Check spike in office, property prices or lose competitiveness: MM Lee

Check spike in office, property prices or lose competitiveness: MM Lee

By Wong Siew Ying, Channel NewsAsia | Posted: 07 July 2007 2137 hrs


SINGAPORE: Check the spike in rents for office and residential space or risk losing out on competitiveness, said Minister Mentor Lee Kuan Yew.

Singapore, he warned, must never allow its rents to shoot up as high as those in Hong Kong.

Mr Lee made these points when he attended a Tanjong Pagar GRC community event at Orchard Road's Ngee Ann City on Saturday evening.

Orchard Road is buzzing, tourism is up, consumer confidence is evident at restaurants and food courts.

Last year, Singapore attracted 9.7 million visitors. This positive trend has continued into 2007.

Minister Mentor Lee, who noted all these when he and other MPs mingled with youths and young families from their constituency, said Singapore has done well and is now enjoying good economic growth and social development.

Its economy grew by 6.6 percent in the last quarter of 2006 and 6.1 percent in the first quarter this year.

This golden period could stretch over a few years, barring any wars or oil crises.

Mr Lee said: "The chances are, it'll be around 5 to 6 percent for the whole year. And for a mature economy like Singapore, with a per capita of over US$25,000, that's not bad at all. Once you have growth, all problems can be managed. When you have no growth and you have unemployment and no jobs, then all problems become intractable."

Investors are injecting funds into the East and Southeast Asia by investing in stock markets in the region.

Led by the growth of China and India, Mr Lee said the entire Asian region is getting a lift-up, with Singapore well-positioned to benefit from it.

He said: "The developed countries like America, Europe and Japan know that the growth for the world is in East Asia and in India, so they want to ride on this growth, and they are pouring money through fund managers, who are investing in stock markets of all the countries in the region. On average, ASEAN's stock markets have risen by 48 percent in the last few months."

And this has led to many financial institutions moving their top people and their regional headquarters to Singapore to manage the wealth, pushing up demand for high-end office and residential accommodation.

Mr Lee said: "Many homeowners who sold their condos in en bloc sales have received windfall gains. Some of them, in turn, are buying upper-end HDB executive and 5-room flats, pushing up their values."

Hence the need to check the spike in property prices to stay competitive.

Mr Lee added: "We are releasing more land for new office blocks and condos. While they are being built, we may have to make available other forms of office spaces such as the transitional office site at Scotts Road and release state-owned properties for office use to help keep rents from spiralling up.

"We must not allow our rent to shoot up like Hong Kong. As for residences, URA has assured us that there are more than 42,000 units of private housing being completed in the next three years."

As to whether there would be another Asian financial crisis, Mr Lee said even if there were a sudden withdrawal of funds like before, it would not be like the crisis of 1997.

This is because no Asian country today is heavily indebted in US dollars.

The minister mentor said how well an ASEAN country does during this golden period will depend on how sound it has become for foreign investments.

And he has noted that China has been getting the largest inflow, about US$70 billion a year, with India attracting about over US$10 billion a year.

Singapore has kept up its FDIs (foreign direct investments) at around S$6 billion to S$7 billion. Other Southeast Asian countries are also getting increasing FDIs, although they have not recovered to their pre-Asian crisis levels.

Looking ahead, Mr Lee said Singapore's future has been envisioned as a city with night buzz – with more liberal arts and entertainment scenes, and upcoming attractions like the integrated resorts and the first-ever Formula One night racing in the world.

Mr Lee believes that in the next five years, Singapore will be transformed into one of the most vibrant cities in this part of the world.

But some of the challenges that need to be tackled include ageing, working beyond retirement age, keeping medical costs down and narrowing the income gap.

Still, he is confident that an experienced team of ministers is getting Singapore's policies set in the right direction.

And the young in Singapore will have a bright future.

He added: "If we maximise our opportunities in this golden period, in five years' time, we will have a more vibrant, cosmopolitan Singapore that is not only clean, green and safe, but also a city that is fun to work and live in for Singaporeans and for the many foreign professionals and their families."


- CNA/so

July 8, 2007

Check property prices to stay competitive: MM

His comments come on the back of recent Government moves to cool red-hot market

By Aaron Low


RISING property prices and rents have to be kept in check, or Singapore will lose its competitiveness, Minister Mentor Lee Kuan Yew said last night.

In the strongest comments yet from a minister on the red-hot property sector, he said Singapore 'must not allow our rents to shoot up as in Hong Kong'.

Property analysts say prime office rents in the territory average $25 to $30 per sq ft - almost double that of Singapore.

Mr Lee, who was speaking at a Tanjong Pagar GRC event, noted that Singapore had attracted many foreign professionals, especially top financial executives, and this was contributing to a demand for office and residential space.

Foreign institutions have been moving their people and headquarters here to manage the wealth flowing in from the Gulf states, the United States, the European Union and Japan.

'Demand for high-end office and residential accommodation has increased,' Mr Lee said.

'Many homeowners who sold their condos in en bloc sales have received windfall gains. Some of them in turn are buying upper-end HDB executive and five-room flats, pushing up their values.

'We must check this spike in rents for office and residential space or we will lose our competitiveness.'

Mr Lee's remarks come on the back of a series of recent steps by the Government to cool a property sector that has seen office rents and property prices soaring.

There has been concern that rising rental costs may erode Singapore's attractiveness as a business centre.

On Monday , the Urban Redevelopment Authority (URA) assured potential home buyers that there were more than 42,000 units of private housing being completed in the next three years.

On Wednesday, it released a plot of land next to Newton MRT station to be developed as temporary office space. More such sites, where low-rise offices can be built quickly, will be released if the move is popular.

According to one property consultancy, prime office rents in May jumped by 85 per cent compared to a year ago.

The Government also announced that Jurong and Paya Lebar - with potentially cheaper office space - have been designated as new business hubs.

The URA also took the unusual step of advising the public to interpret rental projections by consultants with caution.

It was referring to a report by a property firm which warned that Singapore's office rents could surpass Hong Kong's by the end of next year.

In his remarks yesterday, Mr Lee also noted that the Government was releasing more land for office blocks and condos.

Property analysts contacted last night saw Mr Lee's comments on the steps that the Government had been taking as a reassurance to the market over rising prices.

They believed that the Government's measures thus far were adequate.

Knight Frank's director for research and consultancy, Mr Nicholas Mak, said the signals from the Government were 'not to panic'.

'Last week we had URA do a few things. Now, Mr Lee is giving an assurance that the Government has the sector under control.'

Mr Lui Seng Fatt, regional director at Jones Lang LaSalle, believes that rents and property prices here are currently far from the levels in Hong Kong.

'On average, prime office space in Hong Kong may be $25 to $30. It is about $12 to $15 here,' he said.

'That's a 70 per cent difference and does not take into account the measures the Government is taking to address the issue.'

[email protected]