Resale prices of Caribbean at Keppel bay cross $1,100 psf

Source : The Edge – 3 Aug 2009

With the opening of the $6 billion Resorts World at Sentosa fast approaching, there is a buzz of excitement as investors anticipate the influx of visitors expected in 1Q2010. To cater for a surge in tourists and locals to the island, a 620m $70 million walkway is being constructed and is expected to be completed in November 2010.

As development at the upcoming casino gain traction, interest in properties on the mainland of Singapore and Sentosa Cove have picked up in recent months.

For instance, at the 969-unit Caribbean at Keppel Bay, developed by Keppel Land and completed in 2004, there were three transactions in the week of July 3 to 10, according to caveats lodged with URA Realis. A check against the monthly number of transactions shows there was an average of five units changing hands from April to June this year versus only two from January to March.

According to property agents, buying activity has picked up and there is more interest from foreigners. However, transaction levels remain low, owing to higher quantum prices and the gap in asking prices ranging from $1,300 to $1,400 psf versus buyers’ expectations of $1,000 to $1,100 psf.

On July 9, a 1,636 sq ft unit on the second floor was sold for $1.85 million, or $1,131 psf, translating into a gain of 20% for the seller, who had purchased it at $1.5 million in 2005. On the third floor, a 1,227 sq ft unit went for $1.4 million — almost 60% higher than the purchase price of $911,430 in 2005.

A unit on the fifth floor went for $1.58 million, or $1,184 psf. The seller made a gain of 37% compared with his purchase price of $1.15 million in 2006.

With prices going above $1,100 psf, home-owners who purchased in 2005 have been able to register decent gains. Still, generally, prices in the development are still trading below the peak levels in early2008, when units changed hands for as high as $1,757 psf.

At the 1,129-unit Reflections at Keppel Bay nearby, a unit on the 24th floor of one of the towers went for $1,516 psf on July 1 on the subsale market. This transaction is the first for the development to be lodged on URA Realis this year. Before that, a unit was sold for $2,081 psf last October. Reflections at Keppel Bay, which provides luxury yacht charter services to home owners, was designed by Daniel Libeskind, the masterplan architect famous for the reconstruction of Freedom Towers at the site of the former World Trade Center in New York.

Across the waterway, a 1,711 sq ft unit on the seventh floor of The Oceanfront@Sentosa Cove went for $2.7 million, or $1,578 psf, in the sub-sale market. This was the third time the unit changed hands. It went for $2.04 million in February this year and $2.38 million in 2006. The 12- to 15-storey condominium project being developed by City Developments is expected to be completed next June.

Meanwhile, a 1,884 sq ft unit at The Berth By the Cove changed hands for $2.4 million, or $1,280 psf, in a resale. The original owner had purchased the unit from the developer, Ho Bee Investment, for $1.64 million in 2005.

There were two substantial deals for landed homes at Sentosa. A bungalow at Paradise Island with a floor area of 9,138 sq ft was sold for $12.6 million, or $1,379 psf. A bungalow along Ocean Drive, with a floor area of 9,579 sq ft, changed hands at $8.5 million, or $888 psf. Market sources say, just last week, another bungalow at Ocean Drive, which has a land area of 8,000 sq ft and a built-up area of 6,000 sq ft, changed hands for $12.99 million, or $1,624 psf.

NZ house prices rise for a 3rd month in July

Source : Business Times – 11 Aug 2009

New Zealand house prices rose for the third month in July, signalling the property market is recovering and may help the economy emerge from a recession.

Prices rose 0.7 per cent from June and have gained 1.3 per cent from a low in April, Quotable Value New Zealand Ltd, the government valuation agency, said in an e-mailed report.

Reserve Bank governor Alan Bollard last month kept the benchmark interest rate at a record-low 2.5 per cent and said he is unlikely to raise borrowing costs until late 2010.

Rising consumer confidence, housing demand and immigration are helping New Zealand recover from its worst recession in three decades.

‘There are signs that more vendors are putting their properties on the market,’ Glenda Whitehead, valuation manager at Wellington-based Quotable Value, said in the report. ‘This is perhaps in response to reports of shortages of listings and signs that values have stopped declining.’

House prices slumped last year amid a credit crisis and a plunge in consumer confidence. By March, prices were 9.3 per cent lower than a year earlier.

In July, prices were 5 per cent lower than a year earlier, yesterday’s report showed.

New Zealanders are more optimistic about the housing market, with 27 per cent of 600 people surveyed in July saying they expect prices will rise, ASB Bank Ltd said in a report last week.

Sixty-four per cent said it was a good time to buy a home. Annual immigration growth accelerated to the highest level in more than two years in June, while house sales rose 40 per cent.

Consumer confidence rose to an 18-month high in the second quarter, according to a survey by Westpac Banking Corp and McDermott Miller Ltd.

Aussie home loan demand rises

Source : Business Times – 11 Aug 2009

Demand for Australian home loans climbed for the ninth straight month in June, adding to evidence that a strengthening housing market is driving a recovery and backing views that the central bank will start raising rates in coming months.

Government data yesterday showed that demand for home loans rose 1.1 per cent in June, slightly lower than market forecasts of a 1.8 per cent rise, but up over 25 per cent from a year earlier.

First-time home buyers continued to support the housing market, helped by 50-year-low mortgage rates and generous government handouts, although demand from them showed signs of waning.

‘This is a pretty good set of numbers and shows that the demand side of the housing market is pretty strong,’ said Adam Carr, senior economist at ICAP. ‘The data keeps expectations of a rate hike before the year end very much alive.’

Financial markets last week swung to price in a rate hike as soon as November after a surprisingly strong jobs report for July, which continued a run of robust data as large doses of monetary and fiscal stimulus kicked in.

Last week, the Reserve Bank of Australia (RBA) shifted away from its easing bias and raised its growth forecasts, making clear that rates could be expected to rise to normal levels over time.

The RBA’s cash rate is at a record low of 3 per cent, having been lowered by 425 basis points between September and April.

The bulk of those aggressive rate cuts have been passed on to borrowers and, along with generous handouts to first home buyers, the housing sector has supported activity in the Australian economy.

House prices jumped 4.2 per cent in the second quarter, a fact that has been highlighted by RBA governor Glenn Stevens.

Last month, Mr Stevens said that there was a danger of an asset price bubble developing if low mortgage rates led only to higher property prices and not to increased home building.

Yet the latest data gave an early sign of some cooling in demand.

The proportion of first-home buyers as a percentage of all dwellings finance slipped to 27 per cent in June from 28.5 per cent a month earlier.

‘This may suggest that the first-home buyer boom may have peaked,’ said Josh Williamson, analyst at Citi. ‘Some moderation in the growth of first-home owner demand would be welcomed by the RBA as pre-bubble like conditions were starting to develop.’

Also, there was a rise in demand for fixed rate loans.

They accounted for 8 per cent of the total in June, up from 6.2 per cent in May, as more borrowers locked in mortgage rates on speculation that official rates have already bottomed.

‘With most market economists, including ourselves, expecting the next move in the official cash rate to be up, more and more borrowers will be locking in home loan rates going forward,’ said Helen Kevans, economist at JP Morgan.

Dublin to provide guarantee for home loans

Source : Business Times – 11 Aug 2009

It will create agency to buy up bad property loans at discount from banks

The Irish government, faced with a firestorm of falling property prices, is trying to prevent a national drama from becoming a disaster by providing huge guarantees to the loan market.

The figures speak for themselves: house prices, which began to boom on the back of the so-called Celtic tiger economy in the mid 1990s, have fallen by 30-40 per cent from a peak in 2006 and are continuing their downward spiral.

The government is now working on a scheme to provide support of 90 billion euros (S$185.8 billion), an astronomical sum working out at about 22,500 euros per head for Ireland’s population of just four million people.

The plan is to create a National Assets Management Agency (NAMA), which would be a so-called ‘bad bank’ to buy up bad and doubtful property loans at a discount from the country’s ailing banks.

Lawmakers in recession-hit Ireland are cutting short their summer holidays to discuss legislation to set up the bank, which the finance ministry sees as one of the most far-reaching economic measures in the country’s history.

Under the scheme, the government is to take on loans equivalent to roughly a third of Ireland’s gross domestic product (GDP) of 182 billion euros in 2008.

Most of the loans are in Ireland, but some have been made for activities in Northern Ireland and Britain, and in places far farther afield.

The property crash has generated widespread distress in Ireland.

But banks have so far not enacted widespread default procedures, nor put large numbers of seized homes on auction, and have even held back on shedding staff who worked in now depressed mortgage activities.

The implosion of a property bubble fuelled by cheap credit, which drove up the prices of property during the decade of the ‘Tiger’ boom, has left a legacy of bad loans on the books of the country’s financial institutions.

It has led also led to banks showing a reluctance to lend money.

The mega guarantee plan is seen as removing a big obstacle to the flow of credit to the economy as a whole, and also staving off the risk of widespread mortgage defaults and the national trauma that would follow.

Lawmakers hope that details of the key issue of the discount – the so-called ‘haircut’ – will be outlined by Finance Minister Brian Lenihan when the Dail (parliament) reconvenes on Sept 16.

Publishing a 136-page draft law for NAMA last month, Mr Lenihan denied that it was effectively a bailout for struggling developers and builders.

‘Anyone who owes money before NAMA continues to owe it and is expected to repay the full amount of the debt,’ he said.

He also said that the method of valuation ‘will recognise that the current market for property- backed loans and the underlying assets are very illiquid and will not require the banks to accept ‘fire-sale’ values’.

NAMA would also not be guided ‘by the property prices and expectations regarding property prices that underpinned the original lending decision.

‘It will aim to set a reasonable price having regard to a longer-term perspective on the property market,’ he stressed.

The Irish Times newspaper put the issue in the starkest terms.

Deciding the writedown, it said, will ‘represent a juggling act between the need to price the loans realistically and not force the banks to accept losses on a scale which lead to their collapse’.

Dubai home prices drop further

Source : Business Times – 11 Aug 2009

Dubai house prices fell by 24 per cent in the second quarter from the prior quarter but the pace of decline slowed, in line with improving global property markets, Landmark Advisory said on Sunday.

Prices fell less in the same period in Abu Dhabi, as the United Arab Emirates’ (UAE) capital, home to most of the country’s oil, continues to weather the global downturn better than its neighbour.

The average sale price for villas in Dubai fell 24 per cent while apartments declined 17 per cent, Landmark said.

Prices for villas and apartments fell 32 per cent and 23 per cent respectively in the first quarter from the fourth quarter, the firm said in its May report.

Dubai’s once-booming real estate sector has been hit hard by the global financial crisis, but the pick-up in more mature markets such as the United States and Britain is starting to cheer investors.

Prices in the US rose in May for the first time in three years while prices in Britain gained for a third month running in July.

House prices in Dubai are likely to stabilise by the fourth quarter, after falling 9 per cent in the second quarter from the previous quarter, Colliers International said last week.

Rents for villas in Dubai fell 19 per cent to 220,350 dirhams (S$86,480) in the second quarter, while apartment rents dropped 23 per cent to 129,900 dirhams, Landmark said.

Transaction volumes rose 25 per cent and 20 per cent respectively as more people relocated to Dubai from the neighbouring emirates of Abu Dhabi and Sharjah, it said.

In Abu Dhabi, sale prices fell by up to 11 per cent for apartments in the second quarter and 8 per cent for villas compared with the previous quarter, but prices are unlikely to suffer further significant declines, the report said.

The rate of decline also slowed as prices for both categories fell 20 per cent and 30 per cent respectively in the first quarter from the fourth quarter, Landmark said in May.

Rents for both apartments and villas fell by roughly 10 per cent in the second quarter, it said, adding average rents would likely fall significantly as more supply enters the market.

Seven emirates make up the UAE federation.

Landmark Advisory is part of real estate brokerage and consultancy Landmark Properties, which has offices in the UAE and London.

Fans of American architect saves The Last Wright

Source : Business Times – 11 Aug 2009

Frank Lloyd Wright enthusiasts are claiming victory in their effort to restore the architect’s last standing hotel, a northern Iowa landmark that has fallen apart over the past few decades.

The Park Inn Hotel in Mason City, designed by Wright and completed in 1910, has been used as a hotel, apartments and even a strip club. It fell further into neglect while city officials searched unsuccessfully for a way to maintain the historic structure.

Now, a private group has taken over the effort.

‘It certainly has been an eyesore, it has had a very, very chequered history over the past 40-50 years,’ said Ann MacGregor, executive director of Wright on the Park Inc, the group behind a planned US$18 million restoration.

The hotel is the last remaining of six designed by Wright after the Imperial Hotel in Tokyo was demolished in 1968.

The Park Inn Hotel will have 20 suites when it reopens to the public in early 2011, Ms MacGregor said.

The restoration has caused discord in the city that was home to The Music Man creator Meredith Willson. His boyhood home has been made into a museum, and there’s a life-sized replica of The Music Man movie set in downtown Mason City.

Some wonder why the hotel designed by Wright, considered by many to be America’s greatest architect, hasn’t had the same support.

‘There are naysayers for this project . . . who don’t appreciate or understand the architectural, historical nature of this property,’ Ms MacGregor said. ‘They question what it will do for downtown Mason City.’

Market analysis shows that there is demand for such a tourist destination, and a hotel management company based in Fort Atkinson, Wisconsin, has been hired to ensure things operate smoothly, she said.

Former Mason City Mayor Jean Marinos, who serves as president of Wright on the Park’s board, also believes that the hotel would help economic development. The group plans to invite presidential candidates to the hotel during the Iowa caucuses and hopefully host a televised debate.

‘Five years from now, when this hotel is up and running, we’ll really have some great opportunities in the downtown for small businesses to come in,’ said Ms Marinos.

The hotel made national headlines in 2004 when the city council put an ad on eBay to sell it for US$10 million to anyone who promised to restore it. When that failed, Wright on the Park stepped in, and the city signed over the deed.

‘It wasn’t that they didn’t want (the restoration) done,’ Ms Marinos said, ‘it was just they didn’t want the city to do it.’

Wright enthusiasts have been in a race for funding. The state of Iowa came through with about US$8.2 million through its Vision Iowa programme, and various federal and state historic grants and donations will pay for much of the work. There’s only about US$2 million left to be raised.

‘I think we’ve moved mountains in a relatively short period of time,’ said Ms MacGregor.

Alaina Santizo, the programme manager for Vision Iowa, said that state officials believe that the project will draw tourists from across the country.

‘This historic gem will be restored to its original splendour, while providing modern amenities that will appeal to today’s travellers,’ she said.

Born in Richland Center, Wisconsin, Wright was part of the Prairie School, a residential architectural movement that started in Chicago and spread through the Midwest.

He came to Mason City in 1908 after two local lawyers hired him to build new law offices and sandwich them between a hotel and a bank for added revenue.

Wright also built a private residence in Mason City called the Stockman House that’s now a museum.

Bruce Pfeiffer, director of archives for the Frank Lloyd Wright Foundation in Scottsdale, Arizona, said that the Park Inn Hotel was interesting because it includes bank and law offices, but it’s been ‘very badly mutilated over the years’.

‘It’s such a remarkable building, it should definitely be preserved back into its original condition,’ he said. ‘I think a lot of people would be outraged if anybody ever thought of demolishing it.’

Film director Lucille Carra created a one-hour documentary called The Last Wright that is being released on DVD this month in North America and Australia. The film traces 100 years of the economic and social history in Mason City, with special attention to the hotel’s fate.

Battered owners hopeful as home sales, prices rise

Source : Business Times – 11 Aug 2009

But analysts remain sceptical on the longer-term outlook for property prices

For homeowners around the world struck by the collapse of property markets, figures showing the downward spiral may be halting are the most meaningful signs yet of a possible economic recovery.

As battered banks and stocks rally again, news that US house prices are finally rising after nearly three years of traumatic decline offers the greatest hope to hard-pressed homeowners from California to Krakow.

The sub-prime home loan crisis in America was the pressure-point that exposed underlying global financial chaos – and many economists say that property prices there are the linchpin for confidence in broader economic recovery.

US home sales have been rising and the latest Standard & Poor’s/Case Shiller index of home prices in 20 major US cities showed a 0.5 per cent increase between April and May – the first monthly rise since 2006.

‘This is the first time we have seen broad increases in home prices in 34 months. This could be an indication that home price declines are finally stabilising,’ said Standard & Poor’s analyst David Blitzer.

Data from the National Association of Realtors also showed that the median price of existing US home sales was US$181,600 (S$261,704) in June – 15 per cent lower than a year ago, but up from US$174,700 in May.

Celia Chen, an analyst at credit rating agency Moody’s, said that there were ‘tantalising signs that the descent in house prices is at least moderating’, but warned that house prices will not reach their 2006 highs until 2020.

Joel Naroff at Naroff Economic Advisors disagreed with that downbeat view, saying the increase ‘could start increasing much more rapidly than projected’.

Analysts remain sceptical on the longer-term outlook for property prices as stable economic growth remains vulnerable to rising unemployment and government strategies for a clean exit from recession after unprecedented fiscal stimulus.

But that is doing little to dampen cautious optimism on property markets.

Official data in China is showing house prices in 70 cities were up 0.8 per cent in June from May, rising for the fourth straight month, while real estate investment nationwide rose 9.9 per cent in the first half of the year.

In Britain, house prices rose by 1.1 per cent last month to just under £160,000 (S$384,808) from June, but were down 12.1 per cent over 12 months, a survey from home-loans provider Halifax showed this week.

In neighbouring Ireland, however, prices have fallen by up to 40 per cent from their peak in 2006 and are still going down – with the government now working to provide 90 billion euros (S$184 billion) in guarantees to the loan market.

Likewise, Spain’s second-biggest bank BBVA has forecast that house prices, after a decade-long, tourism-fuelled property boom, will still fall by nearly 30 per cent between 2008 and 2011 before they start to recover.

In the Gulf emirate of Dubai, house prices have almost halved over the past year. The sector there is struggling with a shortage of liquidity and job security for expatriates who represent over 80 per cent of the population.

The decline in Dubai has had wider implications, with US bank Morgan Stanley saying that world steel production will remain below 75 per cent capacity as it awaits a revival in the construction sector in the Middle East.

And, despite the price rises in Britain, China and the United States, IHS Global Insight analyst Howard Archer warns that there may be surprises in store.

‘We suspect that they will be prone to relapses over the coming months,’ Mr Archer said, referring to British house prices.

He warned that houses could become less affordable because of ‘the economic climate of recession, sharply rising unemployment and slowing wage growth’.

China property sales leap 60% in first 7 months

Source : Business Times – 11 Aug 2009

Concern over asset bubbles brought on by record lending

China’s property sales surged 60 per cent in the first seven months amid concern that record lending will stoke asset bubbles in the world’s fastest-growing major economy.

The gain in the value of sales, announced by the statistics bureau on its website yesterday, compares with a 53 per cent increase in the first half from a year earlier. Real estate investment accelerated to 11.6 per cent growth from 9.9 per cent, the agency said.

Home prices in 70 major cities gained one per cent in July from a year earlier, the biggest increase in nine months, the National Development and Reform Commission (NDRC) said yesterday in a separate statement.

Premier Wen Jiabao reiterated on Sunday that monetary policy will remain unchanged, after climbing asset prices triggered speculation that a tightening could be imminent.

‘Policymakers may be getting a bit edgy about asset bubbles developing,’ said David Cohen, an economist with Action Economics in Singapore. ‘They may use administrative measures to cool prices.’

Improved property sales are part of a broader recovery. China’s economic growth accelerated in the second quarter and the Shanghai Composite Index of stocks has climbed almost 80 per cent this year, powered by US$1.1 trillion of lending in the first six months. Home prices in the 70 cities began to rise in June after declining for the previous six months.

Property sales by area climbed 37 per cent in the first seven months from a year earlier, the statistics bureau said.

‘The overall increase that we’re seeing in property prices is still manageable, the government would be more concerned about the stock market,’ said Sherman Chan, an economist at Moody’s Economy.com in Sydney. ‘Higher confidence and more liquidity’ are causing price gains, she added.

Central bank and finance ministry officials said on Aug 7 that they will scrutinise gains in stock prices without capping new lending. The Financial Times reported the same day that the central bank had told the largest state- controlled lenders to slow growth in new loans, citing unidentified sources.

China Construction Bank Corp president Zhang Jianguo said last week that the bank will cut new lending by about 70 per cent in the second half to avert a surge in bad debt.

Property prices are being boosted by a lack of investment alternatives in China, Kenneth Tsang, Asia-Pacific head of research at LaSalle Investment Management, said on Aug 6.

‘It’s property or the stock market,’ he said. ‘Some of the government officials lately are increasingly concerned about the situation in China and there may be a bubble.’

In July, new home prices rose in 43 cities and fell in 26 from a year earlier, the NDRC said. The largest increase was a 6.4 per cent gain in the eastern city of Ningbo. Month-on-month, 63 cities posted increases in new home prices, with three reporting declines.

Across the 70 cities, home prices climbed 0.9 per cent from June, the fifth straight monthly again.

Luxury retailers still expanding here

Source : Straits Times – 11 Aug 2009

WITH consumers hesitant to spend, and visitor arrivals dwindling, it is no surprise that retail sales have been on a downward slide in recent months.

But a stroll down Orchard Road reveals one segment of the industry that still shines: luxury retail.

Despite the recession, luxury developers and retailers here have not put the brakes on their glittery expansions.

The next high-end development on its way is Knightsbridge, an 83,000sqft, four-storey retail podium connected to Park Hotel Orchard and scheduled to open in May next year.

Unveiled last month, Knightsbridge will house its eight to 10 luxe tenants in double-storey flagship units.

The developer, Park Hotel Group, has secured 50per cent tenancy and says it is confident of opening with a full house next year.

It joins two other upcoming or newly completed projects on the strip, in proximity to the existing temples of luxury, Palais Renaissance, Paragon and Ngee Ann City.

Just opposite Knightsbridge is the 190,000sqft Mandarin Gallery, expected to host the likes of Emporio Armani and Mont Blanc when it opens in October.

Up the road, crowds continue to throng the Louis Vuitton and Cartier outlets at the month-old Ion Orchard.

Luxe industry players are confident the industry will remain buoyant here, pointing to a continuing demand for such goods in the Asian region.

They also cater to a segment which has been less buffeted by a turn of fortunes.

‘The luxury market is less volatile than the mass market in a downturn. Those who immediately feel the pinch are the mid-income groups, but high-income earners don’t really drop their spending,’ said Mr Allen Law, group director of Park Hotel Group.

A spokesman for Club 21, which is opening five stores in Ion Orchard and three in Mandarin Gallery, noted that there is still room for Singapore’s growth as a financial and fashion capital.

They may have reason to be confident. Market research by UM Consulting has found that the performance of the luxury goods sector has steadily increased every quarter since last year.

It estimates spending in that sector to be $369.3million for the first quarter of this year, compared to $289.1million in the same period last year.

There is a steady hunger for bags and bling among Asians, who make up the bulk of visitors to Singapore.

‘Developing countries like Indonesia and India are seeing their appetites being sustained, even increasing,’ observes UM Consulting analyst Ramesh Brahmadathan.

Asia has been a focus for luxury brands’ expansions.

Worldwide, they have taken a beating: the world’s biggest luxury house LVMH, which owns top brands like Louis Vuitton, Givenchy and Tag Heuer, saw a 12per cent drop in its first-half operating earnings.

In stark contrast to luxe’s ascent, there have been signs that the mid-tier market here may be flagging.

It was estimated to be worth $1.65billion in the first quarter of this year, dropping from $2.14billion in the quarter before that.

Mr Law predicted: ‘The luxury sector will still grow, and it will grow faster than the rest of the market.’

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A LESS VOLATILE MARKET

‘The luxury market is less volatile than the mass market in a downturn. Those who immediately feel the pinch are the mid-income groups, but high-income earners don’t drop their spending.’- Mr Allen Law, group director of Park Hotel Group

Swings in liquidity flows set to continue

Source : Straits Times – 10 Aug 2009

IN THE face of the continuing economic slowdown affecting developed economies such as the United States and Japan, the soaring financial markets around the globe present a big puzzle.

Stock prices across the region have hit 12-month highs, clawing back the losses sustained in the fallout from the collapse of US investment bank Lehman Brothers. The property market has turned sizzling hot as well.

Yet, this financial mini-boom sits oddly, with tell-tale signs of the recession that still ravages Asian economies.

Last week, disk-drive maker Seagate said it is axing 2,000 workers from its Ang Mo Kio plant as it relocates some of its operations to other countries.

But try telling house-hunters that Singapore is still mired in recession. They were more worried about a further surge in prices as they rushed head-long into the Optima condo project next to Tanah Merah MRT station, snapping up all its 297 units within three days last week.

Some suburban condo projects such as the Centro Residences in Ang Mo Kio have also been commanding prices of more than $1,100 per sq ft – a price which is usually associated with the prime Orchard Road area.

But the exuberance is not confined to Singapore. Other Asian financial centres such as Hong Kong, Seoul and Shanghai are experiencing similar surges in asset prices – both in terms of stock and real estate.

Much has been written in the Western media about the rising jobless rates in the US, despite last Friday’s report of a slight fall in numbers, and in Europe. The theory is that this is dampening consumers’ demand there as they tighten their belts to save more and become more frugal in their spending habits.

Since Asian countries rely on exports for their growth, the argument goes that unless the US and Europe start to grow again, Asian economies are unlikely to experience a turnaround as well.

But this fails to explain the surge in stock prices, suggesting, at face value, the emergence of a robust V-shaped recovery for the region as it puts the global financial crisis firmly behind it.

The usual line of explanation from analysts is that Asian economies, led by China, have successfully de-coupled from the West.

A growing appetite for more of everything – from commodities to financial services – from China would take up the slack caused by falling demand in the West, so the argument goes.

Then there is the theory that as the financial markets emerge from the biggest credit crunch in decades, the higher prices simply reflect a return to normal, after being beaten down to bargain-basement levels at the start of the year.

Still, the most plausible explanation for the recent surge in asset prices is the sloshing around of ‘excess money’ created by central banks in their zest to unclog the global financial system and arrest any further economic decline.

Since March, the US central bank has been on a programme to buy US$300 billion (S$430 billion) worth of US government bonds and US$1.25 billion of mortgage-backed debts.

Last week, the Bank of England upped the ante by announcing it would be buying a further &pound50 billion (S$122 billion) in gilts, or British government bonds, after exhausting its original budgeted purchase of &pound125 billion.

While the original intention of the two central banks was to bring down borrowing costs and ramp up spending in their respective battered economies, it hardly comes as a surprise that some of this money is finding its way to Asia, where it is fuelling a stock market boom.

The problem is exacerbated by the ability of traders at investment banks to get access to cheap US dollar funding, as the Fed has slashed interest rates to almost zero to fight deflationary pressure caused by the fall in consumer spending.

With the greenback weakening against Asian currencies, traders also stand to make a bundle from foreign exchange gains as well, with their huge positions in regional equities.

This has produced a situation similar to that seen 10 years ago when speculators borrowed heavily in Japanese yen to make huge bets in emerging markets after Tokyo cut its interest rates to zero to fight economic stagnation.

The picture becomes still murkier when you consider the flood of money pouring out of China from the liquidity generated by the lending made by Chinese banks to jump-start the economy.

As Morgan Stanley recently noted, Hong Kong equities – and, by extension, those in the rest of the region – could be ’squeezed up’ by mainland players and global investors all making a beeline for them at the same time.

So what can investors in small, open economies such as Singapore do as the collision of vast streams of liquidity cause wild swings in asset prices?

It is not surprising to find some ordinary investors throwing caution to the wind by snapping up newly launched condos or by diving deep into the stock market, even though the outlook for most businesses may still look murky.

But with global demand still weak, unemployment rising and MNCs still experiencing over-capacity in production, the likelihood is that consumer price inflation might stay low for now.

This may, in turn, mean that major central banks like the Fed and the Bank of England will not raise interest rates any time soon, or reverse course in their efforts at printing money.

For the stock market, there will be no respite from the dramatic price swings that have bedevilled equities since the US sub-prime mortgage crisis erupted two years ago.

After rising almost non-stop for three weeks, the benchmark Straits Times Index fell four days in a row last week.

Traders will have no choice but to learn to ride the wild swings produced by the ebb and flow of money as it washes through the region. Vast fortunes will be made – and lost – before the global economy begins to regain its poise.

En bloc debate, HK style

Source : Straits Times – 10 Aug 2009

WHEN land is scarce, your right to live in your home ends when your neighbours sell theirs.

This logic applies not just to Singapore – which defied expectations by recently producing its first collective sale offer since the recession took hold – but also to Hong Kong, which is now deep in debate over proposed changes to its compulsory property sale rules.

On the surface, the operative concept in both cities is the same: Urban renewal is expensive, and private capital speeds up the process. The government lends a hand by allowing an estate to be sold even if the sale does not get the unanimous approval of all the owners.

But Hong Kong and Singapore differ in the weight each accords to minority owners. Singapore requires an 80 per cent consent for a sale of a property at least 10 years old, and a 90 per cent approval for a development less than 10 years old.

Meanwhile, Hong Kong has maintained a 90 per cent threshold since the 1990s, with a tribunal giving the final go-ahead after considering a host of factors, including the property’s age and state of repair.

The Hong Kong administration has recently proposed that the threshold be lowered to 80 per cent – but only in cases where all but one unit has been acquired by one party, and where the development is at least 50 years old.

A observer may think this is just a case of laissez-faire Hong Kong playing catch-up, but the territory’s deliberations on the matter actually hold many lessons for the Republic.

For starters, Hong Kong remains protective of minority rights. Even if the proposed change is passed, it would still be harder for the majority of owners in a Hong Kong estate to push though a sale, compared with those in Singapore.

And yet, the opposition to the proposed change in some quarters in Hong Kong has been fierce. The change, they say, is tantamount to a subsidy for developers as it would mean that they would not need to entice as many home owners with a good sale price.

One South China Morning Post reader declared in a letter published on Aug 3: ‘The powers to compulsorily take away private homes are a draconian statutory provision that should be vested only in government – and used only for a defined public purpose. Making a profit for developers is not a public purpose.’

The language is refreshing, considering the tendency here to cast in a negative light those opposing an en bloc sale.

At times, they are made out to seem as greedy home owners holding out for more money, or eccentric seniors unduly attached to their property, or simply stubborn people who will not let their neighbours get on with their lives elsewhere.

Some here may point to Singapore’s public housing programme, where upgrading works are passed with a 75 per cent vote. If the majority can rule in public housing, why can’t it rule in private estates?

But that is hardly a parallel, given that public flat owners who have their homes renovated via a majority vote get to keep their homes whether they approved the upgrade or no. Private home owners have no such comfort.

Another interesting point about the Hong Kong debate is that it gives weight to environmental concerns.

The proposal notes that the normal working life of reinforced concrete buildings – during which they are unlikely to require major repairs – is assumed to be 50 years. Consequently, it sets 50 years as the minimum age for a building which may be subject to a compulsory sale application under the relaxed guidelines.

Given the huge amount of energy and material that erecting a building requires, this safeguard reduces the likelihood of unnecessary demolition waste.

In Singapore, money is by far the biggest measure used to determine whether a collective sale can go ahead.

The Strata Titles Board, which gives such sales the final nod, takes into account the transaction’s sale price, the method of distributing the sale proceeds and the relationship of the buyer to any of the unit owners.

Objections to the sale have to be couched in the language of dollars and cents. The minority owner has to suffer a financial loss or be unable to redeem the mortgage against his home in order for the sale to be called off.

The potential loss of built heritage or good architecture is not a consideration. Neither is the environmental cost of demolishing a building that is in good working condition.

There are mitigating factors of course.

Singapore has a pro-active conservation authority which keeps a look-out for historically and architecturally valuable buildings, and adds them to its protected list. This may lessen somewhat the need for stringent collective sale rules to protect urban heritage.

Singapore is also two-thirds the size of Hong Kong. This means the Republic has a smaller buffer of land and cannot afford to leave decaying buildings untouched for long.

Still, the debate in Hong Kong does hold up a useful mirror to our practices, whichever way that debate pans out.

It has been 10 years since the laws were amended here to allow a private estate to be sold without the unanimous consent of all its owners.

In the most recent property peak in 2007, 111 estates changed hands for $12.4 billion, according to property consultancy CB Richard Ellis.

As the Republic braces itself for the next en bloc wave, it could also cast its eye beyond its shores for clues as to how else it might reshape the Singapore skyline.

Urban renewal, after all, is far from being only a numbers game.

Banks woo home-buyers in new ways

Source : Straits Times – 10 Aug 2009

THE recent surge in HDB and private home sales has seen a pick-up in the pace of lending among banks, which have come up with new and innovative loan products to lure home-buyers.

Compared to the first quarter, the second quarter saw the number of approvals more than doubled, said Mr Gregory Chan, head of consumer secured lending at OCBC Bank.

‘We continue to see double-digit growth in sales, with a 30 per cent quarter-on-quarter increase in new mortgages as of Q2 2009,’ said Mr Dennis Khoo, general manager of retail banking products at Standard Chartered Singapore.

Banks are introducing more variations in their loan products, not only to seize market share but also, in part, to avoid the old ‘How-low-can-you go?’ war of interest rates.

‘The best mortgage is not necessarily the one with the lowest interest, but the one that best suits a customer’s needs,’ said Ms Sherry Leong, business head for home financial services at Citi Singapore.

‘We consider it important to offer product innovation and differentiation along with good after-sales service that is relevant to our customers’ needs.’

The Straits Times surveyed seven lenders and found many variations of the traditional fixed- or floating-rate mortgages. They include loans that allow changes in loan tenures, offer loyalty discounts, and even a few that earn interest like a savings account.

For example, United Overseas Bank’s latest HomePlus loan allows customers to earn the same interest rates on their deposits – of up to 75 per cent of their outstanding loan amount – in a separate bank account.

According to UOB, customers have the option of using the interest earned to offset their loan’s interest.

Promotional rates for UOB’s HomePlus are now at 1.5 per cent for the first year, 2.99 per cent for the second and 4.5 per cent for the third. But depending on the deposit amount maintained in an account with the bank, an implied interest rate on the home loan can be as low as 1 per cent in the first year and up to 3 per cent in the third year, said UOB.

StanChart’s MortgageOne Optimizer also comes with an offset feature where customers can use the interest earned on their deposits to reduce the interest payable on their home loans.

‘It is a smart money manager that optimises the deposits and mortgage loans of home-owners…automatically optimising returns by using the lowest interest-earning deposit accounts to offset the highest interest-paying loans,’ explained Mr Khoo from StanChart.

Aside from an interest-offset feature that helps customers pay down their home loans faster, Citi’s Home Saver is also an index-linked home loan that offers customers one of the widest selections of index tenures in the market, ranging from one month to three years.

With that, customers have the flexibility to switch from one tenure to another when the loan hits its maturity date, enabling them to react periodically on when to fix or float their interest rates, depending on their view of market trends.

‘For instance, clients can take advantage of the low one-month Sibor now and then change to a 12-month Sibor later when they feel that interest rates are likely to rise, thereby fixing the rate on their instalments for that period,’ explained Citi’s Ms Leong.

‘Conversely, a client who has chosen a six-month Sibor initially can switch to a one-month Sibor if he believes that interest rates could ease in the coming months.’

However, traditional heavyweights in the home loans market such as DBS Bank, OCBC and Maybank say plain vanilla loans with low fixed or floating rates linked to Sibor, or SOR, continue to remain popular, especially in today’s low interest rate environment.

One particular feature in DBS’ fixed- rate loans is the flexibility – which is usually not available for fixed-rate packages – of allowing customers to partially pay for their loans at any time within the period.

While DBS offers customers more freedom in managing their home loan, HSBC introduced a special feature to keep their customers banking with them.

‘We are the only bank to reward customers for keeping their home loan with us by giving them a loyalty discount, in the form of a year-on-year decrease in the interest rate spread charged,’ said Mr Sebastian Arcuri, head of personal financial services at HSBC Singapore.

‘This benefit is also ‘portable’, giving customers the flexibility of carrying forward their loyalty discount to a new property when they finance it with us.’

HSBC says there is also no lock-in period for its loyalty home loan packages, so customers are not tied down.

HSBC’s Sibor-pegged loyalty packages also come with a year-on-year decrease in the interest rates spread charged in the first three years, unlike conventional home loans, which typically see interest rate spread rise over the loan tenure.

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UOB’S HOMEPLUS:

~ Allows customers to earn the same interest rates on their deposits in a separate bank account.
~ Customers have the option of using the interest earned to offset their loan’s interest.

CITIBANK’S HOME SAVER:

~ Offers customers one of the widest selections of index tenures in the market, ranging from one month to three years.
~ With that, customers have the flexibility to switch from one tenure to another when the loan hits its maturity date.

HSBC:

~ Rewards customers by giving them a loyalty discount in the form of a year-on-year decrease in the interest rates charged.
~ There is also no lock-in period for its loyalty home loan packages, so customers are not tied down.

Hold firm, first-time home buyers

Source : Sunday Times – 9 Aug 2009

Patience, research and sticking to “affordable psf” should result in a headache-free home

Two Sundays ago, my editor wrote in this column about property advice his parents gave him just before he bought his first home.

He was unaware, but on the day his column was published, I took the plunge and bought my very first property with my partner.

His words obviously resonated with me: My purchase was an apartment way below $1,000 psf and under $1million, and reasonably near an MRT station by 2015.

But beyond these guidelines, I discovered that buying the first home was a lot more difficult and agonising than I had ever imagined – a process determined by so many pressures and factors.

For the longest time, the classified advertisements on Saturdays were my best friend. I zoomed in on cheap private properties because my partner and I were deemed ineligible for HDB flats (he is neither a citizen nor a permanent resident).

I pored through every single column, rang countless property agents and viewed so many apartments that one blurred into the next, and I had to start remembering them by something like the colour of the owner’s cat.

At the start of the year, I had seen some potential homes, but told myself to be patient – wait till year-end for prices to bottom out.

Well, apparently, that period of time was the bottom, and I had missed the boat.

Asking prices for properties soared as much as $50,000 to $100,000 more in just the difference of a month from April to May.

Queues started appearing at new project launches, blank cheques were being written for agents and a certain euphoria started to grip the market.

As my search deepened, the further my heart sank, for my dream apartment seemed unreachable as unrealistic sellers priced in Singapore’s economic recovery even before any evidence of it.

All through the hype, I had to remind myself not to be pressured into making a rash decision just because Singaporeans’ infamous ‘kiasuism’ for property was manifesting itself again.

One key factor which kept me grounded was this: affordability.

According to one widely used international standard to measure housing affordability, the monthly mortgage payment should not exceed 20 per cent to 30per cent of a household’s total monthly income.

Do the sums to derive your comfortable monthly outlay, ask banks to calculate from that what your total home loan is, and you get what I call your ‘affordable psf price’.

Often, you will get tired of the hunt like I did sometimes, see a nice home out of this budget and contemplate upping the psf just to get the search over and done with.

At times like these, I wanted so much to believe the usual spiel that agents give about land-scarce Singapore and how home values will always rise, even if the price you pay now seems high.

But whatever you do, do not budge from this price.

A story I was told warned me this could only be foolhardy.

During the 1997 property boom, my friend’s parents had bought a unit in the area I was looking at – a time when it was highly fashionable to invest in new suburban homes to ride the property wave – not unlike now, actually.

But when the Asian financial crisis hit the region, the property boom-turned-bubble eventually burst. The value of their property plunged more than $200 psf thereafter and has still not recovered to the original level a decade on.

With this in mind, I did more homework, studying historic psf prices of the estate at its lowest and highest levels, and made sure I bought only at a price that had potential upside.

It baffles both me and some analysts I speak to that new suburban homes in Ang Mo Kio, for example, are selling for $1,100 psf.

Where is your upside when you are already paying city-fringe prices for suburban estates?

Be firm about saying no to unrealistic sellers who like to test the market with bullish prices if they are beyond your budget.

If everybody kept a level head about purchasing properties, it would certainly help avoid turning a property boom into a property bubble as in the last decade.

No matter how heartbreaking, I said ‘no’ to many dream homes before finding one with sincere sellers who sold at a price that was a win-win for both parties.

My home-hunting journey ended only after I had made hard decisions to narrow down my options to specific projects, doing research and keeping to my affordable psf price.

As a result, National Day this year has taken on a special meaning for me because for the first time as a citizen, I have a physical stake in the country.

Our very own home: a spacious apartment set on a hill at the edge of a rainforest, a quiet, green haven away from the hustle and bustle of the city.

Finding that first home can be an exhausting experience, but also a rewarding one if you safeguard yourself against huge risks which could otherwise come back to haunt you.

Good luck with the hunt, and Happy National Day!

Looking for a home to buy? Try resale

Source : Sunday Times – 9 Aug 2009

Prices are mostly lower, living space is larger, but one must choose carefully

Now that the property market has picked up, individual sellers are out in full force.

They are putting up their properties for sale, from the newest uncompleted homes to fully furnished tenanted units and ageing apartments.

For home seekers, this means that apart from brand-new launches, there are plenty of choices in the resale market.

Even developer Keppel Land (KepLand) has started releasing tenanted, fully furnished units at its 99-year leasehold Caribbean at Keppel Bay for sale.

The 969-unit development, launched in 2000 at about $800 per sq ft (psf), had been fully sold, except for 168 units that KepLand has kept for leasing purposes under Caribbean Residences.

The developer declined to disclose the number of transactions, but said asking prices are around $1,300 psf to $1,400 psf. Caveats lodged last month show deals done from $1,131 psf to $1,218 psf.

But, said HSR Property Group executive director Eric Cheng, ‘the resale market is not that hot compared with 2007, when you could sell one apartment within one or two days’.

Right now, only the new projects are moving very fast, he said.

He added that ‘market sentiment is strong as people are very confident. I think a bubble is forming but it is not near the bursting level yet’.

In the resale market, not only are the units bigger, but living space is also larger as there are fewer bay windows and planter boxes unlike in new condo units.

Prices are also much more affordable, said Chesterton Suntec International’s research and consultancy director Colin Tan. But at the moment, ‘a large amount of the liquidity or excess money in the market is going mostly into the new launches, that is, uncompleted properties’, he said.

‘The genuine buyer may end up paying a high premium for a newly launched unit and…spend his whole life working to pay off the mortgage.’

Buyers may want to consider already-built or older projects near new launches which are selling at lower prices, property experts said.

‘Quite a number of buyers are not aware that there are better buys in the resale market. They know only how to buy from showflats,’ said an investor who recently profited from the sale of a Citylights unit, which he had bought for just $550 psf three years ago and sold at $1,200 psf.

Buyers should ask themselves which properties are available for the budget they have, he suggested. Then, they should narrow down their choices and pick a unit that gives them the most value for their money.

In the Tanah Merah area, deals caveated last month at the nearly completed Casa Merah were at $699 psf to $751 psf, below the average launch price of $810 psf at the sold-out project Optima just next door. Some sellers at Casa Merah may now be asking for higher prices but it remains to be seen if buyers will bite.

Sellers at other completed projects may also be asking for more, as Mr Tan pointed out. He cited an owner of a low-floor 1,453 sq ft unit at Savannah CondoPark in Simei Rise who recently raised his price from $850,000 to $920,000 in line with market sentiment.

This is despite the fact that the owner has failed to find a buyer at the earlier price since January, said Mr Tan.

Greed often gets in the way of a deal, property experts said.

Said the unnamed investor: ‘In order to entice buyers to buy resale units, sellers must price them at least 10 per cent below developer units in the vicinity.’

In general, prices of many completed projects are still falling but a few of the better ones have seen some price increases recently, said Mr Tan. However, even then, the increases are minimal compared with those of the new launches.

For those who are ready to commit to a property purchase, it may pay to look at completed homes in the resale market.