Real News‎ > ‎2014‎ > ‎October 2014‎ > ‎

29th October 2014

Top Stories

Productivity must rise in long term: PM

Ways to boost productivity include educating the population well, providing good training for workers and bringing in sunrise businesses

Source: Business Times / Government & Economy

While Singapore wants to help its people earn more, wages cannot go up indefinitely and it is the country's productivity that must improve over the longer term. Speaking at a dialogue on Tuesday, Prime Minister Lee Hsien Loong cited several ways of boosting productivity, among them educating the population well and providing good training for workers such that they continue to pick up skills that are relevant to their jobs.

-By Lee U-wen

Wages rise, but growth in productivity stalls

Locals snap up most job vacancies as labour costs climb amid tight market

Source: Straits Times / Top of The News

THE local share of total employment gains in the first half of 2014 (73%) was higher than in the full-year of 2011 (31%) .

Nearly three out of every four jobs created in the first half of the year went to locals, said the Monetary Authority of Singapore (MAS) in its latest macroeconomic review released yesterday.

It also said the tight labour market will continue to drive up wages and employment for Singaporeans, although it also means that firms are increasingly passing on higher costs to consumers.

The share of new jobs filled by locals shot up to 73 per cent in the first six months of the year - far higher than the 31 per cent in the full year of 2011.

This follows multiple rounds of foreign labour tightening measures implemented as part of ongoing restructuring efforts, which aim to raise labour productivity.

But four years into economic restructuring, progress remains slow.

Labour productivity inched up just 0.2 per cent a year from 2010 to last year.

Productivity fell 0.3 per cent in the first half of this year over the same period last year, dragged down by the weak performance in the service and construction sectors, the MAS said. In the same period, resident wage growth came in at 3 per cent "with no cost offset from productivity".

Higher wages led to unit labour costs rising 3.1 per cent from January to June, compared with 1.2 per cent from July to December last year.

Productivity growth will be constrained in the short term, given the lack of a strong cyclical rebound in the global economy, the MAS said.

"It will also take time for firms to reduce their reliance on workers, especially in construction and services," it added.

This means labour costs will continue rising in the near term.

Businesses in the food-related sectors and labour-intensive services, where demand remains firm and labour constraints are most binding, are more likely to pass on the higher costs to consumers.

Meanwhile, competition and tepid global demand have kept a lid on price increases in export- dependent sectors.

The MAS said it expects core inflation - a measure of the rise in everyday out-of-pocket costs - to remain elevated into the next year, even as overall inflation numbers remain relatively subdued.

Core inflation averaged slightly over 2 per cent in the first three quarters of this year.

Overall inflation is set to be 1 per cent to 1.5 per cent this year, while core inflation is forecast at 2 per cent to 2.5 per cent.

"Since the balance of risks remains slightly tilted towards higher core inflation, the prevailing monetary policy stance continues to be optimal in ensuring domestic price stability over the medium term," the MAS said in its review.

Earlier this month, the central bank said it will stick with its policy for a relatively strong currency.

Singapore conducts monetary policy by managing its exchange rate against a basket of the currencies of its major trading partners.

A stronger Singdollar helps to dampen inflation by making the prices of imported goods lower.

-By Chia Yan Min

Tharman: Home prices correction not there yet

Source: Business Times / Real Estate

Property prices in Singapore have not seen a "meaningful correction" yet, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam on Tuesday. "We have seen some correction in both private property prices and HDB resale prices over the last 4-5 quarters, but there is some distance to go in achieving a meaningful correction after the sharp run-up in prices in recent years," said Mr Tharman, who is also chairman of the Monetary Authority of Singapore (MAS), at the Credit Counselling Singapore's 10th anniversary luncheon.

-By Jamie Lee

Tharman signals cooling measures not likely to be relaxed soon

TODAY reports: There is “some distance to go in achieving a meaningful correction”, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam says.

Source: Channel News Asia / Singapore

SINGAPORE: Signalling that the Government is not intending to relax property cooling measures any time soon, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said on Tuesday (Oct 28) there is “some distance to go in achieving a meaningful correction”.

“If we do not get a meaningful reversal after each upswing, property prices will run ahead of the growth of household incomes over the long term, which we should avoid,” said Mr Tharman, who was speaking at Credit Counselling Singapore’s 10th anniversary lunch.

He noted that there has been some correction in both private property prices and Housing and Development Board resale prices over the last four to five quarters, following the sharp run-up in recent years.

“We can never get rid of cycles in the property market, with the upswings in some years being followed by corrections. Our cooling measures cannot eliminate the cycle, but they aim to temper it,” he said. “What this means is avoiding a bubble during the upswing and allowing for a correction in prices subsequently.”

The Government had introduced several rounds of cooling measures, including the Total Debt Servicing Ratio framework and tightened loan-to-value ratios for housing loans.

Last week, National Development Minister Khaw Boon Wan said it is still not the right time to wind down cooling measures and that there is still room for prices to moderate.


Tharman signals cooling measures not likely to be relaxed soon

Source: Today Online / Singapore

Signalling that the Government is not intending to relax property cooling measures any time soon, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said yesterday there is “some distance to go in achieving a meaningful correction”.

“If we do not get a meaningful reversal after each upswing, property prices will run ahead of the growth of household incomes over the long term, which we should avoid,” said Mr Tharman, who was speaking at Credit Counselling Singapore’s 10th anniversary lunch.

He noted that there has been some correction in both private property prices and Housing and Development Board resale prices over the last four to five quarters, following the sharp run-up in recent years.

“We can never get rid of cycles in the property market, with the upswings in some years being followed by corrections. Our cooling measures cannot eliminate the cycle, but they aim to temper it,” he said. “What this means is avoiding a bubble during the upswing and allowing for a correction in prices subsequently.”

The Government had introduced several rounds of cooling measures, including the Total Debt Servicing Ratio framework and tightened loan-to-value ratios for housing loans.

Mr Tharman said the share of borrowers taking multiple housing loans has fallen from about 30 per cent of new housing loans in 2011 to about 13 per cent as of the second quarter this year. The average tenure of new private housing loans has also shortened to about 25 years, compared with a peak of 30 years in 2012.

Last week, National Development Minister Khaw Boon Wan said it is still not the right time to wind down cooling measures and that there is still room for prices to moderate. 

-By Siau Ming En

Singapore Economy

MAS's sobering take on S'pore economy

GDP and productivity growth to remain constrained; core inflation to stay above historical average

Source: Business Times / Government & Economy

THE Monetary Authority of Singapore (MAS) has presented a sobering prognosis of the Singapore economy - GDP expansion will continue to be muted, productivity growth will remain constrained, and core inflation will stay above its historical average on the back of labour cost pressures. The manufacturing sector, too, continues to face difficulties from land and labour constraints, although one positive is that companies have been moving up the value creation chain successfully.

In reiterating its 2014 GDP growth forecast of 2.5-3.5 per cent in its twice-yearly Macroeconomic Review on Tuesday, the central bank also sought to put it in perspective: "This should be seen in the context of the domestic economy settling down to a slower, but more sustainable growth path. With Singapore's relatively high real GDP per capita of US$61,000 (S$77,723) and labour productivity of US$99,700 on a purchasing power parity-adjusted basis (as at 2013), the moderation in the medium-term growth rate is in line with global experience."

In response, UOB economist Francis Tan said: "I see this as the MAS trying to temper growth expectations, to remind people to be more realistic. An abundance of labour is no longer part of the equation, so we won't be seeing growth of 6 or 7 per cent any longer."

Looking ahead, the MAS said that a "broadly similar" pace of growth is expected in 2015, and that the Singapore economy is "on track for moderate growth" despite some external and domestic headwinds. It qualified, however, that the performance across sectors will be uneven. "Sectors that cater to final demand in the US will fare relatively favourably, while those that are tied to the eurozone and China could be weighed down by the sluggish performance in these economies. Concomitantly, some of these external-facing industries will continue to grapple with resource constraints and falling product prices.

"Meanwhile, domestic-oriented sectors will remain resilient on the back of firm underlying demand, although those segments that are more reliant on labour input, or face greater competition, could experience profit margin pressure," said the central bank.

Still, beyond 2015, Mizuho economist Vishnu Varathan isn't ruling out a growth performance better than 2.5-3.5 per cent: "Apart from the external crosswinds highlighted by the MAS, we also have a domestic economy still undergoing restructuring, which is a major change. So you can't really decide how you're going to look when you're still in the changing room ... As we innovate with our regional services, we could very well see a significantly higher pace of growth in the next few years."

As for the manufacturing sector, the MAS noted the industry's "continuous evolution", with the most recent phase of change marking a shift from mass production, to higher-margin niche production and services. It is particularly optimistic about the prospects of the electronics and information & communication sectors, expecting "a healthy pipeline of investments" to boost output in the near to medium term.

On the productivity front, overall labour productivity fell by 0.3 per cent year-on-year in the first half of 2014, after rising by 0.8 per cent in the second half of 2013, due to the weak performances of the services and construction sectors.

As such, Singapore's unit labour cost (ULC) rose more significantly by 3.1 per cent in H12014, compared to 1.2 per cent in H22013.

Said the MAS: "Productivity growth will be constrained in the short term, given the lack of a strong cyclical rebound. It will also take time for firms to reduce their reliance on workers, especially in construction and services. Accordingly, ULC is expected to rise moderately in the near term, even with government subsidies, such as the Wage Credit Scheme."

The MAS added that strong labour demand will continue to butt up against labour supply constraints, keeping wage growth firm; the economy-wide resident wage growth is expected to be around its 10-year historical average of 3.7 per cent in 2014 and 2015. Therefore, domestic cost pressures - mainly stemming from the tight labour market - will remain the "primary source" of inflation.

Summing up its outlook on the Singapore economy, the central bank said: "Resource constraints amid intermittent external headwinds will temper growth, but as firms leverage more intensively on capital and skills, the transitional costs during the adjustment phase will ebb. Higher productivity and more capital-intensive modes of production will provide a firmer basis for Singapore's future growth prospects."

-By Kelly Tay

Uneven road ahead for economy in transition

Tight labour market and slumping demand weigh on some sectors

Source: Straits Times / Top of The News

IN A sobering appraisal of the state of the economy, Singapore's central bank has warned that growth could remain muted over the next few quarters and some industries could be hit by rising wage costs, which they may not be able to pass on to consumers.

The six-monthly economic review released yesterday suggested uneven expansion across different sectors as the economy adjusts to the soft global outlook and local labour constraints.

A period of "adjustment" lies ahead and firms will have to raise their productivity - which actually fell 0.3 per cent, year on year, in the first six months of the year.

The Monetary Authority of Singapore (MAS) noted that the effects of the global financial crisis have not been shaken off. This leaves the world economy relying largely on the United States to support growth.

Europe, Japan and China continue to grapple with structural reforms - a situation likely to continue well into the next year, the MAS said.

This means industries here catering to final demand in the US are likely to perform better than those tied to the euro zone and China.

Singapore's manufacturing sector, which makes up a fifth of the economy, gained modestly from an uptick in the US economy in recent months.

Industries that depend largely on the domestic economy are expected to "remain broadly resilient".

But the MAS warned that "businesses which are more reliant on labour inputs or face greater competition could experience profit margin pressures". For example, small retailers and maid agencies have been forced to lower prices despite higher costs.

The construction sector, which is struggling with higher foreign worker levies, a slowing property market and delays in projects such as the Ng Teng Fong General Hospital, has contracted for two consecutive quarters.

The tight labour market will continue to drive up wages and lead to higher prices in some segments of the economy, as businesses pass on costs to consumers.

The economy is expected to expand by between 2.5 per cent and 3.5 per cent this year, and at a broadly similar pace next year.

"This should be seen in the context of the domestic economy settling down to a slower, but more sustainable growth path," the MAS said yesterday, adding that expansion should "proceed at a steady clip alongside the recovery in the global economy".

It also highlighted structural transitions under way here, noting that electronics manufacturers, in particular, are shifting towards higher-margin production and moving up the value chain. "Higher productivity and more capital-intensive production will provide a firmer basis for Singapore's future growth prospects," it said.

-By Chia Yan Min

Singapore economy to grow at ‘moderate pace’: MAS

Source: Channel News Asia / Singapore

SINGAPORE: The Republic’s economy is expected to grow at a moderate pace over the next few quarters, according to the Monetary Authority of Singapore (MAS).

In its half-yearly macroeconomic review released on Tuesday (Oct 28), MAS said that Singapore’s GDP growth forecast would come in at between 2.5 per cent and 3.5 per cent this year. A broadly similar pace is expected for 2015, it added.

"This should be seen in the context of the domestic economy settling down to a slower, but more sustainable growth path," it said.

The MAS report highlighted that some external-oriented sectors of the economy should benefit from the uplift in the US economy. Still, some activity in the sector may be subject to sluggish demand in the eurozone and China.

MAS also pointed out that the manufacturing sector is expected to move up the value chain towards high-margin activities such as research and development (R&D) as well as services. For instance, there has been an increase in the number of fabless semiconductor firms based in Singapore looking to expand their R&D and supply chain management operations, it said.

The share of total electronics output accounted for by these fabless semiconductor firms more than doubled from 11 per cent to 23 per cent between 2010 and 2012.

It added that the services content of Singapore's production output has also been on the rise.


On the labour market, the central bank said the tight labour supply and strong demand for workers have continued to put pressure on costs at home. It expects the labour market to remain tight in the manufacturing or non-tradable sectors. 

Going forward, continued growth of industries such as financial services, information and communications, and professional services, will create job opportunities in the non-manufacturing sectors.

"Singapore may well follow the experience of the advanced economies, where the relevance of skills, rather than academic qualifications, determines the employability and wages of workers," MAS said.

On inflation, MAS said CPI-All Items inflation could ease to below 0.5 per cent in the fourth quarter of this year, due to the high base a year ago. Looking forward, overall inflation is expected to come in at about 0.5 to 1.5 per cent in 2015, compared with 1 to 1.5 per cent in 2014.

- CNA/cy

Labour market remains chief source of inflation

But impact on consumer prices uneven across sectors: MAS

Source: Business Times / Government & Economy

The chief source of Singapore's inflation will remain the tight labour market and how it is pushing wages up, but not all sectors will be able to hike prices. Businesses providing education, healthcare and meals are more likely to pass costs on to consumers, while retailers facing intense competition will find it harder to raise prices, according to the latest Macroeconomic Review published twice a year by Singapore's central bank.

-By Teh Shi Ning

Singapore Real Estate

URA release of Paya Lebar Central site, with conditions, draws mixed views

Wide range in forecasts: 3 to 8 bids expected with top price anywhere from S$700 to S$1,000 psf ppr

Source: Business Times / Real Estate

The Urban Redevelopment Authority has finally released a much anticipated, big-ticket mixed development site in Paya Lebar Central. Nearly 55 per cent of the project's maximum gross floor area (GFA) of 164,794 square metres (about 1.77 million square feet) has to be for office use. The rest of the space can be for additional office, retail, entertainment, F&B and residential uses.

-By Kalpana Rashiwala

Bids for Paya Lebar site likely to top $1b

3.9ha plot's transport links a draw but developers will need deep pockets to bid

Source: Straits Times / Money

A LARGE mixed-use site that can play a key role in plans to develop Paya Lebar into a major commercial hub went on sale for the second time yesterday, with bids expected to go well over $1 billion.

The 3.9ha plot's connectivity to a major transport hub and its proximity to the city - coupled with government moves to decentralise businesses - could entice developers but it will require one with deep pockets given its size and construction challenges.

The 99-year leasehold site, with a potential gross floor area (GFA) of 1.78 million sq ft, is on the confirmed list of the Government Land Sales programme. It first went up for tender in July 2011 but was not sold after the UOL Group offered a lone bid of $529.5 million - a price deemed "too low". At that time, the site was a smaller 2.07ha.


Experts predict the top bid for the parcel now could fall between $700 and $850 per sq ft per plot ratio, or $1.24 billion to $1.51 billion, with five to 10 players throwing their hats into the ring.

A new development on the larger plot will have up to 969,000 sq ft of GFA set aside for offices, a maximum of 419,800 sq ft for retail with an additional 10,800 sq ft for an outdoor "public plaza" featuring a mall. About 440 residential units or serviced apartments can also be built as part of the development. It will have transport links to the Paya Lebar interchange and MRT station, where the Circle and East-West lines meet.

But the site comprises two plots separated by Sims Avenue and developers will have to bear significant costs for work to link the plots underground, noted Ms Ong Choon Fah, chief operating officer of DTZ. Construction costs from building above the Geylang Canal would also be sizeable.

The complexity of construction means the larger developers are likely to throw their hats into the ring, experts said.

The UOL Group is expected to join the fray again, having developed the nearby One KM mall in Tanjong Katong Road as well.

The new development will add to the 12ha of land available for development in the Paya Lebar Central precinct, which could yield up to 5.38 million sq ft of commercial space, said the Urban Redevelopment Authority.

Mr Chris Archibold, head of markets at JLL, said the quantum of office space that will be made available through the new site will have enough critical mass to change the dynamics in the area.

The site's layout makes it tougher for strata subdivision of office units but healthy leasing demand is expected from bigger firms keen on larger floor plates and eager to locate their operations out of the city, added Mr Ong Kah Seng, director of R'ST Research.

The tender closes on March 31.

-By Cheryl Ong

URA releases second land parcel in Paya Lebar for sale by tender

URA says the tender period for the land parcel in Paya Lebar will last for about 22 weeks until Mar 31 at 12pm next year.

Source: Channel News Asia / Business

SINGAPORE: The Urban Redevelopment Authority (URA) on Tuesday (Oct 28) announced in a media release that a second land parcel in Paya Lebar Central has been launched for sale by public tender. In Jan 2011, the first sale site was launched for tender for commercial use.

With a 99-year lease period, URA said the 39,000sqm site located next to Paya Lebar Interchange MRT station will be an accessible location for businesses that prefer to be located outside the Central Business District (CBD). It is envisioned to be a mixed-use development comprising office, retail and residential uses, but hotel use is not allowed, said URA.

Other new developments in the area include commercial property Paya Lebar Square, shopping mall One KM and the Workforce Development Agency’s new Lifelong Learning Institute.

CBRE Research Head in Southeast Asia Desmond Sim commented on the release: “It is a highly anticipated plot as it is yet another step in the Government’s plan to provide a viable alternative to the CBD commercial market, helping occupiers manage costs and bring jobs closer to homes."

"Decentralisation has been relatively successful in Singapore, case in point where The Metropolis has been able to attract multinational corporates to establish their regional headquarters in Buona Vista," added Mr Sim. "In terms of attributes, the Paya Lebar site is quite similar to Buona Vista and it is expected to draw a high level of interest from developers." 

According to URA, the tender period for the land parcel will last for about 22 weeks until Mar 31 at 12pm next year. Selection of the successful tenderer will be based on the tendered land price only, it added.

- CNA/xk

Private home prices down 0.7% in Q3

Source: Today Online / Business

SINGAPORE — Prices of private homes in the Republic fell for a fourth consecutive quarter between July and September, but the pace of decline was more moderate, in what analysts said signals a market that is stabilising.

Still, they cautioned that the market has not made a complete U-turn and prices could soften further in the coming months.

In the third quarter this year, overall prices of private residential properties were down by 0.7 per cent, quicker than the 0.6 per cent in the flash estimates three weeks ago but slower than the 1 per cent fall in the March to June quarter, data by the Urban Redevelopment Authority (URA) showed yesterday.

Property analysts said the softer fall was underpinned by several “higher-priced” new launches, such as Highline Residences at Kim Tian Road, City Gate at Beach Road and Bijou at Jalan Mat Jambol, where units at the developments were sold at more than S$1,800 per square foot.

“There weren’t that many launches in (the third quarter), but the prices of a few launches were on the higher side, so that gave some support to the price index. The market is approaching a soft landing, but I don’t think this is the bottom yet,” said Mr Nicholas Mak, executive director at SLP International Property Consultants.

Condominium prices declined across all geographical segments, with the city centre, or Core Central Region (CCR), recording the steepest fall of 0.8 per cent compared with 1.5 per cent previously. Prices in the city fringes, or the Rest of Central Region (RCR), dipped 0.4 per cent, similar to the previous quarter, while suburban or Outside Central Region (OCR) prices slipped 0.3 per cent from 0.9 per cent.

In the landed segment, prices were 1.8 per cent lower, compared with the 1.7 per cent decrease in the previous quarter. In the third quarter, developers launched 1,294 private homes and sold 1,531 units, both down from the 2,843 units launched and 2,665 units sold in the second quarter. Resale transactions also dropped to 1,288 sales from 1,389 transactions.

“Economic fundamentals are sound and we are not in any crisis mode. As sellers are under no pressure to cut prices significantly, the (market) continues to see a mismatch of expectations and deals take longer to close,” said Mr Eugene Lim, key executive officer of ERA.

Knight Frank’s director of consultancy and research Alice Tan said private home prices could see a slower decline in the last three months of the year, as developers are less likely to moderate prices further as they try to maintain profit margin and manage development cost.

Mr Mak agreed, adding that as several sites sold under the Government Land Sales programme in the second half of this year are in better locations, the launches would be able to hold their prices, thus limiting the softening of the URA index.

“(But) I expect the price decline to continue for another year because there’s still a lot of supply in the pipeline and demand is still restricted by the cooling measures and financing curbs,” he said.

The URA said that as at the end of the third quarter, there were 74,496 uncompleted private homes in the pipeline, with 28,120 of them unsold.

-By Lee Yen Nee

Dip in resale prices of private homes

SRPI figures show 0.7% drop in September, with more falls expected

Source: Straits Times / Money

RESALE prices of private homes dipped last month, dashing hopes that there would be a buyer rebound from the Hungry Ghost month when sales went on hold.

Apartment prices fell 0.7 per cent overall in September from August, according to the Singapore Residential Price Index (SRPI) yesterday. That decline reversed the revised 0.2 per cent increase in August over July and points to further falls ahead.

The index compiled by the National University of Singapore tracks a basket of completed homes across the island.

September's reversal confirms analyst forecasts last Friday that home prices have yet to bottom out in the wake of tough mortgage caps and levies on foreign buyers.

They point to an impasse between buyers and sellers as home owners have holding power and are in no hurry to sell. This is likely to result in further declines in prices every month as fewer homes will be sold.

"What causes prices to go up is volume," said Mr Eugene Lim, key executive officer at ERA Realty.

"The SRPI is based on resale transactions, which have been low, and it's generally negative because there are still mismatched expectations between sellers and buyers. In the first place, there are not a lot of transactions in the whole market."

Just 1,288 units changed hands on the resale market in the three months to Sept 30, accounting for 43.6 per cent of all transactions, according to the Urban Redevelopment Authority last Friday. In the same period last year, 1,392 resale units were sold.

The steady decline in activity can be seen in stark terms when considering that there were 3,459 resale transactions in the fourth quarter of 2012, just before the tough cooling measures were imposed in January last year.

Shoebox units - apartments of up to 506 sq ft - were the only winners in September with a price gain of 0.4 per cent following a slip of 0.1 per cent in August.

The mortgage cap, which limits a borrower's monthly debt to 60 per cent of gross monthly income, has put larger units out of reach for many buyers - hence the switch to smaller flats.

City area prices slipped 0.9 per cent in September from the preceding month after remaining unchanged in August.

Suburban apartments posted a dip of 0.6 per cent after eking out a 0.3 per cent gain in August over July.

Resale homes in the city centre have been hit by the cooling measures, including extra taxes on foreigners, while the supply of unsold luxury homes has increased and developers are offering discounts at new projects.

"Even though wealthy buyers may be able to afford the levies... or do not require a loan, some of them do not like the notion of being restricted in buying," said Mr Ong Kah Seng, director of R'ST Research.

Prices of resale homes are expected to dip by 8 to 10 per cent over the next year on the back of sagging demand, said property consultants, as the Government has signalled that the cooling measures and lending rules are unlikely to be lifted any time soon.

-By Cheryl Ong

Resale prices of private homes slip in September: SRPI

Overall prices fell 0.7 per cent on-month in September, with prices of homes in the central region leading the decline, according to Singapore Residential Price Index (SRPI) estimates.

Source: Channel News Asia / Singapore

SINGAPORE: Resale prices of private homes slid in September according to Singapore Residential Price Index (SRPI) estimates, which were released on Tuesday (Oct 28).

The SRPI, compiled by the National University of Singapore's Institute of Real Estate Studies, showed overall prices fell 0.7 per cent in September from the previous month. In August, prices rose 0.2 per cent from a month earlier.

Prices of homes in the central region, excluding small units, led the decline with a 0.9 per cent fall. Homes in the non-central region, excluding small units, fell 0.6 per cent in September from August.

Prices of small units, which have a floor area of 506sqf or below, bucked the trend, rising marginally by 0.4 per cent on-month.

- CNA/cy

2 confirmed list sites, 1 reserve list site open for tender

Source: Business Times / Real Estate

JTC on Tuesday launched for tender two confirmed list sites at Tuas South Street 9 (Plot 52) and Tanjong Penjuru, as well as a reserve list site at Tuas South Street 7 (Plot 53). The confirmed list sites are zoned for business-2 development, or heavier industrial use. The 0.8-ha site at Tuas South Street 9 (Plot 52) has a 20-year seven-month tenure with a maximum gross plot ratio of 1.0. The 1.6-ha site at Tanjong Penjuru has a tenure of 20 years and a maximum gross plot ratio of 2.5.

-By Lee Meixian

62 Lim Chu Kang farms affected by change in land use

The leases or tenancies of these farms, which expire between 2014 and 2021, will either be extended till 2017 or be allowed to run their course. No compensation will be given, said AVA. 

Source: Channel News Asia / Singapore

SINGAPORE: 62 farms in the Lim Chu Kang area will be affected by land use changes, the Agri-Food and Veterinary Authority of Singapore (AVA) confirmed on Tuesday (Oct 28).

The western part of Lim Chu Kang will be needed for military purposes. This tract of land will replace the current training grounds that Mindef is giving up for the development of Tengah New Town, according to an AVA statement. 

The affected farms in this area, whose leases or tenancies expire between 2014 and 2021, were informed in September of these developments. The farms whose leases or tenancies expire between 2014 to early 2017 will be given an extension till June 2017. Those whose leases expire after June 2017 can remain till the end of their current leases, said the AVA. Those who wish to continue their farming businesses can then bid for new sites at Lim Chu Kang and Sungei Tengah from next year.

“Given our limited land for farming, the new sites will have a smaller land area compared to the existing sites. This is why we are helping our farmers to raise their productivity and intensify the use of limited farmland through the adoption of technology and automation,” said AVA.

Earlier this month, the authority launched a S$63 million Agriculture Productivity Fund to help the famers invest in new and high-tech farming equipment and systems.  

But the affected farms will not receive compensation, "as the leases would have run their course till expiry", said AVA. "We have communicated clearly and as early as we could to the affected farms so that they can make alternative plans ahead of the expiry of their leases.” AVA will also help facilitate the farms in applying for the final extension to Jun 30, 2017.

Farmers we spoke to said they were concerned about whether they would be able to obtain new sites, as competition for these tenders is expected to be fierce. The Government has also increased the percentage of land use for production purposes from 70 per cent to 90 per cent for production purposes. Farmers we spoke to said they had been told that farms at these new locations must meet production quotas, or risk losing the site.

Mr John Hay, Managing Director of Hay Dairies goat farm said if the farm was expected to meet production quotas with the help of high-tech equipment, it would have to invest at least S$4 million to S$5 million.

Those at Jurong Frog Farm also felt that the strict restrictions of land use could limit the exposure of the younger generation to the industry. Said the farm’s manager Ms Chelsea Wan: “It means that we have very little flexibility on how we can try to attract local tourism into this area."

- CNA/xy

Surbana signs MOU to work on Dalian projects

Source: Business Times / Real Estate

Surbana International Consultants hopes to work with the Dalian New Airport Coastal Business District on various projects for a new 140-sq-km airport coastal business district to be built in the northern area of Dalian city, Liaoning province. Both sides signed a memorandum of understanding (MOU) at the 8th Singapore-Liaoning Economic and Trade Council (SLETC) meeting here on Tuesday.

-By Lee Meixian

Companies' Brief

CDL Hospitality's DPU down slightly in Q3

Distribution per stapled security is 2.61 Singapore cents, down from 2.64 Singapore cents in Q3 '13

Source: Business Times / Companies & Markets

Mainboard-listed CDL Hospitality Trusts (CDLHT) posted a slightly lower income available for distribution per stapled security - after deducting income retained for working capital - of 2.61 Singapore cents in the third quarter of 2014, down from 2.64 Singapore cents in the same period last year.

-By Claire Huang

FCL to seek shareholders' approval at Nov 12 EGM

Source: Business Times / Companies & Markets

Frasers Centrepoint Limited (FCL) on Tuesday said it will hold an extraordinary general meeting on Nov 12 to seek shareholders' approval on two counts. The first is to obtain their retroactive approval of the company's acquisition of Australand Property Group. The second is to get approval for an interested person transaction.

-By Claire Huang

Wing Tai Q1 profit dips 1% to S$24.2m

Source: Business Times / Companies & Markets

Wing Tai Holdings on Tuesday reported a 28 per cent drop in revenue to S$160.1 million for its first quarter ended Sept 30, 2014. Consequently, net profit dipped one per cent to S$24.2 million, while earnings per share fell to 3.07 Singapore cents, from 3.12 Singapore cents a year ago.

-By Lee Meixian

Wing Tai Holdings

Source: Straits Times / Money

LUXURY developer Wing Tai Holdings' first-quarter net profit eased by 1 per cent to $24.2 million. This was despite revenue for the three months to Sept 30 falling by 28 per cent to $160.1 million.

Progressive sales recognised from The Tembusu, the additional units sold in Helios Residences in Singapore as well as The Lakeview in China contributed to revenue during the quarter.

Group operating profit decreased by 14 per cent to $37.2 million, largely due to the lower contributions from development properties.

Wing Tai posted a gain of $21.2 million arising from the sale of shares in a property subsidiary in Indonesia. Its share of profits from associated and joint venture companies jumped by 69 per cent to $13.4 million, mainly due to the higher share of operating profit from Wing Tai Properties in Hong Kong.

Earnings per share slipped to 3.07 cents from 3.12 cents previously while net asset value per share climbed to $3.85 compared to $3.78 as at Dec 31.

CapitaRetail China Trust

Source: Business Times / Companies & Markets

CRCT Q3 2014 distribution per unit (DPU) grew by 10.4 per cent year on year to 2.35 Singapore cents, on the back of a 30.2 per cent jump in gross revenue to S$51.4 million. Robust 22.6 per cent rental reversion in Q3, driven largely by CapitaMall Wangjing and CapitaMall Grand Canyon. But we expect near-term pressure on footfall, tenants' sales and occupancy rates at CapitalMall Mingzhongleyuan.

CDL Hospitality Trusts

Source: Business Times / Money

CDL Hospitality Trusts said its income available for distribution per stapled security dipped to 2.61 cents for the third quarter, from 2.64 cents in the same period last year.

Gross revenue was $40.1 million for the July to September quarter, up from $35.9 million last year, due to the recognition of the full revenue of Jumeirah Dhevanafushi hotel.

For the first nine months, gross revenue rose by $12.4 million, driven by the addition of Jumeirah Dhevanafushi and higher rent for Angsana Velavaru.

Views, Reviews & Forum

Striking a precious housing balance

Source: Straits Times / Opinion

FEWER applicants for new flats and five consecutive quarters of resale price falls have seen the Housing Board market going off the boil. The operative word is "going", denoting an incomplete market correction. National Development Minister Khaw Boon Wan's view that control measures for the sector as a whole should remain is the clearest word yet that real estate retains a capacity to cause an unwelcome wobble in the economy. Relative to the cumulative price run-up in the boom years, the considered judgment is that such cooling as has occurred has some way to go.

A planned 25 per cent reduction in the supply of build-to-order HDB flats next year, on top of a smaller trim this year, is a measured response in the sense that most people who currently need a flat have got one, although prices are only slowly coming off their peak. Young married couples and families wanting to live close together will continue to enjoy preference. This is pitching close to the golden mean.

But mindful of the last bout of frothiness, when cash over valuation became a burden to buyers, one could not be certain that the supply contraction will produce the desired price stability within a reasonable period. (In new and resale private housing, industry expectations of 10-15 per cent falls to more sensible price levels have not eventuated.)

Things are never that simple in real estate, especially in public housing planning. The HDB works to a gestation of four to five years, beginning with the number crunching of existing stock, marriage rates, foreigners granted residency and, yes, even emigration outflow to an extent. Anything could happen in the interim to necessitate a review.

Preserving a balance between holding fair value for existing owners and keeping prices reasonable enough for intending buyers and upgraders is part logic, part intuition. Singapore has seen extremes, sometimes unavoidably.

In the booming 1990s, HDB applicants had to contend with long queues despite strong supply. Finicky buyers undecided about location and flat-type waited for up to seven years. The Asian currency crisis that struck shortly after caused the market to seize up, leaving what became a dead stock of 30,000 flats. It took years to clear the surplus.

Disruptions can occur at any time. Unease about the current global growth slowdown is a reminder that asset volatility can be managed up to a point only. Imponderables include terrorist strikes and spikes in interest rates.

The HDB maintains a small buffer stock to act as a stabiliser, but even this is subject to variables. Hence, it would be a tall order to expect planners to always strike a perfect balance between supply and demand, and between affordability and eroding asset values.

Global Economy & Global Real Estate

11-country tour to market London's Battersea begins

539 of the new homes under the project's Phase 3 will be showcased in S'pore

Source: Business Times / Real Estate

Surbana signs MOU to work on Dalian projects

Source: Business Times / Real Estate

Home Prices in U.S. Show Slower Year-to-Year Increase in August

Source: Bloomberg / Luxury

Home prices in 20 U.S. cities rose at a weaker pace in the year ended in August as borrowing standards remain tight and wage gains fail to accelerate.

The S&P/Case-Shiller index of property values increased 5.6 percent from August 2013, the smallest gain since November 2012, after rising 6.7 percent in the year ended in July, a report from the group showed today in New York. The median projection of 32 economists surveyed by Bloomberg called for a 5.7 percent advance. Nationally, prices rose 5.1 percent year-to-year after a 5.6 percent gain in July.

Property costs are appreciating more gradually as investor participation wanes and still-tight credit restrains first-time home buyers from entering the market. The fastest pace of payroll growth since 1999 may help bring stronger wage advances, helping to keep homeownership in reach for more Americans.

“We’re going to see a slower pace of increase, prices still going up, but at a slower pace, and that will help pull some of that sideline demand in,” said Lindsey Piegza, chief economist at Sterne Agee & Leach Inc. in Chicago. “I do expect prices to continue to slow in order to allow for new demand to come into the marketplace.”

Economists’ estimates in the Bloomberg survey ranged from gains of 4.9 percent to 10 percent. The S&P/Case-Shiller index is based on a three-month average, which means the August figure was also influenced by transactions in June and July.

Home prices in the 20-city index adjusted for seasonal variations decreased 0.1 percent in August from the prior month, weaker than the Bloomberg survey median that called for a 0.2 percent increase. Unadjusted prices rose 0.2 percent.

The year-over-year gauge, based on records dating back to 2001, provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

National Prices

Nationally, prices rose 0.4 percent in August from the prior month and increased 0.2 percent in unadjusted terms.

Each of the 20 cities in the index showed a year-over-year gain, led by a 10.5 percent advance in Miami and a 10.1 percent pickup in Las Vegas. Cleveland showed the smallest year-over-year increase, with prices rising 0.8 percent.

Borrowing costs flirting with record lows may help draw more buyers into the market. The average rate on a 30-year, fixed mortgage fell to 3.92 percent in the week ended Oct. 23, the lowest since June 2013, according to Freddie Mac data. The rate has dropped by 0.27 percentage point over the past three weeks of reported data.

Lower Rates

“The deceleration in home prices continues,” David Blitzer, chairman of the S&P index committee, said in a statement. “Continued labor market gains, low interest rates and slower increases in home prices should support further improvements in housing.”

September reports show residential real estate posting modest gains as the industry heads into quieter winter months.

The pending home sales index increased 0.3 percent after dropping 1 percent in August, the National Association of Realtors said yesterday in Washington. The median projection in a Bloomberg survey of economists called for a 1 percent gain.

Contracts climbed 3 percent in the 12 months ended in September after a 4.1 percent annual decline in August, marking the first year-over-year increase since September 2013.

Home Sales

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

Those resales rose last month to a 5.17 million annual rate, the highest level in a year, NAR data showed last week. Demand topped out at a 5.38 million pace in July 2013, an almost four-year high.

Homebuilders such as Westlake Village, California-based Ryland Group Inc. are pointing to economic issues that are supporting the industry, while acknowledging the pace of improvement has been modest.

The industry is seeing advances “thanks to a strengthening employment picture, a favorable affordability dynamic and a low level of housing inventory,” Chief Executive Officer Larry Nicholson said on an Oct. 23 earnings call. At the same time, the housing market “still has a long way to go before returning to long-term norms.”

Federal Reserve officials meeting today and tomorrow also will consider progress on the employment outlook as they weigh changes to monetary policy. Policy makers will probably bring an end to the bond-buying program while keeping their benchmark interest rate near zero, according to the median forecast of economists surveyed by Bloomberg ahead of the Oct. 29 statement.

Payroll gains on pace for their best year since 1999 are supporting the Fed’s normalization of policy and bolstering potential home buyers. Employers have added an average 227,000 jobs per month through September and the unemployment rate has fallen to 5.9 percent from 6.7 percent at the end of last year. The Labor Department will release October figures Nov. 7.

-By Michelle Jamrisko

U.S. Homeownership Rate Falls to Lowest Since Early 1995

Source: Bloomberg / Luxury

The homeownership rate in the U.S. fell to the lowest in more than 19 years as the market shifted toward renting and tight credit blocked some potential buyers.

The share of Americans who own their homes was 64.4 percent in the third quarter, down from 64.7 percent in the previous three months, the Census Bureau said in a report today. The rate was at the lowest level since the first quarter of 1995.

Entry-level buyers have been held back by stringent mortgage standards and slow wage growth. The share of first-time buyers was 29 percent in September for the third straight month, compared with about 40 percent historically, according to the National Association of Realtors said.

“The homeownership rate hasn’t bottomed yet,” Paul Diggle, U.S. property economist for Capital Economics Ltd. in London, said in a telephone interview. “Something like 64 percent seems like a reasonable floor. But that floor is now in sight.”

The homeownership rate peaked at 69.2 percent in June 2004 and is close to the average of 64.5 percent from 1965 to 1999, data compiled by Bloomberg show.

The market since the latest recession has shifted toward rentals as millions of homeowners lost properties to foreclosure and potential buyers couldn’t afford to own a home or had trouble qualifying for loans. Demand for rentals sent leasing costs to records in some cities, spurred an apartment-construction boom and created a new industry of single-family landlords.

Rental Vacancies

The vacancy rate for rental homes was 7.4 percent in the three months through September, the lowest level since the first quarter of 1995, the Census Bureau reported today. The rate was down from 8.3 percent a year earlier and 7.5 percent in the second quarter.

The homeowner vacancy rate, the share of properties empty and for sale, fell to 1.8 percent in the third quarter from 1.9 percent a year earlier and in the previous three months.

The number of owner-occupied homes dropped to 74.2 million in the third quarter from 74.9 million a year earlier, according to the report. Renter-occupied properties increased to 41.1 million from 39.9 million.

-By Prashant Gopal

InnVest, KingSett Buy Stake in Toronto’s Royal York Hotel

Source: Bloomberg / News

A group of investors including InnVest Real Estate Investment Trust (INN-U) bought a majority stake in Toronto’s historic Royal York Hotel for C$186.5 million ($166.4 million).

InnVest and KingSett Real Estate Growth LP entered into a joint venture to acquire an 80 percent interest in the Fairmont hotel which was built in 1929, the companies said today in a statement. The remaining 20 percent will be held by Ivanhoe Cambridge Inc., the real estate arm of the Caisse de dépôt et placement du Québec, the hotel’s current owner.

The Caisse, Canada’s second-largest pension fund manager, has been unloading its portfolio of hotels in recent years. In June, it sold the Fairmont Empress in Victoria, British Columbia, and last year it sold Ottawa’s Fairmont Chateau Laurier.

“We are delighted to partner with KingSett and Ivanhoe Cambridge on what we believe is one of Canada’s most prestigious hotel properties,” Ed Pitoniak, managing director of Mississauga-based InnVest, said in a statement. “We are also looking forward to extending our relationship with Fairmont.”

The sale price values the hotel at roughly C$137,000 per room, the companies said in the release. KingSett will become the managing partner in the joint venture and InnVest will become the hotel asset manager and will oversee the property’s hospitality operations, working with Fairmont Hotels and Resorts Inc., the operator of the 1,363-room hotel, they added.

The Royal York, undergoing a C$100 million renovation, was built by Canadian Pacific Railway Ltd. (CP), across from Toronto’s Union Station with the goal of being the largest hotel in the British Commonwealth at the time, according to its website.

The purchase of the Royal York is the first major investment at InnVest since it was the subject of an activist campaign led by New York hedge fund Orange Capital LLC. earlier this year that reconstituted its board.

-By Scott Deveau

Lloyds CEO Says Leverage Rules Will Boost Mortgage Costs

Source: Bloomberg / News

Lloyds Banking Group Plc (LLOY), Britain’s biggest mortgage lender, sees the cost of U.K. home loans rising as regulators prepare to increase the capital the country’s banks must hold, making lending more expensive.

Chief Executive Officer Antonio Horta-Osorio, 50, said today the higher the Bank of England sets the leverage-ratio requirement on Oct. 31, the greater the corresponding increase in mortgage pricing. The regulation dictates how much equity capital banks must hold against their assets and measures a bank’s total lending, without weighting categories of loans by their riskiness.

“Banks will have to include the new cost of capital on their pricing,” Horta-Osorio said on a conference call with investors today to discuss the bank’s third-quarter results. Depending on what leverage level the BOE sets this week, “it will have less or bigger impact on mortgage pricing because it’ll become a restriction.”

U.K. regulators are demanding larger capital buffers to make bank failures less catastrophic after taxpayers had to bail out the financial system six years ago. The BOE said in July large, important banks must boost their leverage ratios above the minimum 3 percent level required by the Basel Committee on Banking Supervision. As the leverage measure isn’t risk-weighted, it is harder for banks to game than other capital gauges that allow banks to take asset quality into account.

“What is being said on Friday I’m pretty sure will bite” our competitors, Chief Financial Officer George Culmer said. “When you look at where some of our peers currently are, that will have an immediate impact, one would have thought, on pricing” of banking products such as mortgages.

Barclays Plc (BARC) is expected to have the largest capital shortfall among the U.K.’s major lenders, followed by Royal Bank of Scotland Group Plc and HSBC Holdings Plc, analysts at Morgan Stanley estimated. Lloyds will have the smallest hole to plug.

This week’s European stress tests revealed a lower capital level at Lloyds than some analysts expected, raising concerns the bank may have to delay a return to dividend payments. Today, the bank reported third-quarter pretax profit rose 41 percent to 2.16 billion pounds ($3.49 billion), beating estimates.

-By Richard Partington and Stephen Morris

Madison Square Garden Explores Plan to Split Into Two

Source: Bloomberg / News

Madison Square Garden Co. (MSG) is exploring splitting into two publicly traded companies to unlock value in the New York Knicks and New York Rangers sports franchises and buoy its entertainment business.

MSG, controlled by the Dolan family, has been considering since July a plan to house its sports teams and cable networks in one company and move its real estate assets and its concert and entertainment business into another, according to a statement yesterday.

Nelson Peltz, the co-founder of Trian Fund Management LP, and Scott Sperling, co-president of private-equity firm Thomas H. Lee Partners LP, will be nominated to the board and MSG will buyback as much as $500 million in Class A shares.

The $2 billion purchase of the Los Angeles Clippers by former Microsoft Corp. Chief Executive Officer Steve Ballmer -- almost four times the previous record paid for an NBA team -- was one catalyst for the board’s decision, people familiar with the situation said. Mario Gabelli, whose family of funds own more than 7 percent of MSG’s outstanding shares, said in May that a buyer would get the Knicks for free, given the Clippers valuation.

The Dolan family owns about 69 percent of MSG’s voting shares.

Knicks Value

“Investors favor companies with greater strategic focus on their core businesses,” Tad Smith, MSG’s CEO, said in yesterday’s statement.

MSG rose 10.6 percent to $72.75 a share as of 9:31 a.m. in New York trading, giving the company a market value of about $5.6 billion. The Knicks may be “intrinsically worth” as much as 50 percent more than the Clippers, bringing the value of MSG’s assets to about $6 billion, Albert Fried & Co. estimated in May.

John A. Thaler’s JAT Capital Management LP, which disclosed a stake in MSG in August and has since pushed its holding to more than 9 percent of shares outstanding -- pressed the board to evaluate ways to improve shareholder value, in part leading to MSG’s decision, according to a person with knowledge of the situation.

“We are very pleased that MSG’s board of directors and management have committed to pursue a plan to enhance value for all MSG shareholders,” the fund said in an e-mailed statement.

Peltz’s Trian doesn’t own a stake in MSG, according to a person familiar with the situation who asked not to be identified discussing private information. A representative for Peltz declined to comment.

Three Divisions

MSG is currently run as three divisions. MSG Sports owns and operates the National Basketball Association’s Knicks, the National Hockey League’s Rangers, the Women’s National Basketball Association’s New York Liberty and the American Hockey League’s Hartford Wolf Pack.

Under the plan being considered, that would be combined with MSG Media, which consists of the company’s regional sports networks that appear in most expanded basic pay-TV packages throughout the New York area.

A separate company would include MSG Entertainment, which produces and hosts concerts and shows at MSG’s real estate venues, comprising Madison Square Garden Arena, Radio City Music Hall, the Beacon Theatre, the Chicago Theatre and the Forum in Inglewood, California.

LionTree Advisors LLC is serving as MSG’s financial adviser for the spinoff.

NBA Values

Before the Clippers purchase, the most paid for an NBA team was $550 million for the Milwaukee Bucks. That franchise was sold this year to Avenue Capital’s Marc Lasry and Fortress Investment Group co-founder Wes Edens.

NBA teams are seeing their value rise as TV deals boost revenue. Under an agreement reached earlier this month, starting in 2016 Walt Disney Co. and Time Warner Inc. will pay the NBA almost three times as much to air games as under the last contract.

The media and sports company may also become an eventual target for larger companies, which have been looking to consolidate as pay-TV distributors add scale. Comcast Corp. (CMCSA)’s deal for Time Warner Cable Inc. and AT&T Inc.’s acquisition of DirecTV are the two largest U.S.-based mergers and acquisitions this year, totaling more than $130 billion including debt.

Real Estate

A newly created real estate and entertainment company could qualify as a real estate investment trust, according to one of the people familiar with the matter. The real estate itself could be a target, said John Tinker, a New York-based analyst at Maxim Group LLC.

“You don’t need for instance the team to own the stadium, so if private-equity comes in there you could easily do a sale-leaseback,” he said in a phone interview last week.

A coalition of New York civic leaders last week released a report arguing that MSG’s namesake arena should be moved three blocks to allow for the expansion of Pennsylvania Station. MSG has nine more years on its current lease after last year completing a three-year, $1 billion renovation of the building.

Company boards are increasingly turning to spinoffs as a way to boost returns for investors - betting that the separate pieces will fetch a higher valuation in the stock market.

A record 76 spinoffs -- by companies from EBay Inc. to International Paper Co. -- have been announced in the U.S. this year, data compiled by Bloomberg show.

Cablevision Spinoff

Cablevision Systems Corp. spun off MSG in February 2010, 16 years after it and ITT Corp. acquired it from Viacom Corp. for $1.08 billion. James Dolan, the CEO of Cablevision and son of the company’s founder, Charles Dolan, is MSG’s chairman and the owner of the Knicks and Rangers.

JAT Capital, based in Greenwich, Connecticut, uses a long-short strategy that seeks to profit by betting on rising and falling stocks, and is focused on technology, media, telecommunications, travel and leisure companies.

Trian, founded by Peltz with partners Peter May and Ed Garden in 2005, manages about $10 billion. Self-described “constructivists,” Trian buys stakes in public companies they regard as under-performers and seek to work with management and boards to boost shareholder returns.

-By Alex Sherman, Jeffrey McCracken and Scott Soshnick