Real News‎ > ‎2014‎ > ‎November 2014‎ > ‎

13th November 2014

Singapore Economy

S'pore 'must get creative' on housing, income inequality 

Ho Kwon Ping offers radical ideas on challenges facing economy

Source: Straits Times / Top of The News

HOUSING affordability and income inequality are two challenges facing Singapore's economy in the next 50 years, businessman Ho Kwon Ping said yesterday.

In a lecture that examined how the nation's economic strategy would need to evolve in the coming decades, Mr Ho offered some radical solutions for these bread- and-butter issues that have become political hot potatoes.

To keep home prices within the reach of Singaporeans, he proposed setting "sale price caps" for all new homes and doing away with the distinction between public and private housing.

The price caps would be decided by a redefined Housing Board, which would have given up its role as a developer and become a "national housing price regulator", said Mr Ho, in the second of five Institute of Policy Studies- Nathan lectures that he is giving on Singapore's public policy.

After setting the sale prices for homes on a land parcel, the HDB would auction the plot to private developers to build the homes.

This move would ensure housing affordability by allowing home prices to be directly pegged to the economy's health and income growth, said Mr Ho, who is also executive chairman of hospitality group Banyan Tree Holdings.

"We already have price regulation through HDB unilaterally setting the price of entry-level flats," he noted.

Extending this to private homes would improve the current system, in which the prices of public housing - where 85 per cent of Singaporeans live - are influenced by private home prices which, in turn, are determined to some extent by foreign demand, he said.

Mr Ho's proposal drew several questions from the 250 people at last night's lecture, with some questioning how it would dovetail with housing subsidies and whether the proposal was similar to the now-defunct Design, Build and Sell Scheme (DBSS). Mr Ho responded that the subsidies would be built into the HDB's price caps, and the proposal differed from DBSS as the HDB would not be selling the flats itself.

As for tackling income inequality, the erstwhile journalist and dissident had two proposals.

One was to give graduates of vocational and technical schools more industry experience and apprenticeships so that they can command similar starting salaries to those of university graduates.

The other was to set up a "more innovative immigration programme" to raise the quality of foreign workers here, many of whom are cheap and unskilled and depress salaries at the low end.

This could be done by converting the current "punitive" foreign worker levy into deferred savings, which can be withdrawn by the worker when he leaves Singapore.

This Central Provident Fund- like savings account would raise foreign workers' overall pay and attract higher-skilled talent, Mr Ho said. It would also help ensure good behaviour among these workers while they are in Singapore.

"The two-year 'use and discard' approach to foreign workers, besides being less than humane, is just simply bad economics," he added. It would be "far more productive" to invest in training foreign workers, giving them the incentive of a longer work residency here and top-ups to their savings accounts.

Such creative solutions to Singapore's land and labour issues, as well as to the problem of more competition from other global cities, will be needed as the nation deals with the biggest "known unknown" in the next 50 years: disruptive technological change, said Mr Ho.

His lecture yesterday, held at the National University of Singapore, followed his first talk last month on politics and governance in Singapore in the next 50 years.

He will give three more lectures - on demography and family, society and identity, and arts, culture and media - in his capacity as the first S R Nathan Fellow.

-By Fiona Chan, Senior Economics Correspondent

HDB must evolve from current role: Ho Kwon Ping

In his second lecture under the IPS-Nathan series, the Executive Chairman of Banyan Tree Holdings said HDB should focus on a new dual role - as a master land developer and regulator of housing prices.

Source: Channel News Asia / Singapore

SINGAPORE: As Singapore looks ahead to the next 50 years, one key area that needs looking into is the allocation of scarce land, said Mr Ho Kwon Ping. 

Mr Ho, the Executive Chairman of Banyan Tree Holdings, is an S R Nathan Fellow for the Study of Singapore. He gave his second lecture on Wednesday (Nov 12) under the IPS-Nathan series organised by the Institute of Policy Studies at the National University of Singapore.

The Housing and Development Board (HDB) needs to evolve from its current role as a housing developer, said Mr Ho. Over the next few decades, it should focus on a new dual role - as a master land developer and regulator of housing prices.

This means setting sale-price ranges for land parcels, which are in turn auctioned off to private developers. Mr Ho says the competition will ensure design and quality, but within price ranges set by HDB.

“The competition by private developers on detailed design, quality, features and so forth, will ensure market forces dictate, but within presidential price ranges set by HDB. Not price ranges for land, but price ranges for the final product," he said. 

"If we did that, all housing developments will become private. There will be a single master land developer selling parcels to private developers. There will be no more private versus public divide. Then HDB estates will be real towns, with housing of different price ranges, so as to erode the social distinctions that we still have and should not have in the next 50 years."


Mr Ho also cited other areas that must adapt to change, in order to remain relevant for the next half-century.

To remain competitive as the city-state's geographic location becomes less strategic, Singapore must create eco-systems of business activity which are so elaborately inter-related that they cannot be reconstructed by competitors, he said. 

Meanwhile, to address current concerns relating to foreign labour, Mr Ho suggested innovative immigration programmes, such as converting the foreign worker levy into a deferred savings account, to be withdrawn upon the worker's permanent repatriation so as to ensure good behaviour while in Singapore.

- CNA/xy

Singapore Real Estate

Rents squeezed by new demand-supply scenarios

Source: Business Times / Real Estate

RENTALS for private condos/apartments as well as HDB flats continued to come under pressure in October, latest SRX flash estimates show.

Market watchers blame this on the tightened inflow of foreign talent crimping leasing demand on the one hand and a ramp-up in private home completions. Moreover, HDB upgraders are choosing to put their flats up for rent after they have moved into their new private condos given current weak buying demand for HDB resale flats due to the 30 per cent mortgage service ratio cap.

This scenario is expected to continue in the near future, with more than 20,000 private homes forecast to be completed for each of the next two years - mostly in the suburbs, note industry players. The nearly 18,000 private homes estimated for completion this year reflect a substantial increase from 13,150 units last year and 10,329 units in 2012.

Flash estimates for October 2014 released on Wednesday show that since December last year, SRX's overall rental index for non-landed private homes has eased 3.9 per cent, a bigger drop compared with the 2.5 per cent fall for the whole of last year.

In the suburbs or Outside Central Region (OCR), the rent drop so far this year has been 5.5 per cent, more than double the 2.5 per cent decline last year.

ERA Realty's key executive officer Eugene Lim noted that almost 60 per cent of the 18,000 private homes expected to be completed this year are in surburban areas.

Agreeing, R'ST Research director Ong Kah Seng added: "Expats, especially those from Western countries, have not massively decentralised to rent suburban condos. A typical mass-market project has at least 300 units and is crowded on weekends. These expats prefer city-fringe or smallish developments that offer a quieter environment; so tenant demand for suburban condos tends to be mainly from Asian professionals who are cost savvy and open to even renting rooms in a HDB flat."

Going by SRX's flash estimates, the rent deterioration has been even more pronounced in Core Central Region (CCR), the so-called high end segment; so far this year, the subindex for the region has shrunk 4.8 per cent - contrasting with an increase of 1.3 per cent in 2013.

In the city fringe, or Rest of Central Region (RCR), SRX's October 2014 flash estimate was 2.8 per cent lower than December 2013. Last year the subindex slipped 3.8 per cent.

For HDB rents, SRX's flash estimate for October was 1.7 per cent below last December. Full year 2013, the index declined 2 per cent.

R'ST Research's Mr Ong estimates that HDB rents will contract by up to 4 per cent for the whole of this year and weaken further by as much as 8 per cent in 2015. "Rents of HDB flats will better match tenants' affordability by the end of 2015," he argued.

For private condo and apartment rents, Mr Ong estimates a full-year 2014 drop of around 7 per cent, to be followed by a further decline of up to 10 per cent next year. "The fall will be most pronounced in Core Central Region as companies are cutting back on housing allowances. For Outside Central Region, the drop will be due to increased completions of sububurban condos," he said.

Nicholas Mak, executive director at SLP International, argues that the OCR may face the greatest downward pressure on rents given that this is the segment with the biggest private home completions over the next few years. On the whole, notes Mr Mak, "Without a substantial increase in the population of foreigners boosting leasing demand in both the private and HDB housing markets, rents (in the two segments) are likely to continue to slip gradually in 2015".

ERA's Mr Lim said that competition for tenants among suburban private property owners who are lowering their rents for family-sized units to S$2,500-3,500 a month are drawing tenants away from the HDB rental market.

While he expects this trend to continue given that the bulk of newly completed private homes are in suburban locations, Mr Lim reckons that the "HDB rental market will continue to have firm support from tenants with monthly rental budgets of S$2,500 or lower".

For October itself, the SRX overall non-landed private home rental index dipped 0.9 per cent compared to September, marking the ninth consecutive monthly fall. The October flash estimate reflects a year-on-year contraction of 5.3 per cent.

Month-on-month, the subindices for CCR, RCR and OCR slipped 0.7 per cent, 1.1 per cent and 1.5 per cent respectively.

Leasing deals were entered into for an estimated 3,208 non-landed private homes last month, a slight dip from 3,250 units in September. Year-on-year, the rental volume in October 2014 was up 11.8 per cent.

SRX's rental index for HDB flats shed 0.5 per cent month-on-month in October. Year-on-year, the drop was 2.1 per cent.

Rentals of four-room, five-room and executive flats registered respective month-on-month decreases of 0.8 per cent, 0.2 per cent and 1.4 per cent. On the other hand, three-room flat rentals inched up 0.2 per cent.

SRX estimates rental contracts were inked for 1,559 HDB flats last month, up 0.8 per cent from 1,546 units in September. Year-on-year rental volume in October 2014 was down 2 per cent.

-By Kalpana Rashiwala

New condo supply hurting rental market

Growing number of units in suburbs gives tenants more bargaining power

Source: Straits Times / Money

FRESH signs have emerged that the rental market is buckling under the weight of a mounting supply of new condos in the suburbs.

Rents of private non-landed homes fell 0.9 per cent last month from September, after tumbling for nine straight months, Singapore Real Estate Exchange (SRX) estimates showed yesterday.

The leasing market has not been this weak since December 2010. The index stood then at 117.3, while last month's rental index stood at 122.5.

Analysts expected the weaker market, as a plethora of new units has given tenants more bargaining power. But they added that the step-up in completed condos so far this year has been concentrated in the suburbs.

Suburban rentals dragged down the private rental market, with a 1.5 per cent dip. Rents of city-fringe units fell by a gentler 1.1 per cent, while those in the prime central districts slipped by 0.7 per cent.

"Declining private rents in the suburbs are expected to have a spillover effect on the Housing Board rental market. As rents in the suburbs become more affordable, some HDB tenants may consider moving to private condominiums," said Mr Wong Xian Yang, research manager at OrangeTee.

"This would sap demand from the HDB market and put downward pressure on rents."

In the nine months to Sept 30, 6,621 condo units sprang up in the suburbs alone, said SLP International research head Nicholas Mak. This exceeded the 6,097 condo units built in the city centre and city-fringe in that period.

The result is price competition between landlords, with HDB tenants drawn to larger condo units which could have rents lowered to $2,500 to $3,000 a month, said Mr Eugene Lim, key executive officer of ERA Realty.

Condo rents are down 5.3 per cent from a year ago, SRX said.

There were also fewer rental deals last month. An estimated 3,208 condo units and apartments were leased out last month, a 1.3 per cent dip from September. However, 11.8 per cent more units were rented last month than the 2,869 units leased out a year ago.

But vacancy rates of condo units are about 7 per cent, said Mr Lim, and this is likely to top 10 per cent in the next two years.

"The situation is likely to get worse, as there are more than 20,000 non-landed units to be completed each year, in 2015 and 2016," he said. "Tenants who are renewing their leases may take the opportunity to move to better-located units."

-By Cheryl Ong

Condo rents fall again to near-4-year low in Oct

Downtrend expected to continue in coming months as more private homes will be completed, say analysts

Source: Today Online / Business

SINGAPORE — In another sign that the leasing market is turning in favour of tenants, rents of non-landed private residences fell to their lowest in nearly four years last month as the increase in supply of homes being offered for rental outpaced the growth in the tenant pool.

Private-home rental prices slipped 0.9 per cent last month — the ninth consecutive month-on-month decline — with the reading of the rental index compiled by the Singapore Real Estate Exchange (SRX) at its lowest since January 2011, a flash report by the SRX showed yesterday. Compared with the same period last year, October’s rents were 5.3 per cent lower.

The suburban area, or the Outside Central Region (OCR), led the decline with a 1.5 per cent month-on-month fall. The city fringes, or the Rest of Central Region (RCR), registered a 1.1 per cent decrease while that in the city centre, or the Core Central Region (CCR), dipped 0.7 per cent.

Mr Eugene Lim, key executive officer of property agency ERA, said: “The continued drop in rents is expected as it is currently a tenants’ market. Tenants have strong bargaining power as the current supply glut and declining expat demand are pushing down rents.”

An estimated 3,208 new leases were signed last month, 1.3 per cent lower than September’s 3,250 units, the SRX report showed.

Analysts said the downtrend was expected to continue in the coming months as more private homes will be completed, adding to the stock of units competing for tenants.

Mr Nicholas Mak, executive director of SLP International Property Consultants, noted that around 55,000 non-landed private homes would be completed from the fourth quarter of this year to 2017.

“Without a substantial increase in the population of foreigners to boost the leasing demand in both the private and HDB (Housing and Development Board) housing markets, rental rates are likely to continue slipping gradually in 2015,” Mr Mak said.

The public-home sector also saw weakness in the leasing segment last month, with rents of HDB flats falling 0.5 per cent, the second straight month of decline after a slight rebound in August. However, rental volume inched up 0.8 per cent to an estimated 1,559 units from 1,546 units in September.

Mr Lim said one reason for the softening in HDB rents is competition for tenants from private home owners in the OCR. “The competition for tenants from suburban private-property owners, who are lowering their rents of family-sized units to S$2,500 to S$3,500 a month, is drawing tenants away from the HDB rental market.”

-By Lee Yen Nee

CDL warns of fire sales in high-end market

While the residential property market is on a downturn, group can ride on 'shining stars' of offices and hotels

Source: Business Times / Companies & Markets

City Developments Ltd (CDL) executive chairman Kwek Leng Beng has warned that the current subdued state of the Singapore housing market particularly in the high-end segment, if it continues, could ignite fire sales. Mr Kwek made this point in CDL's third quarter results statement. CDL posted net earnings of S$127.21 million for the third quarter ended Sept 30, 2014, up 4.7 per cent from the same year-ago period. Revenue rose 58.3 per cent to S$1.32 billion.

-By Kalpana Rashiwala

Ease developer rules, CDL urges

Source: Straits Times / Money

DEVELOPER City Developments (CDL) sees "no signs of any rebound" in home prices and called for an easing of rules which force builders to complete projects in a specified time.

It also noted in its third-quarter results yesterday that development land remains pricey, mainly due to foreign companies, particularly those from China, entering the local property market.

The company also noted that restrictions imposed by qualifying certificate (QC) rules, which make it difficult for developers to buy plots in the private market, mean competition for prime sites is "still keen" as companies need to restock their land bank.

"The group hopes that the QC rules will be reviewed in light of the changing landscape."

QC rules mean a developer has to finish building a residential project within five years of buying the site and sell the units within two years of completion. A developer that wants extra time on either deadline has to pay extension charges.

The remarks came as the company reported a 4.7 per cent rise in net profit to $127.2 million, thanks in part to the completion of its 602-unit Blossom Residences executive condominium (EC).

Revenue rose 58.3 per cent in the three months to Sept 30 to $1.32 billion.

The property development segment was the biggest earnings contributor, with turnover up 130 per cent to $750.4 million, and pre-tax profits up 12.3 per cent to $99.8 million.

Profits were booked from H2O Residences, Jewel @ Buangkok, UP @ Robertson Quay, and Buckley Classique, which obtained its temporary occupation permit in August.

Contributions also came for the first time from The Venue Residences and Shoppes, and Blossom Residences EC, which is fully sold.

Revenue from the hotels segment increased 13.7 per cent in the quarter to $444.3 million, with contributions from two hotels acquired in the first half of the year and stronger performances from recently refurbished outlets. Earnings per share were 14 cents for the quarter, up from 13.4 cents a year earlier, while net asset value was $8.79 at Sept 30, up from $8.50 at Dec 31.

-By Rennie Whang

Singapore to Face Fire Sales With Home Curbs, Developer Says

Source: Bloomberg / Luxury

Singapore’s housing market may face “fire sales” with mortgage defaults as the government’s property curbs hurt home sales and prices, the city-state’s second-biggest developer said.

City Developments Ltd. (CIT), which built luxury condominiums such as St. Regis Residences near the Orchard Road shopping belt, said the high-end market in particular remains subdued, with developers holding back the sale of new projects. Rents, especially for high-end homes, are on the decline, it added.

“If this trend continues, with prices dipping more, some mortgage borrowers affected by lower rentals, may have difficulty servicing their loans, possibly leading to forced fire sales,” the company said in a statement yesterday, adding that the curbs will “weigh heavily on the market.”

The government said last month that there’s some distance to go for Singapore’s home prices to achieve “a meaningful correction,” signaling the longest stretch of declines in housing values since the global financial crisis may not be enough to prompt the city to ease its curbs.

Singapore’s private home prices fell 0.7 percent in the three months ended September, the fourth quarter-on-quarter drop, bringing the slide in the past year to almost 4 percent. That’s the longest losing streak since 2009, when the government started introducing measures, with some of the strictest implemented last year, including a cap on debt.

Further Decline

“Homebuyers are waiting and watching because they think prices will decline further,” said Alan Cheong, a Singapore-based director at broker Savills Plc said. “Prices will languish into next year as developers have no confidence to raise prices with sentiment so low.”

The government said the share of homebuyers taking up multiple mortgages has slid to 13 percent of new housing loans in the second quarter from 30 percent in 2011.

Other developers share City Developments’ concerns. CapitaLand Ltd. (CAPL), its biggest publicly traded competitor in Singapore, said earlier this month “the real estate cooling measures and concerns over interest rate hikes continue to weigh down the market.”

City Developments, whose chairman is billionaire Kwek Leng Beng, yesterday posted a 4.7 percent increase in third-quarter profit on higher property sales. Net income rose to S$127.2 million ($99 million) in the three months ended Sept. 30, from S$121.5 million a year earlier.

Shoebox Apartments

In addition to mortgage curbs and higher taxes, the developer is also concerned about the government’s measures to cap the number of shoebox apartments, or those smaller than 50 square meters (538 square feet), in the suburbs.

“The market will continue to be price sensitive and favor the trend towards smaller unit format,” City Developments said. “However, these shoebox units are limited as the government had issued new rules to cap its supply since 2012.”

The developer is seeking to expand overseas amid declining demand in Singapore. In September, it invested in a plot of land in Tokyo valued at S$356 million. It will also offer fund management products, it said.

The stock added 0.3 percent to S$9.39 as of 10:03 a.m. in Singapore. The stock dropped 2.2 percent this year, compared with the 5.1 percent gain in the Singapore property index.

-By Pooja Thakur

International design competition for Jurong Lake Gardens likely in 2015

The competition will happen after a public consultation on the Gardens is conducted in March 2015, according to the Urban Redevelopment Authority.

Source: Channel News Asia / Singapore

SINGAPORE: The first Jurong Lake District Steering Committee meeting was held on Tuesday night (Nov 11), chaired by Minister for Culture, Community and Youth Lawrence Wong. Members discussed a public consultation for Jurong Lake Gardens and an international design competition for the Gardens next year.

The steering committee also noted the possibility of a Malaysia-Singapore high-speed rail terminus being sited in the district, linked up to the new Jurong Region and Cross-Island MRT lines planned for the area. The Urban Redevelopment Authority (URA) said in a news release on Wednesday that this is a "game changer which could make Jurong Lake District a second CBD with high connectivity and very distinctive green and blue features".

However as the location of the high-speed rail terminus is still being worked out, the steering committee concentrated on discussing the development of the Jurong Lake District, which is the "more immediate focus", URA said. This includes revitalisation of the existing Chinese and Japanese Gardens and the integration of these elements with the new Science Centre grounds, URA said.

There will be a public consultation on the plans for the Gardens in March 2015 and the ideas gathered will be incorporated into a design brief for an international design competition likely to be launched in the latter part of 2015, it stated.

"The view was unanimous around the table that it is rare in any city to find such extensive greenery and water bodies in one area," Mr Wong said. 

"So we should take advantage of this natural endowment to create a distinctive and unique identity for the precinct. We will engage the public extensively to gather feedback to help shape the district into an outstanding live, work, play district that is sustainable, smart and connected.”

- CNA/kk

Crane operator killed in site accident

Source: Straits Times / Singapore

A LORRY-CRANE operator was crushed to death yesterday morning, after the metal load he was lifting with the crane fell and pinned him to his seat.

The incident occurred at about 11.40am at the construction site of Pasir Ris One, a public housing development near Pasir Ris MRT station.

When The Straits Times arrived at the scene, about 10 people, believed to be the 60-year-old victim's family members, had to wait for an hour outside the site before being allowed in at about 3.30pm.

Singapore Civil Defence Force (SCDF) officers received a call about the accident at 11.45am. Paramedics pronounced the man dead at the scene. His body was removed by repositioning the crane boom and removing the materials, SCDF said.

Mr Tng Bi Da, a director of Kay Lim Construction and Trading, listed as the builder for the construction project, said the lorry crane involved had been supplied by a subcontractor.

The Manpower Ministry said it has instructed Kay Lim to stop all work there. Police are also investigating.

In the first half of this year, there were 17 fatalities in the construction sector, a spike of more than 50 per cent over the same period last year. Workplace injuries also climbed to 6,284 in the first half, a 14 per cent jump from the same period last year.

In a recent crackdown on unsafe crane operations over July and August, the ministry fined or warned 79 companies after inspecting 80 work sites.

-By Pricilla Goy

Companies' Brief

Croesus Retail Trust Q1 DPU beats forecast

Source: Business Times / Companies & Markets

Croesus Retail Trust (CRT) reported an income available for distribution of 791 million Japanese yen (S$8.85 million) for Q1 FY2015 ended Sept 30, 2014, with distribution per unit (DPU) for the quarter working out to 2.08 Singapore cents. The Japanese mall investment trust has no directly comparable financial statements for the period July 1, 2013 to Sept 30, 2013, as it was listed on May 10 last year and had obtained a waiver from the Singapore Exchange to report its first financial results for the period spanning May 10, 2013 to Sept 30, 2013.

-By Nisha Ramchandani

Taking construction to a new level

Source: Straits Times / Opinion

THE Building and Construction Authority's (BCA) new requirements, on the use of labour-efficient construction methods and building design, are the latest move in serious efforts to ramp up productivity in a sector that has contributed to weighing down Singapore's overall record. Also, construction firms will soon need to have a minimum percentage of higher-skilled workers on their payrolls. The State's aim is to transform construction into an efficient and more integrated industry in which forward-looking firms and a higher-skilled workforce set the benchmarks.

Official goals are buttressed by concrete support, such as the BCA's Construction Productivity and Capability Fund, which seeks to incentivise development of the workforce, adoption of technology and enhancement of capability. Yet the industry lags behind.

The picture is not completely bleak. There is the issue of whether Singapore's overall targets themselves - 2 to 3 per cent in annual productivity growth over a decade - adopted in early 2010, were too ambitious to begin with. Then, it is necessary to adopt different measures of productivity to reflect accurately how each sector is performing. On that count, the industry has been making progress, going by square metres constructed per man day. Even so, however, construction is a recalcitrant under-achiever as the country approaches the half-way mark of its economic restructuring drive.

Labour productivity growth averaged a miserly 0.1 per cent from 2011 to the second quarter this year, and only 0.4 per cent if construction is excluded. Clearly, the situation is untenable, and the sector is cause for concern irrespective of arguments about productivity levels and indicators.

The key, and perennial, issue is that construction work is not attractive to Singaporeans. This aversion causes heavy dependence on abundant foreign labour. While administrative moves to enhance the skills profile of the foreign labour force do oblige the industry to upgrade itself, the easy availability of that labour is an impediment to speedy and lasting change. Yet, there are best practices in other countries that could be imported, even if only partially, to improve the situation. A study of Australian construction productivity, for example, cited the following as industry strengths: strong competition at all levels in the industry; flexible management structures and work organisation; a strong skill and technological base; strong international linkages; and flexible industry regulation.

Singapore's construction industry must look beyond its veritable army of cheap foreign labour, and see itself as a sector that is fully capable of arising above the unenviable label of a productivity laggard.

Views, Reviews & Forum

Public feedback, design contest to shape Jurong Lake Gardens

Source: Business Times / Real Estate

An international competition will be held in the later part of next year to come up with a design for Jurong Lake Gardens. The public will also be consulted on what to include in the gardens in March, and the ideas gathered from this exercise will go into the design brief for the competition.

Global Economy & Global Real Estate

'Haunted' flats a tough sell in Asia's priciest real estate market

Unnatural deaths in HK can result in rental discounts of 10-20% and can be more than double that for sinister killings

Source: Business Times / Real Estate

Rents slashed for HK flats with gory past

Belief that such units are unlucky leads to big discounts for willing takers

Source: Straits Times / Asia

HONG Kong - There's a grim phenomenon in Hong Kong's real estate market: discounts of as much as 50 per cent for home-seekers willing to live in an apartment where a murder has occurred.

Unnatural deaths typically result in rental discounts of 10 per cent to 20 per cent, and the discount can be more than double that for sinister killings, according to Mr Sammy Po, head of the residential department of realtor Midland Holdings.

Chinese believe such places, known as "haunted apartments", are unlucky, he said.

The rent for a Wan Chai district apartment where police found two women's bodies on Nov 1 was HK$29,000 (S$4,840) a month at the time of the murders. It will probably drop by half when the apartment is released from being a crime scene, cleaned and rented again, according to a director of the company that owns the unit. The sales value of the unit in the luxury J Residence would decline from HK$9 million to HK$6 million if it were sold immediately, he said.

Hong Kong is otherwise Asia's priciest real estate market.

This year, the city had almost 190 sites where an unnatural death took place, including murders and suicides, according to a database compiled by

Squarefoot lists the date of the incident, the address, the district and a brief description of the death. Among recent listings were an apartment where an 18-year-old male student slipped a plastic bag over his head last month and jumped to his death; one where a middle-aged couple, plagued by financial troubles, committed suicide by inhaling burning coal smoke; and another where a mother was hacked to death by a mentally unstable neighbour while protecting her two daughters.

Hong Kong is not the only place where home- seekers can be wary of a residence marred by tragedy. Nevertheless, in a comparably high-demand market like New York City, the stigma is less marked, according to Mr Jonathan Miller, president of real estate appraiser Miller Samuel in Manhattan.

Where sales inventory in the city is scarce and rents are at near records, a crime or other negative event would not have much effect on price, he said.

Hong Kong property agents are not required by law to disclose if a death occurred in a unit, but they should provide information when asked, under the industry's code of ethics, according to the Estate Agents Authority. Potential tenants or buyers should ask whether a suicide or homicide took place because there is no legal definition of a "haunted property", the agency said.

Superstition and geomancy beliefs run deep.

Hong Kong people also shun sites close to cemeteries, hospitals and churches, which can be considered unlucky. Buildings typically omit the fourth floor because the number is a homonym for the Chinese word for death. And property developers also rely on feng shui, the practice of arranging the physical environment in harmony according to beliefs about energy and design.

-By Bloomberg

Merger with rival may boost IHG share price: Marcato

Source: Business Times / Real Estate

NZ central bank says it won't relax loan curbs

There remains a risk of a resurgence in house-price inflation, particularly in light of strong immigration flows, says governor

Source: Business Times / Real Estate

Management software maker RealPage in play for buyout firms

Source: Business Times / Real Estate

New York's second tier office buildings going green

Analysts say that energy savings can be significant though landlords may have difficulty recouping amount spent on green features

Source: Business Times / Real Estate

Cubicles emerging in unlikely world of publishing

With their profit margins being squeezed by Amazon and electronic books, publishers are facing a reality in which private offices may be a luxury not worth paying for

Source: Business Times / Real Estate

Salesforce to Buy San Francisco Tower for $640 Million

Source: Bloomberg / Tech Inc. (CRM), which has agreed to lease what will be San Francisco’s tallest office tower, now plans to buy its first building in the city to expand its headquarters.

The company agreed to purchase 50 Fremont St. for about $640 million, according to a regulatory filing yesterday. That ranks as the city’s most expensive office deal this year. Salesforce already leases about 60 percent of the 41-story building in the South of Market area. The deal includes the office tower and two retail buildings totaling 817,000 square feet (75,900 square meters), the company said in a statement.

Salesforce, the biggest maker of customer-management software, is buying the property for flexibility to add amenities as it centers its headquarters campus on three buildings at the corner of Fremont and Mission streets, said Burke Norton, chief legal officer. Its current main address is four blocks away at One Market St. The company has said it will lease space in two properties under construction, including one that will be named Salesforce Tower when it’s finished in 2017.

“We want facilities and workplaces that match the quality of our employees and maybe inspire them to do the best work of their lives,” Norton said in an interview. He declined to specify possible changes to the 50 Fremont building, which was renovated shortly before Salesforce moved in about 18 months ago.

Blackstone Purchase

The price for the property exceeds the roughly $600 million paid by Blackstone Group LP earlier this year for a 49 percent stake in One Market Plaza, a two-tower office complex in the same neighborhood, according to research firm Real Capital Analytics Inc.

Salesforce, which says it’s the largest technology employer in the San Francisco Bay area, has hired about 1,100 people in the region this year, bringing its local workforce to more than 5,000, Norton said. The company, founded in 1999, has more than 15,000 employees worldwide.

Strong leasing demand from technology companies has attracted domestic and foreign investors to San Francisco, where office-building sales surpassed $7 billion through three quarters of 2014, more than six times the year-earlier period, according to Real Capital.

San Francisco is the second-busiest market for office deals this year after New York, according to Real Capital. In September, Norway’s sovereign-wealth fund bought a stake in San Francisco’s Orrick Building through an alliance with TIAA-CREF for $139.7 million.


TIAA-CREF remains an active buyer of office, retail and apartment properties in the area, Lynette Pineda, a senior director at the company’s global real estate unit, said in the statement. TIAA-CREF bought 50 Fremont more than a decade ago.

“The asset has performed well, yet we are constantly reviewing our holdings and rebalancing the portfolio to best meet investment goals,” Pineda said.

The 50 Fremont tower is Salesforce’s biggest real estate purchase and its second major property acquisition after land in the Mission Bay area of San Francisco, Norton said. Since April, the company has sold or agreed to sell the 14 acres (5.7 hectares) that it purchased in 2010 for $278 million with intentions to build a new headquarters, according to filings. The land had been sitting undeveloped after Salesforce opted instead to lease space downtown.

-By Hui-yong Yu

American Realty Capital Sues RCS Over $700 Million Deal

Source: Bloomberg / News

American Realty Capital Properties (ARCP), the biggest U.S. owner of single-tenant buildings, sued investment partner RCS Capital Corp., alleging it wrongly terminated an agreement to buy a business.

RCS agreed to buy American Realty’s private-capital management business, Cole Capital, for at least $700 million then reneged on the deal, the real estate investment trust said in a complaint filed yesterday in Delaware Chancery Court in Wilmington.

“Under the circumstances, the independent members of the ARCP board of directors and ARCP had no choice but to file this litigation in order to preserve and protect the interests of ARCP’s shareholders under the purchase agreement,” the New York-based company said today in a statement.

American Realty lost almost a fifth of its market value on Oct. 29 after saying an accounting error was intentionally concealed. The company, owner of more than 4,000 properties such as banks, restaurants and drugstores, is facing an investigation by prosecutors and the Federal Bureau of Investigation, a person familiar with the matter said.

The dispute sets up a battle between two companies that have the same chairman, Nicholas Schorsch. RCS may have scuttled the deal because the scandal at American Realty might spill over to Cole, tainting efforts to sell shares of Cole’s nontraded REITs, Paul Adornato, an analyst with BMO Capital Markets, said last week.

Stock Plunge

Jonathan Keehner, an RCS spokesman with Joele Frank, Wilkinson Brimmer Katcher, didn’t immediately reply to phone and e-mail messages seeking comment on the lawsuit.

American Realty rose 1.5 percent today to $8.79, while RCS climbed 3.8 percent to $11.59. RCS shares have lost 41 percent since the disclosure of the errors on Oct. 29, compared with a 29 percent drop for American Realty.

RCS’s “deliberate, precipitous and improper actions in attempting to improperly terminate the purchase agreement appear to be the product of a concerted effort by RCAP to distance itself from ARCP in order to prop up its own flagging stock price,” according to the lawsuit.

The deal termination “had everything to do with curbing the price decline in RCAP’s stock (in which Mr. Schorsch owns a significant interest), and not with the breach of any representation or warranty made by ARCP in the purchase agreement concerning the acquired companies,” American Realty said in its complaint.

Schorsch beneficially owns about 40 percent of RCS’s Class A common stock and, through his beneficial ownership of its Class B common stock, has majority voting control of the company, according to the complaint.

The case is American Realty Capital Properties Inc. v. RCS Capital Corp. (RCAP), CA10339, Delaware Chancery Court (Wilmington).

-By Phil Milford and Brian Louis

Bank of America Won’t Loosen Mortgage Standards, CEO Says

Source: Bloomberg / News

Bank of America Corp., which paid more in legal settlements tied to the U.S. housing collapse than any other company, will avoid easing mortgage standards even as regulators seek to expand lending, Chief Executive Officer Brian T. Moynihan said.

“You won’t see us start to expand our criteria much past what we’ve done today,” Moynihan, 55, said at a New York investor conference sponsored by Bank of America. “I don’t think there’s a big incentive for us start to try to create more mortgage availability where the customers are susceptible to default.”

Moynihan was responding to a question today about recent government efforts to improve access to credit in a market so tight that even former Federal Reserve Chairman Ben S. Bernanke couldn’t refinance his mortgage. Last month, Federal Housing Finance Agency Director Melvin L. Watt said that Fannie Mae and Freddie Mac will better define when those U.S.-backed companies would force banks to repurchase loans.

It’s part of a broader push by the Obama administration to unlock credit after banks had to repurchase billions of dollars of mortgages that were issued during the housing bubble. Many people seeking to buy their first home, and others deemed too risky have been shut out of the real estate market. JPMorgan Chase & Co. CEO Jamie Dimon has bemoaned that credit was needlessly tight.

‘Fundamentally Based’

“I know that that doesn’t sound good for an instant housing recovery and faster housing markets, but it’s actually good because in the long term it keeps housing more fundamentally based,” Moynihan said.

Bank of America has paid more than $70 billion to settle disputes after the financial crisis, most of it tied to the 2008 takeover of subprime lender Countrywide Financial Corp. Moynihan has shuttered several businesses inherited from that takeover to focus on creditworthy customers who have checking accounts or other relationships with the firm.

“Having watched this play out over the last several years, watched the underlying consumer difficulties created by people borrowing more than they could pay back,” the Charlotte, North Carolina-based company’s priority is underwriting loans to people who can repay them, he said.

A customer without the means to make a down payment of at least 10 percent should consider renting rather than trying to buy a home, Moynihan said.

-By Hugh Son

Apartment Boom Puts RealPage in Play for PE: Real M&A

Source: Bloomberg / News

RealPage Inc. (RP), a maker of software that helps apartment landlords manage their properties, is now in play.

An investor-turned-activist is seeking talks with management about RealPage’s strategic direction after the Financial Times reported it rejected a buyout bid from Vista Equity Partners. With recent stumbles including a third straight quarterly loss, now may be a good time to find a buyer that could run the business better. U.S. apartment construction is set to surge over the next few years, giving RealPage a shot at more revenue.

RealPage’s Web-based technology would complement Vista’s existing property-management platform, said JMP Group Inc. (JMP) Other private-equity firms may be attracted to the $1.8 billion company’s minimal debt and the chance to improve its operations. Companies including Zillow Inc. and CoStar Group Inc. (CSGP) may also want RealPage because its rental-property software would help them reap more from the recovery in the real-estate market, according to Barrington Research Associates Inc.

“The multifamily industry outlook is very strong for years to come,” Craig Richard, a fund managerand analyst at Kornitzer Capital Management Inc., said in a phone interview. “That, plus the opportunity for margin expansion, is what gets potential buyers excited.”

Kornitzer manages the Buffalo Funds, which oversee assets including shares of RealPage.

Representatives for Carrollton, Texas-based RealPage, Washington-based CoStar and Vista didn’t respond to requests for comment. A representative for Seattle-based Zillow declined to comment.

Apartments in Demand

The rising demand for apartments after the economic crisis has been a double-edged sword for RealPage.

On the one hand, record occupancy rates have meant property managers have little need for the leasing and marketing services that make up about 30 percent of the company’s revenue, according to Jeff Houston of Barrington. That’s part of the reason RealPage is set for its weakest sales growth since at least 2007.

On the other, the rate of apartment construction is estimated to increase over the next few years, according to a report from the Federal Reserve Bank of Kansas City. A baseline projection has annual multifamily housing starts rising to a peak of 570,000 by 2019, almost twice the amount last year. That means more potential customers for RealPage’s products, which also include tenant screening and utility-management software.

RealPage might benefit from a buyer that recognizes those growth opportunities and knows how to take advantage of them, said Richard of Kornitzer.


One way a private-equity firm could increase revenue and profit at RealPage is to do a better job of cross-selling products to customers.

“That’s the piece of the puzzle they failed to execute on,” Richard said. As a result, the company hasn’t grown revenue per apartment as much as it could, he said.

“There are issues that could be corrected,” he said. “A private-equity buyer would see value in the name. The market opportunity is fairly large.”

JHL Capital Group LLC, RealPage’s second-largest shareholder, last week said in a filing that it wishes to engage in “more extensive dialogue” with management about topics including the company’s strategic direction. It said it may also communicate with potential strategic or financing partners.

RealPage could get as much as $30 a share in a takeover, Houston of Barrington estimated. That would be a premium of about 35 percent, based on yesterday’s closing price.

The shares fell less than 0.1 percent to $22.46 today.

Strategic Deal

For Vista, buying RealPage would almost double its share of the market for the financial software that landlords use to manage everything from inventory to the general ledger, Houston said. Vista acquired Intuit Inc.’s real-estate software business in 2010 and renamed it MRI Software LLC.

Other private-equity firms may be interested in buying RealPage to create a property-management platform of their own, Patrick Walravens, a San Francisco-based analyst at JMP, wrote in a report last week. The company has stable free cash flow and little debt.

CoStar, a commercial real-estate information provider, is a logical strategic bidder, according to Eric Mintz, a fund manager at Eagle Asset Management Inc., which oversees about $31 billion, including RealPage shares.

In April, the $5.2 billion company bought, a rental resource website that links to RealPage’s database. That same month, Chief Financial Officer Brian Radecki said he sees “massive” opportunity in multifamily housing.

“It would make a lot of sense for them to have that asset as well,” Mintz said in a phone interview. CoStar trades at one of the highest profit multiples in the information-services industry, giving it a strong currency to use in a bidding war with private equity.

Zillow (Z), the owner of apartment-rental search site, or closely held Yardi Systems Inc., a competitor of RealPage, may also be interested in a takeover, said Houston of Barrington. Zillow, which agreed earlier this year to buy Trulia Inc., already has a partnership deal with RealPage that allows the two companies to share apartment listings and some services.

A representative for Yardi didn’t respond to a request for comment.


RealPage Chief Executive Officer Stephen Winn owns about a third of his company. An acquirer will have an easier time getting a deal done if he’s on board. Mintz of Eagle Asset said Winn is probably a more willing seller after the company’s operational missteps. Even if he isn’t, JHL and Vista have sizeable stakes of their own with a combined holding of almost 15 percent, according to data compiled by Bloomberg.

“Management has to lend an ear and be willing to listen,” Richard of Kornitzer said. “One reason we stuck with the name is we believed they at some point can get the execution right. If not them, then someone else is going to come along” and see the opportunities.

-By Brooke Sutherland

Banker Enclave Rises as Poor Kicked Out of Sydney Harbor Homes

Source: Bloomberg / Luxury

For sale: 287 homes needing million-dollar makeovers, most in spitting distance of Sydney harbor and its iconic Opera House. Wanted: Somewhere to shift a low-income, angry community.

A shabby three-bedroom house offering a view of Sydney Harbour Bridge from a small upstairs window earned the New South Wales state government A$2.3 million ($2 million) in September, after lying vacant for almost two years. It was the fifth auction in a mass sell-off of public housing that’s displacing central Sydney’s oldest working class neighborhood.

“One of the reasons we wanted to move here is it’s full of character, it’s a mixed community,” said John Bulford, 53, a former banker who paid A$1.75 million for a 99-year lease on a rundown house in the area three years ago. “This could just become a ghetto for lawyers and bankers.”

Australia’s most populous state, eager to protect a AAA credit rating amid a ballooning housing budget deficit, has unearthed a goldmine in the district that was once home to deported convicts. While surging property prices have created the nation’s most valuable public housing stock, the sell-off comes at the expense of residents who once thought they had subsidized homes for life in the former slum, now nestled between the central business district and a A$7 billion development of a new financial precinct.

Brutalist Block

The state has spent almost A$7 million maintaining the homes over two years, with costs more than four times the average for New South Wales public housing, it said when first announcing the sale in March. For every property sold in the program, which includes 79 apartments in the concrete brutalist Sirius building in the historic Rocks district, three could be built elsewhere to help accommodate 59,000 households waiting for public housing, it has since said.

Barney Gardner, 65, who has lived in Millers Point his whole life, isn’t convinced.

“It’s a planned attack by the government to get rid of us; by not doing maintenance the places have deteriorated,” he said. “It’s basically eviction by dereliction.”

In Gardner’s home, natural light is scant and his backyard is a narrow alleyway. In the bathroom and second bedroom, parts of walls are without paint after lacking proper maintenance for at least a decade, he said. Tenants pay a quarter of their income in rent, in Gardner’s case about A$108 a week.

Six-Star Hotel

From his front porch, Gardner regards another world. Where wharves that supported Sydney’s shipping industry sat for more than a century, workers hired by Lend Lease Group are building Barangaroo, a new financial district of skyscrapers, luxury apartments and a six-star hotel and casino.

“It’s morally the correct decision; it’s taxpayers’ money that’s been subsidizing the housing here,” said Blair Hayden, 63, who co-owns the Lord Nelson Brewery Hotel, the nation’s oldest pub brewery, in the Rocks district. “Whilst I feel for the people tremendously, things move, things change.”

A road alongside the pub will be one of the main walking thoroughfares to Barangaroo when it’s finished, he said.

Millers Point was among the first areas of Sydney to be settled by Europeans after Britain established a penal colony in 1788. It prospered as one of the city’s most important maritime areas, until the bubonic plague hit in 1900, and the state government seized thousands of properties to disinfect them, Shirley Fitzgerald and Christopher Keating wrote in “Millers Point: The Urban Village.”

Wharf Workers

In the 1920s, the state rented the homes to wharf workers, creating Sydney’s first public housing. Residents could make their own improvements and pass the homes on to their children.

“The properties were definitely assumed to be secure, not only for their own use but for their children and descendants,” Fitzgerald and Keating wrote.

The rest of Sydney looked on the area as a slum, until a 1960s construction boom had developers coveting its water views and proximity to the city center, according to the book. The threat to its heritage and close-knit community drew protests, and the city designated Millers Point a residential precinct, putting pre-20th century buildings on a preservation list.

The push to offload state-owned properties in the area started in the late 1980s when the government, amid protests, began advertising some hotels and shops for sale to raise funds to provide other homes. It irked locals further in 2010 by offering 99-year leases on a further 36 homes.

Sponsored Gentrification

“The fact that the government is willing to clear that area of anyone who can’t afford A$1.5 million or A$2 million for a home is the sort of thing that governments shouldn’t be in the business of doing,” said Bill Randolph, director of the University of New South Wales’ City Futures Research Centre. “It’s government sponsored gentrification.”

Authorities say proceeds from the sales will be spent on new homes and maintenance.

“While the government understands that Millers Point tenants have a strong connection to the area, it needs to balance this against its obligation to make sure that public resources are used to benefit as many people in need as possible,” the Department of Family and Community Services said in an e-mailed response to questions. “All proceeds of the sales will be invested in the social housing system.”

Still, a lack of detail about plans for new housing has failed to convince critics that supply will increase.

“I don’t trust that commitment at all,” said Darcy Byrne, a councillor and former mayor of Leichhardt Council, an inner Sydney suburb about 7 kilometers (4.3 miles) southwest of Millers Point, which has joined with surrounding councils in a campaign against future public housing sales. “They’ve yet to identify a single example of where new housing will be built.”

Surging Prices

Six of the Millers Point properties have been sold in closed auctions as part of a pilot round of sales that raised A$15 million. Three more homes are to be auctioned next month. The state is benefiting from Sydney house prices that RP Data Pty said jumped 14 percent in the year through October, taking the median tag to A$792,000.

“Some residents put forth a proposal with alternate models to retain some public housing and sell others to make it sustainable, and that was ignored,” Sydney Deputy Lord Mayor Robyn Kemmis said in an interview. The sales are proceeding even after an independent assessment said that older people are negatively affected by severing community ties, she said.

Leaky Roof

Millers Point’s median has soared 34 percent in the past year to A$1.38 million, according to Domain Group, and RP Data named it Australia’s fourth-priciest suburb. Still, many homes being sold require about A$1 million of renovations, estimates Bulford, who had to fix a leaky roof, falling plaster, a collapsed floor and damp in the basement.

Some of the heritage-listed properties are located under the Harbour Bridge, meaning residents must put up with the steady roar of commuter trains passing overhead. For Gardner, who like other residents is being offered relocation expenses, it’s the only home he’s ever known.

“What if they offered me a penthouse somewhere?” he said. “Nah. This is where I was born.”

-By Nichola Saminather and Chris Bourke

Damac Quarterly Profit More Than Doubles on Dubai Home Sales

Source: Bloomberg / Luxury

Damac Real Estate Development Ltd., the Dubai-based property company that first sold shares in London in December, said third-quarter profit more than doubled as it completed sales in its home market.

Net income climbed to $224.3 million from $84.4 million a year earlier, the company said in a statement today. Revenue more than tripled to $577.3 million. Damac’s global depositary receipts climbed as much as 6 percent, the biggest gain since Aug. 21.

The company is building Hollywood-themed apartment towers, a golf course and villas branded by New York mogul Donald Trump to tap into Dubai’s popularity as a tourist destination. Projects completed in the third quarter include The Vogue and Capital Bay apartments and two buildings in the Lincoln Park development.

“More than 80 percent of Damac’s projects are in Dubai, which is still seeing good demand in the premium segment,” Harshjit Oza, an analyst at Naeem Brokerage, said by phone from Cairo today. “Most of those customers are from Gulf countries and they don’t need to take out mortgages to buy.”

The company handed over 2,581 homes to buyers across seven projects, collecting completion payments during the nine months through September, the company said. Its gross margin “remained strong” at 58.9 percent in the third quarter.

Cash Jumps

The company’s cash from operations surged to $741.2 million in the first nine months compared with $238.3 million. That was mainly driven by an increase in advance payments from customers and higher profit generated during the period.

Damac in September withdrew an offer to swap its London-listed GDRs for shares traded in Dubai, saying it needed more time to arrange a United Arab Emirates listing. A Dubai share sale is imminent, Chief Financial Officer Adil Taqi said today in an telephone interview.

The company’s founder and chairman, Hussain Sajwani, may sell more of his stake in a Dubai listing if demand is there, Taqi said.

“When we did the original float, it’s arguable we didn’t sell enough,” Taqi said. A sale of additional shares by Sajwani is possible “looking a year or 18 months on.”

Damac’s GDR was up 5 percent at $19.40 as of 11:40 a.m., lifting this year’s increase to 25 percent.

-By Zainab Fattah

Additional Articles of Interests - Local & Overseas Real Estate