JTC, HDB AND NEA FACTORIES, SHOPHOUSES AND MARKETS (Rental rates)

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JTC, HDB AND NEA FACTORIES, SHOPHOUSES AND MARKETS:

(Rental rates): 8.

Mr Leong Horn Kee asked the Minister for Trade and Industry in view of the continuing weak domestic sector and the depressed market rental in the retail and industrial sectors, whether the Government will consider a reduction of the rental rates set by JTC, HDB and NEA for factories, shophouses and markets, as a measure to assist the small retailers and SMEs. ****

9.

Mr Zainudin Nordin asked the Minister for Trade and Industry, with the property market showing signs of improvement, (a) will Jurong Town Corporation (JTC) give an update of the

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occupancy rate of its industrial spaces; and (b) are the rental rates of JTC industrial spaces competitive and reflective of the current market conditions. ****

Mr Lim Hng Kiang: Mr Speaker, Sir, can I have your permission to take Question Nos.8 and 9 together as they are related?

Mr Speaker: Yes.

Mr Lim Hng Kiang: Sir, Mr Leong Horn Kee feels that the market rental in the retail and industrial sectors is depressed. On the other hand, Mr Zainudin Nordin thinks that the property market is showing signs of improvement. Let me use this opportunity to clarify the situation and give an update.

First of all, JTC, HDB and NEA periodically review the posted rents and prices for the different land products to ensure that they are in line with prevailing market rates. Current posted rents and prices have been reviewed and adjusted to market.

Second, let me give an update on the various property sectors - industrial properties, shophouses and markets. For industrial properties, the occupancy rates of JTC ready-built facilitiesare around 80-81% in the last two years. There is a slight improvement in the second half of last year but, generally, occupancy rates still remain low compared to 2000 and 2001 or compared to the early 1990s.

In January 2005, JTC completed its latest quarterly review of industrial land rents and prices. Posted rents and prices for industrial rents were reduced by an average of 20%, and even up to one-third in some areas. This latest round of rate cuts is very significant and will help to lower business costs for SMEs. JTC will continue to monitor our industrial land

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rent prices and ensure that they are internationally competitive.

For ready-built facilities, JTC and HDB also review their rental rates quarterly and peg them to market. In 2004, rental rates for their ready-built facilities were reduced by up to 10%. In January 2005, JTC has also further reviewed its posted rents and reduced the rentals for some estates such as Ayer Rajah, Kolam Ayer, Loyang and Kaki Bukit by up to 6%. In general, the rents and prices for this sector have already fallen in the last few quarters of 2004 and are competitive.

For shophouses and markets, HDB and NEA monitor the rentals closely. The rent for each shop and market stall is reviewed whenever the tenancy is due for renewal. Most of the tenancy contracts are short term, up tothree years. Some tenants can even opt for shorter tenancies and have their rents adjusted earlier to reflect the prevailing market conditions. For market and hawker stall holders, rentals have already gone down between 10% and 20% in the last two years. Hence, hawker and market stallholders who renewed their tenancy agreements in the lasttwo years had their rents reduced in line with prevailing market conditions. For HDB shops, the rents have remained fairly stable in the last two years.

In addition, to help businesses adjust, existing shop and stallholders who were given rental rebates before 2005 will continue to enjoy half the rental rebates till 30th June 2005.

Mr Leong Horn Kee (Bishan-Toa Payoh): Sir, may I ask the Minister about the rental rebates? With only half the rental rebate being retained, some of the shops are actually now facing higher rentals. With the renewal of the rebates due for review in June, will it be possible for the Ministry to consider continuing with the rebates?

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Mr Lim Hng Kiang: Mr Speaker, Sir, we should take the issue of rental rebates separately. The rental rebates were given over the last few years inview of the difficult market conditions that we faced - the 1997-1998 Asian financial crisis, the 2001 recession and the 2003 SARS. Since then, the situation has stabilised. Last year, we have enjoyed fairly good growth and, this year, we expect the growth to continue to be stable. And that is the reason why we have gradually removed these rebates. In the meantime, the rents have been lowered to reflect the current market conditions. So HDB shopkeepers and stallholders will face current rents which are very low, compared to the last five or 10 years.

Mr Leong Horn Kee: Sir, I would like toinform the Minister that there are two cases in my constituency. One is the Sin Ming motor workshops and the other is the Shunfu Mart which is for wet market and foodstalls. In both of these cases, we now have the experience where the new tenders are priced lower than the existing tender for the rentals. In such cases, will the Ministry concerned review and lower the rates for the existing tenants?

Mr Lim Hng Kiang: Mr Speaker, Sir, asI havesaid, we review our market rents regularly. If Mr Leong Horn Kee is prepared to say that when the rents go up next time, we will undertake a review to raise rents.If he illustrates with this example, and when rents come downwe lower the rents, I will accept his proposition. But, as Members know, one swallow does not make a summer. So we always reviewthe rents and indeed if there is a trend of the rents going down, we will adjust the rents accordingly.

Mr Leong Horn Kee: Sir, the Ministerknows thatthe Governmentactually increases rentals when rentals go up. It is

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a fact. I cannot give an assurance. But it is a fact that the Ministry increases rentals whenever rentals go up.

Mr Lim Hng Kiang: As I have said, we also reduce the rents when rentals come down.

Mr Wee Siew Kim (Ang Mo Kio): Sir, I wouldlike to inform theMinister that I also have a couple of swallows in my constituency. Although the term is for three years, for those whoare trapped in the three years and seeing rents dropping all along and increased competition frompeople who are benefiting from the lower rentals, I think they feel that something ought to be done. Can I ask the Minister that for these exceptional cases, especially if the disparity is very big, to take this into consideration and review these cases as well?

Mr Lim Hng Kiang: My response is similar. If you are locked into a three-year period and the rents go up sharply, will you also consider adjusting your rent even though your three-year period is not up? So it must work both ways. Anyway, shopkeepers can opt for shorter tenancies, and HDB and NEA will consider.