Real News‎ > ‎2014‎ > ‎July 2014‎ > ‎

11th July 2014

Singapore Real Estate

New URA rules to affect expansion plans for hostels, hotels

Some industry players have said that the new measure by URA to restrict the number of hotels and hostels will likely affect expansion plans in the next couple of years.

Source: Channel News Asia / Singapore

SINGAPORE: There has been growing demand to convert land for use as new hotels, boarding houses and backpacker hostels. As such, the Urban Redevelopment Authority (URA) said it is tightening guidelines to ensure there is a good mix of commercial uses to meet the needs of visitors and residents.

Earlier this week, the URA issued a circular to the industry, outlining new measures to curb the potential proliferation of such developments.

One of those affected by the new guidelines is Rucksack Inn.

The hostel has grown nearly 5 times over the past five years in terms of the number of beds. It started as a 38-bed hostel, but now has 226 beds across three outlets in Singapore.

Rucksack Inn has three outlets -- Lavender Street, Temple Street and another in Hong Kong Street.

Rucksack Inn said the new restriction on the change of use for new hostels could limit the options for a growing group of budget travellers and push prices up if there are insufficient beds to cater to rising demand.

Jacquelyn Chan, general manager of Rucksack Inn, said: "We see a lot of influx from the new emerging markets like the Philippines, Malaysia and Indonesia. By limiting the number of bed, that would be a disadvantage to us in the long run. In the short run, yes, we may see an increase in occupancy."

Rucksack Inn said its average occupancy hovers around 80 to 90 per cent and the new measure could increase occupancy by another 10 per cent.

Backpackers' hostels are a pretty common sight in some areas such as Chinatown and Little India, and some of them have been converted from other commercial uses.

From July 7, the URA will not approve proposals for new hotels, backpackers' hostels or boarding houses on sites that are not zoned for hotel use.

This restriction, which will be reviewed in two years, applies to locations outside the central area and four planning regions in the city.

They include the Rochor area -- covering locations like Serangoon Road and Jalan Besar, as well as a section in Bugis, including Purvis Street and Liang Seah Street. The third area encompasses Carpenter Street and Hong Kong Street, near the Singapore River.

The new rule will also apply to the Outram area, including a substantial part of Chinatown as well as Duxton Road and Neil Road.

Some industry players said the new measure will likely affect expansion plans in the next couple of years. But there are other ways to grow, for example by taking over the business of an existing operator.

According to some analysts, the new restriction will provide a timely assessment of the industry.

Ku Swee Yong, the CEO of Century 21 Singapore, said: "The macro environment, traffic flow and the mix of trades... I think security, safety and some of the potentially harmful vice trades that may spring up or clustered around these locations, that could be a consideration with the authorities."

Nicholas Mak, executive director of research & consultancy at SLP International Property Consultants, said: "Some of these hostels are not running at full occupancy right now. So with the restriction, there is still enough supply of budget hotels, 3-star hotels to cater to budget-conscious travellers."

The URA said it has received more applications for new hotels, boarding houses and backpackers' hostels. There are currently 13 such developments in the Upper Circular Road precinct near the Singapore River -- 12 of which were converted to hotel use in the last three years.

URA said such conversions have "generally displaced" other commercial uses such as offices, restaurants, coffee shops, music studios, kindergartens and commercial schools in these areas.

According to data from the Singapore Tourism Board, there are 54,962 hotel rooms in Singapore in 2013. As at the first quarter of 2014, there are 12,673 rooms in the supply pipeline. 

- CNA/ac

Tighter JTC subletting rules seen crimping Reits

Source: Business Times

JTC's tightening of its subletting rules is expected to affect the Reits market here. For sure, it will temper sale and leaseback transactions - where industrialists wishing to be asset-light and to unlock value from their properties sell their factory leases to third parties such as real estate investment trusts (Reits).

HDB resale prices dip 0.6% in June to hit a two-year low

Subdued decline points to price stability in coming months: analysts

Source: Business Times / Singapore

HDB RESALE prices continued to slip for the fifth consecutive month, registering a 0.6 per cent dip in June from May and marking a fresh two-year low since April 2012.

This translates to a 6.1 per cent drop from a year ago and a 3 per cent fall year-to-date, going by data from the Singapore Real Estate Exchange (SRX), which looks at pre-caveat resale transactions and unit rental information.

Softness in resale prices last month was seen in three, four and five-room resale flats.

Resale prices for HDB executive flats, however, rebounded with a 1.3 per cent month-on-month increase in June.

-By Lynette Khoo

HDB resale prices fall to 2-year low: SRX

In June, HDB resale prices dipped 0.6 per cent compared to May, affecting 3-, 4- and 5-room flats, according to the Singapore Real Estate Exchange.

Source: Channel News Asia / Singapore

SINGAPORE: The resale prices for Housing and Development Board (HDB) flats fell to a two-year low after it slipped 0.6 per cent month-on-month in June - the fifth consecutive months of declines, according to the Singapore Real Estate Exchange.

According to the SRX HDB flash report released on Thursday (July 10), June's HDB resale prices marked a new two-year low since April 2012. Compared to the peak in April 2013, prices for resale flats have declined by 6.8 per cent, SRX said.

Thomas Tan, executive director of REMAX, said: "From the supply perspective, HDB has released quite a fair bit of BTO thus far, so that will literally take demand away from the resale market. That explains the volume being low as well, besides the prices.

"From the demand end, HDB has also implemented policies like Mortgage Servicing Ratio... your affordability is capped at 30 per cent of your income."

Chris Koh, director of Chris International, attributed the fall in resale prices ot a change in procedure when selling resale flats. He said: "On top of that, this year in March, we had a change in procedure, in terms of the selling of HDB resale flats. Today, they will negotiate a price and then do the valuation.

"So we saw a lot of buyers being very conservative. When they make the offer, they make it low, for fear that the valuation is unable to match the price that they are offering. So the offers come in low, and if the owner accepts it, then you have a lower transacted price and therefore there's this dampener on prices."

The SRX report revealed that the price drop affected 3-, 4- and 5-room flats, which saw a price decline of 0.6, 0.8 and 0.3 per cent, respectively, compared to May. Executive flats, however, saw a rise in price by 1.3 per cent.

Mr Koh added: "We must acknowledge that HDB is not building any more executive flats. So people who are holding executive flats, not many want to sell them.

"So sometimes when a flat comes onto the market, you'll be surprised that many buyers are keen to buy it and if this flat is in a good location, or sometimes in a nice high level with panoramic views, buyers are willing to pay a premium for it."

In June, 1,315 HDB flats were sold, five less than the 1,320 transacted units in May, SRX added.

Rental volume and prices also fell for June. An estimated 1,590 HDB flats were rented out in June, and this was a 2 per cent decrease from May's 1,622 units. Rental prices fell 1.1 per cent on-month, reaching a new low since January 2012, the report stated.


The overall median Transaction Over X-Value (TOX), which measures whether people are overpaying or underpaying the SRX estimated market value, remained at a negative S$4,000 for June.

The majority of HDB towns - 18 out of 26 estates - saw negative median TOX in June. Among HDB towns with more than 10 transactions, the lowest median TOX are in Hougang, Punggol and Sembawang, at negative S$9,000, negative S$8,100 and negative S$8,000, respectively.

Mr Tan added: "They could be thinking of letting go of their current HDB flats because the projects which they bought, the condos which they bought could be reaching TOP (Temporary Occupation Permit). So they could be releasing the units in the market now... Once you see more supply in the market, definitely you'll see a downward pressure in terms of the prices."

Bucking the trend is Geylang, which was the only town with a positive median TOX of S$1,500, SRX said.

For the rest of this year, some property analysts expect HDB resale flat prices to continue to decline before stabilising -- possibly softening at 5 to 8 per cent for the whole of this year. However, they added that a sharp drop is unlikely as economic fundamentals are still sound.

- CNA/kk

HDB resale prices shrink to two-year low

Small change in number of flats sold from May may indicate stabilising market, say analysts

Source: Today Online / Business

SINGAPORE — The public housing market softened further in June with resale prices falling for a fifth consecutive month to reach a two-year low, as cooling measures and loan restrictions continued to affect sentiment.

Prices of previously owned Housing and Development Board (HDB) flats slipped 0.6 per cent from the previous month to their lowest level since April 2012, a flash report by the Singapore Real Estate Exchange (SRX) showed yesterday. The decline, however, was slower than the 1 per cent on-month fall seen in May, mainly because of an increase in the prices of executive flats, analysts said.

The previously-owned executive flats segment was the only one to experience an uptick in prices, gaining 1.3 per cent last month from May, the SRX said. Prices of three-, four- and five-room flats were down 0.6, 0.8 and 0.3 per cent, respectively.

“The smaller price drop was due to the increase in prices of executive flats. Those that are upgrading to larger flats are capitalising on this period of stabilising HDB prices to make the move,” said Mr Eugene Lim, key executive officer of ERA.

The number of resale flats transacted was relatively flat at 1,315 units last month, only five homes short of that sold in May. Analysts said this could be an indication that the fall in demand is bottoming out.

“In the last three months or so we’ve seen prices reach a level where buyers are willing to come back into the market, that’s why we’re seeing volume stabilising,” said Mr Alan Cheong, senior director of research and consultancy at real estate agency Savills.

On the other hand, with measures such as the stricter Mortgage Servicing Ratio (MSR) and newly-minted permanent residents having to wait three years before being allowed to buy HDB flats still impacting on sentiment, the public resale market could be in for further price corrections.

“When more people realise that prices still have room to fall further, resale volume may drop because potential buyers may choose to wait for better deals,” Mr Cheong said.

Adding further pressure is an upcoming supply of build-to-order (BTO) flats that are expected to be completed in the coming years.

“Owners collecting the keys to their new BTO flats and private properties may have more urgency to dispose their flats in the resale market … Prices could continue to fall a bit further before stabilising as the measures continue to bite,” said Mr Lim, adding that resale HDB prices may decline by 5 to 8 per cent over the entire year.

The SRX said prices have dropped by 3 per cent since the beginning of this year.

Meanwhile, in the rental market, sustained weakness saw prices fall by 1.1 per cent from May to reach a new low since January 2012. Rental volume also dropped 2 per cent to 1,590 transactions, according to the SRX report.

Analysts said this segment could also come under pressure in the coming months as more BTO flats approach their minimum occupation period, meaning an increasing number of landlords will be competing for a shrinking pool of potential tenants.

-By Lee Yen Nee

Fewer new flats this year as demand falls

Source: Straits Times

The supply of new Housing Board flats has been further reduced amid declining demand, as the resale market continues to cool for the fifth consecutive month. About 1,900 flats, or 8 per cent, have been cut from an original supply of 24,300 units this year. This is in order to "respond appropriately" to shrinking demand, the authorities told The Straits Times late on Wednesday.

Sembawang EC tender result reflects softer market

Just 4 bids received; top bid of $320 psf ppr from Frasers, Keong Hong tie-up

Source: Business Times / Singapore

A STATE tender for an executive condominium (EC) site in Sembawang Avenue has drawn just four bids, reflecting the soft sentiment for ECs following December's introduction of a mortgage service ratio cap for EC purchases from developers.

The top bid of $320.11 per square foot per plot ratio (psf ppr) is lower than the $350 psf ppr that another EC site in Sembawang fetched at a tender in January.

In fact, the earlier site, along Canberra Drive, is further from Sembawang MRT Station and it drew six bids.

The top bid at yesterday's tender closing is from a tie-up between units of Frasers Centrepoint and Keong Hong Holdings.

-By Kalpana Rashiwala

The wheel comes full circle

Source: Today Online / Business

The wheel comes full circle

The North-South and East-West MRT lines follow the Radial Rule for investing in Singapore property.

This rule states that as one moves away from Raffles Place MRT Station on either line, the median price per square foot (PSF) of condominiums within 1km of a station drops. There is a recognisable price pattern and this has been rather linear in most cases.

However, the Circle Line does not have such a discernible, linear pattern because, well, it is a rather odd-shaped circle.

This line primarily serves the rest of central region (RCR). From the perspective of property prices, it can be a wild ride.

As you move anticlockwise, PSF drops precipitously from Marina Bay to Nicoll Highway and all the way down to Bartley. There, the train starts travelling back up the PSF track as it moves towards HarbourFront.

After Lorong Chuan, fasten your seat belts. You are in for a roller coaster of a ride, with the median PSF varying dramatically from one station to another. For example, median PSF is S$1,571 at Holland Village. One stop later at Buona Vista, you pay S$1,448. At the next stop, one-north, median PSF is back up at S$1,578. Two stations later, you plunge, like in a roller coaster, to S$1,331 PSF at Haw Par Villa, only to climb up to the dizzying height of S$2,065 PSF three stops later at Telok Blangah. Are you seasick yet?

You might have seen different patterns in the Circle Line from that I have just outlined.

However, one pattern on which we can all agree is that if we start at Marina Bay, where median PSF is S$2,239, and ride the Circle Line all the way to Telok Blangah, we are back in the S$2,000 PSF range. As Edmund in Shakespeare’s King Lear said, the wheel is come full circle.

-By Sam Baker, Co-founder of Singapore Real Estate Exchange

Real Estate Companies' Brief

Hong Leong-linked First Sponsor Group launches IPO

China-based developer offers shares at $1.50 apiece

Source: Business Times / Companies

FIRST Sponsor Group Ltd (FSGL), a developer of residential and commercial properties in China, yesterday launched its Singapore mainboard initial public offering (IPO) of 34.05 million shares at $1.50 each.

The invitation represents about 5.8 per cent of the group's enlarged share capital.

The IPO comprises 3.8 million public-offer shares and 30.25 million placement shares.

FSGL, whose key controlling shareholders are Hong Leong Group Singapore through its shareholding interests in Millennium & Copthorne Hotels plc and Tai Tak Estates Sendirian Berhad, expects to have a market capitalisation of about $884.7 million when listed on July 22.

-By Kelly Tay

Global Economy & Global Real Estate

NY landlords fight tenants in buyout battle

But tenants stand their ground, demanding suitable alternative accommodation

Source: Business Times / Property

[NEW YORK] The first offer from the landlord's representative came in April: take US$90,000 to move out, the tenants said they were told, or the landlord would sue and they would lose their apartment anyway.

Lin Thai Ng, who lives in a cramped US$500-a-month studio in NoLIta with her husband, said no. The landlord persisted and offered US$100,000. After they refused again, the couple received a notice saying they were not the lawful tenants and declaring them squatters. They were told they had 18 days to get out or they would be evicted.

"He wants us to move," Ms Ng, 57, an immigrant from Malaysia, said in Cantonese through an interpreter, "but where are we going to move?"

Buyouts have long been part of the city's real estate lore, complete with only-in-New York stories of tenants who made millions relinquishing apartments they did not own. But as offers have become more common at the lower end of the ravenous housing market, buyouts have become instruments of illegal harassment and a growing threat to the stock of affordable housing, tenant groups and housing officials said.

-From New York, US

Shanghai allows record home prices by builder

Developer can set prices for its units as high as 298,000 yuan per sq m

Source: Business Times / Property

[SHANGHAI] Shanghai, China's financial centre, has approved a developer to seek the highest ever home prices in the city, in an effort to boost its sluggish luxury-home market.

Shenzhen Overseas Chinese Town Co can set prices for its high-end residential properties as high as 298,000 yuan (S$59,700) per square metre, according to the website of the city's real estate trading centre. That's the highest asking price ever in the metropolis, according to SouFun Holdings Ltd, China's biggest real estate website, and realtor Centaline Group.

"This is a kind of policy-easing as the government is trying to boost buyers' confidence," said Liu Yuan, a Shanghai-based researcher at Centaline. "If developers are allowed to sell at a higher price, then people will think the market is not as bad as they may have thought."

Some Chinese cities have already started to ease property policies amid a slowdown of the nation's property industry, prompted by the government's four-year effort to rein in prices and stamp out speculation. Home sales from January to May slumped 10 per cent from a year earlier, a stark contrast to the 27 per cent surge in 2013, even as developers tried to boost sales by reducing prices and offering incentives.

-From Shanghai, China

Shanghai approves city’s most expensive homes amid downturn

Source: Today Online / Business

SHANGHAI — China’s financial centre, Shanghai, is allowing a developer to seek the highest-ever home prices in the city, in an effort to boost its sluggish luxury home market.

Shenzhen Overseas Chinese Town can set prices as high as 298,000 yuan (S$59,700) per square metre for its high-end residential properties, said the website of the city’s real estate trading centre. This is a record asking price for the metropolis, said SouFun Holdings, China’s biggest real estate website, and realtor Centaline Group.

Chinese developers are required to obtain approval from the government and register their sale price at the local housing authority.

“This is a kind of policy-easing, as the government is trying to boost buyers’ confidence,” said Mr Liu Yuan, a Shanghai-based researcher at Centaline. “If developers are allowed to sell at a higher price, then people will think the market is not as bad as they may have thought.”

Some Chinese cities have already started to ease property policies amid a slowdown in the market caused by the government’s four-year effort to rein in prices and stamp out speculation. Home sales from January to May slumped 10 per cent from a year earlier, a stark contrast to the 27 per cent surge last year, even though developers have tried to boost sales by reducing prices and offering incentives.

Pre-sale approvals are part of the government’s property policies to regulate the market by placing caps on home prices. First-tier cities such as Beijing, Shenzhen and Guangzhou, where home-price gains were among the biggest last year, have once rejected pre-sale permits for projects that had target selling prices deemed too high by local officials.

Shanghai on Wednesday sold a 6,885sqm plot in the city’s downtown area for 577 million yuan, implying a cost of 85,513 yuan per sqm of buildable space, the most expensive in the country, China Securities Journal reported yesterday, without citing anyone.

-By Bloomberg

Eastern China city relaxes home curbs

Source: Business Times / Property

[BEIJING] A city in eastern China has removed restrictions on home purchases to allow people to buy more properties, underlining increasing pressures on local governments to safeguard their revenues and counter the faltering economy.

The government in Jinan in Shandong province started allowing residents to buy more homes from yesterday, regardless of how many they already own, or whether they are registered as residents, a local official said.

"The home purchase restrictions have been lifted," the official at the Jinan Housing Administration Bureau said yesterday.

Economists say the cooling housing market may pose a significant risk to China's economy if conditions deteriorate sharply. Average home prices fell for the first time in May while new construction starts have tumbled.

-From Beijing, China

Reit leads US$700m deal for St Regis stores

Source: Business Times / Property

[NEW YORK] Vornado Realty Trust is leading a partnership to buy the retail portion of the St Regis Hotel on Manhattan's Fifth Avenue for about US$700 million, gaining space on one of the world's most expensive shopping corridors.

The real estate investment trust (Reit) joined with Crown Acquisitions, a New York-based property firm that specialises in retail space, in a deal for the stores, which have 100 feet of frontage on Fifth Avenue at 55th Street. The acquisition also includes an adjacent retail townhouse, Vornado said on Wednesday.

Fifth Avenue ranks behind only Hong Kong's Causeway Bay among the costliest retail locations, according to Cushman & Wakefield Inc. The St Regis space is leased to Kering SA's Gucci division for its Bottega Veneta brand, and to LVMH Moet Hennessy Louis Vuitton SA, which uses its portion for a De Beers store, Vornado said. Kering's lease expires in January 2016, and LVMH's three years later.

The purchase price works out to US$28,340 per square foot, according to Real Capital Analytics Inc. The US record was the US$31,333 a square foot that Chanel SA paid for Upper East Side retail space earlier this year, the research firm said.

-From New York, US

U.S. Mortgage Rates Increase as Job Market Improves

Source: Bloomberg / News 

U.S. mortgage rates for 30-year loans rose for the first time in four weeks, increasing borrowing costs as job creation bolsters the housing recovery.

The average rate for a 30-year fixed mortgage was 4.15 percent this week, up from 4.12 percent, Freddie Mac said in a statement today. The average 15-year rate climbed 3.24 percent from 3.22 percent, according to the McLean, Virginia-based mortgage-finance company.

A better-than-expected jobs report last week pushed up yields for the government bonds that guide mortgage rates. The economy added 288,000 workers in June and the unemployment rate fell to an almost six-year low of 6.1 percent, Labor Department figures showed.

“The employment report was definitely good,” Keith Gumbinger, vice president of, a Riverdale, New Jersey-based mortgage-data firm, said yesterday in a telephone interview. While solid economic news should be pushing mortgage costs even higher, the Federal Reserve “is still buying mortgage-backed securities and treasuries, both intended to keep rates low.”

After a slow start to 2014, housing demand is gaining strength. Contracts (USPHTMOM) to buy previously owned U.S. houses climbed 6.1 percent in May, the biggest monthly gain since April 2010, the National Association of Realtors said this week.

The Mortgage Bankers Association’s index of purchase-loan applications rose 3.7 percent in the week through July 4, while the refinancing gauge climbed 0.4 percent, the trade group said yesterday.

-By Prashant Gopal

U.K. House-Price Growth Slows as Some Top London Areas Post Drop

Source: Bloomberg / Luxury

U.K. house-price growth slowed in June as new mortgage regulations damped activity and some of London’s most expensive areas posted declines, a survey shows.

Values in England and Wales rose 0.7 percent from May, when they increased 1 percent, according to data complied by Acadata Ltd. Prices gained 9.6 percent from a year earlier to 268,637 pounds ($459,900), the real-estate research firm and LSL Property Services Plc said in a report today.

Regulators introduced tougher mortgage affordability tests in April, under the Mortgage Market Review, and the Bank of England took action last month to limit riskier loans. Officials left the benchmark rate at a record low 0.5 percent yesterday to underpin the recovery, counting on its macroprudential powers to prevent an unsustainable buildup of debt.

“There are new signs that growth is beginning to slow as we move into summer and following the changes brought about by the Mortgage Market Review,” Richard Sexton, director of LSL’s e.surv division. Still, “the housing market recovery continues to seep across the country beyond the capital.”

In May, the latest month for which regional figures are available, prices in London surged an annual 15.6 percent to an average of 545,643 pounds.

In Hammersmith and Fulham, the fourth-most expensive London district, prices dropped 0.1 percent in May from April, to an average 838,232 pounds. In the City, the capital’s financial area, they slumped 8.2 percent to 819,920 pounds. Values rose 3.8 percent in Kensington and Chelsea, Britain’s priciest district with an average house price of 1.94 million pounds, after a 28 percent surge in the past year.

Acadata estimates housing transactions in England and Wales rose 10.3 percent in June from a year earlier to 73,750. They slid 6 percent from May.

-By Jennifer Ryan

Henry Ford Home Vying for Record Shows Calgary Booming

Source: Bloomberg / Luxury

Larry Lindholm made his fortune in Calgary’s booming energy industry, building and selling an oilfield equipment company. Then he bought a C$10.4 million ($9.8 million) mansion.

“This is the big reward,” Lindholm, 52, said from the new home he shares with wife, Kristi, 35, and their four kids. “Calgary’s a neat city to be part of, the opportunities are here right now. It’s amazing how it’s grown, with all the development taking place in the oil and gas sectors.”

The energy patch in Calgary, nicknamed “Cowtown” for its annual rodeo, and low mortgage rates are transforming Canada’s fourth largest city into a hub of luxury housing. Neighborhoods named Tuxedo Park and Hamptons are expanding as energy industry executives from Canada, the U.S. and Europe fuel record sales of Calgary’s most expensive homes.

Lindholm’s 14,500 square-foot (1,347 square-meter) estate, which features an eight-foot Swarovski crystal chandelier, broke the record for the most expensive home sold in Calgary when he bought it last year. That mark was topped by a C$11.1 million sale later thatyear, which in turn may be shattered by a current listing of a C$37.9 million home once owned by Henry Ford’s family.

“Luxury demand is growing,” said Corinne Poffenroth, an agent for Sotheby’s International Realty Canada in Calgary, who represented the Lindholms in their home purchase. “Our energy sector is very strong and it attracts top-ranking executives across the country and the world. There’s a lot of young new money.”

Helicopter Tours

While Vancouver and Toronto, Canada’s financial capital, boast the country’s most expensive housing, sales of luxury homes in Calgary are surging. Realtors in the city, known for sprawling suburbs and the tallest office tower in western Canada, sold 404 homes priced above C$1 million in the year to June 13. That’s an all-time high for Calgary and more than 10 times the total for an entire year a decade ago, according to Calgary Real Estate Board data.

The jump in sales has been powered by oil, the most important commodity in the western province. Investment in Alberta’s oil sands may reach a peak this year of more than C$30 billion, according to investment bank Peters & Co. That’s generating high-paying jobs in Calgary, Alberta’s biggest city, whose population expanded to 1.2 million last year.

Calgary has the highest concentration of millionaires in any of Canada’s major cities, according to Calgary Economic Development, a nonprofit group. Some of the city’s wealthiest residents and foreign buyers flock to tours of highly priced homes by helicopter. Sotheby’s International Realty Canada added a private helicopter service for its real estate clientele in Calgary in June, a first for the firm in Canada.

Oil Prices

“It’s a boom-bust economy that lives and dies by oil prices, and the housing market is the same,” said Robert Kavcic, Bank of Montreal senior economist in Toronto. “If you were to say what’s going to drive luxury real estate in Calgary, I’d say just oil prices.”

West Texas Intermediate, the U.S. benchmark crude, has averaged more than $90 a barrel over the past five years, the longest stretch at that price. That stability is unusual for a volatile commodity whose price sank to $33.87 a barrel in December 2009 from a record of almost $150 six months earlier.

Low mortgage rates have also helped drive housing sales. Posted rates for a five-year loan have been at a record low of 4.79 percent since April 9. And some lenders are offering three-year variable-rate mortgages for as low as 1.99 percent.

Millionaire Mortgages

Millionaires are taking home loans because a lot of their assets are tied up in investments they don’t want to liquidate, said Martin Reid, president of Home Capital Group Inc., Canada’s largest alternative mortgage provider. Lenders often offer smaller loans for luxury homes because the prices are susceptible to big fluctuations. Reid said about five percent of the homes for which his company provides mortgages across Canada are priced above C$1 million.

“We’re not going to give as much of a loan on a percentage basis as you get into that luxury space,” Reid said. “If it’s a C$500,000 dollar house, we loan 75 percent of the value. If it’s a C$2 million house, we’ll likely lend 60 percent of the value.”

Calgary, which sprang up in 1875 as a fort town for the North-West Mounted Police along the banks of the Bow and Elbow rivers, now has at least four neighborhoods where the average house price is C$1 million or higher, according to the city’s real estate board.

Henry Ford

Those communities include older areas like Mount Royal. It was developed by the Canadian Pacific Railway, which owned most of the land in Calgary in the early 20th century. Bel Aire, one of the established million-dollar areas, has a view over the city’s largest reservoir and is bordered by its oldest private golf course.

The former estate of Henry Ford, the founder of Ford Motor Co., is now listed for C$37.9 million, the highest in the province. The 5,000 square foot home is guarded by a security gate and surrounded by 242-acres (98-hectare) of pastures and several lakes in Millarville, a 45-minute drive south of Calgary. The home, with views of the Rocky Mountains, comes with four fireplaces, C$1 million in mouldings and two garages for six cars.

Energy Executives

Demand for housing in Calgary extends into the middle market as well. The average home price in the city was C$491,995 in June, a 5.5 percent gain from the same time last year, according to data compiled by Bloomberg from regional real estate boards.

“Oil and gas is definitely fueling the market,” said Sam Corea, a real estate agent with Re/Max Holdings Inc. in Calgary, who’s busiest during the energy industry’s bonus season in late winter.

Corea’s typical client is a professional in the oil and gas sector between the ages of 35 and 50 who wants expensive amenities including top-tier appliances and granite countertops.

“Calgary is a much more sophisticated market than it was 10 or 15 years ago,” said Corea, who last year sold 128 homes at an average price of C$943,000 each.

Corea said the city’s housing could begin to lose its glow as supply catches up to demand.

“The market is starting to feel a bit like the spring of 2007 just before it stalled,” he said. “The market edge is starting to slip away.”

Supply Grows

Homes listed at more than C$500,000 jumped 42 percent to 1,359 units in June over the same time last year, according to the city’s real estate board. Single detached homes will be constructed this year at the highest pace since 2007, according to forecasts by Canada Mortgage and Housing Corp.

“As this market has moved into more balanced conditions, and if inventories continue to rise, price growth should ease throughout the remainder of the year,” said the board’s chief economist Ann-Marie Lurie.

Lindholm, the oil entrepreneur who drives a red Ferrari, said his father gave him a warning after he bought his castle-like home.

“My dad says, ’Nice house. You’re never going to be able to sell that’,” said Lindholm, who moved his family from a home in the city that they sold for C$2 million. “I think he’s right. Maybe not now because there’s a small market for this size house -- but it’s growing.”

-By Katia Dmitrieva and Jeremy van Loon

Standard Chartered Private Equity Buys Stake in China Property

Source: Bloomberg / News

Standard Chartered Plc (STAN)’s private equity arm led a group to buy a 28 percent stake in a Longfor Properties Co. (960) development for $124 million, the latest foreign investor to signal interest in China’s property market.

Standard Chartered Private Equity will invest $70 million, and the rest will be funded by an unnamed Chinese institutional investor and an Asian family group, the London-based bank said in a statement today. The office and retail development project, spanning 312,310 square meters (3.4 million square feet) is located in the western city of Chongqing, it said.

The London bank follows others such as CBRE Global Investors to search for investment opportunities in China real estate after four years of government curbs prompted a slowdown in the industry. Some Chinese cities are already easing property policies after home sales in the first five months slumped 10 percent from a year earlier, compared with the 27 percent surge last year.

Longfor Properties, based in Beijing, is controlled by billionaire Wu Yajun. She has a net worth of $3.2 billion, according to Bloomberg Billionaires index.

-By Michelle Yun

Berlin Home-Price Gains Beat Rents as Demand Increases

Source: Bloomberg / Luxury

Advertised prices for Berlin apartments rose more than twice as fast as rents in June as housing demand in Germany’s capital outpaced construction and low borrowing costs encouraged buyers.

An index measuring asking prices for apartments in the city in June rose 15.6 points from a year earlier to 161, while a rent index rose 7 points to 140.7, according to data compiled by online broker Immobilien Scout GmbH.

“It would be misleading to attribute this to the start of a bubble,” Michael Kiefer, Immobilien Scout’s chief analyst, said in a statement today. “Other factors, led by demand, play an important role.”

More people are buying homes in Berlin as the city attracts professionals with higher incomes and investors take advantage of low interest rates. At the same time, legislators plan to introduce new rules to keep rents in check.

Officials in cities including Hamburg, Berlin and Munich plan to make it unlawful to raise rents in certain neighborhoods by more than 15 percent over a three-year period, officials said last year.

Berlin posted the strongest price gain among Germany’s five biggest cities, followed by Munich, which had a 12.2-point increase. Across Germany, prices and rents rose more slowly, both measures gaining 5.3 points, Immobilien Scout said.

-By Dalia Fahmy

DLF Leads Surge in Property Shares as Jaitley Plans REIT Rules

Source: Bloomberg / Luxury

DLF Ltd. (DLFU), India’s largest real estate developer led gains among property stocks after Finance Minister Arun Jaitley proposed revamping tax rules to enable the introduction of real estate investment trusts.

DLF surged 12 percent to 227.45 rupees at 2:45 p.m. in Mumbai, its biggest gain in five years.Oberoi Realty Ltd. (OBER), the country’s second-largest developer by value, jumped 6 percent while Prestige Estates Projects Ltd., a Bengaluru-based developer added 7 percent. The S&P BSE India Realty Index rose 9 percent, set for its biggest gain since 2009.

Jaitley’s proposal to amend rules to end double taxation for REITs will boost transparency in the real estate sector and help developers raise funds, said Neeraj Bansal, Partner and head real estate and construction at KPMG LLP said.

“We finally got a specific statement on REITs which have been under discussion for a while,” said Sanjay Ubale, managing director, Tata Realty & Infrastructure Ltd. “Whether it spurs actual development or not, will depend on how quickly regulatory clearances come through. But now we can at least see the pieces falling in place.”

The government also plans to introduce a REIT-type structure for infrastructure projects which will help reduce pressure on the banking system and such instruments will attract long-term finance from foreign and domestic investors, Jaitley said.

Among the listed developers that have rent yielding properties and are likely to introduce REITs are DLF, Prestige Estates (PEPL), Brigade Enterprises Ltd., Phoenix Mills (PHNX) Lt. and Oberoi Realty, Kotak Securities said in a note to clients today.

-By Pooja Thakur

City of London to Vote on Salesforce Tower’s Renaming

Source: Bloomberg / Tech

The City of London’s local government will vote on whether the Heron Tower can be renamed Salesforce Tower London after some of the skyscraper’s tenants raised concerns about it being named after a competitor.

Other companies in the building could use its 110 Bishopsgate address instead of the new name as a compromise, the borough said in a filing ahead of the July 17 vote. While council members can reject the name change because it may cause confusion, officials recommended approval of the application, according to the filing. Inc. (CRM) agreed to rent six floors of the 46-story tower, one of the financial district’s tallest buildings, as part of the naming deal, the company and developer Heron International Ltd. said in May. The tower’s owners include the State General Reserve of Oman Fund and members of Saudi Arabia’s royal family.

The San Francisco-based maker of online customer-management, support and HR software is “an example of the expanding high-technology businesses that are increasingly seeking accommodation in or near the City,” the borough said in the filing.

Salesforce declined to comment. Heron didn’t immediately respond to requests for comment.

Salesforce in April agreed to rent more than half of San Francisco’s tallest building, which will also be named after the company, in a deal that set a city record for office rents.

-By Neil Callanan

Barratt Says Annual Earnings Doubled as Property Values Soared

Source: Bloomberg / Luxury

Barratt Developments Plc (BDEV), the U.K.’s third-largest homebuilder by market value, said fiscal 2014 earnings more than doubled as prices rose and the company built larger homes in better locations.

Pretax profit for the 12 months through June climbed to about 390 million pounds ($668 million), the company said in a statement today. Barratt reported pretax profit of 192 million pounds excluding one-time items a year earlier.

Barratt is increasing the number of homes it builds as demand grows, the company said. The value of homes sold before they were completed rose 45 percent to 1.2 billion pounds for the fiscal year.

Barratt’s return on capital exceeded 18 percent two years ahead of schedule as rising prices increased the value of its assets, according to the statement. The homebuilder said it welcomed the Bank of England’s planned introduction of loan-to-income caps on mortgage lending as the central bank attempts to prevent a housing bubble.

“The market remains positive with strong demand for new homes across the country,” Chief Executive Officer Mark Clare said in the statement. “Our focused approach to land buying will enable us to maintain a land supply of around 4.5 years and support a significant increase in profitability and return on capital employed.”

-By Neil Callanan