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29th June 2014

Singapore Real Estate

S'pore buyers eye smaller London units

Source: Straits Times

Singapore buyers are still keen on London property but they are focusing more on smaller and cheaper units these days. Consultants CBRE found that 62 per cent of London property sales from Singapore in the first five months of the year were for units priced between £500 ($1,060) and £750 per sq ft.

Real Estate Companies' Brief

Keep an eye on equities, property

Source: Straits Times

Singapore property looks set to remain unpromising, with analysts forecasting residential prices to slide as much as 20 per cent from now into next year. But anything over 20 per cent seems "unlikely" even after accounting for the "anticipated physical oversupply and interest rate uptrend ahead", says OCBC analyst Eli Lee.

Global Economy & Global Real Estate

Slowing China Economy Dims Profit Outlook to 2012 Low

Source: Bloomberg / News

The most-actively traded Chinese companies in the U.S. are on pace to report the smallest profits in two years as growth in the world’s second-largest economy decelerates to the slowest since 1990.

Analysts covering stocks listed on the Bloomberg China-US Equity Index (HSCEI) estimate that on average they will post earnings of $5.64 per share this year, which would be the lowest profits reported since 2012, data compiled by Bloomberg show. They’ve cut revenue forecasts by 7.9 percent in the past 11 weeks.

Earnings and sales projections are falling as economists surveyed by Bloomberg estimate China’s gross domestic product expansion will slow to 7.4 percent this year, the weakest pace in 24 years, after back-to-back annual increases of 7.7 percent. While the government has implemented tax breaks, accelerated spending and cut some banks’ reserve requirements, investors are concerned that officials aren’t doing enough to stem a decline in real estate prices and boost private consumption.

“What we’re seeing now is the near-term impact of the adjustment in expectations as these policies get implemented,” Alan Gayle, senior investment strategist, who helps oversee about $50 billion for RidgeWorth Investments, said by phone from Atlanta on June 27. “They’re trying to slow down some of the more inflationary real-estate related sectors and improve overall average standards of living.”

The China-US gauge advanced 0.2 percent to 105.96 at 10:07 a.m. in New York today, cutting its loss for the year to 0.1 percent. That compares with a 3.2 percent drop in the Shanghai Composite Index (SHCOMP) for the first six months, and a 4.5 percent decline in the Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong.

Home Prices

New-home prices last month fell in half the 70 cities tracked by the government for the first time in two years, the Bureau of Statistics said on June 18. SouFun Holdings Ltd. (SFUN), China’s biggest real estate information website, sank 30 percent this quarter in the second-worst performance on the Bloomberg index of the most-traded Chinese stocks in the U.S. E-House China Holdings Ltd. (EJ), a Shanghai-based online property brokerage, has dropped 28 percent.

While analysts tend to be “pessimistic,” accelerating global growth may improve the prospects for Chinese company profits, according to Katherine Nixon, Chief Investment Officer of Wealth Management at Northern Trust Corp. Economists surveyed by Bloomberg estimate world GDP expansion of 2.67 percent this year and 3.08 percent in 2015.

“Continued global central bank stimulative policies will support this growth,” Nixon said by e-mail on June 27. That “will potentially revive moribund important export markets,” she wrote.

Estimate Cuts

Analyst projections indicate an average 41 percent decline in profits this year from 2013 for companies in the China-US index, data complied by Bloomberg showed. Their sales forecasts have dropped 7.9 percent on average from this year’s high on April 14.

Deutsche Bank AG cut its estimate for SouFun’s 2014 sales by 8 percent, and lowered the earnings projection by 29 percent on June 12 after the Beijing-based real-estate website discounted listing fees to some clients by 40 percent.

Stifel Nicolaus & Co. reduced its 2014 revenue forecast for International Ltd. (CTRP), China’s biggest online travel agency, by 2.1 percent and its profit estimate by 3 percent in a research note dated June 24. Air China Ltd., the nation’s largest airline by market value, said it will lower its base commission rate paid to ticketing agencies to 2 percent from 3 percent from July 1.

-By Belinda Cao

Ikea Goes Urban With First City Store in Hamburg’s Altona

Source: Bloomberg / Luxury

Ikea became the world’s biggest home-furnishings retailer by getting shoppers to drive to sprawling hyper-centers on the outskirts of cities from Stockholm to Shanghai. From today, residents in Hamburg can just walk in off the high street.

The Swedish chain opened its first city-center store in the district of Altona, the most westerly of Hamburg’s seven boroughs, in a pilot project targeting a rising number of urbanites who dread the long haul to its traditional outlets with their distinctive blue and yellow design. The store opening, which is costing the company 80 million euros ($109 million), is an experiment for Ikea, breaking new ground in its largest market, said Johannes Ferber, the managing director who’s spearheading Ikea’s expansion in Germany.

“It’s a very expensive experiment for us, but we want to know if the city-store concept works out,” he said. “Altona could serve as a model for other big cities such as Berlin.”

The venture is part of a wider trend by retailers to populate urban centers as companies fromTesco Plc (TSCO) to Carrefour SA (CA) open smaller downtown shops. Carmakers are also discovering city centers. Daimler AG (DAI) this month opened its first ever Mercedes Me store, also in Hamburg, with a bistro, gallery area and a single car on show.

Abandoned Site

Ikea, which operates 356 stores worldwide, has 49 centers in Germany. The Altona outlet is its third in the port town, Germany’s second-largest and most affluent city in terms of gross domestic product per capita, according to statistics compiled by the local business development authority.

The decision to situate the store in Altona came as the retailer sought an additional location in Hamburg, said Ferber. It was approached by the local municipality, which offered the site that had been abandoned for more than six years, he said.

The retailer expects an average 4,000 customers per working day and about twice as many on Saturdays and other peak days, compared with as many as 12,000 at sites in Munich and Berlin, he said.

“There are many city-dwellers who don’t have a car or aren’t willing to drive outside the city to do their shopping,” said Ferber, adding that he expects more than half of Altona clients to travel to the store by public transport or by bike.

Borrow Bikes

Ikea will lend out cargo bikes and clients may borrow bike trailers for free to transport their purchases home if they return them within three hours. Alternatively, customers can order bike couriers at a starting price of 9.90 euros to do the physical work and let them carry their goods home, larger furniture boxes included, according to the company.

“It’s a big challenge for us as we needed a good traffic and service concept to get products to clients’ homes within a short period of time,” Ferber said.

Ikea also tailored its product selection in Altona to the 150,000 potential customers that live within a 3-kilometer (1.9-mile) radius of the store, including shelves, boxes and baskets. Local staff visited about 200 apartments in the area to assess the challenges clients face, said Ferber.

“There are many people in Hamburg who take their expensive bicycles into their apartments as they don’t have a basement, and we have found solutions for that” by offering a special clamp to hang a bicycle on the wall, he said.

Unlike Ikea’s typical hyper-markets with few windows, the Altona store’s ground floor has a large glass front displaying products such as Skruvsta swivel chairs for 99 euros and Maskros lamps for 39 euros.

‘Kill Billy’

Inside, Ikea combines its furniture display areas with the market halls, where shoppers can load products onto their trolleys or stuff them into carrier bags. In conventional stores, the two areas are on different floors.

“It’s a new way of presenting goods as the kitchen section is followed by the cookery shop where you can buy glasses, porcelain, pots and pans before you get to the section with dining tables and chairs,” Ferber said.

The store opening sparked opposition from some locals, who voiced their criticism by attaching “Kill Billy” stickers to lamp posts and trash cans in a reference to Ikea’s hallmark Billy shelves, fearing the store opening will inflate rents and property prices.

Proponents organized a referendum in Altona in January 2010, with 77 percent of voters in favor of the store. “If the approval rating had only been at 51 percent we may have withdrawn, but as we got that comfortable majority we decided to get on with it,” Ferber said.

“For Ikea, it must be a very different experience from setting up a store on a green field on the outskirts, as they need to come to terms with their neighbors here,” said Florian Kroeger, who runs a deli on the other side of the pedestrian zone.

Kroeger’s family has owned the little Claus Kroeger store for 90 years, selling a selection of teas, coffee and wine. Kroeger, 41, said he’s in favor because the store will bring a long-needed boost to the traditional working class area.

-By Nicholas Brautlecht