Increases in cost of Singapore offices, shops starting to slow down

Increases in cost of Singapore  offices, shops starting to slow down

By Fiona Chan, Property Reporter

RESPITE may be in sight for those who have been griping about the surging cost of doing business in Singapore.
Latest figures show that the increases in the cost of shops and offices eased in the fourth quarter of last year, in line with a general slowdown in the property market.

Prices and rentals for these commercial properties soared for most of last year, especially for office space, which reached an all-time high amid an acute short supply.

This prompted complaints from businesses and sparked off worries about Singapore’s competitiveness.

But official data released by the Urban Redevelopment Authority yesterday may finally calm these jitters.

Rentals for offices rose by 10.9 per cent between October and last month, down from 14.8 per cent in the previous three months - which was a decade-high jump, said Mr Li Hiaw Ho, the executive director of CBRE Research.
The slowing could be ‘the initial sign that the numerous efforts by the Government to cool the sector are taking effect’, said Ms Tay Huey Ying, the director of research and consultancy at Colliers International.

These moves include releasing more land for offices as well as immediate steps such as short-term leases in existing buildings and temporary office plots.

Colliers’ own data shows that office tenants are becoming increasingly resistant to further rent rises. Rents for office space in several areas, including Grade A buildings in Raffles Place, have seen declining growth rates for the past two to three quarters, said Ms Tay.

She said this is because firms are more willing to explore alternative business space locations, including business parks and high-tech industrial space.

For the whole year, rentals for office space jumped by 56.1 per cent. The rental index is now at an all-time record of 175.1 points, said Mr Li.

Ms Tay expects growth to moderate next year as tenants hold out for the expected large new supply in 2010. She is forecasting a rise of up to 20 per cent for Grade A office space.

As for shops, the rise in rentals has all but peaked. Overall rentals rose by 0.6 per cent in the fourth quarter, compared with 8.1 per cent in the previous quarter.

In Orchard Road, rental growth was almost flat at 0.3 per cent in the quarter. Shops on the fringes saw slightly higher growth, but suburban retail space did the best with a 1.3 per cent rise.

For the whole year, shop rents rose by 18.2 per cent.

But landlords wanting to raise rents this year are likely to face strong resistance from retailers, said Mr Nicholas Mak, the director of research and consultancy at Knight Frank.

‘With the projected large supply coming on stream next year, retailers would have more space choices and would resist large increments in retail rents.’

He expects rents to increase by 5 to 10 per cent for this year.
Source : Straits Times  - 26 Jan 2008

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Singapore Home prices on city fringe, suburbs still rising strongly

Singapore Home prices on city fringe, suburbs still rising strongly

PRICE increases for high-end homes in the central areas may be easing, but not so for homes on the city fringe and suburban apartments - where prices are still rising strongly.
Urban Redeveloment Authority figures showed growth in the prices of uncompleted apartments in the central areas slid from 7.8 per cent to 7.6 per cent from October to December. Price increases for city fringe units, on the other hand, rose from 7.6 per cent to 8.3 per cent.

Growth in the prices of uncompleted apartments in suburban areas also crept up to 9.2 per cent from 9.1 per cent.

Dr Chua Yang Liang, head of research, South-east Asia, at Jones Lang LaSalle, said home prices in the suburbs would keep growing by 24 per cent to 26 per cent this year. This would be supported by home owners looking for new homes after being disloged by collective sales.

Last year, 14,811 new homes were sold.

Mr Li Hiaw Ho, executive director of research at CB Richard Ellis, meanwhile, expects price rises and sales volume to moderate this year.
‘Luxury prices are likely to stabilise at current levels, while mid-tier and mass market prices may have the potential to rise by 10 per cent to 15 per cent,’ he said.
TAN HUI YEE

Source : Straits Times  - 26 Jan 2008

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Buyers paying $22k over valuation for Singapore resale flats

Buyers paying $22k over valuation for Singapore resale flats

Median cash over valuation amount up a third; trend filters to outlying areas

By Tan Hui Yee, Housing Correspondent

BUYERS of resale Housing Board (HDB) flats paid a median amount of $22,000 in cash over the property’s valuation for their new homes from October to last month, a whopping 30 per cent rise from the previous quarter.
The good news for HDB flat owners in outlying areas is that this trend is filtering outwards towards them from the most popular districts downtown.

HDB data released yesterday showed that 86 per cent of all resale transactions in the fourth quarter of last year required cash payments over valuation, up from 80 per cent in the previous quarter.

However, greater resistance from buyers to the surging prices of resale flats last year resulted in a 13 per cent drop in the number of flats sold, to 6,700. For the whole of last year, 29,436 flats changed hands.

In fact, despite the overall rise, the median cash over valuation (COV) of some units in traditionally more popular estates such as Queenstown actually dropped. The median COV for a five-room flat in that area, which hit $110,000 in the July to September period, actually shrank to $79,000 in the period after that - albeit off a high base.

This, said the assistant vice-president of ERA Singapore, Mr Eugene Lim, showed the extent of the current market resistance towards high COVs.
‘Very often, the deal cannot be closed or takes much longer to close because of unrealistic sellers demanding high COV transactions,’ he said.

The chief executive of PropNex, Mr Mohamed Ismail, said another reason for this phenomenon is that the number of flat buyers with thick wads of cash in hand - mostly due to the collective sales of their private homes - is shrinking.

Most people buying HDB flats rely heavily on home loans to finance their purchase.

Resale prices of HDB flats rose 5.7 per cent during the quarter to bring the year’s growth to 17.5 per cent.

Last year’s growth is the biggest in a decade but property agents are not expecting a repeat for now as the HDB is offering at least 4,500 new flats for the first half of this year to calm buyers worried that housing is growing out of their reach.

These flats, which are highly subsidised, have an advantage over resale flats because they do not require buyers to fork out cash over valuation.

While ERA’s Mr Lim expects the price of resale flats to grow by 5 to 8 per cent this year, Mr Ismail reckons it would move by about 10 per cent.

Mr Ismail pointed out: ‘The economy is still doing well. And the labour market is tight.’

Source : Straits Times  - 26 Jan 2008

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Singapore SMRT sees good opportunity in plan to build new rail lines

Singapore SMRT sees good opportunity in plan to build new rail lines

By Grace Ng
COST CHALLENGE: SMRT’s gains slide 5.3 per cent as rising diesel prices add to expenses in the third quarter. — ST FILE PHOTO

SMRT Corp yesterday expressed confidence that it was ‘well-positioned’, as the dominant transport operator in Singapore, to compete in the tender to operate services on two new rail lines that the Government would build by 2020.
Ms Lim Cheng Cheng, SMRT executive vice-president and chief financial officer, said new plans to double Singapore’s existing rail network offered a ‘good opportunity’ for SMRT to participate in the new infrastructure system.

She said in a conference call discussing the company’s third-quarter results, that with more than two decades of operating efficient rail and other transport services behind it, SMRT was ‘confident it will be competitive in the new framework’.

Singapore will invest $20 billion to build two new subway lines by 2020.

It will also shorten the licence terms of railway operators from 30 years to as low as 10 years to make operators more efficient and ‘make the rail industry more contestable’, announced Transport Minister Raymond Lim yesterday.

Right now, however, SMRT is grappling with a different kind of challenge - rising diesel prices that pushed up its third-quarter operating costs and bit into profits.

Net profits for the three months ended Dec 31 slid 5.3 per cent to $38.3 million, from $40.4 million a year earlier.

This was in spite of a 7.3 per cent jump in third-quarter revenues to $202 million - boosted by more commuters taking the MRT and buses, as well as growth in its rental and advertising businesses.

But SMRT’s third-quarter bottom line was dragged down by higher diesel costs and repair and maintenance expenses. This drove up total operating costs by 4 per cent to $159.2 million.

The group said in a statement yesterday that it expects operating costs to rise further in the fourth quarter due to the volatile and rising price of diesel.

Earnings per share fell to 2.5 cents, compared with 2.7 cents a year earlier. Net asset value per share was flat at 42.4 cents, compared with 42.3 cents as at March 31 last year.

Ms Lim said the Government’s initiative - also announced yesterday - to add 93 additional train services during the morning and evening peak hours each week to reduce congestion, will not have a ‘material impact’ on its total operating costs.
Source : Straits Times - 26 Jan 2008

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Prospect of bidding war sends Singapore Straits Trading to record high

Prospect of bidding war sends Singapore Straits Trading to record high

By Lee Su Shyan, Assistant Money Editor

THE Straits Trading Company’s share price hit a record high of $5.89 yesterday on speculation that the low-profile firm may soon be at the heart of a bidding war.
On Thursday night, the Lee family, who founded OCBC Bank, said they were making a counter-offer of $5.76 a share for the firm.

This is just a tad higher than the offer of $5.70 from the family of the late Dr Tan Chin Tuan, via Tecity, earlier this month.

Dr Tan ran OCBC for many years and the two families were very close for decades.

But this latest move by the Lee family has raised conjecture that the two families have grown apart.

As well, given that the second offer is only marginally better than the first, the bets are on that the bids will go higher.

Yesterday’s share price was the highest that the counter has achieved in at least 20 years.

It ended 18 cents higher at $5.89, after hitting an intra-day high of $6.11.

However, volume was relatively low, with only about 166,000 shares traded. In the past six months, the average daily volume has been about 253,000 shares.

It is unlikely that the buyers were either the Tan family or the Lee family. If they buy at a higher price, they will have to raise their offers correspondingly.

News of the Lee family’s bid was released on Thursday night; trading was then halted for the morning session yesterday. Trading resumed in the afternoon.

There could be investors out there who reckon that the company - which has tin mining and smelting operations in Malaysia and property interests - is undervalued.

Yesterday, Straits Trading - which also owns and operates hotels such as Rendezvous Hotel Singapore - said it had signed an agreement to manage a new four-star hotel to be built in Shanghai.

To be branded as part of Rendezvous’ The Marque Collection of Hotels, it will be named the Marque Hotel Yu Gardens and is due to open in the middle of next year. It will be located near the famous Yu Gardens and the Bund area.
Source : Straits Times - 26 Jan 2008

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Plan to divest Singapore Senoko waste plant

Plan to divest Singapore Senoko waste plant

THE Singapore Government is considering divesting itself of an incineration plant.
In a statement yesterday, it said it was issuing a request for a proposal to sell the Senoko Incineration Plant either through a newly listed infrastructure business trust or to an existing listed trust.

As part of the exercise, it will appoint a fund manager and operator to manage the trust and operate the plant as well as procure incineration services from the trust.

‘The key objectives of this divestment exercise are to encourage competition and further improve efficiency in the waste management sector through greater private sector involvement, and also to create investment opportunities for the public to invest in the infrastructure sector,’ the statement said.

The request for a proposal will go through a number of stages with deadline for submission for the first stage on Feb 11.

Shortlisted bidders from Stage 1 will be invited to participate in subsequent stages.

Singapore currently has four incineration plants that handle about 8,200 tonnes of waste daily.

In the process, they generate more than 250MW of electricity.

A fifth waste-to-energy plant is being built by a Keppel Corp subsidiary. When completed next year, it can process 800 tonnes of waste per day of municipal and generate 20MW of green electricity.

Source : Straits Times - 26 Jan 2008

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Slide in factory output points to slower year ahead - Singapore

Slide in factory output points to slower year ahead - Singapore

Drug production sinks for fourth month, electronics growth falls again

By Bryan Lee, Economics Correspondent

FACTORIES in Singapore slowed more than expected last month, setting the stage for another weak year for the local manufacturing sector.

Industrial output shrank by 1.7 per cent, a bigger slide than November’s 0.5 per cent contraction, as drug production dived for the fourth straight month and electronics growth continued to fall.

Economists said the latest figures, published yesterday by the Economic Development Board, further confirm that the once-mighty economic growth engine will continue to sputter this year.

They said that with global growth set to slow, led by a possible recession in the key United States export market, the immediate outlook for Singapore - and other Asian export heavyweights - is anything but encouraging.

Indeed, the disappointing December data was a trigger for some economists, who had resisted downgrading their 2008 growth forecasts for the overall economy, to slash their predictions.

UNDER PRESSURE
‘There’s probably some excess inventory in the system and manufacturers will have to cut back production as demand weakens.’
MR KIT of Citigroup, on electronics demand weakening further as the US looks increasingly likely to enter a recession

‘The trend in overall industrial production is firmly pointing south,’ said HSBC economist Prakriti Sofat. The bank is looking to cut its gross domestic product growth forecast from 7.3 per cent, to possibly about 6 per cent.

Last month’s contraction contrasted with market predictions by a Reuters poll of six economists for a 2.3 per cent rise.

Once again, it was the notoriously volatile drug industry that caught out the experts. After three months of contraction, many were hoping for a big rebound to offset expected weakness in electronics.

But a sharp 36 per cent fall in pharmaceuticals, coupled with electronics growth almost halving to 3.3 per cent from 6.1 per cent, meant another month in the red for Singapore factories.

It was a similar picture for the full year, with growth at 5.8 per cent as electronics expanded just 4 per cent and drugs shrank 2.5 per cent.

While large, the recent falls in drugs output have not set off alarm bells as analysts say they were due to plants shutting down for maintenance and cleaning ahead of changes in their product mix.

‘We could well see a big bounce over the next few months. There is nothing to suggest that Singapore has lost its structural advantage in the pharmaceuticals sector,’ said Ms Sofat.

United Overseas Bank economist Ho Woei Chen said the rebound could occur within the first three months of the year.

But more worrying is the persistent weakness in electronics, which makes up 29 per cent of total manufacturing. ‘Electronics is under pressure because of the external environment,’ she said.

With the US, a key buyer of technology goods made here, looking increasingly set to enter a recession, economists said demand for Singapore factories will weaken further.

‘There’s probably some excess inventory in the system and manufacturers will have to cut back production as demand weakens,’ said Citigroup economist Kit Wei Zheng.

He said electronics may even shrink at some point in the first six months of this year, pointing out that electronic exports have been contracting for the past 11 months but production has instead been growing.

Economists said transport engineering, fuelled by the building of ships and oil rigs, will be a key anchor for the manufacturing sector.

But overall, it will be a rough year ahead. OCBC Bank economist Selena Ling said: ‘With the external outlook turning more bearish, we don’t think manufacturing will see a quick turnaround soon. Growth will depend on services and construction.’
Source : Straits Times - 26 Jan 2008

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No hike, so Singapore Prime cabbies’ earnings badly hit

No hike, so Singapore Prime cabbies’ earnings badly hit

Drivers from other five firms see earnings rise; Prime cabbies to vote on upping charges

By Lim Wei Chean
IN FLUX: While Prime cabbies saw their take-home pay drop by 50 per cent initially, other firms reported a slight increase. Transport Minister Raymond Lim said he expects the market to take three to four months to stabilise. — ST PHOTO: LAU FOOK KONG

THE lone Singapore taxi company to decide against raising its fares last month could soon reverse that decision.
Drivers from Prime Taxis, the island’s smallest cab firm, will vote next Tuesday on whether to raise flag-down fares and after-hours rates, said its managing director Neo Nam Heng.

The company’s 100 cabbies saw their take-home pay drop by 50 per cent after five of Singapore’s six companies raised fares last month, a move that drove many commuters away from taxis.

‘For the first two weeks, there was a fall in their income because people saw the other companies increase price and stopped taking cabs,’ said Mr Neo.

The situation, though, has improved recently. Drivers are seeing their income inch back up to the pre-hike rate of $100 to $120 a day, said Mr Neo.

It has been a roller-coaster ride for Singapore’s taxi companies, some of whom, like Prime Taxis, are starting to see business rebound.

Drivers from the island’s biggest firm, ComfortDelGro, have seen their take-home pay creep upwards over the last few weeks.

The average ComfortDelGro cabby earned $159 per shift, up from $153 before the fare increase, according to a company survey of 5,000 drivers. This is before deducting expenses like rent and diesel costs.

Premier Taxis’ managing director Lim Chong Boo said the firm’s numbers are ‘consistent’ with those at ComfortDelGro.

Together, the two companies have about 18,000 cars, or about 80 per cent of the taxis on Singapore roads.

All operators agree, though, that it is still too early to judge the effect of the fare hike, which was greeted with groans by passengers. Many said they would opt for public transit instead of paying more for a taxi ride.

Demand has cooled since the fare increase. Trans-Cab has seen bookings dip by some 20 per cent and

SMRT Taxis said that since Dec 21, it has been receiving 85 fewer calls per hour.

Although a key reason for the fare hike was to raise cabbies’ earnings, Trans-Cab, SMRT and Smart Taxis say they are getting varied response from their drivers.

In Parliament this week, Transport Minister Raymond Lim said that he expects the market to take three to four months to stabilise.

A Straits Times check at five taxi stands yesterday in the city showed more taxis in the queue than customers. In places like Ngee Ann City, where commuters used to have to wait a long time for cabs, there was a steady stream of taxis yesterday.

SMRT cabby Seah Yong Kok, 51, said customers are shying away because of the 35-per-cent peak-hour surcharge.

He used to take home $230 to $250 driving 12-hour shifts, but now takes home $170 to $180. To get back what he used to earn, he has to drive 14 to 15 hours.

He said: ‘I am thinking of giving up after Chinese New Year.’

Source : Straits Times - 26 Jan 2008

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Singapore Property market shows signs of cooling

Singapore Property market shows signs of cooling

By Fiona Chan, Property Reporter

AFTER months of relentless price rises, the property market finally took a breather at the end of last year.
Almost all sectors - including private and public homes, offices and shops - applied the brakes in the fourth quarter, ending almost two years of acceleration, official figures showed yesterday.

They confirmed initial estimates earlier this month that suggested, in particular, that housing demand is cooling.

Experts say this was due partly to the global fallout from the sub-prime mortgage crisis in the United States and partly to local government measures, such as the withdrawal of the deferred payment scheme in October.

The slowdown is set to continue this year. Growth will still be healthy, but considerably lower than last year’s one-record-after-another spiral, experts say.

Most predict a rise in private home prices of 10 to 20 per cent this year - a far cry from the robust 31.2 per cent growth last year.

Private home rental, which caused tenants no end of headaches by shooting up 41.2 per cent last year, are also expected to moderate to between 5 and 15 per cent.

HDB resale prices are projected to increase by not more than 10 per cent, down from last year’s 17.5 per cent. Offices and shops will also fall in line. Price rises are forecast to be less than last year’s increases of 32.6 per cent and 13.2 per cent, respectively.

Volatility in stock markets and the stream of bad economic news coming out of the US have made for a quiet start to the year, particularly in the housing market.

Developers have delayed planned launches of new projects or scheduled upcoming launches well after Chinese New Year, according to industry sources.

Plans to start sales for Marina Bay Suites yesterday, for example, are said to have been shelved until after the festive holiday.

‘We expect the residential market to remain cautious, at least in the first quarter of 2008, until the global situation becomes clearer,’ said Mr Li Hiaw Ho, executive director at CBRE Research.

Demand for homes also appears to have eased.

Although a record 14,811 new homes were sold last year, sales in the last three months contributed only 1,449 of those units - the fewest transactions in a quarter since 2005.

But homeowners can take heart: The boom has enough steam to run for some time before reaching its peak, said property consultants.

‘I would say we could be nearing a peak, but we’re not there yet,’ said Dr Chua Yang Liang, head of Singapore research at consultancy Jones Lang LaSalle.

‘Typically, we will see growth of around only 1 per cent in a quarter before we hit a peak,’ added Mr Nicholas Mak, director of research and consultancy at Knight Frank.

Private home prices rose 6.8 per cent in the fourth quarter of last year, down from 8.3 per cent growth in the third quarter.

HDB resale prices grew 5.7 per cent, compared with 6.6 per cent in the previous three months.

Consultants said while the rises in home prices will slow, prices will not actually fall until at least 2010, when a slew of new homes is expected to be completed.

In the meantime, much of this year’s residential market growth is likely to come from HDB flats and suburban mass market condominiums, which are signs of more genuine home-buying demand.

Speculative demand has already dropped dramatically. A measure of speculation is sub-sales, which are when uncompleted homes change hands. These fell to 513 in the fourth quarter - a third of their level in the previous quarter.

Source : Straits Times - 26 Jan 2008

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Two new Singapore MRT lines by 2020

Two new Singapore MRT lines by 2020

They will run through estates in north and east; North-South and East-West lines will also be extended by 2015

By Maria Almenoar

TWO new underground MRT lines will be built by 2020 - one from Woodlands to Marina Bay via Thomson, and the other from Changi to Marina Bay via Marine Parade.
The 27km Thomson line will run through Sin Ming and Kim Seng, while the Eastern Region Line (ERL) will slice through Siglap and Tanjong Rhu. All are neighbourhoods not served by the MRT now.

The two new lines add 48km of rail and possibly 30 new stations.

In addition, extensions will be made to the East-West and North-South lines by 2015.

The East-West line will stretch 14km out to Tuas with an above-ground track, while the North-South line will be extended underground to Marina South.

These four additions, together with the lines now being built, will extend the rail network from the current 138km of track to 278km.

The tab: $20 billion. This is over and above the $20 billion already committed for the Circle Line, the Downtown Line and the Boon Lay extension.

When completed, cross-city trips will be faster; commuters will have a train stop within 400m, or five minutes’ walking distance, said Transport Minister Raymond Lim yesterday.

He was delivering Part Two of his three-part policy speech on improvements to Singapore’s land transport system.

He first unveiled a slew of changes to the bus system last week, and will wrap it up next week with what is in store for other road users.

With the Thomson Line in operation, commuters in Sin Ming, for example, will shave 20 minutes off their current 45-minute trip to the city; those in Marine Parade will get to Marina Bay on the ERL in 20 minutes - almost as fast as by car, said Mr Lim.

The extensions to the existing East-West and North-South lines will also shorten commuting time.

Take, for example, a commuter who lives in Clementi and works in Tuas. To get to work now, he will have to take a train from Clementi to Boon Lay, from where it will take him another 35 minutes by bus to his destination. With the extension of the East-West line to Tuas, he will save 20 minutes.

Mr Lim, who toured the Kim Chuan train depot yesterday, said: ‘Commuters can look forward to new extensions or stages of new lines opening almost every other year until 2020.’

The next milestone will be marked in the middle of next year, when Stage 3 of the Circle Line opens - a year ahead of schedule - to connect areas such as Lorong Chuan and Bartley.

But commuters will experience improvements from next month, when 93 train trips will be added every week during the rush hours to ease crowding and cut waiting times.

Down the road, new trains will be bought and work done on the two oldest tracks so they can carry 15 per cent more passengers.

As with bus routes, the Government will also open up the rail market to competition. Contracts to run rail services will be 10 to 15 years long, down from 30.

To enhance the commuter’s experience, more covered linkways and overhead bridges will be built in the next two years; the elderly and disabled will have full access to buses and improved access to MRT stations. A six-month trial to allow foldable bicycles on trains will also be carried out.

As for taxi commuters, a centralised call booking centre will be set up by July.

Mr Lim gave the assurance that fares will continue to be regulated by the Public Transport Council, and help will be given to those who cannot afford to pay.

Source : Straits Times - 26 Jan 2008

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