Singapore Real Estate Roxy sitting pretty as it casts its net wide It is in no hurry to slash prices at Trilive and Sunnyvale Residences despite tepid sales Source: Business Times / Companies ROXY-PACIFIC Holdings may be feeling the chill of the Singapore residential market but it is in no hurry to slash prices - the listed developer and hotel operator is sitting on pre-sale revenues of S$955.4 million, 2.6 times its record fiscal 2013 revenue and a sum that will be progressively recognised as profits until fiscal 2017. In addition, the group has cast its net beyond its home market and its core development segment in sourcing for deals. Group executive chairman Teo Hong Lim tells The Business Times that Roxy is looking at office and residential projects in Australia, under-utilised hotels in Japan that can be optimised, and potential sites in Kuala Lumpur. While it has had no luck yet with the bidding for hotel sites in government land tenders, the group is still keen to add hospitality assets to its portfolio to generate more recurring income. Roxy currently runs only one hotel in Singapore - Grand Mercure Roxy Hotel in the east which is managed by international hotel operator Accor Group.
"The constant challenge is how to keep looking for deals even when the market is challenging," Mr Teo says. -By Lynette Khoo Luxury hotels do fine despite fewer tourists More competition for mid-tier hotels; slump in visitor arrivals from big China market Source: Business Times / Top Stories [SINGAPORE] The hotel industry is experiencing some softness this year, in line with the sluggish growth in tourist arrivals, but luxury hotels are bucking the trend and pulling off strong growth. A slump in visitor arrivals from Singapore's second biggest source market, China, is dragging down overall tourist numbers while increased competition from new hotels is contributing to a challenging environment for the hotel industry. For January to May, preliminary estimates from the Singapore Tourism Board (STB) show, visitor arrivals declined 1.7 per cent to 6.33 million as visitor arrivals from China plunged some 27 per cent. In contrast, overall visitor arrivals in Singapore were up 7.4 per cent for 2013 as a whole. The drop in Chinese visitors has been deepening too, from a near 20 per cent year-on-year contraction in March, to some 45 per cent in April and close to 52 per cent in May. The disappearance of Malaysia Airlines Flight MH370 in March has dampened tourism demand from Chinese tourists, who typically travel to Malaysia, Singapore and Thailand as part of a multi-destination tour. Analysts have also said that jitters in the wake of the fatal MH17 crash in Ukraine last month could affect travel volumes between South-east Asia and Europe. In the first half of 2014, the industry-wide average room rate (ARR) climbed 1.2 per cent year-on-year to S$257.70, while average occupancy slipped 1.2 percentage points to 84.7 per cent. This caused revenue per available room (RevPar) to emerge more or less flat at S$218.40, down 0.2 per cent. Luxury hotels are, however, doing well with a 7.8 per cent rise in ARR to S$458.30. Economy hotels, too, edged up 6.6 per cent to S$107.60. Upscale and mid-tier hotels, on the other hand, slid 0.5 per cent and 0.6 per cent respectively to S$266.30 and S$188.30. Similarly, luxury hotels reported the strongest growth in RevPar, climbing 8.5 per cent to S$403.90, while economy hotels saw a more muted 1.2 per cent growth to S$86.80. The RevPar for upscale hotels inched up 0.4 per cent to S$229.60, while RevPar for mid-tier hotels declined 4.1 per cent to S$156.20. In terms of occupancy levels for the first half, average occupancy for luxury hotels was 88.1 per cent followed by upscale hotels at 86.2 per cent, and mid-tier (82.9 per cent) and economy hotels (80.7 per cent). Mid-tier and economy hotels - tiers which have seen strong supply increases in the last 12-18 months - experienced bigger drops in occupancy. Despite the flat growth in visitor arrivals, one bright spot is that room nights occupied were up 5 per cent in January-April - suggesting guests are either spending more days in Singapore or a larger proportion of travellers are now staying in hotels, said Robert McIntosh, executive director at CBRE Hotels. "This is helping to balance the increases in supply which will continue, particularly in the mid-tier and economy segments." Akshay Kulkarni, Cushman & Wakefield's regional director for hospitality (South-east Asia), reckons the robust demand for luxury-tier properties stems from a rising number of corporate travellers as well as the relatively limited supply of luxury hotels. This year, Cushman & Wakefield expects a 2 per cent rise in average daily rate over 2013 to S$263 underpinned by the luxury and upscale segments, while industry-wide occupancy is expected to fall 3.3 percentage points to 83 per cent due to increased supply and little growth in tourist arrivals. Mr Kulkarni said RevPar could slip 2 per cent this year. He projects that while visitor arrivals to Singapore could pick up in the second half, visitor arrivals are likely to total 15.8-16.3 million for 2014, which suggests the final tally could possibly fail to meet STB's 16.3-16.8 million forecast. CBRE Hotels too has revised its projections for visitor arrivals in Singapore downwards, but still estimates growth of 1-3 per cent above the 15.57 million seen in 2013. Singapore's new Sports Hub will hold several major events this year, including the Women's Tennis Association Championships, and this could help attract tourists. Meanwhile, CBRE is expecting industry-wide RevPar this year to clock either flat growth or little growth of up to 2 per cent. "The political situation in Thailand is beginning to settle down and there are new efforts aimed at promoting tourism," said Mr McIntosh. "The issues in Vietnam have yet to be resolved, and we expect this to be a continuing drag on the market. The very unfortunate events in Ukraine have not helped traveller confidence but we expect that to correct itself in relation to this region fairly rapidly. Overall, there will be some spillover into H2." Citing data from STB and Horwath, CDL Hospitality Trusts said in its Q1 results that the operating environment will remain competitive due to the injection of new supply this year.
CBRE Hotels estimates that some 1,140-1,740 rooms will come onstream in 2H14 - depending on date of completion - while Cushman & Wakefield projects 1,650 rooms from seven upcoming hotels, including Holiday Inn Express at Havelock, Traders Orchard Gateway Hotel and One Farrer Hotel & Spa. By Cushman and Wakefield's reckoning, some 1,300 rooms from five hotels were injected into the market in the first half of the year. -By Nisha Ramchandani Global Economy & Global Real Estate GST, property slump hit UEM Sunrise margins Firm may delay some projects as current slowdown may last for another year Source: Business Times / Malaysia [KUALA LUMPUR] UEM Sunrise Bhd, Malaysia's biggest developer by market value, said that it faces lower profit margins from a new tax and may delay some projects amid the nation's steepest slump in property sales since the 1998 recession. The company's costs will rise as a 6 per cent goods and services tax (GST) starting in April next year boosts prices of building materials that can't be passed on for some projects, Izzaddin Idris, an executive director at the Kuala Lumpur-based firm, said in an e-mail interview last week. UEM is "revisiting" some of its planned developments as the current slowdown might last for another year, he said. Malaysian property companies are grappling with higher costs in an industry already reeling from central bank curbs on lending last year and the first interest rate increase in more than three years in July. Property transactions in 2013 sank the most since the aftermath of the 1997 Asian financial crisis, while home prices in the first quarter rose at the slowest pace since 2010.
While residential property is exempted from GST, the increase in input costs tied to the levy can't be claimed by developers, said Mr Izzaddin. "Most contractors or suppliers that are tendering for projects are already factoring in potential cost increases pursuant to the GST." -From Kuala Lumpur, Malaysia http://www.businesstimes.com.sg/premium/malaysia/gst-property-slump-hit-uem-sunrise-margins-20140811 India Sets Norms to Open $20 Billion REIT Market Source: Bloomberg / News India approved the setting up and listing of real estate investment trusts as the nation seeks to unlock a $20 billion market. The trusts, or REITs, will have to own assets worth at least 5 billion rupees ($82 million), the Securities and Exchange Board of India said in New Delhi yesterday. Investors must put in a minimum 200,000 rupees. Final notifications would be issued soon to make the new rules for REITs effective in a month or two, Press Trust of India reported, citing U.K. Sinha, chairman of the capital-markets regulator. The introduction of REITs will provide a new source of funding for cash-strapped developers that are struggling to reduce debt amid one of the highest interest rates in Asia and economic growth near the lowest in a decade. The products will give investors the ability to participate in the country’s property market without investing directly. “The sector has been in all sorts of trouble primarily due to high leverage for most of the developers,” Pramod Gubbi, director for institutional sales at Ambit Capital Pvt., said in an interview to Bloomberg TV India. “What REIT does is to open up another avenue for funding and this should bring down their cost. More money in the hands of the developers could see more projects taking off.” DLF Ltd. (DLFU), India’s largest developer by value with about 28 million square feet (2.6 million square meters) of operational rental assets, could be a “big beneficiary,” brokerage Emkay Global Financial Services Ltd. said in an Aug. 1 report. Combined DebtOther gainers include Prestige Estates Projects Ltd. (PEPL), a Bengaluru-based developer with 8 million square feet, and Phoenix Mills Ltd. (PHNX), a mall operator that owns 6 million square feet, according to HDFC Securities Ltd. The S&P BSE India Realty Index rose 2.6 percent as of 9:56 a.m. local time. DLF added as much as 4.2 percent, Prestige 4.5 percent and Phoenix Mills 4.8 percent. The combined debt of India’s six largest developers climbed to a record 394 billion rupees in the 12 months through March 31, more than double the 158.8 billion rupees in 2007, according to data compiled by broker IIFL Ltd. REIT-funded assets may reach $20 billion by 2020, according to an estimate by property-broker Cushman & Wakefield, of which as much as $12 billion could be raised in the first three to five years. Top Markets“It’ll also provide liquidity to investors as these trusts will be listed and traded on stock exchanges,” Neeraj Bansal, partner and head of the real estate and construction practice at KPMG India, said in an e-mail. REITs, pioneered in the U.S. in the 1960s, are traded publicly and pool investor money to buy real estate such as shopping malls, office buildings and rental housing. India’s REIT market has the potential to grow to rank among the top five markets in Asia by market capitalization, according to Cushman & Wakefield. While the market regulator had released the first draft of guidelines for REITs in 2008, they didn’t get final approval because of a lack of clarity on taxes and because the global financial crisis hurt the investment climate, according to a report by Knight Frank LLP in June. The regulator released a new set of guidelines in October, outlining the eligibility criteria for setting up REITs. -By Bhuma Shrivastava and Santanu Chakraborty http://www.bloomberg.com/news/2014-08-10/india-sets-norms-to-open-20-billion-reit-market.html London House-Price Growth to Cool to 3% in 2015, Hampton’s Says Source: Bloomberg / Luxury London house-price growth will slow to about 3 percent next year as the prospect of higher borrowing costs forces sellers to lower their expectations, Hamptons International said in a report today. The 2015 forecast by the London-based broker is half the pace it predicted in September. Values in the city will probably climb 15.5 percent this year, it said, more than double its previous prediction. London’s residential property values rose at their slowest pace in 15 months in June, after leading the surge in British house prices in the past year, the Royal Institution of Chartered Surveyors said last month. Surging values in the U.K. capital prompted the Bank of England to limit riskier mortgages and introduce tougher affordability tests. The number of people saying the next 12 months is a good time to buy a U.K. home fell to the lowest since 2011, a survey by Lloyds Banking Group Plc showed last month. “Despite a strengthening economy, there is now evidence of a change in sentiment across the country brought about by increasingly strong messages from the Bank of England culminating in the implementation of more stringent affordability regulations,” said Fionnuala Earley, director of residential research at Hamptons. Home prices across England and Wales will gain 8 percent this year and 5.5 percent in 2015, Hamptons said. The broker expects values in London’s most expensive boroughs, Kensington & Chelsea and Westminster, to rise 10 percent this year, up from its September forecast of 3 percent. Next year’s growth will amount to 3 percent, the firm said. Hamptons based its forecasts on data compiled by the Land Registry in London. -By Andrew Blackman and Neil Callanan |