Business Times - 02 Apr 2008
South Asia struggles to control inflation
Countries in the region are using various methods to check rising prices - well aware of the consequences if they fail
By M SHAHIDUL ISLAM
AFTER enjoying low inflation for more than one-and-a-half decades, many countries are now faced with exorbitant price hikes in fuel and non-fuel commodities. Since early 2007, oil and many agricultural commodities have been witnessing abrupt price increases.
In much of South Asia, the hikes have exposed the vulnerability of the low- and middle-income groups as well as government exchequers. Inflation has surged in many of the South Asian countries due to low per capita domestic production; the central bank's lax monetary policies or lagged effects of earlier monetary expansion; undervalued exchange rate policies (in economies other than India); and internal political instability. According to the Economist Intelligence Unit (EIU), the consumer price index (CPI) inflation in Sri Lanka was 17.5 per cent in 2007, followed by Bangladesh (9.1 per cent), Pakistan (7.6 per cent) and India (6.4 per cent).
For the South Asian countries, the challenges of inflation are two- pronged.
Firstly, galloping inflation could significantly destabilise key macro- economic variables, including GDP growth. Higher oil import bills that most economies in the region absorb through subsidies could further swell their fiscal deficits.
Regressive tax
Secondly, price volatility poses political dangers. South Asia has the largest number of poor people in the world and the poor spend a relatively high proportion of their income - up to 80 per cent - on food.
Rising food prices are thus effectively a regressive tax. If the past is any guide, price volatilities of South Asian staples like rice and wheat could result in political instability in the region.
India is relatively less vulnerable to the current inflationary shock, thanks largely to its higher domestic agricultural production capacity and the recent appreciation in its currency. Nevertheless, in his 2007-08 Union Budget speech, Finance Minister P Chidambaram acknowledged pressure on domestic prices of food articles in India. He contended that, 'managing the supply side of food articles will be the most crucial task in the ensuing year and keeping inflation under check is one of the cornerstones of our policy'. In India, inflation based on the wholesale price index soared to a 12-month high of 5.92 per cent on March 8, which is above the 5 per cent limit set by the Reserve Bank of India (RBI) for this fiscal year.
The other major economies in the region (Pakistan, Bangladesh and Sri Lanka) - which are largely dependent on international markets for fuel and, to a lesser extent, non-fuel commodities - have been facing much more daunting challenges than India to contain inflation. The point-to-point inflation in these three countries is now double-digit. According to the Central Bank of Sri Lanka, the New Colombo CPI reached 21.6 per cent in February. In Bangladesh, the central Bangladesh Bank reported that inflation was 11.43 per cent on a point-to- point basis in January whereas food inflation hit 14.2 per cent in the same period. In Pakistan, the year-on-year consumer price inflation reached 11.3 per cent in February while food inflation was 18.3 per cent - the fifth consecutive month of double-digit increase, according to the EIU.
Furthermore, inflation in India, Pakistan, Bangladesh and, to some extent, Sri Lanka could have been far worse had their exchequers not absorbed a substantial portion of the oil import bills via subsidies. Only Sri Lanka has revised its administered energy prices upwards in several stages since 2000. As a result, the oil price hike has had a direct impact on the economy's CPI inflation. Fiscal deficits in Pakistan and Bangladesh are swelling due to oil subsidies. In India, however, the petroleum subsidy is an off-budget item and it does not affect the government's fiscal book.
The price hike of fuel and non-fuel commodities in international markets is widely blamed for the current inflation in South Asia. Secondly, the monetary expansion or the lagged effects of higher-than-programmed money and credit growth during the fiscal year 2007 and excess liquidity have also played a part in raising prices in the region. Thirdly, imported inflation in Sri Lanka, Pakistan and Bangladesh has soared as their domestic currencies have weakened in recent years.
The nominal effective exchange rate (NEER) and the real effective exchange rate (REER), except for the Indian rupee, have been moving in opposite directions. Generally, NEER and REER move quite closely together, except in high inflationary environments. If the nominal exchange rate does not sufficiently appreciate, real exchange rate adjustment only happens through the increase in the price level over time, relative to trading partners. The Chinese economy also experienced a similar situation recently until the yuan was allowed to appreciate.
Furthermore, the supply side of the commodity market has been disrupted by internal political unrest and emergency rule in Bangladesh and Pakistan. The former also faced two major natural disasters in 2007 which damaged standing crops, among others. In Sri Lanka, ethnic conflict exacerbated inflation. To compound these problems, the growth of the agriculture sector in many parts of South Asia in recent years has been sluggish.
If the US dollar continues to slide, oil prices remain high, strong demand for commodities persists and more and more oil-seeds and staples channel towards bio-fuel production, the South Asian economies may witness even higher inflation in the coming months.
India's inflation is still at a tolerable level. Moreover, the country is expecting a record harvest in 2008. To avoid food inflation, the authorities have banned exports of several commodities and fixed higher prices for exportable agriculture produce. Nevertheless, the potential risk of price hikes in the economy may arise from three avenues.
First, foreign portfolio investors' increasing appetite for the Indian market will continue to put upward pressure on the rupee. If capital inflows are not fully sterilised, the economy will have excess liquidity that can induce inflation. The cuts by the US Federal Reserve to deal with the sub-prime crisis have put pressure on the RBI to revise its key interest rates downward. However, the dilemma for the RBI is that lowering interest rates will fuel inflation.
Secondly, roughly 10 million public sector employees in India are likely to get a 50 per cent pay rise this year. If wages go up, prices are also set to increase.
Thirdly, the country is preparing for a parliamentary election early next year. Government expenditures tend to increase in election years, adding to inflation.
If all these issues are left unchecked, India's inflation may surpass the RBI's expectations in the coming months.
Currency appreciation
Most emerging market economies are now fighting inflation either by appreciating their currencies or hiking policy rates or both, depending on the macro-economic conditions. In India, currency appreciation continues to be used as a major instrument to contain imported inflation, though a widening current account deficit is a concern for the policy makers. Nevertheless, as most of India's competitors, including China, are now appreciating their currencies to contain inflation, competitiveness concerns for India are less pressing.
Despite the latest Fed rate cut, the RBI may increase its key policy rates slightly. In an election year, the current United Progressive Alliance government may prefer to check inflation even if this would slow down India's economic growth slightly, by containing credit and money supply growth.
Bangladesh can afford to keep its currency slightly stronger, thanks to its favourable current account position. The Bangladesh Bank has already tightened the broad money supply and credit growth. The monetary policy should be more contractionary even if it affects the country's economic growth. Sri Lanka and Pakistan have to rely on interest rate hikes, as the current account deficits in these economies have been widening.
Fiscal policy tools, including reductions in import and excise duties, could be applied to contain imported inflation. Indeed, such tools have been applied in Bangladesh. Lately, import duties on a number of essential commodities (in particular, edible oil) have been reduced in India. Sri Lanka had earlier reduced import duties but later re-imposed them because the revenues generated were too important to forgo, even temporarily.
Apart from fiscal and monetary measures, it is important for the South Asian countries to address domestic supply-side bottlenecks to enable international prices to converge with domestic prices.
The writer is a research associate at the Institute of South Asian Studies, an autonomous research institute within the National University of Singapore.
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Wednesday, April 2, 2008
Inflation cited as region's No 1 threat
Inflation cited as region's No 1 threat
Wednesday • April 2, 2008
THE World Bank has sliced 1.2 percentage points off its Singapore growth forecast and warned inflation will be the region's No 1 threat this year. It believes dealing with high food and fuel prices will be an even greater challenge to East Asian governments than US financial turmoil and a slowing global economy.
Singapore's inflation rate hit 6.5 per cent in February, slightly off January's 26-year high.
The World Bank cut its GDP forecast for Singapore from 6.4 per cent to 5.2 per cent, within the Government's revised official growth range.
"For all commodity prices, this is not a short-term problem," said Mr Vikram Nehru, World Bank chief economist for East Asia and the Pacific. "There may be volatility. They may come down for a while, but eventually we are expecting a relatively long period of elevated prices in metals, food and oil."
It's not just a Singapore problem. In China, inflation has surged to its fastest pace in 11 years, while consumer prices in Sri Lanka and Vietnam are hovering around 20 per cent. The World Bank believes East Asian governments should consider solutions like targeted subsidies to help the poor. — Esther Fung
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Wednesday • April 2, 2008
THE World Bank has sliced 1.2 percentage points off its Singapore growth forecast and warned inflation will be the region's No 1 threat this year. It believes dealing with high food and fuel prices will be an even greater challenge to East Asian governments than US financial turmoil and a slowing global economy.
Singapore's inflation rate hit 6.5 per cent in February, slightly off January's 26-year high.
The World Bank cut its GDP forecast for Singapore from 6.4 per cent to 5.2 per cent, within the Government's revised official growth range.
"For all commodity prices, this is not a short-term problem," said Mr Vikram Nehru, World Bank chief economist for East Asia and the Pacific. "There may be volatility. They may come down for a while, but eventually we are expecting a relatively long period of elevated prices in metals, food and oil."
It's not just a Singapore problem. In China, inflation has surged to its fastest pace in 11 years, while consumer prices in Sri Lanka and Vietnam are hovering around 20 per cent. The World Bank believes East Asian governments should consider solutions like targeted subsidies to help the poor. — Esther Fung
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More temp office space on offer soon
More temp office space on offer soon
More than 360,000 sq ft at Badminton Hall area in Guillemard to be released
Wednesday • April 2, 2008
Cheow Xin Yi
cheowxinyi@...
IN A bid to help alleviate an office space crunch, the Singapore Land Authority (SLA) hopes to release another 368,000 square feet in gross floor area for temporary conversion by the middle of the year. But that is still 20 per cent less than what was released in the same period last year.
Mr Teo Cher Hian, director of private land operations at SLA, said this shortfall is due to there being fewer state properties left to convert.
The latest site to be offered this month will be the Singapore Badminton Hall and Association's premises at Guillemard Road.
The state land agent has already released two properties for tender this year — the former Monk's Hill Secondary School and Siglap-Changi Community Centre.
Mr Teo said the SLA will monitor market take-up and identify more sites if demand merited.
Average office rents shot up over 50 per cent last year. However, Urban Redevelopment Authority statistics show potential new office supply of around 10 million square feet over the next five years when some major new developments are complete.
Mr Colin Tan, research head at Chesterton International, believes SLA is probably being cautious. "It's probably to relieve the current squeeze. But have they done studies to see if releasing now will affect supply, say, two years down the road?"
A Colliers International report shows rental growth for prime office space moderating in the past three months, rising a more modest 3.2 to 6.9 per cent quarter-on-quarter.
Instead, it said industrial rents are rising faster — some 16 per cent in the past quarter. That's because more companies had turned to high-specification industrial space as an alternative amid rising office rents.
Citibank, DBS Bank and Standard Chartered Bank have announced they will relocate some of their operations to built-to-suit office complexes in Changi Business Park.
Mr Tan Boon Leng, Colliers' director for industrial sales and leasing, said: "It is expected that more banks are likely to jump on this bandwagon soon."
Colliers expects rental for high specification industrial space to rise 20 per cent for the rest of the year.
But industrial rents are coming from a low base. Knight Frank's research head, Nicholas Mak, said: "Rentals in the industrial sector are still single digits, $3 to $4 per square foot per month, compared to $10 to $18 per square foot in the office sector. So, there is obviously more upside for growth in percentage terms."
Copyright MediaCorp Press Ltd. All rights reserved.
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More than 360,000 sq ft at Badminton Hall area in Guillemard to be released
Wednesday • April 2, 2008
Cheow Xin Yi
cheowxinyi@...
IN A bid to help alleviate an office space crunch, the Singapore Land Authority (SLA) hopes to release another 368,000 square feet in gross floor area for temporary conversion by the middle of the year. But that is still 20 per cent less than what was released in the same period last year.
Mr Teo Cher Hian, director of private land operations at SLA, said this shortfall is due to there being fewer state properties left to convert.
The latest site to be offered this month will be the Singapore Badminton Hall and Association's premises at Guillemard Road.
The state land agent has already released two properties for tender this year — the former Monk's Hill Secondary School and Siglap-Changi Community Centre.
Mr Teo said the SLA will monitor market take-up and identify more sites if demand merited.
Average office rents shot up over 50 per cent last year. However, Urban Redevelopment Authority statistics show potential new office supply of around 10 million square feet over the next five years when some major new developments are complete.
Mr Colin Tan, research head at Chesterton International, believes SLA is probably being cautious. "It's probably to relieve the current squeeze. But have they done studies to see if releasing now will affect supply, say, two years down the road?"
A Colliers International report shows rental growth for prime office space moderating in the past three months, rising a more modest 3.2 to 6.9 per cent quarter-on-quarter.
Instead, it said industrial rents are rising faster — some 16 per cent in the past quarter. That's because more companies had turned to high-specification industrial space as an alternative amid rising office rents.
Citibank, DBS Bank and Standard Chartered Bank have announced they will relocate some of their operations to built-to-suit office complexes in Changi Business Park.
Mr Tan Boon Leng, Colliers' director for industrial sales and leasing, said: "It is expected that more banks are likely to jump on this bandwagon soon."
Colliers expects rental for high specification industrial space to rise 20 per cent for the rest of the year.
But industrial rents are coming from a low base. Knight Frank's research head, Nicholas Mak, said: "Rentals in the industrial sector are still single digits, $3 to $4 per square foot per month, compared to $10 to $18 per square foot in the office sector. So, there is obviously more upside for growth in percentage terms."
Copyright MediaCorp Press Ltd. All rights reserved.
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Singapore Home prices hold their own, but just barely
Singapore Home prices hold their own, but just barely
Analysts expect at least one quarterly dip this year
By KALPANA RASHIWALA
(SINGAPORE) Despite the quieter market, home prices continued to edge up in the first quarter, although at a slower pace, latest flash estimates show.
The quarter-on-quarter rate of increase in the Urban Redevelopment Authority’s price index for private homes decelerated to 4.2 per cent in Q1 this year, after a 6.8 per cent gain in Q4 2007.
Some property consultants are now factoring in declines for at least one of the remaining three quarters of this year, as the full impact of the US economic slowdown bites into the local property market.
URA’s flash estimate also showed that regional sub-indices for non-landed private home prices posted smaller gains all-round in Q1 this year than they did in Q4 2007. However, the 4.8 per cent increase in the Outside Central Region (OCR) in Q1 outpaced gains of 4.4 per cent in the Core Central Region (CCR) and 3.9 per cent in the Rest of Central Region (RCR) - for the first time in four years.
Jones Lang LaSalle said prices are steady in the CCR, supported by deep-pocketed investors, but may be peaking in the RCR, while demand continues to be strong in the OCR as en bloc sellers pick up replacement homes in the suburbs, where prices are relatively more attractive.
In the public housing segment, the Housing & Development Board’s flash estimate shows that the HDB resale flat price index rose 3.4 per cent in Q1 over the preceding quarter, again slower than the 5.7 per cent increase posted in Q4 last year.
Knight Frank director (consultancy and research) Nicholas Mak said that in a worst-case scenario - assuming the Singapore economy contracts in the coming months - URA’s overall price index for private homes could post a full-year increase of zero to 5 per cent.
This factors in one quarter of decline, to the tune of 0.5 to 2.5 per cent, possibly towards the end of the year. Any decline in the index would be the first since Q1 2004, Mr Mak added.
Mr Mak’s best-case scenario is for a 10-15 per cent full-year gain in the index, with increases in all four quarters.
URA’s private home price index rose 31.2 per cent in 2007.
Colliers International’s director for research and consultancy Tay Huey Ying too said that the Singapore property market is likely to experience the full impact of the US economic slowdown by Q3 or Q4 this year.
In a worst-case scenario, URA’s private home price index may rise 8 to 10 per cent for the whole of this year, with possibly a decline in the fourth quarter of not more than 4 per cent, Ms Tay said.
In a best-case scenario - if the US enters a mild recession and recovers by the year-end and Singapore’s GDP growth rate is at the higher end of the MTI’s forecast of 4 to 6 per cent - the full-year increase in URA’s index could be 12-15 per cent.
For the next quarter, CB Richard Ellis is predicting a marginal rise in the index, of about one to 2 per cent from the Q1 level. It estimates that developers sold about 700-1,000 private homes in Q1, less than the 1,449 units they sold in Q4 last year.
Observers said that price gains in the OCR may have come from the secondary market, from completed developments like The Clearwater and Aquarius by the Park in the Bedok Reservoir area. The fact that a new launch in the area, Waterfront Waves, sold for an average price of about $800 psf could have encouraged the trend.
In the western part of Singapore, units sold at The Lakeshore and LakeHolmz in the Boon Lay vicinity may also have helped boost the sub-index for non-landed homes in the OCR, analysts suggest.
Knight Frank’s Mr Mak said that the 4.4 per cent gain in the CCR during Q1 was the lowest rate of increase in the past seven quarters.
As for the HDB resale price index, ERA Singapore assistant vice-president Eugene Lim predicts a full-year increase of not more than 10 per cent, compared with a 17.5 per cent jump in 2007.
Some demand may be taken away from the resale market because of a higher supply of new flats coming onstream, so resale prices may increase at a more measured pace in the coming months.
The HDB said in its release yesterday that the total planned Build-To-Order (BTO) supply of 6,100 new flats for Jan-Sept 2008 will surpass the annual BTO flat supply in 2007 (6,000 units) and 2006 (2,400 units).
HDB’s records show that in February 2008, about a quarter of resale flats were transacted at prices not exceeding $10,000 above market valuation.
Source : Business Times - 02 April 2008
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Analysts expect at least one quarterly dip this year
By KALPANA RASHIWALA
(SINGAPORE) Despite the quieter market, home prices continued to edge up in the first quarter, although at a slower pace, latest flash estimates show.
The quarter-on-quarter rate of increase in the Urban Redevelopment Authority’s price index for private homes decelerated to 4.2 per cent in Q1 this year, after a 6.8 per cent gain in Q4 2007.
Some property consultants are now factoring in declines for at least one of the remaining three quarters of this year, as the full impact of the US economic slowdown bites into the local property market.
URA’s flash estimate also showed that regional sub-indices for non-landed private home prices posted smaller gains all-round in Q1 this year than they did in Q4 2007. However, the 4.8 per cent increase in the Outside Central Region (OCR) in Q1 outpaced gains of 4.4 per cent in the Core Central Region (CCR) and 3.9 per cent in the Rest of Central Region (RCR) - for the first time in four years.
Jones Lang LaSalle said prices are steady in the CCR, supported by deep-pocketed investors, but may be peaking in the RCR, while demand continues to be strong in the OCR as en bloc sellers pick up replacement homes in the suburbs, where prices are relatively more attractive.
In the public housing segment, the Housing & Development Board’s flash estimate shows that the HDB resale flat price index rose 3.4 per cent in Q1 over the preceding quarter, again slower than the 5.7 per cent increase posted in Q4 last year.
Knight Frank director (consultancy and research) Nicholas Mak said that in a worst-case scenario - assuming the Singapore economy contracts in the coming months - URA’s overall price index for private homes could post a full-year increase of zero to 5 per cent.
This factors in one quarter of decline, to the tune of 0.5 to 2.5 per cent, possibly towards the end of the year. Any decline in the index would be the first since Q1 2004, Mr Mak added.
Mr Mak’s best-case scenario is for a 10-15 per cent full-year gain in the index, with increases in all four quarters.
URA’s private home price index rose 31.2 per cent in 2007.
Colliers International’s director for research and consultancy Tay Huey Ying too said that the Singapore property market is likely to experience the full impact of the US economic slowdown by Q3 or Q4 this year.
In a worst-case scenario, URA’s private home price index may rise 8 to 10 per cent for the whole of this year, with possibly a decline in the fourth quarter of not more than 4 per cent, Ms Tay said.
In a best-case scenario - if the US enters a mild recession and recovers by the year-end and Singapore’s GDP growth rate is at the higher end of the MTI’s forecast of 4 to 6 per cent - the full-year increase in URA’s index could be 12-15 per cent.
For the next quarter, CB Richard Ellis is predicting a marginal rise in the index, of about one to 2 per cent from the Q1 level. It estimates that developers sold about 700-1,000 private homes in Q1, less than the 1,449 units they sold in Q4 last year.
Observers said that price gains in the OCR may have come from the secondary market, from completed developments like The Clearwater and Aquarius by the Park in the Bedok Reservoir area. The fact that a new launch in the area, Waterfront Waves, sold for an average price of about $800 psf could have encouraged the trend.
In the western part of Singapore, units sold at The Lakeshore and LakeHolmz in the Boon Lay vicinity may also have helped boost the sub-index for non-landed homes in the OCR, analysts suggest.
Knight Frank’s Mr Mak said that the 4.4 per cent gain in the CCR during Q1 was the lowest rate of increase in the past seven quarters.
As for the HDB resale price index, ERA Singapore assistant vice-president Eugene Lim predicts a full-year increase of not more than 10 per cent, compared with a 17.5 per cent jump in 2007.
Some demand may be taken away from the resale market because of a higher supply of new flats coming onstream, so resale prices may increase at a more measured pace in the coming months.
The HDB said in its release yesterday that the total planned Build-To-Order (BTO) supply of 6,100 new flats for Jan-Sept 2008 will surpass the annual BTO flat supply in 2007 (6,000 units) and 2006 (2,400 units).
HDB’s records show that in February 2008, about a quarter of resale flats were transacted at prices not exceeding $10,000 above market valuation.
Source : Business Times - 02 April 2008
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Friday, March 28, 2008
Laguna 88 3 bedder Penthouse for sale - Singapore apartments and property real estate
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Laguna 88
- Penthouse 3 bedrooms easily convertible to 2 bedrooms
- Unblocked greenery view. Very bright unit and with a constant breeze due to its totally unblocked view.
- Private living room and small roof terrace on the 2nd level
- 2100sqft. Build in 2020sqft. Roof terrace 80sqft.
- Excellent move in condition.
- Very suitable for families and those who enjoy a tranquil and quiet environment.
- Excellent price. Asking only $1.15m
- Swimming pool, gym, clubhouse, bbq area, playground and multi purpose hall
- Address: 46 Eastwood Road
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