Singaporeans can look forward to more property launches. The Real Estate Developers’ Association of Singapore (REDAS) on Thursday announced that its members will be bringing forward property launches.

REDAS added that its efforts are only limited by the land available and hence the long-term solution to a stable market is still adequate supply.

The association celebrated the Lunar New Year, riding on an upbeat mood.

Joining in its Spring Festival was Finance Minister Tharman Shanmugaratnam, and the association shared with him its views on his recent Budget Statement.

Simon Cheong, president, Real Estate Developers’ Association of Singapore, said: “REDAS was hoping for more cash in our ang pows (red packets) from you, Minister. But when we opened the ang pow, we were disappointed there was not much inside for developers.

“Nonetheless, we are happy with your long-term productivity ang pow, as what is good for Singapore’s economy in the long run must also be good for the Singapore property market. It is what REDAS calls a deferred payment ang pow.”

REDAS said that its members are surprised with the speed with which Singapore’s property market has recovered. But they added that they are prepared to live with the current problems rather than the problems faced by the property market last year.

However, in the interest of a stable property market, REDAS said its members are committed to a fast-track supply to satisfy demand. This would also minimise excessive speculation in the property market.

Mr Cheong said: “Given the unexpected return of an active property market, developers over the next few months would also be actively bidding for more land to position for the future supply.

“As such, REDAS, unlike the situation in the preceding 12 months, is now looking forward to more sites in the confirmed list for developers to replenish their land bank.”

Just last week, the government introduced two more measures to cool the property market and pre-empt a bubble from forming in the private homes sector.

Source: Channel News Asia, 25 Feb 2010

RAFFLES Education Corporation is considering setting up a university in the Iskandar Malaysia region.

It is teaming up with a wholly owned subsidiary of Iskandar Investment – Education@Iskandar – to study the feasibility of establishing an education campus in the Johor economic zone, the company said yesterday.

The development will be known as Raffles University Iskandar and will include the launch of Raffles University as part of its first phase of development, it said.

Upon the successful completion of the feasibility study, procurement of the university, vocational and technical licences and other regulatory approvals, the Singapore-listed education group and Education@Iskandar will form a joint venture to build and operate the university.

Yesterday’s announcement came two weeks after Raffles Education’s subsidiary secured a 300 million yuan (S$62 million) investment from Malaysia’s state investment agency, Khazanah Nasional.

Khazanah – through its subsidiary Rawa Investments – is buying a 10 per cent stake in Oriental University City, which owns a campus in China’s Hebei province that provides education services to 16 colleges and some 36,000 students.

Khazanah has a 60 per cent share of Iskandar Investment.

Raffles University will be developed on a 26ha plot of land and will offer a range of undergraduate programmes, including business, technology, arts and design, health science, education and social science specialisations.

It aims to enrol some 5,000 students within its first five years.

Raffles Education chairman and chief executive Chew Hua Seng said: ‘We are delighted to partner Education@Iskandar to jointly explore the viability of replicating our Oriental University City’s successful business model in Iskandar Malaysia.’

Iskandar Malaysia has attracted about $1.1 billion in manufacturing investments from the Singapore private sector.

Source: Straits Times, 25 Feb 2010

Fed chief says US job market remains weak despite signs of growth

WASHINGTON: Federal Reserve chairman Ben Bernanke told Congress yesterday that a weak job market and low inflation would likely allow the US central bank to keep interest rates at very low levels for ‘an extended period’.

In his first appearance before Congress following a testy confirmation vote in the Senate last month, Mr Bernanke offered a relatively sombre assessment of the United States economy despite recent signs of strong growth.

The country has lost 8.4 million jobs since the start of the economic downturn, the deepest since the Great Depression. The Fed chief said job losses were abating, but also acknowledged the recession’s toll on American workers.

‘Notwithstanding the positive signs, the job market remains quite weak,’ Mr Bernanke said in prepared testimony to the US House of Representatives Financial Services Committee.

He told lawmakers that he stood prepared to continue supporting the economy with extraordinary stimulus for some time, but also argued the Fed possessed a broad array of tools to remove such accommodation when the time was right.

Deciding when to boost rates will be the next big challenge facing Mr Bernanke. Boosting rates too soon could derail the recovery. But waiting too long could trigger inflation and feed a speculative asset bubble. That, too, could threaten the economy, along with Americans’ pocketbooks and nest eggs.

Mr Bernanke would say only that ‘at some point’, the Fed would need to move to tighten credit. He sketched out the Fed’s strategy, first unveiled on Feb 10, on how this would be done.

He said the Fed is likely to boost the rate it pays banks on money they leave at the central bank, which would mark a shift away from the funds rate, the Fed’s main tool since the 1980s. A bump up in the interest rate on bank reserves, though, would ripple though the economy in much the same way an increase in the funds rate does. Consumers and business borrowers would have to pay more for loans.

Meanwhile, government data yesterday hinted at potential trouble for the fragile housing market recovery, showing sales of newly built single-family homes unexpectedly fell to a record low last month.

The Commerce Department said sales dropped 11.2 per cent to a 309,000-unit annual rate, the lowest level since records started in January 1963, from an upwardly revised 348,000 last December.

The percentage decline last month was the largest in a year. Analysts polled by Reuters had expected new home sales to increase to a 360,000-unit annual pace from December’s previously reported 342,000 units.

Compared to January last year, sales fell 6.1 per cent.

‘It’s awful. This is with the home buyer tax credit. I don’t understand people who say the housing market is turning,’ said Mr Joe Saluzzi, co-manager of trading at Themis Trading in New Jersey.

Source: Straits Times, 25 Feb 2010

Taxes on luxury-home purchases go up, supply of apartments to rise

HONG KONG: Hong Kong will increase taxes on luxury-home purchases for the first time in more than a decade and boost the supply of apartments as a surge in prices last year fuels concerns that the market may be overheating.

Stamp duty on homes selling for more than HK$20 million (S$3.6 million) will rise to 4.25 per cent from 3.75 per cent beginning in April, Financial Secretary John Tsang said in his annual budget speech yesterday.

Buyers of these flats would no longer be allowed to defer payment of stamp duty. The measure could be extended if excessive speculation was detected in the trading of less expensive properties, he said.

The government will also put more residential sites up for auction, he added.

Mr Tsang warned that a recent property frenzy, driven by a huge inflow of more than HK$640 billion since late 2008, could threaten economic stability.

‘If capital flows were to reverse or interest rates rebound, asset prices would become more volatile. This in turn may affect the stability of our financial system and the recovery of the real economy.’

Overall housing prices in Hong Kong rose above 30 per cent last year due to demand from wealthy mainland Chinese, tight land supply and loose monetary policy.

Mr Tsang said the government would strive to increase residential land supply, with plans to auction several urban residential sites in the next two years if market conditions allow.

He also pledged to prevent excessive expansion in mortgage lending.

Prices of some luxury flats returned to the peaks of the 1997 property boom last month, he said.

But some analysts said the moves unveiled by Mr Tsang would have limited effect.

‘It doesn’t help to cool the property prices. It can’t because most of the luxury property buyers come from China. They will not care about a 4.25 per cent or even 5 per cent tax,’ said Mr Castor Pang, head of research at Cinda International.

‘They think property investments in Hong Kong are quite safe,’ he added.

Mr Wong Leung-sing, head of research at Centaline Property Agency, said a bubble would still be created with Hong Kong’s interest rates remaining low due to its currency peg to the US dollar.

He said: ‘The economic boom in China and low interest rates in the United States are two major external factors that together will almost guarantee a property bubble in the next few years.’

Share prices of property firms rose after the budget speech as stock investors were relieved that the measures were much weaker than expected.

Ms Nicole Wong, a Hong Kong-based real estate analyst at CLSA Asia-Pacific Markets, said the stamp-duty increase was ‘lip service’ as the measure will affect only about 2 per cent of the property market.

Stimulus measures by governments around the world have boosted liquidity, which has led to large fund inflows into Asia, driving asset prices higher, Mr Tsang said.

Land sales and stamp duties were the major contributors to the government’s surprise surplus of HK$13.8 billion for the 2009-2010 financial year, he added.

The government is ‘cautiously optimistic’ about Hong Kong’s economy this year and expects it to grow by 4 per cent to 5 per cent.

The city emerged from its latest recession in the second quarter of 2009, when its gross domestic product rose 3.5 per cent on a quarterly basis after four consecutive quarters of contraction.

Source: Straits Times, 25 Feb 2010

Beijing will scrap some home purchase incentives after property prices surged, reducing the scope of the housing sales-tax exemption and enforcing the 40 per cent down payment requirement for second homes.

Homes sold after being owned for five years will be exempt from the tax, compared with two years previously, the Beijing Municipal Commission of Housing and Urban-Rural Development said in a statement posted on its Web site late on Tuesday.

The measures are aimed at curbing investment and speculative purchases and at balancing supply and demand, according to the statement.

China’s property prices surged 9.5 per cent in January, the most in 21 months, as total new loans surged to 1.39 trillion yuan (S$286.8 billion), more than in the previous quarter combined.

The China Banking Regulatory Commission told banks last month to ’strictly’ follow property lending policies.

Beijing will also tighten rules on home purchases by foreigners, temporarily relaxed after the financial crisis. Non-Chinese resident for less than a year can’t buy properties and qualified purchasers are limited to one home, the statement said.

The local government will also adopt administrative measures to help developers speed up construction and sales, the government agency said.

Source: Business Times, 25 Feb 2010

Segment will make up a third of group Ebitda in 5-10 years, from a fifth now

Wyndham Worldwide Corp projects that its hotel unit will be a larger part of its business in the next five to 10 years, as it seeks to grow in China, India and a host of other global hotspots.

Wyndham projects that hotels would make up a third of its earnings before interest, taxes, depreciation and amortisation as early as 2015, chief executive Stephen Holmes said on Tuesday at the Reuters Travel and Leisure Summit.

Currently, hotels make up 21 per cent of Ebitda.

‘Brands are not as prolific outside the US as they are inside the US, so there’s tremendous opportunity for growth,’ Mr Holmes said.

Wyndham is the No 2 hotel company in the world as measured by number of rooms, according to Smith Travel Research. The company also has a vacation exchange and rentals business as well as a timeshare unit.

Wyndham said in 2008 that it would shrink its timeshare unit, cutting 4,000 jobs in the process. The segment accounted for roughly half of the company’s revenue in 2009. This year, the timeshare segment will provide a smaller percentage of the revenue, Mr Holmes said.

Growth in the lodging segment could come through adding more hotels or a new brand to its portfolio. Wyndham said in recent quarterly calls that it was looking for brands to acquire.

The number of new hotels in the United States is expected to tick up this year, but that growth is expected to be muted compared to earlier years. There is also a dearth of hotel rooms in areas that are starting to see travel demand grow.

Mr Holmes said last year that Chinese tourism officials told him there would 200 million additional travellers entering the leisure market.

‘Two hundred million – they do not have enough hotel rooms to service that population growth.’

India presents an array of challenges, but Mr Holmes see that country as holding tremendous potential for the company.

‘The infrastructure in India still has a ways to go. that is the biggest challenge to that market,’ he said. ‘We’re active in that market and we hope to see growth there.’

Like many hotel operators, Wyndham does not own any of its properties. It franchises and manages hotels owned by others.

But many properties, including a handful run by Wyndham, have gone into foreclosure in the past year. Mr Holmes said that the seizure of the credit markets was a source of concern for him.

The number of hotels changing hands last year fell to a 10-year low as buyers and sellers haggled over their worth. When a hotel changes hands, there is an opportunity for a company such as Wyndham to change the brand on the property.

‘Clearly, the decrease in transaction volume . . . is (a) dampener of growth for us,’ Mr Holmes said.

Investors have bet heavily on Wyndham’s shares since last March. The stock has risen nearly seven-fold since then, outpacing the S&P 500 which is up 60 per cent.

Some of that rise is attributable to the company’s decision to shrink its timeshare unit, said FBR Capital Markets analyst Patrick Scholes who rates the stock an ‘outperform’.

The CEO also said that Wyndham’s share price could run higher, given that its valuation remained below its peers.

‘We still have a tremendous amount of running room,’ Mr Holmes said. ‘We’re gaining momentum.’

Source: Business Times, 25 Feb 2010

Malaysian Resources Corporation Bhd’s (MRCB) lower gearing provides more room for it to acquire new land bank for future growth, says Kenanga Research.

‘The successful rights issue, which raised RM514 million (S$212.7 million), lowered net gearing to 0.3 times from 1.25 times. It has also positioned the company to acquire new land bank for future growth or invest in infrastructure concessions,’ it said.

OSK Research in a separate note said that the potential acquisition of federal land could provide a further re-rating of MRCB’s share price from RM1.63 per share.

OSK had previously quoted MRCB’s target price at RM1.54.The research house also said it expects an overall strong performance by the company in 2010.

As for the 2009 financial results which moved MRCB back into the black, Kenanga said, it was mainly due to the continuous strong construction and property revenue and profit contribution.

MRCB posted a pre-tax profit of RM46.492 million for the year ended Dec 31, 2009 against a pre-tax loss of RM42.155 million in the previous financial year.

Revenue jumped to RM921.616 million from RM788.552 million previously.

Kenanga is maintaining MRCB’s net profit forecast of RM56.6 million for its financial year ending Dec 31, 2010 and estimates the 2011 net profit to be RM80.9 million.

Source: Business Times, 25 Feb 2010

Home-price index rose 0.3% from Nov ‘09, more than economists expected

Home prices in 20 US cities rose in December for a seventh consecutive month, indicating the industry at the heart of the worst recession since the 1930s is stabilising.

The S&P/Case-Shiller home-price index increased 0.3 per cent from the prior month on a seasonally adjusted basis, more than anticipated and matching the gain in November, figures from the group showed on Tuesday in New York. The gauge was down 3.1 per cent from December 2008, the smallest decline since May 2007.

Lower property values, rising incomes and government credits are making homes more affordable. A sustained recovery in housing still faces hurdles that include mounting foreclosures, a weak labour market and the eventual end of a Federal Reserve program aimed at keeping borrowing costs low.

‘It’s reassuring that we’re seeing stabilisation and outright increases in home prices,’ said Michael Feroli, an economist at JPMorgan Chase & Co, who accurately forecast the adjusted month-over-month gain. He said he expects prices to be ‘flat’ in coming months.

Economists surveyed by Bloomberg News anticipated that prices would drop 3.1 per cent in the 12 months to December, based on the median estimate of 27 projections. Estimates ranged from a decline of 5.3 per cent to a gain of 3 per cent. They also forecast a 0.1 per cent seasonally adjusted increase in December from a month earlier, the survey showed.

Stocks fell and Treasury securities rose after a separate report showed consumer confidence dropped in February to a 10-month low. The New York-based Conference Board said its index of sentiment slumped to 46, below the lowest forecast in a Bloomberg survey, from 56.5 in January.

The Standard & Poor’s 500 Index fell 1.2 per cent to 1,094.49 at 12.53 pm in New York. The yield on the 10-year Treasury note declined seven basis points to 3.72 per cent.

Compared with the prior month, 14 of the 20 areas covered showed an increase on a seasonally adjusted basis, while five had a decline. The biggest month-to-month gain was in Los Angeles, where prices rose 1.4 per cent. Home prices rose an adjusted 1.2 per cent in Phoenix, 1.1 per cent in San Diego, and 0.9 per cent in both Boston and Las Vegas.

Increased foreclosures and an unemployment rate that economists forecast will end the year at 9.5 per cent are obstacles to steady gains in housing prices. Rising foreclosures are adding to inventory and may discourage some builders from beginning construction.

A record three million US homes will be repossessed by lenders this year as unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc forecast last month. Last year there were 2.82 million foreclosures, the most since the Irvine, California-based company began compiling data in 2005.

In an effort to bolster the housing market, President Barack Obama in November extended a tax credit for first-time homebuyers and expanded the programme through April 30 to include some current owners.

The end of Fed purchases of mortgage-backed securities, aimed at keeping borrowing costs low, represents another challenge for the industry. The programme is scheduled to expire by March 31.

‘The rebound in the housing market since April seems to be related to government efforts such as the homebuyer tax credit and the Fed’s purchase of mortgage-backed securities,’ said Robert Shiller, who co-created the home-price index, on Tuesday in a Bloomberg Television interview. ‘A lot of people are coming in buying because they think the recession has just ended.’

Mr Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, a former economist professor at Wellesley College, created the index based on research from the 1980s.

Some homebuilders are seeing gains ahead of the expiration of the homebuyer tax credit. DR Horton Inc, the second-largest US homebuilder by revenue, this month reported its first quarterly profit since 2007.

‘We expect our September quarter will be the most challenging as a tax credit support for home sales will have expired,’ said Donald J Tomnitz, president and chief executive officer, on Feb 2.

Lowe’s Cos, the second-largest US home-improvement retailer, on Monday posted better-than-forecast sales in the fourth quarter, signalling a recovery in the housing market. The Mooresville, North Carolina-based company said sales in stores open at least 13 months may rise as much as 3 per cent this year. ‘We don’t have the job losses at as large a rate as we had previously,’ chairman and chief executive officer Robert Niblock said.

Source: Business Times, 25 Feb 2010

Sales of new homes plunged to a record low in January, underscoring the formidable challenges facing the US housing industry as it tries to recover from the worst slump in decades.

The Commerce Department reported yesterday that new home sales dropped 11.2 per cent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who had expected sales would rise about 5 per cent over December’s pace.

The January decline will heighten fears about the fledgling recovery in housing. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programmes are withdrawn. The sales decline in January marked the third-straight monthly drop following decreases of 3.9 per cent in December and 9.5 per cent in November.

The drop in sales pushed the median sales price down to US$203.500.

That was down 5.6 per cent from December’s median sales price of US$215,600, and off 2.4 per cent from year-ago prices. New home sales for all of 2009 had fallen by almost 23 per cent to 374,000, the worst year on record. The National Association of Home Builders is forecasting that sales will rise to more than 500,000 sales this year, an improvement from 2009 but still far below the boom years of 2003 through 2006 when builders clocked more than one million new home sales per year.

The Conference Board reported on Tuesday that its Consumer Confidence Index fell almost 11 points to 46 in February, pushing the index down to its lowest reading since last April. At 46, the index is a long way from the 90 reading that economists generally view as depicting healthy consumer attitudes.

Source: Business Times, 25 Feb 2010

The default rate for commercial property mortgages held by US banks more than doubled in the fourth quarter and may reach a peak of 5.4 per cent at the end of next year, according to Real Capital Analytics Inc.

The default rate for loans on office, retail, hotel and industrial properties surged to 3.8 per cent from 1.6 per cent a year earlier, the New York-based real estate research firm said on Tuesday in a report. The default rate for loans on apartment buildings climbed to 4.4 per cent from 1.8 per cent.

‘The level of distress continues to rise irrespective of improving economic trends,’ Sam Chandan, Real Capital’s global chief economist, said in an interview.

The US jobless rate declined to 9.7 per cent in January from 10 per cent in December, after hitting a 26-year high of 10.1 per cent in October.

Unemployment and tighter credit are hurting commercial property values, which fell 29 per cent in December from a year earlier and are down 41 per cent from the October 2007 peak, according to the Moody’s/REAL Commercial Property Price Index released on Feb 22.

US banks with US$100 million to US$1 billion in assets hold 25 per cent of commercial property loans outstanding and 15 per cent of apartment loans, Real Capital data show. The biggest banks, those with more than US$10 billion in assets, hold about half of commercial loans and two-thirds of apartment loans.

‘With the concentration of commercial mortgages in small and community banks, there is a potential spillover that will impinge on their ability to make loans to small businesses and families,’ Mr Chandan said.

Almost US$1.1 trillion in commercial loans and US$211 billion in apartment loans were held by US banks on Dec 31, according to Real Capital.

The Congressional Oversight Panel on the financial system bailouts said in a Feb 10 report that ‘the ultimate impact of the commercial real estate whole loan problem will fall disproportionately on smaller regional and community banks’ that have higher concentrations of such loans.

‘Some community banks seemed to have abandoned, or never really practised, sound risk management’ by lending too much on real estate in their local markets, David Hendler, New York-based analyst for CreditSights Inc, said in a Feb 22 note.

The commercial default rate rose from 3.4 per cent in the third quarter, representing an increase of US$4.5 billion in defaulted loans in the period, according to Real Capital. The rate will reach 5.1 per cent at the end of this year, the research firm said.

The apartment default rate rose from 3.6 per cent in the third quarter. The jump reflected a US$1.6 billion increase in defaulted loans. Apartment defaults will peak at 5.3 per cent at the end of 2010, said Real Capital, which based its analysis on bank filings and data from the Federal Deposit Insurance Corp.

Source: Business Times, 25 Feb 2010