Property plays fall on tax concerns

A PROPOSED tax change designed to make the rules clearer on profits made from the sale of property was still creating a stir yesterday about a week after news of it first broke.

Even though the Government has clarified that the proposal is not intended to stifle speculation, traders are still concerned that it might have a detrimental impact on the property sector.

Under the proposed change, an individual will escape tax on gains made from selling a property if he has not sold any other property over the preceding four years.

But there remain lingering fears among analysts that home buyers might interpret it negatively, despite government assurances that there are no plans to change the tax treatment of individuals selling more than one property within a four-year period.

Market watchers spent the weekend carefully gauging the mood at showflats. And, going by the carnival atmosphere witnessed by many, some analysts have concluded that sentiment remains positive – especially for condos targeted at mid-range buyers and HDB upgraders.

This positivity, however, has not allayed concern that the planned tax change – set to become law in January – may well dent the top-end of the residential market, where condos are invariably bought for investment purposes.

So it was not surprising to find property counters caught in a fierce tug-of-war between the bulls and bears as the tax-change debate continued to rage.

Among the property sector’s big losers of the day were City Developments which fell 20 cents to $8, CapitaLand which lost eight cents to $3.31, United Overseas Land which slipped nine cents to $3.21, and Wing Tai Holdings which was down four cents at $1.23.

Elsewhere, local banks were hit by selling activity as investors looked forward with some apprehension to United States lenders, such as Citigroup and JPMorgan Chase, reporting their quarterly earnings later this week.

DBS Group Holdings fell 22 cents to $11.42, United Overseas Bank lost 16 cents to $14.42, and OCBC Bank was down 20 cents at $6.86.

Given somewhat reduced investor appetites, even the telcos – which were being snapped up last week because of their high dividend yields – came under selling pressure. SingTel lost four cents to $3.12 and StarHub fell six cents to $2.13.

The general sell-off caused the benchmark Straits Times Index to plummet 41.34 points, or 1.8 per cent, to 2,266.64. Because of the lacklustre investor interest, only 1.05 billion shares worth $863.2 million changed hands.

Across the region, a general state of uncertainty saw both Hong Kong’s Hang Seng and Japan’s Nikkei-225 dropping about 2.6 per cent each.

Citigroup Investment Research noted in a report yesterday that funds investing in Asian markets suffered a net outflow of US$365 million (S$534 million) last week. Although trifling when compared to the second-quarter net inflow of US$13.2 billion, the outflow raised fears that it might signal the shape of things to come.

Source : Straits Times – 14 Jul 2009
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A whiff of growth after four quarters of contraction

Q2 flash estimates today may finally buck the trend in on-quarter terms
After months in the red, economies across Asia are expected to report positive GDP numbers for the April-June quarter, starting with Singapore today.

Singapore’s Ministry of Trade and Industry is due to release early this morning flash estimates of the economy’s Q2 gross domestic product (GDP) growth, which economists widely expect to be not just positive but in double digits. But only in the seasonally adjusted, annualised on-quarter terms, which have so far seen four negative quarters since Q2 2008.

The year-on-year (y-o-y) pace will probably still, for the third straight quarter, spell contraction.

The advance estimates to be unveiled this morning are based on only two months’ data, not the full quarter. But seemingly strong April and May industrial output figures have spurred economists to put out fairly bullish Q2 forecasts in recent weeks, even revise up their full-year projections in some cases.

Apart from a lone negative forecast from Standard Chartered Bank, most of the Q2 quarter-on-quarter (q-o-q) estimates are in the double-digit teens, with Citigroup’s near-23 per cent pace about the most upbeat – until Daiwa Institute of Research’s forecasts came along over the weekend.

Daiwa’s Asia chief economist P K Basu’s ‘conservative’ Q2 estimate is 35 per cent q-o-q (adjusted) growth, which translates to minus 1.5 per cent y-o-y.

‘In fact, even minus 1.5 per cent maybe a little bit too low, because financial services and business services would both have grown at a fairly decent clip, construction would have grown a little over 10 per cent, and manufacturing actually grew in the first two months of the year,’ he told BT.

‘So I find it pretty difficult to see real GDP contracting at all in Q2. But, conservatively, I’d say minus 1.5 per cent because otherwise, the q-o-q would be something quite spectacular.’
Stock-market turnover rose 2.3 per cent y-o-y in Q2 after sharp declines in the previous two quarters, and bank credit continued to grow, he noted. And business services would also have been buoyed by the turnaround in real estate. Plus, a ‘better’ set of June manufacturing data would mean a GDP surge of 40 per cent q-o-q, he added.

‘Our top-of-the-street forecast for 2009 real GDP may need to be raised further!’ he said. Months ago, Mr Basu already forecast minus 3.3 per cent for 2009 GDP – against official projections of 6 to 9 per cent contraction – though Citigroup has recently upped its forecast to minus 2.7 per cent.

Macquarie Securities economist Rajeev Malik also just raised his full-year forecast by one point to minus 5 per cent. He sees the economy rebounding by 16.5 per cent in adjusted q-o-q terms in Q2, or minus 5 per cent y-o-y.

‘On our revised trajectory, y-o-y GDP growth will continue to improve, and is expected to return to the black in Q4 2009,’ says Mr Malik.

Also highly bullish – not just about Singapore but the region, particularly China – is DBS Bank’s David Carbon, who wrote in a report published yesterday: ‘It’s payback time. The V-shaped recovery in industrial production and exports in Asia over the past few months will show up in double-digit GDP growth in most of Asia in Q2 2009, starting this week with China and Singapore.’

He expects Singapore to report sequential GDP growth of 15-16 per cent for Q2, and China, 16-17 per cent. South Korea, Taiwan and Thailand are expected to follow in the weeks ahead.
But Stanchart, which is sticking to its off-trend bearish forecast for Q2, notes that both external and domestic demand remain weak.

‘We expect the services sector to be the main drag on economic growth in Q2 2009 while construction growth should slow in Q2 . . . the surprise on the upside could come from manufacturing,’ the bank said in a recent report.

In any case, it remains to be seen if an end to negative q-o-q numbers translates eventually to full economic recovery.

Source : Business Times – 14 Jul 2009

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Recession over, strong V-shaped recovery seen

THERE are tentative signs that Singapore’s worst ever recession is over and a strong V-shaped recovery is to follow over the rest of this year, according to HSBC’s Asian Economics report for the third quarter.

‘Unemployment is expected to peak at the end of this year at 4.2 per cent and then come down to 3.4 per cent at the end of 2010,’ said Robert Prior-Wandesforde, HSBC senior Asian economist, at a media briefing for Asian Outlook 2009.

‘For Singapore, we’re looking at negative 6 per cent GDP growth this year, towards the better end of the government’s forecast range. For 2010, we’re looking at positive 5.3 per cent growth.’
For Asia ex-Japan, GDP growth is expected to 4.2 per cent this year, and 6.9 per cent in 2010.
‘We are optimistic about the recovery and we see increased evidence that recovery has begun,’ Mr Prior-Wandesforde said.

In the Asian Economics report for Q3, three overlapping stages of the recovery process which underpin HSBC’s belief in a sustained pick-up in growth are discussed – initial post-crisis relief bounce, effects of various policy stimulus packages across Asia, and the self-sustaining phase of growth.

‘Since the collapse of Lehman Brothers, there was a feeling that we were heading into a second great depression, the end of the financial world as we know it,’ said Mr Prior-Wandesforde.
‘But thanks to the very aggressive policy action that is being taken by governments and central banks around the world, particularly the US, it seems to us that scenario is pretty much gone.’
Asia ex-Japan will see quarter-on-quarter annualised GDP growth of more than 8 per cent in the second quarter, the report says. ‘Omens are looking even better for the third quarter, with double-digit quarter-on-quarter annualised GDP growth.’

The HSBC coincident indicator includes Chinese and South Korean composite lead indicators, the Commodity Research Bureau index, German IFO business expectations and the S&P 500 equity market index.

This means that ‘we can rule out an L-shaped kind of recovery, and also an U-shaped one’, explained Mr Prior-Wandesforde.

The second phase relates to various policy stimulus packages put in place across Asia – the biggest and most synchronised easing of fiscal policy and monetary policy ever.
It is estimated that these will add ‘at least one per cent of GDP growth in the region this year and another 2 per cent in 2010′.

‘This reflects the length of time it often takes in Asia to get these infrastructural projects in place, and also the fact that monetary policy works with a significant lag in Asia – with 12 to 24 months’ lag being typical,’ noted Mr Prior-Wandesforde.

With all these policy effects stimulating domestic demands within Asia, it is expected to ‘at least create a regional trade recovery before world recovery’.

Tracking the level of Asia ex-Japan private consumption and investment as a proportion of the equivalent series for the US, the latter was actually 20 per cent higher than its American counterpart last year.

Asian private consumption came to just 40 per cent of the US level in 2008 but it has grown more in absolute terms in each of the last two years.

‘Our Asia ex-Japan and China export lead indicator points to a pick-up in year-on-year real export growth Q309,’ Mr Prior-Wandesforde said.

‘It’s typically the most open economies, like Singapore and Malaysia that crashed the most, which we think will see the greatest trade recovery kicking in.’

Source : Business Times – 14 Jul 2009
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CBRE expects smaller fall in retail rents this year

It cites healthy demand for Orchard Rd space, limited suburban supply
CB RICHARD Ellis (CBRE) now expects Orchard Road retail rents to fall 10-12 per cent this year – less than its earlier estimate of 15-20 per cent.

‘We expect the rate of rental decline for prime space along Orchard Road to ease given the healthy demand for existing shop space as well as high pre-commitment levels at yet-to-be completed malls,’ CBRE said in a report released yesterday.

The firm now also expects suburban mall rents to contract just 5-6 per cent for the whole year – down from its earlier estimate of 10-15 per cent.

Prime Orchard Road rents fell to $33.90 per sq ft (psf) per month on average in Q2 2009 – down 2.9 per cent quarter-on-quarter and 7.8 per cent year-on-year. This means that according to CBRE’s data, prime Orchard Road rents fell 6 per cent in the first half of this year.

Prime suburban rents were unchanged in Q2, averaging $28.30 psf pm. They were supported by the limited pipeline of supply in the suburbs, and the fact that suburban malls owned by real estate investment trusts (Reits) are under pressure to be yield-accretive and so are less likely to drop rents drastically. Prime suburban rents dipped a marginal 2.4 per cent in H1 2009.

The three new major malls coming up in Orchard Road have so far reported healthy leasing figures. Ion Orchard said recently that it is 94 per cent leased. And at the other end of Orchard Road, 80 per cent of the space at Orchard Central is committed. 313@Somerset, which is due to open at year-end, has said that it is 85 per cent leased so far and will be 100 per cent let by the time it opens.

Analysts have said that the fall in retail rents is expected to moderate in H2 2009 with seasonal activities such as the Great Singapore Sale, F1 Grand Prix and Christmas festive season.
Source : Business Times – 14 Jul 2009

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Strong demand at two weekend condo previews

DEMAND for new private property developments remains strong, judging by the interest generated at two previews held over the weekend.

At high-end condominium Ascentia Sky’s preview for selected clientele, over 90 per cent of the 80 units released were snapped up for as much as $1,250 per sq ft (psf), according to developer Wing Tai’s spokesman.

‘We received strong public demand at the launch,’ said the spokesman, citing the prime location in the Alexandra-Tanglin area as a key selling point.

A public preview is set to be held this weekend before the official launch, which is likely to take place over the following weeks.

The high-rise development has 373 units comprising two- to four-bedroom units, two five-bedroom penthouses and three super penthouses.

Mass-market-priced freehold condominium The Gale, located at Flora Road, was already 65 per cent taken up after its preview that began last Friday. Units were sold at an average price of between $650 and $700 psf.

Hong Leong Holdings had originally planned to release 80 units at the preview, out of a total of 329, but ended up opening 135 more units to interested buyers.

It had employed a novel marketing strategy by setting up a Facebook page featuring information about the property and the preview dates.

The official launch will be held on Saturday, where units including one-bedroom and two-plus-one types – the largest being four-bedroom apartments with a roof terrace – can be viewed.
Buyers have the option to join the Interest Absorption Scheme, meaning they have to pay only 20 per cent of the price of the unit upfront and the remainder upon the condominium’s completion.

The Gale is the latest project from Tripartite Developers’ Upper Changi properties. Tripartite Developers is a joint venture involving Hong Leong Holdings, City Developments, and Trade and Industrial Development.

Source : Straits Times – 14 Jul 2009

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Top-end home sales gently pick up pace

More transactions streaming in at higher price bands as bottom-up recovery starts to take root
High-end residential transactions continue to stream in steadily, in both the primary and secondary markets. Two units were sold recently at Nassim Park Residences by its developer at above $3,000 per square foot (psf), one of them at $3,813 psf.

Buyers returning: Two units were sold recently at Nassim Park Residences at above $3,000 psf, one of them at $3,813 psf

In the sub-sale market, a caveat has surfaced for a 37th floor unit at The Orchard Residences at about $3,550 psf last month.

Caveats have also been lodged for transactions of three units at The Ardmore Park at $2,375-$2,513 psf, and for a sub-sale deal at Marina Bay Residences at $2,200 psf in June.

Also in the sub-sale market, a three-bedroom unit on the 13th floor of Tate Residences at Claymore Road has been sold for $2,400 psf or about $5.25 million.

The seller and buyer were both Indonesians, says Jerry Tan, managing director of JTResi, which brokered the sale. The option was exercised about 10 days back. Two months ago, JTResi had also handled the sale of a 17th-floor unit in the development, facing the same way, at a lower price of $2,150 psf.

The 36-storey freehold project is slated for completion in a few months. ‘Prices at Tate Residences have trended up from the lows of $1,850-1,950 psf seen in March-April. Those were some of the scariest months in the property market,’ Mr Tan adds.

In the primary market, at the freehold Nassim Park Residences near Botanic Gardens, an option was exercised last week for a second-storey unit at $3,813 psf or $13.25 million. The unit is in the premium block, on an elevated part of the project, with a pool view and with the back facing Nassim Hill.

The 3,477 sq ft unit has four bedrooms and a study. The buyer is Indonesian, said CB Richard Ellis (CBRE) executive director Joseph Tan, whose firm is the joint-marketing agent for Nassim Park Residences.

The project’s developer is also said to have issued last weekend an option for the sale of a fourth-level unit at $3,081 psf. The five-storey condo is being developed by UOL Group, Kheng Leong and Orix Corporation.

‘Of late, we have been seeing an increase in transactions in the market above $2,000 psf. However, what this covers may be the top 5 per cent of buyers, who remain selective and are project specific. We’re seeing an equal mix of foreigners and Singaporeans buying. Current prices – which are about 20-25 per cent off the 2007 peak levels – are pretty attractive,’ CBRE’s Mr Tan added.

CBRE also brokered the sale of a fifth floor unit at Ho Bee development The Orange Grove last week for $2,200 psf, or $4.7 million, to a Singaporean buyer. According to government data, five units in the project were sold by Ho Bee in May at between $2,255 psf and $2,380 psf. These levels are roughly 20 per cent lower than the $2,800 psf average price for the project early last year.

Orchard Turn Developments has sold 10 units at The Orchard Residences since May at $2,700 psf to $3,300 psf. The buyers comprise a mix of Singaporeans, permanent residents (PRs) and foreigners.

Despite a return of transactions in the higher-price segments, DTZ executive director Margaret Thean notes that ‘buyers are more cautious with their offers’.

JTResi’s Mr Tan observes that the pick-up in transactions of higher-priced units has led some developers, who had earlier planned to launch or relaunch projects, to hold back. ‘They basically don’t want to under-price their projects,’ he added.

Ho Bee executive director Ong Chong Hua said: ‘Sales are beginning to filter to the higher end, but not in a big way yet – because the overall quantums involved are usually quite large. Banks are also more cautious about granting home loans for this segment, whereas for the mass and mid-market projects, banks have relaxed on lending and valuations are no longer an issue.’
Hong Leong Holdings said yesterday that 215 units have been sold at The Gale, a freehold condo in the Upper Changi area, since last Friday. The average price is said to be about $650-660 psf.
At Alexandra Road, Wing Tai sold over 70 units at the 99-year leasehold Ascentia Sky during last weekend’s preview. The average price is $1,250 psf.

Over the weekend, MCL Land sold 55 units at The Peak @ Balmeg, a freehold condo at Pasir Panjang, bringing total sales to 100 units. The average price is $1,000 psf.

Interest absorption schemes are available for all three projects at price premiums.
Remarks Mr Ong: ‘What we’re seeing is a bottom-up recovery, which is more sustainable – unlike the last recovery from 2005 to 2007, which was top down.’

Source : Business Times – 14 Jul 2009
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Strong growth suggests Singapore emerging from recession

Singapore said Tuesday its economy grew for the first time in a year in the second quarter, led by biomedicals and electronics, suggesting the city was emerging from its worst ever recession.
The economy soared 20.4 per cent in the three months to June compared with the first quarter on a seasonally adjusted annualised basis, the Ministry of Trade and Industry said, while raising its forecast for 2009.

A Dow Jones Newswires poll of 10 analysts had tipped an average 14.1 per cent economic expansion.

Gross domestic product (GDP) was now expected to contract 4-6 per cent for the year from an earlier projection of 6-9 per cent, the ministry said, while warning that any recovery would be weak due to the fragile global economy.

It was the first quarter-on-quarter growth in five quarters.

Trade-driven Singapore became the first Asian economy to slip into a recession in the second half of last year after a financial and economic crisis that started in the United States hit demand for its exports.

Tuesday’s data means Singapore is the first of the Asian countries hit by recession to release statistics pointing to a recovery.

Compared with the previous year, however, output in the June quarter was down 3.7 per cent, indicating that the economy remained weak.

“I guess technically the recession would have ended, the economy is growing again,” said David Cohen, an economist with research house Action Economics.

“Growth won’t be very strong but it should remain in an upward trajectory,” he told AFP.
“The Singapore economy registered a stunning turnaround in the second quarter, much in line with our expectation,” DBS Group said in a research note.

Despite the quarter-on-quarter growth, the trade ministry cautioned that “the outlook for the rest of the year remains largely unchanged: of a weak recovery susceptible to downside risks.”
“At this juncture, there is no evidence yet of a decisive improvement in final demand,” the ministry said in a statement, adding the second quarter surge “may not be sustained.”
The services sector, which accounts for two-thirds of the economy, continued to shrink with a decline of 5.1 per cent in the June quarter from a year ago, the ministry said.
It noted that rising unemployment and reduced consumer spending in Singapore’s major export markets like the United States and Europe reflected the continued weakness in the global economy.

Action Economics’ Cohen said however he was cheered by the second quarter numbers.
“I think this will be the first in a series of upbeat GDP reports for the second quarter from Asian economies,” he said, noting that China and South Korea would also be announcing their growth data in the next two weeks.

“Maybe this will provide some reassurance to the markets which have been jittery in the last few weeks about the sustainability of the recovery. It shows that Asian economies have turned the corner in the second quarter.”

Dariusz Kowalczyk, chief investment strategist with SJS Markets trading house, said the June quarter data suggested Singapore may not have been as hit hard by the global recession as initially thought.

“Production and exports account for such a large proportion of the Singapore economy that global trends will determine whether it grows or contracts but I am upbeat on the global economy so this bodes well for Singapore,” he said.

He added that he has revised the city-state’s 2009 growth outlook to a contraction of 4.3 per cent from 5.9 per cent previously forecast.

The June quarter figures are computed mainly from the April-May period and the ministry is expected to release a more detailed picture in the next few weeks.

Source : Channel NewsAsia – 14 Jul 2009

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