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21st January 2015

Singapore Economy 

Net deficit at HDB to stay high in coming years: Khaw Boon Wan

This is due to flats being completed progressively and handed over to homeowners

Source: Business Times / Government & Economy

THE Housing and Development Board's (HDB) net deficit will continue to be high in the coming years as more new flats are completed and handed over to homeowners, said National Development Minister Khaw Boon Wan in parliament.

The net deficit for the year ending March 2014 came up to S$1.97 billion before government grants, much higher than the S$797 million recorded for the previous financial year and S$443 million for FY2011/12.

This spike was due to the ramp-up in its flat-building and upgrading programmes, said Mr Khaw in response to a query from West Coast GRC MP Foo Mee Har on Tuesday.

The size of the latest HDB net deficit was expected, he added, as the government continued to ramp up its building of new flats in Singapore.

But Mr Khaw said that he did not foresee the current pace of construction - about 25,000 new flats per year since 2011 - to carry on for too long, and that HDB was already beginning to scale down on its building.

Mr Khaw revealed that HDB's deficit will "continue to be high" in the next few financial years, as flats launched in the ramp-up phase are completed progressively and handed over.

"For future years, the deficit level will depend on several factors such as housing demand, HDB's building and upgrading programmes, as well as development costs and policy changes. HDB will continue to use its allocated resources judiciously to provide affordable and quality homes for Singaporeans," he told the House.

Mr Khaw explained that the net deficit is the outcome of government policies to "provide good, affordable public housing and quality living environments in HDB towns for Singaporeans".

In its annual report released last December, HDB noted that it incurred deficits every financial year to provide homes for Singaporeans, with this deficit fully covered by government grants.

"HDB operates under a deficit financing model, so whatever the deficit is for the year, we receive a grant from the MOF (Ministry of Finance) so that we can balance it out. That grant is reflected in the overall budget for the year," said Mr Khaw.

HDB's deficit is largely due to the subsidy extended to buyers of new flats and the disbursement of CPF housing grants to eligible buyers of resale flats.

-By Lee U-Wen

HDB's net deficit to remain high in the next few years: Khaw

National Development Minister Khaw Boon Wan says the spike in FY2013 was due to HDB's ramp-up in its flat-building and upgrading programmes.

Source: Channel News Asia / Singapore

SINGAPORE: The Ministry of National Development (MND) said the Housing and Development Board's (HDB) net deficit will continue to be high in the next few financial years.

Speaking in Parliament on Tuesday (Jan 20), National Development Minister Khaw Boon Wan said the spike in FY2013 was due to HDB's ramp-up in its flat-building and upgrading programmes. He was responding to a question by MP Foo Mee Har regarding the implications of HDB's net deficit of S$1.97 billion in FY13/14 and the deficit trend in future years.

The HDB had launched over 77,000 flats, or more than 25,000 flats per year, between 2011 and 2013.

Mr Khaw noted that HDB's deficit is largely due to the subsidy extended to new flat buyers and the disbursement of CPF Housing Grants to eligible resale flat buyers.

"Was the almost S$2 billion deficit expected? Yes it was, because as we ramped up the numbers to 25,000 homes, you should expect that the deficit should grow of that quantum," the minister said.

"But I really don't see our 25,000 units per year construction programme continuing for a long time. In fact, this is already year four, and we've started the process of ramping down for the simple reason that the number of family formations is not of that level," he added.

The deficit in future years will depend on factors such as housing demand, HDB's building and upgrading programmes, and developments costs and policy changes, he said.

- CNA/ac

Singapore Real Estate

Fair Tenancy Framework launched with room for refinement

Source: Business Times / Real Estate

The Fair Tenancy Framework launched on Tuesday, which aims to help small and medium-sized enterprises (SMEs) negotiate fairer tenancy agreements, is a work in progress, says the working group behind it. The Rental Practices Working Group (RPWG) of the SME Committee (SMEC) says more can be done to refine the guidelines in the framework, which has already won the backing of CapitaMall Trust and Ascendas.

-By Mindy Tan

Guide fills gap in business tenancy issues

Framework includes leasing guidelines and negotiation principles, and highlights mediation to resolve disputes

Source: Straits Times / Money

LANDLORDS and tenants in business leases must take responsibility for the fine print in rental contracts and educate themselves before getting caught in a snare.

That was a key theme at the unveiling of the Fair Tenancy Framework yesterday.

The framework aims to establish a set of clear leasing guidelines and negotiation principles for small and medium-sized enterprises (SMEs) as well as landlords across the commercial, industrial and retail industries.

The guidelines, developed by the Rental Practices Working Group (RPWG), the Small and Medium Enterprises Committee and the Singapore Business Federation (SBF), have been six months in the making.

They fill a gap in a free market without formal laws or industry standards on leasing agreements.

"Some tenants and landlords can be demanding and add clauses as and when they like to suit the circumstances," said Ms Cynthia Phua, executive vice-president of Singbridge Corporation and chairman of the RPWG. "On that basis, let's do something to share with both the tenants and landlords."

As part of the initiative, the Ministry of Trade and Industry will for the first time roll out public data on rental rates so businesses can make informed decisions, particularly in renewing leases.

Ms Phua said information on retail, office and industrial space will be available, based on location, size and floor level. Full details will be released today.

To help SMEs understand the implications of what they are committing to in a contract, the guide outlines common concepts such as "gross rents", "stamp duties" and "indemnity clauses".

The RPWG also highlighted a mediation clause in its recommended lease agreement, in a move to encourage mediation as an alternative to resolving rental disputes in court.

"The courts are very supportive of mediation but they have not enforced a mediation clause (in rental contracts)," said Mr Loong Seng Onn, executive director of the Singapore Mediation Centre.

Minister of State for Trade and Industry Teo Ser Luck noted at the briefing that the Government would look at legislating the framework only after assessing the acceptance among businesses. "Singapore is a pro-business economy, you don't want to have too many rules and legislation that will limit businesses," he said.

However, the guide is still in its infancy and is a "first step" to getting the majority of landlords on board. There is scope to galvanise support from trade associations and chambers, such as the Real Estate Developers Association of Singapore, that are members of the SBF as well, said SBF chief executive Ho Meng Kit.

But Dr Jannie Chan, president of the Singapore Retailers Association, said that "Reits have played a major role in shop rental hikes", with retailers often left to negotiate with "faceless" landlords.

"I think some work has to be done to understand how Reits actually interface with retailers," said Dr Chan.

CapitaMall Trust's latest results showed that it registered an annual change in rents of 2 per cent in the last four years - lower than the inflation rate of 2.4 per cent in 2013.

-By Cheryl Ong

Fair tenancy framework launched to promote sound practices in rental market

The framework sets down key reference points to help tenants and landlords work out rental agreements under three initiatives.

Source: Channel News Asia / Singapore

SINGAPORE: The Singapore Business Federation (SBF) has launched a set of guidelines to promote sound practices in the rental market. 

Called the Fair Tenancy Framework, it sets down key reference points to help tenants and landlords work out rental agreements under three initiatives.

1.      To work with the Government to provide rental data information for businesses for greater transparency, so businesses can make informed decisions related to the tenancy market.

2.      The introduction of a guide to help small businesses understand typical terms and conditions in lease agreements, as well as a basic reference containing common obligations found in tenancy deals. 

3.      To tap on the Singapore Mediation Centre to resolve tenant-landlord disputes, should they arise.

The framework was developed in consultation with the Government, private sector landlords and various trade associations. A key thrust is to provide transparent information to stakeholders for them to make decisions, with soaring rental rates being a common complaint among businesses.

"It avoids undue advantage taken by another party in any business. So I welcome this move, said Mr R Dhinakaran, Vice President of the Singapore Retailers Association. "But most importantly, the landlords need to follow the guidelines or adopt the guidelines. If they do that, this framework will help businesses to continue in the long term."

When it comes to renewing leases, the guide recommends landlords and tenants consider three options.

"One is a market rental with a cap. And the second option is a valuation, a fair valuation of each party and maybe you take a average of it, or a third valuation. And the last option that we have actually recommended is to adopt available market indicators," said Ms Cynthia Phua, Chairman of the Singapore Business Federation's Rental Practices Working Group. 

However, being a guide, the framework does not have legislative teeth as leasing practices in Singapore currently operate on a free-market principle. SBF said legislation in this area would require greater in-depth study on the implications.

Said Minister of State for Trade and Industry Teo Ser Luck: "If we don't have to legislate, we don't want to do that. Because (at the) end of the day, it doesn't mean that using the law, you will solve every problem. Because what you want is the community to self-help and self-rely, the best is community can self-govern, without necessary using a sledgehammer, you know, just for a smaller issue."

The framework has the support of major landlords CapitaMall Trust and Ascendas.

- CNA/ek/dl

SBF launches fair tenancy framework

Guidelines aim to create a more balanced playing field between landlords and tenants

Source: Today Online / Business

SINGAPORE — The Singapore Business Federation (SBF) yesterday laid out guidelines aimed at putting a stop to unfair leasing practices, in a move that should create a more balanced playing field between landlords and tenants here.

The guidelines under the voluntary Fair Tenancy Framework were developed after companies reported surprise jumps in rents when renewing leases, which add considerable pressure to already escalating business costs in a tough economic restructuring environment.

“Over the past few years, businesses have seen continuous increases in rental costs. This is not confined to just retail and F&B shop spaces, but also for office, commercial and industrial spaces. While it is a reflection of a healthy economy where demand far outstrips supply, at some point, it becomes unsustainable as businesses find it difficult to make ends meet,” said SBF chairman Teo Siong Seng.

SBF hopes that the framework will help businesses, particularly small and medium enterprises (SMEs), to better understand tenancy terms and conditions, thereby leading to a fairer negotiation ground between both landlord and tenant.

As part of the framework, an SBF-led committee has published a guidebook on common terms and conditions found in leasing agreements, as well as explanations on what they mean and their implications.

The guide also include clauses that tenants may opt for to better protect themselves, such as using mediation as a primary choice for dispute resolution.

The committee is also working with the Government to release more detailed rental data that businesses can refer to when negotiating leases.

This data can be broken down in terms of street, size and floor level, said Ms Cynthia Phua, chairman of the Rental Practices Working Group under the SBF-led SME Committee.

In addition, rental rates can also be presented in the price range of the 25th percentile, median and 75th percentile.

However, as a guide, the framework is intended to be voluntary. Legislation in this area would require greater in-depth studies on the implications, noted Minister of State for Trade and Industry Teo Ser Luck, who was also present at yesterday’s briefing. Nevertheless, he said this is the first step towards fairer leasing practices.

“Singapore’s reputation is important. While we develop our business sector to be more vibrant, I think it is important to have fair practice not just on the consumer side, but also between businesses. This framework adds on to the good reputation and goodwill of Singapore in terms of a pro-business government, pro-business economy and that is exactly what we are trying to promote,” he said.

Mr Kurt Wee, president of the Association of Small and Medium Enterprises, said: “One of the things we hear is when you have a landlord that is aggressive, every incremental dollar of margin that a business makes ends up paying the rent and over the long term, this kind of characteristic actually compromises value creation, entrepreneurship and risk taking.

“So this is about sustainability; this is not about tenants coming back against the landlords … There’s also a huge responsibility on the end of the SMEs to learn about lease and not just sign blindly.”

-By Lee Yen Nee

Exec condo land bids slump to lowest since 2011

Bids for Sengkang parcel come in below expectations; Sim Lian's top bid 24% below price of nearby plot last Feb

Source: Business Times / Real Estate

The generally weak sales at most executive condo launches in recent months are eroding developers' confidence in this market segment. Sim Lian's top bid of S$280.04 per square foot per plot ratio (psf ppr) on Tuesday, for a 99-year leasehold EC site along Anchorvale Crescent in Sengkang, was 24 per cent lower than the S$367 psf ppr that SingHaiyi paid for a neighbouring plot in February last year (which it will develop into The Vales project). That tender drew 12 bids - against just three at the latest tender.

-By Kalpana Rashiwala

EC site may fetch lowest price since 2011

Source: Straits Times / Money

THE top bid at a tender for a Sengkang executive condominium (EC) site that closed yesterday will, if successful, be the lowest EC land price since July 2011, consultants noted.

The tender for the 1.75ha site in Anchorvale Crescent attracted just three bids, reflecting a cautious market outlook amid weak sales and ample supply.

Sim Lian Land's top offer of $157.8 million, or $280 per sq ft (psf) per plot ratio (ppr), was the lowest since the Twin Waterfalls EC site in Punggol Field was sold 31/2 years ago at $270 psf ppr.

It was also well below the initial estimate of $180 million to $203 million, or $320 to $360 psf ppr, said Mr Nicholas Mak, SLP International's executive director. Sim Lian's bid was 9.7 per cent higher than the second bid by Allgreen Properties.

Yesterday's tender for the site, which can yield 525 homes, was in stark contrast with the most recent EC site sold in the area.

The Vales, across the road, was sold in February last year for $367 psf ppr or 24 per cent more, and fetched a bullish 12 bids, said Mr Ong Teck Hui, JLL national research director.

It appears developer sentiment has weakened significantly since. The last tender for an EC site - in September last year - closed with just two bids for a 2.8ha site in Sembawang.

Islandwide, a record 2,000 EC units have been launched but remained vacant as at Dec 31 last year, said Mr Desmond Sim, CBRE research head for South-east Asia.

"There are, in the near future, at least 6,000 units in the pipeline, of which 1,700 are located in the north- east," he added.

Indeed, the Sengkang and Punggol area is home to the highest concentration of new EC projects. Prior to the latest site, 14 EC sites have been sold in the area, said Mr Ong of JLL.

The take-up rate at EC projects has also been muted.

In Punggol, nearly 600 of 747 units are unsold at The Terrace EC, which launched on Dec 7.

At the end of last year, 465 of 651 units were unsold at Bellewaters EC in Sengkang, which was launched in November, 64 units were unsold at Waterwoods EC (launched November 2013) and 54 units at Ecopolitan EC (July 2013).

If the latest site is eventually sold to Sim Lian at $280 psf ppr, break-even price for the project could be $640 to $660 psf, noted Mr Mak.

This would allow Sim Lian to launch at prices undercutting other projects in the area.

Ms Christine Li, research head at OrangeTee, said the trend of developers "fishing" for low winning bids could continue. "Given current tepid market conditions, we may possibly also see this behaviour extend into land tenders for private residential plots."

-By Rennie Whang

EC land prices plunge to lowest since 2011

Source: Today Online / Business

SINGAPORE — The price of land for executive condominiums (ECs) has fallen to the lowest in three-and-a-half years as developers curbed bids amid poor sales for the hybrid public-private housing type.

An EC plot in Anchorvale Crescent attracted only three bids by the close of tender yesterday, with Sim Lian Land submitting the top bid of S$157.8 million for the 187,830 sq ft site, the Housing and Development Board said.

With a maximum permissible gross floor area of 563,493 sq ft, the bid translated to S$280 per sq ft per plot ratio, well below analysts’ forecasts of S$320 to S$360 psfppr.

Mr Nicholas Mak, executive director of SLP International Property Consultants, said the bid is the lowest for EC land since July 2011, when a tender for a Punggol Field EC site closed at S$269 psfppr.

“The low participation rate among developers in this tender and the low bids illustrate the falling interest among developers for EC development sites due to the relatively poor sales in some of the recent EC launches. Based on the top bid in today’s land tender, the EC land price has returned to the level in mid-2011. This is perhaps another sign of a stabilising real estate market as a result of the government’s cooling measures,” he said.

If the tender is awarded to Sim Lian, the break-even price for the EC units in this future development is estimated to range from S$640 to S$660 psf, allowing the developer to undercut other EC projects launched in the vicinity, Mr Mak added.

The site is next to two other EC projects along Anchorvale Crescent that are being developed into Bellewaters by Qingjian Realty and The Vales by SingHaiYi.

The land price of Bellewaters was S$330.65 psfppr in May 2013, while that of The Vales was S$366.91 psfppr in February last year, Mr Mak said.

In addition, there were 1,580 EC units that were still unsold as at the end of last year in developments within the Sengkang and Punggol planning areas, he noted.

Demand for ECs was hit after changes late in 2013 that included the introduction of a mortgage servicing ratio and resale levies for second-time applicants.

Tougher rules to raise the bar at large dormitories

Compulsory licensing scheme to improve workers' living conditions

Source: Straits Times / Top of The News

OPERATORS of dormitories for foreign workers with at least 1,000 beds will be licensed from the second half of this year, under a new law passed by Parliament yesterday.

They will be governed by strict rules that require them to provide facilities such as ATMs, minimarts and even game rooms so that the workers can shop and play without leaving the premises.

Other must-haves include sick bays and quarantine areas for any outbreak of an infectious disease.

These measures have a specific purpose: to regulate the running of large-scale housing for foreign workers, said Manpower Minister Tan Chuan-Jin yesterday when presenting the Foreign Employee Dormitories Bill,

Those who flout each new rule face a fine of up to $50,000, a maximum jail term of one year, or both.

But those who run such large dorms without a licence can expect more severe penalties: a maximum fine of $500,000, jail of up to two years, or both. These will be doubled for repeat offenders.

A commissioner will be appointed with wide-ranging powers that include arresting errant operators.

This new law, which will help improve living conditions for the 200,000 or so foreign workers living in large dormitories, comes amid the construction of a growing number of such premises.

Mr Tan expects "the proportion of foreign workers staying in larger dormitories within the (licensing) threshold to increase".

The new legislation also adds to the existing rules on hygiene, safety and minimum living space that currently govern all foreign worker dorms in Singapore.

Operators of large dorms have six months to apply for a licence, after the law takes effect in the second half of this year. The licence is valid for up to three years.

Existing dorm operators will get financial help to renovate their premises to meet the minimum standards, said Mr Tan.

Most of the 11 MPs who spoke supported the Bill but several expressed concerns, like the emergence of double standards as the new law does not apply to smaller dorms. Mr Yeo Guat Kwang (Ang Mo Kio GRC) fears employers could favour smaller, cheaper and less tightly regulated dorms.

But MPs like Ms Lee Bee Wah (Nee Soon GRC) felt the law provided a timely opportunity for Singapore to look at how foreign workers are treated. "Let us take this opportunity to examine the overall welfare of our foreign workers," she said.

Workers' Party MP Pritam Singh (Aljunied GRC) suggested the Government build and manage some dormitories that will set the standard for the industry.

In his wrap-up before the Bill was put to the vote, Mr Tan said that "as more of these purpose- built dorms come on stream, we will also begin to take a stricter view about how workers are housed elsewhere, and therefore you will begin to see a lot more of them shifting towards the purpose-built dorms".

He stressed that smaller dorms outside the law will continue to be regulated under existing regulations that come under several government bodies. But the minister did not rule out further changes to the law, saying it does not preclude the possibility of "an overarching Bill that brings in together everything".

-By Toh Yong Chuan, Manpower Correspondent 

Commissioner to oversee licensing of larger foreign worker dorms: Tan Chuan-Jin

The Commissioner for Foreign Employee Dormitories will be able to impose conditions that licensed dormitories must comply with, including the development of quarantine plans.

Source: Channel News Asia / Singapore

SINGAPORE: A Commissioner will be appointed to oversee the administration of the proposed Foreign Employee Dormitories Bill, Manpower Minister Tan Chuan-Jin said in Parliament during the second reading of the Bill on Tuesday (Jan 20).

The Proposed Foreign Employee Dormitories Bill is a licensing framework for dormitories with at least 1,000 beds, and will mandate requirements that cover public health and safety, security and public order, and the provision and maintenance of social and commercial facilities and services.
There are about 400,000 transient workers in Singapore, living in accommodations of varying standards. 

The management of public health and safety issues would mean that operators must put in place measures such as quarantine plans and pest control systems, while the management of safety and public order would include measures including computerised access systems and provisions to isolate disturbances.

Facilities like minimarts, weekly recreational activities, and cooking facilities would fall in provision of social and recreational amenities.

Mr Tan said the Commissioner will be able to impose conditions that licensed dormitories must comply with.

For instance, he will be empowered to get operators to develop quarantine plans, in the event of an infectious disease outbreak, and provide sufficient sick bay facilities based on guidelines set by the Health Ministry. He can also get operators to establish emergency response plans, in consultation with the police and the Singapore Civil Defence Force, to deal with fires or other potential public order incidents, he stated.

For dormitory operators who contravene the guidelines, the Manpower Ministry has "deliberately set relatively high penalties as a deterrent", Mr Tan said. "We have also provided for a broad suite of tools to allow the Commissioner to require that errant parties remedy their breaches," he added.

The highest proposed penalty for operating an unlicensed dormitory is a fine of up to S$500,000, or imprisonment of up to two years, or both, for the first offence. For repeat offenders, the penalty will be doubled, while a "substantial" penalty for breach of each licensing condition is also being proposed.

"This Bill gives us greater regulatory powers as larger purpose-built dormitories are built to better address the housing and living needs of foreign workers. Due to the different dynamics that come with larger sites, it is necessary for the Government to start upstream and put in place these additional regulations," Mr Tan said.

As for operators of smaller dormitories that do not cross the 1,000-bed threshold, the minister said they will continue to be subject to existing regulations to protect the safety and well-being of residents.


Members of Parliament (MPs) who spoke on the Bill highlighted a string of cases involving foreign workers housed in poor conditions, such as this recent case of a fire which broke out at a converted shophouse, cramped with foreign workers. The blaze claimed four lives.

Ang Mo Kio GRC MP Yeo Guat Kwang said complaints handled by the Migrant Workers' Centre, which he heads, usually involve smaller factory-converted or makeshift accommodation, with fewer than 1,000 beds.

About 192,000 foreign workers are housed in such sites. Mr Yeo added the new licensing requirements may also push up costs for larger dorm operators, which may be passed on to employers.

Said Mr Yeo: "Employers constantly grapple with their business costs and depending on the considerations that drive them, and the degree of importance they place on keeping costs as low as possible, many of the more errant bosses prefer to house their workers in cheaper, less favourable, and often smaller accommodation.

"The cases are well-publicised and we know that this phenomenon is common. What is worrying to the operators of properly licensed dormitories is how the requirements and conditions in the Foreign Employee Dormitories Bill will inevitably lead to further increases in their own running costs that will be passed on to the consumer," he said.

Mr Yeo added that the fear with the situation happening is that while the increase in cost of compliance applies to the larger dormitories that already practice higher standards today, the Bill seems to leave the smaller operators to their own devices.

He elaborated: "It is difficult to argue with the simple economic proposition that higher costs for larger, purpose-built dormitories will make smaller, cheaper dormitories held to a lesser standard even more attractive to employers.

"In the longer term, if this preference begins to take root, and the concern is not addressed, the large operators are concerned that the uneven treatment towards these two groups might pull down overall migrant housing standards in general."

Other MPs also agreed with the point brought up by Mr Yeo. MP for Tampines GRC Irene Ng asked in Parliament, "Given the current realities, what assurances there are that first, employers would house them at the purpose-built dorms even if more were built, and second, that the employers would not try to pass on the higher cost of such housing to the foreign workers by squeezing their salaries?"

MP for Holland-Bukit Timah Christopher De Souza also asked in Parliament: "Would the minister kindly clarify why the proposed licensing regime only seeks to target larger dorms with 1,000 beds and over, when a large proportion of foreign workers in Singapore reside in dormitories with less than 1,000 beds?"

He also asked how the ministry would keep tabs on dorm operators who deliberately keep numbers below the 1,000-bed threshold to escape licensing requirements.

"In setting out a new regulatory and licensing regime, we must be careful not to inadvertently incentivise dormitory operators to circumvent these important requirements by deliberately operating dormitories with less than 1,000 beds," he said.

Opposition MP Pritam Singh suggested the Government build and manage some foreign worker dormitories to set standards and keep costs down.

"For example, employees that employ 100 or less foreign workers, being more sensitive to cost pressures, can be eligible to house their workers in government built and operated dormitories which set the standards for the entire industry," he said.

"The entry of the Government into this sector can be modelled along the entry of the Ministry of Education into the kindergarten business, which is to provide good pre-school education and more importantly to catalyse improvements in this sector. If deemed appropriate, a fraction of the foreign worker levy can be used to establish such dormitories with a subsidy for small companies that show real and sustained productivity improvements in their operations."

Responding, the Manpower Minister said smaller dorms are subjected to existing regulations, which cover areas such as fire safety, building and sanitation standards. He added that larger dorms bring with it a different scale of complexities, with regard to security and health care issues. 

"But for the many Purpose-Built Dormitories that are going to come online, the new ones and the existing ones, we do need these additional requirements because the scale of those dormitories are quite different. So these requirements will be on top of existing levers that will continue to apply."

Mr Tan added different classes of licensing may be introduced in future.

- CNA/kk/xk

MPs want law to cover all foreign worker dorms

Source: Straits Times / Top of The News

A NEW law which aims to improve the living conditions of foreign workers left several MPs asking why it applied only to large dorms housing 1,000 or more workers.

They also pressed Manpower Minister Tan Chuan-Jin to extend the scope of the Foreign Employee Dormitories Bill to cover smaller dorms and other places where foreign workers live.

Wrapping up the debate in which 11 MPs spoke, Mr Tan said the Manpower Ministry (MOM) chose to impose stricter regulations on dorms with 1,000 or more workers as it is ramping up construction of more purpose- built dorms in the next few years.

"We will expect the proportion of foreign workers in larger dormitories within the (licensing) threshold to increase," he said.

Under the new law, operators of large dorms will need to get a licence which requires them to take steps to control the movement of workers, provide social and recreational facilities and have quarantine plans in place, in case of an infectious disease outbreak, among other requirements.

There are now some 40 dorms offering 200,000 beds for foreign workers. Another nine large dorm complexes will be built in the next two years, adding 100,000 beds.

While larger dorms will be held to higher standards, it does not mean the MOM is not looking out for workers living elsewhere.

Mr Tan said existing regulations require all types of foreign worker housing to meet standards in the areas of fire and structural safety, hygiene and subletting.

These include some 700 factories that have been converted into dorms with some 100,000 workers. Other workers live in shophouses, apartments and makeshift quarters on construction sites.

Mr Yeo Guat Kwang (Ang Mo Kio GRC) cautioned MOM against applying "double standards" by imposing stringent rules on large dorms and allowing standards at other places to slide.

Mr Pritam Singh (Aljunied GRC), Mr Christopher de Souza (Holland-Bukit Timah GRC), Mr Gan Thiam Poh (Pasir Ris-Punggol GRC) and Mrs Lina Chiam, a Non-Constituency MP, said that living conditions in places with fewer workers tend to be poor.

They cited recent media reports on filthy and dangerous conditions in some shophouses, apartments and construction sites where workers were housed.

Mr Singh said the large number of continuing violations suggests that Singapore does not have a sufficiently robust framework governing foreign worker housing.

Mr Yeo, who chairs foreign worker group Migrant Workers' Centre, suggested that the authorities apply similar standards for all types of worker accommodation.

He was among several MPs concerned about costs, noting that rents in dorms have risen from around $170 per bed in 2009 to about $350 today.

Dr Fatimah Lateef (Marine Parade GRC) noted that land prices have risen, while Ms Foo Mee Har (West Coast GRC) asked if the move would see large players dominating the market.

Mr Singh also asked whether MOM has considered bringing smaller foreign worker quarters under the licensing framework.

Mr Tan said MOM would bear in mind the possibility of having different classes of licence in future, if needed.

He also acknowledged the anecdotal examples of poor living conditions, but stressed that this does not mean the situation is dire across the board. "I think it is important for the House not to have the wrong impression that there is widespread mistreatment of foreign workers," he said.

-By Amelia Tan

Rising interest rates set to pressure mortgages

Singapore banks, known as some of the most robust in the world, are set to face a stern test as home prices fall and interest rates edge higher.

Source: Channel News Asia / Business

SINGAPORE: Recent headlines suggest an oncoming storm - as property prices come down, speculators are clearing out the market, leaving banks holding the bag.

In the case of Marina Collection in Sentosa Cove, lender UOB is suing the developer and several homebuyers after 37 out of 38 units there defaulted. Now, rising interest rates only seem to add to the gloom - since the start of the year, three-month SIBOR, a benchmark most mortgages are tied to, has risen almost by half to 0.65 per cent.

Even before that, the Monetary Authority of Singapore (MAS) said the housing non-performing loan ratio rose for the first time in three years, ticking up to 0.4 per cent in the third quarter of 2014.

Analysts said that more defaults are inevitable, however there is no need to hit the panic button just yet. Mr Cyrus Daruwala, managing director of IDC Financial Insights, said: "Anybody who has been punting, anybody who has been speculating and overextended, this marginal creep up of half a percentage point for example, that is going to get to them.

"But the real non-performing loans, I think we are going to budge from 0.8 per cent to maybe 0.9 per cent - it is still under 1 per cent of the total portfolio."

That is in part because the Government put a limit on how much financing buyers can obtain during the bull market, and those measures are giving banks ample headroom as the market turns. In fact, some analysts said that a steady rise in interest rates could be good for banks - by making their loan portfolios even more profitable.

Mr Ivan Tan, a director at Standard & Poor's, said: "When you look at the funding side, a lot of it is current or savings deposits, retail deposits, so there is a repricing gap.

"Generally, banks are slower to revise up interest rates for their deposits, whereas the loan repricing is quite fast. So between the loan repricing and deposit reprising, there is some interest margins to be had."

The wild card now is the jobs market. If the past is any guide, analysts said that Singapore homeowners do not usually bail on their debt unless they lose their paychecks.

- CNA/ac

More than 200 flats seized by HDB in last three years

Flats are compulsorily acquired from lessees who have committed major lease infringements such as the unauthorised subletting of flats, says Minister of State for National Development Desmond Lee.

Source: Channel News Asia / Singapore

SINGAPORE: A total of 202 flats were seized by the Housing and Development Board (HDB) between January 2012 and December 2014, Minister of State for National Development Desmond Lee said on Tuesday (Jan 20).

Flats are compulsorily acquired from lessees who have committed major lease infringements such as the unauthorised subletting of flats, Mr Lee said, in response to a Parliamentary question by MP Zainal Sapari.

“The action is also taken, as a last resort, against mortgagors who persistently refuse to resolve their arrears, or work towards a sustainable solution, despite the assistance given,” he added.

HDB will assist such households to find alternative accommodation, Mr Lee said. “For those who can afford smaller flats, HDB will help them buy one and may offer them another loan for the purchase, if necessary. Those who are unable to afford another flat, and have no family support or other housing option, are allocated rental flats.”

Mr Lee added there are many measures - both short- and long-term - that can be taken to help HDB homeowners resolve their arrears issues. These include helping the home owner reschedule a mortgage loan up to the maximum repayment period, or allowing owners to pay lower monthly instalments under the reduced repayment scheme. 

Mr Lee said HDB has assisted 9,752 families with one or more of these measures, from January 2012 to December 2014.

"It is not in the interest of lessees to accumulate mortgage arrears. It's not just a heavy financial burden on them, but also a tremendous emotional strain. HDB therefore intervenes early, proactively and sympathetically, to help flat owners resolve their arrears issues," he said.

"For instance, loan instalments are usually paid on the first of each month. But HDB gives lessees up to the end of the month if they face temporary cash flow difficulties for instance. But if they still face problems doing so, HDB will make a call, arrange a meet up or even do a home visit, to better understand the situation and better offer help," Mr Lee added. 

- CNA/cy/dl

Relocation of Paya Lebar Airbase to only take place from 2030

Current airbases - Changi Airbase East and Tengah Airbase - will have to be expanded first to replace the Paya Lebar Airbase, says Defence Minister Ng Eng Hen.

Source: Channel News Asia / Singapore

SINGAPORE: The relocation of Paya Lebar Airbase will only take place in at least another 15 years' time, at about 2030 and beyond.

This is because, current airbases - Changi Airbase East and Tengah Airbase - will have to be first expanded to replace the Paya Lebar Airbase, Defence Minister Ng Eng Hen said this in a written parliamentary reply to MP Christopher de Souza on Tuesday (Jan 20).

Mr de Souza had asked for an update on the Airbase's relocation plans, which were first announced during the National Day Rally 2013 by Prime Minister Lee Hsien Loong.

The focus now is expanding the Changi Airbase East and building a new runway at Changi, Dr Ng said. Construction of facilities at Changi will commence after the completion of detailed site surveys and land preparation works. 

As for the Tengah Airbase, Dr Ng said efforts are focused on developing a design for the airbase facility. 

To ensure the Singapore Air Force's operational readiness is maintained, the RSAF has put in place plans to build up capabilities such as the recently-announced Island Air Defence System, Dr Ng added.

The RSAF will also be upgrading and renewing some of its older systems to meet the country's long-term security needs.

- CNA/xk

Companies' Brief

Analysts sense special dividend as KepLand soars ahead of results

Payout possibility based on gains from MBFC Tower 3 stake sale; talk of parent taking KepLand private seen unlikely

Source: Business Times / Companies & Markets

Shares of Keppel Land hit a 52-week high on Tuesday, closing 1.1 per cent higher at S$3.65, even while rumours of a potential privatisation by its parent were dismissed by analysts covering the stock. Despite some market rumours of a potential privatisation, analysts see little prospect of a complete takeover by Keppel Corp, which now owns 54.6 per cent in Keppel Land, citing a lack of business synergy between the two and the high costs of doing so.

-By Lynette Khoo

Bumper payout as spin-off buoys Keppel T&T's Q4 bottom line

One-off gains lift quarter's net profit to S$198.4m from S$17.7m; final, special dividends total S$0.15 per share

Source: Business Times / Companies & Markets

Following a spin-off of assets into Keppel DC Reit, Keppel Telecommunications & Transportation (Keppel T&T) posted a bumper fourth-quarter bottom line and recommended a special dividend on Tuesday. The firm's net profit for the quarter ended Dec 31, 2014 surged from S$17.7 million S$198.4 million on the back of gains from the disposal of its data centre properties and associated companies. The assets were injected into Keppel DC Reit which went public late last year. The disposal boosted Keppel T&T's other income from S$3.7 million in Q4 2013 to S$235.9 million in Q4 2014.

-By Joyce Hooi

Asset sales drive surge in profit for Keppel T&T

Disposal of two data centres the main factor in dramatic Q4 hike

Source: Straits Times / Money

DATA centre and logistics provider Keppel Telecommunications & Transportation (Keppel T&T) yesterday reported a dramatic surge in fourth-quarter net profit thanks to the sale of assets.

Net profit for the period ended Dec 31 rose to $198.4 million from just $17.7 million, while revenue was up 57.6 per cent to $70.9 million.

The latest results followed the group's move to list Keppel DC Real Estate Investment Trust (Reit) on Dec 12 last year, when Keppel T&T sold two of its majority-owned data centres - Keppel Digihub and Keppel Datahub - in Singapore to the trust.

The gains from the disposal of the data centres, along with other factors, was behind the surge in profit, Keppel T&T said when announcing its latest results after the market closed yesterday.

As a result, full-year net profit was up from $63.2 million in 2013 to $246.6 million, while revenue improved 34.6 per cent to $224.6 million.

For the full year, net asset value increased by 49 per cent to $1.27 per share, Keppel T&T said while announcing a final dividend of 3.5 cents per share and a special dividend of 11.5 cents per share.

Excluding the one-off gains in the fourth quarter, earnings of the mainboard-listed company - a subsidiary of Keppel Corp - were lifted by higher revenue from both data centre and logistics divisions.

"The group continued to maintain high occupancy at its logistics facilities and encouraging throughput at its integrated ports in China. Construction has been completed for the new warehouses at Tampines Logistics Park in Singapore… while construction of Tianjin Eco-city Distribution Centre in China is nearing completion," Keppel T&T said, expecting the new facilities to boost the logistics portfolio starting this year.

Meanwhile, the listing of Keppel DC Reit in December had raised $512.9 million in total, as its public tranche units were almost 10 times subscribed.

Four of the eight data centres in the Reit's portfolio were owned or majority-owned by Keppel T&T.

"The successful listing of Keppel DC Reit and divestment of data centre assets into the Reit have created a platform for the group to continue to develop and grow its pipeline of data centre assets, and at the same time strengthen its operational capability going forward," Keppel T&T noted.

Shares of Keppel T&T closed at $1.485 yesterday after rising 4.58 per cent.

-By Wong Wei Han

Keppel Reit

Source: Business Times / Stocks

Q4 2014/fy2014 distributions per unit (DPUs) fell 23.4 per cent/8.2 per cent year on year on lower rental support as well as higher borrowing costs. Reiterate "neutral" and dividend discount model-based S$1.18 TP, implying a 2.1 per cent total return. All eyes are now on OFC to hit its breakeven rent when its first tranche income support depletes in Q1 2015 for the 87.51 per cent stake of the property acquired from Keppel Land on Dec 14 2011.

Mapletree Industrial's Q3 DPU up 6.4%

Source: Business Times / Companies & Markets

Mapletree Industrial Trust on Tuesday reported a 6.4 per cent increase in distribution per unit (DPU) to 2.67 Singapore cents for its third quarter ended Dec 31, 2014. This was up from the 2.51 cents that it paid out a year ago. Higher rental rates secured for renewal leases in its flatted factories, business parks and stack-up/ramp-up buildings, as well as revenue contribution from its completed development projects boosted gross revenue by 3.3 per cent to S$78.13 million.

-By Lee Meixian

Mapletree earnings up in third quarter

Source: Straits Times / Money

HIGHER rents and purchasing electricity in bulk lifted third-quarter earnings for Mapletree Industrial Trust.

Distribution per unit (DPU) for the three months to December rose 6.4 per cent to 2.67 cents from the previous year, it said in a statement yesterday.

That was on the back of a 9 per cent climb in distributable income to $46 million from the preceding year. Revenue rose 3.3 per cent to $78.1 million.

Mr Tham Kuo Wei, chief executive of the trust manager, said the better showing was largely due to higher rents upon lease renewal, revenue contribution from completed development projects and cost-saving initiatives.

Average portfolio rents increased slightly to $1.83 per sq ft (psf) per month in the October to December period from $1.82 psf per month in the preceding quarter, the trust said.

The median rental rate for multi-user factory space islandwide was $1.98 psf per month in the three months to Dec 31, up from $1.91 psf per month in the three months to Sept 30, according to official data.

Mr Tham also said that the trust has started to work with licensed electricity retailers to buy electricity in bulk, resulting in lower utilities expenses.

He added that the trust has taken steps to protect itself against changes in interest rates.

Higher interest rates may make it more expensive for real estate investment trusts (Reits) to borrow money, and may also cause the market value of their properties to decline.

Mr Tham said that the trust's balance sheet remains robust, with 86 per cent of its $1.09 billion in gross borrowings hedged against interest rate fluctuations.

The average occupancy rate for the properties in its portfolio fell marginally from 91.5 per cent in the July to September period to 90.8 per cent in the October to December period.

The trust said this was due to the progressive relocation of tenants from its Telok Blangah cluster, which includes two flatted factories and a canteen. That site in the Telok Blangah industrial estate will be redeveloped into a $250 million build-to-suit project for Hewlett-Packard Singapore, it noted.

Mapletree Industrial Trust units rose 1.5 cents to close at $1.58 on Tuesday before its results announcement.

-By Melissa Tan

Lian Beng doubles H1 profit to S$35.5m

Source: Business Times / Companies & Markets

Mainboard-listed Lian Beng Group has doubled its net profit to S$35.5 million for the first six months of its financial year ending Nov 30, 2014, largely due to the spike in share of results of associates and joint ventures. For the first half of FY2015, the construction group's share of results of associates and joint ventures came in at S$21.5 million, compared with the S$964,000 loss in the previous corresponding period.

-By Claire Huang

Views, Reviews & Forum

Exciting potential of being a Smart Nation

Source: Straits Times / Forum Letters

SINGAPORE'S Smart Nation blueprint mentions quite a bit about the deployment of sensors and making sense of the data collected.

In essence, it is about giving "eyes and ears" to an already established information and communications technology network. The scope of possibilities is immense.

Throw in utility vehicles that drive themselves and flying drones that "see" and "sniff", and you can imagine the productivity boost we can achieve and the manpower shortages we can overcome.

Ultimately, the software that runs these systems has to be good, and the people managing the systems must be savvy.

I wonder if the Government is amenable to setting up a crowdfunding platform to attract funds for new ideas.

Professor Dani Rodrik's commentary ("Moving from welfare state to new innovation state"; last Friday) highlighted the need for "public venture funds" to sustain innovation and provide equity.

It seems a very good model for technocratic Singapore to follow. A government getting involved and having ownership trumps the old private-enterprise approach. Innovators will perceive this to be less risky and come up with altruistic solutions to issues - something private enterprise might otherwise shun for lack of attractive returns.

For example, if a nation owned its own communications network, any "usage tax" - currently in the form of telco subscriptions - can be pooled and channelled to finance even more out-of-the-box thinking.

It will certainly give our Smart Nation the legs to run on and even lead innovation to become a new cultural phenomenon.

-By Lai Tuck Chong

Suite of incentives to boost local hotel sector

Source: Today Online / Commentary

Singapore tourism has grown by leaps and bounds since the nation was formed 50 years ago. The number of visitors has swelled, from 90,000 in 1964 to 15.6 million in 2013, said the Singapore Tourism Board (STB).

The hotel industry, which is a key supporting pillar of tourism, has also seen significant growth. Gazetted hotel-room revenue in the first half of last year was estimated to be S$1.6 billion, a rise of 9.1 per cent from the same period the previous year.

Recognising the hotel industry’s contribution to tourism in Singapore, the STB offers assistance to the industry through various grants, tax incentives and resources.

Its grants include the Business Improvement Fund (BIF), the Tourism Technology Fund (TTF) and the Training Industry Professional in Tourism (TIP-iT).

These grants can help fund up to 50 per cent of projects that are aimed at helping companies enhance their business models and processes, encourage technology innovation and adoption, upgrade employee skills, and develop talent and leadership.

Hotels enjoy several tax incentive schemes as well. These include the double tax deduction on expenses incurred for participating in certain local and overseas trade fairs, as well as the enhanced tax deduction under the Productivity and Innovation Credit (PIC) scheme for leasing or acquisition of information technology and automation equipment, and training of employees.

However, the hotel industry continues to face challenges. In this highly labour-intensive industry, the slowing growth rate of the workforce in Singapore could mean a worsening of the current labour crunch that many hotels face.

Further, with more technologically savvy and discerning “millennial travellers”, hotels have to cater to new and distinctive travel preferences, such as a need for speed, efficiency, convenience and connectivity, as well as a penchant for unique experiences.

The changing profiles of their manpower and customers mean hotels will have to innovate and reposition themselves to retain the former and appeal to the latter.

Meeting this challenge will require a multi-pronged approach. Hotel redesign, advocated by the STB and industry associations, is one of the ways to innovate. Hoteliers throughout the world are revisiting their business concepts and models, and rediscovering the benefits of “select-service” versus full-service hotels to enhance customer experience and deliver more efficient services. This strategy may involve overhauling the physical layout of hotels and rolling out more technological innovations such as digital check-ins or smartphone-activated room keys.

Another strategy is to attract and develop “millennial talent” who will be able to understand the desires of fellow millennial travellers and develop products and services that will resonate with them.


While Singapore has existing grants and incentive schemes to support these initiatives, perhaps more can be done in this year’s Budget announcement to specifically encourage our hotels to embrace innovation and further develop talent.

The reintroduction of the Hotel Refurbishment Incentive for hotels, which was discontinued in 2003, could be of help. Currently, Singapore hoteliers face huge challenges when they carry out major renovation or refurbishment projects, as a significant portion of the costs incurred may not enjoy any tax-deduction or -depreciation benefit.

If a revamp of the hotel layout is needed to introduce innovative concepts or make better use of technology, the Hotel Refurbishment Incentive, with some fine-tuning, would help to defray the costs of such a makeover. Here, allowing an enhanced tax depreciation claim of up to 150 per cent of the renovation costs for approved projects would be welcomed.

The Government can also consider introducing a modified version of the Land Intensification Allowance (LIA) scheme, which is currently administered by the Economic Development Board, where tax depreciations are granted on qualifying industrial buildings or structures.

The current LIA scheme is aimed at promoting the intensification of industrial land use towards more land-efficient and higher-value-added activities. Perhaps a modified LIA scheme for the hotel industry in land-scarce Singapore, aimed at encouraging hotels to locate themselves in outlying areas (instead of prime locations) could be introduced.

This could also spur hotels to come up with innovative products or unique service experiences to attract clientele to stay at such locations.

There is also an opportunity to further develop local hotel brands to inject greater vibrancy to the sector and enable local brands to go abroad. The Government can support this through co-investment in ventures, grant funding or tax breaks to encourage the conceptualisation and development of local brands, with the condition that the intellectual property (IP) of such local brands must be registered in Singapore. This will also strengthen Singapore as an IP hub.

Expanding on existing schemes and incentives, the Government could perhaps consider allowing double tax deductions or PIC-enhanced tax deductions on the remaining project costs, which are not supported by the grants approved under the BIF, TTF and TIP-iT. From a manpower perspective, other than training and development support, the grant or tax incentive schemes could also be expanded to include recruitment assistance for hoteliers to attract millennial talent and enable the development of local talent.

Singapore’s tourism industry has enjoyed phenomenal growth in the past five decades. Taking it to the next level of sustainable growth will require a vibrant and thriving hotel sector.

To that end, incentives by the STB and Government are important enablers. Their continued support through various tax and non-tax initiatives, greater collaboration among the hotel industry and other tourism players, and innovation by all will be key to unlocking greater economic potential.

-By Tan Lee Khoon & Helen Bok

Global Economy & Global Real Estate

China insurers on prowl for trophy properties

New breed of buyers have boosted prices in New York and London

Source: Business Times / Real Estate

HK tightens investor mortgage rules amid record prices

Source: Business Times / Real Estate

China developers seek alternative finance as offshore market dries up

Source: Business Times / Real Estate

China's new home sales jump after interest rate cut boosts demand

Housing sales surge 41% to 938.4 billion yuan from November and are 4.2% higher than a year earlier

Source: Business Times / Real Estate

Jersey City, New Jersey, to Get 95-Story Condo Tower

Source: Bloomberg / Luxury

A Chinese developer is planning a 95-story condominium tower for the Jersey City, New Jersey, waterfront that would be the tallest building in the state.

China Overseas America Inc. plans to construct the 950-foot (290-meter) building at 99 Hudson St., according to a statement on Tuesday from Mayor Steven Fulop. The skyscraper, with 760 for-sale dwellings, would surpass the Goldman Sachs Group Inc. tower two blocks to the south, which is 781 feet tall, according to the statement.

The project shows how Jersey City has become a refuge and market of choice for a mix of empty-nesters and buyers priced out of Manhattan, Fulop said in an interview. The plan, calling for condos ranging from one to three bedrooms, shows that the city is attracting more families and others who want to buy homes and remain there.

“This building will literally have the best view in the world,” Fulop said. “It’s going to have panoramic views of the Statue of Liberty, Ellis Island and the New York City skyline.”

The final project will include an affordable-housing component, to be determined, Fulop said.

Condominium towers targeting wealthy buyers have been rising across the Hudson River in Manhattan, as apartment prices have climbed to their highest since their 2008 peak. One of them, 432 Park Ave., will be 1,397 feet tall upon completion, taller than the Empire State Building. High-rise towers are also going up across the East River in Brooklyn and the Long Island City section of Queens.

‘Building Bigger’

In Jersey City, about 6,000 residential units are under construction, and 18,000 more have been approved, the mayor said in his statement. As new projects have opened, the population has grown, showing people are being attracted from outside the city limits, he said. Jersey City is likely to pass Newark to become the state’s most populous city next year, according to Fulop.

“Jersey City is becoming one of the premier mid-sized cities in the country,” Fulop said in the interview. “We’re building bigger and you’re going to see a totally different-looking skyline over the next five years.”

The nearby Trump Plaza, at 532 feet, is currently the state’s tallest residential building, according to the statement.

The city’s planning board will vote on measures needed for the project at a meeting Tuesday night in advance of city council approval, according to the statement. Construction may begin by the end of June.

-By David M. Levitt and Terrence Dopp

Loeb Reinsurer Picks Short Hills, New Jersey for Office

Source: Bloomberg / News

Third Point Reinsurance Ltd. (TPRE), the Bermuda-based company co-founded by hedge-fund manager Dan Loeb, has picked Short Hills, New Jersey, as the location for a new U.S. subsidiary.

Shane Haverstick, senior vice president of operations, said he’s moving to the new office from Bermuda with Tony Urban, an executive vice president of underwriting. The property is at 51 John F. Kennedy Parkway, where David Tepper’s hedge-fund firm Appaloosa Management occupies space on a separate floor, according to regulatory filings.

The reinsurer last year hired Tom Wafer and Jonathan Norton, two former Alterra Capital Holdings Ltd. executives, to lead a push in the U.S. and said the company was looking to open an office in the country. Third Point Re is among reinsurers pressured by increased competition as investors including hedge funds crowd into the business of providing backup coverage for primary carriers.

“TPRUSA’s management team may be challenged by the increased competition from established carriers as well as other alternative capital insurers, also in the start-up phase,” A.M. Best said Monday in New York in a statement. The ratings firm said “the company’s hedged investment strategy” also can add risk.

Third Point Re said today said in a filing that it probably posted an underwriting loss in 2014 and that net income declined from a year earlier on lower investment returns. The company released preliminary 2014 financial data as the U.S. subsidiary disclosed plans for an offering of senior notes.

Tepper Connection

The reinsurer declined 1.9 percent $13.28 at 4:01 p.m. in New York, extending its loss since Dec. 31 to 8.4 percent. The company dropped 22 percent last year.

Loeb started his hedge fund in the weight room of Tepper’s office in Chatham, New Jersey, in 1995 and later moved to New York, according to Bloomberg News reporter Katherine Burton’s 2007 book “Hedge Hunters.” Loeb also helped start the reinsurer, which was incorporated in 2011.

-By Jing Cao

Confidence Among U.S. Homebuilders Little Changed in January

Source: Bloomberg / Luxury

Confidence among U.S. homebuilders hovered in January close to a nine-year high, indicating the residential real estate market is poised to expand this year.

While the National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 57 this month from 58 in December, readings greater than 50 mean more respondents report good market conditions, according to figures issued from the Washington-based group Tuesday. The median forecast in a Bloomberg survey called for 58.

A strengthening job market and mortgage rates near historically low levels will probably keep underpinning demand for homes in 2015. A report on Jan. 16 showed consumer confidencejumped in January to the highest level in 11 years, raising the odds more households will be looking for residences.

“Steady economic growth, rising consumer confidence and a growing labor market will help the housing market continue to move forward in 2015,” David Crowe, NAHB chief economist, said in a statement.

Estimates in a Bloomberg survey of 45 economists ranged from 55 to 60. The December reading was revised up from a prior estimate of 57. The index reached a nine-year high of 59 in September.

The group’s gauge of current single-family home sales held at 62 this month. The reading on prospective buyer traffic declined to 44 from 46 the prior month, while the index of the six-month sales outlook decreased to 60 from 64.

Builder confidence eased in the North, South and West. It climbed in the Midwest.

Mortgage Rates

Borrowing costs have retreated in the past month. The average 30-year, fixed-rate mortgage was 3.66 percent in the week ended Jan. 15, the lowest since May 2013, according to data from Freddie Mac in McLean, Virginia.

Gains in employment will encourage home purchases. Payrolls climbed by 252,000 workers in December after a 353,000 rise the previous month, and the jobless rate fell to 5.6 percent, the lowest since June 2008, according to Labor Department figures. About 3 million more Americans found work in 2014, the most in 15 years.

The University of Michigan preliminary consumer sentiment index rose this month to 98.2, the highest since January 2004. A measure of Americans’ assessment of their personal finances and a gauge of expectations six months from now both advanced.

Wells Fargo & Co. (WFC), the largest U.S. home lender, is among companies that are encouraged by the outlook for the economy.

Improving Confidence

“There have been many signs of strength in the U.S. economy,” Chief Executive Officer John Stumpf said on a Jan. 14 earnings call. “I don’t think this is a breakout, but I think we’re on our front foot and consumers’ confidence is at an all-time high since the downturn.”

Some companies are less sanguine. Lennar Corp., a Miami-based builder, this month reported that profit margins are being hurt by a reduced ability to raise prices. Tight credit, especially for first-time homebuyers, is curbing demand.

“Across the board, we’re seeing intensified competition as builders go out and chase volume,” Lennar Chief Executive Officer Stuart Miller said on an earnings conference call.

A Commerce Department report tomorrow is projected to show housing starts increased to a 1.04 million annualized pace in December from 1.03 million the prior month, according to the median forecast in a Bloomberg survey. Permits, a sign of future construction, also climbed, economists predicted.

-By Shobhana Chandra

Blackstone Said in $1.7 Billion Deal to Buy Apartments

Source: Bloomberg / Personal Finance

Blackstone Group LP (BX), the biggest owner of U.S. single-family houses, agreed to buy 36 apartment properties across the country for about $1.7 billion as it expands its rental business, according to two people with knowledge of the transaction.

The low-rise, garden-style properties are being sold by Praedium Group, a New York-based real estate investment firm, and contain about 11,000 apartments, said the people, who asked not to be identified because the deal is private. About half of the buildings are in California, Washington, D.C., and Boston, with the rest located around the U.S., they said.

The deal would increase the number of apartments managed by Blackstone’s LivCor multifamily real estate unit to about 43,000 at a time when demand for rental housing in the U.S. remains robust. The national apartment-vacancy rate was 4.2 percent in the fourth quarter, hovering near the lowest level in 13 years, according to property-research firm Reis Inc.

Three of the four cities with the highest annual rent growth last quarter are in California, with San Jose in first place, followed by Oakland in third and San Francisco in fourth, according to Reis. Denver was second.

Peter Rose, a spokesman for New York-based Blackstone, declined to comment. Floyd Lattin and Russell Appel, the founding principals of Praedium, didn’t reply to requests for comment.

Evercore Partners Inc. and Jones Lang LaSalle Inc. advised Praedium on the sale, according to the people with knowledge.

G.E. Assets

Blackstone, the world’s biggest private-equity owner of real estate, formed LivCor in 2013 with assets acquired from a unit of General Electric Co. That roughly $2.3 billion deal, in which Blackstone took over GE’s agreements with eight operating partners, comprised 71 properties inTexas and the Southeast.

LivCor currently owns about 80 properties, according to its website. It doesn’t show any holdings in California, Massachusetts or Washington.

With the Praedium properties, Chicago-based LivCor would be about half the size or smaller of the two biggest U.S. real estate investment trusts specializing in apartments. Equity Residential (EQR), also based in Chicago, owns stakes in 393 properties with about 110,000 units.AvalonBay Communities Inc. (AVB), of Arlington, Virginia, held interests in 274 properties with more than 82,300 units as of Sept. 30.

Rising Construction

A surge in apartment construction is starting to prevent U.S. vacancies from falling further, Ryan Severino, a senior economist at New York-based Reis, said in a report this month.

“Demand will struggle to keep pace with the significant amounts of new construction that should come online over the next few years,” Severino wrote.

Blackstone also has bet on rentals through its single-family housing unit, Invitation Homes. The firm started buying the residential properties in 2012 at distressed prices and now owns about 47,000 rental houses throughout the country.

Blackstone said in June 2013 that it expects housing demand to outpace supply as household formations exceed construction. The U.S. will see average annual growth of about 1.3 million new households a year from 2015 to 2020, the Joint Center for Housing Studies at Harvard University said in its most recent estimate, released in March 2014.

A Commerce Department report Wednesday is estimated to show single-family and multifamily housing starts increased to a 1.04 million annualized pace in December, from 1.03 million in November, according to the median estimate in a Bloomberg News survey.

-By Hui-yong Yu

Additional Articles Of Interests - Local & Overseas Real Estate