Singapore Economy S'pore '4th most expensive city for expats' Source: Straits Times Singapore has become the fourth most expensive city in the world for expatriates, says a report by research firm Mercer. The Republic climbed one rung from fifth place last year, Mercer said in its annual cost of living survey released last week. Singapore now 4th most expensive city in the world for expats: SurveyThe Republic climbs one spot from last year to come in fourth, behind two African cities and Hong Kong. Source: Channel News Asia / Singapore SINGAPORE: The Republic is now the fourth most expensive city in the world for expatriates and the second most expensive in Asia, according to the latest cost of living survey by Mercer. Singapore gained one spot from last year to come in fourth, behind two African cities – Luanda in Angola and N’Djamena in Chad – and Hong Kong. Four of the top 10 cities in this year’s ranking are in Asia. The most expensive city in the region, Hong Kong, jumped from sixth place to third, followed by Singapore. Tokyo - previously Asia's most expensive city for expatriates - fell four places to seventh, while Shanghai came in 10th on the list, jumping four spots from last year. “Rankings in many regions were affected by recent world events, including economic and political upheavals, which resulted in currency fluctuations, cost inflation for goods and services, and volatility in accommodation prices,” said Mr Ed Hannibal, Partner and Global Leader for Mercer’s Mobility practice. “While Luanda and N’Djamena are relatively inexpensive cities, they are quite costly for expatriates since imported goods come at a premium. In addition, finding secure living accommodations that meet the standards of expatriates can be challenging and quite costly as well." The survey covers 211 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods and entertainment.
- CNA/cy
http://www.channelnewsasia.com/news/singapore/singapore-now-4th-most/1262440.html Singapore Real Estate Non-residential deals to remain active in H2 Investments in Q2 down 11% from Q1 as private home sales falter: DTZ Source: Business Times / Property [SINGAPORE] Non-residential deals will continue to drive investment activity in Singapore for the rest of this year, given faltering sales in the tepid private residential market, DTZ said in a report yesterday. The report found that overall real estate investments fell around 11 per cent from the previous quarter to $4.4 billion in Q2. And although non-residential investments (particularly offices) drove the volume, they too fell 6 per cent to $2.9 billion on muted transactions in the hospitality and mixed-use sectors.
At least six big-ticket non-residential property deals were concluded in Q2. -By Lee Meixian http://www.businesstimes.com.sg/specials/property/non-residential-deals-remain-active-h2-20140715 Prices of resale condos slip 1.4% in June: SRX Deal volume up but still far below year-ago numbers Source: Business Times / Top Stories [SINGAPORE] Resale prices of private condos dipped further last month to a low since December 2012, despite an increase in resale volumes. This could be due to more buyers moving into the resale market as owners relent to lower prices to match the expectations of buyers, property consultants say. Transaction data from Singapore Real Estate Exchange (SRX) shows that prices fell 1.4 per cent from May, dragged by declines across all regions. But the number of resale transactions increased by 7.9 per cent month-on-month to 452 in June. This is, however, 23.8 per cent lower than the number of resale transactions inked in June last year. "June's increase in resale deals cannot be construed as buoyant sales activity as total monthly resale deals is still fairly limited. Some deals moved in June as owners finally relented to lower prices offered by buyers, after the property was up for sale prior to June for a while but could not find a buyer who is willing to pay near the asking price," said Ong Kah Seng, director at R'ST Research. The resale market was also quiet due to the June holidays and the World Cup period, he added. The Rest of Central Region (RCR) marked the biggest price decline of 3.2 per cent, followed by 1.7 per cent in Core Central Region (CCR) and 0.3 per cent in Outside Central Region (OCR). ERA Realty key executive officer Eugene Lim noted that the price declines in RCR and CCR, where homes fall in a higher price band, steered the prices down. Resale prices in the CCR are also affected by loan curbs, ample unsold developer stock, additional buyers stamp duty and weak leasing demand. But he reckoned that as prices stabilise, more buyers may be moving back to the resale market. In the rental market, condo owners were more willing to lower their asking rents to secure tenants. According to SRX, overall rental prices in June dipped 0.8 per cent from May, and fell 6.5 per cent from a peak in January last year. This is based on an estimated 3,151 units rented in June. This estimated number of rental transactions is a 2.2 per cent increase from the 3,084 rental contracts inked in May, and 18.6 per cent higher than the 2,657 rental contracts signed in June last year. Mr Lim noted that the completion of private condos will rise from 13,150 units last year to an estimated 17,138 units this year. This is expected to rise further to 21,738 units in 2015 and 26,252 units in 2016.
More condo units entering the resale market and the tightening of foreign manpower will probably keep rents depressed going forward, he said. -By Lynette Khoo More deals done, but resale private home prices fell to 18-month low in June: SRXThe number of private home resale transactions was a 7.9 per cent increase over May, but prices fell by 1.4 per cent in June, according to the Singapore Real Estate Exchange.Source: Channel News Asia / Singapore SINGAPORE: Resale prices for non-landed private residential
homes continued to fall in June, reaching a 1.5-year low, according to the
latest report by the Singapore Real Estate Exchange (SRX) on Monday (July 14). Overall resale prices fell 1.4 per cent month-on-month to hit an 18-month low, with prices at their lowest since December 2012, according to the SRX Flash Report. Compared to the price peak in January this year, June prices are 4.7 per cent lower. Prices fell for all three regions - Rest of Central Region (RCR), Core Central Region (CCR) and Outside Central Region (OCR) - with the city fringe area leading the fall by 3.2 per cent. This was followed by the core central area and the suburbs, which dropped 1.7 per cent and 0.3 per cent, respectively, SRX said. The majority of districts - or 15 of 24 districts - saw zero or negative median Transaction Over X-value (TOX) in June. For districts with more than 10 resale transactions, districts 15 (Katong, Joo Chiat and Amber Road) and 10 (Bukit Timah, Holland Road and Tanglin) had the lowest median TOX at negative S$50,000 and negative S$37,000, respectively.
The number of resale transactions went up though, registering a 7.9 per cent month-on-month growth to reach an estimated 452 deals in June. Resale volume has gone up by 53.7 per cent since the beginning of year, the report said. In terms of rental deals, prices slipped 0.8 per cent compared to May while volume went up 2.2 per cent over the same period. An estimated 3,151 whole units were rented out last month, according to SRX. - CNA/kk http://www.businesstimes.com.sg/premium/top-stories/prices-resale-condos-slip-14-june-srx-20140715 http://www.channelnewsasia.com/news/singapore/more-deals-done-but/1262214.html Office deals fire up Q2 property figures Source: Straits Times Office deals were the main driver of property investment sales in the second quarter and will likely stay at the forefront in coming months, consultants said. They noted that a resurgence in rents has led to keener interest from investors in the office sector.
Construction firm grows new wings Logistics Holdings banks on its Paya Lebar residential project and Johor precast plant as revenue drivers. LESTER WONG reports Source: Business Times / SME Inc. FOLLOWING the Budget 2014 announcement, Singapore's construction sector has had to adjust to a new reality of tighter restrictions on foreign labour and an increased impetus to achieve productivity gains through innovation. This carrot and stick approach has produced a corresponding carrot and stick response from local construction company Logistics Holdings. The company has made use of the carrot to partially fund a new precast plant in Johor, Malaysia, in line with new regulations for government land sales sites, among other things. At the same time, it has been made to toe the line on the hiring of foreign labour by the prodding of the stick.
Grudging acceptance describes Logistics chief executive officer Phua Lam Soon's reaction to the new normal. "Construction is still a very labour-intensive business and there are certain things you cannot do without labour. "Look at your building (SPH News Centre), for example. It curves here and there and the wall panels are of different sizes. We can only do precast if they are all of the same size." -By Lester Wong http://www.businesstimes.com.sg/specials/sme-inc/others/construction-firm-grows-new-wings-20140715 Private site acquired for public housing Source: Straits Times A private industrial property at No. 16 King George's Avenue is part of a 1.23 ha plot that will be bought by the Government and developed for public housing. The site will be acquired under the Land Acquisition Act, said the Housing and Development Board and Singapore Land Authority (SLA) in a joint statement yesterday. Land at King George's Avenue for public housing developmentThe 1.23-hectare plot of land at the junction of Syed Alwi Road and King George's Avenue will be developed for public housing, as stated in the Master Plan.Source: Channel News Asia / Singapore SINGAPORE: The Housing and Development Board (HDB) and Singapore Land Authority (SLA) has earmarked a 1.23-hectare plot of land at the junction of Syed Alwi Road and King George's Avenue for public housing development. In a joint statement on Monday (July 14), the agencies said the land is zoned for residential use in the Master Plan and comprises mainly of vacant State land and a private industrial property at No. 16 King George's Avenue. To facilitate the development, the Government will be acquiring the private property under the Land Acqusition Act. The SLA gazetted the land affected by the acquisition on Monday, and both agencies are in touch with the affected landowner to assist with any queries and concerns, the statement said. More information on the future public housing development will be provided when the plans are ready, the agencies said. - CNA/kk
http://www.channelnewsasia.com/news/singapore/land-at-king-george-s/1262532.html Real Estate Companies' Brief Frasers trust closes above offer in debut Units end at 89.5¢; investors drawn by higher yield Source: Business Times / Companies FRASERS Hospitality Trust, backed by Thailand's richest man, closed its first day of trading at 89.5 cents, up 1.7 per cent, as its higher yield attracted investors. The units opened at 90 cents apiece at 2pm yesterday, 2.3 per cent above the offer price of 88 cents. The trust, which is backed by six hotels and six serviced residences, offered 185.06 million units. Combined with commitments from cornerstone investors, Frasers Hospitality issued 418 million securities to raise $368 million, it said on Friday. Frasers Hospitality Trust plans to offer a dividend yield of 7 per cent for the 2015 financial year, higher than Ascott Residence Trust's 12-month yield of 6.2 per cent and Far East Hospitality Trust's 6.4 per cent.
The initial portfolio of 12 properties is spread across seven key gateway cities in Asia, Australia and the UK, with a total of 1,928 hotel rooms and 842 serviced residence units, according to the firm.
Oxley cancels Malaysian land deal Source: Business Times / Companies OXLEY Malaysia, a wholly owned unit of Oxley Holdings, has agreed to terminate its acquisition of TCK Capital Sdn Bhd (TCK). TCK's proposal to buy a piece of land in Kuala Lumpur has been "cancelled by the Malaysian government", Oxley Holdings said. A deposit of RM8 million (S$3.12 million) has been fully refunded to Oxley Malaysia. http://www.businesstimes.com.sg/premium/companies/others/company-briefs-20140715 Australand offer 'fair and reasonable' Source: Business Times An independent expert's report has deemed Frasers Centrepoint's offer for Australand "fair and reasonable". It ascribed a value for Australand in the range of A$4.22 to A$4.54, compared to Frasers Centrepoint's offer of A$4.48 per stapled security. Australand's directors have recommended security holders accept the offer in the absence of a superior proposal.
http://www.businesstimes.com.sg/premium/companies/others/company-briefs-20140715 Global Economy & Global Real Estate Chinese homebuyers fuelling US foreign sales They have spent US$22b on property in the year through March, up 72% Source: Business Times / Property [LOS ANGELES] Henry Nunez, a real estate agent in Arcadia, California, met with so many homebuyers from China that he bought a Mandarin-English translation app for his phone. The US$1.99 purchase paid off last month, when he sold a five-bedroom home with crystal chandeliers, marble floors and two kitchens, one designed for smoky wok cooking. The buyers were a Chinese couple who paid US$3.5 million in cash. "Last year, it would've been US$2.8 million," said Mr Nunez, a property broker for 27 years in the city 32 kilometres east of Los Angeles. "The biggest driver is a lot of people wanting to invest their money here."
Buyers from Greater China, including people from Hong Kong and Taiwan, spent US$22 billion on US homes in the year through March, up 72 per cent from the same period last year and more than any other nationality, the National Association of Realtors said in its annual report on foreign home purchases. That's 24 US cents of every dollar spent by international homebuyers, according to the survey of 3,547 real estate agents. -From Los Angeles, US Dubai property concerns hit top builder's sukuk Yield on Damac's 2019 debt jumps 69 bps to 5.87% in June Source: Business Times / Property [DUBAI] Islamic bonds from Damac Real Estate Development Ltd have become the region's worst performers this year just three months after they were issued, amid concern Dubai's property boom is running out of steam. The developer, which once raffled a Caribbean island in a bid to sell more luxury apartments, was last month caught up in a sell-off led by property securities that sent the local equity gauge into a bear market. The yield on Damac's 2019 sukuk jumped 69 basis points (bps) to 5.87 per cent in June, according to Bloomberg data, compared with the 10 bp increase to 4.17 per cent for Middle East Islamic bonds on a JPMorgan Chase & Co index.
The securities have traded below their selling price since they were sold in April. -From Dubai, UAE Australia Housing a Significant Source of Risk, Inquiry Says Source: Bloomberg / News An increase in Australian housing debt since 1997 and banks’ exposure to mortgages are a significant source of risk to the country’s financial system, according to a government inquiry. Since a previous financial sector review, “household leverage has almost doubled,” the five-member panel led by David Murray said in an interim report released today. “Higher household indebtedness and the greater proportion of mortgages on bank balance sheets mean that an extreme event in the housing market would have significant implications for financial stability and economic growth.” Australia’s average home price rose to a record in April and since a trough in May 2012 has climbed 15 percent, according to the RP Data-Rismark home value index. Household debt increased to around 1.5 years of income in 2008 from 0.8 years in 1997, according to the panel, which said it will seek more information on how to temper the effects of the housing market on the financial system and economy. “The report sounds like it is paving the way for macroprudential tools given the rise in household debt,” said John Buonaccorsi, a Sydney-based analyst at CIMB Group Holdings Bhd. said by phone. The Australian Prudential Regulation Authority and central bank’s view is they “would need to see more valuation issues and lending going out of control” to employ such tools, he said. Capital RequirementsThe inquiry panel also asked for submissions on whether the bigger banks should set aside more capital against mortgages. The Bank of England said last month lenders must limit the proportion of mortgages at 4.5 times a borrower’s income to no more than 15 percent of a bank’s new home loans. It also said lenders must decline mortgages to borrowers who fail a new repayment test. The Reserve Bank of New Zealand last year said loans for more than 80 percent of a property’s value must account for no more than 10 percent of new lending. Tax rules for investment properties tend to encourage leveraged and speculative investment, the report said. Australian investors can reduce their tax liabilities by deducting borrowing costs and other related expenses against total income at the individual’s full marginal tax rate. While similar tax treatment is available for other leveraged investments, such as equities, investors perceive housing as less risky and there is a falsely held view that house prices never fall, the report said. New MortgagesHousing loans to investors represented 40 percent of all new mortgages in May compared with 35 percent two years earlier, according to the Australian Bureau of Statistics. A sharp fall in house prices could push some households into negative equity, amplify financial distress and hurt the quality of bank balance sheets, the report said. The panel sought views on increasing the capital requirements for banks considered systematically important. Australian mortgages are the largest asset class for the country’s four main banks and the biggest profit contributor. They represent 59 percent of loans for Commonwealth Bank of Australia, the largest lender by market value, 60 percent for Westpac Banking Corp. (WBC), the second-largest, 45 percent at National Australia Bank Ltd. (NAB) and 40 percent at Australia & New Zealand Banking Group Ltd., according to first-half filings from the lenders. The four banks held A$1.06 trillion ($996 billion) in mortgages as of May, according to APRA. The panel expects to make its final recommendations by November. The inquiry is the first since a government-appointed review of the financial sector headed by Stan Wallis, which reported in 1997. The Wallis inquiry resulted in the formation of APRA under a restructure of regulatory authorities. -By Narayanan Somasundaram Lodha Said to Seek IPO Valuing Indian Developer at $10 Billion Source: Bloomberg / Luxury The Indian developer of the world’s tallest residential tower in Mumbai is planning an initial public offering that may raise as much as $1 billion, said people with knowledge of the matter. The sale may value Lodha Developers Pvt. at as much as $10 billion, according to one of the people. Shares of the Mumbai-based company will probably start trading next year, two of the people said, asking not to be identified as the deliberations are confidential. Lodha is seeking a listing after home prices in Mumbai, the country’s financial capital, more than doubled in the five years through March, according to data from Liases Foras Real Estate Rating & Research Pvt. A $1 billion IPO would be India’s biggest since 2010, when state-owned miner Coal India Ltd. (COAL)’s share sale raised $3.4 billion, data compiled by Bloomberg show. The company is building the 117-story World One residential tower, which it says will be the world’s tallest at 423 meters (1,390 feet), according to its website. The development, which will feature apartments outfitted by Giorgio Armani SpA’s interior design brand, is located in central Mumbai’s Lower Parel district near the offices of Morgan Stanley and KKR & Co. (KKR) Lodha may be competing for stock-market funding with the Indian government, which is planning to reduce its stakes in state-owned companies including Coal India and Power Finance Corp., said P. Phani Sekhar, a Mumbai-based fund manager at Angel Broking Ltd. Asset SalesPrime Minister Narendra Modi’s administration plans to earn more than 800 billion rupees ($13.3 billion) from the asset sales in the year to March 31, finance ministry officials with direct knowledge of the matter said last month. “The stock market hasn’t improved sufficiently and the government has also planned a lot of disinvestment for state-run companies,” Sekhar said, adding economic growth needs to accelerate to at least 7 percent for the Indian real estate industry to revive. While the benchmark S&P BSE Sensex (SENSEX) index has almost doubled in the past five years, shares of billionaire Kushal Pal Singh’s DLF Ltd. (DLFU), the largest listed developer in India, have slumped 36 percent in the same period. India’s $1.8 trillion economy expanded 4.7 percent in the year ended March 31, near the slowest pace in a decade. The combined debt of India’s six-biggest listed developers climbed to a record 394 billion rupees as of March 31, from 158.8 billion rupees in 2007, according to data compiled by IIFL Ltd. (IIFL) Reviving PlansLodha is reviving its IPO after seeking to raise as much as 27.9 billion rupees in 2010. Lodha has held discussions with investment banks about an IPO, though the process is at an early stage and no advisers have been hired, the people said. “We are well capitalized to meet our business growth plans through our internal cash flows, and have no plans of raising capital through a public listing at this time,” Lodha said in an e-mailed response to questions. Foreigners have poured $11 billion into Indian shares, spurring an 18 percent rally in the Sensex this year, the best performance among the world’s 10 biggest markets, data compiled by Bloomberg show. The index may double in the next three years after Modi laid the groundwork for strengthening Asia’s third-largest economy in last week’s budget, according to BlackRock Inc. (BLK) Buying PropertiesLodha agreed to buy a Canadian diplomatic property in central London’s Mayfair district in November for C$530 million ($495 million). In February, it bought another London property on Carey Street, close to the Royal Courts of Justice, for 90 million pounds ($154 million) to develop a residential project. Lodha is building Palava, a 4,000-acre (16.2-square-kilometer) township near the planned second airport in Mumbai. The company, founded in 1980 by Chairman Mangal Prabhat Lodha, has more than 35 million square feet under development, according to its website. In 2010, Lodha bought a central Mumbai plot for 40.5 billion rupees from the Mumbai Metropolitan Region Development Authority, which it said was India’s biggest land deal to date, according to the company’s website. The company acquired a 17-acre plot in central Mumbai from DLF for 27 billion rupees in 2012. Lodha posted sales of 90 billion rupees in the 12 months ended March 2013, the most recent year for which figures are available, according to the company’s website. That’s higher than DLF, which reported sales of 77.7 billion rupees that year, data compiled by Bloomberg show. -By George Smith Alexander and Pooja Thakur Canadians Most Optimistic About Housing Since 2008 Source: Bloomberg / News Canadians are the most optimistic about the country’s real estate market in more than six years as prices reignite. The share of Canadians predicting higher home prices over the next six months rose to 47 percent last week, according to polling by Bloomberg and Nanos Research Group, the highest level since the survey began in 2008. That figure has risen 10 percentage points since April. The data suggest Canadians are brushing off forecasts of a slowdown in a market some analysts have warned is unsustainable. Home prices rose 8.1 percent through the first five months of the year, according to the Canadian Real Estate Association, compared with a 1.3 percent gain over the same period in 2013, and prices may be poised for further gains if expectations for rising home values continue to whet demand. The behavior of buyers today would be “completely ridiculous, unless there’s an implicit assumption that there’s going to be capital gains involved, and that’s a mentality that you see in these long upswings in prices,” Ben Rabidoux, president of North Cove Advisors Inc., a research firm that specializes in housing, said in a phone interview last week. The survey, part of polling for the Bloomberg Nanos Canadian Confidence Index, is based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents. The results are accurate to within 3.1 percentage points, 19 times out of 20. The share of Canadians who expect a drop in real estate prices was 11.6 percent. At 35.4 percentage points, the difference between optimists and pessimists is the widest since 2009. Confidence BoostThe Bloomberg Nanos Canadian Confidence Index -- derived from survey questions on real estate, job security personal finances and the economic outlook -- rose to the highest in more than four years led by stronger expectations for housing, gaining to 60.5 in the week ended July 11. “Consumer confidence in Canada is being noticeably propelled by views on real estate,” said Nik Nanos, chairman of Nanos Research Group. The housing market is rebounding from a lull this winter that saw colder-than-usual temperatures put a temporary chill on construction activity and home sales. Sales in Canada’s largest city rose 15 percent last month, the Toronto Real Estate Board said July 4, with the average price hitting a record. Buyers are also taking advantage of historically low borrowing costs, with the Bank of Canada over the past year downplaying the likelihood of interest rate increases and lenders this spring lowering five-year fixed mortgage rates to below three percent. Bank StocksRegulatory efforts, meanwhile, to keep overly indebted borrowers out of the market have failed to quell gains. A government decision in 2012 to tighten qualification requirements for mortgages led to a temporary slowdown later that year, only to see the market recover in 2013. Investors have noticed. Canadian lenders, which hold more than C$1 trillion worth of mortgages, have been among the world’s best performers since the middle of 2013. The Standard & Poor’s/TSX Composite Banks Industry Group Index has gained about 22 percent in U.S.-dollar terms since June 3, 2013, compared with about 5 percent for the Bloomberg World Banks Index. Canada’s six largest banks are among the top 10 stock performers among North American banks over the past year, led by Toronto-Dominion Bank (TD)’s 30 percent gain. The surge in prices, coupled with household debt levels near record highs, has prompted analysts including Dan Werner, an equity analyst at Morningstar Inc., to warn of a retreat. ‘Almost Inevitable’Within the next five years a correction in Canada is “almost inevitable,” Werner said in a note to investors this month. Prices could fall 25 percent to 30 percent, he said. Fitch Ratings Ltd. also said that homes in Canada are about 20 percent overvalued in a report released today. Policy makers may need to take more steps to cool the market and create a so-called “soft landing,” Vanessa Purwin, senior director of U.S. structured finance, said in the note. Even at the Bank of Canada, where policy makers have said they see signs that household debt is stabilizing, the issue is still seen as the biggest risk to the Canadian economy. Outside of a few small corrections, Canadian home prices have been on a steady ascent more than 15 years. The average price in Canada’s largest city hit a record in May, according to Toronto Real Estate Board data. They are up 77 percent over the past 10 years, according to the Teranet-National Bank Home Price Index, roughly 10 times the pace of U.S. housing, according to the seasonally adjusted S&P/Case-Shiller composite-20 home price index. -By Theophilos Argitis and Katia Dmitrieva http://www.bloomberg.com/news/2014-07-14/canadians-most-optimistic-about-housing-since-2008.html U.K. Commercial-Property Values Rise Most Since May 2013 Source: Bloomberg / News U.K. commercial-property values last month rose the most since the market began to recover in May 2013, led by office buildings, Investment Property Databank Ltd. said. The average value of stores, offices and industrial properties climbed 1.6 percent from a month earlier, London-based IPD said in a statement today. Total return, which combines changes in real estate values and rental income, was 2.1 percent as rents gained the most in almost eight years. Business confidence in the U.K. reached a 22-year high as profits and revenue are expected to growth, Lloyds Banking Group Plc said June 30. Rents rose 0.5 percent in the month, the most since December 2006, and have now climbed for 11 straight months, according to IPD. London office buildings led the gains with an increase of about 2 percent. “Performance is being bolstered by strengthening occupier markets,” Phil Tily, a managing director at IPD, said in the statement. “Yields remain competitive with other asset classes.” Office buildings appreciated by 2.1 percent, while warehouse values rose by 1.9 percent and stores gained 1.1 percent. -By Neil Callanan Bali Beach-Pad Boom Makes Developers Top Gainers: Asean Credit Source: Bloomberg / Luxury Indonesian real-estate dollar bonds are gaining the most among emerging Asian developers as the presidential front-runner seeks to allow apartment sales to foreign investors. U.S. currency securities from the companies returned 13 percent this year, the most in the region, according to a Bank of America Merrill Lynch index of emerging-market property borrowers. Bonds of PT Modernland Realty, which builds luxury townships in Indonesia, reached their highest level since an October sale. Notes for PT Lippo Karawaci, which operates malls in Bali and plans to open a hotel in the resort island next year, are near a one-year high. Rising urbanization and a young population will drive property sales in Southeast Asia’s most-populous nation even after the government’s attempts to cool prices, Standard & Poor’s said in a July 6 report. Developers may get a further boost if the new president is confirmed as Joko Widodo, who’s pledged to let foreigners buy apartments worth at least 2.5 billion rupiah ($214,427) for the first time in areas including Jakarta and Bali. “The planned policy change would add to demand for luxury property, supporting larger expansion and potentially increasing bond sales from this sector,” Handy Yunianto, head of fixed-income research at PT Mandiri Sekuritas, the nation’s largest underwriter of bonds last year, said in a July 11 interview. “Property sales have declined on the back of higher interest rates and more stringent down-payment rules, so this new policy may help pick up demand.” Highest ReturnsIndonesian builders sold $543 million of dollar-denominated notes in the U.S. currency in the first half, compared with $280 million for the whole of 2013, according to data compiled by Bloomberg. Returns on the nation’s debt in the U.S. currency are at 19.4 percent, the highest in Asia this year after Pakistan, according to JPMorgan Chase & Co. indexes. Modernland’s $150 million of 11 percent notes are trading at 105 cents on the dollar, the highest since they were sold at par in October, according to Bloomberg prices. Lippo Karawaci’s $250 million of 2019 securities are trading at a yield of 5.7 percent, a 14-month low, after they were issued at a seven percent coupon in May 2012. Builders in the country are recovering after the central bank raised interest rates by 1.75 percentage points to 7.5 percent from June to November last year, in the most aggressive monetary tightening since 2005. That was teamed with the bank imposing stricter loan-to-value ratios on mortgages. The Jakarta Stock Exchange Construction Property and Real Estate Index has climbed 34 percent this year, about twice that of a Bloomberg-compiled gauge of large-cap U.S. real estate investment trusts. New CondominiumsWhile the unresolved election and tighter regulations have created a “short-term challenge” for Lippo Karawaci, it plans to launch projects in township developments and market new condominiums in the second half, Mark Wong, an executive director, said in e-mailed responses to questions July 14. PT Pakuwon Jati, developer of the Pakuwon City gated residential complex in eastern Surabaya that offers a private clubhouse, plans to start marketing a similar Grand Pakuwon project in the city’s west in the second half, according to Minarto Basuki, the company’s finance director. “We will market more aggressively in the second half,” he said in a July 11 phone interview from Surabaya. Pakuwon Jati sold $168 million of 7.125 percent five-year bonds June 25, the first time it tapped the U.S. dollar market since 2009, according to data compiled by Bloomberg. The notes, issued at par, are trading at 100.6 cents on the dollar. Unofficial LeadWidodo, known locally as Jokowi, and rival candidate Prabowo Subianto both claimed victory last week after elections in Southeast Asia’s largest economy. Widodo has a lead of between two and six percentage points, based on most unofficial counts of the July 9 presidential elections. The official results will be announced in Jakarta by July 22 and any subsequent legal challenges will be ruled on by late August. Demand for houses in Indonesia is running at about 1.2 million houses a year, compared with the 400,000 units being built annually, according to the S&P report. Almost 55 percent of the population are aged 20 to 54 and are more likely to move out of their parental homes or relocate for work. “The slew of regulatory actions that came out last year damped the market,” Kah Ling Chan, a Singapore-based analyst at the ratings company said in a July 11 interview. “Since then, however, there’s been more clarity on how the regulations would pan out and sales have improved.” Bali BoomThe price of luxury property in Jakarta led worldwide gains, rising 38 percent in 2013, with Bali coming in third place on 22 percent, according to a report by Knight Frank LLP. Auckland secured second place with 29 percent. That compares with a 6 percent drop in property prices in Saint-Tropez and 2 percent fall for Lake Como. Seeking foreign investment in Indonesian industries to help build the nation is a “regrettable reality,” Prabowo wrote in a January editorial in the Jakarta Post, adding that he plans to renegotiate contracts with foreign companies to “hammer out” fair terms for the state. Jokowi would respect existing deals to build confidence in investing in the nation and renegotiate contracts only if the agreements allow, he said in a June televised debate. Either administration is unlikely to enforce more regulation to temper the property market, said S&P’s Chan. “Indonesian developers usually seek overseas debt to replenish their land banks,” she said. “With the market and sales picking up, developers will continue to return.” -By Tanya Angerer and Yudith Ho |
