Monday, October 13, 2014
Singapore Q3 GDP misses forecasts
Singapore Q3 GDP misses forecasts: "The economy expanded 2.4 percent in the third quarter from the year-ago period, missing a Reuters forecast for a 2.8 percent gain and following a rise of 2.4 percent rise in the previous quarter."
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LittleBits CEO: Invent your own prototype
LittleBits CEO: Invent your own prototype: "
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Video Embed Size: 530 X 298 640 X 360
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This is the most dangerous stock market since 2008 - MarketWatch
This is the most dangerous stock market since 2008 - MarketWatch:
Bottom line: Some believe the long-anticipated correction has finally arrived. My view is that it could be worse — the end of the bull market. Take action before too much damage is done to your portfolio. The last thing you want is to try to get out when everybody else is selling.
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Bottom line: Some believe the long-anticipated correction has finally arrived. My view is that it could be worse — the end of the bull market. Take action before too much damage is done to your portfolio. The last thing you want is to try to get out when everybody else is selling.
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Sunday, October 12, 2014
What Should Investors Do About The New REIT Regulations Proposed By MAS? | The Motley Fool Singapore
What Should Investors Do About The New REIT Regulations Proposed By MAS? | The Motley Fool Singapore:
The Monetary Authority of Singapore (MAS) released a consultation paper on Thursday which contained several proposals to strengthen the real estate investment trust (REIT) market.
I wrote a summary of the proposed changes here. In this article, I would like to write about how this may change the way we look at REITs.
A REIT’s ability to allocate capital
A lot of traits which we look for in a sustainable REIT should not change. As Foolish investors, we still need to consider the ability of a REIT to secure good properties at reasonable prices and increase the net property income (NPI) of its purchased properties.
The proposed regulatory changes may make it easier for a REIT to fund its activities (part of the changes involves the increase of a REIT’s leverage limit), but it is likely a good thing only if we put more cash in the hands of a REIT with good capital allocation skills – putting more cash in the hands of a REIT with poor ability to allocate capital may not be the smartest thing to do.
A REIT’s ability to borrow money smartly
Along this vein, REITs should also show the ability to secure competitive borrowing rates and demonstrate flexibility in securing funding across different economic climates. Having fewer limits on a REIT’s ability to borrow does not preclude a REIT from having to display this trait.
A REIT’s economic characteristics
The economic characteristics of REITs from different sectors would also not be affected (for better or worse) by this round of proposed changes in the regulatory environment.
For instance, REITs such as Suntec Real Estate Investment Trust (SGX: T82U) and CapitaCommercial Trust (SGX: C61U), which are both in the office rental sector for REITs, are affected by the demand and supply of different grades of office rental space and the ability of Singapore to attract new companies to set up shop here.
On the other hand, hospitality REITs like CDL Hospitality Trusts (SGX: J85) are influenced by a completely different set of factors such as tourist arrivals in Singapore and the supply of hotel rooms in our country.
In short, individual REITs will still need to deal with the inherent idiosyncrasies in their own sectors.
Using the “too hard” pile
If and when leverage limits for REITs are increased in the future as per MAS’ proposed changes, it might be prudent for Foolish Investors to consider tossing highly leveraged REITs in volatile sectors into the “too hard” pile. If a sneeze in the economy can produce wild swings in the income from a REIT’s properties’, then having elevated debt obligations over the long-term could be damaging for a REIT and its investors, to say the least.
Foolish take away
Ultimately, MAS’ proposed regulatory changes shouldn’t affect how investors view the long-term business fundamentals of a REIT. Most of the changes – such as the proposal to enhance disclosure standards – would likely allow investors a better opportunity to study REIT managers’ incentives and their operational know-how. But the rule changes would not change how good or bad a REIT is.
At the end, Foolish investors would still be better served only if they focus on REITs which have good quality properties and a capable management team in place who are able to create value over the long-term.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Suntec REIT.
'via Blog this'
The Monetary Authority of Singapore (MAS) released a consultation paper on Thursday which contained several proposals to strengthen the real estate investment trust (REIT) market.
I wrote a summary of the proposed changes here. In this article, I would like to write about how this may change the way we look at REITs.
A REIT’s ability to allocate capital
A lot of traits which we look for in a sustainable REIT should not change. As Foolish investors, we still need to consider the ability of a REIT to secure good properties at reasonable prices and increase the net property income (NPI) of its purchased properties.
The proposed regulatory changes may make it easier for a REIT to fund its activities (part of the changes involves the increase of a REIT’s leverage limit), but it is likely a good thing only if we put more cash in the hands of a REIT with good capital allocation skills – putting more cash in the hands of a REIT with poor ability to allocate capital may not be the smartest thing to do.
A REIT’s ability to borrow money smartly
Along this vein, REITs should also show the ability to secure competitive borrowing rates and demonstrate flexibility in securing funding across different economic climates. Having fewer limits on a REIT’s ability to borrow does not preclude a REIT from having to display this trait.
A REIT’s economic characteristics
The economic characteristics of REITs from different sectors would also not be affected (for better or worse) by this round of proposed changes in the regulatory environment.
For instance, REITs such as Suntec Real Estate Investment Trust (SGX: T82U) and CapitaCommercial Trust (SGX: C61U), which are both in the office rental sector for REITs, are affected by the demand and supply of different grades of office rental space and the ability of Singapore to attract new companies to set up shop here.
On the other hand, hospitality REITs like CDL Hospitality Trusts (SGX: J85) are influenced by a completely different set of factors such as tourist arrivals in Singapore and the supply of hotel rooms in our country.
In short, individual REITs will still need to deal with the inherent idiosyncrasies in their own sectors.
Using the “too hard” pile
If and when leverage limits for REITs are increased in the future as per MAS’ proposed changes, it might be prudent for Foolish Investors to consider tossing highly leveraged REITs in volatile sectors into the “too hard” pile. If a sneeze in the economy can produce wild swings in the income from a REIT’s properties’, then having elevated debt obligations over the long-term could be damaging for a REIT and its investors, to say the least.
Foolish take away
Ultimately, MAS’ proposed regulatory changes shouldn’t affect how investors view the long-term business fundamentals of a REIT. Most of the changes – such as the proposal to enhance disclosure standards – would likely allow investors a better opportunity to study REIT managers’ incentives and their operational know-how. But the rule changes would not change how good or bad a REIT is.
At the end, Foolish investors would still be better served only if they focus on REITs which have good quality properties and a capable management team in place who are able to create value over the long-term.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Suntec REIT.
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Friday, October 10, 2014
John Lim Sees Real Returns With Li Ka-shing
John Lim Sees Real Returns With Li Ka-shing:
BY JANE A. PETERSON
This story appears in the August 18, 2014 issue of Forbes Asia
Property tycoon John Lim quit worrying about having enough money in 2007. That was when ARA Asset Management went public and he cashed out part of his holdings as the company’s cofounder. “It was the biggest payday of my life,” says the group chief executive, who describes himself as an “ordinary guy” with a knack for spotting a good deal.
To celebrate Lim bought a secondhand Porsche 911 Carrera S, picking silver as the color because it wasn’t too flashy. He moved his growing staff into new quarters on the 16th floor of one of the Suntec City towers just above the crown jewel of his real estate empire, Suntec City mall. The mid-1990s office building is functional but, again, not too flashy. Lim says he didn’t consider slacking off and instead found himself working more. “It’s the passion that drives me now,” he explains. “After so many years I still love my business.”
Maybe that’s because business is booming. ARA–short for Asian Realty Advisors–encompasses eight real estate investment trusts, seven private real estate funds, a burgeoning property-management operation and more than 1,000 employees. The business spans 14 cities, from Dalian to Sydney. It boasts $20.2 billion in assets under management as of Mar. 31, and its shares are up more than 120% since 2007. He makes the Singapore list for the fifth straight year, with a net worth of $565 million–40% higher than a year ago.
Click here for Singapore’s Richest 2014
The 58-year-old Lim’s road to riches began only in 2002. Over dinner one night in Singapore a lieutenant of Hong Kong billionaire Li Ka-shing suggested that they form a Hong Kong real estate fund. Li knew Lim from deals that Lim had pursued in Hong Kong, though none had come together. Joining with Li meant leaving a career at GRA Singapore, a subsidiary of U.S.-based Prudential Real Estate Investors, but who turns down Superman? Lim stumped up $700,000 of his own money to add to Li’s $300,000, and they were in business. To this day Lim says he isn’t sure why Li tapped him as a partner. Still, the chemistry worked.
The venture encountered a rocky start–the SARS virus soon hit, hammering the Hong Kong economy–but Lim had an idea. He persuaded Li to bundle the malls and list the package not in Hong Kong but in Singapore–Asia’s first cross-border REIT. “I smell opportunity,” he says from his boardroom chair, recalling the 2003 listing. “That is my gift.”
Now Lim is embarking on another bold alliance that could boost ARA’s assets under management by 40%. Under a deal signed last October he and Singapore blue-chip Straits Trading Co. agreed to commit up to $770 million in seed capital to start property funds that ARA will manage. ARA and Straits Trading say they expect the funds to reach $8 billion in assets under management eventually.
But Straits Trading, owned by the family of the late banker and philanthropist Tan Chin Tuan (granddaughter Chew Gek Khim makes the list this year), drove a hard bargain. It put up 90% of the seed capital, and it demanded the largest share of ARA–20.1%. As a result Lim reduced his stake from 33% to 19.5% and the share held by Li’s Cheung Kong (Holdings) Ltd. fell to 7.8%. “I am happy to take a smaller stake in a much bigger pie–a much, much bigger pie,” he says. The new venture hasn’t announced any real estate purchases yet.
Lim grew up in Singapore as the youngest of six kids. His first mentor was his father, a strict teacher turned vice principal who was a classic, old-school taskmaster. “My father was fierce,” recalls Lim. “He would whack us when we failed a test.”
That upbringing produced his inner strength, Lim believes. While never making head boy, he says he was always in the top 10% and ultimately achieved first-class honors in engineering at the National University of Singapore. “I was not a good student in school compared with some of my friends who were rocket scientists,” he recalls. “But I worked hard and was blessed with the fruits of meritocracy.”
Before graduation in 1981 DBS Land offered Lim a job, and he soon began advancing in the company. Lim befriended his bosses’ bosses, who became his mentors. When he left to join GRA Singapore, and later when he started ARA with Li, they applauded. “They play golf with me now so I must still be a good student,” he says.
Lim calls China’s midmarket malls the “sweet spot” of Asian investment, regarding them as recession-proof. “In tough times you go to the mall, you buy your noodle bowl and the groceries, and you watch a movie,” he says, adding this warning about high-end malls: “When the market is no good, nobody will buy your Louis Vuitton.” He continues: “I’m not so worried about e-commerce. Mainland Chinese are just like Singaporeans. Weekend shopping is their hobby. They want to be seen shopping.”
credit: Nelson Ching/Bloomberg
Lim is now spending $340 million to upgrade Suntec City mall, a prime example of a midmarket shopping center. It finished phase one last year; among the new features is the world’s largest high-definition video wall, according to Guinness World Records. It flashes: “Suntec Singapore, the preferred place to meet.” Suntec also boasts one of the world’s largest fountains, the now refurbished Fountain of Wealth, where shoppers line up to walk out and touch the pulsing water, absorbing its qi of prosperity. Lim himself doesn’t go down to touch the water, but like most Chinese businesspeople in Asia, he believes in feng shui and signs contracts on “good days,” if at all possible. He’s also not a shopper. “I walk around malls,” he says, “but I don’t shop.”
Lim starts each morning at 7, walking his Shetland dog, Chili, in his East Coast neighborhood while he plans his strategy for the day. After juice and a soup made of white fungus, which is “good for the lungs,” he heads to the office. “When I have a vision, I brainstorm with my senior people. Then I put up an execution plan and entrust my people to execute.” While some projects fail, he says he never blames the idea, only the implementation, which is always fraught with tax and regulatory hurdles, sticky relationships and funding hassles. “I’m a hard master,” he admits, “but my staff must find the solutions.”
Cheryl Seow, group chief financial officer, has been with Lim from the outset and sits in on interviews with journalists. “He is a good mentor,” she says. “But people who work for him must share his passion.” Says Lim, pointing to a Korean business that ARA pried away from Macquarie Group in December: “Most of the time we’re on the offensive. You don’t wait for people to come to you. You find ways to persuade them to sell.”
On Sundays Lim has a regular dinner date with his family, sometimes gathering at home but often going out. “Sometimes we go to fancy restaurants, and it costs me a lot of money!” he says. “But it’s important. I want to give my philosophy of life–my values of hard work and philanthropy–to my sons.” He thinks back to when he was building ARA, traveling even more than he does today. “I hardly paid attention to my boys when they were teens,” he muses. “That is my biggest regret.”
His Lim Hoon Foundation–started in 2008 and named after his late father, the schoolteacher–funds scholarships. The philanthropy, says Lim, has the added benefit of bringing his family closer together: “It’s improved our communications. We now have more to talk about.”
Lim’s elder son, Andy, who trained as a lawyer, lives across the street from his father and runs the family office next door to ARA’s offices. He and his professional managers help Lim invest his wealth, putting money into fixed income and equities and also Chinese and Singaporean startups in e-commerce, energy and health care. Lim’s younger son is still in school.
What is Lim’s weakness? “Public speaking,” he says, “and being interviewed.” Though seemingly at ease as he answers questions, Lim shudders when recalling his one live appearance on CNBC. After spending four days preparing to answer a set of questions, the interviewer asked him entirely different ones. He vowed to never repeat the mistake. “Life is too short,” he says, “I don’t need that kind of stress.”
These days Lim prefers to reserve his energy for building ARA: “The world is changing all the time. Once you stand still, you lose your leadership position–something I do not intend to do.”
'via Blog this'
BY JANE A. PETERSON
This story appears in the August 18, 2014 issue of Forbes Asia
Property tycoon John Lim quit worrying about having enough money in 2007. That was when ARA Asset Management went public and he cashed out part of his holdings as the company’s cofounder. “It was the biggest payday of my life,” says the group chief executive, who describes himself as an “ordinary guy” with a knack for spotting a good deal.
To celebrate Lim bought a secondhand Porsche 911 Carrera S, picking silver as the color because it wasn’t too flashy. He moved his growing staff into new quarters on the 16th floor of one of the Suntec City towers just above the crown jewel of his real estate empire, Suntec City mall. The mid-1990s office building is functional but, again, not too flashy. Lim says he didn’t consider slacking off and instead found himself working more. “It’s the passion that drives me now,” he explains. “After so many years I still love my business.”
Maybe that’s because business is booming. ARA–short for Asian Realty Advisors–encompasses eight real estate investment trusts, seven private real estate funds, a burgeoning property-management operation and more than 1,000 employees. The business spans 14 cities, from Dalian to Sydney. It boasts $20.2 billion in assets under management as of Mar. 31, and its shares are up more than 120% since 2007. He makes the Singapore list for the fifth straight year, with a net worth of $565 million–40% higher than a year ago.
Click here for Singapore’s Richest 2014
The 58-year-old Lim’s road to riches began only in 2002. Over dinner one night in Singapore a lieutenant of Hong Kong billionaire Li Ka-shing suggested that they form a Hong Kong real estate fund. Li knew Lim from deals that Lim had pursued in Hong Kong, though none had come together. Joining with Li meant leaving a career at GRA Singapore, a subsidiary of U.S.-based Prudential Real Estate Investors, but who turns down Superman? Lim stumped up $700,000 of his own money to add to Li’s $300,000, and they were in business. To this day Lim says he isn’t sure why Li tapped him as a partner. Still, the chemistry worked.
The venture encountered a rocky start–the SARS virus soon hit, hammering the Hong Kong economy–but Lim had an idea. He persuaded Li to bundle the malls and list the package not in Hong Kong but in Singapore–Asia’s first cross-border REIT. “I smell opportunity,” he says from his boardroom chair, recalling the 2003 listing. “That is my gift.”
Now Lim is embarking on another bold alliance that could boost ARA’s assets under management by 40%. Under a deal signed last October he and Singapore blue-chip Straits Trading Co. agreed to commit up to $770 million in seed capital to start property funds that ARA will manage. ARA and Straits Trading say they expect the funds to reach $8 billion in assets under management eventually.
But Straits Trading, owned by the family of the late banker and philanthropist Tan Chin Tuan (granddaughter Chew Gek Khim makes the list this year), drove a hard bargain. It put up 90% of the seed capital, and it demanded the largest share of ARA–20.1%. As a result Lim reduced his stake from 33% to 19.5% and the share held by Li’s Cheung Kong (Holdings) Ltd. fell to 7.8%. “I am happy to take a smaller stake in a much bigger pie–a much, much bigger pie,” he says. The new venture hasn’t announced any real estate purchases yet.
Lim grew up in Singapore as the youngest of six kids. His first mentor was his father, a strict teacher turned vice principal who was a classic, old-school taskmaster. “My father was fierce,” recalls Lim. “He would whack us when we failed a test.”
That upbringing produced his inner strength, Lim believes. While never making head boy, he says he was always in the top 10% and ultimately achieved first-class honors in engineering at the National University of Singapore. “I was not a good student in school compared with some of my friends who were rocket scientists,” he recalls. “But I worked hard and was blessed with the fruits of meritocracy.”
Before graduation in 1981 DBS Land offered Lim a job, and he soon began advancing in the company. Lim befriended his bosses’ bosses, who became his mentors. When he left to join GRA Singapore, and later when he started ARA with Li, they applauded. “They play golf with me now so I must still be a good student,” he says.
Lim calls China’s midmarket malls the “sweet spot” of Asian investment, regarding them as recession-proof. “In tough times you go to the mall, you buy your noodle bowl and the groceries, and you watch a movie,” he says, adding this warning about high-end malls: “When the market is no good, nobody will buy your Louis Vuitton.” He continues: “I’m not so worried about e-commerce. Mainland Chinese are just like Singaporeans. Weekend shopping is their hobby. They want to be seen shopping.”
credit: Nelson Ching/Bloomberg
Lim is now spending $340 million to upgrade Suntec City mall, a prime example of a midmarket shopping center. It finished phase one last year; among the new features is the world’s largest high-definition video wall, according to Guinness World Records. It flashes: “Suntec Singapore, the preferred place to meet.” Suntec also boasts one of the world’s largest fountains, the now refurbished Fountain of Wealth, where shoppers line up to walk out and touch the pulsing water, absorbing its qi of prosperity. Lim himself doesn’t go down to touch the water, but like most Chinese businesspeople in Asia, he believes in feng shui and signs contracts on “good days,” if at all possible. He’s also not a shopper. “I walk around malls,” he says, “but I don’t shop.”
Lim starts each morning at 7, walking his Shetland dog, Chili, in his East Coast neighborhood while he plans his strategy for the day. After juice and a soup made of white fungus, which is “good for the lungs,” he heads to the office. “When I have a vision, I brainstorm with my senior people. Then I put up an execution plan and entrust my people to execute.” While some projects fail, he says he never blames the idea, only the implementation, which is always fraught with tax and regulatory hurdles, sticky relationships and funding hassles. “I’m a hard master,” he admits, “but my staff must find the solutions.”
Cheryl Seow, group chief financial officer, has been with Lim from the outset and sits in on interviews with journalists. “He is a good mentor,” she says. “But people who work for him must share his passion.” Says Lim, pointing to a Korean business that ARA pried away from Macquarie Group in December: “Most of the time we’re on the offensive. You don’t wait for people to come to you. You find ways to persuade them to sell.”
On Sundays Lim has a regular dinner date with his family, sometimes gathering at home but often going out. “Sometimes we go to fancy restaurants, and it costs me a lot of money!” he says. “But it’s important. I want to give my philosophy of life–my values of hard work and philanthropy–to my sons.” He thinks back to when he was building ARA, traveling even more than he does today. “I hardly paid attention to my boys when they were teens,” he muses. “That is my biggest regret.”
His Lim Hoon Foundation–started in 2008 and named after his late father, the schoolteacher–funds scholarships. The philanthropy, says Lim, has the added benefit of bringing his family closer together: “It’s improved our communications. We now have more to talk about.”
Lim’s elder son, Andy, who trained as a lawyer, lives across the street from his father and runs the family office next door to ARA’s offices. He and his professional managers help Lim invest his wealth, putting money into fixed income and equities and also Chinese and Singaporean startups in e-commerce, energy and health care. Lim’s younger son is still in school.
What is Lim’s weakness? “Public speaking,” he says, “and being interviewed.” Though seemingly at ease as he answers questions, Lim shudders when recalling his one live appearance on CNBC. After spending four days preparing to answer a set of questions, the interviewer asked him entirely different ones. He vowed to never repeat the mistake. “Life is too short,” he says, “I don’t need that kind of stress.”
These days Lim prefers to reserve his energy for building ARA: “The world is changing all the time. Once you stand still, you lose your leadership position–something I do not intend to do.”
'via Blog this'
Thursday, October 9, 2014
Tuesday, October 7, 2014
Monday, October 6, 2014
Resale volumes of private condos plunge, Top Stories Premium News & Headlines - THE BUSINESS TIMES
Resale volumes of private condos plunge, Top Stories Premium News & Headlines - THE BUSINESS TIMES:
[SINGAPORE] In yet another sign of a stalemate between buyers and sellers, resale volumes of private condominiums have fallen to levels last seen during the Global Financial Crisis, with the bloodbath of declines seen splattered islandwide.
While sellers with strong holding power seemed unwilling to let go of their units at much-lower prices, District 18 in the east and District 27 in the north appear to have held up well in resale volumes for the second quarter.
District 18, which comprises Tampines and Pasir Ris, saw resale volumes inch up 5.6 per cent in the second quarter this year to 57 transactions compared to the year-ago period before the total debt servicing ratio (TDSR) kicked in on June 29, 2013.
Resale volumes of private condos in District 27, which covers Yishun and Sembawang, were flat at 18 transactions in the second quarter, compared to the same quarter last year.
Their resilience came against a plunge in resale volumes islandwide.
Total resales of private condos stood at 1,314 units in the second quarter, accounting for 31.9 per cent of all private non-landed residential transactions. This is moderately higher than the 29.9 per cent in the same quarter last year but lower than the 40.9 per cent in the fourth quarter of 2012.
District 7 comprising Middle Road and Golden Mile and District 19 covering Serangoon Garden, Hougang and Punggol saw the biggest falls in resale volumes across districts. Transactions in District 7 fell to two units in the second quarter from 12 in the second quarter last year while that in District 19 plummeted to 57 units from 164.
The comparisons of resale volumes before and after TDSR are based only on caveats lodged, which typically represent some 80 per cent of the market. This illustration excludes new sales as they are driven mainly by new launches that may not have taken place in certain districts. The heterogeneity of property units also prevent direct comparisons on price movements over time without controlling for quality differences through constructing an index, a weighted scheme or tracking repeat sales.
Nicholas Mak, executive director of SLP International, noted that much of the resales caveats were for family-size units. "The marketing activities of new projects in that district could have attracted buyers, who may have later decided to buy resale properties as they were cheaper in per square foot (psf) terms."
New launches in District 18 included City Developments' Coco Palms in Pasir Ris, which has moved over 560 units at a median price of S$1,020 psf since its launch in May. MCC Land managed to sell more than 100 units at The Santorini in Tampines since its launch in April at a median S$1,113 psf, according to URA's developer sales data. In comparison, median prices of resale units in District 18 stood at S$897 psf in the second quarter.
The lack of new launches in certain districts could also have the converse effect on the resale market - as seen in Districts 19 and 12 (Balestier, Toa Payoh, Serangoon), Mr Mak added.
R'ST Research director Ong Kah Seng noted that buying interest for homes in Pasir Ris is supported by well-tested leasing demand, especially from the Changi Business Park. The decentralisation of the banks' non-core back-office operations to the business park and increased foreign professionals in the technology sector have also expanded the potential tenant pool in the eastern part of Singapore, he noted.
At the other end of Singapore, District 22 (Jurong) also registered a marginal 4.3 per cent year-on-year drop in resale transactions of private condos in the second quarter, possibly finding some support from renewed interest in the area given URA's masterplan to transform Jurong Lake District, consultants observed.
All transactions (new sales, resales and subsales) involving private condos have slumped 40.7 per cent year-on-year in the second quarter to 4,118 - similar to the levels last seen during the 2008-2009 Global Financial Crisis.
Based on the URA property price index for non-landed homes, prices of private condos transacted in the second quarter have fallen to levels last seen in the fourth quarter of 2012. Prices in the Core Central Region (CCR) fell by a larger magnitude to a level similar to that in the fourth quarter of 2010.
OrangeTee head of research and consultancy Christine Li noted that the drop in foreign purchases due to the additional buyer's stamp duty (ABSD) has hurt the CCR market segment, as foreign buyers make up a significant portion of this segment.
"Secondly, the implementation of loan restrictions such as loan-to-value limits and the TDSR framework have hurt properties with high quantums," she added. "As such, CCR properties have not held up as well as RCR (Rest of Central Region) and OCR (Outside Central Region). This trend is likely to persist until current cooling measures are tweaked."
But given the exuberant run-up in property prices since the second half of 2009, sellers who sold their units recently are unlikely to have suffered a loss, though they could be making less profits than if they had sold their units last year, consultants noted.
A random sampling by SLP International on resale transactions in the second quarter showed that most of the sellers did not incur losses in the resale market because a majority of them bought their units more than three years ago when the prices were cheaper and they did not have to pay the seller's stamp duty for properties that they have held for more than four years.
'via Blog this'
[SINGAPORE] In yet another sign of a stalemate between buyers and sellers, resale volumes of private condominiums have fallen to levels last seen during the Global Financial Crisis, with the bloodbath of declines seen splattered islandwide.
While sellers with strong holding power seemed unwilling to let go of their units at much-lower prices, District 18 in the east and District 27 in the north appear to have held up well in resale volumes for the second quarter.
District 18, which comprises Tampines and Pasir Ris, saw resale volumes inch up 5.6 per cent in the second quarter this year to 57 transactions compared to the year-ago period before the total debt servicing ratio (TDSR) kicked in on June 29, 2013.
Resale volumes of private condos in District 27, which covers Yishun and Sembawang, were flat at 18 transactions in the second quarter, compared to the same quarter last year.
Their resilience came against a plunge in resale volumes islandwide.
Total resales of private condos stood at 1,314 units in the second quarter, accounting for 31.9 per cent of all private non-landed residential transactions. This is moderately higher than the 29.9 per cent in the same quarter last year but lower than the 40.9 per cent in the fourth quarter of 2012.
District 7 comprising Middle Road and Golden Mile and District 19 covering Serangoon Garden, Hougang and Punggol saw the biggest falls in resale volumes across districts. Transactions in District 7 fell to two units in the second quarter from 12 in the second quarter last year while that in District 19 plummeted to 57 units from 164.
The comparisons of resale volumes before and after TDSR are based only on caveats lodged, which typically represent some 80 per cent of the market. This illustration excludes new sales as they are driven mainly by new launches that may not have taken place in certain districts. The heterogeneity of property units also prevent direct comparisons on price movements over time without controlling for quality differences through constructing an index, a weighted scheme or tracking repeat sales.
Nicholas Mak, executive director of SLP International, noted that much of the resales caveats were for family-size units. "The marketing activities of new projects in that district could have attracted buyers, who may have later decided to buy resale properties as they were cheaper in per square foot (psf) terms."
New launches in District 18 included City Developments' Coco Palms in Pasir Ris, which has moved over 560 units at a median price of S$1,020 psf since its launch in May. MCC Land managed to sell more than 100 units at The Santorini in Tampines since its launch in April at a median S$1,113 psf, according to URA's developer sales data. In comparison, median prices of resale units in District 18 stood at S$897 psf in the second quarter.
The lack of new launches in certain districts could also have the converse effect on the resale market - as seen in Districts 19 and 12 (Balestier, Toa Payoh, Serangoon), Mr Mak added.
R'ST Research director Ong Kah Seng noted that buying interest for homes in Pasir Ris is supported by well-tested leasing demand, especially from the Changi Business Park. The decentralisation of the banks' non-core back-office operations to the business park and increased foreign professionals in the technology sector have also expanded the potential tenant pool in the eastern part of Singapore, he noted.
At the other end of Singapore, District 22 (Jurong) also registered a marginal 4.3 per cent year-on-year drop in resale transactions of private condos in the second quarter, possibly finding some support from renewed interest in the area given URA's masterplan to transform Jurong Lake District, consultants observed.
All transactions (new sales, resales and subsales) involving private condos have slumped 40.7 per cent year-on-year in the second quarter to 4,118 - similar to the levels last seen during the 2008-2009 Global Financial Crisis.
Based on the URA property price index for non-landed homes, prices of private condos transacted in the second quarter have fallen to levels last seen in the fourth quarter of 2012. Prices in the Core Central Region (CCR) fell by a larger magnitude to a level similar to that in the fourth quarter of 2010.
OrangeTee head of research and consultancy Christine Li noted that the drop in foreign purchases due to the additional buyer's stamp duty (ABSD) has hurt the CCR market segment, as foreign buyers make up a significant portion of this segment.
"Secondly, the implementation of loan restrictions such as loan-to-value limits and the TDSR framework have hurt properties with high quantums," she added. "As such, CCR properties have not held up as well as RCR (Rest of Central Region) and OCR (Outside Central Region). This trend is likely to persist until current cooling measures are tweaked."
But given the exuberant run-up in property prices since the second half of 2009, sellers who sold their units recently are unlikely to have suffered a loss, though they could be making less profits than if they had sold their units last year, consultants noted.
A random sampling by SLP International on resale transactions in the second quarter showed that most of the sellers did not incur losses in the resale market because a majority of them bought their units more than three years ago when the prices were cheaper and they did not have to pay the seller's stamp duty for properties that they have held for more than four years.
Sunday, October 5, 2014
Warren Buffett on investing: Look at stocks like you'd look at a business
Warren Buffett on investing: Look at stocks like you'd look at a business: ""If you own your stocks as an investment—just like you'd own an apartment, house or a farm—look at them as a business," Buffett advised. "If you're going to try to buy and sell them based on news or something your neighbor tells you, you're not going to do well. Find a good bunch of businesses and hold them.""
'via Blog this'
'via Blog this'
Friday, October 3, 2014
From The Straits Times archives: New contracting model a 'good move' for bus operators and commuters
From The Straits Times archives: New contracting model a 'good move' for bus operators and commuters:
What are your thoughts regarding the changes?
The new contracting model is superior to the status quo for three main reasons. First, the Government can be more responsive in making changes to bus routes and service attributes as travel patterns evolve.
Second, the Government can procure more effectively, through open and competitive tenders.
Third, service levels will improve as the winning bidder will be subject to a relatively short contract period of five years, which could be extended for two years if it performs well. Operators would also want to bid for other bus packages... so a good service track record would make commercial sense for the operators. This system better aligns the interests of the operator with those of the commuter.
The new model will succeed if there are sufficient bidders for each package so that the benefits of competition can be realised. The Land Transport Authority (LTA) would need to reach out to reputable operators, both local and foreign, to encourage them to bid.
Also, each of the packages should be large enough to retain economy of scale in operations and yet small enough that the bidders are not limited to only the very large operators.
In addition, the tender could take a two-envelope approach, where the first stage focuses on the quality of the proposal and the second on gross cost. We should not simply award contracts to the lowest cost bidder if there are doubts about its ability to perform.
I would caution against a "big bang" approach, where too many packages are implemented at one go. Transition issues would be challenging, given the large and diverse commuter base for public bus services.
The Government has always been loath to take revenue risks. So why this?
One of the benefits of the Government assuming fare risk is a better outcome in procurement. Ceteris paribus, removing fare risks from private sector bidders will improve the tender results. If a prospective operator had to take fare risks, he would build in a higher mark-up to account for the higher risk. In contrast, the Government would come under public pressure whenever it wanted to increase fares, even if conditions warranted it. No commuter likes a fare increase.
The new model will at least create greater transparency. This sits well with a better-educated populace. We would know what the "market clearing cost" is to provide the level of service that commuters need. Assuming this gross cost is higher than prevailing fare revenues, the amount of government subsidies needed would also be known.
What are the implications for taxpayers?
One could make a case for some form of government subsidies in public transport. I believe taxpayers will support subsidies for certain groups of commuters. For example, currently, two groups of commuters are directly subsidised by the Government: persons with disabilities and low-income workers.
Also, infrastructure investments create positive externalities for the Government: a more productive economy, a more attractive investment destination, higher government land sale prices, higher home prices, etc. These externalities benefit the Government and the populace at large and not just commuters.
Finally, efficient public transport is an essential public good and should be kept affordable. That doesn't mean no fare increases at all, since transport workers also need the occasional pay adjustments, fuel costs could rise and service levels might need to be enhanced over time. But my view is that fare increases should not outpace wage increases.
SMRT Corp chief executive Desmond Kuek
How do you feel about the sweeping reforms?
We look forward to them. A fee-based contracting arrangement is a much more sustainable business model for operators.
Currently, we run services to stipulated regulatory standards, but have little control over fares, routes or ridership. The new model takes away the fare revenue risk and allows us to focus squarely on the quality of our service delivery.
This is an area where we have been placing the greatest priority, and we believe we stand in good stead in the competitive tendering exercise. However, there remain significant issues in terms of bus and depot assets that need to be transferred with any change in operator - and most importantly, the interests of affected staff... that will need to be looked after.
What are the pitfalls we need to sidestep to make a success of this new model?
The greatest concern will be the impact on the overall workforce, because if bus captains are demotivated by changes in operator every five to seven years, or if they do not have the assurance of job stability or career progression... it will be hard to maintain a high level of service. So it's not just the immediate set of issues for transition to the contracting model that need to be ironed out, but also the long-term issues for a sustainable and professional workforce that need to be clarified upfront.
Another concern will be how to ensure stable operations during the transition, so commuters will not be unduly affected.
What do you think the new model will mean for bus drivers?
Winning a contract at a reasonable margin is not everything - attracting and retaining suitable bus captains, interchange and depot staff, and service controllers will be the more pertinent challenge. I believe our bus captains are discerning, and look for more than just a job - they seek an employer of choice and a viable career proposition.
Currently, SMRT has around 30 per cent of the market. With competitive tendering, there is a chance you might be out entirely. How do you feel about that?
That's the nature of competition - only the fittest survive. We are ready and prepared, and confident that we will be competitive based on the strength of our service delivery and operational efficiency.
PwC's Asia-Pacific leader for capital projects and infrastructure Mark Rathbone
In the contracting model, it might come across to some that tax money is being used to shore up the shortcomings of private enterprises. We have seen nationalised entities that are highly successful. So why not this route?
A key principle that governments should bear in mind when deciding on different operating models is that the model must be designed to meet policy objectives. There is no single model that fits every situation.
At the moment, LTA is providing funding to the bus network through the Bus Service Enhancement Programme, and this funding has resulted in improvements to service levels and passenger experience. Under the new model, LTA will pay operators for the services they deliver - it will not "bail out" the operators. LTA will clearly define the services that must be delivered. If the operators do not deliver, then we expect that they will be penalised financially. As a last resort, LTA could terminate the contract, and it might not award them any more contracts.
Throughout the world, there is a move away from state-owned enterprises delivering transport services. This is driven by the fact that these enterprises take the full risk of any cost increases, including those for labour, which is a key component for bus services. Adopting a contracting model transfers this risk to the private operators.
How will the Government keep a lid on public spending? In London, it seems subsidies have soared since this model was adopted in 1985.
As the masterplanner, LTA has the ability to control the specification of the network, which gives it some control over the level of funding it has to provide. Competition between operators at the time of tendering by LTA will result in efficiencies.
In addition, new operators from abroad will bring in new operating and maintenance practices, which will further drive improvements. These efficiencies and new operating practices will benefit both operators and the Government.
Further, operators must bid a price for a contract, at the time of tendering. Operators are paid this amount and are responsible for managing costs. Thus, LTA can forecast in advance what it will need to pay the operators - it provides them with budget certainty.
Public transport is a public good that has positive benefits for the economy and the quality of life for residents. For example, a reliable and safe bus network would encourage people to shift from private to public transport. Thus, government subsidisation of public transport should not be viewed negatively. What is more important is the effectiveness of the subsidy.
Investor and corporate advisor Mano Sabnani
How will the changes affect investors' perceptions of transport stocks?
It is a big change, which I think is positive overall.
Operators are assured of profitability. They will become asset-light, and their capital expenditure will go down.
They might lose some routes to competitors, but that is to be expected. The market has partly factored in this risk.
So from an investment point of view, transport stocks will become more attractive. But their prices have moved up already... and benefits will take time to show.
Commuters can look forward to higher standards at relatively low fares. Fares will be kept affordable, with the Government bearing any operational losses.
The Government can recover capital through land sales around interchanges, which would fetch higher prices.
christan@sph.com.sg
This article first appeared in The Straits Times on May 30, 2014
'via Blog this'
What are your thoughts regarding the changes?
The new contracting model is superior to the status quo for three main reasons. First, the Government can be more responsive in making changes to bus routes and service attributes as travel patterns evolve.
Second, the Government can procure more effectively, through open and competitive tenders.
Third, service levels will improve as the winning bidder will be subject to a relatively short contract period of five years, which could be extended for two years if it performs well. Operators would also want to bid for other bus packages... so a good service track record would make commercial sense for the operators. This system better aligns the interests of the operator with those of the commuter.
The new model will succeed if there are sufficient bidders for each package so that the benefits of competition can be realised. The Land Transport Authority (LTA) would need to reach out to reputable operators, both local and foreign, to encourage them to bid.
Also, each of the packages should be large enough to retain economy of scale in operations and yet small enough that the bidders are not limited to only the very large operators.
In addition, the tender could take a two-envelope approach, where the first stage focuses on the quality of the proposal and the second on gross cost. We should not simply award contracts to the lowest cost bidder if there are doubts about its ability to perform.
I would caution against a "big bang" approach, where too many packages are implemented at one go. Transition issues would be challenging, given the large and diverse commuter base for public bus services.
The Government has always been loath to take revenue risks. So why this?
One of the benefits of the Government assuming fare risk is a better outcome in procurement. Ceteris paribus, removing fare risks from private sector bidders will improve the tender results. If a prospective operator had to take fare risks, he would build in a higher mark-up to account for the higher risk. In contrast, the Government would come under public pressure whenever it wanted to increase fares, even if conditions warranted it. No commuter likes a fare increase.
The new model will at least create greater transparency. This sits well with a better-educated populace. We would know what the "market clearing cost" is to provide the level of service that commuters need. Assuming this gross cost is higher than prevailing fare revenues, the amount of government subsidies needed would also be known.
What are the implications for taxpayers?
One could make a case for some form of government subsidies in public transport. I believe taxpayers will support subsidies for certain groups of commuters. For example, currently, two groups of commuters are directly subsidised by the Government: persons with disabilities and low-income workers.
Also, infrastructure investments create positive externalities for the Government: a more productive economy, a more attractive investment destination, higher government land sale prices, higher home prices, etc. These externalities benefit the Government and the populace at large and not just commuters.
Finally, efficient public transport is an essential public good and should be kept affordable. That doesn't mean no fare increases at all, since transport workers also need the occasional pay adjustments, fuel costs could rise and service levels might need to be enhanced over time. But my view is that fare increases should not outpace wage increases.
SMRT Corp chief executive Desmond Kuek
How do you feel about the sweeping reforms?
We look forward to them. A fee-based contracting arrangement is a much more sustainable business model for operators.
Currently, we run services to stipulated regulatory standards, but have little control over fares, routes or ridership. The new model takes away the fare revenue risk and allows us to focus squarely on the quality of our service delivery.
This is an area where we have been placing the greatest priority, and we believe we stand in good stead in the competitive tendering exercise. However, there remain significant issues in terms of bus and depot assets that need to be transferred with any change in operator - and most importantly, the interests of affected staff... that will need to be looked after.
What are the pitfalls we need to sidestep to make a success of this new model?
The greatest concern will be the impact on the overall workforce, because if bus captains are demotivated by changes in operator every five to seven years, or if they do not have the assurance of job stability or career progression... it will be hard to maintain a high level of service. So it's not just the immediate set of issues for transition to the contracting model that need to be ironed out, but also the long-term issues for a sustainable and professional workforce that need to be clarified upfront.
Another concern will be how to ensure stable operations during the transition, so commuters will not be unduly affected.
What do you think the new model will mean for bus drivers?
Winning a contract at a reasonable margin is not everything - attracting and retaining suitable bus captains, interchange and depot staff, and service controllers will be the more pertinent challenge. I believe our bus captains are discerning, and look for more than just a job - they seek an employer of choice and a viable career proposition.
Currently, SMRT has around 30 per cent of the market. With competitive tendering, there is a chance you might be out entirely. How do you feel about that?
That's the nature of competition - only the fittest survive. We are ready and prepared, and confident that we will be competitive based on the strength of our service delivery and operational efficiency.
PwC's Asia-Pacific leader for capital projects and infrastructure Mark Rathbone
In the contracting model, it might come across to some that tax money is being used to shore up the shortcomings of private enterprises. We have seen nationalised entities that are highly successful. So why not this route?
A key principle that governments should bear in mind when deciding on different operating models is that the model must be designed to meet policy objectives. There is no single model that fits every situation.
At the moment, LTA is providing funding to the bus network through the Bus Service Enhancement Programme, and this funding has resulted in improvements to service levels and passenger experience. Under the new model, LTA will pay operators for the services they deliver - it will not "bail out" the operators. LTA will clearly define the services that must be delivered. If the operators do not deliver, then we expect that they will be penalised financially. As a last resort, LTA could terminate the contract, and it might not award them any more contracts.
Throughout the world, there is a move away from state-owned enterprises delivering transport services. This is driven by the fact that these enterprises take the full risk of any cost increases, including those for labour, which is a key component for bus services. Adopting a contracting model transfers this risk to the private operators.
How will the Government keep a lid on public spending? In London, it seems subsidies have soared since this model was adopted in 1985.
As the masterplanner, LTA has the ability to control the specification of the network, which gives it some control over the level of funding it has to provide. Competition between operators at the time of tendering by LTA will result in efficiencies.
In addition, new operators from abroad will bring in new operating and maintenance practices, which will further drive improvements. These efficiencies and new operating practices will benefit both operators and the Government.
Further, operators must bid a price for a contract, at the time of tendering. Operators are paid this amount and are responsible for managing costs. Thus, LTA can forecast in advance what it will need to pay the operators - it provides them with budget certainty.
Public transport is a public good that has positive benefits for the economy and the quality of life for residents. For example, a reliable and safe bus network would encourage people to shift from private to public transport. Thus, government subsidisation of public transport should not be viewed negatively. What is more important is the effectiveness of the subsidy.
Investor and corporate advisor Mano Sabnani
How will the changes affect investors' perceptions of transport stocks?
It is a big change, which I think is positive overall.
Operators are assured of profitability. They will become asset-light, and their capital expenditure will go down.
They might lose some routes to competitors, but that is to be expected. The market has partly factored in this risk.
So from an investment point of view, transport stocks will become more attractive. But their prices have moved up already... and benefits will take time to show.
Commuters can look forward to higher standards at relatively low fares. Fares will be kept affordable, with the Government bearing any operational losses.
The Government can recover capital through land sales around interchanges, which would fetch higher prices.
christan@sph.com.sg
This article first appeared in The Straits Times on May 30, 2014
'via Blog this'
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