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2nd July 2014

Singapore Real Estate

Home prices seen dipping further for rest of 2014

Market players attribute slide in private market to competitive prices by developers, softening rentals

Source: Business Times / Top Stories

[SINGAPORE] Amid the current supply-demand imbalance, the gradual decline in private home prices is set to continue for the rest of the year after three quarters of decreases, say property consultants.

Including the 1.1 per cent quarter-on-quarter drop in the second quarter based on Urban Redevelopment Authority's (URA) latest flash estimate, the official private home price index has shed 3.2 per cent in three straight quarters of declines after peaking in Q3 last year.

In the first half, the index has eased 2.3 per cent (comparing the latest Q2 number with that for Q4 2013) and consultants expect a 4-8 per cent full-year decline. Property consultants are forecasting a moderate price erosion - barring a recession or external shocks.

CBRE executive director Joseph Tan attributes the Q2 price drop to competitive pricing by developers for ongoing projects in the primary market, as well as softer prices in the secondary market as property owners are now more prepared to lower prices.

ERA's key executive officer Eugene Lim reckons the softening rental market - which has been under pressure on the back of rising private housing completions and a slowdown in new demand due to reduced expat inflow - is also contributing to sliding home prices.

The 1.1 per cent drop in Q2 is smaller than Q1's 1.3 per cent fall. That was probably due to prices of non-landed homes in the city fringe, or Rest of Central Region (RCR), easing at a slower clip of 0.6 per cent in the April-June quarter compared with the 3.3 per cent slide in the first three months.

Market watchers believe the RCR subindex in Q2 was probably supported by the launch of Kallang Riverside and Commonwealth Towers, with respective median prices of $2,111 per square foot and $1,626 psf achieved in their first month of launch.

In all other categories - non-landed private homes in Core Central Region (CCR) and Outside Central Region (OCR), as well as landed properties - the latest flash estimate Q2 price declines were bigger than in Q1 (see table).

The 1.1 per cent contraction in suburban locations or OCR in Q2 (compared with a 0.1 per cent dip in Q1) is thought to be due to lower-priced units transacted at a number of projects - most notably The Panorama in Ang Mo Kio but also to a lesser extent, Vue 8 Residence in Pasir Ris, Riverbank @ Fernvale, The Tembusu in Kovan and The Skywoods in the Dairy Farm area.

The pace of price decline also gathered momentum for non-landed homes in CCR - which includes the traditional prime districts 9, 10 and 11, Downtown Core Planning Area and Sentosa. The subindex shrank 1.5 per cent in Q2 after falling 1.1 per cent in Q1.

This segment has posted the sharpest drop of 5 per cent after five consecutive quarters of decline since its recent peak (in Q1 2013), amid a slowdown in purchases by foreign buyers and investors due to the additional buyer's stamp duty (ABSD).

Landed homes - long regarded as a bastion of strength in the Singapore property landscape due to their more limited supply - have also been seeing their prices crumble. URA's subindex for this category eased 1.5 per cent in Q2, double the 0.7 per cent fall in Q1.

SLP International executive director Nicholas Mak attributes the continuing decline to thin transaction volume.

PropNex Realty CEO Mohamed Ismail noted that while buyers will continue to favour reasonably priced homes with desirable product features and location, the private residential market looks to be heading towards "a more muted growth trajectory with weak demand". Total Debt Servicing Ratio (TDSR)-

induced credit tightening will continue to rein in exuberant buying, while softening resale HDB prices are eroding the capacity for upgrading to private housing. As well, there is a plethora of choices for potential buyers.

CBRE estimates developers have sold 4,300-4,400 private homes in the first half. With a limited number of new mass-market projects expected to come onstream in H2, the full-year figure could be 8,000-9,000 units.

Knight Frank's projection is 9,000-12,000 units. Last year's figure was 14,948 units.

Analysing some of the options for developers, JLL national director Ong Teck Hui said: "Developers that have not paid too high for land have a bigger margin and can price new launches more competitively to achieve better take-up. They are in a fortunate position.

"As for existing projects with unsold units, the dilemma facing developers is that there is no guarantee that even if they cut prices by 10-15 per cent, they will finish selling the rest of the project - as demand has shrunk significantly due to TDSR."

Savills Singapore research head Alan Cheong said that at this juncture, a critical factor for developers' success is "how good they are at reading buyers' wishes rather than their needs".

"For example, buyers may only want to invest in real estate rather than upgrade so to speak. If this is the case, it is pointless to build larger units so that a family can move in comfortably. Smaller units may be what they want, and with the TDSR and cooling measures still in place, that may be where the market is for the masses," he added.

By thus minting a substantial chunk of units in the affordable lump-sum price range for buyers, developers can maintain, if not inch up, psf prices.

-By Kalpana Rashiwala

Singapore Home Prices Post Longest Losing Streak In 5 Years

Source: Bloomberg / Luxury

Singapore’s home prices slid for a third consecutive quarter, the longest losing streak in five years, as tighter mortgage measures cooled demand in Asia’s second-most expensive housing market.

An index tracking private residential prices fell 1.1 percent to 209.3 points in the three months ended June 30, following a 1.3 percent decline in the previous three-month period, according to preliminary data released by the Urban Redevelopment Authority today.

Declines may deepen as the government extends a campaign to cool prices that started in 2009, with Chesterton Singapore Pte forecasting they will drop as much as 8 percent this year. Singapore last June capped the amount individuals are able to borrow, adding to measures that included new taxes and higher down-payments.

“The price moderation last quarter was lower than expected, which probably means that the measures are here to stay for now,” said Donald Han, managing director of Chesterton Singapore Pte, a real estate consulting company. “It’s a healthy correction though volumes have dropped by half since the loan measures last year.”

The FTSE Strait Times Real Estate Index lost 0.8 percent at the close of trading in Singapore, its lowest since April 16.

More Successful

The curbs in the Southeast Asian nation are proving more successful than other parts of the world where policy makers are trying to rein in asset prices, according to Vikrant Pandey, an analyst at UOB Kay Hian Pte in Singapore.

Countries including New Zealand, China, the U.K., Canada and Norway are seeking the right policy mix to deflate potential housing market excesses, with some taking steps that limit credit rather than rely solely on rate increases.

“The measures in Singapore are working,” said Pandey. “The government has been able to implement and enforce the measures very effectively compared to say China where it has been difficult to enforce.”

The Singapore government may start relaxing the curbs that were aimed at controlling demand after it see a more meaningful decline of 8 percent to 10 percent in property prices, he said.

Falling Prices

Apartment prices fell 1.5 percent in prime districts in the second quarter after sliding 1.1 percent in the previous three months, the URA data showed. Those in the suburbs dropped 1.1 percent, compared with a 0.1 percent decline in the previous quarter, according to the data. Prices in areas near prime districts slipped 0.6 percent, compared with a 3.3 percent decrease in the previous quarter, the data showed.

Under the new loan framework, mortgages shouldn’t push a borrower’s total debt-servicing ratio above 60 percent and those that do will be considered imprudent, the Monetary Authority of Singapore said in June 2013.

Mortgage loan growth at 7.6 percent in May was the second-slowest pace since June 2007, data compiled by Bloomberg based on MAS figures showed.

A slew of property measures have raised concerns among those in the industry. Singapore could lose its competitive edge as an investment destination unless the government reviews its property cooling measures, the Straits Times newspaper reported, citing Kwek Leng Beng, executive chairman at City Developments Ltd., the country’s second-largest developer.

Home prices added 1.1 percent in 2013, lower than the 2.8 percent gain in 2012 and the smallest annual increase since 2008 when prices slid 4.7 percent.

Singapore’s home sales rose in May to 1,470 units, highest in almost a year, from 749 units in April, as developers marketed new projects amid declining prices, a government report showed last month. Sales of new private residential units may decline to between 10,000 and 12,000 units this year from about 16,000 last year, Han said.

Singapore was the most-expensive city to buy a luxury home in Asia after Hong Kong, property broker Knight Frank LLP said in an annual wealth report.

-By Pooja Thakur and Sanat Vallikappen

HDB resale flat prices continue to cool in Q2

Source: Straits Times 

Resale prices in the public housing market fell for a fourth straight quarter, down 1.3 per cent in Q2, according to HDB's flash estimates released yesterday. This follows a 1.6 per cent decline in the first quarter. Property consultants invariably pinned the reason on recent cooling measures, particularly the reduction of the mortgage servicing ratio (MSR) cap to 30 per cent of borrowers' monthly income.

Private, HDB resale home prices continue to soften in Q2

Private home resale prices fell 1.1 per cent while HDB resale prices fell 1.3 per cent in the second quarter, according to URA and HDB flash estimates.

Source: Channel News Asia / News

SINGAPORE: The price index for private homes fell 1.1 per cent in the second quarter, the third continuous quarter of price decrease, according to flash estimates released by the Urban Redevelopment Authority (URA) on Tuesday (July 1).

Prices of non-landed private residential properties in all market segments declined in the second quarter, the agency said. In the core central region, prices fell 1.5 per cent, higher than the 1.1 per cent decline in the previous quarter. Prices outside the central region decreased by 1.1 per cent, higher than the 0.1 per cent decrease in the previous quarter. In the rest of the central region, prices fell 0.6 per cent, compared with the 3.3 per cent decline in the previous quarter.

Prices of landed properties fell 1.5 per cent, higher than the 0.7 per cent decline in the previous quarter, the URA said.

Prices of resale HDB flats in the second quarter also fell 1.3 per cent from the previous quarter, according to flash estimates released by the Housing and Development Board (HDB) on Tuesday.

A total of 9,707 flats under three Build-To-Order (BTO) exercises and 3,383 flats under a Sale of Balance Flats exercise were sold in the first half of 2014, HDB said, adding that it will offer about 3,810 BTO flats in Punggol, Sembawang, Toa Payoh, Woodlands and Yishun this month.

- CNA/cy

Lower-than-expected bids at Woodlands industrial plot

Expectations already modest due to large size of plot

Source: Business Times / Singapore

THE industrial plot at Woodlands Avenue 12 garnered conservative bids which fell below consultants' already-modest expectations at its tender close yesterday.

Wee Hur Development, the property development arm of Wee Hur Holdings, trumped four other bids with its offer of $76.9 million, which works out to $72.85 per sq ft per plot ratio (psf ppr). Consultants had estimated a winning bid of $80 to slightly below $100 psf ppr.

Most of the consultants had taken reference from the 1.4-hectare Gambas Crescent (Parcel 3) site which Far East Organization clinched for $102.20 psf ppr in December last year.

Expectations had not been high to begin with due to the plot's sheer size. The site can yield about 1 million sq ft of industrial space and can be potentially developed into 550 to 650 strata units.

-By Lee Meixian

Potong Pasir HUDC estate goes private but 'price spikes unlikely'

Source: Straits Times

The Potong Pasir Avenue 1 HUDC estate was privatised yesterday, but analysts are not expecting a significant rise in prices for units there because of the cooling property market. The Housing and Urban Development Company (HUDC) estate next to the Kallang River comprises 175 flats in Blocks 110 to 112. It was converted to strata-titled property under the Land Titles (Strata) Act, the Housing Board said in a statement.

HUDC estate at Potong Pasir Ave 1 privatised

With this move, of the original 18 HUDC estates, only one – Braddell View – is yet to be privatised.

Source: Channel News Asia / Singapore

SINGAPORE: The HUDC estate at Potong Pasir Avenue 1 has been privatised under the Land Titles (Strata) Act, after it obtained the required 75 per cent majority support, the Housing and Development Board (HDB) said on Tuesday (July 1).

This means that the Potong Pasir Town Council is no longer responsible for managing and maintaining the common properties of the estate, which comprises 175 units of flats at Blocks 110 to 112 Potong Pasir Avenue 1.

The Management Corporation Strata Title Plan No 4010 will be constituted to take over the management and maintenance of the estate’s common properties. Individual owners in the estate will own their respective strata units, as well as the common property such as car parks and open landscaped areas, as tenants-in-common, the HDB said in a statement.

Residents Channel NewsAsia spoke to said they hope there would be an en-bloc sale. However, Mr Eugene Lim, Key Executive Officer from ERA Realty Network said residents might hold out a bit longer before jumping on the en-bloc bandwagon.

"I don't think they'll go into the market today, because the en-bloc sale market is relatively weak," he said. "We'll look how things pan out when Bidadari is launched next year. There's a lot of interest for Bidadari, and this is expected to shore up interest in the area."

Still, he said the site would be popular with private developers due to its small land size, location on the city fringe and lower payable quantum.

With the Potong Pasir HUDC estate’s privatisation, Braddell View is the last of Singapore’s 18 HUDC estates yet to complete the privatisation process.

- CNA/cy

BBR clinches $196m contract to build NTU student hostels

It will be 1st public high-rise devt in Singapore to use PPVC technology

Source: Business Times / Companies

CONSTRUCTION group BBR Holdings has secured a $196 million contract to build Singapore's first public high-rise development using the pre-fabricated and pre-finished volumetric modular construction (PPVC) system.

The contract, through wholly owned subsidiary Singapore Piling & Civil Engineering Pte Ltd, will involve building six blocks of 13-storey student hostels comprising 1,582 hostel rooms at Nanyang Technological University's (NTU's) North Hill precinct.

The project is scheduled to be completed within 19 months.

PPVC technology is a light-weight steel modular system under which room-sized units complete with internal finishes, fixtures and fittings are pre-fabricated in factories and then transported to construction sites for installation and assembly to form modular apartments.

-By Raphael Lim

Real Estate Companies' Brief

Property weighs down S'pore stocks: UBS

Bank renews call to clients to maintain a long position on risk assets, writes GENEVIEVE CUA

Source: Business Times / Executive Money

UBS has called an underweight on Singapore equities, which are seen to be weighed down by concerns over a weak property sector and a tight labour market.

Tan Min Lan, UBS head of Asia-Pacific investment office, said that the property market is likely to endure a "multi-year period of decline".

She spoke to reporters yesterday prior to the UBS Wealth Management Chief Investment Office APAC Forum. The forum was attended by about 700 participants.

"We continue to think clients who are over-invested in real estate have to think about what they want to do in the coming three years. The big question is when the government will ease (the cooling measures). It will not ease the measures until it sees price declines."

-By Genevieve Cua

FCL bid for Australand becomes binding

Source: Business Times / Companies

HAVING completed the due diligence work, Frasers Centrepoint Ltd (FCL) has made its off-market offer to acquire Australand Property Group a binding one.

FCL is giving cash of A$4.48 (S$5.29) for each stapled security in a deal that values the Australia-listed firm at about A$2.6 billion.

The four-week due diligence process had affirmed the strategic fit of Australand to FCL, said FCL's group chief executive officer Lim Ee Seng.

"FCL had planned on achieving several key strategic objectives over the medium term, including increasing the proportion of overseas earnings and recurring income, as well as enhancing our platform in Australia," he said. "This transaction ticks all the boxes and will allow FCL to achieve our targets in a much shorter period of time."

-By Andrea Soh

Frasers to Proceed With $2.6 Billion Australand Bid

Source: Bloomberg / News

Frasers Centrepoint Ltd. (FCL) will pursue its offer to buy Australand Property Group (ALZ) for about A$2.6 billion ($2.4 billion) in the Singapore real estate company’s biggest proposed acquisition after trumping a bid by Stockland.

Frasers completed due diligence and will proceed with an off-market takeover offer to acquire all Australand shares, following a preliminary bid last month of A$4.48 per share, the two companies said in a regulatory filing today. That compares with Stockland’s all-share bid, valued at A$4.43 as of June 3.

The acquisition would give Frasers control of Australand’s A$2.3 billion of office and industrial properties and A$9.3 billion of developments in Australia, where the Singapore company is already building the 2,000-apartment Central Park project in downtown Sydney. Frasers is seeking to boost its operations in faster-growing markets abroad and has flagged Australia and China as preferred destinations.

“The due diligence affirms the rationale and strategic fit for FCL to acquire Australand,” Frasers Group Chief Executive Officer Lim Ee Seng said in the statement. “FCL had planned on achieving several key strategic objectives over the medium term, including increasing the proportion of overseas earnings and recurring income as well as enhancing our platform in Australia.”

Due Diligence

Australand had granted Frasers four weeks of exclusivity to conduct due diligence. Under the Frasers offer, Australand shareholders would retain their expected first-half dividend of 12.75 Australian cents per share, according to the filing.

The offer is subject to conditions including acceptance by more than 50 percent of Australia’s shareholders and approval from Australia’s Foreign Investment Review Board, according to the statement. The offer is scheduled to open on July 7 and close on Aug. 7 unless extended, it said.

Australand said in May it expects its 2014 operating earnings per share to rise as much as 25 percent, compared with its earlier forecast for an increase of as much as 20 percent. The group projects earnings will rise as much as 15 percent a year until the end of 2015, it said.

Overseas business contributed to 38 percent of Frasers’s earnings before interest and tax in the year ended March 31, compared with 10 percent a year earlier, the company said in May.

Australand shares, which have risen 15 percent this year, were unchanged at A$4.44 at the close of trading in Sydney. Frasers added 0.3 percent to S$1.86 before it was halted from trading on the Singapore exchange.

Stockland (SGP) bought 19.9 percent of the Sydney-based company and followed that with an all-share bid equivalent to A$4.20 a share, which Australand rejected on April 23. It returned with a sweetened bid that equated to A$4.35 a share on May 28 and A$4.43 on June 3, the day before Frasers made its bid.

-By Pooja Thakur and Nichola Saminather

Analysts keep eye on Frasers Hospitality IPO

Source: Straits Times

Frasers Hospitality Trust's (FHT) $367.9 million initial public offering (IPO) has attracted strong demand from institutional investors but analysts are watching to see if the warm reception extends past its trading debut. Frasers, a global hotel and serviced residence trust comprising Frasers Hospitality Real Estate Investment Trust and Frasers Hospitality Business Trust, said on Monday that its international placement of 139.6 million stapled securities at 88 cents apiece snagged interest valued around $2.5 billion. That translates to a subscription rate of 21 times.

Views, Reviews & Forum

Mixed views on easing property curbs

Source: Straits Times

Property prices may be on the slide but opinions are mixed over whether the cooling measures should be rolled back. Investors are firmly behind a revision and developers tend to want some tweaks to the main policies, although market watchers and consultants believe prices have not adjusted enough to warrant changes.

Global Economy & Global Real Estate

GIC 'eyeing full control' of one of Italy's largest malls

Source: Straits Times 

Singapore investment firm GIC is said to be in talks to buy the remaining half of one of Italy's largest malls for €200 million (S$341 million) to further expand its European property portfolio. A Dutch news provider cited "well-informed market sources" when it said on Monday night that GIC is acquiring the other 50 per cent of the Roma Est mall in Rome, a move that would give it full control.

Why Ying Li attracts China Everbright

Its business model and focus seen as positive features

Source: Business Times / Companies

CHINA Everbright Limited (CEL), which will be pumping $284 million into Ying Li International Real Estate, has cast its eyes on the Singapore mainboard-listed Chongqing developer because of its attractive features: its business model and focus.

The Hongkong-listed company also likes Chongqing's economic and political landscape: strong growth amid China's slowdown and its position as a high-ranked city.

James Pan, Everbright head of real estate investment and fund raising, said at a press conference yesterday: "If you look at the top 100 developers in China, they aggressively acquire land, do residential, sell to customers ... Our view is that this model has to be changed."

The high leverage and indiscriminate land purchases in lower-tier cities made by other developers did not put them in good stead when the market changed, he noted. China is now facing a property market downturn, especially in its second- and third-tier cities.

-By Cai Haoxiang

MRCB secures land to develop RM7b township

It shows developers are still confident of property despite slowing demand

Source: Business Times / Malaysia

MALAYSIAN Resources Corporation (MRCB) has won a bid to develop a massive RM7 billion (S$2.72 billion) township in an indication that developers are still confident of property despite signs of slowing demand.

MRCB told the stock exchange late Monday that it had beaten off five other contenders for the right to develop 64 acres (about 25 hectares) of the former Rubber Research Institute's (RRI) land that encompasses over 2,200 acres. The 64 acres will be turned into Kwasa Damansara, billed as the centrepiece of what will be the largest township development in the Klang Valley.

The RRI land is now owned by the Employees Provident Fund (EPF) which also happens to be the largest shareholder (40 per cent) in MRCB. Even so, the EPF is largely a passive investor and leaves the running of the firm to its new managing director and 16.8 per cent shareholder, Salim Fateh Din.

The award of such a massive project illustrates the unbounded confidence of developers in a market that is already showing signs of a brewing bubble. Already, clear signs are emerging of declining demand, but not a single major property development has been shelved or postponed anywhere in Peninsular Malaysia.

-By S Jayasankaran in Kuala Lumpur

US commercial property owners are paying off mortgages early

Low interest rate policy has plied financial system with cheap cash

Source: Business Times / World

[NEW YORK] Landlords are paying off more boom-era loans early, chipping away at US$316 billion of debt maturing till 2017 that has loomed over the commercial-mortgage backed securities market since the credit seizure six years ago.

Owners of US properties from skyscrapers to hotels have extinguished US$17 billion of debt before it was due during the past 12 months, more than four times the amount retired before maturity in 2011 and 2012 combined, according to Credit Suisse Group AG. Proprietors of the Mall of America, the largest shopping centre in the US, are getting a US$1.4 billion loan to repay borrowings that do not mature until 2016.

Borrowers who otherwise may have struggled to repay their mortgages after property values plunged as much as 42 per cent from their 2007 peak are getting a reprieve as central banks globally ply the financial system with cheap cash. That has prompted everyone from banks and insurers to pension funds and foreign investors to turn to real estate as an alternative to evaporating yields.

"Financing has improved quite a bit, giving borrowers more options," said Roger Lehman, a bond analyst at Credit Suisse. "They are taking advantage rather than waiting until loans actually mature."

-From New York, Us

Urban land prices in Japan rose last year: report

Source: Business Times / World

[TOKYO] Land prices in Japan's three largest metropolitan areas rose in 2013, while prices in smaller cities kept declining, highlighting a widening divide between urban centres and remote areas, a government survey showed.

Land prices in Tokyo rose 1.8 per cent last year while Osaka posted a 0.3 per cent rise, both climbing for the first time in six years. Prices in Aichi prefecture, which includes the city of Nagoya and the headquarters of Toyota Motor Corp, rose 1.2 per cent after rising 0.1 per cent the year before, according to the National Tax Agency.

Land prices in rural Akita prefecture in northern Japan recorded the largest decline of 4.8 per cent.

While land prices in most of Japan's 47 prefectures fell, Miyagi and Fukushima prefectures, both damaged by the 2011 earthquake and tsunami, posted increases last year. Overall, Japan's land prices fell 0.7 per cent. - From Tokyo, Japan

Scottish independence vote puts off property investors

Source: Business Times / World

[LONDON] Scotland's commercial property market, already lagging behind the recovery in London following the British economy's slump, has developed another obstacle for investors: the possibility of the UK breaking up.

The prospect of voters supporting independence in a referendum scheduled for Sept 18 is weighing on the market, according to brokers and investment managers. While polls show Scots are more likely to opt for the status quo, in most of them enough are undecided to make the result too close to call.

"Clients are holding off on key decisions," said Simon Light at construction consultants EC Harris. "The element of uncertainty exists quite strongly and so people are just waiting."

British politics has replaced the economy and the European debt crisis as the biggest concern for commercial property investors, according to Ben Stirling, managing director at Aviva Investors. In contrast, the vote on Scottish independence has had little effect on stock and bond markets.

-From London, UK

Housing: The ultimate momentum trade

Source: Business Times / Editorial & Opinion

WHAT will happen next in the housing market? The question comes up all the time in many countries, for an obvious reason: House prices jump around too fast for the good of the economy.

The price hyperactivity does not follow a uniform pattern around the world. Look at the indices of average prices for dwellings by nation, adjusted for inflation, compiled by the Bank for International Settlements (BIS). Since 2000, the real average price is up by 63 per cent in the UK, by 49 per cent in Switzerland and by 12 per cent in the US. The average Dutch price declined by 7 per cent. In Germany, though, there has been so little house price action that BIS could only find data back to 2003. Since then, the average German price is down by a tiny one per cent in real terms.

Basic economic indicators - GDP growth, employment levels and general price levels - can explain almost none of this variation. The patterns in the American and European economies over the last 13 years have been far more similar than the house price trends.

Concrete variations in the balance of housing supply and demand are more relevant, but more for differences within than between countries. Variations in planning rules and demographic patterns have been nowhere near large enough to explain the sharply different direction of house prices.

-By Edward Hadas

In Japan, QE faces supply side problems

Source: Business Times / Editorial & Opinion

QUANTITATIVE easing (QE) which usually involves the buying of government bonds and other financial assets on a major scale by a nation's central bank in order to pump money into the economy has worked quite well in restoring growth in the United States.

The eurozone has been unable to follow the Federal Reserve's form of QE to boost its own growth because it does not have a unified government bond market. But Japan, which does have a substantial financial asset market, has jumped right in with its own mega QE programme.

The Bank of Japan (BOJ) is now discovering to its cost, however, that one man's medicine can be another man's poison where QE is concerned and that the success or otherwise of QE remedies depends upon the nature of the ailment which they are intended to cure.

If that ailment is a financial system crisis, a slump in economic activity and rising unemployment (as was the case in the US), QE can work. Restoring liquidity to the system can foster growth and jobs - but only in cases where "supply side" factors can be adjusted to meet the demand side.

Deutsche Bank, CarVal Said to Make Irish Loan-Sale Shortlist

Source: Bloomberg / News

Deutsche Bank AG and Kennedy-Wilson Holdings Inc. (KW) are among four bidders shortlisted to buy real estate loans with a face value of more than 400 million euros ($547 million) from Ireland’s bad bank, two people with knowledge of the matter said.

The National Asset Management Agency in Dublin also picked a Cargill Inc. unit, CarVal Investors, and Kildare Partners LLC among final bidders for the loans, said the people, who asked not to be identified because the matter is private. The portfolio, known as Project Spring, is linked to real estate owned by Irish developer Gerry Conlan and is being sold at a discount, three people said in March.

Spokesmen for NAMA, Deutsche Bank, CarVal, Kildare Partners and Debt Exchange Inc., known as DebtX, which is managing the loan sale, declined to comment. Officials at Kennedy-Wilson didn’t respond to requests for comment.

NAMA, established in 2009 to purge Ireland’s banks of about 71 billion euros of risky property loans, is seeking to take advantage of renewed interest in Irish assets following western Europe’s worst property crash ever. Irish commercial real estate values rebounded almost 10 percent in the year through March, according to Investment Property Databank Ltd. They remain 64 percent below their 2007 peak.

The liquidation of defunct nationalized lender Anglo Irish Bank Corp. since February 2013, with the sale of 90 percent of a 22 billion-euro loan book, shows that there is strong demand for Irish commercial real estate assets, the European Commission said in a June 23 report.

Permanent TSB Group Holdings Plc (IPM), the bailed out Irish lender, is also seeking to sell its 2.1 billion-euro commercial-property book.

-By Joe Brennan, Neil Callanan and Donal Griffin

HSBC Agrees to Pay $10 Million to Settle U.S. Fraud Suit

Source: Bloomberg / Luxury

HSBC Holdings Plc (HSBA) agreed to pay $10 million to settle U.S. allegations that it overcharged Fannie Mae and the U.S. Department of Housing and Urban Development’s Federal Housing Administration on foreclosure fees.

U.S. District Judge Thomas Griesa in Manhattan yesterday gave final approval to the accord which settles a whistle-blower lawsuit and a fraud suit filed by the office of Manhattan U.S. Attorney Preet Bharara, Bharara’s office said in a statement.

HSBC, Europe’s largest bank, provided residential mortgage loan services such as collecting mortgage payments and pursuing foreclosures. The London-based bank failed to maintain a quality control program to review its services and also to ensure all costs submitted to Fannie Mae for reimbursement were reasonable, the U.S. said. The failure cost FHA and Fannie Mae millions of dollars, the government said.

The bank accepted responsibility for failing to create or maintain the systems from May 1, 2009, to Dec. 31, 2010, according to the settlement. Those systems included reviews of fees and charges submitted by outside law firms hired by HSBC to pursue foreclosures, according to the settlement.

“Since 2010, we have taken steps to enhance oversight of foreclosure law firms and put in place a robust law firm management and oversight program even before we received notice of this particular action,” Rob Sherman, a spokesman for HSBC in New York, said in an e-mailed statement.

HSBC also agreed to comply with all the rules applicable to services of mortgage loans insured by FHA and loans held or securitized by Fannie Mae and Freddie Mac, according to the accord.

The private whistle-blower lawsuit, which the U.S. joined, remains sealed and the government continues its investigation, according to the statement.

The case is U.S. v. HSBC, 13-cv-1467, U.S. District Court, Southern District of New York (Manhattan).

-By Patricia Hurtado

Cerberus Leads Spain’s $27 Billion Real Estate Servicing Market

Source: Bloomberg / News

Haya Real Estate, a real estate servicer owned by Cerberus Capital Management LP, has taken the largest share of Spain’s servicing market as distressed-property investors target 19.9 billion euros ($27 billion) of assets to manage.

Haya now has 22.4 percent of a market comprised of 210,949 properties, according to a report by Aura Real Estate Experts, which draws from data on assets published on the websites of Spanish banks. That’s up 30 percent from the first quarter of last year.

“That figure for the value of market is just the tip of the iceberg. It uses only published data,” said Fernando Ruiz Acuna, founder of Aura. “In reality, the market is much larger as there is product, including bad loans, that isn’t made public.”

Haya, based in Madrid, boosted its market share earlier this month, agreeing to pay 225 million euros for a 10-year contract to manage assets valued at 7.3 billion euros belonging to savings bank Cajamar. Spanish banks have been selling their real estate platforms to meet stricter capital rules and focus on lending after the property market crashed in 2007. That tipped the economy into the worst recession in five decades and prompted a 41-billion euro banking industry bailout.

The asset sales have paved the way for more funds to capitalize on distressed debt and made it easier for the government’s bad bank to dispose of soured real estate assets. Haya bought Bankia Habitat, the real estate servicing arm of Spain’s third-largest lender Bankia SA, for around 90 million euros in September. It acquired servicing rights for 17 million euros of assets from Sareb, Spain’s bad bank, in December 2012.

Haya, which manages total assets with a net value of 35 billion euros located throughout Spain, sells around 30 homes a day and has divested over 1.2 billion euros of properties and loans backed by real estate over the past six months, according to the company’s website.

Haya, Anida and Servihabitat are the largest servicers in Spain, representing 50 percent of the market. The rest is made up of smaller companies such as Aliseda, CXG, Altamira, Aktua and Solvia, according to Aura.

-By Sharon Smyth

China Developers Offer Buyback Guarantee in Weakest Home Markets

Source: Bloomberg / Luxury

Property developers in two of China’s weakest housing markets are offering to buy back homes above the purchase price to boost sales as demand slows.

In Hangzhou, where home prices fell the most in May among 70 Chinese cities watched by the government, Shanheng Real Estate Group is giving homebuyers an option to sell back their apartments in five years for 40 percent above the purchase price. In Wenzhou, DoThink Group is offering to repurchase homes at three of its projects for 120 percent of the purchase price after three years.

The offers are the latest strategy by developers across China, including reducing prices, delaying project launches and offering incentives to potential buyers, as they seek to maintain sales targets. Prices of new homes fell in May from April in half the 70 cities tracked by the government, the largest proportion since May 2012, according to government data. A more persistent and sharper downturn in the property sector is the biggest risk forChina’s economy in the next couple of years, according to UBS AG.

“Obviously they’re relatively cash-thirsty,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co. “If it works, there surely will be other developers following suit.”

China’s home sales slumped 10.2 percent in the first five months of this year from the same period a year earlier amid tight credit and an economic slowdown, reversing last year’s 27 percent jump. The average new-home price in 100 cities tracked by SouFun Holdings Ltd. fell 0.5 percent in June from the previous month, accelerating from the 0.3 percent decline in May that ended 23 consecutive months of gains.

Purchasing Power

For closely held Shanheng Real Estate, which is controlled by Shanghai-based clothing maker Shanshan Group Co., the buyback offer helped attract more than 1,000 potential buyers to its Yishanjun project, meaning “mountainside homes” in Chinese, a half-hour drive from downtown Hangzhou during the three-day Dragon Boat Festival holiday that ended June 2.

More than 50 of the at least 100 units eligible for the buyback were sold, exceeding the project’s total sales in the first five months of the year combined, according to the company’s President Xiao Jixiao.

“The five-year buyback helped a lot of people who wanted to buy make up their minds,” Xiao told Zhejiang Online in an interview, according to a video posted on the news website affiliated with the Communist Party’s local commission in the eastern province of Zhejiang. “The purchasing power in the market remains very strong.” The Shanghai-based developer declined to comment when contacted by phone.

Uncertain Outlook

Yishanjun is selling at an average price of 7,000 yuan ($1,126) a square meter (10.76 square feet), down from 9,000 yuan last year, according to sales information on Inc.’s real estate website.

New-home prices in Hangzhou, capital of Zhejiang province and popular with tourists for its West Lake, fell 1.4 percent in May from April amid high inventories, the biggest decline among the 70 Chinese cities tracked by the National Bureau of Statistics.

Slowing sales in Hangzhou are already hurting some of the city’s other developers. Standard & Poor’s cut Zhong An Real Estate Ltd. (672)’s long-term corporate credit rating to B- from B in a June 27 report, citing “worsening operating conditions,” particularly in the developer’s biggest market of Hangzhou that are likely to weaken cash flows.

‘Root Cause’

Hangzhou-based DoThink Group said it is offering to buy back more than 200 apartments in Wenzhou, ranging from 70 square meters to 190 square meters, through private equity unit Kylin Investment Management Co.

The closely held developer has built more than 10 million square meters of homes and office buildings since 1993.

“Many developers have tried various marketing methods to get cash back, but they all missed the root cause” of falling home sales, Kylin’s Chief Executive Officer Huang Dong said by phone from Hangzhou. “The key is lack of confidence and the uncertain outlook” of the property market.

Underground Lending

A Kylin-managed fund will sign agreements to buy back homes after buyers pay the full price and hold the property for three years, a measure that can prop up confidence in the value of the properties, Huang said.

The company raised 200 million yuan in May from investors for a three-year property fund that will agree to buy the apartments at 120 percent of the current selling price, he said. That level is still profitable because the projects’ land and construction costs were low after the local property market declined in the past few years, enabling the projects to be priced competitively, Huang said.

The average new-home price in Wenzhou, known for pioneering local entrepreneurs, has slumped 35 percent since its peak in November 2011 after a thriving underground lending market collapsed, while the national average climbed 12 percent in the period, according to SouFun, China’s biggest real estate website owner.

Prices in Beijing jumped 40 percent during the period and surged 19 percent in Shanghai, according to SouFun.

Sales Targets

“Given rising sales pressure, we expect developers to offer more attractive pricing” in the second half of the year, Barclays Plc’s Hong Kong-based property analysts led by Alvin Wong wrote in a report June 24.

Contracted sales as of May 31 at 28 developers tracked by Barclays accounted for only 30 percent of their full-year targets, suggesting they can only complete 36 percent in the first half, “significantly lower” than the 47 percent a year earlier, the analysts wrote in a June 12 report.

A gauge tracking Shanghai-listed real estate companies fell 0.4 percent at the market close, extending this year’s decline to 6.2 percent.

Shanghai Yuehe Real Estate Co.’s construction of mixed-use residential and commercial project in the city was halted last month after the closely held company couldn’t find sufficient funds, and the project was frozen by a court, two government officials familiar with the matter said last week.

Prolonged Downturn

About 120 miles away in the eastern city of Fenghua, Zhejiang Xingrun Real Estate Co. became insolvent in March with 3.5 billion yuan in debt, and its founder was detained for illegal fundraising, a local official said at the time.

To combat the weaker market in Guangzhou, in the southern province of Guangdong, almost 20 housing developments rolled out no-down-payment plans to boost sales, Nanfang Daily, Guangdong’s official Communist Party newspaper, reported in April, as government agencies in Guangzhou and Shenzhen issued warnings against the practice.

China’s property market downturn this time will be more prolonged than the last two corrections,Tom Byrne, a senior vice president at Moody’s Investors Service, said at a conference in Shanghai June 19. A 10 percent drop in property sales and building construction will lower the country’s economic growth rate to between 5 percent and 6 percent, he said.

-By Bloomberg News

China showing signs of easing property curbs

Source: Straits Times

Lew Urges Yuan Gains, Sees No Global Risk From China Real Estate

Source: Bloomberg / News

Treasury Secretary Jacob J. Lew urged China to let its currency appreciate further and expressed confidence the world’s second-largest economy has the tools to manage a frothy real-estate market.

Speaking before a key U.S.-China economic meeting next week, Lew said he’s frustrated with the pace of policy changes, particularly to the exchange rate, market access for U.S. businesses and cyber security.

The yuan has declined 2.4 percent against the dollar so far this year, and Lew said more progress needs to be made letting markets determine its worth because preventing an appreciation hurts Chinese consumers as well as American exporters.

“It’s undervalued and that is something that hurts Chinese consumers, it reduces their purchasing power,” Lew said today in Washington. “It’s fundamentally not fair in terms of trading practices, which is why we press on it so hard.”

Lew, who will be in Beijing on July 9-10 for talks with Chinese leaders as part of the annual U.S.-China Strategic and Economic Dialogue, also addressed concern over China’s excess real-estate supply and the possibility of a property bubble.

“I don’t think that it is something that looks like it presents any kind of a global threat to financial stability because we are not looking at a great deal of leverage or interconnectedness with other economies,” he said. “It’s clearly something that China has to focus on, but I do believe China has the capacity to manage.”

Property Prices

New-home prices in May fell in half the 70 Chinese cities tracked by the government for the first time in two years, the Bureau of Statistics said on June 18.

Lew said China needs to follow through on pledges to open its economy.

On a bilateral investment treaty the two countries agreed to last year, he said “we did see an agreement in principle to go from what was considered a presumptively closed market to a presumptively open market -- except that China then proceeded to list almost everything of any value to say that it would be closed.”

“So it is not just a conceptual move to go to an open market,” he said. “You actually have to have the open market.”

China already widened the yuan trading band and raised the target rate, steps that Lew praised, while calling on China for more transparency when it intervenes in foreign-exchange markets.

The yuan climbed for a fourth day in the longest run of gains since January as reports showed factory output picked up in June. The currency touched a 12-week high as the official Purchasing Managers’ Index for manufacturing released today showed a reading of 51 for last month, the highest since December.

“We seem to take two steps forward and at least part of a step back,” Lew said at an event hosted by the U.S.-China Business Council. “We need to keep making progress getting toward a market-determined exchange rate.”

-By Kasia Klimasinska and Ian Katz

American Homes 4 Rent Acquires Beazer Rental-Home Company

Source: Bloomberg / Luxury

American Homes 4 Rent (AMH), the largest publicly traded U.S. single-family housing landlord, bought Beazer Pre-Owned Rental Homes Inc. for about $263 million in debt and equity, a sign of industry consolidation.

American Homes 4 Rent issued 8.2 million shares, worth about $145.6 million as of yesterday’s close, and paid as much as $5 million in cash held in escrow, the Agoura Hills, California-based real estate investment trust said in a statement today. It also assumed debt including about $112.8 million outstanding under the Beazer business’s credit line.

Beazer Pre-Owned has acquired more than 1,300 rental houses since 2012 with $100 million in initial backing from investors led by buyout firm KKR & Co. Beazer Homes USA Inc. (BZH)owns about a 15 percent stake in the company, and will receive American Homes 4 Rent shares as part of the transaction, according to a statement from the Atlanta-based builder.

“This group of single-family rental focused companies are looking to expand their portfolios of properties and trying to find ways to do that in an environment where home prices are rising,” said Jeffrey Langbaum, an analyst for Bloomberg Industries in Skillman, New Jersey. “It’s all about finding alternative ways to continue to grow.”

REITs, private-equity firms and hedge funds have spent at least $20 billion to buy as many as 200,000 U.S. rental homes in the past two years. The largest buyers, such as Blackstone Group LP, have slowed acquisitions as home prices climbed and their focus shifted to efficiently managing thousands of properties scattered across several cities.

California Homes

The Beazer homes are located in Arizona, California, Florida and Nevada, according to the American Homes 4 Rent statement. The deal gives the REIT a new presence in California, a market it had previously left, Jade Rahmani, an analyst at Keefe Bruyette & Woods Inc., wrote in a note today.

“We are pleased to add these well-located, high-quality homes to our portfolio,” David P. Singelyn, chief executive officer of American Homes 4 Rent, said in the statement. “We expect to move quickly to seamlessly integrate these operations and realize the resulting synergies as we continue to grow our business.”

American Homes 4 Rent owned 25,505 homes in 22 states as of March 31. Its shares gained 0.8 percent to $17.91 at 10:44 a.m. in New York. The stock has climbed about 12 percent since its initial public offering last July.

-By John Gittelsohn and Heather Perlberg

Dubai’s Nakheel Plans 1,000 Villas to Boost Leasing Income

Source: Bloomberg / Luxury

Nakheel PJSC, developer of man-made islands off Dubai’s coast, plans to build 1,000 villas in the emirate to rent out as it seeks to boost recurring income, the company’s chairman said.

Construction is expected to start before the end of the year and the villas would take about 18 months to complete, Chairman Ali Rashed Lootah said in a June 29 interview, without disclosing the project’s location.

Nakheel, which drove Dubai near default in 2009, is concentrating on projects that provide regular revenue. The developer has announced plans to develop income-producing assets, including 2,900 hotel rooms in the next three years as well as 7.9 million square feet of shops, restaurants and leasing space.

“We are seeing a growing trend with developers starting to hold properties and lease them,” said Asjad Yahya, an analyst at Dubai-based investment bank Shuaa Capital. “The villa market has been relatively underserved and generally there is demand for it.”

Developers in the emirate such as Emaar Properties PJSC, owner of the world’s largest mall by area, have stayed away from residential leasing in favor of recurring income from hotels, retail and office space, Yahya said.

-By Zainab Fattah

U.K. Housing Curbs Divided Central Bank Officials

Source: Bloomberg / Luxury

The Bank of England said financial-stability officials differed on how best to curtail excessive mortgage lending and prevent the housing market threatening the economy.

Minutes of the Financial Policy Committee’s June meeting showed a debate among members on how to curb home loans at high loan-to-income ratios. The panel ultimately settled on limiting the proportion of mortgages at 4.5 times income to no more than 15 percent of new home loans.

BOE Governor Mark Carney said last week the biggest risks to Britain’s recovery stem from property as he introduced the measures to prevent an unsustainable buildup of consumer debt. The FPC also said banks must decline loans to borrowers who fail a new stress test that assumes an immediate 3 percentage-point increase in the benchmark rate.

“The committee assessed that there was the potential for a large adverse impact on aggregate demand from household indebtedness, with this risk more marked in relation to borrowers with higher levels of indebtedness,” the BOE record said. “The size of that impact on aggregate demand was sufficient to warrant intervening now in the mortgage market.”

According to the record, some FPC members favored setting a high loan-to-income threshold with a “relatively tight limit” on the number of such mortgages that could be approved. Others suggested a lower threshold and a greater proportion of lending above that level.

Complementing Policies

Of the 15 percent of new mortgages that banks are allowed to grant above the loan-to-income limit, officials debated whether that should be based on volume or value. The record showed they decided on volumes and asked the PRA to monitor values.

In the record, officials said they took action “to act as a complement to monetary policy by insuring against risks arising in specific sectors.” This would seek to “make the central projection in the MPC’s forecast more likely.”

Last week’s move by the central bank was a response to a surging housing market, with prices nationally rising about 10 percent over the past year, and 20 percent in London.

The measures take “account of the fact that there was inevitable uncertainty about the effect of such macroprudential tools,” the record said. “By acting cautiously, it reduced the risk that the measures would have a greater than expected dampening impact on the housing market and the economic expansion.”

Officials also said “financial stability risks remain, including from market participants potentially underestimating risks that could arise either as monetary policy in advanced economies returned to more normal settings or from the materialization of tail risk event, to which financial markets were now attaching an unusually low probability.”

-By Jennifer Ryan