Archive for August 7th, 2009|Daily archive page
Economy: Positive signs but too early to rejoice
Leave a commentTRADE ministers from both sides of the Causeway say it is still too early to conclude that a strong recovery is at hand despite positive economic signs.
Trade Minister Lim Hng Kiang told a gathering of almost 700 Singapore and Malaysian business owners yesterday: ‘While we are probably past the worst of the economic crisis, we are still not out of the woods.’
Mr Lim’s Malaysian counterpart, International Trade and Industry Minister Mustapa Mohamed, added: ‘There are more green shoots than yellow weeds around, so hopefully the green shoots will outnumber and overwhelm the yellow weeds, then the worst will be over.’
Mr Lim pointed out that key economic indicators have been showing signs of stabilisation globally in recent weeks.
‘Hopefully, the sharp declines that we saw for trade in the fourth quarter of last year and the first quarter of this year would be a thing of the past,’ said Mr Lim at the dialogue session on business opportunities in Malaysia.
The minister said manufacturing output appears to have picked up here, with positive readings in June for leading indicators such as the Purchasing Managers’ Index and Index of Industrial Production.
He added that business expectations in the second quarter for local firms in manufacturing and services have also become less negative compared with the previous quarter.
Advance gross domestic product estimates for the second quarter indicate that the economy expanded by 20.4 per cent on a quarter-on-quarter seasonally adjusted annualised basis – the first expansion after four consecutive quarters of contraction.
Mr Lim cited the volatility in exports that suggest it was premature to assume that Singapore’s exports have stabilised, and the labour market outlook has also yet to improve.
With the Malaysian economy expected to contract between 4 and 5 per cent in 2009, Datuk Mustapa also cautioned against expectations of a rapid recovery.
But he remained upbeat, expecting to see ‘improvement in the numbers’ in the next quarter.
‘Anecdotal evidence from some of our (small- and medium-sized enterprises) indicates that some orders have picked up, just like in Singapore,’ he added.
Source: Straits Times, 7 Aug 2009
Worst of crisis behind us in Asia: Tony Tan
But global outlook and protectionism are still a concern
THE worst of the crisis seems to be over for Asia, which will emerge stronger owing to its sound fundamentals, said Government of Singapore Investment Corporation (GIC) deputy chairman and executive director Tony Tan yesterday.
He sounded a cautiously upbeat message at the annual Economic Society of Singapore dinner, noting that the crisis also presented opportunities for Asian financial institutions and markets.
‘The worst seems to be behind us in Asia. Asian economies are now expected to see continued improvement through 2010,’ Dr Tan said at the event, held at Swissotel The Stamford.
While cautiously optimistic in the short term, he also warned of possible risks and challenges to recovery, such as trade protectionism and a global environment which does not stabilise and recover by next year.
In July 2007, at another event, Dr Tan spoke of dark clouds on the horizon for financial markets. In April last year, well before the financial mayhem that erupted in September, he warned the world could be facing its worst recession in 30 years.
Last night, he noted that the region could emerge from the crisis in a better position, and reorientate itself to ensure more balanced and sustainable development.
Dr Tan said: ‘Asia’s fundamentals are generally sound, policymakers have lots of flexibility, and the population is hard-working and educated.’
The economic downturn has presented regional financial institutions and markets with ‘tremendous opportunities over the next decade’, he noted.
This is because Western banks will probably be unable to meet the capital demand needed to finance Asia’s growth due to constraints and re-regulation.
‘This leaves the playing field unusually open for Asian financial institutions and markets, particularly for the next three to five years,’ he said.
However, regional banks and markets will need to develop quickly to fill this gap, he added.
Other implications of the crisis for Asia are the volatile capital flows and asset bubbles which policymakers will face due to ample liquidity and low interest rates.
‘Like in the early 1990s, managing large capital inflows and prospective bubbles given managed exchange rates will be a major task for policymakers.’
But the road ahead also holds a few potential bumps.
‘The greatest risk to the outlook for Asia is a global economic and financial environment that does not stabilise and recover by 2010. Downside risks remain high, despite signs of stabilisation.’
For instance, US officials may need to ask Congress for more funds if the economy fares worse than expected.
Another risk is the US consumer spending less and saving more. This could result in sustained deflation, and America relapsing into recession.
Protectionism is also a key threat, said Dr Tan, and it is not confined to developed countries as several developing nations also use import restrictions to deal with slowing global demand. ‘There is a danger – probably highest if there is no recovery next year – that protectionism could rise dramatically,’ he added.
On the crisis front, Dr Tan noted that the global economy is stabilising as massive measures taken by governments and central banks start to work through the economies.
‘Confidence is returning and fears of a meltdown in global financial markets and banks have receded,’ he said.
Key economies, including the United States, are expected to post positive growth later this year.
However, Dr Tan tipped lower growth among the developed countries in the coming years, due to deleveraging, derisking, re-regulation and ageing populations.
For instance, the US banking sector will likely be stable enough to support ‘sub-par growth of 1-2 per cent’, but may not be strong enough to support credit needed for a ‘sustained robust growth significantly above 2per cent’.
Another major change is an increased risk of both inflation and deflation.
Dr Tan also noted that emerging economies, anchored by China and India, will play a more important role in the world economy, and are expected to account for more than half of the world’s gross domestic product growth over the next decade.
‘Emerging economies are likely to displace the G-7 as the world’s largest economies over the next 10-15 years, even if per capita incomes still lag behind the developed economies,’ he added.
Source: Straits Times, 7 Aug 2009
More racial interaction at madrasah’s new site
IN JUNE, Madrasah Al-Arabiah moved from its cramped premises in Lorong 13, Geylang to a bigger site in Toa Payoh.
Its bigger, air-conditioned classrooms and badminton and football facilities are a delight to Secondary 5 student Khairil Bahri Kamal.
But it is its location near at least three national schools that appears most appealing to the 16-year-old.
‘We can have regular games as our schools are almost next door,’ he said yesterday, after his Islamic school hosted a ceremony to mark National Day, which is on Sunday.
Minister-in-charge of Muslim Affairs Yaacob Ibrahim told reporters after the ceremony that he welcomed the madrasah’s efforts to forge greater interaction between its students and their peers of other races and religions in the neighbourhood.
‘These are developments we should encourage as much as possible,’ said Dr Yaacob, who is also Minister for the Environment and Water Resources.
The madrasah’s principal, Mr Juraimi Ali, is planning to hold exchange programmes and joint excursions with the other schools, which include Pei Chun Public School and First Toa Payoh Primary and Secondary schools.
Yesterday’s event was organised by the Islamic Religious Council of Singapore (Muis) and Al-Arabiah.
Al-Arabiah is one of six full-time Islamic schools in Singapore.
The students are taught Arabic and religious subjects, on top of others such as English, maths and science, to give them the foundation to be religious teachers for their community.
But the heavy workload had led to a dip in academic standards.
To help lift standards, Al-Arabiah and two others have banded to form the Joint Madrasah System, to focus on their strengths and get more funding from the community.
Al-Arabiah has 300 students, some in primary classes. From this year, it will concentrate on secondary students who want a strong grounding in mainstream academic subjects.
Giving an update on its progress, Dr Yaacob praised the madrasah’s teachers: ‘Speaking to the students, I’m very impressed that they’re very confident, able to stand on their own and speak their mind.’
Source: Straits Times, 7 Aug 2009
Demand for private homes on an upward curve
‘Natural demand’ may be higher as immigrants step in; supply not a nagging issue
Mass-market home prices have risen about 10 to 20 per cent from the recent low in Q1, according to property consultants.
One concern is whether the market is running out of supply of mass-market condos and whether this will set the base for further price hikes.
The current pipeline has about 7,500 mass market homes yet to be launched on sites sold in the past, according to CB Richard Ellis data. These include three 99-year leasehold condo projects in Toa Payoh, Yishun and West Coast Crescent on earlier sites sold by the government.
The rest include 99-year projects by Hong Leong Group on a large historic landbank in Pasir Ris, projects by Far East Organization and Frasers Centrepoint on remaining land on the former Waterfront site along Bedok Reservoir, and a host of freehold projects by various developers in places like West Coast Road, Tampines Road, Yio Chu Kang Road, Toh Tuck Drive and Hillview Avenue.
After the recent launch of two housing sites (at Dakota Crescent and Chestnut Avenue) from the government reserve list following successful applications by developers, this list still has sites that can potentially generate a total of about 5,800 private homes. Some are attractively located near MRT stations in places like Bishan, Serangoon Ave 3, Bartley Road and Bedok. The last two sites will be ready for application by developers in November and December respectively.
The government could add more sites to its reserve list for first-half 2010, or even reintroduce the confirmed list, where sites are launched according to a prestated schedule, unlike reserve list sites, which are launched for tender only upon successful application by developers undertaking to offer minimum bids acceptable to the state.
It will take some time for site launches to translate to new condo launches. However, ensuring there’s enough supply should not be a nagging issue.
But beyond looking at supply, one needs to also understand why demand has spiked since February. Developers have sold a total of 7,250 private homes in the first six months of 2009 – exceeding the 4,264 units sold in the whole of last year. Some consultants are predicting the number for the whole of this year may reach the record of 14,811 units set in 2007.
The current home buying wave began in the mass-market segment, then permeated upwards. Some of the buying represents pent-up demand. People are also taking the opportunity to pick up their dream home at current prices – which despite recent price hikes are still below peak-2007 levels – for fear of missing the boat as they did during the property run-up in 2006 and 2007.
Property speculators are also busying themselves.
But other factors are also at play that are creating a paradigm shift which could suggest that ‘natural demand’ henceforth may be higher than the average 8,000 private homes developers sold annually over the past 10 years (between 1999 and 2008).
These include an increase in immigration into Singapore over the past few years as it embraces foreign talent and wealth and a gradual ‘internationalisation’ of the Singapore property market as foreigners are drawn by Singapore’s emergence as a global city.
Another point to consider when understanding why there could be higher natural demand for private homes is to look at the public housing segment.
The Housing & Development Board’s construction of new flats has slowed down over the years. During 1981-85, an average of about 37,000-plus flats were built by HDB per year. In 1998 too, some 36,600 new flats were built. Later in the face of a supply glut, HDB scaled back building new flats; the figure eased to about 10,000 units a year completed in 2002 and 2003, and fell further to about 5,000 units completed in 2007.
A smaller supply of new HDB homes has made it easier for HDB residents to sell their flats in the resale market and upgrade to entry-level private homes in the suburbs.
Incomes of Singaporeans have grown over the decade, making more aspire to own a private home.
The low-interest rate policies adopted by governments around the world to cope with the global financial meltdown have translated to near-zero returns on fixed deposits and low mortgage rates – making property an attractive investment option. The strong distaste for structured financial products post-Lehman has made property more sought-after.
The home-buying frenzy of late has also come about due to a confluence of two important factors – a recognition of value by buyers (following price chops by developers in Q1) and an improvement in sentiment.
More value-recognition will emerge for real estate as Singapore’s railway network is doubled to 278 km by 2020, boosting connectivity and cutting travel time from homes in locations once called suburbs to the city.
Perhaps we should not be too surprised if strong demand for private residential properties persists. Of course, if another international disaster takes place and foreign property investors again exit, demand could dive, like it did last year during the global financial crisis.
Spikes and dips in home buying and property prices could become more pronounced by virtue of Singapore’s real estate market becoming more international.
Source: Business Times, 7 Aug 2009
Homes from sold-out projects back on market
Speculators a minority as they shoot for small flipping gains
(SINGAPORE) Some buyers who managed to lay their hands on units at projects sold out recently are trying to get lucky for the second time – by selling what they snapped up, for a profit.
This brings to mind the government’s warning last week – that some element of speculation is back in the property market. Industry watchers say, however, that subsales are common for fully sold projects and speculation still remains mild.
Advertisements for subsales at Optima@Tanah Merah have surfaced in the last few days – with owners seeking prices which are at least 5 per cent more than what they paid.
This comes less than a week after all 297 units at the 99-year-leasehold project were taken up in just three days.
Developer TID sold the units at an average price of about $810 per square foot (psf). It had to conduct two rounds of balloting as home seekers descended upon the showflat in droves.
There are also offers for subsales at 8@Woodleigh. Frasers Centrepoint sold all 330 units at the 99-year-leasehold project over a few weeks in June.
According to industry watchers, sellers in the subsale market need to charge a premium of at least 5 per cent to break even. This would cover stamp duty, legal fees and any agent’s commission. To earn more, some may set prices which are up to 10 per cent more than what they paid.
But given the market today, those flipping properties would be glad to come out of the deal with $50,000 to $80,000, said ERA Asia Pacific associate director Eugene Lim.
He pointed out, though, that speculation today is ‘not excessive’. Every new project will attract a small number of speculators but most buyers today are ready to keep and lease out the property, he explained.
It is when the project is sold out that these buyers may change their minds, he added. ‘While some people buy with a medium-term view, because the project is sold out, it presents an opportunity for them to make a quick gain.’
Savills Residential director Phylicia Ang also believes that most buyers do not plan to ‘flip’ their properties initially. But she noted that if there is profit to be made, some are willing to hear out the offer and may sell later.
She also suggested that not all advertisements may be placed by owners – some property agents may take the initiative to promote units, test market interest and ‘gather more leads’.
Both Mr Lim and Ms Ang highlighted that speculation is nowhere as feverish as it was some two years ago. According to Mr Lim, buyers in the subsale market today are more particular – probably looking out for specific units they could not get during the launch.
Rising optimism in the property market seems to be benefiting older projects as well. Casa Merah – which is near Optima and will receive Temporary Occupation Permit soon – has seen prices at its units rise in the last few months. While caveats lodged for units there in February reflected prices of $631-$665 psf, those in July showed prices of $699-$751 psf.
Meanwhile, new launches continue to do well. The 70-unit Airstream at St Michael’s Road, for instance, was fully sold through balloting on Wednesday. Previews for Keppel Land’s 56-unit Madison Residences have begun, while previews for Allgreen’s Viva in Novena will start this weekend.
Source: Business Times, 7 Aug 2009
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