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17th June 2014

Singapore Economy

Singapore climbs to 9th spot on global FDI rankings

Foreign investors said to be keen to leverage Republic with upcoming AEC

Source: Business Times / Top Stories

[SINGAPORE] With the birth of the Asean Economic Community just around the corner, foreign investors seem to be turning their attention back to Singapore.

After it was nearly knocked out of the top 10 in an influential global comparison that predicts where foreign direct investments are headed, Singapore is back on its feet at 9th position this 


Its climb-back in the annual Foreign Direct Investment (FDI) Confidence Index rankings, based on polls of top business executives by global consulting firm AT Kearney, came barely a year after total investments flowing into the Asean states exceeded those going into China.

According to Bank of America Merrill Lynch's estimate, total foreign investment in the five biggest Asean economies - including Singapore - was US$128.4 billion in 2013, up 7 per cent from 2012. For China, in the same year, it was $117.6 billion, down 3 per cent.

And "more of the same" trend is expected in 2014, says John Kurtz, AT Kearney's Asia-Pacific leader.

Singapore, which accounted for a big chunk of the Asean investments, slipped from 7th in 2012 to 10th in 2013 in the FDI Confidence Index rankings. In bouncing back to 9th position in 2014, AT Kearney pointed to Singapore's "famously predictable regulations, a relatively low corporate tax rate and an ample supply of qualified workers".

It also noted that Singapore is a favourite regional headquarters and R&D centre for many multinationals - a role that's likely to expand further when the Asean Economic Community is formed next year.

Malaysia, another Asean-5 country, made an even bigger recovery to jump from 25th to 15th in the rankings. It was in the 10th position in 2012.

AT Kearney attributed Malaysia's better showing to "strong inbound regional FDI flows and good performance in financial services, heavy industry and primary industry".

Only three Asean countries made it to the 2014 FDI Confidence Index rankings. The third, Indonesia, barely made it.

After seeing FDI hit a new high of US$19.9 billion in 2012, Indonesia drops one spot to 25th in the latest rankings. This is because its "regulatory environment jeopardises the country's) investment climate".

"A hotly contested ban on unprocessed mineral exports went into effect in January 2014, but the full details of last-minute compromise and carve-outs continue to cause confusion in the country's mining sector, a major source of revenue," AT Kearney said.

While business leaders are more bullish about the global outlook - and large companies are sitting on a huge pile of cash - Singapore and its fellow Asean members can't assume that foreign investments will rush in simply because they will have a bigger market. Asean not only has other emerging-market competitors to reckon with; it also have the developed ones to deal with.

The latter, including economies from fiscally-challenged Europe, still occupy over half of the top 10 rankings in the Index. The United States, which retains the top spot, is in the strongest position since the rankings started in 1998.

"A full 49 per cent of respondents - compared to 39 per cent in 2013 and 23 per cent in 2007 - indicated that their outlook for the US is significantly more positive now than it was two years ago," AT Kearney said. Only 6 per cent expected the outlook to be more negative.

"The message is crystal clear: the US is back in the minds of global business leaders as the prime destination for their investment," it concluded. "Never in the 16-year history of this index has a country had such a positive net position (43 per cent)."

In comparison, 33 per cent of the respondents saw a more positive outlook for Singapore and 10 per cent a more negative outlook.

AT Kearney noted that the latest rankings show a strong shift to OECD economies. Last year, OECD members represented 13 of the top 25 destination for direct investments; this year the number jumped to 17.

While there are concerns about the fragile state of some emerging economies, AT Kearney said the rankings reveal that a core group of developing markets continues to enjoy widespread confidence among foreign investors. This include China in second placing, Brazil in 5th and India in 7th in the rankings.

Other emerging markets are also among the top 25: United Arab Emirates (11th), Mexico (12th) and South Africa (13th).

-By Chuang Peck Ming

Singapore Real Estate

Upmarket condos set for launches

Source: Straits Times

Suburban condos have been driving sales in recent weeks but upmarket homes are poised to take centre stage with a series of launches coming up. Wing Tai's The Crest off Alexandra Road and near the exclusive area of Jervois Road is expected to be launched soon.

Paya Lebar site may cost more than a billion dollars: Analysts

Analysts say the area lacks character and a core focus, but that could change when a commercial site next to the MRT is released for sale in October. 

Source: Channel News Asia / Singapore

SINGAPORE: A commercial site along Paya Lebar Road that is expected to be launched for sale later this year could set the tone for the development of the Paya Lebar regional centre. That is according to some property analysts, who also say that any developer keen on the site may have to cough up more than a billion dollars, just in land cost alone.

In October, the Government is expected to release a 4-hectare commercial site next to the MRT station for sale. Some analysts estimate that the potential "Grade A" development could offer about one million square feet of net lettable space, with office space taking up about 50 to 60 per cent. About 440 residential units can also be built there.

However, the site will not come cheap. "The land cost alone will be S$1 billion or even more, and that increases the risk to any single developer who wants to take a bite of this," said Mr Alan Cheong, Senior Director of Research & Consultancy for Savills Singapore. He believes that developers will come in as a consortium for this particular site.

"This project itself, with more than 130,000 sq metres of gross floor area commercial space, together with Paya Lebar Central, will set a tone for this area," he added. "There is no character right now for Paya Lebar."

Once a sleepy industrial estate, Paya Lebar was earmarked for development as a commercial hub outside the city centre under the 2008 Masterplan, as part of the government's decentralisation strategy. But some property-watchers say that the area -- with its mix of workshops and industrial premises -- seems to lack a core focus right now, compared to regional centres in Jurong and Tampines., and believe more can be done to attract more companies to locate here.

Said Century 21 CEO Ku Swee Yong: "SingPost is obviously not sufficient now to bring in a lot more demand for office space, or fill up the industrial B1 space in the Paya Lebar area. But if, for example, we have a Government ministry that is willing to relocate there with about 70,000 sq ft of space - that could be a trigger, a catalyst that would bring other SMEs and service-providers to Paya Lebar Regional Centre."

According to Savill, the average office rental rate at Paya Lebar is currently around $6.50 per square foot per month, compared to S$5.50 in Tampines, and S$7 to S$8 for some of the newer commercial projects in Jurong. Analysts add that Paya Lebar could potentially appeal to firms in the IT, telecom and multimedia industries.

- CNA/xy

May sales of private condos double from preceding month's

But momentum not expected to continue in June

Source: Business Times / Top Stories

[SINGAPORE] Developers' sales of private homes nearly doubled in May from a month ago as new launches were priced to target buyers who have become more price-sensitive as a result of loan curbs.

But such robust sales are unlikely to be repeated this month, a seasonally slow period because of the school holidays. Even the World Cup soccer competition could become a distraction for potential buyers in this tepid market, analysts say.

"It is premature to conclude that the market has revived from its slump," said Ong Teck Hui, national director of Research and Consultancy at JLL, pointing to the mixed showing at new launches last month.

Latest data from the Urban Redevelopment Authority showed that developers sold 1,470 private condos last month, the highest level since June 2013 and a 96 per cent jump from the 749 units sold in April. The top five projects made up 78 per cent of total sales in May.

The strong showing is driven by new launches, with 1,790 condo units launched last month compared with only 600 units in April. There were no new launches for executive condos (ECs) last month; 58 ECs were sold, up from 48 in April.

"The increase in the number of new projects launched in May and the strong launch figures do show that developers are more confident in resuming launches as there still many buyers in the market but who are now more price-sensitive," Mr Ong said.

The two top sellers were Coco Palms and Commonwealth Towers - both located near MRT stations and deemed attractively priced. Together, they made up more than half the month's unit launches and sales. Some 590 units at Coco Palms were sold at a median price of $1,018 per square foot (psf), and 275 at Commonwealth Towers were sold at a median price of $1,626 psf.

The Panorama in Ang Mo Kio became a top seller last month, with some 100 units sold at a median $1,241 psf after developer Wheelock Properties slashed prices by around 10 per cent in its re-launch last month. The project moved only 56 units in the initial launch in January at a median $1,343 psf.

Not all new launches fared well, however. Oxley's The Rise@Oxley Residences - the only new launch in the Core Central Region (CCR) - sold eight units out of 120 at a median price of $2,452 psf.

Ecco Development' Singa Hills and Macly Equity's Loft 33 managed to move only two units and 12 units respectively. These projects were apparently launched with little or no fanfare.

"Projects that lack visibility will see greater difficulty in attracting buyers, especially if they are not near transport nodes and the price point is not attractive," said Alice Tan, Knight Frank's head of research and consultancy.

Colliers International director of research and advisory Chia Siew Chuin noted that Commonwealth Towers in Queenstown and Kallang Riverside in Kampong Bugis have benefited from 

pent-up demand, given the lack of new launches in the two locations.

But developers' sales volume is expected to ease to 600-900 units in the traditional lull period of June, before developers resume their launches ahead of August, which is the lunar seventh month and regarded by the Chinese as an inauspicious period to commit to home purchases, Mr Chia said.

Potential launches in the pipeline include Roxy-Pacific's Trilive, a freehold project in Tampines Road of which 70-80 per cent of the 222 units are dual-key units, which are essentially a 2-in-1 apartments.

Wing Tai opened the showflat last Saturday for its 469-unit The Crest at Prince Charles Crescent, while China Sonangol Land and OKP Land are slated to launch their 109-unit freehold project Amber Skye on Amber Road soon.

Nicholas Mak, executive director at SLP International, expects mass-market condos in suburban areas to continue leading sales islandwide.

Last month, mass-market suburban condos accounted for 64 per cent of sales and slightly over half of total units launched.

This is followed by city-fringe condos in the Rest of Central Region (RCR) that made up about 34 per cent of sales and 39 per cent of units launched. There were only 32 units sold in the CCR or 2 per cent of total islandwide sales.

Mr Mak noted that some developers hurried to launch mass-market condos last month ahead of new EC launches this year. From August to December, five EC projects with a total of 3,100 units could potentially be launched for sale.

With the increased competition, some developers may adopt "a more flexible pricing strategy" to boost their sales, he added. For the whole of 2014, sales volumes in the primary market could total 9,500-12,500 units, Mr Mak predicted. This compares with some 15,301 units sold by developers for the whole of last year.

-By Lynette Khoo

New private home sales nearly double on launches, price cuts

Analysts say buying sentiment remains cautious, developers may have to keep pricing low

Source: Today Online / Business

SINGAPORE — The private housing sector sprang into life in May after months of lacklustre activity, with primary sales surging 96 per cent to their highest in almost a year after developers put more new homes on the market and cut prices.

But while the improvement was encouraging for a market that has languished in the doldrums after being hit by a slew of government measures and loan curbs, analysts said buying sentiment was still cautious.

Last month, developers sold 1,470 new private homes, nearly doubling the 749 units they moved in April. It was the highest number seen since the introduction of the Total Debt Servicing Ratio (TDSR) framework in June last year, data from the Urban Redevelopment Authority (URA) showed yesterday.

The higher sales volume came as developers launched 1,790 new homes in May, nearly three times that of the 600 units in the previous month.

Mr Nicholas Mak, executive director of research and consultancy at SLP International, said: “I would say there is pent-up supply in the market because developers have been waiting for the right time to launch their projects. And after waiting from December last year till April, some of them launched in May.

“Even though the launch volume in May was three times that of April, the sales volume only increased by two times. This means that the market is still quite soft and buyers are still price-sensitive, because the projects that have sold well are perceived by the buyers as attractively-priced,” he added.

Two projects co-developed by City Developments topped the bestselling list for the month: Coco Palms at Pasir Ris Grove saw 590 units sold at a median price of S$1,018 per square foot (psf) out of the 600 launched. Over at Commonwealth Avenue, 275 homes were sold in Commonwealth Towers at a median price of S$1,626 psf out of the 400 that were launched.

These two developments helped boost activity in the Outside Central Region and the Rest of Central Region. The former saw a 92 per cent pick-up in sales to 944 units, while volume in the latter more than doubled to 494 homes. In the Core Central Region, transactions were up 52 per cent to 32 units.

Besides the new launches that did well, there were several successful re-launches last month, with 100 homes sold at Wheelock Properties’ The Panorama in Ang Mo Kio at a median price of S$1,241 psf, down from its initial launch price in January of a median S$1,343 psf.

Meanwhile, CapitaLand sold another 15 units at Sky Habitat in Bishan at a median price of S$1,336 psf, down from the median S$1,377 psf a month earlier and S$1,583 psf at the initial launch in April 2012, Colliers International real estate agency noted.

“The lower prices have helped buyers to keep within the boundaries set by loan curbs, such as the TDSR of 60 per cent … Developers may be further encouraged to price their projects reasonably due to the cooling measures and increased supply,” said Mr Eugene Lim, key executive officer of property agency ERA.

Analysts said sales volumes are likely to slow down in the coming months with the school holidays in June and the seventh lunar month in August, two traditionally slow periods for property transactions. To keep sales moving during this lull, developers will have to stick to the theme of attractive pricing.

PropNex chief executive Mohd Ismail said: “Ultimately, what matters in the current challenging environment is price — both on a psf and absolute basis. While selected projects which are reasonably priced and well located will continue to attract home buyers, prices are expected to come under some pressure as the potential pool of buyers shrinks and developers face stronger competition for consumer dollars.”

Mr Ismail expects new home sales to average between 900 and 1,000 units a month for the rest of the year, and the annual volume to total 11,000 to 12,000 units.

-By Lee Yen Nee

DBS pegs mortgages to fixed deposit rates

Banks says it's transparent and easier for customers to understand

Source: Business Times / Top Stories

[SINGAPORE] DBS Bank has introduced a new benchmark for its mortgages - they are pegged to the bank's fixed deposit rates, which it said is easier for customers to understand and is pretty transparent.

It's the first time a bank is basing a mortgage on its fixed deposit rates.

Called the fixed deposit home rate or FHR, it takes the simple average of the bank's 12-month and 24-month fixed deposit (FD) rates. The FHR is currently 0.40 per cent, based on DBS' 12-month FD rate of 0.25 per cent and 24-month FD rate of 0.55 per cent.

DBS continues to sell loans pegged to Sibor (Singapore interbank offered rate), which are also the most popular home-loan product at other banks, but said that customers are receptive to its new FHR package.

"The response has been encouraging," said Lui Su Kian, DBS Bank's managing director and head of deposits and secured lending.

More than half of home buyers who opt for floating rates have taken up the FHR package since it was launched two to three months ago, she said. The others continue to go for Sibor. The rest of the borrowers go for the bank's fixed rate packages, she said.

The FHR is an easy to understand and transparent pricing product, she added. "Most consumers lean towards Sibor rates - they want something simple and easy to understand."

Sibor rates, which are wholesale rates, can be accessed easily. They are administered by the Association of Banks in Singapore.

Ms Lui noted that Sibor formulas are quite technical.

Will the new product improve DBS' margins?

"The outcome we'd like to see is . . . that margins are stable and keep inching up," Ms Lui said.

Some bankers note that Sibor rates being wholesale prices are more volatile.

Over the past 24 months, there has been some volatility in the three-month Sibor which is the most popular tenor for home loans. It's ranged from a low of 0.37083 per cent to a high of 0.40626 per cent; it's presently at 0.40376 per cent.

The last time DBS adjusted its 12-month and 24-month fixed deposit rates was in 2012, said Ms Lui.

"The popularity of interbank rates is a clear indicator that consumers desire transparency especially for large financial commitments such as mortgages," she said.

However, interbank rates such as Sibor have been known to fluctuate while fixed deposit rates are less volatile, she said. "Hence, FHR will appeal to home buyers who wish to take advantage of the low interest environment and yet have some protection from market movement."

Rival banks are sticking to Sibor-pegged home-loan packages, noting its transparency.

Said Dennis Khoo, United Overseas Bank's Singapore head, personal financial services: "Home loans pegged to Sibor allow home buyers to capitalise on the current low interest rate, but the rate will vary along with interest rates movements."

"Likewise, home loans pegged to fixed deposit rates will be impacted by interest rates movements.

"Most customers prefer Sibor-pegged packages due to its open and transparent concept. It is determined by the banks in Singapore and published by the Association of Banks in Singapore," said Phang Lah Hwa, OCBC Bank head of consumer secured lending.

The stability of Sibor in recent years has also contributed to the popularity of these packages, said Ms Phang.

Our experience shows that most of the customers who take up our mortgages prefer an index-linked package as we offer the widest range of Sibor indices, said Peng Chun Hsien, Citibank Singapore head of secured finance and e-business.

We also allow customers to switch Sibor any time during their home-loan tenure with 30 days' notice or on the Sibor expiry date, said Mr Peng.

This flexibility adds to the attractiveness of our offering, he said.

"We believe that being pegged to fixed deposit rates does have some inflexibility for the customers who may have to stay within an agreed rate for a fixed period of time," said Mr Peng.

Though interest rates have been low for several years, they are forecast to start rising next year when US rates do so in response to improving economic conditions.

Borrowers should realise that when interest rates move, the movements can be steep, up or down.

In August 2011, Swap Offer Rates (SORs) briefly turned negative and borrowers thought they would benefit, that is, banks would pay them instead. SOR represents the synthetic cost of borrowing Singapore dollars, by borrowing US dollars for the same maturity and swapping these in return for Sing dollars.

But banks invoked a market disruption clause to reset the rates charged to customers and since then they have withdrawn SOR pegged home loan packages. SOR continues to be used by corporates.

-By Siow Li Sen

Boutique hotel in Kg Glam up for sale

Indicative pricing is $17-18m; 3 Little India shophouses also on market

Source: Business Times / Property

A BOUTIQUE hotel, comprising three shophouses along Jalan Klapa, off Victoria Street in the Kampong Glam Conservation Area has been put up for sale with an indicative pricing of $17-18 million.

Located at 9, 11 and 15 Jalan Klapa, the shophouses are on total land area of 4,275 sq ft; the site has a balance lease term of about 92 years. The gross floor area is estimated at 7,911 sq ft.

The site is zoned for commercial use but is permanently approved for hotel use. The shophouses have 15 themed rooms (with an average size of around 215 sq ft), spanning across two storeys and a mezzanine level, a cafe lounge and a small pool.

The indicative pricing translates to a net yield of around 2-3 per cent, based on the current income stream from rooms as well as food and beverage operations.

-By Kalpana Rashiwala

Views, Reviews & Forum

Fighting Godzilla of asset inflation

The monster is finally coming under attack from IMF's slide rules and common sense on the key issue of property prices

Source: Business Times / Editorial & Opinion

AN odd thing about Godzilla is that, terrifying in size and aspect as it can be when it towers above the urban landscape wreaking havoc and destruction upon everything in its path, its approach often goes undetected until it is too late to prevent mayhem.

Our figurative "Godzilla" in this case is asset inflation or, more specifically, inflation in the property market. For years - decades, in fact - central bankers failed to perceive this monster lumbering into their cities until it was too late. Either that, or they turned a blind eye to a threat they feared they could not cope with. The result has been a series of booms and busts over decades, causing billions of dollars' worth of damage to the property market and to the financial system.

Finally, Godzilla is coming under attack - not from squads of AK-47-wielding commandos or helicopter gunships but from International Monetary Fund (IMF) bureaucrats wielding slide rules and (finally) an ounce or two of common sense on the critical issue of property prices.

-By Anthony Rowley in Tokyo Correspondent

Global Economy & Global Real Estate

M'sians snap up China developer's Selangor project

Source: Business Times / Property

MALAYSIAN home buyers appear to have embraced Chinese developer Country Garden Holdings Co Ltd's Diamond City project in Semenyih, Selangor, with four out of five purchasers being locals. The take-up comes amid reports that the Hong Kong-listed builder plans to reclaim land for a huge 5,000-acre (2,023 hectare) man-made island near Pendas and the Second Link in Johor.

Work has already commenced on the island. Development would be undertaken in joint venture with state agency Kumpulan Prasarana Rakyat Johor and span over 30 years, The Star newspaper reported yesterday.

The daily quoted Country Garden's regional president for Malaysia, Kayson Yuen, as stating plans for a mixed development, including luxury homes. Local contractors had been hired for reclamation works as well as an Australian consultant who had previously worked on Sentosa Island's reclamation.

"This will be a massive mixed development and the investment and commitment shows our confidence in the Malaysia market," Mr Yuen said.

-By Pauline Ng in Kuala Lumpur

Johor royals emerging as key Iskandar property players

Source: Straits Times

Johor's royal family have emerged as key players in the booming Iskandar property market with major stakes in several developments as well as holdings in related industries.

London house prices fall from record high

Source: Business Times / Property

[LONDON] Asking prices for London homes fell from a record this month in a sign that buyer concern about overpaying is prompting them to step back from the market, according to Rightmove Plc.

Values in London slipped 0.5 per cent to an average £589,776 (S$1.3 million), the first decline this year, the property website operator said yesterday. Prices in Kensington and Chelsea, Britain's most expensive district, fell 0.3 per cent to £2.38 million. Across the UK, they rose 0.1 per cent, a less-than-average increase for this time of year.

"Parts of the London market are starting to run out of steam," Rightmove director Miles Shipside said. "It's an example to the rest of the country of what happens when affordability and common sense get stretched too far."

The slowdown comes as Mark Carney prepares to lead a discussion among Bank of England financial-stability officials today on whether action is needed to prevent property from overheating. Rightmove said that new tougher mortgage rules and a cooling in demand may have taken some momentum from the market.

-From London, UK

London House Prices Fall Back From Record High

Source: Bloomberg / Luxury

Asking prices for London homes fell from a record this month in a sign buyer concern about overpaying is prompting them to step back from the market, according to Rightmove Plc.

Values in London slipped 0.5 percent to an average 589,776 pounds ($999,700), the first decline this year, the property website operator said today. Prices in Kensington and Chelsea, Britain’s most expensive district, fell 0.3 percent to 2.38 million pounds. Across the U.K., they rose 0.1 percent, a less-than-average increase for this time of year.

“Parts of the London market are starting to run out of steam,” Rightmove director Miles Shipside said. “It’s an example to the rest of the country of what happens when affordability and common sense get stretched too far.”

The slowdown comes as Mark Carney prepares to lead a discussion among Bank of England financial-stability officials tomorrow on whether action is needed to prevent property from overheating. Rightmove said new tougher mortgage rules and a cooling in demand may have taken some momentum from the market.

Only a third of London’s 32 boroughs saw asking prices rise this month, Rightmove said. The largest increase was in Westminster, the second-most expensive district, where values climbed 3.5 percent. Prices in Haringey, north London, plunged 4.8 percent.

U.K. home prices have surged in the past year amid near record-low borrowing costs and a strengthening economic recovery. In London, values got an extra boost from cash-rich foreign investors seeking a haven. Rightmove’s report showed U.K. house prices have risen 7.7 percent in the past year, with London up 14.5 percent.

Bubble Warnings

The surge has prompted warnings from both the BOE and international groups such as the European Commission. Carney said last week that housing debt is a concern and the government plans to give the central bank additional powers to curb mortgage lending. That may further restrict growth after the introduction of new rules in the Mortgage Market Review.

“Through luck or judgement it appears that the timing of the MMR, more property for sale in all regions, and a tail-off in pent-up buyer demand are alleviating some of the upwards price pressure,” Shipside said. “This will come as a relief to the governor of the Bank of England and the FPC.”

-By Fergal O’Brien

High property prices 'right problem': London mayor

Source: Business Times / Property

[LONDON] London mayor Boris Johnson said high property prices are "the right problem to have" and that technology startups are attracted to the city regardless of its "creaking" infrastructure.

In a Bloomberg Television interview, Mr Johnson said the UK capital is Europe's answer to America, drawing in migrants seeking a better life.

London's property prices have surged in recent years, boosted by record-low interest rates and cash-rich foreigners seeking a haven from political turmoil.

Asking prices in the UK capital rose 14.5 per cent in June from a year earlier, almost double the national average, property website operator Rightmove Plc said yesterday.

-From London, UK

Johnson Says London Property Prices Are Desirable Problem

Source: Bloomberg / Luxury

London Mayor Boris Johnson said high property prices are “the right problem to have” and that technology startups are attracted to the city regardless of its “creaking” infrastructure.

In a Bloomberg Television interview, Johnson said the U.K. capital is Europe’s answer to America, drawing in migrants seeking a better life.

London’s property prices have surged in recent years, boosted by record-low interest rates and cash-rich foreigners seeking a haven from political turmoil. Asking prices in the capital rose 14.5 percent in June from a year earlier to 589,776 pounds ($1 million), more than double the U.K. average value, property website operator Rightmove Plc said today.

“It’s the right problem to have,” Johnson said in a joint interview with former New York Mayor Michael Bloomberg, while acknowledging that the influx of wealthy foreigners made property in London expensive for those already there. “It’s a massive premium here in London.”

Home prices in 17 of London’s 32 boroughs were above the city average this month, according to Rightmove. In four, the average value was more than 1 million pounds. In Kensington and Chelsea, Britain’s most expensive, it was 2.38 million pounds.

Prime Minister David Cameron, the leader of Johnson’s Conservative Party, has pledged to cut immigration, a stance that pits him against those such as Johnson who see inward migration as an engine of growth. Net migration to the U.K. was 212,000 last year, up from 177,000 in 2012, according to official data published last month.

British Reserve

“London is turning culturally and philosophically into the America of the European Union,” Johnson said. “It’s the place where people want to go. It’s the place where people want to be together.” He also said the British need to change their attitude to the rich.

“We have a natural British reserve about accumulating billions,” Johnson said. “There’s nothing sinful or wrong about amassing wealth. The banks and the venture capital people need to be as daring and risk-taking as they can be.”

Johnson said the technology startups he wanted to attract to London weren’t put off by poor facilities. “They love that stuff,” he said. “The older and creakier, the better.”

The mayor said he was proud that London’s immigrant population now matched New York’s. “We have even more languages spoken than New York,” he said. “The original language of London was of course Latin. Pushy Italian immigrants founded our city -- we’re grateful to them.”

-By Robert Hutton and Josh Tyrangiel

UBS plans to expand into China commercial property

It may partner with a developer or a company with an ability to source existing assets

Source: Business Times / Property

[SYDNEY] UBS AG, Switzerland's biggest bank, is planning to expand its Chinese property investment business with a move into commercial real estate.

Office, retail and industrial properties are "where investor demand is certainly moving to" in China, Trevor Cooke, head of global real estate for Asia-Pacific at UBS Global Asset Management, said in an interview in Sydney. "The stock of investment grade assets in China is growing at about 35 per cent per year."

The bank would either partner with a developer or a company with an ability to source existing assets, he said.

Several cities in China are expected to experience improving rental demand for commercial space on the back of recent regulatory changes, including policies to boost growth in certain areas, CBRE Group Inc said in its Asia Pacific Office MarketView report. China was among the five most sought-after markets for retailers looking to open stores this year, a separate report by the broker, released in March, showed.

-From Sydney, Australia

UBS plans China property expansion with move into commercial assets

Source: Today Online / Business

SYDNEY — UBS, Switzerland’s biggest bank whose largest shareholder is Singapore’s GIC, is planning to expand its Chinese property investment business with a move into commercial real estate.

Office, retail and industrial properties are where investor demand is certainly moving to in China, said Mr Trevor Cooke, head of global real estate for Asia-Pacific at UBS Global Asset Management. “The stock of investment grade assets in China is growing at about 35 per cent per year,” he said in an interview in Sydney.

Several cities in China are expected to experience improving rental demand for commercial space on the back of recent regulatory changes, including policies to boost growth in certain areas, said property consultancy CBRE in its Asia Pacific Office MarketView report. China is among the five most sought-after markets in the world for retailers looking to open stores this year, it said in another report.

UBS already invests directly in Chinese residential property through a joint venture formed in 2008 with Shenzhen-based developer Gemdale. The bank is planning a second residential fund, with an initial close of about US$100 million (S$125 million) and a total of at least US$350 million, Mr Cooke said. “It’s hard not to acknowledge the macro-sentiment around residential property in China right now — the concerns about a Chinese bubble. But that just puts the emphasis on the asset management credentials.”

The value of homes sold in China fell about 11 per cent to 446.1 billion yuan (S$90.7 billion) last month from May 2013, calculations based on National Bureau of Statistics data showed. 

-By Bloomberg

BOE gearing up to rein in UK housing market

Pressure to act mounts as house prices rise faster than wage growth

Source: Business Times / Property

[LONDON] Bank of England governor Mark Carney is edging closer to putting restraints on the UK housing market, and economists say that's the right thing to do.

In a monthly Bloomberg survey, 85 per cent of economists said the BOE's Financial Policy Committee should take steps to cool demand for real estate when Mr Carney chairs its next meeting today.

Options include putting a minimum limit on downpayments for houses, making banks hold more capital against mortgage lending and toughening affordability tests.

The meeting comes as the debate about the risks posed by the housing market intensifies.

-From London, UK

Manila calls for construction freeze in South China Sea

Source: Today Online / China & India

MANILA — The Philippines yesterday said China’s “expansion agenda” in the disputed waters of the South China Sea threatened security and stability in the region, calling on all claimant states to halt construction activities that might raise tensions.

Philippine Foreign Affairs Secretary Albert del Rosario said he supported the proposal of Mr Daniel Russel, United States Assistant Secretary of State for East Asia, for China and South-east Asian states to get together for dialogue.

“I think we would use the international community to step up and say we need to manage the tensions in the South China Sea before they get out of hand,’’ Mr Del Rosario said.

He said he would propose the Association of South-east Asian Nations (ASEAN) call for such a moratorium.

“Let’s call for a moratorium in terms of activities that escalate tension,” Mr Del Rosario told ANC Television yesterday. “Now, let’s do that while we work on an expeditious conclusion of the Code of Conduct and effective implementation.”

The Foreign Affairs Secretary said China and other claimant states have been rushing construction activities in the respective claimed territories for expansion reasons, citing works in Fiery Cross Reef, Johnson South Reef, Gaven Reef and Cuarteron Reef.

“They’re accelerating their expansion agenda for the following reasons ... one is they want to do this before the conclusion of the Code of Conduct. They’re also trying to do this very quickly in anticipation of the handing down of the tribunal award.”

South-east Asian states have been pressing China to conclude a Code of Conduct — a set of rules governing naval actions — for the South China Sea.

Last year, the Philippines filed a case at the Permanent Court of Arbitration in The Hague to clarify its rights to explore and exploit resources under the UN Convention of the Law of the Sea. China has refused to participate in the case.

Ms Hua Chunying, Chinese Foreign Ministry spokeswoman, said China had a right to do what it wanted on its islands in the South China Sea as they were Chinese territory.

She also criticised the Philippines for what she called Manila’s illegal occupation of some of the islands and construction work there.

“On the one hand, the Philippines keeps making further provocative moves and on the other hand, makes thoughtless remarks about China’s appropriate moves within the scope of our sovereignty,” she told a daily news briefing. “This is totally unreasonable.”

The Chinese official also said Beijing was committed to resolving issues with countries on a bilateral basis and that island disputes between China and the Philippines were not an issue for ASEAN.

China claims 90 per cent of the South China Sea, believed to have huge oil and gas deposits and is rich in fishery resources.

Brunei, Malaysia, the Philippines, Vietnam and Taiwan also have claims over the sea, where about US$5 trillion (S$6.25 trillion) of ship-borne trade passes every year.

Mr Del Rosario said Chinese construction in the Spratlys in the South China Sea was an attempt to alter the character of the features, converting reefs into islands to be able to increase maritime entitlements.

China and Vietnam are also involved in an increasingly bitter spat over the operations of a Chinese oil rig in another part of the South China Sea, around the Paracel Islands.

On Saturday, China began building a school on the largest island in the Paracel chain to serve the children of military personnel and others, two years after it established a city there to administer the South China Sea area it claims.

Brookfield Said Near Lease Deal With Jane Street Capital

Source: Bloomberg / News

Brookfield Property Partners LP (BPY) is in the late stages of negotiating a lease at lower Manhattan’s Brookfield Place with Jane Street Capital LLC as the landlord moves closer to filling vacant space at the complex.

Jane Street, a trading firm that specializes in exchange-traded funds and other financial products, is in talks for a lease of 140,000 square feet (13,000 square meters) at 250 Vesey St., said two people with knowledge of the discussions who weren’t authorized to speak publicly. The deal would bring occupancy at the 2 million square foot skyscraper, once Merrill Lynch & Co. headquarters, to more than 90 percent.

Bank of America Corp., which agreed to buy Merrill in 2008 as the investment bank was close to collapse, left behind about 3 million square feet of offices at the former World Financial Center complex, renamed Brookfield Place. If the Jane Street deal and two pending agreements at 225 Liberty St. are completed, less than 400,000 square feet of that space will remain, one of the people said. The vacancies have weighed on the downtown market, which has more than 2 million square feet of new, unrented offices at the nearby World Trade Center.

“Things have changed,” said Jessica Lappin, president of the Alliance for Downtown New York, an advocacy group. Leases at Brookfield Place show “that there’s clearly demand, the market is robust, and that people want modern, state-of-the-art office space, and they want it downtown.”

Matthew Cherry, a spokesman for Bermuda-based Brookfield, declined to comment on the pending leases. Calls made to Jane Street two days last week and a phone message left today for Jack Johnson, the firm’s human resources director, weren’t returned.

BNY Mellon

One of the leases said to be close to completion is with Bank of New York Mellon Corp. for about 400,000 square feet at 225 Liberty St., the building where Time Inc. agreed to rent 700,000 square feet. The magazine publisher last month said it would move its headquarters from Midtown to Brookfield’s tower.

Among other recent leases at Brookfield Place, the law firm Jones Day in November took 330,000 square feet at 250 Vesey St.

While many financial firms are scaling back, Jane Street is expanding. The company, which uses quantitative analysis to guide its trading strategy, plans to more than double its office space when it leaves 1 New York Plaza, a tower on the east side of lower Manhattan, according to one of the people with knowledge of the talks. Jane Street rents about 60,000 square feet in that building, which Brookfield also owns.

Trading Floor

At 250 Vesey St., most of the slab between two stories will be removed, creating a 40,000-square-foot double-height trading floor, one of the people said. Jane Street trades more than $8 billion of equities worldwide on its busiest days, according to its website.

Brookfield has been renovating its namesake complex in an attempt to make it more appealing to technology and media tenants. While Jane Street is a financial company, it rejects the Wall Street dress code of expensive suits and wing-tip shoes, encouraging employees to wear jeans and sport shirts to work, one of the people said.

The firm’s current offices have game rooms, gyms and fully stocked kitchens, according to the website. A list of upcoming speakers includes Houston Rockets General Manager Daryl Morey, billed as the “Billy Beane of basketball.” Beane was the subject of Michael Lewis’ book “Moneyball,” about how the Oakland Athletics executive built a winning baseball team using statistical analysis.

Jane Street is being represented by brokers at Cushman & Wakefield Inc., whose spokesman, Nicholas Derasmo, declined to comment.

-By David M. Levitt

Kai Yuan to Buy Paris Marriott Hotel for $468 Million

Source: Bloomberg / News

Kai Yuan Holdings Ltd. (1215), an investor in Chinese steelmakers and real estate, said it agreed to buy the Paris Marriott Hotel Champs-Elysees for 344.5 million euros ($468 million).

The company will borrow $280 million from shareholder Du Shuanghua, who owns a 5.54 percent stake, according to a Hong Kong stock exchange filing yesterday.

The purchase of the hotel in France’s capital is the Hong Kong-based company’s second acquisition in six months. In December, it agreed to buy a 90-room, 32-story property in Hong Kong’s Sheung Wan district for HK$488 million ($63 million).

Kai Yuan gained 9 percent to 9.7 Hong Kong cents on June 3, its last day of trading before the stock was suspended. The shares have slumped 52 percent this year as the benchmark Hang Seng Index is little changed. The suspension of Kai Yuan’s shares will be lifted today.

The Paris Marriott purchase includes a 226 million-euro purchase of the real estate and a 118.5 million-euro acquisition of operating and holding companies, Kai Yuan said. Tamweelview European Holdings SA is the current owner of the hotel, according to the filing.

Marriott International Inc.’s agreement to manage the hotel is scheduled to expire in 2030 with automatic renewal for three periods of 10 fiscal years, Kai Yuan said.

The company has set a deadline of Sept. 5 for completion of the deal.

-By Joshua Fellman

Luxury Goes Vertical in Frankfurt as High-Rises Spread

Source: Bloomberg / Luxury

Alexander Dimolaidis is moving on up, going somewhere he thought he’d never go: to the 21st floor.

Until now, he associated high-rise living with the ugly behemoths on the fringes of Frankfurt reserved for subsidized housing. Last month, he bought a one-bedroom unit in the 40-story Henninger Turm.

“I like the freedom of being up so high, the open views,” said Dimolaidis, 43, an advertising executive who fell for the 140-meter (460-foot) skyscraper, which is due to be completed in 2016. It features concierge service, mosaic floors and unobstructed views of the Taunus hills. “It’s very different from the ghettoized life in the high-rises on the outskirts.”

From London to Warsaw, high-rises are losing their reputation as grim necessities on the Old Continent. Europeans, like buyers in New York, Hong Kong and Dubai, are increasingly drawn to their amenities and convenience. Developers, seeking to maximize profit in densely built cities, are feeding the demand with a record pace of construction.

Henninger Turm is one of at least seven upscale residential towers planned in Frankfurt, home of the European Central Bank and the euro area’s financial capital. There is now just one such property: the 21-story Skylight, built by Deutsche Telekom AG (DTE) more than a decade ago.

Warsaw, Paris

At least 135 residential high-rises -- defined by Los Angeles-based property broker CBRE Group Inc. (CBG) as buildings taller than 20 stories -- are planned for London. They include One Blackfriars and Newfoundland. In Warsaw, Daniel Libeskind designed the Zlota 44. In Paris, Norman Foster is working on Hermitage Plaza. In Berlin, Frank Gehry won a competition to design a 39-story twisting tower that will be Germany’s tallest apartment block.

“Going up vertically gives you a greater gross development value,” said James Price, head of international residential development at London-based broker Knight Frank LLP.

Prices for Henninger Turm’s 207 apartments start at 4,500 euros ($6,100) per square meter, 35 percent higher than the city average. Perched on a hill in the touristy Sachsenhausen district, the building replaced a 120-meter tall granary built for a brewery in the 1960s and dismantled last year.

A population gain also is driving up housing costs.

Population Growth

The number of Frankfurters increased 6 percent in the five years through 2012, surpassing 700,000, while the number of apartments grew by 3 percent, local government data show. That gap has helped lift sales prices 53 percent in the past three years to an average 3,880 euros per square meter, and rents by 23 percent to 13.50 euros per square meter, according to data compiled by the broker Jones Lang LaSalle Inc. (JLL)

Demand is concentrated in the 32-square kilometer (12-square mile) center, an area about half the size of Manhattan. While the density of 6,000 residents per square kilometer is half of London’s and lower than in Berlin or Munich, developers are running out of lots; most of the land is taken up by offices, parks and ornate townhouses that survived World War II.

“Frankfurt is tiny compared to Germany’s other large cities, so we always face the question of how to use the space efficiently,” said Olaf Cunitz, head of urban planning and construction in the city government. “We’ve always built up for offices, and now we’re building up for homes.”

Vertical Living

Apartments in high-rises will make up about a tenth of all homes built there in the next three years, estimates Laura Mueller, a residential analyst at property-research firm Bulwiengesa AG in Frankfurt. Developers have started building or are planning 1,500 apartments to be sold at market rates in towers taller than 60 meters, compared with 40 units that exist now, the firm estimates.

Virtually all the existing residential high-rises were built by the city government in the 1960s and 1970s. They “had a bad reputation as urban cauldrons,” Mueller said. Now, “the high-rise is becoming fit for polite company.”

To be sure, the new buildings fall short of New York and London standards. The towers will range in height from 60 meters to 160 meters, which is slightly shorter than the Washington Monument. By comparison, One57, New York’s tallest apartment building, measures about 306 meters.

International buyers are growing particularly interested in Frankfurt, said Joachim Poes, head of city development at Nassauische Heimstaette Wohnungs- und Entwicklungsgesellschaft mbH, which is building the 19-story Praedium in the Europaviertel district near the city’s exhibition grounds.

International Buyers

Almost half of the buyers at the Praedium, whose developers promise residents “living like on Central Park,” are from countries including China, Brazil, the U.K, and Russia, said Poes. Apartments start at about 3,200 euros per square meter, and the best units probably will sell for as much as 8,000 euros, he said. About 20 percent of the apartments, due for completion at the end of 2016, have been sold, he said.

Frankfurt’s government, eager to breathe around-the-clock life into the financial and shopping districts, which shut down after dark, has been urging developers to build towers for middle- and upper-income residents since the 1990s.

Many developers found it unprofitable to build standalone residential towers, said Ralf Sadowski, head of developments at Frankfurt-based Wilma Wohnen Sued GmbH, which is building the 19-story Axis tower not far from the Praedium.

While construction and land costs rose in the 1990s as a booming financial sector fuelled the construction of offices, apartment prices stagnated until about five years ago. Wilma Wohnen in October began building the Axis after keeping a blueprint in the drawer for five years.

Construction Costs

“It costs about 50 percent more to construct a high-rise than to build a conventional building,” said Sadowski. “At the moment you can earn that back in the residential market, but that wasn’t the case five years ago.

Wilma Wohnen has sold about half of the apartments in the Axis, which will have a gold- and silver-colored lobby and an in-house dog-cleaning station.

Cities across Germany are grappling with housing shortages, as builders race to catch up with demand.

The number of Germans living in its largest 10 cities rose 3.8 percent between 2006 and 2011, while the number of residents in rural areas dropped by about 2.9 percent, according to government data.

Frankfurt needs 17,500 homes, according to a 2013 study by Hanover-based economic-research group Pestel Institut. Last year, officials issued construction permits for 5,300 apartments, the most in 50 years, and 55 percent more than in 2012.

Main Riverfront

Frankfurt’s attraction during the past decade has increased as a growing number of regulators add staff and the city develops the formerly under-utilized Main riverfront.

High-rises will fill only a small part of the housing gap. City planners are zoning new residential areas in industrial, agricultural and red-light districts.

In Ostend, near the new ECB headquarters, architect Stefan Forster is tearing down the notorious Sudfass brothel to put up low-rise apartment buildings with walking paths to the river.

‘‘We need homes desperately in central Frankfurt, and to waste space on brothels where men come to relieve their sexual urges is a total waste,” said Forster.

-By Dalia Fahmy

Manhattan to Add Most Office Space Since ’90 Over 3 Years

Source: Bloomberg / News

Manhattan is poised to add the most office space in any three-year period since 1990 as projects including buildings at Hudson Yards and the World Trade Center site are completed, the New York Building Congress said.

The borough, home to the largest U.S. office market, probably will add 9 million square feet (836,000 square meters) of office space at nine development sites from last year through 2015, according to the organization, which promotes construction in the New York City area. An additional 10 million square feet at six buildings is likely to become available from 2016 through 2018, the group said in a statement today.

“It’s a vote of confidence in the market, which we think is long overdue,” Richard T. Anderson, president of the New York Building Congress, said in a telephone interview. “As a global center of finance and office-related functions, the city needs to regenerate its office space.”

Office-using jobs in New York City last year surpassed the 1.8 million mark for the first time, an increase in demand that’s helping support the construction boom, the group said. The estimates through 2018 include planned towers at 2 and 3 World Trade Center in lower Manhattan, where office leasing has exceeded the five-year average in each of the past 12 quarters, real estate brokerage CBRE Group Inc. (CBG) said in an April report.

A total of 24.4 million square feet of new office space is expected to be built from 2010 through 2019, more than the 19.4 million square feet added from 2000 through 2009 and the 10.7 million square feet delivered in the 1990s, the Building Congress said. This decade’s total will be about half of the 49 million square feet completed in the 1980s, the group said.

Slowing Growth

Filling the added office space may be a challenge, with slowing job growth in office-related industries including finance, insurance and law, Anderson said. Also, the amount of space occupied by each Manhattan office worker is dropping to about 200 square feet per worker in newly built and renovated buildings from 250 square feet, a sign of cost-cutting by employers, according to the Building Congress.

Renovation remains the dominant source of office construction, making up 70 percent of development spending, the group said.

Lower Mahattan’s 3 World Trade Center is stalled at eight stories while government officials and developer Larry Silverstein work on a plan to finance the 80-story tower. He is seeking an anchor tenant to justify the construction of 2 World Trade Center.

-By Jonathan LaMantia

Burgundy Vineyards Continued Ascent as France’s Priciest

Source: Bloomberg / Luxury

Dreams of a life growing wine grapes in Burgundy are getting more expensive every year.

The average cost of buying Burgundy grand cru vineyards, France’s most-expensive wine property, rose 5.3 percent in 2013, the Agriculture Ministry wrote in an online report today. Prices advanced for a 17th year, reaching an average 4 million euros ($5.4 million) for a plot the size of a rugby field.

Of the world’s 50 most expensive wines, 32 are a grand cru from Burgundy and another six are first growths from the region, according to a ranking by Wine-Searcher drawn from a database of 6.3 million prices. The list is headed by Domaine de la Romanee-Conti in Burgundy’s Cote-d’Or region, with an average price tag of $13,659 a bottle for the estate’s Romanee-Conti Grand Cru as of June 1.

“In Cote-d’Or, the prices continue to climb, no matter the appellation,” the Agriculture Ministry wrote in a report on agricultural property in Burgundy. “Vineyard transactions are sharply down, which doesn’t stop prices from rising again.”

Burgundy grand cru wine property changed owner for between 2 million and 9.5 million euros a hectare (2.47 acres) last year, the ministry wrote. The average price rose from 3.8 million euros a hectare in 2012, and has climbed every year from 1.22 million euros in 1996, data show.

As a comparison, in Bordeaux’s Pauillac wine region, home to Chateau Latour and Lafite Rothschild, average vineyard prices were 2 million euros a hectare in 2012. In Champagne’s most-expensive Cote de Blancs appellation, wine-property prices averaged 1.56 million euros a hectare.

Grand Cru

For Burgundy’s first-growth vineyards, considered a level below grand cru in prestige and quality, the price for a plot of white-wine grapes in Cote-d’Or rose to an average 1.27 million euros a hectare last year from 1.22 million euros, according to the ministry. For red-wine grapes in that category, it rose to 525,000 euros a hectare from 500,000 euros.

Burgundy has 559 hectares of grand cru vineyards and 3,326 hectares of first growths, jointly making up about 14 percent of the grape growing area, according to the region’s wine board, BIVB. Reds account for 56.8 percent of the grand cru area and 44.2 percent of first growths, the board’s data show.

“In Burgundy, transactions of vines represent around 2 percent of the area of the agricultural real-estate market and 33 percent of the value,” the ministry wrote.

France asked the United Nations in January to add the vineyards of Burgundy’s Cote de Beaune and Cote de Nuits, jointly known as Cote-d’Or, to a list of world heritage sites.

The vineyards are a patchwork of 1,247 named plots called climats that dates back to Roman times. The region’s vintners say soil, exposure and micro climate as well as farming methods, collectively known as terroir, give wines from each plot a unique character.

-By Rudy Ruitenberg

Mideast Funds to Boost Property Buys Fivefold Over Decade

Source: Bloomberg / News

Middle East investors, including some of the world’s largest sovereign-wealth funds, may increase commercial real estate purchases to $180 billion over the next decade, broker CBRE Group projected.

Investment in Europe will rise fivefold as the continent attracts about 80 percent of the spending, Nick Maclean, CBRE’s managing director for the Middle East region, said today in Dubai. The Asia Pacific and Americas regions will each get about 10 percent.

The increase is emerging from the “extraordinary mismatch” between the lack of institutional real estate in the funds’ domestic markets and the spending power concentrated in those countries, CBRE said in a report today.

Middle East sovereign funds are increasingly targeting European real estate as they seek to diversify their holdings. Little of the investment goes to property in the region because few assets are for sale, there’s little transparency and markets and institutions aren’t mature, according to CBRE.

Investors from the region are expected to increase the proportion of spending allocated to real estate to 7 percent to 8 percent from 5 percent or 6 percent now, CBRE said. Saudi Arabia, which recently announced plans to create a sovereign-wealth fund, will probably invest 8 percent of it in real estate outside its borders, according to Maclean.

London Leads

London and the rest of the U.K. will receive about $85 billion of the investment over the next decade. Another $60 billion will go to continental Europe, especially cities such as Paris, Madrid, Barcelona and Amsterdam, Maclean said.

The U.K. capital attracted 44 percent of all Mideast property investments last year and Paris came in a distant second with 15 percent, according to the broker. Foreign demand for investments in Middle East property is also on the rise, with funds from the U.S. and Far East leading the way. Most of those investors are interested in properties in Dubai and Abu Dhabi, Maclean said.

Investors from the Middle East spent $13 billion last year buying commercial real estate globally, up from $7 billion in 2012, according to the report.

-By Zainab Fattah

BOE’s Carney Tackling Housing Boom Backed by Economist

Source: Bloomberg / News

Bank of England Governor Mark Carney is edging closer to putting restraints on the U.K. housing market, and economists say that’s the right thing to do.

In a monthly Bloomberg survey, 85 percent of economists said the BOE’s Financial Policy Committee should take steps to cool demand for real estate when Carney chairs its next meeting tomorrow. Options include putting a minimum limit on down payments for houses, making banks hold more capital against mortgage lending and toughening affordability tests.

The meeting comes as the debate about the risks posed by the housing market intensifies. Chancellor of the Exchequer George Osborne plans to give the FPC new powers to curb lending and Carney said last week the panel is considering wielding its macroprudential tools to head off any threats to the economy.

“The central bank is gearing up to take action to rein in the housing market,” said Rob Wood, an economist at Berenberg Bank and a former BOE official. “It’s likely to be gradual and gentle, but make no mistake, it is on the way.”

Carney gave his latest warning on housing June 12 when he signaled the benchmark interest rate might start to rise earlier than anticipated from its record-low 0.5 percent. Investors have responded by pricing in a rate increase by January compared with previous bets for May, Sonia contracts showed.

Since Carney made his comments, the two-year government bond yield has gained 17 basis points to 0.90 percent, the highest in more than three years, and the pound has extended its gain against the dollar over the past 12 months to more than 8 percent.

Pressure Building

Pressure to act has mounted as house prices increase faster than wage growth, stretching affordability for homebuyers. The number of high loan-to-income mortgages is rising and Carney warned last week of signs that banks are weakening underwriting standards.

Britons owed a record 1.28 trillion pounds ($2.2 trillion) on their homes in April, an amount equal to about 76 percent of gross domestic product, latest BOE figures show. According to the Council of Mortgage Lenders, first-time buyers in London are borrowing almost four times their gross income and the average loan is 200,000 pounds -- almost double the U.K. as a whole.

A report from property-website operator Rightmove Plc today showed asking prices for U.K. homes rising 7.7 percent in June from a year earlier, with average values in London surging 14.5 percent to the equivalent of $1 million. That growth has prompted warnings from the International Monetary Fund and the Organisation for Economic Cooperation and Development.

BOE Warnings

BOE officials have acknowledged the dangers. Deputy Governor for Financial Stability Jon Cunliffe has said it would be “dangerous” to ignore the momentum, while fellow policy maker Ben Broadbent said last week that housing is a risk to the economy.

Twenty nine of 34 economists, or 85 percent, in Bloomberg’s June survey said Britain’s housing market is at risk from overheating. That’s up from 82 percent in May and the highest since the question was first posed in November. When asked in May if the FPC will take steps this month to cool the housing market, only about two-thirds of respondents agreed.

Carney said last week that the FPC will weigh “the merits of graduated and proportionate actions to mitigate the potential vulnerabilities arising from what is the greatest risk to the domestic economy.”

‘Clear Hint’

Those comments were “a clear hint that the FPC will take action at its coming meeting,” according to David Tinsley, an economist at BNP Paribas SA in London and a former BOE official.

Out of the economists who say policy makers should take action, the most favored option, supported by 63 percent, is the capping of loan-to-value ratios on mortgages. Increasing sectoral capital requirements was backed by 41 percent and reducing the maximum value of properties eligible under Help to Buy, a government program to aid people with small down payments, was supported by 37 percent.

“Given where the Bank of England is, given the Help to Buy program the government still has in place, given the fact that the housing market is overheating more than the economy as a whole, they have to at least try the macroprudential tools before they do a big interest-rate rise,” Adam Posen, president of the Peterson Institute for International Economics and a former BOE policy maker, said on Bloomberg Television today.

Rate Forecasts

The FPC will publish the results of the meeting on June 26.

Economists’ interest-rate forecasts are centered on the first half of 2015, though the monthly poll was conducted before Carney’s comments on the potential timing of the first rate increase. Some economists have changed their predictions since then.

Credit Suisse Group AG and Commerzbank AG both today predicted a rate rise in November instead of 2015. Banks that changed forecasts last week include Societe Generale SA, which now expects a quarter-point increase in the fourth quarter and says an earlier move is possible. Deutsche Bank AG also brought forward its prediction by six months to November.

“The governor has made it very clear that we should be gearing up for a rate rise later this year,” said George Buckley, an economist at Deutsche Bank in London.

-By Scott Hamilton and Joshua Robinson