Buying within your means

IN THE rush to secure a home amid escalating property prices, first-time homebuyers, especially young adults, may inadvertently commit themselves to properties beyond their means.

Since mortgage payments and other home bills take priority over other basic necessities, rising mortgage rates may push some homebuyers to suffer a housing-induced fall in their standards of living. It is important, thus, to take a long-term perspective on housing affordability.

Affordability is usually measured by the ratio of monthly mortgage payment to current monthly household income. In the United States, if this ratio is less than 30 per cent it is assumed that the property is affordable. In Singapore, a cut-off ratio of 40 per cent is one of the criteria banks use to decide on home loans.

However, this is not a good measure of affordability for two reasons. First, by extending the amortisation period, monthly mortgage payment can be reduced. This can give the impression that affordability has improved, although the total interest burden has gone up. Second, the measure essentially focuses on short-run housing affordability by using current income instead of an estimate of permanent income. Undue reliance on short-run housing affordability measurements was one of the triggers in the US sub-prime mortgage crisis.

A much better indicator of housing affordability is the ratio of house price to lifetime income - house price being the discounted present value of future mortgage payments. Lifetime income can also be worked out as a discounted present value of the future income stream, using the same mortgage rate.

(For example, if the annual interest rate is 5 per cent, the discounted present value of $105 one will receive next year is $100. Alternatively, if one saves $100 today at the 5 per cent interest rate, one will receive $105 next year.)

Under some conditions, the two ratios - mortgage payment to permanent income, and house price to lifetime income - are the same. We can thus use a cut-off ratio like 30 per cent to define an affordability limit. We have not worked out an optimal cut-off value for Singapore yet.

Homebuyers know the prices of the houses they want and the transaction costs involved. What they need is an estimate of their lifetime income - that is, their accumulated savings plus the discounted present value (DPV) of their earnings, over their remaining working life.

Using survey data collected by the Department of Statistics, we can decipher predicted income profiles by birth cohorts for different income groups over the working ages of 20-64. We now have data only for three income levels: lower (25th), middle (50th) and upper (75th ) percentiles.

Since our focus is on young homebuyers, the accompanying table presents estimates of the DPV of household income for households headed by 30-year-olds. By adding their own accumulated savings to the income figures, young homebuyers can obtain an estimate of their lifetime income. They can then divide the price (including the transaction cost) of the home they are buying by their estimated lifetime income to see what percentage of their lifetime income will be consumed by the property.

The rest of the table provides illustrative computations of housing affordability for the three income group references. Accumulated savings (including interest earnings) were estimated from household expenditure survey data, and transaction costs were estimated using current rates on stamp duties and other fees and charges. Property taxes and costs of home insurance and maintenance were not included.

Some general observations that emerge from this table are worth highlighting:

# First, when the mortgage rate goes up, homebuyers have to spend a higher percentage of their lifetime income on housing, and affordability goes down.

# Second, given that current mortgage rates are above 5 per cent, and if we use the 30 per cent cut-off rule, HDB resale flats of four rooms and above are not that affordable for low-income groups.

# Third, at current mortgage rates, HDB resale flats are well within the affordable range for middle- and upper-income groups.

# Fourth, private properties are obviously for high-income groups. Still, even for those in the 75th income percentile, private residential properties at median prices are not within the affordable range at current mortgage rates.

Tilak Abeysinghe is deputy director of the Singapore Centre for Applied and Policy Economics, National University of Singapore. Gu Jiaying is pursuing a PhD at the University of Illinois at Urbana-Champaign.

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A much better indicator of housing affordability is the ratio of 'house price' to 'lifetime income'.

For a 30-year-old earning $5,520 a month with savings of $118,900, affordable homes would be an HDB executive flat or lower, using a cut-off ratio of about 30%.

Source: Straits Times, 4 Aug 2010

Traders see property upside

DATA released by the Urban Redevelopment Authority and the Housing Board last week showed price increases had accelerated across the property sector, from resale flats and private housing to industrial and retail properties.

Rentals are also spiking, as the economy forges ahead strongly.

For the second quarter, private residential rentals registered a 5.9 per cent quarterly growth, while demand for office space rose about 71 per cent to 441,320 sq ft, from 258,334 sq ft in the first quarter.

Traders hope the rental increases mean bumper earnings for property counters going ahead.

In a report, Deutsche Bank said property companies are trading at an average discount of 18 per cent to their revalued net asset value.

'With rising risks for residential, we continue to prefer the office and integrated players and Reits (real estate investment trusts),' the report said last week.

But risks include an economic growth trend reversal and further government tightening measures.

Traders can get exposure to property counters by trading the covered warrants issued by foreign banks. For CapitaLand, Macquarie Bank will list two call warrants and one put warrant today.

One of the new call warrants offers investors the option to buy the mother share at $4.20 till next January, while the other call gives them till next June to buy at $4.30. This will enable a profit if the warrant moves in tandem with any gains made by CapitaLand.

For the put warrant, investors can sell the counter at $4 until next February. Investors stand to gain from any rise in the warrant, if CapitaLand falls in price.

Source: Straits Times, 2 Aug 2010

Singapore's richest get 17% wealthier this year

(SINGAPORE) The Republic's wealthiest are enjoying better fortunes this year, in tandem with the local economy's improving performance, according to data collected by Forbes Asia.

The publication, which tracks the wealth of Singapore's 40 richest people, said their total net worth this year is US$45.7 billion (S$62.4 billion) - up 17 per cent from last year's US$39 billion.

Of the lot, 26 tycoons saw their wealth increase this year, while seven suffered declines.

The family of the late Ng Teng Fong - who died in February - topped the list with a combined net worth of US$7.8 billion.

Still, they were among the few whose wealth declined - from US$8 billion the year before, as the value of their shareholding in Hong Kong developer Tsim Sha Tsui Properties fell 18 per cent over the past year, on fears of a slowdown in China. Forbes Asia said the biggest chunk of the family's wealth continues to come from its privately held Singapore property development company Far East Organization.

Meanwhile, the family of the late Khoo Teck Puat (who died in 2004) is second, with a total net worth of US$5.9 billion, up from US$5.5 billion in 2009. The family - the 14 children who inherited the fortune - sold its stake in Standard Chartered Bank to Temasek for US$4 billion in 2004. Its main asset is the Goodwood Group of hotels and a minor stake in the Ng family's Orchard Parade Holdings.

United Overseas Bank chairman Wee Cho Yaw moves up to third from fifth place last year, adding US$500 million to his wealth. Wilmar International's chairman Kuok Khoon Hong holds steady in fourth place with a net worth of US$3.5 billion. He's expected to add more to his fortunes, however, with the recently inked US$1.5 billion deal to buy Sucrogen (the largest raw sugar producer in Australia and maker of fuel ethanol) expected to be completed by September.

There were also some notable entrants to the list this year. Making a debut, at No 5, is New Zealand- born social entrepreneur Richard Chandler, who became a Singapore resident in 2008. The 52-year-old heads RF Chandler (a fund which invests in emerging markets) and has also set aside US$100 million for educational causes in the developing world.

The other newcomers to the top-40 list this year are Otto Marine's Yaw Chee Siew, who comes in at No 22, with a total net worth of US$385 million, and ARA Asset Management's John Lim at No 38, with US$202 million.

And returning to the list, after a two-year absence, is Osim International's Ron Sim. He re-enters at No 28, with a net worth of US$301 million, after having written off his investment in loss-making Brookstone in 2008.

Hotelier Ong Beng Seng and his wife Christina Ong are also first-time billionaires - with a combined wealth of US$1 billion, up from US$700 million last year, thanks to the better performance of their hotel and retailing empire. Between them, they control Hotel Properties, UK fashion house Mulberry, the Club 21 retail chain and the Como Group.

Meanwhile, among those suffering a decline in fortunes is Yanlord Land Group's Zhong Sheng Jian, who made his fortune from China's property boom over the last two decades, and was named 'Businessman of the Year' at BT's Singapore Business Awards 2010. His net worth fell 10 per cent from the year before, to US$1.8 billion this year, as Yanlord's stock price fell due to worries about the Chinese government's efforts to curb real estate prices.

The full list of Singapore's richest can be found in the August issue of Forbes Asia.

The magazine said it compiled the list by calculating the individuals' public net worth using share prices and exchange rates as at July 14. For privately held wealth, it estimated what they would be worth if they were public.

The publication also said that this ranking, unlike the Forbes billionaire list, includes numerous family assets shared by individuals and their children, grandchildren and siblings. Where family assets are held by extended families, such as the Kwek cousins (that is, Kwek Leng Beng, Kwek Leng Kee and Kwek Leng Peck), Forbes Asia split them into separate entries.

Source: Business Times, 30 Jul 2010

S'pore slips a notch in expat living cost ranking

In Asia-Pac, it's now fourth, after Tokyo, Osaka, HK: survey

SINGAPORE is the 11th most expensive city in the world for expatriates, one place lower than its 10th position last year, says HR consultancy firm Mercer.

But the city moved up a notch to fourth place among cities in Asia-Pacific - which for the first time has three cities in the top 10 list of the dearest places for expats.

Tokyo remains the most expensive city in Asia-Pacific, with sister city Osaka second, and Hong Kong third. Singapore and Seoul round out the top five.

Cathy Loose, Asia-Pacific global mobility leader at Mercer's information product solutions business, said: 'Cities in Asia, such as Tokyo and Osaka, continue to be the most expensive cities given the relatively strong yen against other major currencies such as the US dollar.

'Other high-ranking cities such as Hong Kong, Singapore and Beijing remain relatively the same in terms of overall cost-of-living ranking.'

Part of the reason Asian cities feature more prominently in the worldwide top 10 list is the rise in residential property prices in the region, said Mercer senior researcher Nathalie Constantin-Metral.

'At the end of 2009 and the beginning of 2010, residential property prices in many Asian countries rose as the economic environment began to stabilise and demand for good expat housing increased,' said Ms Constantin-Metral.

Among the 214 cities surveyed by Mercer, Tokyo was ranked second worldwide, giving up its place as the world's most costly city for expats to Angola's capital Luanda.

Ndjamena, in the central African nation of Chad, was placed third, followed by Moscow, then Geneva.

Mercer said the high living costs in some African cities reflects the continent's increasing economic importance across all business sectors.

'We've seen an increase in demand for information on African cities from across the business spectrum - mining, financial services, airlines, manufacturing, utilities and energy companies,' said Ms Constantin-Metral. 'Many people assume that cities in the developing world are cheap, but this isn't necessarily true for expatriates working there.'

In particular, the cost of good, secure accommodation can be 'extraordinarily high', she said.

Mercer's Cost of Living survey covers 214 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transport, food, clothing, household goods and entertainment.

New York is used as the base city for the index, and all cities are compared against the Big Apple. Currency movements are measured against the US dollar.

The cost of housing - often the biggest expense for expats - plays an important part in determining where cities are ranked.

Source: Business Times, 30 Jun 2010

S'pore third most liveable city: study

SINGAPORE is the third most liveable city in the world, going by preliminary findings from a broad-based study commissioned by a think-tank here.

The Centre for Liveable Cities (CLC) released initial results from its Global Liveable Cities Index (GLCI) at the World Cities Summit (WCS) yesterday. Of the 64 cities assessed, Geneva emerged tops and Zurich second. Copenhagen and Helsinki tied at fourth.

Asia-Pacific cities which made it to the top 20 include Hong Kong (eighth), Melbourne (10th), Osaka (16th) and Tokyo (18th).

CLC got the study going in 2008 to assess cities' liveability in five areas: economic vibrancy and competitiveness; environmental friendliness and sustainability; domestic security and stability; quality of life and diversity; and governance and leadership.

GLCI is still a piece of work in progress, but CLC and some of the study's co-authors will present it at a WCS session today to gather feedback on its criteria and methodology.

'In terms of looking at liveability from a more holistic and balanced framework, I think there are probably very few, if any, such set of indicators that are around,' CLC director and National Environment Agency CEO Andrew Tan told the press yesterday.

Across the five areas which the GLCI looked at, Singapore fared best in domestic security, coming in first. It scored fairly well in terms of governance, quality of life and economic vibrancy. But its showing in eco-friendliness was weakest, at 14th place.

According to Tan Khee Giap, a co-author of the GLCI and associate professor at the Lee Kuan Yew School of Public Policy, Singapore's green efforts could be underrated. He cited an example: the country did well in water management, but this was not reflected because comparable data was lacking in other cities.

Source: Business Times, 30 Jun 2010

S’pore emerges as most liveable Asian city in new Global Liveable Cities Index

Singapore has emerged as the most liveable Asian city in a new index. It was ranked third worldwide coming in behind Geneva and Zurich in the Global Liveable Cities Index.

Published by Singapore’s Centre for Liveable Cities, the index looked at 64 cities including 36 from Asia.

When it comes to liveability, Singapore has been ranked up there with some of Europe’s best cities.

In individual rankings, it came in first for domestic security and stability and third for good governance and leadership.

And it ranked 5th for economic vibrancy and quality of life.

But Singapore paled in the area of eco-friendliness and sustainability which looked at things like pollution and environmental initiatives.

Dr Tan Khee Giap, lead researcher, Global Liveable Cities Index, said: “We did very well on water management but this data is not available to most cities. Data which is available in Singapore but not available in most of the 64 cities we studied, will not be used.”

Dr Tan said cities can work with the centre if they want to improve their ranking.

He said: “We do simulations by looking at cities and identify 20 weakest indicators among the more than 100 indicators we have. And hypothetically, if you improve your weakest 20%, how would your ranking be raised? So in that sense, it is more constructive than just doing a ranking which can be a beauty contest.”

These preliminary findings of the index were unveiled at the World Cities Summit on Tuesday.

The Centre for Liveable Cities said the index is still a work in progress.

While the index is comprehensive and covers 135 indicators, it is by no means complete.

Dr Tan said that they may be looking to include more factors such as gender bias.

Other cities, such as Penang and Tatarstan, have also indicated interest in being included in the index.

The index’s framework will be put up for further discussion during a workshop at the summit on Wednesday.

The Centre for Liveable Cities said its index stands out from other current rankings as it takes a more balanced approach.

But the way it’s computed will be discussed and refined further.

Andrew Tan, director, Centre for Liveable Cities, said: “In terms of looking at liveability from a more holistic and balanced framework, I think there are probably very few, if any, such set of indicators around.”

Separately, National Development Minister Mah Bow Tan also proposed a “Learning Network for Cities,” to share the best practices in building a liveable city.

He said: “Cities differ from one another in size and character. They are shaped by their own demographics, cultures and traditions, their history and geography.

“But there are some recurring themes in the sustainable development practices of successful cities. These themes include strong governance, citizen engagement, balancing development and the environment, and international collaborations.”

The push for sustainable urban living comes at a time when cities are growing at an unprecedented rate.

Every day, about 200,000 people move in cities and towns and by 2050, seven in 10 people will live in cities.

This presents challenges for governments to provide access to clean water, affordable housing and good sanitation.

Source: Channel News Asia, 29 Jun 2010

Diverse planners key to making a city liveable

Singapore is among the world's most liveable cities, say women delegates due to attend World Cities Summit here

LIVEABLE cities are best designed by diverse planners, say high-ranking women due to attend the World Cities Summit in Singapore next week.

A wide range of perspectives is unmistakably important in planning for practical lifestyles and a safe and comfortable living environment, says Fumiko Hayashi, the mayor of Yokohama, Japan.

'It is said that half of the world's population currently dwell in cities and that percentage is certain to continue to grow in the future,' she told BT. 'If that happens, there will be more and more opportunities for people with a variety of values to live in the same city.'

Today's culturally diverse cities require culturally diverse planners who can bring different lifestyle and value perspectives, says Vishakha Desai, president of the Asia Society.

And Louise Cox, president of the International Union of Architects, likewise believes that diversity among planners is essential: 'Otherwise, a city becomes boring, unloved and unused, so unfortunate things happen that do not need to happen to people and places.'

Diversity is where having women on a planning committee comes in handy. Saskia Sassen, a professor of sociology at Columbia University's Department of Sociology & Committee on Global Thought, says that women's concerns may be different from men's. 'Many women will mention security as the key issue, and some sense of privacy. So we have women-only carriages in crowded commuter trains in India and Japan, for example,' she points out.

Ms Cox agrees that security is a major concern for women: 'As a woman I view safety in a city and on its public transport as an enormous consideration.'

Some big cities, for example, have office areas that are virtually deserted after work - which can make a lone person walking down these streets at midnight vulnerable, she says. Lonely parks are another worry.

'These situations should and can be avoided,' says Ms Cox. 'It is more economical for a building or place to be used all the time instead of only eight hours a day.'

The women identify Singapore, New York, Paris and Sydney as some of the most 'liveable' cities.

And what makes these places stand out is how their quality urban environments - with excellent architecture and urban design - bring tangible economic and financial benefits, foster creativity, attract brains and businesses and engender a sense of rootedness among citizens.

Liveable and sustainable cities are those which can successfully balance economic growth, cultural diversity and social dynamism with a high quality of life, says Cheong Koon Hean, chief executive of Singapore's Urban Redevelopment Authority (URA). 'A great, liveable city must also provide a diversity of experiences for its people - diversity in housing options, diversity of working environments, and diversity in leisure offerings,' she adds.

Amanda Burden, chair of New York City's planning commission and director of the department of city planning, says that when she first became commissioner, her team looked at areas where the city can grow and foster economic opportunity - not just established business districts such as Midtown or Lower Manhattan, but wherever there is potential, such as in Jamaica (in Queens) and Downtown Brooklyn. 'We transformed long neglected areas into thriving centres of economic activity,' she says. 'Through long-range comprehensive plans we ensure that development can flourish in districts located near transport hubs, providing new jobs and tax revenue for the city and its residents.

'The heart of this approach is to recognise the potential of new ways of doing business, take innovative approaches to unlock the potential of new places and make strategic investments today for the long-term health and stability of the city.'

But when all is said and done, the 'energy' of the people living in a city is crucial to its vitality and sustainable development, says Ms Hayashi. 'Citizens loyal to the cities they live in are active in all aspects of business and life, and I believe that this loyalty is what gives rise to safe, comfortable cities. We must gather the collective wisdom of these citizens to overcome global issues such as global warming, energy and poverty, and create sustainable cities together,' she says.

Adds Mrs Cheong: 'I believe that a successful city is not about being the biggest or having the tallest buildings, but it should focus on being a place where people want to be and can call it a home.'

Source: Business Times, 26 Jun 2010

S'pore slips to 16th in real estate transparency ranking

Its score remained the same while other markets improved theirs

SINGAPORE has slipped two places to 16th in a ranking of the transparency of major real estate markets worldwide.

The city-state's position in the latest Global Real Estate Transparency Index compiled by Jones Lang LaSalle (JLL) fell as other countries' scores improved, while Singapore's remained the same.

Singapore scored 1.73, which placed it 14th in the previous index. But with the same score this year, Singapore has taken 16th spot, as several European nations including Sweden, Ireland and France improved their scores. A score of one is the best and five is worst.

According to the index, Australia is now the world's most transparent real estate market. In the Asia-Pacific, Australia and New Zealand (fourth globally) are the region's most transparent markets, followed by Singapore and Hong Kong (18th globally).

The greatest improvements in transparency in the region were recorded in China and India.

'The big improvement for China and India has been mainly due to increased data availability and ongoing regulatory changes,' said Jane Murray, JLL's head of research for the Asia-Pacific.

In both markets, a recent boom in real estate contributed to the improvements as public and private sector players took steps to promote transparency, she said. 'International corporate occupiers and investors are increasingly demanding better information on market fundamentals, while government agencies and market regulators have made slow but steady progress on the regulatory and legal front.'

Singapore and Hong Kong are classified as 'transparent' but not 'highly transparent' because there is room for improvement in two areas for both markets, Dr Murray said. Both countries lack investment performance indices, for example, she said.

In light of the global financial crisis, the index assessed - for the first time - the transparency of the real estate debt markets in terms of the breadth and depth of data available on commercial real estate debt.

Factors such as outstanding balances, maturities and defaults, as well as how thoroughly real estate debt on banks' balance sheets is monitored, were considered. Singapore did well in this aspect, scoring high for its regulatory and legal environment.

Alastair Hughes, JLL's chief executive for the Asia-Pacific, said one of the chief concerns for international real estate investors is where to place their capital safely.

The index helps investors and occupiers operating in foreign markets to anticipate challenges, he said. And for governments and industry organisations, the index provides a gauge to help improve transparency in their home markets.

Source: Business Times, 24 Jun 2010

Asia-Pac millionaires' millions surpass Europe's

The heaviest concentration of wealth, however, is still in the US

(SINGAPORE) Wealth among millionaires in the Asia-Pacific region has surpassed Europe for the first time, even as the number of millionaires hits parity with Europe.

The latest World Wealth Report by Merrill Lynch and Capgemini found that the size of the Asia Pacific's wealth pie expanded by 30 per cent to US$9.7 trillion. Europe's wealth at US$9.5 trillion saw an expansion of 14.2 per cent.

The number of high net worth individuals hit three million in the Asia Pacific, equal to Europe's number.

The largest concentration of wealth is still in the US with US$10.7 trillion in assets. The number of HNWI (high net worth individuals) in the US at 3.1 million is within touching distance of the Asia Pacific.

In a statement, Bertrand Lavayssiere, Capgemini's global financial services managing director, said: 'The last few years have been significant for wealthy investors. While in 2008 global HNWI wealth showed an unprecedented decline, a year later, we are already seeing distinct signs of recovery, and in some areas a complete return to pre-crisis levels of wealth and growth.'

The report said the Asia Pacific is set to be the 'powerhouse of HWNI growth in coming years', driven by India and China. Last year eight out of 10 countries with the highest growth in HNWI population were from the region, led by Hong Kong with a stunning growth of 104 per cent.

Singapore, also among the top 10, showed an expansion of 32.7 per cent in the ranks of HNWI to over 80,900.

The Boston Consulting Group's recent wealth report named Singapore as the market with the highest growth in millionaire households. Based on BCG data, there were about 122,700 households with at least US$1 million in net investible assets, growing about 35 per cent last year.

Merrill Lynch and Capgemini noted that market capitalisation was a powerful driver of wealth in Hong Kong. Market cap surged 73.5 per cent in 2009, after plunging 50 per cent in 2008.

The territory's market cap to GDP ratio is about 11 times, compared to the global average of 0.8 times. 'That ratio makes Hong Kong particularly vulnerable to losses in wealth when the market declines as it did in 2008, but also produces outsized gains in wealth when stock prices rise.'

Singapore's market cap to GDP ratio last year was about 1.75 times.

India, whose high net worth population grew 50 per cent in 2009, has a market cap to GDP ratio of two times.

In terms of asset allocation, the wealthy showed a preference for stability, reducing holdings in cash in favour of fixed income. Equities' allocation rose from 25 per cent in 2008 to 29 per cent but still falls shy of the 2007 weighting of 33 per cent.

The wealthy in Asia Pacific ex-Japan showed a marked preference for real estate, as investments jumped 56 per cent in the second half of 2009 to US$25 billion.

By the year-end, the allocation to real estate stood at 28 per cent compared to 23 per cent previously.

The region's wealthy also had the highest exposure to residential real estate at 60 per cent.

Meanwhile the study found that the wealthy's investor psyche has shifted towards caution and conservatism. Clients are also more engaged in financial affairs, opting to educate themselves on products, disclosures and investment risks before conferring with advisers.

Capgemini director of financial services solutions Foong Lai Kiun said clients appeared to have regained trust in their advisers and wealth management firms to some degree, but they have yet to regain trust in regulatory bodies that were supposed to monitor markets.

A small number of firms are understood to be seeking to incorporate behavioural finance into their advisory process. But the challenge is to develop a model that is scalable and profitable.

Source: Business Times, 24 Jun 2010

S'pore property market 'third most transparent in Asia-Pacific'

SINGAPORE is ranked the third most transparent property market in Asia-Pacific, according to a key industry index.

The league table places Singapore at 16th worldwide, two spots ahead of Hong Kong but behind regional rivals Australia, ranked first, and New Zealand at fourth.

Singapore has slipped two places from the last survey in 2008. Its score has remained unchanged but other countries have moved up the ladder.

'Rising levels of transparency are associated with rising levels of foreign direct investment, a powerful incentive for encouraging the free flow of information and the fair and consistent application of local property law,' said Jones Lang LaSalle, which compiled the index with its unit LaSalle Investment Management.

More transparent market conditions allow for quicker investment deals between one foreign investor and another, it said.

The index, which was started in 1999 and is updated every two years, covers all property sectors, though the bulk comprises commercial real estate.

It assessed 81 markets under five categories - performance measurement, market fundamentals, listed vehicles, legal and regulatory environment and the transaction process.

Jones Lang LaSalle's South-east Asia research head, Dr Chua Yang Liang, said the index showed that Singapore's strength lies in its regulatory and legal environment.

'The transparency of our regulatory framework supported the influx of US$4.7 billion (S$6.4 billion), which is more than half of the total dollar value investments, into the commercial asset market during the peak in 2007,' he said.

Singapore can lift its ranking by improving market performance and the transaction process such as introducing more openness, said Jones Lang LaSalle Asia-Pacific research head Jane Murray.

Dr Chua cited the launch of the National University of Singapore residential price index, an alternative to the Urban Redevelopment Authority service, as a move in the right direction.

He added that recent government moves to increase the level of professionalism and general practices of real estate agents are long overdue.

'As a key vital component in the real economy, the real estate industry needs to strengthen its ethical standards and the eventual regulatory structure if enforced will surely push Singapore further up on the rankings,' said Dr Chua.

In Asia-Pacific, Singapore ranks one place ahead of Hong Kong after new questions on commercial real estate debt - a contributing factor of the financial crisis - were considered.

Hong Kong is 'more laissez-faire' in the regulatory sector and its monitoring of debt is slightly less rigorous than in Singapore, Dr Murray said.

Overall, the index showed a notable slowdown in the progress of real estate transparency over the past two years, suggesting that industry players were focusing on survival rather than market advancement during the financial turmoil.

Source: Straits Times, 24 Jun 2010

Asia-Pacific leads in minting millionaires

MOST millionaires are still found in countries such as the United States, Japan and Germany, but the Asia-Pacific region is minting new ones faster than the developed world.

Asia-Pacific markets comprised eight out of the world's 10 fastest-growing millionaire pools, according to the latest World Wealth Report by Merrill Lynch Wealth Management and Capgemini SA.

Singapore's 80,947 millionaires last year was up one-third from 61,000 in 2008.

This puts the Republic in the No.6 spot in the world's top 10 fastest-growing millionaires' clubs - behind Hong Kong (104.4 per cent), India (50.9 per cent), Israel (42.7 per cent), Taiwan (42.3 per cent) and Australia (34.4 per cent).

China, Indonesia, Norway and Vietnam rounded out the top 10.

'We are seeing significant wealth creation in the Asia-Pacific, fuelled by strong economic growth typically led by the entrepreneurial class,' said Barclays Wealth Asia Pacific's chief executive Didier von Daeniken.

For many private banks, Asia has become the 'sweet spot' for opportunities.

'Singapore as a wealth management hub has largely benefited from an increasing proportion of wealth created in Asia being retained in the region,' said UBS Wealth Management's regional market manager, Mr Peter Kok. 'Singapore's role as a well-regulated and stable financial centre makes it an attractive booking centre in Asia (for assets).'

The report said Asia-Pacific residents with at least US$1 million (S$1.4 million) of investable assets rose 26 per cent to three million in 2009, matching Europe and almost overhauling North America's 3.1 million.

Hong Kong was the world's fastest- growing millionaire market, after a sharp stock market rebound, with market value surging 73.5 per cent last year after falling about 50 per cent in 2008.

Hong Kong also has a very large proportion of well-heeled types in the US$1 million to US$5 million wealth band, so many had been quickly relegated to the 'mass affluent' bracket amid the market crash of 2008 - and many were just as quickly promoted back to millionaire status when asset prices rose last year.

Source: Straits Times, 24 Jun 2010

Investment gains creating many more millionaires

New study supports earlier report of big increase in rich-list

THE rebounding share market and surging real estate prices have sent the number of millionaires here rocketing over the past two years, says a new study.

The number of people meeting the millionaire criteria jumped 32.7per cent from about 61,000 in 2008 to 80,947, according to estimates from Merrill Lynch Wealth Management and Capgemini.

A millionaire is defined as a person with net assets of at least US$1 million (S$1.39million), excluding his main residence and everyday possessions.

The new report reflects the findings of a recent Boston Consulting Group (BCG) report, which estimated that 11.4per cent of Singapore's households - about 125,000 - owned more than US$1 million as at the end of last year.

While numbers differ, observers agree that the sharp rise is largely because the well-heeled here invested heavily in stocks and real estate and caught the wave of the rebound.

Both sectors were hammered in the financial crisis but performed better last year when economic conditions improved.

Take the MSCI index of Asia-Pacific stocks traded outside Japan. It rose nearly 70per cent last year - its best performance since 1993.

And Knight Frank's Wealth Report 2010 showed that the prices of luxury residences here rose 17per cent last year.

Another reason for Singapore's good showing in the wealth stakes is that people here generally have a much better savings rate than a lot of countries with higher average incomes.

That meant that when the crisis came, Singaporeans did not suffer too badly when their asset values fell.

'A rising tide lifts all boats,' said Mr Nick Pollard, chief executive of private bank RBS Coutts Asia, yesterday.

'With Asia recovering more quickly than most other regions, the net worth of private clients in this region has also risen as their investment portfolios are largely concentrated in Asia.'

The Merrill Lynch and Capgemini report uses data on income distribution provided by the World Bank, Global Insight, the Economist Intelligence Unit and national statistics from surveyed countries.

It then uses what is known as Lorenz curves to distribute wealth across the adult population in each country.

Economists say the methodology is sound but could be improved.

'Year-on-year changes are very fleeting, so maybe a better way of looking at it would be a wider longer-term trend,' said Barclays Capital economist Leong Wai Ho.

Mr David Cohen, economist with Action Economics, said that 'it's not that out of line to estimate that the wealth distribution here is roughly in line with other developed countries'.

'In any case, the major message is how much things have improved from a year ago, and I think that's certainly the correct conclusion.'

Private bankers say there are indeed more rich people around, pointing to the growing numbers of newly minted Singaporean citizens from India and China, many of whom are professionals and entrepreneurs.

Anyone looking for advice on how to break into the millionaire ranks should see how assets like stocks and property can drive wealth creation.

Relying on income growth alone may not be the surest way to strike it rich. After all, the latest figures from Singapore's taxman show that there were just 3,838 taxpayers who earned more than $1million in 2007.

'Asset allocation is very important and it's one of the key things in all financial planning,' said Mr Paul Chan, a former president of the Insurance and Financial Practitioners Association of Singapore.

'Of course you can't put all your money into property, but holding on to cash won't make you a millionaire.'

Source: Straits Times, 24 Jun 2010

No risks seen for banks from real estate exposure

This is because prices are rising in tandem with GDP growth: Moody's

SINGAPORE banks' real estate exposure - while hefty - is not posing any risks as prices are rising in tandem with economic growth, said analysts from Moody's Investors Service.

Real estate exposure has always been an area of concern as it makes up 40-50 per cent of Singapore banks' exposure, said Christine Kuo, Moody's Singapore banking analyst.

'Having said that, we look at Singapore banks' housing portfolios and they are performing quite reasonably well up to now and the Singapore government has also put in a few measures to cool down the real estate market which seem to be working,' she said.

Ms Kuo also said Singapore property prices are growing in tandem with GDP growth.

'If you look at the charts, the property price line is moving parallel to the GDP growth lines ... while it has converged in Hong Kong,' she added.

The unabated rise in Singapore property prices this year, as well as in Hong Kong and Shanghai, has led to asset bubble concerns.

In April, the International Monetary Fund said real estate markets in East Asia are overheating and that capital inflows into Singapore and Hong Kong have fuelled price rises.

It noted that the proportion of real estate loans to total bank lending, which in Singapore was close to 80 per cent in Q4 2009, is the highest among markets highlighted in its report.

In the same month, DBS Group Holdings chief executive Piyush Gupta said asset bubbles have already formed in Asia but he did not think a price correction would precipitate a crisis.

'There are asset bubbles in Asia. That's true of Singapore property, of Hong Kong property, of Shanghai property - there's no question,' said Mr Gupta then.

But he added that when a correction comes, he did not think it would lead to a crash which would bring everything back down on its knees.

Singapore property prices only recently surpassed those of the 1996 peak, said Deborah Schuler, Moody's senior vice-president and group credit officer, Asia.

'Only this year we are starting to see the growth in housing prices versus the growth in GDP, sort of housing prices getting a bit ahead of GDP so there isn't the sign yet that we're dealing with a big bubble ... it doesn't look like we're terribly out of line with the growth in the economy,' said Ms Schuler.

The worry would be only if housing prices accelerated while GDP growth slowed, she added.

Both analysts were speaking to the media yesterday following a morning conference on the impact of the global financial crisis.

Earlier, Ms Schuler said Asian banks would do well when the Basel III amendments are implemented.

The implementation, which is expected at the end of 2012, will tighten capital and liquidity requirements of all banks.

'With the exception of Vietnam and Cambodia, our South-east Asian banking system outlooks are stable. NPLs (non-performing loans) have peaked at much lower levels than expected. Bank revenues are growing and should continue to do so as long as China's economic growth does not drop abruptly,' she said.

'The region's banks are well positioned to cope with the Basel III capital and liquidity requirements, thanks to their strong capital levels, traditional banking franchises and customer deposit funded loan portfolios.'

Source: Business Times, 23 Jun 2010

Singapore among top 25 most liveable cities: survey

Low crime rate, ease of setting up business and timely emergency services

THERE'S no lack of Starbucks or Zara here, and certainly not sunshine, but still Singapore has slipped three rungs to 21st in a global ranking of the most liveable cities.

European cities, led by Munich, took the top spots in the latest quality-of-life survey by UK magazine Monocle, which goes beyond hard economic indicators in assessing the attractiveness of a city.

The poll includes 'soft' factors such as hours of sunshine and other attributes of urban appeal, such as the number of cinema screens and yes, the number of Zara and Starbucks outlets in town.

These are 'often-overlooked factors that can bring happiness and ease to everyday life', says the London-based lifestyle and global affairs magazine.

Singapore was rated highly for its low crime rate, ease of setting up a business - which takes about 15 minutes online - and prompt emergency services.

'However, high stress levels, a relatively high cost of living and a sense of self-censorship present room for improvement,' says Monocle.

Germany's Munich beat Zurich, which slipped from first place last year to third this year, while Copenhagen hung on to the second spot.

Munich's connectivity, cultural investment and abundance of green space helped it win top position, says Monocle. This is the second time the German city has been ranked number one since the survey started four years ago.

A growing commitment to embed environmental awareness in every aspect of urban planning was cited by Monocle as a key strength of the top three cities.

Several new metrics were introduced for this year's survey, including the amount of outdoor seating available, accessibility of green spaces, response time for emergency services and ease of starting a business.

These new attributes place a higher premium on small-scale neighbourhoods than on over-developed expatriate cities, says Monocle.

The 2010 top 25 list remains largely unchanged from 2009, with only Amsterdam dropping out and Northwestern US city Portland joining the league.

'There was a noticeable lack of reshuffling in 2010, in part because the economy saw many large-scale improvement projects put on hold,' says Tyler Brule, Monocle's editor-in-chief.

'But there were enough shifts, including Geneva, Madrid and Portland, to ensure no mayor should be resting on last year's performance.'

Tokyo, which dropped one spot to fourth position this year, was lauded for its connectivity and easily accessible transport system.

Other regional cities that made the top 25 list were Melbourne (9), Sydney (12), Fukuoka (14), Auckland (20) and Kyoto (23).

Source: Business Times, 21 Jun 2010

Singapore climbs in global ranking of living costs

Strong Sing$ pushes it up 5 rungs to become 67th priciest city to live in

A STRONGER currency has pushed Singapore to the 67th most expensive city to live in, five places higher than its 72nd position last year, according to the latest rankings provided by ECA International.
Among Asian cities, Singapore gained one level to ninth place. This makes Singapore a more pricey place to live in as compared with South Korean's Busan and Ulsan, and Taipei in Taiwan. It is, however, still cheaper than Chinese cities Hong Kong and Shanghai, as well as Japan's Tokyo - which snagged the spot as the world's most expensive place to live in. Singapore's rise in the cost of living rankings come on the back of a strengthened local currency, which 'has been strong relative to other major currencies in the region', said ECA.

It added that prices of goods and services commonly bought by international assignees have also risen at much faster rates here, as compared with other developed cities regionally.

Said ECA's regional director for Asia, Lee Quane: 'Singapore's rise continues a long-term trend. In recent years, we have witnessed the city's gradual move up our rankings. The cost of living differential between the city state and Hong Kong has become smaller and smaller.

'This is a double-edged sword,' he said.

On the one hand, companies here will now see lower cost of living allowances when they send staff out of Singapore. On the other hand, for companies bringing staff to Singapore, allowances will carry on increasing as Singapore continues to move up the ranking table.

Worldwide, Norway's Oslo came in after Tokyo to rank as the second-most expensive city to live in. Rounding up the top five list are Luanda in Angola - where many regularly used items are expensive due to the country's war-damaged infrastructure - and Japan's Nagoya and Yokohama. In Asia, the Japanese city of Kobe and South Korea's capital city, Seoul, joined Tokyo, Nagoya and Yokohama at the top.

ECA's cost of living study is done based on surveys carried out in March and September every year using a basket of day-to-day goods and services such as meat, fresh fruit, vegetables, clothing and electrical goods. The data for its latest survey was collected in March this year, and was compared with information taken in the same month last year.

Source: Business Times, 15 Jun 2010

Directors' property buys: Building up confidence

Their support of own property firm's projects keeps investors assured

CAPITALAND disclosed recently that its group president and chief executive officer Liew Mun Leong had paid about $3.74 million for a penthouse on the 23rd level of The Interlace, a development at the junction of Depot Road and Alexandra Road.

Having directors of property firms snap up units is not unusual. Many transactions are not picked up in media reports even though the property companies have disclosed the purchase on the Singapore Exchange website.

Property consultants see such purchases by directors and interested persons as a vote of confidence in the project.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said: 'When the market is hot, directors and their immediate family members usually get onto the VVIP list and are able to pick the choice units.'

He added: 'On the other hand, when the market is slower, or the sale of the project is not progressing as fast as expected, some directors may buy units, and sometimes even at a bullish price, to give confidence to buyers and investors.'

Under Singapore Exchange listing rule 910, the sale of a unit developed by a listed company to its own director must be disclosed, partly because directors may get a discount. The disclosure of the purchase will inform shareholders about the terms a director has received.

In essence, such disclosures and the review of the purchase terms by the company's audit committee are to show that the sale has not hurt the interests of the minority shareholders or the company, for example, by the sale of a unit at a rock-bottom price to the director.

Indeed, companies generally disclose fairly detailed information nowadays: the name of the purchaser, the relationship to the director if it is not the director making the purchase, and the price, terms and even the unit number of the project.

At the expense of an even greater loss of privacy for directors, more disclosure in this area could well be something to consider.

For instance, what about when a director sells a unit?

Currently, no such disclosure is required. The rationale is that these are open market transactions with no impact on the company involved.

However, disclosure advocates argue that in a hot market, if a director sold a unit a few months after making the initial deposit, shareholders would be none the wiser unless they had taken various tedious steps to check if the unit had been sold.

So consider this: Shareholders or other buyers might pile into the project, thinking it must be a good buy, based, at least in part, on the disclosure that a company director had bought a unit.

But in the meantime, the director or his immediate family members could well be pocketing a tidy profit, having quietly exited the project.

And they have a strong incentive for trying to sell, as the directors usually get the best pickings of the units on offer - which are likely to yield the best selling prices.

Of course, there are arguments for why disclosure of a director's sale would be going over the top.

For instance, if the unit is sold to an unrelated third party as is usually the case, the sale has no direct bearing on the listed company which is what minority shareholders would be concerned about.

Another argument is that the unit could be sold for strictly personal reasons, such as the need to raise cash. The public or investors, unaware of these personal factors, might read too much into a director selling off a unit he had just bought a few months ago.

Also, since each purchase involves large sums, it is unlikely that any one director could commit himself to many transactions, which tends to diminish the force of the case for public disclosure.

But with many of these purchases, the same group of directors is likely to be involved. As property firms have a pipeline of projects, these same buyers are likely to feature over and over again so their buying patterns would be of some interest to investors.

The sale of properties soon after purchase at the time of a launch could be seen as analogous to the sale of shares by key shareholders soon after an initial public offering.

These disclosure questions give rise to another possible change that would offer greater certainty to shareholders: encouraging companies to put a moratorium on sales by their directors until the property obtains a temporary occupation permit.

That would offer a clear assurance to investors that directors who make purchases are committed to the project.

Source: Straits Times, 14 Jun 2010

S’pore ranked Asia’s 9th most expensive place to live in

A survey has ranked Singapore as the ninth most expensive location in Asia to live in.

According to human resources consultant ECA international, Singapore’s currency has been strong relative to other major currencies in the region.

Furthermore, it said prices of goods and services commonly purchased by expatriates have risen at much faster rates here than in other developed locations.

Globally, Singapore has gained six places in ECA’s global rankings and is now in 67th position, overtaking locations such as Guangzhou and Shenzhen.

ECA International said Singapore’s rise up the list continues a long term trend.

In addition, the cost of living differential between Singapore and Hong Kong has become smaller and smaller, said ECA International’s regional director (Asia), Lee Quane.

This, he said, is a double-edged sword: on the one hand companies sending staff out of Singapore need to pay lower cost of living allowances for an employee to maintain their standard of living on assignment.

On the other hand, for companies bringing staff into Singapore, allowances will carry on increasing as Singapore continues to rise on the ranking table.

Tokyo has regained its status as the world’s most expensive city for the first time in five years.

ECA said the Japanese yen, which has gained in value by about 30 per cent against the US dollar in the past three years, has contributed to the Japanese capital’s position at the top of the ranking.

Joining Singapore and Tokyo in Asia’s top ten are the Korean cities of Seoul and Busan as well as Hong Kong, Beijing and Shanghai.

ECA International said currency fluctuations continue to be the main factor impacting the ranking of Asian locations.

The strengthening of Asian currencies over the past year, on the back of strong economic performance, has contributed to the higher costs.

Conversely, locations in mainland China have become cheaper, with Shanghai falling 18 places and Beijing dropping 29 places.

This is due mainly to the pegging of the Chinese yuan to the weakened US dollar.

Shanghai is China’s most expensive city followed by Beijing and Guangzhou.

Norway’s Oslo is the second most expensive city in the world and the most costly European nation.

ECA International said the strengthening of the krone against major currencies, an upward trend in oil prices and a short-lived recession contributed to its rise.

Source: Channel News Asia, 14 Jun 2010

S'pore millionaire club the fastest growing

11% of households in S'pore have investable assets of over US$1m

SINGAPORE added millionaires at a faster rate than anywhere else in the world last year, despite a recession that decimated wealth in many nations.

The millionaire club grew by 35 per cent here, putting Singapore just ahead of second-placed Malaysia, with a 33 per cent gain, and Slovakia on 32 per cent and China on 31 per cent.

In absolute numbers, the United States still has by far the most millionaire households at 4.7 million, followed by Japan and China. But you are more likely to bump into a millionaire here.

An annual study by Boston Consulting Group (BCG) showed that Singapore had the highest concentration of millionaires, as in 2008. A total of 11.4 per cent of households here own more than US$1 million (S$1.4 million) - defined as those with investable assets of over US$1 million, exclusive of property and items like art. BCG did not provide the number of millionaire households in Singapore.

Hong Kong was next in terms of concentration, followed by Switzerland, Kuwait, Qatar, the United Arab Emirates and the US.

Singaporean T.J. Thang, who belongs to the elite group, did not fare too badly during the downturn. 'Some of my stocks fell in value during the recession, but I was still getting attractive property rental yields, and hence my cash grew,' said the 49-year-old businessman.

Economists and wealth managers cite a number of factors as to why Singapore is leading the way in the growth of millionaire households. One is the increasing number of property owners reaping profits from en bloc sales.

'I had a few friends who benefited from the en-bloc windfall and they parked their money in stocks and bonds,' said Mr Richard Wee, chief executive of private bank Lombard Odier Darier Hentsch & Cie (Singapore).

People here are also more likely to capitalise on their familiarity with the region by investing in shares in fast-growing Asia. The MSCI index of Asia-Pacific stocks traded outside Japan rose nearly 70per cent last year - its best performance since 1993 - far outpacing expected gains of just over 20per cent in US and European stocks.

Then there is Singapore's 'liberal admissions policy' to attract talent and the well-heeled, said CIMB Research economist Song Seng Wun.

Today, virtually every big-name private bank which caters to the well-heeled has made Singapore its regional hub.

What this latest report means is, 'for all the private bankers who are here, it confirms that this is the right spot to be', said Mr Rolf Gerber, chief executive of LGT Bank in Liechtenstein (Singapore).

BCG told The Straits Times yesterday: 'Part of the reason for high wealth is that Singapore has a much higher savings rate than a lot of countries with higher average incomes.

'In terms of the 'average Singaporean', the majority of households in Singapore (about 60 per cent) have bankable assets worth between US$250,000 and US$1 million, with more at the lower end of the range than the higher end.'

Another factor could have been the strength of the Singapore currency against the US dollar.

The sharp rise is also likely taking place from a low base. A Merrill Lynch Cap Gemini report last year reported that the number of millionaires in Singapore had fallen 21 per cent to 61,000 in 2008 due to the financial crisis.

Separately, the latest figures from Singapore's taxman show that there were 3,838 taxpayers who earned more than $1 million in 2007.

BCG's study reviewed the assets under management covering 62 markets representing around 99 per cent of global economic output.

------------------------------------------------
Top of the list
Country growth in millionaire households
Singapore: 35%
Malaysia: 33%
Slovakia: 32%
China: 31%
Morocco: 28%
South Korea: 28%
United Arab Emirates: 23%
Germany: 23%
Indonesia: 21%
Algeria: 21%

Source: Straits Times, 12 Jun 2010

Millionaire households on the rise

Singapore stands out, with such households rising by 35% last year

THE rebound in asset markets last year has buoyed the global wealth market by 11.5 per cent to US$111.5 trillion, with Singapore making its mark yet again as the market with the highest growth in millionaire households.

Singapore's millionaire households rose 35 per cent in 2009, says the Boston Consulting Group (BCG) in its latest Global Wealth Report. Singapore also had the highest concentration of millionaire households at 11.4 per cent, followed by Hong Kong at 8.8 per cent.

These comprise households with at least US$1 million in assets under management (AUM). BCG's data cover liquid assets and exclude property.

But while asset growth may look robust, there are sobering aspects to the business. Wealth managers' average profitability fell to 22 basis points, from 27 basis points in 2008.

The survey of 114 wealth-management institutions worldwide found that revenues fell despite the fact that assets under management of the firms surveyed increased by an average of 14.3 per cent. Revenue margins - measured by return on assets - slipped by an average 12 basis points to 83 basis points. While managers' costs fell, it was not enough to offset the fall in revenues. Cost-to-income ratio hence rose to 74.4 per cent from 72.3 per cent previously.

BCG says in its report: 'The recovery in AUM masks significant and lasting challenges to the industry's profitability. In most regions, wealth managers face the prospect of persistently low revenues and revenue margins, along with stubbornly high costs.'

It adds: 'Wealth managers must not allow the surge of global wealth to lead to a sense of complacency or a lack of urgency when it comes to addressing (the) challenges. They must focus on quality, precision and service delivery - as well as on truly understanding the client.'

The average cost-to-income ratio in Asia actually rose 24 percentage points between 2007 and 2009. This is a greater magnitude than the global average increase of five percentage points in the same period.

What's more, global assets in 2009 remained in a state of flux. This was driven, says BCG, by a couple of trends: Clients moved assets out of global institutions, spreading them among multiple banks. And, regulatory pressure led to a repatriation of assets from offshore centres to clients' home markets.

Still, net new assets - the difference between asset inflows and outflows excluding market performance - rose by an average of just 1.5 per cent globally. Asia-Pacific saw net new money of 6.2 per cent.

The outlook for Asia and the emerging markets, however, remains bright. BCG expects global wealth to grow at an annual clip of nearly 6 per cent from end-2009 to 2014. Asia's growth is expected to be nearly twice the global rate.

BCG partner Tjun Tang, who also co-authored the report, said: 'There is no doubt that wealth will continue to grow faster in emerging markets, fuelled by strong economic growth. We expect Asia-Pacific, including Japan, to grow at nearly twice the global rate, raising its share of global wealth from 15 per cent in 2009 to almost 20 per cent in 2014.'

Switzerland remained the largest offshore wealth centre with US$2 trillion or 27 per cent of global offshore wealth. BCG lists Singapore and Hong Kong's combined share at US$700 billion or about 9.4 per cent of total offshore AUM of US$7.4 trillion.

In Asia and Europe, market values and increased savings played an equal part in the AUM rise. In the United States, market values accounted for 70 per cent of the rise in AUM. While Europe remained the largest wealth region with US$37 trillion in AUM, the largest absolute gain in wealth was seen in North America. Asia registered the greatest percentage gain in wealth of 22 per cent to US$3.1 trillion.

Clients' asset allocation remained fairly conservative in 2009. Globally, allocations to cash rose declined from 51 per cent in 2008 to 48 per cent last year. But the latter is still higher than the 2007 cash allocation of 44 per cent.

Equities' share was 30 per cent. Here lies part of the reason for wealth managers' lower margins as clients still preferred simpler products. This is in addition to the pressure of fewer transactions and tougher price negotiations.

Tongjai Thanachanan, a core member of BCG's South-east Asia asset and wealth management practice, said: 'Investors have started moving assets out of safe havens, but they still have a lot of wealth parked in basic, low-margin products.

'Their asset allocations tend to be more conservative than their actual risk profiles. In addition, the use of discretionary mandates is down, as investors remain wary of signing over control of their wealth.'

Source: Business Times, 12 Jun 2010

Hot property market to cool?

Analysts expect drop in transactions

The local property market is in for a correction in the coming months, said industry players, citing tell-tale signs like a plateau in home prices and a drop in transaction volumes.

The Singapore Institute of Surveyors and Valuers (SISV) said there were only 899 caveats lodged for condominiums in the first three weeks of last month. There were 3,060 for the whole of April.

And although new condominium projects are still doing well, property agents said homes sales in the secondary or resale market have dropped by up to 20 per cent recently.

Dennis Wee Group said buyers are becoming more cautious going by last month’s sales figures.

“Instead of seeing a 30 per cent increase in transactions as in the month before, I only saw a marginal 3.5 per cent increase,” said Mr Chris Koh, director at Dennis Wee Properties.

“A lot of buyers are pulling their handbrakes. What they feel today is that the seller is asking for too high a price and ‘if I am not in a hurry, why not sit and wait?’” he added.

Industry data from SISV showed sales falling across various districts as of the middle of last month.

The prime districts of 9, 10 and 11 recorded a 76 per cent drop, while the downtown city area saw the sharpest decline of 88 per cent.

Analysts also expect transaction volumes to fall by 5 to 10 per cent due to the World Cup which begins tomorrow.

Meanwhile, ECG Property said it now takes longer to close a transaction. It used to be about 45 days before, but is now up to 80 days.

Industry players expect the market correction to last between three and six months, and some said home prices could trend down by 3 to 5 per cent on average during this period.

“Some of these prices are over book-keeping value where some banks may not even match some of the asking prices today,” said Mr Eric Cheng, chief executive officer of ECG Property.

“That also shows that these prices could be a speculation price instead of a true reflection price. I think the market is going through a slight correction,” he said.

Analysts said prices may also be capped by more land supply due to be released by the Government. Other risk factors include volatile stock markets and the European debt crisis.

Source: Today, 10 Jun 2010