Real News‎ > ‎2014‎ > ‎March 2014‎ > ‎

26th March 2014

Singapore Economy

MAS not likely to ease monetary policy, say economists

Source: Straits Times

Mounting pressure on costs here coupled with risks abroad give the central bank little reason to ease monetary policy when it meets next month, said economists. They expect the Monetary Authority of Singapore (MAS) to stand pat on its approach of a gradual and modest appreciation of the Singapore dollar.

Singapore Real Estate

Retail rents still stagnating islandwide in Q1: DTZ

Retailers resistant to rent hikes; landlords staying firm on their asking prices

Source: Business Times / Singapore

RETAIL rents continued to stagnate islandwide in the first quarter as leasing deals took longer to complete, with retailers more resistant to rent increases and landlords staying firm on their asking prices, according to DTZ Research.

Nevertheless, a large potential supply in the pipeline - an estimated 2.4 million square feet of net lettable retail space to be completed this year - could change the picture.

About 56 per cent of this new supply will be located in suburban areas, followed by 24 per cent in the city fringes, and 20 per cent in Orchard/Scotts Road.

The 2014 pipeline makes up 45 per cent of the 5.4 million sq ft of retail space expected to come onstream from now till 2018.

-By Lee Meixian

HDB to relocate 399 industrial units from Eunos

Source: Business Times / Singapore

HDB will be relocating another batch of units in the Eunos Industrial Estate under its Industrial Redevelopment Programme (IRP) to facilitate future redevelopment of the estate.

Under this 14th batch, 399 units will be relocated and affected tenants will be offered replacement units in a new high-rise Industrial Complex in Ang Mo Kio Industrial Park 3. The complex is scheduled to be completed in mid-2018.

The units involved in this relocation exercise are located in 26 blocks. The remaining units will be relocated in subsequent IRP batches.

Since the IRP was launched in 1997, HDB has announced 13 IRP batches and relocated about 3,000 industrial units islandwide to new high-rise industrial complexes with better facilities.

JTC opens 2 more industrial sites in Tuas South for bids

Source: Business Times / Singapore

JTC, the principal developer of local industrial estates, has launched two more ready-to-build industrial sites at Tuas South for bidding.

Released under the Industrial Government Land Sales (IGLS) programme, they are each 8,369 square metres in size; the gross plot ratio is one.

The tenure on them is 21 years two months.

One site is Plot 49 in Tuas South Street 9, and the other, Plot 51 along the same street.

-By Chan Yi Wen

Rift widens in Gilstead Court sale committee

Source: Straits Times

Infighting has intensified within the Gilstead Court sale committee involved in the stalled $150.2 million sale of the Newton freehold condominium en bloc. Two committee members are trying to carry on with the sale without its treasurer in an escalating dispute over penalty clauses in the collective sale agreement.

Crane topples in CBD site; no one injured

Source: Straits Times

A crane toppled over at a worksite in the Central Business District on Tuesday evening. No one was injured in the incident, to which the police and Singapore Civil Defence Force were alerted a little after 7pm. A worker is believed to have been operating the mobile crane when it toppled on its side.

Paralysed worker sues employer and contractor

Source: Straits Times

A construction worker from China who was paralysed from the waist down after a steel cage fell on him is suing his employer and the main contractor for compensation. Mr Chen Qiangshi, 43, was among several workers helping to move a steel-bar cage that had been wrongly installed at the worksite of an industrial building in Mandai on Dec 26, 2012.

Tycoon's son sues over alleged unpaid rent

Source: Straits Times

Mr wee Ee Chao, a son of Singapore's richest man Wee Cho Yaw, sued a medical devices firm for allegedly failing to pay rent on a bungalow near Orchard Road. Aluminaid owes Mr Wee and his wife $646,000 for loss of future income from the unfulfilled term of the lease and unpaid rent, according to a lawsuit filed in the Singapore High Court.

Real Estate Companies' Brief

CDL Hospitality Trusts

Source: Business Times

Tourism growth slows but supply can be absorbed. A total of 8,096 new rooms from known hotel projects will come on-stream between 2014 and 2016, according to commercial real estate services company CBRE.

Mapletree Industrial Trust

Source: Business Times

Mapletree Industrial Trust (MINT) announced that it has secured a contract to develop a new built-to-suit facility for Hewlett Packard (HP) for a total consideration of $250 million. Upon completion in FY2018, HP will sign a long-term lease of 10.5 years, with two five-year extension options, providing strong income visibility for MINT.

Global Economy & Global Real Estate

Redwood Returns to Mortgage-Bond Market With $342 Million Deal

Source: Bloomberg / Luxury

Redwood Trust Inc. (RWT), the biggest issuer of U.S. home-loan securities without government backing last year, ended a four-month absence from the market with a $341.9 million transaction.

Redwood, which specializes in jumbo mortgages, sold $179.7 million of top-rated securities paying 4 percent coupons at 101.3 cents on the dollar, according to a person with knowledge of the matter, who asked not to be identified citing a lack of authorization to speak publicly. That’s about 2.7 cents on the dollar less than comparable benchmark Fannie Mae-guaranteed bonds, according to data compiled by Bloomberg.

The real-estate investment trust returned to the market after saying last month it has been selling most of its mortgages without packaging them into securities amid the relatively higher prices being paid by banks seeking loans for their balance sheets. Bundling mortgages into bonds offers Mill Valley, California-based Redwood income after issuance because it retains the riskiest slices of the debt.

Redwood created securities backed by about $5.6 billion of loans in 12 deals last year, according to data compiled by Bloomberg. Today’s sale, which also included a top-rated $136.5 million portion with a 3 percent coupon, was managed by Bank of America Corp.’s Merrill Lynch unit, the person said.

Forecast Cut

Demand from banks for jumbo loans prompted JPMorgan Chase & Co. analysts this month to lower their forecast for 2014 issuance of non-agency, or private label, securities to $5 billion to $10 billion, from about $20 billion.

Issuance has also been hurt by bond investors’ demands for higher relative yields and a slump in new loan volume sparked by higher mortgage rates. Prices on recently-issued top-rated non-agency securities fell to as low as 4 cents on the dollar below similar agency bonds toward the end of last year, after fetching higher prices early in 2013, according to JPMorgan.

While total issuance of non-agency securities tied to new loans jumped to $13.4 billion last year from $3.5 billion in 2012, the sales collapsed after September, Bloomberg data show. Less than $1 billion of the deals were completed from October through December, and issuance totals about $1.3 billion so far this year. Sales peaked at $1.2 trillion in both 2005 and 2006.

Jumbo mortgages are those larger than allowed in government-supported programs, currently as much as $729,750 for single-family properties in high-cost areas. Limits range from $417,000 to $625,500 for Fannie Mae (FNMA) and Freddie Mac loans with the lowest costs for borrowers using 20 percent down payments.

-By Jody Shenn

CommonWealth REIT Confirms Removal of Board of Trustees

Source: Bloomberg / News

CommonWealth REIT (CWH), the target of an investor campaign to overthrow the board, said all of its trustees have been removed after the required two-thirds of shareholders voted in favor of an ouster.

A special meeting to elect a new board will be held on or before May 23, according to a statement today by the Newton, Massachusetts-based real estate investment trust. Shareholders who have owned at least $2,000 worth of stock for at least one year may nominate trustees.

The board removal marks a victory for Corvex Management LP and Related Cos., which together own 9.6 percent of the REIT’s shares and have been seeking to oust management for a year. The New York-based firms argued that the ownership of an external management firm by CommonWealth President Adam Portnoy and his father, Barry, a company founder, led to conflicts of interest and underperformance. Both Portnoys have been directors of CommonWealth, which pays fees to the management company.

Corvex and Related said last week they had votes to remove the board from stockholders representing 81 percent of shares.

The activists have proposed a new slate of board candidates led by billionaire investor Sam Zell and David Helfand, co-president of Zell’s Equity Group Investments. Zell and Helfand have agreed to serve as the REIT’s chairman and chief executive officer, respectively, if they are chosen for the new board.

Buying Stock

An entity affiliated with Zell and Helfand will have an option to acquire as many as 4 million CommonWealth shares, Corvex and Related said last month.

The dissident group has argued the Portnoys have been more concerned about collecting fees for their firm, REIT Management & Research LLC, than operating CommonWealth for the benefit of all stockholders because the father and son don’t own many shares themselves.

CommonWealth has denied Corvex and Related’s claims of conflicts of interest and said it is focused on buying office buildings in U.S. downtowns and selling suburban properties to boost shareholder value.

The company in September announced changes to its corporate governance after conversations with investors who said they wanted RMR’s financial incentives to be more aligned with shareholders. The changes were made in December, according to the REIT.

In the five years ended Feb. 25, 2013, the day before Corvex and Related made their first public filings on CommonWealth, the stock fell 45 percent, compared with an 11 percent advance in the Bloomberg REIT Index. The shares have since surged 69 percent, closing yesterday at $26.75.

-By Oshrat Carmiel and Brian Louis

Home Prices in 20 U.S. Cities Rose 13.2% in Year to January

Source: Bloomberg / Personal Finance

Residential real-estate prices climbed at a slower pace in the year through January than a month earlier, indicating momentum in the housing market may be cooling.

The S&P/Case-Shiller index of property values in 20 cities increased 13.2 percent from January 2013, the smallest gain since August, after rising 13.4 percent in the 12 months through December, the group said today in New York. The median projection of 30 economists surveyed by Bloomberg called for a 13.3 percent advance. Compared with the prior month, prices rose 0.8 percent.

Price appreciation on a year-over-year basis has eased in recent months as higher mortgage rates and unusually severe winter weather slowed demand for properties. Smaller increases in asking prices will help improve affordability, providing support for the residential real-estate market, which has been a source of strength for the economy.

“Prices are rising, even though we should see those gains moderating,” said Scott Brown, chief economist at Raymond James & Associates Inc., who correctly forecast the year-over-year gain. “You’re still talking about double-digit percentage increases, which aren’t going to be sustainable over the long term.”

Estimates (SPCS20Y%) in the Bloomberg survey ranged from year-over-year gains of 11.2 percent to 13.8 percent. The Case-Shiller index is based on a three-month average, which means the January figure was also influenced by transactions in December and November.

Stock Futures

Stock-index futures held earlier gains after the figures, with the contract on the Standard & Poor’s 500 Index maturing in June rising 0.4 percent to 1,857.3 at 9:13 a.m. in New York.

Home prices adjusted for seasonal variations increased in January from the prior month after climbing 0.7 percent in December. The Bloomberg survey median called for a 0.6 percent gain.

The month-over-month price gains in cities were led by a 1.8 percent increase in San Diego and a 1.7 percent advance in San Francisco. Prices climbed in all 20 major metropolitan areas.

‘A Breather’

“The housing recovery may have taken a breather due to the cold weather,” David Blitzer, chairman of the S&P index committee, said in a statement. “Expectations and recent data point to continued home-price gains for 2014. Although most analysts do not expect the same rapid increases we saw last year, the consensus is for moderating gains.”

Unadjusted prices decreased 0.1 percent in January from the prior month after a similar decline in December. Twelve areas reported a drop in unadjusted prices, while values increased in seven cities.

The year-over-year gauge, which uses records dating back to 2001, provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.

All 20 cities in the index showed a year-over-year increase, paced by gains of 24.9 percent in Las Vegas and 23.1 percent in San Francisco. Cleveland showed the smallest increase of 4 percent.

Builder Profits

The acceleration in prices since the end of 2012 has generated more profit for companies such as Lennar Corp. (LEN) and KB Home. Miami-based Lennar, the biggest homebuilder by market value, reported net income rose to $78.1 million in the three months through February from $57.5 million a year earlier, the company reported March 20.

“In the first quarter, we have seen clear signs that volume is returning to the market even as severe weather made conditions difficult,” Stuart Miller, Lennar’s chief executive officer, said on a conference call. “We continue to believe that the fundamental drivers of improvement in the housing market remain a steadily improving economy with a slowly improving employment picture unlocking pent-up demand, while supplies remain constrained to meet that demand.”

Los Angeles-based KB Home also reported fiscal first-quarter earnings that beat estimates as it raised prices and opened communities in high-cost, land-constrained markets, such as parts of California.

As Federal Reserve officials gauge economic improvement while scaling back an unprecedented stimulus program, they’re also monitoring the effects their policies may have on interest rates. Treasury yields jumped March 19 after Janet Yellen said in her first press conference as Fed chair that rates could rise “around six months” after asset purchases end, most likely in the fall.

Federal Reserve

Policy makers also said that the recovery in housing is still slow. That may give way to a pickup as more people take advantage of borrowing costs that, while higher than a year ago, are historically low.

“There’s a lot of demographic potential there for new household formation that would ultimately generate new construction,” Yellen said after the Fed’s policy meeting. “And the level of rates I think does matter, and the fact that they’re low now is something that should serve as a stimulus to people coming back into the housing market.”

The average rate on a 30-year, fixed-rate purchase loan was 4.32 percent in the week ended March 20, up from 3.54 percent around the same time a year ago, according to McLean, Virginia-based Freddie Mac. That’s still below the 20-year average of 6.26 percent.

Winter Weather

Beyond the recent increase in borrowing costs and declining affordability, the slowdown in housing since the middle of last year also reflects limited job growth and more recently, bad weather. February ended with its coldest final week since 2003, according to Berwyn, Pennsylvania-based weather data provider Planalytics Inc. The second week of the month was the snowiest such period since 2007.

New-home sales are projected to fall 4.9 percent to a 445,000 annualized pace in February from the month before, according to the median forecast in a Bloomberg survey before the Commerce Department’s figures later today.

Another report last week showed sales of previously owned homes fell 0.4 percent to a 4.6 million annual rate in February, the weakest level since July 2012, according to figures from the National Association of Realtors.

-By Victoria Stilwell

Sales of New U.S. Homes Fell in February to Five-Month Low

Source: Bloomberg / Luxury

Purchases of new homes in the U.S. fell in February to the lowest level in five months, a sign the industry may take time to pick up after inclement weather damped demand earlier in the year.

Sales declined 3.3 percent to a 440,000 annualized pace, following a 455,000 rate in the prior month that was the strongest in a year, figures from the Commerce Department showed today in Washington. The median forecast of 77 economists surveyed by Bloomberg called for 445,000.

Unusually frigid temperatures added to restraints including rising mortgage rates, higher property values, and a lack of supply that kept prospective buyers away from the market for new and existing properties. Bigger gains in employment and consumer sentiment would help spur the recovery in homebuilding, sustaining its contribution to economic growth and boosting earnings at companies such as Lennar Corp. and KB Home.

“There’s a big upside to new-home sales,” said Robert Dye, chief economist at Comerica Inc. in Dallas, who correctly projected the drop in sales last month. “We have a huge amount of pent-up demand and very tight inventories. Mortgage rates, although they’ve risen, are still very low. We expect to see continuing improvement in the housing market.”

Economists’ estimates ranged from 406,000 to 506,000. The reading for the prior month was revised down from a previously reported 468,000.

Slower Appreciation

Another report today showed prices of home resales climbed at a slower pace in the year through January than a month earlier, indicating momentum in property-value appreciation is cooling.

The S&P/Case-Shiller index of 20 cities increased 13.2 percent from January 2013, the smallest gain since August, after rising 13.4 percent in the 12 months through December. The median projection of 30 economists surveyed by Bloomberg called for a 13.3 percent advance. Compared with the prior month, prices rose 0.8 percent.

Also today, another report showed consumer confidence unexpectedly jumped in March to the highest level in six years. The Conference Board’s sentiment index rose to 82.3 in March, the highest since January 2008, from 78.3 a month earlier, the New York-based private research group said.

The median forecast in a Bloomberg survey of 76 economists called for a reading of 78.5 this month. Estimates ranged from 75 to 80.

Shares Climb

Stocks held earlier gains after the reports. The Standard & Poor’s 500 Index increased 0.6 percent to 1,868.76 at 10:23 a.m. in New York.

The median sales price of a new house decreased 1.2 percent from February 2013, to reach $261,800, according to today’s Commerce Department report. It was the biggest year-to-year decline since June 2012. The median can be affected by the mix of sales by region as prices are generally higher in the Northeast and West where demand declined.

Purchases (NHSLTOT) dropped in three of the four regions, led by a 32.4 percent slump in the Northeast. The West decreased 15.9 percent and the South fell 1.5 percent. Demand in the Midwest jumped 36.7 percent to the highest level since May 2013, after dropping almost 20 percent the prior month.

More Supply

The supply of homes at the current sales rate climbed to 5.2 months from 5 months in the prior month. There were 189,000 new houses on the market at the end of February, the most since December 2010.

New-home sales, which accounted for about 8 percent of the residential market in 2013, are tabulated when contracts are signed, making them a timelier barometer than purchases of previously owned dwellings. Sales of existing homes are tabulated when a deal closes, typically a month or two later.

The weather depressed parts of the housing market, recent reports showed. Sales of previously owned properties declined in February to the lowest level since July 2012, according to data from the National Association of Realtors. The National Association of Home Builders/Wells Fargo index of builder confidence rose less than forecast in March.

Warmer temperatures may revive construction and help bring more buyers out in coming months.

The recent weakness is “a temporary pause,” and the homebuilding industry is still in the early stages of recovery,Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, said in a statement on March 5.

Growing Profits

Lennar, the biggest U.S. homebuilder by market value, last week reported a fiscal first-quarter profit that beat analysts’ estimates as it sold more homes at higher prices.

“The housing-market recovery continues as we begin to enter the more vibrant seasonal months of the year,” Chief Executive Officer Stuart Miller said on a March 20 conference call with analysts. “The fundamental drivers of improvement in the housing market remain a steadily improving economy with a slowly improving employment picture unlocking pent-up demand, while supplies remain constrained to meet that demand.”

Los Angeles-based KB Home also reported fiscal first-quarter earnings that beat estimates as it raised prices and opened communities in high-cost, land-constrained markets, such as parts of California.

Rising borrowing costs have limited affordability. The average 30-year, fixed-rate mortgage rate was 4.32 percent in the week ended March 20, up from 3.54 percent a year earlier, according to Freddie Mac in McLean, Virginia.

Federal Reserve policy makers last week gave themselves room to keep borrowing costs low at least until next year by dropping a link between the benchmark interest rate and a specific level of unemployment. The central bank also reduced the monthly pace of bond purchases by $10 billion, to $55 billion.

Household formation would ultimately generate new construction, Fed Chair Janet Yellen said during a news conference after the policy meeting.

-By Shobhana Chandra

Axa Sees ECB Stress Tests Producing Real Estate Investment Deals

Source: Bloomberg / News

European Central Bank stress tests of lenders will create real estate investment opportunities this year as the region’s banks shore up their balance sheets, according to the head of Axa SA’s property unit.

“Some of the assets which could have been secure or very safe six or seven years ago, now they may be riskier,” Pierre Vaquier, chief executive officer of Axa Real Estate Investment Managers, said in an interview. “They may have shorter leases. They might have need for asset management. This is where we feel you will get interesting opportunities.”

The tests, examining a bank’s ability to withstand financial setbacks, will be done on a sample of 128 lenders and include an asset-quality review, the ECB said March 11. More than 40 billion euros ($55 billion) of commercial property loans and real estate owned properties will be sold this year, 32 percent more than last year, broker Cushman & Wakefield Inc. said in February.

The tests aren’t necessarily going to generate a lot of transactions at big discounts, Vaquier said. “Banks have learned from the 1990s that if you have the balance sheet and a bit of support naturally, it’s better to take your time to deleverage and restructure your assets.”

Axa Real Estate, based in Paris, is seeking properties in need of refurbishment or that aren’t fully leased as the best quality assets in Europe are “a bit pricey,” Vaquier said.

“Over the last 18 months we’ve done nearly 1.5 billion euros of value-add,” he said. “It has been where we have seen the most attractive situations.”

Price-Drop Vulnerability

Poor-quality commercial properties in regional locations in France are vulnerable to price drops, Vaquier said. “The economy is not doing well, we are in the middle of the pack more or less,” he said. “I think on secondary stuff we will see an adjustment.”

Office buildings in London are the best part of the European property market as the U.K.’s economy rebounds, Vaquier said. A building near St. Pancras rail station bought by Axa before its completion, and without tenants in about 40 percent of the space, will be fully leased at rents above expectations when it opens, Vaquier said at the MIPIM real estate conference in Cannes, France.

The office property was bought for about 300 million pounds ($495 million) and is due for completion next year, according to a September 2012 statement by the asset manager.

The strength of sterling and the euro may cause demand for European real estate by Asian investors to fall, he said. The pound has gained about 19 percent against the Malaysian ringgit and about 11 percent against the Singapore dollar since May.

“For insurance companies, it’s going to be a problem and some of them I’m not sure have always hedged their currency,” he said. “For the ones who have not, it might be an issue.”

-By Neil Callanan

Israel Housing Boom Threatened as Netanyahu Seeks Caps

Source: Bloomberg / Luxury

Israel’s failure to cap a surge in housing prices threatens to add a new drag on an already slowing economy.

With the International Monetary Fund warning of a possible bust, a committee including Prime Minister Benjamin Netanyahu yesterday approved proposals to exempt first-time buyers from value-added tax, and capping new home prices.

Housing prices soared 80 percent between 2007 and 2013, while wage increases trailed at 25 percent, according to the Central Bureau of Statistics in Jerusalem. The boom threatens the broader economy as people funnel more and more money into homes, said Shai Azar, a real estate analyst at Tel Aviv-based IBI - Israel Brokerage & Investments Ltd.

“Real estate prices force people to take large mortgages, and that can affect consumption,” Azar said by phone. “People will break into their savings to pay for apartments, at the expense of consumption, hurting economic growth.”

Israel’s $273 billion economy has already been clobbered by an appreciating shekel and depressed global demand that have cut into exports. Gross domestic product grew 3.3 percent in 2013, the least since 2009, and the Bank of Israel yesterday pared its 2014 forecast to 3.1 percent. Exports, accounting for one-third of the economy, rose 0.7 percent in 2013, down from 0.9 percent in 2012, 7.3 percent a year earlier and 14 percent in 2010.

Netanyahu told Channel 2 television on March 8 that his government hasn’t done enough to tame housing prices and he doesn’t “intend to neglect this front.”

Tangled Process

Last month, the IMF warned that Israeli home prices were 25 percent above equilibrium and that there was a 20 percent chance of a recession-provoking housing bust. As home prices continued climbing, the Tel Aviv Stock Exchange’s EST-15 index of Israel’s biggest real estate companies has outperformed the broader TA-100 index since early last year.

In Israel, the state owns 93 percent of the land and leases it for construction. The Bank of Israel, which introduced new restrictions on mortgages after rate cuts made homebuying more attractive, has urged the government to boost supply.

“There’s an enormous amount of red tape to cut before you can even dream of creating enough supply,” Jonathan Katz, a Jerusalem-based economist for HSBC Holdings Plc (HSBA), said in a telephone interview. Citing government statistics, he said it takes an average 13 years from the initial planning stages to delivering the keys of a finished apartment to the buyer.

Azar said the government hasn’t tackled the supply problem because the multiple government offices that would have to sign off on changes sometimes have conflicting agendas.

Different Agendas

“They all must cooperate, and in practice, they pull in different directions and that is holding it up,” he said.

What’s more, “the government has profited nicely from the rise in prices,” Azar said. “When apartment prices went up, land prices went up, profit taxes and betterment taxes went up, and the government benefited.”

Housing costs touched off a summer of cost-of-living protests in 2011 that drew as many as 400,000 people to the streets. Hundreds pitched tents on Tel Aviv’s fashionable Rothschild Boulevard for months to dramatize their inability to make ends meet.

While initially denouncing the protests as “populist” stunts, Netanyahu eventually pledged to bring down prices. The government’s efforts so far have been insufficient, he said in his interview with Channel 2.

“You have to break the government monopoly to free up more land and build more housing,” Netanyahu said.

Profits Eroded

Opening more land to development may help construction companies such as Property & Building Corp. (PTBL) and Africa-Israel Residences Ltd. (AFRE), according to Noam Pincu, an analyst at Tel Aviv-based Psagot Investment House Ltd. “Land is so expensive that it cuts into profits even when prices are high,” he said.

Ori Greenfeld, chief economist at Psagot, said housing starts must rise to 50,000 a year to cover mounting demand, up from 44,341 in 2013 and 46,763 in 2011.

“Even if the prime minister tries to maneuver the market into building more housing, it’s going to take a long time to see results -- at least five years,” Greenfield said.

IBI’s Azar estimated there is a current shortfall of 80,000 housing units. With annual demand at 40,000 to 45,000, 50,000 to 60,000 homes will have to built in each of the next three to four years to bridge the gap, he said.

Lower Prices

One of the measures approved yesterday, promoted by Netanyahu, would cap prices for some new construction at 20 percent below the end-2013 market median by subsidizing land costs. The other proposal, by Finance Minister Yair Lapid, would exempt some first-time buyers from the 17 percent VAT. It isn’t clear how much the programs would cost.

The Bank of Israel predicted yesterday that the measures “are likely to lead to volatility in volumes of activity and in prices in the market in coming months.” Lapid said in a television interview late yesterday that prices will start to decline this year and drop “significantly” in 2015.

Lapid’s plan set off a round of high-level squabbling after it was disclosed last week. Housing Minister Uri Ariel called it “half a plan,” and Bank of Israel Governor Karnit Flug, who supports Netanyahu’s concept of a “target price,” warned that it would fuel demand.

Finance Ministry chief economist Michael Sarel quit, saying the program “is based on a superficial and inaccurate economic analysis of the real estate sector and the effects of the proposed policy on supply and demand.”

Looking Abroad

Today, seven in 10 Israelis live in their own homes, according to government statistics. With a modest, three-bedroom apartment in Tel Aviv going for about $800,000 and the average annual wage around $33,000, many young people are despairing of becoming homeowners. Some are looking abroad for cheaper housing, in some cases moving to Germany and other European nations their persecuted grandparents fled.

If the government doesn’t increase supply considerably, “it will hurt an entire generation of young people,” Amir Haik, chief economist at Union Bank of Israel Ltd., said by phone. “They need to have fair prices.”

-By Jonathan Ferziger

Egypt Real Estate Shares Lead Index Surge to Highest in 5 Years

Source: Bloomberg / Luxury

Egyptian stocks rose to the highest level in more than five years as investors speculated property developers would benefit from an army agreement with Arabtec Holding Co. (ARTC) to build low-income housing.

The benchmark EGX 30 Index snapped two days of losses, gaining 1.1 percent to 8,501.63 at the close in Cairo, the most since August 2008. About 1.1 billion Egyptian pounds ($152 million) of stocks traded, compared with one-year full-day average of 480 million pounds. Ten out of the gauge’s 11 real estate stocks rose, led by a 6.9 percent spike for Medinet Nasr Housing.

Property stocks have outperformed the EGX 30 since the military signed a memorandum of understanding with Arabtec on March 9 to build 1 million apartments for low-income individuals. The benchmark index has gained 25 percent this year, the most in the world after the Dubai Financial Market General Index, among 94 equity gauges tracked by Bloomberg, as the army seized power following the ouster of President Mohamed Mursi in July of last year.

“The military’s deal with Arabtec is definitely driving the entire market, but especially the real estate sector,” Tamer Ismail, head of dealing at Cairo Capital Securities, said by phone. “The thinking is the deal will drive up building material prices and thereby strengthen property prices. We’re already seeing signs of this.”

Medinet Nasr Housing climbed to 33.8 pounds, the highest level in almost six years. Palm Hills Developments SAE advanced 2.2 percent to 4.22 pounds, a three-year high. The shares advanced 33 percent and 24 percent, respectively, since the Arabtec deal. That compares with a 7.1 percent increase for the EGX 30.

-By Ahmed A. Namatalla

Berlin Airfield Is Battleground for Scarce Housing: Real Estate

Source: Bloomberg / Luxury

Christoph Breit stands atop a squat lookout tower surveying the former Tempelhof airfield, now a vast park where windsurfers barrel down the runways that had been the city’s lifeline during the 1948 Berlin airlift.

Breit, 38, is in a fight to stop construction of almost 5,000 apartments and a library at the airfield, which since 2010 has served as a recreation area bigger than New York’s Central Park. Breit moved to Berlin 10 years ago and settled in the Neukoelln neighborhood adjacent to the park. He helped collect close to 200,000 signatures to force a May 25 referendum to block the housing, the city’s response to a home shortage.

“Would anyone try to transform Central Park into a housing complex?” he said on a sunny winter morning, pointing to skaters and windsurfers pulled by giant kites along the runways where American planes, nicknamed ‘‘Candy Bombers,’’ once delivered food to a city besieged by the Soviet Army. “There are many other places more suitable for building.”

More than two decades after the fall of the Berlin Wall, the city is divided over how to address a housing shortage. The long-awaited post-reunification growth is finally happening, with 50,000 people moving to Berlin last year and another quarter million forecast to arrive by 2030. The German capital’s unique history has provided it at the same time with plenty of central areas to build, and a populace skeptical about the intentions of politicians and real estate developers.

Urgent Necessity

Building is now an urgent necessity to meet rising demand for everything from inexpensive rentals to luxury condominiums.

At stake in the referendum is the kind of city Berlin will become: one where those on low incomes can still afford to live in downtown locations, or somewhere like London, Paris or New York, where the center is dominated by the relatively wealthy.

Construction cranes already dominate the skyline in central neighborhoods like Mitte and Kreuzberg. Private builders such as Groth Development GmbH and Peach Property Group AG are building in the center, putting up housing for the minority of Berliners who buy their homes. Aided by low interest rates, private construction companies have steadily increased their output in the past five years and completed 6,000 apartments in 2013, according to data compiled by research firm Bulwiengesa AG. That was the most in 14 years.

About 60 percent of the condos they’re building are sold to homebuyers from outside of Berlin, said Christian von Gottberg, a broker at Hamburg-based luxury-homes seller Engel & Voelkers. Buyers from western German cities account for about 40 percent of the total, while 20 percent of the homes go to purchasers from other European countries, the U.S. and Asia, many as investment properties to rent to locals.

Cheaper Option

“People are moving here because Berlin is suddenly like London and Paris, but significantly cheaper,” Gottberg said. “Foreigners who buy here are looking for stability, they know they’ll get their rent payments.”

Sites like Tempelhof offer a rare opportunity to provide low-cost housing close to the center. At least half the 1,700 homes planned for Tempelhof in the first phase of construction would be affordable, according to Martin Pallgen, a city spokesman.

When Stefanie Frensch joined city-owned developer Howoge Wohnungsbaugesellschaft mBH as chief executive officer in 2011, the company had built nothing in at least 10 years. After reunification in 1990, an expected surge in population with the city’s rebirth as the capital of a new Germany had spurred a brief building boom. When the people failed to come, Howoge and its sister companies focused on collecting rent and maintaining the properties. The city had even been demolishing some apartment buildings.

Slow Burn

“Berlin was always interesting, but it took 20 years for people to realize that it was the most important city in Germany,” said Frensch, 44. “When the population started to grow, we realized we didn’t have enough housing, so we went back to being a construction company.”

Howoge plans to build about 3,000 apartments in the next four years. Its projects include a conversion of a former hospital into 500 apartments surrounded by parks, and a high-rise with 200 apartments.

Unlike most German cities, Berlin has many undeveloped properties. Some were empty lots left after the Berlin Wall came down in 1989, while others were World War II ruins the East German government hadn’t repaired. Many of those spaces were filled with the help of construction subsidies in the 1990s, and now the capital’s second building boom is beginning to close the ones that remain in districts such as Mitte and Prenzlauer Berg.

Goering’s Ministry

Tempelhof, designed in 1934 to 1936 by Ernst Sagebiel, an architect in Hermann Goering’s Reich Air Ministry, is unique for any city. Its buildings, where as many as 1.1 million travelers per year once passed, now serve as exhibition space, and the airfield itself is as big as the principality of Monaco.

Six years ago, the fate of Tempelhof Airport itself was decided by a referendum in which those who opposed its closure - - including Chancellor Angela Merkel -- lost out because of a low turnout. The result: the city’s plan to build Berlin Brandenburg Airport as a single transport hub on the city’s outskirts stayed on track.

Originally scheduled for completion in 2011, the airport’s opening has been delayed several times and there’s currently no target date. The project was budgeted at about 2 billion euros ($2.8 billion) and the latest projection is almost 5 billion euros, Berliner Morgenpost reported in January.

The last flight from Tempelhof was in 2008 and the next year local residents staged demonstrations, demanding the airfield be opened to the public, which happened in 2010.

Neighborhood Transformation

For the residents of Berlin’s Neukoelln neighborhood, it was almost as though without moving they had gone from living in New York’s Jamaica, Queens, neighborhood next to JFK Airport to suddenly finding themselves in Brooklyn’s Park Slope, one of the city’s most sought-after neighborhoods, adjacent to the borough’s biggest park.

When Breit arrived, Tempelhof was still open, with planes roaring overhead, and the neighborhood, he said, was crime-ridden and struggling, dominated by drug dealers and the destitute. It was “written about as one of the worst places to live in Germany,” he said. Now, Breit points out the families at the local playground, including his, the fresh coats of paint on many buildings, and the new restaurants and businesses on almost every block.

Merkel’s Support

This time, the referendum on Tempelhof’s future coincides with a European parliament vote, which should boost turnout.

The ballot measure, if passed, would block all development of the airfield, leaving it just as it is. To pass, the majority of those who vote on the referendum must vote “yes” and their total number must be equal to a quarter of all Berliners entitled to vote. That number was about 670,000 on March 25, according to the Berlin Elections Commission.

Breit and his group, 100% Tempelhofer Feld, had to collect about 174,000 signatures to win the right to hold a ballot, and ended up with about 185,000. That’s more than 7 percent of all Berliners who are allowed to vote.

The plan for Tempelhof includes a new library, school and kindergarten, as well as 4,700 housing units, which will be built over several phases.

All of the developments would be on the edges of the former airfield, Pallgen said, leaving the rest of the site as a public space that would still be bigger than Berlin’s Tiergarten, a park on the west side of the Brandenburg Gate.

‘Unique Space’

“The Tempelhof field is a unique open space in Berlin’s inner city,” Pallgen said. “It’s big enough to allow for several uses at once.”

Berlin’s city planning commission last year published a proposal to build 1,700 apartments in the first phase, at least half of which would be affordable. In order for the plan to be binding, it must be voted on by the Berlin parliament after the planning commission lays out the project’s financial feasibility. After the first phase, city planners expect to add another 3,000 apartments, although the exact scale and pricing has not yet been determined, Pallgen said.

“We have a long history of distrust in Berlin between the Senate and the people,” said Breit, a co-founder of 100% Tempelhofer Feld. “That’s because the politicians have a long history of saying one thing and doing something else.”

Berlin needs to build 10,000 to 12,000 housing units every year to keep up with its growing population. Since 2005, the number of people living in Berlin has risen 3 percent to 3.4 million. The city’s government expects 7 percent more residents by 2030.

Greek Jobseekers

Newcomers include students and artists attracted by rents that are among the lowest in northern Europe, and workers from Greece and Spain looking for jobs in Europe’s largest economy, said Karl Brenke, a researcher at the DIW Economic Institute.

That’s beginning to change. Demand for housing pushed up rents by an average of 23 percent in the past three years, according to data compiled by Bulwiengesa. The biggest gain was in Friedrichshain, a trendy district in eastern Berlin, where tenants had to pay 45 percent more.

“Housing has become an issue,” said Andre Adami, head of Berlin residential property at Bulwiengesa. “Rent increases in the past few years have forced some people with lower incomes to move out of their neighborhoods.”

Berliners have about 17,000 euros of disposable income per year on average, compared with about 20,000 euros nationally, according to data compiled by the Federal Statistics Office in 2011, the most recent year for which data is available.

Renters Rule

“Berlin is a city that can’t stomach rising rents because its economic structure is simply worse than Hamburg’s or Munich’s,” said Reiner Wild, head of the Berlin Tenants Association, the city’s most powerful tenant advocacy group. “Berliners don’t have the kind of incomes that allow them to buy apartments.”

As a result, about 85 percent of Berliners are tenants, compared with 75 percent in Munich and Hamburg, according to data from the Federal Statistics Office. An apartment in Berlin costs about 8.20 euros per square meter to rent, compared with 15 euros in Munich, Germany’s most expensive city, Chicago-based broker Jones Lang LaSalle Inc. estimates.

The rising cost of living in central neighborhoods such as Friedrichshain, Mitte and Kreuzberg already is pushing some Berliners to the outskirts, as the city’s economy lags behind the country as a whole. The unemployment rate of about 11 percent compares with a German average of about 7 percent.

In some parts of Berlin, local governments have taken other measures, such as requiring private developers to add affordable homes to their plans. In Prenzlauer Berg, city planners have banned renovations such as combining apartments or adding balconies.

‘Social Mix’

“These types of renovations are aimed at increasing the price of an apartment so they can be sold,” said Jens-Holger Kirchner, head of city planning in Prenzlauer Berg. “You don’t want a mono-culture in your district; cities thrive on the social mix.”

Groth Gruppe, a Berlin-based developer that was set up in 1982, plans to construct about 500 homes this year and 1,000 next year, compared with 300 in 2013. The company is putting 270 units on a former railyard in Kreuzberg that’s not far from Potsdamer Platz. The average asking price is about 4,400 euros a square meter, or 420,000 euros for a two-bedroom with nine-foot ceilings, hardwood floors and a balcony.

While that’s in line with prices for other newly built homes in the area, it’s less than London’s 9,200 euros per square meter and Paris’s 10,662 euros, according to data from CBRE Group Inc.

‘Concrete Gold’

“It’s a good time to be in construction,” said Rainer Kieschke, head of project development. “Demand for apartments started to rise at the start of the euro crisis in 2008, because people felt they needed a safe place to put their money. People are investing in concrete gold.”

Breit, who lives less than a mile from Tempelhof and spends weekends there biking and flying kites with his children, says building apartments on the site is just the beginning of a land grab that would force middle-class Berliners to the periphery. New arrivals are already pushing a rising number of people from central locations to the outskirts, according to CBRE.

“It’s important to keep Tempelhof as a historic site to commemorate the important things that happened decades ago,” said Breit. “In the long term, we’re going to regret having taken a space like this to build on.”

-By Dalia Fahmy and Rob Urban

Hidden Qatar Billionaire Al-Thani Seen With Hotel Empire

Source: Bloomberg / Luxury

The Sheikh Faisal bin Qassim Al Thani Museum sits 14 miles west of Doha, the capital of Qatar. A desert fortress with stone turrets and arched wooden doors, the museum’s 15 halls hold more than 15,000 artifacts, including ancient Qurans, Yemeni daggers and vintage American cars.

The Al Thani museum is home to a collection belonging to Sheikh Faisal bin Qassim Al Thani, owner of Al Faisal Holding, a Doha-based conglomerate that operates about 50 businesses in nine industries. It’s also a symbol of the wealth that’s been accumulated by Qatari businessmen during the past four decades.

“We are lucky to live in a country with a rapidly growing economy,” Al Thani, 65, said in a March 16 e-mail. “In order to benefit from this economic boom, one has to take the initiative and be willing to seize opportunities.”

Through Al Faisal and its publicly traded subsidiary, Aamal Company, Al Thani has assembled a collection of luxury hotels and commercial real estate properties in six countries. He has a net worth of at least $2.2 billion, according to the Bloomberg Billionaires Index, and has never appeared on an international wealth ranking.

Al Thani’s success is linked to Qatar’s, which has the world’s third-largest natural gas reserves and the highest per capita income, according to the International Monetary Fund. Demand for gas has helped Qatar quadruple its gross domestic product during the past decade, compared to a doubling in Turkey and a 33 percent rise in the U.S, according to data compiled by the World Bank.

Gas Production

The Connecticut-sized country’s GDP is expected to expand by 5 percent in 2014, more than Turkey or Brazil, according to data compiled by the International Monetary Fund. Qatar’s liquefied natural gas production, almost all of which is controlled by the state, has helped boost Al Thani’s businesses, including real estate, hotels, for-profit schools and the country’s biggest industrial laundry service.

“The oil and especially gas sectors provide enormous ‘rents’ or royalty income,” Matthew Gray, an associate professor at the Australian National University in Canberra, and author of “Qatar: Politics and the Challenges of Development,” said in a March 6 e-mail.

Al Thani is part of Qatar’s ruling family, the largest of all the Gulf countries which, including extended members and in-laws, account for as many as one-fifth of Qatar’s 300,000 citizens, according to Gray. The royalty income generated by oil and gas sales trickles down to consumers through government spending and subsidies that encourage foreign investment and trade, and benefit the private sector, he said.

Family Ties

The Al Thani name doesn’t guarantee success, as certain branches of the family may be kept on the margins by the ruling branch, away from power and opportunity, to avoid coups or dissent. For those close to the Emir’s line the name is “a ticket to opportunity,” said Gray, as local and foreign businesses prefer working with a royal.

“The businesses that do best are those led by, or connected, to the key players, which can include royals, established merchant families, even some favored foreign firms and individuals” he said.

Al Thani, who is a distant relative of the current Emir, Tamim bin Hamad Al Thani, is one of the most prominent Qatari businessmen bearing the Al Thani name. Most of Qatar’s other diversified, family-owned businesses, such as Doha-based Alfardan Group and Darwish Holding, are owned by non-royals.

Building Boom

One of Al Faisal’s largest subsidiaries is Aamal, a Doha-based manufacturing and real estate group listed on the Qatar stock exchange that had 2.12 billion riyals ($582 million) in revenue in 2013. Al Thani controls 66 percent of Aamal directly and through Al Faisal, according to company documents.

Al Thani controls other commercial real estate properties outside of his interest in Aamal, including more than a dozen residential and office buildings and three hotels in Doha, according to Al Faisal’s website. He has eight more hotel properties under construction in the capital, part of a city-wide building boom ignited after it won the rights to host the 2022 FIFA World Cup.

The government plans to spend $45 billion -- about what Russia spent on the Sochi Winter Olympics -- over the next 15 years in a bid to boost its annual visitor count more than five-fold, according to a February report by the Qatar Tourism Authority.

The influx of tourists, many passing through Doha on Qatar Airways flights, lifted occupancy rates 6 percent in 2013, according to data compiled by TRI Hospitality Consulting.

Diversifying Abroad

Qatar’s transformation from a fishing and pearl-diving village to a skyscraper-packed metropolis is something Al Thani witnessed first-hand. Born in 1948, nine years after Qatar began exporting oil, Al Thani started his first business venture in 1964, a small auto-parts distributor called Gettco Trading.

At that time, he said, Qatar was still rural and isolated.

“When I started my business, communications were very limited,” Al Thani said in the e-mail. “We were only exposed to the outside world through traveling.”

As more oil revenue flowed into Qatar in the 1970s, Al Thani diversified to meet the needs of the country’s growing economy. He formed a construction-materials company, Linx Qatar, and expanded into paint supply, gas stations and car washes.

“Starting a business is not a challenge, but making a business successful is,” Al Thani said. He declined to comment on his net worth.

Al Thani has been diversifying abroad, acquiring a Four Seasons hotel in Cairo, a Grand Hyatt in Berlin and the Radisson Blu Aqua in Chicago. He paid $318 million in 2011 for the W hotel in London’s Leicester Square, and bought Miami’s St. Regis Bal Harbour Resort for $213 million in January.

“Our vision is to build a renowned portfolio of prominent hotels in terms of brand, location and architectural design,” he said. The recent non-Qatari acquisitions, he said, “have all these elements.”

-By Devon Pendleton