The Age

Nicole Lindsay
May 14, 2012

A handful of bumper results and strengthening auction clearance rates put some life back into Melbourne’s struggling auction market at the weekend.

The auction clearance rate hit 63 per cent, a number not seen since February when demand, pent up after the summer holidays, boosted activity.

The rate from the Real Estate Institute of Victoria was based on 591 reported auctions with 63 results still outstanding.

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REIV spokesman Robert Larocca said the steadily improving clearance rate showed there was resilience in the market.

Four properties sold for more than $4 million, three of them in the Boroondara area, and three of them under the hammer.

It’s a sign of growing confidence at the top end of the market and in the economy, despite the political imbroglio over the federal budget.

RT Edgar director Jeremy Fox, who sold this week’s biggest-selling house, in Toorak, said the Reserve Bank’s move to cut interest rates by 50 basis points two weeks ago was a factor.

”The fact that interest rates are not going up but going down gives a lot of confidence. If people have businesses – and they’re the ones buying the big houses – they get nervous when interest rates are going up and they pull back,” Mr Fox said.

”I’m finding things are stabilising and there is more confidence coming back into the market.”

National Australia Bank chief executive Cameron Clyne reckons there will be further interest rate cuts during the year.

”We are likely to see a further 50 basis points in the course of the year,” Mr Clyne told the ABC yesterday.

Any further fall in house prices depended on the unemployment rate, he said.

”If there is going to be a fall it’s going to be very moderate and the economy has been able to absorb the house price declines to this point,” he said.

Last week, the Australian Bureau of Statistics revealed an increase of 15,500 jobs last month and a 0.2 percentage point fall in the unemployment rate to 4.9 per cent.

Jellis Craig director Alastair Craig said the Boroondara market was performing strongly.

On Saturday he auctioned two of the highest-priced properties, a new French provincial-style house at 20 Fellows Street in Kew’s Studley Park precinct for $4.4 million, and a renovated Edwardian at 6-8 Fitzgerald Street in Balwyn. ”It’s not often you get to knock down two $4 million-plus property on the one weekend,” Mr Craig said.

”And we sold five out of five properties over $2 million. People have been talking down the $2 million-plus a bit but to have five out of five shows it’s coming back.”

Mr Craig said the buyer of the Balwyn property had decided to go to the auction that morning and was unknown to the agents.

The house was on a large 1786-square-metre double block and had a pool and tennis court.

It seemed the buyer had just started house hunting and had already found his quarry.

”It’s hard to buy a four-bedroom fully renovated house in this area – with pool and tennis court – for under $4 million,” he said.

Simon Johanson, Miki Perkins
May 14, 2012

As Melbourne grows taller and increasingly dense, more residents are losing their view and even access to light and fresh air.

IN REAL estate parlance Michael Smolders is living with a ”borrowed view”. Over the next few years the sweeping outlook across Port Phillip Bay from his 27th-floor apartment in Southbank will change for the worse – and there’s nothing he can do about it.

”The sun comes over the river and sets behind the West Gate Bridge,” he says wistfully, looking out through his floor-to-ceiling living room window.

Smolders is unhappy about the future of his view because although planning guidelines for Southbank stipulate there should be a minimum of 25 metres between high-rise buildings, Planning Minister Matthew Guy has approved a 71-storey platinum glass tower that will be only 10 metres from his living room couch.

Despite guidelines recommending a height of only 160 metres, Smolders’ new neighbour will soar 276 metres to become Australia’s third tallest building, only 21 metres shorter than the nearby Eureka Tower.

Losing his view is upsetting, but that is not what concerns him most. He says nearly half of the $274 million Queensbridge tower’s 592 luxury units will look into his lounge room and bedroom, or into the living spaces of his 250 neighbours in his building, Freshwater Place.

”Who would want to be staring at a neighbour 10 metres away and not have another room to go to, to look out at something else?” the marketing executive says.

”You can’t guarantee property prices or views but … depriving people of their basic right to sunlight and amenity is just outrageous. Why would anyone in their right mind want to buy an apartment that’s facing me in Freshwater Place? I don’t get it.”

Developers are squeezing taller buildings onto smaller blocks as prime city sites become scarcer. Nearly 7400 apartments are under construction in the CBD, Southbank and Docklands, with another 5100 advertised across the city, according to analysts Charter Keck Cramer.

And there’s more like Queensbridge tower to come.

Planning decisions for city buildings larger than 25,000 square metres in the capital city zone – which includes the CDB, Docklands and Southbank – rest solely with the minister. While that allows government to fast-track developments, it has also led to previous planning ministers being accused frequently of pushing through unpopular projects.

Over the past 10 years, the central city’s population has grown rapidly, as have the number of apartment buildings, which continue to get taller.

Melbourne City Council says that by 2030, if all underutilised land is developed, the central city’s population could double to 208,000.

But as the city mushrooms, the high-rise boom is pitting residents against developers in a system that residents say is skewed against them. ”We have no rights,” says Peter Renner from the Freshwater Place management committee.

Usually in suburbs across Melbourne, developers and home owners alike are required to advertise prospective changes to their property and inform neighbours.

But in the city, there are no such requirements, and residents say this underlines the shortcomings of planning rules in the CBD and the problems being caused by increasing density. ”We have no access to object through the Victorian Civil and Administrative Tribunal,” Renner says. ”We have tens of thousands of people living in the capital city zone and yet these rights are denied us. It’s the older-age people who have invested their life savings in Freshwater Place that are going to be the ones who suffer because they’ll have no privacy and no access to sunlight or daylight.”

Renner says Guy has treated the planning system and Freshwater Place residents with disdain by approving the Queensbridge skyscraper.

But Melbourne Council planning committee member Ken Ong says residents do not have any ”right” to a view. ”If you choose to live in the city and there are empty spaces nearby, don’t expect them to stay empty for ever. Someone will build on it,” he says. ”If you buy a house in an area that says maximum two storeys, then you’re fine. If you buy in the city that says height limits are discretionary, you take the risk.”

He says the city council is about to finalise a 20-year plan setting out what kinds of buildings can be built where and how high they can go.

The question many residents and planners are asking is how close can skyscrapers be to each other?

Melbourne architect Callum Fraser says the key is how the neighbouring buildings are designed.

”There are many ways of achieving that sharing of light, views and ventilation and not necessarily having 25-metre spaces between the buildings,” Fraser says.

He says the trend towards taller, narrower buildings on smaller blocks will make Melbourne more like an Asian city, which will require the government to be more flexible with planning controls. ”Planning policies and expectations need to adjust as cities move forward.”

A similar story to that of Freshwater Place is unfolding across the Yarra River, in another of Melbourne’s development-intensive locations.

Michelle Ong (no relation to Ken Ong) will not only lose ”borrowed” views, but light and air too.

Looking west from her balcony in the modest ninth-floor flat on the CBD’s northern edge that she bought four years ago, the treetops of Flagstaff Gardens are still just visible through the cranes and concrete of a 36-storey tower rising from 350 William Street.

South of her one-bedroom unit is the roof of a two-storey art deco building, which is hemmed in on its other side by another high-rise.

The space above Ms Ong’s art-deco neighbour is the sole source of light and fresh air for her apartment and the apartments of 48 other residents in her building.

Ong knew the art deco building might be redeveloped one day and accepted it as a part of life in the CBD. But she and other residents were shocked by the eventual proposal: a 32-storey apartment tower just centimetres from the side of their own 25-storey building that would enclose all their balconies inside a 20-storey-deep shaft that they would have to rely on for all their natural light and ventilation.

It has embroiled them in a dispute with the developer that has cost them $25,000 so far.

City of Melbourne planners, worried it would set a precedent, have rejected the draft plans. But even under altered plans contested at VCAT last week, Michelle Ong will be able to lean into the three-metre gap between the buildings and converse with her new neighbours.

”Sunlight is the very basic thing for all of us,” she says.

”I didn’t think that this would happen. I come from Malaysia where the laws about building aren’t good. I always thought in Australia we would have more protection, more rights.”

These battles over views, light and air are having an impact on the value of the existing properties that are affected by development.

Property valuers Opteon say that some apartments in Freshwater Place may lose 10 per cent of their value, depending on their aspect. ”Buyers will become more sophisticated as to what views are protected and what aren’t,” says valuer Matthew Baxter. ”They’ll no longer just accept that the view that’s potentially in front of them is the view that they’ll keep.”

But a sweeping city or river vista can make or break a project and that’s why some developers are not leaving the security of that view to chance.

Using ”air rights” – buying the space above a building – to protect views is not common in Australia, but there are several high-profile examples in the US, including that of media tycoon Donald Trump who bought the air rights of neighbouring properties to protect views from his Trump World Tower.

Late last year developer Michael Yates took legal action to protect the ”million-dollar” river views of his Claremont development in South Yarra after trying to buy the ”air rights” of a neighbouring building.

The developer had offered $250,000 to residents of 19 Yarra Street, a two-storey building next to Melbourne High School, for the ”airspace lot” above their roof on the condition that they did not object to his development next door.

They declined, saying their objections were not over the price of air rights, but because his proposed development would remove their own ”right” to redevelop their block.

BUT Yates had earlier bought a $650,000 top-floor apartment in their building, which gives him veto rights – like other residents – over attempts to redevelop it.

He then subdivided that apartment into two lots: one with a horizontal boundary to the roof and the other to include all the airspace above the roof as well as an easement – or property right – for ”light and air” that was in favour of the owners of his new development next door.

”There’s only one buyer for the airspace rights and that’s the adjoining owner,” Yates says.

The local council eventually approved the 26-storey Claremont apartment block. It also ruled that the unsuccessful attempt to buy the ”air rights” over the neighbouring building to secure unimpeded river views was a commercial rather than a planning matter.

But experts say the battle for, and use of, air rights is likely to become more common as Melbourne continues to grow upwards and outwards.

In Fitzroy, developers Neometro are building and selling a $15 million three-storey addition on top of the heritage-listed Panama House in Smith Street. The work will keep intact the entire existing structure underneath.

Melbourne University planning expert Dr Alan March says Australia’s planning system has long been subservient to individual property rights, but as development intensifies, planners will need to regulate decisions – such as air rights or rights to a view – that affect large numbers of people. That will make the planning system much more complex, he says.

As it stands, it’s a case of buyer beware. ”People must learn to take responsibility to check all this out. It’s something people should be aware of,” March says.

But Michael Smolders says he did all the necessary research and that based on the present planning guidelines he knew any development of the neighbouring Queensbridge tower site could not be higher than 160 metres. What he could not predict, he says, was the minister’s decision to override existing guidelines.

”Inevitably we’re going to find as Melbourne builds up and we have these high-rise areas that people are going to be very disappointed to find their apartment now looks inside somebody’s bedroom,” says Michael Buxton, a planning expert at RMIT University.

”The capital city zone is not an oversight, it’s a deliberate intent – the designers of that zone didn’t want objectors getting in the way of development,” he says.

”They [developers] argue, of course, that people had the right to object when the zone was brought in, but the problem with that was that happened in the late ’90s.”

Some city dwellers are now fighting back, and have launched a website campaign called residentswithoutrights.com.au.

”If you’ve got developers coming in and riding roughshod over the existing and planned guidelines, it’s going to make residents and investors think twice about what might happen to the block next door to them,” says Peter Renner.

Architect Callum Fraser says that while tension around views is difficult, the unfortunate reality is that people are relying on a view over somebody else’s land.

”Welcome to the city,” he says.

Oliver Hume Research

Andrew Perkins. National General Manager – Research

In Victoria, multi-unit activity should remain relatively strong for the balance of the financial year, albeit falling from its peak last year when some 24,400 dwellings were approved.

Approvals are likely to be underpinned by the continuing presence of owner-occupier buyers.

At its peak, multi-unit activity made up 41 per cent of all Victoria dwelling approvals: up from 31 per cent in 2009/10, and 23 per cent in 2005/06.

In 2011/12, multi-unit approvals are forecast to slip back to around 15,900 or 35 per cent of all dwelling approvals.

A key driver within the multi-unit segment in Victoria has been high-rise apartments.

High-rise apartment approvals peaked in 2010/11: just over 60 per cent of all multi-unit dwelling approvals and 41 per cent of total approvals.

Three-storey walk-ups made up 7 per cent of all multi-unit approvals.

In 2011/12, high-rise approvals are likely to slip back to around 17 per cent of all approvals; around 8,000 approvals: down from some 15,000 last year and about the same as in 2009/10.

Click here to download the Article

Chris Tolhurst
May 12, 2012

The Reserve Bank’s latest action could create some movement at the entry level.

The latest 50-basis-point cut in the cash rate by the Reserve Bank looks set to stimulate sales, a welcome move that could push up prices in at least two key property categories.

Analysts expect buyer demand for entry-level properties priced less than $600,000, and inner-city period houses priced up to $1.2 million, to move up a notch or two in coming weeks.

Investors target sub-$600,000 properties heavily. Many believe, rightly or wrongly, it’s better to own three $400,000 units than one house worth $1.3 million.

First-home buyers have been increasingly active in the affordable property sector since January. Given young home buyers and investors are locking horns to buy in this price bracket, the Reserve Bank’s double rate cut is likely to increase the competitive tempo and boost prices.

A senior economist with the Fairfax-owned Australian Property Monitors, Dr Andrew Wilson, says investors focus on entry-level property to minimise capital inputs.

”Most investors are small investors and would rather build a portfolio of four or five cheaper properties than buy one big one and be exposed in the market,” Dr Wilson says.

”In most city markets, first-home buyers have come back because they have to – they have to live somewhere.”

By contrast, there has been a hiatus in investment activity during the past 18 months.

Investors have been quiet because there have been affordability barriers at the entry level, Dr Wilson says. Also, bank deposit rates have been high, which has encouraged many potential buyers to bank their funds rather than invest in bricks and mortar.

Now that deposit rates are heading south on the back of the RBA’s cuts to official interest rates since November, it’s going to be a lot more tempting for the cashed-up to invest.

The pressure to buy will only intensify if large numbers of investors accept the growing chorus of claims from property commentators that the market has bottomed.

There are signs this is occurring. The managing director of Wakelin Property Advisory, Monique Sasson Wakelin, says interest rate cuts tend to have a disproportionate benefit for investors and home buyers because of the high level of borrowings and interest rate sensitivity in the property sector.

She says the latest cut comes at a time when city markets are entering a new property cycle after 18 months of sluggish performance, including a 5 per cent to 10 per cent national decline in values across the residential sector.

”Following the two cuts in November and December, I expect the 50-basis-point cut to magnify the cyclical upswing in the property market, delivering price growth at some point in 2012,” Ms Wakelin says.

”I expect the boost to be felt most in the lower, sub-$600,000 price range. This is where home buyers and entry-level investors usually have the least equity, so are most sensitive to changes in interest rate settings.”

Dr Wilson believes investors are yet to re-enter the market in large numbers. ”I think what they need are clear signals of capital gain,” he says.

Evidence of a new cycle in price growth could be waiting in the wings if the cuts to official rates – about two-thirds of which are being passed on to borrowers by the banks – work to push up prices.

There is firm evidence the market is lifting at the bottom level, a shift which is affecting positively mid-priced properties, particularly smaller inner-city period houses.

Ms Wakelin is confident the latest rate cut will spur into action home buyers wishing to trade up.

”Reduced borrowing costs will increase the likelihood of upgraders paying more to secure the property of their choice,” she says.

The Age

May 10, 2012 – 1:24PM

The jobs figures look great, but don’t take them too seriously. Between the lines, that’s the assessment of Employment Minister Bill Shorten, and he’s absolutely right.
If you believe them, the seasonally adjusted jobs figures show unemployment plunged in April from 5.2 per cent to 4.9 per cent, the lowest for a year. Employment grew by 15,500, the first time in six months that we’ve had jobs growing for two months in a row.
As Shorten said, that is a surprise. The headlines are full of job losses at this or that firm. Job ads plunged 3 per cent in the month, and business surveys showed more employers planning to cut staff than to hire them.
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At face value, Shorten was quick to point out that the figures show more Australians have a job than ever before, and that the benefits of the mining boom are flowing throughout Australia.
But he added that much of the economy is still soft, particularly in Victoria and Tasmania, and the jobs figures bounce around. Indeed, in the past year, the Bureau’s monthly jobs figure has gone down, up, down, down, up, up, down, down, up, down, up and up. You’d have to expect the next move to be down.
The government is sticking to its forecast that unemployment in the June quarter will average 5.5 per cent, which implies a nasty rise ahead. And the history of the figures suggest that’s very likely.
The Bureau keeps warning us not to focus on the seasonally adjusted figures, because even in a survey as big as this, month-to-month changes are impossible to measure accurately. All it says is that it is 95 per cent confident that the real movement was somewhere between a gain of 70,000 jobs and a loss of 39,000 jobs.
The state figures are even more volatile, and untrustworthy. In Victoria, the seasonally adjusted unemployment rate went from 5.4 per cent in February to 5.8 in March, and then back to 5.3 per cent in April. In Tasmania, unemployment on that measure jumped from 7 per cent in March to 8.3 per cent in April.
The Bureau urges us to focus on its trend figures, which smooth out the volatility. The estimate that jobs are now growing by about 10,000 a month, with unemployment steady at 5.1 per cent. That’s probably the most accurate figure in today’s release.
That is encouraging, given the prominence of job losses in manufacturing, retailing, banking and government. But even the trend figures can change direction from month to month. Treasury is not expecting a serious jobs recovery until 2013.
In trend terms, unemployment at state level in April ranged from 7.7 per cent in Tasmania to 3.9 per cent in WA and 3.3 per cent in the ACT.
The other states were closely bunched: 4.9 per cent in NSW and the Northern Territory, 5.2 per cent in South Australia, 5.3 per cent in Queensland and 5.5 per cent in Victoria.

Jobless rate in surprise fall
Chris Zappone
May 10, 2012 – 11:30AM

The employment picture may not be as grim as many think.
Australia’s jobless rate surprisingly fell to the lowest in a year last month, reducing the likelihood that the Reserve Bank will cut interest rates again next month.Jobless rate lowest since April 2011. Part-time jobs eclipse loss of full-time roles.

Australia’s unemployment level in April came in at 4.9 per cent, according to the Australian Bureau of Statistics. Economists had tipped the jobless rate to increase to 5.3 per cent from 5.2 per cent in March.

“It’s generally stronger than expected,” said RBC Capital Markets economist Su-Lin Ong. “You’ve got another reasonable gain in employment and while the previous month was revised down, the last couple of months have been decent.”

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The economy added 15,500 jobs last month – better than the 5000 jobs analysts had been tipped companies would shed. The net gain, though, was entirely the result of 26,000 part-time positions being created, with employers actually cutting 10,500 full-time roles in April.

The unexpected drop in the jobless rate is likely to cheer Treasurer Wayne Swan as he continues efforts to promote this week’s federal budget. The budget is based on a jobless rate of 5.3 per cent by the end of June, rising to 5.5 per cent by June 2013.

Rates view
The dollar jumped on the jobless rate reduction, adding half a US cent to trade to rise above the $US1.01 mark. Investors are betting that the better-than-forecast employment result reduces the need for the RBA to follow up with another interest rate cut when it meets on June 5.

RBC’s Ms Ong said the RBA would likely delay the next rate cut based on today’s jobs figures. She also said the market was anticipating too many rate cuts, prior to today’s data release.

Financial markets, though, are still tipping the central bank will follow up last week’s 50 basis-point rate cut next month. The chance of a further 25 basis-point reduction is about two-in-three, down from a 95 per cent likelihood before the jobs figures landed.

‘Pinch of salt’

While the headline figures were surprisingly strong, some economists queried whether they reflect the strength of the underlying economy.

“It’s a monthly number so we have to take it with a pinch of salt,” said ANZ senior economist Justin Fabo.

“We still think overall labour market conditions are soft, the job ads are telling us that,” Mr Fabo said.

“The participation is rate is down over the year,” he said. “Some of the fall in unemployment rate is related to the structural change story.”

Victoria leads

The state-by-state jobless rates may also baffle some commentators.

Despite a slew of job losses in the manufacturing sector lately, the unemployment rate in Victoria plunged last month to 5.3 per cent from 5.8 per cent in March, seasonally adjusted, the ABS said.

New South Wales, the most populous state, saw the jobless rate tick higher to 4.9 per cent from 4.8 per cent in March.

ANZ’s Mr Fabo dubbed the 23,000 jobs created in Victoria ‘‘pretty unbelievable’’ given other reports on the health of the state’s economy.

In Western Australia, the jobless rate slid to 3.8 per cent from 4.1 per cent over that time, while in Queensland, it dropped to 5.1 per cent from 5.5 per cent, the ABS said.

In South Australia the unemployment rate was steady at 5.2 per cent over the two-month period, while in Tasmania it soared to 8.3 per cent in April from 7 per cent in March, the ABS said

Hours, participation

The ABS report also showed aggregate hours worked by employed people in Australia rose by 0.4 per cent in April, seasonally adjusted, after a fall of 0.7 per cent in March.

Aggregate hours worked in April 2012 were 2.6 per cent higher than in April 2011, after a rise of 1.4 per cent between April 2010 and April 2011.

Helping the unemployment rate drop was a fall in the ratio of people of working age actually looking for work.

The April participation rate was 65.2 per cent, compared with a downwardly revised 65.3 per cent in March.The participation rate was forecast to be 65.4 per cent.

More to come

The Age

John Collett
May 9, 2012

With some luck the Reserve Bank’s three interest rate cuts since November last year should help produce a sustainable recovery in Australian shares.

The performance of Australian shares affects not just those with direct shareholdings, but just about everyone through their superannuation funds’ typically high exposure to Australian equities.

Australian stock prices, excluding dividends, have been pretty much flat over the past year, but have performed more strongly since the start of this year, up about 7 per cent. While cuts to interest rates can help sharemarkets, there are other factors at play.

Sectors such as retail and manufacturing are struggling, and consumer confidence remains low, with consumers reluctant to take on debt.

The constant shedding of jobs and higher costs for things such as utilities and insurance don’t help.

Foreign holders of Australian shares pull their money out rapidly whenever the outlook on global economic growth turns gloomy because the performance of Australia’s resources-dominated economy is closely tied to the demand for its resources. The high Australian dollar has also been working against higher Australian share prices as it makes Australian shares more expensive for overseas buyers.

But last week’s 0.5 percentage point rate cut immediately caused the value of the Australian dollar to fall against the US dollar, thereby making our shares a bit cheaper for foreign buyers.

Lonsec’s head of equity research, Bill Keenan, thinks Australian shares could be ready to rebound. He thinks last week’s rate cut, and likely further cuts to come, could see the Australian market, as measured by the All Ordinaries Index, reach 5000 points by the end of the year from about 4500 now.

”History shows that a period of successive rate cuts nearly always leads to a strong rally in Australian equities,” he says.

Lower rates should help economic growth and a lower dollar should boost exports. Lower interest rates on cash, term deposits and bonds should cause investors to switch out of these investments into shares, he says.

By iProperty | Property Blog – Tue, May 8, 2012

By Sheena Chua
43 years. That is the number of years that an average Singapore resident needs to pay for a luxury home in the city-state.
The figure was revealed in a Bloomberg report about the growing disparity between incomes and housing prices in emerging markets. The report, which compared national income averages against the prices of homes in prime locations, concluded that Mumbai was the world’s least affordable home market. Singapore placed last among the 14 countries ranked, behind other Asian cities like Jakarta (61.7 years), Bangkok (67) and Hong Kong (96.4).
In Singapore, a typical piece of luxury property spanning 100 sq m (about 1,076 sq ft) costs about US$2.71 million (S$3.38 million)—roughly 43 times the nation’s average annual income. This means that at an average price of S$3,149 per sq ft, a luxury home here would require an average resident with a typical per-capita purchasing power of US$59,900 (S$74,679) more than half his life to pay off.
Calculations were based on property consultancy firm Knight Frank’s housing index, which compiled information from 63 different housing markets, as well as the US Central Intelligence Agency (CIA) World Factbook’s gross domestic product (GDP) per capita estimates for 2011.
The GDP per capita estimates are based on the per capita purchasing power parity of each country, which compares how much money is needed in each country to buy similar baskets of goods and services.
CIA World Factbook estimates put Singapore’s 2011 per capita purchasing power at around US$59,900 (S$74,679); while Knight Frank’s Wealth Report 2011, released early April, revealed that prices of Singapore’s luxury home segment has reached US$27,100 per sq m (S$3,149 per sq ft) as of last year.
In other words, a prime location property in Singapore costs about 43 times the city-state’s average annual income. Based on the average Singaporean life expectancy of 81.3 years (based on World Bank statistics), the average Singapore resident could be paying for his luxury home for more than half his life. This is, of course, not taking into account other costs of living like utility bills and daily expenses.
Speaking to Bloomberg of the findings, head of residential research at Knight Frank Liam Bailey noted that it is not unusual for developing countries to experience such disparities in wealth. He said, “There are big differences in wealth levels in emerging markets compared to the developed world, which is part of the course for economic development. In the first phase of growth some people make big fortunes, it takes time for this to trickle down as the middle class develop and generate their own wealth.”
While Singapore may not be the anywhere near the ten most expensive luxury home segments in the world, we could be well on our way there. The Wealth Report 2011, compiled by Citi Private Bank and Knight Frank, revealed that the country’s luxury housing segment charted an 18% price growth—the third largest hike of the year.
However, the fact remains that over 80% of the Singaporean population still live in public housing. Most homebuyers have to take out housing loans to fund their purchases, and tolerance for surging home prices—even those not in the luxury home segment—are thinning.
These observations suggest a growing income gap between Singapore’s middle-class and ultra-rich, and that Singapore still has a long way to go before the majority of its residents can splurge on luxury homes.

Aussie bonds fall to lowest since 1950s
May 9, 2012 – 3:20PM

Investors continued to rush Australian government bonds in the wake of last night’s budget, sending Canberra’s borrowing costs to a record low.

Debt market pundits welcomed the Gillard Government sticking to a commitment to keep a large stock of bonds on issue, even as its need to borrow fresh funds falls away as it returns to a budget surplus.

Canberra is planning to sell $11 billion in net new Commonwealth government bonds over the 2013 financial year, a sharp slowdown from the pace of overall government issues over recent years.

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Treasury bond issuance in financial 2013 is expected to be around $35 billion. But after accounting for maturities of $26 billion this represents net issuance of $9 billion, the Australian Office of Financial Management said this morning.

In addition, the government plans to issue $2 billion of Treasury Indexed Bonds in financial 2013, that is bond where interest is linked to inflation, the AOFM said.

The total stock of Commonwealth Government bonds on issue is expected to be $235 billion by June 2012, but with the new issuance this will rise to $246 billion.

Even as stresses swept through Europe’s credit markets overnight, Australian 10-year bond yields fell to record lows. They were last quoted at $120.43 each, implying a yield of 3.36 per cent, down five basis points overnight, to levels not seen since the 1950s.

Australia’s net debt is expected to peak around 9.6 per cent of GDP before falling towards 7.3 per cent over the next three years.

“If anything Australia could run a larger deficit than what is being signalled by AOFM issuance plans and suffer no ratings consequences or lose market confidence,” said Societe Generale interest rate strategist Christian Carrillo.

“After this budget Australian bonds are likely to continue enjoying a ‘safe haven’ status in international markets,” Mr Carrillo said. Australia is one of just eight of countries in the world to have a ‘AAA’ credit rating, underpinned by its low levels of debt. Australian government bonds have been snapped up by offshore investors in the past year as they look to park funds in the relative safety of the Australian economy.

The government said it plans to keep the Australian government bond market at between 14 per cent to 16 per cent of GDP.

The Government outlined plans to increase its debt ceiling by $50 billion to $300 billion as part of efforts to provide vital liquidity to the Commonwealth government bond market, it said the move was crucial to supporting broader activity across futures and debt markets.

Channel News Asia

By Linette Lim | Posted: 07 May 2012 2153 hrs

SINGAPORE: The seeds of the next financial crisis could be sown even before the current one is completely over.

That’s the warning from some experts at a conference on asset price bubbles in Singapore at the Singapore Management University.

However, they noted that crisis could be averted, if central banks did a better job of communicating their policy stance to the market.

Property price bubbles are in part driven by uncertainty about savings.

And this happens easily in a global environment of low interest rates, with investors seeking out higher-yielding assets.

However, China has managed to rein in property prices, with clear signals from authorities.

David Fernandez, managing director and head, Emerging Asia Research, JP Morgan, said: “The numbers come out, its down, and we all look around and say, ‘is it down enough? Are they going to stop this yet?’ And then you have another speech that this is still a policy priority… So in this case, it’s having a bubble come down with a direction stated by the policymaker.”

But not all policy messages are well received by the market, as in the UK recently.

James Mirrlees, Emeritus Prof of Political Economy, University of Cambridge, 1996 Nobel Laureate in Economics, said: “The Chancellor of the UK was saying ‘Please banks, lend more’. And I think that clearly counts as a not very effective macro-prudential policy, although it is very clear and might well be regarded as very predictable.”

Macro-prudential policies also include lowering the loan to value ratio of housing loans – to prevent risky borrowing by individuals.

These measures – along with punitive taxes for housing transactions – have been adopted by administrations in Hong Kong and Singapore to stem sharp property price increases.

Some experts said this is a problem that comes with success.

David Mayes, BNZ Professor of Finance, University of Auckland, said: “Singapore is an extremely successful economy – you’ve got to live with it. This is going to be reflected in that your wealth is going to go up compared to other people.

“Some of this is going to happen in prices. If you’re not allowing it to happen through the exchange rate, it’s going to happen through domestic prices.”

As economies prosper, experts said it is only natural that people look to spend money to improve their standard of living.

But other policy tools – such as transfers to the poor – are needed, to even out the distribution of wealth.