Real News‎ > ‎2015‎ > ‎February 2015‎ > ‎

24th February 2015

Top Stories


22 constituencies benefited from HDB's Neighbourhood Renewal Programme: MND

The selection of Neighbourhood Renewal Programme projects are done at the town council level, where the Ministry of National Development can ensure a good geographical spread of projects and meet the preferences of the respective town councils.

Source: Channel News Asia / Singapore

SINGAPORE: Twenty-two constituencies have benefited from 100 projects selected for the Housing Development Board's (HDB) Neighbourhood Renewal Programme (NRP) from 2007 to 2014, said the Ministry of National Development on Monday (Feb 23).

This was in response to a question in Parliament by NCMP Mrs Lina Chiam on the NRP.

Speaking in Parliament, Minister of State for National Development Maliki Osman said that the selection of projects was not done at constituency level, but at the town council level. He explained that this was to allow the ministry to ensure a good geographical spread of projects and meet the preferences of the respective town councils.

Since 2011, 41 projects have been selected with each town council (with the exception of East Coast where all eligible NRP blocks had already been selected),  getting one to five projects each.

He added that S$150 million has been disbursed under the NRP.

- CNA/ac

New projects to improve Potong Pasir on the cards: Khaw

National Development Minister Khaw Boon Wan said that five-year plans for Potong Pasir will centre around the betterment of living environment.

Source: Channel News Asia / Singapore

SINGAPORE: Minister for National Development Khaw Boon Wan said there will be new development projects in Potong Pasir to improve the living environment for residents.

He said this in a written parliamentary reply to a question from Non-Constituency Member of Parliament Lina Chiam on plans for Potong Pasir and Lorong 8 Toa Payoh over the next five years.

Mr Khaw said the projects will include the development of the site next to the Potong Pasir MRT station for mixed residential and commercial purposes, and the improvement of water channels.

"The stretch of Kallang River from Potong Pasir Avenue 1 to St. Andrew's Junior School, and the drain along Lorong 8 are being enhanced under PUB's Active, Beautiful and Clean (ABC) Waters programme," Mr Khaw said.

He added that more sheltered linkways will be provided for commuters from the Potong Pasir North-East Line MRT station. Cycling paths connecting Potong Pasir MRT station to the Kallang Park connector are also in the pipeline to shorten commuting distances. 

- CNA/rg

Singapore Economy


Singapore Budget 2015

Source: Straits Times (Pg A1 – A7, C1 – C14)

Jubilee Budget sets course for Singapore's future

Culture of personal effort, responsibility to be complemented with stronger collective responsibility: Tharman

Source: Business Times / Government & Economy


BUDGET 2015 did not bring the sort of one-off celebratory goodies most were expecting, but the measures announced amounted to a more permanent, far-reaching shift in Singapore's economic and social narrative.

Economic restructuring will be more finely calibrated, the workforce will be equipped with skillsets required for the future, and all Singaporeans - especially those with lesser means - can look forward to greater assurance in retirement.

Delivering the Budget Statement in Parliament on Monday, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said: "This Budget is focused on building Singapore's future. We must reach our next frontier as an economy, with firms driven by innovation, and higher incomes coming from deep skills and expertise in every job.

"We must ensure a society that is fair and just, where everyone has a chance to move up and do well regardless of where they start. And we must complement a culture of personal effort and responsibility with stronger collective responsibility, especially for our elderly."

"It will take time to develop a new economic and social culture . . . But we can only get to where we want in the long term by taking steps now, moving ahead relentlessly, and never thinking that the status quo will get us to a better place," added Mr Tharman in his close to 21/2-hour-long speech.

With an inevitable rise in government expenditure over the long term - Mr Tharman projects overall spending to reach about 19.5 per cent of GDP on average over the next five years, about one per cent of GDP higher than the revenues today - steps have also been taken to strengthen future revenues.

With effect from 2016, the expected returns of Temasek Holdings will be included in the government's net investment returns framework, which is already applied to GIC and the Monetary Authority of Singapore (MAS).

To further bolster fiscal resources, the government will also raise the personal income tax rates of top income earners from Year of Assessment (YA) 2017. The change will affect those in the top 5 per cent who earn at least S$160,000 a year, but the increases are largest for the highest income earners - for those with a chargeable income of over S$320,000, the top marginal tax rate will increase by two percentage points to 22 per cent.

According to the government's assessment, the tax increase for high-income earners should not significantly dent Singapore's competitiveness. Still, Mr Tharman stressed that "we cannot take tax competitiveness lightly".

The hike in top personal income tax rates is expected to raise S$400 million of extra revenue a year. Taken together with Temasek's inclusion in the net investment returns framework, it would provide additional revenues of about one per cent of GDP annually for the budget over the next five years.

Singapore's economic restructuring journey will also be fine-tuned, with a notable deferment of this year's round of announced levy increases for S Pass and work permit holders in every sector. This, Mr Tharman said, will give companies more time to adapt to "the new normal of a permanently tight labour market".

"However, to avoid any misunderstanding, let me affirm unequivocally that while we are adjusting the pace of our foreign worker measures, we are not changing direction. It remains crucial for Singapore that we restructure towards reducing our reliance on manpower, and find new and more innovative ways of doing business," stressed Mr Tharman.

The popular Wage Credit Scheme has also been extended for 2016 and 2017, although the co-funding of wage increases will be lowered from 40 per cent to 20 per cent.

But apart from helping companies cope with rising business costs, the government also delivered on calls to look at firms' topline growth. To that end, it will offer more support for innovation and internationalisation activities - particularly for those undertaken by small and medium-sized enterprises (SMEs).

Budget 2015 also introduced further measures to strengthen savings and income in retirement for all Singaporeans - first, through enhancements to the CPF system, and second, by introducing the Silver Support Scheme.

To enhance CPF savings, the CPF salary ceiling will be increased to S$6,000 from S$5,000 from Jan 1, 2016. CPF contribution rates will also be increased for older workers - for example, those aged above 50 to 55 will see a two percentage point increase in contribution rates to 37 per cent - the same level as that of younger workers.

The government will also make the CPF system more progressive by paying an additional one percentage point of Extra Interest on the first S$30,000 of CPF balances from the age of 55. This will take effect from Jan 1, 2016, and builds on top of the existing one point Extra Interest for the first S$60,000 of balances.

In addition, with the permanent Silver Support Scheme, more targeted help will be given to seniors in need, who have insufficient savings for retirement. Quarterly cash payouts of between S$300 and S$750 will be given to the elderly poor, depending on the senior's lifetime wages, household support, and housing type. About 150,000 of today's elderly are expected to benefit.

Another major thrust of Budget 2015 had to do with the SkillsFuture push, which sees a major new phase of investment in Singaporeans - beginning in the schooling years, and progressing throughout one's career.

For one, a SkillsFuture Credit will be created for all Singaporeans, which can be used for a broad range of courses supported by government agencies. Every citizen 25 years old and up will receive an initial credit of S$500 in 2016, with further top-ups made at regular intervals in the future.

On a broader level, the government will also be working with employers to chart future skills needed in each industry. Mr Tharman said that the government would collaborate with stakeholders to develop and implement these comprehensive sectoral manpower plans in all key sectors by 2020.

Even though expectations ran high for hefty SG50 or pre-election goodies - similar to Budget 2011's S$3.2 billion Grow and Share package and Budget 2006's S$2.6 billion Progress Package - Budget 2015 did not follow the script.

Several observers noted the greater weight placed on longer-term, more fundamental changes to Singapore's economic and social culture, than on shorter-term goodies.

Said Credit Suisse economist Michael Wan: "It seems to us that Budget 2015 focuses much more on long-term measures to boost the supply-side capacity of the economy, but is lacking in some of the short-term 'consumption' boosting measures that we, together with other analysts, have been expecting . . . There were no significant cash handouts given out in this budget."

Still, in addition to Service & Conservancy Charges rebates and a personal income tax rebate of 50 per cent capped at S$1,000, Goods and Services Tax Voucher (GSTV) cash will also be given to all Singaporeans, with an additional GSTV for seniors.

-By Kelly Tay

Budget 2015: Business reactions

Source: Business Times / Government & Economy

"The Singapore International Chamber of Commerce (SICC) welcomes the targeted focus on developing skills and competencies via SkillsFuture. Boldness is needed to achieve sustained innovation and productivity improvement and this is a bold step. It encourages and incentivises a mindset change among employers and employees alike. SkillsFuture recognises that a continuing process of acquiring and polishing skills is the only way to achieve mastery in any field. The chamber's European MNC members have much experience with this model. They and other members are ready to support the Pact (Partnerships for Capability Transformation) initiative to help SMEs in their supply chain. The modest increase in the salary cap for CPF contributions was expected, as were the increased contribution rates. Both are fair and just."       

Budget 2015: Boost in funding for Singapore's infrastructure development

Singapore will commit S$26 billion to the public transport system over the next five years, says Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.

Source: Channel News Asia / Singapore


SINGAPORE: A new Changi Airport Development Fund (CADF) will be set up to help in the building of Terminal 5.

Presenting the Budget in Parliament on Monday (Feb 23), Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said an initial S$3 billion will be injected into the fund. This can be topped up subsequently when Singapore's fiscal position allows.

Changi Airport’s Terminal 5 will be able to process up to 50 million passengers a year - more than Terminal 2 and 3 combined.

"This will be a major outlay for the Government over the next 10 to 15 years. It is right and prudent to set aside monies today for this large investment, while we have the resources to do so,” said Mr Tharman.

In 2017, the new Terminal 4 is expected to be ready. Another key project is Jewel Changi Airport, a S$1.7 billion mixed-use project that will open in 2018.

Mr Tharman said the development of the Tuas seaport will also secure Singapore's place as a logistics hub in the region.

Improvements are also being made in public transport - with more lines, trains and buses added to the network.

"About S$14 billion has been deployed to the public transport system over the past five years, and another S$26 billion has been committed for the next five years."

Singapore's healthcare infrastructure will also be expanded. There will be more beds in acute hospitals, community hospitals and nursing homes.

The last time Singapore made such significant investments in infrastructure was in the 1990s. Some of the investments then included the development of Jurong Island, the North-East MRT Line, the Light Rail Transit network and Changi General Hospital.

"Just as these investments two decades ago laid the foundations for better living standards over many years, we must now invest in the next era of jobs and incomes, and a higher quality of life," said Mr Tharman.

Mr Tharman said Singapore's spending on infrastructure will be increased by 50 per cent to about S$30 billion by the end of this decade. This is about 6 per cent of the country's gross domestic product.

"As we embark on large infrastructural projects, we are placing great emphasis on optimising project design and cost efficiency. Overall, we must spend judiciously, achieving value-for-money and providing subsidies to Singaporeans in a fair and targeted manner,” added Mr Tharman.

Mr Tharman said all developments will be complemented by the country's Smart Nation initiative to improve the quality of life of citizens.

Professor Lee Der Horng from National University of Singapore's Department of Civil and Environmental Engineering said the increased amount of investment in the transport system in the next five years is a "very necessary" move. He added that it is still too early to tell if the cost of the investment will be passed on to commuters.

- CNA/xq

Tax incentives for S-Reits extended but not stamp duty remissions

Source: Business Times / Government & Economy

Income tax and GST concessions for Singapore real estate investment trusts (S-Reits) will be extended for five more years, but stamp duty concessions for the purchase of local properties will be allowed to lapse after March this year, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam on Monday. This is because the stamp duty concessions "were intended to enable the industry to acquire a critical mass of local assets as a base from which the Reits can expand abroad, (and) this has been achieved", he said in his Budget speech.

-By Lee Meixian


Singapore to Extend Tax Breaks for Property Trusts by Five Years

Source: Bloomberg

(Bloomberg) -- Singapore will extend tax incentives for real estate investment trusts by five years, allowing them to earn income from foreign properties without paying taxes.

The nation will also extend local tax exemptions for REITs, Finance Minister Tharman Shanmugaratnam said in his budget speech to Parliament on Monday. He indicated the government will resume charging the trusts stamp duties on Singaporean property purchases.

The extension of tax breaks will help Singapore-listed property trusts maintain their competitiveness versus peers in countries from Australia to China. More than 30 REITs and business trusts have listed in Singapore since 2002 amid tax-efficient investment structures. The nation’s benchmark REIT index now has a market value of more than $65 billion.

To support the listing of REITS, Shanmugaratnam said he will extend income tax and goods-and-services tax concessions for five years, and enhance GST concessions to facilitate fundraising by special purpose vehicles set up by REITS.

By allowing the real estate trusts to continue to earn income from foreign properties without paying taxes, Singapore is extending a benefit first introduced about a decade ago that would have expired on March 31. When the incentive was first introduced, it was for an indefinite period. An expiry date clause was introduced in the nation’s 2010 budget.

The government won’t extend the exemption REITs have had since 2005 from paying stamp duties on Singapore properties, Shanmugaratnam said. Trusts that have all their assets in the country will face a maximum duty of 3 percent on the value of properties they acquire, Vikrant Pandey, an analyst with UOB Kay-Hian Pte in Singapore, wrote in a Feb. 9 note.

Pandey had flagged the possible removal of the stamp-duty exemption in his report, citing a maturing REIT market.

CapitaCommercial Trust, Singapore’s biggest office REIT, has all its assets in the country. Others with only Singapore assets include Mapletree Industrial Trust and Far East Hospitality Trust.

The FTSE Strait Times Real Estate Investment Trust Index gained 2.6 percent this year. It climbed 9.2 percent in 2014, its biggest annual advance in two years.

-By Pooja Thakur

Singapore Real Estate


New office space could go fast as firms seek quality

Tech companies becoming a big driver of demand, says consultancy 


Source: Straits Times / Money

THE surge in the supply of new office space over the next two years is likely to be absorbed fairly quickly as firms want high-quality facilities, property consultancy Cushman & Wakefield said yesterday.

It also noted that the technology sector was quickly becoming one of the biggest drivers of demand.

"Unlike in previous years during boom times, office tenants last year were mainly driven by relocations to better-value propositions in newer buildings, rather than the need to upsize," said Cushman & Wakefield research head Christine Li.

Calling this trend a "flight to quality", she said Grade A office rents may climb a further 5 per cent to 6 per cent this year.

Office rents in the Central Business District (CBD) shot up 14 per cent last year, the biggest increase in Asia, according to consultancy JLL. But analysts reckon that a bumper crop of new office completions over the next two years could put a lid on rents.

About 1.15 million sq ft of new space will come on stream in Singapore this year, with the figure rising to 1.6 million sq ft next year and 4.7 million sq ft in 2017, according to a Bloomberg report earlier this month that cited real estate broker Knight Frank.

Ms Li yesterday said 62 per cent of Cushman's leasing deals that were each for at least 25,000 sq ft last year involved relocations within Singapore, most of which were from older buildings to newer premium office space.

The remaining 38 per cent of its leasing deals for Grade A office space and business parks in Singapore were lease renewals and for new entrants.

"Some tenants took advantage of the more efficient floor plates by consolidating their spaces in the newer buildings, which come with large column-free spaces that allow more effective layout of work stations," said Ms Li, adding that this has led to strong take-up rates for the newly completed offices.

These include Marina Bay Financial Centre Tower 3, Asia Square Tower 2, CapitaGreen and South Beach.

Ms Li said that CapitaGreen's occupancy rate is close to 70 per cent while South Beach is about 80 per cent leased.

The rapidly growing tech sector has been increasingly snapping up Grade A office space in the CBD, while the financial industry's share has shrunk.

Ms Li said tech companies have "more than doubled their presence" in the Grade A office market over the past 12 months. They accounted for about 15 per cent of office demand last year, up from 6 per cent in 2013.

The amount of office space that tech firms occupy has also expanded to more than 300,000 sq ft last year, from around 160,000 sq ft the year before.

One entrant last year was LinkedIn, which moved into two floors at Marina Bay Financial Centre given up by Barclays.

"As technology companies... accelerate the expansion of their reach across Asia, they will be the market darling for office leasing in the CBD," Ms Li noted.

That trend looks set to continue this year.

City Developments last week said Facebook will be the anchor tenant of the 34-storey office tower at its South Beach project, taking up 70,000 sq ft.

The social media giant will move there later this year from its premises at 158 Cecil Street.

In contrast, though the financial industry still dominates the CBD, its portion of market demand for office space fell from 41 per cent in 2013 to 30 per cent last year.

Banks and other financial institutions also slashed their office space sharply, from 1.1 million sq ft in 2013 to slightly more than 600,000 sq ft last year.

-By Melissa Tan

Sengkang columbarium: No full refund for flat cancellation, says HDB

Flat buyers who wish to cancel their flat application after signing the Agreement of Lease will have the 5 per cent of purchase price of the booked flat forfeited, HDB says on Monday (Feb 23).

Source: Channel News Asia / Singapore


SINGAPORE: The Housing and Development Board (HDB) on Monday (Feb 23) said it has received a total of 95 requests from flat buyers to cancel their bookings with refund for their Build-To-Order (BTO) flats in Fernvale as of Feb 9.

This is out of the 4,000 units located near the three BTO projects at Fernvale Link.  However, HDB said it will not be able to accede to the buyers' requests to cancel their bookings with a full refund of payment.

It also said flat buyers who wish to cancel their application before signing the Agreement for Lease will have the paid option fee forfeited, while cancelling the application after the signing of the agreement will result in flat owners forfeiting the 5 per cent of purchase price of the booked flat, it added. 

HDB said these flat buyers will have till Feb 27 to inform the board of their final decision on the cancellation of their flat application.

"Once you have entered into an agreement or an exercise, legally you will be liable to purchase it for the entire amount,” said Mr Mohamed Ismail, CEO of PropNex. “In this instance, the Government is acting on a goodwill basis - for people who are really not comfortable for whatever reason, they can get away with it, but by losing 5 per cent (of the purchase price)." 

Residents had previously cried foul over plans to build a columbarium within the Chinese temple designated at a plot of land located near the three projects at Fernvale Link. Many said they were unaware of the plans for the columbarium. 

HDB said the intent of the temple was stated both in the Master Plan and its sales brochure for one of the projects, and that this plan remains unchanged. 

National Development Minister Khaw Boon Wan subsequently announced in Parliament on Jan 29 that the site was not meant for a commercial columbarium, and his ministry will ensure the tender site at Sengkang is restored to the original plan of a Chinese temple.  

"As a buyer, be aware of such situations, and if you are concerned, you should ask," said Mr Mohamed Ismail. "When you ask a question, the agents or sales person are obliged to tell what has happened. They cannot hide facts.”

He also stressed that developers must be transparent too. 

Whether the temple will provide columbarium service will depend on the decision of temple trustees, and will be subject to the Urban Redevelopment Authority’s planning approval.

A buyer whom Channel NewsAsia spoke with said she had changed her mind about cancelling her booking. She explained that even though she has concerns about the temple and the services it could offer, she would rather get her flat now than wait for another BTO exercise.

- CNA/xk          

Firms welcome break from foreign levy hike

TODAY reports: While most companies welcomed the one-year respite from foreign levy increases, there were mixed feelings in the construction sector due to the continued labour crunch amid a high turnover.

Source: Channel News Asia / Singapore


SINGAPORE: Companies welcomed the one-year respite from foreign levy increases, which they said would give them the breathing space to restructure and wean themselves off cheap foreign labour.

Singapore Business Federation chief operating officer Victor Tay said the deferment of the scheduled levy increase, which will benefit all sectors, “slows down the whole process of cost increment” and buys some time for businesses to boost productivity despite limited manpower resources.

Companies in the manufacturing sector had more to cheer about than others. Levy rates for Work Permit holders of all tiers and skill levels for the sector will remain at Jul 1, 2014, rates for the next two years.

Mr Lam Joon Khoi, secretary-general of the Singapore Manufacturing Federation, said the move gives the sector more time to “transform itself” and make relevant changes to address the labour crunch.

“(Some are) changing the workflow from manual to automation, while others are innovating in terms of how they perform certain tasks. For example, some companies outsource (work) to a centralised service provider... So they don’t have to worry about hiring more employees to do the work,” he said.

The construction sector, on other hand, greeted the announcements with less enthusiasm. The lowering of Man-Year-Entitlement (MYE) waiver levies would make it easier for companies to hire Higher Skilled (R1) workers, but the increase in the basic tier levy for Basic Skilled (R2) workers - from S$550 to S$650 in 2016, and subsequently to S$700 the following year - would see fewer R2 workers hired, doing nothing to alleviate the current labour crunch.

Singapore Contractors Association president Ho Nyok Yong said he had “mixed feelings” about the adjustments. Ever since the tightening measures were put in place, the construction industry has had to cut its manpower strength by 45 per cent, despite the sector’s all-time high turnover of S$35.7 billion last year.

“It’s difficult to cope... More developments are coming up, but our manpower remains the same. But the lowering (of the MYE waiver) is good news... And one year (of deferred levy increment) is better than nothing,” he said.

While he had hoped there would be no further foreign worker levy increases for good, Association of Small and Medium Enterprises (ASME) president Kurt Wee said he was pleased the Government was ramping up support for small and medium enterprises (SMEs) in innovation and internationalisation.

“Training of the workforce (to) deepen skill sets, internationalisation - these are quite important and critical to SMEs. (The Government’s support) will be like an external training support pillar for SMEs,” he said.

KPMG head of tax Tay Hong Beng said other measures, such as an enhanced mergers and acquisitions tax incentive, would attract businesses to come together and consolidate.

“This should inject a much-needed interest and enthusiasm in the SME segment, where consolidation would result in a more competitive business venture especially when venturing abroad,” he said.

Deloitte tax partner Lee Tiong Heng said the revised Capability Development Grants (CDG) scheme would provide a more flexible support platform for companies, particularly SMEs, to innovate and internationalise.

“Making smaller projects of less than S$30,000 easier to qualify for CDG from SPRING Singapore will be welcomed by SMEs and should in some way support innovative efforts by SMEs,” he said.

But Mr Melvin Tan, managing director of engineering firm Cyclect Holdings, felt the internationalisation programmes introduced would only help to a certain extent.

“Entrepreneurs still risk their own capital when expanding overseas, (while) tax benefits only benefit those who make money on the whole,” he said.


Companies' Brief


Singtel, HK Land drag STI lower

The two stocks together cut 14 points off the index, outweighing gains in other blue chips

Source: Business Times / Companies & Markets

The Straits Times Index (STI), which last Wednesday had been pushed up 20 points, on Monday fell back by 14.36 points or 0.4 per cent to 3,421.30, dragged lower mainly by selling of Singtel and Hongkong Land (HKL).

-By R Sivanithy

Weak ringgit makes Sime Darby's buy more pricey

But the conglomerate is upbeat that its acquisition of NBPOL would pay off in the longer term, as it would enable its expansion and a chance to move up the value chain upstream

Source: Business Times / Companies & Markets

A limp ringgit is expected to make Sime Darby's acquisition of New Britain Palm Oil Ltd (NBPOL) more costly, given that the Malaysian currency has depreciated by some 7 per cent against the British pound since last October, when the Malaysian conglomerate made its takeover offer.

-By Pauline Ng

Global Economy & Global Real Estate


Home Sales Drop as Lack of Supply Drives Up Prices: Economy

Source: Bloomberg

(Bloomberg) -- Broad-based price increases put more properties out of reach for American homebuyers in January, becoming the latest hurdle preventing a more robust recovery in residential real estate.

Purchases of existing houses dropped 4.9 percent from December to a 4.82 million annualized rate, the least since April, figures from the National Association of Realtors showed Monday in Washington. The median cost of a previously owned home climbed 6.2 percent compared with January 2014 as the number of dwellings on the market dropped.

While rising property values boost homeowner wealth and spending power, too-rapid increases are outstripping wage gains, representing a hurdle for young or first-time buyers. Nonetheless, strengthening employment, historically low mortgage rates, more expensive rents and easier financing will probably sustain demand and give sales a boost this year over last.

“We’re starting to see big concerns about pricing and affordability,” said Jacob Oubina, a senior economist at RBC Capital Markets LLC in New York, whose forecast that sales would drop to a 4.8 million pace was the closest in a Bloomberg survey. “Folks are finding out they are priced out of the market.”

The Standard & Poor’s 500 Index was little changed at 2,109.66 at the close in New York, just off the record of 2,110.3 reached on February 20. The S&P Supercomposite Homebuilding Index dropped 1 percent.

Survey Median

The median forecast of 74 economists in a Bloomberg survey called for existing home sales to decline to 4.95 million. Estimates ranged from a 4.76 million pace to 5.2 million. The December reading was revised up to 5.07 million from a previously reported 5.04 million.

The median price of an existing home climbed to $199,600 from $187,900 in January 2014, the report showed.

Increases of this magnitude are probably caused by a lack of supply, and clearly swamp income gains and inflation in general, Lawrence Yun, NAR chief economist, said at a news conference as the figures were released. This is not a “healthy” sign, he said.

The number of previously owned homes on the market dropped 0.5 percent from January 2014 to 1.87 million, marking the second consecutive year-over-year decrease after 15 consecutive monthly gains.

The decline is a “puzzle” and is “not welcome news,” Yun said. It could either be because owners fear losing their current ultra-low mortgage rate should they sell their house -- the so-called lock-in effect -- or because of lingering uncertainty about the outlook for the economy, he said.

Staying Put

Owners are now staying in their homes for about 10 years on average, compared with the more normal seven years, Yun said a recent NAR survey showed.

At the current sales pace, it would take 4.7 months to sell those houses compared with 4.4 months at the end of December. Less than a five months’ supply is considered a tight market, the Realtors group has said.

First-time buyers accounted for 28 percent of all purchases in January, a second consecutive monthly decrease and the fewest since June, the report showed.

Purchases dropped in all four regions of the country, suggesting bad weather was less of a factor. The decrease in demand was led by a 7.1 percent slump in the West and a 6 percent setback in the Northeast.

Housing Tailwinds

Home sales will benefit from the improving labor market, which bounded forward in January. Payrolls advanced by 257,000 month-over-month, according to Labor Department figures, capping the biggest three-month gain in 17 years. The unemployment rate rose to 5.7 percent from 5.6 percent as more than a million Americans streamed into the labor force seeking work.

Low borrowing costs help, too. The average 30-year, fixed-rate mortgage was 3.76 percent in the week ended Feb. 19, according to data from Freddie Mac in McLean, Virginia. That’s still close to the record-low of 3.31 percent reached in November 2012.

Barriers to credit are easing for first-time homebuyers. Fannie Mae, which buys mortgages and packages them into securities, began purchasing loans with down payments as low as 3 percent in December, a drop from its previous floor of 5 percent for most loans. Freddie Mac is preparing a similar reduction beginning in March.

Fannie Mae, Freddie Mac and the FHA also made changes last year to the way they handle mortgages with underwriting flaws to give banks more certainty that they won’t have to absorb the cost of soured loans that they originated with due diligence. The average FICO credit score on purchase loans backed by Fannie Mae or Freddie Mac was 754 in November compared with 759 in 2013, according to mortgage-technology company Ellie Mae.

Annual Forecast

Such issues combined with rising rents and household formation probably mean 5.3 million existing houses will be sold this year, a 7 percent increase from 2014, and the most since 2006, Yun projected.

“All the factors that would push up home sales are moving positively,” he said in the news conference. January is typically a slow month and could be volatile, so the market should pick up, said Yun.

With the report, the Realtors’ group issued annual revisions covering the monthly data for the past three years to reflect changes in seasonal adjustments. The annual totals were unaffected.

Existing home sales, which are tallied only when purchase contracts close, account for more than 90 percent of the residential market. A timelier barometer is new-home purchases, because they are tabulated earlier in the process, when contracts are signed. They constitute about 7 percent of the market. Those figures come out Feb. 25.

-By Bloomberg News

Goldman Made $10 Billion From Fund Stakes in Last 5 Years

Source: Bloomberg 

(Bloomberg) -- Goldman Sachs Group Inc. generated about $10 billion over the last five years from investments in funds, holdings that the firm is required to scale back because of the Volcker Rule.

Stakes in credit, real estate, private equity and hedge funds produced 6 percent of the firm’s total revenue in the past five years and 3 percent of revenue over the past decade, New York-based Goldman Sachs reported in its annual regulatory filing on Monday. The company previously said the investments generated an immaterial portion of total revenue since the bank went public in 1999.

Goldman Sachs has traditionally taken significant stakes in funds offered to its clients, leading investors and analysts to question how much revenue will decline when the holdings are reduced. Gains from those investments account for almost half of the $24 billion in revenue in its investing and lending segment over the past five years.

The Volcker Rule limits banks’ investments in covered funds to 3 percent of Tier 1 capital, meaning Goldman Sachs’s stakes would be capped at $2.35 billion at the end of 2014. The Federal Reserve has pushed back the deadline for meeting the limits and indicated it will move the date to July 2017.

The firm had $9.84 billion of fund investments as of Dec. 31, down from $14.4 billion a year earlier, according to Monday’s filing. The biggest reduction was in credit funds, where the firm’s holdings fell 72 percent to $1.02 billion.

Goldman Sachs redeemed $417 million of its hedge-fund stakes in the fourth quarter, most of its $762 million in redemptions for the year, according to the filing. The filing showed the firm also canceled commitments to some credit funds.

-By Michael J Moore

New Residential to Buy Home Loan Servicing Solutions

Source: Bloomberg

(Bloomberg) -- New Residential Investment Corp., a U.S. real estate investment trust, agreed to buy Home Loan Servicing Solutions Ltd. for about $1.3 billion.

New Residential will acquire the outstanding shares of Home Loan, which is based in the Cayman Islands, for $18.25 each, according to a statement on Sunday. That’s 9 percent more than the closing price on Friday.

The deal addresses “uncertainty” about Home Loan’s future financing obligations, HLSS Chief Executive Officer John Van Vlack said in the statement.

HLSS was created by Ocwen Financial Corp. to help finance investments in servicing contracts and was taken public in 2012. Last month, investment firm BlueMountain Capital Management LLC said “misconduct” by Ocwen triggered a default in securities issued by an HLSS trust. HLSS said it would “vigorously defend against the claims.”

New Residential was formed by Newcastle Investment Corp. and spun off as a separate publicly traded entity in May 2013, according to its website. The New York-based company is externally managed and advised by an affiliate of Fortress Investment Group LLC.

“The acquisition will significantly add to the value of our book of mortgage servicing assets and expand our relationships with mortgage servicers,” Michael Nierenberg, CEO of New Residential, said in the statement.

The transaction has been approved by both companies and is expected to be completed in the second quarter, according to the statement.

New Residential was advised by Bank of America Merrill Lynch and Credit Suisse Group AG. Citigroup Inc. advised HLSS.

-By Michelle Yun

As US office space shrinks, so does workers' privacy

With rents surging as the office market rebounds, many companies are looking to cut costs.

Source: Business Times / Real Estate

Thailand's Central Group plans to invest 37b baht in 2015

About 80% will be for opening new shopping malls, acquisitions: CEO

Source: Business Times / Real Estate

US$150m Manhattan triplex to set luxury-condo record

Source: Business Times / Real Estate

Understanding US millennial homebuyers

Source: Business Times / Real Estate

Additional Articles of Interests - Local & Overseas Real Estate


Local & Overseas Real Estate - Full Article