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21 January 2014

Singapore Real Estate News

52 strata office units at ARC 380 sold

Source: Business Times / Property 

All 52 strata office units available for sale at the ARC 380 project in Lavender Street/Jalan Besar have been sold.

However, only nine of the 19 retail units have found buyers.

The 16-storey freehold project, being undertaken by two companies associated to Tong Eng Group, will come up on the current Eminent Plaza and next-door Lavender Food Square site. It is located near the upcoming Bendemeer MRT Station on the Downtown Line.

Two office floors were picked up during a VIP preview last Thursday - one at $22.6 million and the other at $23.1 million, translating to $2,410 per square foot and $2,464 psf, respectively.

- By Kalpana Rashiwala

HDB received 737 appeals from S'poreans to keep their overseas properties

Source: Channel News Asia / Singapore

Over the last two years, the HDB received 737 appeals from Singaporeans with non-Singaporean spouses to keep their overseas property in their purchase of HDB flats.

Of these, 482 were approved.

National Development Minister Khaw Boon Wan gave this update in a written Parliamentary reply to Hougang MP Png Eng Huat who had asked the figures.

Mr Khaw said the main reasons for granting such exemptions were that the overseas properties were not of substantial value and were housing extended family members of the couple.

The nationality of the non-Singaporean spouse is not a consideration in HDB's evaluation of an appeal.

- CNA/fa

Close watch on impact, size of foreign workforce

Source: Business Times / Top Stories

The government will continue to monitor closely the overall number of foreign workers here and the impact on the communities that they interact with, said Acting Manpower Minister Tan Chuan-Jin.

The authorities are also looking at ways to enhance the overall management of their well-being, he told Parliament yesterday.

Mr Tan said last month's Little India riot - the worst public order disturbance in the Republic in more than four decades - would not have a material impact on the government's plans to ease the growth of the foreign worker population to more sustainable levels.

He spoke of how there is already a "targeted and adaptive" approach to raise the quality of foreign workers and help businesses reduce their reliance on low-cost foreign labour.

- By Lee U-Wen

Real Estates Companies' Brief

K-Green maintains 2013 DPU at 7.82 cents

Source: Straits Times / Money

Real estate investment trusts (Reits) and business trusts, which enjoyed a strong run last year, will continue to come onto the market, they said. Vineet Mishra, head of equity capital markets for South-east Asia at JP Morgan Chase, said that central banks' pullback on quantitative easing (QE) will not make investors abandon new Reits and business trusts, although they will be scrutinising total returns rather than just the yield itself.

Keppel Reit Q4 DPU stays at 1.97 cents

Source: Business Times / Companies

KEPPEL Reit posted a fourth-quarter distribution per unit (DPU) of 1.97 cents, unchanged from a year ago.

The three months ended Dec 31, 2013, saw distributable income rising 5.9 per cent year-on-year to $54.9 million from $51.9 million.

For the full year, DPU was up 1.4 per cent at 7.88 cents while distributable income rose 6 per cent to $214 million from $201.9 million a year ago.

This is the highest full-year distributable income since the real estate investment trust's listing, and represents a distribution yield of 6.6 per cent based on its closing price of $1.185 on Dec 31.

- By Mindy  Tan

Keppel Reit Posts Record Distributable Income

Source: Today Online / Business

Keppel Real Estate Investment Trust (REIT) said yesterday that it achieved a record full-year distributable income of S$214 million on better performance of its properties and additional income from an acquisition in Melbourne.

Income available for distribution rose 6 per cent, compared with about S$202 million a year earlier, Keppel REIT said in a statement after markets closed. Distribution per unit increased 1.4 per cent to S$7.88 for the period.

Both property income and net property income increased 10.9 per cent to S$174 million and S$138.3 million respectively, due to stronger performance from Ocean Financial Centre, Marina Bay Financial Centre Phase 1 and One Raffles Quay, and additional income from newly acquired 8 Exhibition Street in Melbourne and Old Treasury Building in Perth.

Keppel REIT said its portfolio attained 99.8 per cent committed occupancy as of the end of last year, with seven out of its eight buildings fully occupied.

Looking ahead, the trust noted that rents and office demand are expected to rise as the South-east Asian economy improves further over the next few years and the Government positions itself as a business hub for various industries.

K-Reit may buy more S'pore property

Source: Straits Times

Keppel Real Estate Investment Trust (K-Reit) said it may pick up more property in Singapore such as Marina Bay Financial Centre (MBFC) Tower 3. Ms Ng Hsueh Ling, chief executive officer of the Reit's manager, yesterday said it would, "at the right time", approach its sponsor Keppel Land to buy the tower.

Ascendas Reit

Source: Business Times 

Ascendas Reit (A-Reit's) nine- month revenue grew 6 per cent year on year to S$154 million, constituting 76 per cent of our and 74 per cent of consensus estimates. The rise was attributable to rental income earned from The Galen, which was acquired at the end of FY3/13, rental income from Nexus @ one-north, A-Reit City @ Jinqiao and finance lease interest income received from a tenant.

OUE C-Reit yield high, thanks to sponsor

Source: Straits Times

The projected yield being dangled by listing hopeful OUE Commercial Real Estate Investment Trust (OUE C-Reit) beats many other office Reits - but only if its income support is included. Once the top-ups from sponsor OUE are removed, OUE C-Reit's projected distribution yield this year will fall from 6.8 per cent to 5.56 per cent, below many other office landlords listed here, a Straits Times compilation showed.

Mapletree Logistics Trust's DPU up 7% in Q3

Source: Straits Times

Gains from a property sale helped Mapletree Logistics Trust increase its distribution per unit (DPU) for the third quarter. DPU was 1.84 cents, 7 per cent up on the same period last year. This is on the back of a 7.7-per-cent rise in the amount distributable to unitholders, to about $45 million. The increase includes the partial distribution of a $600,000 gain from the divestment of 30 Woodlands Loop.

View, Reviews & Forums

Bubble? Depends on where and how you look

There's no housing bubble in Singapore, but only if people buy within their means, says CAI HAOXIANG

Source: Business Times / Companies

A BUBBLE can provoke fear or outrage.

Fear, because if a speculative bubble rising on nothing but hot air bursts, the resulting sudden plunge in asset values can bode ill for the economy and cause unemployment and personal hardship. Outrage, because the continued existence of such a bubble implies the failure of regulators to protect the man on the street from rushing headlong towards disaster.

To say a bubble exists in Singapore means that there is a lack of control by the powers that be, which is anathema to the government's perception of itself as a forward-looking architect of a well-planned and orderly economy.

So one can very well imagine the reaction of Singapore's central bank when Jesse Colombo, a French-born, American independent economic analyst who just turned 28, wrote a widely circulated column last Monday warning that there is not just a low interest rate-fuelled credit bubble here, but also a residential property bubble, construction bubble, financial-sector bubble, wealth bubble and population bubble.

Mr Colombo did not only see bubbles all around Singapore and surrounding emerging markets, he went on to argue that the foundations of the Republic's wealth - sovereign wealth funds Temasek Holdings and GIC - were at stake, and that Singapore's current prosperity was illusory.

The Monetary Authority of Singapore's (MAS) response was swift.

"Singapore is not facing a credit bubble that puts the country or its banking system at any risk of crisis," the central bank said last Tuesday evening.

While MAS said that unusually low interest rates have caused credit growth and a rise in property prices in Singapore and other countries, the government has "taken decisive steps to cool property demand and prevent excessive leverage".

MAS added that the property market is stabilising, new housing loans have been declining, household balance sheets are strong, and the financial system here is strong, as reflected by Singapore's AAA rating from major credit rating agencies.

Mr Colombo replied that the MAS was in denial, just like other governments in the region. Household balance sheets might be strong now when interest rates are low, but not so when they rise, he said.

Low interest rates might stay for a few more years and delay the burst of Singapore and the region's wealth bubble, he said. But "it also means that the city-state's asset and credit bubbles are likely to grow even larger and more threatening than they currently are".

What is a bubble?

Bubbles are a nebulous concept. There is a difference between the temporary insanity of a bubble and the normal ups and downs of a market, when assets are just overpriced. Hence, to decide whether Singapore is indeed caught up in a bubble, it is important first of all to define what a bubble is.

Bubbles have a psychological element that make them dangerous. The building of a bubble requires a kind of spontaneous optimism characterised by British economist John Maynard Keynes as "animal spirits", and later by former Fed chairman Alan Greenspan as "irrational exuberance". While property showrooms may still be packed here, an element of caution has crept in, with the property market by all accounts slowing down. The animal spirits are subsiding, in no small part due to a debt servicing framework introduced in mid-2013.

In a bubble situation, prices of assets deviate significantly from their fundamental values. What constitutes "significant" is arguable. Given sufficient historical data, a possible starting point for a bubble call is when financial ratios deviate from their long-term averages by, say, more than two standard deviations.

A recent instance of a bubble was the dot-com boom of the late 1990s. Then, the long-term cyclically adjusted price to earnings (PE) ratios of America's S&P 500 index went up to more than 40 times, more than three standard deviations from the 130-year average of 16.5 times and even the post-war average of 18.4 times. In Singapore, the Straits Times Index (STI) is trading at roughly or just under its long-term average of about 15 times earnings. Using our definition, we can safely say there is no bubble in our equity markets.

Moving on to property, a common indicator of value is the ratio of median house prices to median household yearly incomes. By various accounts, this ratio peaked in America in 2006, almost hitting five times and deviating more than two standard deviations from its long-term average of about 3.5 times. Median household incomes were around US$50,000 then, so median house prices were about US$250,000.

In Singapore, one might very well ask if there is a residential property market bubble. In the HDB resale market and the private property market, average prices have doubled from a decade ago. Incomes have increased by only about 60 to 70 per cent.

Mr Colombo cited a statistic from cost-of-living comparison website Numbeo that showed Singapore's price-to-income ratio at 25 times, which is the third-highest in the world. On the surface, the number makes sense: The typical price of a suburban condominium is $1.2 million, with the implied median household income at $48,000.

These statistics are flawed, however. The latest household income data show that households earning $48,000 a year belong to the bottom third of income earners, who live in much cheaper, subsidised HDB flats anyway.

More than 80 per cent of Singaporeans live in HDB flats. This puts those who live in condos in the top fifth of wage earners. One cannot benchmark a typical Singaporean to a condo unit.

There should thus be at least two separate price-to-income ratios for Singapore when measuring whether the market is in a bubble: one for the private property market, and others for various segments of the HDB market.

Assuming the top fifth of households buy condos, the next fifth buy five-room HDB flats, and so on, back of the envelope calculations using latest data show the price-to-income ratio for HDB five-room flats at about 4.2 times, and 4.3 times for condos - both very far from the statistic of 25 times used in Mr Colombo's piece.

By comparison, at the property market trough 10 years ago, the equivalent ratios would be about 3.3 times for five-room flats and 3.6 times for condos.

More data could be crunched to find out whether Singapore's price-to-income ratio differs significantly, or outrageously, from historical averages. But that does not seem to be the case from an initial reading of the data - with a caveat that people must buy within their means.

Basically, between 2003 and now, homes cost about 0.6 to one year's worth of household income more at the most, from trough to peak. This means people have to take two to three more years to repay their loans, assuming they use a third of their incomes every year to do so. If they only use a fifth of their incomes, then they will take three to five years more.

If Singaporeans buy property within their means, three or four extra years of paying the mortgage, given later retirement ages and longer lives, seem to be reasonable.

Interesting tidbits can be gleaned from the analysis. If people aim beyond their wage bracket, house prices become pricey. A typical median-income household buying a five-room resale flat, or even an 81st to 90th percentile household buying a suburban condo, will see their price-to-income ratio shoot up from three-plus to six times - which is arguably unsustainable. If a family can only use 20 to 30 per cent of its income to pay the mortgage, this easily means an extra 10 years of work.

It is therefore not surprising that with increased expectations, even the middle and upper middle-income groups would complain that houses have become unaffordable. Going by the data, the average Singaporean household can aim for a $500,000, four-room resale flat to keep the affordability ratio within four times annual income.

Mr Colombo is not wrong in warning Singapore of the dangers of rising asset prices, if they are not backed by productivity gains or economic growth.

However, the situation confronting Singapore's residential property market now is more inflated expectations and less runaway prices.

Commentators pointing out numerical increases in any statistic should define what makes something a bubble and what does not. Overusing the word can obfuscate rather than illuminate.

Refine HDB subletting rules

Source: Straits Times

The Government has introduced quotas for renting out flats to foreigners and permanent residents, "to prevent the formation of foreigner enclaves in HDB estates and maintain the Singaporean character of our HDB heartland" ("HDB sets quotas for renting out flats to foreigners and PRs"; last Friday).

Keep to spirit of retirement housing

Source: Straits Times

Retirement villages are, by definition, housing options for older people that offer a combination of independence, security and elder-friendly amenities, together with opportunities for social interaction and leading an active lifestyle. So does The Hillford ("All 281 units of retirement resort sold out within hours"; last Saturday) qualify as a retirement village by virtue of its 60-year lease and elder-friendly services?

Global economy & Global Real Estate News

Richemont seeks entry into India's luxury retail market

Source: Business Times / India

Luxury goods group Richemont, whose stable of brands includes jewellers Cartier and Van Cleef & Arpels, has applied to open shops in India, joining other global retailers who entered the market since New Delhi relaxed investment rules.

The entry could be a boost for the country's luxury retail sector, which represents a tiny fraction of global luxury brands' sales but has a fast-rising number of wealthy people.

The sector has been hampered by high tariffs, complex legislation and lack of retail space, prompting brands to trade mainly in luxury hotels in Asia's third-largest economy.

Richemont has applied to enter in the "single brand" retail space, where stores sell only one brand, for an initial investment of US$5 million, a senior Indian government official said last Thursday.

- From New Delhi, India

Work starts on deluxe resort on Dubai islands

Source: Business Times / World

A property developer has started building a huge resort complex on a man-made archipelago off Dubai's coast as the emirate revives tourism and real estate projects suspended after its property market crash in 2008.

The "Heart of Europe" project, a complex of luxury hotels and villas stretching across six small islands, is expected to be completed at the end of 2016, the Kleindienst Group said yesterday.

Lying about 5km off mainland Dubai in the Persian Gulf, it will feature classic Italian, Spanish and German architecture as well as landscaped gardens and streets that in some cases will be lined with artificial snow, the company said.

Kleindienst, an international developer based in Dubai, declined to reveal how much the project would cost or how it would be funded, saying an announcement on this would be made next month. Local press reports have put the cost at over US$800 million.

- From Dubai

Drop in December US housing starts smaller than expected

2013 tally is best since 2007 and is 18.3% higher from previous year

Source: Business Times / Property

The pace of US home construction dropped less than forecast in December, capping the best year for the industry since 2007.

Housing starts fell 9.8 per cent to a 999,000 annualised rate following November's revised 1.11 million pace, which was the highest since November 2007, the Commerce Department reported. The median estimate of 83 economists surveyed by Bloomberg was 985,000. Permits for future projects declined, a sign that activity may pause in early 2014.

Housing remains a mainstay of the expansion, with builders breaking ground on more projects as an improved job market boosts demand for real estate. At the same time, bigger gains in employment and incomes will be needed to overcome the decline in affordability as property values and mortgage rates rise.

"Housing will make a significant contribution to growth this year," said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, who forecast a decrease to 997,000. "Higher prices are bringing more building."

- From Washington, US

Non-profit architect group brightens up Sofia

Low-budget civic art, design transforming Bulgarian city

Source: Business Times / Property

Delcho Delchev came back.

For many of his generation, this is commuting against the tide of emigration from his native Bulgaria into the rest of Europe. But Mr Delchev, a 34-year-old architect, is one of the founders of a non-profit group called Transformers that has been trying since 2009 to brighten up this former Soviet outpost with low-budget civic art and design projects.

A few years ago, he returned to Bulgaria, turning down an offer to stay in France, where he had been studying. In some ways, Sofia might not seem like the most inspiring place for an architect. Rows of Soviet-era buildings stack up like dominoes along the landscape, many crumbling. Sculpture from the Communist and czarist eras dominate public spaces, unemployment has been rising sharply, and for months protesters have been gathering in the city's streets to denounce the latest government, which is viewed as corrupt and out of touch.

But the Bulgarian capital is also a city with parks and green spaces, and one can see the younger people chafing to break free of aesthetic homogeneity. In a central park downtown, a giant sculpture depicting Soviet soldiers has had run-ins with various graffiti artists. It was recently covered in pink paint, and the name of the Notorious BIG, a rapper killed in 1997, is scrawled on one side.

- From Sofia, Bulgaria

NZ home prices and sales volumes dip in Dec

Source: Business Times / Property

New Zealand house prices in December retreated from a record high, while the number of houses sold also slipped from the previous month, the Real Estate Institute of NZ (Reinz) said yesterday.

The Reinz's house price index slipped one per cent from the month before, to be 9.2 per cent higher than the same month a year earlier. The number of houses sold was down 18.3 per cent from November.

The housing market has picked up since early 2012, particularly in Auckland, the country's biggest city, and earthquake-damaged Christchurch, as a shortage of houses in both cities has been bolstering prices.

Limits on how much retail banks can lend on low deposit home loans were imposed in October by the Reserve Bank of New Zealand to try to slow the rise in house prices.

- From Wellington, New Zealand

Palm Islands developer to have 9 hotels by 2016

Source: Business Times / Property

Nakheel PJSC, the property developer at the heart of Dubai's debt crisis in 2009, will have nine hotel projects under development by 2016 to benefit from the emirate's growth as a regional tourist destination.

The builder of the Palm Islands off the emirate's coast may unveil plans to build four new hotels on Deira island along with its existing one, adding to four other developments across the rest of the city, chairman Ali Rashed Lootah said at a news conference in Dubai on Sunday. The hotels will be part of new projects with a sales value of 6-8 billion dirhams (S$2.1- 2.8 billion) that Nakheel will unveil this year, including homes, retail and leisure destinations, he said.

"We are seriously thinking of expanding in hospitality, which goes along with the vision of the Dubai government of trying to build enough facilities," Mr Lootah said. "By 2016, we will have nine hotels and more to be announced."

Dubai's economy expanded 4.9 per cent in the first half of 2013, led by the hotel and restaurant industry, as growth in the Middle East's tourism and financial hub rebounded. Traffic through Dubai's airport, the world's second-busiest by international passengers, surged 15 per cent to 60.4 million in the 11 months through last November, official statistics show.

- From Dubai

China 2013 new home sales hit record high

Prices in tier 1 cities surge in absence of more property curbs

Source: Business Times / Property

China's new home sales last year exceeded US$1 trillion for the first time as property prices in cities the government considers first tier surged in the absence of more nationwide property curbs.

The value of new homes sold last year rose 27 per cent from 2012 to 6.8 trillion yuan (S$1.43 trillion), National Bureau of Statistics said yesterday. New-home prices last month climbed 20 per cent in Guangzhou and Shenzhen from a year earlier, and jumped 18 per cent in Shanghai and 16 per cent in Beijing, the bureau of statistics said on Saturday.

"Clearly, the real estate market in China remains hot," Dariusz Kowalczyk, a senior economist and strategist at Credit Agricole, said yesterday. "Urbanisation and investment demand are leading to rising sales volumes, while prices continue to gain. China's growth remains heavily dependent on the real estate market."

Premier Li Keqiang hasn't imposed additional nationwide measures to cool the market since his predecessor Wen Jiabao stepped up a three-year campaign in March, ordering higher down payments and interest rates for second-home loans in cities with "excessive fast" price gains. Instead, Mr Li has left it up to individual cities to impose their own curbs, with at least 10, many of them provincial capitals, tightening local property policies since November.

- From Shanghai, China

London home price growth slows in Jan after a strong year

Source: Business Times / Property

London house price growth slowed in January after the best year since 2006 as values slid in the most expensive districts of Westminster and Kensington and Chelsea, Rightmove plc said.

Asking prices in the UK capital increased 0.2 per cent to £514,704 (S$1.07 million), after growing 10.6 per cent last year, the operator of Britain's biggest property website said in a report yesterday. Values in Westminster slid 8.3 per cent, while those in Kensington dropped 6.9 per cent.

"The average asking price of property coming to market is having a pause after a pretty hectic year of heady rises," said Miles Shipside, a director at Rightmove in London. "It's traditionally a quieter time of year. London needs more properties for sale to lessen upward price pressure."

London is leading the housing market as supply fails to keep up with demand and the capital's economy powers UK expansion. Bank of England governor Mark Carney predicted last week that housing will continue to strengthen in 2014, and while policy makers have downplayed concern that prices could spiral, they scaled back a mortgage lending programme last year.

- From London, England

China’s new home sales hit record S$1.4 Trillion

Source: Channel News Asia / Business

The value of new home sales in China surged 27 per cent last year to a new record of 6.8 trillion yuan (S$1.4 trillion), the National Bureau of Statistics said yesterday, led by gains in first-tier cities in the absence of new nationwide property curbs.

“Clearly, the real estate market in China remains hot. Urbanisation and investment demand are leading to rising sales volumes, while prices continue to gain,” said Credit Agricole economist Dariusz Kowalczyk in Hong Kong.

Prices of new homes climbed 20 per cent last month in the southern Chinese commercial cities of Guangzhou and Shenzhen from a year earlier. They jumped 18 per cent in the financial hub of Shanghai and 16 per cent in the political centre of Beijing.

Chinese Premier Li Keqiang has not imposed additional nationwide measures to cool the housing market since his predecessor Wen Jiabao stepped up a three-year campaign last March, ordering higher down payments and interest rates for second-home loans in cities with “excessive” price gains.

Instead, Mr Li has left it up to individual cities to impose their own curbs, with at least 10, many of them provincial capitals, tightening local property policies. Guangzhou, Shenzhen and Shanghai have all raised minimum down payments for second homes to 70 per cent since November.

“The effect of those measures was limited last year because in first-tier cities, demand still outpaced supply,” said Citigroup economist Ding Shuang in Hong Kong.

Investment in homes, office buildings, malls and other real estate gained 20 per cent to 8.6 trillion yuan last year from a year earlier, according to the NBS data. New property construction rose 14 per cent to 21.5 billion sq ft. AGENCIES

China’s 2013 New Home Sales Hit $1.1 Trillion, Record High

Source: Bloomberg News

China’s new home sales last year exceeded $1 trillion for the first time as property prices in cities the government considers first tier surged in the absence of more nationwide property curbs.

The value of new homes sold in 2013 rose 27 percent from 2012 to 6.8 trillion yuan ($1.1 trillion), National Bureau of Statistics said in a statement today. New-home prices in December climbed 20 percent in Guangzhou and Shenzhen from a year earlier, and jumped 18 percent in Shanghai and 16 percent in Beijing, the bureau of statistics said Jan. 18.

“Clearly, the real estate market in China remains hot,” Dariusz Kowalczyk, a senior economist and strategist at Credit Agricole CIB, said in an e-mailed reply today. “Urbanization and investment demand are leading to rising sales volumes, while prices continue to gain. China’s growth remains heavily dependent on the real estate market.”

Premier Li Keqiang hasn’t imposed additional nationwide measures to cool the market since his predecessor Wen Jiabao stepped up a three-year campaign in March, ordering higher down payments and interest rates for second-home loans in cities with “excessive fast” price gains. Instead, Li has left it up to individual cities to impose their own curbs, with at least 10, many of them provincial capitals, tightening local property policies since November.

Shenzhen, Shanghai and Guangzhou have all raised minimum down payments for second homes to 70 percent since November.

“The effect of those measures was limited last year because in first-tier cities demand still outpaced supply,” Ding Shuang, a Hong Kong-based senior China economist with Citigroup Inc. said in a phone interview.

Property Reliance

The value of new housing sales was 5.4 trillion yuan in 2012, an 11 percent gain from the previous year, according to the government data.

China’s economy rose 7.7 percent last year from 2012, the government said today, the same as the median estimate in a Bloomberg News survey of 31 analysts.

Investment in homes, office buildings, malls and other real estate gained 20 percent to 8.6 trillion yuan last year from a year earlier, according to the statistics bureau data. New property construction rose 14 percent to 2 billion square meters (21.5 billion square feet).

The Shanghai Stock Exchange Property Index, which tracks 24 developers traded in the city, was little changed at the close of trading, while the benchmark fell 0.7 percent.

Rising Prices

New-home sales volume rose 18 percent to 1.2 billion square meters, the government data showed.

New and existing home sales in the U.S. were about $1.1 trillion last year, including $149 billion of new homes sold, broker Cushman & Wakefield Inc. estimated, based on U.S. Bureau of Census data.

China’s existing-homes market is about one-third of new homes by sales, according to Centaline Property Agency Ltd., because the nation only allowed private home ownership in 1998. The government doesn’t release data on existing-home sales.

Existing-home prices rose 20 percent in the capital Beijing last month from a year earlier and increased 14 percent in Shanghai, according to the Jan. 18 data.

Private figures also showed no sign of cooling in the property market. Home prices in December had the biggest year-on-year gain in 2013, increasing 12 percent, according to SouFun Holdings Ltd. (SFUN), China’s biggest real estate website owner.

‘Near Despair’

“There has been a misconception that China’s property curbs are aimed at cracking down on the market or squeezing sales,” said David Hong, a Hong Kong-based property analyst at China Real Estate Information Corp., or CRIC, a property data and consulting firm. “The country’s economy, especially that of less affluent cities, is relying on the real estate industry.”

First-tier cities, including Beijing and Shanghai, may impose further curbs if prices rise too fast, Standard & Poor’s Hong Kong-based analyst Bei Fu said Jan. 17. Home prices will increase about 5 percent this year from 2013, while home sales volume will jump about 10 percent, according to S&P.

Almost one-fifth of respondents in a Renmin University of China survey gave a zero score to the government’s property policies, indicating “near despair” with housing prices, the official China News Service reported last month, citing survey results.

New-home prices in the eastern city of Wenzhou in Zhejiang province fell 2.6 percent from a year earlier, declining for a 27th month. It was the only city among the 70 to show a decrease, the government data showed.

Artificial Tightening

“The government should increase land and home supply in major cities because only artificially tightening the market through government orders will not work,” Citigroup’s Ding said.

Beijing, the financial center of Shanghai, and the southern business hubs of Guangzhou and Shenzhen are considered first-tier cities by the statistics bureau. The four have “high levels of international business connectivity, deep corporate bases and well-developed international grade stock, and they are the country’s most liquid and transparent markets,” according to broker Jones Lang LaSalle Inc.

Home sales will continue to rise this year because of economic growth, supportive credit environment and government reforms including the easing of the one-child policy, said Sigrid Zialcita, head of Asia research at Cushman, in an e-mailed reply.

Home sales rose at a rate of about 30 percent each year from 1998 to 2009, according to Centaline, China’s biggest real estate brokerage. The annual rate has slowed to about 10 percent since 2010, according to the brokerage.

They won’t continue growing as fast given their already rapid increase and government curbs, said Liu Yuan, a Shanghai-based researcher at Centaline. Growth in the early 2000s was driven by tax rebates and other incentives to encourage home buying as the nation’s property market was opened to private ownership, he said.

Abe Eyes Land-Price Reflation to Spur Construction Boom

Source: Bloomberg News

Japan wants to trigger a jump in inner-city property prices by loosening building restrictions in test zones under Abenomics, a government adviser said.

“Central-city property prices will likely rise when various plans are announced,” Tatsuo Hatta, 70, a member of a government council on special economic zones, said in an interview in Tokyo last week. The economic impact from the urban-planning changes will be “extremely big,” he said.

Prime Minister Shinzo Abe is trying to sustain an economic rebound that risks losing steam in April when a sales-tax increase will dampconsumer spending. While Hatta’s comments offer some insight into the government’s plans for special economic zones, investors are still waiting for fuller details of Abe’s growth strategy in what Goldman Sachs Group Inc. calls a “critical year” for Abenomics.

Home prices in Tokyo are around 120,000 yen to 150,000 yen per square foot, Chicago-based Jones Lang LaSalle said last year. That compares with about 280,000 yen to 400,000 yen in Hong Kong and 200,000 yen to 250,000 yen in Singapore, it said.

According to Hatta, the changes will make it easier to construct residential buildings in business districts in designated zones, creating opportunities to improve urban planning and make cities more enticing for employees of foreign companies.

Stock Bust

The bursting of a bubble in the stock market, which peaked in 1989, and a real-estate market bust in the 1990s saddled banks with bad loans, plunging Japan into a deflationary slump that it’s still trying to shake.

While prices in some cities picked up after former Prime Minister Junichiro Koizumi cleaned up the banking system in the early 2000s, a sustained rebound has been elusive. Nationwide residential real-estate prices at the end of September were down 51 percent from a peak in 1991.

Introducing special economic zones is a cornerstone of Abe’s effort to create opportunities for Japanese companies, along with steps to boost industrial competitiveness and open up the country more to international trade.

The government may decide in March where it will locate the special zones, Abe said on Jan 7.

2020 Olympics

The council will decide on criteria for selecting these areas at its next meeting expected to be held at the end of January or early February, Hatta said. There will be a maximum of five zones, with one or two “virtual” areas and the rest in big cities, he said.

Tokyo’s real-estate market has started to perk up, helped by unprecedented monetary easing by the Bank of Japan and the city’s successful bid to host the 2020 Olympics. The monthly average vacancy rate in Tokyo business areas fell to 7.34 percent at the of December from 8.67 percent a year earlier and 9.01 percent at the end of 2011, according to data from Miki Shoji Co.

The real-estate subindex of Japan’s benchmark Topix of shares climbed about 62 percent over the past year, outpacing a 43 percent gain in the Topix index.

Japan’s commercial real-estate transaction volume jumped 41 percent in October-December from the previous quarter, led by Japan Real-Estate Investment Trust activity, according to DTZ Research. Sales of commercial property more than doubled last year to 3.54 trillion yen ($34 billion), the highest since 2007, it said in a research note this week. Commercial property includes office buildings, shopping malls and distribution centers.

Attracting Foreigners

Loosening rules on residential construction in business districts would create more demand for education, medical and other services in those areas, Hatta said.

“Labor and other issues are more important and will have an impact over the long term, but this will have a strong impact in the short run,” Hatta said of the building deregulation. “The focus, as far as attracting foreign nationals is concerned, is to make living in city centers comfortable,” Hatta said.

By Chikako Mogi

Deutsche Bank Sees German Home Prices Rising for Sixth Year

Source: Bloomberg 

German apartment prices will rise for a sixth year in 2014 as an increase in employment fuels demand for homes,Deutsche Bank AG (DBK) said.

Prices for existing apartments will climb 4 percent, while new properties will rise 5 percent, the Frankfurt-based bank said in a report today. In Germany’s largest cities, existing apartments will gain 6 percent.

Home prices in Germany’s biggest urban areas have been rising for five years as more people move to locations where jobs are easier to find and home construction lags behind demand. Low interest rates are making acquisitions cheaper and prompting investors to switch out of bond markets and into real estate.

“The macroeconomic drivers of the upswing are still in place,” Jochen Moebert, an analyst at Deutsche Bank, said in the report. “The German housing market remains one of the few undervalued housing markets in terms of affordability.”

Increased regulation may damp demand from housing investors, Moebert said. A law took effect last year that allows state governments to cap rent increases in some areas at 15 percent every three years, compared with 20 percent previously.

The German government in November proposed tenant protections including a law that would bar landlords from entering new leases with rents that are 10 percent above the neighborhood average.

“The new measures and the political bickering over the details will weigh on investors’ willingness to invest, at least until the new laws are fully enacted,” the report said.

Germany’s biggest seven cities are Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart.

- By Dalia Fahmy

Hong Kong, Vancouver Least Affordable Home Markets, Survey Shows

Source: Bloomberg 

Hong Kong, Vancouver and Honolulu have the least affordable housing markets across nine nations in the Demographia International Housing Affordability survey.

The median home price in Hong Kong rose to 14.9 times gross annual median household income from 13.5 times last year, according to the 10th annual report by the Belleville, Illinois-based consulting company. Homes in Vancouver cost 10.3 times income and 9.4 times in Honolulu. Australia and New Zealand were the most unaffordable countries after Hong Kong, with home prices at 5.5 times gross income.

The survey examined housing prices in 360 metropolitan markets in Australia, Canada, Hong Kong, Ireland, Japan, New Zealand, Singapore, the U.K. and the U.S. A reading of 5.1 or more is “severely unaffordable,” while below 3 is affordable.

Surging home prices across Hong Kong, Australia and Canada have raised concerns about bubbles in markets that top the Demographia survey. Hong Kong home prices have more than doubled since the beginning of 2009, driven by demand from mainland China and mortgage rates at record lows. In Australia, historically low central bank rates pushed home prices in the nation’s major cities 9.8 percent higher in 2013, and Canadian property prices are forecast to continue climbing this year.

“Land use regulations and the availability of trunk infrastructure heavily constrain the supply of developable land,” Alain Bertaud, senior research scholar at the Stern School of Business at New York University, wrote in the introduction to the report. “If planners abandoned abstracts and unmeasurable objectives like smart growth, livability and sustainability to focus on what really matters -- mobility and affordability -- we could see a rapidly improving situation in many cities.”

Ireland was the most affordable country for housing, with homes costing 2.8 times incomes. Rockford, Illinois, was the most affordable city across all markets, and Pittsburgh was the most affordable in cities with populations of more than 1 million, the survey showed. Except for the U.S., no country had cities with more than 1 million people where the median home price was less than three times income, according to the report.

- By Nichola Saminather

Buyout Firms Shift to German Offices From Housing: Real Estate

Source: Bloomberg

Blackstone Group LP (BX), the private-equity firm that cashed in on Germany’s booming housing market last year, plans to join the ranks of investors shifting money into the country’s commercial properties, where financially-strapped owners are under pressure to make deals.

Investors from insurers and pension funds to buyout firms last year spent the most on German offices, stores and warehouses since 2007, broker Savills Plc estimates. Blackstone and its competitors want to join the acquisition spree even as values increase.

“Residential is getting too expensive and they’re using the peak to liquidate,” said Fabian Klein, the Frankfurt-based head of German investments at CBRE Group Inc. (CBG) “There’s clearly more interest from opportunistic investors” in commercial-property deals.

Private-equity firms accounted for 3 percent of the 30 billion euros ($41 billion) that investors paid for German commercial real estate in 2013 and that will probably climb to 10 percent this year, London-based Savills said. Demand is rising in anticipation of new properties becoming available as banks and cash-strapped owners sell distressed assets.

In December, Blackstone agreed to buy three warehouse properties in Germany for about 100 million euros, a person with knowledge of the matter said. The seller is CS Euroreal, a Credit Suisse Group AG (CSGN)mutual fund that’s in liquidation, said the person, who asked for anonymity because the deal hasn’t closed. Blackstone and Credit Suisse declined to comment.

Benson Elliot Capital Management LLP, a U.K.-based private-equity real estate firm, in December made its first commercial-property purchase in Germany since 2006.

$11 Billion Fund

Blackstone’s real estate business has stepped up investments since 2008, when it raised an $11 billion fund to purchase buildings around the world. Last year, the New York-based company raised $13.3 billion to create the biggest opportunistic property fund. The company has been investing in European real estate for almost two decades and in 2012 it founded LogiCor, a European warehouse owner and operator.

As part of that strategy, Blackstone wants to double its European warehouse holdings within two years. The company’s been slow to enter the German logistics market because prices are higher than in other countries, Jonathan Lurie, a London-based managing director in charge of Blackstone’s European property investments, said in an interview. The company’s also looking for retail properties, he said.

Falling Yields

Yields for the best logistics properties in Germany’s six largest cities declined to an average of about 6.6 percent in the fourth quarter from 6.9 percent a year earlier, according to data compiled by Jones Lang LaSalle Inc.Lower yields indicate that prices are increasing.

“The market has of course increased in value, but there remain opportunities to invest in properties where further work is required on stabilizing or improving occupancy,” Lurie said.

Blackstone and Apollo Global Management LLC (APO) were among the private-equity investors that sold German housing assets in 2013 as prices rose for a fifth year. Apartment values climbed to the highest since at least 2003 in the third quarter, according to the VDP Association of German Pfandbrief banks, even as buyout firms made fewer acquisitions.

Last year, their share of residential property investments declined to about 6 percent of the total from 13 percent in 2012 and as much as 50 percent in the years leading up to the financial crisis, Savills estimates.


“The residential industry is increasingly well-capitalized,” Lurie said.

Blackstone in April agreed to sell 6,900 Berlin apartments to Deutsche Wohnen AG and is in talks to sell its stake in 30,000 homes held by Vitus Immobilien Sarl. In July, Apollo sold a stake in residential landlord Deutsche Annington Immobilien SE.

The increased appetite for commercial deals is underpinned by the strength of the German economy, the largest in Europe. The Bundesbank in December projected growth of 1.7 percent in 2014 and 2 percent in 2015, saying the economy was in “good shape.” Last month, German investor confidence rose to the highest in seven years.

“Investors are more willing to take on commercial leasing risk than they were 12 or 18 months ago,” said Philipp Braschel, head of German investments at Benson Elliot. “The outlook on extending leases and on moderate rental growth is more positive than it was a year ago.”

Frankfurt Acquisition

Benson Elliot in December bought the Turmcenter, an office property in Frankfurt, from German state-owned lender Landesbank Baden-Wuerttemberg. The firm expects to be a net buyer of commercial real estate in 2014, and has been a net seller of homes since 2012. In July it divested 360 Berlin apartments.

Private-equity investors in particular are attracted to commercial-property deals because more distressed properties are being offered for sale, said Andreas Wende, head of investments at Savills in Frankfurt.

Cheap commercial deals are more widely available in secondary locations, such as smaller towns or unpopular neighborhoods of large cities, Wende said. In contrast, prices for the best properties in popular locations have risen to record highs, he said.

Prime office yields in central Frankfurt, Germany’s financial capital, were 4.5 percent at the end of 2013, while yields for less attractive office buildings on the city’s outskirts were 6.4 percent, according to data from Savills.

Distressed Assets

Royal Bank of Scotland Group Plc in June sold an office building on the outskirts of Mannheim, a town the size of Cincinnati, to Activum SG Capital Management Ltd., according to the Jersey-based private-equity firm. The property became available after Morgan Stanley (MS) Real Estate funds defaulted on the debt, Activum Chief Executive Officer Saul Goldstein said. RBS and Morgan Stanley declined to comment.

“For us it’s a value-add situation,” Goldstein said. “We do our leasing work, we stabilize the asset and then we move it in a couple of years.”

Many of the properties targeted by private-equity firms are legacies of a two-year buyout boom that ended in 2007, when investors bought overpriced assets with small down payments, Wende said. As financing for these assets runs out, the properties are put up for sale by the lenders or the cash-strapped owners, Wende said.

“There are forced sellers who haven’t been able to achieve their asking prices,” Braschel said. “They’re simply ready now to take the haircut they have to take.”

Unwinding Loans

European banks have more than 200 billion euros of distressed German commercial property loans on their books that must be either sold or held until maturity, said Daniel Mair, a transactions adviser at Ernst & Young LLP in Frankfurt. German bad banks created to wind down loans formerly held by Hypo Real Estate Holding AG, Commerzbank AG and WestLB AG, have performing and non-performing loans valued at about 40 billion euros, according to data compiled by Bloomberg.

Banks that divested non-performing property loans last year include Wells Fargo & Co., which sold nine shopping malls to Cerberus Capital Management LP. In February, Lloyd’s Banking Group Plc agreed to sell loans on German supermarkets and home-improvement stores valued at about 400 million euros to New York-based investment firm Marathon Asset Management LP, a person with knowledge of the deal said. The person asked not to be identified because the information is private. Lloyds declined to comment and no one at Marathon responded to requests for a comment.

Liquidated Holdings

Another source of commercial-property deals will be seven German mutual funds that are liquidating their holdings after investors tried to withdraw more money than the funds had available. Funds including Credit Suisse Group’s CS Euroreal and SEB Asset Management (SEBINAI)’s ImmoInvest own more than 5 billion euros of offices and shops in Germany that by law must be sold by 2017, according to data compiled by Berlin-based research firm Scope Corporation AG.

The private-equity industry is unlikely to abandon Germany’s residential-property market altogether. Last year, buyout firms accounted for about 6 percent of all investments in the market, compared with as much as 50 percent in the years leading up to the financial crisis, Savills estimates. Even so, companies like Blackstone are still on the look-out for deals.

“Residential is a sector where we’ve had a lot of success for our investors, and that we have a strong appreciation for,” Lurie said. “We’ll try to find a way to stay active in it.”

- By Dalia Fahmy

Glorious Property Plunges After Buyout Rejected: Hong Kong Mover

Source: Bloomberg 

Glorious Property Holdings Ltd. (845) fell by a record in Hong Kong trading after shareholders rejected an offer by Chinese billionaire Zhang Zhirong to take the company private.

Glorious Property dropped as much as 30 percent and closed 27 percent lower at HK$1.25, the biggest decline since Oct. 2, 2009. The Hang Seng Index fell 0.9 percent.

The company’s shares traded at less than half their net asset value before the offer, tracking a slide in China Rongsheng Heavy Industries Group Holdings Ltd. (1101) after the shipyard co-founded by Zhang sought a government bailout. Zhang quit as chairman of both Glorious Property and Rongsheng in November 2012.

“Glorious needs to speed up its asset disposal to improve its asset turnover and valuations,” Standard Chartered Plc Hong Kong-based analysts Andy So and Raymond Cheng wrote in a report after the buyout offer didn’t gain enough support at a meeting in Hong Kong on Jan. 17.

The offer lapsed after 62 investors voted against the plan and 58 holders voted in favor, according to a filing to the city’s stock exchange. Zhang can’t make another bid for 12 months, except with regulatory consent, the company said in the statement Jan. 17.

Rongsheng shares rose as much as 3.8 percent and finished the day 2.3 percent higher at HK$1.34.

Slumping Sales

Zhang, who owns 68.4 percent of Glorious Property, offered as much as HK$4.57 billion ($589 million) for the developer, according to a November filing. He offered HK$1.80 a share for Glorious Property, 45 percent more than the then most-recent price of HK$1.24, for all outstanding stock, the filing showed.

Contracted sales by the developer, which has residential, office and retail projects in 12 Chinese cities, slumped 33 percent last year amid property curbs aimed at cooling China’s housing market. Developers, including Glorious Property, face rising default risks as funding options narrow, according to Standard & Poor’s.

Glorious Property was the only listed developer with declining sales in China, hurt by a relatively high ratio of short-term loans and tight liquidity, Samson Man, an analyst at CMB International Capital Corp. with a sell rating on the stock, wrote in a report today.

“The outlook will not improve until Glorious adjusts its pricing to the market conditions,” Man said.

- By Rachel Butt and Rachel Evans

London Property-Market Growth Cools After 2013 Surge

Source: Bloomberg

London house-price growth slowed in January after the best year since 2006 as values slid in the most expensive districts of Westminster and Kensington and Chelsea, Rightmove Plc said.

Asking prices in the U.K. capital increased 0.2 percent to 514,704 pounds ($846,000), after growing 10.6 percent last year, the operator of Britain’s biggest property website said in a report today. Values in Westminster slid 8.3 percent, while those in Kensington dropped 6.9 percent.

“The average asking price of property coming to market is having a pause after a pretty hectic year of heady rises,” said Miles Shipside, a director at Rightmove in London. “It’s traditionally a quieter time of year. London needs more properties for sale to lessen upward price pressure.”

London is leading the housing market as supply fails to keep up with demand and the capital’s economy powers U.K. expansion. Bank of England Governor Mark Carney predicted last week that housing will continue to strengthen in 2014, and while policy makers have downplayed concern that prices could spiral, they scaled back a mortgage lending program last year.

Capital Economics Ltd. said in a report this month that London’s economy will expand 4 percent in 2014 and 2015. It has projected a 3 percent annual increase in U.K. gross domestic product in the same period.

London Leads

“London almost certainly led the U.K.’s growth rate in 2013,” said Richard Holt, an economist at Capital Economics. “We project that to continue this year and next, with several of the U.K.’s more northern or peripheral regions and nations bringing up the rear.”

Rightmove isn’t the only report to show London leading the property market. Data from the Office for National Statistics last week showed that U.K. annual house-price growth was 5.4 percent in November, compared with 11.6 percent in the capital. Excluding London and the southeast, average prices in the U.K. rose 3.1 percent.

London has Britain’s most expensive properties, with the average value in Kensington 2.05 million pounds in January, according to Rightmove. That compares with the national average of 243,861 pounds. In Westminster, homeowners are looking for around 1.39 million pounds for their properties.

Nationally, values climbed 1 percent this month, the largest ever January increase in the price of property coming to market, Rightmove said. Values in Yorkshire and Humber increased 4.5 percent, while prices in the north declined 1 percent.

“Early activity indicators suggest a strong 2014 for the housing market,” Rightmove said. “Seller and estate agent optimism is on the up.”

From a year earlier, U.K. asking prices for homes rose 6.3 percent in January, the highest annual rate since November 2007. London’s values increased 7 percent in the same period.

The pound was little changed at 82.46 pence per euro as of 8:29 a.m. London time, after appreciating to 82.33 pence, the strongest since Jan. 9. Sterling traded at $1.6438, from $1.6424 at the end of last week.

- By Emma Charlton