Real News‎ > ‎2014‎ > ‎August 2014‎ > ‎

3rd August 2014

Singapore Economy

S'pore 'must stay the course' on restructuring

Journey to improve productivity and innovation gaining momentum: Swee Say

Source: Straits TImes / News

Singapore must stay the course on its restructuring journey, even though it may not be a painless or instant one, labour chief Lim Swee Say said yesterday.

"I firmly believe that we are heading in the right direction," he said.

Even though there is still much work to be done in some sectors, such as construction and retail, the move towards productivity improvement and innovation is gaining momentum, added Mr Lim, who is secretary-general of the National Trades Union Congress.

To improve, the jobs that are created must be above the national average in terms of productivity and the value they add.

At the first of the labour movement's National Day observance ceremonies, held at The Promontory @ Marina Bay, he told reporters: "Our business cost and wage cost are going up, so we are becoming a higher-cost location for doing business. But being a higher-cost location does not mean being a high-cost location."

Speaking to an audience of 7,000 comprising workers and their family members who had gathered for a picnic, Mr Lim also said that Singapore needs to keep one step ahead of the competition by doing things other people cannot do, so that the profitability for businesses and the wages of workers can continue to improve.

Separately, in his written National Day message to unionists, Mr Lim said that a higher re-employment age for older workers and a more progressive wage ladder for low-wage workers will make Singapore's labour situation even better.

Under the Retirement and Re-employment Act, which kicked in in 2012, bosses must offer healthy workers who have performed satisfactorily re-employment from the ages of 62 to 65, or a one-off payment. But calls have been made to raise the ceiling to 67, and a tripartite committee is discussing when and how to do so.

Mr Lim also said separately that progressive wages are applicable to workers at all levels. "For us to succeed at restructuring, we have to find ways to make better use of every worker because of the tight labour market."

The progressive wage model sets out career ladders with benchmark wages for resident workers - Singaporeans and permanent residents - in various sectors.

Adopting the scheme is mandatory for licensed cleaning companies, and this will soon apply to the security sector as well. Discussions are under way about the need for a progressive wage model for the landscaping industry.

Mr Lim, who is Minister in the Prime Minister's Office, shared in his message that he told international union leaders in June about Singapore's low unemployment rate, its growing employment rates for women and mature workers, and how wages were rising faster than inflation.

"I hope the next time when we share our Singapore Story with tripartite leaders of other countries, it will be an even better story," he added.

Only a minority of countries will succeed in creating enough jobs, both in number and quality, said Mr Lim. "I believe Singapore will be one of them."

While employers agree with the need to improve productivity, many are at a level where, without additional manpower, they feel unable to grow their capacity, said Association of Small and Medium Enterprises president Kurt Wee.

He added that although the association tries to help members make use of available government assistance programmes, it still comes across some who are unable to take on additional orders.

"It still feels like productivity doesn't happen overnight and sometimes, businesses wonder if it will happen at all," he said.

-By Joanna Seow

Singapore Real Estate

Larger flats bear brunt of slow resale market

Fewer units sold, and it is taking longer to find buyers despite falling prices

Source: Straits Times / Money

Sales of five-room and executive flats have been the worst hit by the shrinking Housing Board resale market.

Not only are fewer of these large flats being sold, but they are also taking more than twice as long to find buyers, compared with five years ago.

This is despite prices falling since the start of last year. The median cost of a five-room flat in Sengkang, for example, was $495,500 in the second quarter of this year, down from $523,000 at the start of last year.

An executive flat in Woodlands now fetches $600,000, down from $629,000 before.

According to property experts and agents, the declining interest is due to recent home loan curbs turning more buyers away from these more expensive units. Some sellers also remain reluctant to accept lower prices.

Since peaking at 34.4 per cent in 2009, the resale market share of five-room and executive flats has fallen to 27 per cent in the second quarter of this year, according to the latest HDB figures.

Data from property firms also showed that it was getting harder to find a buyer.

ERA Realty said it took an average of 31 days in 2011 to sell a five-roomer or an executive unit. Now, it takes around 47 days.

Figures from PropNex Realty also showed that such flats took one to two months to sell in 2009. This lengthened to two to three months last year. This has now stretched to between three and five months.

The mortgage servicing ratio limit, which caps the share of monthly income that can be used for housing loans, was lowered from 35 per cent to 30 per cent last August.

"This limits the size of the loan a buyer can get. So they now tend to avoid higher-priced flats," said ERA Realty key executive officer Eugene Lim.

The new total debt servicing ratio, introduced last June, has also made it harder for buyers to get a maximum loan of 80 per cent.

That means buyers who are keen may be unable to get the necessary financing, said SLP International Property Consultants head of research Nicholas Mak.

One seller of an executive flat in Ang Mo Kio, who declined to be named, has faced just this issue. "There are interested viewers, it's just that some of them cannot get the loans," he said.

And because executive units are rare, sellers seem to be less willing to compromise on price in order to close a deal, said Mr Lim.

The HDB stopped building new executive flats in the early 2000s.

Five-room flats make up about a quarter of existing HDB flats, but executive flats account for just 7.5 per cent.

Added PropNex Realty chief executive officer Mohamed Ismail Gafoor: "The increase in supply of Build-To-Order flats has also swung buyers over from the resale market."

BTO supply was ramped up from 2011 till 2013, with more than 25,000 new flats launched each year.

All of this has made it harder for sellers, who have had to accept lower prices or shelve their downgrading plans.

One seller who had to face the new market reality was 43-year-old Janice Tan, who put her five-room Jurong West flat on the market in March.

A deal was closed last month - but only after she and her husband lowered their price for the unit, which had previously been valued at $500,000.

"We actually went much lower, by about 8 per cent," said the human resources executive. Given the current market, they believe they had little choice, she added.

And that is precisely what property experts have been urging: for sellers to be more realistic in their expectations.

-By Janice Heng

Global Economy & Global Real Estate

China Services Index Drops to Six-Month Low on Property

Source: Bloomberg / Luxury

A Chinese services-industry index declined to a six-month low in July, dragged down by a weaker property market.

The non-manufacturing Purchasing Managers’ Index fell to 54.2 from 55.0 in June, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. A reading over 50 indicates expansion.

Today’s report highlights the danger a correction in the property market poses to growth in the world’s second-biggest economy and contrasts with a government report last week that showed manufacturing expanded at the fastest pace in more than two years. The International Monetary Fund’s China mission chief warned last week that real estate is the biggest near-term risk to the economy.

“Real estate continued to soften, reflecting a thin market in the low season, while the range of price discounting widened,” Cai Jin, a vice chairman at the logistics federation, said in the statement. “The decline in the index isn’t large and overall, markets are stable.”

A gauge of business expectations in the survey rose to 61.5 in July from 60.4 in June, today’s report showed.

Services accounted for 46.6 percent of gross domestic product in the first half of 2014, 1.3 percentage points higher than the same period a year earlier, the National Bureau of Statisticssaid last month when it released second-quarter GDP data.

Services Growth

Expansion in services quickened to 8 percent in the first half from 7.8 percent in the first quarter, and compared with a 7.4 percent pace in manufacturing, mining and construction industries, the agency’s data show.

The non-manufacturing index from the statistics bureau and CFLP is based on responses from purchasing managers at 1,200 companies in 27 industry groups including catering, retailing, construction and transportation. A new seasonally adjusted series began in March 2012 and the data were revised back to March 2011.

A separate survey of purchasing managers in services industries will be released by HSBC Holdings Plc and Markit Economics on Aug. 5. Its June reading of 53.1 was the highest in more than a year.

-By Bloomberg News