Singapore Economy S'pore's 4.1% growth beats estimates Source: Channel New Asia / Singapore SINGAPORE: Singapore's economy expanded 6.1 percent on-quarter in October-December owing to a surge in manufacturing, the Ministry of Trade and Industry said on Thursday, revising its previous estimation of a contraction and lifting overall growth in 2013 to 4.1 percent. The MTI had last month estimated a 2.7 percent contraction in the fourth quarter based on preliminary data from October and November, but a ramp up in production and exports in December prompted the upward revision. On a year-on-year basis, the Singapore economy grew by 5.5 per cent in the fourth quarter of 2013, easing slightly from the 5.8 per cent growth in the preceding quarter. Robust fourth quarter performance boosted annual GDP growth in 2013 to 4.1 percent, better than the government's earlier revised forecast for 3.5-4.0 percent expansion. The better-than-expected outcome was due to strong growth in the manufacturing sector. The star performer in the fourth quarter, the manufacturing sector grew by 7 per cent on a year-on-year basis, extending the 5.3 per cent growth seen in the previous quarter. Growth was supported by improvements in the electronics cluster and continued expansion of the transport engineering cluster. Growth was also seen in the wholesale and retail trade sector. It expanded by 7.3 per cent in the fourth quarter, extending the 6.3 per cent growth in the previous quarter. The finance and insurance sector grew by a robust 9.7 per cent, following the 10 per cent growth in the previous quarter. Looking ahead, the MTI said the Singapore economy is expected to post modest growth in 2014 with externally-oriented sectors such as manufacturing and wholesale trade likely to continue to recover and provide support to growth,together with the recovery in global demand. However, it cautioned that tight labour conditions could weigh on growth in some labour-intensive domestically-oriented sectors. The MTI maintained its forecast for the economy to expand 2.0-4.0 percent this year against the backdrop of a sustained but slow recovery in the US and the eurozone, and a projected moderation in China's growth. It expects key ASEAN economies to remain resilient despite recent pressures on their financial markets and currencies. Ow Foong Pheng, Permanent Secretary for MTI, said: "Countries like Indonesia and Malaysia have taken concrete steps to strengthen their fiscal positions, such as through subsidy rationalisation. Second, improvements in the advanced economies should help to support the exports of ASEAN economies." While Singapore's total trade declined by about half a percent to S$980 billion in 2013, economists are positive on the outlook for Singapore's exports. Edward Lee, Regional Head of Research at StanChart, said: "If you look at the last couple of years, it is domestic activity boosting overall GDP headline growth. So this year the profile is a bit different, not just for Singapore. In fact across the region, how we are seeing is - external profile, external contribution to growth will be higher this year." He expects to see a slowdown for domestic activity across the region.
- AFP/CNA/sf/de
http://www.channelnewsasia.com/news/singapore/singapore-s-economy-up-6/1005832.html IE S'pore keeps 2014 export growth forecast NODX in 2013 contracts 6% as shipments to eight of top 10 markets fall Source: Business Times / Top Stories [SINGAPORE] Growth forecasts for both total trade and non-oil domestic exports this year are maintained at 1-3 per cent, even though the two put up a disappointing performance in 2013 NODX, which barely grew in 2012, fell 6 per cent last year against the official forecast of a 4-5 per cent decline, figures released yesterday by the trade promotion agency International Enterprise Singapore show. The drop came after NODX's growth slowed from 2.2 per cent in 2011 to 0.5 per cent in 2012. This was reflected in a drop in shipments to all of Singapore's top 10 markets (which accounted for 78 per cent of total NODX), except for China and Taiwan. Total trade dipped 0.5 per cent to $980.2 billion in 2013, against a 1.1 per cent rise the year before. The decline fell short of the 1-2 per cent growth that IE Singapore had expected.
Non-oil re-exports (NORX) was about the only important indicator that was up last year, jumping 9.8 per cent following a 0.3 per cent increase in 2012. -By Chuang Peck Ming Tighter labour market may curb growth this year Q4 and full-year 2013 GDP growths top estimates Source: Business Times / Top Stories [SINGAPORE] The Singapore economy grew 4.1 per cent in 2013, roundly beating market forecasts and the government's own estimate. But growth this year could run up against rising wage costs as the labour market tightens further. Costs and manpower are the very issues businesses seem most anxious to hear about from Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam when he delivers the Budget speech today. Singapore's gross domestic product (GDP) grew 5.5 per cent in Q4 from a year ago, shooting past the flash estimate of 4.4 per cent to beat the market consensus forecast of 5.2 per cent growth as well. This meant a quarter-on-quarter annualised rate of 6.1 per cent growth - far better than the government's advance estimate of a 2.7 per cent contraction. These unusually large upward revisions were in part due to statistical adjustments to 2012's figures. Singapore grew 1.9 per cent in 2012, not 1.3 per cent as reported earlier, the Ministry of Trade and Industry (MTI) said yesterday. But the revisions also came from better-than-expected industrial production in December. Manufacturing grew 7 per cent year-on-year in Q4, up from a 3.5 per cent flash estimate, driven by "simultaneous spikes in output from the biomedical and electronics sectors", said DBS economist Irvin Seah. The services and construction sectors' growth rates for Q4 were also revised up to 5.9 per cent and 4.8 per cent year-on-year respectively, though both eased from Q3's pace. High labour costs may have compressed the margins of construction firms despite a healthy pipeline of projects, said Mr Seah. He thinks wage costs weighed services' growth down too, though stronger regional growth boosted the trade- related, tourism and financial services segments. Singapore's full-year growth was revised to 4.1 per cent, up from the 3.7 per cent Prime Minister Lee Hsien Loong announced in his new year message. This was despite a 6 per cent contraction in Singapore's key non-oil domestic exports for the full-year - a worse performance than the 4-5 per cent drop International Enterprise (IE) Singapore had forecast. As manufacturing began to recover its rhythm only in the second half of 2013, the financial services and the wholesale trade sectors clocked the strongest contribution to growth last year. MTI permanent secretary Ow Foong Pheng said the official growth forecast for 2014, which remains at 2-4 per cent growth, takes into account that the global economy will "improve modestly". The US economy is slated to improve as fiscal cutbacks ease, and private consumption and investments rise; and the eurozone recovery is set to gain traction. Nearer home, China's growth will moderate as Beijing pushes out reforms to drive the economy towards consumption-driven growth, but Asean economies are expected to stay resilient, Mrs Ow said. The global recovery will benefit Singapore's external-facing sectors, but MTI cautioned that the things to watch for include how the lack of certainty over the pace of the US quantitative easing (QE) tapering weighs on financial markets and business sentiment, and the potential unintended consequences of China's policy adjustments. Also, growth for labour- intensive, domestic-facing sectors may be constrained by tight labour market conditions - set to get even tighter as foreign levies rise another notch in July. Credit Suisse economist Michael Wan thinks that more foreign labour curbs may be unveiled in today's Budget statement. Labour, rental and utilities costs account for 78 per cent of manufacturing SMEs' total business costs and 85 per cent of large manufacturers', an MTI study found. Upward pressure on rents is slated to ease with the strong supply of industrial and commercial space in the pipeline; and utilities cost increases may ease as global oil prices moderate. But the tight labour market will continue to feed higher wage costs into unit labour cost (ULC) increases this year, said MTI's economics division director Yong Yik Wei. The ULC rise moderated from 5.3 per cent in 2012 to 3.1 per cent in 2013, but Citi economists Kit Wei Zheng and Brian Tan noted that ULC growth picked up in Q4. This points to cost pressures and reinforces the need for an enhanced Productivity and Innovation Credit (PIC) to bolster the cashflow of SMEs in domestically oriented sectors, they said. Ms Yong said: "ULC is also a function of productivity; if productivity gains traction and improves, that should improve." Unfortunately, labour productivity growth was flat last year, though it did not fall as it had in 2012, by 2 per cent.
But Mrs Ow said SMEs' take-up rate of productivity initiatives launched by the government has been encouraging, and expects productivity - especially for the manufacturing sector - to improve. "Productivity is driven, of course, not only by the bottom line but also the topline, as we grow and expand into new markets," she added. -By Teh Shi Ning Restructure towards more productive sectors: MTI study Source: Business Times / Top Stories [SINGAPORE] A Ministry of Trade and Industry (MTI) study of Singapore's labour productivity suggests that it is important not only to drive sectoral productivity gains, but also restructure the economy towards more productive sectors. Conducted by MTI economist Goh Tee Wei, the study analyses whether Singapore's recent productivity trends - described by some economists as "lacklustre" - have been the result of sectors becoming more/less productive; or the result of more/less productive sectors taking a larger employment share of the economy. Findings show that even though overall productivity growth in the last five years was supported by within-sector improvements in productivity, this was dragged down by a shift in employment towards less-productive sectors. In particular, the electronics, biomedical manufacturing, precision engineering, transport engineering, and finance & insurance sectors saw the highest average annual productivity growth between 2008 and 2013. However, over the same period, employment grew faster in most of the less-productive sectors, relative to the more-productive sectors - thereby pulling down overall productivity performance. Indeed, Mr Goh found that the employment shares of several sectors with above-average productivity levels like electronics, transportation & storage, and wholesale & retail trade, declined in the last five years. Only two of such sectors - information & communications and finance & insurance - saw an increase in their employment shares over this period. Conversely, a number of sectors with below-average productivity levels - such as construction, business services, and accommodation & food services - saw their employment shares rise. Mr Goh singled out the construction sector as the main drag on overall productivity growth - especially with the recent rise in building and infrastructure projects, which has in turn resulted in a "substantial expansion" of the sector.
Said Mr Goh: "If we exclude the construction sector from our analysis, the negative (impact on productivity growth) would have been much smaller ... Specifically, about 0.3 percentage-points of productivity growth was lost each year on average in the last five years, as a result of the increase in employment share of the construction sector," said Mr Goh in his report, released yesterday. -By Kelly Tay Singapore Real Estate NEA starts Quieter Construction Fund Source: Business Times / Singapore THE National Environment Agency (NEA) has launched a $10 million Quieter Construction Fund (QCF) to encourage construction companies to use quieter machines and noise control equipment. For instance, a Singapore-registered builder can apply to the fund to acquire a jack-in piling machine which generates about 20 dB(A) (A-weighted decibels) less noise than bore piling machines. Alternatively, the company may choose to acquire perimeter noise barriers, which can reduce noise by 5dB(A) to 10 dB(A). The QCF will reimburse companies up to 50 per cent of the cost of purchase or leasing of supported items, subject to individual equipment caps. The maximum grant that will be disbursed to each project site is $100,000 or 5 per cent of the project contract value, whichever is lower.
In his opening address at the Quieter Construction Fund Seminar organised by the NEA yesterday, Ho Nyok Yong, president of the Singapore Contractors Association Ltd (SCAL), welcomed the move to adopt quieter equipment and methods of construction. -By Mindy Tan NEA to introduce S$10m fund to mitigate construction noise Source: Channel News Asia / Singapore SINGAPORE: A new S$10 million fund will be launched on April 1 this year to encourage construction firms to buy quieter machines and noise control equipment. The National Environment Agency (NEA) gave details of the fund on Thursday morning at the Quieter Construction Seminar, saying that it aims to reduce noise pollution from construction sites, which would hopefully lead to a quieter living environment. The NEA said the number of complaints on construction noise has been on the rise -- averaging over 16,000 a year due to more projects. The Quieter Construction Fund (QCF) will offset up to 50 per cent of the cost of purchasing or leasing of noise reducing machines and is subject to individual equipment caps. The maximum grant that will be disbursed to each project site is capped at S$100,000 or five per cent of the project contract value, whichever is lower. The targeted recipients are construction companies operating at construction sites located close to residential or noise sensitive premises. The supported categories of equipment are quieter construction machines, noise control equipment and other innovative solutions. An example of quieter construction machines is jack-in piling machines, which generates about 20 dB(A) less noise than bore piling machines. Noise control equipment includes perimeter noise barriers, which can reduce noise by 5 dB(A) to 10 dB(A). When used as part of a good noise management system, the equipment will be effective in reducing construction noise. Firms can start applying from 1 April 2014 to 31 March 2016. The funds will be disbursed from 1 April 2014 to the end of 2017. Dominic Choy, Secretary-General of Singapore Contractors Association Limited, said: "For the construction companies, this fund will help companies to consider, or motivate them to consider adopting quieter equipment and processes. "The bigger companies, by and large, they are already using much of this technology, but with the aid of the fund, they can do more or perhaps even consider getting better equipment than they have. "The fund also helps mostly the small companies which usually have fewer cash resources. With this fund, I think it will definitely help them to be able to afford quieter equipment and processes." The QCF is the latest initiative in NEA's measures to mitigate construction noise and build up the industry's expertise in the implementation of quieter construction. It will also encourage construction companies to use innovative solutions to mitigate noise.
- CNA/xq/fa S$10m fund seeks to spur construction firms to cut noiseNEA starts scheme to meet rising expectations for quieter environment as Singapore experiences construction boom Source: Today Online / Singapore SINGAPORE — The National Environment Agency (NEA) yesterday launched a S$10 million fund to encourage construction companies to use quieter machines and noise-control equipment to help reduce noise in the midst of a construction boom in Singapore. The Quieter Construction Fund (QCF) is the latest initiative by the agency to promote a quieter living environment in areas near construction sites, such as hospitals and schools. Existing measures to reduce construction noise include imposing maximum permissible noise levels and the no-work rule on Sundays and public holidays. Over the past few years, public feedback on construction noise has been increasing, averaging more than 16,000 a year due to the growing number of construction projects, said the NEA. Enforcement action taken has also risen. “Construction companies have shared with us their challenges in managing construction noise level and complying with noise regulations — namely, more developments taking place in highly-built-up areas and rising expectations for a quieter environment among members of the public,” said NEA CEO Ronnie Tay at the launch of the fund. The Singapore Contractors Association Limited (SCAL) expects work on construction projects worth between S$31 and S$38 billion to be carried out this year and more construction sites can be expected to be set up near densely built-up residential areas. Mr Tay said: “There are several challenges to overcome before we can achieve our vision of widespread adoption of quieter construction equipment and methods. One of them is the high cost of investments in such technology or noise-mitigating measures. “The QCF will help construction firms defray the cost of investing in quieter construction machines, noise-control equipment and other innovative solutions.” Under the fund, companies will be reimbursed up to 50 per cent of the cost of buying or leasing of noise-control equipment, such as a perimeter noise barriers, or quieter machines such as jack-in piling machines, which generate less noise than bore piling machines. All Singapore-registered firms involved in the construction industry can apply for the fund from April 1 to March 31, 2016. Mr Fong Peng Keong, NEA Director of Pollution Control Department, hopes the fund can be used for about 100 to 300 construction projects. Mr Dominic Choy, 46, Director of Projects for Hexacon Construction, said the QCF would come in handy for smaller construction companies. He noted that many construction firms were already investing in noise-control equipment, such as noise screens. “With the fund, we can probably consider more expensive screens, which are more effective. For smaller companies, it will certainly help them as they may not have these screens.”
SCAL President, Dr Ho Nyok Yong, welcomed the launch of the fund, but said: “While the NEA pushes towards more widespread adoption of quieter construction, it should be mindful of other equally important factors faced by the construction industry, such as a labour crunch, increase in operation costs and the push to achieve higher productivity.” http://www.businesstimes.com.sg/premium/singapore/nea-starts-quieter-construction-fund-20140221 http://www.straitstimes.com/premium/singapore/story/10m-fund-cut-noise-worksites-20140221 http://www.channelnewsasia.com/news/singapore/nea-to-introduce-s-10m/1006052.html
http://www.todayonline.com/singapore/s10m-fund-seeks-spur-construction-firms-cut-noise Poor housing outlook not deterring land buyers Source: Today Online / Business SINGAPORE — Billionaire Kwek Leng Beng, head of Singapore’s second-largest listed developer, said last year that skyrocketing prices and restrictive rules made buying residential land here suicidal. That has not stopped international developers from rushing in. Land prices in some parts of the country are climbing at three times the pace of apartment costs, with plot values rising by an average of 30 per cent each year since early 2011, said property broker Chesterton Singapore, which used government auction data. Singapore’s fourth-quarter home prices slid for the first time in almost two years, as curbs cooled values. “The increase in land prices has had a tremendous impact on developers’ profit margins,” said Chesterton Singapore Managing Director Donald Han. “Those that used to enjoy margins in excess of 20 per cent will have to contend with narrower returns.” Builders with international backing such as Kingsford Development and MCC Land (Singapore) have driven the gains as they sought to benefit from home prices that have jumped 61 per cent since mid-2009. Land prices are squeezing profits, while Singapore, ranked by Knight Frank as the most expensive to buy a luxury home in Asia after Hong Kong, has introduced measures that limit mortgages, require higher downpayments and impose new taxes to tamp housing inflation. Profit margins have narrowed to 10 per cent from as much as 20 per cent just three years ago, said broker CBRE Group. That has hammered property stocks in Singapore, with South-east Asia’s largest developer CapitaLand’s share price down about 26 per cent in the past year and City Developments, run by Executive Chairman Kwek, losing 17 per cent. Mr Kwek, reported to have a net worth of US$3.9 billion (S$5 billion) in the Bloomberg Billionaires Index, said in August it would be suicidal to buy land given the Government’s requirement that new homes must be sold within two years of completion. “Non-traditional property developers, especially foreign construction companies, are also entering the real estate development field, bidding aggressively to secure land, while sacrificing their profit margins in construction,” the company said in its earnings statement in November. “This is a very potent trend that may affect the industry in the medium to long run.” While developers are expecting prices to fall because of the measures, that is not stopping them from buying more land. “Recent bids are indicative of high competition for land bank among developers as they continue to bid aggressively to replenish their declining inventories despite a bleak outlook for property prices,” said UOB Kay Hian analyst Vikrant Pandey. CapitaLand said on Wednesday it would continue to replenish land bank in Singapore through government auctions and private sales. Home prices are expected to moderate this year due to the property measures, said Chief Executive Officer Lim Ming Yan, adding that some of the short-term measures such as stamp duties or taxes may be eased if housing values fall as much as 10 per cent. For developers, recovery in demand would be a prerequisite to avoid further compression of profit margins, said Mr Nicholas Mak, Executive Director and Head of Research at SLP International Property Consultants. “If the market is softening and units are taking longer to sell, then a rational developer will not bid so much for the land even though there are fewer land parcels,” he said. “It cuts both ways; demand will influence price.” Some of the biggest land price increases have been for plots in Upper Serangoon and Tampines, as well as in Bukit Merah and Alexandra. These former industrial areas now host car dealerships and residential apartment buildings close to the city centre. Bidding at auctions, especially those in which foreign developers took part, drove up prices in the areas annually by 32 per cent and 39 per cent, respectively, in the three years since early 2011. Over the same period, prices of homes built on the sites rose only 7 per cent per annum, Mr Han said. Chinese developer Kingsford Development emerged as the top bidder for two plots in Serangoon after offering S$522 per square foot in December, showed data compiled by Chesterton, based on the Urban Redevelopment Authority’s (URA) auctions. That compares with the S$291.39 psf winning bid by Singapore developer Allgreen Properties in September 2011 in the same area, Chesterton said. MCC Land, a unit of Metallurgical Corp of China, placed the highest offer for a Tampines plot, paying S$562 psf. The bid was about 34 per cent higher than what Singapore’s largest privately held developer Far East Organization offered for a plot in the same area in May 2012, Chesterton data showed. The Government has been fighting property speculation since 2009 as record home prices amid low interest rates raised concerns of a bubble. Rules were unveiled last June governing how financial institutions grant property loans to individuals. It is also limiting land supply to prevent units from flooding the market as demand declines. There are potentially 65,000 private homes that could be completed between 2014 and 2016, said Mr Mak.
The Government will cut sales of residential plots by 18 per cent for the first half from the six months ended December, the URA said in December. The 11,585 units of total supply expected for the six months to June will be below 14,155 for the first time since 2010. Of that total, the planned supply for private residential units will drop 44 per cent in the period. -By Bloomberg Singapore’s Soaring Land Prices ‘Suicidal’ for Developers Source: Bloomberg / Luxury Billionaire developer Kwek Leng Beng said last year that skyrocketing prices and restrictive rules made buying residential land in Singapore “suicidal.” That hasn’t stopped international developers from rushing in. Land prices in some parts of the island-state are climbing at three times the pace of apartment costs, with plot values rising by an average 30 percent per year since early 2011, according to property broker Chesterton Singapore Pte, which used government auction data. Singapore’s fourth-quarter home prices slid for the first time in almost two years, as property curbs cooled values in the Southeast Asian city. “The increase in land prices has had a tremendous impact on developers’ profit margins,” said Donald Han, managing director of Chesterton’s Singapore unit. “Developers that used to enjoy margins in excess of 20 percent will now have to contend with narrower returns.” Builders with international backing such as Kingsford Development Pte and MCC Land (Singapore) Pte have driven the gains as they sought to benefit from home prices that have jumped 61 percent since mid-2009. Land prices are squeezing their profits, while the city, ranked by Knight Frank LLP as the most expensive to buy a luxury home in Asia after Hong Kong, has introduced measures that limit mortgages, require higher down payments and impose new taxes to tamp housing inflation. Profit margins have narrowed to 10 percent from as much as 20 percent as recently as three years ago, according to broker CBRE Group Inc. That’s hammered property stocks in Singapore, which have declined 1.3 percent this year, extending their 9.7 percent drop in 2013, based on the performance of the FTSE Strait Times Real Estate Index. ‘Potent Trend’While developers are expecting prices to fall due to the measures, that isn’t stopping them from buying more land. CapitaLand Ltd. (CAPL), Southeast Asia’s biggest developer, said yesterday that it will “continue to replenish landbank” in Singapore through government auctions and private sales. Home prices are expected to moderate this year because of the government’s property measures, said Chief Executive Officer Lim Ming Yan, adding that some of the curbs may be eased if housing values fall as much as 10 percent. CapitaLand’s operating profit totaled S$527.7 million ($417.6 million) in the year ended Dec. 31, missing the UOB Kay Hian’s full-year expectations. It had 3.4 million square feet of buildable area as of June, according to a July 25 presentation. “Recent bids are indicative of high competition for landbank amongst developers as they continue to bid aggressively to replenish their declining inventories despite a bleak outlook for the property prices,” said Vikrant Pandey, an analyst at UOB Kay Hian Pte in Singapore. ‘Bidding Aggressively’City Developments Ltd. (CIT), run by Kwek, has declined 18 percent in the past year. The island-state’s second-biggest developer reported in November that third-quarter income fell 10 percent, adding that builders are beginning to cut prices for existing and new projects and accept lower profit margins. Kwek, who has a net worth of $3.9 billion, according to the Bloomberg Billionaires Index, said in August it would be “suicidal” to buy land given the government’s requirement that new homes must be sold within two years of completion. “Non-traditional property developers, especially foreign construction companies, also are entering the real estate development field, bidding aggressively to secure land for development, while sacrificing their profit margins in construction,” the company said in the earnings statement in November. “This is a very potent trend that may affect the industry in the medium-to-long run.” Suburban LandCity Developments declined to comment further before its earnings on Feb. 27. The company’s landbank in Singapore as of June was 1.2 million square feet on which it can build 3.5 million square feet, according to a presentation on Aug. 6. A plot in Bukit Merah, a residential area carved out of a hill about 5 kilometers (3.1 miles) from the central business district, sold for S$1,162 per square foot of maximum buildable floor area in April 2013, according to data from the Urban Redevelopment Authority. That’s a 20 percent increase from an auction in the same area four months earlier and almost double the price recorded in 2007. Some of the biggest land price increases have been for plots in Upper Serangoon in the east and Tampines, near Singapore’s Changi Airport, as well as in Bukit Merah and Alexandra. These former industrial areas now host car dealerships and residential apartment buildings close to the city’s center. Foreign BiddersBidding at auctions, especially those in which foreign developers took part, drove prices up in the areas by 32 percent and 39 percent annually respectively in the three years since early 2011. Over the same period, prices of homes built on the sites increased only 7 percent per annum, Chesterton’s Han said. Land prices have almost doubled in the past six years in suburban areas such as Tampines, named after a forest of ironwood trees, Clementi, in the west near the National University of Singapore, and Jurong West, known for its bird park, URA’s auction data showed. Kingsford Development, a closely held Chinese developer based in the northern city of Shenyang, emerged as the top bidder for two land plots in the Serangoon area in the island’s northeast where Little India is located. The company bid S$522 per square foot in December, according to data compiled by Chesterton, based on URA’s auctions. That compares with the S$291.39 per square foot winning bid by Singapore developer Allgreen Properties Ltd. in September 2011 in the same neighborhood, Chesterton said. The average annual increases in the area are 40 percent. MCC LandMCC Land, a unit of Metallurgical Corp. of China Ltd., placed the highest offer for a plot in Tampines, an area to the east of the city center, paying S$562 per square foot. The bid was about 34 percent higher than what Singapore’s largest privately held developer Far East Organization offered for a plot in the same area in May 2012, Chesterton data showed. Developers’ profit margins have declined 50 percent over the past six months and could fall further to under 10 percent over the next 12 months if prices remain flat, Standard Chartered Plc analysts led by Regina Lim said in a note to clients in September. Singapore Land Ltd., (SL) Wheelock Properties (Singapore) Ltd., Wing Tai Holdings Ltd. and Keppel Land Ltd. are the most exposed to margin compression based on land purchases made over the past 12 months, according to the note. ‘Main Culprit’Wheelock could make a net profit of less than 5 percent on a condominium project at Ang Mo Kio, in the northeast of the island-state, Standard Chartered’s Lim said in a separate note to clients in January. “Rising land prices are the main culprit for margin compression.” Lim said in the September note. Most Singaporeans live in government-backed housing. Under first Prime Minister Lee Kuan Yew, the city was transformed from a colonial backwater during its independence in 1965 into one of Asia’s most prosperous nations. Public housing was a priority of Lee’s. His government built modern apartments where 82 percent of Singaporeans now live, according to the Housing & Development Board’s website. Singapore has been seeking to combat property speculation since 2009 as record home prices amid low interest rates raised concerns of a housing bubble. The government unveiled new rules in June governing how financial institutions grant property loans to individuals. At the same time, the government is limiting the supply of land to prevent units from flooding the market as demand declines. There are potentially 65,000 private homes that could be completed between 2014 and 2016, according to Nicholas Mak, executive director and head of research at SLP International Property Consultants. Cutting SupplyThe government will cut sales of residential plots by 18 percent for the first half from the six months ended December, according to a statement from URA on Dec. 18. The 11,585 units of total supply expected for the six months to June will be below 14,155 for the first time since 2010, when 10,500 units were made available. Of that total, the planned supply for private residential units will drop 44 percent in the period. The property market is stabilizing, the central bank said on Jan. 15. Fourth-quarter home prices slid 0.9 percent, trimming annual gains to the smallest since 2008, government data last month showed. Home sales fell in January, marking the slowest start to the year since 2009, as developers sold fewer projects after the property curbs crimped demand, a government report showed on Feb. 17. Curb OutlookSingapore may start easing some of the “short-term” measures such as stamp duties or taxes for homebuyers if home prices fall between 5 percent and 10 percent, CapitaLand’s Lim said in an interview yesterday, adding that it’s his personal view that conditions weren’t yet in place for the measures to be loosened. For developers, recovery in demand would be a prerequisite to avoid further compression of profit margins, said SLP’s Mak. “If the market is softening and units are taking longer to sell, then a rational developer will not bid so much for the land even though there are fewer land parcels,” he said. “It cuts both ways; demand will influence price.” -By Pooja Thakur http://www.todayonline.com/business/poor-housing-outlook-not-deterring-land-buyers?singlepage=true
Not time to tweak property cooling measures, say observers Source: Today Online / Business SINGAPORE — While a growing number of property market participants are calling for the Government to tweak some of the measures introduced to cool the market, observers said it may be premature to do so as there is still room for the sector to stabilise. Economists TODAY spoke to have raised concerns that any unravelling of the cooling measures before interest rates start to rise would, once again, heighten the risk of excessive leverage. “We haven’t seen interest rates rise, so it’s a little premature at this point. People are still looking to come back at levels that they feel comfortable, so I think a premature loosening would reignite the speculative element that we’re trying to dampen,” said CIMB economist Song Seng Wun. “Rising interest rates bring about concerns in terms of repayment, affordability and whether people have the ability to service their debts … So, loosening now could encourage more reckless borrowing. We would certainly want a market that is more stable before doing that,” he added. While agreeing that there is still uneasiness surrounding the hike in interest rates, Bank of America Merrill Lynch economist Chua Hak Bin said the Government can keep loan curbs intact and fine-tune some of the stamp duties instead. “I think a case can be made for some measures — the additional buyer’s stamp duty (ABSD), for example — to be reduced because the latest index has shown more slowing down. Mortgage loan growth was also down to 7 per cent to 8 per cent from a peak of more than 20 per cent. So, I think a lot of the concern about runaway prices and property bubbles forming have been abated considerably,” he said. Latest figures by the Urban Redevelopment Authority showed price growth in the private residential property sector tamed somewhat, increasing by 1.1 per cent for the whole of last year compared with 2.8 per cent the previous year. New sales also moderated by more than 30 per cent last year. This has prompted several market participants, the most prominent being City Developments Executive Chairman Kwek Leng Beng, to suggest that it might be time to tweak some of the curbs. One measure that can be lifted is the ABSD, Mr Kwek said. But KPMG Principal Tax Consultant Leung Yew Kwong said that while there are merits in the proposals to roll back some cooling measures considering a somewhat weaker market, it is unlikely that the Government would start with “potent” measures such as the ABSD. “I think the likely candidate would be the seller’s stamp duty. First, this measure has lost its potency because we now have the ABSD and TDSR (Total Debt Servicing Ratio) to choke off demand. Second, removing it may encourage more people to sell, and introducing more supply into the market can help bring prices down,” said Mr Leung. “But realistically speaking, I don’t think the Government will relax (the measures) so soon because it has indicated that there still needs to be some cooling down. Even though transactions are low now, prices still have room to correct,” he added, noting that any changes may only come next year.
Mr Song agreed that a better time to start scaling back these measures would be at the end of this year or next. “There’s no rush. The market can still withstand further correction before it becomes harmful to the economy. With nobody in jeopardy or difficulty yet, I would say it’s okay to keep the measures around now.” http://www.todayonline.com/business/not-time-tweak-property-cooling-measures-say-observers Real Estate Companies' Brief Bonvests profit surges to $56.2m on stronger revenue, revaluation gains Source: Business Times / Companies HOTEL and property group Bonvests Holdings' net profit attributable to equity-holders more than doubled to $56.23 million for the year ended Dec 31, from the preceding year's $24.6 million. This came on the back of stronger revenue and revaluation gains on its investment properties. Revenue for last year rose 11.5 per cent to $183.97 million, as the increase in contributions from the hotel and industrial divisions partly offset lower contributions from the property-rental and investment division. Revaluation gains from investment properties leapt more than four-fold to $35.75 million from $8.4 million.
This bolstered the group's "other income including interest income" to $39.4 million, which was more than three times 2012's $12.14 million. -By Lynette Khoo ARA Asset's Q4 profit up 25% at $22.1m Source: Business Times / Companies ARA Asset Management saw net profit for the fourth quarter ended December jump 25 per cent from $17.69 million to $22.13 million on the back of revenue rising 19 per cent to $43.83 million. This was boosted by its acquisition, divestment and performance fees which increased to $11.8 million from $1.5 million a year ago, thanks to fees received in relation to Fortune Reit's acquisition of Kingswood and Suntec Reit's progress payment for its acquisition of the 177-199 Pacific Highway property in Australia. Excluding unrealised marked-to-market gains/losses, net profit was $24.6 million for Q4 compared to $16 million a year ago, representing a 53 per cent year-on-year increase.
For the full-year ended December, net profit rose 2 per cent to $74.3 million while revenue rose 5 per cent to $140.4 million. -By Mindy Tan http://www.businesstimes.com.sg/premium/companies/others/ara-assets-q4-profit-25-221m-20140221
http://www.straitstimes.com/premium/money/story/ara-asset-managements-q4-profit-rises-25-20140221 Chip Eng Seng Q4 net falls Source: Business Times / Companies CONSTRUCTION and property group Chip Eng Seng's fourth-quarter net profit fell 11.7 per cent year-on-year, due to lower profits from its construction and property development divisions. Net profit for the three months ended Dec 31, 2013 was $34.6 million or 5.34 cents per share, against $39.2 million or 5.93 cents per share a year ago. A lower net fair value gain on the group's investment properties of $13 million, compared to $30 million a year earlier, also affected the bottom line. Revenue for the quarter fell 22.2 per cent to $173.2 million, dragged down by the property development division, which saw revenue fall 35.5 per cent to $97.2 million. -By Raphael Lim http://www.businesstimes.com.sg/premium/companies/others/chip-eng-seng-q4-net-falls-20140221 BBR 2013 earnings up 68.5% at $21.8m Source: Business Times / Companies HIGHER revenue recognised from construction and engineering projects helped construction group BBR Holdings to post a net profit of $21.8 million for its financial year ended Dec 31, 2013, 68.5 per cent higher than a year ago. Revenue was up 55.4 per cent at $426.3 million. The company said yesterday that revenue growth came from the general construction and specialised engineering segments. Its property development segment recorded lower revenue, but the highest pre-tax profit among the three segments.
A first and final dividend of 0.8 cent a share was declared. This translates to a dividend yield of 3 per cent based on BBR's closing price of 26.5 cents yesterday and a dividend payout ratio of 11 per cent out of 2013's earnings. -By Cai HaoXiang http://www.businesstimes.com.sg/premium/companies/others/bbr-2013-earnings-685-218m-20140221 Views, Reviews & Forum Property sales: How Iras gauges taxability of gains Source: Straits Times We thank Mr Yeo Chee Kean for his feedback ("Tax rule on property traders lacks clarity"; Tuesday). We would like to explain how the Inland Revenue Authority of Singapore (Iras) determines the taxability of gains from the disposal of properties, although we had earlier informed Mr Yeo of the basis of our assessments.
Global Economy & Global Real Estate Lack of water hits housing projects Source: Straits Times Hundreds of housing projects in Kuala Lumpur, Putrajaya and Selangor have been deferred over the past year due to lack of water, the victim of political haggling between the state government and the federal authorities. One official has warned that the ongoing dry spell is going to affect even more projects this year.
http://www.straitstimes.com/premium/asia/story/lack-water-hits-housing-projects-20140221 KL inflation in January up more than forecast Source: Business Times / Malaysia Malaysia's inflation rate continued to rise, with the latest data showing that it rose 3.4 per cent last month from a year ago and exceeding a Bloomberg survey of 3.3 per cent, Malaysia daily The Star reported. The Statistics Department said on Wednesday that the inflation rate, measured by the Consumer Price Index, also increased by 0.6 per cent from December. The CPI had increased by 3.2 per cent in December. Elaborating on the details, the department said that the CPI for January 2014 increased by 3.4 per cent to 109.5 from 105.9 a year ago, due to increases in all the main groups except miscellaneous goods & services. "The index for Food & Non-Alcoholic Beverages and Non-Food for January 2014 showed increases of 4.2 per cent and 3 per cent on-year. "When compared with the previous month, the index for Food & Non-Alcoholic Beverages and Non-Food increased by 0.8 per cent and 0.4 per cent," it added. -From Kuala Lumpur, Malaysia http://www.businesstimes.com.sg/premium/malaysia/kl-inflation-january-more-forecast-20140221 America's housing starts in January notch biggest fall in 3 years Source: Business Times / World Housing starts in the US slumped last month by the most in almost three years as unusually harsh winter weather added to the industry's burdens. Builders began work on 880,000 homes at an annualised rate last month, matching the lowest projection in a Bloomberg survey of economists and down 16 per cent from December, according to data from the Commerce Department issued on Wednesday in Washington. The decrease was the biggest since February 2011. The coldest January in two decades probably limited groundbreaking as construction in the Midwest dropped to a record low, indicating homebuilding will contribute less to economic growth at the start of 2014.
The outlook for the rest of the year will hinge on whether hiring picks up enough to overcome declining affordability as mortgage rates and property values climb. -From Washington, US J-Reits in biggest bond selling spree since 2012 Japan property market getting big Abenomics boost Source: Business Times / World Japanese real estate investment trusts are offering the most bonds since 2012 as Prime Minister Shinzo Abe's stimulus steps spark a property-market boom and cut costs for Reits to refinance. Five issuers including Sekisui House SI Investment and GLP J-Reit have sold 25 billion yen (S$310 million) of notes so far this month, the most since November 2012, data by Bloomberg show. Sekisui offered five-year debt at 0.374 per cent on Tuesday, compared with 0.63 per cent for similar-maturity bonds a year earlier. The average yield on US Reit debt was 3.1 per cent, according to Bank of America Merrill Lynch data. Mr Abe's stimulus programme to beat deflation has spurred a revival in the real estate market that has seen one gauge of prices stay near the highest in more than four years. Mizuho Securities expects the trusts to focus on refinancing debt after industry data showed that they raised 1.1 trillion yen via equity sales last year, more than double the amount in 2012.
"J-Reits can't make investments now even if they boost equity because real estate prices have gone up so much," said Takashi Ishizawa, the chief real estate analyst in Tokyo at Mizuho Securities, a unit of Japan's third-largest bank by market value. "They are instead trying to improve their finances by issuing bonds at a low cost." -From Tokyo, Japan http://www.businesstimes.com.sg/premium/world/j-reits-biggest-bond-selling-spree-2012-20140221 Oskar Schindler's factory to go on market Town offering it for symbolic sum to investor to clean it up and create jobs Source: Business Times / Property Oskar Schindler's factory is headed for the market, and Blahoslav Kaspar knows it will be a tough sell. The mayor of Brnenec, a village of 1,300 in the eastern Czech Republic, insists the crumbling complex would be the perfect spot for any kind of light industry. He also suggests it could be a Holocaust museum. The factory once belonged to Mr Schindler, a Czech-German industrialist, spy and a member of the Nazi party who sheltered about 1,200 Jews there in the final months of the Second World War. Their story was featured in Steven Spielberg's Academy award-winning 1993 film Schindler's List.
The complex "has real potential", Mr Kaspar said, looking at the cluster of abandoned buildings from the window of his second-floor office perched on a small hill above the factory. He does acknowledge that for now, "it looks like Dresden after the bombing". The complex has been the subject of almost 100 civil and criminal lawsuits since it went bankrupt 10 years ago. Mr Kaspar says that those disputes are close to being resolved, and says that the town would offer it for a symbolic sum to an investor with the resources to clean it up and create jobs in the town 190km east of Prague. -From Prague, Czech http://www.businesstimes.com.sg/specials/property/oskar-schindlers-factory-go-market-20140221 Battersea home sales: priority to Londoners 254 apartments will be on offer only in London from May 1 Source: Business Times / Property Residential property in the second phase of the Battersea power station project in London will be offered for sale in the British capital before being marketed to overseas buyers, the scheme's Malaysian-backed developer said. The decision comes in response to increasing pressure on builders to give Londoners priority for new homes in an effort to combat a housing shortage exacerbated by the droves of overseas buyers who have snapped up residential property in the city over recent years. The power station, famous for its imposing quartet of art deco chimneys, stood derelict on the south bank of the River Thames for about three decades until the 15.8 hectare site was bought in July 2012 by a Malaysian consortium.
As part of the project's second phase, 254 apartments will be on offer in an exhibition that will be held only in London from May 1. They will range from studio flats to five-bedroom penthouses. -From London, UK http://www.businesstimes.com.sg/specials/property/battersea-home-sales-priority-londoners-20140221 Brookdale Senior Living to Buy Emeritus for $1.4 Billion Source: Bloomberg / News Brookdale Senior Living Inc. (BKD) agreed to buy Emeritus (ESC) Corp. for about $1.4 billion in stock, building a network of housing for the elderly across 46 U.S. states. Investors in Seattle-based Emeritus will receive 0.95 shares of Brookdale for each share they own, the companies said in a statement today. That values Emeritus at about $28.56 a share, a 33 percent premium to today’s closing price. Including debt, the transaction is valued at about $2.8 billion. Brookdale, based in Brentwood, Tennessee, said the deal will create the country’s “only national full-spectrum senior-living solutions company,” with more than 1,100 locations. It will also increase the company’s presence in high-population states in the West and Northeast, more than doubling its units in California, New York, New Jersey and Massachusetts. “This combination will improve our ability to deliver the best high-quality solutions for the growing demographic of aging seniors and their families,” Brookdale Chief Executive Officer Andy Smith said in the statement. “With still only 10 percent market share post-merger, we are confident of our prospects for driving further long-term revenue growth.” The combined company’s properties will offer services including assisted living, dementia care, skilled nursing, outpatient therapy, home health and hospice care. The deal will expand Brookdale’s units by more than two-thirds to 112,700. Smith will be CEO of the combined company. Emeritus CEO Granger Cobb will join the board and continue in a consulting role, the companies said. -By David M. Levitt Murdoch Buys 4 Floors of NYC Condo Tower for $57 Million Source: Bloomberg / Luxury News Corp. Chairman Rupert Murdoch agreed to buy the top four floors of a condominium tower near Manhattan’s Madison Square Park for $57.3 million. Murdoch, 82, who is also chief executive officer of Twenty-First Century Fox Inc., went into contract to purchase two units at One Madison, a triplex penthouse spanning the 58th through 60th stories and another full-floor apartment beneath it, his spokesman, Steven Rubenstein, said. The properties total about 10,160 square feet (944 square meters), according to a statement from Related Cos., one of the developers of the tower on East 22nd Street in Manhattan’s Flatiron neighborhood. The 7,000-square-foot triplex, sold in “raw condition,” includes floor-to-ceiling windows and a wraparound terrace, “with uninterrupted cinematic views of Manhattan, river to river, and from the World Trade Center to the uptown tip of Madison Avenue,” Related said in the statement, which didn’t name the buyer. The three-bedroom 57th-floor unit is in finished condition. Seventy-five percent of the building’s apartments have been sold, according to the statement. One Madison, with 53 units, includes amenities such as butler service, a screening room and an indoor pool surrounded by marble walls, according to listings website StreetEasy.com. Dolly Lenz, principal of a New York-based brokerage that bears her name, represented the buyer, according to Related’s statement. “One Madison has clearly proven to be the ‘it’ building in New York,” Lenz said in a telephone interview. She declined to discuss the transaction. Murdoch and his third wife, Wendi Deng Murdoch, divorced last year. As part of the settlement, Wendi Murdoch kept the couple’s Fifth Avenue apartment, which was transferred to her name last month, according to New York City property records. -By Oshrat Carmiel and Edmund Lee Foreclosure Starts Fall to 2006 Level as Home Prices Rise Source: Bloomberg / Luxury The rate of new foreclosures in the U.S. dropped to the lowest level in eight years as rising property prices erased negative equity and allowed more delinquent homeowners to sell without losing money. The share of loans on which foreclosure actions were started declined in the fourth quarter to 0.54 percent from 0.7 percent a year earlier, the Mortgage Bankers Association said in a report today. The rate was the lowest since the third quarter of 2006, when home prices were just starting to fall in what would become the worst crash since the Great Depression. The foreclosure crisis is fading for much of the country as the economy improves and Americans negotiate with banks for modifications or approval to sell for less than what’s owed. The jobless rate rate dropped last month to 6.6 percent, the lowest in more than five years. Home prices rose 11 percent in December from a year earlier, the 22nd straight increase, Irvine, California-based CoreLogic Inc. reported this month. “Foreclosures are back to the typical historic range,” said Michael Fratantoni, chief economist for the Washington-based Mortgage Bankers Association, said in a telephone interview today. “The vast majority of loans that remain to be worked out are very old at this point.” About 75 percent of seriously delinquent loans in the fourth quarter were originated in 2007 or earlier, according to the Mortgage Bankers Association. Housing RecoveryThe rate of foreclosure starts peaked in 2009 at 1.42 percent. Since then, low mortgage rates and tight inventories have helped provide a foundation for the housing recovery. The mortgage-delinquency rate, which measures loans at least 30 days behind and not in foreclosure, fell to a seasonally adjusted 6.39 percent in the fourth quarter from 7.09 percent a year earlier, according to the group’s report. The percentage of loans in the foreclosure process dropped to 2.86 percent from 3.74 percent a year earlier. Both figures were the lowest since 2008. The Miami metropolitan area had the highest foreclosure inventory rate of the top 25 markets in the fourth quarter, at 10.34 percent. That was down 1.09 percentage points from a year earlier. Miami was followed by Tampa, Florida, with an 8.71 percent rate; Long Island, New York, at 7.17 percent; and Edison, New Jersey, at 6.19 percent. States such as Florida, New York and New Jersey, which require court approval for repossessions, account for most of the loans in foreclosure. Of the 17 states that had a higher foreclosure inventory rate than the national average, 15 were judicial states. -By Prashant Gopal Accor 2013 Profit Exceeds Target on Hotel-Industry Recovery Source: Bloomberg / News Accor SA (AC), Europe’s largest hotel operator, said 2013 profit rose 1.9 percent on cost cuts and a hotel-industry recovery. Earnings before interest and taxes rose to 536 million euros ($737 million) from 526 million euros a year earlier, the Paris-based owner of the Sofitel and Ibis brands said in a statement today. That beat the average estimate of 528.3 million euros from 18 analysts surveyed by Bloomberg and the company’s target of 530 million euros. “While the economic environment remains uncertain in a few regions, overall we are benefiting from the global recovery,” Chief Executive Officer Sebastien Bazin said in the statement. Accor in November scrapped a plan to sell properties and expand through operating more hotels, focusing instead on owning the hotels it runs. The strategic change was Accor’s first since Bazin took office in August after the company fired his predecessor. Accor declined 0.7 percent to 36.49 euros at the close of trading in Paris. The shares have gained 30 percent in the past 12 months, while the French CAC 40 Index (CAC) has climbed 17 percent. The company in January said its 2013 earnings would be at the top of its target range, at about 530 million euros. Higher DividendAccor reported annual net income of 126 million euros compared with a year-earlier loss of 599 million euros that was caused by the sale of its Motel 6 chain. Accor plans to raise its dividend to 80 cents a share from 76 cents. The company sold hotels valued at about 336 million euros in 2013, Bazin said by phone. Accor has about 2 billion euros of cash to make acquisitions, although some of the funds may be used to pay back 2.3 billion euros of debt that expires between 2017 and 2021, he said. This year’s earnings will be boosted by the company’s new strategy of running its hotel operations and hotel investment businesses as separate units, Bazin said. “The strategy will take time to be implemented, certainly at HotelInvest, because of the the size of the portfolio,” he said. Accor said in November it plans to make most of its acquisitions in Europe, where there is high demand for budget and mid-scale properties. The company opened 22,637 rooms in 2013, bringing the total number of rooms it operates to 461,719, Accor said in January. Accor cut its costs by 37 million euros in 2013, exceeding its target of 30 million euros, according to the statement. In 2014, the company plans an additional reduction of 63 million euros. -By Dalia Fahmy Barrack’s Colony Bidding for Italy Property Company Risanamento Source: Bloomberg / Luxury Tom Barrack’s Colony Capital LLC and a former chief executive officer of Risanamento SpA (RN) are making a joint bid for the Italian developer and property manager. OUI SpA, 70 percent owned by Colony, made an offer for the Risanamento shares held by banks including Intesa Sanpaolo SpA, UniCredit SpA and Sistema Holding, Milan-based Risanamento said in a statement today. OUI will also make a legally-required offer for the publicly traded shares. Colony’s investments in Europe include stakes in hotel operator Accor SA and supermarket chain Carrefour SA as well as office and retail assets and property-backed loans. Risanamento last month agreed to sell nine commercial properties in Paris’s central shopping district for 1.23 billion euros ($1.7 billion). The company will realize a gain of more than 230 million euros after paying debt related to the assets, it said in a statement. Former Risanamento Chief Executive Officer Luigi Zunino owns the other 30 percent of OUI, according to the statement. Zunino made a separate 25 cents a share bid for the company in June, according to a statement at the time. Risanamento has a market value of about 190 million euros. OUI may offer 20 cents a share for the property company, Il Sole 24 Ore reported today, without saying where it got the information. Risanamento said it’s unable to comment on the bid because it hasn’t received any communication from shareholders. Colony didn’t immediately respond to an e-mail seeking comment on the bid. -By Ross Larsen and Chiara Remondini Commerzbank Said to Sell Spanish Property Loans June 30 Source: Bloomberg / News Commerzbank AG (CBK) plans to sell more than 4 billion euros ($5.5 billion) of loans linked to Spanish real estate by June 30, two people with knowledge of the situation said. The Frankfurt-based bank set a March 2 deadline for buyers to submit indicative bids for the remaining property loans in Spain, named “Project Octopus,” said the people, who asked not to be identified because the information is private. Nils Happich, a spokesman for Commerzbank, declined to comment. Commerzbank, Germany’s second-largest bank, is winding down its real estate financing arm and shipping loans to focus on business and consumer banking after it received an 18.2 billion-euro bailout in 2009 from the German government, which now owns a 17 percent stake. Commerzbank’s shares have more than doubled in value since July on speculation that the bank is getting a grip on its finances after five capital increases in four years. “There will be a lot of demand for the loans as there’s a lot of pressure on the large distressed investors to do this kind of deal,” said Fernando Acuna, founder of real estate advisory firm Aura REE. “This is probably the only large commercial real estate loan book which will trade in Spain during this cycle.” U.S. BuyersThe bank sold 5 billion euros of U.K. property loans to Wells Fargo & Co. and Lone Star Funds in July at a 3.5 percent discount to book value. Commerzbank’s commercial-property loans in Spain, which are both performing and nonperforming, totaled 4.8 billion euros at the end of December, according to its fourth-quarter results. Commerzbank said it sold 710 million euros of the loans Feb. 6. The bank was little changed at 12.77 euros at 3:02 p.m. in Frankfurt. The Bloomberg Europe Banks & Financial Services Index fell 0.8 percent to 110.82. Commerzbank shares are expected to trade at 12.48 euros in 12 months, according to the average estimate of 27 analysts on Bloomberg. Sales of commercial-property loans and real estate-owned sales totaled 30.3 billion euros in Europe last year, according to a Feb. 5 report by Cushman & Wakefield Inc. Spain represented 4.5 billion euros of transactions, second only to the U.K. and Germany. Investment in European property debt is set to rise to 40 billion euros this year as funds such as Apollo Global Management LLC (APO) and Cerberus Capital Management LP buy loans cheaply and financing for purchasing them becomes more readily available, Cushman & Wakefield said. -By Sharon Smyth, Nicholas Comfort and Shane Strowmatt Housing in U.S. Cools as Weather Adds to Burdens: Economy Source: Bloomberg / Personal Finance Housing starts in the U.S. slumped in January by the most in almost three years as unusually harsh winter weather added to the industry’s burdens. Builders began work on 880,000 homes at an annualized rate last month, matching the lowest projection in a Bloomberg survey of economists and down 16 percent from December, according to data from the Commerce Department issued today in Washington. The decrease was the biggest since February 2011. Another report showed wholesale prices remained constrained. The coldest January in two decades probably limited groundbreaking as construction in the Midwest dropped to a record low, indicating homebuilding will contribute less to economic growth at the start of 2014. The outlook for the rest of the year will hinge on whether hiring picks up enough to overcome declining affordability as mortgage rates and property values climb. “We won’t know until probably April at the earliest whether there is some change in the fundamentals” of the market because of the weather impact, said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, whose projection of 894,000 starts was among the closest in the Bloomberg survey. If there is growth in job creation and incomes, “that will offset higher mortgage rates,” he said. The continued bad weather this month means “we won’t know until probably April at the earliest whether there is some change in the fundamentals,” Moody said. U.K. UnemploymentThe jobs outlook will also play a role elsewhere. A report today showed U.K. unemployment unexpectedly rose in the fourth quarter, reinforcing the case for the Bank of England to keep its key interest rate at a record low. For their part, Federal Reserve policy makers plan to soon change their guidance for the path of interest rates as unemployment declines toward a threshold for considering an increase in borrowing costs, minutes of their January meeting showed today. “Several” Fed policy makers also said that in “the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace” of the Fed’s bond purchases $10 billion at each meeting. Stocks fell as the Fed minutes indicated stimulus cuts will continue and as the International Monetary Fund said risks of prolonged market turmoil in emerging markets and deflation in the euro area are threatening the world’s economic prospects. The Standard & Poor’s 500 Index dropped 0.7 percent to 1,828.75 at the close in New York. Survey ResultsThe median estimate of 84 economists surveyed by Bloomberg projected January housing starts in the U.S. would come in at a 950,000 pace. Estimates (NHSPSTOT) ranged from 880,000 to 1.04 million. The Commerce Department revised the December reading up to 1.05 million from a previously estimated 999,000 pace. Another report today showed the producer-price index increased 0.2 percent in January, led by gains in goods such as food and pharmaceuticals. The advance followed a 0.1 percent rise the prior month, according to data from the Labor Department. Over the past 12 months, wholesale prices rose 1.2 percent. The data marked the debut of the first major overhaul of the PPI since 1978, which more than doubled its reach of the economy by including prices received for goods, services, government purchases, exports, and construction. The lack of pressure at the earlier stages of production, one reason inflation is running below the Federal Reserve’s target, has given policy makers room to keep borrowing costs low. Inflation Pressures“Pipeline pressures remain muted,” said Russell Price, a Detroit-based senior economist at Ameriprise Financial Inc., who correctly projected the 0.2 percent gain in the PPI. “Overall, businesses have very weak pricing power.” The Commerce Department’s housing report showed permits for future projects declined 5.4 percent to a 937,000 pace in January, less than the projected 975,000, according to the Bloomberg survey median. The smaller decrease in applications shows the weather played a role in last month’s slump in starts, according to economists such as Joshua Shapiro. “Normally when permits hold up in the face of a steep drop in starts, the starts have merely been delayed owing to weather conditions, and they will occur when conditions allow,” Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York-based forecasting firm, said in a research note. For all of 2013, builders began work on 926,700 homes, the most since 2007’s 1.36 million. Homebuilding SlumpsWork on single-family houses dropped 15.9 percent to a 573,000 rate in January, the fewest since August 2012, from 681,000 the prior month. Construction of multifamily projects such as condominiums and apartment buildings declined 16.3 percent to an annual rate of 307,000, a three-month low. Three of four regions showed declines in groundbreaking last month, led by a record 67.7 percent plunge in the Midwest to a 50,000 annualized pace, the fewest in data going back to 1959. Starts dropped 12.5 percent in the South. By contrast, in the Northeast, where the mercury also declined, starts surged 61.9 percent, the most since December 2012. Weather probably played less of a role in the West, where starts dropped 17.4 percent last month, the biggest decrease since November 2012. Last month was the third-driest January on record in California, according to the National Oceanic and Atmospheric Administration. California, Arizona and Nevada all had January temperatures ranking among the 10 warmest on record, NOAA said. Regional BreakdownThe drop in the West, following a 25.9 percent surge in December, still put starts in the region at their second-strongest level in almost six years. Inclement weather has weighed on the economy so far this year, holding back builders and preventing customers from visiting car dealerships and retailers. Government offices in Washington closed Feb. 13 as a winter storm that paralyzed the South with snow and ice moved to the Northeast, canceling flights, snarling traffic and downing power lines. Last month was the coldest January since 1994 in the contiguous U.S., based on gas-weighted heating-degree days, a measure of energy demand, according to Commodity Weather Group LLC in Bethesda, Maryland. The Northeast is also on track for the coldest winter since 1982, measured from December to February, the group said. Confidence among U.S. homebuilders plunged in February by the most on record as the bad weather limited prospective buyer traffic and depressed sales. Confidence SlumpsThe National Association of Home Builders/Wells Fargo sentiment gauge slumped to 46 this month, weaker than the most pessimistic estimate in a Bloomberg survey, from 56 in January, figures from the Washington-based group showed yesterday. All four regions showed declines. Readings less than 50 mean more respondents reported poor market conditions than good. Beyond weather, borrowing costs for homebuyers have climbed since mid-2013. The 30-year fixed mortgage rate averaged 4.28 percent in the week ended Feb. 13, up from 3.35 percent in early May last year, according to data from Freddie Mac in McLean, Virginia. At the same time, some builders, such as Atlanta-based Beazer Homes USA Inc., remain upbeat about the outlook for demand. “While housing isn’t the screaming bargain that it was a year ago, it is still highly affordable in relation to household incomes and to alternative rental payment,” Chief Executive Officer Allan Merrill said on a Jan. 31 earnings call. “Household formations are occurring, and they drive new construction.” -By Michelle Jamrisko and Shobhana Chandra |