Fewer homes worth less than remaining loans as prices rise - Singapore

Fewer homes worth less than remaining loans as prices rise  - Singapore

Owners no longer in negative equity may be tempted to sell and cash in

By Joyce Teo& Grace Ng, Property CorrespondentFinance Reporter

THE number of home owners in negative equity - where the property is worth less than the loan taken to buy it - has been slashed due to soaring real estate prices.
Four years ago, about 13.7 per cent of owners with home loans were in negative equity but that has now fallen to just 2.5 per cent, said the Monetary Authority of Singapore (MAS).

The proportion a year earlier was 5.1 per cent.

In terms of the total value of outstanding home loans, only 2.4 per cent were in negative equity in September - down from 4.7 per cent a year ago and 14.1 per cent in 2003.

Property experts tip that the significant shift into ‘positive equity’ will tempt some owners, particularly investors, to sell and cash in.

Owner-occupiers may refinance - taking out a new mortgage at a lower rate - while others will wait for prices to rise even more before selling.

The MAS figures, contained in its latest Financial Stability Review, came from a survey of six banks, which account for almost the entire home loan market.

OCBC Bank’s head of consumer secured lending, Mr Gregory Chan, said: ‘In line with the healthy economic growth, we observe that home loans taken on properties bought in the mid-1990s have been steadily recovering from their negative equity positions since 2004.

‘We have also noted an increased trend of consumers selling their properties for a profit.’

The number of requests for loan refinancing has also gone up in the past three months.A local bank executive believes positive equity is one of the reasons for this.

Home owners who wanted to sell their properties while in negative equity would have had to pay the bank the difference between the outstanding mortgage and the sale price. But those who held on may now be willing to sell, said property consultants.

‘Singaporeans are quite averse to selling things - especially big-ticket items - at a loss,’ said Mr Nicholas Mak of property consultancy Knight Frank.

Mr Eric Cheng, executive director of property agency HSR, recalled one owner who bought a Mandarin Gardens unit for $950,000 in 1996, only to see its value drop to about $600,000 around 2001.

After holding out for more than a decade, he finally managed to sell his unit for $1.08 million earlier this year.

For such sellers who have had the distressing experience of being in negative equity, cashing out with a profit at the earliest chance is a must. ‘They don’t want to experience another slump, which may last for another eight to 10 years,’ said Mr Cheng.

Owners might also be tempted to get out while the going is good, given recent government steps to cool the market, said a banker. Stricter collective sale rules, hikes in development fees and the axing of deferred payments would moderate price rises.

But there will be others who will hang on, waiting for home prices to rise further.

Mr Geoffrey Ying of financial advisory firm New Independent said: ‘It’s human psychology: since they have waited so long, what’s a few more months or years?’

The MAS also said that the banking system’s overall property exposure has gone up further as the boom spreads to the mass market. While the rise in banks’ property exposure has been driven mainly by loans to property-related firms, loans to individual investors have also risen of late.
Source : Straits Times - 04 Dec 2007

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Singapore Taxi fares likely to go up soon

Singapore Taxi fares likely to go up soon

Flag-down fare may hit $2.80, and the meter will jump faster, sources say

By Christopher Tan & Tracy Sua
TWEAKS UNDER WAY: Meters in ComfortDelGro’s 15,000 taxis have been adjusted for next year’s public holidays, but the fix also includes a chip allowing the fare structure to be adjusted wirelessly. — ST PHOTO: JOYCE FANG

TAXI drivers want it and their associations have asked for it, so all that remains is for the biggest taxi operator ComfortDelGro to go ahead and do it - raise taxi fares that is.
All the signs point to it happening, and soon. A year after the last increase, which saw the flag-down rate go up by 10 cents to at least $2.50 and peak period surcharge double to $2, sources say a bigger jump is imminent.

The flag-down fare is expected to rise by 30 cents, bringing the minimum starting fare to $2.80.

Newer taxis such as the Hyundai Sonata and Kia Magentis charge 20 cents more, so their flag-down rate should hit $3, The Straits Times understands.

Distance and time-based rates are also expected to change. Currently, the meter advances by 10 cents every 210m or every 25 seconds of waiting. After 10km, it jumps 10 cents every 175m.

Industry observers expect leading operator ComfortDelGro to make the first move this month, but the company has remained mum about its plans.

‘Fare adjustment is a commercially sensitive topic, so we cannot comment on it,’ ComfortDelGro spokesman Tammy Tan said.

For the past three weeks or so, the company - which has a fleet of 15,000 taxis - has been sending its cabs to have their meters adjusted.

Ms Tan said this was mainly to update the meters for next year’s public holiday slots. There is a $1 surcharge for public holidays.

But The Straits Times understands the tweaks - taking around 20 minutes per cab - also include adding a chip to allow the metered fare structure to be adjusted wirelessly.

Taxi drivers have been calling for a fare hike for several weeks now, citing the higher cost of fuel and the two percentage point rise in the goods and services tax, which has raised their rental rate by an average of $50 a month.

Diesel at the pumps, after a discount, has risen by around 20 per cent since the last cab fare increase in July last year, raising fuel cost per cab by around $300 each month.

Member of Parliament Seng Han Thong, an adviser to the taxi operators’ associations, said taxi fares should be pegged to the cost cabbies bear. He told The Straits Times two weeks ago that the taxi operators’ associations have been lobbying for a fare rise.

‘Although taxi drivers are always worried about losing business if fares go up too high…they still hope there would be a fare increase,’ Mr Seng said.

Some quarters have called for fares to rise substantially to manage demand, so that commuters who need a cab will find it easier to get one.

Cabby Chew Lian Sheng, 37, said that is the ‘only way to manage demand’, since taxi companies are unable to put more taxis on the road because there are not enough drivers around.

Mr Chew said the flag-down fare should be between $7 and $10. ‘There’d be a public outcry. But cabbies can earn a living with fewer trips.’

Mr Chew is also of the view that surcharges must be removed or at least, simplified, as they ‘create an artificial market’.

Cabby Manjeet Singh, 62, said the flag-down fare should be $6 or $7. ‘It’s pathetic now,’ he said. ‘We should also abolish the surcharges - they are very confusing.’

Transport researcher and National University of Singapore lecturer Lee Der-Horng said simply raising fares would not solve all taxi woes. He said a ‘package solution’ was needed.

This includes having Electronic Road Pricing subsidies to encourage cabbies to go into the Central Business District; more designated taxi stands in the city centre; and simplifying surcharges.

Associate Professor Lee also suggested having ‘a centralised call booking system…This way, passengers will just need to dial one number to get access to the pool of taxis from all taxi companies’,

He said doing away with all surcharges may not be the answer. For instance, how can cabbies be encouraged to ply the ‘graveyard shift’ otherwise?

Nevertheless, he reckons the imbalance between demand and supply ‘cannot be fully resolved’.
Source : Straits Times - 04 Dec 2007

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S’pore Yishun hospital to cost $100m more

S’pore Yishun hospital to cost $100m more

By Salma Khalik & Teh Joo Lin
THE new general hospital in Yishun is going to cost about 30 per cent, or $100 million, more than planned because of the construction boom.
This would push the cost of the 550-bed hospital up from the estimated $400 million to about $500 million, including beds and all the equipment needed to get it running.

It could be even higher, said Mr Liak Teng Lit, chief executive officer of Alexandra Hospital, who will run the new facility.

This is because the five bids received in last month’s tender for the superstructure works alone, ranged from $350 million to $480 million.

This is higher than the $320 million estimate from two years ago to build the entire hospital. Add another $80 million for equipment, beds and other fixtures and the total comes to $400 million - the original price tag.

So far, a $67 million contract for piling works and construction of the basement has been awarded, in October last year.

Although bids have gone up, Mr Liak said that cost will not be the only consideration in awarding the tender.

The 30 per cent increase in cost is the result of building materials, labour and equipment being in critically short supply, with several major construction projects under way. Costs of materials such as steel bars and cement have also risen by more than 20 per cent over the past year.

For the new facility, to be called the Khoo Teck Puat Hospital, the Health Ministry has decided to go ahead so that work starts on time next year.

Mr Liak expects its specialist clinics to open their doors on March 28, 2010, while the hospital proper will admit its first patient in September that year.

The urgency is clear: the space crunch at the other public hospitals, which have been told to add more subsidised beds as a temporary measure.

The worst hit is the centrally located Tan Tock Seng Hospital, whose 1,400 beds are often fully taken up. The high demand forces the hospital to close its emergency department to non-critical cases several times a month.

But because of the high construction costs, plans to build another new hospital, in Jurong, have been pushed back.

Also on hold is the building of a bigger Communicable Disease Centre, to replace the century-old buildings now used, and a stand-alone National Addiction Management Centre.

These are among several public-sector projects worth at least $2 billion, planned for next year and 2009, being postponed to help ease the intense pressure on resources in the construction industry.

Health Minister Khaw Boon Wan said at a community event in Woodlands on Sunday that the tender for the Jurong hospital would not be called until prices were ‘more reasonable’.

Otherwise, ‘unnecessary costs’ would be the result.

‘The first task…is to settle on the site, which we’ve not decided yet. Because we are keeping Alexandra Hospital for a while, it’s not so urgent.

‘But definitely, we’ll build it and get it open before 2015,’ Mr Khaw said.

Source : Straits Times - 04 Dec 2007

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$12M: S’pore Coffee shop in Jurong fetches record price

$12M: S’pore Coffee shop in Jurong fetches record price

By Jessica Cheam
TOP DOLLAR: Bought by foodcourt operator Koufu, the sale price for the 4,700 sq ft VariNice coffee shop in Jurong East works out to $2,553 psf - well above the old record set by a coffee shop in Ang Mo Kio, which sold for $2,225 psf in 2004.

A COFFEE shop in an HDB parking building has sold for a record-breaking $12 million.
The eatery called VariNice is just a stone’s throw from the Jurong East MRT and bus interchange.

Its huge catchment area of residential blocks and business parks nearby makes it a prize location, said property analysts.

The eatery - which boasts 12 stalls selling a variety of food from duck rice, to seafood and western food - has been going for about 20 years.

It was sold off by the Government in the 1990s and changed hands again in 2000 for about $10 million.

Its latest buyer is well-known foodcourt operator Koufu, which runs 37 food and beverage outlets across Singapore.

Lianhe Wanbao reported yesterday that Koufu was believed to have paid $13 million for the premises, and is collecting $12,000 a month in rent from each stall.

But Koufu founder and managing director Pang Lim told The Straits Times last night that the price tag and rental were less than that. The firm paid about $12 million and collects monthly rent of $6,000 from each stall.

The sale price works out to $2,553 per square foot for the 4,700 sq ft premises - well above the old reported record set by an 8,000 sq ft coffee shop in Ang Mo Kio which sold for $17.8 million, or $2,225 psf, in 2004.

The payback period for Koufu’s latest buy is about 13 to 14 years.

Mr Pang said the deal was its biggest purchase but added that it was a long-term investment.

‘It was a high price, but we need good locations and in the long term, it’ll be worth it,’ said Mr Pang.

PropNex chief executive Mohamed Ismail told The Straits Times that the value of coffee shops depends purely on traffic. ‘Good business locations will always command a premium,’ he said.

Mr Nicholas Mak, head of research and consultancy at Knight Frank, said bullish market expectations paved the way for the record deal.

This was especially so as the recent slowdown in residential property has not touched the retail and food and beverage scene.

‘This is likely to be few and far between, however,’ he added, ‘as few shops get transacted at such a high price.’

Earlier this year, a coffee shop in Block 501, Jurong West Street 51, sold for $9 million.

Three coffee shops - in Tampines, Yishun and Bukit Batok - are on the market for $15 million apiece with no takers to date.
Source : Straits Times - 04 Dec 2007

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Keppel Land markets India projects here Singapore

Keppel Land markets India projects here Singapore

The company is also looking to expand to other Indian cities
By UMA SHANKARI
(SINGAPORE) Keppel Land is looking to sell its residential properties in India to Indians based in Singapore, the developer told BT.

Mr Ang: ‘…they know us and can see the projects we have launched here.’
‘In Singapore we see a growing non-resident Indian (NRI) market,’ said Ang Wee Gee, KepLand’s director of regional investments.

‘In the past we have not been selling in Singapore. But now - with more Indian professionals coming here to work and live - we have decided to.’

KepLand showcased its India properties in Singapore last weekend.

About 300 people visited the company’s booth and about 40 of them are ’serious buyers’ the developer will follow up with, Mr Ang said.

KepLand is now marketing two projects in India - the 1,573-unit Elita Promenade in Bangalore and the 1,376-unit Elita Garden Vista in Kolkata.

It also has another project - the 1,168-unit Elita Horizon in Bangalore. The project is expected to be launched soon.

KepLand has so far sold 86 per cent of 1,340 units launched at Elita Promenade. Units went for between 3,000-3,400 rupees per square foot - a jump of more than 30 per cent since the project was first launched in 2005.

At Elita Garden Vista, the company has sold about 60 per cent of the 250 units launched. Prices were 2,600-3,000 rupees psf, Mr Ang said. The project was launched a few months ago.

About 15 per cent of all the units sold at both projects were bought by NRIs, Mr Ang said.

But most of these people are not from Singapore - they are from places such as the US, the UK and Hong Kong.

However, this is set to change as KepLand is seeing more interest among NRIs based here. ‘We have an advantage here - they know us and can see the projects we have launched here,’ Mr Ang said.

KepLand is upbeat about its future in India, where it has had a presence since 2003. More residential projects are planned there. ‘Definitely, we would want to expand,’ said Mr Ang.

‘Apart from Bangalore and Kolkata we are also looking in Hyderabad, Chennai and the gateway cities of Mumbai and New Delhi.’
Source : Business Times - 04 Dec 2007

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Three of Asia’s biggest deals done in Singapore

Three of Asia’s biggest deals done in Singapore

Value of the 3 total US$1.77b, or about 20% of the Top-10 transactions
By ARTHUR SIM
(SINGAPORE) The Top-10 real estate investment deals in Asia in the third quarter of 2007 amounted to US$9.3 billion, and three of those deals concerned Singapore properties.
A report by CB Richard Ellis (CBRE) shows that two of the Singapore deals involved stakes in One Raffles Quay while the third involved the sale of Chevron House. The total value of these deals came to US$1.77 billion or about 20 per cent of the value of the Top-10 deals.

CBRE also said that foreign investors have shown no sign of scaling back Asian real estate investment activity, ‘especially given the relative scarcity of investment grade properties’.

As a general guide, investors will look at property yields when shopping for real estate and the 4.3 per cent yield for office property here is competitive with cities like Hong Kong where the yield is 4.5 per cent.

Cities like Manila and Jakarta do offer the potential of higher yields of around 11 per cent but as CBRE executive director Jeremy Lake notes: ‘Yields reflect many factors, including risks.’
Foreign investors have shown no sign of scaling back Asian real estate investment activity, ‘especially given the relative scarcity of investment grade properties’.

- CBRE

Mr Lake explains that these ‘risks’ usually include aspects of a country’s legal, political and fiscal policies.

Singapore is more likely to attract investors seeking lower risk and and perhaps lower yields, Mr Lake added.

A low-risk/low-yield dictum may not be a bad thing in volatile times.

CBRE notes that some foreign capital is being redirected to Asian property markets, seeking to benefit not merely from the natural appreciation of real estate in dynamic economies, but also from appreciation of Asian currencies against the US dollar, particularly the Chinese renminbi.

Mr Lake also pointed out that investors are drawn to markets where the cost of borrowing is lower than the property yield, explaining why Tokyo saw the largest real estate investment deals in the quarter, with the Top-three commercial real estate deals totalling US$3.95 billion.
Source : Business Times - 04 Dec 2007

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Singapore Office occupancy rates to stay in the 91-95% range

Singapore Office occupancy rates to stay in the 91-95% range

By UMA SHANKARI

(SINGAPORE) Occupancy levels for office space in Singapore will remain in the 91-95 per cent range over the next five years, CB Richard Ellis (CBRE) said in a new report released yesterday.
At the end of August 2007, potential supply of office space - the total of known supply from the private sector and awarded government land sales (GLS) sites as well as potential supply from expected future land sales - stood at some 10.8 million sq ft for 2007-2012, the property firm said.

This reflects a 147 per cent increase from the potential supply of 4.4 million sq ft identified at the beginning of 2007.

The potential supply works out to an average annual supply of 1.8 million sq ft for the next six years, exceeding the average supply of 1.5 million sq ft a year seen over the past decade.

CBRE said that an estimated 788,000 sq ft will come on stream in 2008, while the majority of the new space will enter the market in 2010-2011.

And based on projected average annual take-up of 1.6 million sq ft for 2007- 2012, even if full potential supply materialises, ‘we anticipate relative equilibrium between supply and take-up over this period’, CBRE said.

It said occupancy levels for office space will remain in the 91-95 per cent range over the next five years.
CBRE’s report comes as other experts predict that Singapore could see an oversupply of office space going forward.

Citigroup, for example, warned in a report last week that Singapore is in danger of seeing an oversupply of office space from 2010 onwards.

Based on the bank’s estimates, occupancy rates are likely to peak in 2008-09 and decline thereafter with the impending supply.

Prime office rents in Singapore averaged $12.60 per square foot per month (psf pm) in the third quarter of 2007, increasing 16.7 per cent quarter-on-quarter and 82.6 per cent year- on-year, CBRE’s data shows.

Rents now exceed the 1990 historical high of $11.50 psf pm.

While further rental increases are expected, the pace of growth should ease, CBRE said.

Source : Business Times - 04 Dec 2007

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Hungary markets hold untapped potential

Hungary markets hold untapped potentialBy OH BOON PING
SINGAPORE companies looking to penetrate new markets might like to take a look at Hungary, which promises untapped potential in logistics, industrial and research areas.
Already the central European country has signed agreements with Singapore on economic cooperation and R&D, as bilateral trade reached US$800 million last year.

‘That is growing dynamically. We expect trade value to go up some 15-20 per cent this year,’ said Peter Medgyessy, who led the Hungarian delegation to the recent EU-Asean Commemorative Summit. Hungary has attracted 700 million euros (S$1.5 billion) of foreign direct investment (FDI) from Singapore, he said.

A former prime minister of Hungary, Mr Medgyessy was once finance minister and distinguished himself by consolidating the economy, curbing inflation and launching the reform of public sector finance.

Based on his estimates, the value of FDI in Hungary is projected to reach 4-5 billion euros in 2007.

Although this is lower than the 6 billion euros seen last year, Mr Medgyessy said FDI could rise to an annual 9-10 billion euros by 2010 if transfers from the EU Development Funds are included.
He told BT that transport and logistics offer the best investment opportunities, as Hungary is at the intersection of major transport routes in central Europe. ‘For example, Budapest airport clocked up passenger traffic of some 10 million last year and our target is to double it,’ he said.

Singapore’s GIC Special Investments was part of a consortium that acquired a significant stake in Budapest Airport from Britain’s BAA in May this year.

Other attractive areas include consumer electronics and industrial segments, Mr Medgyessy said. Science parks that focus on environmental technology such as water treatment and alternative energy are also worth looking at. Hungary has attracted a number of venture capital funds. Supporting services like bank financing, legal advice and accounting are also readily available, he said.

Mr Medgyessy also touched on the conducive investment climate in Hungary, citing factors such as political stability and transparent laws. ‘Plus 95 per cent of our companies are privately owned, and we have a significant pool of skilled labour and professionals.’

As Hungary is now a part of the European Union, a substantial amount of financial aid is available for development projects in Hungary. ‘So Singapore firms setting up operations in Hungary can partner their local counterparts to tap on those funds.’

This year, Singapore and Hungary signed a master collaboration agreement to cement ties in research and development. Singapore’s Agency for Science, Technology and Research (A*Star) signed the pact with Hungary’s National Office for Research and Technology.

The aim is to promote joint scientific meetings, research collaboration and exchanges, and PhD and post-doctoral fellowships. Another tie-up is the Singapore-Hungary Economic Cooperation Agreement, which aims promote closer links across a broad front, including sectors like information technology and petrochemicals.
Source : Business Times - 04 Dec 2007

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Wages keeping pace with household debt - Singapore

Wages keeping pace with household debt - Singapore

Household balance sheet strengthened by rising property, equity prices
By SIOW LI SEN
SINGAPOREANS are a conservative lot. Despite strong wage growth, they are careful about borrowing too much.
And with strong appreciation in property prices, the negative housing equity situation continues to improve.

Household debt of $157.9 billion as a share of wages has continued to fall, from 195 per cent in 2005 to 181 per cent in 2006, according to the Monetary Authority of Singapore’s 2007 Financial Stability Review.

Households play an important role in the banking system as depositors and borrowers. Household deposits make up around half of domestic non-bank deposits and loans to households account for about half of domestic non-bank loans.

Rising property and equity prices have strengthened the household balance sheet, it said. In addition, wage growth has kept pace with growth in household debt.

Household debt grew in Q2 2007, but at a slower pace than remuneration and household assets.

As a share of gross domestic product (GDP), household debt has also fallen, from 81 per cent in Q4 2005 to 74 per cent in Q4 2006 and 71 per cent in Q2 2007.
‘Notwithstanding the strong economic growth and therefore positive consumer sentiment, loan growth underlying spending on large items such as cars and homes has been moderate,’ it said.

‘Indeed, housing loans grew 1.3 per cent year-on-year and growth of car loans was flat, compared to wage growth of 8.5 per cent in second quarter 2007,’ it said.

But home loans growth has picked up considerably since then and in October accelerated to 14.4 per cent from a year ago. Car loans continued to shrink, down 1.8 per cent, their fourth consecutive month of contraction.

The MAS said there is some concern with stronger credit card loans, which rose 14 per cent in Q2 2007, although they currently constitute only about 3 per cent of total household borrowing.

Here, too, consumer spending seems to have moderated with credit card loans slowing to 11.5 per cent in October. In addition, credit card charge-off rates have been falling.

Share financing provided by banks has shown even bigger increases but comprises only about one per cent of total household loans.

Not surprisingly, individual bankruptcies per quarter and non-performing loan ratio of loans to households have been falling this year.

Assets have continued to outpace liabilities in growth, resulting in net household wealth growing by 19 per cent year-on-year in Q2 2007 to $894 billion, or about four times the GDP.

The fast pace of the appreciation in the value of property and equity has also meant that net wealth has increased. Investment assets were not the only factors behind the asset build- up. Cash and deposits also grew by a significant 18 per cent from Q2 2006 to Q2 2007. Cash and deposits alone have continued to exceed total liabilities.

Property prices have been a key driver of growth in asset value, with prices of private properties rising by 27 per cent year-on-year and those of Housing and Development Board (HDB) resale flats by 12 per cent year-on-year in Q3 2007.

A recent MAS survey of the six banks that account for almost the entire housing loans market shows that negative equity for private residential properties fell to 2.4 per cent of the total value of outstanding mortgage loans in September 2007, compared with 4.7 per cent a year ago.

Similarly, in terms of the number of mortgage accounts, 2.5 per cent were in negative equity in September 2007 compared with 5.1 per cent a year earlier.

Source : Business Times - 04 Dec 2007

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Tax climate in Singapore ranked third best in region for expats

Tax climate in Singapore ranked third best in region for expats

UAE, Russia, HK are among world’s most benign personal tax environments, says Mercer survey
By ANNA TEO

FOR expatriates considering a posting to Asia, the personal tax climate in Singapore is third best in the region, behind Hong Kong and Taiwan. And unlike elsewhere, it makes little difference here whether the taxpayer is single or married, with or without kids.
According to Mercer’s survey of 32 ‘expatriate hotspots’, the United Arab Emirates, Russia and Hong Kong are among the world’s ‘most benign’ personal tax environments, while Belgium, Denmark and Hungary are the most onerous.

The findings also show that in general, married employees are better off than single employees tax-wise, and married employees with two children fare the best.

But the difference in tax liability is not too great in a few countries, including Singapore, while employees in China and India pay the same tax regardless of marital status.

Says Guo Xin, deputy regional head of Mercer, Asia: ‘Within Asia, Hong Kong and Taiwan have the most gentle tax systems regardless of marital status. The toughest personal tax regimes can be found in India and Australia, with Indians paying more tax than Australians if they are married with two children.’

And through its Central Provident Fund scheme, Singapore has one of the highest social security contributions - second only to Japan - at 11.4 per cent. Social security payments in Hong Kong, for instance, amount to barely 2 per cent.
‘If you exclude the mandatory CPF contributions, Singapore’s tax rate for middle managers would be 5 per cent, making it the lowest rate in Asia,’ Wong Su-Yen, managing director of Mercer Asean notes.

Except for Russia, European countries fill the bottom rungs of the rankings.

Apart from taxation, other key considerations for expatriate allowances are housing, private schooling and local cost of living adjustments - all of which can add up to the high cost of a global expatriate work force.
Source : Business Times - 04 Dec 2007

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Fewer sub-sales but value hits all-time high

Fewer sub-sales but value hits all-time high
Median Q3 sub-sale prices also hit record of $1,246 psf, up 25% year-on-year - Singapore
By ARTHUR SIM

(SINGAPORE) The level of sub-sale activity may be just about half of what it was in 1995 but the value of sub-sale apartments transacted in the first three quarters of this year is already at an all-time annual high of $6.7 billion.
An analysis of data by DTZ Debenham Tie Leung reveals that although the number of sub-sale transactions actually fell to 1,374 in the third quarter of this year - representing a quarter-on-quarter (qoq) decline of 23 per cent - sub-sales made up 19 per cent of the volume, up from 16 per cent in the second quarter.

Equally significant is the fact that median sub-sale prices also hit a new record high of $1,246 psf, a qoq increase of 13.6 per cent and a year-on-year increase of 25 per cent.

The value per transaction of sub-sale apartments is also at a record high this year at $1.71 million per transaction.

But while the level of sub-sale activity can sometimes be an indicator of market bullishness, DTZ executive director Ong Choon Fah points out that factors driving up numbers in the third quarter may have more to do with real demand in the light of short supply and with various new developments becoming available for immediate occupation.
DTZ believes the overall value of sub-sale apartments in 2007 is expected to increase further.

The Icon for instance, has consistently been one of the top two developments in terms of sub-sales this year with its median sub-sale price increasing 26 per cent qoq to $1,495 in Q3. But as Mrs Ong notes, Icon has recently received its temporary occupation permit (TOP), and other attributes like its inner-city location and the affordability of its small units do make it popular.

Another popular development among sub-sellers is The Sail @ Marina Bay which increased 21 per cent qoq in terms of median sub-sale price in Q3 to hit $2,093 psf.

Interestingly, according to DTZ’s analysis, the number of units at The Sail and Icon that have been sub-sold is now 512 and 370 units respectively. And assuming that units were not repeatedly sub-sold, DTZ suggests that almost half of the units in these developments have changed hands already.

More telling perhaps is that of the recent launches, only The Lakeshore, which has received TOP for some phases, and One-north Residences registered a significant number of sub-sales.

The number of sub-sale apartments in the luxury band fell 41 per cent to 317 transactions but it still makes up 45 per cent of sub-sale transactions.

DTZ believes that while the sub-sale market is increasingly competitive and sub-sale activity is not likely to accelerate further, the overall value of sub-sale apartments in 2007 is expected to increase further, backed by potential price increases.

And foreigners could be helping to boost the sub-sale market. DTZ’s report reveals that although the number of foreigners buying sub-sale apartments in Q3 fell by 20 per cent qoq to 460 transactions, this number exceeds that of apartments bought directly from developers.

Indonesians made up 38 per cent of these buyers, followed by Malaysians and Koreans who made up 15 per cent and 9 per cent respectively.

Again, The Sail and Icon proved to be the most popular with these buyers with foreigners buying 26 and 25 units (41 and 36 per cent) respectively in the quarter.

DTZ believes the sub-sale market will continue to receive interest from buyers seeking immediate occupation with some investors looking to realise returns earlier by tapping on the buoyant leasing market. But with the withdrawal of the Deferred Payment Scheme, sub-sale activity may slow and deals look set to be more sustainable.
Source : Business Times - 04 Dec 2007

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Volatile markets could pose risk to Singapore local bank profits: MAS

Volatile markets could pose risk to Singapore local bank profits: MAS

Their core interest income may fall if there is a sharp US slowdown
By SIOW LI SEN

(SINGAPORE) The Monetary Authority of Singapore (MAS) has warned local banks of a challenging environment ahead in which there could be risks to their profits from volatile financial markets.
In its latest 2007 Financial Stability Review, released yesterday, the MAS also said that the banks’ core interest income may fall if there is a sharp US economic slowdown.

‘Key short term risks to banks’ profitability could stem from a spike in volatility of financial asset prices or a sharp US economic slowdown,’ it said.

‘Falling and volatile financial markets could lead to trading losses, markdowns in collateralised debt obligations (CDO) assets and lower fee income as customer trading activity diminishes.’

The three local banks are DBS Group Holdings, United Overseas Bank (UOB) and OCBC Bank.

The MAS noted that for the third quarter 2007, some local banks reported net profit after tax between 10 and 14 per cent lower than that for the previous quarter, before the credit market turmoil.
CDO exposure involving US mortgages including sub-prime loans amounted to $2.36 billion for DBS, $641 million for OCBC and $388 million for UOB - which was seen as low compared with the banks’ capital. Separately, customer exposure to CDOs managed by the banks’ asset management arms, where the risk was borne by the customers and not the banks, were $1.5 billion for DBS, $5.6 billion for OCBC and $11.4 billion for and UOB.

The MAS said that despite the local banks’ limited US sub-prime or asset backed securities exposure, their share prices and credit default swaps (CDS) spreads were affected.

During the August turmoil, share prices of the three banks fell by 15-17 per cent and their credit spreads widened by around 51-53 basis points.

However, it said the three banks’ funding activity in Singapore and key overseas subsidiaries was relatively unaffected, unlike banks in the US and Europe. In addition, local banks have access to stable retail funding.

Share prices of local banks continued to be volatile, plunging again in November after recovering in October.

In recent weeks, their CDS spreads fluctuated around 20-80 basis points above the pre-August levels, the MAS said.

The MAS also cautioned that a sharp slowdown in the US may lead to lower demand for loans and affect the banks’ interest income. Interest income accounts for the greater part of local banks’ profit.

‘Interest income may also decline if a US recession were to materialise and cause a slowdown in Asia, thus dampening external and domestic loan demand,’ it said.

Loans growth in October accelerated to 15.5 per cent, the fastest in almost 11 years, driven by broad-based demand.

Still, the MAS said there has been ample liquidity in the banking system and banks have strengthened their risk management systems in recent years. Averaging 14.6 per cent this year, the aggregate of local banks’ total capital adequacy ratio has remained above the minimum regulatory 10 per cent requirement. They have also maintained their AA- Long Term Issuer Default rating by Fitch Ratings.
Source : Business Times - 04 Dec 2007

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Foreign matchmakers woo Singapore business

Foreign matchmakers woo Singapore business

Business development agencies are opening doors for Singapore companies
By OH BOON PING
(SINGAPORE) Ever thought of venturing into Ukraine, setting up a business in Portugal or tying up with a partner from Israel?

According to the Economic Development Board, the number of foreign business incubators has shot up in recent years, reaching 43 such centres here by the end of last year.

All these possibilities are being opened up for local entrepreneurs, who find themselves targeted by foreign business development agencies mesmerised by ‘Brand Singapore’.

In recent months, the Republic has attracted a number of new players like the Russian Business Incubator and a business accelerator set up by Ukraine’s Economic Development Group.

This year’s Global Entrepolis @ Singapore featured two overseas incubators - Israel’s RAD BioMed and Dubai’s Entrepreneur Business Village (EBV) - which hope to attract investment dollars and firms to their incubation programmes.

According to the Economic Development Board, the number of foreign business incubators has shot up in recent years, reaching 43 such centres here by the end of last year.

These agencies provide start-ups with low-cost infrastructure and appropriate support to grow businesses.

EDB said the foreign incubators here are mainly focused on ‘bringing their countrymen into Singapore to start businesses’, but local firms can also venture overseas by partnering those foreign firms under incubation.
For example, the Invest Japan Business Support Center (IBSC) provides information and consultation services to Singapore firms planning to launch their business in Japan.

Since its inception in 2003, some 32 Singapore firms have made use of its services.

Last November, Ukraine’s EDG set up its business incubator - UkraineRus Accelerator - to boost investment and encourage joint projects in areas like energy, environment, IT, marine and aerospace technologies.

Its director, Lyubov Taranenko, said that many Ukrainian firms were also keen to partner Singapore outfits in sectors like producing equipment for cell and genetic engineering as well as water purification technologies and treating industrial sewage. In all, there have been about 70 investment offers for Southeast Asia so far.

At Dubai’s EBV, the goal is to attract small and medium-sized enterprises (SMEs) from around the world - including Singapore - to set up operations in its 1 million sq ft facility in downtown Dubai. Its partners include financial institutions and it will offer supporting services to SMEs. Singapore SMEs can contribute their business knowledge to start-ups in Dubai, said its project director Muneeb Abdulrazzaq Kazim.

‘The new generation of entrepreneurs are the ones who have experience working for companies, but they have no idea how to run a business,’ he told BT. ‘I want this younger generation to gain this capability.’

EBV, which commences commercial leasing next year, can accommodate up to 600 SMEs, said Mr Kazim.

Meanwhile, Israel’s Rad BioMed Incubator, whose focus is on life sciences, provides its participating entrepreneurs with seed capital, business development and a wide range of related services to help them establish firms in Israel’s biomedical industry.

The typical size of seed investment is about US$500,000 for a two-year project, but its president Idan Tamir said Rad has made investments of up to US$800,000, including grants from the Israeli government.

Just recently, the Portuguese government announced it was setting up a permanent business development agency in Singapore to attract investments into Portugal, and promote the European country as a tourism destination.

Last year, the trade between the two countries stood at some 750 million euros (S$1.605 billion).

Managing director Carlos Moura said: ‘We will assist any company to set up business in Portugal, and support Portuguese companies in exporting to Singapore.’
Source : Business Times - 04 Dec 2007

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