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11th March 2015

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Khaw seeks 'soft landing' for housing market

MPs ask for ABSD adjustment for S'poreans to curb risky foreign property buys and excessive price corrections

Source: Business Times / Real Estate

NATIONAL Development Minister Khaw Boon Wan is aiming for a "soft landing" for the housing market as "a market crash benefits no one", he said at Tuesday's Committee of Supply debate.

This was in reply to questions in parliament on the impact of government policies on the property market. The government was asked whether it would consider adjusting the Additional Buyer's Stamp Duty (ABSD) for Singaporean buyers when it is ready to unwind the cooling measures.

West Coast GRC Member of Parliament Foo Mee Har also asked at which point property cooling measures would be eased, in order to cushion any excessive price corrections.

While Mr Khaw did not directly answer the questions on the ABSD and the timing of policy changes, he agreed that the government "should not go into overdrive, and unwittingly undermine the retirement plan of our seniors who look to their housing assets for monetisation".

Earlier, Ms Foo had cautioned of the need to ensure that the "well intended" cooling measures are not overdone. "Given the huge new housing supply yet to hit the market and the impending rise of interest rates, we must be cautious that this downward price trend does not inadvertently get into a momentum and reach an unintended pace.

"Some industry players have told me that this is easier said than done. Their concern is that once a downward momentum begins, the downward pressure on prices may not be so easy to control, as we have seen in previous property cycles."

Lee Bee Wah (Nee Soon GRC) said that while the ABSD started out as an initiative to discourage unnecessary ownership of multiple properties, it has led to Singaporeans "who have spare cash" investing in riskier foreign properties.

"Coupled with low initial downpayments, and fewer restrictions in foreign property, Singaporeans are enticed to look abroad. This not only does little benefit to our economy, but puts our people at risk.

"I feel we should keep the Total Debt Servicing Ratio (TDSR) to encourage prudence in finance spending, but remove the ABSD for Singaporeans so they can invest in properties in Singapore."

MPs also noted that the cooled property market has made it difficult for retirees looking to sell their flats to right-size in order to fund their retirement. Those attempting to sell off their existing flat or private property within the six-month grace period before buying a resale flat are also struggling.

Since January 2013, Singapore citizens who already own a home have to pay an ABSD of 7 per cent on the purchase of a second residential property; this percentage climbs to 10 per cent on the third and subsequent property. This is seen as a measure to slow property investment and speculation.

Under the TDSR framework, borrowers' total monthly debt repayments (including car loans and credit cards) cannot exceed 60 per cent of their gross monthly income. This is a permanent measure to encourage financial prudence.

In his speech, Mr Khaw said: "Indeed, we should not overkill. The property market is in transition and it is a time that calls for vigilance and nimbleness. We will be careful."

He went on to share data to show how his ministry's efforts in taming the housing market has yielded results. HDB resale prices have risen from their previous trough in 2005. From 2005 to 2014, resale flat prices have gone up 87 per cent, while household income has gone up by 72 per cent.

Although Singapore is not yet at the 2005 affordability level, at least the affordability gap has narrowed from the 2011-2013 property market boom (see chart).

He added too that "sobering news" about the "acute" housing situations in cities such as London and Hong Kong put Singapore's "more benign situation" into better perspective.

During Tuesday's Committee of Supply debate, Mr Khaw also thanked MPs for their ideas on how to adjust the Lease Buyback Scheme. The new Lease Buyback Scheme, which is extended to four-room flats, takes effect in April.

He also said that he would mull proposals to introduce shorter lease tenure in some build-to-order projects to cater to different groups with varying needs. He will also consider raising the S$10,000 HDB income ceiling, after noting that couples are marrying later and income levels are rising.

-By Lee Meixian


Singapore wants 'soft landing' for housing market: Khaw Boon Wan

'We want a soft landing for our housing market because a market crash benefits no one,' says National Development Minister Khaw Boon Wan. 

Source: Channel News Asia / Singapore

SINGAPORE: National Development Minister Khaw Boon Wan on Tuesday (Mar 10) reiterated that Singapore wants to see a "soft landing" for its housing market. 

2014 was the first full year that home prices fell after several years of increase, amid Government measures to cool the property market. HDB resale flat prices slipped by six per cent, while private homes saw a four per cent decline. 

Some Members of Parliament (MPs) raised concerns that the market may slip too far, and Mr Khaw said the Government will be careful in that respect. The current property cycle picked up from its trough in 2009. 

Between then and last year, HDB resale flat prices went up and reached a peak in 2013. However, prices have since cooled. 

Outlining plans for his ministry in the year ahead, Mr Khaw noted the Government's efforts in taming the housing market have seen results. HDB resale prices have eased by 37 per cent above the 2009 level. Over the same period, median household income has caught up, rising by 38 per cent. 

But there were some MPs who cautioned that the Government's efforts to rein in housing prices should not be overdone. "We want a soft landing for our housing market because a market crash benefits no one,” Mr Khaw said. 

He added: “Ms Foo Mee Har said that we should not go into overdrive, and unwittingly undermine the retirement plan of our seniors who look to their housing assets for monetisation. I agree, that is why we have substantially reduced the supply of new flats.  

“Ms Foo and Er Lee Bee Wah suggested that we adjust the Additional Buyer’s Stamp Duty, especially for Singaporean buyers, when we are ready to unwind the cooling measures. I have also heard Dr Lily Neo’s very thoughtful words of caution.

"Indeed, we should not overkill.  The property market is in transition and it is a time that calls for vigilance and nimbleness. We will be careful."

With new flats being subsidised substantially, Mr Khaw noted that those buying flats directly from the HDB have benefited even more. Compared to the increase in median household income, Mr Khaw noted that with grants, prices of Build-To-Order (BTO) flats in non-mature estates have grown by six per cent. 

Last year, about 20,000 BTO flats were booked by Singaporeans. Ninety per cent of three-room flats were sold at below S$250,000, while 81 per cent of four-room flats were sold under S$350,000. Eighty-nine per cent of five-room flats were sold below S$450,000. 

Mr Khaw said that according to a survey, this was all within the amount that respondents had said they were willing to play for a flat. "I would like BTO prices to be within four years of an applicant’s annual salary. But this assumes that BTO applicants will be prudent in their choice of housing." 

Mr Khaw added that home ownership is not only a privilege of the rich. He noted that benefits of its home ownership policy have reached all income groups - including those from the lower-income group.

Between March 2012 and July last year, 1,491 families with household incomes below S$1,000 booked a two-room flat.

- CNA/xk

Singapore Economy


MAS 'unlikely to change stance on S$

Source: Straits Times

The central bank is unlikely to further slow the appreciation of the Singapore dollar at its scheduled policy meeting next month, even though growth remains tepid, some economists say. They believe a weaker Singdollar could worsen Singapore's already high living and business costs while not doing much to help growth.

Singapore Real Estate


S$450m to boost productivity in the construction sector

This second tranche of funds is expected to benefit about 7,000 firms in the built-environment sector

Source: Business Times / Real Estate

To raise productivity in the construction sector, the government will set aside S$450 million for the second tranche of the Construction Productivity and Capability Fund (CPCF) for the next three years. This fresh funding, provided under the Second Construction Productivity Roadmap of the Building and Construction Authority (BCA), was announced by Senior Minister of State for National Development Lee Yi Shyan during the Committee of Supply debate on the ministry on Tuesday

-By Lee Meixian


S$450m more to be set aside to raise construction productivity

The funds add to a previous S$335 million set aside in the last five years to improve productivity in the construction sector.

Source: Channel News Asia / Singapore

SINGAPORE: The Government will commit a further S$450 million over three years to raise productivity in the construction sector.

This adds to a previous S$335 million in funding for the same purpose, set aside in the last five years. The National Development Ministry announced this during the debate on the Budget on Tuesday (Mar 10).

Productive construction methods, like the use of prefabricated bathroom units, are common in places like Europe. Such methods involve making building components off-site in a factory, before they are moved on-site to be put in place. It promises to cut manpower needs by half or more.

The Government is further pushing Singapore's construction sector to head in this direction, with the S$450 million Construction Productivity and Capability Fund. For three years from June 2015, 70 per cent of the funding will help firms with technology adoption, with the rest going towards workforce development. It is expected to benefit about 7,000 companies.

"We are pushing as much work off-site as possible, so that will reduce our manpower needs, quality will be better. And I think it is equally important that the impact on the surrounding neighbourhood would also be reduced because there will be less dust, less noise,” explained Dr John Keung, chief executive of the Building and Construction Authority.

Site productivity has been improving at 1.4 per cent yearly since 2010. Under Singapore's next Construction Productivity Roadmap, the aim is to raise productivity by an average of two to three per cent yearly till 2020, with the help of fresh funding.

The Productivity Innovation Projects scheme supports the adoption of impactful construction technologies. The scheme's funding limit will be raised from S$5 million to S$10 million.

At the same time, firms will have more incentives to upgrade their staff as Singaporeans can receive enhanced subsidies of up to 90 per cent under the Workforce Training and Upgrading scheme.

“Our progressive firms must develop new expertise in in-house cross-functional teams comprising architects, engineers and project management professionals,” said Senior Minister of State for National Development Lee Yi Shyan. “They should have larger proportion of skilled workers, professionals and a stable workforce.”

Two new part-time programmes - or sponsorships for the diploma and postgraduate levels - will support more pathways for upgrading. More details on the sponsorships will be announced later.

Other vocational training efforts will also be enhanced. Fresh graduates from the Institute of Technical Education will be able to embark on an Earn and Learn programme for the built environment sector. The programme aims to help the graduates deepen skills sets and attain relevant work experience valued by the industry, in line with the SkillsFuture movement.

- CNA/xq

MCL Land tops bids for Jurong West site

MCL planning higher proportion of 1 and 2 bedders to complement mostly 3 and 4 bedroom unsold stock in its Lakeville project next door

Source: Business Times / Real Estate

Charged with confidence from its experience with launching two condo projects in Jurong growth region in the past two years, MCL Land on Tuesday placed the top bid of S$338.12 million or S$630.13 per square foot per plot ratio (psf ppr) for Jurong West Street 41 (Parcel B). This is 6.4 per cent more than the next highest bid of S$592.46 psf ppr from Chinese developer Hao Yuan's unit HY Realty.

-By Kalpana Rashiwala

Frasers to start selling condos in Yishun project at end-March

Source: Business Times / Real Estate

North Park Residences, Frasers Centrepoint Ltd's (FCL) newest condominium project in Yishun, is slated to begin sales at the end of this month, with a preview starting this weekend for buyers to express interest through placement of cheques. Property consultants said they are expecting residential projects within integrated developments to outperform pure residential projects.

-By Lynette Khoo

Feb condo resale prices continue to stagnate

Source: Business Times / Real Estate

Resale prices of condominiums and private apartments continued to stagnate, remaining flat in February over the preceding month, according to flash estimates released by SRX Property on Tuesday. SRX Property also said that the month­on­month change in the price index for January 2015 has been revised from a 0.2 per cent decrease to unchanged.

-By Kalpana Rashiwala


Private apartment resale prices flat in February: SRX Property

Year-on-year, resale prices for non-landed private homes dropped 3.2 per cent from February 2014.

Source: Channel News Asia / Singapore

SINGAPORE: Resale prices of non-landed private homes were flat in February from the previous month, while resale volume remained low, according to flash estimates from SRX Property on Tuesday (Mar 10).

Year-on-year, resale prices dropped 3.2 per cent from February 2014. Compared with the recent peak in January 2014, prices have declined 5.8 per cent, SRX said.

Resale prices of private homes in the Core Central Region and the Outside of Central Region rose 1.5 per cent and 2.0 per cent month-on-month, respectively. In comparison, prices in the Rest of Central Region fell 0.8 per cent.

Resale volume remained low, with 321 units resold in February, a 6.7 per cent decrease from January, which saw 344 units resold. Year-on-year, resale volume was 36.6 per cent higher compared with the 235 units transacted in February 2014.


The overall median Transaction Over X-Value (TOX), which measures whether people are overpaying or underpaying the SRX Property X-Value estimated market value, remained at -S$10,000 last month, the same as in January.

For districts with more than 10 resale transactions, district 10 (Bukit Timah, Holland Road, Tanglin) had the highest median TOX of S$27,000. This means that majority of the buyers in this district has purchased units above the computer-generated market value, said SRX.

Conversely, district 15 (Katong, Joo Chiat, Amber Road) had the lowest median TOX with -S$31,000, followed by district 23 (Bukit Panjang, Choa Chu Kang) with -S$20,000.

- CNA/ek


Private-home resale prices flat as market stalemate continues

But data may not give complete picture as transactions occurred during seasonally slower period, says analyst

Source: Today Online / Business

SINGAPORE — The private residential market stayed in the doldrums last month, with resale non-landed home prices remaining flat as transaction volumes fell, largely due to the continuing stand-off between buyers and sellers as well as the seasonally quiet Chinese New Year holiday period.

February was the second consecutive month of unchanged private-home resale prices after the 0.2 per cent month-on-month decline in January was revised upwards to flat, a flash report by SRX Property showed yesterday.

On a year-on-year basis, last month’s prices were 3.2 per cent lower than in February last year.

The report showed that price movements were mixed across the island, with those in the Rest of Central Region (RCR), or the city fringes, declining 0.8 per cent, while the other two areas — Core Central Region (CCR), or the city centre, and Outside Central Region (OCR), or the suburbs — saw prices climbing 1.5 per cent and 2 per cent, respectively.

This was a reversal of the price movements in January, which saw RCR homes enjoying gains while those in the CCR and OCR registered declines.

Despite overall prices remaining unchanged in the past two months after two months of declines, analysts told TODAY there was little evidence to show that the market had bottomed out.

“I think this is more a case of a stalemate than the market bottoming. We probably won’t reach the bottom unless expectations for prices to fall further are done and dusted. But with such expectations still lingering, there will still be downward pressure on the market,” said Mr Alan Cheong, senior director of research and consultancy at property agency Savills.

Mr Chris Koh, director of property firm Chris International, said the latest data may not paint a complete picture of the market as transactions occurred during the seasonally slower period, evident by the fall in transaction volume.

SRX estimated 321 previously-owned non-landed private homes changed hands last month, 6.7 per cent lower than the 344 units resold in January. On a year-on-year basis, however, this was 36.6 per cent higher than the 235 transactions in February last year.

“Activity is usually slower in January and February because of the school opening and Chinese New Year celebrations, so the figures may not show the entire picture. The price increases in CCR and OCR are also not likely to indicate a recovery. They could just be due to the type of transactions — maybe there were more higher-value homes sold that month,” Mr Koh said.

“What the figures show is that prices are holding and sellers are not hard-pressed to sell because we are not in an economic recession … We need to look at the figures from March onwards to get a better reading of the market,” he added.

TODAY earlier reported that many private-home owners have set asking prices above the properties’ valuations, refusing to budge despite the weakening housing market, while potential buyers are hunting for bargains.

Buying sentiment will continue to be affected by the property cooling measures as well as loan curbs in the coming months, but buyers could gradually return to the market as homes become more affordable, analysts said.

Mr Cheong said: “The stalemate will continue and it is anybody’s guess when that will end.

“But the market has been going down since the implementation of the Total Debt Servicing Ratio in June 2013 — that’s two years of price declines. For people on the sidelines, that’s two salary increments and two bonus payouts. Many of them can afford to buy and maybe this year, we will see them give up waiting and enter the market.”

-By Lee Yen Nee

More new flats to be set aside for singles

Source: Straits Times

Singles will soon have more chances at securing new homes. Starting from May, half of the new two-room flats launched in non-mature estates will be set aside for them. This is up from the current 30 per cent. This will provide greater assurance to singles and reduce their backlog of pent-up demand for flats, said Minister for National Development Khaw Boon Wan yesterday.


Quota raised for 2-room flats for singles

This year, the Government will launch 4,000 two-room flats, and it will raise the quota for singles to 50 per cent, starting from the next Build-to-Order exercise in May.

Source: Channel New Asia / Singapore

SINGAPORE: National Development Minister Khaw Boon Wan announced several new housing measures in Parliament on Tuesday (Mar 10). These included increasing the quota of new two-room flats set aside for singles and a review of the Studio Apartment Scheme.

Mr Lim Sio Poh, 46, is getting ready to move into his new two-room flat in Bukit Panjang. He applied for the unit directly from the Housing and Development Board (HDB) - under the singles scheme last year.

Said Mr Lim: "Everyone wants to have a house of their own. It is also a good investment and nearer my workplace." After receiving S$28,000 in housing subsidies, Mr Lim's flat costs S$120,000, which he can fully pay for using his CPF.

It took Mr Lim two tries before he secured the unit. Over 18,000 singles have applied for a two-room flat since the singles scheme began in 2013. But only half have had the chance to book a flat.

Mr Lim said: "I felt that a lot of people were applying and my chances were very low. If I wasn't successful, there is nothing I could do."

To address the pent-up demand, Mr Khaw said 4,000 two-room flats will be launched this year. The quota for singles will also be raised to 50 per cent, starting from the next Build-to-Order (BTO) exercise in May.

Mr Khaw also announced a review of the Studio Apartment Scheme. The scheme had been introduced in 1998 - to allow seniors a smaller flat option, with a 30-year lease. But with two-room flats also being offered by the HDB now, with a 99-year lease, Mr Khaw said the suggestion to offer varying leases for two-room flats could better align both schemes as well as cater to varying needs.

Mr Khaw also announced that the HDB is studying whether more help can be given to those who want to buy a resale flat near their parents. He noted that there are couples who have earlier moved away from their parents, but would like to move back closer after having children, or when their parents need more care.


Mr Khaw also responded to calls by some Members of Parliament (MPs) to raise or even remove the qualifying income ceiling for new HDB flats.

"We increased it in 2011. I do not think we want to lift the income ceiling completely because HDB flats are heavily subsidised and we should continue to target help at those who need help more. However, as income level rises, we must be prepared to adjust the income ceiling. Anyway, I have noted the MPs’ call and I will mull over it," he said.

Mr Khaw added that the Government is keen to help Singaporeans living in rental flats become home owners.

One example is Madam Koh Lee Heng and her husband. They had been living in a rental flat since 1982. They recently moved into a brand new two-room flat, which they can finally call their own. Said Madam Koh: "At last we have our own home, we bought it. The other flat we were staying at earlier, we rented it - it is different.”


Mr Khaw said the Government is also looking at how it can help other rental tenants who have exhausted their housing privileges and no longer qualify for grants.

He said: "Many wish they can turn back the clock, undo some of their bad decisions, and be able to provide a better home for their kids. Mr Zainal Sapari offered some suggestions. The question is how we can help such families without creating a moral hazard.

“Can we formulate a scheme which requires the family to make a serious commitment towards their children, for example, and in return we provide a small flat with shorter lease? Dr Maliki Osman has been hand-holding such families in his ward and has helped some graduate into homeowners. It requires intensive counselling and nudging.

“The test is how to ensure that they do not end up losing the third flat and returning to apply for another public rental flat again? This requires careful thinking through."

Mr Khaw reiterated his ministry's commitment to not only provide good homes, but also to enable home ownership for Singaporeans. 

- CNA/ms

Views, Reviews & Forum


Substantial improvement seen in public housing affordability

Source: Today Online / Singapore

SINGAPORE — Median household income has caught up with Housing and Development Board (HDB) resale prices based on levels in 2009, when the housing market was in a trough.

However, while he spoke at length on the substantial improvement in public housing affordability in recent years, National Development Minister Khaw Boon Wan signalled yesterday that the authorities are not ready to roll back the cooling measures — a move that developers and prospective home sellers have been yearning for.

“If we look further back, the previous resale HDB market trough was in 2005, 10 years ago,” Mr Khaw said during the Ministry of National Development’s Committee of Supply debate. “Comparing against this baseline, resale flat prices have gone up by 87 per cent, between 2005 and 2014. Over the same period, household income has gone up by 72 per cent. So we are not yet at the 2005 affordability level; there is still a gap.”

HDB resale prices had peaked in 2013. Prices have since fallen to 37 per cent above the levels in 2009 — the year that the current property cycle picked up from.

Over the same period, median household income has risen by 38 per cent, said Mr Khaw.

“Whether we use 2009 or 2005 as the base year, the situation today is very much better than in 2011. Our efforts in taming the housing market have seen results,” he added.

Some Members of Parliament (MPs), including West Coast GRC MP Foo Mee Har and Tanjong Pagar GRC MP Lily Neo, cautioned the Government against overdoing the correction. In doing so, it could unwittingly affect seniors who are looking to monetise their housing assets for retirement, Ms Foo said.

In response, Mr Khaw said: “Indeed, we should not overkill. The property market is in transition and it is a time that calls for vigilance and nimbleness. We will be careful.”

Mr Khaw said those who bought new flats directly from the HDB had benefited even more from the Government’s intervention in the property market. Between 2009 and last year, Build-to-Order (BTO) prices in non-mature estates increased by 15 per cent excluding government grants or a mere 6 per cent when grants are included, he said. “Measured against the household income increase of 38 per cent, we can see that public housing affordability has substantially improved since 2011,” he added. “Unfortunately, not everyone knows how affordable our BTO flats are.”

Mr Khaw cited a recent Ministry of National Development survey, in which respondents were asked how much they thought a four-bedroom BTO flat in a non-mature estate costs. “A good 34 per cent admitted they didn’t know. Five per cent even said: More than half a million dollars!” he said.

The survey also asked how much those intending to buy a flat would be willing to pay. The respondents’ answers were up to S$300,000 for a three-room flat, and between S$300,000 and S$500,000 for a four- or five-room unit.

In reality, among the roughly 20,000 BTO flats booked by Singaporeans last year, 90 per cent of three-room units were sold below S$250,000, 81 per cent of four-room flats were transacted at less than S$350,000, while 89 per cent of five-room flats were sold below S$450,000.

“These are actual transactions. They paint a comforting picture of young Singaporeans being able to get their first BTO flat, well within their expected budget,” said Mr Khaw.

“If we include housing grants, the picture looks even better. As far as housing is concerned, young Singaporeans are many times better off than their London or Hong Kong counterparts. This is the reality.”

Mr Khaw said he would like BTO prices to be lower than or equal to four years of an applicant’s annual salary. However, this assumes that BTO applicants will be prudent in their choice of housing, he said. “In Singapore, home ownership is not a privilege of the rich only. The benefits of our home ownership policy have reached all income groups, including the lower-income,” he reiterated.

In January, Mr Khaw said in Parliament that 744 families earning between S$1,000 and S$1,200 a month had booked two-room or larger BTO flats launched between March 2012 and July last year. During the same period, another 1,491 families with household incomes below S$1,000 a month had also booked flats, he said yesterday. “So when we said families with S$1,000 household income could afford two-room flats, we were not imagining things,” he added.

Property analysts TODAY spoke to concurred with Mr Khaw’s assessment that BTO prices are affordable for most families. While they also agreed that there is room for HDB resale prices to fall further, they were doubtful that affordability could return to 2005 levels. Property firm OrangeTee’s research and consultancy manager Wong Xian Yang noted that, for that to happen, HDB resale prices would have to fall by another 7 to 9 per cent.

Century 21 CEO Ku Swee Yong pointed out that apart from property prices and household-income levels, affordability is also co-related to people’s sentiment and outlook. “Most people don’t see Singapore as having a hot economy in the next two years … So in that case, affordability will improve if salaries maintain (at current levels) ... or go up slightly (and) housing prices drop a little more,” he said.

-By Laura Elizabeth Philomin

Companies' Brief


S-Reit prices could slide as much as 9% this year, say analysts

RHB Securities estimates DPU yields are around 5.9% now and could rise to 6.5% later this year once the Fed starts raising rates

Source: Business Times / Companies & Markets

Prices of Singapore real estate investment trusts (S-Reits) could slide by as much as 9 per cent later this year as the segment faces further headwinds from a looming interest rate hike in the United States, analysts have warned.

-By Melissa Tan

Global Economy & Global Real Estate


US dollar hits S$1.39 and may keep rising            

Carney Says Housing Remains Biggest Medium-Term Risk to U.K.

Source: Bloomberg

(Bloomberg) -- The British housing market remains a threat to the country’s economic recovery even after officials took action last year to tame risky lending, Bank of England Governor Mark Carney said.

“The legacy of high indebtedness and structural imbalances in the U.K. economy means that there are risks that, if left unchecked, could undermine the durability of the expansion,” Carney told a House of Lords committee on Tuesday. “The biggest medium-term risks relate to the housing market.”

While real estate will continue to be monitored by the Financial Policy Committee, Carney said the Monetary Policy Committee is staying focused on returning inflation to the 2 percent goal. He noted that consumer prices will barely increase for much of the year because of weak commodity costs and slack remaining in the economy.

The MPC left the key interest rate at 0.5 percent last week, as officials monitored the impact of record-low inflation on expectations for prices. Carney has already had to write one letter to the Treasury explaining why inflation, now at 0.3 percent, has strayed so far from the bank’s target, and he anticipates sending a few more letters this year.

Carney’s wide-ranging comments to the Lords’ Economic Affairs Committee may be among his last in public before government officials undergo a purdah period before the May 7 general election. Among risks he pointed to were those stemming from a long period of low interest rates, and misconduct in financial markets.

‘Reckless’ Behavior

“Time and again, this country has seen how quickly responsible can turn to reckless, creating imbalances that ultimately destabilize the economy,” he said.

Carney’s mention of housing-market risks follows action the BOE took last year to cool real estate. In June, the Financial Policy Committee said lenders must limit the proportion of mortgages at 4.5 times income to no more than 15 percent of their new home loans. It also said banks must decline loans to borrowers who fail a new stress test for interest-rate increases.

Asked about the tools available to the BOE to tackle a prolonged period of below-target inflation, Carney said he preferred cutting interest rates to quantitative easing. Bond purchases are “more effective in markets that are dislocated or under stress than in more normal times,” he said.

Inflation Target

Asked about the inflation target, the governor said there may be a situation where it becomes necessary to change the goal, though he wasn’t advocating such a move.

“I’m in the pure hypothetical now, but if it were identified that we were in a period of a prolonged supply shock which had positive productivity implications,” there “might be a case for adjusting the level of the inflation target,” he said. “But that is a sober adjustment made by parliament, by government, over time through public debate as opposed to a reaction to temporary deviations in inflation.”

While Carney says low price growth in the U.K is caused by temporary factors and officials are prepared to look through them, European Central Bank President Mario Draghi is starting his first round of QE to stop deflation taking hold in the euro area. The ECB will buy 1.1 trillion euros ($1.2 trillion) of debt, and Carney said that may add 1 percentage point to the region’s gross domestic product over the next three years.

“That’s good news for us as exporters,” Carney said. “Greatly reducing that tail risk from Europe in the near term is a benefit.”

-By Jennifer Ryan & Scott Hamilton

German Funds in Liquidation Selling Properties at 20% Discount

Source: Bloomberg 

(Bloomberg) -- German mutual funds in liquidation are taking a hit as they follow government orders to sell properties.

Real estate assets sold last year for 3.3 billion euros ($3.6 billion) were discounted by an average 20 percent, London-based broker DTZ said in a statement on Tuesday. The biggest concessions were made in the Nordic region and central and eastern Europe, DTZ said.

The open-ended funds, managed by companies including Skandinaviska Enskilda Banken AB and Credit Suisse Group AG, have been forced to liquidate after failing to meet redemption requests. The credit crisis exposed a flaw in their operation: while investors can take money out daily, managers hold assets that usually take months to sell.

“The biggest discounts were recorded for the most urgent disposals from funds that were set to be liquidated in 2014,” Magali Marton, head of Europe and Middle East research at DTZ, said in the statement. “We also saw some long-term liquidation in specific countries within southern Europe, central and eastern Europe and Benelux.”

German open-ended funds have 81 billion euros of property assets globally, and almost 13 billion euros must be sold by 2017, DTZ said. Most of the 11.7 billion euros of properties not yet sold are in Germany, Belgium, Netherlands, Luxembourg and France.

-By Dalia Fahmy

London’s ‘Dysfunctional’ Home Supply to Hurt Tech Firms

Source: Bloomberg

(Bloomberg) -- The growth of London’s technology industry, which has buoyed office landlords as banks cut staff, could be derailed by the city’s housing shortage, a Crown Estate executive said.

“The dysfunctional housing supply in London is one of the biggest risks to its continued success because businesses can’t find accommodation for employees and newcomers,” Paul Clark, director of investment and asset management at the Crown Estate, said on Tuesday at the MIPIM property conference in Cannes. The shortage, along with high rents, is particularly difficult for the technology, media and communications industries, he said.

Technology companies were the largest source of office demand in London in the four years through 2014 as Inc., Google Inc. and Twitter Inc. expanded, Knight Frank LLP said in a Feb. 10 report. A shortage of homes could deter companies from expanding further, according to Clark.

The Crown Estate, which generates income for the U.K. Treasury, has more than half of its properties in London. The city needs 49,000 new homes a year to accommodate its growing population and has the capacity to build 42,000, Mayor Boris Johnson said in an e-mailed statement on Tuesday. About 22,000 homes are built in the capital each year, according to government figures.

About 8.63 million people now live in the capital, eclipsing the previous high set before World War II, the Greater London Authority said on Feb. 2.

-By Patrick Gower

Simon’s Pursuit of Macerich Shows Allure of Top Malls

Source: Bloomberg

(Bloomberg) -- Simon Property Group Inc.’s unsolicited bid to buy Macerich Co. for more than $20 billion shows how enticing a top-flight U.S. mall business can be at a time when other parts of the retail real estate industry are struggling.

Simon, the No. 1 mall owner, went public with its bid on Monday after being rebuffed privately by Macerich. Indianapolis-based Simon offered $91 a share in cash and stock for its Santa Monica, California-based competitor. The offer was valued at $22.4 billion, including debt.

Simon has become the biggest real estate investment trust in part by doing deals both in the U.S. and around the world. By buying Macerich, which owns or has stakes in more than 50 malls, Simon would expand in its home country, particularly on the West Coast. Takeovers of competitors are one of the few ways large U.S. mall owners can grow because high-quality retail centers rarely come up for sale.

The possibility of adding so many top-tier malls with one transaction “is a unique opportunity,” said Rich Moore, an analyst at RBC Capital Markets, in Solon, Ohio. “The chance to get a hold of something like this is almost too good to be true.”

The offer is setting up a buyout fight. Simon, which has a history of shrewd dealmaking and has walked away from deals in the past, may have to boost its offer, with its target not appearing eager to be purchased.

“Macerich has an excellent portfolio of malls,” Alexander Goldfarb, an analyst at Sandler O’Neill & Partners LP in New York, said in a telephone interview. “The deal makes sense, but it takes two to tango and you have to have a willing seller.”

Tysons Corner

Simon would expand in California and Arizona and add major properties in the eastern U.S., he said. Macerich’s properties include Tysons Corner Center in Virginia, Fashion Outlets of Niagara Falls in New York and Santa Monica Place in Southern California. Simon’s malls include Roosevelt Field in New York, King of Prussia in Pennsylvania and the Forum Shops at Caesars in Las Vegas.

While some retailers have contracted, malls with higher sales have maintained elevated occupancies and generated better growth in same-store net operating income, Jeffrey Langbaum, a REIT analyst with Bloomberg Intelligence, wrote in a March 5 report.

Top-tier regional malls, or Class A properties, have higher tenant sales per square foot than lower-quality malls, or Class B centers, which tend to be in smaller metropolitan areas or are in larger areas but don’t dominate their markets. Shares of Macerich, Simon and General Growth Properties Inc., which have mostly Class A malls, have performed better than other retail landlords in the past 12 months.

Tenant Sales

After spinning off its lower-tier shopping centers last year, Simon’s portfolio had average tenant sales of $619 a square foot in the fourth quarter, above the mall-REIT average, according to Langbaum. Macerich’s average was only slightly lower, at $587. Class B mall owners CBL & Associates Properties Inc. and Pennsylvania Real Estate Investment Trust had sales of $360 and $394 for the year, respectively.

Macerich shareholders would receive the equivalent of $91 a share as 50 percent cash and 50 percent Simon stock under the deal, Simon said in a statement Monday. The transaction would include the assumption of about $6.4 billion of debt.

‘Very Compelling’

“This is a very compelling offer that will enable Macerich stockholders to realize a substantial and immediate cash return while building long-term value through ownership of Simon shares,” Chairman and Chief Executive Officer David Simon said in a letter to Macerich Chairman and CEO Art Coppola, included in the statement.

Macerich said in a statement that it received Simon’s unsolicited offer and that its board will review the proposal with its financial and legal advisers.

Also on Monday, Simon said it has reached an agreement to sell certain Macerich assets to General Growth, the No. 2 U.S. mall landlord, in connection with completion of a Macerich deal.

Simon has also been active in transactions outside the U.S. In 2012, the company acquired an interest in European mall owner Klepierre, based in Paris.

The REIT hasn’t always been successful in trying to complete deals. Simon failed in an effort to buy General Growth after its smaller competitor filed for bankruptcy protection in 2009. Chicago-based General Growth left bankruptcy in November 2010 with financing from a group that included Brookfield Asset Management Inc. and Pershing Square Capital Management after fending off a takeover attempt by Simon.

-By Brian Louis

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