Analysts say office rental slide a necessary correction

Analysts say office rental slide a necessary correction

By Desmond Wong,

SINGAPORE: Prime office rents may be on a downward trend, but analysts say there is nothing much to worry about as the decline is a necessary correction.

An oversupply of office space and low demand has knocked down prime office rentals in the central business district (CBD).

Rents have fallen as much as 40 per cent since the beginning of 2008 but observers said that rents are not in a free fall. They said the slowdown in rental rates is a correction that was going to happen due to the unusually high prices resulting from the boom in 2007.

“We could see office rentals return to a 2005 level. Office rentals have risen to such a high rate, so we must not take it that the 2007 rates are the norm,” said Nicholas Mak, Independent Property Consultant.

“For example, it was quite common before 2005 to find that Raffles Place rentals could be under S$6 (per square foot per month) in some places,” he added.

Experts said that prices should level out at between S$6 and S$10 per square foot per month in the CBD over the next year. This is down from an average of S$15 in 2007 and 2008.

The oversupply of office space has also stalled the developments in the city. However, interest in affordable non-central locations for companies which do not need to be housed in the CBD, has resulted in new project interests outside of town.

Thor Kerr, managing director, BCI Asian Construction Information, said: “If you talk about huge projects like the Marina Bay area, probably not as many, there is just an over supply right now.

“But if you look at smaller projects, especially along the new MRT lines, that is going to be interesting because they have good infrastructure and have a competitive advantage because of pricing.”

Such projects include the new Fusionopolis Tower near Buona Vista, and mixed developments along South Beach Road.

According to observers, this interest in non-prime properties is likely to keep rents down for prime office space until the global economy recovers and big tenants are once again interested in the CBD.

- CNA/sc

Source : Channel NewsAsia - 20 October 2009

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Real estate agencies deserve their cut

Real estate agencies deserve their cut

I REFER to yesterday’s letters by Mr Chua Khim Leng (’New rules should protect property agents’) and Mr Jason Sim (’Zero commission? It’s too good to be true’).

The Institute of Estate Agents was advised by the Competition Commission of Singapore to remove its commission guidelines in June last year. In the commission’s view, the guidelines are ‘harmful to competition, restricting competition in both fee levels and fee structure in the real estate industry, and likely to have the object of appreciably restricting competition among real estate agents in the real estate agency market’.

The commission guidelines were officially removed in September last year. Mr Chua’s suggestion to standardise commission rates is not tenable as it is anti-competitive.

Agencies are at liberty to set their own fee guidelines and compete with each other on value propositions to their clients. This is where agents play a key role in adding value to the services provided.

Mr Chua’s gripe that estate agencies should not take a cut of 10 to 30 per cent from each transaction closed by property agents because the agencies provide little or no support to agents may not be universally true.

Besides office space and administrative support, agents benefit from the estate agencies’ branding, listings, regular training and business networks with developers as well as corporate clients.

As agents are not individually licensed by the authorities, they operate under the auspices of the agencies through an associate agreement and the latter are vicariously responsible for the actions of the agents.

Taking a cut of an agreed percentage from the agent’s commission in each transaction would not be an unreasonable business practice as agents can negotiate contract terms with the agencies they wish to join including the relevant percentage cuts.

Agents who collect ‘zero commission’ from sellers and yet require them to sign an exclusive agreement, in Mr Sim’s example, continue to have professional duties towards the sellers to co-broke whenever necessary in the interests of their clients. The agent’s professional obligations to the sellers are not set aside simply because he has decided to waive the payable commission.

Dr Tan Tee Khoon

Chief Executive Officer

Singapore Accredited Estate Agencies Ltd

Source : Straits Times - 20 October 2009

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Insider trading: More people may be charged

Insider trading: More people may be charged

US investigators prepare to take institutional investors to court: Sources

NEW YORK: US federal investigators are gearing up to file charges against a wider array of insider-trading networks, some linked to the criminal case against billionaire hedge fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said.

The pending crackdown, based on at least two years of investigation, targets securities professionals - including hedge fund managers, lawyers and other Wall Street players - they said yesterday.

Some investigations, like the one that focused on Rajaratnam, rely on wiretaps. Others stem from a secret Securities and Exchange Commission (SEC) data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments.

Investigators have struggled for years to build cases against large institutional investors like hedge fund managers - who often deflect regulatory queries about suspiciously timed bets by arguing the bets are statistical flukes amid their millions of trades.

Rajaratnam, who founded the Galleon Group hedge fund in 1997, was arrested with five alleged conspirators last Friday - in what prosecutors called the biggest insider-trading ring targeting a hedge fund.

Prosecutors said he and his firm reaped as much as US$18 million (S$25 million) by investing on tips from a hedge fund, a credit-rating firm and employees within various companies, including Intel Capital, McKinsey and IBM.

Many cases are established when stock exchanges send the SEC reports on traders who place profitable bets shortly before corporate announcements. Someone who rarely trades may have difficulty explaining later what prompted an uncharacteristic investment. Hedge funds, on the other hand, can more plausibly attribute their windfalls to skill or chance.

To overcome that hurdle, the SEC began using computer software about two years ago to sift hundreds of millions of electronic trading records, known as blue sheets, attached to the stock exchange reports on suspicious incidents, according to people familiar with the project.

By looking for patterns in the library of data, they identify groups of traders who repeatedly make similar well-timed bets. Once investigators find a cluster of correlated trades, they tap other sources of information to unravel how its members obtain and share tips, the people familiar with the project said.

BLOOMBERG

Source : Straits Times - 20 October 2009

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Only 200 HDB blocks not eligible for lift upgrading

Only 200 HDB blocks not eligible for lift upgrading

By Nur Dianah Suhaimi

ONLY 200 out of around 5,300 HDB blocks built before 1990 will not be getting lifts that stop at every floor.

They do not qualify for the Lift Upgrading Programme (LUP) because it would cost more than $30,000 per unit to install lifts in these blocks.

This is in spite of innovative and cost-effective solutions by the Housing and Development Board to bring costs down, Parliament heard yesterday.

Senior Minister of State for National Development Grace Fu said these solutions include installing shaftless lifts, smaller lifts for low-rise blocks and reconfigured lift access for blocks with lift landings halfway between floors.

She was responding to a question by Mr Christopher de Souza (Holland-Bukit Timah GRC), who asked for the number of HDB blocks that do not qualify for lift upgrading because of cost issues.

When the lift upgrading programme was introduced eight years ago, almost 1,000 blocks - or around one in five - failed to qualify because it would have been too expensive.

For some blocks, it would have cost more than $120,000 per unit to have a lift installed, way above the $30,000 budget.

‘This cost may be as high as 40 per cent of the value of a typical three- or four-room HDB flat. It does not make sense to implement the LUP in such blocks,’ Ms Fu said.

To qualify for lift upgrading, the HDB block must have been built before 1990, and at least 75 per cent of the residents must vote in favour of the programme. The cost of the upgrading should not exceed $30,000 per benefiting unit. Ground floor flats are not considered to benefit.

The Government pays between 75 per cent and 90 per cent of the upgrading bill, depending on the flat type.

The remaining 10 per cent to 25 per cent is shared between the town council and the residents.

Mr de Souza also asked if the Ministry of National Development will consider prioritising the upgrading of blocks which have a higher proportion of elderly residents.

Responding, Ms Fu said this can be one of the considerations by the grassroots advisers when nominating their precincts for lift upgrading.

‘HDB will take this into consideration when selecting blocks for LUP,’ she said.

In PAP wards, the advisers are the Members of Parliament, while in opposition-held wards, they are the PAP-appointed representatives.

When asked if the $30,000 lift upgrading budget remains relevant today, she said the sum acts as a general cost guideline.

‘We have, in some of the marginal cases, exercised some flexibility, especially when the cost of construction went up significantly when we had problems with sand supply,’ she said.

However, when construction costs came down in the past few months, the ministry was able to offer lift upgrading to more blocks with the same budget.

Ms Fu said: ‘We indeed believe that the budget has helped us to allocate precious resources to benefit more HDB residents.’

The LUP is a $5.5 billion scheme aimed at providing lift landings on every floor of older HDB blocks, which usually have one lift landing for every three or four floors.

Upgrading has been completed on some 80 per cent of the eligible blocks. Work on the remaining 1,000 blocks is due to be completed by 2014.

In July this year, the Government announced that 65 precincts, including those in the two opposition wards, would be selected for lift upgrading in this financial year.

Source : Straits Times - 20 October 2009

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Will Windows 7 exorcise Vista’s ghost?

Will Windows 7 exorcise Vista’s ghost?

XP users, particularly businesses, will be the hardest to convince

By Oo Gin Lee

THURSDAY will mark a new dawn for Microsoft’s cash cow, the Windows operating system (OS), with the worldwide launch of its seventh edition.

Simply called Windows 7, it is a huge step forward for the software giant trying to exorcise the ghost of Vista - the sixth Windows version.

An OS is the master software in a computer, on top of which other applications like word processing and games can run. So for Macintosh computers it is Mac OS X while for PCs it is mainly Microsoft’s Windows.

Every computer needs an OS, and since about nine out of 10 personal computers are running on Windows, Microsoft’s business strategy for the last 20 years has been the same: release a new version of Windows every two to three years and get users to pay for the upgrade.

But Vista failed to garner the industry support that Microsoft had hoped for. It was launched in January 2007 with an aesthetically superior interface and arguably better security than Windows XP - the fifth Windows OS released six years earlier, in 2001.

The problem was this: Microsoft was trying to fix what was essentially not broken. Windows XP was, and is - unless Windows 7 upstages it - the most successful Windows of all time. It was fast, stable and worked well with applications.

Microsoft clearly needed to turn up the heat to get XP-loving consumers and businesses to take up the upgrade. It sold Vista on looks. It sold Vista on features. It threw millions of dollars in marketing campaigns. But Vista was slower than XP, less stable and had compatibility problems with hardware like printers and scanners at the time of the launch, for many vendors had not yet written the software drivers for Vista. Consumers experienced a mess-up.

In one pre-launch campaign, they were told that computers with the Windows Vista Capable logo meant that these models could be upgraded to the new OS when it was released.

But they later found that not all the PCs had enough processing power to run Vista’s high-end graphical features, and a class action lawsuit ensued in the United States.

That lawsuit lost its ‘class’ status earlier this year but the judge did not dismiss the case. That means the individual consumer can still sue in his or her own name.

A report by web metrics firm Net Applications earlier this month stated that Windows XP account for three-quarters of all existing Windows PCs. Vista has clearly failed, and Microsoft is hoping Windows 7 is the remedy.

It clearly needs the financial boost. Its revenue for the fourth quarter of the 2009 fiscal year - which ended June 30 - was down by 17 per cent year-on-year.

But what of Windows 7? Well, it is based on the same core foundation as the Vista and even looks a lot like it, but it is a lot more stable and faster.

Plus, the drivers which worked on Vista are very likely to work on the new OS as well, alleviating the problem of incompatible hardware when users upgrade to the new Windows.

In short, Windows 7 is what Vista should have been.

Early tech reviews around the world for Windows 7 have been positive and there is a good chance many individual consumers will feel the same. But Microsoft will find it more challenging with businesses, which favour stability and convenience over cool looks and features.

Microsoft has stopped selling Windows XP since January this year, with the exception of netbooks where you can still find it pre-installed.

For new PC purchases, however, where the choice is between Vista and Windows 7, the question is moot as to which consumers will go for: obviously, the latter.

It is the in-between camp - existing customers of XP - who would probably need the most convincing. That is because Microsoft will continue to support XP with free security patches until April 2014. So satisfied Windows XP users can stick to this OS for another four years or until their machines break down.

Microsoft had tried to persuade PC users to switch to Vista when it launched it by aggressively pushing Vista-only games like Halo 2 and Shadowrun. This failed to gain any significant traction and the strategy was soon abandoned.

Microsoft is also unlikely to attempt to make another ‘works on my new OS only’ push in the near future, not with rival Google snapping at its heels with its promise of a new rich array of Web-based applications, which will work on browsers, and therefore on any OS the computer runs on. This means that new applications over the next few years will, in all likelihood, be able to run on XP as well as the Vista/Windows 7 platforms.

In other words, Windows XP still ain’t broken.

Source : Straits Times - 20 October 2009

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Budget 2010 to aim at longer term growth

Budget 2010 to aim at longer term growth

Measures will be less broad-based and more targeted, Tharman says

By Cai Haoxiang

THE Government will continue to spend money to boost the economy in the next financial year, but measures will be more targeted and less broad-based.

Finance Minister Tharman Shanmugaratnam told Parliament yesterday that Budget 2010 will see a shift away from broad-based relief type measures towards measures that are ‘targeted specifically at restructuring, enhancing productivity, and preparing for growth over the medium to longer term’.

Overall, however, the Government’s budget position next year will not be much different from this year’s, in that this year’s ‘expansionary fiscal stance’ will likely remain as there are many major infrastructure projects in the works, like the Marina Coastal Expressway and the various subway lines.

Mr Tharman added: ‘We will live within our means within this term of government. We have some savings as are indicated in the Budget this year.’

In January this year, the Government rolled out an unprecedented slew of measures to help families, workers and businesses cope with the economic crisis.

It included the $20.5 billion Resilience Package that had three main measures aimed at saving jobs: the $4.5 billion Jobs Credit scheme to subsidise employers’ wage bills, a $600 million skills upgrading programme for workers, and the $5.8 billion Special Risk-Sharing Initiative (SRI) to help businesses get credit.

Although the Government saved enough in its current term to fund its January Budget measures, it decided to fund $4.9 billion of the Jobs Credit and SRI schemes from Singapore’s substantial past reserves. The Government also did not need to borrow to fund the Budget.

Replying to questions on the impact of the stimulus package, Mr Tharman said that Jobs Credit and the SRI mitigated the economic decline and ‘helped avert major job losses’.

The Jobs Credit scheme, which will be scaled back and phased out over the first six months of next year, was a ’significant fiscal injection that would have had a multiplier effect on the economy and thereby helped support more jobs’, he said.

Meanwhile, the SRI benefited a broad segment of companies, providing them with credit to sustain their operations, he said. The 16 participating financial institutions gave out loans worth about $4.9 billion, about seven times the value of loans approved in the same period last year.

‘Small and medium enterprises (SME) have benefited from the SRI. More than 90 per cent of the loans approved were granted to SMEs, and these loans accounted for about 70 per cent of the total loan quantum approved,’ he said.

The Government had projected a record Budget deficit of $8.7 billion this year, or 3.5 per cent of Singapore’s gross domestic product of $248 billion last year, after taking stimulus measures into account.

For next year’s Budget, Mr Tharman said there would be benefits that all companies could enjoy ‘if they are putting into place productivity-enhancing measures’.

However, there would also be benefits that some companies could enjoy more than others, especially companies that are ‘growing the fastest, investing more’ and are likely to spur the economy’s growth over the next five years.

At the same time, he noted, the Government is not aiming only to create high-end jobs, but also to include everyone in the economy’s growth.

‘This means improving our workers’ capabilities up and down the line, from the simplest jobs to the most complex jobs. Every worker can improve, every job can yield higher productivity and therefore higher pay. So whether it’s a mature worker or younger worker, we’ve got to address this across the board,’ he said.

He added that a sub-group in the high-powered Economic Strategies Committee (ESC), headed by Manpower Minister Gan Kim Yong, is spending a lot of time to address this issue.

The ESC, which Mr Tharman chairs, will unveil its recommendations ahead of next year’s Budget.

Even as he looks ahead to next year, Mr Tharman remains guarded about the prospects for the global economy.

While the fear of big bank failures has receded, concern about their ability to shed bad assets and start lending again remains, he said.

‘The global financial system is still fragile, the underlying problems have not been resolved… So confidence has not returned to normal, and we, for that matter seasoned observers all over the world, do not expect the next year or two to be very pretty.’

Source : Straits Times - 20 October 2009

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Accreditation raises questions

Accreditation raises questions

Some in the property industry question how the rules can be enforced and ask who will do the policing

By UMA SHANKARI

REPORTER

THE government last week unveiled a proposed framework to regulate property agents here - a move thought to be urgent as complaints about errant agents have risen over the years.

The changes mooted are varied. Among other things, the Ministry of National Development (MND) proposes that real estate agents no longer be allowed to be freelancers - that is, agents not contracted with an accredited agency.

It also wants to prevent agents from representing more than one agency.

And a recognised accreditation body for agents will be set up next year, which will create and maintain a public central registry that lists all accredited agents so that people can check that the agent they engage is qualified.

To oversee all this, a new government agency will be created. The aim is to monitor the activities of property agents more closely and enforce rules more keenly.

But some in the industry question how the rules can be enforced and ask who will do the policing.

There are now an estimated 25,000 to 30,000 agents in the market with varying degrees of training and professional standards.

And about 1,700 real estate agencies are licensed by the Inland Revenue Authority of Singapore.

Under the new framework, much of the burden will fall on agencies. MND said: ‘In particular, requiring real estate agencies to take greater responsibility for the actions of their agents will be a key feature.’

The government will license property agencies - but not individual agents. Property agents will instead be accredited by the accreditation body.

Agencies will play a strong role in disciplining errant agents and making sure the central registry is updated.

For instance, if an agent is fired, the central registry is to be updated to show a black mark against him, which is supposed to prevent another agency from hiring him.

MND said that agencies that fail to exercise adequate control over their agents may be subject to punitive measures, such as restrictions on recruiting more agents.

One agency boss said that the framework is a move ‘from no touch to light touch’.

Agency heads here have repeatedly said that they are not in favour of regulating their own agents.

Instead, they want the government to license individual agents so it will be able to revoke licences if rules are breached.

They point to Hong Kong for comparison. Hong Kong, one veteran estimates, has twice as many agents as Singapore, and uses a system where individual agents are licensed.

With such sentiment on the ground here, it is unclear how the new government body intends to get property firms to take responsibility for their agents - penalties notwithstanding.

Another question mark hangs over who will sit on the accreditation body’s board. Many industry players eligible will no doubt have vested interests.

It is also unclear how ‘introducers’ - de facto property agents - will be dealt with. These people charge a fee, typically to sellers, to introduce them to buyers. They often work independently. And as no agency is responsible for them, it is not known how will they be policed.

Other proposed changes have drawn a positive response. Under the new framework, agents will have to pass an industry examination and be accredited by the accreditation body before they can practise.

This will weed out some part-timers and moonlighters and could cut the number of agents by as much as 20 per cent.

And while the hoped-for licensing of individual agents may not materialise, setting up a accreditation body is seen as a step in the right direction.

‘As far as I am concerned, it (accreditation) is better than nothing,’ said an industry veteran.

Source : Business Times - 20 October 2009

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IP rights, rule of law our competitive edge: MM Lee

IP rights, rule of law our competitive edge: MM Lee

S’pore will resist commitments to firm cuts in emissions at Kyoto II

By CHEW XIANG

(SINGAPORE) Singapore’s protection of intellectual property and rule of law will - at least for the time being - keep it ahead of the Chinese dragon, Minister Mentor Lee Kuan Yew said last night.

Mr Lee: It’s very difficult to spot your niches. Whatever we do now, given time, the Chinese will do it better
Speaking at a dialogue with university students held at the National University of Singapore, Mr Lee said China, India, and possibly Brazil and Russia, were creating a new world order and that it would not be easy for Singapore to survive.

In the wide-ranging, hour-long discussion, Mr Lee also noted that Singapore will resist pressure from Japan and Australia to commit to firm cuts in emissions during the coming climate change talks in Copenhagen.

‘If we have to make such firm commitments to cut down … then our growth will slow down, which I think is unfair to us,’ Mr Lee said.

‘They say that our emissions per capita is one of the highest in the world,’ Mr Lee said. ‘But that includes bunkering, aviation fuel, which is not all for Singapore Airlines, bunkering which is not all just for NOL or APL.

‘We use as much gas as is available for our power stations but the Japanese and the Australians want to upgrade us into Category One where we have to make firm commitments (to cutting emissions).’

He said that most of the goods produced here were for export, not domestic consumption. ‘We are going to resist that. The Australians want us brought to Category One so that we have to slow down economic growth and the Japanese think so too.

‘We’ll see. But we have prepared all our arguments and it’s not possible to just treat us like an ordinary country.’

The Minister Mentor was also asked by a student on key economic sectors that Singapore should focus on in the next ten years.

‘It’s very difficult to spot your niches. Whatever we do now, given time, the Chinese will do it better, because they’ve got more talent,’ Mr Lee said.

‘So where do we retain our competitive edge? In my own analysis, it will take a long time to change the system from no protection of intellectual property rights to protection of intellectual property rights; from no rule of law … to the rule of law. These areas they will not be able to compete with us,’ Mr Lee said.

He added that was a key draw for research and development as well as the pharmaceutical industry. ‘They go to China, no, because in six months you’ll find what you’ve done on the market as a generic product, because they are smart, they reverse engineer it.’

Students at the dialogue session chaired by Ambassador-At-Large Tommy Koh also asked Mr Lee questions ranging on his desired legacy, to the creeping threat of wealth inequality.

Mr Lee noted that the government was trying hard to integrate its foreign population by getting them to spread out through the city, rather than cluster in areas, but admitted he would not be happy if in time to come most Singaporeans were only second generation citizens.

Source : Business Times - 20 October 2009

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