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Singapore Property Downcycle

Home resales: What a difference a year makes

Non-landed home resales plunge 53.9% year-on-year in April; last month also sees 0.4% drop in prices from March

The Business Times - May 11, 2013
By: Mindy Tan

RESALE volumes of private homes have continued their downward trajectory, even as prices island-wide continued to soften.

A total of 572 resale non-landed homes changed hands last month, going by flash figures released by the Singapore Real Estate Exchange yesterday. While comparable to March's 614 units sold, this is a 53.9 per cent drop from the 1,240 transactions recorded in April last year.

DTZ's head of Singapore research Lee Lay Keng suggested that the fall in demand could have come from a mismatch in the expectations of buyers and sellers.

"Singaporeans who already own two or more properties will now have to pay an an additional buyer's stamp duty (ABSD) of 7 per cent or 10 per cent if they were to purchase another property after selling their secondary properties.

"As the replacement cost of selling their properties is now higher, sellers may require a higher price before they will sell their properties, or they may choose to withdraw their properties from the market.

"On the other hand, prospective buyers are waiting to see if prices will fall first before entering the market again."

The impact on prices was more muted however; prices dipped just 0.4 per cent from the previous month.

Price drops for condos in the city centre (Core Central Region or CCR) and city fringe (Rest of Central Region or RCR) fell a little more - by 1.9 per cent over the previous month to $1,772 and $1,267 per square foot (psf) respectively.

This is the fourth consecutive monthly price drop, representing a drop of 8.2 per cent, for CCR since its price peaked last December at $1,931 psf.

That being said, demand for resale condos is expected to slow in the coming quarters.

Separately, overall rental prices slipped 1.0 per cent in April. Rental prices fell by by 4.4 per cent in RCR and by 0.9 per cent in Outside Central Region (OCR) areas; in CCR, rents picked up 2.1 per cent to $4.79 psf.

Rental yields softened in both RCR and OCR, while yields in CCR continued their climb to reach 3.25 per cent. Despite yields softening, RCR still showed the highest gross yield of 3.73 per cent as at April, followed by OCR's 3.68 per cent.

Mr Lim, looking ahead, said rents may soften further as more projects are completed, and as the tightened quota on foreign workers kicks in, leading to fewer of them coming here and needing accommodation.

Further, given that the supply of suburban homes has significantly increased, this will keep suburban rental prices down, he said.

On the public housing front, cash-over-valuation (COV) for resale flats dropped $1,000 to $30,000, the lowest monthly COV since September 2012. Despite this, median resale prices continued trending upwards, hitting $465,000, up 1.1 per cent from $460,000 in March.

ERA's Mr Lim said: "With COVs falling, more home-buyers may be enticed to enter the HDB resale market, as second-time home-buyers will find it more affordable and they need not endure the long wait and numerous unsuccessful ballots for Built-To-Order (BTO) units."
Wow, here goes the clone.Smile
wrong room.Smile

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Singapore Business Review

Chart of the Day: 66.5% of laid off workers in 2012 are professionals

According to Nomura, layoffs peaked in 2012 to 11,010, compared to 9,990 in 2011, and warrants monitoring, especially in the light of weak external demand and the on-going labor market restructuring.

On a quarterly basis, the rate of layoffs has picked up from 2,600 in 1Q2012 to 3,350 in 4Q2012. This number improved slightly in 1Q2013 with layoffs of 2,000.

Here's more from Nomura:

It is interesting to note that 66.5% of resident workers laid off in 2012 were from the Professionals, Managers, Executives and Technicians occupational group.

The positive news is that many of those who were laid off have been able to find work in short time.

However it is worth pointing out that the Ministry of Manpower has highlighted that there has been a fall in job openings over the past 12 months, especially in the PMET (-14%) , clerical, services and sales workers (-18%) and production, transport and laborers (-18%).

Declines were also observed in the wholesale trade and manufacturing segments, which contracted 33% and 23% respectively.
Published 15 May 2013

S'pore housing heading for a downturn, says developer

With a surge of new homes coming on to the market, Singapore’s housing sector will soon become a buyer’s market as developers continue to provide attractive incentives, according to experts.

Chris Comer, CEO of Castlewood Group, the developer of Nikki Beach properties around Asia, said: “It’s going to be a renters’ market here for a very long time.”

In a Wall Street Journal report, Singapore resident Comer reckoned that a downturn could hit Singapore in the next 12 months, and “you’ll start to see properties resold for less than they paid for them”.

Other analysts do not see a bubble, but have warned of an oversupply instead, which will likely cut prices and rents.

In an earlier report, Nomura said that 16,000 new private homes would be delivered in the next three quarters compared with 2,408 in Q1.

“Supply is likely to outstrip demand and vacancy (and rents) will likely come under more pressure in the coming quarters.”

Concurring, Daiwa analyst David Lum acknowledged the possibility of a supply glut, highlighting that some 86,000 private homes were in the pipeline by end-2012. This is in addition to the influx of HDB flats set to enter the market between 2014 to 2016.

He added that this would lead to an 18 percent decline in mass market home prices and 20 percent in the luxury segment through to end-2015.
2-8-2013 7:59 PM
Napoleon Bonaparte said:
wrong room.:)

please go below address.

Dont bother, coz he dont.

Asia-Pacific corporate debt to dwarf that of developed markets

BEIJING — Asia-Pacific corporate borrowing will exceed the combined debt from the United States, the eurozone, Canada and the United Kingdom in four years amid a surge in Chinese funding demand, according to Standard & Poor’s.

Non-financial entities in the region will probably borrow between US$25 trillion (S$31.1 trillion) and US$27 trillion from this year to 2017, about half of the bonds and loans that will be sought globally in that period, it said yesterday. That would boost Asia-Pacific debt to as much as US$32 trillion by 2017, exceeding the projected US$31 trillion total for the four North American and Western European economies, the ratings company said.

Issuers from Australia, China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia, Singapore and Thailand have sold US$113.5 billion of US dollar bonds this year, the most raised in the first five months of a year, Bloomberg data showed.

China’s non-financial issuers may amass as much as US$18 trillion in new borrowing and refinancing over 2013 to 2017, S&P said. That means the country is forecast to overtake the US as the world’s largest corporate debt market as early as next year. BLOOMBERG
Singapore Business Review

Chart of the Day: 90% of Singapore's 2012 GDP came from domestic demand

According to Nomura, domestic demand contributed to 90% of Singapore’s GDP in 2012 even as external demand was weak.

It is interesting to note that construction and business services were the key contributors to Singapore’s meagre 1.3% GDP growth in 2012.

Here's more from Nomura:

Within business services, real estate and legal services are key contributors to growth in the business services segment.

To the extent that these two sectors are dependent on the health of the property market, a sharp pullback in activity in the property sector could dampen economic growth going forward.

Published May 22, 2013

Low rates leading to risky behaviour: Lew

Fed officials see rising risk of asset bubbles in junk bonds and farmland

[WASHINGTON] US Treasury Secretary Jacob Lew warned that a "reach for yield" spawned by record-low interest rates could spur investors to engage in riskier behaviour.

Mr Lew, in testimony prepared for a US Senate hearing yesterday, also said the Financial Stability Oversight Council expects to vote "in the near term" on whether to submit an initial set of non-bank financial companies to enhanced Federal Reserve supervision because their failure could endanger the financial system.

"Yield-seeking behaviour is apparent in several markets," Mr Lew said. "The issuance of high-yield bonds reached a historical high in the fourth quarter of 2012. While underwriting standards remain conservative in many markets, there are some examples of loosening standards."

Fed policy makers have also expressed concern that the central bank's benchmark interest rate, which has been held near zero since December 2008, is encouraging risky behaviour. Fed Bank of Minneapolis President Narayana Kocherlakota said last month the central bank's rate policies, though necessary to spur the economy, will probably generate signs of financial instability. Fed Governor Jeremy Stein and Kansas City Fed President Esther George have warned of heightened risk of asset bubbles in markets such as junk bonds and farmland.

Here’s How QE Tapering Could Hurt Asia

Published: Tuesday, 28 May 2013 | 5:48 AM ET

The tapering of quantitative easing (QE) in the U.S. will likely have a destabilizing impact in Asia, a region that has been a target of hot money inflows in recent years, according to Nomura.

"Strong capital inflows to emerging Asia, coupled with a prolonged period of low real policy rates have led to a worsening of emerging Asia's economic fundamentals," the bank, which expects the U.S. Federal Reserve to start scaling back its bond buying program at the end of September, wrote in a report on Tuesday.

With interest rates remaining low, domestic private debt – including loans by financial institutions to households and companies and corporate bonds - in the region has surged, particularly in countries such as Hong Kong and Singapore that now face risks of property bubbles.

Furthermore, there has been an increase in foreign currency denominated external borrowing which increases the risk of a "currency mismatch" if Asian currencies depreciate sharply, the bank said.

"Potential large foreign equity and/or bond-related outflows are a significant risk for Asia currencies," the bank said. Currencies most at risk are those from countries that are running current account deficits or small current account surpluses such as the Indian rupee and Indonesian rupiah.

Who's Most Vulnerable

According to Nomura, Hong Kong, Singapore, India and Indonesia will be the most vulnerable to a winding down of QE.

With its currency pegged to the greenback, Hong Kong has imported the U.S.'s loose monetary policy which has in turn stoked an unprecedented boom in its housing market. Property prices have risen by 128 percent since December 2008 and a tapering of QE could trigger a major correction in the market as interest rates rise and liquidity tightens, Nomura said.

"The 1997 [Asian financial] crisis in Hong Kong was also to a large extent driven by housing wealth, and the property bubble bursting eventually led to a sharp decline in consumption, which plunged the economy into a deep recession and deflation," Nomura analysts wrote.

Singapore, a country in which a sizable sum of household assets are concentrated in property, would be subject to similar risks.

"Domestic interest rates could rise sharply and lead to balance sheet problems for households which increased leveraged on the assumption that property prices would remain buoyant," the bank said.

Indonesia and India are also at major risk, but for another reason. They both face large current account deficits and have hence become more reliant on portfolio flows to finance them.

In Indonesia, a reversal of portfolio flows could exert heavy pressure on the balance of payments, causing the Indonesian rupiah to depreciate substantially, the bank said.

"Given the potential size of the outflows, this could force the Bank of Indonesia to implement significant policy rate hikes, which would in turn dampen consumer and investment spending," the bank said.

Similarly, in India, a reversal of capital inflows would "wreak havoc" on the rupee and the country's equity market. Net capital inflows into Asia's third largest economy totaled $88 billion in 2012, spurred by global quantitative easing.

"Asset price volatility and a slowdown in capital inflows would hurt investment, as uncertainty further delayed a revival of the capex cycle," the bank said.
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