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7th October 2014

Singapore Economy

Inflation stable, but strong Sing$ policy likely to stay

MAS reluctant to loosen stance as core inflation still elevated: Economists

Source: Straits Times / Money

INFLATION in Singapore has stabilised and the pace of economic growth slowed in the second quarter, but the central bank is not expected to ease up on its policy of a strong currency.

The Monetary Authority of Singapore (MAS), which meets this month for its next monetary policy meeting, is widely tipped to maintain its stance of a "modest and gradual appreciation" in the Singapore dollar, economists say.

This is because economic activity has regained some momentum in recent months, and the MAS likely still expects a recovery in industries that depend on demand from developed nations, said Citi economist Kit Wei Zheng.

Core inflation, a measure of everyday out-of-pocket costs, also remains elevated, which could make the MAS reluctant to loosen its policy stance, added Barclays economist Leong Wai Ho.

Singapore conducts monetary policy by managing its exchange rate against a basket of the currencies of its major trading partners. The exchange rate is allowed to float within a policy band that the MAS can adjust when it reviews monetary policy semi-annually.

A stronger Singdollar, which can be achieved by making the band's slope steeper or lifting its mid-point, helps to dampen inflation by making the prices of imported goods lower. The MAS can also opt to widen the band to accommodate greater fluctuations in the exchange rate.

Economists tip overall inflation - which has already been subdued in recent months - to ease further towards the end of the year, but core inflation to hold firm.

"Headline inflation could stay below 1 per cent in the next six to 12 months on softer housing rents and car prices," said Citi's Mr Kit.

The gauge of consumer price rises has averaged 1.5 per cent since January and fell to a six-month low of 0.9 per cent in August, the most recent reading.

Mr Kit thinks the MAS may trim its current inflation forecast of 1.5 per cent to 2.5 per cent for the full year, and announce a forecast of 1 per cent to 2 per cent inflation for next year.

More specifically, Bank of America Merrill Lynch economist Chua Hak Bin tips the MAS to "lower and narrow" its inflation forecast for this year to between 1 per cent and 1.5 per cent.

For core inflation, which excludes private road transport and accommodation costs, he expects the MAS to pare its current forecast of between 2 per cent and 3 per cent to between 2 per cent and 2.5 per cent.

Dr Chua noted that core inflation "remains elevated at above 2 per cent, and has edged higher since April".

He added: "Overall, we believe the modest GDP growth outlook, elevated core inflation and tight labour market suggest the MAS will likely maintain its policy of a modest and gradual appreciation" of the Singdollar policy band.

The central bank has not changed its monetary policy since April 2012, when it increased the slope of the policy band slightly and narrowed it.

UOB economists Alvin Liew and Quek Ser Leang think there is a one-third chance the MAS will move the mid-point of the Singdollar band slightly lower, to ease pressure on the local currency against a rising greenback.

Their estimates show the Singdollar has recently been trading at between 1 per cent and 1.5 per cent below the mid-point of the current band, and they believe the MAS may decide to use that range to recentre the band.

The Singdollar is likely to fall further to S$1.29 against US$1 by year-end, from the current level of S$1.27 against US$1, the UOB economists said in a report. "If there's a bias for policy, it is likely to be easier - not tighter - in the face of the risk of growth disappointing in our view," they added.

DBS senior currency economist Philip Wee has a more optimistic forecast of the Singdollar strengthening slightly to S$1.26 against US$1 by year-end.

"There are no signs the MAS policy review this month would stop its current stance of appreciating the Singdollar," he said.

The policy of a strong Singdollar has kept its value to the greenback "stable within a wide S$1.20 to S$1.30 range since 2011, weathering many recent global uncertainties" such as the euro zone crisis, the acute yen fall, and the impending end of the easy money policies in the US, Mr Wee added.

-By Fiona Chan, Senior Economics Correspondent

Riding on robots to rev up productivity

At the start of National Productivity Month, The Straits Times takes a look at the next wave of productivity innovation - robots. Joanna Seow and Lester Hio report.

Source: Straits Times / Singapore

FIRST, it was the rise of the machines. Now, the robots have arrived.

In the push towards greater productivity, the next generation of intelligent and mobile robots is finding its way into firms and public spaces.

Like the first machines that transformed the way people lived, from washing machines to vacuum cleaners, robots will also revolutionise the economy, say experts.

Today, they are used most commonly in manufacturing - to perform complex or repetitive tasks.

But they are also increasingly being used outside factories, in hotels, bakeries, on the streets and inside homes.

Across the world, robots are starting to emerge in various sectors.

In the Yotel hotel in New York City, for example, a giant robot arm called Yobot automates the luggage storage process by picking up luggage and storing it in lockers.

And Japan, one of the most automated nations, offers automated underground bicycle parking lots.

Cyclists insert their bikes into above-ground booths, and an elevator system whizzes and stores them underground.

In Singapore, robots have yet to make their mark, but it will be only a matter of time before they do, said robotics experts.

"In the past, the technology for sensing and perception, and to make intelligent decisions, didn't exist," said Professor Chen I-Ming, director of the Nanyang Technological University's Robotics Research Centre.

But this will change as sensor costs are going down, he said.

The speed of adoption of robot technologies will likely accelerate, especially with government agencies like the Singapore Economic Development Board (EDB) and Spring Singapore pushing ahead.

Mr John Lu, Spring Singapore's director for manufacturing and engineering, said that most robotic solutions are now designed for high volume production away from human interaction.

To date, robots are helping to ease the manpower crunch here by frying rice, packing medicine at hospital pharmacies or even tending to other machines.

At precision engineering firm PLC Industries, for instance, two robots oversee four machines, feeding parts in and out of the machines. PLC's chief executive Esmond Lim said this move cut manpower needs by 50 per cent.

The company is one of more than 50 here, from small enterprises to multinationals, which have bought robotic arms from Universal Robots (UR).

A typical installation costs $35,000 and up, a UR spokesman said.

According to the Boston Consulting Group (BCG), global spending on robots is expected to more than quadruple from just over US$15 billion (S$19 billion) four years ago to about $67 billion by 2025.

The report projects the fastest growth in the personal segment - such as robots used for entertainment, cleaning or education. The biggest spending, however, will still be for industrial applications such as welding, material handling or assembly.

The impact on the economy could be huge.

A study last year by the International Federation of Robotics predicted 1.9 million to 3.5 million jobs created either directly or indirectly through robotics, between 2012 and 2020.

Besides providing productivity gains, robots ease the manpower strain by reducing the need for humans to helm lower-end jobs that may be boring, demeaning or dangerous.

Mr Ralph Foong, EDB's deputy director for future of manufacturing, said workers can "take on higher-value, more complex functions such as R&D, engineering, and design that are challenging and better meet the aspirations of Singaporeans".

Looking ahead, observers see more mobile robots in Singapore's future.

Driverless cars are expected to hit the roads, food may be served in restaurants by flying drones and floors cleaned by adaptable robots.

The executive condominium Lake Life, which launched e-sales last Saturday, is set to run a driverless shuttle service.

If approved by the Land Transport Authority, it will ferry residents to and from Lakeside MRT station.

Even as robots look set to become a bigger part of society, there is no replacing the human touch.

Prof Chen, citing the example of phone operators, said: "Automatic phone answering systems are getting better, so you don't need an operator.

"But frankly speaking, people are fed up with such systems. So we still need someone there - the operator cannot be totally replaced."

National University of Singapore Associate Professor Marcelo Ang, the acting director of the university's Advanced Robotics Centre, is quick to put to bed worries about robots taking control.

"Humans still have to turn on machines," he said.

"The human is the brain, the machine is just his muscles."

Singapore Real Estate

Resale volumes of private condos plunge

Sellers hold on to their units in Q2; Districts 18, 27 show more resilience

Source: Business Times / Top Stories

[SINGAPORE] In yet another sign of a stalemate between buyers and sellers, resale volumes of private condominiums have fallen to levels last seen during the Global Financial Crisis, with the bloodbath of declines seen splattered islandwide.

While sellers with strong holding power seemed unwilling to let go of their units at much-lower prices, District 18 in the east and District 27 in the north appear to have held up well in resale volumes for the second quarter.

District 18, which comprises Tampines and Pasir Ris, saw resale volumes inch up 5.6 per cent in the second quarter this year to 57 transactions compared to the year-ago period before the total debt servicing ratio (TDSR) kicked in on June 29, 2013.

Resale volumes of private condos in District 27, which covers Yishun and Sembawang, were flat at 18 transactions in the second quarter, compared to the same quarter last year.

Their resilience came against a plunge in resale volumes islandwide.

Total resales of private condos stood at 1,314 units in the second quarter, accounting for 31.9 per cent of all private non-landed residential transactions. This is moderately higher than the 29.9 per cent in the same quarter last year but lower than the 40.9 per cent in the fourth quarter of 2012.

District 7 comprising Middle Road and Golden Mile and District 19 covering Serangoon Garden, Hougang and Punggol saw the biggest falls in resale volumes across districts. 

Transactions in District 7 fell to two units in the second quarter from 12 in the second quarter last year while that in District 19 plummeted to 57 units from 164.

The comparisons of resale volumes before and after TDSR are based only on caveats lodged, which typically represent some 80 per cent of the market. This illustration excludes new sales as they are driven mainly by new launches that may not have taken place in certain districts. The heterogeneity of property units also prevent direct comparisons on price movements over time without controlling for quality differences through constructing an index, a weighted scheme or tracking repeat sales.

Nicholas Mak, executive director of SLP International, noted that much of the resales caveats were for family-size units. "The marketing activities of new projects in that district could have attracted buyers, who may have later decided to buy resale properties as they were cheaper in per square foot (psf) terms."

New launches in District 18 included City Developments' Coco Palms in Pasir Ris, which has moved over 560 units at a median price of S$1,020 psf since its launch in May. MCC Land managed to sell more than 100 units at The Santorini in Tampines since its launch in April at a median S$1,113 psf, according to URA's developer sales data. In comparison, median prices of resale units in District 18 stood at S$897 psf in the second quarter.

The lack of new launches in certain districts could also have the converse effect on the resale market - as seen in Districts 19 and 12 (Balestier, Toa Payoh, Serangoon), Mr Mak added.

R'ST Research director Ong Kah Seng noted that buying interest for homes in Pasir Ris is supported by well-tested leasing demand, especially from the Changi Business Park. The decentralisation of the banks' non-core back-office operations to the business park and increased foreign professionals in the technology sector have also expanded the potential tenant pool in the eastern part of Singapore, he noted.

At the other end of Singapore, District 22 (Jurong) also registered a marginal 4.3 per cent year-on-year drop in resale transactions of private condos in the second quarter, possibly finding some support from renewed interest in the area given URA's masterplan to transform Jurong Lake District, consultants observed.

All transactions (new sales, resales and subsales) involving private condos have slumped 40.7 per cent year-on-year in the second quarter to 4,118 - similar to the levels last seen during the 2008-2009 Global Financial Crisis.

Based on the URA property price index for non-landed homes, prices of private condos transacted in the second quarter have fallen to levels last seen in the fourth quarter of 2012. 

Prices in the Core Central Region (CCR) fell by a larger magnitude to a level similar to that in the fourth quarter of 2010.

OrangeTee head of research and consultancy Christine Li noted that the drop in foreign purchases due to the additional buyer's stamp duty (ABSD) has hurt the CCR market segment, as foreign buyers make up a significant portion of this segment.

"Secondly, the implementation of loan restrictions such as loan-to-value limits and the TDSR framework have hurt properties with high quantums," she added. "As such, CCR properties have not held up as well as RCR (Rest of Central Region) and OCR (Outside Central Region). This trend is likely to persist until current cooling measures are tweaked."

But given the exuberant run-up in property prices since the second half of 2009, sellers who sold their units recently are unlikely to have suffered a loss, though they could be making less profits than if they had sold their units last year, consultants noted.

A random sampling by SLP International on resale transactions in the second quarter showed that most of the sellers did not incur losses in the resale market because a majority of them bought their units more than three years ago when the prices were cheaper and they did not have to pay the seller's stamp duty for properties that they have held for more than four years.

-By Lynette Khoo

Gradual home price slide a plus for banks: Moody's

Source: Business Times

Ratings agency Moody's said on Monday that the gradual decline in Singapore's private home price index for the third quarter is credit positive for Singapore banks as it relieves pressure on bank asset quality. "Further price increases would have increased the risk of a real estate price bubble bursting," Moody's said in its credit outlook note on Monday, commenting on the Urban Redevelopment Authority's flash estimate released last week.

Early-bird discounts lift Marina One sales

Another project, 546-unit Lake Life EC in Jurong, draws over 1,200 applications

Source: Straits Times / Money

DISCOUNTS for early-bird buyers helped sales take flight at the Marina One integrated development over the weekend.

Of the 1,042 private homes in the project, about 100 have been sold in bulk sales of three or more units since Friday, said real estate agents yesterday.

Developer M+S enticed early buyers with a 10 per cent discount, bringing prices down to between $1,960 and $3,100 per sq ft (psf).

It said last week that it would initially sell units from the first residential block at the Marina Bay development. The second block will be released only after the project is completed in 2017.

Sales to people wanting two apartments are expected to begin tomorrow, while single-unit buyers will have to wait until Friday.

Over at Lake Life, an executive condominium (EC) in the Jurong Lake District, more than 1,200 applications came in over the weekend for its 546 units.

One in three applicants is a first-time homebuyer, according to a statement yesterday by Lake Life's consortium of developers.

The sales of these two projects come amid a narrowing price gap between private homes in the city centre and those in the city fringe.

Price growth in the city centre has been lagging that in other regions, said property consultancy HSR in a report last week.

HSR expects the gap between city centre and city fringe resale values to continue shrinking as property prices keep falling.

During the global financial crisis, the price difference narrowed from a peak of $643 psf in the fourth quarter of 2007 to $367 psf in the first quarter of 2009.

The gap expanded to a high of $610 psf in the fourth quarter of 2011 before shrinking to $461 psf in the second quarter of this year, said HSR, adding: "As prices continue to fall, we believe this gap will continue to shrink by another $50 to $100 psf."

The gap between city centre and suburban resale values has also narrowed, falling from a high of $870 psf in the fourth quarter of 2011 to $712 psf in the second quarter this year.

These narrowing gaps between city centre resale values and those in the city fringe and suburbs could be due to their different rates of price growth, HSR said.

City centre prices climbed 52.5 per cent from the first quarter of 2007 to the second quarter of this year. This lagged the city fringe, where values shot up 103.3 per cent, and in the suburbs, where prices rose 94.6 per cent over the same period.

-By Melissa Tan & Rennie Whang

E-applications for Lake Life EC project cross 1,200

Source: Business Times / Top Stories

[SINGAPORE] More than 1,200 e-applications have been received for Lake Life, a 546-unit executive condominium (EC) housing project near Jurong Lake.

The e-applications were received from Saturday to Monday. E-applications will close on Oct 12. The current indicative average pricing is around S$880- S$890 per square foot (psf). Firm pricing will be released on Nov 5, and bookings will begin on Nov 8.

The project is being developed by a consortium comprising Evia Real Estate, BBR Development, CNH Investment, OKP Land and Ho Lee Group. It paid a record price for EC land of S$419 per square foot per plot ratio for the 99-year leasehold plot at Yuan Ching Road/Tao Ching Road in July 2013. Evia's managing partner Vincent Ong has said the project's breakeven cost is about S$800 psf.

ECs are a public-private housing hybrid with initial buyer eligibility and resale restrictions that are lifted completely 10 years after the project's completion.

Lake Life executive condo gets more than 1,200 e-applications

Source: Channel News Asia / Singapore

SINGAPORE: Lake Life, the second executive condominium (EC) project to go on the market this year, has 546 units on offer. But it has already received more than 1,200 e-applications after just three days of opening.

Lake Life is located in the Jurong Lake District. Units there are expected to go at around S$880 to S$890 per square foot. The project is being developed by a consortium led by Singapore property developer and property fund management company Evia Real Estate.

Of the applications received so far, one in three is a first-time homebuyer, said the developer. It said applicants were attracted to the project's location and active living concept.

The development comes after a long pause in new EC launches, after a new rule introduced by the government last year requires developers to wait 15 months from the time the land was acquired, or till the physical foundation works were complete - whichever is earlier - before launching units for sale.

E-applications for Lake Life close on October 12 and bookings will begin on November 8.

Chestertons managing director, Donald Han, said: "If you look at the earlier days, we had robust demand, just prior to the government introducing measures for ECs. City Life, for instance, was launched about 15 months ago and it was launched at a period when we had about 2.5, almost 3 times, subscription rate."

"So, the subscription rate for Lake Life of about 2 times is nowhere compared to the time before government measures were introduced for ECs, but I think it's still respectable by virtue of location specific. This month and maybe even moving to next month, we will see a huge dosage of EC projects that will dominate the activity for the private non-landed residential market."

- CNA/ir

More than 1,200 applications for Lake Life EC

Source: Today Online / Singapore

SINGAPORE — Despite the sluggish property market, house hunters are flocking to the launch of the latest executive condominium (EC) in Jurong, the first in 17 years to be launched in the area.

The 546-unit Lake Life — built on a site that attracted a record bid for EC land last year — saw more than 1,200 e-applications as of yesterday within only three days of its launch.

Analysts said the keen interest came as no surprise given the property’s location, which will serve pent-up demand from upgraders and first-time home owners who aspire to own private properties, but find condominiums out of their reach. The district’s image was also given a shot in the arm recently when Prime Minister Lee Hsien Loong announced plans for the creation of the Jurong Lake Gardens during the National Day Rally in August.

However, it remains to be seen whether the high e-application rates would translate into actual sales, given the potential dampener from the Total Debt Servicing Ratio requirements, analysts said.

Analysts estimate the prices for Lake Life units to range from S$880 to S$890psf based on the winning bid of S$418.53 per square foot per plot ratio by Evia Real Estate.

However, Century 21 chief executive officer Ku Swee Yong said larger units, such as the four-bedroom flats, could go for about S$750psf.

A 1,400sqf unit could cost about S$1.1 million, making it relatively affordable for a Jurong resident seeking to upgrade from a five-room Housing and Development Board flat, he said.

The majority of the units were allocated to four-bedroom units, which signalled the developer’s intention of attracting second-timers in and around Jurong to give them the opportunity to upgrade, analysts said.

“It’s quite clear that they’re targeting families, quite possible upgraders whose families have grown,” said Mr Eugene Lim, key executive officer at ERA.

Mr Chris Koh, director of Chris International, added: “We have not seen EC launches for a while and we had a lot of buyers waiting. Location is not too bad, there’s a lot of talk about transforming Jurong into another gem of Singapore, (so) I think many people would flock to that area.”

Mr Lim noted that Lake Life was more affordable, compared with other options in the area. For example, the transacted price of Lake Front Residences averaged about S$1,300psf, while Lake Ville units cost about S$1,330psf. However, he was cautious as to whether buyers would ultimately bite. A family with a household income of S$12,000 — the income ceiling for buying an EC — could afford anything priced between S$800,000 and S$1 million.

If a four-bedroom unit at Lake Life sold at prices predicted by analysts, it could be out of reach after taking into account the Mortgage Servicing Ratio and Total Debt Servicing Ratio, he said.

Mr Ku also sounded a cautionary note to upgraders. “Second-timers must consider the fact by the time they collect their keys and sell their current HDB, the HDB resale value may drop by 10 per cent in the next three years. In that case, your financial planning ... cannot cut it too thin,” he said.

The launch of Lake Life comes after the launch of Bellewoods EC in Woodlands on Sept 27. As of Sept 28, developer Qingjian Realty received close to 400 e-applications for the project, which was the first new EC launch after almost a year-long hiatus.

-By Laura Elizabeth Philomin

Real Estate Companies' Brief

Has a brain drain started at CapitaLand?

Source: Business Times / Companies

ON Sept 1, CapitaLand announced the resignation of Lim Beng Chee, chief executive officer of CapitaMalls Asia (CMA). Could this be the start of a brain drain from the group? Talk in the market is that Sharon Lim, chief executive of CapitaMalls Malaysia Reit Management, has also tendered her resignation. And word on the street is that the CV of at least one other senior CapitaMalls management executive is doing the headhunting rounds in the market.

Mr Lim's resignation is said to have been triggered by his unhappiness at not being consulted on CapitaLand's privatisation of CMA. CMA has since been delisted in July. Perhaps corporate governance concerns could have held back CapitaLand's head honchos from engaging CMA's top management about their intentions. But the bottomline is that Mr Lim is said to have left the group in a huff. Jason Leow was named as his replacement effective Sept 15.

Prior to his latest appointment, Mr Leow was CEO of CapitaLand China and is a close associate of CapitaLand's president and group CEO Lim Ming Yan, who himself was formerly CEO of CapitaLand China.

Mr Leow's deputy in China, Lucas Loh, has succeeded him.

-By Kalpana Rashiwala

Keppel Land, Philips team up to save energy

Kepland gets free LED bulbs, shares first 3 years of savings with lighting giant

Source: Business Times / Singapore

THERE are more ways than one to go green.

Following Singapore's green building week in early September this year, local prime office developer and landlord Keppel Land entered, one week later, into a first-ever zero capital expenditure (capex) scheme with lighting giant Royal Philips to reduce energy consumption at its office buildings.

Under this agreement, Philips will, with no upfront costs to Keppel Land, replace the conventional office lamps at the latter's office premises with energy-efficient LED lighting.

Keppel's cost savings from the LED lighting's lower energy consumption - estimated to be of up to 60 per cent of current lighting expenditure - will then be shared with Philips for the next three years beginning the month after installation date, after which, the savings will be enjoyed solely by Keppel, according to a Keppel spokesman.

-By Chan Yi Wen

51 firms so far in Sias's excellence initiative

They commit to uphold high standards of governance to enhance shareholder value

Source: Business Times / Companies

THE Securities Investors Association (Singapore) is holding the 5th Singapore Corporate Governance Week 2014 from Oct 27 to 31.

CG Week has received endorsement and support from the Accounting and Corporate Regulatory Authority (ACRA) and the Singapore Accountancy Commission (SAC) as supporting organisations and Singapore Exchange as the supporting exchange.

A key feature of the week-long programme is the statement of support by corporates to uphold and advance good corporate governance standards. This statement, which will be published in The Business Times, reads: "As an organisation, we are committed to upholding high standards of corporate governance to enhance shareholder value. We believe practising good corporate governance is central to the health and stability of our financial markets and economy."

To date, 51 companies have joined the statement of support initiative for excellence in corporate governance.

Global Economy & Global Real Estate

GIC takes full ownership of Italian mall

Source: Business Times / Singapore

GIC is acquiring the remaining half of the RomaEst Shopping Centre in Italy to gain full ownership of the mall, which is located in Lunghezza, about 14 km east of Rome's city centre.

Singapore's sovereign wealth fund bought the half stake from a fund managed by CBRE Global Investors, formerly known as ING Real Estate.

"Following the purchase, GIC, which already owns 50 per cent of RomaEst through an affiliate, will be the sole owner. . . CBRE Global Investors continues to be the asset manager for the centre," GIC and CBRE Global Investors said in a joint statement on Monday.

"The acquisition demonstrates GIC's confidence in the long-term prospects for Italy and in the future demand for prime regional centres. In addition to RomaEst's stable cash flows, GIC sees opportunities to add value to the centre through active asset management including leasing and refurbishment strategies," the statement said.

-By Kalpana Rashiwala

GIC buys remaining stake in one of Italy's largest malls

Source: Straits Times / Money

SOVEREIGN wealth fund GIC has become the sole owner of one of Italy's largest malls.

It has acquired a 50 per cent stake in RomaEst Shopping Centre from a fund managed by CBRE Global Investors, which will continue as the mall's asset manager.

GIC, which already owns the other 50 per cent of the mall through an affiliate, said in a statement yesterday that the deal shows its "confidence in the long-term prospects for Italy and in the future demand for prime regional centres".

"In addition to RomaEst's stable cash flows, GIC sees opportunities to add value to the centre through active asset management including leasing and refurbishment strategies," it added.

RomaEst is in Lunghezza, about 14km east of central Rome. Its catchment area covers more than one million people within a 30-minute drive of the mall, according to GIC.

The two-storey building has 208 retail units, a hypermarket and a 12-screen cinema. It boasts 10 anchor stores that take up about 10,800 sq ft each and 10 mid-sized units of between 5,400 sq ft and 10,800 sq ft each.

The property has 1.1 million sq ft of gross lettable area and 23 bars and restaurants, said GIC.

Its main tenants include international brands such as fashion retailers Hollister, H&M, Zara and Gap as well as consumer electronics stores Apple and Media Markt.

There is a three-level carpark with 6,750 parking spaces.

GIC has been active in Europe lately.

In the past two weeks alone, it has invested in RAC, Britain's second-largest roadside assistance firm, and agreed to buy 30 per cent of Spanish real estate firm Gmp for more than €200 million (S$321 million).

And last week it was reported that GIC may be part of a group of investors planning to buy airports in Aberdeen and Glasgow in Scotland as well as in Southampton in southern England, for £1 billion (S$2 billion).

-By Ann Williams

GIC acquires remaining 50% stake in RomaEst Shopping Centre

Source: Channel News Asia / Business

SINGAPORE: Singapore's sovereign wealth fund GIC has acquired a 50 per cent interest in RomaEst Shopping Centre from a fund managed by CBRE Global Investors. GIC, which already owns 50 per cent of RomaEst through an affiliate, will be the sole owner of the Italian shopping centre.

CBRE Global Investors will continue to be the asset manager for the centre.

GIC said in a news release on Monday (Oct 6) that the acquisition demonstrates its confidence in the long-term prospects for Italy and in the future demand for prime regional centres. In addition to RomaEst's stable cash flows, GIC sees opportunities to add value to the centre through active asset management, including leasing and refurbishment strategies.

GIC said the catchment area for RomaEst, which is in Lunghezza - about 14 kilometres to the east of Rome city centre - includes well over one million people within a 30-minute drive. 

- CNA/ac

World Bank issues alert on debt servicing, property prices

Source: Business Times / Top Stories

POLICY shifts by leading central banks, coupled with monetary tightening in some Asian economies, could bring problems of debt servicing to households and to business firms in the region, and also trigger falls in property prices, the World Bank has warned.

The latest East Asia Pacific Economic Outlook Update, published Monday by the Washington-based institution, adds yet another voice to a growing chorus of concern over the possible adverse impact globally of changing monetary conditions.

"Global financial conditions are likely to tighten, and financial volatility may also rise, especially if geopolitical tensions escalate. This may create debt-service challenges for some economies.

"Increased divergence in monetary policy among major reserve currencies (also) raises the risk of disorderly exchange rate and interest rate movements," says the World Bank, adding that "the adjustment to the new quilibrium could prove disruptive".

What the World Bank calls the "unwinding of large central bank interventions", in an environment of uncertainty about future policies, could, it warns, "be accompanied by abrupt market reactions, increased volatility, and overshooting of interest rates".

Rising interest rates could create debt service problems for some East Asia and Pacific countries. "In many countries, debt service ratios are now at historically elevated levels, owing to the sharp accumulation of debt since the global financial crisis."

The global economy is "showing signs of recovery, but at an uneven pace", and global growth is expected to rise modestly to 2.6 per cent in 2014, and an average 3.3 per cent in 2015-17, according to the report.

But the World Bank cautions that "significant uncertainties remain about the strength and sustainability of the recovery in high-income economies, as well as about the timing of policy actions by central banks in these countries.

Despite prospective monetary tightening in the US, growth there should be around 2 per cent for 2014, rising to 3 per cent next year, while in both Japan and the euro area, growth is projected at just 1 per cent in 2014, rising only "slowly thereafter".

Growth in the developing East Asia Pacific region as a whole is forecast to moderate gradually from 7.2 per cent in 2013 to 6.9 per cent in 2014-15. But the outlook is clouded with uncertainty, the World Bank says.

In China, growth will gradually moderate to 7.4 per cent in 2014 and 7.1 per cent in 2016, reflecting intensified policy efforts to address financial vulnerabilities and structural constraints, which will "place the economy on a more sustainable growth path".

In the rest of the East Asia and Pacfic region, excluding China, "growth will bottom out at 4.8 per cent in 2014, reflecting the slowdown in Indonesia and Thailand, before recovering to 5.3 per cent in 2015-16".

A key risk to the (Asian) regional outlook is, however, that the global recovery, and the associated pickup in demand for regional exports, may be slower than anticipated, the World Banks says.

Meanwhile, property prices in some countries are likely to come under pressure, according to the latest Economic Outlook. It mentions especially Malaysia and the Philippines where price rises have been "pronounced" and outpaced income growth.

"Similar patterns have emerged in developed economies of the region such as Hong Kong, China; Taiwan, China; and Singapore. More recently, signs of weakness have emerged in the real estate sector, raising concerns about price sustainability."

Historically, "episodes of monetary tightening have been strongly correlated with declines in housing prices", the World Bank notes. "Monetary policy normalisation in the US and UK may therefore accelerate the real estate downturn."

-By Anthony Rowley in Tokyo

Japan condo builder taps bond market after 20 years

Property boom helps Haseko rebound after it defaulted on debt in 1999

Source: Business Times / Property

[TOKYO] Haseko Corp, a Tokyo-based condominium builder, is returning to the bond market for the first time since defaulting in 1999 on about US$3.6 billion in debt after the Japanese real estate bubble burst.

Haseko, which paid dividends for the first time in six years in the year ended March 31, last month registered to sell as much as 30 billion yen (S$350 million) of notes and plans an offering of five-year debt, according to documents from Japan's Finance Ministry and Mizuho Securities Co, one of the arrangers.

This would be Haseko's first sale since it raised 40 billion yen in 1994, Bloomberg-compiled data show.

Prime Minister Shinzo Abe's economic revival policies spurred a property market boom that pushed the average cost of an apartment in the greater Tokyo area to a 22-year high in August at about 57 million yen, according to Japan's Real Estate Economic Institute Co.

-From Tokyo, Japan

Online firms lead Asian office space leasing

Source: Business Times / Property

[HONG KONG] Social media and e-commerce firms are driving office leasing activity in Asia after they took up the most new office space in the second quarter, overtaking financial companies, Cushman & Wakefield says.

Internet companies such as LinkedIn Corp and made up 21 per cent of the space taken up in the second quarter, compared with the 14 per cent by financial companies, according to the New York-based real estate services firm.

The new space they occupied was 1.1 million square feet, more than the previous three quarters combined, Cushman data shows.

New technology firms are emerging to fill the gap in the Asia office market that has been left by multinational banks, many of which have downsized or slowed expansion amid a tighter regulatory environment.

-From Hong Kong, China

London home prices start cooling amid construction boom

Steep falls unlikely as interest from overseas buyers supports market

Source: Business Times / Property

[LONDON] Twenty one cranes loom over the south bank of the River Thames from Battersea Power Station to the St George Wharf tower. Here, in the biggest concentration of residential projects in London, developers are steaming ahead just as prices are starting to fall.

Homebuilding in central London doubled in two years as record-low interest rates and demand from overseas buyers drove up values at a pace not seen since 1987.

Developers such as China's Dalian Wanda Group and UK-based Berkeley Group Holdings were drawn to the Nine Elms district, where Malaysia's Sime Darby is redeveloping the Battersea station as part of a plan to turn the neighbourhood into a prime address.

As the apartment towers rise, the price increases that underpinned the construction boom have come to a halt. London home values fell month-on-month for the first time in two years in September, according to Hometrack, and builders such as Killian Hurley, chief executive officer of London-based Mount Anvil Group, don't see a return to red-hot growth soon.

-From London, UK

London Luxury-Home Developers Outpacing Capacity to Build

Source: Bloomberg / Luxury

Plans to build luxury homes in London have increased to the point where it will become difficult for some developers to find builders for their projects, consulting firm EC Harris LLP said.

Developers aim to construct more than 25,000 luxury properties in the city worth more than 60 billion pounds ($96 billion) over the next decade, compared with a pipeline of 20,000 homes a year earlier, EC Harris said in a report today. That’s expected to lead to a shortage of qualified workers in a market where construction costs are seen rising as much as 8 percent this year, the company said.

Luxury-home developers are aware that “some projects may be undeliverable in quality and program terms unless they get to the front of the queue to secure the right resources,” Mark Farmer, head of EC Harris’s residential team, said in the report.

About half of the luxury homes planned for the next 10 years will be developed in the district of Chelsea and Fulham and in the South Bank area, stretching from Battersea to Tower Bridge, EC Harris said. In August, prime residential properties in central London districts including Chelsea climbed 7.7 percent from year earlier, the smallest increase in four months, according to data compiled by Knight Frank LLP.

American Residents

The number of prime homes planned for South Bank has risen 34 percent from a year earlier to 4,861 and by 45 percent in St. John’s Wood, a district favored by Americans living in the U.K. capital, to 323.

Values across London’s residential property market will fall 2.6 percent next year, the first decline since 2009, the Centre for Economics and Business Research said yesterday.

EC Harris, based in London, defines luxury homes as those that will sell for 1,350 pounds a square foot or more. That’s up from 1,250 pounds last year.

Glass Ceiling

“As capital values have increased, the ability to raise rental levels in parallel will hit a glass ceiling of domestic market-led rental affordability,” Farmer wrote. “As questions remain over the sustainability of recent levels of sales value inflation, the fragility of this market is brought into focus.”

Still, a cooling Chinese property market may attract more Asian buyers and developers to London, Farmer said.

There is increasing interest from developers in building homes valued at 500 pounds a square foot to 1,000 pounds a square foot, particularly those near the Crossrail line that will link Heathrow Airport to Canary Wharf, EC Harris said.

-By Neil Callanan