A 'Cool' 2008?

Mkt is cooling, and inflation is going up ... ... these are the outlook for 2008.

Advance estimates of GDP rose at 9.4% on yr-to-yr. But forecast for next yr's economic growth is set at 4-6%, in view of higher oil prices, volatility in financial mkts and inflation.

Inflation is now expected to be at 1.5-2% this year, up from the previous forecast of 0.5-1.5%. This is expected to climb to 3.5% in 1H08, and in the range of 2-3% for 2008.

* MAS-Oct Review , CNA-Growth , AsiaOne-Growth *

No More Deferred Payment

Wef today, the Government has withdrawn the popular deferred payment schemes for all uncompleted properties, due to strong economic and property mkt conditions. The scheme was first introduced in Oct97 when the economy was in recession.

* URA-DPS Withdrawal , AsiaOne-Pty Mkt *

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Though not unexpected, but still came in as a little surprise to me.
The mkt gonna cool down further & speculators will hv to think twice or even thrice before jumping into the water.
Guess this also helps to reduce Bank's risks. In 1-3yrs time, when projects obtain their TOPs, many will hv to service their loans. Who knows what will happen then.

3Q07 Real Estate Data

Sale Prices:
(a) Residential: +8.3% (2Q +8.3%, 1st 9mths: +22.9%)
- Landed: +7.5% (2Q +7.1%)
- Non-landed: +8.3% (2Q +8.4%)
(b) Office: +8.1% (1st 9mths: +22.7%)
(c) Shop: +3.0% (1st 9mths: +9.5%)
(d) Industrial: +3.2% (1st 9mths: +15.8%)

Rental Prices:
(a) Residential: +11.4% (2Q +10.4%, 1st 9mths: +32.2%)
(b) Office: +14.8% (1st 9mths: +40.7%)
(c) Shop: +8.1% (1st 9mths: +17.5%)
(d) Industrial: +8.7% (1st 9mths: +22.4%)

Supply:
(a) Residential: +16.4% to 65.4k units (projects U/C and granted approval). 44.5k units expected to be ready from now till 2010. Unsold units at 38,013.
(b) Office Space: 1.4m sqm GFA available, of which 0.61m sqm expected to be completed from now till 2010.

Stock and Vacancy:
- 2 229 residential units were granted TOP.
- Vacancy rate of completed residential units at 5.4% (2Q 4.9%).

Sub-sale:
Sub-sales fell to 1 163 (2Q 1 791), and accounted for 12.7% of all sale transactions (2Q 12.1%).

* URA-3Q07Data , AsiaOne-3QHome *

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Up, up and away :) .

The Gurus Speak ... ...

Warren Buffet says ... ...
- He expects the US$ continues to weaken.
- He is upbeat on S.Korean stocks and interested in big companies in Asia.
- Berkshire Hathaway has bought undervalued Korean shares such as steelmaker POSCO, Kia Motors, Hyundai Steel and Shinyoung Securities.

Jim Rogers says ... ...
- He is moving his assets out of US$ and buy Chinese yuan as he expects it to quadruple in next 10yrs. He is also buying Swiss francs and Japanese yen because of carry trade.
- Bonds & stocks bull mkts are over.
- He remains bullish on commodities especially on agriculture, and is holding on to platinum, gold, silver and palladium.

Marc Faber says ... ...
- Fed lowered interest rates is contributing stock mkt bubble in US.
- Chinese assets rally (including 171% gain in CSI300 Index) & India's gain will end by Aug08.
- US$ may rebound against euro if bubbles in emerging mkts deflate, as fund mgrs will invest in US then.

* CNA-W.Buffet , IHT-J.Rogers , Bloomberg-M.Faber *

Sept US Home Sales: New & Resale

(1) Resale Homes
Resale fell 8% in Sept to record low of 5.04m units and inventory up by 0.4% to 4.4m units which equates to a 10.5mth supply. The national median price for single-family & condos dropped 4.2% (yr-to-yr) to US$211 700.

(2) New Homes
Unexpectedly, new home sales rose by 4.8% in Sept to 770k units, but still 23.3% lower than a yr ago. Median price had risen to US$238k, up by 2.5%.
The originally reported Aug figure was 795k units, but was later revised to 735k units, the slowest pace in 11yrs.

Merrill Lynch US$8.4b Write-down

Investment banking giant, Merrill Lynch, reported a US$8.4b write-down during the bank's qtrly results statement. This was the biggest qtrly loss in its 93yr history. Stanley O'Neal (ML's CEO) said the severity of the debts mkts were misjudged since July. US$7.9b was lost to CDOs and securities/loans linked to subprime mortgages.

Slumping credit mkts have led to some industry executives' heads to roll and have wiped out >20% of stock mkt value in some firms.

With this, S&P is considering lower the ratings for some CDOs managed in S'pore: Raffles Place Funding by UOB Asset Management, and Singa Funding by OCBC's Lion Capital Management.

* ML-3Q Report , Bloomberg-ML , AsiaOne-ML *

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So, is the shore clear? I doubt so ... ... the impact of subprime mortgages is not easy to assess because the ripples hv not settled down yet.

How abt tis ... ... CDOs & SIVs are held as off-balance-sheet items by financial institutions and this has led to NO transparency on their holdings! Read abt it: AsiaOne-Mkt Risks.

Sept CPI at 2.7%

Sep CPI: 104.2
Mth-to-Mth: -0.3% (Last mth: 0.3%)
Yr-to-Yr: 2.7% (Last mth: 2.7%)
1st 9mths 2007: 1.4%

Top 3 highest increase on yr-to-yr:
1) Healthcare 5.9%
2) Recreation & Others 4.6%
3) Food 3.7%

As oil prices hit record highs, inflation is expected to rise further.

* SingStat-Sept CPI , CNA-CPI , Bloomberg-CPI *

Worldwide Jobs Cut

(1) BBC, 1.8k jobs cut
- To integrate its TV, radio & internet news operations

(2) GMAC Financial Services, 3k jobs cut
- Abt 25% cut of its mortgage unit, Residential Capital (ResCap), due to "severe weakness in the housing market and mortgage industry".
- In 1H2007, already 2k jobs were cut

(2) Morgan Stanley, 300 jobs cut
- Hit by recent mkt turmoil, most are fr its institutional securities division in mortgages, fixed-income trading and other biz.
- Abt 2wks ago, it announced restructuring of its mortgage biz that would result in 600 jobs cut.

(3) Boston Scientific, 2.3k jobs cut
- To restructure or sale of biz units and to reduce operating expenses.

* BBC-Jobs , GMAC-Jobs , Reuters-Morgan Stanley , BostonSci-Jobs *

Sept UK's CPI at 1.8%

Britain's Consumer Price Index (CPI) remained at 1.8% in Sept (yr-to-yr), and was the 3rd month running below the central bank's target of 2%. On mth-to-mth basis, inflation rose just 0.1% from Aug.

* CNA-UK CPI *

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Great for keeping inflation low, but coming mths will be tough 'cos of rising oil price. Ouch!

Infill Sites, Anyone?

SLA will be releasing some small sites (enough for one home each) over the next few months. However, the sites might have been used for public purposes, such as parks, sub-stations, septic tanks. SLA will conduct certified tests before releasing them for sale, and will also outline the locations of waterpipes/sewers within the site.

Past sites released:
1991:
Braddell Rd, 9 000 sf, $402k ($45 psf)

1993:
(1) 10 Mt Sinai, 4 855 sf, $880k ($181 psf)
(2) Ceylon Rd, 5 581 sf, $1.3mil ($233 psf)
(3) 408 Dunearn Rd, 15 080 sf, $3.6mil ($239 psf)
(4) 110-112 Tamarind Rd, 11 236 sf, $1.45mil ($129 psf)

* AsiaOne-Sites *

Investment Gone Wrong

The Marina Bay Villa, once touted as the biggest developments in West Batam, Indonesia, was razed in 2005. The project was supposed to complete in 1992, but out of the 304 units, only 80 were built after 7yrs later. One owner has paid $134k for a 6 500 sf bungalow and put in another $20k in renovations.

2yrs on, the owners still drew a blank from the authorities and companies in Batam. The contract was signed in Batam and comes under Indonesian jurisdiction, but the Indonesian developer, PT Karya Sinar Batam, had since closed down and their S'pore representative, Island Club Condominium, was also not liable; hence there is no recourse to sue.

A Batam land officer believes that the houses were demolished because the building permit was invalid, and claimed that the land was owned by a S'porean.

* ST-Batam Pty , Another Owner's Woes *

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Some other investments gone wrong ... ...
(1) PT Magic Kingdom Island Resort Paradise, Indonesia, 2002
1 000 S'poreans paid $3.8k each to join the club, but the club went bankrupt and never started the resort project.

(2) Villa Temasek, Indonesia (Bintan), 2001
90 S'poreans paid $16k for each unit, but developer disappeared.

(3) A 816-unit Condo Project, Bangalore, 1996
40 S'poreans & M'sians lost btw US$54k - US$98k. Marketed by S'pore-based company, Chesterfield Int'l, the directors couldn't be traced when the project was aborted.

(4) Houses, China (Shandong, Qingdao), 1996
18 S'poreans paid btw $30k - $70k for each house built by Dragon Land. They turned out to be poorly constructed with no amenities.

(5) Anjung Seri Condo, M'sia (Johor Baru), 1995
37 investors paid btw RM$150k - RM$400k, but the project was never completed.

Record Bid for Upper Pickering Hotel

Hotel site at Upper Pickering St
Land 6,959 sqm, GFA: 29,227 sqm
Top Bid Price: $253.2 mil (which translates to $805 psf ppr) by Hotel Plaza Ltd (Developer UOL's hotel arm).

This set a record bid, and is >40% higher than the previous 2 hotel sites at Tanjong Pagar area:
(1) Tras St: Land 2,866 sqm, GFA 16,047 sqm, at $97.1 mil ($562 psf ppr) [Jul 07]
(2) Gopeng St: Land 2,373 sqm, GFA 19,933 sqm, at $123 mil ($573 psf ppr) [Jun 07]

* URA-Gopeng St , URA-Tras St *

*** Update ***

(1) Hotel site at Upper Pickering St was awarded to Hotel Plaza Ltd on 15 Oct 07.
Land 6,959 sqm, GFA: 29,227 sqm, at $253.2 mil ($805 psf ppr) [Oct 07]
(2) Hotel site at New Market Rd/Merchant Rd was awarded to Park Regis Investments Pte Ltd on 29 Oct 07.
Land 3,508 sqm, GFA 12,278 sqm, at $100.7 mil ($762 psf ppr) [Oct 07]

* URA-Pickering St , URA-Merchant Rd *

"A New Direction for Hong Kong"

HK Chief Executive, Donald Tsang, delivered his annual policy address yesterday.
10 mega infrastructure projects will be rolled out in the next 5yrs, which are expected to fetch about HK$100 bil/yr in economic benefits, and create 250k jobs.

Besides infrastructure development, other carrots are:
(1) Tax Reduction (for FY2008 - 2009)
- Profits tax fr 17.5% to 16.5%
- Salary tax fr 16% to 15%

(2) Financial Activities
- Integrate HK's financial industry with China
- HK as a platform for China's investment funds
- Develop Islamic finance and bond mkt

(3) Education
- Free public education for 12yrs, up from current 9yrs (wef 2009)
- Increase number of international schools

* ChinaView-Policy , ShangHaiDaily-Policy *

Marina Bay Suites

Marina Bay Suites, the 2nd and last residential block at Marina Bay Financial (MBF) will likely be launched early next year. The 65-storey project will have 223 3BR and 4BR apartments from 1,500 - 2,500 sf, and prices for smaller units are expected to cost $4m - $5m or at an ave of $3k psf.

Sub-sale prices for nearby projects:
(1) Marina Bay Residences
Highest recorded: $3.6k psf in Jun
Recent transactions (Aug): $2,061 - $3,080 psf

(2) The Sail @Marina Bay
Highest recorded: $3,301 psf in Aug
Recent transactions (Aug): $1,300 - $2,999 psf

Marina Bay Condo

Marina Bay Suites, the 2nd and last residential block at the Marina Bay Financial Centre (MBFC), will be launched next yr.

The 65-storey, 223-unit tower will have 3BR and 4BR ranging from 1,500 sf - 2,500 sf, 2 duplex penthouses on the 63rd floor, and a single-level penthouse on the 65th floor. Smaller units are expected to fetch $4m - $5m each, and average price is expected to be around $3k psf.

In Aug, nearby Marina Bay Residences units were sold for $2,061 - $3080 psf, and The Sail for $3,301 psf.

* KeppelCorp-MBS , MBSuites *

Ang Mo Kio Hotting Up

Not only condo, HDB flats are also hotting up in AMK. In Sep, average transacted price of 3Rm, 4Rm and 5Rm around MRT station were $197.5k, $339k and $474.5k respectively.

Median rental for HDB 4Rm was at $1k and 5Rm at $1.3k in 2Q07.

Tightened En-bloc Sale Procedure

To ensure transparency in en-bloc sales, more regulations are introduced into the market to minimise complaints and unfairness. The Land Titles (Strata)(Amendment) Act will take effect from today.

Changes (wef 4 Oct 2007):
1) Voting
Additional voting based on floor area, to address voting rights in a mixed development.
[ Before: Voting only based on share value.
For development <10yrs>=10yrs old, 80% approval is required]

2) Sales Committee
Regulate formation of a Sales Committee and its proceedings, such as updates of the consent level have to be done every 4wks and certified by lawyer.

3) Collective Sales Agreement (CSA)
Regulate the drafting and signing of CSA procedure. A lawyer needs to be present when signing the CSA, and a 5d cool-down period after signing the CSA.

4) Sales by Public Tender or Auction

5) Valuation by Independent Valuer

6) Funds
Management and sinking funds are to return to owners upon legal completion.

* MinLaw-LTA(Strata) , CNA-LTA(Strata) , AsisOne-Enbloc , AsiaOne-En-bloc , Forum-En-bloc *

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Hopefully, these can help to minimise grievances and sellers got to honour their action even if it's gonna be vy heartache ... ... Horizon Tower Case.