Complete Property Market Updates of Singapore

May 5, 2008

Turn Capitol area into Mice venues

Filed under: 1 — Propertymarketupdates @ 2:10 pm

The article, ‘Wanted: New ‘director’ for Capitol Theatre’ (The Sunday Times, April27), prompted me to write this letter.

Singapore has sufficient performance venues and museums. The Capitol Theatre and its surroundings would be put to better use as hotels, serviced apartments and Mice – or meetings, incentive travel, conventions and exhibitions – venues.

Serviced apartments would be patronised not just by visitors, but also visiting lecturers to the Singapore Management University next door.

The theatre, with its high ceiling, could be converted into a hotel ballroom, function room or exhibition hall.

These would be more attractive to potential investors.

N. Senthilkumaran

Source : Sunday Times – 4 May 2008

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May 3, 2008

Experts divided over whether good times are back

Filed under: 1 — Propertymarketupdates @ 3:37 pm

Is the global financial crisis really over? Many in the financial industry seem to think so.

On Thursday, Britain’s central bank suggested that the credit crisis was easing, saying the market has been overly pessimistic in valuing certain assets which now even look like bargains.

But a number of economists continue to caution that much of the optimism is misplaced. The full extent of the crisis, they say, has yet to wend through the wider economy, and may be the trigger for a long-overdue unwinding of economic imbalances that have built up in recent years.

Echoing earlier optimistic comments by heads of investment banks, the Bank of England (BOE) said that ‘while there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually in the coming months’.

Mr John Gieve, a BOE deputy governor, said in the bank’s twice-yearly Financial Stability Report that ‘the pricing of risk in credit markets seems to have swung from being unsustainably low last summer to being temporarily too high relative to fundamentals’.

The report added, ‘As uncertainty falls and market liquidity improves, it should become clearer that some assets appear cheap relative to credit fundamentals.’

The comments are the latest in a discussion among policymakers, bankers, economists and investors about whether the current financial and economic turmoil is nearing the end.

On Wednesday, United States Treasury Secretary Henry Paulson Jr said that credit market conditions were improving. ‘We are closer to the end of this problem than we are to the beginning,’ he told Bloomberg Television.

The International Monetary Fund has estimated that the ultimate cost will reach nearly US$1 trillion (S$1.36 trillion) in write-downs and credit losses in the current crisis. But this estimate, based on imperfect information and models, may turn out to have been unduly pessimistic, the BOE said.

Still, some economists, like Mr Julian Jessop, the chief international economist at Capital Economics in London, said that even if conditions in the financial markets improved quickly, the wider economic fallout from the credit crisis would persist for many months or even years to come.

‘Indeed, the financial crisis might be seen as simply the trigger for the long-overdue unwinding of the economic imbalances that have built up in recent years,’ he said.

Uncertainties about the extent of the economic downturn and house price declines, Mr Jessop added, will add to the risk aversion in the financial sector.

The BOE shared some of that caution in its report on Thursday, saying tight credit conditions could lead to a pickup in defaults among vulnerable borrowers, parts of the commercial property sector and some non-financial companies with a lot of debt.

The BOE cut its benchmark interest rate last month for a third time since December, to 5 per cent, while the US Federal Reserve on Wednesday lowered its benchmark rate to 2 per cent, its seventh cut since September.

The BOE, following a similar initiative by the Fed, also announced a plan to swop £50 billion (S$133.59 billion) of British government bonds for up to three years in exchange for the illiquid mortgage securities that banks were holding on their balance sheets.

But some analysts pointed out that the banks’ need for such a facility illustrated that there were still not enough buyers for these assets in the market and that their value might have to drop further.

Banks worldwide have already written off more than US$300 billion in soured investments since the crisis began last summer with the collapse of the US sub-prime mortgage market.

The BOE is conscious that the market is partly ruled by sentiment, and the bank made clear in its report that too much pessimism about valuations and persisting concerns ‘could become self-fulfilling’.

Mr James Knightley, an economist at ING Financial Markets in London, said that ‘there may be signs that the credit crunch is easing up but there are still uncertainties about write-downs, and the macro numbers will get worse before they get better’.

‘There is still so much uncertainty that it is difficult to value the costs of the credit crisis, and there are so many shifts and turns in sentiment that it’s impossible to predict any timeframe,’ he said.

PROBLEMS WILL PERSIST

‘The financial crisis might be seen as simply the trigger for the long-overdue unwinding of the economic imbalances that have built up in recent years.’ – MR JULIAN JESSOP, chief international economist at Capital Economics in London, who believes the wider economic fallout from the credit crisis will persist for many months or even years

STILL TOO EARLY TO TELL

‘There is still so much uncertainty that it is difficult to value the costs of the credit crisis, and there are so many shifts and turns in sentiment that it’s impossible to predict any timeframe.’ – MR JAMES KNIGHTLEY, an economist at ING Financial Markets in London

Source : Straits Times – 3 May 2008

CapitaLand CEO sits on paper gain of $2.86m from options

Filed under: 1 — Propertymarketupdates @ 3:35 pm

CAPITALAND Group president and CEO Liew Mun Leong is sitting on a handsome paper gain of $2.86 million (based on yesterday’s closing price for the counter) after exercising options for a total of 600,000 CapitaLand shares at an average $2.33 per share on April 30.

The counter closed 30 cents higher yesterday at $7.09.

A filing by CapitaLand to Singapore Exchange yesterday evening gave a breakdown of the exercise prices of the share options. Mr Liew exercised options for 200,000 shares each at $1.02, $2.25 and $3.73 each. Following the exercise, his direct stake in the property giant increased from about 1.832 million shares to 2.432 million shares, or a 0.086 per cent stake. His deemed interest in CapitaLand remains unchanged at 158,000 shares.

Mr Liew received $6.49 million in pay from the property developer last year, mostly in bonuses – more than the $5.14 million he earned in 2006.

On top of the $6.49 million pay packet last year, Mr Liew was granted contingent share awards of some 462,800 CapitaLand shares last year, based on information in CapitaLand’s latest annual report.

The actual number of shares that Mr Liew receives from the share awards last year will depend on his achieving ‘pre-determined targets’ over a period of one to three years, according to CapitaLand.

If ’superior targets’ are met, Mr Liew could receive a maximum of 845,000 CapitaLand shares – nearly twice the ‘baseline’ number of shares awarded. But if he fails to meet the targets, no shares will be issued under the awards.

CapitaLand this week posted a 59.3 per cent year-on-year drop in Q1 net profit to $247.5 million, from $608.1 million in Q1 2007 when the bottom line had been boosted by a $426.8 million fair-value gain from the sale of 8 Shenton Way.

Source : Business Times – 3 May 2008

That condo is moving out of reach

Filed under: 1 — Propertymarketupdates @ 3:34 pm

THERE have been several episodes of residential property price escalations in Singapore that may have overshot income levels. But just how do we determine if private property prices have become more or less affordable?

We have developed a housing affordability index that might add an additional indicator to help answer policy questions on housing affordability. Standard measures that link property prices to annual incomes are not enough. Here we present a more meaningful index that we developed primarily to assess the affordability of private residential housing in Singapore.

Buying a residential property is a long-term decision. We need, therefore, a measure of a household’s long-term income. For this we obtained unpublished data from the Department of Statistics on median household income since 1990 by age of household head at five-year intervals from age 20 to 64. The raw data shows income peaks occurring at age groups 30-34 and 55-59. If we remove the effect of different birth cohorts from the data, we can see that income peaks around age 50.

From the above income data, we used statistical techniques to estimate the income of different birth cohorts over their working age. From this, we computed a time series of lifetime incomes as the discounted present value of future income streams – that is, calculating future incomes in terms of today’s dollars.

Chart 1 plots the lifetime income of middle-income earners by birth year. Significantly, the lifetime incomes of those born before the 1960s were stagnant. As can be seen from the chart, whether one was born in 1926 or 1956, the lifetime median income hovered around $500,000 in 2000 prices. (Most of these cohorts were in their old age during our observation period.)

The lifetime median incomes of those born after 1960 were significantly higher, coinciding with the rapid economic growth of Singapore at that time. But the lifetime median incomes of those born after the mid-1970s taper off. This is because these people began their working lives after the mid-1990s, when the economy entered a turbulent period beginning with the 1997-98 Asian financial crisis.

Having developed a chart tracking the lifetime median incomes of different cohorts, we linked this to property prices to derive an index. We divided long-term income for any chosen age group by the price of a selected type of property. This gives us a housing affordability index, which in essence measures property price against the median lifetime income of a household.

Chart 2 plots the income-price ratio for the 30-year-old group each year considering buying private residential property. We focus on this age group because that is roughly the age at which people might begin to buy private residential property. One graph on the chart looks strictly at this income-price ratio.

The other graph ‘with HDB upgrader effect’ tries to capture the wealth effect generated by rising HDB resale prices. We assume that the 30-year-old had bought a subsidised HDB flat, resold it, and directed all cash proceeds from the sale into the purchase of a private property. In practice, not all HDB resale proceeds accrue to the seller, but for lack of available data, we assume that it does. This means the ‘HDB wealth effect’ as represented on the graph is an overestimate, but it provides a useful indicator nevertheless.

Chart 2 is instructive. In 1975, a 30-year-old’s lifetime income was nearly five times the amount he would have paid for a private property. But with prices rising, by 1983, his lifetime income would have sufficed to purchase only one private property. This trend continued: By 1997, a 30-year-old’s lifetime income would have been enough to pay for only about 60 per cent of the price of an average private property.

In other words, as a result of the rapid increase in property prices in the early 1980s, private housing affordability dropped rapidly. After recovering somewhat in the late 1980s, affordability further declined in the 1990s when property prices escalated to unexpected heights. Last year, affordability moved in the downward direction.

Generally, since 1992, the index has hovered around unity – that is, lifetime income has just about equalled the price of one property. The pattern is the same even for HDB upgraders, though their affordability is somewhat better.

An income-price ratio of unity means that a middle-income household that buys an average-priced private property would be locking up its entire lifetime income in that property. The price escalation in the mid-1990s pushed the income-price ratio below unity, indicating a scenario of perpetual debt if a middle-income earner had committed to an average- (or higher-) priced private property.

The same computations using the data available since 1990 for average-priced HDB resale flats show a much better picture. The HDB affordability index dropped from eight in 1990 to three in 1996 and then recovered to five between 2001 and 2006. The price hike last year led to a slight drop in the index to 4.5, which means lifetime earnings were equal to 4.5 times the price of an HDB flat.

An optimal rate for property price inflation should be one that does not erode housing affordability. The long- term growth rate of our lifetime income measure is about 4-5 per cent, which has also been the long-term growth rate of per-capita disposable income. But the long-term increase in property prices has been much higher.

There are serious implications when housing affordability is eroded to the point where higher prices do not translate into higher wealth for property owners. For example, if affordability sinks below unity, this generation’s lifetime income would not be enough to pay for the property, so the wealth from higher prices cannot accrue to the property owner today. Housing wealth may end up being transferred to the children of the current owners.

If this occurs, a question would arise: How to balance the cost of private property to the current generation against the benefits that might accrue to their children of having higher-valued properties?

On this point, our colleague Professor Basant Kapur thinks that a system of intergenerational transfers may work, whereby children can compensate their parents for such properties once they start earning. The complex of issues this raises would require another detailed research paper to examine.

By Tilak Abeysinghe & Gu Jiaying

Tilak Abeysinghe is the deputy director of the Centre for Applied and Policy Economics, Department of Economics, National University of Singapore.

Gu Jiaying is a research fellow at the centre.

Source : Straits Times – 3 May 2008

3M opening US$200m film coating plant in Singapore

Filed under: 1 — Propertymarketupdates @ 3:33 pm

65,000 sq m plant will be 3M’s most advanced outside the United States

TECHNOLOGY-BASED company 3M has pumped in some US$200 million to set up a manufacturing plant in Singapore that will produce coatings for film-based products used in commercial, electronic and automotive applications.

These products include films that are coated onto car windows and interior glass panelling, helping to reduce the amount of ultraviolet rays and heat that passes through them, said Jay V Ihlenfeld, 3M Asia-Pacific senior vice-president.

‘We will also develop new products at the site, prototypes which we’ll (let our customers) sample, and scale them into full production,’ he said.

‘Going forward, we would like to expand the capabilities and the different technologies that we practise on the site to create new products for our customers.’

He added that some 250 engineering jobs will be opened up once the manufacturing plant is completed, which is expected to be by mid-2009.

Frank Sommerfeldt, manufacturing and engineering manager for 3M Singapore, said that the 65,000 sq m plant will have a ’substantial’ capacity and will meet the demands of 3M customers in South-east Asia, a market that has been growing at double digits for the company.

‘The plant will be 3M’s most advanced film coating facility outside the United States,’ he added.

3M is one of the 30 Dow Jones Industrial Average companies and is headquartered in the United States. It produces a range of items for the consumer, electronics and communications, and healthcare industries, among others, and its trademark brands include Scotch, Post-it, Nexcare and Scotch-Brite.

The company set up a sales and marketing operation centre in Yishun in 1966, and a manufacturing facility in Woodlands which produces flexible circuits and adhesives.

Dr Ihlenfeld said that the company chose to set up the plant in Singapore as the Republic presents a good business environment for the firm.

‘For a high-tech company like 3M, Singapore has many important advantages: a high quality workforce, well-educated people, outstanding scientific institutions, intellectual property and probably the most important – political stability and a government that helps companies make investments,’ he said, adding that 3M has been working with the Economic Development Board and JTC Corporation in setting up the plant.

Source : Business Times – 3 May 2008

3M to open $274m plant in Tuas

Filed under: 1 — Propertymarketupdates @ 3:33 pm

It will expand ops in Singapore, which it envisions as its regional superhub

United States technology conglomerate 3M, best known for innovative products such as Post-it note pads, is expanding operations in Singapore with a new US$200 million (S$274.2 million) plant in Tuas.

The factory will employ 250 workers initially to make thin film coatings. These coatings are used mainly on windows to reduce glare and heat, but they also have electronic and automotive uses.

3M, which makes a vast range of products for both consumer and industrial use, has a long relationship with Singapore, which dates back to 1966 when it set up a sales office here.

The company said the new 65,000 sq m plant will be its most advanced thin film coating facility outside the US and will be a centre of excellence for 3M’s film coating business in the Asia-Pacific region.

The facility is expected to be up and running by the middle of next year, 3M said.

In expanding its operations here, the company envisions that Singapore will become a ‘3M regional superhub’, said Mr John Woodworth, the senior vice-president of corporate supply chain operations.

3M regional superhubs are large production and resource-sharing facilities that are tied to the company’s regional growth needs. They also manufacture products for other 3M businesses.

The Tuas plant will be 3M’s second facility in Singapore. It established a $400 million plant at Woodlands in 1998. That plant makes flexible circuits and electronics adhesives, and also carries out research and development. It currently has about 700 employees. 3M also has a sales and marketing office in Yishun.

Singapore was selected as the location for 3M’s new plant because of its proximity to the company’s supply chain operations in the region.

The new plant will serve 3M’s customers in the Asia-Pacific. Most of the products manufactured at this plant will be exported.

‘The Asia-Pacific market makes up about 30 per cent of total sales revenue,’ said 3M Singapore’s manufacturing and engineering manager, Mr Frank Sommerfeldt, who attended the ground-breaking ceremony at the Tuas site yesterday.

3M’s film manufacturing vice-president, Mr Kevin Kuck, said: ‘This investment brings us closer to our customers and creates a regional source of supply…and helps us respond more quickly to our customers’ needs in the fast-growing Asia market.’

‘Singapore has all the ingredients for the technology-intensive manufacturing that 3M is involved in,’ said Mr Donald Chang, the managing director of 3M Singapore and South-east Asia.

Minister of State for Trade and Industry Lee Yi Shyan, who was the guest of honour at the ground-

breaking ceremony, welcomed the company’s expansion moves.

‘For many, 3M stands for innovation, a value that Singapore embraces in developing her knowledge economy,’ Mr Lee said.

Source : Straits Times – 3 May 2008

Myanmar nationals: Most live in the west

Filed under: 1 — Propertymarketupdates @ 3:32 pm

MYANMAR nationals seem to congregate in the western part of Singapore, going by the number of shops catering to them which have sprung up there.

At least seven of them, mainly provision shops and mini-marts, have surfaced in Clementi, Boon Lay and Jurong East over the past two years.

On sale are Myanmar fare such as pickled tea leaves, preserved fruit jam and Myanmar noodles.

Ms Aye Aye, 29, opened Kaung Zone mini-mart in Clementi in 2006 after noticing that the area was home to Myanmar students from the nearby Singapore Polytechnic and the National University of Singapore. ‘Most of them come here to buy phone cards every week to call their loved ones at home,’ she said.

Like other shops catering to the community, she offers a faxing service for those who want to send documents home.

These neighbourhood shops are welcomed by the community, whose members usually have to make their way to Peninsula Plaza in North Bridge Road. That is another hub for Myanmar nationals, with over 100 shops there catering to them.

NUS postgraduate student Kyaw Swar, 27, shops at a mini-mart two blocks away from his three-room HDB flat. He said: ‘It’s so convenient to buy my daily essentials here. I head to Peninsula Plaza for that weekly big shopping trip.’

Source : Straits Times – 3 May 2008

Myanmar community here gets bigger

Filed under: 1 — Propertymarketupdates @ 3:32 pm

MYANMAR nationals are making their presence felt here, not just in their red T-shirts joining the queue outside their embassy to vote on their country’s new Constitution, but in other sectors of Singapore too.

The Myanmar Embassy, in St Martin’s Drive, estimates that there are 100,000 of its nationals living here, up from 60,000 at the beginning of last year.

This 40,000 jump in numbers has been fuelled by the unrest in their country, which was triggered by the ’saffron’ protest in August last year when monks demonstrated against the rising price of fuel.

Some 75,000 people fled their homes in East Myanmar amid the conflict, which left about 500,000 displaced.

Most of the Myanmar nationals here hold employment passes or work permits, and work in accounting, engineering and construction. More are also arriving to work as maids.

Most come here in search of money and a better life.

‘There are more opportunities here and we can get access to the Internet, a wide range of books and reference materials from the library,’ said Ms Ei Thet Khine, 29.

She came here in 2006 to work as an assistant accountant, while studying to be certified as one.

Mechanical engineer Maung Pho, 31, said Singapore has given him a chance for a better life. His $3,400 salary pays for the rent on a two-room HDB flat in Jurong West and supports his wife and two-year-old daughter.

‘The same job in Myanmar would pay me only $60 a month. How could I feed my family?’ he said.

The presence of well-heeled Myanmar nationals is also being felt in the property sector. They made it into the Urban Redevelopment Authority’s top 10 list of foreign buyers of private property last year for the first time in the last decade.

Last year, Myanmar nationals bought 159 condominium apartments, said Mr Joseph Tan, executive director (residential) at CB Richard Ellis.

Popular areas include Little India, Buona Vista and Boon Lay.

Myanmar youth are also filling up classrooms here.

While the Education Ministry declined to give figures, Myanmar student networks say they number about 5,000. The students are enrolled in all levels of government schools and at tertiary and private language institutes.

Partly driving those numbers is the Singapore Tourism Board’s (STB) aggressive effort since 2006 to promote Singapore to Myanmar students.

That year, its education exhibition in Myanmar’s biggest city, Yangon, drew about 1,500 people. Last year, 2,700 showed up, said STB director of education services John Gregory Conceicao. It now plans to open an education information centre there.

Mr Gregory Lye, general manager of Education Unlimited Singapore, one of the largest agencies which match foreign students to schools, said he placed 60 Myanmar students in private and government schools last year.

Madam Zin Zin, a Myanmar ’study mama’, explained: ‘Over here, my children learn more about the outside world and can ask questions, something they can’t do back in Myanmar.’

Her son is in his final year at Temasek Polytechnic and her daughter is in Whitley Secondary School.

The 53-year-old housewife and part-time tutor, who holds a master’s degree in science, plans to sink her roots here by getting permanent residency and a job.

Despite the rising cost of living and struggles with learning English, most Myanmar nationals say roughing it out here beats going back to a home still in a state of unrest.

An administrative executive who arrived here last year and gave her name only as Nyunt, said: ‘Even if it means cutting down on my expenses and eating out less here, I’d rather do that than go back.’

Source : Straits Times – 3 May 2008

Missing owners’ condo unit sold for $1.6m

Filed under: 1 — Propertymarketupdates @ 3:31 pm

AN UNUSUAL auction of an apartment at King’s Mansion off Tanjong Katong Road has attracted strong bidding – driving up the sale price to $1.59 million, well above expectations.

The condominium’s management corporation had taken the rare step of selling the three-bedroom property after the owners had disappeared for more than a decade.

The auction, conducted on Wednesday, came after the foreign owners had failed to pay property fees, which could have run up to $30,000 or more.

The management corporation had tried repeatedly to get in touch with the four owners and their lawyers – but to no avail.

The sale price was considered fairly strong in a generally weak auction market, analysts said.

The starting bid for the freehold 1,604 sq ft high-floor unit was $1.18 million, which was within the guide price of $1.1 million to $1.2 million.

Five bidders chased the price up, with a local businessman succeeding in buying the unit at $1.59 million, said Knight Frank’s auctioneer, Ms Mary Sai.

This price works out to about $991 per sq ft (psf), considerably higher than the starting bid of $735 psf.

A somewhat larger unit at King’s Mansion, at 1,808 sq ft, sold for $1,106 psf a few months back, according to a caveat lodged in February.

After deducting fees and other expenses, such as costs associated with arranging this week’s auction, the management corporation is expected to keep the rest of the money in a trust for the owners.

Mystery surrounds why the owners departed the scene and why they have failed to make themselves known despite publicity prior to the auction.

If they ever do reappear to claim the balance of the sale proceeds, it is likely they will make a tidy profit.

Source : Straits Times – 3 May 2008

Better laws needed to regulate estate agents

Filed under: 1 — Propertymarketupdates @ 3:31 pm

I REFER to the Saturday Special report, ‘Rodeo realtors’ (April 19).

While the number of complaints is of much concern, it should be noted that they are committed by errant agents from a few companies.

As realtors deal with high value-added services, it is unfortunate that many of these complaints have invoked strong reactions.

For all intents and purposes, most practitioners realise they need to uphold the professional code of ethics and conduct to ensure long-term success in their profession.

These complaints are further compounded by the fact that, unlike in most developed countries, there are presently no well-defined laws regulating real estate practice in Singapore, an industry which is neither fully regulated nor totally deregulated.

I am of the opinion that self-regulation, in the context of the local consumer culture, operates optimally only within the framework of a well-crafted legislation for both real estate companies and agents.

Any private regulatory initiatives in a highly competitive industry are almost impossible unless there is adequate support and appropriate power to champion the best interests of consumers.

In appointing their agents, consumers should ensure they are committed to a stringent code of practice. They must go through comprehensive and vigorous training on a continuing basis.

In addition, agencies should be equipped with state-of-the-art technology and marketing resources. They should be in a position to submit an effective sole agency marketing plan, backed by a series of guarantees for performance, service and results.

Consumers can be assured, if they do their due diligence, there are many professional advisers in the market who can meet, and even exceed, these criteria.

Patrick Liew
CEO, HSR Property Group
 
Source : Straits Times – 2 May 2008

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