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Archive for the ‘Property’ Category

Reits: Keep on holding

In Economy, Financial competency, Property, Reits, Temasek on 19/03/2015 at 7:24 am

Likewise stocks with sustainable, decent dividend yields like Temasek’s Fab 5

“The Fed rate projections have been significantly lowered over a three-year horizon. This points to a later lift-off,” FT quotes a BNP Paribas economist.

In simpler English:

“The Fed is in no rush,” said Ward McCarthy, chief US economist at Jefferies.

“At the current juncture, the timing of the liftoff is still indeterminate and will depend upon the inflation data. The policy statement eliminated the use of ‘patient’ in forward guidance, but the FOMC also described the new forward guidance as being “consistent” with the prior forward guidance.”

He added: “The word ‘patient’ was removed, but the meaning of patient remained.” (BBC)

Or as Reuters puts it:  The Federal Reserve on Wednesday moved a step closer to hiking rates for the first time since 2006, but downgraded its economic growth and inflation projections, signaling it is in no rush to push borrowing costs to more normal levels.

http://www.reuters.com/article/2015/03/18/us-usa-fed-idUSKBN0ME0D520150318

Reits: The Ugly and the Good

In Property, Reits on 16/03/2015 at 1:12 pm

If you believe stock brokers:

Industrial

High supply and limited demand are key risks.

The good times may finally be drawing to a close for industrial REITs, after enjoying three consecutive years of double-digit revenue growth.

A report by CIMB stated that industrial REITs have limited room for further positive rental reversions. In the past three years, rental indices for the different types of industrial properties have rebounded to pre-GFC levels on the back of a lack of supply, and strength of the manufacturing production index (MPI) gaining strength.

These two factors will be absent this year, what with the MPI forecasted to only grow from around 1-2% while supply will be high, averaging 7.1m sq ft p.a. for single-user factory space, 5.7m sq ft for multi-user factory space, 5.7m sq ft for warehouses, and 1.7m sq ft for business park space in 2015-2016.

“As such, we believe the room for further positive rental growth could be suppressed. In addition, with passing rents for industrial REITs’ properties mostly marked to market, the lack of decent growth in the headline rents in this sector could limit the room for higher rental rates when leases are due for renewal in the coming quarters,” stated CIMB.

– See more at: http://sbr.com.sg/commercial-property/in-focus/good-times-are-over-industrial-reits#sthash.aCLjlS5M.dpuf

Office

According to BNP Paribas, it may be time to take profit on office REITs as positives have been priced in by the market and new CBD offices are on their way in 2016.

“Office rents should continue to rise in 2015, with an increase of 10% y-y in 2015. That said, we believe this has been largely priced in by the market, as reflected in the share-price outperformance of office REITs in 2014. Looking ahead, new CBD offices that are due to come on the market in 2016 could lead to a flurry of leasing activity, starting as early as 2H15. This should cap rental growth in 2016,” stated BNP Paribas.

– See more at: http://sbr.com.sg/commercial-property/news/it-time-take-profit-outperforming-office-reits#sthash.nvdScjBc.dpuf

Retail

According to CIMB, the worst is finally over for these retail REITs. For one, space supply is expected to moderate this year peaking in 2014. Around 2.6m square feet of space flooded the market last year, more than twice the 3 -year historical average net take-up of 1.1m sq ft.

“We expect supply to moderate, averaging about 700k sq ft annually in 2015-2018. Additionally, we believe Singapore is not “over-malled” vs. other Asian cities and historically,” stated CIMB.

– See more at: http://sbr.com.sg/commercial-property/news/retail-reits-in-rebound-after-extremely-bleak-2014#sthash.8BhDMwSt.dpuf

SG50: Millionaire pioneers/ Emigration: Our “dirty” secret

In Property, Uncategorized on 10/03/2015 at 6:23 am

Millionaire pioneers

In response to the last sentence in this,  a S’porean who grew rich in the PAP yrs (renting out condos  now he says) but who is no fan wrote: At least those who believed in Buffet 50 yrs ago can retire today as multi-millionaires.

Sinkies who believed in PAPies 50 years ago are still working until they drop dead, picking up cardboard & rubbish to sell to recycling companies at 10 cents per kg.

This reminded that, yesterday, my mum told me about her friend. All her three children migrated many years ago and she’s happily living here in a “home” because she is getting on 90+. She is very comfortable because she had a house to sell.

This fact made me respond to the commenter: “My mum’s a millionaire. ))) Dad bot house in 1962/63. And those who bot HDB even in the 80s, are millionaires. ))))

SG50 is silent on this

On to a more serious matter. My mum’s story about her friend’s children (one grandson born in the UK is now working in Bangkok, but none is here)  reminded me of this extract from a BBC article.

At the same time, people are leaving – the high cost of living and the search for a better work-life balance has led many to move away. In a 2012 survey, 56% of the 2000-odd Singaporeans surveyed said they would migrate if given a choice.

Fauja Singh's family in 1970 Fauja Singh’s family in 1970 – only three grandchildren remain in Singapore

This too is reflected in my own family. My two brothers and their children now live in the US and my mother joined them there after my father passed away. The majority of my grandfather’s huge family, captured in a photograph in 1970, no longer live in Singapore. Only three of his 15 grandchildren still do. I chose to return after many years away in the US, Canada and Japan. What made me come back? The same reasons my grandfather came – opportunity.

https://wordpress.com/post/10461569/new

All because of Mandarin

I have a cousin who migrated to the US many years ago, partly because the kids couldn’t get a good education here because they failed Mandarin. And this still seems to be a reason to migrate: kids’ education because they can’t pass Mandarin.

I have a friend who migrated because her son failed his Mandarin. His Oz grades got him a letter from the Oz PM (students who are among the top 1% in Oz “A-levels” each yr get this letter), and he returned here to do NS and study in SMU. His younger brother too got the letter and is now an NS officer.

No quitters these boys: but then mum juz got allocated a BTO flat in the NE even though she’s not resident here.

Banging their balls

Let’s finally sneer at those emigrants who are banging their balls: the Eurasians who fled S’pore after the PAP came into power in 1959. Likewise those Eurasians, Chinese and Indians who fled S’pore after 1965 and after the US defeat in Vietnam, because they tot S’pore would go to the dogs.

Anti-PAppies like Goh Meng Seng,  Roy and New Citizen H3 may think S’pore has gone to the dogs; but it went thru a “golden age” that benefited many.

Ferndale Lea: Will owners fold or raise?

In Property on 04/02/2015 at 5:03 am

Will the owners sit down and keep quiet accepting a temple with a columbarium attached to it? Or will they continue the alliance with the anti-PAP cyber warriors  and demand “justice”: temple with no columbarium or a refund.

,Since the National Development Minister Khaw Boon Wan in Parliament on Thursday (Jan 29).

“We now understand that the winning tenderer for this site, Eternal Pure Land, is actually a private company without any religious affiliation. From what we know, the plan of the company is to run a commercial columbarium on the site,” the minister said. “This is not in line with our plan for the Places of Worship site.” (CNA),

while anti-PAP warriors are flooding cyberspace with continued attacks of the PAP administration and its apparent U turn, the owners have been quiet.

They had been spinning that they only objected to a commercial columbarium* because this would spoil the environment. So they wouldn’t mind a real temple that had a columbarium, would they? Because Khaw said:

He added that many temples provide an incidental columbarium service for their members and devotees, and whether the eventual temple in Sengkang will provide such a service is a decision for the temple trustees to make.

Mr Khaw said the Ministry of National Development is “in discussion” with Eternal Pure Land to “ensure that the land is restored to the original plan of a Chinese temple”

Err I suspect they would still object if there was a temple with a columbarium because this is what was circulated earlier something slighly different (analysed here by me and another) which had this very NIMBY bit

We are unhappy and felt aggrieved by HDB’s misrepresentation by way of omission of material fact in their sale brochures. We reiterate that there was absolutely NO MENTION of columbarium in the sale brochures while the stated “Ancillary Service” phrase is so general that anyone who read that would have misconstrued as something else. Such definition can only be found in URA website and not HDB website at all. Any ordinary man would not have known how to get access to the details at all.

2) We are against such sales tactic as we should be treated fairly to be given FULL DISCLOSURE of information by the seller, HDB before we chose to buy the flat. We should have the right to make INFORMED choices and not short-changed with such omission of critical material information by HDB.

And even in the BS missive to PM and Khaw they made it clear towards the end of the letter: no urns containing ashes and bones:

11. We hope that in the event of putting the land up for tender again, HDB could consider the combination of Chinese Temple with Childcare/Student Care. The Childcare/Student Care centre should be required to open to all races. This will serve the community well as many of the residents are young couples with kids.

I think the owners are hoping (and praying?) that somehow there won’t be a  columbarium. Dream on. Know any recently built temple that doesn’t have a  columbarium: the columbarium provides a good, regular stream of income that helps defry the cost of running a temple.

Meanwhile, they’ve decided to keep quiet. Smart move.

 

Sentosa Cove: God tells Khong to wait 5 yrs?

In Property on 27/01/2015 at 2:19 pm

Can Sun Ho wait that long? Prosperity gospel? What prosperity gospel?

Those were my tots my I read yesterday that Khong’s trial was resuming. I then tot of last week’s

— URA reports that for the whole of 2014, private property prices fell by 4% – the first year of overall price decline since 2008; and

— prices of resale flats fell by 6 per cent in 2014 – the second straight year of decline – while the number of resale transactions declined 4.3%, according to the HDB.

All this led me to remember some reports I read about Sentisa Cove a month ago.

Condominium prices in Sentosa are close to their lowest level since the end of 2006, according to Maybank Kim Eng Securities in mid December. Some house prices on the island have halved since 2012.

Remember Prosperity gospel pastor and wife promoter Khong has a Sentosa penthouse that is underwater and causing him S$17,000 a month.

But God has given him a break: only five yrs more of suffering. It was reported on 19th December last yr: Blackstone Group LP, which is taking part in the refinancing of luxury Singapore properties, is prepared to wait as long as five years for a turnaround in residential prices to see higher returns on the transaction.

Blackstone and Malaysia’s CIMB Bank Bhd. agreed i… to take part in a financing for a luxury hotel, retail and residential development, owned by City Developments Ltd. (CIT), Singapore’s second-largest developer, on Sentosa island.

“We have a positive long term view of Singapore,” said Singapore-based Kishore Moorjani, a managing director who oversees Blackstone’s Tactical Opportunities Group. Blackstone wouldn’t be satisfied with just a 5 percent return on its Sentosa investment and is eyeing the long-term potential of the residential properties, he said. “We will do very well on this in the long term. We will be better off in five years than we are today,” he said.

Both Blackstone and CIMB said they are willing to wait several years before selling to give prices time to recover.

Under the terms of the refinancing agreement, City Developments has to achieve a price of at least S$2,400 per square foot before it can sell the residential properties.

City Developments has sold only 25 of the 228 apartments in the Sentosa development and has leased about half of the rest.

The refinancing, announced Dec. 16, involves Blackstone, CIMB and City Developments investing a total S$750 million in a capital instrument called a profit-participation security. Separately, DBS Bank Ltd. and Oversea-Chinese Banking Corp. will provide S$750 million in loans.

Don’t Sell

City Developments will receive about S$1.2 billion from the transaction. That will allow the company to reduce debt and gives it a freer hand for overseas acquisitions, Chief Executive Officer Grant Kelley said.

The developer is looking for purchases in China and Australia, after spending $1 billion on overseas investments this year, he said. The company will also focus on Japan, the U.S. and the U.K.

Kelley said it will take time for Sentosa residential property prices to recover, though he expressed confidence that prices will rise well above the minimum S$2,400 per square foot within five years.

“Now is not the time to be selling,” Kelley said. “The base case assumption of S$2,400, there is an ultra high probability, almost a certainty, of achieving that. We expect it to be significantly beyond that by the time 2018-2019 comes around.”

CIMB also said it expects to wait to realize a return on the residential properties included in the transaction.

“This gives us a fixed income and also an equity kicker at the end of the five years,” Carol Fong, country chief executive officer, investment banking, for Singapore at CIMB Securities (Singapore) Pte said.

http://www.bloomberg.com/news/2014-12-19/blackstone-ready-to-wait-5-years-for-singapore-property-recovery.html

Jan- Jun 2015: Hibernate unless mortgaged to eyeballs

In Economy, Financial competency, Financial planning, Property on 07/01/2015 at 11:40 am

(Updated on 9 January 2015 to include bit about clueless “consultant”.)

2015 is likely to begin in a merited atmosphere of gloom …

“Lowflation”, basically stable prices, is set to make everything worse. The already heavy debt loads of both consumers and governments will become more burdensome as nominal GDP growth slows down. The sharp fall in commodity prices may increase spending power in some countries, but it could turn lowflation into outright deflation.

http://blogs.reuters.com/breakingviews/2014/12/16/this-is-as-good-as-global-recovery-gets/

But if mortgaged yr eyeballs …. https://atans1.wordpress.com/2014/12/16/why-oil-price-falls-bad-for-mortgagees/ and

A key interest rate that housing loans in Singapore are pegged to rose sharply for a second day, indicating home owners may face higher mortgage payments.

Bloomberg data showed the three-month Singapore Interbank Offered Rate (Sibor) was fixed at 0.62052 per cent at 11.30am on Tuesday (Jan 6), up from 0.57762 per cent on Monday.

Sibor is the rate at which banks lend to one another and is a widely used measure of the cost of funds. The three-month Sibor had been creeping up previously, rising from around 0.4 per cent in October to around 0.45 per cent at the end of last week.

Many housing loans are pegged to three-month Sibor. Oversea-Chinese Banking Corp (OCBC), for example, is currently offering home loans at three-month Sibor plus 0.85 percentage points for the first three years, according to its website.

The lending rate is reviewed every three months.

Assuming mortgage rates in Singapore rise to 2 per cent from around 1.5 per cent currently, a home buyer with an outstanding loan of S$500,000 and 20 years remaining will need to pay around S$2,530 a month, up from S$2,410. Should the rate rise to 3 per cent, the monthly payment will increase to S$2,770.

(CNA yesterday)

But here’s one mortgagee who lives in lala land. She obviously is not into finance.

New home owner Huang Sijia, 26, who took out a Sibor floating loan last year, is sticking to her package for now. “I am not too worried because the interest rates have been quite stable for the past three years,” said the consultant.

http://business.asiaone.com/property/news/mortgage-payment-hike-likely-key-rate-rises

S’pore’s prospects

3% this yr 3.1% next yr from 3.3% and 3.7% respectively say the worse than fortune tellers forecasters

Private sector economists are less upbeat about the growth outlook for the Singapore economy this year, and have moderated their growth expectations for almost all sectors, according to a quarterly survey released by the Monetary Authority of Singapore (MAS) on Wednesday (Dec 17).

The economists polled in the survey said they expect Singapore’s economy to grow by 3 per cent this year, down from their median forecast of 3.3 per cent in the previous survey in September.

The latest estimates are in line with the official growth forecast of 2.5 to 3.5 per cent, which was announced in August.

The lower forecast comes after gross domestic product (GDP) growth in the third quarter was weaker than expected. The economy expanded by 2.8 per cent during the quarter, lower than the median forecast of 3.2 per cent in the previous survey.

Manufacturing is now expected to grow by 3.5 per cent this year, down from the 4.2 per cent in the previous survey. Construction is now expected to grow by 3.4 per cent, down from 4.7 per cent. The forecast for wholesale and retail trade has been revised to 2.4 per cent from 2.6 per cent, while the forecast for accommodation and food services has been revised to 1.2 per cent from 1.5 per cent.

Finance and insurance was the only sector that had its forecast revised upwards. The sector is now expected to expand by 7.3 per cent, up from the 5.5 per cent in the previous survey.

INFLATION LIKELY TO SLOW

Inflation is expected to slow, with the economists forecasting the consumer price index (CPI) to come in at 1.1 per cent for the full year, down from the 1.8 per cent forecast in September. Core inflation – which excludes accommodation and car prices – is expected at 2 per cent, down from 2.2 per cent in the previous survey.

Looking ahead, economists expect GDP will expand by 3.1 per cent in 2015, down from the 3.7 per cent in the September survey. Headline inflation and MAS core inflation are forecast to be 1.1 per cent and 1.9 per cent, respectively.

The MAS Survey of Professional Forecasters is conducted every quarter after the release of detailed economic data for the preceding three months. The median forecasts in the latest report were based on the estimates of 22 economists

(CNA late last yr)

The final sign of winter: lemmings have made M&A deals

 Michael J. de la Merced writes in DealBook. Some 40,298 transactions ‒ worth nearly $3.5 trillion ‒ were announced worldwide in 2014, according to Thomson Reuters. It was the biggest year in deals since 2007. Goldman Sachs and the law firm Skadden, Arps, Slate, Meagher & Flom led the global M.&A. tables for financial and legal advising.

Sure, debt financing was cheap and stock prices were climbing. But perhaps the biggest change, deal makers say, is that corporate boards and management teams realized that their ability to expand their companies on their own had become more difficult. And with some semblance of predictability in the markets, boards now feel more comfortable taking the plunge, Mr. de la Merced writes. The busiest sectors for the year have been the oil and gas industry and the pharmaceuticals industry. But the biggest deals of the year, including the assumption of debt, have been takeovers in the telecommunications industry, including Comcast’s $45 billion proposal to buy Time Warner Cable.

“The question now is whether the confluence of factors that enabled the merger revival will carry over into 2015,” Mr. de la Merced writes.

Much ado about urns/ Where to buy in NE

In Property on 07/01/2015 at 4:27 am

Three pieces follow.

The first is from those KPKBing about the urns. My comments are interspersed. The other is a response from an intelligent TRE poster (Yup they do exist, though they are jeered by the rabble). The third tells of a better buy in the NE (Thanks for telling me about the area).

It’s all about “living environment”?/ Talking self-serving cock

The Singapore Mass Media has put up very negative report on us trying to portray us as some petty people who only care about our flat value and that is why we reject the columbarium. That is far from the truth.[Will say that wouldn’t they?]

I hereby represent the hundreds of affected stakeholders to put up the following statement:

1) We are unhappy and felt aggrieved by HDB’s misrepresentation by way of omission of material fact in their sale brochures. We reiterate that there was absolutely NO MENTION of columbarium in the sale brochures while the stated “Ancillary Service” phrase is so general that anyone who read that would have misconstrued as something else. Such definition can only be found in URA website and not HDB website at all. Any ordinary man would not have known how to get access to the details at all.

2) We are against such sales tactic as we should be treated fairly to be given FULL DISCLOSURE of information by the seller, HDB before we chose to buy the flat. We should have the right to make INFORMED choices and not short-changed with such omission of critical material information by HDB.

3) We are also very concerned about how HDB allowing a private commercial entity owned by a foreign public listed company to bid for the land gazetted for religious purposes. It is totally inappropriate for a commercial entity to make money out of any religion.

[Come on , tell us something new.]

4) According to High Court ruling, any entity that advance religion cause, should be subjected to Charity Act and put under the supervision of Commissioner of Charities. Apparently HDB has not made appropriate screening prior to the award of this land, which is meant for religious use, to a commercial entity.[What has this to do with the price of eggs?]

5) Commercial business should be restricted to land meant for commercial purposes, like industrial park. Land meant for religious purposes should be reserved to religious organizations registered in Singapore. This is to protect the interests of religious organizations as commercial entities would have more financial muscles to outbid them. It is totally unfair to these religious organizations which are Non-Profit Organizations to compete with Profit-oriented commercial entities in bidding for such limited land slated for religious purposes. [Gd point except that in traditional Chinese religion, there is no governing religious authority.]

6) Most of us are buying a flat as a HOME, not for property speculation. Thus, property resale value is least of our concern. Our main concern is the conduciveness of our living environment for our families. Thus the Main Stream Media has put up a totally misrepresentation of our plight and this is really a double whammy to us.[Come on, tell the truth. You are concerned about resale because a high-rise block containing urns does not affect the “living environment”. And you guys objected to a kindergarten. And are likely to object to an old folks recreation centre according to yr MP. You people think you are scholae Eng is it?] What we want is just a fair deal for our choice of home and we plead to the Main Stream Media not to put a double stabbing into our hearts and dignity by such grossly misreporting. [Nope MSM is right to slime you guys]

7) We are all law abiding citizens and we expect the Rule of Law to be adhered by the very institutions which are supposedly tasked to uphold the law and justice for citizens.

8) We sincerely hope that the relevant authorities, including the Ministry of Development, HDB and URA to look into the matter as soon as possible.

Thank you.

On Behalf of
Stakeholders, BTO Buyers.

An intelligent TRE poster responds

fernfoliage:

Addressing the points raised by the original poster.

1) You should have read the fine prints and clarify whatever you are not sure. Ignorance is no excuse in the eyes of the law.

2) What “such sales tactic”? You were INFORMED but when did not understand the information, you did not seek clarifications.

3) to 5)
Remember those days when the govt was in charge of everything and took care of everyone from cradle to grave? Well, you guys complained, criticised, condemned, cursed and swore at the govt at the slightest mistake it made. Now that the govt passes everything to the private sector, you guys complain about profit-making, commercialization. If the govt does not do it, the private sector also not allowed to do it, who will? Will you?

6) and 7) If you sincerely believe in what you have written, then just let the columbarium be. It is for the good of everyone, living and dead. Not only the healthy living but the sicked, the aged and the dead too have their rightful places in this country.

Rating: -70 (from 80 votes)
Best place in NE
Soccerbetting2:

Give up the Sengkang west way BTO flat loh . Buy the resale HDB nearest at Punggol loh .

Punggol going to have some more amenities coming up like all the coney island supposed to opened up this year . Wonder what is taking so long for them to open up Coney island situated at end of Punggol Road . A big shopping centre will opened by year 2017 at Punggol Central near the waterway . Another Safra will be opening think between year 2016/17 . Punggol has other facilities like golf driving range , supermarkets, a small Punggol Plaza, restaurants dining ,yacht club area …..etc. With a seaside view to provide for , certainly can consider .

 Rating: +22 (from 22 votes)

Why oil price falls bad for mortgagees

In Economy, Financial competency, Property on 16/12/2014 at 12:06 pm

Oil price-led disinflation is desirable as it helps competitiveness gains by reducing cost and price differentials analyst at Lombard Street Research quoted by FT. So gd for economic growth and property prices?

True but then:

Household debt in Korea, Malaysia and Thailand is now in excess of 80 percent of GDP; it’s 76 percent in Singapore. When borrowers loaded up on debt, they expected three things: Money-printing in rich nations would keep borrowing costs low for an extended period; domestic property prices would keep rising; and steady inflation would boost wages, reducing the real household debt burden.

The third part of this equation has buckled. Inflation is low – and slowing – across Asia. As oil prices fall, the slide will accelerate. In Korea, China and Singapore, deflation is now a real threat.

http://blogs.reuters.com/breakingviews/2014/11/28/cheap-oil-worsens-asian-debtors-lowflation-woes/

(Emphasis mine)

Deflation means real interest rates go up.

The born losers who read TRE will be happy to see their fellow S’poreans go bust. Uniquely S’porean.

 

Look on the bright side: No wonder PM thinks govt doing a great job

In Economy, Financial competency, Political governance, Property on 11/12/2014 at 6:39 am

Blog E-Jay* posted this on Facebook to prove point that “PAP, will be voting against you again in 2015/2016. Thank you for making my life difficult.”

Well, there are other, reasonable legtimate ways of looking at the chart:

— Wah flat owners got windfall if they willing to retire to Batam or M’sia

— I should have used bonus for one yr to buy 3-room HDB flat for cash in early 90s . Only thing allowed for us oppressed singletons then: maybe taz why I’m so hard on those who KPKB about being discriminated for trivial things like being gay. Only a real sleaze bas got prosecuted by AGC under 377A. Had to client of M Ravi.

— HDB owners so ungrateful: property worth so much all ’cause of SuperLoong and sidekick Mah. Instead of being grateful, HDB owners fret for their children’s inability to afford “affordable” housing. PAP makes them rich, must also make their kids reach. WTF!

Seriously, what the chart tells us is that Ah Loong allowed Mah Bow Tan to screw S’poreans. And he wants us to vote for him? And not to have better checkers than the Worthless Party is now providing. One of these days, I’ll blog on why PM is behaving like scholar Eng, and how two really rich and privileged kids, to the manor born, so to speak, can teach him some humility and common sense. Then maybe, he doesn’t need checkers. In the meantime, we need better checkers than the Worthless Party’s MPs.

But we got to play our party, deprive the PAP of its two-thirds majority.

*Actually, a revised Magnificent 7 list should include him and Uncle Leong [Added at 11.00am]

Property developes think they GLCs? Or Dr Eng Kai Er?

In Economy, Property on 05/12/2014 at 6:28 am

PAP administration must always ensure that they make good money or can screw the taxpayers  to indulge themselves (Btw, one of these days, when I really make up on the wrong side of the bed, remind me to blog on why Dr Eng’s actions show that while she may have a passion for the arts — like she had — when was interviewed for her scholarship, she had a passion for scientific research, she doesn’t have a clue about the way to craft a narrative  that pleases the audience. She must belong to the school that believes in upsetting the audience, unlike Stanley Kulbrick, John Ford or even Shakespeare who entertained while provoking them)

Sorry, for the digression. I got the impression that property developers think that they like GLCs and Dr Eng can screw the public when I read that REDAS president Chia Boon Kuah said  at the Real Estate Developers’ Association of Singapore’s (REDAS) 55th anniversary dinner at the Ritz-Carlton on 26 Nov, that the real estate industry could be heading for major trouble unless the government takes “supportive measures” to help property developers.

“[The slowdown and added pressures in the residential market] pose significant challenges to the property sector, and there could be wider impact on the economy,” he said.

Mr Chia is worried that the looming supply of 68,000 completed new residential units in the next few years is likely to cause home vacancy rates to head towards 10%. Presently, the private home vacancy rate is estimated to be at 7.1% in the 3Q of this year.

“This will add even more pressure on the residential market,” Mr Chia said.

“Developers are concerned. Genuine home buyers from the Singapore market have adopted a wait-and-see attitude. The situation poses significant challenges to the property sector, and there could be wider impact. It is in no one’s interests to witness unintended outcomes.”

“We urge the Government to stand ready, to take supportive measures to prevent a tipping point, should the market turn volatile and worsen further.”

With National Development Minister Khaw Boon Wan present at the dinner as REDAS’ guest-of-honour.Mr Chia took the opportunity to KPKB that the government’s cooling measures continue to bite and dampen property buying sentiment.

“The data and facts truly speak for themselves,” pointing out the falling transaction volume and declining prices or properties. Private home prices have declined in the last 4 consecutive quarters, while transaction volume has also dipped 50% from 18,000 last year to less than 9,000 expected this year.

Mr Chia also highlighted the importance of the property sector to the Singapore’s economy, “Real estate accounts for about half of the total fixed capital formation. One in 5 people in the workforce is employed by the real estate and construction industry.”

As usual our local media did not criticise the self-seving nature of his comments*. But let’s be thankful. Once upon a time, MediaCorp’s ace columnist (now reired. Wonder how many houses he got at big discounts?) would have come out in support of the developers.

So it was with great pleasure that I read this in Forum a few days ago.

Where was Redas when home prices were rising?

Published on Dec 1, 2014 12:47 AM

LAST Thursday’s report (“Property sector ‘needs govt support'”) reads like a case of the Real Estate Developers’ Association of Singapore (Redas) wanting to have its cake and eat it, too.

Redas president Chia Boon Kuah warned of grave consequences for the country, noting how property prices have declined amid falling sales in the last four consecutive quarters.

Did Redas make any such warning when property prices ran ahead of the growth in household incomes, and did it ask the Government to take action then?

It was only last year that we saw the second-quarter private residential property price index hitting an all-time high despite a few rounds of cooling measures.

Did Redas not realise that rising property prices caused the public to fear that homes would be beyond their reach, and that many have bought property even though they may not be able to service the housing loans?

The supply of 68,000 completed residential units over the next few years will be built by the association’s members.

More properties may have been put on the block due to mortgage defaults (“More homes go under the hammer in weak market”; Nov 21), if not for the cooling measures and the total debt servicing ratio framework.

Khong Kiong Seng

- See more at: http://www.straitstimes.com/archive/monday/premium/forum-letters/story/where-was-redas-when-home-prices-were-rising-20141201#sthash.me7zc0Ki.dpuf

Developers must long for the days when Mah was the property minister

https://atans1.wordpress.com/2011/04/30/property-prices-going-against-natural-laws/

https://atans1.wordpress.com/2009/12/15/property-prices-mm-lee-is-too-modest/

https://atans1.wordpress.com/2014/02/10/bring-back-super-mah/

*But ST said that if the restrictions were not lifted, developers will make less than usual profit margins, and some may lose money: as though making huge profits is the natural state of things, like scholars entitled to indulge their fantasies? [Update at 10 am)

India: Back in fashion/ Ascendas India

In India, Property, Reits on 22/11/2014 at 5:25 am

Since the start of last year emerging-market stocks have trailed their rich-world peers. Currencies are falling. Worst-hit is the Russian rouble, which has fallen by 30% against the dollar this year. The currencies of other biggish emerging markets, such as Brazil, Turkey and South Africa, have also weakened. For such economies growth is harder to come by. The IMF recently cut its forecasts for emerging markets by more than for rich countries. But India is a notable exception to the general pessimism. Its stockmarket has touched new highs. The rupee is stable. And the IMF nudged up its 2014 growth forecast for India to 5.8%. That figure is still quite low: growth rates of 8-9% have been more typical. But in comparison with others it is almost a boom. Why is India doing better than most emerging markets?

In part optimism about India owes to its newish government.

The other reason is that The currents that sway the global economy presently—the dollar’s strength; slowdown in China; aggressive money-printing in Japan; stagnation in the euro zone and falling oil prices—are less harmful to India than to most emerging markets.

http://www.economist.com/blogs/economist-explains/2014/11/economist-explains-11

I’ve had exposure to India via the Ascendas India biz trust since 2008. It’s been a ride but the payouts are very decent. Chk it out as you too may like it. http://aitrust.listedcompany.com/newsroom/20140710_170824_CY6U_ANGLIE824Z3T5WVH.1.pdf

Note that some results have been annced since the above presentation.

 

Reits and other high yielders fit narrative for the “New Neutral”

In Financial competency, Property, Reits on 17/11/2014 at 1:58 pm

BOND KING’S MANTRA LIVES ON William H. Gross may have departed Pimco, but executives at the bond giant have embraced his view that a stagnating global economy will force central banks to keep interest rates low, Landon Thomas Jr. writes in DealBook. …

Before he left the firm, Mr. Gross called his insight the “new neutral,” and Pimco is showing no signs of abandoning its departed leader’s mantra. In so doing, the firm’s executives are making the case that the Pimco bond funds that have made investments based on this economic approach will not soon change their strategy. Daniel Ivascyn, who was appointed to succeed Mr. Gross as group chief investment officer, took pains to point out that this new investment tack had many fathers, and emerged from a Pimco-wide brainstorming session this spring. But it is also true that the notion never really took off until Mr. Gross pitched it at an investor conference while wearing sunglasses, Mr. Thomas writes.

Mr. Gross’s economic predictions have failed in the past, but Pimco looks to be on firmer ground this time around. Like Mr. Gross, a number of economists believe that a mix of high debt, low growth and disinflation will force central banks around the world to keep rates from rising. Before he left Pimco, Mr. Gross had begun to invest in riskier, higher-yielding securities like government bonds in Italy and Spain and corporate bonds in Brazil, a strategy that the firm is still following. …

NYT’s Dealbook

Well the equivalent of these in equities would be Reits and other high yielders. Interestingly, FT reports that the fund mgr of Schroders flagship UK fund thinks there is value in income producing equities.

And an alternative view: We are doomed, doomed. Central banks cannot prevent deflation of everything including assets.

 http://blogs.reuters.com/breakingviews/2014/10/06/asset-price-disinflation-may-be-next-big-thing/

S’pore property more expensive than Swiss city/ What Goh Meng Seng doesn’t tell us about HK

In Hong Kong, Property on 09/11/2014 at 6:41 am

Prime International Residential Index – Square meters US$1m will buy

  • Monaco 15
  • Hong Kong 21
  • London 25
  • Singapore 33
  • Geneva 35
  • New York 40
  • Sydney 41
  • Paris 42
  • Moscow 43
  • Shanghai 46

Source: Knight Frank

Related posts:

https://atans1.wordpress.com/2014/06/04/swiss-cost-of-living-in-s-terms/

https://atans1.wordpress.com/2012/02/27/spore-despite-fts-an-expensive-place-to-make-pancakes/

GMS likes to tell us online the ways in which HK is a better place than S’pore. It’s gd to get the perspective of someone who jets between HK and S’ore and who is raising a family there while working there.

But he never tells us this

Housing chart

We are not among these cities ’cause of our “affordable” public housing that is causing debt problems for younger S’poreans. It’s so affordable that GMS sold his flat to help fund his bid for a S$15,000 monthly salary. He knew he could get a second bite at the cherry if he needed to?

Whatever it is, we do know that GMS has the money to raise a family in a city where housing is very “unafforable”. He FT in HK?

Reit that has refunded all its debts/ Property is all about financing

In Property, Reits on 16/10/2014 at 4:17 am

… listed developers and real-estate investment trusts (REITs) face their heaviest burden of near-term maturities on record just as home prices drop.

The 80 property companies on Singapore’s stock exchange reported a combined S$23.5 billion of borrowings that have to be repaid within a year in their latest filings, Bloomberg-compiled data show. The looming debt wall comes as the vacancy rate for condominiums soared to the highest since 2006, pushing prices to the lowest in almost two years, data from the Urban Redevelopment Authority (URA) showed.

 Savills predicts refinancing for home builders and REITs will be more challenging as Singapore’s economy slows, with expansion cooling to 2.4 per cent in the second quarter, from 4.8 per cent in the previous three months. Population growth on the island is at a 10-year low and Standard & Poor’s expects home prices have further to fall.

“We’re at that point in the cycle when every quarter you’re seeing selling prices come down a little bit and secondary market transactions aren’t very active,” said Ms Kah Ling Chan, a property analyst at S&P in Singapore. “I suspect we haven’t seen the bottom yet.” Bloomberg

But Frasers Commercial Trust (FCOT) has obtained enough loan facilities to refinance all of its outstanding borrowings, most of which would have been due in the next financial year.

The commercial real estate investment trust (Reit) announced on Monday that it had obtained a S$365 million five-year syndicated term loan facility and a S$180 million three-year syndicated term loan facility.

It had also taken an A$135 million (S$154 million) four-year syndicated term loan facility.

The new facilities are unsecured and are expected to be used by end-September to refinance all of the trust’s outstanding loan facilities. (BT 16 September).

I had been thinking of selling FCOT because its tai kor (Thai tycoon that controls F&N is up to his eyeballs in debt) and because of the debts coming due at FCOT. I’ll hang on a bit more as mgt is innovative as this 2012 deal shows..

But in general,

REITs are in better shape than listed developers because they started refinancing with longer tenor debt ahead of rising interest rates, said S&P.

“For the REITs, I don’t see a major problem yet,” Ms Chan said. “The bigger players are still getting good rates and valuations haven’t fallen dramatically,” she said.

Other bits of Bloomberg’s report.

Developers

Developers of residential homes are suffering not so much from lower selling prices than “collapsed” sales volumes, said Mr Alan Cheong, a senior director of real-estate research at Savills in Singapore.

Secondary home sales plunged to the lowest since 2003 in the first quarter, URA data showed, and as business slows, builders with less pre-sales money to finish projects have to rely on loans, boosting short-term borrowings, he said by phone on Oct 2.

Despite the weaker demand, the number of new residential dwellings being built remains high. Units under construction reached a record in the second quarter of last year and about 65,270 apartments were in the pipeline as of June 30, URA data show.

Regulatory measures have been introduced to damp the market. Between 2009 and mid-2013, the Monetary Authority of Singapore implemented eight rounds of property cooling measures to address concerns the low interest rate environment would lead to a property price bubble, Moody’s Investors Service said in an Oct 6 report.

Appetite to buy is already curbed and rents could fall further, said S&P’s Ms Chan. “We haven’t seen the full impact yet.”

The 42 listed developers on Singapore’s exchange reported S$13.4 billion of short-term borrowings in their latest filings, 42.5 per cent more than a year earlier, data compiled by Bloomberg showed.

City Developments posted debt of S$1.66 billion in the second quarter, 48.6 per cent more than at the end of 2013. Second-quarter net income fell 33 per cent, it said in August, and the company is looking to expand overseas to offset declining demand in Singapore. A spokeswoman for City Developments said the company has a strong financial position, noting its cash of S$3.4 billion and 33 per cent net gearing ratio.

The three-month swap offer rate, a measure of borrowing costs in Singapore, touched 0.2561 per cent on Sept 16, the highest since June last year.

Hiap Hoe, which recently started selling apartments in its prestigious Skyline 360 building, reported short-term borrowings of S$287.6 million for the quarter to June 30, 94 per cent more than the S$147.9 million for the three months to December. A spokesman for Hiap Hoe declined to comment.

Developers on the island are changing their business models and reducing exposure to the local market, said Singapore-based Mr Tim Gibson, who helps run Henderson Global Investors’ global property equities fund.

“By buying Singapore developers now you’re really buying exposure outside of Singapore and into markets like China,” he said in an interview on Oct 8. It “doesn’t give you a huge amount of confidence that a turnaround in the residential market is coming any time soon”, he added.

Starhill Reit/ Retail Reits

Starhill Global REIT, which has S$124 million of notes that mature in July, reported S$129.1 million of short-term borrowings as of June 30, more than double the amount it had in December last year.

Retail occupancy rates at the trust’s flagship Wisma Atria mall along Singapore’s Orchard Road slipped to 98.5 per cent in June from 99.5 per cent at the end of 2012, company data showed. Office occupancy rates are 100 per cent.

Mr Jonathan Kuah, a Singapore-based spokesman for Starhill, said the company has already refinanced its debt due within the coming 12 months. “The leverage situation hasn’t worsened,” he said by email on Oct 7.

Retail sales, which affect revenue at some REITs, decreased for four of the past five months, the worst performance in two years, data from Singapore’s Department of Statistics showed. Excluding motor vehicles, sales dropped 0.4 per cent in July versus the previous corresponding period.

“Singaporeans don’t shop here any more,” Savills’ Mr Cheong said. “Travelling has become so cheap and they buy more stuff on the Internet. The Chinese have also been avoiding Singapore, Malaysia and Thailand since the MH370 tragedy,” he added, referring to the Malaysia Airlines flight missing since March.

Arrivals of tourists from North Asia, which typically comprise more than a quarter of visitors, slumped almost 13 per cent the first seven months of 2014 from a year earlier, Singapore Tourism Board data showed.

“In 2008, when the refinancing situation was quite bad, the REITs still managed to pull through,” said Mr Danny Tan, a Singapore-based fund manager at Eastspring Investments, which managed US$115 billion (S$146 billion) of assets as of June 30. “There’s a high probability these REITs will be able to refinance especially because the loan market is also open to them.”

http://www.bloomberg.com/news/2014-10-09/singapore-condo-builders-brace-as-19-billion-due-asean-credit.html

Further reading

(7 Oct 2014)    Falling property prices in Singapore – one the world’s most expensive housing markets – have provided some much needed relief for the nation’s banking sector, analysts told CNBC.

“The gradual decline in property prices is credit positive for Singapore banks because it relieves pressure on bank asset quality,” Moody’s analysts said in a note published Monday.

“Further price increases would have increased the risk of a real estate price bubble bursting,” they added.

http://www.cnbc.com/id/102064529

PRCs in Iskandar (con’td) and other M’sian property tales

In Malaysia, Property on 04/10/2014 at 7:36 am

There are media reports that Sichuan Sanjia is trying to sell its project site in Iskandar. This follows news that PRC developers and buyers are wrecking the condo market in Iskandar.  http://business.asiaone.com/news/concern-over-china-firms-launches-iskandar

After complaining that the PRC developers and buyers are spoiling the condo mkt in Iskandar, FD Iskandar, president of Malaysia’s national organisation of developers, the Real Estate & Housing Developers Association (Rehda), tried to spin the story in favour of buying M’sian property.

But Iskandar is bigger than Nusajaya or Danga Bay, he said, adding that demand for landed homes still “looks very strong”.

Mr Iskandar noted that many Singaporean buyers prefer to buy from Singapore developers or reputable Malaysian developers.

There has also been much interest from Singaporean investors in industrial as well as commercial properties.

Meanwhile, other hot property spots in Malaysia such as Penang and Greater Kuala Lumpur are likely to be shielded from the supply glut in Iskandar as strong population growth in these areas is still supporting fundamental demand for housing, according to Mr Iskandar.

[Qn: what happens if PRC developers start moving into Penang and KL? Sure spoil mkt?]

Kuala Lumpur’s population is six million and could grow to 10 million by 2020 through demographic growth, urbanisation and intra-state migration.

Mr Iskandar estimated that this would translate to some 170,000 homes to be built each year, based on the assumption of four persons per household.

Investment yields from residential properties in Penang and Kuala Lumpur are likely to hold up in the region of 5 to 8 per cent while commercial properties could reap higher yields, Mr Iskandar projected.

The retail segment has also emerged as a strong component, with Kuala Lumpur being ranked by global news network CNN as the fourth-best city in the world for shopping after New York, London and Tokyo.

With the upcoming high-speed rail between Singapore and Malaysia expected to cut travelling time from 51/2 hours to just 90 minutes, both Kuala Lumpur and Singapore will benefit from greater inter-city travelling and cross-border investments, Mr Iskandar said.

Still, he is not asking potential buyers to completely snub Iskandar that he believes to be a “highly investable location”.

But Mr Iskandar has a piece of advice: “Please look at the quality of the developers. Be savvy investors. If it’s for owner-occupation, there’s no worry whatsoever but if it is for investment, you need to do due diligence before buying.”

 

Ishandar investors screwed again: by PRCs this time

In China, Malaysia, Property on 01/10/2014 at 4:15 am

Bad news travels in pairs.

Last week, Reuters reported

Amid growing anxiety over a glut of high-rise residences in Malaysia’s Iskandar, a mega waterfront township project there appears to have hit a snag.

The Business Times understands that CapitaLand, South-east Asia’s largest real estate developer, recently sought a six-month extension on the launch of its 900-unit high rise condominium, which is the first phase of a S$3.2 billion ($2.52 billion) Danga Bay project, which spans some 28 hectares on a man-made island.

It seems that it had some problems with Johor state authorities. If  TLC can have such problems, what about yr ordinary, not connected S’porean property buyer?

Then BT on 30 September carried a story reported that thanks to PRC developers and buyers, S’poreans buying to rent in Iskandar are screwed.

A looming housing glut in Iskandar Malaysia may weigh down rental yields in the economic zone, with homes being left empty.

The warning this time came from Malaysia’s national organisation of developers, the Real Estate & Housing Developers Association (Rehda).

FD Iskandar, president of Rehda, noted that some 30,000 homes could be completed by 2016 or early 2017 in Iskandar.

If these are mainly sold to buyers outside Malaysia and Singapore, “then you will see that these units will be empty and once they are put up for rent and there are so many units available, that will put pressures on rental yields”, he said.

Malaysia’s federal government is “actually looking seriously” at this issue … But land administration in Malaysia lies within the authority of the state government.

In the past 12 to 18 months, the deluge of homes launched or in the pipeline by China developers, including Country Gardens and Guangzhou R&F Properties, has stoked concerns over a looming housing glut in the Iskandar region, which encompasses an area of more than 2,000 square kilometres in Johor.

“… developers from China launching a few thousand units at one go,” Mr Iskandar said, adding that Malaysian or Singaporean developers would typically have 400-600 units in one project.

Most of the buyers of these Chinese projects come from mainland China, he observed. “…concerns about these residential units being empty.”

 

 

Kong & lieutenants: God’s fools or the Joker is God

In Humour, Property on 01/09/2014 at 4:46 am

Here’s the evidence that they’re fools. Or evidence that God’s the model for the Joker , Batman’s foe.

Penny wise, pound foolish? 

One thing has puzzled me about the management team’s actions.

It was obvious from the testimony so far that at least his lietenants knew that the way that Sun Ho’s carrer was being funded* could be an issue with the auditors. Hence they claimed they had disclosed everything to the auditors esp to Comrade Brother Foong Daw Ching the head of the audit firm, who they claimed knew everything and was their consultant. Daw and the auditors denied everything, but they would wouldn’t they? Their testimony reminded me of “I know nothing, nothing” German sergeant in Hogan’s Heroes (a tv comedy series in the 70s)

What puzzled me was the absence of lawyers’ advice.

Now we know that Kong and gang only sought legal advice after police questioning

“Shaken to the core” was how the founder of the City Harvest Church felt when he was told by lawyers in early June 2010 that he and his five deputies had been negligent and “had done wrong” in managing the church’s finances.

Recounting yesterday that he had met up with the other accused and two lawyers a day after he recorded his first statement to the Commercial Affairs Department (CAD), Kong Hee, 49, said he had always consulted the lawyers and auditors on the church’s plans, be it bond investments or the financing of his singer-wife Sun Ho’s debut English album in the United States.

Taking the stand for the fourth day, he said: “I was shocked because I thought that all this while, we had relied on professionals to advise us; now one of the key professionals was saying we had done wrong.” (BT 15 August)

Were Kong and his lieutenants too mean to pay for legal advice. Every little penny for Auntie Ho and her Hollywoods friends?

Or did they have a suspicion that lawyers would advice against scheme? Too clever by half then?

Trusted that Kong had line to God

Xtron** had projected album sales of S$16 million in 2011, and S$23 million in 2012. A prosectuorpointed out that given there was neither a distribution contract nor an album contract, the figures were either “false, or at very best, purely speculative”.

John Lam, one of the defendants, said it was his belief in Kong Hee’s ability to make the Crossover Project a success which led to him supporting the church’s investment into the Xtron bonds, despite knowing that Xtron was not a profitable company, and that Sun Ho’s music albums were losing money.

We we now know based on the losses Kong is suffering as a result of his Sentosa Cove penthouse, that he doesn’t have a direct line the Fock Lok Siew God of Prosperity.

Dozens of houses – complete with their own private yacht berths and multiple swimming pools – sit empty while few lights are on in the apartment blocks overlooking the marina, a few kilometres away from Sentosa’s giant casino.

Prices in the gated community, where Australian mining tycoons Gina Rinehart and Nathan Tinkler bought properties, fell around 20 per cent in the past year as lending restrictions and taxes on foreign buyers burst a bubble in the South-east Asian financial hub’s luxury real estate market.

Investors could see the value of their assets fall even further with developers and investors still struggling to sell even after the recent price falls.(BT 29 August)

Earlier article on Sentosa and Kong.

So why does the congregation still trust that he has a private line to god? Time to sacrifice him to propitiate the prosperity god? Or is CHC the ship of fools?

Not trusting CHC members

If only Khong and gang had trusted the congregation, and raised funds for Sun Ho’s Hollywood lifestyle. It’s clear from their actions: supporting “Project Crossover” after being told how it had been funded, and funding the defence of most of the defendants). Oh ye people of little faith.

 

To end on a different note,

The court also heard that the money spent on Ms Ho’s US album went “down the drain” when she had to return to Singapore to assist with investigations into the alleged financial irregularities within the church.

It’s obvious that the anti-PAP cyber-warriors hate those who are more well-off than them. Shouldn’t they be cursing the govt for making Kong, Ho and gang lose money, and spoiling her career? Or are the most virulent anti-PAP ranters also envious born-losers?

——

*The prosecution alleges that payments between the church and Xtron was essentially moving money from one pocket to another. Its case is that the bonds were merely a device to funnel money from the church’s building fund into Xtron to be used for the church’s Crossover Project. Fronted by Ms Ho, the project was the church’s way of evangelising through pop music.

“The idea of using Xtron bonds was so it could be presented as an investment, and hide the fact that you were using building fund monies to fund Sun’s career,” said Lead Prosecutor Mavis Chionh, adding that there were telling signs that the bond investments were not genuine. For example, the church did not carry out due diligence on Xtron before subscribing to the bonds.

Money that went to Xtron was largely used to fund the church’s Crossover Project. In cross-examining former church board member John Lam, the prosecution pointed out that there was no basis for Xtron’s huge projected sales of Ms Ho’s then-delayed US album.

Church monies to the tune of S$4.79 million were used to meet expenses related to Sun Ho’s music albums, and this was something the church leaders had tried to hide, said the prosecution in the trial of City Harvest Church leaders on Tuesday (Aug 5)

**One of the companies the church invested in was Xtron, Ms Ho’s artiste management firm.

 

 

 

Desperately seeking “core plus” or “value add” Reits

In Financial competency, Property, Reits on 29/07/2014 at 5:37 am

When it comes to Reits, I’m almost like Pussy Lim saying the PAP is doomed (since 1990s), though she recently nuanced her remarks and Roy on the govt “stealing” (my take on what he is claiming, not his word) CPF. Same old messages.

Here’s a variation on my Reits tale. I’m looking at a Reits’ strategy to guard against the effects of likely interest rate rises*. I’m looking at a“core plus” or “value add” strategy: Reits that buy underperforming assets, for example a building with empty space, and focuses on improving returns, for instance by increasing occupancy.

Or Reits outside traditional core commercial real estate include student housing, medical offices, storage and even social housing. I’ll be looking at the Jap Golf Reit.

If I find Reits that are executing this “core plus” or “value add” strategy competently, I’ll switch to them even if their yields are lower. Let you know my conclusions after I do the switches.

BTW, Bank of S’pore, OCBC’s private bank, is recommending Reits and other income plays.

Sounds like what I’ve been doing, suggesting the last few yrs. Maybe I can be Bank of Singapore’s strategist?

Singapore equities will remain range-bound for the short term, but dividend plays will continue to attract interest, said BoS’s CIO on July 3.

“… certain interesting themes in the Singapore market, and one of which … there are many opportunities in the dividend yielding sector, ‘REITs’, some of those Temasek-linked companies** do give you a very nice yield in the context of a very low yielding environment in the world,” said Chief Investment Officer Hou Wey Fook.

BOS says the impact of a slowing Chinese economy on Singapore’s growth will likely be offset by the pick-up in the developed economies. This combined with the steady performance of emerging economies will deliver the best global economic outlook in 2014, since three years ago. (BT report)

BoS, like me, says it prefers equities to fixed income due to falling bond yields and soaring stock market indices. It also expects the improving growth momentum to spur companies into increasing their capital expenditure and M&A activities.

——-

*Keep an eie on the junk bond market. It’s going through a serious correction that could turn into a collapse given that many say the junk bond is a bubble.

**https://atans1.wordpress.com/2013/10/03/temaseks-fab-5-spore-blue-chips/

Want slower GDP growth? Ok if property prices fall more than 20%?

In Economy, Property on 17/07/2014 at 4:56 am

When TRE republished this, Chris K* commented:
In short there is as much risks in an economy growing too fast as in growing too slow. The authorities had to be counter-cyclical i.e. push in the opposite direction to lessen the risks. In Singapore, the govt is cheering on the economy on, adding fuel to the fire. Stratospheric property prices, elevated cost of living, growing disparity in incomes are the result. They are irresponsible and unfit to run the economy*.

Because of its housing policies (keep on raising the prices of affordable public housing ’cause not to do so would be raiding reserves), a property crash (not juz the expected 20% fall)will result in a gloomy 50th yr anniversary next yr and the possibility*** of a freak election result. All the govt’s attempts to spend more of our money on ourselves in the hope of shoring up the vote for the PAP will go to nought.

As it is, the 20% fall is among other things based on GDP growth this yr of around 3.5%. If this turns out to be too optimistic (remember analyss have been busily revising downwards their above 4% growth), maybe property prices could fall 40%? A crash.

Those who want a slowing economy, esp those TRE posters who want a property crash should think of the hard working S’porean home owners (many of who whom are their friends and relatives), mortgaged to their eyeballs for basic shelter, not speculators (whose ranks are alleged to include millionaire ministers who have plenty of spare cash) that will be affected by a crash. Why should anyone be happy or gloat that others will suffer if property prices crash, unless the gloaters are lifer’s born losers.

(Related post: https://atans1.wordpress.com/2014/01/16/why-banks-tested-for-50-plunge-in-property-prices-and-other-wonderful-tales/)

And engineering slowdowns can be tricky. Ask the Swedes. They tried and now face deflation http://www.economist.com/news/finance-and-economics/21606895-interest-rates-are-back-crisis-lows-sub-zero-conditions.

Let me be clear, I speak as a retiree who stands to benefit if the economy crashes: prices come down and I can eat gourmet meals every day. So I’m not talking my book in understanding the dilemma that the govt faces, even if it is responsible for the mess we are in.

But don’t worry. All the PAP govt needs to do is to allow borrowers to borrow more: https://atans1.wordpress.com/2014/04/29/property-prices-valuations-are-irrelevant-its-all-about-credit/

All those TRE born losers will be left leaving frus and banging balls again.

*He knows his financial stuff esp risk mgt. He had better. He works as a risk mgr  in a nearby financial centre that is bigger than ours.

**His preceding comments: The comparison to the UK right at this moment bears watching. 1 year ago John Carney took over at the head of the Bank of England. He said at the time that interest rates will stay very low for a long time to come. Then the economy began to pick up steam and is now at around 2.9%, strong by European standards and close to the top of its long term growth potential. Last month John Carney has signalled to the markets that the central bank will be moving up its time frame to raise interest rates and head off risks. What are those risks? Strong growth raising the inflation rate. House prices shooting up causing instability. At the same time, the new financial stability committee is called to look into measures to mitigate these risks.

***Only possibility ’cause of GRC system. Anyway WP will support PAP if PAP doesn’t get majority. Low has said as much. PritamS wants it.

Sentosa Cove: His god deserts Kong Hee?

In Property on 15/07/2014 at 4:21 am

“We believe in you for better jobs, raises and bonuses, finding money, money finding us, incomes, royalties, real estates, dividends, inheritances…We pray to Jesus and there shall be a turnaround,” sums up the essence of the prosperity gospel*.

I was reminded of the above when it was reported yesterday that the trial of Kong Hee and friends was resuming.

Well his god seems to have left him to swing in the wind when it comes to property investing. Reminder: he owns a Senosa penthouse. A benefactor of Kong Hee’s church, an Indonesian tycoon, Wahju said in court a few months ago, that  he and Kong have been paying $17,000 a month each for a penthouse at Ocean Drive since 2008.  The tycoon had tot it would make a gd investment.
The penthose remains underwater, not literallo, of course. I was reminded of the penthouse by a BT report of a few weeks ago, that I juz read on Sunday.

ABOUT two in five Sentosa condominium units have resold at a loss in the past year, symptomatic of the plight of luxury homes here, as financing restrictions put off buyers, industry watchers say.

Since May last year, 31 units have changed hands at six Sentosa projects: Marina Collection, Seascape, The Azure, The Berth, The Coast and The Oceanfront, according to data compiled by STProperty.sg from URA Realis.

The profitability findings is in line with data gathered by HSR Research which shows resale prices at the plush Sentosa district falling 25 per cent to about $1,800 psf in the first five months of this year, compared to around $2,400 psf over the Jan-May 2013 period**.

Maybe his god thinks giving him Sun Ho and her filthy rich parents (they are paying his legal fees) is enough prosperity for one man? But he was too greedy and incurred the wrath of god? Hubris?

Or maybe he is a S’porean Job. The Lord’s praise of Job prompted Satan to challenge Job’s integrity, suggesting that Job served God simply because God protected him. God removed Job’s protection, allowing Satan to take his wealth, his children, and his physical health (but not his life) in order to test Job’s character. (Wikipedia)

And all will be well. God rewards Job’s obedience during his travails and restores his health and doubles his original riches.

Let’s see.

——————

*Another continent, another country (poorer). But the same rationale and motivation for donating generously

The service is for thanksgiving, which coincides with the first Sunday after payday. In what sounds like an economic report, the congregation is told to not worry about the first, second and third quarter of the year and that in the fourth quarter, there is still a chance to be blessed financially and materially. Congregants give testimonials describing long ambitions to land a job within government, to acquire a bigger house or a car and detailing how after fasting, praying, giving to the church, they are at last reaping the rewards. A leather-lined bin lands at Baobab’s feet. Give what you can, and you will be blessed …

… In Nigeria, where decades of governments have stolen hundreds of billions of dollars of oil money but most people live on less than $2 a day, many turn to religion, believing that only God can protect them and pull them out of poverty.

Note “poverty” is relative.

**Of the 31 transactions in the past year, profitability analysis could not be done for seven because caveats, which include information on purchase prices, were not lodged for the units. Profitability is calculated by subtracting purchase prices from selling prices. Of the remaining 24 transactions, 10 resold at a loss.

Among the loss-making transactions, four were units at The Berth, the debut project at the Cove which was launched in 2004 and completed in 2006. Three units made losses at The Oceanfront, two at the Coast, and one at the Azure.

Two in particular made seven-digit losses. A 2,982 sq ft unit at The Oceanfront sold for $5.65 million ($1,895 psf) in November last year, after it was purchased in April 2008 for $7.2 million ($2,415 psf) – a $1.55 million loss.

Another 2,820 sq ft unit at The Coast sold for $4.8 million ($1,702 psf) in January this year, two years after it was purchased at $6 million ($2,128 psf). This was a $1.2 million loss.

SLP International executive director … suggests that this could be due to owners struggling to find tenants for their units amid the weak leasing market. Some may also not be able to secure high enough rental rates to service their loans. (Most Sentosa homes are bought not for own occupation, but as investment.) “So they may find it a better option to just liquidate,” he said, adding that the location is also not the most convenient for expats to commute to the mainland for work.

Another industry watcher added that buyers who bought units at $2,100 psf and above appear to have “overpaid”. Those who profited from their resale deals mostly bought in at lower psf prices; a handful even got their units at $800, $900-plus psf back in 2006.

Meanwhile, several Sentosa Cove units are also up for sale at auction houses here. A 2,777-sq-ft unit at Turquoise condo, put up for sale by a lender at a Colliers’ auction this week, yielded no bids, despite having reduced its opening price to $4 million from its previous $5 million.

Two Sentosa homes are up for auction by DTZ, both by lenders, one at Turquoise and another at Marina Collection. Another four are for sale by private treaty (akin to private negotiations) by JLL – two at Turquoise and two at Marina Collection.

Typically, banks repossess homes and put them up for auction as part of a repayment structure when delinquent mortgagors (borrowers) are unable to find buyers and dispose of their properties themselves.

JLL’s head of auction … aid: “The owners of the two Turquoise units bought them at $7 million each, which is quite difficult to match in the current market.

“Auctioning is a good method to garner all interested parties in a room to competitively bid. Potentially, the owner can also expect to get the optimum price because it’s a competitive method of sale.”

Meanwhile, some Sentosa condos such as Cape Royale and The Residences at W have made strategic decisions to lease out their unlaunched units instead, given current soft condo prices on the Cove.

Roaring sales in the waterfront enclave back in 2006-2008 were hit by the financial crisis and had hardly recovered when the private housing market succumbed to successive rounds of cooling measures from 2009 … “For property prices anywhere, what goes up will also come down.”

Property: Tharman trying to crack jokes again

In Economy, Property on 10/07/2014 at 4:34 am

I’ll not comment on Tharman’s CPF speech as Uncle Leong and many others have covered it. Instead, I’ll focus on a sppech he made last week congratulating himself on “cooling” the property market.

On 5th July BT reported that Deputy Prime Minister and Finance Minister Tharman ShanmugaratnamHe told a conference that Singapore had responded early enough to raging property prices with a set of cooling measures.

Err is he living in the same S’pore as I am or is he in S’pore (Roy Ngerng’s version).

Here’s what the FT reported on 30th June

Over the past four years, the Asian city state has implemented more than a dozen measures to cool its housing market and stem a growing tide of protest from locals that rich foreigners are making home ownership unaffordable.

If this sounds like an echo of popular sentiment in London, that is because these are very similar economies. A big financial services industry, paying generous wages, sustains demand for high-end housing. That, in turn, pulls up prices further down the price scale, a dynamic accentuated by the availability of mortgage finance at record low rates. Both cities are also regional hubs for wealthy foreigners, with solid legal systems and relatively open borders attracting property investment from Chinese, Russian and Middle Eastern millionaires.

Back in 2010, when Singapore began to tighten mortgage conditions, the initial moves were similarly token [Talking of recent UK measures]. Stamp duty was imposed on property sellers, and the cap on the size of a buyer’s loan relative to the value of the property being bought was trimmed from 90 per cent to 80 per cent. Every few months since then, there have been further, ever more desperate measures. Stamp duty was raised, to punish quick purchases and resales; the LTV cap was cut to 50 per cent; higher taxes were imposed on foreign buyers; and a tradition of 50-year loans was cut to 30 years. None had much of an effect.So much so that this normally politically conservative island nation has been rebelling. The popularity of the ruling PAP party – in power since the formation of Singapore as an independent state 49 years ago – has plummeted. Disaffection with rising property prices is widely cited. [Emphasis mine]

It was only recently that Singapore’s cooling measures finally had a clear impact on runaway house prices, following introduction of a new “total debt servicing ratio” – a metric that limits a borrower’s aggregate debt repayment commitments to 60 per cent of income. Property purchase volumes have duly fallen by 50 per cent. Prices are down by 6 per cent and are forecast to fall by as much as 20 per cent.

Or is he trying to entertain his audience? As he’s an intelligent, no BS person, I have to conclude that he’s out to entertain.

Isn’t his comments on govt acting quickly on property prices, bit like his jokes on inflation, wages?

https://atans1.wordpress.com/2012/05/25/will-hougang-make-the-pap-moan-the-inflation-blues-not-joke-abt-it/

https://atans1.wordpress.com/2013/11/11/tharman-trying-to-tell-jokes-again/

BTW, according to the BT report, he raised the possibility of a further correction in property prices, “I think further correction would not be unexpected.” but added that a crash in the property market was unlikely. The PAP would hope not given that next yr is an impt yr to remind the sheep of the PAP’s good deeds in the 60s, 70s and early 80s (before PM became a cabinet minister and too bad about the late 1990s and noughties, when he was DPM, dauphin and economic czar).

And On the subject of keeping track of the market, he called for more emphasis on monitoring banks. “I don’t want to quarrel with the Basel recommendations. They are basically in the right direction; they are good for the long term. If anything our banks are over-monitored (which is why the intellectual financial stuff gets done in HK, while the commoditised trading gets done here) , not that this over-monitoring has done the “little people” any gd: ask the mini-bonders.

 

Time to sell? New, inexperienced punters rushing in?

In Financial competency, Property on 03/07/2014 at 6:28 am

(Or “The bull SGX is spinning?”)

Serious mkt correction on the cards based on SGX’s boast that more than 68,000 new Central Depository accounts were opened last year as the largest number of new retail investors in the past five years “ventured into the stock market in the face of an uncertain property sector”? (For those seriously challenged for time, skip right to the end for my take.)

The number of accounts is a big jump from the year before, when about 51,000 new accounts were created. At a press briefing last week on Singapore Exchange’s ongoing retail initiatives, SGX’s senior vice-president for retail investors, Lynn Gaspar, said that about half of all CDP accounts or a record-high 844,000 actually held some shares.

BT reported earlier this week:

“Subscription to SGX’s My Gateway’s e-newsletter over the past 12 months has risen 21 per cent to 187,000 and the increase in unique visitors to our website has been 45 per cent over the same period,” she said.

However, she added that, notwithstanding the increase in interest, the proportion of Singaporeans who invested in the stock market is still low when compared with other markets.

“Only about 8-10 per cent of the population is in stocks, compared with 20-25 per cent in Hong Kong and 15-20 per cent in Australia,” said Ms Gaspar. “If you assume the potential retail investor population to be about three million people, only about one third has some direct involvement in stocks while 62 per cent has never been in the market. Of these people, about 400,000 are interested in getting into the market. Based on a survey we conducted in 2012, we found that the barriers to entry for these people are they don’t know how to start, don’t know where to start and don’t have the time or money.”


To help interested but inexperiened retail players gain some insights into the stock market, SGX has partnered local firm TradeHero, which offers a mobile market trading application that can be downloaded onto phones.

The exchange is also offering up to $198,000 in prize money in its StockWhiz contest which is open to Singapore residents aged 18 years and above, the aim of which is to allow the public to learn to trade with virtual money.

“TradeHero allows investors to trade using real-time prices,” said Ms Gaspar. “We feel this is a great chance for the public to gain risk-free experience on how to trade.”

Bull on stocks vis-a-vis property?

Today reported her as saying:“In an emergency, the ability for you to liquidate property takes a longer time. So, the stock market is a good alternative for people to be able to come in and invest in a higher-yielding asset, not without risk … But you can see the value of the asset you are investing in, you can make those decisions and there’s also liquidity,”

Whatever, given that SGX’s CEO and COO are FTs, and so are many of its senior executives, it’s ironic that SGX is boasting that it’s attracting local punters back. It’s the same Mgt that drove them away.

Now the solution to regenerate a dying, irrelevant regional mkt is to grow the retail mkt? Takes FTs to do this?

“T” stands for “Trash”? Juz look at the IPO mkt and the secondary listing of Gazprom, a dog with fleas if ever there was one.

Coming back to whether market is set for serious correction? Well volumes remain depressed*, so the accout-opening and education, doesn’t translate into activity. The little people are inactive. So the rush to open accounts is not a sign of trouble yet. Watch the volume (not $ value but shares traded).

The only reason to be wary is that with residential property prices expected to fall another 20% next yr, the prices of developers may not yet reflect this expectation. As UBS pointed out recently, the stock mkt is influenced by property prices and it affects more weakness in that sector.

——

*Update at 9.30am: Figures juz reported show that in June daily average value of securities traded on the SGX fell by 40% on the same month last year, to just S$978m.

 

HPL: More than “fair and reasonable”?

In Corporate governance, Financial competency, Property on 09/06/2014 at 4:38 am

The second revised buyout offer for Hotel Properties Limited (HPL) is considered to be “fair and reasonable” by the independent financial adviser to HPL. 68 Holdings, a consortium led by tycoon Ong Beng Seng and Wheelock Properties, had raised its bid a second time to $4.05 per share last month.

CIMB’s opinion on the offer is unchanged from its earlier report issued after the consortium first raised its offer price from $3.50 a share to $4. The updated report by CIMB was released in a supplementary letter to shareholders by HPL’s board of directors yesterday.

On the second revised offer of $4.05 a share, CIMB’s recommendations to HPL shareholders are also unchanged. (BT last Fri)

Given that the first offer was already “fair and reasonable”, shouldn’t this be an offer that is “more than fair and reasonable”?

Or the first one should have been “neither fair nor reasonable”? It was a low ball bid?

In 2002, the independent adviser to the board of Optus had come out with the opinion that far from paying too much, the offer is actually “unfair”.Independent adviser, Grant Samuel said the SingTel offer was “unfair”, but recommended the offer and says “while it is not fair, it is reasonable”. As a result, the directors of Optus recommended the deal to shareholders.

The M&A boutique said the deal was unfair based on valuation techniques, but said it was  reasonable because if there wasn’t an offer, Optus’ share price would be trading at lower levels: “In assessing the fairness of the offer, Grant Samuel indicates that its judgement of fairness is at the margin, and that while the Singtel offer is not fair, it’s only just not fair.”

Well, many S’poreans tot, at the time, that that the price paid was unfair and unreasonable to SingTel investors (self included0). Turns out we are right even today, it seem. If it wants to float Optus today, there would be a small gap of a bn or so A$ between its purchase p-rice and valuation of Optus today: small change leh.

Coming back to the HPL offer, CNA reported last week in relation to another takeover offer, “Minority shareholders are becoming increasingly disillusioned with boilerplate advice from independent financial advisers (IFAs) and are questioning their usefulness, the head of the Securities Investors Association of Singapore (SIAS) said on Friday (June 6).”*

To which the retort from bidders and IFAs would be, “They would say that wouldn’t they? They want unfair and unreasonable prices to be paid for their shares.”

*Cont’d

The remarks by SIAS President & CEO David Gerald came in a statement noting the dissatisfaction on the part of minority shareholders over a buyout offer for LCD Global, a hospitality and investment company, at S$0.17 a share.

“SIAS notes that while the IFA report has indicated that the offer is fair, based on a historical perspective, the offer does represent a discount to NAV at S$0.27,” …

 

Invest with the Hong Leong gp in contrarian play

In China, Property on 27/05/2014 at 4:49 am

First Sponsor Group Ltd, a real estate group whose controlling shareholders are Hong Leong Group S’pore and Tai Tak Group S’pore, is looking to raise up to $102.1 million, through an IPO and a sale of shares to cornerstone investors.

First Sponsor, whose focus is on residential and commercial properties in tier-two China cities, said it plans to make a share offer of 54.05 million shares at between $1.50 and $1.60 per share. This includes 49.05 million placement shares for institutional investors and high net worth investors, and a public offer of five million shares.

The data from China on property is gloomy. Example:http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e37541&u=2014_05_20_08_46_baf327d0669d4ae5bc33702b274e2271_PRIMARY.jpg

So the Hong Leong group offering investors to join it in investing in China property is intriguing. The group is a shrewd property investor and so may know something that the ang mohs don’t know. Hitch a ride with First Sponsor and find out?

Thinking of London property? Think Hwa Hong?

In Property on 12/05/2014 at 4:43 am

Singaporeans are the biggest overseas force in the British capital. The Chinese are a’coming though:

It takes a long trip on the London underground to get to the Aura housing development. From Waterloo Station, 42 minutes tick by until you pull into Edgware, the stop nearest to the half-completed apartment blocks being built on land formerly occupied by a now-bankrupt football club. Attempt the journey at the weekend, when large swathes of the tube are typically shut, and you must make a detour to nearby Canon’s Park station. From there, you face a 15-minute trek taking in a boarded-up pub, a Lidl supermarket and a municipal office block with smashed ground-floor windows. In every sense, you are a long way from what estate agents like to call “prime central London.”

Yet projects like Aura say a lot about how London’s property bubble is changing. Six thousand miles away, on the thirteenth floor of Hong Kong’s Mandarin Oriental hotel, a host of investors cluster around a scale model of this latest addition to northwest London’s housing stock. Some are affluent middle-class Hong Kong couples looking to invest a couple of hundred thousand pounds for the long term. Others are looking for a quick flip. They plan to put down 10 percent of the purchase price now, wait for values to rise, and sell for a tidy profit before the development opens to residents next year.

The smarter Chinese investors think differently from the average Russian oligarch billionaire seeking a London pad. Both like London’s stable politics. But many Chinese buyers are seeking the 5 percent-plus rental yields that can now only be found far from London’s over-inflated centre, where sub-3 percent yields are common.

There’s also plenty of less clever Chinese money, though. Three years ago, mainland China hosted just seven international property exhibitions, according to a person familiar with the situation. Now there are 200 filling huge halls with eager would-be property investors who neither speak English nor know where they are buying. Unscrupulous developers retouch sales images so that Canary Wharf appears to be right next to Tower Bridge, rather than three miles further down the Thames. One unfortunate investor in search of a London address wound up with a property in Lincolnshire.

http://blogs.reuters.com/breakingviews/2014/04/14/how-china-is-stoking-londons-housing-bubble/

Why think Hwa Hong?

Hwa Hong Corporation is the latest local developer to set its sights on the vibrant London property market. The listed company recently bought a stake in a residential building in the posh neighbourhood of Kensington. The deal was transacted via a wholly-owned unit which bought a 19% stake in an investment vehicle for $9.9 million. The six-storey freehold property is on Allen Street, which is within 100m from Kensington High Street.

Hwa Hong’s portfolio of properties in London includes freehold residential developments in Queensgate and Hornton Street. At the same time, it also has stakes in office buildings in Central London, Manchester, Liverpool and Sheffield. In the local scene, Hwa Hong has jointly developed the 545-unit freehold condominium RiverGate in Robertson Quay with CapitaLand.

According to Mr Ong Eng Yaw, investment manager of Hwa Hong, he said the firm has always viewed investing in Britain as a means to diversity its property portfolio. He added that Hwa Hong has been able to make sound returns from the investments in the UK and will continue to leverage their knowledge on the market there to explore further opportunities.

http://www.iproperty.com.sg/news/7861/-Local-developer-Hwa-Hong-buys-into-upscale-London-area

FTR, I’m a v.v. contented long-term shareholder in Hwa Hong, once a grab-bag of investments, now a property-owner in S’pore and the UK. The CEO, a Mr Ong Choo Eng, studied at Queen Mary college, London, and has over many yrs dabbled via Hwa Hong in the London property market. His family is the controlling shareholder and the co is like its investment trust, family office. I’m not complaining though. If anything I’d want it to increase its gearing to o.46 (in 2009) from o,22, (albeit an increase since 2010). Interest cover is now a whooping 39.85. Lots of room to expand borrowing.

Every few yrs, co makes a huge special bonus dividend. Its yearly dividend yield of 3% is nothing to sneer at.

Check out the annual report esp the list of its London and other UK properties, and its UK income and non-current assets ( I’m assuming that these are property related). And draw yr own conclusions. I’m juz a gundog, you the reader have to decide whether there’s a bird in the bush, and whether to pull the trigger. BTW, I added a few more Hwa Hong shares to my portfolio recently.

Property prices: Valuations are irrelevant/ It’s all about credit

In Financial competency, Property on 29/04/2014 at 5:00 am

The availability of credit, or is the case, now, the non-availability of credit.

And it’s not Heart Truths screaming this out loud; Roy Ngerng sadly prefers to teach anti-PAP S’poreans to suck eggs in ever more complicated ways.. It’s the constructive, nation-building local media that are screaming it out loud that it’s credit that matters.

Private home price decline accelerates as curbs bite (Today 26 April)

... in the first three months of the year, with finalised data from the Urban Redevelopment Authority (URA) confirming that the price decline had picked up pace amid persistently weak sentiment.

Private home prices slipped 1.3 per cent in the first quarter of the year from the previous three months, unchanged from the preliminary estimate released earlier this month and accelerating from the 0.9 per cent fall in the fourth quarter of last year, the URA said yesterday,

 Analysts said the multiple sets of property market cooling measures introduced by the Government, especially the Total Debt Servicing Ratio (TDSR) framework imposed last June, have been effective in curbing demand and runaway prices.

They expect the measures to remain for now, suppressing demand and probably leading to further weakness in home prices in the following quarters.

“Market exuberance for private homes was very much tempered by the existing property cooling measures and the TDSR … The various government measures have effectively curtailed demand from most groups of home buyers,” said PropNex Realty’s chief executive Mohamed Ismail.*

Shophouse deals continue to languish (14 April)

Shophouse transaction volumes continued to languish for the third consecutive quarter, as demand took a hit following the introduction of the Total Debt Servicing Ratio (TDSR) framework in late-June last year. However, prices have continued to hold – due to a limited supply of shophouses and most owners taking a longer-term horizon and having holding power.

CBRE’s analysis of caveats data shows that 26 shophouses changed hands for a total $118.4 million in the first quarter of this year, down from $149.3 million in Q4 last year and $197.2 milion in the preceding Q3. In Q1 and Q2 last year the figures were $463.7 million and $458 million respectively, reflecting the buoyant market pre-TDSR. CBRE’s analysis covered only shophouses on sites zoned for commercial use.

Shophouse transactions weakened to $346.5 million in the second half of last year from $921.7 million in the first half – resulting in a full-year figure of $1.27 billon, down from $1.38 billion in 2012.

Besides TDSR, which has tightened lending for property purchases across the board, another key reason for the sharp slowdown in shophouse transaction volumes is that prices have risen in the past few years to levels beyond the affordability of most potential buyers, said Knight Frank executive director Mary Sai.

It’s all about the Total Debt Servicing Ratio (TDSR) introduced last June.

Why did it take so long to introduce this measure? Heart Truths should be asking this question

So now you know why

Some are giving big discounts, while others are going on marketing blitzes — property developers are pulling out all the stops to boost sales which have been hit by cooling measures.

Statistics from the Urban Redevelopment Authority (URA) on Friday showed a 1.3 per cent decline in prices in the first quarter of this year. It is the largest drop since the second quarter of 2009, when prices fell by 4.7 per cent.

The Interlace condominium was launched in 2009 and some residents have since moved in.

However, the project by CapitaLand still has 183 unsold units as of March 2014.

Over at Whampoa East Road, the Eight Riversuites condominium has 205 unsold units. However, the 862-unit project was one of the top sellers last month, when it sold 44 units.

It was the project’s highest sales volume in a single month since June 2013, when the government tightened property loan rules. Under the Total Debt Servicing Ratio framework, home buyers can only loan up to 60 per cent of his or her income.

The units were sold at a median price of about S$1,100 psf — almost 20 per cent lower compared to when the project was first launched some two years back, when it was sold at S$1,340 psf.

Property watchers … said developers may be under pressure to cut prices in order to boost sales.

Nicholas Mak, executive director at SLP International Property Consultants, said: “If a certain residential project has been launched for quite some time and still has substantial unsold units, and this project is quite near to its completion date, the developers may be under some pressure to increase sales.

“Because if let’s say the development is completed and there is still quite a number of unsold units, they (the developers) could also be facing competition from other developments that could be newly-launched in the vicinity.”

Jones Lang LaSalle’s national director of research and consultancy Ong Teck Hui said: “Since the TDSR was introduced in June 2013, the number of unsold units in launched private residential projects has increased significantly by 19 per cent from 5,243 units in Q2 2013 to 6,247 units in Q1 2014.

“This is reflective of the slower take-up of units at new sales launches, resulting in the build-up of unsold units.”

Besides cutting prices, developers are also trying other tactics.

Sales for the Sky Habitat project at Bishan Street 15 picked up in April, after a marketing blitz. In a statement issued on Friday on its first quarter earnings, developer CapitaLand said 106 units were sold in April — after more than six months of single-digit sales volume, according to URA’s figures.

“Another strategy that some developers may embark on is to increase the sales commission for agents,” Mr Mak added.

“For example, a one percentage point reduction may not be that attractive to buyers. However, if developers were to raise the commission by one percentage point of the price, that absolute amount will give a lot more incentive to the property agents to work harder in attracting buyers.”

The competition is expected to intensify with close to 15,000 units, including executive condominiums, to be completed for the rest of the year. This brings the total number of units to be completed in 2014 to almost 20,000 — higher than the some 14,400 units in 2013. (CNA 28th April)

——-

* More: Both the primary and secondary markets suffered sharp slowdowns in buying activity. Developers launched 1,964 new private homes from January to March and sold 1,744 units, fewer than the 2,631 launched and 2,568 sold in the previous three months. In the resale segment, transactions dropped from 1,206 units to 899 homes, the URA said.

Prices fell across all segments of the private housing market in the first quarter, with condominiums in the Rest of Central Region (RCR), or city fringes, leading the decline at 3.3 per cent. Those in the Core Central Region (CCR), or city centre, dipped 1.1 per cent, while the Outside Central Region (OCR), or suburbs, registered a slight 0.1 per cent fall.

Ms Christine Li, head of research and consultancy at property agency OrangeTee said the bigger declines in the CCR and RCR could be due to developers focusing on trying to sell houses from previous launches.

“Most of the homes sold in the first quarter are from existing property launches, where prices could be more attractive as developers have dangled more incentives and discounts to move sales in a slow market,” she said.

Ms Li added that prices in the RCR could see some support in the second quarter as more “attractively located” projects are expected to be launched during this period.

“Three of the highly anticipated projects — Commonwealth Towers, The Crest and Highline Residences — are expected to be launched in the current quarter. These projects are also expected to fetch a higher median price than what’s been achieved in the first quarter.”

And while prices of mass market homes are likely to stay relatively stable, the odds seemed to be stacked against the high-end CCR segment, analysts said.

Ms Chia Siew Chuin, director for research and advisory at real estate consultancy Colliers International, said: “Domestic demand has been weakened by the loan curbs while interest from foreigners, who traditionally form a large demand base for high-end properties, has diminished in view of more favourable investment options in the recovering foreign markets.

“On the supply side, developers of high-end properties may feel the heat to meet the Qualifying Certificate deadline.”

The analysts estimated that overall prices could fall between 4 and 8 per cent by the end of this year, as the property measures are likely to remain.

“As long as borrowing costs stay low, the Government is unlikely to reverse the earlier anti-speculation measures … Under such an environment, we expect price weakness to persist,” said Mr Ismail.

 

Iskandar, answer to rising costs, Reits & other cost tales

In Economy, Malaysia, Property, Reits on 09/03/2014 at 4:16 am

“The government has underestimated the impact of high business costs on our future economy,” said Inderjit Singh (Ang Mo Kio), urging the government to set up a cost competitiveness committee to tackle the root causes of soaring costs before SMEs and MNCs relocate with jobs in tow. He also asked the government to reverse its land divestment policy, which he deems a key reason behind high industrial rents.

Companies are facing a “triple whammy” of rising rents and utility bills, growing wage costs, and a shortage of workers, said Mr Singh, himself a businessman. And this “chronic” cost issue does not affect SMEs alone. “The top management of some large MNCs here … have expressed their serious concerns about the unrelenting increases of the cost of doing business coupled with the unavailability of workers,” he said.

Iskandar’s industrial parks are a “huge threat”, he said. If Singapore’s SMEs are forced to move to Johor, MNCs may follow their SME suppliers and subcontractors. “The exodus may be larger than we imagine … We risk hollowing out our economy in the future, and I would like to sound an alarm that we are close to the tipping point.”…

Though he acknowledged that PIC and PIC+ would help with topline revenues growth, Mr Singh said: “We are just trying to do too many things too fast, and this is hurting many companies.”

Both he and nominated MP R Dhinakaran, who is also managing director of Jay Gee Group, pointed to rising industrial and commercial rents as a key culprit of the high costs of doing business in Singapore.

Citing Association of Small and Medium Enterprises president Kurt Wee’s comment at BT’s Budget Roundtable that rents rise as much as three-fold when leases are renewed, Mr Dhinakaran said: “In this economic climate, rental increases of this magnitude will be fatal for a large number of SMEs.”

Both Mr Singh and Mr Dhinakaran also linked the high rental costs to the government’s land divestment policy. “JTC was a landlord for 18 per cent of industrial property some 10 years ago, but today manages only 3 per cent of the market. This is a huge shift, and the government lost the ability to influence rental prices resulting in developers and investors making the money,” said Mr Singh.

“We have to reverse this policy, even if it means the government having to buy back some of the Reits. In any case, the biggest Reit players are government-linked entities like Mapletree and CapitaLand,” he added.

Denise Phua (Moulmein-Kallang) felt that certain cost increases – the restoration of CPF contribution rates for older workers, higher progressive wages for low-income earners and cost hikes due to tighter low-skilled foreign manpower policies – are justified, with “strong rationale”.

But she also said that business rents need “the touch of the State”, and asked the government to consider “cooling measures, especially for business rents”.

BT 5 March

Given that Ascendas (a GLC) is the biggest player in the industrial land arena: why do you think when the govt says this?

The government will intervene if it sees evidence of collusion or the abuse of market dominance by any landlord – including real estate investment trusts (Reits), said Minister of State for Trade and Industry Teo Ser Luck … in Parliament … calls for help with climbing business costs (and in particular, the affordability of business space) have grown louder both in and outside of Parliament in recent months.

Reits – some of which were formed after JTC and HDB divested space to private owners – have been blamed for shorter lease renewals and sharper spikes in rentals.

“We know that it has come up as an issue, many of you have raised it. We will monitor it,” said Mr Teo.

At the same time, he noted that “Reits are not necessarily the leading players in the rental space market, because they currently only own about 13 per cent and 16 per cent of retail and industrial rental spaces respectively. Like any other landlord, they have to compete in the rental market to attract tenants and cannot charge excessive rents”.

Mr Teo also said that rents for space are likely to moderate in the medium term, as the government has released a “significant amount of land”.

Over the next three years, about 145,000 square metres of new shop space will be completed each year. Over the same period, an average of 500,000 square metres of multiple-user factory space will come on-stream each year.

For the former, that represents more than double the average annual demand for such space in the last three years; for the latter, it is just under double.

(BT 7 March)

Silicon Valley S’pore style?

Entrepreneurship will also receive a boost, since by the end of this year, JTC will open two more blocks to incubate start-ups, as part of a cluster called JTC LaunchPad@one-north.

“It’s our answer to Silicon Valley,” said Mr Teo.

The risk Reit buyers bear

In Financial competency, Property, Reits on 25/02/2014 at 4:09 am

CapitaMall Trust recently sold retail bond offering paying 3.08% annually.

Its units trade at a yield of 4.55% as yet yesterday’s close.

The percentage difference (48%) between the two numbers is the willingness that holders of the units are willing to accept (whether they realise it or not) for the higher (but not assured) payout. If Reits, reduce their payouts, the price falls to compensate for the reduced yield. Even if the payout remains constant, high yielding shares are only a good investment if a falling share price does not undo the yield return.

As there are many other Reits that have better yields, reit investors should be mindful of the risk they are assuming in chasing higher yields.

FYI, I’m still a holder of Reits.

Relared posts:

https://atans1.wordpress.com/2014/01/09/why-owning-reits-in-a-rising-interest-rate-environment-may-make-sense/

https://atans1.wordpress.com/2013/11/14/where-reits-can-go-wrong/

CapitaMall Trust launches retail bond offering paying 3.08% annually – See more at: http://sbr.com.sg/retail/news/capitamall-trust-launches-retail-bond-offering-paying-308-annually#sthash.pEWiNljc.dpuf

S&P: Tough year for S’pore and regional banks

In Banks, Economy, Property on 20/02/2014 at 4:14 am

Lower economic growth prospects and tighter credit conditions could create a tougher operating environment for the banking sector here and in the region, said a report by Standard & Poor’s (S&P) late last week.

S&P expects S’pore’s GDP) growth to fall to 3.4 % this year, from 3.7% last year.

The report also notes that corporate and household indebtedness has been on the rise here. The situation could worsen this year, in anticipation of interest rates rising; higher borrowing costs amid rising. See DBS’s CEO’s tots below* and related post https://atans1.wordpress.com/2014/01/16/why-banks-tested-for-50-plunge-in-property-prices-and-other-wonderful-tales/

Related articles: The three local banks posted their reports last week too and for quick snap-shots (not the usual ST or BT fluff)

http://sbr.com.sg/financial-services/news/5-highlights-you-should-know-about-uobs-2013-results

http://sbr.com.sg/financial-services/news/find-out-what-badly-hurt-ocbcs-fy13-results

http://sbr.com.sg/financial-services/news/dbs-braces-itself-looming-30-35-drop-in-mortgage-loan-applications

Charts on banks’ loans etc

http://sbr.com.sg/financial-services/news/10-charts-prove-singapore-banks-mixed-finish-2013

Cheap way of owning UOB shares

https://atans1.wordpress.com/2011/09/05/haw-par-rediscovered-yet-again/

Update at 6.ooam:

South-east Asia’s three biggest lenders, DBS, Oversea-Chinese Banking Corp and United Overseas Bank, have seen their share prices rise this week after posting solid results last Friday. Common trends in the fourth quarter were better margins, trade finance-driven loan growth, seasonally softer treasury earnings and no asset quality weakness, CIMB noted.

UOB has been the star performer this week, gaining 3.5 per cent, while OCBC has risen 2.3 per cent and DBS 0.4 per cent.

UOB, despite being the smallest of the trio, has been particularly impressive with its fee income and regional strategies, CMC Markets Analyst Desmond Chua told TODAY.

“In terms of fee income, it has performed relatively well while the market has been lacklustre, in part due to a higher interest outlook. Its diversification to grow in regional emerging markets has also helped it maintain loan growth despite weaker mortgage demand in Singapore,” he said.

“On the other hand, OCBC’s share price might have been affected by the prospect of its overpriced acquisition of Wing Hang Bank in Hong Kong while DBS hasn’t been able to impress with its fee-based revenue in recent times despite aggressively attacking this space,” he added.

UOB’s net interest margin, which is the highest among local banks at 1.72 per cent full-year, is another advantage for the lender, Voyage Research’s Deputy Research Head Ng Kian Teck added. “UOB has historically been good on this front, and it means the bank can churn the most value out of every dollar loaned — that’s what’s attracting the investors,” he said.

All three banks ended last year on a positive note, with their fourth-quarter net profit rising between 6 and 11 per cent on the back of strong growth in net interest income.

The banks have also continued to solidify their regional presence, drawing more revenue from overseas than before.

….

“Their return on equity is healthier vis-a-vis the other industries, which are facing greater margin pressure due to higher wages. But the banks have been able to control this issue better.”

CMC Markets’ Mr Chua is also bullish, saying: “I’m looking at the banking space being an outperformer this year even though interest rates are bound to rise. Their tactical diversification across this region allows them to tap into Indonesia’s emerging affluent segment, for example.

Update at 5.15pm:Can Singapore safely deflate its property market? http://www.cnbc.com/id/101409247

————————

*DBS Bank chief executive Piyush Gupta expects home prices to fall by 10-15 per cent this year – more than the 10 per cent forecast by property consultants – but says that this decline would not make a material impact on the bank’s loan book. Speaking at DBS’s Q4 results briefing, he said it is likely that the prices of high-end homes will slide 15 per cent, and that for lower-end ones, by 10 per cent.

As for the higher interest rates expected with the shrinking of monetary stimulus policy by the US, he said he was not expecting it to have any effect on DBS. “The Singapore portfolio is really driven on income considerations . . . As I’ve said before, the pressure will likely start coming when unemployment rises – more than when property prices change.” Singapore’s unemployment rate is now at a low 1.8 per cent.

Mr Gupta said: “All our stress tests in the past have shown that we can easily withstand a 20 per cent reduction in Singapore property prices without material impact on our portfolio. We stress-test (for a) 20 (per cent fall in property prices), but don’t expect it to happen; our stress tests are always calibrated to go off the charts. My own sense is that there will be a correction of 10-15 per cent.”

He noted that the market was already stabilising and that the froth was running off, but that if this continued, the government would roll back some of the macro prudential measures. Sales of new mortgages have plunged 30-35 per cent at DBS, and by 40-50 per cent at OCBC Bank as a result of the stricter loan rules.

Mr Gupta likened the Singapore property market to that of New York and London, where prices held up even during the financial crisis between 2008 and 2012. While prices in the rest of the US fell by about a third, prices in New York slipped by only 10 per cent. It was a similar situation in London, another city where the demand is not dependent on the state of the domestic economy.

Mr Gupta said he expects regional money buying properties here to also put a floor under prices. With the slower sales, DBS’s $49.1 billion mortgage book is likely to grow by $2 billion to $2.5 billion this year, down from $3.5 billion last year and $5 billion the year before that, said Mr Gupta.

OCBC Bank chief operating officer Ching Wei Hong said of the new mortgage sales having declined across the board: “That’s expected, given all the cooling measures that have been imposed. We’ve built up a healthy inventory level. The inventory drives the growth of (the loan) book, going into 2014 and 2015. Beyond 2015 H2 and 2016, if conditions remain the same, we’ll see a bit of tapering in that period.”

(BT article last Saturday)

Buying, renting or the Korean way?

In Economy, Financial competency, Property on 18/02/2014 at 4:23 am

Recently, the FT carried a commentary (behind pay-wall) on why a leading UK architect was renting, not buying (UK has a home-purchasing culture which one LKY imported and made S’porean for reasons explained below).

Here are two gd responses to the article:

— “People are obliged to borrow to buy property because they need a roof over their heads when they retire and do not want to be at the mercy of a landlord, who will increase the rent annually and reserve the right to serve notice three months after signing the annual shorthold tenancy agreement.” (a reader)

–“As everyone knows, buying property used to be like standing in front of a fruit machine that was jammed on three cherries. Wealth came pouring out. And as everyone also knows, that machine has now stopped dispensing cash. You can’t buy a house that will change your life like my grandmother did, nor buy a flat that makes you rich, like I did when I was only 23. Most people can’t afford to buy anything at all.” (Lucy Kellaway, an FT columnist)”

She also reminds, “It has nothing to do with money, and everything to do with culture, emotion and family.” The very reason why the PAP govt wants S’poreans to own their homes, never mind that most of them are buying 99-yr leases.

At the end of the day as she points out, buying “is a wise move” when property prices go up, “renting is smarter” when prices go down. So long as S’pore is a one-party state with the PAP in charge, property prices may keep on rising*. With WP or SDP in charge, what do you think?

—–

In Korea, there is an unusual rental system, known as jeonse, does not involve monthly rental payments. Instead, tenants provide landlords with a deposit, typically between a quarter and half of the property’s value, to invest for the duration of the lease. Property owners keep the returns and then repay the lump sum at the end of the tenancy … Tenants’ deposits financed landlords’ properties, interest-free, while pushing renters to pool savings: over time, the deposit would become their own home-purchase fund. For decades, monthly rental was synonymous with poverty.

Yet interest rates and property prices have sunk since 2008. To earn a decent return on their investments, landlords have been raising jeonse prices.

(http://www.economist.com/news/finance-and-economics/21596566-landlords-are-having-ditch-century-old-rental-system-lumping-it)

Related article: This S’porean bot http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={157655219-19866-5631219744}

Related posts

https://atans1.wordpress.com/2014/02/10/bring-back-super-mah/

https://atans1.wordpress.com/2014/01/16/why-banks-tested-for-50-plunge-in-property-prices-and-other-wonderful-tales/

https://atans1.wordpress.com/2014/02/11/property-khaw-must-be-doing-shumething-right/

———————————————

*But not in 2014:

DBS Bank chief executive Piyush Gupta expects home prices to fall by 10-15 per cent this year – more than the 10 per cent forecast by property consultants – but says that this decline would not make a material impact on the bank’s loan book. Speaking at DBS’s Q4 results briefing, he said it is likely that the prices of high-end homes will slide 15 per cent, and that for lower-end ones, by 10 per cent.

As for the higher interest rates expected with the shrinking of monetary stimulus policy by the US, he said he was not expecting it to have any effect on DBS. “The Singapore portfolio is really driven on income considerations . . . As I’ve said before, the pressure will likely start coming when unemployment rises – more than when property prices change.” Singapore’s unemployment rate is now at a low 1.8 per cent.

Mr Gupta said: “All our stress tests in the past have shown that we can easily withstand a 20 per cent reduction in Singapore property prices without material impact on our portfolio. We stress-test (for a) 20 (per cent fall in property prices), but don’t expect it to happen; our stress tests are always calibrated to go off the charts. My own sense is that there will be a correction of 10-15 per cent.”

He noted that the market was already stabilising and that the froth was running off, but that if this continued, the government would roll back some of the macro prudential measures. Sales of new mortgages have plunged 30-35 per cent at DBS, and by 40-50 per cent at OCBC Bank as a result of the stricter loan rules.

Mr Gupta likened the Singapore property market to that of New York and London, where prices held up even during the financial crisis between 2008 and 2012. While prices in the rest of the US fell by about a third, prices in New York slipped by only 10 per cent. It was a similar situation in London, another city where the demand is not dependent on the state of the domestic economy.

Mr Gupta said he expects regional money buying properties here to also put a floor under prices. With the slower sales, DBS’s $49.1 billion mortgage book is likely to grow by $2 billion to $2.5 billion this year, down from $3.5 billion last year and $5 billion the year before that, said Mr Gupta.

OCBC Bank chief operating officer Ching Wei Hong said of the new mortgage sales having declined across the board: “That’s expected, given all the cooling measures that have been imposed. We’ve built up a healthy inventory level. The inventory drives the growth of (the loan) book, going into 2014 and 2015. Beyond 2015 H2 and 2016, if conditions remain the same, we’ll see a bit of tapering in that period.”

(BT article last Saturday)

Property: Khaw must be doing shumething right

In Property, Public Administration on 11/02/2014 at 4:18 am

(And so is Paper General Tan)

Yesterday, I blogged about a HDB owner worried that he would lose money on his HDB flat and wanted assurances from govt that this wouldn’t happen.

When even a property mogul asks the govt to review restrictions, it’s clear that Khaw is getting something right. Last Saturday BT reported the following:

IT is time for the government to tweak some of its property cooling measures such as the additional buyer’s stamp duty (ABSD), given concerns over the global economy and signs that the property market here is slowing down, said Kwek Leng Beng, executive chairman of Hong Leong Group Singapore and property developer City Developments.

He suggested that the government consider lifting the hefty stamp duties imposed on foreigners when they buy property here, and replace it with a tax on sellers who offload their property three or four years after snapping it up.

“Everybody is attracting foreigners today to their countries. We should attract foreigners. But if . . . you penalise them by having to pay additional tax, then they (will) say you don’t welcome me.

“So why don’t you (the government) just say, if you sell within three years, four years, then I tax you. You come in (and buy property) I don’t want to tax. I think this is one way,” said Mr Kwek, who was speaking to reporters on the sidelines of the Real Estate Developers’ Association of Singapore (Redas) Spring Festival lunch yesterday.

The government can also consider lifting ABSD for locals – who are subject to the additional tax when they purchase more than one home – and permanent residents, he said.

“I don’t think there is a lot of speculation. The prices are high because developers have got no land stock . . . in the land bank. (At the same time) they have to survive, they cannot let business come to a standstill.

“So I think for some of these, we will (need to) have a dialogue with the government . . . I think the government has the bigger picture. We leave it to them. They are trying their best. They want a stabilised market. We will cooperate with them.”

Mr Kwek’s comments come amid signs that the housing market is slowing down. Statistics from the Urban Redevelopment Authority (URA) showed that for the last three months of 2013, private home prices fell 0.9 per cent – the first quarterly drop in about two years. For the full year, URA’s overall private home price index ended 1.1 per cent higher – a smaller gain compared with the 2.8 per cent recorded in 2012.

And when developers talk like this you know that they are concerned that MoM is monitoring their work practices:

Besides working closely with the government to build a healthy property market, developers will also work closely with the government on the next phase of nation-building and real estate development to achieve a “distinctive, high-quality living environment for all”, said Chia Boon Kuah, president of Redas.

This means that construction activity will remain at high levels and continue unabated for several years, making it “ever more important to re-focus our collective attention on workplace safety and welfare of the some 30,000 migrant workers in our industry”, he said.

“As developers, we should support our contractors in showing duty of care for the health, safety and welfare of these workers. This enhances productivity, which, in the long run, translates into benefits for all.”

Last month, a worksite accident in Sentosa left one foreign worker dead and 10 others injured.

The death of the worker takes the number of fatalities at worksite accidents to nine in just over a month, prompting Acting Manpower Minister Tan Chuan-Jin to write on his blog that the recent spate of accidents was “not tenable”.

Developers and contractors should, therefore, “up the ante on workplace safety training and communication” and “recognise the contributions these workers make to our country”, said Mr Chia, who is also group president and chief executive of developer GuocoLand.

Redas would hold a forum to identify and discuss common causes behind construction workplace accidents, challenges to risk reduction and best practices, he said.

Two cheers each for Khaw, Mom Tan and of course their boss, the PM. Three cheers for each is a cheer too far.

two cheers for

British

used for saying that you think something is good but that it could be better

Bring back Super Mah?

In Political governance, Property, Public Administration on 10/02/2014 at 4:52 am

If the PM brings back Mah, the minister who made sure HDB prices rose in a recession*, this Forum writer should be very, very happy about. HDB prices not falling. But to be fair to this idiot KS S’porean, P Ravi has empathy for the sentiments expressed.Still that doesn’t excuse his sense of entitlement.

Can Govt ensure HDB flats keep their value over time?

There have been recent reports on the falling prices of Housing Board resale flats (“First HDB resale price dip since 2005″, Jan 25; and “Resale flat prices not yet at ‘steady state’”; last Sunday)

The number of resale transactions has fallen considerably and we are seeing some negative cash-over-valuation deals.

Despite this, National Development Minister Khaw Boon Wan says a “steady state” has yet to be reached and that home buyers should welcome the softening prices of HDB resale flats.

A few years ago, I took part in several flat balloting exercises as a first-time buyer. I was not successful and had to pay a steep price for a resale flat.

Then National Development Minister Mah Bow Tan had said flat owners would benefit from rising prices because their homes would become more valuable.

There is certainly a need to ensure flat buyers are not disadvantaged by overly high prices.

But it is equally imperative that due consideration be given to flat owners, so they will not suffer a loss in the value of their homes over time. Are there measures to ensure this will not happen?

Chan Kwang Ping

P Ravi on Facebook commenting on the above, “People cannot be faulted for buying a flat even when the price is high and it is the sellers’ market, because whatever the market condition, people still need a house to live in. When people’s retirement fund are stuck in the house they own, such sentiments are understandable.”

What do you think?

And do you think he he will vote for WP? Maybe as WP has promised that it will only be PAP’s co-driver, a co-driver that will let PAP do as its like (OK! OK! WP says will slap PAP if it makes mistakes. But it only gets worked up when NEA, PA and PAP make trouble for WP: not when PAP makes trouble for S’poreans.). Will he vote RP or NSP? Err I don’t think he that stupid.

Will he vote SDP? I hope so (even if I think that its policy of crawling to the Indons doesn’t work), but doubt it as SDP wants to cut the link between investment for retirement and public housing.  A laudable, rational aim, but a tough sell when so many S’poreans are taking 25 yrs to pay off 99-yr HDB leases (About 87% of S’poreans live in HDB flata). Besides these leases have been a gd investment on paper (but useless as security), so far. Hmm maybe SDP should stress these flaws.

Khaw should say, “Vote PAP leh”.

Related posts:

https://atans1.wordpress.com/2011/11/19/hdb-oversupply-again-by-next-ge/

https://atans1.wordpress.com/2011/06/01/consequences-of-khaws-hdb-policies/

https://atans1.wordpress.com/2011/10/27/hdb-affordability-and-market-based-land-costs-redefined/

——-

*https://atans1.wordpress.com/2011/04/30/property-prices-going-against-natural-laws/

Intellectual netizen hero critiques doom monger & govt policy

In Economy, Indonesia, Malaysia, Property on 18/01/2014 at 4:56 am

(Or “Are S’pore & other major Asean economies are doomed?)

Even though Singapore is no longer an emerging market nation, I consider its bubble economy to be part of the overall emerging markets bubble that I have been warning about due to its strategic role and location in Southeast Asia, which is also known as ASEAN (Association of Southeast Asian Nations). My recent reports on Malaysia, Thailand, the Philippines, and Indonesia show that the entire region is caught up in a massive bubble, and Singapore is benefiting from this bubble by acting as ASEAN’s financial center.

(http://www.forbes.com/sites/jessecolombo/2014/01/13/why-singapores-economy-is-heading-for-an-iceland-style-meltdown)

This piece and its sequel have been well publicised, and the central babk has critiqued the first piece (It would wouldn’t it?)

Readers may recall that Donald Low is a scholar who has liberal viewers despite being the Associate Dean (Executive Education and Research) at the Lee Kuan Yew School of Public Policy. He served fifteen years in the Singapore government and I’ve been told he was one of the fathers of Workfare (a scheme I support though I think it’s too mean). He critiqued the article on Facebook as regards S’pore. I’ve paragraphed hos comments to make it easier on the eye:

Donald Low’s FC

There’s a Forbes article on an impending crash in Singapore circulating widely on FB. I won’t dignify it by posting it but here are my thoughts about it: I read the article a while ago and wasn’t at all convinced with his line of argument. It’s just far too sweeping.

Above all, if you look at the usual triggers of financial crises, they are mostly non-existent in Singapore. We don’t have a large current account deficit – on the contrary, we have a huge current account surplus. We don’t have a large fiscal deficit – we run structural budget surpluses. And we don’t have an highly leveraged/indebted household or corporate sector.

On his point about a housing bubble in Singapore fueled by low interest rates, he is partially correct. But to claim that we are on the verge of financial collapse on account of that is utter nonsense. Our leverage ratios are still healthy and I suspect a large part of the run-up in housing prices in recent years is inadequate supply – a problem which has now been largely corrected. Will we see house prices fall this year? Yes, quite possibly. My guess is 10% but even if house prices were to fall 20%, I don’t think it will impact the health of our banks or even our households. There will be households that have negative equity, but as long as they have the cash flow to service their mortgages, it will not precipitate a financial crash.

But there is one argument from the article that is worth highlighting and which I mostly agree with. And that is booms which are led by real estate development and the financial sector are mostly illusory. They create the impression of economic dynamism without creating any real productive capacity in the economy (think back to Bangkok, KL and Jakarta just before the Asian crisis). They also distort and re-direct resources away from productive activities. Real estate and finance are inherently distributive, not creative, activities – they move money and wealth around, but they don’t produce any productive capacity and technological capabilities for the economy.

So when I argue that the Singapore government should look not just at the quantity of growth, but also the quality of growth, I have in mind not just equity and distributional considerations, but also the composition of growth. Is the growth coming from manufacturing and high value-added services, or is it dominated by real estate and finance? If it’s the latter, we have a structural problem.

Finally, I would also highlight that what this article reveals is the failure of government efforts to attract high net worth individuals to Singapore, to make Singapore a wealth management hub for the rich, and to bring in more billionaires even if they increase inequality. I think the costs to the economy and society of such efforts far outweigh their benefits. What productive capacity do property speculators and HNWIs who park their monies in Singapore help to create? So yes, we get a tiny wealth management industry that employs a few thousand people and manages several billion dollars. We can easily do without these ‘benefits’. Meanwhile, their costs in terms of raising property prices, the competition they create for positional goods, and their ostentatious lifestyles undermine our egalitarian norms and values. They also reduce the trust and mutual regard citizens have for one another, undermining their willingness to contribute to more redistribution. All in, I would say that the efforts to attract rich foreigners to Singapore are incredibly misguided.

Why banks tested for 50% plunge in property prices and other wonderful tales

In Economy, Property on 16/01/2014 at 4:23 am

Singapore banks are so well-buffered that they will be able to withstand even a 50 per cent plunge in property prices here if this were to occur over the next two years, say stress tests done by the International Monetary Fund (IMF) and the Monetary Authority of Singapore (MAS). (BT late last yr)

I waz wondering when I read the above, why 50%?

Now I know: typical govt over-reaction:

BOTH public and private housing prices in Singapore have finally come down after a raft of government market curbs.

Prices in the once red-hot suburban private home market dropped in the fourth quarter of last year for the first time since 2009, new data yesterday showed. This dragged down overall private home prices.

Housing Board flat resale prices also tumbled in the October to December period, hard on the heels of a third-quarter decline.

This marked the first time public housing prices have slid for two straight quarters since 2005.

Consultants said weak demand for homes could mean that sellers will finally be at the mercy of home buyers this year, adding that a bumper crop of upcoming homes will swing things more heavily in favour of buyers.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={417120496-19741-7479931115}

Well if property prices ever fell 50%, the PAP govt would be overthrown overnight. And the co-driver kicked out with it. mad Doc and his RI doctors will be in charge Actually it would be the end of the world as we know it.

But maybe the govt isn’t over-reacting: http://www.forbes.com/sites/jessecolombo/2014/01/13/why-singapores-economy-is-heading-for-an-iceland-style-meltdown/. Note that the article conveniently forgets that the banks have been stress-tested to survive even a 50% fall in property prices. Lots of other things wrong with the analysis that I’ll cover one of these days. But for now juz remember that one LKY was a regular contributor to Forbes. Taz the quality of their contributors? Oh, the central bank has come up with a rebuttal: read it in yesterday’s constructive, nation-building media.

Next tale: the cowboys were correct that the govt should restrict HDB sales to PRs:

The proportion of Permanent Residents (PRs) buying Housing and Development Board (HDB) resale flats has gone down in the last few months.

This comes after new rules to stabilise the HDB resale market were announced in August.

PRs now have to wait three years after obtaining their Singapore PR status before they are allowed to buy an HDB resale flat.

According to HDB, in the three months after the new rules were announced, PRs made up 12 per cent of all HDB resale transactions, with 528 units sold to them.

This is down eight percentage points from January to August, when PRs made up 20 per cent of all HDB resale transactions.

There were 2,581 resale flats sold during that period.

HDB also noted that the decrease is not unexpected, as there are now fewer PRs eligible to buy a resale flat.

It also pointed out the drop may not be solely due to the three-year waiting period. (CNA 23 december 2013).

Maybe PM should outsource policy decisions to the masses. Even IT operations are being done by the masses via crowdsourcing http://www.bbc.co.uk/news/business-25714443.

Why owning Reits in a rising interest rate environment may make sense

In Financial competency, Property, Reits on 09/01/2014 at 4:46 am

When ST talks down Reits, as it has been recently, because interest rates are rising, it’s time think again. Remember its big-balls up when Reits were at their (with hindsight) their peak in May last yr?

Here’s some stuff that appeared in reference with US Reits but is applicable here: While REIT investors did an about-face following the Fed’s tapering announcement, some industry experts say all the attention surrounding interest rates and REITs is unfounded. “Ever since May 22, there’s been this discussion about the role of interest rates in REIT returns – and it’s a very strange discussion,” said Brad Case, VP of Research with the National Association of Real Estate Investment Trusts (NAREIT) in a recent interview with CoStar News. “Because the truth is, when interest rates go up, it usually means the economy is strengthening. That’s good news for REITs and means that returns will be strong.” In support of this statement, Case pointed out that REITs have performed well in 12 out of 16 periods of interest rate increases since 1995.

But be prepared that they underperform other types of “shares”

While there is controversy regarding the degree to which interest rates affect REITs, Affleck pointed out that investors need to consider more than just how REITs perform when interest rates change. “The relevant measure is not whether REITs have done well during interest rate increases, but how they performed relative to the broader market,” Affleck said. “On that count, the data are definitive – REIT performance relative to the broad market is inversely related to interest rate movements.” Affleck added that REITs outperformed the broad market – gaining 27% compared to a 20% gain for the S&P 500 – when interest rates fell from 3.5% in March 2011 to 1.5% in April 2013.

Juz take the payouts and bank them. But remember that Reits, unlike shares, pay out most of the income they get.When things go wrong (higher borrowing costs, lower rents), payouts suffer. No buffer, unlike comnpanies dividends. In the worse case, can end up having to subscribe to rights issues because Reits don’t have reserves to draw on in hard times.

Related post: https://atans1.wordpress.com/2011/12/12/primer-on-yields-of-reits-biz-trusts/

TRE readers are illiterate in economics and finance

In Economy, Financial competency, Property on 19/12/2013 at 4:51 am

Or at least many are. Let me explain.

TRE posted this piece of mine on Reits.

It provoked a long rant* from someone called Armchair Anarchist. His or her basic grumble against the govt was that interest rates should have been raised a few back to curb various ills including rising property prices. It received huge positive ratings. And there are no dissenting views, not one.

Last yr around this time, I met an old friend at a function. He was an ISD detainee (short while and it seems ’cause dad was Barisan partisan)) and a strike leader. He later got a MA in Econs and was in admin service (taz meritocracy at work in S’pore, TRE readers, at least 30 yrs ago) before becoming a wheeler-dealer.He was, and is a proud S’porean. No S’pore hater he.

We were discussing what Tharman would do in 2013 to control inflation and property prices given that he couldn’t use interest rates, and the policy of strengthening the currency slowly was not working to control inflation or property prices.

We knew that raising interest rates would only make things worse. Given that everyone (except TRE, TOC and TRS readers) think that S’pore is a safe haven, raising interest rates will result in more foreign money pouring in to take advantage of the better yield here. The currency will be pushed up and exports and services will become uncompetitive. Prices of  most properties (and other assets) will rise. FTs will be willing to accept lower wages, ’cause S$ worth a lot more in their home currencies.

The result: a recession, unemployment among locals, deflation and rising asset prices (except possibly for HDB flats and low end condos: S’porean PMEs default ’cause they lose jobs to FTs). He and I and others with access to credit would make a killing buy low-end condos and renting them out to FT PMEs.

Is this what TRE readers want for Christmas and Chinese New Year?

Are they that deft?

—-

*Armchair Anarchist:

S-REITs payouts lean towards the high side of the global REIT market (e.g. average dividend yield of around 6+% compared to less than 5% in Japan and Germany, 6% UK). If dividends are cut by 20-25%, the yield is still relatively attractive given the dearth of high yielding instruments in Singapore.

But I do find MAS’s warning rather strange. If they are indeed worried about such things as REITs and the health of the Singapore financial sector in face of a potential rise in interest rates, the MAS ought to have engineered such a rise in rates at least 2 years ago and taken the froth out of REITS, the property market and reduced the risk in Singaprean banks’s balance sheets. Why issue warning now that the Fed may begin to taper when the MAS ought to have acted long ago? The easy financing for real estate speculation and the rise in inflation are not new. These had been with us for a few years now and are clear warning signs that interest rates are too low and liquidity too plentiful in Singapore. Look at bank deposit rates and CPF ordinary account rates: we suffered from negative real interest rates when adjusted for the underlying inflation rate (CPI is too crude, PCE deflator is a better indicator). When real rates are negative, the ordinary savers suffered as the value of their savings are inflated away. But it is great for speculators and big companies because it provides a very cheap source of debt financing.

Seems to me, the MAS is probably basking in the reflected glory of superior GDP growth while sleeping on the job in terms of forecasting the real threat to the economy. Another bunch of over-paid, incompetent elites?

Rating: +25 (from 25 votes)

Armchair Anarchist:

I like expand a little bit more on MAS caution regarding rise in interest rates.

My view is MAS left it rather late in the day to caution and to act if necessary. Certain sectors will be hit, not least real estate which had several adrenalin shots that propel values ever higher. But, for our savings and long term investments, it is no bad thing if interest rates are going up. It is my conviction that not just exercising political repression, the govt also exercise financial repression. I said before our AAA-rating is absolutely great for GLCs and big companies but a total disaster for ordinary citizens who have to save and invest for retirement and the rainy day. The Govt incessant extraction of revenues from all sorts of economic activity (tax, COE, surcharges etc)result in persistent budget surplus because in their anti-welfare extremism, the govt do not spend much on social, health and infrastructure programmes. Therefore, our bond yields are artificially low because the govt do not really need to borrow. The govt actually pretend that our CPF rates are pegged to market but in effect the govt control the levers of the bond markets giving themselves a low financing rate. The effect is that we received bugger-all out of bank deposits, CPF and bonds. Singapore company dividends are lousy because whatever crap they pay is still higher than CPF and bond yields.

So let interest rates go up. At least it reverse the equation slightly in favour of the man in the street rather than have the Govt, the GLCs and the big companies indulged themselves in winner-takes-all.

Rating: +20 (from 20 votes)

Central bank cautions on Reits

In Property, Reits on 12/12/2013 at 6:02 am

[A] Monetary Authority of Singapore (MAS) report … warned that a rise in rates will hit Reits – and lower their dividends.

Reits own a portfolio of property and pay investors regular dividends out of their income – the property rentals received.

The central bank’s financial stability review noted that Reits need to distribute 90 per cent of any taxable income to unitholders.

So these vehicles have limited retained earnings and are dependent on capital markets and banks to meet their financing needs.

The MAS estimated that the ease with which Singapore-listed Reits would be able to pay their interest bills would fall markedly once interest rates headed north.

The median “interest cover” for Singapore-listed Reits would fall from 6.8 to 3.5 times if interest rates were to rise by 3 percentage points, the MAS estimated.

The interest cover is a ratio used to determine how easily a company can pay interest on its debt – the higher the ratio, the easier the interest can be paid.

The MAS also warned that higher interest rates would likely increase interest expenses and lead to lower dividend payouts. Reits might then appeal less to investors, capping their ability to raise more cash from capital markets.

On the bright side, the debt maturity profile of Reits is better now than before the global financial crisis in 2008 and 2009.

A smaller proportion of borrowings by Reits are due for refinancing in the next two years.

The MAS also issued a warning over the larger corporate sector.

“If interest rates were to rise from their currently low levels, firms’ debt-servicing burdens could increase significantly.”

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={1011063489-19666-9955500363}

Don’t blame govt if Reits tank after you buy buy.

Possible gd alt to Reits for the KS: https://atans1.wordpress.com/2013/10/03/temaseks-fab-5-spore-blue-chips/. While the yields are not as high, some pretty lowish in fact, they are not highly leveraged and have maintained steady pay-outs.  And think ComfortDelgro and even SMRT (fare rises leh)

Related post: https://atans1.wordpress.com/2013/11/14/where-reits-can-go-wrong/

What a 4-room HDB flat buys in Iskandar & KL.

In Malaysia, Property on 01/12/2013 at 4:28 am
Why it’s right to vote for the PAP if one has fully-paid up or even if 50% paid up,  landed, condo or HDB flat:
While Horizon Hills surrounds a golf course and is luxurious by Malaysian standards, homes cost far less than in Singapore. Four-bedroom houses in the 1,200-acre (487-hectare) development, popular with expatriates, are advertised online at $270 per square foot, compared with the $503 per square foot asked for a four-bedroom public-housing flat in Singapore’s central Bishan district.
The average price of a new 1,000-square-foot (93-square-meter) condominium in Singapore is between $800,000 and $960,000, according to London-based broker Savills Plc. A similar-sized place in Kuala Lumpur costs about $374,000, according to CBRE Group Inc.’s Malaysian unit. [[Less than 4-room HDB flat too.]
(http://www.bloomberg.com/news/2013-11-19/singapore-property-boom-fuels-malaysia-spillover-bubble.html)And property in Iskandar will only get cheaper:
Iskandar developers seen taking a big hitHeftier taxes, scrapping of easy financing will deter buyers, says RHB ResearchDEVELOPERS with substantial exposure to the Iskandar Malaysia region are expected to be the “worst hit” by recent property measures, as heftier taxes would deter short-term foreign purchasers who also account for a significant portion of residential sales in some areas, a research house has said.

At the same time, overseas developers are expected to be more cautious about land transactions as more punitive taxes could lead to higher landholding costs, said RHB Research.

CBRE data indicates that foreign buyers account for 54 per cent of total high-rise residential sales (by developers) in Nusajaya, and 39 per cent in Johor Baru and major suburbs.

But the new 30 per cent RPGT (real property gains tax) on foreigners who gain on disposals within the first five years of acquisition is likely to “wipe out short-term foreign speculators to a certain extent”, RHB observed in a real estate report dated yesterday. (Friday’s BT)

Related posts: https://atans1.wordpress.com/tag/iskandarland/

https://atans1.wordpress.com/2013/11/04/paps-view-of-us-40ers/

Where Reits can go wrong

In Property, Reits on 14/11/2013 at 5:20 am

Reits are back in fashion after the Fed delayed tapering. QE is still coming.

So bear in mind the following comments by Fitching Ratings (ST 10 October 2013):

Yet key risks remain, including high-leveraged Reits that borrowed more to take advantage of low interest rates.

Reits could also face refinancing issues if loans are not renewed or when asset values fall below what had been anticipated.

Rising supply could also hit industrial Reits, with more multi-user factory space coming onstream over the next two years.

This could depress rents and lower asset valuations, which would worsen the sector’s financial metrics, warned Fitch Ratings.

“This is particularly salient for the hospitality industry which is the most cyclical and leveraged of the Reits under Fitch’s coverage,” the agency stated.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={412728214-19457-4491932987}

I’m still long Reits, have no intention of selling yet, but am not a buyer. https://atans1.wordpress.com/2013/07/08/why-im-not-selling-my-reits-yet/. Look at dividend stocks. KS people shld look at Temasek Fab 5  and compare their dividends with waz available from CPF or govt bonds or S$ fixed deposits.

Iskandar & related BT story suck

In Malaysia, Property on 10/11/2013 at 6:20 am

Trumpets pls for this recent post on Iskandar.

M’sians Double confirm now that S’poreans kanna screwed by the M’sian govt Budget measures and Johor’s proposed

Malaysia’s Iskandar Waterfront delays IPO on gov’t property steps -sources

* Postpones listing to Q4 2014, a year later than initially planned

* Concerned measures to rein in property prices will slow demand

* Not immediately clear if delay will impact Johor metropolis development

http://uk.reuters.com/article/2013/11/04/malaysia-iskandar-ipo-idUKL3N0IP1FE20131104

This story came out juz after a BT article on 4 November 2013, a few hours before the above appeared:

Jubilee: An interesting Iskandar play

THE property rush across the Causeway in the past couple of years has seen prices in Iskandar Malaysia double or even triple. Despite talk of a bubble, investors unwilling to jump onto the buyers’ bandwagon can still take bets on property developers themselves.

Jubilee Industries Holdings – formerly loss-making plastic injection mould producer JLJ Holdings – appears poised to be the latest intriguing Iskandar play on Singapore Exchange.

A proposed reverse takeover (RTO) announced in mid-October will see Singaporean businessman Dennis Ng inject Tenderside Ventures, a subsidiary of his Malaysian property development company Jewelstone Properties, into Catalyst-quoted Jubilee.

The deal gives a well-connected and established family a foothold in a listed entity in Singapore.

Mr Ng is executive director of United Malayan Land (UMLand), of which his father, Ng Eng Tee, is deputy chairman and also executive director.

http://www.businesstimes.com.sg/premium/companies/others/jubilee-interesting-iskandar-play-20131104

Even NY & London getting less friendly to non-resident property owners

In Property on 03/11/2013 at 4:25 am

NY and London vie for the status of the world’s most global city. Yet even NY and the UK are showing signs of getting tired of too many FTs (where the “T” stands for “Talent” not “Trash”)

Plan to Tax the Rich Could Aim at Nonresidents “Ultrawealthy nonresidents who own property in New York City certainly make a ripe target for potential revenue,” James B. Stewart writes in the Common Sense column in The New York Times. “People who spend fewer than half the year in New York City don’t pay any city income tax, even if they generate much of their fortune in the city.”

Meanwhile in the UK,

The government is reported to be considering a tax for overseas investors buying UK properties, in a move to stop house prices rushing out of reach of homebuyers.

Sky News claims that the chancellor, George Osborne, is “actively investigating” charging capital gains tax (CGT) when foreign buyers sell UK homes, in a move that will bring their taxation in line with UK citizens.

Currently, only UK citizens and residents pay the tax, which is charged on profits made from the sale of any property that is not the owner’s main home. Basic rate taxpayers pay 18% of the profits, while higher rate payers hand over 28%.

http://www.theguardian.com/money/2013/oct/31/george-osborne-capital-gains-tax-overseas-buyers

 

The maths of salaries when mortgage rates rise 50%

In Financial competency, Property on 28/07/2013 at 10:22 am

Up to 9,000 Singapore private property owners could be forced to sell their homes if interest rates rise in the city-state, according to an analyst report published today.

On the back of news that up to 10 percent of Singapore households may have already over-leveraged their private property purchases beyond the new 60 percent limit that was recently imposed by the Monetary Authority of Singapore (MAS), wealth management firm Religare Enterprises has cautioned its clients to avoid investing in Singapore property developers.
http://www.propertyguru.com.sg/property-management-news/2013/7/36279/analyst-9-000-troubled-units-could-be-on-market.

If debt servicing absorbs a third of your income when the rate is x% and the rate rises 50% to 1.5x%, it will absorb a half of your income. You will need a 17% pay rise just to maintain your non-debt spending and a 50% pay rise to return your debt servicing ratio to its previous level.

Think you will get this type of rise?

Taz why MAS is afraid, very afraid*.

(BTW, the MAS concern is a tight slap to the nation-building, constructive ST because on 3 July 2013, ST spun a rose tinted tale on a worrying statistic)

SINGAPORE households are among the most indebted in Asia relative to what they earn, according to a Standard Chartered report this week

Households had borrowings worth 151 per cent of their annual income last year, second in the region only to Malaysia, with debt at 182 per cent of income.

This is mainly because consumers here take on large dollops of property debt, amounting to 111 per cent of household income – the highest level in the region, Stanchart said.

On the bright side, households have a robust buffer of financial assets from high savings, so their debt levels are relatively low compared to these assets, the bank added.

“We are not concerned about household solvency in Singapore,” it said.

Thanks to low interest rates, the repayments that Singapore households make on loans are also among the lowest in the region as a share of income.

However, Stanchart warned that as rates rise, debt servicing may become more difficult for home owners who are over-leveraged, although current debt burdens are still manageable.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={617222427-18073-5858065485} BT, gave a more sober reading of the same report http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={617243129-18067-663266181})

Coming back to reality from STLand, StanChart is not the only one arguing that financial assets buffer S’poreans against over-leverage. While, rising household debt is a concern, it should also be viewed in context with the asset side of the balance sheet. If needed, they [borrowers] could draw down on deposits,” said Michael Wan, economist at Credit Suisse. http://www.cnbc.com/id/100882025

I suspect they are wrong for two reasons.

S’poreans may have financial assets, but some may have very tiny discretionary income to rely on for emergencies such as increasing mortgage payments. ST reported MAS as saying, One couple with a total monthly income of $6,000 were granted a new home loan of $400,000 on top of their existing debt, as they had a savings deposit of $90,000. But their total monthly loan repayments came to more than 90 per cent of their income. http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={568402008-18352-5608736872}

That $90,000 will be smashed peanuts if the equity in their property turns negative or juz drops, and the bank asks them to top-up. And what happens if, in addition, they have to pay higher rates of interest on their debts? As I wrote above, if debt servicing absorbs a third of your income when the rate is x% and the rate rises 50% to 1.5x%, it will absorb a half of your income. You will need a 17% pay rise just to maintain your non-debt spending and a 50% pay rise to return your debt servicing ratio to its previous level.

Then too, financial assets unless they are bank deposits can depreciate too as interest rates rise (example bonds, or structured products predicated on low interest rates). And if the deposits are in foreign currencies, these currencies may lose value against the S$.

The only financial assets that matter then are S$ deposits, which brings us to Moody’s comments on the local banking scene. While Moody’s is concerned. I wouldn’t pay much attention to Moody’s concerns over the banking sector. Credit agencies are now overcompensating for being super bullish over US sub-prime and bank ratings. Netizens, especially TRE posters should think ST, when they “rate” credit agencies’ BS remarks.

S’pore’ banks are among the safest in the world. In fact too safe, for investors, I”ve argued https://atans1.wordpress.com/2011/06/30/ocbc-look-after-yr-shareholders-not-yr-creditors-or-regulators/. FTR, I have Haw Par shares which owns shares in UOB https://atans1.wordpress.com/2011/09/05/haw-par-rediscovered-yet-again/

To end, let me repeat, “If debt servicing absorbs a third of your income when the rate is x% and the rate rises 50% to 1.5x%, it will absorb a half of your income. You will need a 17% pay rise just to maintain your non-debt spending and a 50% pay rise to return your debt servicing ratio to its previous level.”

Can get this kind of rise, or not?

Why I’m not selling my Reits yet

In Financial competency, Property, Reits on 08/07/2013 at 5:14 am

I’ve been long Reits since 2008.

Despite the recent turbulence, I’m still not a seller because the global economy (and S’pore’s) faces four potential outcomes: a return to healthy growth (in which case Reit incomes should rise); a low-growth, low-inflation period in the doldrums (in which case the income appeal of Reits should help); a return of rapid inflation (as a real asset, property should offer some protection and Reits offer property and leverage); or a deflationary slump. Only in the last case would property suffer. Three-out-of-four sounds good odd for any racing man. And the last in S’pore is impossible to imagine. Easier to imagine a S’pore where the PAP doesn’t form the govt.

As to whether I’m a buyer https://atans1.wordpress.com/2013/05/21/s-reits-why-stay-away/. Look at dividend yielding stocks.

BTW, since https://atans1.wordpress.com/2013/05/28/bad-timing-st-article-on-reits/, I’ve been told the Reits index is down about 14%.

BTW2: Still looking at Comfort Delgro. https://atans1.wordpress.com/2013/06/17/when-raising-fares-sbs-smrt-govt-dont-have-this-problem/ explains why it looks interesting.

ST’s bearish on reits! Time to buy?

In Financial competency, Property, Reits on 10/06/2013 at 5:08 am

Fee-fi-fo-fum; I smell the blood of reporters and analysts that were bullish on reits. Be they alive or be they dead, I’ll grind their bones to make my bread.

ST has finally given up promoting reits (something I’ve been bitching about recently here and here), reporting: MAYBANK Kim Eng Research has gone against the long-prevailing view and downgraded Singapore’s red-hot real estate investment trust (Reit) sector amid a period of increasing price volatility.

Reits have come under heavy selling pressure the past fortnight amid fears the golden days of low interest rates may be ending.

The FTSE ST Reit Index, which tracks the sector, dropped 1.68 per cent yesterday and is down 8.2 per cent since May 22, when the United States Federal Reserve’s chairman raised the possibility of ending its money-printing.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={309678777-17695-45587420}

Gee, less than a month and two bullish stories, ST is now reporting bearish news on reits. Even when I waz an equities salesman, I didn’t change my views so fast. ST Money Desk practicing to be salespersons.

But before rushing into reits, think. The prices of reits were helped by institutional equity investors* buying them for the yield. Now those who chased yields in the equity markets may switch into cyclicals and defensives, if they think the yield party is over. If so buying into reits may face a stampede out of reits, and then relative underperformance.

*Remember, bond investors don’t buy reits. They stick to bonds, moving to junkier bonds for yield. When cautious, they sell the junk and buy US govt bonds.

Time for ST to stop promoting Reits

In Financial competency, Property, Reits on 03/06/2013 at 5:53 pm

Opps ST nearly did it again. On Saturday, an ST headline screamed: “Buying opportunity after Reits rout”. http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={498059457-17610-6138972043}. Market overall was off 24.6 points (0.74%), while the reits’ index was off a marginal 1.1 point.

Could have been worse. The last time ST promoted reits, ““It was no different in Singapore, where the benchmark Straits Times Index sank 61.2 points or 1.8 per cent to 3,393.17, its worst one-day plunge in percentage terms since its 2.2 per cent reverse on May 7 last year” (“Markets tumble amid US, China fears”: ST headline. Didn’t have the balls to tell us, reits here were off about 5%”https://atans1.wordpress.com/2013/05/28/bad-timing-st-article-on-reits/

On a more serious note, ST shld not be promoting reits. True the yields are better than most plays, but reits are leveraged plays. Now is not the time to be bullish on reits.: https://atans1.wordpress.com/2013/05/21/s-reits-why-stay-away/

I’m still long but I got in in 2008 and 2010. I’ve been riding the run and collecting the payouts to pay for my expenses.

 

Bad timing! ST article on Reits/ Will mkts continue rising?

In Financial competency, Humour, Property, Reits on 28/05/2013 at 5:29 am

On 22 May ST screamed “Reits look like good bets to yield-hungry investors”

The opening para read “SINGAPORE real estate investment trusts (Reits) are among the hottest assets in town to own”.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={332593593-17481-7717667817}

On 23 May, Japan’s stock market fell by about 7%. “It was no different in Singapore, where the benchmark Straits Times Index sank 61.2 points or 1.8 per cent to 3,393.17, its worst one-day plunge in percentage terms since its 2.2 per cent reverse on May 7 last year” (“Markets tumble amid US, China fears”: ST headline. Didn’t have the balls to tell us, reits here were off about 5%*. They have since recovered slightly.

Fee-fi-fo-fum; I smell the blood of reporters and analysts. Be they alive or be they dead, I’ll grind their bones to make my bread.

For what’s it’s worth, I repeat my take first expressed here https://atans1.wordpress.com/2013/05/21/s-reits-why-stay-away/. But I’m not selling, yet, juz collecting the distributions, and watching to sell.

Update after first publishing: Juz read in FT that while the Topix index is down 10%, reits there down 1%. Seems investors want to own real assets, given that Japan wants to raise inflation.

Update, Update: However, there are three good reasons why stock markets, a few blips aside, will continue to grow for some time: central banks are scared; there is lots of money waiting to be invested; and returns on all other assets are low … Strapped to these three rockets, the market can still soar. Of course, Spain could yet go bust or China grind to a halt. There could be a natural disaster, an act of terrorism or war. History tells us a bust is waiting down the track, but while the world economy recovers and governments and central banks maintain their pledge to keep printing money, we should expect prices to rise.
Phillip Inman from Guardian

 

S-Reits: Why stay away

In Property, Reits on 21/05/2013 at 5:33 am

Here are gd reasons not to come into S-Reits or to buy more.:

http://www.fundsupermart.com/main/research/viewHTML.tpl?articleNo=8173

Time to get real on retail Reits, and S-Reits generally?

In Financial competency, Property, Reits on 16/05/2013 at 3:35 pm

Ong Kian Lin, an analyst with Maybank Kim Eng, wrote in a note dated March 22 that the recent S-Reit rally was not due to strong fundamentals but fuelled by inflated asset values from quantitative easing by the US Federal Reserve and ample liquidity.

He noted how retail and office property prices have gone up but rentals have been slow to catch up.

A Colliers International report reflected this divergence. As at the end of the first quarter of 2013, retail property rents in its areas of study have fallen from the previous quarter while capital values went up.

While maintaining a positive outlook for the retail and retail Reit sector, Savills’ Mr Cheong noted signs of trouble in that retail sales figures are trailing growth in areas such as tourist arrivals, population and inflation.

Retail sales fell 2.7 per cent in February. Tourist arrivals last year was 9.1 per cent higher than the year before. The consumer price index rose 3.5 per cent in February from a year ago. Total population growth was 2.5 per cent between 2011 and 2012.

The demand seen in the market right now is due to sentiment still being buoyant, Mr Cheong feels.

“At the moment it’s still rising, but it’s a binary issue. You cannot go and push to the tipping point, you push to the tipping point, everybody will bolt for the door like a fire in a cinema or retail mall. If everyone bolts for the door, everything will be vacated.”

NUS’ Prof Sing said retailers have increasing choices of malls. And the risk is that with greater choice, consumers may drift away from traditionally popular malls, leading to a downward spiral.

“When this happens, tenants will also start to move out. This cycle will continue, because you (as a manager) cannot pull in the crowd, I (as a retailer) cannot afford to pay such a high rent, I have to move out from the mall. So you put in another tenant that is not as good, so fewer people will come.”

Prof Sing and Knight Frank’s Mr Png said they are watching the Jurong East area, with several commercial and retail developments due for completion.

Retailers also have to cope with tighter foreign manpower policies.

“Much as the government would like to talk about productivity you find that retailers, the services business, is still very labour intensive,” Mr Png said.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={4798875-17374-4688516258}

Err the issue of inability to raise income could also apply across the board to office and industrial reits too, given the economic slow down. Price rises can only depend on yields going down. FTR, I own various Reits.

DBS still loves Reits

In Property, Reits on 02/05/2013 at 5:24 am

It prefers those with stronger earnings growth potential and/or have potential to deliver earnings surprises. Preferred S-Reits are Perennial China Retail Trust (PCRT), MGCCT and Cambridge Industrial Trust based on their upside potential.

PCRT is seen as attractive due to its valuations and earnings visibility as operations are ramping up at its malls. New development assets are also completed and seen generating cashflow. Target price is around $0.84.

MGCCT offers investors “an attractive opportunity to own iconic, best-of-breed commercial assets”. The trust has resilient cashflow with strong organic growth drivers. The target price at $1.18.

As for Cambridge, its completed acquisitions and asset enhancement initiatives (AEIs) are expected to contribute positively. Its target price is seen around $0.93. I personally am not comfortable with Cambridge because it lacks a tai kor.

It advises investors who benefited from price gains in Mapletree Industrial Trust, AReit, Suntec Reit and Parkway Life Reit shares, to consider selling these.

Property: Tharman is wrong that measures are working?

In Property on 19/04/2013 at 6:45 am

Colin Tan has a regular column on Friday in Today. Unlike the other property “experts” that appear in the local media, his take is always slightly different from the govt spin. Take this week’s http://www.todayonline.com/business/property/cooling-measures-or-market-booster

Based on the new private home sales data for March, the seventh round of the Government’s property market cooling measures must definitely qualify as an own goal, as a colleague put it. Instead of cooling the market, the latest curbs unveiled in January actually boosted it as buyers turned up in droves.

Tharman was quoted by today’s ST as saying: “Property prices remain high but they are moving in the right direction”, and that govt had no plans for additional measures.

I’m sure prices will soar now that buyers know no more curbs coming.

 

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