Roubini Says Third Quarter Growth in U.S. to Be ‘Well Below’ 1%

Yes, we all know that economic growth in the third, and likely, fourth quarters will be anemic. The question is how will 2011 be? Any soothsaying economist want to put your head out and give us your take?


Aug. 25 (Bloomberg) -- Nouriel Roubini, the New York University economist who predicted the global financial crisis, said U.S. growth will be "well below" 1 percent in the third quarter and put the odds of a renewed recession at 40 percent.

Roubini, chairman of Roubini Global Economics LLC, said his forecast assumes the government will lower its estimate for growth in the second quarter to an annual rate of 1.2 percent "at best."

"All the growth tailwinds of the first half of the year become headwinds in the second half," he said in an e-mail message, including the government's $814-billion stimulus plan, hiring for the census, and incentives such the cash-for-clunkers program and tax credits for first-time home buyers.

In the best scenario, he said he expects an "anemic, sub- par, below-trend U for many years given the need and process of deleveraging" by households, governments and the financial system.

"With growth at a stall speed of 1 percent or below, the stock markets could sharply correct, and credit spreads and interbank spreads widen while global risk aversion sharply increases," he said. "Thus a negative feedback loop between the real economy and the risky asset prices can easily then tip the economy into a formal double-dip," he said, referring to two recessions in a quick succession.

The Commerce Department may report revised figures in two days showing the economy grew at a 1.4 percent pace in the second quarter, according to the median estimate of economists surveyed by Bloomberg News. That's down from an earlier estimate of 2.4 percent, because of a widening trade deficit, a smaller buildup of inventories and weaker construction.

TODAY: Still hungry for land

Still hungry for land

by Ephraim Seow | Aug 25

SINGAPORE - A residential site on Miltonia Close, next to the Orchid Country Club, attracted seven bids by the close of the public tender yesterday, in an indication that property developers still have a healthy appetite for land, property analysts said.

Hoi Hup Realty and Sunway Developments jointly submitted the highest bid of $165 million, which translates to about $406 per square foot per plot ratio. This is about 31-per-cent higher than the next highest bid at $126 million submitted by Master Contract Services.

The remaining bids, ranging from $97.9 million to $125.3 million, came from developers like Allgreen and MCL Land unit Superport.

On Hoi Hup's bullish top bid, Ngee Ann Polytechnic real estate lecturer Nicholas Mak said the developer had failed at least eight times in other tenders since the beginning of the year and hence might have had a greater need to build up its land bank.

The Miltonia Close site was launched by the Housing and Development Board (HDB) on July 2. The land parcel spans 291,000 sq ft and can yield a maximum gross floor area of about 407,000 sq ft.

With a 99-year lease term, the site can be developed into strata landed housing, condominium housing or flats.

Mr Leonard Tay, director of CBRE Research, noted that the site's good location beside the Orchid Country Club Golf Course would offer an unblocked view of Lower Seletar Reservoir. It is also close to Yishun HDB town.

He added the winning developer would likely develop a five-storey low-rise condominium.

Mr Tay said the top bid reflected a breakeven cost of around $700 to $750 psf should a low-rise condominium be built.

"Condominium units in this new project could possibly sell above $800 psf," he said.

This would put it at the higher end of recently transacted prices in the area from April to this month. Units in The Estuary, which was launched in April, sold for $650 to $850 psf, Mr Tay said.

Singapore Bond Sales Beat Record as Economy Fires, Costs Plunge

Good news for those with variable mortgages, looks like rates will remain low for 'an extended period of time'.

Aug. 25 (Bloomberg) -- Singapore bond sales are accelerating as companies on an island vying for the title of world's fastest-growing economy exploit the lowest funding costs in at least two decades to finance expansion.

Temasek Holdings Pte. and CapitaLand Ltd. led borrowers that raised $14.1 billion this year, topping the record $13.2 billion of notes sold in 2001, according to data compiled by Bloomberg. The benchmark three-month interbank lending rate was last at 0.54889 percent, the lowest since 1987, when data on the Monetary Authority of Singapore's website starts.

"Singapore is going through an outstanding period of economic growth with most sectors performing well," Aaron Russell-Davison, head of Asia debt syndicate at Standard Chartered Plc, said in a phone interview from the city-state. "In this context it makes sense that companies are looking to borrow longer-dated money at historically attractive levels."

The economy of Singapore, Asia's second-smallest country after the Maldives, may be the world's fastest-growing in 2010 after ballooning demand for goods and services prompted the government to raise forecasts three times since January. Gross domestic product increased 17.9 percent in the first half, ahead of the trade and industry ministry's full-year prediction of between 13 percent and 15 percent and surpassing India's expectations of 8.5 percent growth and China's of 9.5 percent.

Leisure Visitors

Companies added about 63,000 jobs in the six months to June 30, according to the Ministry of Manpower, a year after Singapore exited its worst recession since independence in 1965. Monthly tourist arrivals exceeded 1 million for the first time in July after Las Vegas Sands Corp. and Genting Singapore Plc opened the city's first casino resorts.

Property developers, shopping mall operators and hoteliers accounted for 26 percent of Singapore's 113 bond issues this year, Bloomberg data show.

CapitaLand, Southeast Asia's biggest developer, sold S$1.25 billion ($917 million) of bonds this month in maturities ranging from four to 10 years. The company paid a 4.3 percent coupon when it sold S$350 million of 10-year bonds at par on Aug. 17 compared with 4.4 percent when it sold S$100 million of eight- year notes in 2003, the data show.

"Our approach has been to grow the orchard not squeeze the orange," said Olivier Lim, CapitaLand's chief financial officer. We "nurture the group's access to markets and raise money when markets are conducive, not when we need the funds."

Lower Coupons

Temasek is Singapore's most prolific borrower this year after it issued notes in British pounds and Singapore dollars with maturities of between 10 and 40 years, according to Bloomberg data. The state-owned investment company is paying a 4.2 percent coupon for its 40-year notes, 10 basis points less than the 4.3 percent it paid for 10-year money in 2009.

Temasek sells bonds "as public markers of our credit quality," spokesman Jeffrey Fang said in an e-mailed response to questions. As well as improving capital efficiency and funding flexibility, they "foster the discipline of engaging with both international and Singapore bondholders," he said.

"With reasonable growth coming back into Asia, locking in a low coupon for the next 10 years is a pretty smart thing to do," said Sean Henderson, Hong Kong-based head of Asia debt syndication for HSBC Holdings Plc, the No. 3 arranger of Singapore bond sales this year. "Singapore borrowers tend to be rare and very high quality names, so investors have been comfortable about extending durations in order to get a bit of extra yield."

Smaller Sales

When Singapore's AAA rated Housing & Development Board sold S$500 million of three-year bonds in July it paid a 1.15 percent coupon, according to Bloomberg data. No Singapore borrower has paid more than 7.5 percent this year, the data show.

Olam International Ltd., the Singapore-based commodities trader, paid 7.5 percent this month when it sold $250 million of 10-year bonds, its longest-maturity notes. The bonds traded at 101.13 cents on the dollar to yield 7.338 percent yesterday, according to Royal Bank of Scotland Group Plc prices. Olam declined to comment in an e-mailed response to questions.

While companies can typically borrow larger sums in the U.S. dollar bond market, according to HSBC's Henderson, they pay slightly less to sell bonds in Singapore. Companies completed 35 U.S. dollar-denominated sales that raised $500 million or more in Asia excluding Japan this year compared to nine corporate sales of at least S$500 million.

Interbank Costs

The Singapore interbank offered rate that banks charge each other to borrow U.S. dollars was last at 0.31944 percent, its lowest in at least 23 years. The rate rose to as much as 5.7775 percent during the global financial crisis as banks hoarded capital after the collapse of Lehman Brothers Holdings Inc.

Borrowers sold $2.5 billion of bonds in the city in 1999 and issuance ranged between about $5 billion and $7 billion a year for much of the last decade, Bloomberg data show.

"The regulators in Singapore have been working hard to make this market appealing to both investors and issuers," said Clifford Lee, head of fixed-income for DBS Group Holdings Ltd., the top-ranked underwriter of Singapore dollar bond sales. "There's no withholding tax and the approval process for foreigners to sell bonds is simple and quick if it's just an offering to accredited investors," he said.

VTB Group, Russia's second-largest bank, raised S$400 million from two-year notes this month. It was the only Russian issuer to target Asian investors apart from Moscow-based gas company OAO Gazprom, which sold yen-denominated bonds in 2007.

Agricultural Bank of China Ltd., China's biggest lender by customers, sold $50 million of floating-rate notes through its Singapore unit in April. The lender has offices in the city- state as well as in Hong Kong, London, Tokyo, Seoul, Frankfurt, Sydney and New York, according to its website.

"We are seeing an increased maturity and sophistication in the Singapore capital markets," Standard Chartered's Russell- Davison said. "2010 is set to be a big year, reflecting the confidence of both issuers and investors."

To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

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Properties near MRT appreciate in value

(C) mypaper - Monday August 23, 2010

For the full article, please visit Page A6 of http://myepaper.mypaper.sg/ebook/web_php/fvbrowserjs.php?urljs=http://myepaper.mypaper.sg/ecreator/sphopf/mya230810cnd_opf_files/mya230810cnd.js&ver=Gen

Decrease in default rate

I find it hard to agreed with those who say a market crash is imminent.

"The number of mortgagors defaulting on their property loans has reduced over the last two years, according to DP Credit Bureau (DPCB). It said in a report that the average default rate across all age groups fell to a low 0.43% in March 2010, down from the 0.89% in March 2008. DPCB general manager Lincoln Teo said this represents an improvement in the property market, leading to more positive sentiment which indirectly drives better payment behaviour."

Read more at http://www.channelnewsasia.com/stories/singaporelocalnews/view/1076643/1/.html

TODAY: New kid on the block is good news

New kid on the block is good news

by Png Poh Soon of Knight Frank | Aug 20

When the show flat of a new residential project is ready, the new kid on the block often creates a buzz among the residents living nearby. People are generally curious about what the project looks like, its launch and completion date, and most importantly, the launch price.

Homes in these new projects are often priced higher than the average transacted value of resale units in the neighbourhood because of several factors, such as newer designs and longer tenures.

Many homeowners have asked how these new launches affect the value of their homes. Does the pricing of these new properties affect the prices of nearby resale units and, if so, to what extent?

Knight Frank has carried out a study to examine the pricing effects of new projects on resale properties in their vicinity. Our study is adjusted against the benchmark Urban Redevelopment Authority (URA) price index in the respective regions to take into account the effects of broad general market movements.

The price effect is based on the change in transacted prices per square foot over time of selected new and resale properties over the period from 2004 to last year in the Core Central Region (CCR), the Rest of Central Region (RCR) and the Outside Central Region (OCR), according to the URA's geographical classification.

The average transacted prices of similar-sized units in developments adjacent to the new project were studied and compared over a three-month period before and after the new launch. Sizes were controlled to reduce price distortion where smaller units command higher prices on a psf basis and vice-versa.

Anecdotal comparisons showed that new projects were generally priced 20 to 40 per cent higher than the average transacted prices of nearby developments of similar sizes. This was especially so in the CCR and the RCR region and during property market upturns.

The new developments were found to have a positive effect on the transacted values of resale units after adjusting for broad market movements.

Resale prices moved up in tandem following the launch of higher-priced developments. The average resale unit price appreciation was 12.98 per cent in the CCR, 19.14 per cent in the RCR and 4.23 per cent in the OCR over and above the benchmark price index.

Prima facie, new launches do seem to have a positive effect on resale prices.

For example, when Marina Bay Residences was launched in December 2006 at a premium of 38 per cent to the average price of similar-sized units in the neighbouring development, transacted prices of the already-launched The Sail went up by some 21 per cent after adjusting for broad market movement. Likewise, the transacted prices of The Metropolitan went up by 12.2 per cent after The Ascentia Sky was launched at a premium of 36.3 per cent in July last year.

Arguably, the positive effect arises because resale units take reference from the transacted prices in the vicinity, including the higher priced new projects.

Higher priced launches raise the selling price expectations of the owners of resale units, particularly if they are located near the new project.

From the buyers' perspective, resale units may also appear to offer value for money if they cost lower than their new neighbours. Inadvertently, this results in price appreciation for these resale units.

The real estate adage of "location, location, location" also applies in this instance, where the price effects of new launches have greater impact in the CCR and the RCR rather than the OCR.

Apparently, older properties in better locations benefited more where buyers have deeper pockets vis-a-vis buyers in the suburban regions.

But before you decide to jump on the property bandwagon, we would like to add a caveat. We noticed in our study instances where new launches did not result in a positive effect on the prices of nearby resale units.

Broadly, these instances occur during periods where home buyers' sentiment was weak, such as when the broad market was awash with negative news or in the doldrums. There were also periods when buyers' sentiment turned cautious after the announcement of public policies aimed at cooling the property market.

For example, in September last year, the Government announced the withdrawal of the interest absorption scheme and interest-only loan as an attempt to pre-empt a speculative bubble from forming.

The property market turned quiet for a while as buyers adopted a cautious stance. Resale units near new launches during this period did not exhibit much price movement compared to the market before the announcement.

To sum up, while new projects are still popular with potential home buyers, resale properties may be worth a second look, whether it is for owner-occupation or for investment.

Gems can be uncovered, especially for properties near sites with potential for new developments.

Perhaps it may help to look at yet-to-be launched sites that had been tendered between last year and this year.

If your sums, market conditions and timing are right, a pot of gold may be waiting at the end of the rainbow.

The writer is senior manager at Knight Frank's consultancy and research department.

NODX exports register slowest growth for year

Not surprise by this piece of news, the economy can't grow at the rate like the first half of this year, simply not sustainable.

Other notable nugget of news includes a pick up on en bloc deals, a surge in property sales for last month, a huge supply of homes by the way of government land sales and of course the Seventh-month.

My guess is there might be a moderation in the buying mood, this month and probably the next. The market here comes in fits & starts. So you won't know when it will suddenly pick up again.

from TODAY: NODX exports register slowest growth for year

by Ephraim Seow | Aug 18

SINGAPORE - Singapore's non-oil domestic exports (Nodx) registered their slowest growth so far this year, dragged by a lagging pharmaceutical sector.

Data released yesterday by the trade promotion agency, International Enterprise (IE) Singapore, showed that Nodx grew18 per cent last month from July last year, lower than the 28 per cent growth in June.

On a month-on-month seasonally adjusted basis, Nodx fell 3.9 per cent, compared to the 0.1 per cent contraction in June.

Action Economics director David Cohen said: "The pharmaceutical sector is a big factor contributing to the smaller growth ... Besides, Singapore's economy is moderating after getting ahead of itself."

The volatile pharmaceutical sector contracted 23.5 per cent last month compared to July last year, retreating from the 29.7 per cent gain in June. Industry experts say this year is appearing to be a year of two halves. After the stellar performance in the first six months, last month's Nodx presages a slower second half. They say Nodx growth will likely plateau at the lower end or even slightly under IE Singapore's forecast of 17 per cent to 19 per cent.

"With concerns of the sustainability of the global recovery in the coming months, unemployment remaining stubbornly high in G3 markets and lingering Europe sovereign debt concerns, we could yet see more significant moderation in Nodx growth in the second half this year," said Mr Alvin Liew, economist at Southeast Asia, Global Research, Standard Chartered.

Uncertain external conditions will impact demand for electronics in the next few months. However, this is buffered by demand arising from the recent launches of smartphones and Apple's iPad, the experts said.

Last month, electronic Nodx rose 26 per cent, after the 44 per cent increase in June and non-electronic Nodx grew by 14 per cent, after the previous month's 21 per cent rise.