Real News‎ > ‎2014‎ > ‎May 2014‎ > ‎

24th May 2014

Singapore Economy 

S'pore inflation rises to 2.5%

Source: Straits Times

Pricier cars and a tight labour market drove consumer prices up 2.5 per cent in April, up from March's 1.2 per cent increase. While steeper car prices are likely to keep inflation up in the short term, domestic cost pressures from higher wages will remain the main source of inflation over the rest of the year, said the Monetary Authority of Singapore and Ministry of Trade and Industry.

Singapore Real Estate

Property developers missing in action

Source: Straits Times

A number of property developers seem to have fallen off the radar, with hardly any land bids or new projects in recent years. Some are longstanding market players but rising land prices and market cycles have led to fewer land acquisitions and projects. Other developers were dragged under by the financial crisis.

Skywoods condo in Dairy Farm sees slow sales

Source: Straits Times

The upcoming Skywoods condo in Dairy Farm Heights is having a hard time shifting units as it battles the slowing real estate market and tough competition from other properties in the area. Sales at the 99-year leasehold project being developed by TA Corporation, Hock Lian Seng Holdings, King Wan Corp and Far East Distillers have been lacklustre.

Sentosa Cove villas relaunched at a discount

 Developer Ximeng Land giving 5% discount for remaining 12 luxury villas on Pearl Island

Source: Business Times / Wealth

XIMENG Land, controlled by mainland China parties, is relaunching the balance 12 luxury villas on Pearl Island in Sentosa Cove at $2,185 psf on land area. The price is inclusive of a 5 per cent discount to the $2,300 psf list prices for the units. A year ago, the developer's asking price was $2,400 psf.

Absolute prices vary from about $14.3 million to $25.5 million per villa. Pearl Island is one of the five man-made islands in the upscale waterfront housing district.

"These are the last remaining brand-new luxury villas in the island developments in Cove, fully fitted and ready for occupation," said Steve Tay, associate director at Newsman Realty, which was last month appointed sole marketing agent for the villas.

Since 2010, Ximeng has sold seven of the project's 19 villas at prices ranging from $1,904 psf to $2,228 psf on land area. The buyers comprise Singaporeans, Indonesians and mainland Chinese. The seven units sold include two adjacent units bought by members of the Liu family that controls Ximeng Land. One was purchased for $17.1 million or $1,904 psf on land and the other, for $19.5 million or $1,906 psf. The highest absolute price achieved for the seven sold units was $27 million (translating to $2,162 psf), for a bungalow on 12,486 sq ft of land - the biggest of Pearl Island's 19 villas.

-By Kalpana Rashiwala

Real Estate Companies' Brief

Fall in JV contributions drags GLP's Q4 net

This despite rise in revenue from strong China business

Source: Business Times / Companies

A SHARP fall in contributions from jointly-controlled entities hit the bottom line of Global Logistic Properties (GLP) in the fiscal fourth quarter when group revenue actually rose by a fifth to US$150.4 million on the back of its strong China segment.

Revenue was helped by the "completion and stabilisation of development projects in China".

For the January-March final quarter, net profit fell 28.6 per cent to US$160 million, down from US$224 million a year ago.

-By Raphael Lim

Hong Leong-linked First Sponsor eyes S'pore listing

Source: Business Times / Companies

FIRST Sponsor Group Ltd, a real estate group whose controlling shareholders are Hong Leong Group Singapore and Tai Tak Group Singapore, is looking to raise up to $102.1 million, through an initial public offering (IPO) and a sale of shares to cornerstone investors.

In a preliminary prospectus lodged with the Monetary Authority of Singapore (MAS) yesterday, First Sponsor, whose focus is on residential and commercial properties in tier-two China cities, said it plans to make a share offer of 54.05 million shares at between $1.50 and $1.60 per share.

This includes 49.05 million placement shares for institutional investors and high net worth investors, and a public offer of five million shares.

-By Raphael Lim

Buyers snap up Panorama condo units

Source: Straits Times

Buyers snapped up scores of units at the relaunch of The Panorama condominium in Ang Mo Kio yesterday after the developer slashed prices by 12 per cent. The success of this relaunch, after a lacklustre initial launch in January, was down to getting the pricing right, analysts said.

Views, Reviews & Forum

Medical tourists flouting short-term rental rule

Source: Straits Times

Over the last few years, there have been reports of home owners purportedly leasing their properties to tourists, in violation of the six-month minimum subletting rule ("More renting out homes as 'hotels' "; April 29). These incidents appear to be facilitated through portals such as Airbnb and Roomorama.

Global Economy & Global Real Estate

Property glut? Yes Property crash? No

Source: Straits Times 

China's biggest homebuilding slump in at least four years is not enough to dissuade a majority of economists from predicting real estate will still contribute to growth this year. Property controls will be eased, they said in a Bloomberg News survey.

China’s Stocks Advance as Property Measure Jumps Most in

Source: Bloomberg / News

China’s stocks rose, sending a gauge of real-estate companies to the biggest gain in a month, on speculation the government is easing property curbs to prevent the economy from missing its growth target for this year.

China Vanke Co. and Poly Real Estate Group Co. advanced more than 3 percent, with the Shanghai property sub-index climbing 2.1 percent for the biggest gain since April 22. Greentown China Holdings Ltd. and China Overseas Land & Investment Ltd. (688) jumped more than 5 percent in Hong Kong.

The Shanghai Composite Index rose 0.7 percent to 2,034.57 at the close, while Hong Kong’s Hang Seng Index advanced 0.1 percent to 22,965.86. China has allowed cities to adjust home-buying curbs except for Beijing, Shanghai, Guangzhou and Shenzhen, the Southern Weekly reported yesterday, citing several unidentified people from the housing ministry. The China Securities Journal said today the government will remove restrictions on home purchases depending on market conditions.

“Although some fine-tuning policies have already been introduced by various cities, this would be the first time the market could expect a significant relaxation of the home purchase restrictions,” Toni Ho, an analyst at Bocom International Holdings Co., wrote in a report today.

The Hang Seng China Enterprises Index (HSCEI) gained 0.1 percent today, while the CSI 300 Index climbed 0.8 percent as software producers led a rally for technology shares. For the week, the Hang Seng Index jumped 1.1 percent, while the Shanghai gauge added 0.4 percent.

After four years of government restrictions to cool the housing market, sliding home sales and property construction have become a drag on the economy, which recorded its slowest growth in six quarters in the first three months of the year.

Economic Slowdown

Industrial-output and investment growth unexpectedly decelerated last month, while new building construction fell 22 percent in the first four months of the year. New-home prices rose in April in the fewest cities in a year and a half as developers offered discounts.

UBS AG and Bocom International Holdings Co. said this month that a weaker property market poses the biggest risk to stocks. UBS has estimated the real-estate industry accounts for more than a quarter of final demand in the economy when including property-generated needs for goods such as electric machinery and instruments, chemicals and metals.

China Vanke gained 3.3 percent in Shenzhen while Poly Real Estate advanced 4.3 percent in Shanghai. China Overseas Land jumped 5.5 percent in Hong Kong. Sunac China Holdings Ltd., a homebuilder partly owned by buyout firm Bain Capital LLC, surged 8.2 percent in Hong Kong after agreeing to pay HK$6.3 billion ($812 million) for a 24.3 percent stake in Greentown. Greentown surged 6.6 percent.

Survey Results

The Ministry of Housing and Urban-Rural Development has allowed most Chinese cities to independently adjust curbs, the Southern Weekly reported. Two phone calls to the news department of the housing ministry went unanswered. Hangzhou, a city near Shanghai will limit home price cuts, the Qianjiang Evening News reported, citing an unidentified person with a developer.

The biggest homebuilding slump in at least four years isn’t enough to dissuade a majority of economists from predicting real estate will still contribute to 2014 growth. Property controls will be eased, they said in a Bloomberg survey.

While 12 of 18 economists say China has some national oversupply of housing, only seven say the market is in a bubble state countrywide, according to the survey conducted from May 15 to May 20. Half see bubbles in some cities, and a majority says the loosening of restrictions on home purchases and loans will be limited to a regional level.

BYD Falls

Central bank Governor Zhou Xiaochuan said China may have housing bubbles in some cities, an issue that’s difficult to resolve with a single nationwide policy. The economy “can still manage something around a 7.5 percent growth rate,” Zhou said in an interview in Rwanda yesterday, referring to the nation’s expansion target for 2014.

BYD Co. (1211), the Chinese automaker partially owned by Warren Buffett’s Berkshire Hathaway Inc., slid 1.8 percent before shares were suspended from trading. The company is offering to sell $400 million in new stock, according to a term sheet obtained by Bloomberg News.

-By Weiyi Lim

Zell Named Chairman of CommonWealth REIT’s New Board

Source: Bloomberg / Luxury

CommonWealth REIT (CWH) named billionaire Sam Zell chairman of its newly elected board, marking the completion of a 15-month effort by Corvex Management LP and Related Cos. to overthrow management and install new trustees.

The seven-member board also chose David Helfand, co-president of Zell’s Equity Group International, to become chief executive officer, CommonWealth said in a statement today. The board accepted the resignations of the real estate investment trust’s previous executive officers.

“With our team in place, we can get to work executing on our goal to create long-term value for our shareholders,” Zell said in the statement.

Office landlord CommonWealth has been operating without a board since March, after shareholders voted to oust trustees led by Barry Portnoy and his son Adam, who had been president. Corvex and Related, which together hold 8.8 percent of the REIT’s stock, claimed that the Portnoys’ ownership of a management company that ran the firm resulted in conflicts of interest and underperformance.

The board was elected by about 85 percent of the shares outstanding, Corvex and Related, both based in New York, said in a separate statement today. Zell and Helfand will be joined on the board by Peter Linneman, James Corl, Edward Glickman, Jim Lozier and Kenneth Shea.

“Today is a historic milestone for CommonWealth and the REIT industry, and a tremendous victory for shareholder rights,” Corvex founder Keith Meister and Related CEO Jeff Blau said in their statement. “We remain confident that the highly qualified and experienced board elected today will work expeditiously and successfully to usher in a new era of accountability.”

Headquarters Moving

The new board is considering changing the company’s name and ticker symbol, said Allen Samuel, a CommonWealth spokesman. The corporate headquarters will move to Chicago, Zell’s base of operations, from Newton, Massachusetts, Samuel said.

The dissident group had argued the Portnoys had been more concerned with collecting fees for their firm, REIT Management & Research LLC, which managed Commonwealth, than operating the company for the benefit of all stockholders, because the father and son didn’t own many shares themselves.

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

‘It’s Early’

RMR will continue to manage CommonWealth’s properties for now, Samuel said. Property management will be brought gradually in-house under the new corporate structure, he said. Samuel said he couldn’t say how long that would take.

“We’re just kicking off a transition,” he said in a telephone interview. “It’s early in the process.”

Zell, 72, is chairman of public companies including Chicago-based Equity Residential (EQR), the largest U.S. apartment REIT, and Equity Lifestyle Properties Inc., an owner of manufactured-home communities. The billionaire, nicknamed “the grave dancer” for buying distressed properties left for dead in the 1990s, sold his Equity Office Properties Trust in 2007 for $39 billion as the commercial real estate market was peaking.

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

The CommonWealth “slate appears well-qualified to oversee this REIT, given Zell’s long and successful experience in creating and managing REITs,” analysts from Institutional Shareholder Services wrote in a May 12 report. The candidates “include some luminary names in real estate investing.”

-By David M. Levitt

U.S. Home Sales Come Out of Deep Freeze

Source: Bloomberg / Luxury

Sales of new U.S. homes climbed in April for the first time in three months, allaying concerns of an extended setback in the residential real-estate market.

The 6.4 percent increase to a 433,000 annualized rate was the biggest in six months and followed a 6.9 percent March decline, Commerce Department data showed today in Washington. The advance was spurred by a surge in demand in the Midwest.

Last month’s gain brought the sales pace in line with the first-quarter average, indicating housing’s contribution to economic growth will be muted. An increase in the number of available homes, slower price gains and easier lending standards would help encourage prospective buyers to take advantage of falling mortgage rates.

“The deep freeze is over, and I think we can expect new home sales to continue to rise,” said David Berson, chief economist at Nationwide Insurance in Columbus, Ohio, who projected a 432,000 rate of April sales. “It’s better; it’s still not strong.”

Figures yesterday from the National Association of Realtors painted a similar picture of the housing market. Sales of previously owned homes climbed 1.3 percent, helped in part by an increase in the supply of properties.

New-home sales account for about 7 percent of the residential market and are tabulated when contracts are signed, making them a timelier barometer than transactions on existing homes, which are based on closings.

Lacking Momentum

“You’re not seeing renewed upward momentum yet,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, who projected an April sales rate of 435,000. Still, “I don’t think there’s a downtrend here of any consequence.”

Stocks rose after the report, with the Standard & Poor’s 500 Index closing above 1,900 for the first time. The S&P 500 increased 0.4 percent to 1,900.53 at the close in New York. The S&P Supercomposite Homebuilding Index advanced 2.7 percent.

Elsewhere, German business confidence declined more than economists forecast amid signs that growth in the euro area’s largest economy will slow this quarter.

The median forecast of economists surveyed by Bloomberg called for a 425,000 annual rate of U.S. home sales. Estimates ranged from 395,000 to 460,000. Sales in March ran at a 407,000 pace, stronger than the previously reported 384,000.

The increase in new-home sales last month was led by a 47.4 percent surge in the Midwest to an 84,000 annual rate, the fastest since November 2007. Purchases also climbed 3.1 percent in the South. They fell in the Northeast by the most since October 2012 and were unchanged in the West.

Home Prices

The regional data were reflected in the price figures. The median selling price in the U.S. fell 1.3 percent from a year earlier to $275,800. Homes are typically more expensive in the Northeast, where sales declined, and in the West.

There were 192,000 new houses on the market at the end of April, representing 5.3 months of supply at the current sales pace after 5.6 months in March.

Housing began to cool in the middle of 2013, with residential investment becoming a drag on the economy during the last two quarters, its worst six-month performance since the first half of 2009.

The slowdown hasn’t gone unnoticed at the Federal Reserve. Policy makers cited a potential “persistent slowdown” in housing as a downside risk for growth, according to minutes of the April 29-30 policy meeting.

“We’re still looking for a modest recovery in housing,” said Anika Khan, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. The April rebound helps reduce “fears that we have an overall stalled housing market.”

Builder Sentiment

Builder optimism has eased as well, reflecting still-tight credit conditions and limited availability of lots. Confidence dropped in May to the lowest level of the year, according to a gauge of builder sentiment from the National Association of Home Builders/Wells Fargo.

“I think that through the rest of the year, we’ll see an improvement, albeit maybe a little bit slow, but I do think that we’re on the right track,” Larry Nicholson, president and chief executive officer at Westlake Village, California-based Ryland Group Inc., said during a May 14 presentation.

Some relief may be in store for potential buyers as borrowing costs decline. The average rate on a 30-year, fixed mortgage dropped to 4.14 percent in the week ended yesterday, the lowest level since October, according to Freddie Mac in McLean, Virginia.

Builders are gradually adding to the supply of single-family homes. A report last week from the Commerce Department showed construction starts of one-family properties increased for a third straight month, to 649,000 at an annual rate in April.

Home appliance maker Whirlpool Corp. in Benton Harbor, Michigan, is upbeat about demand.

“We are, I would say, still in the early stages of a rebound in the housing market,” Chief Financial Officer Larry Venturelli said at a May 14 homebuilding conference. Underlying demand in the housing markets “continue to be very strong.”

-By Michelle Jamrisko

Boris’s London Housing Push Falling Short, Developers Say

Source: Bloomberg / Luxury

London Mayor Boris Johnson’s plans to alleviate the city’s worsening housing shortage don’t go far enough and he’ll have to push boroughs harder to allow denser construction and make more land available, according to a U.K. homebuilders group.

The authority must be “more proactive in seeking to release land with development potential,” the group of seven developers including Barratt Developments Plc, Berkeley Group Holdings Plc and Taylor Wimpey Plc (TW/) said in comments filed to the city on the London Plan, which will guide development for the next 20 years.

Johnson plans to increase high-density residential development and loosen planning restrictions in some districts in an attempt to get 42,000 homes built annually, almost double last year’s pace. That would still be 7,000 short of what’s needed to keep up with population growth in the city, according to a report last year by the Greater London Authority.

Restrictions on high-rise buildings, a rapidly increasing population, soaring home values and the protection of the undeveloped “green belt” around the city have contributed to London’s housing shortage. The city’s population is expected to grow by about 1 million people to 9.2 million in the decade through 2021.

Pent-up Demand

Pent-up demand from years of building fewer homes than needed is adding to the pressure brought by a growing population, the group said. The London authority must press boroughs to approve designs for larger-scale higher-density housing than exists currently, according to the filing dated April 10 and made public this week. Representatives for Taylor Wimpey and Barratt weren’t immediately available for comment. No one from the mayor’s office was available for comment.

“It is now time to take stock and comprehensively review” the restricted boundaries, and make available sites that don’t serve the purposes of the green belt, homebuilder Crest Nicholson Holdings Plc (CRST) said in a separate filing.

High-density housing should be encouraged in London’s outer boroughs with good public transport, according to a filing by DP9 Ltd. on behalf of Canary Wharf Group Plc. The developer of east London’s financial district said 49,000 homes a year should be the minimum target for the U.K. capital. There’s also room for at least 30,000 new homes on the Isle of Dogs, which includes Canary Wharf, compared with a target of 10,000 in the proposed plan, the company said.

Canary Wharf also supports an increase in the minimum number of homes earmarked for the Waterloo district to 2,500 from 1,900. The company owns a land plot there with Qatari Diar Real Estate Investment Co. No one from Canary Wharf or Crest Nicholson was immediately available for comment.

“The mayor has set the most ambitious house building targets in City Hall’s history,” Jonathan Weisgard, a spokesman for Johnson, said in an e-mail. “In the last year, more new homes were started in London than in almost a decade.”

-By Neil Callanan and Patrick Gower

Sunac to Purchase 24% Stake in Greentown for $812 Million

Source: Bloomberg / News

Sunac China Holdings Ltd. (1918), a homebuilder partly owned by buyout firm Bain Capital LLC, agreed to pay HK$6.3 billion ($812 million) for a 24.3 percent stake in Chinese developer Greentown China Holdings Ltd.

Tianjin, China-based Sunac will buy 524.8 million shares at HK$12 each from Greentown Chairman Song Weiping, Chief Executive Officer Shou Bainian and shareholder Xia Yibo, Sunac said in a filing yesterday to the Hong Kong Stock Exchange. Xia is Song’s wife, Greentown said in a separate statement. The cost of the shares was 56 percent higher than the last closing price.

Greentown, the biggest developer in eastern China’s Zhejiang province, in 2012 sold stakes in nine real estate projects to Sunac for 3.37 billion yuan ($540 million) to repay loans and boost working capital. The two companies jointly bought a property project in Shanghai for 5.68 billion yuan about a year ago from Arch Capital Success Ltd.

“The two companies have a positive track record of cooperation,” Fitch Ratings analysts led by Andy Chang wrote in a report. The deal won’t hurt Sunac’s credit profile because of “sufficient liquidity,” they said.

Greentown shares rose 6.6 percent to HK$8.20 in Hong Kong at the close of trading, the biggest gain since April 8. Sunac shares jumped 8.2 percent to HK$3.81, the largest increase since March 26.

Largest Shareholders

Concerns on the property market is one of the important reasons for the stake sales, Greentown Chairman Song told reporters in Hangzhou today.

Sunac will hold the same size stake as Wharf Holdings Ltd. (4), making both of them the largest shareholders of Greentown, Barclays Plc’s Hong Kong-based analysts, led by Jianping Chen, wrote in a report today. The stakes held by Song and Shou will be reduced to 10.5 percent and 8.1 percent, respectively, the analysts said.

Greentown in 2012 sold HK$5.1 billion of shares and convertible securities to Wharf, one of the biggest landlords in Hong Kong.

Greentown said it will appoint Sunac Chairman and Chief Executive Officer Sun Hongbin as co-chairman and a non-executive director and Sunac Chief Financial Officer Huang Shuping as executive general manager and an executive director.

Song will become co-chairman on completion of the deal and then honorary chairman on March 1, 2015, when Sun will become chairman, Greentown (3900) said.

-By Bloomberg News

What China Property Crash? Economists See Growth Bump

Source: Bloomberg / News

China’s biggest homebuilding slump in at least four years isn’t enough to dissuade a majority of economists from predicting real estate will still contribute to 2014 growth. Property controls will be eased, they said in a Bloomberg News survey.

While 12 of 18 economists say China has some national oversupply of housing, only seven say the market is in a bubble state countrywide, according to the survey conducted from May 15 to May 20. Half see bubbles in some cities, and a majority says the loosening of restrictions on home purchases and loans will be limited to a regional level.

New construction has fallen 22 percent and sales have slumped 7.8 percent this year, testing the government’s four-year commitment to curbs targeted at making homes more affordable and its reluctance to enact broader economic stimulus. The slowdown’s depth will have implications for everything from demand for Australian iron ore to land sales that help local governments repay their $3 trillion of debt.

“China won’t fully lose the engine, but the engine will roar less than in the past and will be a more moderate supporter for growth,” said Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist in Hong Kong, who formerly worked at the World Bank.

Central bank Governor Zhou Xiaochuan said China may have housing bubbles in some cities, an issue that’s difficult to resolve with a single nationwide policy. The economy “can still manage something around a 7.5 percent growth rate,” Zhou said in an interview in Rwanda yesterday, referring to the nation’s expansion target for 2014.

Property Stocks

Chinese real-estate companies gained today on speculation the government will ease property curbs. An index of developers listed in Shanghai rose 2.1 percent at the close, the biggest advance since April 22. Poly Real Estate Group Co. surged 4.3 percent.

A manufacturing gauge released yesterday signaled the economy is stabilizing after the government announced tax breaks and faster railway spending to support growth. The preliminary purchasing managers’ index for May from HSBC Holdings Plc and Markit Economics unexpectedly rose to a five-month high of 49.7, approaching the expansion-contraction dividing line of 50.

UBS AG has estimated the real-estate industry accounts for more than a quarter of final demand in the economy when including property-generated needs for goods including electric machinery and instruments, chemicals and metals.

‘Doom Mongers’

Five of 17 respondents said the property market will make a net contribution to growth this year of 1 to 2 percentage points, while four said it would add less than 1 point and one analyst projected more than 2 points. Four people said there would be a drag of 1 to 2 points and two projected a subtraction of less than 1 point.

Next year, 10 economists see a net contribution to growth, while five expect a drag.

The nation’s housing market won’t crash like that of the U.S., Japan and Hong Kong, the official Xinhua News Agency said in an article published May 21 that called people forecasting such an outcome “doom mongers.” China will have strong housing demand because of continuing urbanization, speculative buying is less prevalent than it was in Hong Kong and mortgage debt as a proportion of GDP is lower than it was in the U.S., Xinhua said.

“China’s urbanization process is far from being over,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing, who formerly worked for the World Bank. “The housing market is not seeing any structural turning point but rather suffering from a cyclical downturn, and the market can be brought back to life when policies become appropriate.”

New Buildings

That the property market is undergoing a slowdown is of little dispute. Floor space of new residential buildings under construction fell 23.8 percent last month from a year earlier, the steepest drop in figures going back to April 2010, according to data compiled by Bloomberg. April home prices rose in the fewest cities in 1 1/2 years, government statistics showed on May 18.

While a majority of respondents said China has an oversupply of housing, three said the current national supply is in balance with demand, even if some cities are facing issues, while two said the current supply is too small to meet demand.

Not everyone is optimistic. Moody’s Investors Service this week revised its credit outlook for Chinese developers to negative from stable. Ren Zeping, a researcher at the State Council’s Development Research Center, said economic growth may slow to about 5 percent in two to three years, the state-run Shanghai Securities News reported yesterday.

‘Biggest’ Risk

“Real-estate investment is the biggest macro risk,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong, who sees an investment slump, including the effects on related industries, dragging growth down about 0.5 percentage point in 2014. “The government should do something to contain the downside risk. It’s probably time to remove the home purchase restrictions policy in most cities.”

At the same time, the probability is low that the government will ease curbs at the national level, Zhu said.

The world’s second-largest economy grew 7.4 percent in the first quarter from a year earlier, slowing from a 7.7 percent pace in the previous period, according to government figures. The median projection of economists for full-year growth of 7.3 percent would mark the weakest pace since 1990.

There are signs that the government is taking action to limit the real estate slump. The central bank this month called on the biggest lenders to accelerate the granting of home mortgages, while Southern Weekly reported yesterday that the housing ministry has allowed most cities to adjust home-buying curbs as they see fit.

“The government will be quite keen to avoid a very large downturn,” RBS’s Kuijs said. While real estate amplifies downward pressures on the economy, “it doesn’t have to be the end of the world,” he said.

-By Bloomberg News

Cheung Kong Lures H.K. Buyers With Discount as Supply Rises

Source: Bloomberg / Luxury

Cheung Kong Holdings Ltd. (1), the Hong Kong builder controlled by Asia’s richest man, is offering as much as 16 percent discount at its latest residential project in the city as developers accelerate sales this year.

City Point, the company’s biggest Hong Kong housing project in two years, will sell 350 of a total 1,717 units in the first batch, the company said yesterday. After discounts, the flats in the estate developed jointly with Nan Fung Development Ltd. in the Tsuen Wan district, range from HK$7,634 ($984) per square foot to HK$12,071 per square foot.

Developers including Cheung Kong and Sun Hung Kai Properties Ltd. are competing for buyers in the world’s most-expensive housing market as the government’s curbing measures cooled prices and transaction volume. Prices, which Barclays Plc forecasts will drop at least 30 percent by 2016, are also under pressure from increasing supply in coming years.

“Cheung Kong is sitting on the most available-for-sale units so its strategy is very important for the market,” said Alfred Lau, an analyst at Bocom International Holdings Co. in Hong Kong. The discount at City Point “is not a severe price cut, so it seems they’re not going for volume, which puts less pressure on the pricing.”

The shares fell 0.8 percent to HK$133.50 at the close of trading in Hong Kong. The benchmark Hang Seng Index advanced 0.1 percent.

Sales Target

Cheung Kong will sell 800 units at City Point this year, Executive Director Justin Chiu told reporters yesterday in Hong Kong, adding that the company is confident it can reach its 2014 sales target.

“Our flats are at a significant discount to the market and priced quite competitively,” Chiu said, adding that the first batch at City Point is more than 10 percent cheaper than recent transactions at neighboring estates.

Sales at City Point may also benefit from an adjustment in the double stamp duty, which extends the time local buyers have to sell their existing homes to qualify for a refund of the additional tax. The tweak is a technical adjustment and doesn’t signify relaxation of property curbs, K.C. Chan, Hong Kong’s secretary for financial services and treasury, said last week.

The government may consider adjusting some of the property curbs after the supply and demand in the real estate market returns to normal, Hong Kong Chief Executive Leung Chun-ying told lawmakers yesterday.

Developers may release 15,000 units for sale this year, from 9,753 units last year, an 18-year low, according to realtor Centaline Property Agency Ltd.

Cheung Kong Chairman Li Ka-shing has a net worth of $32.5 billion and is ranked the richest in Asia and 17th globally, according to the Bloomberg Billionaires Index.

-By Michelle Yun

Tiger Woods Course Design Debut Drives Mexico Home Prices

Source: Bloomberg / Luxury

Tiger Woods is turning the Mexican desert in Los Cabos into grass fairways. Americans with home-equity loans are seeing green there too.

Woods, the winner of 14 majors, will open El Cardonal this year, making his debut as a designer of a completed course. The 71-par layout near the southern tip of the Baja Peninsula is part of the coastal Diamante Cabo San Lucas resort, where villas come with palapa bars approachable by infinity pools.

The golf courses and beaches of Los Cabos are luring Americans who are able to get home-equity loans to buy in Mexico as U.S. housing prices rise. Buyers, mostly from California, are purchasing condominiums, villas and estates ranging from $200,000 to more than $7 million following a plunge in prices, according to Deloitte & Touche LLP.

“What I really wanted to do was take advantage of the market,” said Joy Gipson of Lake County, California, who this year financed a 1,600 square-foot Los Cabos condo with a home-equity loan. “Real estate is starting to revive and I didn’t want to get priced out again.”

Visitors to Los Cabos have the rugged Pacific Ocean to the west and the calmer waves of the Sea of Cortez to the east. The coastal region has long drawn scuba divers. It has such a large diversity of fish, sharks and ocean habitats that the late deep-sea explorer Jacques Cousteau called it the “world’s largest aquarium.”

In the 20-mile-long coastal corridor connecting the towns of Cabo San Lucas and San Jose del Cabo, multimillion dollar homes sit aside $500-a-night hotels. With art galleries and nightclubs built around a 380-slip marina for 200-foot yachts, Cabo San Lucas is the contemporary companion to the colonial architecture of San Jose del Cabo.

Home Equity

The 31 percent gain in U.S. home prices since January 2012 has given property owners more equity. That’s made it easier for them to get home equity lines of credit, or Helocs, for as much as $500,000.

To qualify, borrowers usually need 20 percent equity in a property and a credit score of at least 720 on a scale from 300 to 850, said Keith Gumbinger, vice president of, a mortgage data firm in Riverdale, New Jersey.

American buyers in Mexico are benefiting from the decline in the costs of credit lines, which have adjustable rates tied to the prime rate. The average rate for a $100,000 Heloc was 4.55 percent on May 21, down from 5.8 percent a year earlier, according to The average rate for a 30-year fixed mortgage was 4.17 percent.

Mexican Market

“I leveraged the equity in my house and spent my savings,” the homebuyer Gipson said. “I did a lot of research into financing. You can finance homes in Mexico but it’s very expensive.”

Wells Fargo & Co. (WFC), the largest U.S. lender, is offering a $100,000 Heloc at 5.13 percent in Los Angeles and San Diego, with a minimum credit score of 700, according to Bankrate data.

U.S. banks held $596.2 billion of Helocs in the fourth quarter, according to the Federal Reserve. That’s down from the $894.7 billion peak in late 2008, when banks provided credit lines to owners with no home equity, contributing to a wave of defaults.

While resort areas such as Puerto Vallarta and Los Cabos are getting a boost from international buyers, the home market in Mexico has struggled amid weak economic growth and shifts in government policy.

Prices Plunge

President Enrique Pena Nieto’s government curbed subsidies for commuter-town developments, which halted home-construction projects and spurred a housing downturn. Mexico home prices rose 5 percent in the first quarter of this year from a year earlier, according to data from Sociedad Hipotecaria Federal, a government housing bank. That’s the best three month gain in at least seven quarters.

Los Cabos real estate lost 40 percent of its value in the global financial crisis, according to Bruce Greenberg, director of real estate valuation services for Deloitte in Mexico City. Prices have risen about 5 percent a year since the recovery started in 2012, said Greenberg, who has valued more than 1,000 Los Cabos homes.

“Mexico shadows what happened in the United States,” Greenberg said. “The recession of 2007 and 2008 rolled in and that’s when the bottom fell out.”

El Cardonal

Real estate entrepreneur Kenneth Jowdy, 49, bought the property on which Diamante Cabo San Lucas sits in 2006. The resort comprises 1,500 acres of coastline and sand dunes and includes a golf course designed by PGA Champion Davis Love III, a lagoon for water sports and an equestrian center. Love’s Dunes course, which opened in 2009, was ranked no. 1 in Mexico by Golf Digest in 2012.

Jowdy started selling home lots in 2010, and since then, the average sale price has increased about 10 percent annually, he said. Oceanfront lots from half to three-quarters of an acre sell for around $2 million, he said.

At El Cardonal, which features views of the Pacific Ocean, workers were laying grass on the fairways in early May, Woods said on his blog. El Cardonal’s design, characterized by holes that require strategically placed shots with several playing options, was influenced by the old-style courses of Southern California that Woods played growing up, he said.

“There are going to be different ways to play every hole,” Woods said on the course’s website. “Angles of approach are going to be very important and will dictate the type of shots you should consider. I love this kind of golf.”

Golf Villas

Golf villas at Diamante have four bedrooms, five bathrooms and a large living room that extends onto the terrace. There’s even a garage for a golf cart. The properties are built around an open courtyard in the style of centuries-old Mexican haciendas.

“There are other projects that were basically mothballed after 2008,” Jowdy said from Cabo San Lucas. “Now you drive by them and you see equipment out there moving dirt and construction started.”

U.S. buyers avoid getting financing in Mexico because it’s too costly, said Julie Kershner, a broker at Sotheby’s International Realty in Los Cabos. Americans buying in Mexico should expect to pay 14 percent to 16 percent for mortgages.

While mortgages are set to 30-year amortization schedules, they often must be paid in full within eight years, said Ryland Apsey, a mortgage broker with Mexico Capital Mortgage in San Jose del Cabo. He said buyers frequently must make a 35 percent down payment.

San Diego South

International buyers who obtain residency in Mexico typically get a 10 percent fixed-rate mortgage for as long as 20 years, according to Apsey.

Gipson, 57, a marketer for the public transit program in Santa Rosa, California, bought her two-bedroom, two-bathroom condo in Los Cabos as a place to possibly retire. The $193,000 home is a six-minute walk to the beach.

Gipson said the addition of more elite golf courses in Los Cabos will make it even more appealing to Americans.

“It’s going to turn into San Diego South,” she said.

-By Jonathan Levin and Brendan Case

Berkeley Seeks Johnson’s Help to Build 2,000 Extra London Homes

Source: Bloomberg / Luxury

Berkeley Group Holdings Plc (BKG) is weighing the development of 2,000 more homes than originally planned at a site less than 5 miles (8 kilometers) south of London City Airport.

Berkeley now plans to build almost 6,000 homes on a plot of land at Kidbrooke that included the Ferrier Estate, a former government-housing project, the company said in a filing to London Mayor Boris Johnson. The homebuilder, the largest developer of mixed-use buildings in London, will seek approval for the extra homes “in the near future,” according to the filing by planning consultants Barton Willmore LLP on behalf of Berkeley. No one at Berkeley was immediately available for comment.

Johnson has said he wants to increase the number of homes built in London as values soar and the city’s population is estimated to grow by about a million people from 2011 through 2021. Berkeley says it can develop more homes at the Kidbrooke Village project if Johnson increases the minimum number of new homes allowed in districts earmarked for housing construction.

Berkeley is working with the borough of Greenwich and the Greater London Authority on the Kidbrooke project, where a two-bedroom apartment is priced from 407,500 pounds ($687,500), according to the Cobham, England-based homebuilder’s website. The developer has built about 830 homes there since 2009, according to the filing dated April 10 and made public this week.

-By Neil Callanan