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14th October 2014

Singapore Economy

Singapore's economy grew 2.4 per cent in Q3

The growth was unchanged from the previous quarter and slower than economists’ estimates.

Source: Channel News Asia / Singapore

SINGAPORE: The Republic’s economy expanded by 2.4 per cent in the third quarter of this year from a year ago, the Ministry of Trade and Industry (MTI) said in its report on advance third-quarter gross domestic product (GDP) data on Tuesday (Oct 14).

The growth during the July to September period was unchanged from the previous quarter and slower than the median estimate of 2.7 per cent of economists polled by Bloomberg.

Output from the manufacturing sector grew by 1.4 per cent, similar to the 1.5 per cent growth in the preceding quarter, with growth supported primarily by the biomedical manufacturing and electronics clusters.

The construction sector grew by 1.4 per cent on a year-on-year basis, a sharp slowdown from the 4.1 per cent growth in the previous quarter. The slowdown was mainly due to weaker private sector construction activities, MTI said.

The services producing industries grew by 2.9 per cent, slightly higher than the 2.8 per cent growth in the preceding quarter. Growth was supported primarily by the finance and insurance sector and business services sector.

MTI will release detailed GDP estimates for the third quarter in November 2014, including performance by sectors, sources of growth, inflation, employment and productivity. The Government's forecast is for full-year growth to come in at between 2.5 and 3.5 per cent.


Economists initially forecasted that the economy would grow by 2.8 per cent for the third quarter. Following the weaker-than-expected advance growth data for the third quarter, they are reviewing their their full-year growth forecasts for 2014.

Ms Selena Ling, who heads  OCBC Bank's Treasury Research and Strategy department, described the numbers for the manufacturing sector as a "tepid recovery story".

"Electronics has not made a convincing recovery yet, and it is really the volatile segments like biomed holding the sector up. Construction is also seeing a slowdown," she said. "In the past, we had public infrastructure projects holding up the sector, offsetting the weakness in private residential side. But given that the Government has also shelved S$2 billion of its projects in light of the manpower situation, we are seeing more apparent weakness in private sector construction activities."

Looking ahead, economists expect global growth to be patchy, with rising uncertainty around the Eurozone, China and Japan. 

Said Mizuho Bank Senior Economist Vishnu Varathan: "There will be a bit of a levelling off in growth in Q4. We will see growth between 3 to 3.5 per cent, our best guess is 3.2 per cent. This does not distract from the bigger story that growth has slowed somewhat from 2013, and that is really a product of the geopolitical risks that we see, and the slowdown and struggles in China as well as the unexpected developments in the Eurozone."

- CNA/cy/xy

Singapore GDP grows 2.4 per cent in third quarter

Source: Today Online / Business

SINGAPORE – The Republic’s economy expanded 2.4 per cent in the third quarter of this year from a year ago based on advance estimates, the Ministry of Trade and Industry (MTI) said today (Oct 14). The growth was unchanged from the previous quarter.

On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 1.2 per cent.

Both the manufacturing and construction sectors grew 1.4 per cent on a year-on-year basis while the services sector recorded a stronger showing with a 2.9 per cent year-on-year growth.

Singapore Real Estate

Premium grade office rents surge 6.1% in Q3: Colliers

The quarter-on-quarter increase was the highest in three years, and comes amid a continued shortage of office space in the central business district, the real estate services firm says.

Source: Channel News Asia / Business

SINGAPORE: Premium grade office rents in the Raffles Place/New Downtown area surged 6.1 per cent in the third quarter to S$11.67 psf per month amid a continued shortage of office space in the central business district, real estate services firm Colliers International said on Monday (Oct 13).

The 6.1 per cent quarter-on-quarter increase was the highest in three years, and was nearly double the 3.1 percent pace recorded in the second quarter.

Grade A office space in the Raffles Place/New Downtown area rose 2.9 per cent quarter on quarter to S$10.25 psf in July-September, while Grade A rents in the Shenton Way and Tanjong Pagar area gained 2.9 per cent to S$8.83 psf.

Colliers defines premium-grade offices as those found in relatively new buildings with large floor plates of more than 20,000sqft as well as intelligent features. Examples of such buildings include Marina Bay Financial Centre and Asia Square.

Grade A offices, on the other hand, refer to those in good quality buildings in strategic locations that are well served by amenities and transport nodes, for example 6 Battery Road and Republic Plaza Tower 1.

Colliers said the rise in office rents comes amid a supply squeeze, with the average occupancy rates of most micro-markets having breached the technical full occupancy rate of 95 per cent.

For instance, as of September 2014, the average occupancy rate for Grade A space in Raffles Place/New Downtown and Shenton Way/Tanjong Pagar stood at 97.2 per cent and 99.4 per cent, respectively.

- CNA/cy

HDB bags award for service innovation

Source: Business Times / Real Estate

HDB bags international award for Punggol branch

Several new features were piloted at the branch when it opened in 2012, including service ambassadors, electronic noticeboards and an e-Lobby with self-help kiosks.

Source: Channel News Asia / Singapore

SINGAPORE: The Housing and Development Board (HDB) said on Monday (Oct 13) it has beat eight other countries to win the FutureGov Award for creating a new and improved customer experience at its Punggol branch.

Said HDB’s Chief Executive Officer Dr Cheong Koon Hean: “HDB is honoured to be recognised for innovation in delivering quality service to our residents. This is affirmation of HDB’s commitment to put our residents at the heart of what we do.”

Set up in 2012, the Punggol branch was designed with a user-centric experience in mind. For example, “hint cards” have been placed on the wall to provide customers with bite-sized information and tips on commonly asked HDB matters.

A dedicated family service counter was set up with a kid’s corner for children to watch cartoons or do artwork while their parents are being served. Service ambassadors are also on hand to help residents with their enquiries and guide them on the use of e-kiosks for online transactions.

The Punggol branch also features HDB’s first e-Lobby that comes with self-help e-kiosks that enable customers to perform transactions beyond branch operating hours. It also includes the first height adjustable e-kiosk to aid physically-challenged customers.

The new ideas and service concepts piloted at the Punggol branch have been well-received by residents, HDB said, adding that several of the features, including service ambassadors and electronic noticeboards have been introduced at other HDB branches islandwide.

- CNA/cy

Real Estate Companies' Brief

SPH Reit's Q4 DPU beats IPO forecast by 6.1%

Payout of 1.39 Singapore cents brings full-year distribution to 5.99 cents; annualised yield of 6% based on IPO price

Source: Business Times / Companies & Market

SPH Reit posts Q4 distributable income of $34.9m

Paragon, Clementi Mall fully leased; gross revenue in line with forecast

Source: Straits Times / Money

SPH Reit Management has reported an income distributable to unitholders of $34.9 million for the fourth quarter.

This translates to a distribution per unit (DPU) of 1.39 cents for the three months ended Aug 31, which is 6.1 per cent higher than had been forecast during the Reit's initial public offering (IPO) last year.

The distribution will be paid on Nov 14. This is SPH Reit's first full financial year.

It posted an aggregate DPU of 5.99 cents for the period between July 24 last year and Aug 31 this year, which is 3.8 per cent higher than forecast during the IPO. The total amount distributable to unitholders for this period was $150.3 million.

This period encompasses the full financial year plus the 39 days preceding it, starting from the Reit's market debut.

The distribution represents a yield of 6 per cent based on SPH Reit's IPO price of 90 cents, and 5.1 per cent based on its closing price of $1.065 on Aug 29.

Paragon and The Clementi Mall were fully leased, with gross revenue in line with the forecast.

Net property income at Paragon exceeded the forecast by 3.1 per cent, while The Clementi Mall surpassed it by 0.8 per cent, due to "proactive management of expenses", SPH Reit Management said.

Overall, net property income for the fourth quarter stood at $38 million, 3.7 per cent higher than forecast. Between July 24 last year and Aug 31 this year, it was $165.9 million.

Paragon put in a consistently robust performance with rentals increasing 10.5 per cent for the period between July 24 last year and Aug 31 this year, SPH Reit Management added.

The Clementi Mall, which opened in 2011, completed its first lease renewal cycle this year and achieved a tenant retention rate of more than 90 per cent by net lettable area.

The average rental rates achieved for expiring leases between July 24 last year and Aug 31 this year was 5.5 per cent higher than the average rates of the preceding leases typically contracted three years ago, SPH Reit Management noted.

Singapore's near-term economic outlook is expected to remain modest amid uncertainties in the global environment and labour constraints, said chief executive Susan Leng.

"Barring any unforeseen circumstances, SPH Reit's two high-quality and well-positioned retail properties in prime locations are expected to remain resilient and turn in a steady performance," she added.

SPH Reit's portfolio was valued at $3.16 billion as at Aug 31, an increase of 3.4 per cent from the IPO valuation. The net asset value per unit has risen from 89 cents, based on the Reit's pro-forma financial position at its IPO, to 93 cents as at Aug 31.

SPH Reit yesterday closed half a cent lower at $1.06.

-By Yasmine Yahya

Lian Beng Q1 net profit surges 59% to S$11.97m

This comes from strong construction orders previously clinched as well as its JVs in property development

Source: Business Times / Companies & Markets

Q1 profit at Lian Beng Group soars 58.5%

Source: Straits Times / Money

HIGHER revenue from property development and its workers' dormitory business helped lift Lian Beng Group's results for the first quarter.

The construction and development firm's net profit for the three months to Aug 31 soared 58.5 per cent to $12 million year on year.

Revenue for the first quarter was up 10.8 per cent to $167.6 million.

Lian Beng attributed the improvement to profits recognised from joint ventures formed to develop the NEWest mixed-use project, KAP Residences, The Midtown and Midtown Residences.

The better results were in part thanks to lower taxes as a result of claims made under the Government's Productivity and Innovation Credit Scheme.

"The property development projects which we had increasingly participated in through joint ventures are bringing in the results now," said Mr Ong Pang Aik, executive chairman of Lian Beng.

The firm, which adopted new financial reporting standards from June 1, restated its results for the first quarter of last year. Based on the restated figures, its earnings per share came in at 2.26 cents for the three-month period ended Aug 31, up from 1.43 cents recorded a year earlier. Net asset value per share was 75.88 cents as at Aug 31, up from 74.49 cents as at May 31.

Lian Beng's order books stand at $1 billion, which is expected to give the firm a pipeline of activities until the end of its 2017 financial year.

The firm also has cash and cash equivalents of $150.9 million as at Aug 31. This was after $54.6 million had been ploughed into the purchase of an investment property in Leng Kee Road as well as a loan to a partner to purchase Prudential Tower from Keppel Reit.

Lian Beng last month agreed to sell the former Midlink Plaza site in Middle Road to Nanshan Group Singapore for $270 million. It also sold a 5,952 sq ft strata unit at Prudential Tower for $16.4 million.

The firm expects its construction business to continue to drive its revenue, while recognition of profits from development projects under construction should continue to contribute to its earnings.

Lian Beng's shares closed one cent lower at 63 cents yesterday.

-By Cheryl Ong

Global Economy & Global Real Estate

US$40 billion of property funds expiring in next two years

Liquidity from disposal of the 50 Asia-Pacific funds will be more than the market can absorb: CBRE

Source:Business Times / Real Estate

Among the 84 Asia-Pacific real estate funds expiring between 2013 and 2016 is a clutch of 50 funds worth US$40 billion in gross asset value and expected to terminate in 2015 and 2016. CBRE, which referred to this in a report on Monday titled The Great Wave of Fund Expiration, said a typical fund has a life of eight years and that 2013 marked eight years from the pre-financial-crisis boom in real-estate fund activity, at the time driven by a heady mix of liquidity, capital market fundamentals and expectation of high risk-adjusted returns.

-By Lee Meixian

KepLand's SM-KL project in Manila enters Phase 2

Source: Business Times / Real Estate

Keppel Land is moving into the second phase of its SM-KL project in the Philippines - a joint venture between Keppel Philippine Properties and Banco de Oro (BDO), the banking arm of the SM Group. This second phase comprises a 42-storey office building and an extension of an existing five-storey retail component called The Podium. This phase's construction cost comes up to S$336 million.

-By Joyce Hooi

Solid sales at new residential launch in Iskandar's Danga Bay

Source: Straits Times / Money

A NEW residential launch in Danga Bay has brought some cheer to the lacklustre Iskandar property market.

Aquaint Danga Residensi (ADR) sold nearly 80 per cent of the 358 units in two tower blocks during its launch at the weekend, a spokesman for the developer said yesterday.

The project comprises four high-rise towers on 1.6ha of a prime waterfront site. It is being developed by Para Impiana, a joint venture between Rapai Fokus - a wholly-owned subsidiary of Iskandar Waterfront Holdings - and two Singapore partners, Imperial Marina and Skyfront Holdings.

Some of the buyers are understood to be members of a property investment club, Aquaint Property, run by Imperial Marina's founder, Tan Yang Po, although their numbers could not be confirmed. Imperial Marina is itself a property investment firm.

Selling prices ranged from RM900 (S$351) to RM1,200 per sq ft (psf), with most units ranging from 550 to 1,500 sq ft. The project also has "sky bungalows" of up to 5,000 sq ft. The prices range from RM575,000 for a 550 sq ft one-bedder to RM4.3 million for the "sky bungalows".

The four towers will have 818 units in all, with shops as well. They are expected to be ready for occupation by late 2018.

ADR is next to Country Garden's and Greenland Group's projects at Danga Bay. Greenland is expected to launch its project in about two weeks, with units starting from 463 sq ft and at an average price of RM800 psf.

Country Garden has sold more than 6,000 units at an average of RM720 psf. Its units range from 400 sq ft studios to 3,000 sq ft penthouses.

"(ADR's launch performance) shows that the local market may still be able to accept selected products in their targeted segments," said CBRE Malaysia executive director Paul Khong.

"Hopefully, with some positive news in the local JB market, more investors and buyers will have confidence in Iskandar Malaysia," added Mr Khong.

But PA International Property Consultants executive director V. Sivadas was less sanguine.

"The market generally remains unchanged... (but) we do know that projects that are priced reasonably, whether strata or landed units, are able to sell well in Iskandar Malaysia. These would generally be units below RM500,000, or units within established neighbourhoods in Johor Baru, or both."

-By Rennie Whang

Construction to gain from 2015 rise in development spending

Source: Business Times / Government & Economy

-By Pauline Ng

Agile Property in talks with banks to extend loan

Chinese developer's shares fall as much as 31% after trading resumes; will consider other funding options

Source: Business Times / Real Estate

Agile - only the worst of the best

Source: Business Times / Real Estate

-By John Foley

Bargains for the rich as London's priciest homes lose value

Source: Business Times / Real Estate

$20 Billion Property Trusts in India Delayed by Tax Rules

Source: Bloomberg / News

The Indian government has announced rules for setting up real estate investment trusts, vehicles that may spur $20 billion of property development. None of the money will be spent unless the country’s tax code is revised.

“REITs cannot take off in India until changes are made in the tax regime,” Anshuman Magazine, chairman of CBRE South Asia Pvt., said in a telephone interview from New Delhi. “Until these issues are resolved, there isn’t much incentive for developers to take the trust route.”

REITs will provide a new source of funds to debt-laden Indian developers to construct malls and office buildings, bolstering Prime Minister Narendra Modi’s efforts to revive Asia’s No.3 economy. Tax rules that make it unattractive to sell a security in less than three years and concerns about levies to be paid by builders may prolong the wait for greater transparency in a sector where asset pricing often is opaque.

The Securities and Exchange Board of India, the country’s market regulator, released rules for establishing REITs Sept. 26, giving investors the ability to participate in the country’s property market without investing directly. The trusts will have to own assets valued at least 5 billion rupees ($82 million) and investors must put in a minimum of 200,000 rupees, the regulator said.

SEBI doesn’t oversee India’s tax regulations, though, and for now those remain a deterrent to creating or investing in REITs, Magazine said.

Tax Hurdles

The tax bill for starting a REIT would be higher than for raising money through an initial share sale, Bhairav Dalal, associate director for tax and regulatory practice at PricewaterhouseCoopers in Mumbai, said in an e-mail. “Until a finance bill is passed to change certain rules, the tax cost might impact the returns offered to investors.”

Investors are disadvantaged by REITs because under existing rules shares in them must be held for three years before they are exempt from capital gains tax, unlike investments in “listed securities,” which gain the exemption after one year, Dalal said. There is also a lack of clarity on whether the developer setting up the trust would have to pay the so-called minimum alternative tax.

SEBI is in discussions with the finance ministry to resolve tax issues that may be hindering the listing of REITs, SEBI Chairman U.K. Sinha said in Mumbai on Oct. 8. He didn’t give a timeframe for when the code will be changed.

March 2016

Changes to the tax regulations aren’t likely to be announced before the presentation of the next Indian government budget in February, CBRE’s Magazine said.

The first REITs aren’t likely to be listed until late in the Indian fiscal year that ends in March 2016, said Anubhav Gupta, a Mumbai-based real estate analyst at Kim Eng Securities Pvt.

The property trusts pool investor money to buy real estate such as shopping malls, office buildings and rental housing. REIT-funded assets may reach $20 billion by 2020, according to an estimate from property-broker Cushman & Wakefield, of which as much as $12 billion could be raised in the first three to five years.

India has plenty of assets ready to be packaged into trusts. Asia’s third-largest economy has been in the top five global office markets for at least seven years, with average annual net demand of more than 30 million square feet (2.8 million square meters), according to Cushman & Wakefield.

Developer Debts

DLF Ltd. (DLFU), India’s largest developer by value with about 28 million square feet (2.6 million square meters) of operational rental assets; Prestige Estates Projects Ltd., a Bengaluru-based developer; Phoenix Mills Ltd. (PHNX), a Mumbai-based mall operator and Oberoi Realty Ltd. are among developers that will benefit listing REITs, Gupta said by phone on Oct. 7.

DLF yesterday was barred from raising funds in the market for three years by SEBI for failing to disclose information during its initial public offering.

The combined debt of the six largest Indian developers climbed to a record 394 billion rupees in the 12 months through March 31, more than double the 158.8 billion rupees in 2007, according to data compiled by broker IIFL Ltd. India has the highest borrowing costs among major Asian economies.

The S&P BSE India Realty Index lost one percent this year. DLF has lost 37 percent while Prestige has jumped 38 percent and Phoenix Mills 59 percent. The benchmark S&P BSE Sensex index has climbed 24.5 percent.

Foreign institutional investors such as Blackstone Group LP and Brookfield Asset Management Inc. (BAM), have been accumulating Indian rental assets in part with the aim of one day creating REITs, according to a July 10 report from HDFC Securities. Blackstone is the largest private-equity landlord of office assets in India, with about 22 million square feet. Brookfield has about 15 million square feet across the country.

“REITs are a game changer that can bring about more liquidity and transparency into the Indian realty market,” Magazine said. “Domestic and foreign stakeholders have been preparing for this instrument. The question is how long will government take to make amendments to make this product a reality.”

-By Anto Antony

Bargains for Rich as Costliest London Homes Get Cheaper

Source: Bloomberg / Luxury

Britain’s most expensive homes got cheaper this year as more central London mansions and super-prime apartments sported “for sale” signs.

The average value of homes sold for at least 10 million pounds ($16 million) in London’s most expensive neighborhoods was 2,757 pounds a square foot in the first eight months, according to broker Huntly Hooper Ltd. That was 7.4 percent lower than the record of 2,978 pounds set in 2013. Prices for other homes in the area known as prime central London increased.

“Whilst there are record sales being achieved, buyers should not be swayed by headlines suggesting there is a boom in average pricing,” Huntly Hooper director Oliver Hooper said in the statement.

More homes for sale in the Notting Hill and Holland Park neighborhoods have climbed into the top tier of London pricing, giving buyers more choice. Prices for super-prime properties have increased by at least 13 percentage points less than every other part of the prime central London market since 2009, Huntly Hooper said.

Apartments in the top category fared the worst, with a 9 percent decline to an average of 3,565 pounds a square foot (38,370 pounds a square meter) compared with the average value last year. Super-prime house prices dropped 6.3 percent to 2,458 pounds a square foot. There were 66 transactions this year through August compared with 92 for all of last year.

Huntly Hooper, based in the Knightsbridge neighborhood, defines prime central London as 11 postal districts that include Mayfair, Chelsea and Holland Park and Knightsbridge itself.

More Choice

The number of central-London homes offered for sale for more than 10 million pounds increased by 165 percent from 2009 to 2013, according to the report.

Possible tax increases on expensive homes, such as the Labour Party’s planned “mansion tax,” haven’t diminished demand in the market based on the number of sales, the report said. The opposition party plans to raise 1.2 billion pounds from a tax on homes valued at more than 2 million pounds if it gets into power after next year’s national election.

The mansion tax may still have an impact on the central London housing market, Charles Puxley, a Chelsea-based broker at Jackson-Stops & Staff said in an Oct. 9 Royal Institution of Chartered Surveyors residential market survey.

Fewer new homes than normal were offered for sale in September “and there is notably very little activity at just over the 2-million-pound mark,” he said. “Mansion tax seems to be a real worry; it will decimate London prices.”

Average home values in all of London rose about 0.1 percent in the three months through September from the previous quarter, broker Douglas & Gordon Ltd. said in a report today.

“Persuading a buyer to spend rather than just look is proving more difficult than it has for at least five years,” for homes costing more than two million pounds, sales director George Franks said in the report.

-By Neil Callanan