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7th March 2014

Top Stories

Govt to step in if unfair Reit practices arise: Ser Luck

It's also looking into release of more comprehensive shop rental data later this year

Source: Business Times / Top Stories

[SINGAPORE] The government will intervene if it sees evidence of collusion or the abuse of market dominance by any landlord - including real estate investment trusts (Reits), said Minister of State for Trade and Industry Teo Ser Luck yesterday in Parliament.

Speaking during the Committee of Supply debate on the Ministry of Trade and Industry (MTI), Mr Teo also revealed that the government is looking into publishing more comprehensive shop rental data later this year, in a bid to make rental pricing more transparent.

This, he said, would help businesses make more informed decisions about the rental market.

MTI's statements yesterday came as calls for help with climbing business costs (and in particular, the affordability of business space) have grown louder both in and outside of Parliament in recent months.

Reits - some of which were formed after JTC and HDB divested space to private owners - have been blamed for shorter lease renewals and sharper spikes in rentals.

"We know that it has come up as an issue, many of you have raised it. We will monitor it," said Mr Teo.

At the same time, he noted that "Reits are not necessarily the leading players in the rental space market, because they currently only own about 13 per cent and 16 per cent of retail and industrial rental spaces respectively. Like any other landlord, they have to compete in the rental market to attract tenants and cannot charge excessive rents".

Mr Teo also said that rents for space are likely to moderate in the medium term, as the government has released a "significant amount of land".

Over the next three years, about 145,000 square metres of new shop space will be completed each year. Over the same period, an average of 500,000 square metres of multiple-user factory space will come on-stream each year.

For the former, that represents more than double the average annual demand for such space in the last three years; for the latter, it is just under double.

Entrepreneurship will also receive a boost, since by the end of this year, JTC will open two more blocks to incubate start-ups, as part of a cluster called JTC LaunchPad@one-north.

"It's our answer to Silicon Valley," said Mr Teo.

In response to Inderjit Singh's (Ang Mo Kio) concern that the government's restructuring efforts are taking place too quickly, Trade and Industry Minister Lim Hng Kiang said that the appropriate pace may differ at the macro, sectoral, and firm levels.

"I would argue that if you look at it at the macro level, we're not doing it as fast as we should ... If you look at the way the economy is still growing, and the jobs that are still generating, and the labour force (that is) still growing, one could argue that we're slightly behind the curve," said Mr Lim. He added that on the sectoral and firm levels, the ideal pace would vary among sectors and companies.

"So we prefer the middle path - consistent, steady restructuring," said Mr Lim, who said "we feel that this is the right pace".

Meanwhile, Senior Minister of State for Trade and Industry Lee Yi Shyan provided more details on the government's plans to assist companies in their internationalisation efforts.

For instance, $25 million has been set aside to enhance International Enterprise (IE) Singapore's programmes to better cater to companies at different stages of growth. This is expected to 

benefit 200 companies over the next two years.

To help rapidly expanding companies which tend to find securing financing challenging, the government will double the maximum loan quantum under the Internationalisation Finance Scheme from $15 million to $30 million.

In addition to an enhancement in the existing Global Company Partnership initiative, the government will also increase its support for pilot and test-bedding projects - which help companies test out the viability of their products and solutions in new markets - from 50 per cent to up to 70 per cent.

-By Kelly Tay

Singapore Real Estate

Property players split on making public COVs for HDB resale flats

Some think it will only cause downward spiral of prices while others say it's a 'braking' tool

Source: Business Times / Top Stories

[SINGAPORE] The issue of having cash over valuation (COV) in HDB resale transactions - once a political hot potato - is boggling the minds of property analysts and agencies again as latest flash estimates show that COVs have fallen to zero and may dip further into negative territory.

ERA Realty key executive officer Eugene Lim echoed calls from the past to scrap the publishing of COV figures on concerns that negative COVs will cause a downward spiral of HDB resale prices.

"How much cash under valuation, or CUV, is your seller looking at?" That's what buyers are asking the property agents now, Mr Lim said.

COV is the cash premium that buyers pay in excess of the valuation of an HDB flat. The overall median COV for HDB resale flats slumped from $32,000 a year ago to hit zero last month.

Mr Lim said that the HDB was trying to improve market transparency when it started publishing COV tables for the different estates and flat types to educate the public and address the perception that COVs were too high. "But people then started to use that as a benchmark and mark up their prices above it. The COV price becomes the registered price and the next valuation becomes higher.

"Now, if the reverse catches momentum, many flat owners will suffer because the prices will shoot downwards. It's timely to take out the cash over valuation and cash under valuation figures. Just publish market price."

Some members of Parliament have, in the past, suggested scrapping official COV figures as they believe it contributes psychologically to rising HDB resale prices.

But the government had responded that people would calculate those figures themselves even if HDB did not publish them. The COV is not mandatory in a resale transaction and the HDB does not determine the resale price, which is agreed between a willing buyer and a willing seller.

Some property analysts felt that COV remains relevant in today's market.

Ong Kah Seng, director of R'ST Research, noted that COVs have a role to play, serving as a "brake to over-buying during average and buoyant market conditions", despite being blamed for being a psychological benchmark that drives COVs and selling prices higher.

Even with the cooling measures and dampened buying sentiment, the COV mechanism can still act as a reference point for buyers and sellers, he said.

"A zero or negative COV now (and going forward) will signal to buyers that resale flat prices seem quite affordable, and can reduce the possibility of sellers having to relent to endless requests for low or very low prices."

Alan Cheong, director for research and consultancy at Savills Singapore, noted that "COVs have a role to play in setting the benchmark for subsequent valuations down the road" as valuations tend to be backward-looking.

"They should leave COVs alone. There are many measures that are administrative in nature that choke the free market mechanism," he said. "Let's work within the existing framework and calibrate it."

-By Lynette Khoo

Resale flat COVs fall to zero for first time since 2006

Almost two in five HDB deals close below valuation

Source: Business Times / Top Stories

[SINGAPORE] For the first time in nearly a decade, the overall median cash-over-valuation (COV) for resale HDB flats hit ground zero last month, compared with $3,000 in January, as demand for resale public homes softened.

Almost two in five HDB deals closed below valuation, making up 37.3 per cent of HDB resale deals, up from 29.4 per cent in January, based on transaction records from agencies registered with the Singapore Real Estate Exchange (SRX).

Flash estimates by SRX also showed HDB resale prices marking a sharpest month-on-month fall of 1.8 per cent since prices began declining in April 2013, while resale volume dropped 20 per cent from a month ago to 734 deals.

Twelve out of 26 HDB towns saw zero or negative median COV. This is an increase from eight HDB towns in January that saw zero or negative COV.

-By Lynette Khoo

Median COV for HDB resale flats falls to zero in February

Source: Channel News Asia / Singapore

SINGAPORE: The overall median Cash-Over-Valuation for HDB resale flats fell to zero in February, according to latest data from the Singapore Real Estate Exchange.

It is the lowest median since the Singapore Real Estate Exchange began collecting records in 2006.

It was $5,000 in December 2013 and $3,000 a month later, finally hitting the zero mark in February 2014.

Nearly half of 26 estates across Singapore saw zero, or negative, median cash premiums for flat transactions.

Analysts said it's probably a case of the supply of resale flats outstripping demand in those estates.

Mr Thomas Tan, executive director of RE/MAX, said: "You can't say it's widespread in Singapore because not all the flats in Singapore are transacted under value. Because there are flats 

in Singapore like in Bishan, in Bukit Merah area, where they are still commanding quite a fair bit of premium in terms of the Cash-Over-Valuation."

Topping the chart in February for negative cash premiums seen in resale transactions, by estate, was Sengkang, where 69 per cent, or 20 flats, sold under valuation.

This is followed by Woodlands with about 54 per cent, or 19 flats, and Jurong West and Yishun, 15 flats each.

Analysts said these estates in non-central locations naturally command less of a premium.

Overall, the volume of resale transactions dipped from 931 in December 2013, to 918 in January and an estimated 734 in February 2014.

Mr Chris Koh, director of Chris International, said: "Historically also, February, with Chinese New Year, and you know about two weeks of Chinese New Year, you see lesser activities. Not 

many sales, not many purchases during those two weeks. So again, that would put an impact on prices."

Analysts said the various property cooling measures in place, plus the launch of Build-To-Order flats, have driven demand away from resale flats.

They added that falling premiums indicate a measure of success in the government's move to engineer a "soft-landing approach" in stabilising the property market.

Resale prices fell 1.8 per cent in February.

Going forward, analysts expect this to be the trend till mid-2014, until more buyers enter the resale market again, lured by cheaper buys.

- CNA/xq/de

COV for HDB flats falls to zero as resale volume slumps

Source: Today Online / Business

SINGAPORE — The median cash-over-valuation (COV) for Housing and Development Board (HDB) flats fell to zero last month for the first time in at least eight years, a further sign that the Government’s cooling measures have been effective in taking the heat out of the public housing resale market.

The fall, from the S$3,000 COV in January, came as resale volume declined to an estimated 734 units last month from 918 units previously, the Singapore Real Estate Exchange (SRX) said in its flash report yesterday.

It was the first time that the median COV hit nil since it started compiling this data in 2006, the SRX said.

Analysts whom TODAY spoke to said the cooling measures — such as the reduction of the mortgage servicing ratio to 30 per cent, the reduction of the maximum term loan on HDB loans to 25 years and the three-year wait imposed on permanent residents, as well as allowing singles to buy directly from the HDB — continued to weigh on the resale market.

However they said the curbs are expected to remain in place. The slower activity last month could also be attributed to the Chinese New Year holidays, they said, adding that it was probably too early for the Government to start rolling back some of the property curbs.

Mr Ku Swee Yong, Chief Executive of real estate agency Century 21, said: “I don’t think the Government will step in, unless there are so many below-valuation cases that the valuations drop drastically.

“In the last two quarters, the HDB index dropped and they considered the market stable, so if the decline continues in the next two quarters at about the same pace, they will not panic.

“If the resale price index drops 10 per cent a quarter, then that is alarming,” Mr Ku added.

The HDB’s official Resale Price Index had fallen by 0.9 and 1.5 per cent in the last two quarters of last year, but the declines pale in comparison with the 102.9 per cent surge in the resale price index from the first quarter in 2006 to its peak in the second quarter of 2013.

Zero COV is also a sign that the market is stabilising, analysts said.

Mr Nicholas Mak, Executive Director for Research and Consultancy at property firm SLP International, said: “Zero COV does not mean a disaster. It means that the transaction price is in line with valuation and is a sign of more stability in the market. So I think the Government will probably let the market be and see how things turn out in the next few months.”

The SRX said 12 out of the 26 HDB towns saw resale deals done below or at parity with valuation last month, an increase from eight estates in January. Analysts noted that the estates with the most negative-COV transactions were those located far from the central region, including Sengkang, Woodlands and Jurong West. On the other hand, better-located towns such as Bishan and Clementi still fetched good COVs, they said.

Despite the latest fall, potential buyers are not expected to return to the market in droves, with many adopting a wait-and-see approach.

The rule requiring newly-minted PRs to wait three years before they are allowed to buy an HDB flat has also choked off a large chunk of demand.

“Many prospective buyers are still waiting for prices to go down further, so it will still be a situation where we have more sellers than buyers,” Mr Ku said.

Mr Alan Cheong, Senior Director for Research and Consultancy at real estate consultancy Savills, said that in this environment, it may be the right time for the Government to start scaling back the cooling measures before the market crashes.

“It’s not healthy at this pace; if COV continues to drop by S$3,000 a month, within 10 months it will be S$30,000 below valuation,” he said.

-By Lee Yen Nee

Buy pledges bagged for 40% of Cluny Park Residence

Developer Tuan Sing attributes interest to project's location, investment potential

Source: Business Times / Property

CLOSE to 40 per cent of the 52 units at upmarket freehold condominium Cluny Park Residence have received purchase commitments ahead of its official launch tomorrow.

These commitments - by mainly professionals and businessmen - were made at private previews since its soft launch last August. Of the buyers, 70 per cent are Singaporeans, William Liem, chief executive officer of the developer Tuan Sing Holdings, told reporters at a media preview yesterday.

The strong interest comes amid an uncertain residential property market still reeling from cooling measures implemented last year.

Mr Liem attributed this to the development's excellent location and long-term investment potential, thanks to its freehold status at a prime location.

-By Lee Meixian

CDL, Hong Leong top land bank ranking

Source: Straits Times

He may not command quite as many spare hectares as he once did but the man dubbed "Kwek Land Bank" still sits atop the charts when it comes to property developers' stock in trade. Property veteran Kwek Leng Beng's City Developments (CDL) and its parent Hong Leong Holdings have the biggest land bank among developers in Singapore, a study by consultancy DTZ for The Straits Times has found.

More rental data to be available to public later this year

Source: Channel News Asia / Singapore

SINGAPORE: More comprehensive rental data will be made available to the public later this year, according to Minister of State for Trade and Industry Teo Ser Luck.

Speaking in Parliament during the Committee of Supply debate on Thursday, Mr Teo said small and medium enterprises (SMEs) have given feedback that they face significant rental spikes when their tenancies are renewed.

Mr Teo said: "To help businesses make more informed decisions about the rental market, the SME Workgroup has suggested that the government share more rental information. I think Mr Zaqy Mohamad (MP for Chua Chu Kang GRC) has also mentioned about this rental benchmark transparency.

“MTI (Ministry Of Trade and Industry) and URA (Urban Redevelopment Authority) have taken this feedback on board -- we are looking into publishing more comprehensive shop rental data in our indexes later this year, to make our pricing more transparent."

Addressing questions by MPs about the impact of real estate investment trusts (REITs) on the rental market, Mr Teo said REITs are not necessarily the leading players in the rental space market, as they currently own about 13 per cent of retail, and 16 per cent of industrial rental space.

He said they cannot charge excessive rents if there is no demand.

But he added the government will monitor the rental market and intervene if there is evidence of collusion or market domination by any player, including REITs.

Mr Teo said rents are likely to moderate in the medium term as the government has released a significant amount of land for shop space and multi-user factory space.

- CNA/gn

Real Estate Companies' Brief

Singapore Land

March 6 close: S$9.55

DMG & Partners Research, March 6

IN a long-anticipated move, United Industrial Corporation (UIC) recently announced an unconditional cash offer for its 80.4 per cent-owned subsidiary Singapore Land (SingLand).

Who says Tuan Sing is going private?

Source: Straits Times

Privatisation is not on Tuan Sing Holdings' cards despite a stock price that some observers say is "severely undervalued" and has been trading at a widening discount to its net asset value (NAV). Talk sparked that some developer companies may also be taken private after United Industrial Corporation last month took back its subsidiary, Singapore Land, for $761.67 million amid poor market sentiment for the residential property segment.

Lian Beng buys 5.03% of Centurion for $21.7m

It calls acquisition a strategic investment in a property asset- related company

Source: Business Times / Companies

CONSTRUCTION-LINKED Lian Beng Group yesterday bought a 5.026 per cent stake in Centurion Corporation for $21.7 million, forging a closer relationship with the dormitory provider.

Lian Beng became a substantial shareholder through the purchase of 38 million Centurion shares at 57 cents each in an off-market married deal which will be funded by loans and internal resources.

"The acquisition is in line with the group's core business of building construction and property development, as it is a strategic investment in a property asset-related company which requires construction services from time to time," Lian Beng said in a statement.

It said the benefits from the synergies would be beneficial for the group as a construction and property group in the long run.

-By Angela Tan

Hongkong Land posts record underlying profit

Source: Straits Times 

Hongkong Land has posted a 20 per cent rise in underlying net profit to a record US$935 million (S$1.18 billion). Revenue for the year to Dec 31 soared to US$1.86 million, up from US$1.11 billion in 2012. Underlying earnings per share climbed to 39.73 US cents from 33.11 US cents while net asset value per share firmed to US$11.41 from US$11.11 previously.

REITs: Good or bad?

Source: Business Times / Business

As small and medium-sized enterprises (SMEs) struggle with labour tightening in the push for improved productivity, they are also being squeezed by landlords demanding ever-rising rents.

Many businesses that lease commercial and industrial space, especially those under the real estate investment trust (REIT) structure, are hurting, and I must say, hurting real bad. Over the course of this week, Members of Parliament have called on the Government in the House to rein in industrial and commercial rents to help ease the burden on businesses.

Whenever I listen to the rental woes of SMEs, I am reminded of a report many years ago about a local coffee-shop chain that made it big. When asked by the reporter for the secret of its success, the owner said it just had the foresight of buying its premises in the early days of the business.

Does it mean that great success or failure simply boils down to whether the business owns or leases its premises? If you talk to the affected tenants, the answer is a resounding yes. Even those doing all right feel it could be a matter of time before they are squeezed by rentals. There is very little margin for error: All it takes is one business oversight or a stretch of poor sales.

It does not help that the supply of business space has always been behind the curve. Policymakers have always been quick to highlight the scarcity of land in Singapore. I think this is an excuse: It is not about the quantity but the type, mix and distribution as well. You need to get this right, too, because you can always find places where there are no takers for vacant space.

And when you have a scarce resource, you cannot simply leave it to market forces. In fact, rationing or spacing out the supply is already a form of intervention.

It is also not only about raising productivity by working smart. It is about moving up the value chain whether you are in a sunset or sunrise industry. Businesses that thrive or achieve higher productivity are usually helmed by creative leaders, but how do we nurture creativity when a lot of business ideas and entrepreneurial talent are nipped in the bud by the initial high rental costs?

Aside from the supply of business space, we also need to ask whether the REIT structure is partly responsible for the current woes of SME tenants.

Almost all the literature and so-called independent market reports are on the side of REITs, often extolling the benefits that these professionally-managed collective investment schemes bring.

However, academics and analysts lament the dearth of local data from which truly independent studies can be conducted to put the debate to rest. But nobody is volunteering this data, understandably not from the REITs themselves, but also from government bodies that possess some of these figures. More transparency is needed here.

To be fair, the REIT managers are simply doing their job and doing it well: After all, their rewards and salaries depend on how well they do. But why are the actions of REIT landlords praised in the past but not today? Then, they were lauded for breathing life into ageing commercial properties and livening up the business landscape. Has anything changed? As far as I know, they have been going about doing exactly the same things they were doing in the early days.

However, in life, there always has to be a balance. Too much of a good thing can eventually turn out to be detrimental and this may be so in the case of REITs. I know it is not very scientific and those who are always demanding proof before they act will never be satisfied. Not being able to prove something with data, or because of the lack of it, does not automatically make it an untruth.

The problem with REITs may not be so much with the structure itself, but their dominance of the business space landscape. Some describe the present market as akin to an oligopoly. How do we change this to make it more competitive? Do we limit each REIT to only a few properties to introduce more competition?

Nobody has the answers now but it is a problem we need to resolve urgently. If not, because the shares of local REITs are listed and easily tradeable, all of the benefits — especially if REIT managers have been very successful in raising value for unitholders — could eventually land in foreign hands.

Then we will become renters in our own country and have the life sucked out of us.

-By Colin Tan

Views, Reviews & Forum

Implications of being 'priciest' city

Source: Straits Times

SINGAPORE has a penchant for being No. 1. Well, we have done it again - for being the priciest city in the world, according to a survey by the Economist Intelligence Unit ("S'pore 'world's most expensive city' ";Wednesday). However, this is not a feat we should be proud of. In fact, we should be worried.

Global Economy and Global Real Estate

Global Logistic Properties buying Brazil assets for 3.18b real

Source: Business Times / Companies

GLOBAL Logistic Properties (GLP), a provider of modern logistics facilities in China, Japan and Brazil, yesterday announced it would be acquiring a portfolio of 34 assets in Brazil from Brazilian real estate developer BR Properties for 3.18 billion Brazilian real (S$1.74 billion).

The portfolio comprises 1.2 million square metres of completed logistics warehouses with a lease ratio of 99 per cent, said a GLP spokesman.

More than 86 per cent of these assets are located in the primary logistics markets of São Paulo and Rio de Janeiro, which together generate more than 40 per cent of Brazil's gross domestic product, GLP said.

The mainboard-listed company added that it intends to fund the acquisition without issuing additional equity, and is in the process of conducting due diligence investigations on the properties, including their value.

-By Jacquelyn Cheok

New Penang bridge benefiting developers

Source: Business Times / Malaysia

NOW that the Second Penang Bridge is open, good times look set to continue rolling for developers with land banks in Batu Kawan and the surrounding areas on the mainland.

Take little-known Penang mainland builder Tambun Indah Land, for example. Its share price has been steadily rising, gaining 117 per cent in the past year, with its projects expecting to benefit from the bridge, which, at 24km, is South-east Asia's longest.

RHB, in a report yesterday after an analysts' briefing by Tambun Indah, said that Seberang Prai Selatan (SPS), an administrative district in the mainland part of Penang state, has become a focal point with the opening of the bridge.

RHB added that Swedish furnishing store Ikea's participation in an integrated shopping mall, to be completed by 2020, is also adding to the buzz in the area.

-By Pauline Ng in Kuala Lumpur

China property prices are overheating: Vanke

Firm posts 20.5% rise in net profit, in line with forecasts

Source: Business Times / Property

[HONG KONG] China Vanke Co, the mainland's largest listed developer, said yesterday that property prices are overheating in some Chinese cities, the latest company to sound the alarm over real estate in the world's second-largest economy.

The warning adds to a series of recent news - from home price data to reports that developers have cut prices - that has rattled investors and hurt share prices of some of China's top property companies late last month.

"There's overheating in the market now. It needs to return to a logical level," secretary of the board Tan Huajie said after the company reported a 20.5 per cent rise in full-year profit, in line with forecasts.

Mr Tan, echoing comments by private developer SOHO China this week, also said that rising land prices were continuing to create "land kings" - nicknamed for their record-breaking bids at land auctions.

-From Hong Kong, China

HK home prices fall to 7-month low in Jan

Source: Business Times / Property

[HONG KONG] Hong Kong's private home prices dropped to a seven-month low in January, the government said yesterday, as official market-tightening measures drove developers to offer discounts to attract buyers.

Hong Kong's January overall home prices edged down 0.2 per cent from a month earlier to their lowest since June 2013, according to the city's Rating and Valuation Department.

Overall, home prices in one of the world's most expensive property markets have now fallen 0.7 per cent from last August's high point, according to government data. The 0.7 per cent figure comes at a time when many industry watchers are expecting a 10 per cent drop in Hong Kong's home prices this year.

The government has imposed a series of property curbs since October 2009 to tackle a housing shortage and rising home prices, which have jumped nearly 120 per cent since 2008.

-From Hong Kong, China

HK home prices hit 7-month low as discounts bite

Source: Today Online / Business 

HONG KONG — Private home prices in Hong Kong dropped to a seven-month low in January, the government said yesterday, as the government’s property market cooling measures drove developers to offer discounts to attract buyers.

Hong Kong’s overall January home prices edged down 0.2 per cent from a month earlier to their lowest since June last year, the city’s Rating and Valuation Department said. Home prices in one of the world’s most expensive property markets have now fallen 0.7 per cent from last August’s high point, according to government data.

The 0.7 per cent figure comes at a time when many industry watchers are expecting a 10 per cent drop in Hong Kong’s home prices this year.

The government has imposed a series of property cooling measures since October 2009, including higher stamp duties and tighter loan curbs, to tackle a housing shortage and rising home prices, which have jumped nearly 120 per cent since 2008. The number of private home completions in Hong Kong dropped to its second-lowest level on record in 2013. REUTERS

-From Hong Kong, China

Osaka to open Japan's tallest building

The 60-floor complex is part of the city's bid to lure tourists, stem businesses from moving to Tokyo

Source: Business Times / Property

[TOKYO] Japan's tallest building will open today in Osaka, as Asia's third-biggest metropolitan economy aims to lure tourists and stem businesses from moving to Tokyo.

Kintetsu Corp, one of the main rail operators in western Japan, spent 130 billion yen (S$1.6 billion) and four years constructing the 300-meter Abeno Harukas skyscraper, according to the Osaka-based company. It will surpass the 296-meter Landmark Tower in Yokohama, about 32km south of central Tokyo.

The new 60-floor complex, which includes a Marriott International Inc hotel, and a separate proposal for a 500 billion yen casino resort are the latest attempts to bolster the city's economy.

However, rather than tall towers, the metro area of 11 million people may need business zones with fewer regulations, according to Rakuten Securities Economic Research Institute. "The building will be a success, but total demand won't improve," said Masayuki Kubota, chief strategist at the institute. "Osaka should try special economic zones and create new businesses from those zones."

-From Tokyo, Japan

RBA’s Stevens Says He Doesn’t See Need to Reduce Rates Further

Source: Bloomberg / Luxury

Australia’s central bank Governor Glenn Stevens said he’s not sure how long a flagged period of interest-rate stability will last and doesn’t see the need to further loosen “very accommodative” policy at the moment.

“I haven’t said how long a period because I don’t know,” Stevens told a parliamentary panel in Sydney. “That’s a bit of a shift on our part, where we had been saying that there might be scope to go down a bit more if needed. I don’t think we do need to at this point in time.”

Stevens last month said a “period of stability in interest rates” is likely after extending a policy pause since the latest reduction in August took borrowing costs to a record-low 2.5 percent. Policy makers are seeking to engineer a transition from a resource-investment boom to increased residential construction and household consumption.

The nation’s currency has rebounded about 4 percent since the RBA’s Feb. 4 decision as data showed rising housing prices, surging building approvals, and accelerating economic growth even as the jobless rate jumped in January to a 10-year high. Asked about means to lower the currency, Stevens today said so-called jawboning “has a limited effect” on the currency.

“I’ve said that I thought in the 90s or over a dollar was rather higher than any plausible assessment you could come to based on our costs and productivity relative to other countries. I haven’t changed my view about that,” he said. “I don’t resile from what I’ve said before but I have nothing new to say.”

The Australian dollar traded at 90.80 U.S. cents at 11:56 a.m. in Sydney. Traders are pricing in about a 17 percent chance of a quarter percentage point rate increase in the cash rate in September, according to swaps data compiled by Bloomberg.

Aussie Price Impact

Australia’s dollar dropped about 14 percent last year, the steepest decline after the yen among 10 developed nation currencies tracked by Bloomberg Correlation Weighted Indexes. It accelerated its decline in the final quarter of 2013 as policy makers sought to talk down the Aussie. Stevens said the decline in the currency had contributed to a rise in consumer prices in the fourth quarter.

“Our assessment is that inflation is not quite as low as it might have looked six to twelve months ago, but nor is it accelerating to the extent a literal reading of the latest data might suggest,” Stevens said. “The general situation – 18 months of below-trend growth, a rise in unemployment, a marked slowdown in wages – is not one that would be obviously associated with a sustained rise in price pressures. Our view remains that the outlook for inflation, while a little higher than before, is still consistent with the medium-term target.”

The RBA cut rates to support the economy as a mining boom moves from the employment-intensive investment phase to one of increased supply and higher exports.

Rise Strongly

“It is clear that dwelling investment activity will rise strongly over the period ahead,” Stevens said. “The question then is: will the additional demand likely to be generated outside mining as a result of these trends be just the right amount to offset the large decline in mining investment spending, so keeping the economy near full employment? No one can answer that question with great confidence.”

Adam Boyton, chief economist for Australia at Deutsche Bank AG in Sydney, said Stevens’s comments indicate the cash rate is likely to remain unchanged for some time.

“The governor appears to have reinforced the ’low-for-long’ message in the bank’s current policy assessment,” he said in a research report. “It seems clear from this that the hurdle for the bank to move away from its current neutral bias is relatively high.”

-By Michael Heath

Moody’s Seeks Comment on Approach to Rating Rental-Home Bonds

Source: Bloomberg / Luxury

Moody’s Investors Service is asking for comments on a proposed methodology for rating bonds backed by U.S. rental homes, after assigning top grades to a portion of the market’s first deal last year.

The document released today reflects Moody’s plan to create a formal outline of its approach to rating the debt, which it has previously explained in reports and statements, Thomas Lemmon, a spokesman, said by telephone. When ranking a type of securities before creating an official methodology, the firm offers more information on its views as it rates individual deals, he said.

For the initial securities, the New York-based company’s assessment of the transaction’s “ultimate ability to repay investors was based on the liquidation value of the homes under a heavily stressed scenario,” Moody’s said today in an e-mailed statement.

Competitor Standard & Poor’s said Feb. 27 that rental-home securities haven’t met the criteria for its top AAA rankings, following a similar statement by Fitch Ratings in November. Moody’s, Kroll Bond Rating Agency and Morningstar Inc. assigned top grades to 58 percent of the bonds in the $479.1 million offering in November by Blackstone Group LP’s Invitation Homes, the only of its type so far.

Moody’s said today in its request for comment that when grading such deals it plans to focus “on two sources of cash flows that are available to repay the loan: the rental income that the underlying properties will generate, and the proceeds from the sale of the underlying properties.”

Its analysis of the income and legal issues is derived from its process for ranking commercial-mortgage bonds, while its approach for residential securities informs how it assesses property valuations, Moody’s said.

-By Jody Shenn

U.S. Mortgage Rates Fall With 30-Year Average at 4.28%

Source: Bloomberg / Personal Finance

U.S. mortgage rates for 30-year loans fell for the first time in four weeks, decreasing borrowing costs for homebuyers as the recovery in prices stretched into 2014.

The average rate for a 30-year fixed mortgage was 4.28 percent this week, down from 4.37 percent, Freddie Mac said today. The average 15-year rate slipped to 3.32 percent from 3.39 percent, the McLean, Virginia-based mortgage-finance company said.

U.S. home values continue to rise as buyers compete for a limited supply of properties for sale. Prices climbed 12 percent in January from a year earlier, the 23rd consecutive gain, Irvine, California-based CoreLogic Inc. said this week.

“Prices are still growing at very high rates because the markets are still tight,” Patrick Newport, an economist with IHS Global Insight in Lexington, Massachusetts, said in an interview yesterday. “We haven’t been building enough homes at high enough rates for five or six years.”

Rising prices and tougher credit standards have shut out some first-time buyers, slowing the pace of the housing recovery. First-timers accounted for 26 percent of purchases in January, down from 30 percent a year earlier and the smallest share in more than five years of data-keeping, according to the National Association of Realtors.

While purchases rose 8.2 percent for residences costing more than $250,000, they fell 10.7 percent for homes worth less, according to the Realtors group.

-By Prashant Gopal

U.K. Home-Price Growth Accelerates to Fastest Since May 2009

Source: Bloomberg / Luxury

U.K. house-price growth accelerated in February to the fastest in almost five years as the economic recovery strengthened, boosting demand for property.

Values increased 2.4 percent to an average 179,872 pounds ($301,000), Halifax, a unit of Lloyds Banking Group Plc, said in a statement in London today. That’s the largest monthly gain since May 2009. From a year earlier, prices rose 10 percent.

Housing is benefiting from “the improved economic outlook, unemployment falling faster than expected, improvements in consumer confidence and low interest rates,” said Stephen Noakes, mortgages director at Halifax. “However, continuing pressures on household finances are expected to remain a constraint on the rate of growth of house prices.”

A broadening recovery, government incentives and record-low interest rates have fueled Britain’s property revival, with data this week showing mortgage approvals increased to the most since 2007. The strength prompted the BOE to end its support for home loans and Chief Economist Spencer Dale said in an interview last week that officials are alert to the risk of overheating.

In the three months through February, home prices rose 2.1 percent from the previous quarter, today’s data showed. From a year earlier, values gained 7.9 percent in the three months.

A shortage of homes for sale is “adding upward pressure on prices,” Halifax said. “While new buyer enquiries eased in January, this has been accompanied by a decline in the number” of homeowners putting their property on the market, it said.

Lenders granted 76,947 home loans in January, compared with 72,798 in December, the BOE said on March 3. Demand has been partly driven by a government program known as Help to Buy, which guarantees loans to those who can only afford a small down payment.

BOE policy makers will keep the benchmark interest rate at an all-time low of 0.5 percent today, according to all 52 economists in a Bloomberg News survey before the announcement at noon.

-By Scott Hamilton

Silverstein Joins Buffett Celebrating NYC Property Bet

Source: Bloomberg / Personal Finance

For New York University students, a retail property near the school in lower Manhattan is a place to buy a sandwich or milk. For developer Larry Silverstein, the location is part of a bond with billionaire Warren Buffett.

Their 1993 investment in the facility has been on Buffett’s mind recently. Last week, he cited his wager in an annual letter to Berkshire Hathaway Inc. (BRK/A) shareholders as an example of how long-term thinking can produce steady profits. And he contacted Silverstein just last year to say thanks for the opportunity.

“Considering that we both are in our 80s, he thought it appropriate to express his gratitude while he could do it, and I could hear it!” Silverstein, 82, wrote in an e-mail this week.

The men got to know one another when Buffett was chief executive officer of Salomon Inc. in the 1990s and Silverstein was the company’s landlord in New York. Buffett asked the developer to put him in a real estate deal good enough for Silverstein himself. That led to the retail property on East 9th Street between University Place and Broadway.

Silverstein, Buffett and his friend Fred Rose were part of a group that purchased the 67,150-square-foot (6,238-square-meter) facility for about $20 million from the Resolution Trust Corp., the U.S. government agency that sold the assets of failed savings-and-loan institutions, according to Buffett’s letter and a summary sheet of the property from the time.

Members of New York’s Malkin family, the operators of the Empire State Building, helped lead the transaction, according to a Real Estate Weekly article at the time. Buffett, 83, invested $1 million, he said yesterday in an e-mail.

‘Day or Night’

Since then, the billionaire said he has received more than $1.5 million in special capital distributions from the investment, as well as regular payments that have consistently increased. They were $360,000 in 2012 and $432,000 last year, he wrote in an e-mail yesterday.

The sums are small for both men. Silverstein is one of the developers of New York’s World Trade Center site, and Buffett is the world’s third-richest person because of his ownership stake in Omaha, Nebraska-based Berkshire, the $290 billion company he built over the past five decades.

Still, the property, which now counts a Cosi Inc. (COSI) sandwich shop and a Gristedes market as tenants, highlighted some of Buffett’s long-held principles. One of them: focusing on what an investment will produce rather than its daily valuation. In the retail space, his partners managed the property in a way that boosted rental income, he wrote.

All of this was achieved based on trust. Buffett wrote that he has still never seen the property, though he said his line is always open for the developer.

“I’ve given Larry Silverstein all of my various phone numbers and told him he can call me day or night,” Buffett wrote in the e-mail.

-By Betty Liu and Noah Buhayar

China Vanke 2013 Profit Rises on Small-to-Medium Home Sales

Source: Bloomberg / Luxury

China Vanke Co. (3333), the nation’s biggest developer by market value traded on mainland exchanges, said full-year profit rose 21 percent as it sold more small and medium-sized homes that are less affected by government curbs.

Net income climbed to 15.12 billion yuan ($2.5 billion) in the 12 months to Dec. 31 from 12.55 billion yuan a year earlier, the Shenzhen, China-based company said in a statement today. That compares with the 15.43 billion yuan average profit estimate of 17 analysts surveyed by Bloomberg. Revenue rose 32 percent to 127.5 billion yuan, it said.

China’s home prices rose 12 percent last year, according to SouFun Holdings Ltd. (SFUN), even as the government maintained property curbs and at least 10 cities stepped up policies to tackle rising housing values. About 91.5 percent of Vanke’s projects were homes of less than 144 square meters (1,550 square feet) in 2013, helping it boost sales, the company said.

“The company achieved stable growth in operating results by adhering to its end-user-oriented product positioning and proactive sales promotion,” said Vanke President Yu Liang in the statement.

The Chinese government will curb real estate speculation and investment, while regulating the market differently depending on the city, Premier Li Keqiang said in his work report yesterday at the opening of the National People’s Congress in Beijing. China targets to start construction of more than 7 million units of social housing this year, he said in the report.

Slowing Growth

“Instead of controlling property price, the government report this time emphasized social housing and increasing supply of normal residential units,” Yu said at a briefing in Hong Kong today. “This is a healthy mechanism in the long-term and we agree with it.”

Home-price growth slowed for a second month in February, according to SouFun, the nation’s biggest real estate website. Average prices rose 10.8 percent last month from a year earlier, compared with 11.1 percent in January.

Full-year contracted sales rose 21 percent to 170.9 billion yuan, Vanke said today. Chinese developers begin selling homes while they are under construction and book profits upon completion.

Vanke had 44.4 billion yuan of cash at the end of December, it said. The company, the first among China’s biggest homebuilders to report full-year earnings, will pay a final dividend of 4.1 yuan for every 10 shares.

The shares jumped 8.3 percent to 7.32 yuan at the close of trading in Shenzhen, before the earnings were announced. They have lost 8.8 percent this year. The Shanghai Stock Exchange Property Index, which tracks 24 developers, advanced 2.3 percent today.

-By Bloomberg News