DAILY MARKET UPDATES 20th August 2008

Transitional office sites seek niche as market cools
URA rolled out another 15-year leasehold transitional office sites in Mohamed Sultan Road. This is the seventh transitional office site URA has launched since July last year, and one of two transitional office plots for release in second half 2008. The other, at Mountbatten Road, will be launched next month. CBRE expects few bidders for the site and predicts bids of about $80 to $100 psf ppr. The site's location may appeal to businesses that don't require a CBD location. Knight Frank projects a slightly higher price range of $100-$130 psf ppr for the site. It reckons the plot may receive cautious or a few opportunistic bids, citing that the completion time of the project on the plot could be close to 2010, when a large supply of office space is also slated for completion. Morgan Stanley said that it expects Singapore office rents to peak earlier by end-2008, due to expectations for office demand being lower than upcoming office supply (including business parks). CBRE data shows that about 10.1 million sq ft of new office space will be completed between Q3 2008 and 2012, inclusive of 645,000 sq ft of the transitional offices. Separately, URA said it has accepted applications for the release of two 60-year leasehold industrial sites at Kallang Pudding Road and Ubi Avenue 4 in the reserve list. The minimum prices that the successful applicants have committed to bid are $69.88 psf ppr for the Kallang Pudding plot and $69.85 psf ppr for the Ubi site.
- The Business Times, P2 – also see The Straits Times, B25 “Few bids for Mohd Sultan site?”
More land, buildings for foreign schools
Four more state buildings and three land parcels have been identified for use as Foreign System Schools (FSS). The buildings are the former Upper Serangoon Secondary School in Upper Serangoon Road, Nan Chiau High School in Kim Yam Road, Fuchun Primary School in Woodlands Centre Road and Jurong Town Primary School in Hu Ching Road. Except for the Upper Serangoon Road property, the buildings will be leased for three years, with the option to renew for two further three-year terms. The land parcels - at Yishun Avenue 1, Hougang Avenue 1 and Bukit Batok Road - have lease periods of 30 years. Currently, 19 international schools use state property. EDB said that more schools will be attracted to the island in line with market demand from expats.
- The Business Times, P8
Hoi Hup-led group top bidder for DBSS site in Toa Payoh
A consortium led by Hoi Hup Realty is the top bidder for a HDB Design, Build and Sell Scheme (DBSS) site at Lorong 1A Toa Payoh. Its bid of about $198.82 million works out to about $160 psf ppr. Market watchers estimate that the breakeven cost could be around $430-500 psf of saleable area. The breakeven cost will depend on construction costs and whether Hoi Hup succeeds in making its application to URA to secure provisional permission before Oct 7. After that date, bay windows and planter boxes will no longer be exempt from Gross Floor Area calculations and Hoi Hup’s breakeven cost for the project will be higher. The DBSS site, which is being offered on a 103-year leasehold tenure, can accommodate about 1,200 HDB flats comprising a mix of three-, four- and five-room flats. ERA reckons the selling price for the HDB flats on the site may be around $550 psf of saleable area. Currently, in the HDB resale market, four-room flats (969 sq ft) are selling for about $540 psf while five-room flats (1,184 sq ft) are selling for about $530 psf in the location. ERA also said that the threshold for HDB buyers in Toa Payoh should not exceed $650,000 for five-room flats and $550,000 for four-room flats. ERA also commented that the top bid by Hoi Hup was bullish. The tender attracted two other bids - from TP Development Pte Ltd and Sim Lian Land. More than 80% of the 714 units at City View @ Boon Keng DBSS flats, also developed by Hoi Hup, have been sold so far.
- The Business Times, P9
4% growth next year: Economists
Singapore’s economy is likely to grow at about 4% next year - the same rate as this year or even lower, according to a poll of private sector economists. They expect the slowdown to continue well into next year. Weak external demand has dragged down exports, but the fear is that this may spill over to other parts of the economy, which have so far proved resilient, said a Citigroup's economist. A Barclays economist expects a multi-year price correction in residential property. But he also said that the economy is more buffered from an export slowdown by Singapore’s exportable services engines, the building boom and the diverse range of manufacturing. Another positive sign is that inflation has peaked, said DBS. DBS also sees new investments coming in, particularly in pharmaceuticals
- The Straits Times, B26
Lenders face tougher times after strong H1
China's state banks are poised to report strong profit growth for the first half in 2008, thanks to wider margins and strong fee income, but funding costs are expected to rise in the second half, eroding growth. Chinese lenders are likely to face a harder time for the rest of the year and beyond as customers lock up funds in time deposits and move away from more profitable demand deposits. Asset quality is expected to deteriorate as property firms are hit by Beijing's clampdown on borrowing. Robust loan growth is slowing as Beijing took steps to stave off economic overheating.
- The Business Times, P12
Billionaire denies buying world's costliest home
Russian billionaire Mikhail Prokhorov denied French media reports he had bought the world's most expensive home. Newspapers said Mr Prokhorov paid 496 million euros (S$1 billion) for a property in southern France called Villa Leopolda, built in 1902 for Belgian King Leopold II. Mr Prokhorov, Russia's fifth richest man, made his estimated US$22 billion fortune during the economic free-for-all in Russia in the 1990s.
- The Business Times, H16
Echoes of lost decade haunt Japan again
Japan faces fears of prolonged stagnation as Bank of Japan (BOJ) warns of sluggish growth and high prices. Fears were heightened by news last week that Japanese banks are facing new problems with bad loans, especially to the property sector. The BOJ also predicted that inflation in Japan, which has soared to its highest level in more than a decade, will accelerate in coming months. The nation's economy contracted at its fastest pace in seven years during the second quarter of this year, with gross domestic product registering a 2.4% annualised decline. Corporate sentiment and capital expenditure plans in Japan have declined. The Bank of Japan's quarterly survey of business prospects for June showed sentiment to be at its lowest level in five years across a wide spectrum of businesses.
- The Business Times, P1
Why he just leaps when she hesitates
A survey of American households carried out by Iowa State University and presented to the NASD Investor Education Foundation found that in relationships in which couples didn't make investment decisions together, the men took control. Women reported finding investing more stressful, less exciting and more difficult than men did. Men tolerate more risk than women, which means that over time, women's returns could be less. Colorado State University researchers found that single women held 43% of their wealth in risky assets while single men held 51%. As their wealth increased, women devoted less money to risky assets than men did. Women largely exhibit more self-control and rational behaviour than men do when it comes to investment decisions.
- The Business Times, P30

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