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18th December 2014

Singapore Economy

Cloudy global outlook may dampen S'pore growth

Economists lower forecasts amid slowdown in China and oil turmoil

Source: Straits Times / Top of The News

THE volatile global outlook has prompted private sector economists to downgrade their forecasts for Singapore's growth this year and the next.

They now expect the economy to expand just 3 per cent this year, down from an earlier forecast of 3.3 per cent.

The reasons behind the gloomier mood have been making headlines for weeks - the crashing oil price that is driving some producers to despair, a slowdown in China and the faltering economies in Japan and Europe.

Growth this year in the manufacturing, construction, wholesale and retail trade, and accommodation and food services, is likely to be lower than previously expected, said the analysts polled by the Monetary Authority of Singapore.

Economists have also lowered their growth forecasts for next year to 3.1 per cent, compared with an estimate of 3.7 per cent put out in September.

The poll, which was sent out on Nov 25, reflects views received from 22 analysts who closely monitor the Singapore economy.

DBS economist Irvin Seah said the downgrade for this year was expected, given the still tepid outlook for major economies such as Europe and Japan and slowing growth in China.

"This cautious sentiment has spilled over to the outlook for 2015," said Mr Seah.

He added that Singapore will be a "small boat in rough seas" amid volatility in financial markets next year.

Recent weeks have hinted at what may lie ahead, with plunging oil prices hammering currencies such as the ringgit, rupiah and Russian rouble and sparking panicked sell-offs in markets around the world.

This heightened volatility "will persist in 2015... and is likely to spill over to the real economy and affect economic activities", said Mr Seah.

Net oil exporter Malaysia, Singapore's largest trading partner, has been hit hard by falling crude prices, with the ringgit slumping to historic lows.

A weaker Malaysian economy will affect Singapore, which is already seeing its own oil exports hurt by declining prices.

Singapore's non-oil exports have also been weak, rising just 1.6 per cent last month over the same month last year - well below forecasts.

"Lower oil prices will not lift growth significantly because of external volatility... The net impact is still positive, but there will be some pain," said Mr Seah.

While plummeting oil prices have increased market volatility, they have also been a boon to consumers by lowering inflation here.

Survey respondents expect inflation for this year to come in at 1.1 per cent, down from September's estimate of 1.8 per cent, as petrol pump prices and electricity tariffs fall.

Worries about oil prices and global growth have spooked markets in recent weeks, but the decline in crude prices "still implies a big tax cut for consumers, especially in the developed world", said Credit Suisse economist Michael Wan.

Mr Wan, whose forecast of 3.5 per cent growth next year is more upbeat than most, said lower oil prices benefit net importers such as Singapore.

"People have also been too pessimistic about the impact of restructuring on Singapore... We do see signs that the service sector is picking up," he said.

Official forecasts tip growth to come in at around 3 per cent this year and between 2 per cent and 4 per cent next year.

-By Chia Yan Min

Singapore Real Estate

HDB's deficit widens as it ramps up flat supply

Shortfall due to higher expected loss for flats currently under construction, with more BTO projects awarded and increased development costs

Source: Business Times / Real Estate

The Housing and Development Board's (HDB) net deficit (before government grant) more than doubled to S$1.97 billion in its fiscal year ended March 2014, as it spent more to ramp up its supply of public flats.

This was revealed in the statutory board's annual report released on Wednesday. Its net deficit (before government grant) was S$797 million in the previous year. To be sure, HDB incurs deficits every year as it builds homes for Singaporeans.

-By Lee Meixian

HDB deficit more than doubles

·         $1.97b overall net deficit

·         $1.93b home ownership deficit

·         More flats under construction

Source: Straits Times / Singapore

THE Housing Board's deficit more than doubled in the last financial year, as building continued on the record number of new flats launched since 2011.

In the year ended March 31, it incurred a $1.93 billion deficit on home ownership alone, according to its annual report yesterday.

The Special CPF Housing Grant's take-up rate also spiked, after the scheme for first-time buyers was enhanced to make more households eligible in July last year, the HDB said in a separate statement.

Last year's home ownership deficit was 2.7 times that of the previous financial year.

This was mainly because the HDB had more projects on the go, after three years of large Build-to-Order (BTO) launches. There were 86,298 flats under construction, up from 72,737 in the previous financial year.

The HDB thus had to make a larger provision for foreseeable loss under its operating expenses.

This is the difference between the estimated development cost and the selling price of flats. It accounted for most of the home ownership deficit last year.

The HDB's overall net deficit before government grants and taxation was $1.97 billion, up from $797 million the year before.

Mr Liang Eng Hwa, deputy chairman of the Government Parliamentary Committee for National Development, does not see the deficit as cause for worry as long as spending remains sustainable.

"To me, it's essentially social spending," he said. "In public housing, you need to have subsidies."

From 2011 to last year, the HDB launched 77,000 new flats, clearing the backlog of first-timer demand and reducing competition among applicants.

Having achieved that, it began slowing down supply this year.

Yesterday, the HDB also gave updates on policy changes introduced in the last financial year.

One change with huge effects was the July 2013 enhancement of the Special CPF Housing Grant that was first introduced in March 2011.

The income ceiling was raised and the grant was extended to four-room flats, making more middle-income households eligible.

As of the end of October, the grant had benefited about 10,500 households - more than 8,700 of whom took it up after the change.

There were also measures to cater to various groups of buyers.

Singles were allowed to buy new two-room flats from July last year. As of the end of October this year, 3,700 had booked units.

Large three-generation flats for multi-generation families were introduced in the September 2013 BTO. More than 500 have been launched and, as of October, 340 have been booked.

-By Janice Heng

HDB deficit spikes sharply to almost S$2b

HDB attributed the mounting deficit to its efforts to scale up its building programme, to help more Singaporeans own homes as well as provide homes for lower-income families.

Source: Channel News Asia / Singapore

SINGAPORE: The Housing and Development Board (HDB) saw its deficit in the last financial year more than double to S$1.973 billion as it stepped up the building of homes.

According to HDB’s annual report, its overall net deficit for the last financial year - from April 2013 to March 2014 - was S$1.973 billion before Government grants, up from S$797 million the previous year. Its home ownership segment reported a deficit of S$1.927 billion, up from S$719 million.

The bulk of the deficit came from HDB's home ownership programmes - which comprises mainly the gross loss on the sale of flats, disbursement of CPF housing grants and the expected loss for flats that are currently under development.

HDB noted that it incurs deficits every financial year to provide homes for Singaporeans. This annual deficit is fully covered by Government grant.

HDB attributed the deficit to efforts to deliver on its building programme, which aims to help more Singaporeans own homes as well as provide homes for lower-income families.

A total of 13,310 homes were sold in the last financial year, 2,777 units more than the previous year, according to the annual report.

HDB also said it made a series of enhancements to its programmes in the last year. These include raising the income ceiling for the Special CPF Housing Grant from S$2,250 to S$6,500, as well as extending the scheme to first-time buyers of four-room flats in non-mature estates from July 2013.

Since the scheme was introduced in 2011, about 10,500 households have benefited from the grant. As of October this year, HDB said it has disbursed about S$158 million. Of the households which have benefited, more than 8,700 took up the grant after the enhancement. The majority of these households were eligible or had received a bigger grant as a result of the changes, HDB said.

Mr Nicholas Mak, executive director of research and consultancy at SLP International Property Consultants, said: "Based on available records, the HDB budget deficit in the past financial year is one of the largest.

"In the last two years, the Government has actually embarked on a very aggressive BTO (Build-To-Order) programme. But in 2015, the Government plans to cut back on the BTO programme so an estimated about 17,000 new BTO flats will be supplied.

"Hence, I believe the budget deficit is likely to be reduced since in the previous year, most of the budget deficit went to the home ownership programme. I think in the next financial year, this is likely to be reduced as well."

Meanwhile, HDB’s upgrading segment reported its deficit had narrowed to S$568 million from S$619 million the previous year, due to the Lift Upgrading Programme coming to an end. The S$5 billion programme has been implemented in 98 per cent of HDB blocks that were built without direct lift access.

According to the report, lift upgrading works have been completed in 72 precincts under the programme in FY13/14. As of October this year, works for the remaining 66 precincts under the programme are on track, HDB said.

- CNA/cy/ac

HDB deficit more than doubles to almost S$2b

Higher loss attributed to more flats under construction and increased development costs

Source: Today Online / Singapore

SINGAPORE — As a result of the Government’s ramped-up supply of flats and higher development costs, the Housing and Development Board (HDB) has posted a deficit of almost S$2 billion in the financial year ending in March — more than double the amount in the previous financial year.

The deficit has increased almost 14-fold since FY2010/2011 — the financial year before the May 2011 General Election, when housing was a hot topic.

In its annual report released yesterday, the HDB reported an overall deficit of about S$1.97 billion in FY2013/2014, compared with S$797 million in FY2012/2013. The deficit was only S$443 million in FY2011/2012 and S$143 million in FY2010/2011.

Responding to TODAY’s queries, the HDB noted that it incurs deficits every financial year to provide homes for Singaporeans. It said for FY2013/2014, the bulk of the deficit — about S$1.93 billion — came from its home ownership programme, which comprises mainly the gross loss on the sale of flats, disbursement of Central Provident Fund (CPF) housing grants and the expected loss for flats that are under development.

“The higher deficit recorded for the home ownership programme is mainly due to higher expected loss for flats that are currently under construction, as more Build-to-Order (BTO) projects were awarded in FY2013/2014, coupled with higher development costs,” the HDB said.

It added: “The higher deficit on home ownership ... testifies to the HDB’s stepped-up efforts in FY2013/14 to deliver on the building programme, to help Singaporeans realise their home ownership dream and to provide homes for lower-income families.”

The overall deficit was covered by a government grant of around S$2.12 billion, about twice the amount given to the HDB in the previous financial year.

Analysts said the Government has announced it will taper the supply of flats next year, after it ramped up supply in the past few years to meet demand from first-time buyers. They noted that the Government has the financial muscle to support the deficits.

National University of Singapore’s Associate Professor Sing Tien Foo cited the increase of the income ceiling for the Special CPF Housing Grant (SHG), which was also extended to middle-income families, as a factor that caused the HDB’s deficit to balloon. The higher construction and land costs for new BTO flats could also have contributed to it, he noted.

Mr Chris Koh, director of property firm Chris International, said the HDB will carry on incurring deficits as long as the Government maintains its position of subsidising public housing. But the eye-catching deficit in FY2013/2014 is likely to be one-off, he said.

Century 21 chief executive Ku Swee Yong pointed out that the Government’s cooling measures could have led to upgraders being unable to sell off their existing flats. They may then delay collecting the keys to their bigger flats and payments to the HDB, he said.

C&H Properties key executive officer Albert Lu reiterated that the Government is financially very strong and should have no issues financing the deficit. But Assoc Prof Sing pointed out: “The increases in the Government’s allocation to the HDB will mean less will be available to other areas of public services, unless the budget surplus is expanded correspondingly to support the deficit.”

Mr Lu added that it could raise the price of new flats to reduce the deficit, but such a move would not go down well with the public.

The HDB’s annual report showed that 86,298 flats were under construction — an 18.6 per cent rise from 72,737 in FY2012/2013. As at March 31, 16,881 BTO, Selective En bloc Redevelopment Scheme and rental units had been completed, compared with 11,541 units in FY2012/2013.

About 13,300 flats were sold in FY2013/2014, about 2,780 units more than the previous financial year. The HDB recorded a gross loss of S$118 million for these sales.

It launched six BTO exercises in FY2013/2014, where a total of 24,531 units were put up for sale.

Laying out its achievements in the financial year, the HDB pointed to a new scheme launched in July last year that allows singles to apply for new two-room flats in non-mature HDB estates. As at Oct 31, about 3,700 singles have booked a unit, of which close to 600 have collected their keys.

New Three-Generation (3Gen) flats were also rolled out from September last year, with more than 500 3Gen flats launched since. As at Oct 31, 340 households have booked a unit.

The HDB said about 10,500 households have benefited from the introduction of the SHG in March 2011, with S$158 million dispensed as at Oct 31.

-By Joy Fang

Watershed year as investment sales slump to S$17b-18b

Uptick for bulk sales of high-end residential units seen; Blackstone said to have completed purchase of 18 units at Paterson Suites for S$2,100 psf. But 2015 could see an extension of the lacklustre performance in overall market

Source: Business Times / Real Estate

Investment sales of property - big-ticket transactions of at least S$10 million - so far this quarter are at their lowest quarterly level since the global crisis. The year-to-date tally is about S$17 billion-S$18 billion and while this figure is expected to be higher by year-end, the full-year number will still be a big drop from around S$30 billion for each of the past four years.

-By Kalpana Rashiwala

Goodland eyes more overseas revenue and recurring income

Source: Business Times / Real Estate

Goodland Group is mitigating the slowdown in the Singapore property market by focusing on overseas markets in the region, especially those with double-digit growth in prices and sales transactions over the past two years. This is shifting its revenue mix, with one-quarter of group revenue to come from regional projects by fiscal 2016 and more recurring income with its participation in mixed-use project T-City in Ipoh, Malaysia.

-By Lynette Khoo

Goodland Group steps up push into regional market

Upcoming Ipoh project is 'major catalyst' for expansion

Source: Straits Times / Money

DEVELOPER Goodland Group is stepping up its push to go regional in the face of constraints in the Singapore property market, the firm said yesterday.

All of Goodland's revenue came from local property development in the 2014 financial year, but it aims to change that quickly.

By the 2016 financial year, it expects regional developments to make up about 25 per cent of revenue. The company sees an upcoming project in Ipoh as its "major catalyst for regional expansion".

In October, Goodland completed the $62.7 million acquisition of Citrine Assets, which owns 70 per cent of a proposed 82.6ha integrated township in Ipoh.

The township, T-City, is to be built next to the North-South Expressway and be completed by 2030.

T-City will have a built-up space of more than 30 million sq ft and an estimated total gross development value of $4 billion.

It will comprise high-rise residential and commercial office towers, retail malls, shopping streets, shop offices, serviced apartments, motorsports facilities, a motorsports theme park, hotels, and about 25,000 parking spaces.

"As Ipoh's current capital values are significantly lower than the major Malaysian cities - Klang Valley, Penang and Johor - the group believes there is room for significant capital appreciation," said Goodland.

It noted as well that the Singapore property market "remains constrained by property cooling measures... high land prices, increasing construction costs and shortage of workers".

Goodland, in its business update, said the company will continue to "exercise prudence" when evaluating and exploring development opportunities here.

In Ipoh, it will through Citrine Assets own about 20.8ha of land in T-City.

This land parcel has been valued at about $147.5 million and is zoned for commercial and residential developments. It will have a built-up space of over 12 million sq ft and a total gross development value of about $1.8 billion, the company said.

Given T-City's positioning as a lifestyle development catering to international motorsports events, Goodland is considering developing new revenue streams, including renting out car showrooms.

The firm added that it will reveal a development plan by the first quarter of next year. Construction will start by the third quarter of next year.

Goodland's ongoing projects here include The Citron Residences, where it has sold 53 of 54 units and is expected to obtain its temporary occupation permit (TOP) in 2016, and The Bently Residences@Kovan, which has sold 27 of 48 units and is expected to obtain its TOP in the same year.

It also has The Citron, which will comprise 36 strata-titled shops, and an upcoming eight-storey industrial building in Kim Chuan Lane.

- By Rennie Whang

Oxley buys its first property in Japan for $39.6m

Source: Straits Times / Money

LIFESTYLE property developer Oxley Holdings has made its first investment in Japan, with the 3.55 billion yen (S$39.6 million) acquisition of Chiba Port Square, a mixed development in the heart of the Chiba city's port area, in Greater Tokyo.

The purchase, from Masuya Home Company, was funded by internal resources and bank borrowings, and completes the deal announced last month, when Oxley said it had entered into a "booking confirmation" for the property. The price was settled after taking into account current market prices of surrounding properties, and Oxley's assessment of the property's earnings' potential, said Oxley in a statement to the Singapore Exchange.

A formal valuation is yet to be conducted.

"We are excited about the prospects in the Japanese property market," said Mr Ching Chiat Kwong, its chairman and chief executive. "The Japanese yen has fallen to its lowest level since 2007 in recent weeks. The weak yen, coupled with the government's efforts to invigorate the economy, made this an opportunity not to be missed."

The 20,072.5 sq m development comprises a 28-floor office building known as Portside Tower, an eight-floor commercial retail building known as Port Town, and a 21-floor hotel targeted at business travellers, with 270 rooms. There is also an outdoor sky plaza that is a popular events venue.

Oxley intends to hold the property for investment purposes. The purchase price makes up 2.7 per cent of Oxley's $1.49 billion market capitalisation, based on yesterday's closing of 50.5 cents.

Oxley's portfolio here includes industrial property Space@Tampines, as well as two hotel developments, Novotel Singapore on Stevens and Ibis Singapore on Stevens. Both hotels are expected to open their doors at the end of 2016.

Oxley said the acquisition is not expected to have a material impact on the current financial year ending June 30, 2015.

-By Marissa Lee

Oxley Holdings makes foray into Japanese property market

Oxley Holdings has acquired Chiba Port Square, a mixed development located in the heart of Chiba City's port area in Greater Tokyo.

Source: Channel News Asia / Business

SINGAPORE: Homegrown lifestyle property developer Oxley Holdings has made its foray into the Japanese property market. It has acquired Chiba Port Square, a mixed development located in the heart of Chiba City's port area in Greater Tokyo.

This follows an announcement by Oxley earlier in November that it was planning to buy the property for ¥3.55 billion (S$39.5 million) from Masuya Home Company.

With a site area of 20,072.5 square metres, the development consists of a 28-floor office building known as Portside Tower, including a 21-floor hotel called Candeo Hotels Chiba.

Oxley intends to hold the property for investment purposes.

Mr Ching Chiat Kwong, chairman and CEO of Oxley, said: "We are excited about the prospects in the Japanese property market. The Japanese yen has fallen to its lowest level since 2007 in recent weeks. The weak yen, coupled with the government's efforts to invigorate the economy, made this an opportunity not to be missed."

Oxley said the deal will strengthen its investment property portfolio, which currently comprises Space@Tampines, an industrial property, as well as two hotel developments. 

- CNA/ac

Companies' Brief

City Developments

Source: Business Times / Companies & Markets

City Developments Ltd (CDL), Blackstone and CIMB will form a new investment platform to acquire the cashflows and future distributions of Quayside Collection. The transaction will raise S$1.5 billion through the creation of: (i) S$750m of profit participation securities (PPS) and (ii) S$750m in new debt facilities. PPS investors will be paid a coupon of 5 per cent per annum for a five-year tenure.

Global Economy & Global Real Estate

Rise of Dubai property prices slow in H2; 2015 outlook stable

Source: Business Times / Real Estate

Foreign condo owners scarce in Vancouver, Toronto

Source: Business Times / Real Estate

India property fund plans to raise US$500m

HDFC Property Fund eyes funding from GIC, Temasek and Oman's SWF

Source: Business Times / Real Estate

RBS shrinks Irish arm with sale of £4.8b property debt

Source: Business Times / Real Estate

Vanke plans onshore debt after rules eased

Source: Business Times / Real Estate

Dubai Sees Real-Estate Leading Growth 7 Years After Crash

Source: Bloomberg / News

Dubai expects real estate and construction will probably drive economic growth in 2015, seven years after a crash in property prices brought the Gulf emirate to the brink of default.

The emirate’s economy is expected to grow 4.5 percent next year from an estimated 4 percent in 2014, the Department of Economic Development said in a presentation yesterday. Real estate and construction may expand about 6 percent each. Preliminary forecasts for 2014 show the property sector will grow 3.5 percent.

Dubai, the second-richest sheikhdom in the United Arab Emirates after Abu Dhabi, is home to the world’s tallest skyscraper and largest airline by international traffic. The emirate has relied on tourism and hospitality since the 2008 real-estate crash. Property prices rebounded last year, prompting authorities to take steps against speculation, including measures to curb mortgage lending and doubling the transaction tax.

Sheikh Ahmed Bin Saeed Al Maktoum, head of Dubai’s supreme fiscal committee, said the government is “on alert against volatility in the real-estate market, while factoring the positive contribution of this sector to economic development in Dubai and in meeting real demand.”

Capital spending is expected to remain steady for 2015, though it may slow in the following year i foil prices don’t recover, said Mohamed Lahouel, the department of economic development’s chief economist.

Capital Projects

“What has already been started in terms of economic projects will continue,” he said. If “oil remains at something like $65 per barrel, then capital projects will start to suffer.”

Digvijay Singh, an analyst at Renaissance Capital in Dubai, predicted the real estate sector would decline in 2016, if not next year, saying oil prices are unlikely to recover to $110 a barrel in 2015.

“New project announcements and the inventory buildup in the real estate sector should see a sharp slowdown,” Singh said. “To assume 2015 will not see any slowdown at all, I think would be a bit optimistic.”

In addition, Singh forecast “collateral damage” to other sectors that depend on real estate.

Going forward, construction should continue to be a key growth driver, but residential real estate and hotel sectors will depend on supply and demand dynamics, said Monica Malik, chief economist of Abu Dhabi Commercial Bank.

Moderate Growth

“Any development of an oversupply in the medium-term could moderate subsequent growth,” Malik said by phone yesterday.

Oil has slumped 44 percent this year as a surge in shale drilling lifted U.S. output to the fastest pace in three decades amid slowing world demand growth. Leading members of the Organization of Petroleum Exporting Countries such as Saudi Arabia and the U.A.E. have resisted calls from smaller producers to reduce quotas to stem the price rout.

Dubai could benefit from the oil-price drop as transportation costs retreat.

Emirates Airline tickets are expected to “go down quite a bit over the next few months,” said Lahouel, the economist. “For Dubai, this is likely to increase the number of travelers.”

-By Nafeesa Syeed

JPMorgan Asset Management Buys Aviva’s Asia Real Estate Book

Source: Bloomberg / News

JPMorgan Chase & Co. (JPM)’s asset-management unit acquired Aviva Plc (AV/)’s real estate investment business in Australia, Japan and Singapore as it seeks to expand in the Asia Pacific area.

JPMorgan will add Aviva’s real estate team of about 50 people in the region, the New York-based bank said today in a statement. Aviva’s multimanager property strategies in Asia Pacific weren’t affected by the transaction, according to the bank, which didn’t disclose terms.

“Growing in Asia Pacific has been a strategic imperative,” Joe Azelby, head of global real assets for the JPMorgan unit, said in the statement.

JPMorgan’s asset-management group, led by Mary Callahan Erdoes, earned $1.57 billion through the first nine months of 2014, the lowest among the four major divisions at the largest U.S. bank, according to a financial statement. The unit managed $1.71 trillion in assets at the end of September.

Aviva has scaled back from countries including the U.S. as the London-based insurer narrows its focus to main markets. Aviva Chief Executive Officer Mark Wilson struck a deal this month to buy U.K. rival Friends Life Group Ltd. for about 5.6 billion pounds ($8.8 billion).

-By Dakin Campbell

Russians Quit London Luxury-Homes as Only Super Rich Stay

Source: Bloomberg / Luxury

Wealthy Russian homebuyers are vanishing from London after driving a wave of foreign investment that lifted property prices to records. Only the oligarchs persist.

The number of Russians registered through Christie’s International Real Estate to buy homes in the city dropped by 70 percent in a year, said Giles Hannah, the broker’s senior vice president. That has led to a plunge in offers for properties priced at less than 10 million pounds ($16 million) as it becomes more difficult for all but the wealthiest to take money out of their home country.

“The banks are limiting what they can withdraw and we’re expecting further impact as sanctions kick in,” said Hannah, who advised Russian families on 180 million pounds of London property deals in the past two years. “The oligarchs are still spending. They already have banks or lawyers over here that allow them to make purchases.”

Russia is struggling to reverse a rout in the ruble with emergency measures including 7.5 percentage points of interest rate increases and more than $10 billion of ruble purchases as President Vladimir Putin confronts the country’s deepest financial crisis since 1998. A drop in Russian buyers is hitting a London luxury-property market already buffeted by economic uncertainty in the U.K. and taxes introduced by Prime Minister David Cameron’s government this month.

Buyers ‘Eliminated’

Russian buyers have been “eliminated virtually overnight,” Andrew Langton, chairman of luxury-property broker Aylesford International Estate Agents, said by phone. “Those that are still here have money out of Russia and won’t be taking it back in a hurry.”

Russians were the biggest buyers of London’s luxury homes between January and July 2013, according to Knight Frank LLP. They dropped to third during the first six months of this year, behind Italians and French purchasers, the broker said.

Russia has been hurt by sanctions against businesses run by allies of Putin imposed after the country’s March incursion into Crimea in Ukraine. The latest round of U.S. actions, on Sept. 12, targeted OAO Sberbank (SBER), the country’s largest lender, as well as energy firms and five state-owned defense and technology companies.

The ruble has sunk 16 percent against the dollar this month even after posting an 11 percent rebound yesterday, after the Finance Ministry pledged to use as much as $7 billion to support the currency and the central bank announced measures to help companies refinance looming foreign-currency debt. Putin at a news conference today criticized the central bank for not acting faster to support the ruble, which is down 44 percent this year through yesterday.

Money Worries

“You’ll also see a reduction in those trying to buy yachts and smaller items because they’re nervous about their money,” Hannah said. “They’ve got to keep hold of their cash.”

Home prices in London’s wealthiest neighborhoods fell on a monthly basis for the first time in four years in November, according to Knight Frank. Annual price growth slowed to 6.1 percent.

Changes to the U.K.’s stamp-duty sales tax mean buyers of a 5-million-pound home would pay a levy of 513,750 pounds, an increase of almost 164,000 pounds, according to government data.

“The sanctions are really beginning to bite on expensive property in London, on top of all of the tax which the government introduced in the autumn budget,” Langton said. “It’s killed the golden goose.”

French Focus

The story is different for the oligarchs, a group of the richest Russians who have thrived since the fall of Communism. Russians accounted for 21 percent of home purchases worth more than 10 million pounds during the six months to October, up from 13 percent in the prior six months, Knight FrankLLP said in a report Nov. 25. Those that continue to shop for homes are targeting London, Paris and the French Riviera, according to Hannah at Christie’s.

“The heyday of the Russian buyer was probably two years ago and it’s been declining ever since, although there was a bit of buying as a result of the Ukraine crisis,” said Robert Bartlett, chief executive officer of broker Chestertons. “There’s now a broader influx of Indian and Middle Eastern money that is having a bigger impact on the London market.”

-By Patrick Gower.

Boomers Seen Boosting New-Home Sales as Millennials Wait

Source: Bloomberg / Personal Finance

Michael Jay, a New England radiologist who retired this year at age 64, traded heating bills and Massachusetts state income taxes for a three-bedroom house on a Florida golf course.

“If you don’t need a big Northeast job, then there’s nice living in other parts of the country,” said Jay, who in September moved with his wife, Susan, into a 55-and-over community near Tampa.

Southwest Florida is the fastest-growing U.S. market for new houses, a sign that retirees such as the Jays are poised to buoy growth in the country’s depressed homebuilding industry next year. With new-home sales running well below historic levels, older Americans who have had decades to build wealth and credit histories are helping to prop up demand while younger people put off homeownership.

“Everybody’s best-selling projects are those catering to elder buyers,” John Burns, a housing consultant based in Irvine, California, said in an interview. “It’s really going to happen all across the country.”

Sales of new single-family homes are expected to rise 16 percent to 510,000 in 2015, according to the median estimate of 25 economists and housing analysts in a survey conducted by Bloomberg News. That would be an acceleration from this year, which is expected to show a 2.6 percent increase from 2013, based on the survey results.

Housing starts, including multifamily projects, will climb about 15 percent to 1.15 million units, according to the estimates, which were submitted from late November through last week. Builders broke ground at an annual pace of 1.03 million in November, a 1.6 percent decline from a year earlier, the Commerce Department said yesterday. Annual starts haven’t surpassed 1 million since 2007, before the real estate crash accelerated.

Record Prices

Builders have increasingly shifted away from starter homes and are appealing to wealthier buyers, with the median price of a new U.S. house reaching a record high of $305,000 in October. Builders such as Shea Homes, Lennar Corp. and PulteGroup, whose Del Webb business is the largest targeted to older buyers, are depending on the segment’s continued growth.

“The active-adult market, in our case served through Del Webb, is extremely well-positioned to take advantage of a giant population of buyers that are only getting bigger, combined with them feeling better about the housing market,” PulteGroup Chief Executive Officer Richard Dugas said in an interview. “It’s a sweet spot.”

Millennials Behind

Even with next year’s expected growth, the pace of new single-family home sales will remain below the U.S. average of about 650,000 dating to 1963, according to Census Bureau data. Homebuilders are waiting for the millennial generation to increase buying, a boom that could take years to materialize as student debt, tight credit and delayed child-bearing depress their housing purchases.

There are about 74.7 million millennials -- those age 18 to 34 -- compared with with 75.2 million people in the baby-boom generation born from 1946 to 1964, according to Census data. While the baby boomers are greater in number, they cover two more years, said Jed Kolko, chief economist at Trulia Inc. The most common age in the U.S. is 23, he said.

The market has been “bumpy” as buyers remain skittish, Toll Brothers Inc. (TOL) CEO Douglas Yearley Jr. said during a conference call last week. His company, the largest U.S. builder of luxury homes, on Dec. 12 forecast lower-than-expected growth for 2015, sending shares to the biggest drop in almost two years and the year’s biggest one-day withdrawal from the iShares U.S. Home Construction Exchange-Traded Fund.

Wealthier Buyers

The share of first-time buyers this year dropped to the lowest level since 1987, the National Association of Realtors reported last month. While the U.S. homeownership rate has fallen to 64.4 percent, the lowest in almost two decades, the rate among people age 65 or older stayed at about 80 percent.

“Boomers are much wealthier,” said Jeff Handlin, president of Oread Capital & Development LLC, a Denver-area developer based in Centennial, Colorado. “They will pay for upgrades and a lot of premiums that add to the bottom line of the builder. Millennials are more of a price-focused buyer.”

Builders are growing mostly by catering to move-up buyers - - or empty nesters who are downsizing. Baby boomers have better credit and more savings than their children, who often depend on parents to finance their first home, according to Nela Richardson, chief economist for Seattle-based Redfin Corp. In addition to Florida, communities targeting older buyers are popping up around college campuses and urban centers such as Baltimore, Philadelphia and Chicago, Richardson said.

Walkable Communities

“We’re seeing boomers moving to walkable urban communities so they’re going to be sitting side by side with millennials at the same coffee shop, sharing the same electric sockets,” she said in a phone interview. “Boomers and millennials are looking a lot more alike but one of them has the money and credit.”

Top destinations for baby boomers have affordable homes, lower tax rates and a welcoming business environment, according to a report last week by the National Association of Realtors. Leading markets include Albuquerque, New Mexico; Boise, Idaho; Denver; Phoenix; Greenville, South Carolina; and Raleigh, North Carolina, along with cities in Florida.

With an estimated 10,000 Americans turning 65 every day, retirees are already helping to fuel a construction boom in southern Florida. Housing starts in the third quarter jumped 46 percent from a year ago in the Fort Myers-Naples area, with the one-time U.S. foreclosure capital becoming the fastest-growing new home market, according to market researcher Metrostudy.

Florida Developer

The Jays live in Minto Group’s Sun City Center. The Ottawa, Canada-based company, which builds and develops throughout Florida, projects its sales in the state will rise to about 900 next year, up about 30 percent from 2014. About 65 percent of 2015 sales will be in developments restricted to or marketed to boomers, said Mike Belmont, president of Minto Communities Florida.

Minto plans to buy 1,600 acres (650 hectares) in the Daytona Beach area next year, building on the success of the 2,400-acre Isles of Collier Preserve in Naples, which has sold 120 units at an average price of about $650,000 since opening in February, Belmont said.

“We would not have made the acquisitions we’ve made over the last two years if we didn’t have strong confidence that we will be successful,” Belmont said. “Florida is still very attractive. There’s no state income tax and low taxation. The harsh winters that were experienced in the Northeast and Midwest are an impetus for folks to move to Florida.”

PulteGroup Growth

For Atlanta-based PulteGroup, Del Webb’s pace of sales per community increased by about 23 percent in the third quarter, up from a year-over-year growth rate of 7 percent at the start of 2014, Dugas said.

Tri Pointe Homes Inc. (TPH), which sells in eight states after this year’s $2.8 billion acquisition of Weyerhaeuser Real Estate Co., is opening active-adult communities in Phoenix and northern Virginia in 2015.

“The tale that’s going to bring about the housing recovery is the millennials,” Tri Pointe CEO Doug Bauer said in a telephone interview from his Irvine, California, headquarters. “In the short run, obviously the baby boomers and the active adult is an additional segment of housing that we definitely want to play in.”

After the Fort Myers-Naples region, areas with the biggest increases in third-quarter single-family housing starts are Southern California, with a 28 percent jump, and Northern California, up 23 percent, according to Metrostudy. The biggest publicly traded builders in those markets are Lennar Corp. (LEN) and KB Home. (KBH)

Texas Markets

They were followed by Florida’s Sarasota and Bradenton region, where PulteGroup has the largest market share of public builders; and San Antonio and Austin, Texas, where D.R. Horton Inc. (DHI)holds the top market share, according to Metrostudy.

Builders may be following the wrong strategy by going upmarket when there’s a shortage of supply at the bottom, said Sam Khater, an economist for Irvine, California-based CoreLogic Inc. While the retirement of baby boomers will drive growth incrementally, particularly for vacation homes, many of them will choose to age in place, Khater said.

“Mobility declines, and declines a lot as a person ages,” Khater said. “They’re not as likely to move as they were in their 40s as they were in their 20s. I don’t see them being an additional source of demand or supply.”


WCI Communities Inc. (WCIC), a Bonita Springs, Florida-based builder of resort and retirement subdivisions, reported its backlog -- a measure of future sales -- increased 40 percent in volume and 64 percent in value for the quarter ended Sept. 30.

“We’re on kind of a very, very fast-paced growth and our sales year-over-year were up dramatically,” said WCI CEO Keith Bass, whose company filed for bankruptcy in 2008 after Florida’s housing market collapsed. “The demographics, certainly for the buyer profile that we target, makes it a game that goes into some extra innings.”

The Jays, who paid cash for their 2,700-square-foot house in southwest Florida, are also considering buying a summer property in the Denver area. They plan to sell their house in Sharon, Massachusetts, next year, getting two homes in exchange with some money left over, the couple said.

Buying a home won’t be as easy for their children’s generation. The Jays have twins in college.

“Baby boomers are driving the market because they have a certain degree of wealth,” Michael Jay said. “We’re just basically making lateral moves in real estate and retiring. But the kids need to make money.”

-By John Gittelsohn and Prashant Gopal

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