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9th July 2014

Singapore Real Estate

Low Keng Huat buys remaining 36 units at Balestier Towers

Source: Business Times / Companies

LOW Keng Huat (Singapore), which last August acquired 15 commercial units and an apartment at Balestier Towers for nearly $77.4 million, yesterday exercised options to purchase the balance 36 units in the mixed-use development for slightly above $63.9 million.

Its 99 per cent owned subsidiary Newfort Alliance (Moulmein), which made the two sets of acquisitions, plans to redevelop the 29,986-sq-ft site into a mixed residential and commercial development. The site's tenure is statutory land grant, which is akin to freehold tenure. Tan JingWen (Chen JingWen) holds the other one per cent of Newfort.

Low Keng Huat's release did not give further details but under Master Plan 2014, the site is zoned for commercial and residential use with a 3.0 plot ratio (ratio of maximum gross floor area to land area).

Newfort's total purchase price of about $141.3 million for Balestier Towers reflects a unit land price of about $1,570 per square foot of potential gross floor area before payment of any development charge to the authorities.

Govt has been flexible on CPF use for housing

Source: Straits Times

Only one in 10 people aged 55 and older is still using his Central Provident Fund (CPF) savings to pay the monthly instalment for his home, said Manpower Minister Tan Chuan-Jin. And only one in 20 may have to top up his monthly instalment with cash out of his pocket.

12,700 more flats to be launched in next six months

National Development Minister Khaw Boon Wan also says HDB will conduct a second Sale of Balance Flats Exercise later this year to augment the Build-to-Order supply.

Source: Channel News Asia / Singapore

SINGAPORE: Another 12,700 flats will be launched in the next six months, according to a parliamentary written response by National Development Minister Khaw Boon Wan on Tuesday (July 8).

Of the 22,400 Build-to-Order (BTO) flats targeted for this year, 9,700 flats have been launched.

The Housing and Development Board will conduct a second Sale of Balance Flats Exercise later this year to augment the BTO supply.

Mr Khaw added that the ministry will monitor the BTO application rates closely and decide on the supply for next year in due course, but he expects the number to be lower than this year's supply.

- CNA/xk

Real Estate Companies' Brief

Ascott Residence Trust

Source: Business Times / Singapore Markets

July 8 close: S$1.245

CIMB Research, July 7

ASCOTT Residence Trust (ART) has entered into conditional agreements to acquire its first serviced residence in Kuala Lumpur, Malaysia, as well as one property in Wuhan and another in Xi'an, China, for a total consideration of S$173.9 million. Through these acquisitions, 207 units in Malaysia and 500 units in China will be added to ART's portfolio

Views, Reviews & Forum

Key lies in unlocking property value

Source: Straits Times 

Last Thursday's article ("Saving too little, too late for retirement") cited a DBS survey which found that middle-income Singaporeans could face hardship when they run out of funds in their later years. It found a mismatch between their average savings upon retirement and their estimated monthly expenditure for an expected 15 to 20 years of retirement. The survey projected that their savings would last only 13 years.

Global Economy & Global Real Estate

Chinese Cash-Bearing Buyers Drive U.S. Foreign Sales Jump

Source: Bloomberg / Luxury

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 $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 $3.5 million in cash.

“Last year, it would’ve been $2.8 million,” said Nunez, a property broker for 27 years in the city 20 miles (32 kilometers) 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 $22 billion on U.S. homes in the year through March, up 72 percent from the same period in 2013 and more than any other nationality, the National Association of Realtors said yesterday in its annual report on foreign home purchases. That’s 24 cents of every dollar spent by international homebuyers, according to the survey of 3,547 real estate agents.

Chinese purchases of U.S. homes are likely to continue increasing as the country’s swelling ranks of affluent consumers seek refuge from pollution and political and economic uncertainty, according to Thilo Hanemann, who tracks cross-border investment for the New York-based Rhodium Group.

“A lot of people are trying to hedge against a generally bearish outlook for the Chinese economy,” Hanemann said in a telephone interview. “Buying real estate overseas has been in the past limited to a relatively small group of wealthy individuals and sometimes government officials. But it’s become a much bigger trend, involving affluent middle-class people.”

Higher Prices

Chinese buyers paid a median of $523,148 per transaction, compared with a U.S. median price of $199,575 for existing-home sales. While Canadians bought more houses than the Chinese, they spent less -- a median of $212,500 per residence, for a total of $13.8 billion.

Publicly traded builders are responding by catering to Chinese buyers in areas with high demand.Brookfield Residential Properties Inc. staged feng shui blessing ceremonies before beginning work on projects in Anaheim and Foothill Ranch communities in Orange County, south of Los Angeles. The New Home Co. consulted with a feng shui master on the land plan for its Orchard Park development in San Jose, California, that opened in April.

California Demand

California is the most popular U.S. destination for Chinese real estate buyers, according to, a Hong Kong-based property search engine.

Chinese bought 32 percent of homes sold to foreign buyers in the state, double the share sold to Canadians, according to an April survey by the California Association of Realtors. About 70 percent of international buyers pay cash, the survey showed.

“The uncertainties in China’s domestic market are contributing to a higher rate of growth in Chinese interest in U.S. property,” Andrew Taylor, co-chief executive officer of, said in an e-mail. “That interest began accelerating in the second quarter of 2014, in part because of China’s property slowdown.”

New-home prices in China fell in June for a second straight month as a slowing economy and excess supply deterred buyers, according to the China Real Estate Index System Survey. In Hong Kong, new-home prices have dropped by 15 percent to 20 percent since October, according to a JPMorgan Chase & Co report last month.

U.S. house prices have climbed 26 percent since March 2012, after falling 35 percent from their June 2006 peak, the S&P Case-Shiller Index of 20 cities shows.

New Construction

Buyers from China are driving up prices and fueling new construction in Southern California areas such as Arcadia, a city of about 57,500 people with top-rated schools, a large Chinese immigrant community and an array of Chinese restaurants and markets.

The median home price in Arcadia’s 91006 ZIP code was $1.28 million in May, up 18.5 percent from a year earlier, according to research firm DataQuick.

“About 90 percent of my buyers are from China,” said Peggy Fong Chen, a broker with Re/Max Holdings Inc., who sold 80 homes in Arcadia last year. “They want new construction. They want two levels. In China, it is considered a mansion if it has two levels.”

More than three out of four buyers pay cash, said Chen, a native of Hong Kong who’s been selling real estate for 10 years. At least 20 percent are absentee owners who don’t have long-term visas yet. Many purchase houses for their children to attend high school or college, she said.

Tearing Down

Chinese investors are moving into development in Arcadia, Chen said. They are buying lots with homes built in the 1970s and ’80s, tearing them down and erecting sprawling houses like the one Nunez sold for $3.5 million, which has a double-height entry hall and wood-paneled library.

“Local people really cannot afford these most of the time,” Chen said.

While buyers may be driving up prices in some pockets, the wave of money is good for local economies, said Hanemann of Rhodium Group. Arcadia issued building permits for 167 single-family homes worth $120 million in the fiscal year ended June 30, contributing to a 71 percent annual gain in construction fees for the city’s Community Development Division.

“It’s a huge opportunity for builders and of course it’s a huge opportunity in terms of bringing in real economic investment that’s creating local jobs,” Hanemann said. “If the U.S. is able to respond and provide the supply, it’s a very positive thing.”

Chinese Blog

Buyers from China and Asian-Americans purchased about 80 percent of the 47 houses sold at Tri Pointe Homes Inc.’s Arcadia at Stonegate community in Irvine, about 40 miles southeast of Los Angeles, according to Tom Mitchell, president of the Irvine-based builder.

Almost half of the buyers paid cash for houses in the development, at prices starting at $1.16 million, he said. The company has been surprised by how word travels among overseas buyers.

“A Chinese national bought one of our houses at Arcadia in Irvine after reading about it on a blog,” Tri Pointe CEO Doug Bauer said in a telephone interview. “It was a Chinese blog. We couldn’t even read it.”

Five Bedrooms

Hui Hui Huang, a Taiwanese lawyer based in Shanghai, agreed last week to buy a five-bedroom Tri Pointe townhouse in San Mateo, near San Francisco International Airport, for $1.38 million. She and her husband were looking for a U.S. home as they develop a smartphone app to help diabetics better monitor insulin levels.

“We said, ‘Wow, this is really attractive and serves our needs,’” said Huang, 39, who went to law school in San Francisco with a classmate who also bought in the project.

Even as prices climb, U.S. real estate remains a relative bargain for Chinese investors, according to William Yu, an economist at the University of California at Los Angeles’s Anderson School of Management.

Two-bedroom condominiums in Shanghai’s Pudong district cost about $1 million, almost twice as much per square foot as condos in West Los Angeles, according a report by Yu last month. The Pudong units command $1,400 a month in rent compared with $3,300 in Los Angeles.

“From an investor’s point of view, it’s better to be a landlord in L.A. than Shanghai,” Yu said in a telephone interview. “If you compare the rent-to-income ratio, it’s much better in Los Angeles than Shanghai.”

China Limit

Some wealthy Chinese have come up with ways to evade the yearly $50,000 per-person limit on taking money out of the country so they can buy U.S. real estate, Yu said. Methods include laundering money through Macau casinos and cooking the books of import-export companies, he said.

“A lot of people over-invoice export proceeds, so they can park some money outside,” Ha Jiming, chief investment strategist for Goldman Sachs Group Inc.’s China investment management division, said at a Los Angeles conference in April.

Sales of U.S. houses to long-term foreign residents and non-resident buyers accounted for about 7 percent of the $1.2 trillion of existing-home transactions in the year through March, the National Association of Realtors said.

Growing Share

Chinese and Canadians were followed by buyers from India and the U.K., with investors from each of the countries spending $5.8 billion on U.S. homes. Mexicans spent $4.5 billion, making them the fifth-largest international buyer group.

The share of money arriving from China is likely to keep growing, according to Lawrence Yun, chief economist for the Realtors.

“It’s just the beginning of a tidal wave,” he said in a telephone interview.

Overseas buyers are changing Arcadia, according to Nunez, 55, who has lived in the city since he was 6 years old.

“You drive every street and there are three or four new houses being built,” he said. “It’s just incredible, the demand.”

-By John Gittelsohn

Hong Kong Buyers Queue for New Homes After Prices Plunge

Source: Bloomberg / Luxury

On a Saturday morning in mid-June, thousands wait, crammed into Hong Kong’s Fortune Metropolis mall, across Victoria Harbor from the main business district, their eyes locked on large elevated screens. Cheers erupt when numbers flash, indicating the lucky ticket holders in the crowd.

They have paid HK$150,000 ($19,354) to enter a lottery that prioritizes buyers of apartments at City Point, a seven-tower development that billionaire Li Ka-shing’s Cheung Kong Holdings Ltd. (1) is building. More than 5,000 homebuyer-hopefuls are vying for 442 units, or about 11 for every home that went on sale the weekend of June 14.

Housing sales in Hong Kong are rising after government efforts to cool soaring prices led transactions to plunge last year to the lowest since at least 2002. A drop in mortgage rates and discounts from builders are luring back buyers of new homes after their price fell as much as 20 percent since October.

“Six months ago, I was certainly more cautious than I am now in terms of pricing,” said Peter Churchouse, founder of property investment firm Portwood Capital in Hong Kong and publisher of the Asia Hard Assets report. “You can understand why people are coming back into the fray. You’ve had 12 months or more of suppressed demand.”

Mortgage rates have been falling since 2011, when they hit an average high of 2.45 percent in October of that year. Rates were averaging about 1.96 percent in May, according to mReferral Mortgage Brokerage Services, a joint venture between Cheung Kong and Midland Holdings Ltd. (1200), Hong Kong’s biggest listed realtor.

Sales Rising

New and existing home sales in June reached 5,960 units, the highest since February of last year, according to government data. While the number of existing-home transactions hasn’t recovered, the downward price pressure may be over, Jonas Kan, an analyst at Daiwa Securities Group Inc. said in a June 16 report.

“There have not been that many units asking for notably lower prices over the past 15 months, and many of them have been taken up in the past few weeks,” Hong Kong-based Kan said.

The government in February 2013 doubled the sales tax on properties valued at more than HK$2 million in its harshest measure yet to reel in prices and speculation in the former British colony of 7.2 million people. Prices almost quadrupled over the last decade, spurred by a shortage of apartments and an influx of Chinese from the mainland. They made up as much as a third of buyers in the city during the boom years and now account for about 12 percent.

Prices Bottomed

Hong Kong’s existing home prices have bottomed after falling as much as 5 percent from a peak in March 2013, Citigroup Inc. analysts Ken Yeung and Oscar Choi said in a June 6 report. New-home prices have dropped by 15 percent to 20 percent since October, according to a JPMorgan Chase & Co report last month.

City Point, created jointly with Nan Fung Development Ltd., is Cheung Kong’s biggest project in Hong Kong in two years. Located between an expressway and a harborfront, the apartments -- set for completion next year -- sell for about HK$9,000 to HK$14,000 per square foot, according to Cheung Kong.

The first batch of apartments that was released for sale, out of a total of 1,717 units, are more than 10 percent cheaper than recent transactions at nearby developments, Cheung Kong Executive Director Justin Chiu told reporters in May. Buyers can get up to a 16 percent discount, including a sales tax subsidy, the project’s sales documents show.

Developers using discounts to drive volume doesn’t indicate negative views about home prices, Cusson Leung, JPMorgan’s head of property research, told reporters in Hong Kong today. The best strategy for them now, as the government pledges to increase housing supply, is to speed up sales and use the cash to replenish their land banks, Leung said.

Property Index

“Transaction volume has picked up and take-up remains keen for new launches, so we expect developers should have room to gradually narrow discounts,” Alfred Lau, an analyst at Bocom International Holdings Co., wrote in a June 5 report. He also upgraded the property sector to outperform.

The Hang Seng Property Index, which tracks the shares of Hong Kong’s nine biggest developers, fell as much as 20 percent and was down 5.6 percent since the government’s 2013 tax increase to yesterday. It declined 1.9 percent to 29,445.20 today, compared with the 1.6 percent decline in the benchmark Hang Seng Index.

The index rebounded after officials in May relaxed terms of refunding a double stamp duty introduced to discourage owning more than one home. Buyers have been given extra time to dispose of their existing dwelling after purchasing another one, the condition required for a refund.

Existing Homes

Hong Kong developers, which sell new apartments in phases before completion, may put 15,000 units for sale this year, according to Centaline Property Agency Ltd., the city’s biggest closely held realtor. That would be a 54 percent increase from the 9,753 units released for sale last year, an 18-year low.

“Developers have, one after another, positioned themselves for launches, especially the larger projects,” Thomas Lam, the Hong Kong-based head of valuation and consultancy at Knight Frank LLP, said in June.

The number of existing homes changing hands tumbled to 2,017 in February of last year, the lowest since the Land Registry began collecting data in 2002, and remained below 3,000 for eight consecutive months. That compares with an average level of 7,000 to 8,000 units per month, according to data provided by Midland Holdings.

Prices of existing homes have risen 1.9 percent so far this year, according to an index compiled by Centaline. The index may reach an all-time high in the third quarter as prices are expected to rebound 6 percent from a low earlier this year, Addy Wong, Centaline’s Asia-Pacific chief executive officer, told reporters on July 7.

Policy Tightening

Further price increases, in light of the recent pick-up, could trigger more policy tightening, Barclays Plc analysts led by Paul Louie said in a June 30 note. Any additional curbs wouldn’t be as hard-hitting as the existing stamp duties, though the government could impose more mortgage restrictions, JPMorgan’s Leung said today.

“The second-hand market is dry so, it’s very hard to rely on it as an accurate indicator,” said Eva Lee, a Hong Kong-based analyst at UBS AG. “The price right now is not a real market price. The primary market is the one with movement, and if developers want to sell today, they have to price it 10 percent below market.”

People Shouting

Inside Fortune Metropolis mall, which is owned by Cheung Kong-controlled Fortune Real Estate Investment Trust (778), buyers in a snaking queue wait to pick a home from a display board after their tickets are drawn. Red stickers on the board reveal a dwindling number of apartments available. People jostle, point and shout for the unit they want.

Hayley Kam, a 24-year-old teacher, is in the line with her father as they make their third attempt to buy a City Point home. Those who don’t end up buying an apartment are refunded the amount they paid to obtain a ticket.

“There aren’t many first-hand apartments for us to choose from,” Kam said. “I filled in an application too, but they didn’t call my number.”

-By Michelle Yun

Chinese Lead $92 Billion of U.S. Home Sales to Foreigners

Source: Bloomberg / Luxury

Foreigners purchased $92.2 billion of U.S. homes in the 12 months through March, led by buyers from China, according to the National Association of Realtors.

Spending by Chinese buyers soared 72 percent from a year earlier to $22 billion, with their purchases accounting for 24 percent of spending by international buyers, the trade association said today from Washington. Total investments by foreigners jumped 35 percent.

Chinese buyers acquired 16 percent of houses sold to foreigners, up 4 percentage points, spurred by currency appreciation, rising affluence and concerns about an economic slowdown in the world’s most-populous country, the group said.

“It’s just the beginning of a tidal wave,” Lawrence Yun, the association’s chief economist, said in a telephone interview. “Large numbers of wealthy Chinese want to have property in the U.S. because they want to visit the U.S. and they want to diversify the wealth they accumulated in China to outside countries where they feel secure in their property rights.”

Canadians bought the highest number of homes, accounting for 19 percent of residences sold to foreigners. That’s down from 23 percent a year earlier as U.S. home prices rose from a 2012 post-housing-bubble low and the Canadian dollar weakened.

Chinese purchases were concentrated in higher-priced markets such as California, Washington and New York, while Canadians bought in lower-priced Florida and Arizona, popular getaways from northern winter weather. Chinese buyers paid a median of $523,148 per home, compared with $212,500 for Canadians, the Chicago-based association said.

India, Mexico

Sales to long-term foreign residents and non-resident buyers accounted for about 7 percent of the $1.2 trillion of existing-home transactions in the period, the group said.

Chinese and Canadians were followed by buyers from India and the U.K., with investors from each of the countries spending $5.8 billion on U.S. homes. Mexicans spent $4.5 billion, making them the fifth-largest international buyer group. About 60 percent of purchases by foreigners were all-cash deals, the Realtors association said.

The report was based on a survey of 3,547 real estate agents polled from April 14 to May 14.

-By John Gittelsohn

Henderson’s London Smithfield Development Blocked by Govt

Source: Bloomberg / News

Henderson Global Investors Ltd. (HGL)’s plan to rebuild part of London’s Smithfield Market was blocked by U.K. Communities SecretaryEric Pickles, the final arbiter on planning decisions, for failing to adequately protect the 140-year-old property.

The 160 million-pound ($274 million) plan to demolish parts of the market’s buildings to construct offices and shops was “wholly unacceptable,” according to a statement today by the government.

“The extent of damage that the application would cause to the important heritage assets at Smithfield runs entirely counter to national and policy objectives intended to protect such assets from harm,” the government said.

Communities Secretary Eric Pickles used his powers to review large developments after Henderson won local-government approval for the project in the City of London financial district in July 2013. The proposals faced objections from heritage groups including The Victorian Society and SAVE Britain’s Heritage for failing to conserve parts of the market.

“Buildings like Smithfield General Market are what make the City such a special place,” Chris Costelloe, director of the Victorian Society, said in an e-mailed statement. “It is now time for the City of London and Henderson to work together to bring forward a conservation-led scheme that will repair and reopen this magnificent complex of buildings.”

Meat Market

While the existing market is more than 140 years old, it's been the site of livestock transactions for more than 800 years, according to the Smithfield website. Its the only wholesale market in the City that’s located on its original site. Henderson planned to build 16,260 square meters (175,000 square feet) of offices and 5,570 square meters of shops.

“We are surprised and extremely disappointed with the decision taken by the secretary of state, which, in our view, has been influenced by a disingenuous campaign employed by a small minority of objectors,” Geoff Harris, head of TIAA Henderson Real Estate, said in an e-mailed statement.

The decision will mean that the market’s disused buildings, which have been empty for decades, will face further decay, Harris said. TIAA Henderson is a joint venture between Henderson Global Investors and TIAA-CREF, a New York-based manager of retirement accounts for teachers.

-By Patrick Gower