Real News‎ > ‎2014‎ > ‎September 2014‎ > ‎

27th September 2014

Singapore Real Estate

More home buyers choosing to rent while waiting for prices to slide

Source: Today Online / Business

SINGAPORE — When Mr K Amrit and his wife decided to upgrade from a Housing and Development Board (HDB) flat to a private home, they noticed property prices were falling and decided to sell their unit in Bedok late last year before its value dipped further.

“We were lucky. We sold it with COV (cash-over-valuation) of S$30,000. Right after that the COVs kept going down. Then we also heard from our agent and friends that prices could fall some more, so we thought we’d take our time with the house-hunting and in the meantime, we’re renting an apartment,” the engineer, who is in his 30s, told TODAY.

Mr Amrit has not yet found a new home, but is actively viewing potential units and visiting showrooms with his wife. The couple signed a one-year lease last December on a two-bedroom apartment in the east at about S$4,000 a month, willing to cough up that rental, confident that home values would fall enough to justify their decision.

They are among the many prospective home buyers who are staying on the sidelines while waiting for private residential prices to ease further before entering the market, which has in turn led to an increase in home rental volumes.

In the first eight months of this year, close to 38,000 non-landed private residential leases were signed, data from the Urban Redevelopment Authority (URA) and property firm HSR Research showed. This is higher than the 35,000 rental contracts secured in the corresponding period last year and the 34,000 two years ago.

Cashing out on the previous home and biding their time before buying another makes sense in the current property market environment, analysts told TODAY. The arrangement allows these prospective buyers to maximise profits from the sale of their homes in a weakening market while taking advantage of the softening rents resulting from an increase in supply of completed homes.

Prices of private homes decreased by 1 per cent in the second quarter, the third straight quarter of falling values, following the 1.3 per cent and 0.9 per cent declines in the two previous quarters, URA data showed.

“We have noticed that many people are choosing to rent first and hoping that prices will come down later on. They sell off their properties and rent before getting their next home. We are also seeing people signing shorter leases because they are hoping for rents to come down,” said Mr Chris Koh, director of property firm Chris International.

Even among those who have already bought new homes, many opted to sell their existing homes amid fears that prices would fall further if they delayed the sale, choosing to rent while waiting for the completion of their units, HSR research analyst Wong Shanting noted, describing a trend that has taken root in the past few years.

However, the jump in rental volume has not translated into better income for landlords.

Rents for private non-landed homes have declined for three straight quarters, with the URA rental index falling by 1.1 per cent over this period to a median of S$3.79 psf per month by the second quarter this year. But yields have held steady as the prices of both new and resale private homes have also fallen.

Among the different geographical regions, Ms Wong noted that the rental market in the Core Central Region (CCR) has not held up as well as in the Rest of Central Region (RCR) and Outside Central Region (OCR).

“Traditionally, the RCR and OCR cater to local families while the CCR generally has a higher percentage of expatriates. In the last few years, in view of less attractive employment packages offered to expats, we see these tenants increasingly moving outwards because of lower rents in those areas. This could explain the falling rental yields in CCR,” she said.

With more than 20,000 non-landed private homes expected to be completed in each of the next two years, yields are expected to be further compressed. Vacancy rates of non-landed private homes have already been rising for five straight quarters to 8.3 per cent in the second quarter of this year.

“What we are facing now is oversupply that’s going to put a toll on the market because tenants will be spoilt for choice. I think that the rental market will remain strong volume-wise because people can’t buy or they choose to rent first before buying, but yields will not go up,” said Mr Koh.

-By Lee Yen Nee

Bellewoods EC draws 400 applications

Nearly S$5.4b worth sewn up - 13.6% higher than in Q2

Source: Business Times / Top Stories

[SINGAPORE] Investment sales of property - big-ticket transactions of at least S$10 million - have risen this quarter, on the back of a more than tripling in the value of hospitality assets sold, mainly in connection with the listing of Frasers Hospitality Trust.

Moreover, office transactions have continued to post stellar performance with rental recovery firmly in place and expected to continue amid tight supply.

According to figures from Savills Singapore, nearly S$5.4 billion of investment sales were transacted this quarter up to Sept 23. This is 13.6 per cent higher than the Q2 figure of S$4.7 billion and the best showing in four quarters. However, the Q3 number is 61.2 per cent down from a year ago.

CBRE too has a similar figure so far this quarter, reflecting 10.7 per cent expansion from its Q2 number. This takes the year-to-date number to S$15.3 billion and the group's executive director, Jeremy Lake, predicts that the year would end with S$18-20 billion.

-By Kalpana Rashiwala

Year-long wait over for EC buyers

Sales open after being held back by govt move to moderate bids for sites

Source: Straits Times / Money

BUYERS eager to secure an executive condo (EC) unit will have plenty of options after a hiatus of almost a year.

The pause was caused by a government move in January last year stipulating that developers can put an EC project up for sale only 15 months after buying the land or completing foundation works.

This move was aimed at moderating bids for EC sites in the Government Land Sales programme.

However, observers suggest that the measure has not had any discernible impact on the market, with demand from developers little affected.

The last EC project launched was JBE Holdings' Skypark Residences in Sembawang, which went on the market in September last year.

But today, applications open for Bellewoods, a project n Woodlands developed by Qingjian Realty. The 561-unit project is estimated to go on sale at $750 to $820 per sq ft (psf).

By the end of the year, applications for as many as five EC projects are likely to have begun.

Industry players say the measure might have stalled supply but not changed bidding for sites significantly. Instead, buyers seem to be left with less flexibility.

For one thing, developers have seen their costs go up.

Mr Li Jun, general manager of Qingjian Realty, told The Straits Times that developers will have to factor in additional costs when making projections for land bids.

"We need to wait for 20 months before payments from buyers come in and, in these months, we don't know how the market will change.

"Our financial costs will go up because before I sell units, the project's foundation will already have been built. I will need to invest more money because of this," said Mr Li.

Previously, EC launches could go on sale as early as six months from the date of the developer acquiring the land. Payments from buyers would go towards financing construction which might have just begun at that time.

The changed timeframes could translate into higher prices for ECs, said Mr Li. Despite having a wider variety of projects to pick from, buyers who have waited on the sidelines for so long might not have much choice but to bite the bullet.

However, Mr Vincent Ong, a co-managing partner at Evia Real Estate, said the 15-month waiting period has "had very little impact and effect on us".

His project, the 546-unit Lake Life in Yuan Ching Road, is likely to be priced at between $880 and $890 psf.

Mr Nicholas Mak, research director of SLP International, also noted that the 15-month waiting period is "a long time", during which a buyer might have been given a raise in salary. This might disqualify him from buying an EC unit as the buyer's average gross monthly household income must not exceed $12,000.

Developers also are not able to anticipate buyers' preferences, since construction has to begin before units can be sold. "This is not so responsive to the market."

However, Mr Li and Mr Ong maintain this will not affect their bidding behaviour in future EC land tenders.

While industry players might be watching project sales, the developers said the outlook for the EC market remains optimistic. This is despite competition from more units and cooling measures that have made it tougher for buyers to afford property.

"After almost a year of not having ECs, a lot of pent-up demand has accumulated, and these buyers are waiting for new EC projects," said Mr Li.

Also, the Government has cut the supply of EC land this year, so there is no likelihood of an oversupply, he added.

Mr Mak pointed out that buying demand might just be enough to soak up units this time round.

Buyers, however, could be deterred come the next batch of EC launches, slated for the second quarter of next year. This is because of a new rule that kicked in last December. It stipulates that buyers will have to pay a resale tax if they have previously bought an HDB flat.

"Upgraders make up the bulk of EC buyers, and the Government is also pushing out so many BTO (Build-to-Order) flats to first-time buyers, so buying demand will be diverted from ECs. So subsequent launches might find it tough," he said.

-By Cheryl Ong

Demand-supply mismatch fuels surge in medical suite prices: DTZ

At S$10.20 psf per month now, rents are 9.9% higher than a year ago

Source: Business Times / Property

[SINGAPORE] Singapore Grade A office rents are expected to rise to their highest levels since 2008 by year's end, commercial real-estate services firm Cushman & Wakefield predicted on Wednesday.

This comes as average Grade A overall rents have already risen to their highest in three years to S$10.20 per square foot per month - 2 per cent higher than a quarter ago, and 9.9 per cent stronger than a year ago.

The third quarter became the sixth consecutive quarter of rental increases, a result of the increasing scarcity of Grade A space in areas such as Marina Bay and Raffles Place.

New leases taken up during the quarter included advertising and marketing firm Publicis taking up 33,000 square feet (sq ft) of space at Income@Raffles.

-By Jamie Lee

Medical suites 'pulling ahead of other property bets'

Source: Straits Times / Money

MEDICAL suites are proving a better investment bet than other sectors such as residential and industrial property, which are crowded with investors.

A DTZ analysis has found that the medical suite segment has gradually emerged as a possibly worthwhile alternative asset class.

Still, the report noted that, given the lack of clarity over the classification of medical suites, potential buyers should ensure that units marketed as such have the necessary approval for medical use, especially if they are part of a larger mixed-use development.

The report found that price movements for the sector were less volatile than in the office sector, for instance, suggesting limited impact from short-term economic changes. Also, prices rose faster than in the retail sector. Prices of medical suites in the Orchard Road and Tanglin area - where 46 per cent of medical suites are found - surged 60 per cent from 2010 to last year.

In comparison, resale capital values of office and retail space grew by only 15 per cent and 30 per cent respectively for the same period.

"With the limited supply and high demand for space at renowned and established medical centres, prices grew consistently over the years," said DTZ.

In the past, private health-care groups that own hospitals sold or leased these medical suites to only doctors or dentists. But in recent years, mainstream developers have started building mixed developments with units in this field and selling them to general investors as well - though tenants must still be medical practitioners.

Outside the Orchard Road and Tanglin precinct, prices of medical suites are significantly lower, DTZ noted. For example, medical centre units at Mount Elizabeth Novena were initially sold at about 20 per cent to 30 per cent lower than average prices in the Orchard Road and Tanglin area. As at the end of last year, the price gap widened.

Rents were found to follow pricing trends, with rental growth the most pronounced in Orchard Road and Tanglin, where rents range from $8 to $27 per sq ft per month. Rents at Novena and Thomson have grown from $8 to $12 per sq ft per month.

The estimated stock of medical suites, including hospital-supported and non-hospital-supported facilities, is about 1,520 units.Upcoming supply will come from six developments of about 335 private medical suites, which are expected to be completed from 2016 to 2018.

Still, in the near term, given the demand from an expected increase in the number of practising private doctors, as well as the lack of new supply up till 2016, prices and rents of medical suites are expected to keep rising, the report said.

-By Rennie Whang

'Hotel-style' condo to add buzz near Farrer Park

106-unit freehold project lies within 'golden triangle' of medical hubs

Source: Straits Times / Money

THE quiet, predominantly low-rise Mergui Road area is set for a new buzz with the launch of the 106-unit Forte Suites today.

The project, with homes ranging from one-bedroom units to penthouses, has seen about 20 per cent of its units sold since its soft launch three weeks ago.

Prices started from $1,600 per sq ft (psf).

JForte Holdings, whose subsidiary Forte Development is building the freehold project, said it has designed it as a hotel-style condominium.

It has extra touches, including a day concierge service, high ceilings and en suite jacuzzis in some units.

The project near Farrer Park lies within the so-called "golden triangle" of three upcoming and existing major medical hubs.

They are Connexion's medical suites in Farrer Park, Health City Novena and the Orchard Road and Tanglin medical belt, said JForte Holdings chairman Jason Lee.

Nearly half the units sold during the soft launch went to foreign buyers, with some to frequent medical tourists, he added.

Property consultants said they are expecting sales to be brisk, given the launch performances of Highline Residences and Seventy St Patrick's earlier this month.

"The market has been given an improved boost from these projects. I expect this project to echo a similar response," said Mr Donald Han, managing director of Chesterton Singapore.

Resale prices in the area have fallen by about 7 per cent over the past year - from the third quarter of last year to the second quarter of this year.

This decline was in line with the fall in resale prices islandwide, said R'ST Research director Ong Kah Seng.

Resale prices over the past year ranged from $946 psf at the 99-year leasehold Kentish Green to $1,466 psf at the freehold Urban Lofts.

The smaller size of projects here means most do not see more than 10 leases signed each quarter, said Mr Ong.

But there is "definitely ongoing interest from expatriates to rent apartments here", he added.

This is because the area is not too far from Novena, where foreign health-care professionals may be working.

In July, a two-bedder at Oxford Suites of 1,000 to 1,100 sq ft commanded a monthly gross rent of $3,850. A one-bedder in R66 Apartments in Rangoon Road of about 400 to 500 sq ft fetched monthly gross rent of $2,800 last month.

The gross yield in the area is about 3.9 per cent, slightly higher than the islandwide average gross yield of 3.8 per cent in the first half of this year.

Newer projects in the area include Cityscape at Farrer Park in Mergui Road, 8 Farrer Suites and Jool Suites in Sing Joo Walk and Rangoon 88 in Rangoon Road.

Overall, the investment outlook for the area is positive, given its long-established positioning as an upmarket residential area for upper-middle income families and tenant-expatriates who prefer a quieter yet conveniently located living environment, said Mr Ong.

-By Rennie Whang

Aussie commercial property big draw here

Singapore accounts for 28% of net investments in the sector since 2005

Source: Business Times / Wealth

SINGAPORE has emerged as the top foreign investor in Australian commercial properties in the past decade, going by the latest report of real estate consultancy CBRE. Trailing behind are Germany, the US, China, and Malaysia.

There is still headroom for valuations and yields to rise, which serves as a buffer for Australian properties in the event of a global "bear market", the report says.

CBRE noted that demand for Australian commercial properties has been driven by "a compelling growth story" underpinned by a stable economic growth of close to 3 per cent per annum with the mining boom, a stable financial system and strong rental growth. In the next 12-18 months, that story is expected to continue playing out.

"Capital follows investment opportunity and Australia has stood out as a recipient of global funds due to strong growth in real asset accumulation while business investment in other markets stagnated," said Stephen McNabb, CBRE head of research for Australia.

-By Lynette Khoo

S'pore is top foreign investor in Aussie commercial property: Report

Source: Straits Times / Money

SINGAPORE is the top foreign investor in Australia's commercial real estate market, according to a CBRE report.

The report found that about A$18.8 billion (S$21 billion) of net foreign investment has been made in the country since 2005, with Singapore accounting for about 28 per cent or A$5.3 billion.

Germany is next at 14 per cent, the United States at 13 per cent, and China at 9 per cent.

The report noted that Australia represented 5 per cent of global property turnover over the past three years - well above the country's gross domestic product weighting of 2 per cent. This has been driven to a large extent by foreign capital, with Australia reaping more cross-border investment than any other Asia-Pacific market between 2012 and 2014, said CBRE.

"Australia has attracted an above-average share of capital primarily due to firm and stable economic conditions, which have supported a higher interest rate and yield environment in comparison with other markets globally," said CBRE's head of research for Australia, Mr Stephen McNabb.

Foreign investors have included large global institutions and sovereign wealth funds like Singapore's GIC, the National Pension Scheme from South Korea, Germany's Real IS, Blackstone from the US and Canada's CPPIB.

Of the A$18.8 billion of net foreign investment, 68 per cent was for office property, 29 per cent for retail and 3 per cent for industrial assets. Foreign capital into Australia has been taking on an increasingly Asian slant, the report noted. From 2010 to 2012, about two-thirds of foreign investors were from outside Asia-Pacific. This situation reversed from last year. In total, Australia attracted about 12 per cent of Asian outbound capital last year and in the first half of this year.

This momentum is expected to continue as new capital emerges from Asia, said Mr Rick Butler, CBRE's senior director at international investments.

"We're also seeing continued interest in this market from institutional investors and sovereign wealth funds, with Asian developers also targeting opportunities to convert secondary office stock into residential apartments," he added.

For example, Far East Organization has acquired four office assets in Sydney.

The Fragrance Group and Aspial have acquired sites in central Melbourne for residential conversion.

The report noted that prime office rents in central Sydney have doubled in 10 years. In comparison, many other established markets around the world have not fared as well, with growth ranging from 0 per cent to 50 per cent.

Mr McNabb said he was optimistic that Australia will remain a hot spot for the next 12 to 18 months, although factors that have supported its relative attractiveness will fade beyond that.

"An improvement in economic growth in the global economy and a return towards 'normal' interest rate settings, while appearing some way into the future, will be the likely catalyst."

-By Rennie Whang

YTL Starhill Global Reit

Source: Straits Times / Money


Broker: DBS Vickers Securities

Call: Buy

Fair Value: 90 cents

IN OUR earlier report, we highlighted Starhill Global Reit as having one of the most resilient income streams among the Singapore-based retail and commercial Reits due to its geographic and asset class diversification and sizeable base of income derived from master leases.

We estimate that only about 30 per cent of the Reit's total revenue is directly exposed to Singapore's retail sector, through Wisma Atria and level 5 of Ngee Ann City. As both assets are located in the prime Orchard Road area, we believe that they will be beneficiaries of the improvement in visitor arrivals later this year.

FEHT's Sentosa investment positive but carries risks: analysts

Source: Business Times / Companies

FAR East Hospitality Trust's (FEHT) 30 per cent investment in a new hotel on Sentosa with its sponsor carries certain risks, say analysts. But their overall verdict is that it is still a good move, even if its impact is likely to be felt only when the hotel is completed in 2018.

Two risks cited by Fitch Ratings on Friday were possible construction cost overruns, not uncommon in today's tight foreign-labour market, and an increased hotel room supply on Sentosa amid slowing tourist arrivals in Singapore, which may put pressure on occupancy and room rates.

"FEHT will have to contribute its share of any potential cost overruns during the construction period," Fitch said.

-By Lee Meixian

Sentosa project 'good for FEHT's credit rating'

Source: Straits Times / Money

FAR East Hospitality Trust's (FEHT) joint venture to develop a $443.8 million hotel project in Sentosa would be good for its credit rating despite oversupply risks, Fitch Ratings said yesterday.

The credit rating agency said in a report that the hotel joint venture was "on balance, credit-positive" for the trust.

The trust has a 30 per cent stake in the joint venture with its sponsor, Far East Organization, to develop the 850-room Sentosa project.

The development has two hotels. The 620-room Village Hotel Sentosa is aimed at the mid-tier segment and the 230-room Outpost Hotel Sentosa will be more upscale.

Fitch said that teaming up with its sponsor to develop a property would help the trust to "lock in lower investment cost, compared with buying the property" from Far East Organization after it is completed, which would be more expensive.

The agency also said that if the trust buys its sponsor's 70 per cent stake when the hotel project is completed in 2018, the acquisition would "meaningfully improve" the trust's risk profile by diversifying its assets and revenue sources.

"The project is also likely to increase shareholder value in the long run, given its attractive investment cost," Fitch said.

Risks of hotel oversupply do exist. The project could bump up the number of hotel rooms in Sentosa by nearly 30 per cent, which may depress room rates and occupancy at hotels until tourist numbers catch up, it added.

However, Fitch said that since the project will be only the fourth heritage property on Sentosa, which has 16 hotels, that could "help offset a degree of supply risks".

Another risk is that the development costs could go over budget, but Far East Organization has a track record of completing its projects "largely on time and within budget", Fitch said.

It estimated that the trust's loan-to-investment property value (LTV) ratio, a measure of debt, will remain below the 40 per cent level even if the trust buys the completed hotel property and even if the property value does not appreciate from its cost price. This was still "comfortable" but Fitch would consider downgrading the trust's credit rating if the trust's LTV ratio exceeds the 40 to 45 per cent level, it said.

Far East Organization won the heritage hotel site in Artillery Avenue in March this year for between $100 million and $150 million. This sum includes an upfront land premium of $32 million plus annual "rent" payments over the site's 60-year lease.

-By Melissa Tan

Croesus eyes logistics property fund

Source: Business Times / Companies

THE Croesus Group, an Asian real estate manager, is evaluating another fund with logistics properties after listing its first trust holding Japanese malls in Singapore last year.

Croesus has access to 24 to 36 facilities in Japan and the US and may seek to raise about US$500 million to US$600 million through the public or private markets as early as the second quarter next year, co-founder Jeremy Yong said. The company with a presence in Japan, Singapore and China also sees opportunities in data centres, solar farms and hospitality, he said.

"Our focus is on income-generating asset space, any assets that generate a stabilised yield, robust income streams and tangible dividends," Mr Yong said in Singapore on Thursday. "That's where we want to be."

-From Singapore

Croesus mulls over setting up logistics fund

Source: Today Online / Business

SINGAPORE — The Croesus Group, an Asian real estate manager, is evaluating another fund with logistics properties after listing its first trust holding Japanese malls in Singapore last year.

Croesus has access to 24 to 36 facilities in Japan and the United States and may seek to raise about US$500 million (S$635 million) to US$600 million through the public or private markets as early as the second quarter of next year, co-founder Jeremy Yong said. The company, with a presence in Japan, Singapore and China, also sees opportunities in data centres, solar farms and hospitality, he said.

“Our focus is on income-generating asset space, any assets that generate a stabilised yield, robust income streams and tangible dividends,” Mr Yong said in an interview on Thursday. “That’s where we want to be.”

Croesus Retail Trust, which holds shopping malls in Japan including Luz Shinsaibashi in central Osaka and Mallage Shobu in greater Tokyo, debuted trading on the Singapore stock exchange in May last year. The trust has increased its number of assets to seven from the initial four, with the value rising 55 per cent to ¥82 billion (S$955 million) since the listing.

Dividend per unit could increase by 4 per cent in 2016 as rent renewals will be at higher rates, Mr Yong said.

The trust, agreed to buy One’s Mall in greater Tokyo earlier this month and may resume acquisitions next year, Mr Yong said.

While Croesus has also been looking to manage hospitality assets in Japan, the selection of Tokyo to host the 2020 Olympic Games has led to soaring real estate prices, Mr Yong said.

“After retail we had planned hospitality assets,” but the hotel properties are too expensive, he added. Outside Japan, he said, Croesus may build logistic facilities in Taiwan and Malaysia, and data centres in Europe. 

-By Bloomberg

Gryphon sues Sakae over proceeds from property sale

Sushi chain says payment can be made only after other pending lawsuits are resolved

Source: Business Times / Companies

THE legal wrangling stemming from mainboard-listed sushi chain Sakae Holdings' involvement in the Bugis Cube commercial property venture has taken another turn, over more than S$90 million purportedly idling in the bank.

This time, Gryphon Real Estate Investment Corporation, essentially comprising about 90 investors, is suing Sakae and its executive chairman Douglas Foo for not paying out the property sales proceeds.

But Sakae's position is that the payment can only be made when pending lawsuits surrounding alleged financial irregularities at the special vehicle that invested in Bugis Cube, Griffin Real Estate Investment Holdings, are resolved.

Sakae announced the latest development on Wednesday.

According to court documents filed on Sept 8 and seen by The Business Times, Gryphon demands that part of the profits in the venture be distributed to investors as soon as possible.

Gryphon also alleges that legal action by Mr Foo and Sakae against Gryphon director Ho Yew Kong and former director Andy Ong resulted in delays in Bugis Cube renovations.

This allegedly led to liquidated damages of S$941,408.37 that Sakae and Mr Foo are liable for. Mr Foo is also allegedly liable for another late Goods and Services Tax (GST) penalty of S$169,478.10.

The Business Times understands that Sakae is in the process of filing a response.

Griffin is supposedly owned thus: by Gryphon (45.35 per cent), ERC Holdings (29.96 per cent) and Sakae (24.69 per cent).

For Sakae, the dispute centres around whether ERC, controlled by former Sakae director Andy Ong, is a valid shareholder of Griffin. ERC became a shareholder in mid-2012 due to a 

purported share option agreement.

Last January, Sakae raised the alarm over alleged financial irregularities at Griffin. They involved substantial payments to firms majority-owned or controlled by Mr Ong not disclosed to Sakae.

A legal spat intensified in the course of the year. There are currently a few lawsuits pending between both parties.

The dividend payment issue came about in a meeting between the feuding shareholders of Griffin last December.

Gryphon and ERC proposed that a portion of the profits be distributed to investors. Sakae refused. According to the plaintiffs in the latest suit, Mr Foo said this was because Griffin's accounts for the 2011 financial year were not finalised, and he was unsure who Gryphon shareholders were because of the disputed share option agreement that led to the current shareholding structure.

In another meeting between the three parties in July, Gryphon and ERC again failed to get Sakae to agree to distribute the profits.

They said interim dividends could be held by Gryphon on trust in case ERC was deemed not to be a shareholder of Griffin.

They alleged that if no dividends were paid before the previous two suits were resolved, this would be "highly prejudicial" to Gryphon's interests since their shareholding in Griffin was allegedly not in dispute.

Sakae closed at 66 Singapore cents yesterday, up a cent.

-By Cai Haoxiang

Global Economy & Global Real Estate

Investments, spending accelerate Q2 GDP growth

Economy expands 4.6%, fastest pace since 2011; company profits surge

Source: Business Times / Top Stories

THE US economy expanded in the second quarter at the fastest rate since the last three months of 2011 as companies stepped up investment and households boosted spending. Gross domestic product (GDP) grew at a revised 4.6 per cent annualised rate, up from a previous estimate of 4.2 per cent, Commerce Department data showed on Friday in Washington. The increase matched the median forecast of 81 economists surveyed by Bloomberg and followed a 2.1 per cent decline in the first three months of the year.

Busier assembly lines at the nation's factories and job growth that's kept Americans spending indicate companies are a bit more upbeat about the prospects for demand. As the world's largest economy and labour market improve, Federal Reserve policymakers are debating how much longer to keep interest rates near zero. Forecasts for second-quarter GDP ranged from gains of 3.4 per cent to 5 per cent, according to the Bloomberg survey. The estimate is the third and final for the quarter.

The revision reflected bigger gains in corporate spending on equipment and properties. Investment in non-residential structures added 0.35 percentage point to Q2 growth, the most since the first three months of 2012. Business investment increased at a 9.7 per cent annualised rate, up from a previously estimated 8.4 per cent pace. Corporate spending on equipment was revised to an 11.2 per cent rate from an earlier reading of a 10.7 per cent increase, while outlays for structures climbed at a 12.6 per cent pace in the second quarter.

-From Washington, US

London home prices in first fall since 2012

Source: Business Times / Wealth

LONDON house prices fell for the first time in almost two years this month as declining demand led to a weakening of the property market across Britain, Hometrack Ltd said on Friday.

The survey of real estate agents showed values in the capital dropped 0.1 per cent, the first decrease since November 2012, and further "modest" declines are likely in the coming months, the property research company said in a report. National prices stagnated, bringing to an end 19 months of increases.

The survey chimes with other reports showing the London housing market is slowing sharply after values surged by about a quarter over the past year. Hometrack cited a tightening of loan criteria and the prospect of a Bank of England rate increase.

-From London, UK

UK property search sites face lower margins

Source: Business Times / Wealth

PROPERTY search websites Rightmove plc and Zoopla Property Group plc face lower margins and declining revenue as a group of UK's brokers prepare a rival site to avoid paying fees to both companies.

The group, Agents Mutual, expects to begin trading in January with 4,000 members, board member Ed Mead said. To join, brokers must sign a contract agreeing to advertise on no more than one other property portal.

Agents Mutual "not only wants to steal away clients from the incumbents, losing them valuable revenue and profit, but also to actively damage the incumbents' commercial proposition by fragmenting where properties are listed", Citigroup Inc analysts including Thomas Singlehurst said in a note as it downgraded Rightmove to "sell" from "buy". "It is the latter that is more important as it potentially lowers the barriers to entry and reduces pricing power long term."

-From London, UK