News Highlights Tuesday 23 April 2008

Analysts find GIC's views on recession too gloomy
These are turbulent times, but the world economy has seen worse in the past 30 years, according to economists who feel the Government of Singapore Investment Corporation's (GIC's) gloomy outlook is too bearish. GIC deputy chairman Tony Tan said on Monday that the world could be facing its worst recession in three decades, if policymakers do not act soon to stem a global credit crisis. Asian Development Bank managing director disagreed and said that it is too pessimistic, expecting an upturn in the US in the second half, when fiscal recovery measures kick in. Analysts noted that despite the turmoil in the global banking sector, real economic activity has not been that badly hurt so far.

- The Straits Times, H20




Deferred payment scheme: Up to 4,200 homes may be dumped
The URA revealed last week that as many as 29,250 homes offered under the deferred payment scheme (DPS), including 5,760 unsold units as at the end of last month, will be completed from this year to 2013. The concern is that speculators who bought homes under the DPS could dump their units at below-market prices, and this could drag down overall sentiment. Four property experts estimated that up to 30% of homes sold under the scheme last year could be held by speculators who may offload homes as the completion date nears, translating to roughly 4,200 homes. The DPS allowed buyers to pay 10 or 20% of the sale price upon purchase, with the rest due when the unit received its temporary occupation permit (TOP) on completion. Speculators would typically opt for the DPS and sell their units for a profit before the TOP. Any later and they would have to pay up for their homes by arranging for bank loans or other means of financing. Industry experts were divided on the impact these 4,200 homes would have on the market. Some maintained that panic selling is not likely, given Singapore's strong economic outlook. HSR noted that homes set to be completed this year and next are less likely to be sold indiscriminately, since their owners are probably sitting on healthy gains.

- The Straits Times, H22





Alternative real estate ripe for picking
With probably less than 350 completed office and industrial buildings in Singapore available for sale on a strata basis, transaction volumes have been steadily rising with more investors seeing an upside. Colliers International noted that by 2007, the office sector has chalked up total annual sales of 595 transactions, a 117.2% rise compared with 2005. The industrial sector saw 1,227 sales transactions in 2007, up 81.8% from 2005. Colliers also said that while some of the purchases were by end-users, investors were also drawn by the attractive net rental yields of these properties, ranging between 5 and 7%. Residential properties offer net yields of 2.5 to 4%. Compared with the mid-1990s peak, capital values of office and industrial properties as at end-2007 were still some 27.5 and 33.7% lower. The sectors thus hold immense upside potential in rents and capital values.

- The Business Times, S11




Landed plots fetch 22% less at URA auction
Landed-housing sites at Sembawang were sold yesterday at prices 22% lower on average than nearby plots a few months ago. Yesterday's auction by the URA was for 11 plots with 99-year leasehold tenure. All were sold for a total of $45.29 million, or $223 psf on average. The plots come under phase two of Sembawang Greenvale estate. URA sold the 12 plots in nearby phase one in October last year for about $285 psf on average. The phase two plots can be developed into 90 dwellings - one bungalow, 16 semi-detached houses and 73 terraced houses.

- The Business Times, S11





Property tax unlikely this year
China will not start to levy a general property tax in 2008, because many technical and political issues need to be worked out. Renewed rumours about the tax, along with worries about measures to cap prices, have hit property shares in recent weeks. The property tax reform aimed to give local governments a steady revenue stream so that they could offer better public services, distributing tax income that would have stayed with the central government. A senior economist under the Ministry of Finance said that the tax would stabilise prices, as some buyers would be put off expensive homes, forcing developers to build more modest apartments. Average property prices across 70 large and medium-sized cities rose 10.7% from a year earlier in March, slowing from February's 10.9%. The final launch of such a tax structure will probably not come soon. The tax administration said in January that it would expand the introduction of the tax on a pilot basis to three to five more provinces and municipalities this year. An official at the Beijing tax bureau said that residential properties would be exempted at first and said authorities had yet to decide on a tax rate.

- The Business Times, S16




Cold market forces Mapletree, JTC to freeze Reit plan
JTC Corp and Temasek subsidiary Mapletree Investments are not proceeding with their earlier plan to list a real estate investment trust (Reit) owning a portfolio of JTC assets for now, because of unfavourable market conditions. Instead, JTC Corp will divest the $1.71 billion worth of assets to a private trust sponsored by Mapletree. The transfer of properties to Mapletree is expected to be completed by July 1, 2008. The properties to be divested comprise 39 blocks of flatted factories, 12 amenity centres, six stack-up buildings, a ramp-up building, The Synergy and The Strategy at International Business Park in Jurong and The Signature at Changi Business Park, plus a warehouse building.

- The Business Times, P1




India signals steps to contain rising prices
India's federal government is planning to take several steps, including banning the exports of some commodities, to control rising prices. India's key inflation rate surged to a 3-year high of 7.41% last month, before dropping to 7.14% for the week ended April 5. India's central bank said that it was lifting its cash reserve ratio, the proportion of deposits banks must keep with the central bank, by 50 basis points to a seven-year high of 8.0%.The move will drain 185 billion rupees (S$6.2 billion) from the banking system. The aim is to lower the level of inflation-fuelling ready cash and keep money market rates firm - a step the central bank preferred to forcing commercial rates higher with an official lending rate rise.

- The Business Times, P17