Real News‎ > ‎2014‎ > ‎July 2014‎ > ‎

1st July 2014

Top Stories

Too early to relax property cooling measures, says MND

Source: Straits Times

It is still too early to roll back property cooling measures, according to the Ministry of National Development (MND) yesterday. It said that although home sales have decreased, prices have remained relatively stable.

Singapore Economy

Singapore business confidence dips in Q3: Report

Local businesses expressing "cautious optimism" because of slight drop in regional demand and renewed uncertainties in the global economy, says Singapore Commercial Credit Bureau.

Source: Channel News Asia / Business

SINGAPORE: Business confidence in Singapore dipped slightly in the third quarter of this year, sliding to +14.65 percentage points from +22.66 percentage points in the previous quarter.

This is according to Singapore Commercial Credit Bureau's (SCCB) Business Optimism Index (BOI) study released on Monday (June 30), which showed that local businesses were more cautious amid a slight drop in regional demand and uncertainty in the global economy.

The quarterly study by SCCB tracks business expectations in key areas such as net profit, volume of sales and employment.

The services and construction industries ranked among the most optimistic sectors, according to the study.

The services industry anticipated sales volume and net profits to remain at healthy levels, owing to higher retail sales volume and gains in the food and beverage and electronics, watches and jewellery sectors.

Meanwhile, public sector construction activities were expected to drive the industry, despite a tightening foreign worker policy keeping a lid on growth.

Audrey Chia, CEO of SCCB, said: "Recent reports of a contractionary shock in the US economy may have dampened business sentiments here slightly. However, the overall BOI (Business Optimism Index) reading remains healthy and reflects positively on the resilience of SMEs against external risks and uncertainties.

"The healthy BOI reading over the first three quarters this year bodes well for businesses here. This may be indicative of a rising number of firms tapping on Government grants such as the Innovation and Capability Voucher (ICV) scheme and other loan financing schemes to boost productivity, streamline business processes and offset any capital cost which help keep their business lean, profitable and competitive in the near-term."

- CNA/kk

Singapore Real Estate

NUS price index for private homes up 0.8% in May

Increase marks first gain for Overall SRPI after 9 consecutive months of declines

Source: Business Times / Property

NATIONAL University of Singapore's (NUS) price indices for completed non-landed private homes rose month on month in May, after straight declines for several months. Its latest flash estimate shows that the Overall Singapore Residential Price Index (SRPI) rose 0.8 per cent in May from the revised value for April - after slipping one per cent in April over the previous month.

The increase marked the first gain for the index after nine consecutive months of declines between August 2013 and April this year. May's flash estimate is down 6.3 per cent from the recent peak in July 2013. Year on year, the May index value is down 6 per cent.

Commenting on the month-on-month appreciation based on the May flash estimate, associate professor Lum Sau Kim of the university's Department of Real Estate said the May indices were "perhaps boosted in part by the more active sales in the primary market during May".

"Going forward, the lower activity that is often the case in June may result in a small dip in the indices.

-By Kalpana Rashiwala

Resale prices of private homes rebound in May

Source: Straits Times 

RESALE prices of private homes staged a surprise rebound in May over April, reversing a nine- month decline, but experts say to keep the bubbly on hold. They warn that investors remain wary, and the unexpected price bounce does not signal a sustained recovery.

Robust demand for office space in Q2

Highest occupancy rate of 99.4% is in Shenton Way

Source: Business Times / Property

SINGAPORE'S office property market saw stronger demand in the second quarter this year, according to property consultant Colliers International, which pointed out that all Grade A office micro-markets across the island have reached near-full occupancy rate at beyond 95 per cent.

According to the quarterly research report, the Shenton Way/Tanjong Pagar micro-market saw the highest occupancy rate of 99.4 per cent, up from 97.2 per cent in the first quarter. 

Demand came from a myriad of industries such as oil and gas, insurance, telecommunications and pharmaceuticals, said Marcus Loo, Colliers International's executive director for office services.

Upcoming office projects are also beginning to see some interest. CapitaGreen has achieved almost 12 per cent pre-commitment rate as at end-June. The project is expected to be completed by the year-end. Meanwhile, the landlord of South Beach Tower, expected to come on stream in the last quarter of this year, is reportedly in advance discussions to lease out another 20,000 sq ft of space.

The tightening of office occupancy has led to higher rents, with rent growth islandwide at below 3.5 per cent. "The strong demand from various industries and high occupancy rates have inevitably boosted landlords' confidence in the market," said Mr Loo.

-By Sheena Tan

Right time to review cooling measures: Kwek Leng Beng

Source: Straits Times

Veteran property developer Kwek Leng Beng fears Singapore could lose its edge as an investment destination unless the Government reviews its property cooling measures. Mr Kwek, executive chairman of Hong Leong Group Singapore and City Developments, said foreigners were choosing to plough their investment dollars into countries like Britain, Australia and the US over Singapore, while Singaporeans have been investing abroad.

Borrowers' risk profile gets lift from TDSR framework

Source: Straits Times

The risk profile of borrowers has improved with the introduction of the Total Debt Servicing Ratio (TDSR) framework a year ago, said the Monetary Authority of Singapore. It noted that the proportion of borrowers with a loan-to-value ratio above 70 per cent has declined.

0.5ha Tuas industrial site triggered for sale

Committed bid price not less than $3,527,300

Source: Business Times / Property

A 0.5 hectare industrial land parcel at Tuas South Street 7 has been triggered from the reserve list with an application of a committed bid price of not less than $3,527,300.

This translates to about $65.5 per square foot (psf) for the 5,000 square metre site which has a maximum permissible gross plot ratio of 1.0. Plot 44 has a tenure of 20 years and 10 months, and is zoned for Business-2 development.

Ong Kah Seng, director at R'ST Research, said that he expects the site to attract between five and 10 bids, and the top bid to be in the range of $85 to $110 per square foot per plot ratio (psf ppr).

"It is quite within expectations that this site is triggered for sale in 2014 as it is an optimal size for medium-scale industrialists," said Mr Ong. "Also, there's limited sites around 0.5 ha available in the H2 2014 Industrial Government Land Sales Programme (IGLS) for sale."

-By Mindy Tan

CitySpring in JV to develop and lease data centre

Source: Business Times / Companies

CITYSPRING Infrastructure Trust is forming a joint venture with architectural and engineering firm Shimizu Corporation to develop and lease a data centre, as it seeks to deepen its presence in telecommunications infrastructure.

The joint venture, in which its wholly owned subsidiary CityDC Pte Ltd will hold a 51 per cent stake, will design and build a data centre building and install all plant, mechanical and electrical equipment.

When the development works are completed and the data centre is ready for use, the joint venture will then lease the building to 1-Net, which is wholly owned by MediaCorp Pte Ltd.

Explaining the reason for the joint venture, City-Spring said that demand for data centre space has been growing more quickly than supply. "The data centre industry, both worldwide and in Singapore, has been growing steadily over the recent years as a result of growing Internet penetration into the consumer and corporate market," said

-By Andrea Soh

A property alliance to take on the big boys

Grouping of four agencies aims to address shrinking pool of buyers

Source: Business Times / Top Stories

[SINGAPORE] The slowing property market has nudged four mid-sized property agencies - SLP International, OrangeTee, HSR International and Dennis Wee Realty - to form an alliance which will rival the two largest players in the market, ERA Realty and PropNex Realty.

The alliance, called Project Alliance Group (PAG), comes into effect today.

It will focus on marketing local residential projects - a sector which is becoming a "numbers game", said Steven Tan, managing director at OrangeTee, because developers now tend to go for bigger agencies with more salespeople and thus greater buyer reach.

Following the alliance, the four agencies will have a strength of almost 6,000 agents combined, overshooting ERA's 5,700 and PropNex's 5,600.

-By Lee Meixian

Singapore ahead of HK in property transparency

Source: Business Times / Singapore

SINGAPORE has inched ahead of Hong Kong once again since 2010 in a close race for the top transparency position in Asia, according to JLL's eighth Global Real Estate Transparency Index.

Singapore has been ranked 13th and Hong Kong 14th among the world's most transparent commercial property markets. Myanmar is one of the least transparent countries globally, at 100th position.

According to the study, which covers 102 markets globally, Hong Kong is seeing its scores fall since 2012 in the areas of property taxation relating to cooling measures, as well as in accounting standards and corporate governance.

"All countries in emerging South-east Asia have seen some advances (but less significant than 2012 when the sub-region accounted for three out of the top 10 global improvers)," JLL wrote in a media statement accompanying the biennial Global Real Estate Transparency report.

-By Angela Tan

Singapore ranked most transparent real estate market in Asia

Singapore has been ranked the most transparent real estate market in Asia, according to the Global Real Estate Transparency Index 2014. It maintained 13th place, while Hong Kong slipped from 11th to 14th.

Source: Channel News Asia / Business

SINGAPORE: Singapore has been ranked the most transparent real estate market in Asia. This is according to Global Real Estate Transparency Index 2014, published by consultancy firm JLL. Overall, the top positions are still dominated by markets in the west.

Singapore maintained its 13th place in the index. But with Hong Kong slipping from 11th in 2012 to 14th in the latest report, it has pushed Singapore to top position among Asian real estate markets. The top position in Asia has usually been held by Hong Kong since the report was first launched 15 years ago.

JLL said Hong Kong was dragged down by lower scores in the area of property taxation relating to cooling measures and also in accounting standards and corporate governance.

This is the second time Singapore has been ranked higher than Hong Kong since the index was published in 1999.

However, when compared to other mature markets like the UK, US and Australia, JLL said Singapore did not fare as well in terms of transaction process. But Singapore was in the global top 20 for performance measurement, market fundamentals, governance of listed vehicles and regulatory and legal sub-indices.

Chua Yang Liang, head of research at JLL Singapore, said: “In other markets, the tenants have the ability to look the components within that service charge. In Singapore's case, it is typically a broad number and tenants typically do not have the ability to audit.

"The other one is the market fundamentals in terms of the time series, the depth of the data, we have strong series, quite long - but in terms of depth of the details like building information, building profile, that kind of details that are publicly available are still lacking compared to other mature markets."

JLL said improvements in transparency in Asia Pacific have been steady but unspectacular.

This year, the report also covered Myanmar, which emerged as one of the least transparent real estate markets globally, ranked 100.

Analysts said investors generally tend to favour more transparent markets. Donald Han, managing director of Chestertons, said: "If they are risk-averse, they would need to put more allocation to more mature transparent markets, but these markets would generate lower returns. In some cases, it could be 3 to 4 per cent in terms of yield.

“Myanmar is more opportunistic currently. Potentially, it would have higher returns. I would even expect double-digit (returns) because of the unpredictability in government regulation."

Looking ahead to 2016, JLL said several factors could boost transparency. They include new technologies, greater use of social media, more knowledge-sharing as well as increasing demands for transparency from government and commercial organisations. 

- CNA/xq

Real Estate Companies' Brief

Frasers Hospitality Trust IPO units at 88 cts each

Acquisition pipeline provides potential for its asset portfolio to swell

Source: Business Times / Companies

FRASERS Hospitality Trust (FHT), which will start trading on the Singapore Exchange this month, could be making another acquisition as early as in the next 15 to 18 months.

Besides an initial portfolio of 12 hospitality assets worth $1.67 billion, it has the right of first refusal (ROFR) to acquire 18 other assets from its sponsor Frasers Centrepoint Limited (FCL) and the latter's major shareholder TCC Group.

This acquisition pipeline through ROFRs alone could more than double FHT's portfolio from the current 2,770 hotel rooms and serviced residences units.

"There could be a couple of assets to be ready in the next 15 to 18 months," Eu Chin Fen, chief executive of the Reit manager, told reporters.

-By Lynette Khoo

Frasers Hospitality share placement 21 times subscribed

Strong demand from institutional investors for Frasers Hospitality Trust's initial public offering.

Source: Channel News Asia / Business

SINGAPORE: Frasers Hospitality Trust on Monday (June 30) provided more details about its S$367.9 million initial public offering (IPO), saying the offer has seen strong demand from institutional investors.

The hotels and serviced residences real estate investment trust (REIT) said its international placement of 139.6 million stapled securities at S$0.88 apiece attracted interests valued around S$2.5 billion - which translates to a subscription rate of around 21 times.

A group of cornerstone investors, including DBS and Fortress Capital Asset Management, had subscribed for another 232.9 million stapled securities, also priced at S$0.88 each.

The public portion of its IPO, aimed at ordinary retail investors, will comprise 45.5 million stapled securities priced at S$0.88 apiece.

The public offer opens at 9am on Tuesday and closes at 12pm on July 10, Frasers Hospitality said. The stapled securities will begin trading on the Singapore Exchange on July 14.

Frasers Hospitality - which is sponsored by Singapore property giant Frasers Centrepoint Ltd - will have an initial portfolio of six hotels and six serviced residences valued around S$1.7 billion.

The six hotels, which came from Frasers Centrepoint's Thai parent TCC Group, are the InterContinental Singapore, Novotel Rockford Darling Harbour, Park International London, Best Western Cromwell London, ANA Crowne Plaza Kobe and Westin Kuala Lumpur.

The six serviced residences are Fraser Suites Singapore, Fraser Suites Sydney, Fraser Place Canary Wharf, Fraser Suites Queens Gate, Fraser Suites Glasgow and Fraser Suites Edinburgh.

Frasers Hospitality also has first right of refusal to buy another 18 properties from its parent companies.

The REIT offers investors an indicative yield of 7 per cent for the full financial year from 1 October 2014 to 30 September 2015.

Frasers Centrepoint and TCC Hospitality, an associate of TCC Group, will together hold around 65 percent of Frasers Hospitality after the IPO.


- CNA/ly

SLA board to have new chairman, 2 members from Aug

Source: Business Times / Singapore

LIM Sim Seng, group executive and Singapore country head of DBS, has been appointed the new chairman of the board of the Singapore Land Authority (SLA) for a two-year term starting Aug 1.

Mr Lim has been involved in SLA since August 2011 when he was appointed a board member and concurrently chairman of its Investment Board Committee. He was appointed deputy chairman on Aug 1, 2012, for a two-year term.

In a statement, Mr Lim said "boldness, innovation and a large dose of creativity" is needed to optimise the use of Singapore's limited land.

"Like many other thriving cities, we face an unprecedented demand to deliver more exciting, new living spaces where people can live, work and play," he said.

-By Lee Meixian

SPH Reit

Source: Business Times 

Using DDM-based (discount rate of 7.7 per cent), we arrive at a target price of S$1.06, translating into implied CY2014 yields of 5.4 per cent for unitholders. We deem this fair against listed peers such as CMT, FCT and MCT, which trade at CY2014 yields of about 5.6-5.7 per cent.

Views, Reviews & Forum

Is the time ripe to lift property cooling measures?

Source: Straits Times

It is clear from a visit to showflats that the property market is a pale shadow of itself from a year ago, when the boom was in full swing. Back then, agents streamed in with home seekers in tow, cost no object, amid shouts of "sold" resonating through the showroom as units were snapped up.

Global Economy & Global Real Estate

Major changes seen for Malaysia's Forest City project

Amendments aim to cushion impact on the environment

Source: Business Times / Malaysia

[JOHOR BARU] Several major amendments to the original plan for the controversial Forest City project along the Johor Straits are expected as pressure mounts from environmental non-governmental organisations and concerns from Singapore.

The changes were proposed by Kuala Lumpur-based Asian Environmental Solutions Sdn Bhd (AES), which was appointed by project developer Country Garden Sdn Bhd to prepare a preliminary environmental impact assessment (EIA) report for the mammoth project, says a report in Malaysia's New Straits Times.

The proposed changes are aimed at cushioning the impact of the reclamation project on the surrounding environment.

In the preliminary report, one of the major changes proposed was to build two parallel water channels cutting across the island, created by reclamation work, almost in the shape of a right angle isosceles triangle.

-From Johor Baru, Malaysia

Johor Straits Land Reclamation project to be Amended: Reports

Source: Today Online / World

JOHOR BARU — Several major amendments to the massive reclamation project in the Strait of Johor for a housing development near Singapore’s Second Link are expected, following concerns raised by Singapore and environmental non-government organisations (NGOs), the New Straits Times (NST) reported yesterday.

The changes were reportedly proposed by Kuala Lumpur-based Asian Environmental Solutions (AES), which had been appointed to prepare a preliminary environmental impact assessment report by Country Garden, the developer of the project.

The proposed changes in the preliminary report include replanting seagrass and building two parallel water channels, which will be 300m wide and almost in the shape of a right-angle isosceles triangle, across the reclaimed island. They are aimed at minimising the impact of the project on the surrounding environment, the NST reported.

“The main purpose of the water channel is to improve the hydrology of the straits, since there are concerns and worries that the reclaimed island may block or hamper water flow along it,” the newspaper quoted an unnamed source close to the AES as saying.

“With the water channels to be used as a mitigation measure, water flow is still possible, despite the presence of the reclaimed island,” the source added.

Another proposal was to replant seagrass destroyed in the process of reclamation work.

But environmental NGOs in Malaysia doubted that the replanting would be effective, noting that the survival rate of seagrass replanting was 10 per cent, the NST reported.

Last week, the local media reported that Malaysia’s Department of Environment had issued a stop-work order on the massive land reclamation project, pending further studies on its environmental impact.

Singapore had earlier expressed concerns about the possible transboundary impact from the reclamation work in the Strait of Johor and requested more information from the Malaysian government.

Malaysia media reports had said that Singapore Prime Minister Lee Hsien Loong also wrote to his Malaysian counterpart Najib Razak about the issue, after two diplomatic notes on the matter were sent to Malaysia’s Foreign Ministry in May.

A third note was handed to the Minister in the Prime Minister’s Department, Mr Wahid Omar, when he visited Singapore recently, the reports said.

The Forest City project involves creating a 1,817-hectare island almost three times the size of Ang Mo Kio and the construction of luxury homes. The project, which includes a 49ha tourist hub and recreational facilities, is expected to take 30 years to complete.

Earlier reports had said the reclamation work for the tourist hub began in early March and was expected to be completed by the end of the year. AGENCIES

China's Country Garden launches 800-unit project in Sydney

Source: Straits Times

Pending home sales surge in May, highest in four years

Broad-based recovery held back by higher prices, limited income gains

Source: Business Times / World

[WASHINGTON] The number of contracts to purchase previously owned homes jumped in May by the most in more than four years, a sign the residential-real estate market is rebounding after a slow start to the year.

The pending home sales index climbed 6.1 per cent, the biggest advance since April 2010, after a revised 0.5 per cent increase in April, the National Association of Realtors (NAR) said yesterday in Washington.

The gain exceeded the most optimistic projection in a Bloomberg survey of economists, whose median forecast called for a 1.5 per cent gain.

Housing demand is benefiting from cheaper borrowing costs, a stronger employment outlook and easier access to credit for some households.

-From Washington, US

ECB to wait for June measures to bite as inflation stays low

Source: Business Times / World

[BRUSSELS] Eurozone inflation remained stuck at levels last seen during the 2009 recession and lending to companies and households contracted again, data showed yesterday, further highlighting the bloc's feeble economic state.

The reports - for June and May, respectively - underlined the reason for the European Central Bank's unprecedented policy steps earlier last month when it cut interest rates to record lows and promised to hand out more long-term loans to encourage banks to lend more freely.

It will take a while for the measures to take effect and they would not have influenced yesterday's releases. Details have not yet been announced for the long-term loans and most economists do not expect any fresh policy steps when the ECB meets on Thursday.

But there is no sign that the pressure on the ECB is easing. "The ECB has just announced new measures to signal its readiness to bring inflation back to target and boost lending, but it will surely keep the door wide open to more measures at this week's meeting," said Berenberg Bank's Christian Schulz.

-From Brussels, Belgium

Record high foreigners buying Australian homes

Source: Business Times / Property

[SYDNEY] Australia approved a record A$24.9 billion (S$29.2 billion) of home purchases by foreign buyers in the nine months to March 31, a 93 per cent jump from the same period a year earlier, UBS AG said.

Overseas investment in housing in Australia is now 13 per cent of total turnover, compared with a trend of 8 per cent, UBS economists Scott Haslem and George Tharenou wrote in a report dated June 27. About 78 per cent of purchases were of new properties, they said.

The Australian parliament is conducting an inquiry into foreign buying of domestic real estate amid concerns that overseas demand is pushing up prices and making housing unaffordable for local buyers. Dwelling prices climbed 10.7 per cent across Australia's eight state and territory capitals to a median A$545,000 in the 12 months to May 31, according to the RP Data-Rismark home value index, amid interest rates at a record low 2.5 per cent.

"Foreign demand rose despite a relatively expensive valuation and Australian dollar," Mr Haslem and Mr Tharenou wrote in the UBS report. "We see a likely ongoing long-term uptrend of foreign investment in housing", which supports the bank's forecast of a 7 per cent increase in prices this year, they said.

-From Sydney, Australia

Immigrants boosting US housing sales

Fall in newcomers has been a drag on real estate recovery

Source: Business Times / Property

[BOSTON] After decades of factory shutdowns and population loss, the city of Dayton, Ohio, has found a fix for its housing market hard-hit by foreclosures - immigration.

The rust-belt city of 140,000 has been encouraging immigrants from Mexico, Nigeria and Turkey to move there since 2011, after its population hit a 90-year low, by offering to help with resettlement and starting businesses. Dayton's foreign population grew and so did its housing sales, rising last year at almost twice the national rate.

As the housing recovery nationwide sputters, the story of Dayton reveals a reason why: The US market is missing the sales jolt provided by immigration. Last year, the number of immigrants granted US residency - typically a requirement to get a mortgage - hit a nine-year low, according to government data. Immigrants, deterred by a weak American labour market since 2008, aren't likely to get encouragement from Congress, where support for a reform bill has mostly evaporated.

"Immigrants have a drive to become homeowners that surpasses even native-born people, and that gives them a magnified impact on home sales," said Chris Herbert, research director of Harvard University's Joint Center for Housing Studies in Cambridge, Massachusetts. "No one knows how many immigrants will be arriving in the next few years because it depends on what the economy does and what Washington does."

-From Boston, US

Pending Sales of U.S. Existing Homes Rise Most in Four Years

Source: Bloomberg / Personal Finance

The number of contracts to purchase previously owned U.S. homes jumped in May by the most in more than four years, a sign the residential-real estate market is rebounding after a slow start to the year.

The pending home sales index climbed 6.1 percent, the biggest advance since April 2010, after a revised 0.5 percent increase in April, the National Association of Realtors said today in Washington. The gain exceeded the most optimistic estimate in a Bloomberg survey of economists, whose median forecast called for a 1.5 percent gain.

Housing demand is benefiting from cheaper borrowing costs, a stronger employment outlook and easier access to credit for some households. At the same time, higher prices and limited income gains are keeping the improvement in the residential real estate from becoming more broad-based.

“Housing is beginning to bounce back,” Paul Ashworth, chief U.S. economist at Capital Economics Ltd. in Toronto, whose forecast for a 4 percent gain was the highest in the Bloomberg survey. “Mortgage rates have backed down a bit recently. Home prices are still rising, which means fewer people have mortgages that are under water. The longer the housing recovery goes on, the more people will gain confidence to join in.”

The gain in May was the biggest since first-time buyers rushed to sign contracts before the expiration of a tax credit four years ago. Estimates in the Bloomberg survey of 37 economists ranged from a decline of 0.5 percent to an advance of 4 percent after a previously reported 0.4 percent April gain.

June Manufacturing

Another report showed manufacturing cooled in June from a month earlier. The Chicago Institute for Supply Management Inc.’s business barometer fell to 62.6 from 65.5 in May. The median forecast called for the gauge to fall to 63. Readings above 50 signal expansion.

Stocks rose after the data, with the Standard & Poor’s 500 Index advancing 0.1 percent to 1,962.77 at 10:35 a.m. in New York. The S&P Supercomposite Homebuilding Index increased 1.5 percent.

Purchases fell 6.9 percent from the year prior, on an unadjusted basis, after a 9.3 percent decrease in the 12 months that ended in April, the association reported.

The pending sales index was 103.9 on a seasonally-adjusted basis, the highest since September. A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic, according to the NAR.

By Region

Pending home sales climbed in all four regions, led by an 8.8 percent gain in the Northeast. Contract signings increased 7.6 percent in West, 6.3 percent in the Midwest and 4.4 percent in the South.

Economists consider pending sales a leading indicator because they track new purchase contracts. Existing-home sales are tabulated when a contract closes, usually a month or two later.

“Solid income growth and a slight easing in underwriting standards are needed to encourage first-time buyer participation, especially as renting becomes less affordable,” NAR chief economist Lawrence Yun said as the report was released.

Home sales have been slowly emerging from a slump early this year. Purchases of new homes rose in May by the most in 22 years, increasing 18.6 percent, the biggest one-month gain since January 1992, to a 504,000 annualized pace, figures from the Commerce Department showed.

Home Prices

Gains in home prices have started to cool, which will help bring more properties within reach of those prospective buyers with access to credit.

The S&P/Case-Shiller index of property values increased 10.8 percent from April 2013, the smallest 12-month gain in more than a year, after rising 12.4 percent in March, the group reported last week.

Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, is optimistic that demand will continue to rise though sales have been uneven in recent months.

“While the housing market has improved dramatically overall compared to where it was a couple of years ago, the recent recovery has been a little more choppy,” Chief Executive Officer Ara Hovnanian said during an earnings conference call on June 4.

Household formation will be the primary driver of long-term housing demand, he said, and “the creation of well-paying jobs will go a long way” toward it. “Given the low levels of total U.S. housing starts, we remain convinced that we are still in the early stages of the housing industry recovery.”

Home-improvement retailers including Lowe’s Cos. also remain upbeat about the housing recovery.

“We’ve seen a bit of a downturn in housing turnover, but home prices continue to appreciate,” Chief Financial Officer Robert Hull said at a June 24 consumer conference. “As we think about the drivers of our business, both housing and income is constructive.”

-By Jeanna Smialek

Canadian Consumer Confidence Rises on Real-Estate Outlook

Source: Bloomberg / Luxury

Canadian consumer confidence rose for the first time in a month as optimism about real-estate prices surged to the highest in almost five years.

The Bloomberg Nanos Canadian Confidence Index climbed to 59.2 for the week ended June 27, from 58.5 in the prior period. The percentage of respondents who believe home values in their neighborhood will increase in the next six months rose to 44.1, the highest since the fourth quarter of 2009.

Optimism about personal finances and the economy also increased, while job-security sentiment dimmed, according to the survey-based index.

“Looking at the key drivers of consumer sentiment over the past six years, it is clear that positive views of real estate is a key factor in Canadian consumer confidence,” said Nik Nanos, chairman of Ottawa-based polling firm Nanos Research Group. Sentiment about real estate is “noticeably” above its six-year average, while personal-finance views are “marginally” below the average for the period, he said.

Canada’s housing market has been surging even as the world’s 11th largest economy struggles to shift into high gear. Canadian realtors recorded their biggest sales gain in almost four years last month, as the industry rebounded from the impact of a difficult winter, the Canadian Real Estate Association said June 16.

Housing starts rose to their strongest level in seven months in May, following a slump in construction in the first three months of the year, Canada Mortgage & Housing Corp. reported June 9.

Rapid Homebuilding

Bank of Canada Governor Stephen Poloz said June 12 that the biggest domestic risk to the country’s financial system remains households with stretched consumer finances after a period of rapid homebuilding. Poloz also predicted a soft landing in the housing market and progress in Europe’s effort to ease its debt crisis.

Canada’s economic growth slowed in the first quarter as the harsh winter slowed housing construction, business spending and exports, and expanded less than economists forecast in April. Poloz said June 4 it remained appropriate for the central bank to keep its benchmark interest rate at 1 percent, in view of the economy’s “modest” pace of growth.

The survey-based Nanos index has two sub-indexes. The Expectations Index, based on responses about the national economy and real estate, rose to 58.7 last week from 58.2.

The share of respondents who think the Canadian economy will improve over the next six months rose to 21.8 percent from 21.1 percent the week before.

Personal Finances

The Pocketbook Index, based on responses to questions about personal finances and job security, climbed to 59.7 from 58.9.

Those who say their finances have improved over the past year rose to 17.6 percent from 17.0 percent, according to the Nanos report.

The proportion who say they feel at least somewhat secure about their jobs dropped to 68.8 percent, the lowest since May 30, from 69.2 percent.

“A modest pickup in overall economic activity appears to have bolstered consumer sentiment,” said Joseph Brusuelas, senior economist at Bloomberg LP, “However, Canadians remain concerned about their own personal financial condition, which is reflective of the household imbalances that remain a pressing policy challenge.”

Canada’s gross domestic product grew less than economists forecast in April as goods production fell while service industries such as wholesaling expanded, Statistics Canada said today in Ottawa. Output rose 0.1 percent to an annualized C$1.62 trillion ($1.51 trillion), the same pace as in March. The median forecast in a Bloomberg economist survey was for the world’s 11th largest economy to expand 0.2 percent.

The Nanos data are based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents. The results are accurate to within 3.1 percentage points.

-By Andrew Mayeda

S&P 500 Little Changed on Home Sales Amid Quarterly Rally

Source: Bloomberg / Luxury

June 30 (Bloomberg) --The Standard & Poor’s 500 Index was little changed, capping the longest string of quarterly gains since 1998, as a jump in pending home sales offset weaker-than-forecast manufacturing data.

D.R. Horton Inc. rallied 3.2 percent, leading gains among homebuilders.Yahoo! Inc. (YHOO) rose 2.6 percent after Piper Jaffray Cos. recommended buying the stock. MannKind Corp. jumped 9.6 percent as the maker of diabetes drugs rebounded from its worst week in two months. Allergan Inc. declined 2.7 percent following regulatory decisions on its drugs.

The S&P 500 fell less than 0.1 percent to 1,960.23 at 4 p.m. in New York. The equity benchmark gauge rose 4.7 percent for the quarter, a sixth consecutive advance. The Dow Jones Industrial Average lost 25.24 points, or 0.2 percent, to 16,826.60 today, trimming its quarterly advance to 2.2 percent. The Nasdaq Composite Index rose 0.2 percent, giving it a 5 percent increase for the three months.

“Markets are no longer obviously cheap by any stretch, or expensive for that matter,” Jim Kee, president and chief economist of San Antonio-based South Texas Money Management, said by phone. His firm oversees about $2.4 billion. “Stocks are still the only game in the town. Pullbacks possibly, but ultimately stocks will keep grinding higher.”

The S&P 500 trades at 16.6 times the projected earnings of its members, near its highest valuation in four years. The index has failed to post a gain or loss exceeding 1 percent for 51 straight days, the longest stretch since 1995. More than 5.7 billion shares changed hands on U.S. exchanges today, 4.7 percent below the three-month average.

Breeding Ground

The Chicago Board Options Exchange Volatility Index added 2.8 percent to 11.57. The gauge, known as the VIX, is near its lowest level since February 2007.

“We do have positive outlook for growth, we’re excited about earnings coming in, but it does make us nervous, the lack of volatility and the lack of activity,” Anna Rathbun, director of research for CBIZ Inc.’s retirement plan services unit in Cleveland, Ohio, said in a phone interview. The firm manages about $9 billion. “The low interest rates environment is a good breeding ground for asset bubbles. It feels like the calm before the storm.”

The S&P 500 and the Dow advanced earlier as data showed the number of contracts to purchase previously owned U.S. homes jumped 6.1 percent in May, the most in more than four years, a sign the residential-real estate market is rebounding after a slow start to the year.

An S&P index of homebuilders rose 1.1 percent as 10 of its 11 members gained. D.R. Horton advanced 3.2 percent to $24.58 and Lennar Corp. climbed 0.9 percent to $41.98.

Jobs Report

The Institute for Supply Management-Chicago Inc.’s business barometer fell to 62.6 in June from 65.5 the prior month. The median forecast of 45 economists in a Bloomberg survey projected the index would fall to 63.

Other reports this week will give further clues to the strength of the U.S. economy. Tomorrow brings data on manufacturing and auto sales, with the government’s payrolls report due on July 3 before the holiday weekend.

U.S. equities have reached all-time highs as data from employment to housing fueled confidence that the U.S. economy is rebounding after the worst contraction in gross domestic product since 2009. Fed Chair Janet Yellen said on June 18 that accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth.

The central bank has kept interest rates near zero since 2008 to spur economic growth. Low borrowing costs have fueled record corporate debt issuances and helped drive the S&P 500 up190 percent from a bear-market bottom in 2009.

Earnings Season

Investors will get a chance to assess the economy when companies start releasing financial results in July. Earnings for S&P 500 companies probably grew 5.2 percent during the second quarter while sales rose 3.2 percent, analyst estimates compiled by Bloomberg show. The forecasts are lower than they were at the beginning of April, when analysts projected earnings to rise 7.3 percent and sales to increase 3.7 percent.

“We’ve come a long way,” said Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, by phone. “Now, it’s an issue of prove to me that the market can keep getting higher based on continued earnings growth and growth in the economy.”

The S&P 500 is up 6.1 percent for the year while the Dow has gained 1.5 percent. The Russell 2000 Index (RTY) of small companies gained 5.2 percent for June, its biggest monthly advance since September, as the market rebounded from a two-month selloff in Internet and small-cap stocks.

Industry Returns

Utility, materials and technology shares added more than 0.2 percent today for the best returns in the S&P 500. Health-care and industrial shares fell 0.4 percent each for the biggest losses.

Yahoo added 2.6 percent to $35.13. Piper Jaffray raised its rating on the search-engine company to overweight, similar to a buy recommendation, from neutral, saying its 23 percent stake in Alibaba Group Holding Ltd. is undervalued. Analysts estimate the Chinese e-commerce company, which plans an initial public offering in New York, has a value of about $168 billion.

The Philadelphia Semiconductor Index climbed 1.1 percent. Micron Technology Inc. advanced 4.6 percent to $32.95 for the biggest increase in the S&P 500 after Credit Suisse Group AG added the company to the firm’s top investment ideas.

NetApp Inc. jumped 2.9 percent to $36.52. The data-storage company looks “dirt cheap” with 14 percent free cash flow yield, Barron’s reported, citing Brian White, an analyst with Cantor Fitzgerald LP.

Asset Acquisition

PPG Industries Inc. (PPG) increased 3 percent to $210.15 after agreeing to buy Consorcio Comex SA for about $2.3 billion, picking off the Mexican coatings and paint company that competitor Sherwin-Williams Co. failed to buy. Sherwin’s attempt to buy the Mexican portion of the company was blocked by local antitrust regulators.

Bank of New York Mellon Corp. rose 3.5 percent to $37.48. Trian Fund Management LP, the activist investment firm co-founded by Nelson Peltz, is seeking talks with Bank of New York after revealing a 2.5 percent stake in the world’s largest custody bank.

MannKind jumped 9.6 percent to $10.96. U.S. regulators approved its inhaled insulin with a label warning that the product shouldn’t be used by those with asthma or a serious lung disease. The stock fell as much as 23 percent on June 27, before paring losses in the final hour of trading.

Drug Rejection

Allergan, the drugmaker resisting a takeover by Valeant Pharmaceuticals International Inc., slipped 2.7 percent to $169.22. The Food and Drug Administration rejected Semprana (AGN), formerly known as Levadex, an inhalable treatment for migraines, because of problems with the drug’s delivery device. The agency approved Allergan’s Ozurdex, a treatment of vision loss in diabetics.

PetSmart Inc. slipped 1.9 percent to $59.80. The pet-store chain’s sales slowdown will continue this year, hurt by competition, according to Investment Technology Group.

General Motors Co. fell 0.9 percent to $36.30. The company, which has already called back more than 20 million cars in North America for various fixes this year, recalled 8.45 million more today for defects including ignitions and electrical malfunctions.

-By Lu Wang and Jacob Barach

Loews Agrees to Buy Hotel Near Chicago O’Hare Airport

Source: Bloomberg / News

Loews Corp. (L), the holding company controlled by New York’s Tisch family, agreed to buy the InterContinental Chicago O’Hare Hotel to expand its portfolio in the U.S. Midwest.

Loews is purchasing the 556-room property from New York’s Amalgamated Bank and expects the sale to be completed in late July, said Sarah Murov, a spokesman for the buyer. The hotel has more than 53,000 square feet (4,900 square meters) of meeting and event space, and is less than 2 miles (3.2 kilometers) from Chicago’s largest airport, Loews said in a statement today that didn’t disclose terms.

The Midwest “is an important feeder market for our properties all over the country,” Paul Whetsell, chief executive officer of Loews Hotels, said in a phone interview today. Customers from Minneapolis and Chicago “generate a lot of business for our properties all over the country.”

Whetsell’s operation has a portfolio of 21 hotels in locations including New York, San Diego and Orlando, Florida. The company has plans for a separate Chicago hotel, in the city’s downtown, to open next year, and announced weeks ago that it reached a deal to buy a 255-room property in Minneapolis from Graves Hospitality Corp.

The InterContinental Chicago’s former owner, River Road Hotel Partners LLC, filed for bankruptcy in August 2009, less than a year after the hotel opened. River Road had liabilities of more than $100 million, according to a court filing. Whetsell said Amalgamated Bank purchased the property after the bankruptcy. Amalgamated had no comment, said Samantha Berg, a spokeswoman for the bank.

Bad Timing

The developers “had an opening right about the time of the financial crisis,” said Whetsell. “It’s a very nice hotel in a good location but timing was everything to them. And, unfortunately, the timing was not good.”

Whetsell said Loews also plans to expand in Texas and cities on the West Coast including San Fransisco, Seattle and Portland, Oregon.

Loews also has units in the energy and insurance industries. The company advanced 0.5 percent to $44.02 at 2:02 p.m. in New York and has slipped about 8.7 percent this year after losses tied to its bet on natural gas.

-By Kelly Gilblom