Yields of some condos reach above 5% despite slowing economy: Study

RENTAL properties are less profitable for landlords in these tougher economic times, but there are still some condos where yields can reach 5.7 per cent.

Adam Park Condo, Blossoms@Woodleigh, Far Horizon Gardens and The Jade all have yields above 5 per cent.

Areas such as Sengkang, Woodlands and Chua Chu Kang have yields ranging between 4.4 per cent and 4.8 per cent, according to a study by Kim Eng Research.

They are all above the national average of 3.7 per cent, down a touch from last year’s 3.9 per cent average yield.

But prime areas such as Orchard, Newton and Sentosa failed to measure up, with yields between 2.4 per cent and 2.8 per cent.

Rental yield is the annual rent divided by the property’s sale price.

Kim Eng analysed gross yields based on the Urban Redevelopment Authority’s rental and caveat data for non-landed developments with at least 10 rental contracts signed in the second quarter of this year.

Market experts say the quantum prices of properties in a neighbourhood play a significant role in determining the average rental yield.

‘If you buy a mass-market home for $1.5million, you might be able to get between $4,000 and $6,000 in rent, depending on location,’ said Dennis Wee Group director Chris Koh. ‘That’s compared to a Sentosa place that could cost up to $3 million and bring in only $8,000 a month,’

ERA Realty key executive officer Eugene Lim said leasehold properties are normally cheaper than freehold ones. Many leasehold properties are in suburban neighbourhoods, so this may have helped lift rental yields.

‘Tenants aren’t concerned about whether a property is freehold or has a 99-year lease. All they want is somewhere that looks nice in a convenient location,’ said Mr Lim.

Shoebox units, typically less than 500 sq ft in size, come with lower sale prices.

Kim Eng cited Parc Imperial, a 138-unit Pasir Panjang project near the upcoming Haw Par Villa MRT station that comprises mainly smaller flats. The project has a rental yield of 5.7 per cent. Resale units recently sold for an average of $1,333 psf, with median rents hitting $6.28 psf per month.

Attributes like proximity to good schools, MRT stations and other facilities will always stand investors who are chasing good rental yields in good stead, said Mr Koh.

But predicting how rental yields will pan out over the next few quarters is difficult because there are several big unknowns.

Analysts say the fluidity of the property market means some investment decisions may change over time, making it tricky to pinpoint exactly how many properties will come up for rent.

‘Investors may get an apartment with the intention to flip it, but if they can’t sell it at the price they want they’ll rent it out instead,’ said Mr Colin Tan, head of research at Chesterton Suntec International.

He pointed out that property prices could be close to or at their peak, and that there is uncertainty over how long low interest rates will last.

‘Risk levels remain high, but if all the factors work out in their favour, the returns for these investors will be good,’ he said.

Source: Straits Times, 20th Aug 2011

Larger supply, smaller expat packages put pressure on rents

RENTS of posh homes might keep falling in the light of an increased supply and less generous housing packages for expatriates.

High-end home rents have dipped by about 2 per cent in six months, according to GPS Alliance associate agency head Jack Teo, while as an OrangeTee agent said, some of his clients have had to cut rents by about 5 per cent to 7 per cent to land a tenant.

Upscale projects such as The Orchard Residences, Cliveden at Grange and The Orange Grove have recently been completed and they have added to the number of units on the market.

Property agents said landlords asking for a monthly rent of more than $10,000 are now finding it harder to find tenants.

Pressure on rents is also coming from cost-conscious firms putting expat staff on local terms. This means they no longer get a separate housing allowance but must budget for rent from their salaries instead.

‘Multinational corporations have lower budgets now so there’s no longer a separate housing package. And when a tenant has to budget out of his pocket, he is usually more sensitive to price and tends to want to spend less,’ said the OrangeTee agent.

The quieter market can also be partly attributed to a seasonal drop as expats usually look for homes from May to early July before the August school term starts.

Mr Markus Tay, managing director of Luxe Group, said it takes about two to five months to find a tenant for luxury homes now – about 30 per cent more time than six months ago. The market had started slowing then as the supply of homes started to enter the market.

Although landlords eager to score a tenant have cut rents, prices have not declined much overall, he added. GPS’ Mr Teo noted that owners are usually willing to look again at their pricing after vacancies of about three to six months, but others have holding power and might be unwilling to budge from their initial asking price.

The high-end market might firm up again next year once the number of posh completions start to slow and the segment stabilises, he added.

Experts said upscale homes are usually owned by wealthy individuals who see their purchase as a form of investment and wealth preservation, and so are are less concerned about achieving high rental yields.

Rental yields for prime areas are among the lowest across the island, according to a Kim Eng report. Orchard Road yields were just 2.8 per cent, Sentosa homes offered 2.6 per cent while homes in Newton languished in last place with 2.4 per cent.

Suburban yields were as high as 4.1 per cent in Tampines and 4.8 per cent in Sengkang – the most attractive estate in the rental market.

Source: Straits Times, 20th Aug 2011

EXECUTIVE condos (ECs), a hybrid of private and public housing, led the charge in home sales last month as buyers looked for affordability in the midst of sky-high prices.

Last month, 568 EC units – largely at Blossom Residences in Bukit Panjang and RiverParc Residence in Punggol – were sold to buyers such as HDB upgraders.

This is the most monthly EC sales recorded since they were reintroduced last October after a five-year drought. Only 212 EC homes were sold in June.

This strong performance led to sales of new private homes, including ECs, rocketing 40 per cent to 1,954 units sold last month, up from 1,394 units in June.

Excluding ECs, sales jumped a more modest 17 per cent to 1,386 homes.

Mr Ong Teck Hui, Credo Real Estate’s head of research and consultancy, said this shows the still ‘firm demand’ for ECs by the middle-income segment, often called the ‘sandwich class’.

However, they have to be priced reasonably at about 20 per cent lower than mass market private condos, he added.

RiverParc’s 322 units sold had a median price of $694 per sq ft (psf) while Blossom Residences sold 192 units at $702 psf. By comparison, one of the latest mass market projects, Boathouse Residences in Hougang, had an average price of $880 psf during its launch.

While 54 per cent of sales were suburban homes, city fringe homes also saw greater buyer interest with 510 units sold, more than double June’s sales figures.

Experts say that the higher sales volume could be attributed to some superstitious buyers rushing to commit before the Hungry Ghost Festival, seen by some as an inauspicious time to buy a home.

Low home loan rates and attractive launches last month also helped to support the private market.

Still, experts say the number of homes sold this month could dip below 1,000 units, as buyers re-evaluate their choices given policy changes to public housing such as the raising of the income ceiling and the ramping up of HDB supply as mentioned by Prime Minister Lee Hsien Loong in his National Day Rally speech on Sunday.

Ms Tay Huey Ying, a research and advisory consultant at Colliers International, said that in spite of the pick-up in buying last month, sales volume still lagged behind launches.

‘This is a positive sign that the slew of government cooling measures, including the ramping up of supply of both private and public homes, has continued to work to stem buying exuberance,’ she added.

Dr Chua Yang Liang, head of research at Jones Lang LaSalle South-east Asia, noted that a similar trend was also seen in the past two years where a run-up in sales was recorded before falling in the month of the Chinese festival itself.

‘August should see a marked slowdown given that the entire month coincides with the Hungry Ghost Festival and also with the Government’s latest round of policy adjustments. Sales could hit 900 to 970 units,’ he added.

This is, however, conditional on further global and local market conditions, Dr Chua emphasised.

Experts are, however, divided on how the residential market might perform in the later part of the year.

Some expect sales to moderate due to uncertainties in the global economy.

But others feel that low interest rates likely to last till 2013 will be the carrot for investors to step out of the sidelines in spite of the risks.

‘The fleeing of hot money from the troubled Western nations in search of safer investment haven… could also be another bright spot for the private home sales market,’ Colliers’ Ms Tay said.

She expects demand for new homes to rebound, averaging at 1,200 homes a month in the final months of the year.

Last month’s top selling projects included Skyline Residences in Telok Blangah with 167 units sold at a median price of $1,902 psf and The Miltonia Residences in Yishun with 124 units sold at $871 psf.

An artist’s impression of Skyline Residences, which was one of last month’s top-selling private home projects with 167 units sold at a median price of $1,902 psf. — PHOTO: KNIGHT FRANK

Source: Straits Times, 16th Aug 2011

SICK of being held to ransom by ever-ballooning rents, Ms Michelle Lim, 31, and her husband have been on the hunt for a home of their own for a year now.

But they have not found the going easy, with the prices of HDB resale flats and private properties – the only types of properties open to them – at eye-popping levels.

She and her husband, who are both in sales and make a combined income of about $10,000, were thus cheered yesterday by the lifting of the income ceiling for new flats and housing grants.

Unchanged for the last 17 years, the ceiling is now $10,000, up from $8,000.

The couple now have several options: They can apply for a new build-to-order (BTO) flat, consider an executive condo (EC) unit, or buy a resale flat with a housing grant from the HDB. They are also eagerly awaiting HDB’s sale-of-balance flats (SBF) exercise next month, which offers completed or almost completed flats. This is their preferred option for now.

National Development Minister Khaw Boon Wan said yesterday that a record 8,000 flats under HDB’s BTO and SBF schemes will be launched next month.

Ms Lim said: ‘We can’t wait three to four years for a home, so we hope to get lucky. If not, we’ll have to consider other options, such as buying a resale flat with the grant.’

Yesterday’s changes to the rules also opened up an alternative source of financing for the couple: HDB now allows couples earning up to $10,000 to apply for HDB loans, which typically have more stable or lower interest rates.

Ms Valda Lee, 29, and her fiance are among the many who have appealed to the Ministry of National Development about their housing situation.

The couple, who earn above $10,000 monthly, have been house-hunting in the resale and private property markets for more than a year.

‘But now, at least ECs are an option too,’ said Ms Lee, a manager who was also unsuccessful in her application for a flat under HDB’s Design, Build and Sell Scheme because she and her fiance bust the $10,000 income ceiling.

But some couples are not exactly popping the champagne yet. For example, Mr Jeffrey Cai, a 30-year-old who works in IT, foresees that the higher ceiling will mean more competition for flats.

‘We’ve applied more than three times and did not even get to select a flat. Now, with even more people applying, the chances will be even slimmer,’ he said.

Two other groups of home buyers – the single and the elderly – were also cheered yesterday.

Graphic designer Toh Siew Peng, 37, who earns slightly more than $3,000 and has been living with her aunt, said she was very happy to hear that she ‘finally’ qualifies for a grant to buy a flat.

She has set her heart on a three-room one, but it all depends on the price.

Mr Colin Tan, who heads research at Chesterton Suntec International, yesterday commended the income ceiling revision as timely.

‘Many people have been calling for the ceiling to be raised for many years. Now that it has been raised, people will have more choices,’ he said.

He said he expected the immediate impact on the housing market to be minimal. In the longer term, however, the changes may remove buyers from the private property market, since BTO flats lock people in for several years.

‘Even if private property prices correct, there may be fewer buyers,’ he said.

Source: Straits Times, 16th Aug 2011

HIGHER earners who want to buy executive condominiums will be eligible for housing grants – but they will not be as big as what lower earners will get.

The monthly household income ceiling has been raised from $10,000 to $12,000. However, National Development Minister Khaw Boon Wan yesterday announced a ‘fairer’, tiered system to take into account the greater earning power of those who are now eligible.

Buyers with a monthly household income of $10,000 can still receive the full $30,000 Central Provident Fund Housing Grant.

But any household earning between $10,000 and $11,000, will receive $20,000, while those making more than that will get $10,000.

‘I think it’s fair,’ Mr Khaw said yesterday in Mandarin. ‘If your income is higher, naturally you won’t need the subsidies as much as those earning less than you. (Thus), the higher your income, the lower the grant.’

He told reporters at The Pinnacle @ Duxton: ‘Even for those earning more, we will still give them grants, albeit in smaller amounts. I feel this would make for a fairer overall system, and people are more likely to be able to accept it.’

ERA Realty’s Eugene Lim said buyers will still welcome the raised income ceiling, even though the grant is disbursed in tiers.

‘Previously, those earning between $10,000 and $12,000 would have to buy private property, which is still pricey to them,’ he said. ‘So now they can come into the executive condominium market and still get a grant, that’s a bonus.’

Asked what effect this will have on the private property market, Mr Lim said that mass market private developers will have to price their projects competitively.

Mr Khaw also touched on the Design, Build and Sell Scheme (DBSS), which is currently under review. Introduced in 2005, it aimed to give private developers a chance to take part in the public housing market and introduce more innovative buildings.

But it attracted widespread criticism earlier this year when a project launched in Tampines came with sky high price tags.

Mr Khaw said he is taking his time to review the scheme, but pointed out that the DBSS income ceiling, recently raised to $10,000, is comparable to the current Build-to-Order (BTO) offerings.

‘If you believe you can afford DBSS because it’s designed by private developers, go ahead, but if you feel that (you can’t), then come to us… It really offers a choice for those earning up to $10,000, whether you want DBSS or a five-room HDB flat, our quality is as good as any.’

Analysts The Straits Times spoke to said this might spell the end of the scheme.

PropNex chief executive Mohamed Ismail said: ‘To me, DBSS is gone as the Government has suspended all DBSS land sales and the income ceiling for it is unlikely to be raised. Moreover, BTO flats are now in direct competition with it.’

Mr Lim added that typically, BTO flats will always be the cheapest option as the pricing is controlled by the Government. ‘But it’s different for DBSS, where developers had to bid competitively for the land, and thus factor it into their launch prices. So now developers of DBSS projects yet to launch are relooking their prices.’

Source: Straits Times, 16th Aug 2011

IN ONE fell swoop, the Housing Board (HDB) yesterday lifted the income ceiling for several groups of home buyers, from families to singles and the elderly, to make qualifying for a new flat or housing subsidies less of a source of anxiety.

National Development Minister Khaw Boon Wan said yesterday that the changes factor in salary increases over the years, and that the HDB had arrived at the new ceilings from studying the age and wage profiles of home buyers.

Prime Minister Lee Hsien Loong, in his National Day Rally speech on Sunday, announced that the income ceiling for those buying the HDB’s new build-to-order (BTO) flats will be raised from $8,000 to $10,000; the ceiling for executive condominium units will now be $12,000, up from $10,000.

He had noted then that these changes take into account the trend among young couples to marry later, when their salaries are higher; incomes have also risen over the years.

For singles, the income ceiling qualifying them for a Central Provident Fund (CPF) housing grant is now $5,000, up from $3,000; the grant itself has grown from $11,000 to $15,000.

For those aged above 55, the combined household income ceiling for a new studio apartment purpose-built for older folk is now $10,000, up from $8,000.

The changes take immediate effect.

Mr Khaw, speaking to reporters during his visit to the landmark public housing project The Pinnacle@Duxton, said the HDB will put a record 8,000 flats on the market next month to meet the expected surge in demand.

Of these, 5,500 will be BTO flats in Punggol, Sengkang, Hougang, Yishun and Jurong East; the remaining 2,500 will be offered under HDB’s exercise to release flats from its stock leftover units across the island.

Mr Khaw, referring to PM Lee’s announcement that HDB would offer an additional 25,000 new flats next year, in addition to the 25,000 this year, said 50,000 new units were nearly the equivalent of three Sembawang towns, and slightly bigger than Ang Mo Kio.

He said: ‘That’s why I’m so confident that in three, four years’ time, when these units start materialising, whatever pent-up demand, the problem would be largely resolved. But I need time. It can’t happen tomorrow.’

He added that the bumped-up supply would reassure young couples; they will know there are enough flats to go around, how much they would pay for their flat and where it would be.

Asked how many couples will benefit from the revised ceiling, he replied that this was hard to say for now and that HDB would have to monitor the response to the next BTO project.

Analysts told The Straits Times that HDB’s move to raise the income ceiling for couples was expected, but that its doing so for singles and the elderly took the industry by surprise.

PropNex chief executive Mohamed Ismail said the announcement was unexpected, but ‘in the right direction’, as it was a recognition of the contributions and the needs of these two groups.

Mr Ismail said the revised ceilings could ease the demand in the resale market, as couples previously unable to buy new HDB flats could now do so.

HDB said yesterday its new ceiling of $10,000 also applies to CPF housing grants for resale flats and HDB loans.

Previously, a couple’s combined income had to be below $8,000 to qualify either for a new HDB flat or a CPF housing grant of up to $40,000 for buying a resale flat.

Dennis Wee Group director Chris Koh estimates 10 per cent of resale flat buyers could join the queue for new flats, dampening the demand for resale units.

Jones Lang LaSalle head of research and consultancy Chua Yang Liang estimated that demand in the private market for new homes could drop by up to 15 per cent, by between 700 and 2,000 units, as a result of HDB’s stepped-up supply.

Mr Khaw said yesterday he is beginning to see anecdotal evidence of the effects of HDB’s aggressive supply.

‘I can understand, when prices were going up, everybody rushed in, worried that prices at the next launch would be even higher. So now that they know there’s some stability… I hope people will be calmer.’

National Development Minister Khaw Boon Wan with HDB chief executive Cheong Koon Hean at The Pinnacle@Duxton yesterday. Mr Khaw spoke to reporters on a range of housing issues from foreign labour to the release of cash-over- valuation figures. — ST PHOTO: MUGILAN RAJASEGERAN

Source: Straits Times, 16th Aug 2011

Demand for units in good locations healthy despite economic woes

DESPITE stock market and economic uncertainty, prices of well-located suburban homes near MRT stations might still inch up 1 per cent to 3 per cent in the second half of the year, says City Developments (CDL) executive chairman Kwek Leng Beng.

Developers are likely to keep prices stable as demand for such homes is still healthy, he said at the firm’s second- quarter results briefing at M Hotel yesterday.

CDL reported a 17 per cent surge in net profit to $221 million for the three months ended June 30.

Mr Kwek offered a different outlook for homes in less prime locations. Some developers may bring prices down by up to 5 per cent as they price apartments competitively to sell; however, a collapse in prices is unlikely, he added.

He also said that the Government will probably not introduce more cooling measures for the market.

‘I don’t believe (the Government) will come out with new measures to destabilise the market, especially after S&P re-rated the US credit rating; the world is suddenly more uncertain now,’ he added.

The Government is more concerned about the public housing sector where it has already made various policy changes, Mr Kwek noted.

CDL said that it expects to launch another 500 units this year in four projects, including an executive condo in Choa Chu Kang and upmarket project Nouvel 18 in Anderson Road.

CDL also said that while the Government had cautioned of a possibility of an oversupply, subsequent reports may have led to this fear being ‘overblown’.

‘With a low interest rate environment, developers here will be mindful of market appetite which will be a major factor in deciding the timing of their launches and purchase or tender for development sites,’ it added.

Low interest rates, uncertainty and volatility in the equity market and the lack of other suitable investment opportunities also continue to prop up demand, limiting the fall in property prices even in the case of some oversupply.

However, CDL expects a slowdown in the overall residential market with lower sales volume and moderated prices on the back of more cautious sentiment.

High-end homes prices are also still 8 per cent to 10 per cent under their 2008 peak and so are likely to hold steady, Mr Kwek noted.

On the commercial front, Mr Kwek remains confident that the office sector will stay steady and healthy.

Although global economic uncertainties might result in some firms delaying expansion plans for now, they might resume these moves next year instead.

Rents are likely to go up steadily rather than escalate, he added.

For the half year, net profit jumped 45 per cent to $503 million, driven by its property development arm.

Revenue for the second quarter dipped 0.2 per cent to $979 million while it rose 4 per cent to $1.75 billion for the half year.

CDL’s shares were up 24 cents to $10.14 yesterday.

Source: Straits Times, 13th Aug 2011

A PLUM residential site near Potong Pasir MRT station and good schools has attracted bids from no fewer than 15 property developers, far more than in recent successful tenders.

Despite the recent stock market turmoil, the top bid was close to market expectations, at $185 million from low-profile diversified property group Tuan Sing Holdings.

The crowded field of developers vying for the Upper Serangoon Road site is considerably larger than the number for successful land parcel tenders in May and June – fewer than 10, on average.

The 0.87ha site is able to yield 330 units in blocks of up to five storeys.

Tuan Sing’s bid was a mere 3.5 per cent higher than the second highest bid of $179 million. The top bid translates to $567 per sq ft per plot ratio (psf ppr).

The tender for the site, which closed yesterday, attracted a mixed bag of bidders, ranging from industry big boys such as Far East Organization and Frasers Centrepoint, to smaller players such as EL Development.

Several contractor-developers such as Qingdao Construction took part as well.

Bids for the site were spread across a wide range, from $567 psf ppr down to just $240 psf ppr.

The 99-year leasehold site is nestled between Upper Serangoon Road and Pheng Geck Avenue.

It has a gross plot ratio of 3.5 and can be developed up to a maximum gross floor area of 326,394 sq ft.

Yesterday’s top bid was lower than the $607 psf ppr winning bid for an adjacent site last year.

The land price for that site – that is currently being developed as Nin Residences – was 7 per cent higher than the top bid submitted for the Upper Serangoon Road parcel.

Dr Chua Yang Liang, who is head of research at Jones Lang LaSalle, said the bidding suggests that the recent market conditions have had only a slight effect on prices.

He added that developers are taking a long-term view of market conditions in Singapore and the region.

‘It’s still too soon to know where the property market is heading, whether this stock market activity is a short-term blip or a correction,’ said Dr Chua.

Some analysts had expected a price of up to $196 million for the site.

Dr Chua said the modestly lower bid prices may have factored in developers’ expectations of more muted property sentiment in the second half of this year.

Credo’s head of research Ong Teck Hui agreed and said the similarity of the prices of the first few bids was evidence that the current market turmoil had caused the developers to take a measured approach to bidding.

But the site’s considerable attributes would have proved a bigger consideration for the developers, said head of research and consultancy at SLP International Nicholas Mak.

‘They aim to acquire sites with characteristics that would be very attractive to home buyers at a bargain land price, in case the property prices soften.’

The plot of land is located directly opposite the Potong Pasir MRT station, with future residents able to travel to the Central Business District within 10 minutes.

Well-established educational institutes such as Cedar Girls’ Secondary School and St Andrew’s Secondary School and St Andrew’s Junior College are located within the neighbourhood.

CB Richard Ellis’ executive director of residential Joseph Tan said this tender exercise clearly indicates that MRT sites are still considered to be prized plots, attracting interest relative to market conditions.

Mr Mak added that there was a significant presence of contractor-developers.

‘This could be due to the site’s proximity to the MRT station, which would increase the construction cost and the complexity of the project,’ he said, adding that a contractor-developer might therefore be more confident that they could manage the construction process.

Homes at Nin Residences – which is made up of mostly one- and two-bedroom units – were sold at between $1,000 psf and $1,400 psf.

Sub-sales of 8@Woodleigh, another nearby property development, were made at between $980 psf and $1,330 psf.

Property experts estimate that the selling price of the new development could be around $1,000 psf.

Source: Straits Times, 12th Aug 2011

Construction costs expected to rise further, say developers

BIDS by developers for suburban plots may be coming down somewhat but that does not mean that home prices at launches are certain to fall too, top executives of various property firms said yesterday.

Rising development costs – such as an expected jump in labour and construction costs – are challenges that developers are grappling with, they warned.

These cost factors might offset lower land prices, the developers added on the sidelines of a Real Estate Developers’ Association of Singapore (Redas) seminar held at Orchard Hotel yesterday.

Frasers Centrepoint group chief executive Lim Ee Seng said developers do not look at land price alone when pricing their launches. Market expectations are the most important factor.

‘If the market prices it at a certain level and you sell it way above, you cannot sell. But if you can sell it at a certain level, why would you deliberately want to underprice it?’ he added.

But the lower break-even cost brought about by lower land prices gives developers the advantage of more flexibility and a buffer in case the market turns, he added.

However, Mr Lim emphasised that the fall in tender prices has not been significant yet.

Construction costs are expected to rise with strong building demand from the Housing Board, which plans to launch 25,000 new flats this year, more infrastructure works and similarly robust demand from the private sector.

Developers said that, coupled with the reduction in the number of foreign workers and higher material costs, overall costs are expected to spike further.

On the residential property market as a whole, however, Mr Wong Heang Fine, president of Redas and chief executive of CapitaLand Residential Singapore, expects a period of stability without the runaway prices seen in the past couple of years.

Still, while it is too early to call for a reversal of the various cooling measures introduced by the Government, it is clear that they have worked to remove the speculative froth from the market and stem the sharp rise in prices, he said.

‘All the cooling measures that are in place presently; the position that we take is to let the dust settle (and to) let nature take its course… Singaporeans who own private properties make up less than 15 per cent of the total residential market in Singapore.

‘Given this, the private residential market should be given the opportunity to independently adjust to achieve its demand and supply equilibrium.’

Home hunters are taking longer to decide on a purchase, which shows that sentiment has been affected. However, basic demand is still present. In fact, if healthy economic growth, low interest rates and ample funds are present, they will continue to fuel purchases, he noted.

City Developments group general manager Chia Ngiang Hong said that despite concerns of an impending oversupply, the government is able to tweak the six-monthly land sales programme according to market conditions.

‘We are hopeful that along the way, if the market situation does change, the government will take that into consideration and proportion the sites between the confirmed and reserve list,’ he added.

Confirmed list sites go on sale regardless of interest and are often an indication of the Government’s strategic development plans. Land on the reserve list is put up for tender only if developers make an acceptable initial offer.

Source: Straits Times, 29th July 2011

Rise not far off January peak of 5.5%; transport, housing main drivers

HOUSING: 8.8 per cent jump due to pricier accommodation and electricity tariffs. — ST PHOTO: ALPHONSUS CHERN

NEW figures out yesterday confirmed a warning issued last week by the central bank: Inflation is on the rise again.

The consumer price index (CPI) for last month has come in at 5.2 per cent compared to June last year, close to January’s peak levels of 5.5 per cent.

The upswing was flagged by the Monetary Authority of Singapore (MAS) last week.

MAS managing director Ravi Menon had said that inflation would be above 5per cent over the next few months, before easing towards the end of the year.

In issuing the latest CPI figures yesterday, the Department of Statistics said the main contributors to rising inflation were housing and transport costs.

They made up 25 per cent and 16 per cent respectively of the CPI basket that is used to track price changes.

Housing costs rose 8.8 per cent year-on-year, owing to pricier accommodation and electricity tariffs. Higher petrol and car prices also saw transport costs jump by 10.4 per cent.

Only the communications component saw a decrease – of 1.6 per cent – as Internet subscription fees fell.

Still, month-on-month, June prices fell 0.2 per cent lower from May, even though food prices were up 0.3 per cent.

Housing costs declined by 0.9 per cent month-on-month, mainly because rebates for service and conservancy charges were given last month, and not in May.

Bargains on offer at the Great Singapore Sale meant prices of clothing and footwear fell by 3 per cent.

HSBC’s chief economist for India and Asean, Mr Leif Lybecker Eskesen, said the month-on-month drop was distorted by rebates and seasonal shopping discounts. ‘However, annual inflation is holding firm and rising gradually.’

Bank Of America economist Chua Hak Bin and DBS economist Irvin Seah have also raised their full-year inflation forecasts for this year to 4.6 per cent, up from the previous 4.2 per cent.

This is in line with MAS’ estimates, which were revised upwards last week to between 4 per cent and 5 per cent.

Core inflation, which excludes accommodation and transport costs, to give a better picture of out-of-pocket cash costs for consumers, rose 2.3 per cent last month over the same period last year.

CIMB regional economist Mr Song Seng Wun said that as long as the economy keeps generating employment and income, there will be a degree of inflation.

However, Mr Kelvin Tay, chief investment strategist for Singapore at UBS Wealth Management Research, thinks the current rise in inflation will need to be tackled with a mix of tools.

He said: ‘A mixture of high inflation, negative real interest rates and a strong currency is the perfect recipe for an asset bubble to build.

‘The higher prices are largely driven by property and COE prices. A strong Singdollar will mitigate neither. The MAS will increasingly have to consider the presence of other instruments such as regulation, which can directly affect leverage or risk-taking.’

Source: Straits Times, 26th July 2011