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11th September 2014

Top Stories

'Architectural ingenuities' like Jurong Rock Caverns pose new fire safety challenge: Masagos

There is a need to invest in the development of a robust emergency management and response strategy and framework on top of fire safety measures, says Senior Minister of State for Home Affiars and Foreign Affairs Masagos Zulkifli.

Source: Channel News Asia / Singapore

SINGAPORE: "Architectural ingenuities" such as the Jurong Rock Caverns pose new fire safety challenges, said Senior Minister of State for Home Affiars and Foreign Affairs Masagos Zulkifli on Wednesday (Sep 10).

Speaking at the opening ceremony of the Fire Safety Asia Conference (FiSAC) 2014, Mr Masagos said the Government has started to explore subterranean spaces to maximise use of the country's limited land. This is why fire safety and emergency management are critical for a compact and densely populated country like Singapore.

"Our strict enforcement of the fire code also entails that we work closely with urban planners, architects, developers and other industrial experts to incorporate fire safety elements into early stages of our architectural and landscape designs", he said.

"The Singapore Civil Defence Force (SCDF) adopts a performance-based fire safety approach which combines fire safety engineering principles with computer modelling tools to design fire safety measures that meet specific fire safety intents," he added.

Mr Masagos also highlighted the need to invest in the development of a robust emergency management and response strategy and framework on top of fire safety measures. He mentioned how the SCDF is investing in technology such as unmanned fire-fighting machines, and in training such as an upcoming training ground at the Home Team Tactical Training Centre.

Held concurrently with FiSAC is Fire & Disaster Asia (FDA) 2014, which showcases specialised rescue and disaster management equipment, products and services. 

“We hope that through FDA 2014, solutions can be provided to the potential threats that come hand-in-hand with the increasing number of skyscrapers or even facilities which make use of underground or subterranean spaces,” said Mr Edward Liu, Group Managing Director of Conference & Exhibition Management Services (CEMS).

- CNA/av

Singapore Economy

MAS poll: 2014 GDP growth cut to 3.3%

Weaker Q2 brings down full-year forecast; further downgrades seen

Source: Business Times / Top Stories

[SINGAPORE] Economy watchers polled by Singapore's central bank have cut their 2014 growth forecast to 3.3 per cent, following a disappointing second quarter. But some economists warn that more downgrades could still come in, as the Republic grapples with restructuring pains amid a patchy global recovery.

Professional forecasters, polled by the Monetary Authority of Singapore (MAS) from mid-August, have tempered their full-year growth projections by half of a percentage point, down from the 3.8 per cent median forecast seen in June's survey. The lower 2014 growth estimate now falls within the government's forecast range of 2.5-3.5 per cent.

Said Bank of America Merrill Lynch economist Chua Hak Bin: "I think the downgrades shouldn't come as a surprise, because a weaker Q2 basically brought down the full-year forecast. They key thing now is whether we'll see the economy pick up steam, or whether the sluggish growth will be a bit more persistent and structural in nature."

The slip in forecasters' optimism was due to softer growth expectations for all sectors within the Singapore economy, except for the finance & insurance segment, where growth 

projections have been kept intact at 5.5 per cent.

The manufacturing sector is now expected to grow at a slower pace of 4.2 per cent compared to June's estimate of 5.6 per cent, and wholesale & retail trade growth is projected at 2.6 per cent, much lower than the 4.9 per cent previously forecast.

Non-oil domestic exports (NODX) are projected to contract 1.1 per cent, in stark contrast to June's expectations of a 4.1 per cent expansion. The sharp pull-back in sentiment follows year-on-year contractions in both June and July.

Even as the market trimmed its full-year GDP growth forecast, economists The Business Times spoke to stressed that further downgrades could still happen. Dr Chua and DBS economist Irvin Seah estimate 2014 growth at 3 per cent - lower than the survey's median forecast of 3.3 per cent - while CIMB economist Song Seng Wun thinks increased geopolitical risks and "seesawing" regional macroeconomic data add to the uncertain outlook.

Said Dr Chua: "The data coming out of Europe and Japan has generally been on the soft side, so it's not like you have this story of the US recovery supporting a global recovery that's synchronised with an Asian exports recovery. It's all still very patchy - one month it's decent, another month things pull back ... Our view is that the recovery has been somewhat uneven and even elusive in certain countries. And in Singapore, the impact is going to be compounded by the fact that we're undergoing restructuring."

Added Mr Seah: "Some analysts are still hanging on to a thread of hope that we'll see some acceleration in the second half, but this thread is just getting weaker. I think that even if we 

get an acceleration, it's going to be a very gradual one. There are still downside risks from both external and domestic perspectives."

Externally, these include a stagnant Eurozone economy, lacklustre consumption and investment figures in Japan, and a dicey manufacturing outlook in China. Domestically, economists are wary of climbing business costs amid a tight labour market.

One consolation from MAS's latest quarterly survey is that forecasters have lowered their 2014 inflation projections from three months ago.

Their full-year inflation forecast is now 1.8 per cent versus 2.2 per cent previously; MAS core inflation - which strips out accommodation and private transport costs - is expected at 2.2 per cent, also lower than the 2.4 per cent reported in June's survey.

These projections are within the range of the government's 1.5-2 per cent forecast for headline inflation, and 2-3 per cent for core inflation.

The MAS also said in its "Recent economic developments in Singapore" article last week that it expects domestic cost pressures - particularly stemming from a tight labour market - to continue to be the primary source of inflation.

For the third quarter of 2014, forecasters are now expecting lower growth of 3.2 per cent. This fell from the previous median forecast of 3.5 per cent.

But respondents are expecting economic activity to increase next year, as they think GDP growth will reach 3.7 per cent. This is still down, however, from the June survey's forecast of 3.9 per cent.

-By Kelly Tay

Economists revise full-year growth forecast to 3.3%

Source: Today Online / Business

SINGAPORE — The Republic’s economy is likely to grow at a slower pace this year than was expected three months ago, as an uneven global recovery coupled with economic restructuring at home continue to weigh on key economic sectors, a central bank survey of forecasters released yesterday showed.

Full-year growth is now expected to come in at 3.3 per cent, based on median forecasts of 22 economists surveyed by the Monetary Authority of Singapore (MAS).

This marks a downward adjustment from the 3.8 per cent expansion previously forecast in June. Expectations for third-quarter growth have also narrowed to 3.2 per cent from 3.5 per cent in the June survey.

Among economists who are concerned is DBS’ Mr Irvin Seah, who is forecasting an even lower full-year expansion at 3 per cent, due in part to a slower-than-expected recovery in the United States and Europe.

“The market has been hanging on the hopes of a recovery in the second half. We’re still on this path, but must recognise that the pace has been a lot slower than most people anticipated,” he told TODAY.

“In the US, despite the second-quarter rebound, first-half growth was very sluggish on average. And the euro zone seems to be tipping back into the doldrums again if you look at the mixed GDP figures recently,” he added.

“Singapore’s growth is still mostly externally driven. So unless their economic activities see a surprisingly strong uptick in the coming months, there may even be downside risks to the 3.3 per cent forecast.”

Singapore’s gross domestic product between April and June grew 2.4 percent from a year ago — the slowest since the first quarter of last year and a marked slowdown from the 4.8 per cent in the previous three months, as manufacturing and wholesale and retail trade saw much smaller gains.

Last month, the Ministry of Trade and Industry narrowed its full-year GDP forecast to between 2.5 and 3.5 per cent, from 2 to 4 per cent previously. Amid choppy external conditions, this trend is set to continue into the third quarter, with economists adjusting their full-year growth forecast for manufacturing to 4.2 per cent, from 5.6 per cent.

Non-oil domestic exports are flagged for a 1.1 per cent decline — a huge dip from the 4.1 per cent growth previously forecast.

The weak outlook is not surprising as Singapore faces not only external uncertainties, but also domestic constraints resulting from economic restructuring, Credit Suisse analyst Michael Wan noted.

“The impact is reflected in the electronics sector, for instance, where manufacturers have been unable to expand production partly due to a shortage of labour,” said Mr Wan, referring to the sector’s declining output and exports in recent months.

“The overall economy is still some way from firmer recovery, but I believe global demand — and hence Singapore’s growth — will pick up in a more synchronised fashion starting from 2015’s first quarter,” he added as he flagged a 5 per cent full-year growth for next year, above the median forecast of 3.7 per cent in MAS’ latest forecasters’ survey.

Barclays senior economist Leong Wai Ho is even more upbeat, expecting stronger growth this year on the back of a potential rebound in the US.

“Their leading indicators such as ISM index suggest a turning point that can come as early as this month and we should see more tech orders on the horizon for Singapore manufacturers in a US investment up-cycle,” he said.

“If we get that turning point, cost and manpower pressures will be less of a concern.”

-By Wong Wei Han

Singapore Real Estate

Chesterton again urges release of more hotel sites

Property consultant cites high occupancies and room rates

Source: Business Times / Property

PROPERTY consultant Chesterton is again calling for the government to release more hotel sites.

Hotels in Singapore have been enjoying high occupancies (85.5 per cent from January to July this year) and average room rates (S$256.10 per room per night over the same period), which should trigger supply, and yet, according to Chesterton, there appears to be no attempt by the authorities to alleviate the looming shortage of hotel rooms.

"Rather, the authorities seem to be tightening the supply flow," it said in an exclusive report to BT.

For one thing, no new hotel sites were released under the 2014 government land sales programme at all, Chesterton said.

-By Lee Meixian

Serangoon Garden bungalow up for auction

Source: Business Times / Property

[SINGAPORE] A freehold bungalow at 13 Brighton Crescent in the Serangoon Garden area will go under the hammer at a Colliers International auction later this month.

The property is understood to have been put up for sale by the estate of the late Raffles Girls' School principal Noel Evelyn Norris, who died earlier this year.

The indicative price for the rectangular site is S$7.7 million or around S$890 per square foot (psf) on the land area of 8,666 square feet.

"This is a reasonably attractive price in the current market, given the site's redevelopment potential," said Colliers deputy managing director Grace Ng.

Serangoon Gardens site for sale

Source: Straits Times / Money

A FREEHOLD site in Serangoon Gardens with a single-storey detached house on it will go on auction later this month.

The 8,666 sq ft plot at 13, Brighton Crescent is zoned for two-storey mixed landed use and carries an indicative price tag of $7.7 million, said property firm Colliers International, which is conducting the auction.

This price works out to about $890 per sq ft (psf), said Colliers deputy managing director Grace Ng in a statement yesterday.

Ms Ng added that this is a "reasonably attractive price in the current market, given the site's redevelopment potential".

The rectangular plot can hold either two bungalows of 4,333 sq ft each, or three terraced houses with an area of 2,000 sq ft to 3,000 sq ft each, Colliers said.

Either configuration would appeal to home buyers seeking a larger space for a multi-generational household.

Developers may also be keen in acquiring the site due to "the rare availability of such sites being put up for sale in Singapore", Colliers added.

Ms Ng said that a new detached house in Serangoon with about 4,300 sq ft of land area could fetch $6 million, or $1,400 psf.

"Prices of landed properties continue to hold firm despite the recent government curbs in the residential market because there is still an underlying interest in landed properties," she noted.

The median price for detached houses outside the central region - such as in Serangoon - remained above $1,100 psf as at the second quarter.

The Brighton Crescent site is surrounded by landed properties, comprising a mix of single- and double-storey houses.

It is near the popular Chomp Chomp Food Centre and a short drive from the Central and Seletar expressways. The nearest MRT stations are Lorong Chuan and Serangoon.

The auction will be held at Amara Hotel at 2.30pm on Sept 24.

-By Fiona Chan

Temasek, JTC units have history of tie-ups

Due to merge, the firms have shared expertise on joint projects in the past

Source: Straits Times / Money

THE four units of Temasek Holdings and JTC Corp now conducting due diligence ahead of a planned merger already have a rich history of collaborations.

The two groups announced last week that they were exploring a merger of Ascendas and Jurong International Holdings (JIH), both JTC units, with Temasek-owned Singbridge and Surbana.

The idea is to create a major urban planning and development firm able to capture big projects in developing markets that are undergoing rapid urbanisation.

The new entity would provide comprehensive services and solutions covering the project from start to finish.

In fact, the four firms have tied up in various combinations several times over the years to benefit from each other's expertise.

Ascendas and JIH told The Straits Times via e-mail yesterday that past collaborations with Singbridge and Surbana helped them to take on larger projects.

For example, tying up with Singbridge enabled Ascendas to take up the Ascendas OneHub Guangzhou Knowledge City project.

This is the first integrated business park development within the Sino-Singapore Guangzhou Knowledge City. Ascendas is the master planner of the OneHub, while Singbridge is its co-master developer.

Spokespeople from Ascendas and JIH added that cooperating with Singbridge and Surbana also enabled them to take part in projects that required expertise beyond their core competencies.

These include the Dalian Chang Xing Dao Industrial Park and DaNaHai International Petrochemical Park in Guangdong, China.

For both projects, JIH unit Jurong Consultants was tasked with industrial and township planning while Surbana did the residential planning.

"Singbridge invests in, develops and manages integrated cities and sustainable urban solutions across the region, while Surbana has capabilities in master planning and design," the spokespeople said.

"Both Singbridge and Surbana brought valuable expertise to the table that complemented Ascendas' and JIH's core capabilities in building business space solutions and integrated developments."

Data from Temasek shows that at least five other projects have involved two or more of the four firms tying up with each other.

These include Tianjin Eco-City, which involves three of them. Singbridge owns a 10 per cent stake in the project, Surbana developed its first public housing development and Jurong Consultants served as the conceptual masterplanner for the Tianjin Eco-City Business Park.

While most of their collaborations have been in Asia, the firms have also joined hands in markets as far away as the Congo, in Africa, where Surbana and Jurong Consultants are both involved in the Special Economic Zones of Oyo-Ollombo and Pointe Noire.

Observers have said that by forming a merged company, the four firms stand to capture even bigger projects worldwide, at a time when many developing nations, including nearby giants China and India, are building cities to create economic opportunities for their growing populations.

"Large firms have convening power - they have the capacity to bring diverse specialist skills together," noted Dr Stephen Cairns, the scientific director of the Future Cities Laboratory at the Singapore-ETH Centre.

"They must use this convening power to put the best of the world's current research in city planning and urban design into action. This work takes a little bit more risk than is the norm. Bigger firms have the robustness and scale to take that risk."

Ascendas and JIH said that before the announcement of the planned merger was made public, they had informed and explained to their staff the rationale behind the proposal, "which seeks to provide more growth opportunities not just for the four businesses, but also our people".

"Following the announcement, both JTC and Temasek have also met the management teams of both Ascendas and (JIH) to discuss plans with them. Staff will also be kept updated on any new developments," Ascendas and JIH said.

-By Ysmine Yahya, Assistant Money Editor

Five Amber Skye units sold before today's launch

Source: Straits Times / Money

THE freehold condominium Amber Skye in Marine Parade saw five units sold during a week-long preview ahead of today's launch.

The sold units were all two-bedroom flats of 1,100 sq ft and bought by Singaporeans for $1,800 to $1,900 per sq ft (psf), the developers said.

Amber Skye will have 109 units - one-bedders from 527 sq ft to four-bedroom units spanning 2,982 sq ft, six penthouses from 3,300 sq ft to 4,100 sq ft and two 5,177 sq ft "grand villas" that span two floors.

Facilities nearby include the I12 Katong and Parkway Parade shopping malls, as well as the upcoming Amber MRT station on the Thomson-East Coast Line, which was unveiled last month.

The project at 8, Amber Road, is being built by China Sonangol Land and OKP Land.

OKP Land's parent firm, OKP Holdings, and China Sonangol Land are also developing the 54-unit luxury project TwentyOne Angullia Park in Orchard Boulevard.

This is OKP Land's first foray into property development.

OKP Land executive director Or Lay Huat said yesterday he was "optimistic" about the launch.

Mr Tung Kum Hon, executive director of China Sonangol Land, said he was confident that the project will deliver capital appreciation as "growth and confidence in the Singapore property market returns".

China Sonangol acquired the 40,708 sq ft site in 2011 for $161.6 million, or $1,118 psf, when Amber Towers, a 35-year old project, was sold en bloc.

The project is expected to obtain its temporary occupation permit by June 2017.

-By Cheryl Ong

Higher sinking fund for former HUDC estate

Hougang Ave 2 residents better able to build fence and carpark gantries

Source: Straits Times / Singapore

FOR months, residents of the newly privatised HUDC blocks at Hougang Avenue 2 did not know if they could afford to put up a fence around their estate.

They had been waiting to discover how much they are due to receive from Aljunied-Hougang-Punggol East Town Council (AHPETC) from a sinking fund they had paid into when it was still public housing.

The initial estimated sum of $385,000 looked too low to cover the costs for a fence and carpark gantries to be erected. This is a standard procedure when public housing estates go private, as the 336-unit Hougang Avenue 2 estate did on May 22.

The sum would have left too little for long-term maintenance work. However, it has since been given a revised estimate from the council of $600,000 - enough to make residents' plans possible.

Hougang Avenue 2 management committee chairman Winston Chong pointed out that this is still an unaudited figure, with the National Development Ministry's audit of AHPETC's finances to wrap up by the end of the year.

"They (the town council) have done all they can do to revise the numbers to an acceptable level," he said, adding that residents' reactions vary but "mostly, people feel that... it's better than what we had before".

Yet, for a resident who wanted to be known only as Dr Lowe, questions remain.

"Taking into account it was only around two years back when the sinking fund estimate given by the AHPETC was in excess of $1.2 million, even the $600,000 ballpark given now is rather low," said the 33-year-old researcher.

Two other former HUDC estates previously under AHPETC are also getting on with their belated estate plans.

The 244-unit Serangoon North former HUDC estate has an unaudited sinking fund of $400,000.

Households there have agreed to contribute an additional $32 per month to the fund so that they can put up fencing and carpark gantries, and fix the estate's breakdown-prone lifts.

This is on top of the usual privatisation cost, capped at $30,000 per household. The exact sum to be paid is not known yet.

Resident Peter Gwee, 63, is resigned to paying the extra sinking fund contribution but does not think it is fair.

"If other HUDC estates have gone private and they didn't pay this amount, then we are victims," said Mr Gwee, who runs his own business.

Management committee chairman Poon Mun Wai said: "While we are busy carrying out various urgent activities in the estate, a sub-committee is also tasked to engage AHPETC to seek clarification on the issue of sinking funds as well as the issue of cyclical works not done the last few years."

Meanwhile, the 286-unit Hougang Avenue 7 estate has received an undisclosed sinking fund estimate between that of the other two estates.

"It's an improvement from the last estimate (of $328,000)," said former pro-tem committee chairman Lee Meng Chin.

But he added that the committee has not accepted the new figure and has given the Town Council its own estimate, which it did not disclose, based on contribution and expenditure figures.

AHPETC did not respond to queries from The Straits Times.

-By Janice Heng

Real Estate Companies' Brief

SC Global rolls out tennis-for-kids project

Tie-up with tennis body to give primary schoolchildren access to the sport

Source: Business Times / Singapore

CULTURE, Community and Youth Minister Lawrence Wong was at the Education Ministry's sports hall on Wednesday to play tennis with a group of 40 schoolchildren at the launch of SC Global Developments' new "Tennis for Every Child" programme. The local luxury property developer, in collaboration with the Singapore Tennis Association (STA), has rolled out this five-year programme worth about S$500,000 to help nearly 10,000 primary schoolchildren access the sport as part of their school programme in the first year. Fourteen schools have enrolled so far, and four of them have incorporated tennis as a co-curricular activity (CCA) option. The programme will subsidise the coaching fees for the CCA over the first three years, with coaching professionally managed by the STA. SC Global is the presenting sponsor for the inaugural BNP Paribas Women's Tennis Association Finals tournament to be held at the Singapore Sports Hub on Oct 17-26.

Global Economy & Global Real Estate

Dubai developer seizes 'second chance'

Jailed but cleared of fraud charges, he finds it difficult to rebuild reputation

Source: Business Times / Property

[DUBAI] Dubai's boom-and-bust real estate market can land you at the wheel of a Rolls-Royce or behind bars. Kabir Mulchandani should know: He's experienced both.

Five years after spending 140 days in jail facing charges of fraud and embezzlement for which he ultimately was cleared, the chairman of developer Skai Holdings stands at a building site watching cranes start work on one of the company's three projects.

They will have a combined value of about six billion dirhams (S$2 billion) when completed.

"I guess the beauty of life is its uncertainty," said Mr Mulchandani, 42. "I went from making corporate deals, hanging out on a yacht and living in Emirates Hills to sharing a jail cell with eight others."

-From Dubai, UAE

Lower Manhattan revival nears culmination 13 years after attacks

Building at the trade center site is set to be substantially completed in the next year

Source: Business Times / Property

[NEW YORK] Anthony Gardner had sworn off high floors of skyscrapers until his guides on a tour of New York's 1 World Trade Center offered to take people to the 83rd storey. That's the same floor his brother, Harvey Gardner III, was on 13 years ago when the first plane hit the site's North Tower.

"That was a sign that I needed to go up there, and I was so glad and grateful that I did," said Mr Anthony Gardner, 38, who left a public relations career after his brother's death in the Sep 11, 2001 attacks to work on behalf of victims' families.

The World Trade Center site's integration of memory with commerce creates "a very powerful experience for visitors while also contributing to the economic revitalisation of lower Manhattan," said Mr Gardner, now the executive director of the New Jersey State Museum in Trenton. "You're really seeing that take form now today."

Building at the 16-acre trade center site is set to be substantially completed in the next year, following delays, litigation, disputes and power plays among a cast of stakeholders that included political officials, residents, architects and advocates such as Mr Gardner, survivors of the almost 3,000 people lost in the cataclysm. As construction nears a culmination, lower Manhattan is standing out for its revival. Office leasing is accelerating, with media and technology companies joining the financial firms that traditionally inhabited the area, and the population has surged. With the 9/11 memorial and museum now fully open, and two office towers, a transit hub and retail centre to be done by late next year, people are finally going to get to live and work in the vision of a new downtown forged more than a decade ago.

-From New York, US

Atlantic City's Trump Taj Mahal casino likely to close in Nov

Casino job losses in city to hit 8,000 this year as company files for bankruptcy

Source: Business Times / Property

[ATLANTIC CITY] The second poker chip dropped for Trump Entertainment Resorts on Tuesday, when the company filed for bankruptcy protection and threatened to close the Trump Taj Mahal Casino Resort in Atlantic City, New Jersey, by Thanksgiving if it failed to cut expenses drastically.

The gambling company is already set to shut down its only other property, Trump Plaza Hotel and Casino, in a week, making it the fourth casino to close this year on the Atlantic City boardwalk.

Trump Taj Mahal, once the largest and most glamorous of the city's casinos, had begun to look frayed around the edges in recent years.

The white-towered casino, like the other casinos in Atlantic City, has been buffeted by competition from dozens of newer gambling halls that have opened in Maryland, New York, Pennsylvania and West Virginia.

-From Atlantic City, US

Cambodia holds construction, property expo

Source: Business Times / Property

[PHNOM PENH] An international construction and property exhibition kicked off on Wednesday, in the capital city of Cambodia, as the country's construction continued enjoying strong growth, officials said.

Andrew Siow, chief executive officer of AMB Event-Cambodia, which organised the expo at the capital's Diamond Island Exhibition Center, said that more than 300 companies from 23 countries and regions have their construction and property products displayed at the three-day event.

Im Chhun Lim, minister of Land Management, Urban Planning and Construction, said that the expo was a large international event in Cambodia and would contribute to the development of Cambodia's construction, which has seen a rapid growth in recent years.

He said that the country received a total investment of nearly US$2.8 billion in construction last year, up 31 per cent year on year.

-From Phnom Penh, Cambodia

Speculators Go Online Chasing Profits as Home Prices Drop

Source: Bloomberg / Luxury

With just 11,000 yuan ($1,796), 50-year-old Deng Bangfu made his first property investment in China, flipping it in just two months for a profit even as the nation’s home prices fall.

Deng and about 300 other investors bought a 14.9 million yuan townhouse in June in the southern Chinese city of Dongguan and sold it in August for 16 million yuan. The vehicle: a peer-to-peer lending and financing website called Tuandai, which is testing a crowdfunding product that meets developers’ desire to quicken sales by tapping demand for better returns.

“Now I can tell people I once owned a townhouse, which I could never afford myself all my life,” Deng, an accountant at a technology company in Dongguan, said by phone. “We know that local governments have started loosening home-purchase restrictions. As soon as banks ease mortgage curbs, home prices will quickly rebound.”

Online investors, who since 2011 helped drive a 50-fold increase in financing through peer-to-peer websites such as Tuandai, are turning to property as falling home prices prompt the government to ease curbs aimed at stamping out speculation. Officials are seeking to revive local-government revenues at the risk of bringing home-flippers back to the market.

Speculators could return, Fitch Ratings said in an Aug. 7 report.

“If liquidity recovers, home prices start to go up and sentiment improves,” Andy Chang, Fitch’s Hong Kong-based property analyst, said by phone. “Peer-to-peer lending will surely play a stronger role pushing the waves because it’s pure speculation or investment demand.”

Rife Speculation

Speculative buying -- selling assets in a short period of time -- accounts for more than 20 percent of demand in first-tier cities, which include Beijing and Shanghai, JPMorgan Chase & Co. analyst Ryan Li wrote in a report last month.

Investors accounted for 40 percent of homebuyers in 2007, when Shenzhen World Union Properties Consultancy Inc. started asking clients their reason for buying. That was three years before former Premier Wen Jiabao imposed home-purchase curbs and raised down payments to prevent a housing bubble.

Home sales plunged 10.5 percent in the first seven months from a year earlier amid tight credit, according to government data, reversing a 27 percent jump last year. New-home prices fell in 64 of the 70 cities tracked by the government in July from June, the most since January 2011.

To stem the downturn, 37 of the 46 Chinese cities that imposed limits on home ownership since 2010 to snuff out property flippers have relaxed or scrapped restrictions on the number of apartments one can buy as of Sept. 3. The nation’s biggest lenders cut interest rates on first mortgages in Beijing and Shanghai.

With ‘Vengeance’

“When the market recovers, local governments change their tune and the media is again saying things like ‘the property industry is overall healthy,’” said Xu Hongwei, founder and chief executive officer of, which tracks more than 1,000 peer-to-peer loan websites. “I won’t exclude the possibility that these investors would say ‘OK, property is fine now.’”

A removal of home-purchase restrictions may prompt home prices to “rebound with a vengeance,” SouFun Holdings Ltd., owner of the nation’s biggest real estate website, said in an August report after an online survey of 599 people. Almost 80 percent of the respondents said such curbs in Shanghai had hindered their purchase plans, with 42 percent expecting the city to relax the limits later this year.

‘Irrational’ Investments

The risks of online property speculation are “very high” because anybody with 1,000 or 2,000 yuan can take part and many of them may not understand investing, Standard & Poor’s Hong Kong-based analyst Fu Bei said.

“Such investments are irrational, and they won’t become a trend” because it’s short-term speculation not supported by prices in a market downturn, said Zhang Haiqing, Shanghai-based research director at Centaline Group. “This is all fairly crazy.”

Fu said prices will keep falling because of the supply of unsold apartments. The inventory of unsold new homes in 20 large cities jumped to an average of more than 23 months of sales in June, according to Shenzhen World Union data compiled by Bloomberg News.

Seeking Returns

Bricks and mortar have historically offered better returns in China. The average home price, excluding government subsidized housing, jumped almost 180 percent from 2000 through 2012, according to official data. The benchmark Shanghai Composite Index (SHCOMP) gained less than 10 percent in the period.

“There aren’t that many investment channels with satisfactory performance in China,” said Fitch’s Chang. “If you look around, property remains relatively good among industries.”

That’s what the Dongguan online investors, so far free of any government oversight, are betting on. Tuandai attracted 288 of them, including Deng, to take part in the purchase of the 656-square-meter (7,060-square-foot) townhouse on June 17. The order book was filled in 21 hours.

‘Home Baby’

Two weeks later, 517 investors pooled 18 million yuan online in nine hours to snap up a second fangbaobao, or “home baby,” as the products are known in Chinese. This time it was a 705-square-meter townhouse in the same Citic Real Estate Co. project in Dongguan, about an hour drive from Shenzhen.

Tuandai negotiated to pay 25 percent below the market price for Deng’s townhouse and got similar discounts for another 17 Citic homes. A buyer agreed to pay 16 million yuan for the first property and the transaction was completed Aug. 23, according to the Tuandai website. That handed Deng and his fellow investors an annualized return of 40 percent, more than 13 times the benchmark one-year deposit rate, according to the website.

Dongguan eased property policies on Aug. 10, expanding tax favors and scrapping price controls, according to a statement on the city government’s website.

About 60 percent of investors lending through peer-to-peer websites had annual income of less than 100,000 yuan, 85 percent of them male, and 80 percent of them were between 20 and 40 years old, according to data provided by

P2P Boom

Peer-to-peer lending has taken off in China since 2011 as traditional methods of private lending among family and acquaintances, part of the country’s unregulated $6 trillion shadow-banking system, move online. The little-supervised platforms pool money from small investors with as little as 50 yuan to finance anything from wedding preparations, personal medical expenses to car purchases.

The total outstanding amount of investments rose 11 percent from July to 58.1 billion yuan as of Aug. 31, compared to 1.2 billion yuan at the end of 2011, according to

Sites such as Tuandai are able to negotiate large discounts as developers in China’s crowded homebuilder market are eager to revive slumping sales. Tuandai had 2 billion yuan of transactions in the year to Aug. 28, more than 11,000 investors and a lending rate averaging 16.45 percent, according to

Tuandai charges its ordinary members a 0.3 percent fee on withdrawals from online accounts, and collects commissions of 2 percent to 4 percent on loans from borrowers. Investors in the “home baby” offerings are so far exempt from any charges as the website is testing the product. Anyone can invest after registering online and transferring a minimum 50 yuan into their Tuandai account.

Turned Away

More than 10 smaller developers have approached Tuandai for help to sell homes, according to Chief Executive Officer Tang Jun. “Many developers came to me,” Tang, 27, said in an Aug. 5 interview. “I turned them all down because we don’t have that much time and energy now, and we don’t want them to rely on us to sell entire projects.”

Average prices at the Citic development fell to 35,000 yuan a square meter in June, from 40,000 yuan in October 2010, according to information on Inc.’s real estate portal.

12 Minutes

“Some developers are pushing out some of their products at low prices because homes are not selling well, and some crowdfunding websites are just seeing the business opportunity,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co. “The key question is: what if they can’t sell it?”

More than 300 investors snapped up a third “home baby” -- a 15.1 million yuan Citic townhouse -- within just 12 minutes on Aug. 27, according to Tuandai. Two days earlier, investors voted to sell the second property for 18.9 million yuan to a buyer, who runs a local advertising firm, rendering an annualized return of at least 20 percent if the transaction is completed by Oct. 2.

“For the long run, home prices will rise,” said Deng, who plowed 55,000 yuan into the third townhouse, five times his first investment and almost double the one he made in the second Tuandai offering. “Even if we can’t sell it in the market, the property will still be there.”

-By Bloomberg News

London Housing Cools After Boom in Prices That Stretched Buyers

Source: Bloomberg / Luxury

London house prices rose at the slowest pace in more than three years last month, leading a cooling across the country.

The Royal Institution of Chartered Surveyors said its monthly index for the capital dropped to 9 in August from 11 in July. A U.K. gauge slid to 40 from 48, the lowest in a year.

RICS blamed the slowdown on tougher mortgage rules that took effect earlier this year and the prospect of higher interest rates. Property outside London is showing more resilience because in some areas, “the recovery has only recently taken hold and affordability is rather less stretched,” it said.

The survey chimes with other reports indicating property demand and price growth is cooling in London. Hometrack Ltd. said that values in the capital stalled in August and there was “evidence of growing resistance” to high asking prices.

“The London market is gradually moving onto a more sustainable footing,” said Simon Rubinsohn, chief economist at RICS in London. “A modest increase in the number of instructions” is “slowly helping to create a better balance with demand and taking the edge off price gains,” he said.

Risk Rhetoric

In its analysis, RICS said “increased rhetoric” from policy makers on housing risks may also have lowered buyer confidence. Sales expectations have moderated and the number agreed deals dipped for the first time in two years last month. A measure of surveyors’ outlook for prices dropped to the lowest since March 2013.

“The key driver of the moderation in house price pressures has been a sharp cooling in the number of active buyers,” said Ed Stansfield, chief property economist at Capital Economics in London. “The easing in conditions already seen strongly suggests that house prices gains will grind to a halt by the turn of the year.”

Rubinsohn said the U.K. housing market has lost momentum partly because of “concerns over a likely rise in the cost of borrowing at some point in the not too distant future.” The Mortgage Market Review is also “taking its toll on activity, slowing the transaction process by on average up to a month,” he said.

The BOE kept its benchmark interest rate at a record-low 0.5 percent this month. In August, two of the central bank’s nine policy makers wanted to increase the rate, though were outvoted by the majority.

Speaking this week, Governor Mark Carney signaled that borrowing costs could begin to increase in spring next year.

“With many of the conditions for the economy to normalize now met, the point at which interest rates also begin to normalize is getting closer,” he told union leaders in Liverpool, England. “You can expect interest rates to begin to increase.”

-By Fergal O’Brien\

Paramount Buys San Francisco Offices for $395 Million

Source: Bloomberg / News

Paramount Group Inc., which is planning a record U.S. initial public offering for a real estate investment trust, bought a 23-story office building in San Francisco for about $395 million.

Paramount, based in New York, purchased the property at 50 Beale St. from Rockefeller Group Investment Management Corp., the companies said in separate statements today. Rockefeller Group said it sold the 662,060-square-foot (61,507-square-meter) tower for $596 a square foot.

“This building, which is located in one of the most desirable neighborhoods in the heart of San Francisco undergoing immense redevelopment, is the type of iconic asset where we believe we can utilize our operational expertise to attract and retain a premium tenant base,” Paramount Chief Executive Officer Albert Behler said in a statement.

San Francisco is poised to surpass Manhattan as the most expensive U.S. office market next year as technology companies extend a surge in leasing, according to CBRE Group Inc. The Paramount deal follows recent office transactions including Columbia Property Trust Inc. (CXP)’s $309 million purchase of the 33-story 650 California St. from Tishman Speyer and Prudential Real Estate Investors, announced yesterday, and the acquisition of Foundry Square II by TIAA-CREF and Norway’s sovereign-wealth fund, the world’s largest.

Paramount, which filed for an IPO last month, plans to raise more than $2.5 billion in the stock sale, people familiar with the matter said at the time. The largest U.S. REIT public offering was a $1.4 billion IPO by Douglas Emmett Inc. in 2006, according to data compiled by Bloomberg.

Bechtel Headquarters

Paramount has office buildings in New York, Washington and San Francisco, including One Market Plaza, the landlord’s only other property in the West Coast city. The building at 50 Beale St. is about 90 percent occupied. Tenants include Bechtel Corp., which has its headquarters at the tower, Paramount said.

Rockefeller Group Investment Management, which sold the building on behalf of a joint venture of Rockefeller Group U.S. Premier Office Fund LP and Mitsubishi Estate New York, bought the property two years ago. The sale “presented an opportunity to realize gains ahead of plan driven by the strength of the recovery in San Francisco,” the seller said.

-By Nadja Brandt