Prime office rents up 3.3% in August

Prime office rents up 3.3% in August

Raffles Place buildings led rise, with average rents there climbing 5.6%
PRIME office rents in Singapore climbed some 3.3 per cent in August to hit an average of $12.21 per sq ft per month (psf pm), Cushman & Wakefield’s new office report shows.
The property firm used a basket of about 50 buildings to calculate the average rent, managing director Donald Han said.

The firm, which also tracks the office rents for the top 25 Grade A office buildings within the larger basket of properties, said that rents for the selected 25 buildings rose to an average of $12.28 psf pm as at end-August, from $12.07 psf pm in July - up 1.7 per cent.

Last month’s rise in prime office rents was led by buildings in Raffles Place, Cushman & Wakefield’s data shows. Average rents in Raffles Place climbed 5.6 per cent in August to hit $13.68 psf pm. Rents in the Orchard and Scotts area also rose some 2.2 per cent to $9.76 psf pm, while at City Hall/Marina Centre/Bugis, rents rose 0.3 per cent to $12.22 psf pm.

Mr Han expects overall prime office rents to hit $13.50 psf pm by year-end. However, rents at the top tier of Raffles Place properties will hit $19 psf pm by end-2007, he said.
He added that the US sub-prime crisis, which rattled markets here in August, will have little impact on the office market for the rest of the year. ‘Moving forward, you will still see an upside in terms of rentals,’ Mr Han said. ‘Sub-prime or no sub-prime, the fundamentals are still there for prices to keep climbing - there will still be a shortage of office space over the next few years.’
Source : Business Times - 18 sept 2007

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Investment sales to hit $50b in ‘07: CBRE

Investment sales to hit $50b in ‘07: CBRE

Target up from $35b set 3 months ago, with some $12.7b deals done since July
By UMA SHANKARI

PROPERTY investment sales could hit $50 billion by the end of 2007, CB Richard Ellis (CBRE) predicted yesterday - increasing its full-year target from the figure of $35 billion it set just three months ago.
If CBRE’s target of $45-50 billion is met, it will be a substantial increase from the $30.6 billion worth of investment properties transacted in 2006.

The property firm arrived at the new target after total investment sales for the year to date came to some $37.9 billion - exceeding the previous prediction of $35 billion for the whole of 2007.

CBRE’s bullish prediction came on the back of news that some $12.7 billion worth of investment transactions have been recorded since the start of July, placing Singapore in a good position to end the year on a strong footing. ‘At this current pace, CBRE expects sales to peak at an all-time high of $50 billion by the end of 2007,’ the firm said in a report.

CBRE’s investment sales tally includes land deals, collective sales, transactions of entire office and other buildings as well as sales of strata-titled units including good class bungalows and condominiums worth more than $5 million apiece.
‘Prime office properties continue to be highly sought after by investors, with some notable acquisitions made by Reits and foreign funds.’

Investment sales in the private sector accounted for 84 per cent or $31.7 billion of total investment sales so far this year. The public sector contributed the remaining $6.2 billion.

So far this year, the residential sector has recorded $23.8 billion in transacted value - or 63 per cent of the year’s total investment sales, CBRE said. In particular, the collective sales market was fairly active in the third quarter of 2007, with a total of 16 sites generating some $1.7 billion of investment sales.

This was followed by sales of office properties. ‘On the back of the upbeat Singapore office market, investment activity in the office investment market remains robust,’ said CBRE. ‘Prime office properties continue to be highly sought after by investors, with some notable acquisitions made by real estate investment trusts and foreign funds.’Total office investment sales accounted for 24 per cent - or $9.2 billion - of the year’s investment sales.

Source : Business Times - 18 sept 2007

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URA data a boon for property market watchers

URA data a boon for property market watchers
THERE has been a general welcome for the release by the Urban Redevelopment Authority of updates on the volume of property transactions and prices of new developer sales for three months now.
URA releases the details of transacted prices of new developments in different price brackets on its website. So for the 536-unit The Cascadia on Bukit Timah Road for instance, it is clear that although the price range of the 162 units launched and sold was between $1,038 and $1,638 psf, 58 units sold were in the $1,000-$1,500 psf bracket while 104 units sold were in the $1,500-$2,000 psf bracket.

‘It’s clear that the median price is leaning towards the higher side,’ said Savills Singapore director of marketing and business development Ku Swee Yong.

These data also reveal interesting nuggets of information like which developments are being launched in phases and which are not.

Projects launched in phases include The Marq on Paterson Hill and Helios Residences. Both still have units not launched.

The Parc Condominium and Soleil @ Sinaran were both launched completely and fully sold. Colliers International director for research and consultancy Tay Huey Ying said that this depends on the developers strategy, ‘cash out in the shortest time or maximise returns via phased launches in a rising market’.

Source : Business Times - 18 sept 2007

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Sub-prime’s impact on S’pore ‘hard to gauge’

Sub-prime’s impact on S’pore ‘hard to gauge’
MAS is monitoring the situation and stands ready to inject funds if needed, says Iswaran
By UMA SHANKARI
IT is ‘quite a difficult task’ at present to quantify how much the US sub-prime crisis will impact Singapore, Minister of State for Trade and Industry S Iswaran said in Parliament yesterday.
Mr Iswaran: ‘The government’s economic growth forecast for 2007 stays unchanged at 7-8 per cent’
However, the risks have ‘increased’, and Singapore’s central bank is monitoring the situation and stands ready to inject funds if needed, he said.

Mr Iswaran also said that the government’s economic growth forecast for 2007 remains unchanged at 7-8 per cent, despite the recent global market turbulence.

‘The growth in the region and the diversity of our export markets will provide us with some buffer, but we are not immune to a slowdown in the major industrial economies,’ Mr Iswaran said. ‘At this stage, although the risks have increased, it is not clear that there has been a significant spillover into the real economy.’

Second Finance Minister Tharman Shanmugaratnam added that the Monetary Authority of Singapore (MAS) will inject liquidity into the market only if there is a ’systemic crunch’ - such as when normal borrowing and lending between the banks is not taking place. ‘This has not been the case so far,’ he said.

MAS is also working with the Singapore Exchange (SGX) to monitor its members and to ensure that there are sufficient resources in its clearing funds to meet outstanding obligations, Mr Iswaran said.

Separately, Minister for National Development Mah Bow Tan said that there is ‘no sign of a negative impact’ from the sub-prime crisis on the property market here.

‘The property market is driven by economic fundamentals and confidence,’ said Mr Mah. ‘Our economic growth is still healthy.’

The property market in Singapore is currently enjoying a boom. Home prices rose some 7.9 per cent in the second quarter of the year - the biggest quarter-on-quarter gain in about seven years.

All three ministers were responding to questions from their counterparts in Parliament about the impact of the US sub-prime crisis on Singapore.

Source : Business Times - 18 sept 2007

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US rate cut likely to boost S’pore growth

US rate cut likely to boost S’pore growth
GDP may rise 1.4% points with 75 basis point cut in Fed rate: Citigroup
By OH BOON PING

SINGAPORE’S economic growth may jump by another 1.4 percentage points, if the key US interest rate is cut by 75 basis points, says Citigroup.
Citigroup thinks the Singapore economy is less sensitive to any US economic downturn, due to its diversification.

In a report, its economist Chua Hak Bin said he expects the Fed funds and discount rate to be slashed by 50 basis points (bps) to 4.75 per cent and 5.25 per cent respectively at the upcoming Federal Open Market Committee meeting.

Also, he sees another possible cut of some 25 bps before year-end, which will ‘lift Singapore’s gross domestic product growth by 1.4 per cent points’.

Based on Citigroup’s analysis, this is almost double and far higher than the average of 0.8 per cent across Asian economies, because of Singapore’s heavy dependence on external demand and sensitivity of domestic interest rates to US interest rates.

Expectations of rate cuts came after the recent financial market troubles, which have affected US consumption outlook.

For example, ‘US housing prices have declined by an average of 8 per cent, but elevated levels of unsold homes suggest that further corrections are likely’.

Fed rate cuts will thus help cushion and reduce the potential negative impact from slower US growth.
The research house also thinks the Singapore economy is less sensitive to any US economic downturn, due to the diversification away from segments more sensitive to US business cycles, such as the electronics and pharmaceutical sectors.

In all, Citigroup says a one percentage point fall in US GDP growth cuts Singapore’s GDP growth by about 1.7 per cent point.

Indeed, its projected cut in rates may possibly lift Singapore’s GDP growth by more than necessary if US consumer spending does not slow as sharply as expected, aggravating the current pressures arising from supply bottlenecks.

Citigroup believes that the rate cut will strengthen the Sing dollar by 0.6 per cent, improve the current account surplus to GDP by 0.3 per cent point, and increase the fiscal balance to GDP by 0.2 per cent point.

However, the impact on local interest rates is likely to be modest, thus limiting the impact on mortgage rates and property market.

For example, the three-month Singapore Interbank offered rate is expected to shed only about 10 to 20 basis points to about 2.6 per cent in six months’ time, if the US rate cut is realised.

‘This is because short-term interest rates had already fallen sharply in the early part of the year and the ongoing upward adjustment since represents some normalisation.’

Stronger domestic investment growth may also start putting upward pressures on rates early next year.

Overall, Citigroup expects mortgage rates to fall by possibly 10 to 20 bps.

On the property front, Citigroup’s analyst Wendy Koh sees a supply crunch amid strong employment growth and falling vacancy rates. She expects residential rental rates to rise by 20-30 per cent a year.

This came as a record 113,800 jobs were created in the first half of this year, and Citigroup sees residential occupancy rates rising higher next year to over 97 per cent.
Source : Business Times - 18 sept 2007

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Property: Mass market sales up in August, speculation slows

Property: Mass market sales up in August, speculation slows

Fall in subsale deals as sub-prime fallout and Ghost Month cool buying fever
By ARTHUR SIM
(SINGAPORE) In the traditionally quiet ‘Ghost Month’ of August - when property transactions slowed dramatically - two significant trends emerged.
The Urban Redevelopment Authority released its update on private residential properties yesterday, showing that sales by developers actually went up compared to July. But caveats lodged in August showed that there was a sharp drop in subsales, signalling a cooling down of speculative activity.

At the same time, Colliers International pointed out that compared to July, August saw far more activity in the mass market.

The trends emerged against the backdrop of the US sub-prime mortgage shock, which served as a reality check for those gripped by the market frenzy of earlier months. In tandem with the Hungry Ghost month, this reduced the total number of transactions in August to 2,875, compared to 4,492 in July.

Developers launched 1,847 units in August, and sold 1,720.

And Colliers International estimates that about 47 per cent of the units launched and around 40 per cent of those sold were in the mass market segment.

‘This trend differed from that of last month in which the bulk of 45 per cent of the units launched were mid-tier units located in the rest of central region (RCR). Mass market units only accounted for 27 per cent in July 2007,’ said Colliers’ director for research and consultancy, Tay Huey Ying.

Although Ms Tay believes it is still too early to say if developers’ focus has now shifted to the mass market, she added: ‘The high-end and luxury segment has dominated the market since 2005, but from what we are seeing, it does now seem to be more evenly spread.’

Prices growth appeared to be somewhat muted. ‘Median prices of developments with units sold in both July and August rose marginally by an average of 2.7 per cent only,’ Ms Tay said.

The US sub-prime crisis and the lack of high-profile launches could have contributed to the slowdown, she added.

The development which saw the highest growth in median price in August was The Orchard Residences. Its median price rose 25.8 per cent. However, only two units were sold - one at $5,500 psf and another at $4,687 psf. A spokesman for CapitaLand said the $5,500 psf penthouse was bought by a foreigner.

The penthouse, which is expected to have cost between $23 million and $27.5 million, has set the record for the most expensive property in Singapore on a per square foot basis.

Prices for most properties, however, are seen to be stabilising.

Ms Tay expects overall prices to ‘resume with the return of market confidence’, but added that price growth will be more ‘controlled’.

Interestingly, more stable prices have been accompanied by a drop in subsale activity. Colliers’ analysis of caveats lodged in August show that it now stands at 7 per cent of the total volume of property transactions. In July alone, subsale activity was almost twice as high at 13 per cent.

But, overall, market confidence is still intact, noted CB Richard Ellis executive director Li Hiaw Ho, who pointed out that prices still rose in August - albeit more slowly.

‘The very prime projects were marketed at above $3,600 psf while those in the fringe area were sold at above $1,200 psf,’ he said.

Two hot launches - The Parc Condominium and Soleil @ Sinaran - accounted for over 60 per cent of developer sales. Mr Li said median prices of Soleil @ Sinaran, at $1,410 psf, and The Parc Condominium, at $870 psf, were ‘within expectations’.

‘For the rest of the third quarter, price levels are expected to remain stable,’ he said.

Although the mass market prices have been slower to rise, Savills Singapore director of marketing and business development Ku Swee Yong believes the increases on a year-on-year basis are significant.

‘Last year, most buyers’ definition of prices for a mass market development would have been around $600 psf,’ he said. Based on URA’s monthly figures, only 71 units, or about 4 per cent of the units sold in August, cost under $750 psf.

Source : Business Times - 18 sept 2007

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Higher CPF returns from next year

Higher CPF returns from next year

Extra interest, bigger Workfare top-ups and bonuses tied to draw-down age among moves to help S’poreans save for old age
By Lydia Lim, Senior Political Correspondent

ALL CPF members will enjoy higher returns from next year.
And seven in 10 will enjoy an extra one percentage point in interest on all their balances. These are members with $60,000 or less in their Central Provident Fund (CPF) accounts.

The new interest rate is part of a suite of changes to help Singaporeans save more for old age.

These include bigger Workfare income top-ups for older low-wage workers, and new bonuses tied to postponing the draw down on members’ CPF Minimum Sum.

Manpower Minister Ng Eng Hen yesterday fleshed out the details of several measures first announced by the Prime Minister in his National Day Rally speech last month.

Of these, a proposed compulsory annuities or longevity insurance scheme has proved the most unpopular.

Yesterday, Dr Ng promised a flexible scheme that will take into account people’s different needs.

A new committee, helmed by National Wages Council chairman Lim Pin, will study how best to ensure those who live beyond age 85 - the age when people’s CPF Minimum Sum runs out - have an income until their deaths.

Dr Ng even held out the possibility that CPF members could stretch out their Minimum Sum payouts to 30 years, up from the current 20, thereby reducing the need to buy the insurance.

The 14 MPs who joined the debate yesterday supported the changes, several describing them as bold. But they also took pains to reflect workers’ worries, sprinkling their speeches with Hokkien phrases to convey ground sentiments that ranged from confusion to suspicion over the Government’s motives.

They said unhappiness centred on the compulsory longevity insurance and the raising of the CPF Minimum Sum draw-down age.

Now set at age 62, it will be raised to 63 in 2012, 64 in 2015, and 65 in 2018.

Dr Amy Khor, chairman of government feedback unit Reach, said some were saying in Hokkien that they would end up with ‘boh chi, boh kang’ - that is, ‘no money, no job’.

Setting the context for the changes, which he said were necessary even if unpopular, Dr Ng noted that Singaporeans were living much longer than before.

Of those who turned 62 last year, one in two will live beyond age 85. And more than half of those who stop work at the current retirement age of 62 will have to prepare for over 20 years of retirement.

Singapore’s ageing population also means that there will be fewer younger folk to support the elderly.

The ratio is now eight people aged 15 to 64 for every senior aged 65 and over. But the ratio will fall to four to one in 2030.

According to a United Nations study, by 2050, Singapore’s population will be the fourth oldest in the world.

Dr Ng said: ‘We must therefore tackle this challenge now, as we have done with other national issues which can affect our nation’s well-being and future.’

Many had asked about the Government’s role in improving retirement security, he noted.

It will foot the bill for the changes, he said, to the tune of $1.1 billion a year for higher CPF returns and Workfare payouts, and a one-off outlay of $1.2 billion for the bonuses tied to draw-down age.

While the problem of retirement adequacy was a looming challenge for many countries, he said Singapore was one of the few ‘tackling this problem head-on, with eyes wide open and the public engaged’.

The Government’s three-pronged retirement support plan consists of ways to help people work longer, improve CPF returns, and make savings last for their whole lifespans.

There will be a new re-employment law by 2012 and higher Workfare income top-ups for low-wage earners aged over 55.

CPF returns will also go up from next year.

Savings in the CPF Special, Medisave and Retirement accounts will also be pegged to a new rate: that of 10-year Singapore Government Securities plus one percentage point.

Dr Ng said the Government will justify the new system to the President and explain that there will be no draw down on past reserves. Second Finance Minister Tharman Shanmugaratnam will speak in Parliament on the issue.

In tandem with the raising of the Minimum Sum draw-down age, the Government will pay special bonuses to those affected by the change, or who volunteer to delay the use of their CPF savings.

Dr Ng said that taken together, the changes would strengthen and make for a better and sustainable CPF system.

They would ensure all CPF members, especially the lower- and middle-income, will be better off and that ‘as many as possible will have savings for as long as they live’.

The Parliament debate on the CPF changes continues today.

Source : Straits Times - 18 sept 2007

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