Real News‎ > ‎2014‎ > ‎September 2014‎ > ‎

19th September 2014

Singapore Economy

Possible new China-Singapore joint venture is "a big decision": PM Lee

Wrapping up his China visit, Prime Minister Lee Hsien Loong told reporters that logistics, aviation and telecoms could be focus areas for a possible joint venture in western China, but such a project would have to be considered carefully. 

Source: Channel News Asia / Singapore

HONG KONG: Logistics, aviation, telecoms and financial services could be focus areas for Singapore and China's possible joint venture in western China, said Prime Minister Lee Hsien Loong on Thursday (Sep 18).

Wrapping up his China visit with a candid, wide-ranging interview with the Singapore media, Mr Lee said improving connectivity and services for China's vast, relatively undeveloped western region "makes sense”, but Singapore has yet to make a decision on how, and whether the project will proceed.

Talks about a new China-Singapore joint venture started last year, when Chinese Vice-Premier Zhang Gaoli proposed it on a visit to Singapore. Government-to-government projects are costly endeavours. Following the Suzhou Industrial Park and Tianjin Eco-City, the Chinese are "very keen" on a third one, while Singapore is taking it "very seriously", said Mr Lee.

"I think the Suzhou project has more or less graduated. It is 20 years this year, we are celebrating the anniversary," he said. "The Tianjin project is making progress but it is still early days and a long way to go yet. So to start a new one, well it's a big decision, we have to consider that carefully."

Southern China is also developing rapidly, with large infrastructure projects that promise to connect the region to Southeast Asia and the rest of the world. Mr Lee said Singapore can prosper together with these fast-rising cities, but only if Singapore keeps moving ahead.

This latest trip saw him visit several cities in southern China, including Guangzhou, which saw a recent leadership change - part of the Chinese central government's ongoing corruption purge.

This was not a topic of the leaders' discussion, but Mr Lee told reporters the campaign is clearly in progress. "If you look at the way they serve you the meals - in the old days, you would have very elaborate meals. Now it's good quality but ‘chop chop’ and fewer courses. Which actually I'm very happy with and I suspect some of them are very happy with too."

Mr Lee wrapped up his China visit in Hong Kong, where as recently as last weekend, activists were staging protests calling for universal suffrage. Asked to comment, Mr Lee said both sides - activist and government - have a big vested interest to make the 'one country, two systems' path work.

"There is really no other way forward to it. If we understand that then we will know what are the possible ways forward. And which ways don't really lead to any practical, sensible outcomes," he said. 

On the Middle East, Mr Lee said Singapore is happy that the United States has taken a stand against the Islamic State militants, but the Republic has not yet decided how it can support the US-led effort. "In the Middle East, things are never so simple and you can't come riding in on a white horse, knock out the bad guys and tomorrow, peace breaks out. It's a very complicated situation," he noted. 

- CNA/xy

S'pore seriously considering third China park project

It will focus on connectivity and modern services

Source: Business Times / Top Stories

SINGAPORE is seriously considering taking on another mega industrial park project in China, this time in the western region which will figure large in the next phase of the country's economic development, Prime Minister Lee Hsien Loong told Singapore reporters on Thursday.

But he said Singapore has yet to make up its mind to go ahead with the project, which Chinese newspapers reported will focus on "connectivity and modern services". "We have not reached that point yet."

"The Chinese side is very keen and we're taking it seriously," Mr Lee said after wrapping up an eight-day official visit to southern China and Hong Kong.

While it's referred to as another government-to-government project, similar to the China-Singapore Suzhou Industrial Park and the China-Singapore Tianjin Eco City project, he said "the exact form will depend on the Chinese side and we'll be discussing with them". "It's a big decision. We have to consider that carefully."

The project must have a balance between policy and commercial goals, according to him. "To start a third government-to-government project, there has to be a clear understanding of what the objective is, the economic policy and, at the same time, how can we package it so that it's a commercially cogent and viable project," Mr Lee said. "Then also, (we) have to decide where we're going to do this. These are things we're studying and discussing with the Chinese side and we hope to come to a conclusion soon."

He agreed that connectivity and modern services should be the focus of the project. It "makes sense because you're talking about the western region, you're talking about vast areas, linking them together not just physically but also IT, financial services . . . and modern services is something which encompasses logistics and many other relevant things".

Mr Lee would probably like the project to follow the private-sector-led and government-backed model that is the Sino-Singapore Guangzhou Knowledge City project. After visiting this industrial park in Guangzhou last week, he suggested that, because government resources are already stretched to their limits, it is one model for future China-Singapore mega investment projects.

Mr Lee, who had spoken to some of the Singapore investors in southern China in the past week, said they are taking the China market very seriously. "One of them told me (that) working in Guangxi, which is not quite so developed, not quite so well known, there's advantage being there because there are more untrodden paths where you can break new ground and find new opportunities."

The Singapore businessmen were happy to see him there. "They said, 'How about you come twice a year because when you come then we have links. We make contact with the party secretary, with the governor, or the chairman in the case of Guangxi, with the mayors'," Mr Lee said.

"And they get the visibility and everybody knows that there's blessings from the two governments."

On the new Chinese political leaders he met, Mr Lee observed that they are "very driven, know their job and are very anxious to get ahead and to make an impact in their province, of in their city or in their area".

"Whether you're in Guilin, which is a tourism area, or in Shenzhen, which is a 10-million population city, they all are on the lookout for ideas and they all want to show results," he said. 

"And they would like to work with Singapore. Our brand name is good. They think it's a plus to be associated with us, to have projects where they can say, 'This is a Singapore project'."

In Hong Kong, which he last visited in 2001, Mr Lee found that the former British colony has built "even closer ties with China and (is) contemplating its next steps forward".

"They are planning for the next 30 years and we have to be part of this - and our attitude must be that it's good that the region is prospering, so long as we are also moving with it," he said.

-By Chuang Peck Ming in Hong Kong

S'pore can prosper along with Chinese cities, says PM Lee

Source: Straits Times / Top of The News

CHINA'S cities are rising and developing rapidly, and Singapore can prosper with them - but only if it continues to move forward with the region.

Speaking to reporters at the end of a week-long trip to southern China yesterday, Prime Minister Lee Hsien Loong noted how cities such as Guangzhou and Shenzhen have transformed and caught up with Singapore since his last visit almost a decade ago. And in Hong Kong, which he visited this week after 13 years, he saw that its planners are positioning the city "for the next 30 years", he added.

"We have to be part of this. And our attitude must be that, it is good that the region is prospering, so long as we are also moving with it," he said.

Asked if China's fast-rising second-tier cities are a threat to Singapore, he said: "If you don't move, of course it is a threat. But if you continue to move, then we prosper with them."

New York, London and Paris are not threats to Singapore but mutually complementary parts of a globalised world, he said. Just as Singaporeans live and work in other cities, foreigners come to Singapore for opportunities.

"That is the way talent moves in the world, and that is what we have to accept if we want to prosper," he said.

In relatively unexplored parts of China such as the Guangxi region, opportunities abound for Singaporean businessmen, he said. The Singapore brand name is well-regarded and opens doors in China.

During his visit, all the Chinese leaders Mr Lee met, including Guangdong party secretary Hu Chunhua, suggested ideas for collaboration with Singapore.

But on Beijing's proposal for a third government-to-government project in its western region, Mr Lee stressed that the Singapore Government has not yet committed to the idea, which would stretch its resources considerably.

There are two existing Sino- Singapore government-level pro- jects - the Suzhou Industrial Park and Tianjin Eco-City.

Both involved not just commercial objectives but also policy goals, which Mr Lee defined as something beyond the commercial viability of a project.

"What are the new systems you want to try out? What are the new initiatives you want to launch? What examples do you want to prove so that other parts of the country can pick up useful ideas and implement them?"

In Suzhou, the novelty at the time was "in bringing all the pieces of the software together to see how you can run a city, in China, using some of the ideas of how we have done it in Singapore".

In Tianjin, the policy objective was to answer the question: How do you develop with a heavy focus on an environmentally friendly approach?

Singapore will proceed with the third project only if it similarly fulfils this double objective of being commercially viable and breaking new policy ground, Mr Lee said.

He did reveal that if the project does go ahead, it will be in the area of connectivity and modern services. China's vast, western region needs to be linked up not just physically, but through IT, financial, telecommunications, logistics and aviation services, he said.

PM Lee had discussed this with Executive Vice-Premier Zhang Gaoli when they met earlier this week. It will be on the agenda at the next meeting of the Sino-Singapore Joint Council for Bilateral Cooperation in Suzhou later this year.

But Mr Lee said it would be too ambitious to expect an agreement on the project, and its location, by then.

-By Rachel Chang in Hong Kong

Household income rises faster than expenditure

Source: Business Times / Top Stories

[SINGAPORE] Households in Singapore are earning more than they are spending, a new government survey released on Thursday has found.

The latest Household Expenditure Survey (HES) by the Department of Statistics (DOS) also found that average monthly household incomes have gone up across the board, with the bottom 20 per cent of families registering the largest gains.

This survey, the 10th in Singapore's history, is carried out every five years. For this latest report, the national statistical authority interviewed 8,575 Singaporean and permanent resident households from October 2012 to September 2013.

The results showed that the average monthly household income from all sources was S$10,503, up from S$8,105 in the previous survey five years ago.

This is an increase of 5.3 per cent per annum in nominal terms; the rise outpaced inflation, which averaged 3.1 per cent a year between 2008 and 2013.

The DOS' figures do not account for inflation.

Households in the bottom fifth enjoyed the largest income growth. Their average income grew by 6.6 per cent a year over the last five years to S$2,022, while those in the top fifth grew their incomes at a rate of just 4.7 per cent a year.

Across housing types, those in HDB flats experienced higher annual income growth (5.2 per cent) between 2007/08 and 2012/13; those living in condominiums and apartments had increases of 3.6 per cent, and those in landed homes, 4.2 per cent.

Income from employment accounted for 79 per cent of total household income from all sources. Business income contributed 11 per cent, and income from non-work sources such as rental and investments, 10 per cent.

The average amount spent by households was S$4,724 last year, compared to S$3,809 five years ago. This worked out to an annual increase of 4.4 per cent.

The DOS attributed this increase partly to households consuming better quality and higher-end products and services.

Housing, food and transport accounted for the largest shares of household expenditure across the income groups. Collectively, they made up 65 per cent of monthly household expenditure on average, up from 64 per cent in 2007/08 and 61 per cent in 2002/03.

Households here are spending more when it comes to eating out. While meals at hawker centres and food courts continued to make up the bulk of their expenses in this category, the DOS found that the share of spending in restaurants, cafes and pubs has crept up over the last decade.

The average expenditure on transport also rose, from S$700 a month in 2007/08 to S$810 in 2012/13. This came mainly from higher expenses on flights and private transport. The cost of taking public transport went up slightly over this period, from S$160 to S$170.

The survey also pointed to an improvement in standards of living in Singapore; more households now own consumer goods such as mobile phones, LCD television sets and personal computers.

The first HES was undertaken in 1956/57 and covered only the urban area in Singapore. The second survey, which was country- wide, was done in 1972/73. Since then, the HES has been carried out every five years.

The results are used for expenditure and income studies, as well as to update the weighting pattern and the basket of goods and services for the compilation of the Consumer Price Index.

-By Lee U-Wen

Household incomes up, with bottom 20% seeing fastest rises

Residents also spending more each month than five years ago: Survey

Source: Straits Times / Top of The News

HOUSEHOLDS here enjoyed rising incomes across the board over the past five years, with the bottom 20 per cent experiencing the fastest pace of growth.

Residents here are also spending more every month compared with five years ago, with more money going into higher-quality and more expensive goods and services, such as eating in restaurants, spending on air travel and pay-TV.

These snapshots of the average resident household's income and spending patterns were captured in the latest Household Expenditure Survey, which polled more than 11,000 households.

The survey showed that average monthly incomes of resident households here rose 5.3 per cent a year between 2008 and last year, slightly slower than the 5.6 per cent annual rate in the previous five-year period.

But it was the lowest income group that had incomes rise the fastest over the period. Those at the bottom saw average monthly incomes rise by 6.6 per cent a year, growing from $1,466 to $2,022.

A big part of the reason that incomes at the bottom rose quickly was financial help from the Government, which includes aid such as the Workfare Income Supplement and GST Vouchers.

The Department of Statistics, which conducted the survey during October 2012 and September last year, said regular government transfers accounted for 9.3 per cent of this group's total income.

In all, government rebates, subsidies and financial aid came to nearly 90 per cent of the bottom group's average annual household income per household member before any transfers took place.

The data also gave a glimpse of the changing lifestyles of Singaporeans. The resident family now spends $4,724 on average a month, up from $3,809 five years ago. About 30.1 per cent of the monthly expenses went to housing and related expenses.

The next biggest item on the list was food, accounting for about 26.5 per cent of total expenses. Residents here spent $1,188 a month on food.

Transport came next, with households here spending about $811 on average a month. But the bulk of this expenditure was on private road transport, which cost $574 a month on average. Households here spent just $167 a month on public transport.

Together, all three items accounted for nearly two-thirds of monthly expenses on average, noted the Statistics Department.

But while things did get more expensive, with inflation at 3.1 per cent a year on average over the past five years, the Statistics Department also noted that increases in household expenditure "partly reflect lifestyle changes and spending on better-quality products and services".

In all, growth in household income continued to outpace growth in expenditure, a trend which bodes well for households, said OCBC economist Selena Ling. She noted that the past five years had been a difficult period, starting with the recession as well as rising inflation.

"Given all that, it's encouraging that we see incomes outpacing expenditure growth. We are seeing the effects of fiscal help for some of the poorest households," she said.

-By Aaron Low, Deputy News Editor

Incomes rise faster for HDB households

5.2% growth a year outpaces figures for condos and landed property

Source: Straits Times / Top of The News

IN THE past five years, household incomes rose across the board, but they did not do so evenly.

Households in Housing Board flats had higher income growth than those in condominiums and landed property. And although income from work went up, it now forms a smaller proportion of overall household income.

HDB household incomes grew 5.2 per cent a year on average, according to the Department of Statistics' Household Expenditure Survey, conducted every five years.

The latest survey is based on data from 2012 to last year.

In contrast, incomes rose 3.6 per cent a year for households in condos and other apartments, and 4.2 per cent for those in landed properties.

In absolute terms, the gap is still stark. The average monthly income was $7,900 for HDB households, while it was $20,536 for households in condos and $26,058 for those in landed properties.

But with incomes growing faster at the bottom, the income gap seems to have narrowed, noted SIM University economist Randolph Tan. The bottom fifth saw annual income growth of 6.6 per cent, compared with 4.7 per cent for the top fifth.

Overall, household income growth was driven by rises in work and non-work incomes.

Business income rose an average of 5.2 per cent a year, while employment income rose 3.9 per cent. Non-work income grew the fastest, at 22 per cent a year.

The differing growth rates meant that although employment income still forms the bulk of income, its share has fallen.

It accounts for 78.6 per cent of household income, down from 84 per cent five years ago.

Business income continued to account for 11 per cent of income.

But the share of non-work income doubled to 10.5 per cent, from 5 per cent five years ago.

It was especially significant for households in the bottom fifth.

Such households get an average of $536 in such income each month. This represents more than a quarter of their income, up from less than a fifth five years ago.

More than half of this is from sources such as relatives and friends, as well as Central Provident Fund payouts. Retiree households form a quarter of households in the bottom fifth.

But much non-work income also comes from the Government, for instance, in the form of GST Vouchers and Workfare Income Supplement scheme payouts.

For households in the bottom fifth, almost $1 out of every $10 in income comes from regular government transfers, noted Nanyang Technological University Assistant Professor Walter Theseira.

"So, a large part of their income increase is because of the increase in generosity of transfers."

But this is not a good strategy in the long run, he added. "The Government will need to look at policies that help them increase their job earnings."

Those at the top are also getting more income from non-work sources, with an average of $2,956 a month. But this is mainly rental and investment income.

-By Janice Heng

Household income up, outpacing expenditure growth

Source: Channel News Asia / Singapore

SINGAPORE: The average Singaporean household earned S$10,500 a month in 2012/13 and spent S$4,720 a month on goods and services, according to a survey conducted by the Department of Statistics.

By comparison, the average monthly household income was S$8,110 in 2007/08 and the average monthly household expenditure then was S$3,810.

The Household Expenditure Survey, conducted from October 2012 to September 2013, found that household income had risen faster than household expenditure. The average monthly household income rose by 5.3 per cent per annum, while the average household expenditure rose by a lower 4.4 per cent per annum.


Households across all income groups experienced income growth over this period, the survey found. Those in the lowest- to middle-income quintiles saw their income increase by 6.1 to 6.6 per cent per annum, with households in the lowest 20 per cent experiencing significantly faster income growth between 2007/08 and 2012/13 than in the earlier five-year period from 2002/03 to 2007/08.

Across housing types, households living in HDB flats experienced higher annual income growth (5.2 per cent) during the period, compared to those in condominiums and other apartments (3.6 per cent) and landed properties (4.2 per cent).

Households across all income groups also saw increases in their average monthly household expenditure. Households in the middle-income quintile (41st to 60th percentile) experienced the fastest increase in average expenditure compared with other income groups, at 5.5 per cent per annum.

By comparison, average monthly expenditure of households in the lowest 20 per cent and 21st to 40th percentile income groups grew more slowly, at 4.5 per cent per annum and 3.7 per cent per annum respectively.

On average, each member of a low-income household earned about S$6,200 a year, receiving an average of about S$5,500 in Government transfers.

Said Dr Walter Edgar Theseira, Assistant Professor (Division of Economics) at Nanyang Technological University's School of Humanities and Social Sciences: "This is quite a large share of income. The good thing of course is that it means that they are being well supported by Government policy. The issue that we need to be concerned about in the long run, is that for this to be sustainable, they will need to increase the work income by more."

However, lower-income households are spending more than they earn, spending about S$2,200 when they earned an average of about S$2,000 a month.

Associate Professor Paulin Tay Straughan, who is the deputy head of the Department of Sociology at the National University of Singapore, said this means such households are unable to save, unlike those in the middle and high income groups. 

But in targeting assistance, she said the authorities need to find out how much access those from the lower-income group have to essential items - for instance, access to computers for children in lower-income households if it is seen to give children an edge in education.


In 2012/13, housing, food and transport accounted for the largest shares of household expenditure for all income groups. Collectively, they contributed to 65 per cent of monthly household expenditure on average, up from 64 per cent in 2007/08 and 61 per cent in 2002/03.

The increase in monthly household expenditure was partly due to households consuming better quality and higher-end products and services, the Department of Statistics said.

For instance, spending on restaurants, cafes and pubs was at 35 per cent in 2012/13, compared with 27 per cent in 2007/08 and 22 per cent in 2002/03. Still, meals at hawker centres and food courts continued to constitute the bulk of expenditure within food serving services, the survey found.

Similarly, the average expenditure on transport increased from S$700 to S$810 monthly between 2007/08 and 2012/13, due mainly to higher spending on passenger air travel and private transport. Expenditure on public transport rose marginally from S$160 to S$170 over this period.

The rate of home ownership remained high at 89 per cent in 2012/13. Even among the lowest 20 per cent income group, 82 per cent of households were home owners.

Almost everyone owned television sets and washing machines in 2012/13, at 98 per cent and 96 per cent respectively. More households also opted for better quality items such as Liquid Crystal Display (LCD)/Plasma/Light Emitting Diode (LED) TVs over Cathode Ray Tube (CRT)/projection TVs, the survey found.

Ownership of mobile phones, personal computers and air-conditioners also became more common, not only among the higher-income groups but also among the lower income. About 86 per cent of households living in HDB one- and two-room flats had a mobile line in 2012/13, up from 65 per cent in 2007/08 and 56 per cent in 2002/03. Personal computer ownership increased from 70 per cent in 2002/03 to 77 per cent in 2007/08, and further to 83 per cent in 2012/13.

Said Assoc Prof Straughan: "Moving forward, it means that while most people have, it becomes more critical to identify who is the small minority that continues to be left out of everything, because now the difference between the ultra poor group is going to be so much greater compared to the rest of Singapore society." 

- CNA/cy/do

Household income has risen faster than spending

From 2008, average annual income rose 5.3 per cent, while expenditure rose 4.4 per cent

Source: Today Online / Singapore

SINGAPORE — Households across the Republic spent more last year than they did five years ago — but their incomes grew at a faster pace than expenditures.

The average household here drew a monthly income of S$10,503 last year from sources including employment, business, dividends and contributions from friends and relatives. This marked an average annual increase of 5.3 per cent from 2008, when the average monthly household income was S$8,105.

In comparison, the average monthly household expenditure last year was S$4,720, an average annual increase of 4.4 per cent from 2008, when the figure was S$3,809.

These were among the findings of the Department of Statistics’ (SingStat) Household Expenditure Survey 2012/2013 released yesterday, which economists said were reflective of a tight labour market and the Government’s efforts to increase wages of low-income workers.

Conducted every five years, the latest survey is based on data collected in 2012 and last year for Singaporean and permanent resident households.

The numbers were given in nominal terms, but incomes and expenditure rose even after inflation was taken into account, said SingStat. Between 2008 and last year, the average annual change in inflation was 3.1 per cent.

The low- to middle-income households saw incomes rising faster than higher-income households. However, while the bottom one-fifth of households saw the biggest gains, their monthly income of S$2,022 on average still lagged behind expenditure, which averaged S$2,231.

SingStat said this was partly due to a higher proportion of retiree households among this group. It added that households may finance their expenditure through irregular receipts such as proceeds from sale of properties, lump-sum Central Provident Fund withdrawals, insurance claims or ad hoc transfers that are not part of regular income.

The disparity between spending and expenditure for the bottom one-fifth of households has, however, narrowed, which economist Randolph Tan welcomed. “I think the main concern has been the wide disparity between income and expenditure for the lowest quintile revealed (in) the previous survey in 2007/2008,” said Associate Professor Tan, a Nominated Member of Parliament and deputy director of SIM University’s Centre for Applied Research. “That has diminished significantly and although there is still a shortfall, I believe the improvements show the way forward.”

For this group of households, the value of government transfers and rebates or subsidies that offset expenditure amounted to 90 per cent of their annual household income before the transfers.

Among households in one- and two-room flats, incomes — which include regular government transfers such as Workfare and GST Vouchers — exceeded expenditures. Assoc Prof Tan felt allocating transfers by housing type has worked. “In that sense, focusing on housing type when allocating government transfers is still an appropriately-targeted approach.”

Other economists also said the survey findings show that policies to lift wages of low-income workers are working. This sets the tone for continuation of the policies ahead of next year’s Budget, said Barclays economist Leong Wai Ho.

The increase in expenditures last year was partly due to households consuming better-quality and higher-end products and services, said SingStat.

More people are dining out and while meals at hawker centres and food courts continued to make up the bulk of expenditure from dining out or takeaways, the share of spending in restaurants, cafes and pubs has increased.

Housing, food and transport continued to account for the largest shares of household expenditure, totalling 65 per cent. The remainder went to recreational and cultural activities, education, insurance payments and health services, among other things.

Housing and related expenditure registered the largest increase in dollar terms among all expenditure groups in the past five years, from S$1,169 in 2008 to S$1,734 last year. But when imputed rentals for owner-occupied accommodation were excluded, expenditure on actual rentals paid by renting households, utilities and furnishings increased from S$550 to S$690.

Households living in public flats spent a larger proportion of their total expenditure on food than those living in private property and households in one- and two-room flats spent proportionately more on healthcare than other households. The latter is because of the higher proportion of retiree households (nearly 20 per cent) in one- and two-room Housing and Development Board flats, said SingStat.

On the whole, the survey is reflective of underlying macroeconomic conditions such as a full-employment economy, said CIMB economist Song Seng Wun. “We’re seeing businesses pay more and the Government has moved to push wages up. This should help to support wage growth on both the nominal and real income levels,” he said. “It’s not the cheapest place on the planet to live, but wage growth allows households to cope with the cost of living.”

-By Neo Chai Chin

S’pore households better off than before in material terms

Source: Today Online / Singapore

SINGAPORE — Households here are materially better off than before, going by their material possessions and consumption patterns.

This includes low-income households, findings from the Department of Statistics’ (SingStat) Household Expenditure Survey 2012/2013 showed.

Rates of Internet access, pay-television subscription and ownership of mobile phones rose among those in the bottom one-fifth of households in terms of income. Within this group, nearly two in five households had 
pay-TV subscriptions and nearly nine in 10 owned a mobile phone. Nearly half the households had Internet access, with just over half owning a personal computer.

In general, 96 per cent of the households surveyed had a washing machine and 76 per cent had air-conditioners.

The increased ownership of these gadgets and appliances reflects improvements in standards of living, said SingStat. Ownership of washing machines and television sets was near universal, it said, and more households had also opted for better-quality items, such as liquid crystal display (LCD) and light emitting diode (LED) TV sets.

The proportion of households with cars increased to 42 per cent from 38 per cent five years ago.

Average expenditure on transport increased to S$811 monthly last year, up from S$700 in 2008. SingStat said this was due mainly to higher spending on air travel and private transport, as expenditure on public transport rose marginally from S$157 to S$167 between 2008 and last year.

The increase in private transport expenditure was the result of a rise in spending to operate the vehicle, such as on maintenance and petrol. While prices of cars and Certificates of Entitlement had increased in recent years, that did not translate into an increase in the average household expenditure on car purchases, said SingStat.

This was because the proportion of households who bought cars during the survey year was not high, relative to the overall number of households. A significant proportion of existing car owners also bought their cars before the price spike and were servicing loans based on those prices.

Spending on recreation and cultural activities increased marginally from S$383 on average a month in 2008 to S$399 last year.

Expenditure on goods and services, such as alcohol and tobacco, hotel stays and insurance, went up in the past five years. SingStat noted an increase in spending on insurance, including term life insurance, health, travel and motor vehicle insurance.

The survey sampled 11,050 dwellings and eventually processed data from 8,575 households.

-By Neo Chai Chin

Singapore Real Estate

Tidal wave of property supply hits S’pore

Source: Today Online / Business

Investors should sell their residential investments in Singapore. The property market, which has been gradually declining, does not need any new action to tip it over. Just the sheer number of new homes being supplied both in Singapore and Iskandar will drive prices lower.

New private home sales in Singapore have plunged in the past three months to about 40 per cent of the monthly average of the past five years or so.

Since January 2010, the average number of homes sold by developers each month has exceeded 1,300 units. The total number of new homes sold in June, July and August were 531, 560 and 490, respectively, including executive condominiums (EC). Excluding the hybrid housing type, the respective numbers were 482, 509, and 432, respectively, Urban Redevelopment Authority (URA) and Century 21 (IPA) data showed.

Given seasonal factors, such as the Hungry Ghost Month and the quadrennial football World Cup, the three months of dismal private home sales will not be sufficient to render the residential sector a bear market. However, the downward trend can be confirmed by several other indicators.

The Housing and Development Board (HDB)’s resale price index, which has a direct impact on mass market private properties, has fallen 5.4 per cent over the past four quarters.

During the same period, the URA’s private residential price index slipped 3.4 per cent. The weakness is also reflected in the rental market, where median private non-landed rentals eased 1.1 per cent in the past four quarters to S$3.79 psf per month. Meanwhile, private residential occupancy rates fell to 92.9 per cent in the second quarter of this year from 93.9 per cent in the third quarter of last year. In absolute terms, the number of vacant units increased to 21,268 in the second quarter of this year from 17,459 in the third quarter of last year.

Taken together, it is evident that we experienced a slow decline over the past year. Will this gradual weakening lead to a soft landing? Or are we about to fall off the edge of a cliff? As a practising real estate agent, I find it tougher to hold up high rents for landlords. With the rising vacancy rates amid a stream of newly-completed properties, the competition for tenants is intense, especially with the Government tightening foreign employment.

Although some landlords have yet to tune themselves to this new reality, others have reacted quickly ahead of next year’s record high supply, which will further pressure rents.

Supply of HDB, EC UNITS and Private Residences

In the past 10 years, Singapore has added about 8,000 new private residential units per year. But next year, we can expect about 22,000 units to be completed and 24,000 the year after and at least 16,000 in 2017. The pressure on rents will be overwhelming. Lifting the property curbs will not help fill vacant apartments and improve rents.

The expected supply of new HDB flats and ECs is large as well. More than 25,000 units will be completed every year over the next three years. There are also many second-time new HDB buyers and those who are upgrading to ECs who are required by law to sell their current HDB flats when they collect the keys to their new flats or ECs. Unless a few of the cooling measures are lifted and the foreigner employment policies are relaxed, the HDB Resale Price Index and the URA Residential Price Index are set to decline at a faster pace with the onslaught of new, completed home completions, even after taking into account the need for infrastructure to keep pace with population growth.

Supply in Iskandar

We must also not forget the promise of lower-cost properties across the Causeway in Iskandar.

The numerous Iskandar residential projects launched in Singapore since 2010, in locations such as Puteri Harbour, Danga Bay, Tebrau, Medini, etc, are now being completed.

They are ready to compete for tenants from Singapore seeking to reduce their housing costs and who do not mind making the commute between the countries. I estimate that over the next four years, about 10,000 new homes will be added per year in Iskandar and some of these will find tenants from Singapore with their attractive rents.

In the past six months, there has been an increase in the number of mortgagee home sales, with several headline-grabbing ones involving luxury condominiums in Sentosa Cove and the prime District 9. During the luxury property boom from 2006 to 2008, about 60 per cent of top-end apartments were purchased by foreigners. Some have held on to their investments, but they are now feeling stifled as a result of the multiple rounds of cooling measures, weak property demand and the restricted ability to refinance under the current regime.

For those who are willing to take a long-term view, say, 15 years and beyond, landed homes and high-quality freehold properties in Districts 9 and 10 would remain safe bets as these sub-segments are limited in terms of current stock and future supply.

As for now and the immediate future, as I forecast in a commentary in this column last year (“The price war has begun”, Nov 8, 2013), sellers are lowering prices and this will continue to take its toll on investors.

I recommend that investors sell their residential investments before they are engulfed by the tidal wave of new supply.

-By Ku Swee Yong, Chief Executive, Century 21 Singapore

Singapore property developers seek greener pastures in Australia

More property developers are now heading to Australia to enjoy the better margins and yield spreads there, with analysts saying that developers can achieve returns of up to 20 per cent per annum there.

Source: Channel News Asia / Business

SINGAPORE: As market conditions in the Republic become more challenging for property developers, analysts say many of them, even the smaller players, are seeking greener pastures in Australia.

According to a CIMB report, many have headed for Australia in the past 12 months to enjoy better margins and yield spreads. One industry player, Century 21 Singapore CEO Ku Swee Yong, added Australia presents an opportunity for developers to redeploy capital into a market offering higher returns.

"If you could team up with a good builder, or joint-venture with a good developer and control your cost well, Australia still has better margins than Singapore," said Mr Ku. "You would perhaps be able to achieve a 20 per cent return on investment on an annual basis going into Australian property development. In Singapore and today's market condition, I don't think you can achieve even a 15 per cent return per annum."

Big property players like City Developments recently said it was looking at diversifying into Australia and Japan. Australia is also a core market for Frasers Centrepoint (FCL), which has secured a 98.4 per cent stake in Australand.

Mr Lim Ee Seng, Group Chief Executive Officer of FCL, said: "This acquisition will be the catalyst that will help FCL to deepen our roots and accelerate our growth in a market that we believe will continue to offer long-term growth prospects."


It's not just the bigger developers getting in on the act though. Smaller developers are also joining the fray, and boutique developer Heeton Holdings is one of them.

Heeton, the developer of prime residential projects in Singapore such as the Onze @ Tanjong Pagar, is leading a consortium to develop properties in Australia. The consortium,comprising SGX-listed companies Lian Beng Group and KSH Holdings and Australian partners Twin Ocean Property and Sunfire Asset, is developing a mixed-use project in Fortitude Valley in Brisbane.

The A$150 million (S$170 million) residential and hotel development at Wickham Street should be completed in 2017, and will comprise 324 residential apartments and 198 hotel rooms.

Such ventures allow Singapore developers to diversify their business and is seen as a win-win partnership by their Australian counterparts.

Mr Ralph Nunis, a director at Sunfire Asset, said: "In Australia, the finance sector can be quite restrictive at times, depending on the type of development you are undertaking. So we had the view that if we were to engage a long-term partner and go into a joint-venture with a Singapore consortium or public company, they would give us less restrictions with regards to construction finance and pre-sales."


In addition, CIMB said a weaker Australian dollar increased the country's attraction as an investment destination, and properties there remain popular with overseas buyers. In its September report, CIMB said a key competitive edge for Australia is its ability to access a greater overseas clientèle pool in the housing sector, in addition to local demand.

This view was echoed by Mr Ku, who said: "They can also decide to launch it in Singapore, instead of just selling it into the domestic market. For an Australian product, you can bring it out of Singapore, to Hong Kong, Taiwan, China and there will be buyers. So your market reach in terms of distribution and sales would be much wider."

Other pull factors include a stable economic outlook and transparent real estate market. According to consultancy firm JLL, Australia was ranked third on its Global Real Estate Transparency Index 2014 after the United Kingdom and the United States.

It is not just Singapore developers tapping opportunities in Australia. Developers from China and Malaysia have also entered the market and are focusing primarily on residential projects.

However, analysts did state that investing in Australia is not without risks. Some of the risks foreign developers in Australia would face include foreign exchange exposure and interest rate hikes, they said.

- CNA/ac

'Bring your suitcase and move in'

30 Interlace units for sale come furnished and decorated

Source: Straits Times / Money

CAPITALAND has given 30 units at its The Interlace condominium in Alexandra a plush makeover in a move to attract buyers keen to avoid the hassle of furnishing their new home.

Foreign and local interior design firms were let loose in the apartments, decking them out with furniture and paintings in five themes, including minimalist and a classic European style.

They will be available for an additional sum, ranging from $100,000 to $180,000, over the basic selling price, depending on the design and size of the unit.

Mr Wong Heang Fine, chief executive of CapitaLand Residential Singapore, told The Straits Times yesterday that buyers would only have to fork out about half the cost of the decorations and design.

The 30 apartments that have been done up under the designer series vary from three-bedroom-plus-family-room to four- bedroom multi-generation units at prices starting from $2.8 million. The unit sizes range from 1,873 sq ft to 5,608 sq ft.

The average price for units at The Interlace from January is about $1,247 per sq ft, according to data from Realis.

All home buyers have to do is "bring their suitcases and move in", said Mr Wong, who added that the homes could appeal to buyers with "more disposable income and less personal time", as well as foreigners who may be unfamiliar with design and furnishing processes here.

"When we buy a property, we're actually buying a dream home," he noted.

"But it can be very challenging and time-consuming when it comes to fitting out your house and making sure it looks and feels like a dream home."

The five design themes are aimed at catering to "different lifestyle aspirations and decor preferences", said Mr Wong.

"They can also offer other potential buyers some ideas of how space at our units can be maximised and utilised in a creative and aesthetically pleasing manner."

About 83 per cent of the sprawling 1,040-unit development had been sold by the end of August.

Mr Wong added that the designer series was not a strategy introduced in response to the slowing property market, but he noted that CapitaLand will have to continue to grapple with the downtrend at least until the end of the year.

"There are still buyers out there," he said. "It just means that there are now more conditions they have to adhere to.

"And, as a developer, we have to funnel the buyers, such as by focusing a development for certain market segments where there is genuine demand."

Mr Wong said CapitaLand may extend the designer series to its other projects as well, such as d'Leedon in Bukit Timah, if market response is good.

"It also depends on whether the development has a variety of unit layouts and attributes that will allow us to play around with," he said.

The 30 fully-furnished units are available for viewing. Knight Frank and ERA Realty are the agents for the units.

-By Jacqueline Woo

Real Estate Companies' Brief

KepLand sells MBFC Tower 3 stake for $1.2b

Purchase of 1/3 stake by Kep Reit will upgrade its portfolio

Source: Business Times / Top Stories

[SINGAPORE] Market rumours were proven right on Thursday with Keppel Land's announcement that it will divest its one-third stake in Marina Bay Financial Centre (MBFC) Tower 3 to Keppel Reit.

The price tag for the stake is S$1.248 billion; this includes a rental support of up to S$49.2 million for the vacant space and lower-than-market tenancies at the building, which Keppel Reit can draw from over five years.

Without this rental support, the net price will translate to S$2,680 per square foot, in line with recent office transactions.

That said, Keppel Reit will only be paying S$710.1 million in cash and new units for the holding company of the one-third stake, after subtracting the latter's adjusted net liabilities.

Ng Hsueh Ling, the CEO of the Reit manager, told reporters that if the deal goes through, it will give Keppel Reit ownership interest in all three office towers at MBFC, along with greater flexibility to optimise leasing and operational efficiencies.

The deal is still subject to minority unitholders' approval at an extraordinary general meeting to be convened.

Keppel Reit had announced the divestment of its 92.8 per cent stake in the 16-year-old Prudential Tower in May, which fuelled talk that it was looking for funding to buy over Keppel Land's stake in the two-year-old MBFC Tower 3, as has been reported in this newspaper.

With this deal, the Reit's average portfolio age will go down from 6.2 years to 5.5 years, making it the youngest portfolio of premium assets in Raffles Place and Marina Bay.

Ms Ng said: "It is kind of a significant upgrade of Keppel Reit's portfolio. It reduces our need for extensive (refurbishments) or large capital expenditure."

The Reit will become the third largest in Singapore, up from fourth in terms of assets under management, after CapitaMall Trust and Suntec Reit.

To help fund the acquisition, Keppel Reit will issue some units to Keppel Land at market price for S$185 million, raise about S$228 million gross from a placement of 195 million new units, and top it up with sales proceeds from the divestment of Prudential Tower additional borrowings.

For Keppel Land, the divestment will enable it to recycle capital to reinvest in other projects in its core markets of Singapore and China, and growth markets of Indonesia and Vietnam, said Tan Swee Yiow, the President (Singapore) of Keppel Land.

Besides getting a war chest of over S$1 billion and net divestment gain of about S$95.5 million, Keppel Land will later on also likely benefit from the Reit's share of rental income, portfolio capital appreciation, and any upside in unit price.

Keppel Land will own 44.9 per cent of the reit post-acquisition.

Ms Ng said issuing units to Keppel Land will require the Reit to raise less equity from the market in placement.

Asked if it would have been more equitable for unitholders if the Reit had instead issued them a rights issue, she said that would have resulted in a greater price discount, and "forever from henceforth, you have to always distribute your income across this huge denominator base". The current funding structure is a "win-win" for both vendor and buyer.

She added that if rentals were to increase over the next few years, as has been forecast by various consultants, rendering any drawdown from the rental support unnecessary, "there is a good chance" that it might be distributed to unitholders.

MBFC Tower 3's committed occupancy was 94 per cent at the end of August. DBS Bank takes up about half its total space; other tenants include WongPartnership, Rio Tinto,, McGraw-Hill, Mead Johnson and Lego. The remaining two-thirds of MBFC Tower 3 is held by DBS Group and Hongkong Land.

Keppel Land and Keppel Reit last closed at S$3.40 and S$1.23 respectively, before halting trade at about 2.30pm on Thursday. Both counters resume trading on Friday.

-By Lee Meixian

K-Reit enters into deal to buy stake in MBFC Tower 3

$1.25 billion purchase will extend foothold in new financial district

Source: Straits Times / Money

PROPERTY firm Keppel Reit ended months of market speculation yesterday by entering into a $1.25 billion deal to buy a stake in Marina Bay Financial Centre Tower 3 from its sponsor Keppel Land. The Reit (real estate investment trust) will purchase a 33.3 per cent holding in the 46-storey building from the real estate group.

The purchase price is $710.1 million, after taking into accounting the Reit assuming $537.9 million in liabilities of the building's owners, the firms said in a joint briefing yesterday.

The deal will boost Keppel Land's coffers and allow it to step up its acquisitions, while Keppel Reit secures a bigger foothold in the booming new financial district. Keppel Land currently has about a 45 per cent stake in Keppel Reit.

The 99-year leasehold MBFC Tower 3 is owned by Central Boulevard Development, which in turn is owned by Hongkong Land, DBS Group and Keppel Land, with each holding a 33.3 per cent stake.

Keppel Reit plans to issue units to Keppel Land to fund the purchase, while issuing 195 million new units at $1.17 apiece, said Ms Ng Hsueh Ling, chief executive of Keppel Reit's manager. This is expected to raise net proceeds of about $224.6 million.

There will be an extraordinary general meeting by the end of the year for unit holders to vote on the purchase.

Part of the proceeds from Keppel Reit's $512 million divestment of Prudential Tower in May will also go towards the acquisition. The deal is likely to be completed next Friday. Keppel Reit will also take on additional debt to fund the Marina Bay purchase.

There has been speculation about the acquisition, after Ms Ng noted at a results briefing in January that Keppel Reit might consider selling older assets to fund such a purchase.

The tower's sale price translates to $2,790 per sq ft (psf), based on a net lettable area of about 1.34 million sq ft.

Keppel Land will provide the Reit with rental guarantees of up to $49.2 million for five years. Without this, the deal would be valued at $2,680 psf.

Keppel Land expects net proceeds of about $658.9 million from the sale, which will give it more than $1 billion in cash in its war chest, said company president Tan Swee Yiow.

Keppel Reit will increase its debt gearing to 43.8 per cent but its position as one of the biggest office landlords in the Central Business District will be strengthened, as it will own about 2.5 million sq ft of net lettable area.

This includes its 33.3 per cent stake in Marina Bay Financial Centre Towers 1 and 2, in addition to its stakes in One Raffles Quay and Ocean Financial Centre.

Mr Tan said the sale gives Keppel Land the chance to step up its development of foreign commercial properties and investments in developed and emerging markets.

The firm also plans to grow its fund management business, which will have $18.6 billion in assets under management after the sale is completed.

But shareholders should not hold out for a fat dividend payout.

Mr Tan noted that the firm's "policy" is to distribute a third of realised profits.

"As far as possible, we will like to do so, and I believe we will try to maintain this policy in the foreseeable future."

-By Cheryl Ong

Keppel REIT to buy one-third stake in MBFC Tower 3

Source: Channel News Asia / Business

SINGAPORE: Keppel REIT will buy a one-third stake in Marina Bay Financial Centre (MBFC) Tower 3 for S$1.25 billion from Keppel Land, in one of the largest property market deals this year. The price, which works out to around S$2,790 per square foot, is based on independent valuations by property consultancies Cushman & Wakefield and Savills.

Keppel REIT will pay for the property through a mix of cash and new units issued to Keppel Land. In addition, Keppel REIT will raise gross proceeds of S$228.15 million by issuing new units to institutional investors at a discounted price of S$1.17 per unit.

The 46-storey MBFC Tower 3 is part of the Marina Bay Financial Centre integrated development, which comprises three office towers, two residential developments and an underground mall. Tenants at MBFC Tower 3 include DBS Bank, law firm WongPartnership and commodities giant Rio Tinto.

Keppel REIT, which is managed by a unit of Keppel Land, owns a 99.9 per cent interest in Ocean Financial Centre, a one-third interest in Marina Bay Financial Centre Phase One (comprising Towers 1 and 2 and Marina Bay Link Mall), a one-third interest in One Raffles Quay, and Bugis Junction Towers.

The REIT last changed hands at S$1.23 per unit before trading was suspended earlier on Thursday (Sep 18).

- CNA/ac

FCL S$600m perpetual bonds priced at 4.88%

Source: Business Times / Companies

FRASERS Centrepoint Ltd's (FCL) S$600 million debut perpetual issue, the largest perpetual deal this year, has been snapped up, said DBS Bank on Thursday.

The hot demand led to the subordinated NC-5 perpetual bonds being priced at 4.88 per cent, lower than the initial guidance of 5 per cent.

NC-5 means the bonds cannot be redeemed by the issuer until the fifth year, or Sept 24, 2019.

Orders were in excess of S$3.5 billion, said DBS.

-By Siow Li Sen

Singapore Reits

Source: Business Times / Singapore Markets

CIMB Research, Sept 18

SINGAPORE Tourism Board's recently published July 2014 tourism numbers showed that tourist arrivals dipped 0.9 per cent y-o-y, while hotel RevPAR (revenue per available room) was flattish. Although visitor arrivals in July this year were weaker than in July 2013, they were stronger than in June 2014. Although July is a seasonally strong month for tourism, we think it noteworthy that visitor arrivals rose 19.2 per cent m-o-m in July 2014 compared to the historical average of 13.5 per cent (since 2010).

Similarly, Chinese and Indonesian tourist arrival rates rose 97.4 per cent and 6.7 per cent m-o-m in July 2014 respectively, above the historical average of 65.5 per cent and -1.7 per cent, respectively.

Fraser Hospitality Trust

Source: Business Times

We initiate coverage on FHT with a "buy" and a target price of S$1.00, based on the dividend discount model with a required rate of return of 8.3 per cent and a terminal growth rate of 2 per cent. FHT is the only Singapore-listed stapled group that offers a unique opportunity to invest in a globally-diversified hospitality portfolio comprising both hotels and serviced residences. We believe FHT's asset mix of 62 per cent hotels and 38 per cent serviced residences located across key global cities offers a good balance of stability and growth for investors.

Views, Reviews & Fourm

The 'lucky 8' premium in housing unit prices

Superstition - such as fondness for the numeral eight which sounds like prosper in Chinese - does play a role in real estate and in the stock market.

Source: Straits Times / Opinion

IT IS not often that a business school professor gets to quote from a funk music legend, but let me begin with a few words from Stevie Wonder:

When you believe in things that you don't understand,

Then you suffer.

Superstition ain't the way

Three lines from the 1972 hit Superstition sum up a common issue in many cultures. No matter how advanced and rational we might like to think we are, superstition is a practice that remains widespread and has an impact - often detrimental - on our economic lives.

Studies have shown, for example, that many people behave more cautiously when making financial decisions on Friday the 13th than on any other day of the month.

Likewise, many commercial and residential tower blocks in the United States and other countries around the world do not have a 13th floor. Those that do may find they have to offer special discounts to entice tenants.

So do we "suffer"- as Stevie Wonder suggests - financially and economically speaking, as a result of superstition?

Even in countries ranked as highly educated, superstitious practices persist when logic suggests that more rational behaviour brought about by education means they should be swept aside.

In Singapore, for example, ranked among the most highly educated societies in the world, the numbers eight and four still carry particular significance for many in the majority Chinese community. In Chinese culture, eight is traditionally believed to be lucky as it sounds similar to "prosperity", while four - sounding like the word for "death" - is believed to be unlucky.

The Beijing Olympics was a prominent example of this, with the opening ceremony timed to kick off at precisely 8.08pm on the eighth of the eighth month, 2008.

Given the essential role of well-functioning asset markets in economic development, it is also important to gauge the impact, if any, that superstition has on those markets.

For example, if superstitious beliefs affect price signals, the allocation of resources may be distorted, with negative implications for welfare and economic growth.

One recent academic study, for example, examined initial public offerings (IPOs) on the Shenzhen and Shanghai stock exchanges in China between 1991 and 2005, where listed companies are identified by a numerical code.

The study found that, consistent with Chinese superstition over the numbers eight and four, newly listed, ostensibly "lucky" shares (that is, with codes that included at least one lucky digit and no unlucky digit) initially traded at a premium.

That "luck", however, was found not to be permanent, with the premium dissipating within three years.

As for Singapore, studying the effect of superstition on housing prices in the city offers a good case for measuring the magnitude and economic impact of superstitious practices.

In our research, we examined how traditional perceptions of lucky and unlucky numbers - eights and fours - affect new sales in the city's housing market.

Looking at data from almost 50,000 transactions between 2000 and 2009 on the private high-rise real estate market, we found that relatively fewer Chinese Singaporeans bought units on floors ending with four.

Moreover, on a per sq m basis, units with numbers ending in four were discounted by 1.1 per cent and units located on the fourth floor were discounted by 0.5 per cent.

Conversely, units with numbers ending in eight commanded a 0.9 per cent premium.

Additionally, the data indicated that preference for lucky numbers might be seen as a "luxury", with the premium for units ending with a "lucky" eight higher in the more expensive parts of Singapore.

And there was some evidence that home buyers behaved more superstitiously in times of economic troubles, with the premium for "lucky" units higher during times of slowing growth or volatility.

This would support the theory that people rely more on superstition when facing uncertainty.

So do these "lucky" residences pay off for their owners?

Well, perhaps unsurprisingly, our data showed that living in a "lucky" apartment had zero effect on the likelihood of their residents being involved in a car accident.

Indeed, the probability of them having such a misfortune was no different from that of those residing in "unlucky" numbered apartments.

At the same time, looking at selected insurance data, our research found that, overall, Chinese living in units ending with the "lucky" eight bought relatively less insurance coverage.

This raises a significant real consequence of superstition, with these home owners exposing themselves to the risk that they would be inadequately covered in the event of fire or theft.

There are, of course, other factors that might influence the premium placed on so-called "lucky" units, not least that of conspicuous consumption.

We see this in the high prices paid for lucky car licence plates, for example, as a way to show off wealth.

Nonetheless, our research clearly shows that superstitious practices remain influential even in advanced economies such as Singapore.

-By Sumit Agarwal, Professor, NUS Business School

Tail-end of HDB flat lease still has value

Source: Straits Times / Forum Letters

IT IS not necessarily true that the value of an HDB flat with a shorter remaining lease would depreciate faster ("Why unsold lease is worth more than portion sold"; Sept 9).

The value would depend on the economic progress of the country and prevailing market conditions.

HDB flats have shown themselves to be more resilient to price fluctuations than private residential properties during market downturns.

In the 1970s, the average price of a three-room flat with a 99-year lease was about $15,000. In the 1980s, this climbed to $50,000. Today, such a flat (with a shorter lease) costs around $330,000.

Looking at the trend over 40 years, it seems that the tail-end of a lease can retain its worth despite the "time value of money" factor.

The HDB should not consider the tail-end of a lease as holding less value, because the remaining 30 to 35 years is long enough for meaningful residential occupation.

In other words, there is still room for appreciation in value.

The JTC flatted factories with 30-year leases are good examples of how properties with shorter leases still have good resale value.

Even factories with 15 years left on the lease are a good investment in a buoyant market.

So why stop home owners on the Lease Buyback Scheme from selling their units if they can find willing buyers?

Giving them more leeway would boost take-up for the scheme.

-By Paul Chan Poh Hoi

High sum to pay for mechanised parking

Source: Today Online / Voices

I refer to the report “Mechanised parking trial in three estates to cost HDB S$18m” (Sept 15).

The price tag of mechanised car parks seems astronomical, considering these facilities will serve a mere 219 car owners at a time.

The Housing and Development Board has to better explain the financial prudence behind its decision. Has it factored in the ongoing cost of maintaining the car lift systems? Given the high development cost, what should drivers be prepared to pay?

It was also reported that this move is the result of a rising car population. However, this figure has started to plateau and even come down: 604,022 cars in July versus 607,292 last year.

It seems antithetical to build these mechanised car parks, especially when the Government is discouraging car ownership.

-By Gurmit Singh Kullar

Global Economy & Global Real Estate

HK builders slash debt, raise cash to buy more land

Developers expect further price falls as government releases more sites for sale

Source: Business Times / Property

[HONG KONG] Billionaires including Li Ka-shing and Robert Ng have cut debt at their Hong Kong developers to near-record lows in preparation to buy land as prices fall, a signal the city's real estate gains may be coming to an end.

Cheung Kong Holdings brought its net debt-to-equity ratio down to 1.3 per cent as at June 30, the lowest since at least 1991, while Henderson Land Development's is at the lowest since 2007, according to Bloomberg data.

Sino Land has HK$29.7 billion (S$4.86 billion) available for land acquisitions after boosting its net cash position, reports BNP Paribas.

Developers, whose debt levels are now at their lowest in two decades, are on track to sell a record HK$150 billion of new homes this year, reducing inventories and boosting cash reserves to help replenish land holdings after average prices fell 34 per cent from last year. Prices may extend declines as Hong Kong's government, which controls supply, releases more sites for sale to ease a housing shortage, according to CLSA Ltd.

-From Hong Kong, China

Land prices up across Japan's big cities

Source: Business Times / Property

[TOKYO] Land prices in Japan's three largest metropolitan areas rose in the 12 months to July 1, driven by investments in office properties and housing demand, but prices in most smaller cities kept falling, a government survey showed.

Commercial land prices for metropolitan areas surrounding Tokyo, Osaka and Nagoya rose 1.7 per cent in the year to July 1, a much faster pace than the previous year's 0.6 per cent gain, according to the Ministry of Land, Infrastructure, Transport and Tourism.

Residential land prices in those regions rose 0.5 per cent, the first increase in six years, the ministry said.

Last month, privately-held Japanese developer Mori Trust bought a Tokyo office complex and wedding venue from US investment fund Lone Star for around 130 billion yen (S$1.5 billion).

-From Tokyo, Japan

China home prices fall for a fourth month

Source: Business Times / China

[BEIJING] China's home prices fell in August for a fourth straight month, official data showed on Thursday, underlining a deepening downtrend in the property market that is increasingly weighing on the broad economy.

Average new home prices across China fell 1.1 per cent last month, versus a drop of 0.9 per cent in July, according to the Reuters weighted home price index, which is calculated from data issued by the National Bureau of Statistics (NBS).

Compared to a year ago, new home prices were up 0.5 per cent in August, easing from the previous month's 2.5 per cent gain and marking the slowest annual growth in 20 months.

Real estate, which directly impacts around 40 other business sectors in China, was seen as a heavy brake on economic activity in official data out last weekend showing factory output growing at its slackest pace in six years in August.

-From Beijing, China

China should aim to scrap GDP growth targets: S&P

Source: Business Times / China

[HONG KONG] As economists debate whether China can meet this year's gross domestic product (GDP) growth goal of 7.5 per cent, would it be better to ditch targeting altogether?

Yes, according to Standard & Poor's Singapore-based economists Paul Gruenwald and Vincent Conti, who say that China's adherence to targeting is hurting financial stability.

In the absence of export demand or productivity gains to drive growth, officials who have incentives to outperform growth targets turned to credit creation, the economists wrote in a Sept 15 report.

That fanned a surge in bank credit to 128 per cent of GDP at the end of 2013, up from 96 per cent at the end of 2008, Standard & Poor's said, estimating total financial industry credit was 200 per cent of GDP at the end of 2013.

-From Hong Kong, China

Scottish independence may boost London property market

Many businesses based in Edinburgh have said they plan to move to city should Scotland choose to separate

Source: Today Online / Business

SINGAPORE — The London real estate market is unlikely to experience any major negative impact should Scotland vote for independence from the United Kingdom, said British developer Quintain Estates and Development.

Instead, the market could receive a boost as many businesses based in Edinburgh had indicated that they were planning to move south to London should Scotland choose to separate, said Mr Charles Calverley, Quintain’s development director (residential). In the run-up to the Scottish referendum held today, companies such as the Royal Bank of Scotland and Lloyds Banking Group had said they were making contingency plans to relocate their operations in Scotland.

“The only implication of Scotland’s independence on the macro level is the effect it may have on the pound — the pound might go down in value. I don’t think there will be any direct consequences on the London property market,” said Mr Calverley, who was in Singapore yesterday to market the second phase of the company’s North West Village residential project in Wembley Park, located near the iconic Wembley Stadium.

He added that a weaker pound would even give overseas investors, such as those from Singapore, more reasons to buy properties in London.

His comments echoed a monthly property survey by property portal Rightmove that said London would be a logical destination, creating extra employment and knock-on demand for homes should Scotland-based businesses relocate to the UK capital.

Conversely, the portal said that should the pro-Scottish independence voters prevail, the outcome could potentially rattle consumer sentiment in the housing market.

But Mr Calverley said fundamentals are still looking good for London despite reports of slowing price increase in recent months. A Savills research report noted that an average of 35,000 homes are expected to be launched each year over the next five years, falling short of the annual demand of 50,000 homes. “The market took a breather around (the middle of the year), as it normally does. The top end of the market is still a little quieter, but things have started to pick up again in Zones 3-5. We still see demand outstripping supply. The challenge is on the developers to meet those demand levels,” he said. 

“Foreign investment from around the world is still going strong in London … The rental market is also good with demand from (across various segments) ... For example, some people face difficulties getting mortgages, so they go into renting. We’ve also seen corporate rentals coming forward a lot stronger.”

As such, London continues to be an attractive market for overseas buyers, despite the introduction of the property gains tax next year, which is specifically targeted at them.

Quintain has seen healthy interest from investors in Singapore who, along with those from Hong Kong, made up the majority of its overseas customers. Foreign customers accounted for nearly 30 per cent of the project’s overall sales in the first phase of the project.

In the past week, about 15 of the 25 units released for sale so far in the second phase have been picked up by buyers in Singapore and Kuala Lumpur, Mr Calverley said.

-By Lee Yen Nee

Slump in U.S. Housing Starts Led by Multifamily: Economy

Source: Bloomberg / Luxury

Housing starts slumped in August from the highest level in almost seven years, reflecting a setback in multifamily projects that are at the forefront of the rebound in U.S. real estate.

Beginning home construction fell 14.4 percent, the most since April 2013, to a 956,000 annualized rate following July’s revised 1.12 million pace that was the strongest since November 2007, the Commerce Department said today in Washington. Work on apartments and condominiums, which tends to be volatile, dropped 31.7 percent after jumping 44.9 percent in July.

As more Americans decide that homeownership isn’t for them because wage growth is slow and qualifying for mortgages remains difficult, builders have focused on putting up more rental units, which means the industry will see bigger swings month to month. The average number of multifamily units started over the past 12 months was the most since 2006.

“There’s been a fairly compelling recovery in multifamily construction because people need apartments to live in; on the other hand, there’s been significantly less recovery in the single-family market,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York. The construction figures “will continue to improve, but it’s going to continue to be an erratic improvement.”

Over the past 12 months, construction has been started on an average of 349,000 multifamily structures, the most since the same period ended July 2006.

Market Breakdown

Starts of single-family properties declined 2.4 percent to a 643,000 rate in August from the previous month. They’ve averaged 630,000 over the past 12 months. While that’s up from the depths of the economic slump, excluding the recession and subsequent recovery, the reading would be the weakest since 1982.

A slowdown in homeownership in the wake of the housing bubble that coincided with the last recession points to further gains in construction of rental properties, according to McCarthy.

Another report today showed fewer Americans than forecast filed applications for unemployment benefits last week, a sign the labor market continues to strengthen. Jobless claims decreased by 36,000 to 280,000 in the week ended Sept. 13 from 316,000 in the prior period, according to the Labor Department. The median forecast of economists surveyed by Bloomberg called for a decrease to 305,000.

Stocks rose for a third day, sending benchmark indexes to records, as investors speculated interest rates will remain low. The Standard & Poor’s 500 Index advanced 0.5 percent to 2,011.36 at the close in New York.

Construction Permits

The Commerce Department’s construction report showed permits for future projects dropped 5.6 percent to a 998,000 pace in August from a 1.06 million rate the prior month.

The median estimate in a Bloomberg survey of 78 economists called for a 1.04 million pace of housing starts. Forecasts ranged from 995,000 to 1.12 million after a previously reported 1.09 million in July.

All four regions showed a decrease in groundbreaking last month, led by a 24.7 percent drop in the West that was the biggest since November 2012.

Today’s figures were at odds with a report yesterday showing builder confidence rose in September to the highest level since 2005. The National Association of Home Builders / Wells Fargo said its sentiment measure climbed to 59 from 55 in August. Readings above 50 mean more respondents said conditions were good.

Builder Confidence

The housing rebound is good news for companies including PulteGroup Inc., a Bloomfield, Michigan-based homebuilder and seller.

“We’ve been actually pretty pleased with the overall progress of the U.S. housing recovery,” James Zeumer, vice president for investor relations, said in a Sept. 10 presentation. “We’re still in sort of the early-to-middle innings of what will be a protracted and methodical type of recovery.”

Weather dealt a setback to builders at the beginning of the year as snow blanketed construction sites in parts of the country and cold kept some would-be buyers at home. Homebuilding bounced back in the second quarter, climbing at a 7.5 percent annualized rate after a 5.3 percent slump in the first three months of the year, data from the Commerce Department showed July 30.

Cheap borrowing costs are helping some Americans take the plunge into homeownership. The average 30-year, fixed-rate mortgage was 4.12 percent in the week ended Sept. 11, down from 4.53 percent at the start of January, according to data from Freddie Mac in McLean, Virginia.

Labor Market

An improving job market is also helping Americans to afford a home. The economy has added an average of 215,000 jobs per month through August, according to Labor Department figures, more than the 194,000 average last year. The unemployment rate has fallen to 6.1 percent from 6.6 percent at the start of the year.

Another report today showed Americans are less upbeat about the economy because wage gains remain a missing element in the expansion. A measure tracking the economic outlook dropped to 41.5 this month, the weakest since October, from 45 in August, data from the Bloomberg Consumer Comfort Index showed today. The reading was the second-lowest since January 2012.

-By Jeanna Smialek

Lone Star to Buy 38 Hotels From Hyatt for $590 Million

Source: Bloomberg / News

Lone Star Funds, the private-equity firm founded by billionaire John Grayken, agreed to buy 38 U.S. select-service hotels from Hyatt Hotels Corp. (H) for about $590 million.

The purchase consists of about 4,950 rooms at properties including Hyatt Place and Hyatt House hotels, Chicago-based Hyatt said in a statement today. The hotels will maintain their existing branding under a franchise agreement between Hyatt and Lone Star, which plans to spend about $50 million in additional capital on renovations over the next two years.

“Hyatt utilized its strong balance sheet and industry expertise to launch the Hyatt Place and Hyatt House brands,” Steve Haggerty, global head of capital strategy, franchising and select service for Hyatt, said in the statement. “We are now leveraging that brand equity to recycle capital while maintaining a long-term brand presence in multiple markets.”

Lone Star joins investors including Blackstone Group LP and Barry Sternlicht’s Starwood Capital Group in buying select-service hotels, which lack amenities such as restaurants and have limited service offerings. Purchasing such properties and boosting their profitability is often easier than acquiring more upscale hotels with higher operating costs and lower returns.

Jed Repko, a spokesman for Dallas-based Lone Star, declined to comment. Hyatt said the transaction is expected to be completed in November.

-By Nadja Brandt

U.S. Mortgage Rates Jump to the Highest Since Early May

Source: Bloomberg / News

U.S. mortgage rates jumped to a four-month high, increasing home-loan costs as the economy shows signs of strengthening.

The average rate for a 30-year fixed mortgage was 4.23 percent, up from 4.12 percent last week and the highest since early May, Freddie Mac said in a statement today. The average 15-year rate rose to 3.37 percent from 3.26 percent, according to the McLean, Virginia-based mortgage-finance company.

Federal Reserve policy makers yesterday tapered monthly bond buying to $15 billion in their seventh consecutive $10 billion cut, staying on course for an October end to the program intended to keep rates low. The Fed maintained a commitment to keep the benchmark interest rate near zero for a “considerable time” after the asset purchases are completed, saying the economy is expanding at a moderate pace.

“Interest rates can’t forever ignore the increasingly good economic news,” said Keith Gumbinger, vice president of, a Riverdale, New Jersey-based mortgage-data firm. “The window has narrowed a little bit for homebuyers. Odds are we will see some more narrowing as time goes buy.”

Before this week’s increase, mortgage rates had been little changed for the past two months, hovering at the lowest levels of the year. The 30-year average had moved within a range of only four basis points since July 17, Freddie Mac data show. A basis point is 0.01 percentage point.

The labor market has been showing steady gains. Unemployment (USURTOT) last month fell to 6.1 percent, matching the lowest level since September 2008. While monthly payroll growth slowed to 142,000 jobs in August, this year’s average gain of 215,000 puts the U.S. on pace to add 2.58 million positions for the biggest annual growth in 15 years.

Confidence among U.S. homebuilders rose to a nine-year high in September, the National Association of Home Builders/Wells Fargo sentiment measure showed yesterday.

-By Prashant Gopal

Virtu’s Viola Cuts Price for New York Home to $98 Million

Source: Bloomberg / Luxury

It hasn’t been high-frequency trader Vincent Viola’s best year.

His trading firm, Virtu Financial Inc., shelved plans for an initial public offering amid the furor stirred up by author Michael Lewis’s “Flash Boys,” a critique of the industry published in March. His hockey team, the Florida Panthers, won only a third of its games last season.

Now he’s cut the offering price for his six-floor, 19-room Manhattan townhouse, nine months after putting it on the market. The home, described in a real estate listing as exuding the “ultimate in sophistication and grandeur,” was reduced last week to $98 million from $114 million, according to property website

The decision coincides with intense scrutiny of firms like New York-based Virtu, which use computers to automatically place trades for stocks, futures and other assets in tiny fractions of a second. Besides the firestorm spurred by Lewis’s best-selling book, New York Attorney General Eric Schneiderman is investigating allegations that high-frequency traders have unfair advantages in the $24 trillion U.S. stock market.

Alan Sobba, a spokesman for Virtu, didn’t immediately respond to an e-mail seeking comment on the price reduction.

Should Viola’s home at 12 E. 69th St. sell at the reduced price, it would still be among the priciest deals ever in the city. In 2012, former Citigroup Inc. Chairman Sanford Weill sold his penthouse condominium for $88 million, the most expensive completed purchase of a New York residential property.

Panic Room

Since then, two contracts have been signed at more than $90 million each for condos at Extell Development Co.’s newly built One57 skyscraper in Midtown. A penthouse at nearby 432 Park Ave., under construction, found a buyer at $95 million.

Viola gutted his Upper East Side property, which was built in 1884, according to Corcoran Group, the brokerage handling the sale. It features “soaring 12-32 foot ceilings, palatial entertaining space, the finest European-imported materials and state-of-the-art systems,” which “make it an unrivaled modern-day trophy home,” according to a listing on Corcoran’s website. The current owners “spared no expense on an exquisitely detailed renovation, including a panic room.”

-By Nick Baker

Hyundai shares slide after record land bid

Source: Straits Times / World

SEOUL - Hyundai Motor will pay a record 10.55 trillion won (S$12.8 billion) for the site of its new headquarters in Seoul's high-end Gangnam district, outbidding Samsung Electronics and raising investor concerns that it is wasting cash on a trophy property.

The conglomerate smashed the record auction price for a single plot of land in South Korea with its bid, which was more than triple the appraisal value.

Investors and analysts expressed alarm at the price Hyundai was willing to pay for the 79,342 sq m site, where it plans to build an auto theme park and hotel as well as new offices, at a time when it could be pouring money into higher dividends or more auto factories. 

"I was stunned," said Mr Kim Sung Soo, a fund manager at LS Asset Management and investor in Hyundai companies. "Even taking into account competition with Samsung, the bid price is excessive."

Shares in Hyundai and sister company Kia Motors plunged 9 per cent and 10 per cent respectively after the winning bid was announced by the seller, Korea Electric Power.

Although Hyundai has plenty of cash, the company and Kia, which together rank fifth in global auto sales, have been posting slowing profits as the strong local currency saps overseas earnings.

The companies also need to fund new factory projects in Mexico and China, which are expected to go into production in 2016.

While some investors were shocked by the move, Hyundai's big bid for a landmark in the heart of Seoul's trendiest district may help ease its tax burden under proposed rules that would tax excess corporate cash.

-By Reuters