fully subscribed and the public offer was 7.6 times subscribed. Trading of units is expected to start at 2pm today.
http://www.businesstimes.com.sg/premium/companies/others/company-briefs-20140813 Frasers Centrepoint Source: Business Times / Singapore Markets Frasers Centrepoint Aug 12 close: S$1.79 DBS Group Research, Aug 12
Q3 2014 results in line with expectations: Frasers Centrepoint Limited (FCL) delivered a Q2 2014 PATMI (profit after tax and minority interests) of S$109.2 million, which was 59 per cent lower y-o-y. The main reason was the revaluation exercise undertaken prior to the listing of FCL back in Jun 2013. http://www.businesstimes.com.sg/premium/singapore-markets/others/brokers-take-20140813 Global Economy & Global Real Estate Guocoland M'sia surges on privatisation talk Price leap yesterday follows earlier surge in active trading Source: Business Times / Malaysia THE share price of property developer Guocoland Malaysia leaped nearly 10 per cent yesterday to RM1.94 (S$0.76) apiece on speculation that its billionaire controlling shareholder Quek Leng Chan might take it private. In the first week of this month, the stock's price had jumped more than 50 per cent amid enormous trading volumes. The activity prompted an UMA ("unusual market activity") query from the stock exchange to which the firm replied that it was unaware of any material developments that might have affected the stock's price. That Guocoland's stock prices have now cleared the 60 per cent upside mark might have had to do with two developments. One was a Aug 7 report by Kenanga Investment Bank stating that the firm was severely undervalued with an estimated net asset value of close to RM6 a share.
The other was a blog-post by influential stock-picker Salvatore Dali who, in agreeing with Kenanga, went on to point out that purchasing Guocoland at its then-price of RM1.53 apiece was "a no-brainer". He argued that "even more than HLG Capital, Guocoland is all the more important for it to be taken private for its resplendent landbank and its deep, uncorked value". -By S Jayasankaran in Kuala Lumpur http://www.businesstimes.com.sg/premium/malaysia/guocoland-msia-surges-privatisation-talk-20140813 Home-Price Gains Slow in Most U.S. Cities Source: Bloomberg / Luxury Home-price gains moderated in most of the U.S. in the second quarter, with appreciation reaching its slowest pace since 2012 as more houses came to the market. The median price of an existing single-family home rose in 71 percent of the 173 metropolitan areas measured, down from 74 percent in the first quarter, the National Association of Realtors said in a report today. Price growth slowed in 107 markets, said Adam DeSanctis, a spokesman for the group. Price appreciation is moderating as more properties are listed for sale and buyer demand slows. The inventory of previously owned homes for sale rose 6.5 percent in June from a year earlier to 2.3 million, according to the Realtors group. That’s up from a 13-year low of 1.8 million in January 2013. “We’re entering this next phase of recovery where we shift down a gear to a more sustainable pace,” Paul Diggle, U.S. property economist for Capital Economics Ltd. in London, said in a phone interview before the data were released. “It’s not something to worry about -- it’s something to be welcomed. It means price gains are at a more sustainable footing that is more in line with income growth.” The median price for an existing single-family house in the three months through June was $212,400, up 4.4 percent from the second quarter of 2013. The median price during the first quarter rose 8.3 percent from a year earlier. The best-performing area in the second quarter was Salem, Oregon, where the median price jumped 25 percent from a year earlier. Prices climbed about 18 percent in Eugene, Oregon, and Lansing, Michigan. The area with the biggest decline was Elmira, New York, where prices plunged 30 percent from a year earlier. Following was Bloomington, Illinois, with a 8.8 percent drop. -By Prashant Gopal http://www.bloomberg.com/news/2014-08-12/home-price-gains-slow-in-most-u-s-cities.html Damac Profit Climbs 18% as Dubai Property Market Rebounds Source: Bloomberg / Luxury Damac Real Estate Development Ltd. (DMC), the Dubai-based developer that started trading in London in December, said second-quarter profit rose 18 percent amid strong demand for luxury homes. Net income climbed to $253.3 million from $214.7 million a year earlier, the company said in a statement today. Revenue increased 37 percent to $556.1 million. Damac, headed by founder Hussain Sajwani, said demand for luxury properties in Dubai is “robust” as the sheikdom benefits from its status as a business and tourist center. The company is building several projects in Dubai including Hollywood-themed apartment towers and a Trump International golf course and villas. “These are good results, even though the margins have declined year-on-year,” Harshjit Oza, an analyst at Naeem Brokerage, said by phone form Cairo. “Strong revenue growth is based on handovers not only in Dubai, but in Saudi Arabia too.” Damac global depositary receipts were up 1.2 percent at $17.50 at 9:52 a.m. in London, giving the company a market value of about $3.8 billion. They rose 41 percent from the first day of trading through yesterday. The developer’s gross profit margin fell to about 54 percent in the second quarter from 64 percent a year earlier, Oza said. Still, the margin remains “impressive,” he said. Earlier this month, Damac bought a 55 million square-foot (5.1 million square-meter) plot of land in the Dubailand project for $513 million, funded by the sale of a $650 million Islamic bond, or sukuk. Booked sales surged 75 percent to $1.7 billion in the first half. Damac completed 1,634 residential units during the period and expects to deliver 4,000 to 5,000 properties during the whole year. -By Zainab Fattah First-Time Buyers Shut Out of Expanding U.S. Home Supply Source: Bloomberg / Personal Finance The four-bedroom house that Ilia Nielsen-Dembe purchased in west Denver earlier this year wasn’t her top choice. The first-time buyer had to settle on a home in a neighborhood with a high crime rate after losing out on bids for five properties in more desirable areas. “I definitely sacrificed in terms of location,” said Nielsen-Dembe, 33, who lives with her husband and two daughters in the house she bought in April for $184,500. “I had to cross streets that were not ideal in order to get a house.” While the supply of U.S. homes for sale is at an almost two-year high and price gains are moderating, buyers such as Nielsen-Dembe wouldn’t know it. An inventory crunch for entry-level houses has only worsened during the past year as discounted foreclosures become scarce and cash-paying investors snap up affordable listings to convert to rentals. Properties at the lower end of the market are also the most likely to have underwater mortgages, keeping would-be sellers from moving. “There is inventory coming on line, albeit slowly,” said Nela Richardson, chief economist for Redfin, a Seattle-based brokerage. “The problem is it’s not equally distributed. There is more turnover at the higher end. At the more affordable end of the spectrum, people are stuck.” The number of U.S. homes for sale in the bottom third of the market -- below $198,000 -- fell 17 percent in June compared with a year earlier, according to a Redfin analysis of 31 large U.S. metropolitan areas. The supply was up 3 percent in the middle market and jumped 15 percent at the top, the data show. National GainThe inventory of all existing homes for sale rose 6.5 percent in June from a year earlier to 2.3 million, an increase from a 13-year low of 1.8 million in January 2013, according to the National Association of Realtors. That’s a 5.5-month supply at the current sales pace, less than the six months that is considered equilibrium between buyers and sellers.  The rising inventory of more expensive properties is giving a boost to sales and easing the bidding wars of the past two years as historically low mortgage rates fueled competition for a short supply of homes. At the bottom of the market, first-time buyers, even those with the credit, savings and income to overcome tougher underwriting requirements, must face off against other bidders, ready to pounce. Denver, AtlantaIn Denver, entry-level listings in June were down 51 percent from a year earlier, while the upper-end supply was up 4 percent, according to Redfin. Austin, Texas, inventory jumped 14 percent in the top third of the market and fell 34 percent at the bottom. In Atlanta, where Wall Street-backed investors descended to buy homes to turn into rentals, low-end supply declined 13 percent. Top-third listings rose 18 percent. “It’s bad news for people looking for a starter home that all the choices are disappearing,” Lawrence Yun, chief economist at NAR, said. “People shouldn’t expect inventory to show up on the low end. It’s not available.” Competition in the entry-level market intensified during the past few years as Blackstone Group LP and other Wall Street investors paid cash to absorb foreclosed homes from Florida to Arizona. Today, fewer properties are available to buy because many investors are holding them as long-term rentals. Foreclosures and short sales, in which the borrower sells for less than what’s owed, accounted for 12 percent of transactions in the second quarter, down from 17 percent a year earlier, data from NAR said in a report today. Prices RiseAverage list prices on the low-end jumped 15 percent in June from a year earlier, and increased 13 percent in the middle and 9 percent at the top, according to Redfin’s analysis of large metro areas. “If you see prices increasing for reasons other than fundamentals, it’s not good for affordability,” Hui Shan, a housing analyst with New York-based Goldman Sachs Group Inc., said. “A lot of it has to do with investors coming into the market and buying properties. Those are not related to local residents’ incomes going up.” Sharlene Hensrud, a Realtor with Re/Max Results in Plymouth, Minnesota, said buyers of cheaper homes have had to adjust expectations because the bargains have been picked over. She recently took a couple on a tour of homes for about $140,000 and said they were quickly discouraged that a one-bedroom, one-bath house with no garage was all they could afford. A few years ago, a three-bedroom property would have been in their range, Hensrud said. Negative EquityIn June, there was only a 2.8-month supply of properties in the $120,000 to $150,000 range in the Minneapolis area, down from a year ago, according to the Minneapolis Association of Realtors. By comparison, there was 4.6 months of inventory of homes for $250,000 to $350,000, and a 6.3 month supply for $350,000 to $500,000 -- both higher than a year ago. “Inventory does play a role,” Hensrud said. “When we were in the middle of the crash, there were so many foreclosures. The foreclosure levels have dropped so much.” Some properties aren’t available because homebuyers are taking advantage of the strong rental market and leasing out their previous homes. Others who want to list their houses can’t. Owners of inexpensive houses are three times more likely than those with costly homes to owe more than their property is worth, according to Zillow (Z) Inc. About a third of mortgaged homes in the bottom price tier were in negative equity in the first quarter, compared with 18 percent in the middle and 11 percent at the top, Zillow data show. Slower GainsValues of the bottom third of homes in June were 17 percent below their pre-recession peak, while top-tier properties were off by 8.6 percent, according to Seattle-based Zillow. Owners in lower-cost neighborhoods are also more likely to be underwater because many of them took out zero-down payment mortgages during the boom or refinanced and pulled equity out, said Mark Vitner, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. A slowdown in price gains means that it will take longer for underwater homeowners to regain enough equity to sell and have a sufficient down payment to buy something else, said Richardson of Redfin. Residential real estate prices rose 9.3 percent in the 12 months ended May, the slowest pace in more than a year, according to the S&P/Case-Shiller 20-city index. The gauge, which fell as much as 35 percent in the real estate crash, has increased 27 percent from a March 2012 low. “So many people bought during the peak of the boom that they still have very low equity in their home,” Richardson said. “They need prices to go up even further because they bought or refinanced at top of the mountain and we haven’t reached those heights.” New HomesFirst-time purchasers accounted for 28 percent of all sales of previously owned homes in June, down from about 40 percent historically, according to NAR. The contrast is starker in the new-housing market, where homebuilders are focusing on move-up buyers. In May, homebuilders reported that only 16 percent of new-home purchases were made by first-time buyers, the lowest in 15 years of data, according to David Crowe, chief economist for the Washington-based National Association of Homebuilders. That’s further limiting supply as builders shift away from constructing entry-level homes. Tight credit has made it more difficult for young buyers, who have relatively high unemployment, weak wage growth and lower credit scores, Crowe said. Financial BarriersThe supply of cheaper new homes “isn’t there because young people are still up against these financial barriers,” Crowe said. “The builders are responding to the customer that is active in the market. It will be at least two years before there is a measurable change in the share of sales going to first-time homebuyers.” Nielsen-Dembe, a nursing assistant who took on two full-time jobs to qualify for her mortgage, said she wanted to buy because she was tired of the relatively high costs of renting. She expected getting financing to be her biggest challenge. Instead, she struggled with finding a single-family home in her price range. It took six months because of heated competition. Three of the houses she bid on went instead to cash buyers. She found sellers who needed a flexible buyer because the house they were moving to wasn’t going to be ready for two months. “I was willing to wait however long they needed,” she said. -By Prashant Gopal SIG Earnings Advance 21% as U.K. Construction Strengthens Source: Bloomberg / Luxury SIG Plc (SHI) earnings surged 21 percent in the first half as the distributor of building products benefited from a strengthening recovery in the U.K. housing market as well as procurement savings. Underlying operating profit rose to 47.8 million pounds ($80 million) from 39.6 million pounds a year earlier, the Sheffield, England-based company said in a statement today. Sales in the U.K. and Ireland from continuing operations climbed 14 percent to 650 million pounds, offsetting flat revenue in continental Europe. “Trading conditions in the U.K. have continued to gather momentum, led by the revival in the housing market,” Chief Executive Officer Stuart Mitchell said in the statement. “The group’s first-half performance and progress on its strategic initiatives provide a strong base on which to achieve its full-year expectations.” U.K. homebuilding expanded at the fastest pace in more than a decade in July as record-low interest rates and government stimulus measures helped construction grow for a 15th month.Taylor Wimpey Plc, the U.K.’s second-largest publicly traded homebuilder, reported a 45 percent increase in operating profit in the first half. SIG shares fell 0.7 percent to 170.8 pence at 10:10 a.m. in London trading, taking the decline to 19 percent this year. Improved MarginProcurement savings helped deliver a 0.4 percentage point improvement in gross margin and SIG forecast a full-year net benefit of about 7 million pounds, exceeding a previous target of as much as 5 million pounds. First-half revenue climbed 6.5 percent to 1.3 billion pounds, the first increase since 2011. While first-half sales in mainland Europe declined 0.1 percent to 636.5 million pounds, the gross margin on that revenue rose by 0.5 percentage point on procurement savings. European conditions are still “variable,” and the French construction market is expected to weaken further in the second half, Mitchell said in the statement. “Debt levels are still high, countries are still reining in government deficit, and unemployment levels are still high in some countries,” said Robert Eason, an analyst at Goodbody Stockbrokers in Dublin, before the statement was released. “Interest rates can be as low as you like; if employment is low people won’t be buying houses or renovating homes.” Last month, the insulation, roofing and ceiling supplier acquired Sodimat SAS, a French distributor of flat roofing products, for 4.4 million euros ($5.8 million). It also bought Dutch ventilation company Inatherm BV for 5.4 million euros plus additional payments of as much as 2 million euros. -By Benjamin Katz Trump Says He Is Looking for India Hospitality Investments Source: Bloomberg / News Donald Trump is looking to invest in India’s hospitality industry after lending his name to luxury residential projects as the real estate mogul diversifies his businesses outside the U.S. “India is a great place to invest, especially after the elections,” Trump, 68, who has licensing tie-ups with Pune-based Panchsil Realty and Lodha Developers Pvt., said during a press conference in Mumbai today. Prime Minister Narendra Modi’s party secured India’s first single-party parliamentary majority in 30 years after general elections over April and May. He pledged 1.48 trillion rupees ($24 billion) last month to unclog transport links, spur power output and build cities, while also loosening restrictions on foreign investment. Home prices in Mumbai, the nation’s financial capital, have more than doubled in the five years through March, according to data from Liases Foras Real Estate Rating & Research Pvt. The government on Aug. 10 approved the setting up and listing of real estate investment trusts in an attempt to lure investors and unlock a $20 billion market. Lodha Developers, which is looking to raise as much as $1 billion through a public offering, said in September that it was building the Trump Tower Mumbai in its The Park project in Worli as part of a 17.5 acre master-planned neighborhood. The three-, four- and five-bedroom apartments will come with German Poggenpohl kitchens and indoor jacuzzi tubs. Lodha has roped in Bollywood actress Aishwarya Rai as brand ambassador for the project. Trump BrandTrump, who is chairman of the Trump Organization and founder of the Trump Entertainment Resorts, also has licensed his name with Panchil Realty to build twin, 22-story Trump towers in Pune, a city southeast of Mumbai, by 2015. Trump Towers Rio, the 5 billion-real ($2.2 billion) office project in downtown Rio de Janeiro, is another such project where the brand was licensed for the development without Trump providing funding. The builder also has plans for a 18-hole golf course and 104 mansions in Dubai where he is making an investment in the project, expected to be complete in 2017, besides lending his name for a fee. Earlier this month, he sued two Atlantic City casinos that he no longer operates to force their owner either to improve “appalling” conditions or remove his name as he moves to protect his brand. -By Bhuma Shrivastava and Pooja Thakur Dubai’s Hotels Have the Most Vacant Rooms in 18 Years Source: Bloomberg / News Dubai’s hotels had the lowest occupancy in at least 18 years in July, standing more than half empty, as more rooms were created and demand declined, according to research firm STR Global. Occupancy declined 11.8 percentage points to 45.4 percent from a year earlier, STR Global said in a report dated yesterday. That’s the lowest since the company began tracking the Dubai hospitality market. Dubai, which built some of the world’s most recognizable hotels such as the sail-shaped Burj al Arab, plans to almost double the number of hotel rooms by 2020 as it expects a surge of visitors ahead of the World Expo that year. The emirate is targeting about 160,000 rooms, many of them in the three- and four-star category rather than the luxury segment, Helal Saeed Almarri, director general of the Dubai Tourism and Commerce Marketing, said in March. “As July is one of the hottest months within the region and coincides with the fasting month of Ramadan, the city had an overall negative trend, on top of growing supply,” Elizabeth Winkle, managing director of STR Global, said in the report. Revenue per available room, an industry measure of occupancy and rates, fell 7.4 percent to 290.23 dirhams ($79) according to STR Global, which advises hotel operators, developers and banks on the hospitality industry. Dubai, one of seven sheikhdoms that make up the United Arab Emirates, attracted 11 million tourists last year, up 11 percent from 2012, helping the economy expand at the fastest pace in six years. The hospitality industry benefited after the Arab Spring, drawing tourists who were avoiding political turmoil in destinations such as Egypt and Syria. -By Zainab Fattah http://www.bloomberg.com/news/2014-08-12/dubai-hotels-have-worst-monthly-occupancy-in-18-years.html Starwood Waypoint Buys Delinquent Loans in $218.7 Million Deal Source: Bloomberg / Luxury Starwood Waypoint Residential Trust (SWAY), an owner of U.S. single-family homes, bought two pools of delinquent loans and 146 bank-owned houses for $218.7 million. The transaction includes 1,294 non-performing mortgages with an unpaid principal balance of $292.6 million, the Oakland, California-based company said today in a statement. The market for bad mortgages is heating up as Wall Street firms try to profit from the housing recovery and banks seek to avoid the added costs of holding delinquent debt. For Starwood Waypoint, the loan purchases are a “great channel” for acquiring homes at a discount, said Gary Beasley, the company’s co-chief executive officer. “These two pool acquisitions support our view that similar opportunities remain in the marketplace that meet our strict underwriting criteria for portfolio composition and pricing,” Beasley said in the statement. The purchase was primarily funded through the company’s $500 million credit facility with Deutsche Bank AG (DBK), according to the statement. -By Christine Maurus http://www.bloomberg.com/news/2014-08-12/starwood-waypoint-buys-bad-loans-in-218-7-million-deal.html |