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26th February 2015

Top Stories


Bridging social divide calls for more than HDB flats on prime land: Minister

Chan Chun Sing calls for designs of facilities that foster social mixing

Source: Straits Times / Top Stories

THE rich-poor divide in society cannot be bridged simply by building more Housing Board flats on prime land, said the Minister for Social and Family Development yesterday.

While the Government might build such flats, achieving the aim of greater mixing across social divides called for more than this, as it entails people being willing to interact and foster strong community ties, said Mr Chan Chun Sing. Good designs and careful planning can help foster this, he added.

He was responding to a question on whether the Government would consider increasing interaction between the haves and have-nots by building HDB flats on prime land, like Marina South.

Real social mixing goes beyond buildings, but more importantly, it is about the more successful people reaching out and "giving their time, talent, treasures", he said.

Mr Chan was speaking at the inaugural Real Estate Developers' Association of Singapore mentorship programme for students.

Architects, he said, could play a role in fostering greater social interaction across social groups. They would have to tackle issues such as balancing the need for privacy against the need for people to have access to a social support network in an age where family sizes have shrunk.

Mr Chan told the 50 students from the National University of Singapore (NUS) and Nanyang Technological University at the event that, ideally, good

design can guard against the worst of Singaporeans' self-preserving nature - the "not in my backyard" syndrome.

"As architects and real estate developers... (we) can mitigate and minimise the syndrome, if we design according to the needs of the community or emerging community, if we have a good feel of the needs."

A void deck, for example, has many social uses. Instead of infringing on these spaces, childcare centres can be designed upfront into the second storey or carparks, said Mr Chan.

He appealed to students: "As you develop your skills... may you consider carefully how living spaces are designed, and be architects of communities."

Mr Chan cited The Pinnacle@ Duxton HDB complex, noting that apart from potential capital gains, residents paid lower conservancy fees than at a private condominium.

He said rental flats could be included in blocks of Build-to-Order flats, but asked if Singaporeans would want this: "Many people would wax lyrical about (solving the rich-poor divide), but we must touch our hearts (and ask ourselves), will you look down on someone because he stays in a rental flat in the same block?

"Will you shake your head and wonder why we are mixing with these people... Will they affect my flat value?... If our hearts and our answers are different, it says something about us as individuals and as a society."

NUS student Ho Wen Feng said the dialogue on social integration gave him more to think about. "We learnt it is a constant challenge... And we can see the Government is hearing our views, putting in effort to solve the problem of the divide."

-By Rennie Whang


Building social inclusiveness through property design

Speaking at a dialogue with university students, Social and Family Development Minister Chan Chun Sing says the design of HDB flats can help to encourage social interaction.

Source: Channel News Asia / Singapore

SINGAPORE: Building rental units next to new Build-to-Order flats and getting real estate students to also study social sciences - some of the ideas raised by Social and Family Development Minister Chan Chun Sing to have more social inclusiveness in Singapore.

Mr Chan was speaking to 50 engineering and real estate students from the National University of Singapore (NUS) and Nanyang Technological University (NTU) at a dialogue on Wednesday (Feb 25).

Homes today provide greater privacy - for instance, common corridors are no longer seen at newer blocks. Flat owners can have greater privacy this way, but it can have social implications, said Mr Chan.

"In short, today's privacy will be tomorrow's social isolation,” said Mr Chan.

“That common corridor doesn't just serve a functional role to allow people to get from the lift lobby or staircase back to their house – it allows mixing, it allows people to get to know their neighbours, it allows people to walk past and greet each other,” he explained.

“When we take away that in the name of privacy, then we have to ask ourselves the next design that we need to incorporate that will allow people to have privacy and at the same time, not create a situation where in 20 to 30 years' time, we will have an aged population with a social problem."

Mr Chan said in fostering social interaction, those in the real estate industry have an important role. Developers could consider building different types of flats, including rental units, in a single project to bring together people of different social and economic status.

“Perhaps it's important, in our whole society, to have social mixing whereby the rich grow up understanding that there are poor people in this society, that we will count our blessings, that in this society it's our responsibility for those who have been more blessed to extend a helping hand to the poor,” he said.

Mr Chan added that in cases of the “not-in-my-backyard” syndrome, designers and architects can also help to mitigate the situation through careful design.

But for the property sector to play that role well, those in the industry, and real estate students, need to have a good understanding of social needs. That is still lacking in the curriculum of some universities in Singapore, said Mr Chan.

"If you want to be a good architect, a good real estate student, beyond architecture and real estate, you should really study sociology, demographics - you should study social sciences," he said.

When asked if the government will consider building HDB flats at prime locations such as downtown Marina to improve social interaction, Mr Chan said he is sceptical it would work, as there are other issues to consider.

For instance, buyers can purchase HDB flats in prime areas at "artificially low prices", only to flip them in the resale market and enjoy a windfall.

"Who is cross-subsidising them? The Government? Actually the Government has no money to cross-subsidise,” he said. “The real answer is the rest of the people - the three-room flats and the four-room flats are cross-subsidising them. That comes to another point which is then, is this a fair system? So there are complex considerations on where we want to build."

Organisers of the dialogue, the Real Estate Developers' Association of Singapore, said it hoped to foster a better understanding of the real estate environment amongst youths.

- CNA/xq

Singapore Economy


S'pore households' net worth grows a slower 2.3%

Record number of new home completions this year could show up in higher asset values as well as liabilities on household balance sheet

Source: Business Times / Government & Markets

GROWTH in Singapore households' net worth continued to moderate last year as the rise in the value of their financial assets slowed and the aggregate value of residential properties on their balance sheet dipped despite the higher number of dwelling units.

Data released by the Singapore Department of Statistics showed a 2.3 per cent rise in households' net worth (assets less liabilities) from a year ago to S$1.47 trillion at the end of 2014, easing from a 4.2 per cent rise in 2013 and 8.2 per cent growth in 2012.

As expected, households saw a 1.1 per cent dip in the value of residential property assets to S$819.6 billion, with the main drag coming from public housing.

In line with the drop in HDB resale prices last year, the total value of public housing assets on households' balance sheet contracted 4.4 per cent to S$394.7 billion - steeper than the 0.7 per cent fall seen in 2013. The steeper fall in value occurred despite a 0.4 per cent increase in HDB households to 965,200 in 2014.

Private housing assets held up better, with their total value on households' balance sheet up 2.2 per cent at S$425 billion. A 10.8 per cent jump in private property households possibly offset the impact of a 4 per cent drop in private residential prices last year. As at end-2014, there were 231,200 private property households.

UOB economist Francis Tan noted that while households' net worth has been on a downtrend since 2012, there were signs that the growth in assets picked up again in the fourth quarter.

On a quarter-to-quarter basis, households' total assets edged up 0.9 per cent in the fourth quarter to S$1.76 trillion as at end-2014, after a marginal 0.2 per cent quarter-on-quarter rise in the third quarter. For the full year, households' assets marked a 2.8 per cent increase.

Financial assets grew a slower 6.4 per cent in 2014 to S$943.2 billion on the back of a 6.1 per cent rise in cash (currency and deposits), a 10 per cent jump in the aggregate value of life insurance assets, and an 8.9 per cent increase in CPF assets.

The plunge in oil and gas stocks, however, probably hurt the value of shares and securities held by households in the fourth quarter, said Ku Swee Yong, CEO of Century21 Singapore. The value of this asset class dropped 1.4 per cent to S$174.5 billion on the balance sheet; that was still a one per cent increase year on year.

Meanwhile, households' liabilities rose 5.1 per cent year on year to S$294 billion by the end of 2014. This marked the slowest growth since 2011, as growth in both mortgage loans and other personal loans cooled last year amid lending curbs introduced by the government.

"The liabilities growth rate has stabilised in 2014 across the four quarters," Mr Tan observed. But this year, the impending rise in interest rates and new homes being completed could cause a spike in mortgage liabilities. But the record number of new home completions is a double-edged sword, as it will also bolster the assets component of the household balance sheet, he said.

Rising wages amid a tight labour market and favourable economic conditions also remain supportive of asset growth for households, Mr Tan added.

Last year, the total value of mortgage loans on households' balance sheet rose 5.5 per cent to S$216.7 billion, possibly due to more homes being completed and higher interest incurred on Sibor-linked loans.

Mr Ku said that although the latest set of data looks healthy, he is circumspect about how closely the aggregate value of residential property assets on the household balance sheet tracks the actual value.

"For HDB resale flats, price negotiation has become very tough, transacted prices have moved from cash-over-valuation to cash-under-valuation, but the resale price index only reflected a 6 per cent drop last year," Mr Ku said.

The aggregated public housing value on the household balance sheet may not reflect what people are feeling on the ground, he added. And since borrowers of housing loans for new HDB flats do not start repaying until the flats' completion, liabilities on this front are set to increase as new flats are completed.

-By Lynette Khoo

Singapore Real Estate


QC rules still apply for conversions to serviced apartments

A key motivation for developers seeking change is hope of exemption from 2-year sales deadline, without paying any penalty

Source: Business Times / Real Estate

Developers that may be thinking of converting private residential projects on sites that are subject to Qualifying Certificate (QC) conditions to serviced apartments may be heading for a dead end. The Singapore Land Authority (SLA) would still require them to sell the whole project within the stipulated two years after completion - or pay extension charges.

-By Kalpana Rashiwala

Qingjian, Samsung sign MOU on smart homes

Sembawang EC will be private developer's first project equipped with new technology

Source: Business Times / Real Estate

Smart homes will soon be a reality in Singapore, with a memorandum of understanding (MOU) signed by Qingjian Realty (South Pacific) Group and Samsung Asia on Wednesday to integrate smart living technology into new housing developments.

-By Fiona Lam


Futuristic ‘smart homes’ to be a reality soon

TODAY reports: Developer Qingjian Realty and Samsung Asia ink deal to integrate innovative technology into property developments.

Source: Channel News Asia / Technology

SINGAPORE: Amid the Republic’s Smart Nation drive, a developer here has teamed up with technology giant Samsung to build future “smart homes” which will, among other things, recognise owners’ lifestyle patterns.

For example, owners would be greeted by lights that are turned on automatically and the whirling sound of the coffee machine when they wake up.

On Wednesday (Feb 25), Qingjian Realty (South Pacific) Group and Samsung Asia signed a memorandum of understanding to integrate smart living technology into property developments. The first project under the collaboration will be an executive condominium (EC) to be launched in Sembawang next year.

However, given the current limits to technology, the initial focus would be on providing the infrastructure for existing technology that allows, for example, washing machines and vacuum cleaners to be operated remotely from mobile devices.

The collaboration will also benefit some owners under the developer’s portfolio of residential properties. Owners of developments that will be getting the Temporary Occupation Permit from this year - such as the Waterbay EC, as well as the Riversound Residence and River Isles - can buy Samsung appliances at preferential rates.

Details will be announced next month.

Mr Andy Sim, general manager of Enterprise Business for Samsung Asia, said: “This collaboration comes as a natural fit. Both Samsung and Qingjian are committed to the Smart Nation initiative and we are thrilled to start at the heart of any nation - with its people and their homes.”

Mr Donald Ng, head of sales and marketing for Qingjian Realty (South Pacific), added: “The technology may not be fully ready right now for such a seamless integration, but nothing is impossible with technology. We believe the concerted efforts through the Smart Nation blueprint and consumer electronics companies can make this a reality.”

Property analysts TODAY spoke to welcomed the partnership, adding that the Sembawang EC could offer something different as a result of the collaboration in a saturated EC market.

Mr Nicholas Mak, executive director of research and consultancy at SLP International Property Consultants, said: “I guess this is a good selling point. It is useful especially for busy working adults or those without maids... to make their lives better.”

Mr Eugene Lim, key executive officer of ERA, noted that the idea of smart homes was first mooted about a decade ago. However, given that the cost of technology has decreased, such homes can now become a reality.

Still, the analysts noted that smart homes would likely command a premium over regular units. Qingjian said it was unable to give an estimate of the pricing of such future developments, as it would depend on the state of the property market at the time of the launches.


Views, Reviews & Forum


More focus needed on individual, not just household income 

Source: Straits Times / Opinion

HOW much did incomes rise last year?

According to government data released this month, the median monthly income of households with at least one working member rose just over 4 per cent after inflation to $8,290, from 2013 to last year.

On a per capita basis, income was $2,380.

Another set of government data showed that median income of full-time employed citizens rose by less - 1.4 per cent to $3,566.

One thing to note is that the two sets of data aren't directly comparable: household data is for resident households, which include those headed by citizens and permanent residents (PR), whereas data for individual workers is for citizens.

Why might resident household incomes rise faster than those of individual citizen workers? One reason is that the typical PR may earn more than the typical citizen.

Another reason households earned more is that more people in them are working.

The average number of working persons per household was 1.98 last year, up from 1.95 the year before. The difference looks marginal, but it is a 1.5 per cent increase in the number of workers.

One could thus argue that household income growth was partly fuelled by the rise in the number of people working.

Admittedly, this inference is far from certain. For instance, in the bottom 30 per cent of households, there were slightly fewer working persons on average last year, compared to 2012 - yet incomes were higher last year.

None of this is to say that household income figures should be ignored in favour of data on individual worker income.

If the concern is families' ability to support themselves, then household income figures are relevant. The fact that more people are working - and hence boosting household incomes - might then be a good sign, instead of something to be discounted.

But if the concern is whether workers' actual wages are rising, then data on individual workers' earnings is more relevant.

Here, there is a good measure of such data: the Manpower Ministry's annual wage change figures, which measure actual private-sector pay rises for full-time Singaporean and PR workers. But we will have to wait till June to see those figures for last year.

It's important to look at both resident and citizen data to get a clear picture of income trends.

It's also important to look at both household and individual income trends.

Going beyond the median figures would also help. A median household income of $8,290 means that half of households earned less than that, and the other half, more.

For a more fine-grained picture, there are figures for each decile: the bottom 10 per cent, the next 10 per cent, and so on.

Household income by decile is indeed, publicly available in the Department of Statistics report.

But the Government does not regularly release income data by decile for individual workers.

Doing so could improve the picture we have of Singapore's income trends.

-By Janice Heng

Related party transactions: MND replies

Source: Straits Times / Forum Letters

WE REFER to the commentary by Associate Professor Lee Kin Wai ("The problem with related party transactions"; Feb 18).

All town councils (TCs) are to prepare their financial statements in accordance with the Singapore Financial Reporting Standards (FRS). Under FRS 24, a TC is required to disclose related party transactions in the financial statements, in particular, the nature of the relationship and the amount of transactions.

Prof Lee referred to the revised FRS standards, which are applicable to financial statements for periods beginning on or after July 1 last year.

Under the revised standards, transactions between a TC and its managing agent (MA) will also be considered related party transactions, if the MA provides key management personnel services to the TC.

When this comes into effect, all TCs, except Bishan-Toa Payoh TC, which employs its own staff, will have to make related party transactions disclosure in their financial statements.

This new requirement will apply to the TCs' financial year (FY) 2015/2016 (April this year to March next year) and subsequent accounts.

It did not apply to their FY 2012/2013 accounts, which was the period of the Auditor-General's Office (AGO) audit of Aljunied-Hougang- Punggol East Town Council (AHPETC).

It will also not apply to the TCs' FY 2014/2015 accounts (April last year to next month) to be tabled in Parliament in October, since the accounts began before July 1 last year.

The AGO audit highlighted that AHPETC and its MA, FM Solutions and Services (FMSS), are considered related parties under the prevailing FRS 24.

This is because the key management personnel of AHPETC - its secretary Danny Loh, its general manager How Weng Fan and its deputy general manager Yeo Soon Fei - are also owners of FMSS providing paid services to AHPETC; they control FMSS and have a clear personal financial interest in transactions between FMSS and the TC.

FM Solutions and Integrated Services (FMSI) and AHPETC are also considered related parties because FMSI is a sole proprietorship owned by Mr Loh.

In no other TCs are their key management personnel also owners of their MA. They are either direct employees of the TCs, like in Bishan-Toa Payoh TC and the former Hougang TC, or employees of the MA, not owners.

With the exception of AHPETC, all other TCs' auditors did not raise any observation on related party transactions in their auditors' reports.

-By Christine Yap (Ms)


Corporate Communications

Ministry of National Development

Global Economy & Global Real Estate


Australia to impose fees on foreigners buying homes

Source: Business Times / Real Estate


Foreigners buying homes in Australia face new fees

Source: Straits Times / Top of the News

SYDNEY - Australia plans to introduce fees for foreign nationals buying residential property and to fine those who break foreign investment laws, in an attempt to cool one of the world's hottest property markets.

Prime Minister Tony Abbott said yesterday that the new fees would be lower than those in Singapore and Hong Kong.

"We welcome foreign investment, but it has to be foreign investment in our national interest," he said.

Treasurer Joe Hockey said he hopes to raise about A$200 million (S$211 million) a year by charging foreign home buyers A$5,000 for properties valued under A$1 million, and another A$10,000 for every additional A$1 million.

The government will also set up a register of foreign nationals buying real estate. Those who break the law could be fined up to a quarter of the value of their property and be forced to sell.

In 2010, Australia tightened rules under which offshore buyers are allowed to purchase new properties only with Foreign Investment Review Board (FIRB) permission. Temporary residents need FIRB approval to buy properties, which they must sell when leaving the country.

Sydney and Melbourne rank third and sixth in the world's least affordable places to buy a home, according to United States urban planning researcher Demographia.

As home prices in Sydney rose more than 13 per cent in the year to October, many media reports claimed foreigners were snapping up properties, depriving local buyers.

While Mr Hockey did not specify targets, the new rules come as Australia experiences a rapid influx of Chinese money - both legitimate and illegitimate - into its property market.

The FIRB says China was the No. 1 source of foreign capital investment in real estate in 2013, with nearly A$6 billion of investment approved, up 41 per cent from the preceding year.

"The proposed new fees are excessive and will act as a deterrent to foreign investment," said the Property Council of Australia, which represents investors, owners and developers.

There will be a four-week community consultation period on the proposals.

-By Reuters, Bloomberg


Australia plans fees for foreign property investors

Source: Today Online / Business

SINGAPORE — Foreign investors may soon need to cough up an application fee of at least A$5,000 (S$5,350) when buying an Australian home, while those who illegally buy residential properties will face higher fines and be forced to sell the property under rules proposed by Prime Minister Tony Abbott’s government yesterday.

Foreign home-buyers will be charged A$5,000 for properties valued under A$1 million and another A$10,000 for every additional A$1 million, Treasurer Joe Hockey said.

The charges will raise A$200 million a year, he added.

The government will also set up a register of foreign nationals buying real estate and impose a civil penalty of as much as 25 per cent of the value of the property on those who break the law and force them to sell, Mr Hockey said.

While he did not specify any nationality being targeted, the new rules come as Australia experiences a rapid influx of Chinese money — both legitimate and illegitimate — into its property market.

Australia’s foreign investment review board says China was the top source of foreign capital investment in real estate in 2013. It approved nearly A$6 billion of investment from China, up 41 per cent from a year ago.

Singapore was the fourth-biggest source of foreign funds invested in Australian real estate, with about A$2 billion spent.

Industry observers here said they do not expect the changes to have too much of an impact on buying sentiment from Singapore investors, as the tighter rules will still be less onerous than the Additional Buyer’s Stamp Duty in Singapore.

“The impact will be marginal on Singapore investors because the sum is not prohibitive … The investors are likely to take it in their stride, as just another investment cost,” said Mr Nicholas Mak, executive director of SLP International Property Consultants.

Mr Ku Swee Yong, chief executive of property agency Century 21, added: “From a Singapore investor point of view, it is no big deal. It is small compared to what we have; most of us are used to the very high Additional Buyer’s Stamp Duty. I don’t think it will deter the serious investors.”

The measures come after a parliamentary committee in November urged the Australian government to crack down on overseas investors flouting the rules, amid concern that foreign buyers are pricing locals out of the housing market.

Home prices in Sydney jumped 13 per cent over the year through January, leading average gains of 8 per cent across all major cities.

“We need to make sure that all foreign investors are following the rules, and that those foreign investors who break the rules are not able to profit from breaking the law,” Mr Abbott told reporters.

-By Agencies             

Cushman hiring Goldman, Morgan to find buyer

Source: Business Times / Real Estate

Marriott opens to great fanfare in hotel-starved Haiti capital

Source: Business Times / Real Estate

China said to be readying moves to counter housing market slump

Source: Business Times / Real Estate

New office space in Manila set for record

Source: Business Times / Real Estate

NYC rents rising at rate outpacing inflation

Census data show housing availability and affordability continuing to be a serious problem for New Yorkers

Source: Business Times / Real Estate

How New York Hunts Down Tax Refugees

If you're leaving New York for lower taxes, just make sure you can prove it

Source: Bloomberg

Every year, some 55,000 New Yorkers move to Florida, more than those who migrate to any other state. In addition to year-round sunshine, ex-New Yorkers also get relief from some of the country's highest state taxes. And while academics disagree on just how much taxes influence moving decisions, studies show taxes especially sway retirees and other folks living off investment income. According to the AARP, more than half of New Yorkers over age 50 who are planning to retire said they're considering leaving the state. 

New York is not taking this lying down. Few states are as strict about residency rules, accountants and attorneys say, which means that if New Yorkers want to leave–and take state tax revenue along with them–they must prove they really are gone. Each year, New York's Department of Taxation and Finance collects more than $200 million from "residency audits," in which taxpayers must provide elaborate evidence of their whereabouts.

The first test of residency is deceptively simple. If you want to stop paying New York income tax, you must prove you’re spending more than half the year outside New York. If you're close to the 183-day limit, you may need to account for every single day, and that's not always easy. The state will look at phone records, credit card receipts, and other bills. That evidence isn’t always clear-cut, says attorney Karen Tenenbaum. A call is made from the landline at your Manhattan pied-a-terre: Was that you, back in New York, or your sister borrowing the place while you’re in Miami? 

When it comes to counting days in New York, the taxman is strict. If you're flying back to Florida from JFK, for example, and your plane's 11:30 p.m. departure from Queens is delayed until after midnight—bam, you've just spent an extra taxable day in New York. Attorneys and accountants recommend that clients fleeing New York taxes fly through Newark. 

There are a few exceptions. A return to New York for an inpatient medical procedure doesn’t count as a day in New York. If your spouse visits you in the hospital, on the other hand, it counts for him or her.

Even if a taxpayer manages to stay away from New York for more than half the year, New York doesn’t always let them off the hook–especially if they have a big tax bill. Another test of residency is your “domicile,” which New York defines as the place you intend to return to. For example, any real estate still owned in New York will be scrutinized, especially if it’s bigger or more expensive than your homes elsewhere. Membership at New York country clubs, churches, and synagogues can raise red flags. As for voting, you definitely shouldn’t do it in New York.

The state also looks at the people and objects you care about. When you moved to Florida, did your art collection move with you? Or is it still hanging on the walls of your Park Avenue coop? Along with your photo albums and keepsakes, the location of your close family members and business interests matter. If you run a business based in Brooklyn but do so remotely from Sarasota most of the year, you can still expect New York to demand its take. 

If you really want to dodge New York state taxes, it turns out the most straightforward way to do so is actually to move, along with everything that entails. Go figure. 

-By Ben Steverman

Scotiabank Among Lenders Boosting Financing for Condos

Source: Bloomberg

(Bloomberg) -- The Bank of Nova Scotia is among lenders boosting loans to condominium developers as regulators become less vocal about housing-market risk, according to Canada’s third-biggest bank.

Scotiabank is financing as much as 75 percent of a condo project’s value and others are doing the same, according to Chris Milne, vice president of real estate lending at the bank. That’s up from about 70 percent in the past, when banks were concerned “there may be a meltdown” and regulators were more vocal about residential market risk, Milne said.

“The banks are back out there lending in the condo sector,” Milne said at a Toronto real estate conference Tuesday. “There is a hole that the banks are looking to fill. The regulators were really pounding them a year and a half ago and now it’s quiet.”

Banks are boosting financing to condo developers even as the number of unsold units in Canada’s largest city reached a 21-year high in January. There are about 1,600 unsold units on the market following a record number of completions in January, according to a report from Sal Guatieri, senior economist at Bank of Montreal.

Federal regulators have eased warnings on the real estate market compared with the late Finance Minister Jim Flaherty and former Bank of Canada Governor Mark Carney, Milne said. Flaherty backed several mortgage rule changes that tightened scrutiny of the so-called Big Six Banks while Carney often commented on the risk of record consumer debt.

‘Takes A While’

Canada Mortgage & Housing Corp. no longer insures loans to developers to construct condominiums. The federal housing agency said in June it would drop coverage as it seeks to distance taxpayers from the risk of falling home prices.

“OSFI has not issued public guidelines or limits on banks’ operations related to condo financing,” said Brock Kruger, spokesman for the Office of the Superintendent of Financial Institutions, which regulates federal financial firms including banks. “However, OSFI expects banks to have processes and systems in place to manage the risks they take on. OSFI and our regulatory partners continue to monitor and assess Canada’s mortgage and housing market.”

Josianne Menard, a Bank of Canada spokeswoman, said the central bank has flagged housing-market imbalances as a vulnerability to the financial system for “a long time.”

Lenders require a building to be 65 percent sold before making a loan, Milne said. A developer would need to inject more of their own equity into the project if a bank were to finance a building less than 65 percent sold, he said.

“Sales are not where they were in late 2007 where you can sell a high-rise condo in a week,” Milne said. “Now it takes a while.”

-By Katia Dmitrieva

Canada Stocks Rise as Hudson’s Bay Surges on Real Estate

Source: Bloomberg

(Bloomberg) -- Canadian stocks rose the most in two weeks as Hudson’s Bay Co. surged to a record after announcing real-estate joint ventures while banks gained on improving earnings.

Hudson’s Bay soared a record 20 percent after saying the real-estate deals will enable it to pay down about $1.1 billion in debt. Royal Bank of Canada, the nation’s second-largest lender by assets, advanced 3.8 percent after posting earnings ahead of analysts’ estimates. Centerra Gold Inc. rose 5.6 percent as gold climbed from a seven-week low.

The Standard & Poor’s/TSX Composite Index rose 63.60 points, or 0.4 percent, to 15,228.57 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has advanced 4.1 percent this year. Trading volume was 17 percent below the 30-day average.

Six of the 10 main industries in the S&P/TSX advanced. Hudson’s Bay soared to an all-time high, leading consumer discretionary shares to a gain of 1.9 percent as a group.

The two joint ventures collectively value the real estate portfolio of Hudson’s Bay at C$9.2 billion, the company said on a conference call with analysts. The retailer will pay down C$1.1 billion in debt and plans to use funds to renovate existing stores.

Bank Earnings

Royal Bank rallied 3.8 percent, the biggest gain since June 2012, after posting record profit on domestic lending and investment banking. The lender raised its dividend 2.7 percent. National Bank of Canada, which also posted better-than-expected earnings, added 3.3 percent.

Centerra Gold rose 5.6 percent and Iamgold Corp. increased 2.1 percent as gold for April delivery rose to $1,201.50 an ounce in New York, from a seven-week low. First Majestic Silver Corp. gained 4.6 percent as silver advanced.

Federal Reserve Chair Janet Yellen signaled Tuesday an interest-rate increase wasn’t imminent. She continues testimony to U.S. lawmakers today.

BlackBerry Ltd. increased 1.6 percent to the highest level in almost a month after the Waterloo, Ontario-based company announced a partnership with Google Inc. to allow the search giant’s suite of mobile productivity tools to run on the smartphone maker’s device management system.

-By Eric Lam

Sales of New Homes in U.S. Hold Near Six-Year High: Economy

Source: Bloomberg

(Bloomberg) -- New-home sales in January held close to the fastest pace in more than six years, consistent with slow and steady progress that’s been the hallmark of the U.S. housing market since early 2012.

Americans purchased 481,000 properties at an annualized rate last month, little changed from the 482,000 pace in December that was the strongest since June 2008, Commerce Department data showed Wednesday in Washington. Since a lull in July, sales of new homes have climbed 21 percent.

Employment opportunities, historically low mortgage rates and an increase in household formation are underpinning demand for homes as rents rise. Without easier financing terms and bigger wage gains to encourage more first-time buyers to take the plunge, housing may be hard-pressed to make a bigger contribution to economic growth.

The market “continues to move slowly forward, but at a modest pace,” said Gregory Daco, lead U.S. economist at Oxford Economics USA Inc. in New York, who projected home sales at a 480,000 rate. “We’re expecting the different drivers of the housing sector to get in place. That’s an environment of low rates, reduced home price inflation, accelerating wage growth and rising or strong confidence.”

The report showed a disparity among regions which was probably influenced by inclement winter weather that extended into this month.

Sales in the Northeast plunged 51.6 percent to record-low 15,000 annualized rate. In the South, the biggest region, purchases climbed 2.2 percent gain to a more than six-year high of 278,000. Demand in the Midwest also climbed, while the West experienced a small decrease.

Winter Weather

While new-home sales may suffer in February, “when unseasonably harsh winter weather likely depressed sales in the South, we still expect new-home sales to strengthen as we move into the spring selling season,” Mark Vitner and Anika Khan, economists at Wells Fargo Securities in Charlotte, North Carolina, said in an e-mail to clients.

Stocks were little changed near all-time highs as declines in Hewlett-Packard Co. and Apple Inc. offset gains among retailers. The Standard & Poor’s 500 Index fell 0.1 percent to 2,113.86 at the close in New York.

The median forecast of 76 economists surveyed by Bloomberg called for 470,000 new-home sales at an annual rate. Estimates ranged from 440,000 to 504,000 after a previously reported 481,000 pace in December.

The median sales price was $294,300, a 9.1 percent advance from January 2014, the report showed.

Housing Inventory

The supply of homes held at 5.4 months at the current sales pace. There were 218,000 new houses on the market at the end of January, the most since March 2010.

New-home sales account for about 7 percent of the residential market and are tabulated when contracts are signed, making them a timelier barometer than purchases of previously owned dwellings. The latter are calculated when a contract closes, typically a month or two later.

In 2014, builders sold 437,000 new houses, the most since 2008. The market peaked at a record 1.28 million in 2005 and slumped to 306,000 in 2011 after the housing bubble burst, the lowest in figures going back to 1963.

Other data demonstrate a fragile recovery. Existing home sales dropped more than expected in January as prices accelerated and inventory declined, figures from the National Association of Realtors showed Feb. 23. Purchases fell 4.9 percent from December to a 4.82 million annualized rate, the least since April, and first-time buyers accounted for a smaller share of purchases for a second consecutive month.

Existing Homes

The number of previously-owned homes available on the market dropped 0.5 percent from a year earlier, according to Lawrence Yun, the group’s chief economist in Washington. Owners are opting to hold on to their homes for about 10 years on average, compared with the more normal seven years, he said.

That’s translating into more spending on home upgrades, a welcome development for Home Depot Inc., the country’s largest home improvement retailer. The Atlanta-based chain took advantage of a surge in renovation spending, reporting fourth-quarter profit that topped analysts’ estimates.

“We had a strong finish to the year, as strength across the store, the recovering U.S. housing market and solid execution aided our business in 2014,” Craig Menear, the company’s chairman and chief executive officer, said in a Feb. 24 statement.

Home Renovations

The company, which Menear has led since November, said it improved customer service, streamlined online operations and invested in new distribution centers and inventory systems to keep stores better stocked. The result was profit excluding some items of $1 a share in the three months through Feb. 1.

That positive sentiment was not shared industry-wide. Figures on Feb. 18 showed homebuilder confidence waned to a four-month low in February as frigid winter weather kept prospective customers from touring new developments.

That was also reflected in construction data showing builders broke ground on fewer residential projects in January as demand for single-family homes cooled from an almost seven-year high.

Federal Reserve Chair Janet Yellen acknowledged the sluggish growth in her Feb. 24-25 testimony to lawmakers, while signaling that the Fed would adopt a flexible approach to raising interest rates.

“Housing construction continues to lag,” Yellen said Feb. 24. “Activity remains well below levels we judge could be supported in the longer run by population growth and the likely rate of household formation.”

Greater household formation could be spurred by a strengthening labor market. Payrolls steamed ahead in January, capping the biggest three-month gain in 17 years.

For those who can purchase a home, there is incentive to lock in historically low borrowing costs. The average rate on a 30-year, fixed mortgage was 3.76 percent in the week ended Feb. 19, according Freddie Mac in McLean, Virginia. It reached a low of 3.31 percent in November 2012.

-By Bloomberg News

Hudson’s Bay in $3.4 Billion U.S., Canada Property Bet

Source: Bloomberg

(Bloomberg) -- Hudson’s Bay Co. is teaming up with the biggest real estate investment trusts in the U.S. and Canada to unlock the value of the retailer’s properties by creating two companies valued at $3.4 billion.

Both will be positioned for initial public offerings and be on the hunt for more real estate acquisitions.

Hudson’s Bay, the oldest company in Canada, agreed to contribute 42 properties to a retail venture with Indianapolis-based Simon Property Group Inc. that will be valued at $1.8 billion. The company also announced a joint venture with Toronto-based RioCan Real Estate Investment Trust to focus on growth opportunities in Canada in a partnership valued at C$2 billion ($1.6 billion).

Hudson’s Bay is choosing to create separate entities to eventually take public rather than spin off its own REIT after amassing real estate through the acquisitions of retailers Saks Inc. and Lord & Taylor. The Toronto-based company opted for a joint venture so it could create a management team, diversify credit and “fatten up the portfolio” before an IPO, Chairman Richard Baker said on a conference call with analysts.

“This is the optimal structure for our shareholders to participate in the long-term growth of our real estate and retail businesses,” Baker said. “If we had done an IPO we wouldn’t have created as much value as we will when we have a more mature, diversified portfolio.”

Different Situation

There is “no immediate rush” for an IPO for either company, Baker said.

Hudson’s Bay rose 22 percent to a record C$27.03 at 10:21 a.m. in Toronto, its biggest move ever. Simon was little changed at $190.61 while RioCan was up less than 1 percent to C$29.

“As we go forward our plans are to acquire core, cash-flowing, tenanted properties that will diversify our real estate portfolio,” he said. “This is a very different type of situation than years ago when retailers created real estate ventures in order to develop new projects.”

Hudson’s Bay plans to lease back the properties it is contributing to the Simon venture, according to a statement on Wednesday. The stores include the Beverly Hills, California Saks Fifth Avenue, and the Westchester County and Manhasset Lord & Taylor stores in New York. It owns the Lord & Taylor and Saks chains.

Saks, Lord & Taylor

It will also receive $600 million in cash from third-party debt issued by the venture, the company said in the statement. That will go toward reducing Hudson’s Bay’s own indebtedness.

Simon, the biggest U.S. mall owner, will contribute $278.5 million and eventually have a pro-forma stake of 20 percent in the joint venture. The venture will seek out property acquisitions and pursue “attractive” tenants as well as single and multi tenant retail buildings in the U.S., while also exploring foreign real estate opportunities.

Hudson’s Bay holds a lot of valuable real estate, especially Saks Fifth Avenue, said John Crombie, senior vice president of retail leasing at Triovest Realty Advisors Inc. “That real estate alone is worth more than the whole company combined,” Crombie said in a phone interview from Toronto.

Anchor Tenants

The venture with RioCan will include 10 owned or ground-leased Hudson’s Bay properties, including stores in Vancouver, Calgary, Ottawa and Montreal. RioCan will contribute C$325 million and receive a pro-forma equity stake of 20.2 percent, according to the statement on the Canadian partnership.

Going into new properties with a ready-made anchor tenant like Hudson’s Bay will benefit Simon and RioCan, Crombie said. “Having someone like HBC beside you to act as the lead tenant I think is a real value add,” he said

The transaction involving Simon is expected to close in about 90 days, subject to obtaining additional debt financing, the companies said in the statement.

-By David M Levitt

Germany Agrees New Home Rent Controls as Housing Remains Tight

Source: Bloomberg

(Bloomberg) -- Germany’s governing parties agreed to terms for new rent control laws aimed at keeping housing in large cities affordable, addressing a dispute that started after the 2013 national election.

The proposed law caps rents for existing apartments at 10 percent above the local average in areas where the housing market is deemed to be tight. It doesn’t apply to newly built homes. Angela Merkel’s Christian Democratic Union and its Social Democrats coalition partner will send the measure to parliament next week, Volker Kauder, CDU’s parliamentary chief, told reporters Wednesday.

“We’re creating a fair balance between the interests of landlords and tenants,” German Justice Minister Heiko Maas said in a statement. “We want to foster and maintain the high appetite for investment on the residential market.”

Rents in Germany’s largest cities are rising as developers try to reduce a housing shortage caused by migration into cities and a long slump in construction. In Berlin, rents have gained more than 30 percent in the past three years, according to data compiled by Jones Lang LaSalle Inc.

The proposed law will also make it mandatory for real estate brokers to be paid by the person who hired them. Currently, brokers can decide who to charge, which means that tenants usually foot the bill even when the broker is hired by the landlord.

Developers and landlords had lobbied to exclude newly built homes from the law, arguing that rent caps would stifle construction.

-By Dalia Fahmy & Arne Delfs

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