Real News‎ > ‎2015‎ > ‎January 2015‎ > ‎

23rd January 2015

Singapore Economy

Singapore most liveable place globally for Asian expatriates: ECA

Source: Business Times / Real Estate

From over 450 global locations, Singapore has clinched the top spot as the most liveable place in the world for Asian expatriates, human resource consultancy ECA International's annual 'Location Ratings' research has revealed. For the 16th year straight, Singapore ranked top globally for Asian assignees, followed by Australian cities of Adelaide and Sydney.

-By Chan Yi Wen

S'pore remains the most liveable place in Asia for expatriates: Poll

Source: Straits Times / Money

SINGAPORE is still the most liveable place in Asia for expatriates and also the most favoured city in the world for Asian expats, according to a new survey.

Long-time rival Hong Kong has slipped down the rankings by human resources firm ECA International.

Singapore is followed by Adelaide and Sydney in the ranking for Asian expats.

But while Hong Kong holds the No. 6 spot among Asian cities, it fell to 33rd place from 17th globally.

ECA gathers the latest location ratings for expat living conditions annually, and assesses the overall quality of living in more than 450 places worldwide.

Mr Lee Quane, ECA's regional director for Asia, said: "Good air quality, solid infrastructure, decent medical facilities, low crime and health risks have contributed to Singapore maintaining its position at the top of the global ranking for quality of living for Asian assignees."

He noted that Singapore's track record makes "it a very attractive proposition for companies looking to set up in the region, particularly when conditions in Hong Kong have deteriorated a little".

The criteria include climate, availability of health services, political tensions and air quality.

However, the firm noted that the impact of factors such as the differences in culture, language and climate "will vary according to where someone comes from".

Mr Quane added: "Where an employee is going from and to can affect the level of adaptation required on the part of the assignee for some of the factors we measure."

He noted that Singapore ranks at the top for Asians, and has done so for 16 years in a row, but globally, it is 96th for someone from Western Europe, for instance. Hong Kong is also a top pick with Asian expats, but not so globally, as Mr Quane noted the poorer air quality and challenging socio-political environment.

But he said: "Overall it does still remain one of the easier places in the world for an outsider to adjust to living and working in.

-By Rachael Boon

Singapore 'most liveable city in the world' for expatriates: Index

An annual survey conducted by ECA International found that Singapore is the most liveable city in Asia and the world, and for the 16th year in a row, top location for Asian expatriates.

Source: Channel News Asia / Singapore

SINGAPORE: Singapore has again been ranked the most liveable city in Asia and the world according to an index for expatriate living conditions published by human resource consultancy ECA International on Thursday (Jan 22).

"Good air quality, solid infrastructure, decent medical facilities, low crime and health risks have contributed to Singapore maintaining its position at the top of the global ranking for quality of living for Asian assignees," said Mr Lee Quane, Regional Director for Asia at ECA International.

Singapore's regional rival Hong Kong slipped from 17th to 33rd place in the global ranking. However, it remains highly ranked in 6th place among other Asian cities.

"Hong Kong scores well in a range of factors including infrastructure, education and healthcare facilities, and availability of goods and services," said Mr Quane. "However, air quality remains a lot poorer there than many other parts of the region. In addition, Hong Kong's socio-political score worsened this year as a result of the unprecedented unrest there in recent months and the restrictions placed on movement." 

Japanese cities Osaka, Nagoya again took up second and third spots in the Asia ranking respectively. For the global ranking, Adelaide and Sydney in Australia were in second and third positions. 

The least liveable places for Asian expatriates were Afghanistan's Lashkar Gah and Kandahar, and Mogadishu in Somalia.

- CNA/ct

Singapore Real Estate

JTC rolls out new and improved industrial price, rental indices

Source: Business Times / Real Estate

IN a bid to provide a better reading of Singapore's industrial landscape, JTC Corporation has introduced new industrial price and rental indices that come with an expanded data coverage and improved methodology. 

This move, along with the release of more detailed rental data, came amid increased lobbying by various stakeholders for more granular data to be made available for businesses to make informed decisions.

From the previous six indices, JTC has expanded its slate of industrial price and rental indices to 24.

These include price and rental indices for single-user factory space as well as sub-indices for multiple-user factories based on planning region, land-use zoning and remaining tenure. Rental indices for business parks and warehouses are also rolled out.

The data coverage of the indices is expanded to islandwide, as opposed to only covering the Central Region previously.

To improve the way indices are computed, JTC has started to classify properties by more attributes such as location, remaining tenure and land-use zoning, as well as changed the index weights from a moving weight to a fixed weight. This ensures that index movements track true changes in price or rent, and are not caused by changes in quality of properties transacted from one quarter to another.

All these changes took effect from JTC's fourth-quarter industrial statistics released on Thursday, following the launch of the Fair Tenancy Framework on Tuesday containing guidelines for transparency of rental data across all areas and property types.

Terence Seow, assistant CEO for corporate, policy and planning group at JTC, told reporters that these changes have culminated from a review that took place over a year.

Even before JTC took over the function of collecting and disseminating industrial property data from the Urban Redevelopment Authority (URA) early last year, it had received industry feedback on the need to review the methodology, he said. The indices were last reviewed in the first quarter of 2000.

According to JTC, the use of an expanded data coverage islandwide and an enhanced index methodology does not change the direction of prices and rents in previous quarters.

Leong Hong Yew, director of policy and research division at JTC, noted that 15 years ago when the index was last revised, multiple-user factories were mostly concentrated in the Central Region.

But JTC has since ramped up supply of multiple-user factories in the east and west of Singapore, prompting a need to revise the indices.

"If not the index's movement will not represent the true market movement," he said.

Previously, when indices were computed using moving weights based on the past 12 quarters of transaction values, the index could be skewed by a sudden spike in transactions of any particular property types, for instance freehold properties, in a quarter, Mr Leong pointed out.

"Nowadays, with more specialised facilities coming up and transacted in the market, if this is not taken care of, it will lead to spikes in the indices that actually don't represent market movement but is due to a change in the quality of the underlying assets," he explained.

The fixed weights based on one year of transaction values in the base period will not be revised unless there is a significant change in the market structure that renders the current weights less meaningful. All indices will be rebased to the fourth quarter of 2012 but this adjustment will not affect quarterly percentage changes.

Due to a lack of sales transactions in strata-titled warehouse space, JTC will discontinue the price index for warehouses since it mainly captured multiple-user strata-titled warehouses - now a small portion of the market - and therefore does not present a fair picture, Mr Leong said.

Similarly, the lack of sales transactions in business parks, mainly owned by institutional funds and Reits, renders it impossible to come up with a price index for this category now.

Market watchers welcomed the added clarity that the new and improved indices bring to various stakeholders.

Savills research head Alan Cheong noted that this offers industrialists, researchers and policymakers a "richer texture of statistics" to fulfil their respective needs. "Although greater transparency may not lead to lower rents, but it should lead to less variations in the rents concluded since the level of opacity has been reduced," he said. "For industrialists who often do not keep track of developments in the leasing market, the new indices and rental information serves as a quick reference point to get their orientations correct when they are about to engage in lease renewals or signing up rents for additional premises."

Chia Siew Chuin, director of research and advisory at Colliers International, noted that JTC can continue to improve market transparency by availing more granular information. "For example, this could include the release of sales progress and selling price information for new strata-titled industrial projects, similar to what URA has been doing for the private residential market."

-By Lynette Khoo

JTC revamps industrial property indices

Data compilation methods changed to better reflect market trends

Source: Straits Times / Money

SINGAPORE'S main industrial landlord JTC Corporation has made sweeping changes to the way it compiles closely-watched data on the sector for the first time in 15 years.

The idea is to better reflect market trends to give tenants, buyers and sellers a more accurate picture of the industrial scene here.

The changes apply to the methods used by JTC to compile its Industrial Property Price Index and Rental Index. They now take in a broader sweep of industrial properties across the island.

The old indices tracked prices and rents for multiple-user factories and warehouses, but the new price index will also track single-user factories. The new rental index will track single-user factories and business parks as well.

And where the old indices for multiple-user factories included only transactions in the central region, where most of these factories were located in the 1990s, the indices will now cover transactions islandwide.

Said Mr Leong Hong Yew, JTC policy and research director: "With (JTC) ramping up supply and opening more areas, in the east and west for multiple-user factories, for example, there was the need for revision... to represent true market movement."

The old methods did not account for property attributes affecting prices and rents, including location, remaining tenure and zoning, and used a 12-quarter moving average weights system.

As a result, index movements could have been caused by changes in the quality of buildings, for instance, rather than true price or rental movements, said Mr Leong.

In contrast, the new approach groups properties with similar attributes and uses fixed weights in the computation of the indices.

The new methodology - which took about a year to develop and test - is being used for JTC's market report for the fourth quarter of last year, which was released yesterday. It found rents of industrial space fell 0.6 per cent quarter-on quarter, and by 2 per cent for the year, in contrast with its average annual rise of 7 per cent over the past four years.

The fall in rents was in line with a dip in the islandwide industrial occupancy rate, which fell 1 percentage point to 90.9 per cent in the fourth quarter. Industrial property prices fell 0.1 per cent, but rose by 3.5 per cent for the year.

JTC noted that this was still lower than the average annual price rise of about 14 per cent over the past four years.

JTC also said yesterday that industrial rents could fall. About 2.6 million sq m of industrial space is expected to come onstream this year, with 2.2 million sq m next year.

The year ahead is expected to be a market for buyers and tenants, with average prices falling by 4 to 8 per cent and average rents dropping 5 to 10 per cent, said Mr Nicholas Mak, SLP International executive director.

With an uneven global recovery likely to weigh on Singapore's manufacturing sector, industrialists are expected to remain cost-sensitive and may take longer to evaluate their business space needs, added Ms Chia Siew Chuin, director of research and advisory at Colliers International.

-By Rennie Whang

JTC improves industrial property indices to better reflect market landscape

TODAY reports: The revisions include expanding the indices’ geographical coverage to the whole of Singapore, from just the central region previously, and including new property types.

Source: Channel News Asia / Singapore

SINGAPORE: JTC Corporation has revised the methodology it uses to compile price and rental indices for industrial property in Singapore, in a move to provide more comprehensive data coverage and introduce greater transparency into the market.

The revisions include expanding the indices’ geographical coverage to the whole of Singapore, from just the central region previously. The indices now also include new property types such as single-user factories and business parks, as opposed to just multiple-user factories and warehouses previously.

Additionally, the new methodology takes into account more property attributes that affect prices and rents, such as location, remaining tenure and land zoning.

The indices were last reviewed in the first quarter of 2000.

JTC said the revisions were done to better reflect the current industrial property market landscape, which differs from the past when most multiple-user factories were located in the central region. It added that as more property types come on stream, it is important to ensure that the changes in building attributes and quality are taken into account when computing the indices.

JTC also said the revisions did not affect the broad trends of the market, although the magnitude of change may differ from the previous indices.

These changes were reflected in JTC’s latest industrial property market report published on Thursday (Jan 22), which showed that both overall prices and rentals fell quarter-on-quarter in the last three months of last year by 0.1 and 0.6 per cent, respectively.


Industrial capital values, rents dip in Q4; occupancy at 90.9%

JTC's latest price indices based on new methodology that takes into account more geographies, property types

Source: Business Times / Real Estate

Overall industrial property prices and rentals dipped 0.1 per cent and 0.6 per cent respectively in the fourth quarter of 2014, while occupancy rates held steady at 90.9 per cent. This is based on JTC's updated price and rental indices, which are calculated based on a new methodology with expanded coverage, taking into account more geographies and property types. With effect from Q4 2014, JTC has also updated the base year of its indices to Q4 2012, from Q4 1998 previously.

-By Lee Meixian

S’pore office rents to rise again this year: CapitaCommercial

Source: Today Online / Business

SINGAPORE — Prime office rents in Singapore are set to extend gains this year as the number of new properties coming onto the market is limited, said CapitaCommercial Trust Management. “The market is looking good as supply is very tight this year, so the rise in rentals will continue,” said Ms Lynette Leong, chief executive officer of CapitaCommercial Trust Management, in an interview yesterday in Singapore.

The company runs the biggest office real estate investment trust (REIT) in Asia outside Japan.

Singapore’s prime office rents are set to post their biggest increase in at least four years for 2014.

The office rent index for prime areas rose 8.7 per cent in the first nine months of last year, heading for its largest gain since 2010, when it was up 12 per cent, data from the Urban Redevelopment Authority showed.

Ms Leong said prime office rents rose 15 per cent last year and would rise again in 2015, although she declined to give a specific prediction.

Companies involved in social media, technology and commodities are taking up space in Singapore’s central business district, offsetting the cutbacks by investment banks, she added.

CapitaCommercial Trust, the listed REIT, reported a net property income for the quarter ended Dec 31 of S$50.6 million, up 3 per cent from a year earlier. The trust’s monthly average office rents rose 5.9 per cent to S$8.61 per sq ft last year.

Ms Leong said the REIT management company has been signing longer leases for commercial properties to prepare for any softening in rents when a large supply of office space comes onto the market from next year.

For example, leases on the trust’s new CapitaGreen tower in the central business district are for four years, rather than the usual three, she said.

About 1.15 million sq ft of new office space will come on stream this year, rising to 1.6 million sq ft in 2016 and 4.7 million in 2017, said real estate broker Knight Frank.

About 69 per cent of the CapitaGreen tower has been leased at rents ranging from S$9.8 to S$16 per sq ft, said Ms Leong.

CapitaCommercial Trust is partly owned by CapitaLand, South-east Asia’s biggest developer.

It is the biggest office REIT in Asia by market value after Japan’s Nippon Building Fund and Japan Real Estate Investment Corp, data compiled by Bloomberg showed. 

-By Bloomberg

Teck Chye Terrace shophouses sold for close to S$15 million

The final auction figure of S$14.63 million was higher than the indicative price of S$13 million mentioned by marketing agent Colliers International.

Source: Channel News Asia / Business

SINGAPORE: A row of five adjoining shophouses at Teck Chye Terrace was sold for S$14.63 million on Thursday (Jan 22),  according to marketing agent Colliers International. This is higher than the indicative price of S$13 million.

The auction was conducted on Thursday and ended in the evening, but Colliers was unable to disclose the buyer's details.

Located at the junction of Upper Serangoon Road and Boundary Road, the freehold shophouses sit on a land area of about 7,861 sq ft . The five units have a total floor area of approximately 12,163 sq ft.

The first storey of all units have obtained permanent approval for "shop" use. Each shophouse also has a side staircase for access to the upper storey.

- CNA/kk

4,000 property agents drop out, over 50 agencies throw in towel

But dismal sales have not deterred the 3,000 new agents who joined industry in Jan

Source: Business Times / Real Estate

But dismal sales have not deterred the 3,000 new agents who joined industry in Jan

BUFFETED by sagging property sales, close to 4,000 real estate agents have dropped out of the industry while over 50 agencies have closed shop over the past year.

But this has not deterred some 3,006 new entrants from becoming property agents, according to the latest data from the Council for Estate Agencies (CEA).

CEA said on Thursday that it has licensed 1,369 agencies and registered 30,830 salespersons as at Jan 1 this year. This marks a fall from 1,425 licensed estate agents and 31,783 registered salespersons in the previous year's renewal exercise. Some 3,959 salespersons did not renew their registration.

Renewal of licences for agencies and agents usually takes place at the start of the year - there are still some applications pending CEA approval.

With the latest renewals, the top 10 realties here have found that they have lost some agents from end-2014. ERA Realty and PropNex remain the largest agencies with 5,707 and 5,358 agents respectively as at Jan 1.

PropNex chief executive Mohamed Ismail noted that the lacklustre market has become "a purging system of the fittest agencies and efficient agents".

But it is not all doom for those who exit in bad times. Given how overall sales volumes have dropped by some 30-40 per cent, they may be better off in a job with stable income, Mr Ismail said.

For PropNex, its number of agents has fallen by 9 per cent to 5,358 as at Jan 1 from end-2014 but it is a 4 per cent increase from a year ago. This number has since risen to 5,427 currently.

Mr Ismail noted that when sales are poor, some agents find having to make regular CPF contributions and forking out money for professional indemnity insurance and Continuing Professional Development courses deterrents to renewing their CEA licences.

According to ERA Realty chief executive Jack Chua, with the smaller agencies closing shop, their agents have joined the bigger firms. This, he said, are among the reasons why ERA's sales force grew close to 10 per cent from a year ago. But it is a 7 per cent drop compared to end-2014, just before the licence renewal exercise.

Both PropNex and ERA's numbers were boosted with the transfer of over 50 agents each from JLL Singapore over the course of last year, after the latter took a 20 per cent stake in PropNex International, the project marketing arm of PropNex, last August.

Among the top 10 agencies, HSR International Realtors saw a 17.8 per cent net drop-out of agents upon licence renewal to 1,056 as at Jan 1, despite earlier hopes by its management that a new commission scheme it implemented last year allowing agents to earn higher commissions could mitigate a contraction of its sales force.

But HSR chief executive Anne Tong told BT that the number of agents is just one part of the story. "For the first two weeks of the year alone, we have seen a transaction increase of 15 per cent year on year as compared with the same period last year," she said. "Since the launch of the scheme, about 200 new and experienced salespersons have joined us. These are active and producing salespersons."

To help its property agents improve sales, ERA's Mr Chua said the agency has beefed up its marketing and market knowledge training for agents and rolled out mobile apps that allow agents to identify units available for sale quickly so that they can bring their customers to view those units.

Tan Tee Khoon, executive director of residential services at Knight Frank, noted that the start of each year marks a game of musical chairs as some salespersons transfer from one agency to another.

"There is also a salesperson attrition rate of approximately 10-15 per cent after each registration renewal exercise," he said. The number of agents at Knight Frank slipped to 884 as at Jan 1, 2015, down from 933 as at end-2014 and 970 agents at the start of 2014.

Knight Frank is focused on seeking out "career salespersons" who are out to make a living in real estate as a career, he added. Being a full suite consultancy and agency services firm also translates to "a diverse basket of sales and leasing opportunities available to our salespersons", he said.

-By Lynette Khoo

Real estate agents forgoing licences as market cools

Some decide not to renew them amid the slowdown

Source: Straits Times / Singapore

A COOLING property market has deterred real estate agents from entering the industry - and more are choosing to let their licences lapse, figures from the Council for Estate Agencies revealed yesterday.

As at Jan 1, after the latest annual licence renewal exercise, there were 30,830 "registered salespersons" or property agents, down from 31,783 last year.

Of these, 3,006 were new entrants, down from 3,336 last year and 4,567 the previous year.

PropNex Realty chief executive officer Mohamad Ismail Gafoor was not surprised by the fall in interest, given the recent slowdown in both the private and public property markets.

"When people know that existing agents are struggling, they don't want to join," he said.

The number of Housing Board resale deals hit a record low in 2013 (18,100) and were on track to hit a new low for 2014.

Resale deals also fell in the private market last year, while new private sales were the worst since the financial crisis of 2008.

Amid these conditions, the number of licensed estate agencies fell to 1,369, from 1,425 last year.

And more agents have been leaving the industry.

There were 3,959 who chose not to renew their registration this year, compared to 3,382 who left last year.

Yet the pool of agents is still larger than in 2012, even though the market is cooler.

"There are still a lot of agents around. It's hard to find any exclusive listings," said Huttons Asia agent Jesyi Lim.

Some agents have responded by diversifying.

When OrangeTee agent Ivy Chan started out three years ago, she handled only homes. But last year, she branched out to industrial and commercial units as well.

"Because of the cooling measures, things changed drastically. There was really little to do (in the residential market)," she recalled.

The move paid off. "Last year, I actually did better than the year before," she said.

Others have chosen to carve out a niche.

Dennis Wee Realty agent Adrian Ng specialises in Housing Board resale flats in Bedok. "It's more focused," he said.

Property agencies have also been doing their part to retain their staff.

Since 2013, PropNex Realty has paid for its agents' training fees if they renew their licences and stay with the company.

Agents must have at least six hours of continuing professional development training each year in order to renew their registration.

-By Janice Heng

Fewer becoming property agents amid sluggish market

As at Jan 1, there were 30,830 property agents, down from 31,783 the year before, according to figures from the Council for Estate Agencies (CEA).

Source: Channel News Asia / Singapore

SINGAPORE: Faced with a sluggish property market, fewer people are getting themselves licensed as real estate agents and more are leaving the industry, according to figures from the Council for Estate Agencies (CEA).

As at Jan 1, there were 30,830 real estate salespersons, or agents, down from 31,783 the year before. Of the total, 3,006 were new entrants to the industry, down from 3,336 in the previous year.

More were also leaving the industry, with 3,959 agents choosing not to renew their license this year, compared with 3,382 the previous year.

A total of 1,369 real estate agencies were registered as of Jan 1, down from 1,425 the year before, according to the CEA.

- CNA/cy

Rezoning won't change character of Geylang area

More shops, eateries will turn it into more of a retail space: MP Edwin Tong

Source: Straits Times / Singapore

THE move to exclude new residences in part of Geylang will not change the red-light area's character, said the MP of the area, Mr Edwin Tong.

Instead, he expects more shops and restaurants to set up there. "That's the sort of thing we're looking at, making it more of a retail space," he told The Straits Times.

The area, currently classified as a "residential/institution" zone, is bounded by Geylang Road, Lorong 22 Geylang, Guillemard Road and Lorong 4 Geylang and is home to a mix of private properties, shophouses, places of worship, eateries, hotels and even brothels.

Last week, the Urban Redevelopment Authority (URA) announced that it will be rezoned to "commercial/institution", which bars new residential projects in the area.

"This is to minimise the issues arising from incompatibility of uses and friction between residential and non-residential uses in the area," said the URA. It said it had received complaints from residents about noise, littering, traffic congestion and illegal parking "arising from the many activities in this neighbourhood".

Since existing properties are not affected, the overall character of the neighbourhood may not change much, said Mr Tong.

Most of the reaction he received to the rezoning news came from residents living near the affected area. "The main questions are about what the new tenants will be," Mr Tong said.

He has barely heard from any residents in the zone itself. There are about 1,000 homes there, with another 300 or so being built.

Owner-occupiers are rare enough that, for instance, there are no grassroots volunteers living in that area.

"A lot of those apartments are rented out but the owners live nearby," said Madam Annie Lim, 57, a member of the Neighbourhood Committee on the opposite side of Geylang Road.

Customer service manager Kang Ngee Wi, 41, lives at Wing Fong Court in Lorong 14. He doubts the rezoning will affect him, but wonders why it was necessary.

The location is good, amenities such as supermarkets are nearby, and new residents must surely expect unsavoury goings-on to come with the territory, he said. "In this type of area, what do you expect?"

Chef Ng Kiang Hui, 54, who also lives at Wing Fong Court, is similarly unfazed. Scuffles sometimes break out in the street, but only among foreign workers. "They only fight each other," he said.

Engineering assistant Martin Loo, 55, has booked a unit at new development Le Regal but does not plan to live there when it is completed by 2016.

For him, the rezoning bodes well: "It should fetch a decent rental as it is easier to rent out any unit with more commercial activities near the precinct."

-By Janice Heng

Inoculating against higher mortgage rates

Source: Today Online / Business

China’s economic growth has slowed to a 24-year low while Europe’s economies are struggling with disinflation and possibly deflation. Analysts predict that the United States dollar will continue to strengthen this year as the world’s largest economy outperforms the rest of the world.

So what? We live in Singapore. If you are a home owner or a prospective buyer, it matters.

Most floating mortgage rates here are pegged to the Singapore Interbank Offered Rate (SIBOR), which is the interest rate at which banks offer to lend funds to other banks. The SIBOR is correlated to the US dollar: Generally, as the Singapore dollar weakens against the US dollar, the SIBOR increases and local mortgage rates rise.

Since the US and Europe cut interest rates in 2008 in order to stimulate their economies during the global financial crisis, we have enjoyed rock-bottom mortgage rates in Singapore.

The Monetary Authority of Singapore said the three-month SIBOR has fallen from a high of 1.88 per cent in September 2008 to a low of 0.25 per cent in September 2011 and hovered in the 0.38 to 0.42 per cent range from 2012 through most of last year.

As a result, during this time, bank interest rates were significantly lower than the Housing and Development Board (HDB) concessionary loan rate of 2.6 per cent, incentivising HDB owners and buyers to take out bank mortgages in large numbers.

Recently, however, dark clouds have appeared on the horizon. The Singapore dollar has depreciated against the US dollar by about 8 per cent since the middle of last year. Meanwhile, the three-month SIBOR closed at 0.65 per cent as of Jan 20, data from the Association of Banks in Singapore showed.

How much more can we expect the SIBOR and mortgage rates to increase this year?

There are two schools of thought. Some analysts think that the three-month SIBOR could increase to 1 per cent and above, predicting that the US Federal Reserve will raise interest rates and the Singapore dollar will continue to depreciate due to the global movement to US dollars. If this turns out to be the case, we can expect our current bank mortgage rates of 1.5 to 2 per cent to go up.

The other school of thought looks at the world’s struggling economies and is not so sure that the Fed and other central banks will raise interest rates. These analysts see low inflation in the US, disinflation in Europe, and an upcoming presidential election as reasons for the Fed to refrain from tightening this year.

Since no one knows for sure how interest rates will move this year, homeowners should plan for the worst and hope for the best.

There are three ways that you can inoculate yourself against the possibility of rising mortgage rates.

First, in the low interest rate environment that we are still in, try to lock in the lowest possible mortgage rate for as long a loan term as possible.

Second, prepare for the possibility that your monthly mortgage payment will go up by cutting expenses or reallocating savings to cover the increase. We have been lucky with relatively low mortgage rates and have spent elsewhere what used to go to the mortgage. If interest rates go up, we need to reallocate those savings back to the mortgage. This can be psychologically painful, but it is doable.

Third, if you qualify for a HDB loan, do you go for the HDB concessionary interest rate or a private bank mortgage which will still provide significant savings?

Which way you go depends on your tolerance for risk and your cushion of savings.

If your view is that interest rates will not go up much more and you have savings you could put towards your mortgage payments in the event that rates go against you, then you should consider taking advantage of the low interest rates in the banking sector.

If you are concerned about rising interest rates or if an increase in your monthly payments would put your ability to meet your expenses in jeopardy, then you should consider a HDB loan or a bank mortgage that seeks to replicate the HDB loan. For example, POSB offers a floating rate loan that caps the interest rate below the HDB concessionary rate for the first eight years.

Seek advice from HDB advisers, bankers and other financial experts. Interest rates go up and down. There is always a solution, but it depends on your individual circumstances and is best arrived at by conducting research and working with experts who put your best interests first.

-By Sam Baker, Co-founder of SRX

Companies' Brief

Ascott trust unit price up as Q4 DPU surges

Reit expects to grow steadily from acquisitions and renovations of existing properties

Source: Business Times / Companies & Markets

Serviced apartment play Ascott Residence Trust traded 1.5 cents higher at S$1.285 after reporting a 62 per cent year-on-year surge in fourth-quarter distribution per unit (DPU) to 2.16 cents. The trust, which pays distribution semi-annually, will distribute 4.264 cents per unit for the second half of 2014, up 15 per cent. Net asset value at end-2014 was S$1.37.

-By Cai Haoxiang

Ascott REIT’s Q4 DPU surges 62% to 2.16 cents

Source: Today Online / Business

SINGAPORE — Ascott Residence Trust’s (Ascott REIT) distribution per unit (DPU) in the fourth quarter surged 62 per cent from the corresponding period a year earlier to 2.16 cents, the trust manager said yesterday, as distributable income jumped 26 per cent to S$33.1 million following a year that saw it acquire nine properties across seven cities in four countries.

Ascott REIT enjoyed a 13 per cent rise in revenue to S$95 million in the three months ended Dec 31, boosted by S$12 million in contributions arising from acquisitions in Fukuoka, Tokyo, Kuala Lumpur, Dalian, Wuhan, Xian and Greater Sydney, as well as a stronger S$400,000 contribution from existing properties. This was partially offset by decreases in revenue from an asset in Beijing and another in Hanoi. Gross profit rose 10 per cent to S$45.7 million in the period.

For the full year, Ascott REIT’s distributable income rose 9 per cent to a record high of S$125.6 million, while DPU fell 2 per cent to 8.2 cents. Gross profit was up 12 per cent at S$180.2 million as revenue grew 13 per cent to S$357.2 million.

Mr Lim Jit Poh, chairman of the trust manager, said: “Ascott REIT made remarkable achievements in 2014, ending the year with a strong quarter. We acquired nine quality assets with over 1,800 units across seven cities for a total of S$559.1 million … As a result, Ascott REIT’s portfolio has expanded to more than 10,500 apartment units. Its asset size has also quadrupled to S$4.1 billion since its initial public offering, making it the largest hospitality trust listed on the Singapore Exchange by total asset value.”

Ascott REIT said the operating environment will be challenging this year, noting that the global economic recovery last year was weaker than expected and that geopolitical risks remain a concern.

However, it said its resilient extended-stay business model will keep performance healthy and profitable.

“In 2015, we will continue to actively seek accretive acquisitions in key cities of Asia-Pacific and Europe to enhance unitholders’ returns,” said Mr Lim.

Ascott feels the impact of oil price plunge

Outlets in Indonesia hardest hit, with 25% of clients from oil and gas sector

Source: Straits Times / Money

THE plunge in oil prices has created a "challenging operating environment going into 2015", according to Ascott Residence Trust yesterday.

The serviced apartment operator reported that its properties in locations hit by the sharp fall in the price of crude recorded lower revenue in the fourth quarter of last year.

Turnover was weaker at its two outlets in Indonesia - Ascott Jakarta and Somerset Grand Citra Jakarta - as 25 per cent of their clientele are from the oil and gas sector.

Fourth-quarter revenue from these properties fell 6 per cent to US$2.9 million (S$3.9 million) compared with the same quarter a year earlier, although it was up 1 per cent for the 12 months to US$12.5 million.

It could become a similar story at the newly acquired property in Malaysia, Somerset Ampang Kuala Lumpur, where about 30 per cent of the customers are from the energy, oil and gas sector.

While the oil shock hit Ascott's turnover late last year, it was still not enough to offset the impact of the trust's new acquisitions, said its manager, Ascott Residence Trust Management (ARTM).

ARTM chairman Lim Jit Poh said in a statement: "Ascott Reit made remarkable achievements in 2014, ending the year with a strong quarter. We acquired nine quality assets with over 1,800 units across seven cities for a total of $559.1 million."

Gross revenue rose 13 per cent in the fourth quarter to $95 million and rose by the same amount in the full year to $357.2 million.

Full-year distribution rose by 9 per cent to $125.6 million, thanks in part to these acquisitions.

Distribution per unit (DPU) for the three months to Dec 31 was 1.76 cents, up 13 per cent from 1.56 cents the previous year after adjustment for the effects of a rights issue and excluding one-off items.

DPU for the full year, again adjusted, was 7.61 cents, 6 per cent ahead of the 7.19 cents a year earlier.

The Reit manager added that it would take steps to diversify its client base in Indonesia and Malaysia, and that its outlook for this year remained "cautiously optimistic".

Ascott Reit units closed 1.5 cents up at $1.285 yesterday.

-By Michelle Lee

Suntec Reit Q4 distribution per unit up at 2.577 cents

Source: Business Times / Companies & Markets

Despite asset enhancement works for the remaking of Suntec City Phase 3, Suntec Real Estate Investment Trust has reported higher distribution income for the quarter ended Dec 31, 2014, compared to the same period a year ago. Distribution income improved by 11 per cent to S$64.56 million for Q4 FY14, compared to S$58.18 million the year before, its manager, ARA Trust Management reported on Thursday.

-By Chan Yi Wen

Rent hikes, renovation work boost Suntec Reit's Q4 earnings

Source: Straits Times / Money

RENT increases and the completion of some major renovation work boosted Suntec Real Estate Investment Trust's (Suntec Reit) earnings in the fourth quarter.

The trust posted a distributable income of $64.6 million for the three months to Dec 31, up 11 per cent from the same period a year earlier.

Fourth-quarter distribution per unit (DPU) was 2.577 cents, up 0.6 per cent from the same period a year ago. Unitholders will get their payments on Feb 25.

Gross revenue for the quarter climbed 7.3 per cent to $76.8 million, while net property income rose 6.5 per cent to $53 million.

Full-year net property income came in at $191.6 million, up 28.9 per cent, on the back of a 20.6 per cent rise in gross revenue to $282.4 million.

Distributable income for the 12 months rose 9.1 per cent from the previous year to $230.3 million, while full-year DPU inched up 0.8 per cent to 9.4 cents, working out to a yield of 4.7 per cent.

While phase 2 of the renovations at Suntec City was completed around the middle of last year, work is ongoing in phase 3 of the centre's makeover.

Mr Yeo See Kiat, chief executive of the trust's manager, ARA Trust Management, said in a statement yesterday that the trust's office portfolio - which includes offices in Suntec City and Park Mall - remains 100 per cent leased.

"As part of our proactive leasing strategy, we have forward renewed approximately 338,000 sq ft of leases due to expire in 2015, leaving us with a balance of only 12.5 per cent of the office leases due to expire in 2015," he said.

Suntec Reit is Singapore's second-largest Reit by assets under management. These assets, including an office tower under construction in Sydney, stood at $8.8 billion as at Dec 31 last year.

Office revenue was the top contributor to fourth-quarter gross revenue at about 44 per cent, followed by retail revenue at 37 per cent and convention revenue at 19 per cent.

"We remain positive on the performance of our office portfolio in 2015," said Mr Yeo.

The results were announced after the market closed. Suntec Reit units closed half a cent higher at $2 yesterday.

-By Marissa Lee

Ascendas Reit Q3 DPU up at 3.59¢

Source: Business Times / Companies & Markets

Ascendas Reit on Thursday reported a distribution per unit (DPU) of 3.59 Singapore cents for its third quarter ended Dec 31, 2014. This was slightly higher than the 3.54 cents it paid out a year ago. Gross revenue rose 11.2 per cent to S$171.7 million due to the recognition of rental income from Hyflux Innovation Centre and Aperia, as well as higher occupancies at Nexus@ one-north and A-Reit City@Jinqiao.

-By Lee Meixian

A-Reit's Q3 distributable income up 1.6%

Source: Straits Times / Money

AN IMPROVEMENT in occupancy rates and higher rent increases lifted the distributable income at Ascendas Real Estate Investment Trust (A-Reit), though it warned of a challenging operating environment here.

Distributable income for the third quarter ended Dec 31 rose 1.6 per cent to $86.4 million.

Distribution per unit came in at 3.59 cents, a 1.4 per cent rise compared with the same period a year ago.

Gross revenue for the period went up 11.2 per cent to $171.7 million, while net property income gained 5.6 per cent to $114.6 million.

The trust saw positive rental reversion across all segments of the portfolio and benefited from higher occupancy.

Overall portfolio occupancy improved to 86.8 per cent, compared with 85.6 per cent as at Sept 30, mainly because of occupancy at its Aperia property rising from 27.7 per cent at the end of September to 53.6 per cent as at Dec 31.

Mr Tan Ser Ping, the chief executive of the Reit's manager, said in a statement: "In less than six months, we have achieved a total commitment of about 63 per cent for Aperia's high-quality Business-1 and retail space.

"Given the central location of the property, we are confident that leasing interest will continue to be strong."

A-Reit completed the purchase of Aperia for $458 million in August last year.

It also recorded average rent increases of 7.7 per cent in the third quarter, which helped raise the average rental reversion for the nine months to 9.1 per cent.

Net asset value per unit crept up slightly to $2.03 as at Dec 31 from $2.02 at Mar 31.

The Reit cautioned that the growth outlook in Singapore is modest, with the business environment staying challenging because of economic restructuring and rising operating costs.

"While gradual improvements in the United States economy may support externally oriented sectors in Singapore, uncertainties in euro zone and China continue to pose downside risks," it said.

The Reit's portfolio comprises 104 properties in Singapore and two in China.

A-Reit units closed unchanged at $2.52 yesterday. It reported its results after markets closed.

-By Mok Fei Fei

KepCorp, KepLand results briefings today

Source: Business Times / Companies & Markets

Keppel Corporation and its real estate subsidiary Keppel Land are holding their respective results briefings for the media and analysts on Friday this week. The briefings were postponed earlier in the week. Keppel Corporation will go first, conducting its briefing at 2pm, followed by Keppel Land's at 5pm.

The briefings, conventionally held on the day that the respective entities' earnings are released, were called off on Wednesday even though the full-year results were announced on schedule - Keppel Land's on Wednesday and Keppel Corporation's on Thursday.

Frasers Commercial Trust DPU up 20% in Q1

Source: Business Times / Companies & Markets

Frasers Commercial Trust (FCOT) on Thursday reported a strong 22 per cent growth in distributable income from a year ago to S$16.7 million for its fiscal first quarter ended Dec 31, as it reaped significantly higher contribution from Alexandra Technopark, higher occupancy rates, and higher rentals. The increase in distributable income translated to a 20 per cent year-on-year growth in distribution per unit (DPU) to 2.46 cents for the commercial real estate investment trust (Reit).

-By Fiona Lam

Strong Q1 for Frasers Commercial Trust

Source: Straits Times / Money

FRASERS Commercial Trust (FCOT) achieved strong first-quarter growth, resulting in a 20 per cent jump in distribution per unit (DPU) to 2.46 cents, from 2.05 cents a year earlier.

The performance was bolstered by major contributions from Singapore property Alexandra Technopark, trust manager Frasers Centrepoint Asset Management announced yesterday.

Income available for distribution to unitholders jumped 22 per cent to $16.7 million.

FCOT, with $1.8 billion worth of office properties in Singapore and Australia, saw net property income rise 15 per cent year-on-year to $25.4 million in the quarter ended Dec 31, as revenue grew 23.3 per cent to $35.5 million.

"This marks the first quarter of contribution from the underlying leases of Alexandra Technopark following the expiry of the master lease in August 2014, and this has significantly boosted the trust's performance," Mr Low Chee Wah, chief executive of FCOT's manager, said yesterday when announcing FCOT's latest results.

With the expiry of the master lease, rental rates at Alexandra Technopark have been raised from the previously fixed master lease rate. This led to a 66.2 per cent increase in the property's net income.

Meanwhile, the occupancy rate across FCOT's portfolio was 96.6 per cent, with office towers China Square Central and 55 Market Street both fully occupied.

The trust manager also noted that 73 per cent of FCOT's borrowings have been hedged on a fixed interest rate, protecting the trust from upcoming interest rate fluctuations.

Earnings per unit was 2.27 cents for the quarter, up from 1.84 cents a year earlier.

Looking ahead, Mr Low is optimistic. "The significant increased contribution from Alexandra Technopark following the expiry of the master lease will boost future growth in net property income and distribution per unit."

-By Wong Wei Han

KepLand, StarHub, CDL, CapitaLand win kudos for sustainability policies

Source: Business Times / Companies & Markets

FOUR Singapore companies continue to feature among the top 100 most sustainable corporations in the world.

Keppel Land, StarHub, City Developments (CDL) and CapitaLand made it again to the Global 100 Most Sustainable Corporations list announced at the World Economic Forum in Davos, Switzerland, on Thursday.

The list is recognised as the top standard in corporate sustainability.

Keppel Land raced up the rankings, moving from 17th position last year to fourth. It retained its position as the highest ranked in Asia and in real estate worldwide in sustainability.

Said Keppel Land chief executive Ang Wee Gee: "In doing well, we can also be doing good. This recognition spurs us on in our pursuit of excellence and to push ahead in our sustainability journey."

StarHub improved its ranking from 29th to 24th position, while CDL, which is included for the sixth consecutive year, moved up from 39th spot to 34th this year.

StarHub's CEO Tan Tong Hai said the firm has always been "committed to conducting business in a sustainable manner, guided by a basic sense of doing what is right for the community and the environment".

Similarly, CDL's chief sustainabilty officer Esther An said: "We believe that sustainability is imperative to our long-term viability and have built our business around its principles. This has enabled us to pursue new areas of growth and create enduring value."

CapitaLand fell 26 places to 84th spot. The firm was also among the top five real estate companies recognised by sustainability investment specialist RobecoSAM in its sustainability yearbook published earlier this week.

Launched in 2005, the selection for Global 100 Most Sustainable Corporations starts with over 4,600 listed companies with a market capitalisation of more than US$2 billion. They are screened for their sustainability disclosure practices, financial health, product category and financial sanctions.

Those shortlisted are then assessed on 12 key quantitative indicators, including the amount of revenue generated for each unit of energy consumed and the ratio of CEO pay to average worker pay.

The list is compiled by Corporate Knights, a Canadian media and investment research company.

-By Andrea Soh

Keppel Land one of the world's top 'green' firms

CityDev, StarHub and CapitaLand also make the cut on Global 100 list

Source: Straits Times / Money

DEVELOPER Keppel Land is among the world's best when it comes to going green, according to the latest list of the world's 100 most sustainable companies.

Other Singapore names such as City Developments (CDL), StarHub and CapitaLand made the ranks as well.

Keppel Land was ranked fourth worldwide, up 13 positions from 17th last year, on the Global 100 list, "coming up tops among Asian as well as real estate companies globally".

The Global 100, now in its 11th year, is a list of the world's most sustainable corporations.

It is deemed the gold standard in corporate sustainability.

The results were released at the World Economic Forum in Davos, Switzerland - being held from Wednesday to tomorrow - by Corporate Knights, a Toronto-based media and investment research company.

Corporate sustainability involves companies adopting strategies and practices that address the key issues for the world's sustainable development, such as environmental protection, health and human rights development as well as fair globalisation.

Keppel Land chief executive Ang Wee Gee said the firm is committed to "operate in an economically, socially and environmentally responsible manner" for its businesses, the environment and the community.

The developer holds various certifications on quality and environmental management, and occupational health and safety.

Telecommunications company StarHub saw its rank improve to 24th this year, from 29th last year, while CDL came in at 34th spot, up from 39th last year.

CDL, for instance, set a Guinness World Record last year for the largest vertical garden at its Tree House condominium.

The 24-storey, 2,289 sq m vertical garden is expected to achieve energy savings at the condo of between 15 and 30 per cent.

A total of 4,609 listed companies worldwide - with a market capitalisation of more than US$2 billion (S$2.7 billion ) - were considered for the 2015 Global 100 project.

Corporate Knights chief executive Toby Heaps said that firms "now, more than ever, are convinced that incorporating sustainability in their business models is no longer an option, but a necessity".

StarHub chief executive Tan Tong Hai said: "At the end of the day, we are all obliged to safeguard our environment and fellow man. After all, we did not inherit the earth from our forefathers; we are preserving it for our children."

-By Rachael Boon

Soilbuild Business Space Reit

Source: Business Times / Companies & Markets

Soilbuild Business Space Reit (Soilbuild Reit) reported its Q4 2014 results, which met our expectations. Revenue rose 8.3 per cent y-o-y to S$17.7 millin, while distribution per unit (DPU) grew 5.0 per cent to 1.585 Singapore cents. Portfolio occupancy stood at 100 per cent, as at Dec 31, 2014.

Views, Reviews & Forum

Developing a Smart Nation for all

Source: Straits Times / Forum Letters

WE THANK Mr Lai Tuck Chong for his suggestions ("Exciting potential of being a Smart Nation"; Tuesday).

We are heartened that Mr Lai is excited by the potential of the Smart Nation Programme.

Sensors are an example of how technologies can be integrated into our daily lives, not merely to collect data but also to provide solutions that enhance our environment and the quality of our lives.

For example, a system of sensors in the home can help to monitor the safety of the elderly, and notify a neighbour or next of kin if help is required. Such a system will be useful for our ageing society and is currently on trial in a few HDB flats.

Mr Lai referred to Professor Dani Rodrik's article on the need for "public venture funds" ("Moving from welfare state to new innovation state"; last Friday).

Currently, government agencies such as Spring, the National Research Foundation and the Infocomm Development Authority do run various schemes to invest equity in promising start-ups to help them grow and commercialise nascent technology.

Mr Lai also mentioned the idea of crowdfunding. This is an interesting idea that we will explore further, and can form another source of support for technological innovations from our start-ups.

-By Tan Kok Yam

Head, Smart Nation Programme Office

Prime Minister's Office

Workers’ dorms should be considered private space

Source: Today Online / Voices

I am saddened that the proposed law to tackle public drinking designates workers’ dormitories as public spaces, where a drunk person who is unable to handle himself could be fined up to S$1,000, jailed for up to a month, or both.

Foreign workers in Singapore already do not have many private spaces here. Their dormitories are often located in far-flung areas to minimise contact with Singapore residents. And within the dorms, there is not much privacy.

The law would legally take away these personal spaces, which would make life harder and demean these workers who come here to earn a living.

As Humanitarian Organisation for Migrant Economics executive director Jolovan Wham stated in “Planned laws on foreign-worker dorms ‘infringe personal space’” (Jan 21), one can understand if the dorms have their own rules to handle possible drunken disorderly conduct.

Moreover, the Miscellaneous Offences Act covers public drunkenness. Do we need the proposed new law, which seems to stereotype and target these foreign workers? It implies that they need draconian measures to be kept in check, lest they become a nuisance to public order. Surely only a minority are guilty of this?

While we should try our best to prevent a repeat of the Little India riot, the proposed law is harsh and an overreaction. The Government should reconsider aspects of the Bill, so foreign workers living in dorms are not robbed of their dignity by having their private space reduced further.

-By Han Ming Guang

Global Economy & Global Real Estate

US housing construction at highest since recession

Low mortgage rates, better labour market feed home buying, with housing set to boost economy

Source: Business Times / Real Estate

Marriott wants to lure millennials with cheaper, ultraslim rooms

Source: Business Times / Real Estate

Shenzhen govt seen wooing developers to invest in Kaisa

Source: Business Times / Real Estate

Illegal short-term rentals in NY under scrutiny as complaints surge

Source: Business Times / Real Estate

Otis gets a lift from recovering Spanish economy

Firm, which sells and services elevators, sees higher sales in 2015 as new residential building starts to pick up

Source: Business Times / Real Estate

Home Prices Beat Estimates With 0.8% Gain in November

Source: Bloomberg / Personal Finance

U.S. home prices rose more than economists estimated in November, a sign job growth is helping to boost housing demand.

Prices climbed 0.8 percent on a seasonally adjusted basis from October, the Federal Housing Finance Agency said in a report from Washington. The average economist estimate was for a 0.3 percent increase, according to data compiled by Bloomberg. Prices increased 5.3 percent from November 2013.

The property market is benefiting from the lowest unemployment rate since June 2008. Payrolls climbed by 252,000 workers in December, following a 353,000 gain the prior month, and the jobless rate dropped to 5.6 percent, Labor Department figures show. An additional 2.95 million Americans found work in 2014, the most in 15 years.

“The labor-market activity will ignite increasing demand and loosen tight credit constraints,” Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York, said yesterday in a telephone interview. “The labor market will always be the answer to housing woes.”

Economic growth will probably accelerate this year, improving prospects for wage increases and boosting household formation, Fannie Mae’s Economic & Strategic Research Group said in a separate report Thursday. The group raised its projection for economic growth this year to 3.1 percent from 2.7 percent in its prior forecast.

Gains Slowing

The pace of home-price gains has slowed in the past year. In November 2013, values were up 7.5 percent from a year earlier, FHFA data show.

“The fact that you see house-price moderation is good news for the housing market,” Thomas Costerg, an economist at Standard Chartered Bank in New York, said in a telephone interview on Wednesday. “Affordability is improving.”

Prices in November climbed 7.5 percent from a year earlier in the Pacific region, including California, Washington and Oregon; and 6.6 percent in the West South Central area -- Texas, Oklahoma, Louisiana and Arkansas.

New England, including Connecticut, Maine and Massachusetts, had the smallest gain from a year earlier, at 1.6 percent, and was the only region to have a monthly decline. Prices fell 0.9 percent from October.

The FHFA index measures transactions for single-family properties financed with mortgages owned or securitized by Fannie Mae and Freddie Mac. The U.S. measure is 4.5 percent below its April 2007 peak and about the same as the October 2005 level.

-By Prashant Gopal

Ping An Acquires City of London Property for $482 Million

Source: Bloomberg / News

Ping An Insurance (Group) Co. bought Tower Place, an office property in the City of London financial district, for 419 million euros ($482 million).

Ping An, China’s second-largest insurer, acquired the building from Deutsche Asset & Wealth Management, the German company said in a statement today. The low-rise office and shopping complex near the Tower of London was valued at 369 million euros in a Deutsche Bank fund update in September.

European offices offer high yields compared with similar buildings in Asian cities, drawing unprecedented demand from Asia pension funds, insurers and sovereign-wealth funds as they seek a profitable place to invest. Asian buyers spent about 9.9 billion euros on European commercial properties in 2014, compared with 9.4 billion euros in 2013, according to data compiled by DTZ Research in London.

Tower Place was held by Deutsche AWM’s Grundbesitz Europa mutual fund. The building, designed by Foster & Partners, has about 354,000 square feet (32,900 square meters) of offices and 24,300 square feet of shops, according to the website of Tishman Speyer, the developer. Its biggest tenant is Marsh & McLennan Cos Inc. (MMC), according to a statement by Gaw Capital Partners, the Hong-Kong-based private-equity firm that advised Ping An.

-By Vinicy Chan and Dalia Fahmy

Marriott CEO Expects to Have 50 Hotels in India

Source: Bloomberg / Luxury

Marriott International Inc. (MAR) plans to operate about 50 hotels in India within five years as the U.S. company seeks to benefit from a large and growing economy.

Marriott will add properties in India despite challenges that include poor infrastructure, expensive financing and a cumbersome bureaucratic process, Chief Executive Officer Arne Sorenson said today in an interview at the World Economic Forum in Davos, Switzerland. Marriott has about 24 hotels in India and 40 in the pipeline, according to its website.

“While we’re extremely optimistic about the future of India as a destination -- both because of the size of its economy and the likelihood that its economy will grow -- India needs to really continue to develop infrastructure and to simplify the development process,” he said.

Hotel chains are expanding in Asia and Latin America to take advantage of increased travel in emerging-market countries. Marriott has about 150 properties in the Asia-Pacific region and more than 200 in the pipeline, according to its website.

In China, where Marriott has about 70 properties, the company could have more than 150 hotels within five years, Sorenson said.

“We’re opening a hotel every two weeks in China, we love China as a market,” he said. “There’s a lot of press about China’s growth rate slowing a bit. While that is undoubtedly true as China moves toward a consumer economy, it will help industries like travel.”

Marriott on Tuesday said the company may expand its properties in the Middle East and Africa by more than 75 percent, and could increase its presence in Latin America and the Caribbean by almost 50 percent.

-By Jacqueline Simmons and Dalia Fahmy

Bank of Canada Cuts Rates to Protect Its Hot Housing Market

Source: Bloomberg / News

Canada’s soaring real estate market survived the 2008 financial crisis with barely a scratch. With a surprise rate cut, Bank of Canada Governor Stephen Poloz is trying to make sure it survives an oil price crash.

The central bank cut its benchmark interest rate a quarter of a percentage point to 0.75 percent on Wednesday, an unexpected move it said would buffer the Group of Seven’s largest oil exporter from a 55 percent drop in crude oil since June.

In addition to weighing on inflation, business and government spending, the central bank said the “unambiguously negative” drop in oil prices will be a hit to jobs and income that may rattle consumption and housing.

“The big point here is that this decline in oil prices has been a shock to Canadian incomes, which from a debt-to-disposable income point of view is not good news,” Carolyn Wilkins, senior deputy governor at the bank, said Wednesday in Ottawa. “Certainly the interest rate movement we made today is designed to offset part of that.”

Canada’s housing market has been on a decade-long tear, with the average price of a house in Vancouver rising 67 percent since January 2005 to C$638,500 ($517,200) in December. Toronto prices jumped 71 percent in the same period to C$521,300, according to the Canadian Real Estate Association.

The mortgages Canadians have shouldered to buy those houses helped send the ratio of household debt to a record 162.6 percent of disposable income in the third quarter.

Calgary Market

The bank said the slump in oil will affect housing activity in energy-intensive regions, noting there has been a decrease in housing starts and a “sharp” drop in resales and sales-to-listings ratios in Alberta in December.

Existing home sales slid 25 percent in December from November in Calgary, the country’s oil capital, while listings rose 36 percent, according to industry data.

“Near term housing activity elsewhere is expected to remain high, supported by very low mortgage rates, although the extent to which the downturn already evident in Alberta will spill over into other regions remains to be seen,” the bank said in its monetary policy report released with the rate decision from Ottawa.

The bank calculates that housing’s contribution to output would drop by 0.6 percent if oil prices stay at $60 a barrel through 2016, relative to $110, according to the policy report.

Job Cuts

The bank is concerned “with declining oil prices and the fact that that’s going to detract from the overall economic growth and housing market in the country,” Jim Murphy, chief executive officer of the Canadian Association of Accredited Mortgage Professionals, said by phone. “They take these measures to ensure the Canadian economy is stimulated.”

While the drop in oil prices should give consumers a break, the bank said the windfall may be used to pay debt rather than spending and stoking the economy, especially with energy companies such as Suncor Energy Inc. cutting 1,000 jobs.

“With increased risks of layoffs, those households whose incomes rely on the oil sector will have greater incentives to build precautionary savings or pay down debt,” the bank said in its report.

Conversely, the cut may encourage Canadians to increase their debt burden, Peter Routledge, an analyst at National Bank Financial, said. The bank itself has been long warning about the buildup of consumer debt in the economy.

Inflames Debt

“The risk is that household borrowing takes off again because you’ve cut rates,” he said. “They’re balancing that off against the risk of letting a period of disinflation that entrenches itself and creates longer-term problems for the economy and the housing sector.”

The cut will definitely be felt on housing across the country, especially where housing supply is constrained, Phil Soper, chief executive officer of Brookfield Real Estate Services Inc., said by phone Jan. 21. “Buyers will likely be financing their house purchase with a discounted rate.”

Canada’s largest lenders, including Toronto-Dominion Bank, have kept their prime rates unchanged so far following Wednesday’s move. That rate, which serves as a benchmark for borrowing rates on everything from variable mortgages to credit lines have been at 3 percent since September 2010.

“Our decision regarding our prime rate is impacted by factors beyond just the Bank of Canada’s overnight rate,” spokesman Mohammed Nakhooda said today in an e-mailed statement. “Not only do we operate in a competitive environment, but our prime rate is influenced by the broader economic environment, and its impact on credit.”

-By Katia Dmitrieva and Doug Alexander

Additional Articles Of Interests - Local & Overseas Real Estate