Business Times: Property booms, busts make economy vulnerable

October 19, 2007
SINGAPORE ECONOMIC POLICY CONFERENCE
Property booms, busts make economy vulnerable Bubble cuts private spending, raises reliance on volatile foreign
demand By CONRAD TAN

PROPERTY price booms and busts make Singapore’s economic growth more vulnerable to volatile factors and should be prevented, an economist at a think-tank said here yesterday.

While the impact of a spike in property prices on overall GDP growth is ‘quite subdued’, a property price bubble causes private consumption expenditure to shrink, making the economy more dependent on foreign demand and business spending which are much more volatile, said Tilak Abeysinghe.

The deputy director of the Singapore Centre for Applied and Policy Economics (Scape) at the National University of Singapore, was speaking at the inaugural Singapore Economic Policy Conference organised by Scape at Four Seasons Hotel.

His team’s research found that while higher property prices spur construction investment, an accompanying dip in private consumption means overall economic growth does not change much as a direct result of property price inflation.

But the overall effect is still undesirable as it makes the economy far more dependent on business spending and foreign demand for its exports, both of which are more volatile than domestic consumption, he said.

The consumption expenditure share of Singapore’s GDP has fallen from more than two-thirds in 1997 to about 40 per cent today. ‘If
consumption expenditure in Singapore falls further, GDP growth will be very vulnerable to external demand and investment demand,’ he said.

Research found that in contrast with economies such as the US, higher housing prices here do not seem to encourage more personal spending.

In Singapore, ‘housing wealth is relatively illiquid,’ he said. ‘You just can’t sell your house and move to a suburban house.’ This means the ‘wealth effect’ of housing price inflation seen in countries such as the US – when people spend more as the value of their homes rise – is much less noticeable in Singapore.

Also, ‘when housing prices go up, mortgage payments also increase, so people have less to spend on consumption,’ he said.

He believes policymakers here should ‘do their best’ to prevent a property price bubble because of its effect on private consumption spending and its tendency to widen the income gap between the rich and poor.

‘It should be possible’ to prevent another bubble from building by identifying the main cause of the recent run-up in property prices -likely to be people buying properties for investment rather than owner-occupiers – and introducing measures to dampen demand from this source, he said.

But he also cautioned against flooding the market with a vast supply of new homes, which could trigger a price crash and set the conditions for a new bubble.

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Straits Times: URA launches tender for Boon Lay condo site

Oct 18, 2007
URA launches tender for Boon Lay condo site
By Nicholas Fang

A PRIME residential site on Boon Lay Way has been released for sale, just days after news emerged that a nearby condominium unit had fetched a record price of $1,080 per sq ft (psf) last month.

Property pundits expect keen interest in the 2.2ha land parcel next to Lakeside MRT station. The Jurong West HDB estate and Jurong Point shopping mall are nearby.

The Urban Redevelopment Authority (URA) launched the 99-year leasehold site yesterday by public tender, stipulating that it has a maximum permissible gross floor area of 77,003 sq m.

CB Richard Ellis (CBRE) research executive director Li Hiaw Ho said the site is expected to attract significant attention. He noted: ‘Given recent signs of recovery in the suburban market, we expect developers to be keen to bid for this site to beef up their land bank. Demand is likely to be from HDB upgraders and people working in western Singapore.’

Savills Singapore’s director of marketing and business development, Mr Ku Swee Yong, agreed the site would be popular. ‘It’s definitely quite attractive as there are quite a lot of things happening in the west. For example, the Canadian International School is going to move nearby soon.’

URA said this week that a unit in Far East Organization’s The Lakeshore, near the new site, had set a new benchmark of $1,080 psf last month – surprising most analysts as it had been on the market for more than two years.

CBRE’s Mr Li said the Lakeshore site had been purchased by the developer at $197 psf per plot ratio (psf ppr) in August 2002. He noted: ‘The subject site will be able to fetch bids around $300 psf ppr, which translates into a selling price of $700 to $750 psf for the new project on-site.’

Knight Frank’s director of consultancy and research, Mr Nicholas Mak, said about 660 to 700 units could be built on the site. ‘This site would be attractive to major developers such as Far East Organization, Frasers Centrepoint and other listed developers. The number of bids could range from four to eight.’

URA said that a tender period of about eight weeks will be allowed for the site. The tender will close at noon on Dec 12, and selection of the successful tenderer will be based on the tendered land price only.

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Straits Times: HDB glut shrinks in rising market

Oct 18, 2007
HDB glut shrinks in rising market
Number of unsold flats plunges from 10,000 to 3,500 in just three years; more will be built
By Joyce Teo

MORE than 10,000 Housing Board flats were languishing unsold in a tepid market just three years ago.

But the rapidly rising residential market has meant that the stock of unsold flats has fallen dramatically to 3,500.

And by the end of this year, that figure will plunge even further to only about 2,200 units, as eager buyers snap up homes.

In response, HDB is pulling out all the stops to meet burgeoning demand.

‘The rosy economic outlook and improved market sentiment have resulted in rising demand for new flats,’ said HDB chief executive Tay Kim Poh at a briefing held on Tuesday on HDB’s newly released annual report.

Demand is now so strong that HDB’s bi-monthly sale this month attracted 4,800 applicants for just 489 flats.

Mr Tay said HDB is committed to building more flats to meet the rising demand as supply shrinks.

In the next six months, it will offer about 4,500 new flats under the build-to-order (BTO) system, which puts flats on the market only if there is sufficient demand.

So far, in the first nine months of the year, HDB has offered 2,700 new flats under the BTO system.

It will also release another three new Design, Build and Sell Scheme sites, which will yield about 1,500 flats in total.

‘Definitely, whatever that we have, we will push it out,’ said Mr Tay of its stock.

This is a far cry from just two years ago, when HDB was still devising new ways to clear about 9,000 unsold units.

Today, strong demand has meant that buyers in central areas are paying bigger sums over valuation, for instance.

HDB’s initial estimate for the third quarter, released earlier this month, showed that resale flat prices have risen 6.5 per cent, up from a 3 per cent rise in the previous quarter and by far the biggest quarterly jump since 1999.

And prices could rise further in line with the general market.

‘Our prices move with the market,’ said Mr Tay. ‘But if you were to look at how resale prices compare with the market, our movement for HDB flats is not as great as private housing.’

The HDB market has a ’stabilising effect’ as buyers can choose to buy from the resale market or purchase a new flat, he said.

‘When we price our flats, we do look at prevailing market prices. Then after that, we will give a market discount.’

Straits Times: Shopfront clutter: 3 agencies mount checks in Hougang

Oct 18, 2007
Shopfront clutter: 3 agencies mount checks in Hougang
Joint inspection with Aljunied Town Council of 90 shops to enforce fire-safety rules
By Teh Joo Lin

AT AROUND noon along a row of shops in Hougang Avenue 8 yesterday, a woman opened the glass door of a beauty salon and hastily took away a cardboard sign in the walkway fronting her shop.

It was the day officers from three authorities – the Housing Board, the National Environment Agency and the Singapore Civil Defence Force – were mounting their first joint inspection with the Aljunied Town Council, and she did not want trouble.

The aim of the checks: to clear HDB shopfronts of clutter.

About 90 shops in the neighbourhood were checked by officers from the four parties. The three agencies had said a week ago that they would complement the checks done by town councils islandwide.

These beefed-up inspections of the heartland’s famously cluttered shopfronts come on the heels of a Sept 13 fire in Hougang Avenue 8, which caused the death of two siblings.

For 1-1/2 hours in Hougang yesterday, 22 officers, including 10 from the Aljunied Town Council, combed passageways in four blocks looking for those cluttered with goods and breaching fire-safety rules. They found five ‘irregularities’, including a potential mosquito breeding site.

Mr Jeffrey Chua, the town council’s general manager, told reporters later the most common infraction was the failure to keep displayed goods at least 3m from staircases.

One guilty shopkeeper, a 43-year-old woman running a women’s clothing shop, had placed a table right next to a staircase. She moved it away when the officers pointed it out to her.

Shopkeepers who repeatedly flout fire-safety guidelines face fines of increasing amounts and the threat of legal action.

In the neighbourhoods looked after by the Aljunied Town Council alone, 45 written warnings have been given out since the start of this month, when Certis Cisco officers started their patrols.

More than half the shops acted on these warnings; eight were fined $200.

Mr Chua said: ‘Most shopkeepers have cooperated with us. The need to put safety first has dawned upon them.’

But that has not come without grumbles. Shopkeepers claim their takings have dipped.

Some have come up with ways to get around the rules. Because shops are now barred from leaving display cabinets in the walkways after business hours, an aquarium shop in Block 151 Serangoon North Avenue 2 has become a 24-hour business.
Sales assistant Susan Lim of Rainbow Pet & Aquarium said that, after operating hours, the shop could not house all the fishtanks and aquarium ornaments on display in the outside space.

Tightened rules have also been imposed on shop owners, barring them from renting outdoor space to other businesses.

A learning centre in Block 683, Hougang Avenue 8, which did not need its shopfront space, used to sublet it for $800 a month to Mr S.R. Nair, 47, who sold flower garlands.

He is now paying $2,000 a month for a third of a shop unit in Block 681. He said: ‘Last time, I was surviving. Now I am struggling, but what to do?’

Asked about the grouses, Mr Chua said: ‘Where we can allow some flexibility, we have; but where fire safety is concerned, we have stood our ground. Safety is paramount.’

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