Real News‎ > ‎2014‎ > ‎May 2014‎ > ‎

1st May 2014

Singapore Economy

Economy maturing, so growth slower: PM

'Only sustainable way' to grow wages is to develop better workers and create better jobs

Source: Business Times / Top Stories

SINGAPORE'S official growth forecast of 2-4 per cent for this year is "typical of a maturing economy", says Prime Minister Lee Hsien Loong.

The economy is upgrading qualitatively and expanding less quickly than before as the country undergoes a "major transition", he said in his annual May Day Message, which was released yesterday.

The economy performed well last year, he said, with GDP expanding 4.1 per cent as wages and household incomes also went up broadly. As Singapore goes through the transition, he maintained that the goal of improving the lives of the people remained the same.

One important strategy is to develop better workers and create better jobs, which Mr Lee described as "the only sustainable way" to raise wages. He also said it was the collective responsibility of each of the tripartite partners - the government, employers and unions - in Singapore to develop better workers and create better jobs.

"Workers must make the effort to train and upgrade themselves. Employers must invest in workers, develop their skills, and make full use of their talents.

"Only then will the government's programmes bear fruit. By working together, we strengthen our model of tripartism, and keep it our lasting advantage."

On its part, the government is growing the economy and creating good jobs for Singaporeans, and strengthening the social safety nets to give people "more peace of mind".

It is also upgrading the skills of workers by investing heavily when it comes to continuous education and training, with two new institutes set up in Jurong and Paya Lebar to enable more people to upgrade themselves and advance their careers.

Mr Lee shared how the government was giving generous incentives to help companies raise their productivity and create more opportunities to expand overseas.

This message of an economy in transition was one that was prominent in nearly all the May Day Messages released this year by Singapore's leaders and the tripartite partners.

Labour chief Lim Swee Say said last Sunday that the labour market will remain tight all the way until 2030 and urged firms to ramp up their efforts to boost productivity and innovation.

Workers, too, have been told to improve their skills and brace for more changes in the coming years as a result of this economic restructuring.

PM Lee ended his May Day Message with a call for all Singaporeans to honour the contributions and achievements of the pioneer generation that has helped make Singapore what it is today.

"Our pioneer generation overcame long odds to set Singapore on the path to development. In the unions, many pioneers fought the communists and worked with the government to foster constructive labour-management relations, build a competitive economy and deliver better lives for all.

"Let us honour them by upholding their spirit, building on their achievements and creating an even better Singapore for our children."

Mr Lee will join over a thousand unionists in celebrating Labour Day later today at the new Devan Nair Institute for Employment and Employability in Jurong East, where he will deliver the May Day Rally speech.

-By Lee U-Wen

Improving global economy boosts sentiment

Govt surveys find businesses in both manufacturing and services sectors have turned more optimistic for April-Sept

Source: Business Times / Top Stories

BUSINESSES across both the manufacturing and services sectors have turned more optimistic, as better global economic conditions boost the prospects of firms from electronics and precision engineering, to the transport and finance sectors. Government surveys of the two sectors, conducted in March and April, show that businesses optimistic about the six months till September outnumbered those who are pessimistic.

Of the more than 400 manufacturers polled by the Economic Development Board (EDB), a weighted 12 per cent expect better business conditions from April to September, compared to first quarter of this year, while a weighted 5 per cent think conditions may deteriorate.

This means a positive net weighted balance of 7 per cent, up from 4 per cent in the January edition of the quarterly survey. This measure of the difference between the proportion of firms that are optimistic and those that are not is often used to reflect how widespread positive or negative business sentiment is.

-By Teh Shi Ning

Singapore Real Estate

First-quarter retail rents for prime spots edge up 0.8%

Knight Frank report sees such spaces commanding 3-5% rise by the year-end

Source: Business Times / Property

RETAIL rents of prime spaces islandwide inched up 0.8 per cent in the first quarter from the previous period, led mainly by higher rents for such spaces in Marina, City Hall and Bugis.

While overall retail rents could see a gradual 3-5 per cent fall by the end of this year with new supply coming onstream, retail rents for prime spaces are likely to hold firm - and, in fact, grow by 3 to 5 per cent - by the end of this year, according to a Knight Frank report.

"Retailers would be more selective in their relocation and expansion plans with more ample options of available retail spaces," said Alice Tan, Knight Frank's head of consultancy and research.

The report defines prime spaces as units of between 350 and 1,500 sq ft with the best frontage, connectivity, footfall and accessibility in a mall. They are typically the ground or basement level of a retail mall that is linked to a bus interchange or an MRT station.

-By Lynette Khoo

Sharp drop in new home loan applications

Source: Straits Times 

Home loan applications have dived sharply at DBS and OCBC in the wake of strict lending rules introduced last year and real estate agents are feeling the pinch too. The statements from bank chiefs yesterday only confirmed what property agents have been saying for months

Top bid for Potong Pasir plot seen at $650-900 psf ppr

Commercial use capped at 5,000 sq m, or 8.8% of project's maximum GFA

Source: Business Times / Property

A COMMERCIAL and residential site next to Potong Pasir MRT Station launched for sale on the confirmed list of the Government Land Sales Programme is expected to draw four to eight bids.

Property consultants' forecasts for the top bid varied from $650 to $900 per square foot of potential gross floor area. The tender for the site closes on Aug 19.

The government yesterday also made available for application on the reserve list an executive condominium (EC) site at the corner of Sembawang Road and Canberra Link, although most market watchers are not expecting it to be triggered for launch anytime soon as there is sufficient EC supply.

Both sites have 99-year leasehold tenures.

-By Kalpana Rashiwala

Preview for Sungei Ulu Pandan project today

Source: Business Times / Property

WATERFRONT@FABER, which is located on the banks of Sungei Ulu Pandan, will open its doors for preview today.

Indicative prices of units are set to start from $863,000 for a two-bedroom dual key unit which, according to marketing material, ranges from 753 square feet to 764 sq ft. A three-bedroom dual key unit starts from $1.125 million and a four-bedroom unit starts from $1.32 million. Prices for strata-landed units start from $2.48 million.

Three-bedroom dual key units are about 1,023 sq ft. Four-bedroom units range from 1,173 sq ft to 1,292 sq ft. Strata-landed units range from 2,799 sq ft to 3,035 sq ft.

Developed by World Class Land, a subsidiary of Aspial Corporation Limited, the 99-year leasehold development comprises 199 units and 11 strata houses.

-By Mindy Tan

Mapletree in serviced apartment venture

Tie-up with Oakwood aims to open 100 new properties over 5 years

Source: Business Times / Companies

MAPLETREE Group has struck a deal for a corporate and serviced apartment joint venture that aims to open more than 100 new properties around the world over the next five years.

The group said yesterday that it would take a 49 per cent stake in Oakwood Asia Pacific (OAP), US-based Oakwood Worldwide's serviced apartment business in Asia. It also plans to acquire and develop US$4 billion worth of corporate and serviced apartment assets in Asia, Europe and North America.

"The joint venture will draw on Mapletree's expertise in Asia and Oakwood Wordwide's strengths in Europe and North America to more than triple the number of branded Oakwood buildings across the globe," said Mapletree. It added that it would have an option to "acquire additional interests in OAP following the successful deployment of the growth strategy".

-By Lee Meixian

Real Estate Companies' Brief

Soilbuild's Q1 net climbs 4% to $3.9m

Source: Business Times / Companies

SOILBUILD Construction Group's net profit for the first quarter ended March rose 4 per cent to $3.9 million. Meanwhile, revenue rose 28 per cent from $68.1 million a year ago to $87.3 million.

"We are pleased to report revenue and profit growth despite the industry-wide challenges faced by our sector," said Ho Toon Bah, executive director of Soilbuild Construction Group.

The increase in revenue was mainly due to revenue recognition in line with the progress of five key construction projects. These comprise a mixed use development project at Lavender, an Ang Mo Kio HDB project, Bukit Batok BizHub, Mandai Connection and Northview BizHub.

-By Mindy Tan

Fragrance Q1 net jumps 38% to $24.3 million

Source: Business Times / Companies

FRAGRANCE Group has reported a near 38 per cent jump year-on-year in first-quarter net profit to $24.26 million.

Revenue for the three months ended March 31 edged up about 13 per cent to $125.27 million.

Fragrance said the surge in profit attributable to equity-holders was mainly due to decreased profit contribution from its Parc Rosewood project where non-controlling shareholders share 40 per cent interest. The period shows profit attributable to minority interests falling 64.9 per cent to $3.62 million.

-By Nisha Ramchandani

Resignations hit Keppel T&T ahead of Reit listing

Source: Business Times / Top Stories

SEVERAL senior resignations in recent weeks at Keppel Telecommunications and Transportation (Keppel T&T) and its data centre business could raise questions over its highly anticipated listing of the unit.

The Business Times understands that Keppel T&T's chief executive officer, Pang Hee Hon, plans to step down from the post which he has held since January 2010. The decision takes place at a pivotal time when Keppel T&T is readying itself for a milestone transaction - to spin off its data centre business and list it as a real estate investment trust (Reit) on Singapore Exchange's mainboard.

Mr Pang's impending resignation follows on the heels of other departures at Keppel T&T's data-centre business, more specifically at Securus Data Property Fund, which is at the heart of the assets to be injected into the to-be-listed Reit.

-By Anita Gabriel

Global Economy & Global Real Estate

Growth frozen as Q1 GDP grows just 0.1%

Pullback comes as snow blankets country's eastern half, hitting economic activity

Source: Business Times / Top Stories

THE US economy barely grew at all in the first quarter as harsh winter weather chilled investment and exports dropped. The stall occurred even as consumer spending on services rose by the most in 14 years.

Gross domestic product (GDP) grew at a 0.1 per cent annualised rate from January through March, compared with a 2.6 per cent gain in the prior quarter, figures from the Commerce Department showed yesterday in Washington. The median forecast of 83 economists surveyed by Bloomberg called for a 1.2 per cent increase.

Household purchases rose at a 3 per cent pace, spurred by utility outlays and spending on health care tied to President Barack Obama's Affordable Care Act (ACA).

-From Washington, US

Elderly suffering in NYC housing crisis

The US city has fewer market-rate housing options for older people than other major metropolitan areas. By Mireya Navarro and Vivian Yee

Source: Business Times / Property

NUBIA Chavez and Manuel Acuña have been bouncing from rental to rental around New York City like millennials. They recently decamped to a US$700-a-month room in a Queens apartment, with a shared bathroom and no access to the kitchen except to make coffee.

But Ms Chavez, a housekeeper, and Mr Acuña, a retired building porter, are not in their 20s. They are 65 and 72, and they say they are tired - of the moving, of the lack of permanency and of a lifestyle not suited to their age.

"I want to live in my own place," Ms Chavez said. "No more rooms."

-From Washington, US

Lend Lease gets 2 more tenants for A$6b devt

Source: Business Times / Property

LEND Lease Group, Australia's biggest listed property developer, will start building the third office tower at its A$6 billion (S$7 billion) Sydney harbourfront development after signing PricewaterhouseCoopers LLP and HSBC Holdings plc as tenants.

PwC's Australian unit agreed to occupy 26,500 square metres (285,240 square feet) over 12 floors in the 49-storey building at the Barangaroo project, and HSBC's local business has signed to take up 8,000 sq m (86,100 sq ft), Sydney-based Lend Lease said in a regulatory filing.

The developer also sold a 10 per cent stake in the site's first two office towers to the Netherlands' APG Algemene Pensioen Groep NV, reducing its interest to A$300 million, or 15 per cent, from A$500 million earlier, it said.

-From Sydney, Australia

Cunliffe Says Dangerous for BOE to Ignore House Price Momentum

Source: Bloomberg / Luxury

Bank of England Deputy Governor Jon Cunliffe said that spiraling property prices are the most pressing risk to Britain’s financial stability.

“It would be dangerous to ignore the momentum that has built up in the U.K. housing market since the spring of last year,” he said in a speech in London late yesterday. “The Financial Policy Committee will need to be both vigilant and ready to act.”

The FPC, charged with overseeing financial stability, will publish an assessment of risks next month as the U.K. posts record gains in house prices. Annual property-price growth climbed to a seven-year high of 10.9 percent in April, Nationwide Building Society said yesterday.

“Whether and how to act further if, following the pause of the last couple of months, momentum continues to build, will be the most challenging judgment the FPC will have to take in the coming months,” Cunliffe said. “The FPC’s response will depend on the nature of the risks to stability identified.”

The panel has told banks to improve capital levels after the financial crisis, and officials have withdrawn incentives for mortgage lending in their credit-boosting Funding for Lending Scheme. In March, the committee said a tool to make affordability testing of borrowers more stringent will be available as soon as June.

“The FPC’s powers of direction in relation to the capital banks and building societies bear most directly on mortgage lenders’ ability to weather a downturn and housing bust once it has emerged,” Cunliffe said.

Underwriting Standards

The FPC could also make more specific recommendations to regulators on “crucial underwriting standards and affordability constraints like debt service to income, loan to income and loan to value,” he said.

“The recent sharp increase in house prices and transactions appear to have fuelled growing expectations of an ever accelerating market,” he said. “While inflation expectations in the U.K. are generally well anchored, it is a very different story when it comes to expectations for house prices.”

The bank’s Monetary Policy Committee has held its benchmark rate at 0.5 percent since March 2009, and under the forward-guidance policy introduced by Governor Mark Carney it’s pledged no change until slack in the economy is used up. Cunliffe, who oversees the financial stability department of the BOE, is a member of both panels.

Significant Pressure

“The current exceptionally low level of interest rates will need to increase once the recovery is well established,” he said. “So it is particularly important at present to ensure that the current low levels of interest rates do not mask the likely cost of mortgages and so create more headroom for prices to rise.”

The number of U.K. housing transactions may have been reduced by 3 million between 2008 and 2012, Cunliffe said. While some of those may never be regained, many purchases have just been delayed until economic and credit conditions improve and this may “add significantly to pressure on the market for the next few years,” he said.

Cunliffe said property market indicators suggest rising prices are set to continue, with some indicators pointing to double-digit price growth. The “sudden awakening” in the property market from a year ago may be due to a return of economic confidence and mortgage availability, he said.

Warning Lights

“It is difficult to know how much expectations are driving the current market,” he said. “But there is good reason to believe that a mutually reinforcing combination of strong demand, weak supply and expectations of a rising market could lead to a period of sustained and very powerful pressure on house prices in the U.K.”

In London, additional demand is coming from foreign investors looking for investments in a global environment of low interest rates, he said. A government program to help people with small down payments get on the housing ladder may also have contributed to demand, he said.

“There will always be a number of blinking warning lights -- risks generated at home and risks coming from abroad -- on our dashboard,” Cunliffe said. “The growing momentum in the market is now in my view the brightest light on that dashboard.”

-By Jennifer Ryan and Scott Hamilton

Neuberger Berman to Move Headquarters to Vornado Tower

Source: Bloomberg / News

Neuberger Berman Group LLC, the money manager that was part of Lehman Brothers Holdings Inc., will move its headquarters to Vornado Realty Trust’s tower at 1290 Avenue of the Americas in midtown Manhattan.

Neuberger plans to take about 355,000 square feet (33,000 square meters) in the 45-story, 2.1 million-square-foot building, a block north of Radio City Music Hall, the companies said in a joint statement today. The firm’s main offices currently are at 605 Third Ave., between 39th and 40th streets.

Vornado, owner of about 28 million square feet of New York properties, last year completed a renovation of the skyscraper, including a new lobby. Neuberger was attracted to the tower because of its upgrades and central Midtown location, the company said in the statement. The building offers the investment firm a dedicated lobby visitor center and conference center, and will have “extensive” branding.

The move is scheduled to be completed in late 2016. Neuberger has been at 605 Third Ave., owned by Fisher Brothers, since 1992. Its lease there expires in 2017.

Neuberger was represented by Newmark Grubb Knight Frank’s Neil Goldmacher, while Cushman & Wakefield’s Josh Kuriloff and Bruce Mosler worked with Vornado. (VNO)

-By David M. Levitt

U.S. Mortgage Rates Fall With 30-Year Loan at 4.29%

Source: Bloomberg / Luxury

Mortgage rates in the U.S. declined, decreasing home-loan costs as fewer Americans sought financing for purchases.

The average rate for a 30-year fixed mortgage was 4.29 percent this week, down from 4.33 percent, according to a statement today from Freddie Mac. (FMCC) The average 15-year rate slipped to 3.38 percent from 3.39 percent, the McLean, Virginia-based mortgage-finance company said.

Housing demand has cooled as rising prices and tight credit have kept buyers on the sidelines. In the week ended April 25, applications for loans to buy homes dropped 4.4 percent and were down 21 percent from a year earlier, according to data from the Mortgage Bankers Association.

“The drop in applications was disappointing because, with interest rates steadily improving recently, it suggests a reluctance of homebuyers to take action,” Bill Banfield, vice president at Detroit-based lender Quicken Loans Inc., said yesterday in a statement. “However, consumers in the market for a home may find it easier than they thought to purchase, with the added bonus of interest rates near historic lows.”

Rates have declined since the beginning of the year, when the 30-year average was 4.53 percent.

The Federal Reserve said yesterday that the economy is rebounding after a weather-induced stall, allowing it to keep scaling back stimulus efforts that have kept interest rates low. The central bank pared monthly bond purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely.

Completed sales of previously owned U.S. homes fell for a third straight month in March to the lowest level since July 2012, according to the National Association of Realtors. Purchases of new houses tumbled to an eight-month low, Commerce Department figures showed last week.

Contracts (USPHTMOM) to buy existing homes climbed by the most in almost three years in March, a sign that the market is starting to stabilize as it enters the key spring selling season, the Realtors group said three days ago.

-By Prashant Gopal

London Broker Savills to Buy Studley for U.S. Expansion

Source: Bloomberg / News

Savills Plc (SVS) agreed to pay as much as $260 million to acquire Studley Inc., a New York-based real estate brokerage that represents tenants, to expand in the U.S.

London-based Savills, which earned less than 1 percent of its revenue in the U.S. last year, will make an initial payment of $224 million and pay for the acquisition using a combination of cash, notes and shares, the company said in a statement today. The deal is expected to boost earnings in the first year.

Brokers are seeking to buy overseas firms as property investment rises and more buyers are willing to purchase assets outside their region. More than 70 percent of commercial properties sold in Europe in the first quarter were bought by foreign investors, compared with 45 percent in the same period last year, Colliers International said in an April 24 report.

The transaction “not only provides us with a significant platform for growth in the U.S., but also enhances our offering to clients worldwide,” Savills Chief Executive Officer Jeremy Helsby said in the statement.

Savills said the internal rate of return will be “materially” above its weighted average cost of capital.

A further payment of $25 million may be made to Studley’s staff in March 2018 if earnings growth targets are met in the three years through 2017, according to the statement.

Studley, which has 25 offices around the U.S., will be known as Savills Studley, the company said in a separate statement. Chairman and CEO Mitchell S. Steir will continue in that role at Savills Studley, while President Michael Colacino will remain in his position. The transaction is expected to be completed by the end of May.

-By Neil Callanan