Wednesday, April 29, 2009

Designing the Tata Nano - The World's Cheapest Car

World's cheapest car goes on show (Topic - Cost of Production)

See key features that make the Tata Nano so cheap.

Apr 9, 2009 - DELHI - Tata Motors has unveiled the world's cheapest motor car at India's biggest car show in the capital, Delhi.

The vehicle, called the Tata Nano, will sell for 100,000 rupees or US$2,500 (£1,277) and enable those in developing countries to move to four wheels.

The four-door five-seater car, which goes on sale later this year, has a 33bhp, 624cc, engine at the rear.

It has no air conditioning, no electric windows and no power steering, but two deluxe models will be on offer.

Tata will initially make about 250,000 Nanos and expects eventual annual demand of one million cars.

The price will be slightly more than the 100,000 once tax and other costs are taken into consideration.

The Nano release comes as India's domestic car market is predicted to soar in the coming years on the back of the country's fast-growing economy and increased consumer wealth.

'People's car'

Indian car sales are predicted to more than quadruple to $145bn by 2016.

Company chairman Ratan Tata said the launch of the Nano was a landmark in the history of transportation.

He said the car was "a safe, affordable and all weather transport - a people's car, designed to meet all safety standards and emissions laws and accessible to all".

Environmental critics have said that the car will lead to mounting air and pollution problems on India's already clogged roads.

But Tata said the car had passed emission standards and would average about 50 miles to the gallon, or five litres per hundred kilometres.

The firm also said it would introduce a diesel version of the Nano at a later date.

'Family transport'

At the unveiling ceremony Mr Tata said: "I observed families riding on two-wheelers - the father driving the scooter, his young kid standing in front of him, his wife seated behind him holding a little baby.

"It led me to wonder whether one could conceive of a safe, affordable, all-weather form of transport for such a family.

"Tata Motors' engineers and designers gave their all for about four years to realise this goal.

"Today, we indeed have a People's Car, which is affordable and yet built to meet safety requirements and emission norms, to be fuel efficient and low on emissions."

Ravi Vangala, of Hyderbad, India, said: "I... congratulate Tata for his dream, and I will definitely buy the Tata Nano car."

  1. Identify the fixed and variable costs that goes into making the Tata Nano.
  2. How did Tata manage to cut the costs of production in making the Tata Nano?


Friday, April 24, 2009

Recession: Who Gets Hit and Who Doesn't?

Guiding Questions
  • Identify the factors affecting the sales of fast food chains such as McDonalds.
  • To what extent are elasticity concepts relevant for explaining the current situation faced by these firms?


Thursday, April 23, 2009

Videos: Elasticity of Demand

Some videos used or mentioned in the H2 lectures

Learn Price Elasticity of Demand (PED) from the contrasting examples of Pedro the fishmonger and the Island ferry company.

Application of Price Elasticity of Demand and Cross Elasticity of Demand - Fake Disneyland in Beijing? Is this a close substitute to the "real thing"? Should the "real" Disneyland in Hong Kong differentiate itself from this amusement park? Why and why not? What strategies can they employ to tackle the challenge posed by other amusement parks such as this one?

Income Elasticity of Demand - Look at how luxury goods are affected by the global economic downturn. What determines the impact of the recession on a particular product?


How I Studied (or at least tried to make it pain-free)

I recently took two 3-hour long essay-based exams, part of the part time Masters programme I'm currently doing at NTU.

I'm still in my first semester (out of 5) but I've gained some "wisdom" that I thought may be worth sharing with you, especially if you are one of those not "coping" so well at this moment with your studies, or have always wondered if you were studying "right".

Doing a part time Masters programme is actually rather painful... Although the lessons are only twice a week, they are three hours long (with a 5 mins break in-between), in the evenings from 6.30 to 9.30pm after a long day of work, and there are tonnes of readings to be done, everything from 30 to 60 pages of journal articles per week.

At the same time, there are long written assignments (2500 words) to be completed, with bibliography and all; class discussions which we have to participate in as they are graded, as well as individual 1 hour long presentations to be done, in which we also have to come up with discussion questions to lead the class.

And at the end of the semester, after 13 weeks of lessons, we have an exam to take for which we have barely 1 week or so to study, on top of still going to work. And for these exams, we will have to study pretty much alone, cos we don't actually have "consultations" where we get more advice on our materials from our lecturers.

So how do I cope?

The answer is: Consistent class and homework; as well as studying hard and very smart for the exams.

Before lessons: I try to complete the required readings, no matter how long they are (30, 60, 90 pages). That usually means I'll have to give up some of my activities in the weekends. On some Sundays, I'll be reading after lunch all the way to evening/dinner time. I don't try to deceive myself by saying "I'll do it later". I won't. And besides, I'll have other readings that I'll need to do. Then I'll be playing "catch-up" all the time. And anyway, reading ahead helps me to understand the lessons better and I may even be able to ask better questions and take part in discussions. I'm not being "kiasu". I'm just "minimising" the pain I'll feel later...

Readings: There is a trick to understanding what a long journal article is really saying - either read the abstract that is given, or go straight to the "Conclusion". Usually, the summary is given, the key points reiterated, which makes the article that much easier to understand when you read the whole thing later. And if a short review of the journal article is given online, better still. Read it to get a quick idea of what the article is about. And to speed read, do not "subvocalise", or what they call "silent speech", which is defined in Wikipedia as the "internal speech a person makes when reading a word, or imagining the sound of the word as it is read". This is WHY many people read quite slowly, cos they read word by word, as if they are vocalising each word in their mind. It is a habit that is not easy to break, especially if you have been doing it all your life. But if you can train only your eyes to move, you can read a lot more quickly. Trust me. Oh, and if you know you need to review the material again later, just before your exams, then when you are reading it now, highlight the key points and write annotations. It will help you save A LOT OF TIME later when you revise.

During lesson time: I try to pay 100% attention to the lecturer; and take down in the margins whatever points he/she says that I think may be helpful in my understanding or revising of the material later on for my exams. Since I won't have a chance to ask questions later, or may forget what I need to ask, I try to raise the question in class instead of staying ignorant. Anyway, when you are ready to ask questions, you tend to stay awake better too.

Assignments/Presentations/Class Discussions: I try to "ace" them as well as I can. I do the research that needs to be done. I try to know the topic very very well. I study the question carefully and try to answer it. REALLY ANSWER IT. By doing well in my assignments, I find that I would have also covered the topic pretty well and when it comes to revision later on, I can practically "skip" the topic cos I'm already so familiar with it. TIME IS EXTRA PRECIOUS during revision time so the less studying I need to do, the better. And if the assignment is graded, I'll have already scored part of the marks and I need to worry about my final exam a lot less.

Exam Preparation: When I'm a student preparing for the exams, I study. Plain and simple. I put in the hours that I need to put in (as much as it is necessary to cover ALL the materials) and put aside all unnecessary distractions, including the phone, the Internet or TV. I try to get enough sleep just to keep healthy and eat properly (avoiding starchy food that makes me sleepy) and drink enough water to ensure I don't dehydrate. And how do I make sure I"m studying smart? To make sure that what I am studying is "meaningful", I create questions that I have to answer. These questions can be "lower level questions", such as recall type to help me remember stuff, or "higher level questions", such as discussion of both sides of an issue. Creating questions also helps me to see the broad issues surrounding a topic, which in a sense allows me to anticipate what may come out in an exam.

Do not just "go through the motions" flipping through the notes. If you can't recall what you have read, YOU HAVE WASTED YOUR TIME!

Pre-Exam: I try not to cramp any material into my brain in the last minute. I just pick up my list of questions and jog my memory a bit to make sure the stuff I know is ready for recall. No point picking up a whole set of notes and re-reading. You will only exhaust your mind and make yourself nervous. An hour or two before the exams you really can't do anymore.

So this is what I did. Hope it helps.

Sunday, April 19, 2009

Case Study Assignment - The Market For Organic Food

Some tips and reminders:

(a)(i) With reference to figure 1, describe the trend of organic food sales from 1998 to 2006. [2]
  • Look carefully as Figure 1 comprises three different graphs. Consider carefully which one is relevant for answering the question.
  • Trend has already been taught to you in class. Remember NOT to merely describe the graph – your examiner can read it him/herself! Show you can identify the general trend as well as highlight any specific features of the trend. Note that the question is worth 2 marks so do not just give one point (for data interpretation questions).
(a)(ii) Account for the trend shown in (a)(i) [4]
  • Command word: Account for – what does this word require of you? Note that the question is worth 4 marks so a certain level of elaboration and display of the relevant skills is expected.
  • Content: Relevant data from the extracts should be found to support your answer. However, DO NOT JUST QUOTE DIRECTLY FROM THE PASSAGE as your answer! Link it to the appropriate economic terms and analysis – Note: this is NOT a COMPREHENSION QUESTION!
b. Discuss the likely impact of the current worldwide recession and the recent incidents of food scares on the market for organic food. [6]
  • Command word: Discuss – what does this word require of you? Note that as a result, the question is worth 6 marks as an even higher level of response (i.e. consideration of two sides) is expected. Note: How will you SHOW that you are discussing?
  • Content: Again, DO NOT JUST QUOTE DIRECTLY FROM THE PASSAGE! While you should refer to the relevant data given, you need to link to appropriate economic terms and analysis. Link to your understanding of economics (both economic terms and analysis) – this is NOT a COMPREHENSION QUESTION!
  • Content: What does it mean by "market for organic food"? You should note that in the whole of Topic 3, you have been studying various markets and how they respond to changes in demand and supply factors; and as a result new market equilibriums are achieved. Hence, to give a comprehensive answer to this question obviously requires you to do the necessary analysis in this manner.
c. Evaluate the measures that organic food producers and retailers CAN adopt to raise their profit levels. [8]
  • Command word: Evaluate – what does this word require of you? Note that as a result, the question is worth even more, at 8 marks as an even higher level of response (i.e. judgement) is expected. What should you consider when you evaluate a measure? Strengths? Limitations? Effectiveness?
  • Content: Profit level is calculated as the difference between total revenue and total cost. Hence, measures can be drawn from both the revenue and cost side – consider what can affect the revenue and cost of firms, drawing from what you have learnt so far in the lessons.
  • Content: Make reference to the given data where available. Looking at the word: ‘CAN” - you may be tempted to merely come out with your own measures but note that since this is a case study, you should draw from the various sources as far as possible if it is available.


Monday, April 06, 2009

Article - Hotels cut room rates as occupancies slide

Room rates fall up to 20 percent; corporate demand slows as companies cut cost. -BT

Thu, Mar 26, 2009
The Business Times

By Nisha Ramchandani

IT'S known that what goes up must come down, but in this case, the inevitable may be coming a little quicker and sharper than expected as lower occupancies force hotels to cut room rates.

At the Rendezvous Hotel for example, corporate rates have gone down 20 per cent to $190++ and walk-in rates have dropped 20 per cent to $220++. Average occupancy is hovering at 70 per cent, versus last year's 80 per cent. The hotel aims to beef up occupancy through a lower room rate so as to reclaim its 80 per cent occupancy level.

The Royal Plaza on Scotts has adjusted average room rates downward by 12 per cent, due to weakening demand for high end products such as club rooms and suites, says Patrick Fiat, general manager. Its room rates currently start from $198++.

At the Marina Mandarin, rates are down year on year but the hotel declined to give figures. Occupancies for Q1'09 were as expected, but rates are "under pressure".

One of the reasons for this is a drop in business travel as companies try to keep expenses down.

"Since the last quarter of last year, we observed that there has been a slowdown in the corporate sector. Currently, the business trend is still on the slow side, hence we have adjusted the rates to further suit our client spending power," said a spokesperson from the Marina Mandarin.

Over at the St Regis Hotel, room rates for both frequent individual travellers (FIT) and corporate have been lower for the first two months of the year compared to the corresponding period in 2008, according to Cheryl Ong, its director of marketing communications. "Occupancy is under pressure with lesser in-bound travel into Singapore," she added, but declined to comment on actual figures.

Hotels are also offering value-added packages. The Novotel Clarke Quay, for instance, has tweaked rates by between 5-10 per cent for key corporate clients. Those that forego the discount can look forward to other perks such as transportation and Internet service, said general manager Heinz Colby.

And as some consumers trade in their five-star hotel stays for value-for-money accommodation, hotels in the three and four star range are expecting to reap the benefits, although such establishments won't escape unscathed either.

"There are clients who are looking for cheaper accommodation. Hence, we are also affected. For leisure, we see a decline in visitor arrival especially for long haul travel," said Kellvin Ong, general manager of the four star Rendezvous Hotel.

"There are also other factors which may affect occupancy. New kids on the block are sprouting, which may shrink the pie," he added.

Indeed, another hurdle facing the industry, aside from the slump in visitor arrivals, is the injection of supply that the market will see this year as new hotels come on stream.

The recently launched Ibis Singapore - a no-frills, three star hotel by the Accor group - offers rooms starting from $138 per night. Other hotels that are expected to open their doors this year include the 336-room Park Hotel Clarke Quay.

According to a Kim Eng report, an estimated 2,000 hotel rooms from the Marina Bay Sands and a further 1,640 rooms from other hotels are slated for completion in 2009. This would raise the total available room-nights by 12 per cent to 11.7 million for 2009. There are currently 39,000 hotel rooms in Singapore, said the Singapore Tourism Board (STB).

If the integrated resorts (IR) fail to draw the crowds, Kim Eng estimates that average occupancy rate (AOR) could fall to 55 per cent by year end, and to 50 per cent by end 2010 - not far from the lows plumbed at the height of the Sars outbreak in May 2003, when AOR fell to 34 per cent.

On the flip side, a successful showing by the IRs coupled with the positive impact of the various global stimulus packages and the efforts of STB's $90 million BOOST scheme could stabilise AOR at 60-65 per cent for 2009 and 2010, Kim Eng reckons.

Meanwhile, hotels are banking on recent efforts by STB and tie-ups with airlines such as Singapore Airlines to bring the tourists back.

"We are expecting last minute bookings from the region as the various airlines have come up with promotions to stimulate travel. We are optimistic that there will be business out there although the numbers have not yet shown it," said Mr Ong.

STB's figures for January 2009 saw average room rate (ARR) sliding 11.7 per cent year on year to $209, while AOR dropped 17.7 percentage points to 67 per cent, well below last year's overall AOR of 81 per cent. Revpar (revenue per available room) fell 30.2 per cent year on year to $140. Hotels pulled in $124 million in room revenue, a staggering 29.9 per cent less than the corresponding month in 2008.

In contrast, for 2008 as a whole, ARR was $246, an increase of 21.9 per cent over 2007. For the first time since 2003, AOR was down by six percentage points to 81 per cent while Revpar for the year reached $199, up 13.5 per cent from 2007.

For January 2009, luxury and upscale hotels suffered larger drops in ARR and Revpar, while hotels in the economy tier - budget hotels in outlying areas - emerged in a better position.

However, economy hotels still saw a 3.4 per cent year on year dip in ARR to $101 for January, and a 26.8 per cent fall in Revpar to $66.


Saturday, April 04, 2009

Article - It pays to do econs at SMU

By Jane Ng & Amelia Tan (ST 4 April 2009)

ARE you pondering what field of study to take up at university?

If you qualify, picking economics at the Singapore Management University (SMU) or business at the National University of Singapore (NUS) would be worthy options.

Those armed with such qualifications emerged as the top earners in the latest Graduate Employment Survey, which was published by the Ministry of Education for the first time.

SMU economics graduates with cum laude and higher qualifications landed average monthly salaries of $4,164, a shade above the $3,971 earned by NUS business administration honours graduates.

At Nanyang Technological University (NTU), those with chemical and biomolecular engineering degrees made the most, an average of $3,232 a month.

The results of the survey, which looked at those who graduated last year and landed a job within six months, were released yesterday. In the past, the three universities did their own surveys and released results separately, but the different benchmarks they used confused some students.

Explaining the change, the MOE said yesterday that it was made so that students could make informed course decisions. Said a spokesman: 'The data gives prospective students a general indication of the employment conditions of the graduates from the various degree courses offered by our local universities.

'We understand employment conditions may have changed since, but we hope that the data may still be useful as one point of reference for the students.'

The latest figures threw up one surprise: Those who picked teaching as a career emerged among the top earners.

Those who received Arts (with Education) qualifications from the National Institute of Education made an average of $3,207 a month.

Engineering graduates, too, did well.

Those from NUS made between $2,864 (environmental engineering) and $3,448 (computer engineering from its School of Computing), while those from NTU earned between $2,891 (environmental engineering) and $3,232 (chemical and biomolecular engineering).

These figures may prompt more interest in the field, which has struggled to attract students.

Enrolment in courses such as mechanical and electrical engineering has plunged in popularity in the last decade as undergrads moved towards 'softer' options such as business.

In recent years, attempts have been made to increase interest in engineering by introducing new areas such as aerospace engineering, but interest has still flagged despite the relatively high starting salaries for graduates.

Of the three universities, only SMU was able to provide overall average monthly salaries for its graduates across all courses: The figure was $3,170, up from $3,040 in 2007.

Overall, employment rates were also positive, and were little affected by the financial crisis, which began biting last September.

At SMU, eight in 10 graduates secured job offers either before graduation or within a month of graduation.

At NUS, information systems students from the school of computing as well as dentistry students saw a 100 per cent employment rate, as did maritime studies students from NTU, and SMU information systems students with cum laude and higher qualifications.

However, human resource and wage consultants interviewed warned that the picture will not be as rosy for those about to graduate over the next few months, and they should not expect the same kind of pay and employment prospects as their seniors.

Human resource consultancy GMP Group's senior manager Josh Goh said many firms are already slashing new hires' pay by 5 per cent to 15 per cent. He expects further cuts if the recession deepens.

Singapore Human Resources Institute executive director David Ang said it will be tougher for fresh graduates to get employed as they will also be competing with recently retrenched workers for jobs.

'My advice to students is to be open to jobs which they were not specifically trained for. You can learn on the job too.'

The full employment survey can be found at

Wednesday, April 01, 2009

Market Equilibrium: Recent changes in the markets for some goods & services in Singapore

1) Premium seats hit

Asian airlines worst hit as demand for top cabins falls 23.4% (ST March 18, 2009)

by Karamjit Kaur, Aviation Correspondent

AIRLINES are finding it tough to fill first and business class cabins as the global economic downturn continues to hit demand.

Travellers downgrading or just not flying led to so-called premium traffic sliding 16.7 per cent industry-wide in January, compared with the same month last year.

It was the worst showing in more than 20 months, and Asian carriers like Singapore Airlines (SIA) and Cathay Pacific are bearing the brunt of the slump.

The weakest premium travel markets are those associated with this region, according to new data from the International Air Transport Association (Iata), which represents about 230 carriers.

Within Asia, premium traffic fell by a higher-than-average 23.4 per cent. Trans-Pacific premium traffic took a 24.7 per cent hit.

Falling fares and fuel surcharges are also alarming carriers like SIA, which earn almost half of their revenues from top-tier travellers.

A recent American Express survey found business class fares out of Singapore fell 3 per cent in the last three months of last year, compared with the July-September period.

Iata estimates that revenues from premium passengers industry-wide were down at least 25 per cent in January.

The overall drop of 16.7 per cent in the premium segment compares with a 5.9 per cent decline for air traffic across the board.

Iata said: 'What started as a financial crisis in the Western economies has now become a manufacturing crisis, hitting the export-dependent economies of Asia hardest.'

To survive what has been described as the worst crisis in decades, airlines are taking tough measures, including slashing capacity, parking planes and cutting jobs.

SIA, for one, plans to cut 11 per cent of its total capacity in the next 12 months. But with demand falling at a much faster pace, industry experts have warned of tougher times ahead.

Last month, SIA carried 1.18 million passengers, 20.2 per cent down from the same month a year earlier.

The steep fall came despite a 8.5 per cent cut in capacity.

Across its network, the airline filled just 69.7 per cent of available passenger seats, down 7.1 percentage points from a year earlier.

Cargo volumes also slipped, down by 16.9 per cent to just below 80 million kg, with SIA filling 56.7 per cent of available freight space.

This was down 5.5 percentage points from last year.

SIA, which unveiled its performance data yesterday, said: 'The prevailing global economic crisis has significantly dampened travel demand, translating to weaker uplifts.'

This was in contrast to the performance in February last year, which was supported by the Chinese New Year holiday peak, the Changi Airshow and the additional day in the leap year.

The airline said it will continue to monitor traffic movements and make the adjustments to its route network where necessary to match capacity to demand.


2) Public transport cheaper now
(ST April 1, 2009)

SBS Transit operations staff member Tan Kian Guan (left) and Land Transport Authority fare system engineer Ng Wee Hong checking on the systems software in SBS Transit buses to prepare for the new fares. -- ST PHOTO: MUGILAN RAJASEGERAN

COMMUTERS will save more on public transport from today, as lower fares kicked in this morning.

They will now pay two cents less on each bus or train trip. And due to a more generous transfer rebate, those who make transfers will save more, starting at 14 cents for a journey with one transfer.

To prepare for the new fares, thousands of buses and hundreds of MRT fare gates went through a final round of checks last night.

Tests were also carried out overnight at MRT computer control rooms to verify that the new fares were in place. The final round of checks follows weeks of testing of the fare systems to ensure that there are no glitches today.
3) Monitoring use of fuel
(ST, 1 April 2009)

Motorists are more conscious about fuel consumption these days. -- ST PHOTO: SHAHRIYA YAHAYA

MOTORISTS are more conscious about fuel consumption these days than two years ago - and more aware of how to squeeze more mileage from every litre.

This finding came from a survey by oil company Shell, which polled 300 motorists here in January and the same number in each of five other economies - the Netherlands, Germany, Hong Kong, the Philippines and Malaysia.

Three quarters of all respondents said they were more conscious about using fuel efficiently in the last 12 months than in 2007, when only a quarter said so.

The survey was not done last year.

Among Singapore motorists, 77 per cent said they were taking note of the number of kilometres their cars were getting out of each litre of fuel.

Two years ago, only 59 per cent did so.

The 77-per-cent figure made Singapore motorists the most aware of fuel efficiency among the drivers polled. Dutch motorists were next with 75 per cent.

Shell's Fuels Technology Manager in the Asia Pacific Eric Holthusen said he had no doubt the economy and higher fuel prices last year played a big part in motorists wanting to save on fuel.

Motorists here who were polled were also asked what they did to save fuel.

On average, they could name eight fuel-saving tactics this year, up from just 2.5 when the poll was last done in 2007.

4) Singaporeans rise to bait of good travel deals

Fri, Mar 27, 2009 The Straits Times

People visiting the travel fairs at Suntec City on Mar 22, 2009

By Lim Wei Chean

TRAVEL agents are still milking the travel market in Singapore by holding even more travel fairs.

This is despite the recent successful run of fairs, including the granddaddy of them all for the first half of the year, namely the National Association of Travel Agents Singapore (Natas) event.

Last Sunday, ASA Holidays booked a hall at Suntec Singapore Convention and Exhibition Centre for a travel fair.
Three of its rivals - CTC Holidays, Dynasty Travel and Singxpress - followed suit with booths at the Suntec City Mall. Their targeted customers: Those who have yet to book holidays.

Travel agents said competition for the consumer dollar has become stiffer, with the recession biting. So, they are willing to stage travel fairs even after the Natas one.

The Straits Times understands that the cost of staging a one-day fair in Suntec starts at $500,000. Smaller events like the one by CTC Holidays cost $100,000.

CTC Holidays spokesman Alicia Seah explained: "We cannot sit still and do nothing. Our competitors are here, so it's convenient to be here, too, to catch the crowds."

So, are Singaporeans still rising to the bait of good travel deals? It seems they are - as long as the deals are good.

Mr William Goh, 49, who owns his own sub-contracting business, bought himself and his wife an eight-day trip to Japan and Shanghai for $2,400.

He said: "Now that the economy is no good, I think the offers should be good."

Mr Goh has had little time to travel in the past. But with the construction business scene quieter, he can now do so.

Banking analyst Dennis Tan, 30, who missed the recent travel fairs, was out yesterday, sniffing out the best deal for a mid-year European tour with his wife.

He said: "We still need to travel because Singapore is so small. It's not like in the United States, where you can travel from one state to the next for a holiday."

The response to last Sunday's fairs was not as overwhelming as before and during the Natas event. Still, ASA spokesman Louisa Ng said she was "moderately satisfied" with the bookings the company secured. Most were for short-haul trips to China and elsewhere in Asia.

CTC Holidays, which hoped to make about $4 million in the two-day fair, conceded that reaching this goal would be tough. The other travel agents declined to reveal sales targets or figures.

With the news that the economy may take longer than expected to turn around, Dynasty Travel general manager Juliana Gan is worried it will hit travellers' spending power in the latter half of the year.

For now, travel agents are keeping their sights firmly on the competition - how they are pricing their packages and when they are staging events.
5) HDB resale flat prices fall

Thu, Apr 2, 2009 The Straits Times

First-quarter dip is first since 2006 and points to end of record run

PRICES of HDB resale flats fell in the first quarter of this year - the first decline since 2006 and a sign that the two-year run of record-breaking gains has ended.

Flash estimates yesterday showed that prices dropped by 0.6 per cent for the first three months, compared with the fourth quarter of last year.

Prices in the fourth quarter had increased by 1.4 per cent over the previous period and helped drive resale flat prices up by a hefty 31.2 per cent over the past two years.

The latest numbers caught industry experts by surprise and underline how the worsening recession has hit the Housing Board (HDB) market sooner than expected.

Many analysts had predicted further increases in resale prices with a decline becoming apparent only later in the year.

Agency chiefs from both PropNex and ERA Asia Pacific had recently forecast that HDB resale prices could rise by a further 3 per cent to 5 per cent this year.

But yesterday's numbers have altered expectations overnight, with analysts now predicting a decline of anything from 2 per cent to 10 per cent this year.

Tell-tale signs in the market signalled that prices have started heading southwards, in tandem with private property prices, which plunged 13.8 per cent for the first quarter of this year, said Prop- Nex chief executive Mohamed Ismail.

'The gloomy outlook for the past few months, coupled with more retrenchments, have hit home, and even the HDB market is feeling it,' said Mr Ismail.

PropNex and ERA have reported buyer resistance to flats above $500,000, with five-room and executive flats feeling the brunt of the price slide.

6) Private Property Market

Private home prices take double-digit dive (ST, 2 April 2009)

(SINGAPORE) Private home prices plunged 13.8 per cent in the first three months of this year - a record quarterly drop as developers and other market players slashed their expectations.

It was the third quarterly fall in prices - and much steeper than the 6.1 per cent drop in the preceding Q4 2008, according to advance estimates released by the Urban Redevelopment Authority (URA) yesterday. Private home prices dipped 1.8 per cent in Q3 2008 after 17 straight quarters of growth.

Analysts were expecting a significant drop in private home prices, but the actual fall was bigger than thought. In recent months, developers have cut the selling prices of new homes and sellers of secondary properties have also trimmed their asking prices.

'The fall is not surprising as a lot of developers have reduced prices to move new units, and in the resale market, people are now asking for more reasonable prices,' said DTZ's senior director Chua Chor Hoon.

DMG & Partners Securities' analyst Brandon Lee said that new projects and units in previously launched but unsold projects, were being launched or relaunched at 10-30 per cent discounts to the original intended selling prices. Also, there were distressed sales in the secondary market. (read more)

Related: Channel U's Moneyweek Programme 财经追击 - in Mandarin - on July 2008