Singapore Real Estate To Redas, on its 55th anniversary Source: Business Times / Real Estate Past Redas president Wong Heang Fine, current president Chia Boon Kuah, Minister for National Development Khaw Boon Wan, Hong How Group chairman Daniel Teo and City Developments group general manager Chia Ngiang Hong raising a toast to the Real Estate Developers' Association of Singapore on its 55th anniversary. http://www.businesstimes.com.sg/real-estate/to-redas-on-its-55th-anniversary Property sector 'needs Govt support' Redas chief urges measures to help industry avoid getting into big trouble Source: Straits Times / Top of The News Redas chief urges measures to help industry avoid getting into big trouble THE real estate sector could be heading for major trouble unless the Government takes "supportive measures" to help set it right. The stark warning came last night from the leading industry body, Real Estate Developers' Association of Singapore (Redas), which pointed to falling sales and declining prices. Its president, Mr Chia Boon Kuah, said at the organisation's 55th anniversary dinner: "(The slowdown and added pressures in the residential market) pose significant challenges to the property sector, and there could be wider impact on the economy. "It is in no one's interest to witness unintended outcomes... We urge the Government to stand ready, to take supportive measures to prevent a tipping point, should the market turn volatile and worsen further." He declined to elaborate when asked later about what measures could be taken. In his speech at Ritz-Carlton, Millenia Singapore, Mr Chia said the sector is expecting "unabated headwinds", with the slew of cooling measures continuing to bite and dampen buying sentiment. "The data and facts truly speak for themselves," he added. Transaction volume has fallen from about 18,000 last year to less than 9,000 expected this year. Overall private home prices fell in the last four consecutive quarters as well, he noted. The supply of 68,000 completed new residential units over the next few years is likely to push home vacancy rates towards 10 per cent, Mr Chia added. "This will add even more pressure on the residential market. "Developers are concerned. Genuine home buyers from the Singapore market have adopted a wait-and-see attitude." Mr Chia had earlier also pointed to the industry's importance to the economy. "Real estate accounts for about half of the total fixed capital formation. One in five people in the workforce is employed by the real estate and construction industry." He also signalled appreciation for the Government's moderation of land sales this year. Redas had raised concerns at last year's dinner about the substantial amount of residential sites heading for the market. Mr Chong Chou Yuen, chief financial officer of Tuan Sing Holdings, noted that while the Government has said property prices have not yet seen a "meaningful correction", developers hope it will cut back on cooling measures soon before the situation turns too dire. "The Government should also allow the high-end market to be more active - it is Singapore's loss in foreign exchange if we can't attract foreigners to buy such properties here, and wealthier Singaporeans end up going overseas to invest," he added. Mr Chia also reaffirmed Redas' efforts to work closely with the Government and industry partners in real estate development. A recent key initiative is a push for Building Information Modelling (BIM), which facilitates collaboration and raises productivity in the industry. Ten developers, including CapitaLand and Far East Organization, have signed up to pilot the concept. Each developer will form a consortium consisting of those in its value chain like architects, engineers and quantity surveyors. Design information will be shared from start to end, and workflow better managed - preventing construction clashes and less need for reworks, overall shortening the construction cycle. Redas signed an agreement yesterday with four BIM partners - Autodesk, Aconex, DCA Architects and Surbana - to establish the cloud-based infrastructure to support the initiative.
"Once successful, we will scale it up for the entire industry," said Mr Chia. -By Rennie Whang http://www.straitstimes.com/premium/top-the-news/story/property-sector-needs-govt-support-20141127 Redas urges govt to intervene if property market turns volatile Redas chief echoes the property market's concern over the effects of cooling measuresSource: Business Times / Real Estate THE president of the Real Estate Developers' Association of Singapore (Redas) Chia Boon Kuah on Wednesday urged the government to "stand ready to take supportive measures to prevent a tipping point" if the property market turns volatile and worsens. Speaking at the association's 55th anniversary dinner at The Ritz-Carlton, Millenia hotel, he said developers were concerned about the slowdown that has gripped the residential market since the cooling measures and the total debt servicing ratio kicked in. "The data and facts truly speak for themselves," he said. The transaction volume is expected to halve to under 9,000 this year, from around 18,000 in 2013; overall private home prices have declined in the last four consecutive quarters. Mr Chia said: "The industry is expecting unabated headwinds as the slew of cooling measures continue to bite and dampen buying sentiment. The looming supply of 68,000 completed new residential units in the next few years is likely to cause the home vacancy rate to head towards 10 per cent. This will add even more pressure on the residential market." He added, too, that the dampened buying sentiment has led the genuine home buyers among Singaporeans to adopt a wait-and-see attitude. The malaise in the property market could also infect the economy at large: After all, a quarter of the top 20 listed companies in Singapore are property or property-related firms, and one in five persons has a job in real estate or construction. Approached later, Mr Chia declined to elaborate on the kind of "supportive measures" he thought the government ought to make. But the developers who spoke to The Business Times at the event echoed his views, although they did not recommend a complete roll-back of the cooling measures and loan curbs. Qingjian Realty (South Pacific) Group general manager Li Jun was one of those who said the market was already at a point where the government should intervene. He cited as one of his reasons the outflow of capital into overseas foreign properties at a time when investing in overseas real estate assets carries higher risks. "It's hard to say what kind of supporting measures the government should extend. I don't suggest removing all the measures but perhaps some, and gradually, to prevent a hard landing," he said in Mandarin. Tuan Sing group chief financial officer Chong Chou Yuen suggested drawing the line for cooling measures at the mass-market mid-end homes to maintain their affordability. He suggested that the government could afford to relax the policy for high-end investment properties for both local and foreign investors, and spoke of a mismatch between what the government and what developers deemed as a sufficient price correction. Knight Frank Singapore executive chairman Tan Tiong Cheng said the government was "playing a very delicate game". Part of the rationale for keeping the cooling measures in place was to keep property prices down to give wages time to catch up. "The government is acutely aware that real estate forms a big part of Singaporeans' collective wealth. They are not about to allow the situation to deteriorate to a panic stage. But they do have priorities to take care of before developers' interests," he acknowledged. "In a low-interest-rate environment, the only way to cool the market is to ensure that buyers don't overborrow, and reduce competition among investor-buyers of second and third properties. This is so that when interest rates rise, these people will not find themselves financially stretched." At last year's anniversary dinner, Redas had raised its concern over the substantial number of completed residential units coming on stream in the next three years. This seemed to have some impact on policy, as the government moderated land sales this year. At the dinner, Redas also signed a memorandum of understanding with four partners, who will work with the association to pioneer the Redas developer-centric Building Information Modeling initiative. Under this, players in the real estate value chain will share information, improve work flow and raise productivity. Once successful, this will be scaled up for the entire industry. -By Lee Meixian Govt must be ready with support if property market worsens: REDAS The president of the Real Estate Developers' Association of Singapore said the supply of 68,000 completed new residential units in the next few years is likely to cause home vacancy rates to head towards 10 per cent.Source: Channel News Asia / Singapore SINGAPORE: The real estate industry has urged the Government to be prepared to take "supportive measures" to prevent a tipping point, if the property market turns volatile and worsens further. Speaking at the Real Estate Developers' Association of Singapore's (REDAS) 55th anniversary dinner on Wednesday evening (Nov 26), the association's president Mr Chia Boon Kuah added that the looming supply of 68,000 completed new residential units in the next few years is likely to cause home vacancy rates to head towards 10 per cent. Official figures have put the private home vacancy rate at 7.1 per cent in the third quarter of this year. "Developers are concerned. Genuine home buyers from the Singapore market have adopted a wait-and-see attitude. The situation poses significant challenges to the property sector, and there could be wider impact. It is in no one's interests to witness unintended outcomes," Mr Chia said. Mr Chia also noted that private home prices have declined in the last four consecutive quarters, while transaction volume has also dropped from 18,000 in 2013 to less than 9,000 expected this year. National Development Minister Khaw Boon Wan was guest of honour at the dinner. Separately, 10 REDAS developers have come together to pilot the association's developer-centric Building Information Modeling project. The venture will allow those in the industry to share information, improve workflow and raise productivity. The developers are Allgreen. Bukit Sembawang, CapitaLand, CDL, CEL, Far East Organization, Frasers Centrepoint, GuocoLand, Keppel Land and Wing Tai. A Memorandum of Understanding for the project was signed at the anniversary dinner. - CNA/ly http://www.channelnewsasia.com/news/singapore/govt-must-be-ready-with/1495218.html Vacancy rate of private homes ‘may hit 10%’ Source: Today Online / Business SINGAPORE — The vacancy rate of private homes in Singapore could be as high as 10 per cent over the next few years due to a surge in the number of completed units and this will pile further pressure on the residential market, the president of the Real Estate Developers’ Association of Singapore (REDAS) said yesterday. Mr Chia Boon Kuah, who was speaking at the association’s 55th anniversary dinner, estimated that there will be about 68,000 newly completed units in the next few years. “The industry is expecting unabated headwinds as the slew of cooling measures continue to bite and dampen buying sentiment ... (Rising vacancies) will add even more pressure on the residential market,” he said. Data from the Urban Redevelopment Authority (URA) showed that the vacancy rate of private homes was 7 per cent at the end of the third quarter this year. It forecast the number of completed homes in 2015 to 2016 to exceed 20,000 units each year before falling to around 15,000 units in 2017. Mr Chia also said sales of new private homes are expected to be less than 9,000 units for the whole of this year, down sharply from around 18,000 units last year. Coupled with the incoming supply, the property market faces “significant challenges”, which could have wider implications on the economy. “It is in no one’s interest to witness unintended outcomes. We, therefore, urge the government to stand ready to take supportive measures to prevent a tipping point should the market turn volatile and worsen further,” he said.
Private home prices in Singapore fell 0.7 per cent between July and September for a fourth consecutive quarter of decline, narrowing from the 1 per cent decline in the previous quarter, URA data showed. -By Lee Yen Nee http://www.todayonline.com/business/vacancy-rate-private-homes-may-hit-10 No small strata office, retail units allowed for Beach Road site URA says at least 70 per cent must be for offices; it has put a cap on space for retail. Consultants say price will go past S$1,000 psf pprSource: Business Times / Real Estate A minimum 70 per cent office component has been stipulated for the commercial site next to Shaw Tower along Beach Road. Small strata office or retail units will not be allowed in this 99-year leashold site, which has just been made available for applications by developers through the reserve list. -By Kalpana Rashiwala URA releases historic Beach Road site 2ha site housing old police station estimated to cost between $1.1b and $1.4b Source: Straits Times / Money DEVELOPERS with an eye to an arresting chapter of Singapore's history are being invited to bid for the old Beach Road Police Station site. The 99-year leasehold plot between Beach Road and Rochor Road has been released under the reserve list of the second half 2014 Government Land Sales programme. That means the 2ha plot will go to tender only if a developer initially commits to buy the plot for an acceptable minimum sum. The successful bidder will be required to conserve and restore the former police station building. The site can also accommodate a development of up to 45 storeys, with a gross floor area of about 88,000 sq m. About 70 per cent of this will have to be set aside for office use. JLL head of South-east Asia research Chua Yang Liang noted that while the conserved building could be challenging, it gave a developer a "unique opportunity" to feature a mixed development comprising office, retail and possibly residential spaces at such a site. "It is likely to motivate larger developers to launch a flagship development, leaving their mark on the Singapore skyline," he said. He added that as the total cost is large - an estimated $1.1 billion to $1.4 billion ($1,300 to $1,400 per sq ft per plot ratio) - it is most likely to attract the larger property players. "Foreign developers such as the Chinese firms looking to penetrate into the commercial market may find this site attractive." Developers could be interested as office rents in the area, including Suntec City and Marina Square, have been holding up, said R'ST Research director Ong Kah Seng. Leasing demand in the area has been mainly from firms outside the financial industry, including IT and professional services, and mining companies - businesses which are less affected by global economic fluctuations and thus "more resilient" in space requirements and operations. Apart from nearby mixed development South Beach, which will be completed next year and offer 500,000 sq ft of office space, new office space in the area has been limited for a long time, so demand at this new site could be solid, he said. However, the site will also have to contend with mixed development Duo, which includes Duo Residences, offices, retail space and a five-star hotel, and will come onstream in 2016, said Century 21 chief executive officer Ku Swee Yong.
"At this cycle of the market, where new demand for retail and office space is weak, I am not sure if it would be triggered," he said, referring to the sale of the Beach Road site. -By Rennie Whang http://www.straitstimes.com/premium/money/story/ura-releases-historic-beach-road-site-20141127 URA releases commercial site at Beach Road The two-hectare commercial site - for sale under the Reserve List of the second half of the Government Land Sales (GLS) Programme - fronts Beach Road, Rochor Road and Nicoll Highway, and has a 99-year lease period.Source: Channel News Asia / Business SINGAPORE: The Urban Redevelopment Authority (URA) has released a two-hectare commercial site at Beach Road for sale, under the Reserve List of the second half of the Government Land Sales (GLS) Programme. The site fronts Beach Road, Rochor Road and Nicoll Highway, and has a 99-year lease period. In a press release issued on Wednesday (Nov 26), URA said the future development on the land parcel can go up to 45 storeys and will have a gross floor area of about 88,000 square metres. About 70 per cent of this floor area will have to be set aside for office use. URA added that the site is envisaged to provide high quality office space with complementary uses that can meet the needs of the financial and business services. - CNA/ac http://www.channelnewsasia.com/news/business/singapore/ura-releases-commercial/1494934.html Owners' bid to recover legal fees dismissed Judge rules unrecovered costs part and parcel of resolving disputes Source: Straits Times / Money A GROUP of minority owners who got the $500 million Horizon Towers sale killed in the High Court are not entitled to claim more than $500,000 in unrecovered legal costs as these are "a necessary incidence of litigation". The Court of Appeal upheld a decision by High Court Judge Vinodh Coomaraswamy who found that the minority owners have had their day in court and been awarded the appropriate costs. They are, therefore, precluded from bringing a separate action to recover $585,370 in unrecovered legal costs, the judge had found. Judge of Appeal Andrew Phang Boon Leong, who dismissed the minority owners' appeal last week, ruled that the "full recovery of legal costs by the successful party is the exception rather than the norm". "This state of affairs is not something which exists to prejudice the winning party in litigation, but is a manifestation of the law's policy of enhancing access to justice for all," he said. "Put another way, unrecovered legal costs are something which are part and parcel of resolving disputes by seeking recourse to our legal system, and all parties who come before our courts must accept this to be a necessary incidence of using the litigation process." That is because, in order to promote access to justice, a limit is typically imposed on the losing party's liability, and the successful party also has to accept that some of the costs incurred will remain unrecovered. The minority owners, Mr Then Khek Koon, his wife Jasmine Tan, Mr Rudy Darmawan, his wife Widia Seteono and Mr Darmawan's aunt Maryani Sadeli, were earlier awarded $354,370 by the Court of Appeal in a separate action after the deal was quashed. But that was not all they had asked for, leaving a gap between what they recovered and what they had to pay their lawyers. The minority owners went back to court in 2012 to argue that Mr Arjun Samtani, chairman of the first sales committee, and committee member Tan Kah Gee were obliged to compensate them for unrecovered costs. Both were named as prime movers of the sale in a 2009 ruling that quashed the deal. Mr Samtani, who is represented by Senior Counsel N. Sreenivasan of Straits Law, and Mr Tan, who is represented by Mr K. Anparasan of KhattarWong, contended that the claim is unsustainable since costs were already determined by the Court of Appeal. At that 2009 hearing, the minority owners did not seek any costs orders personally against them, they pointed out. Justice Coomaraswamy found that the owners were precluded from bringing their claim for costs as damages because they did have an opportunity earlier to seek an indemnity for their legal costs but "failed to grasp it". The Court of Appeal judge upheld the ruling, finding that it was "an abuse of process for them to now claim as damages the costs of those previous proceedings". The Court of Appeal awarded Mr Samtani and Mr Tan each $30,000 as costs of the appeal. The legal spat over Horizon Towers began in early 2007. The $500 million that Hotel Properties had offered for Horizon Towers in January 2007 was, at that time, the highest price paid for an en-bloc sale in Singapore. But when the property market started rising in early 2007, the minority owners contested the sale, saying the price was too low. They fought all the way to the Court of Appeal, which eventually killed the sale in 2009. By then, the courtroom battle had lasted 21/2 years and was estimated to have cost up to $4 million in lawyers' fees. -By Grace Leong Continental opens S$29.7m R&D extension building Source: Business Times / Companies & Markets German automotive supplier Continental has opened a S$29.7 million extension building to its research and development (R&D) centre in Singapore, in line with its expansion plans against the backdrop of Asia's growing automobile industry. -By Nisha Ramchandani http://www.businesstimes.com.sg/companies-markets/continental-opens-s297m-rd-extension-building Metro's new Centrepoint store to bring new shopping experience Industry watchers said the opening of Metro's new store comes amid an increasingly competitive landscape for department stores along Orchard Road, and Metro - like its competitors - will need to be innovative in order to draw in shoppers.Source: Channel News Asia / Singapore SINGAPORE: Local department store Metro celebrates the grand opening of its newest store at Centrepoint on Thursday (Nov 27). But industry watchers said this comes amid an increasingly competitive landscape for department stores along Orchard Road, and Metro - like its competitors - will need to be innovative in order to draw in shoppers. Metro is trying to widen its reach with its new store at Centrepoint. With 130,000 square feet of retail space spread over six floors, it is almost 70 per cent bigger than its fashion-focused store at Paragon. The new store is able to offer a wide range of products, including new offerings for home and lifestyle.
But Metro is aware of the need to offer shoppers a little extra. Hugh Kwan, branch manager at Metro, told Channel NewsAsia that the Centrepoint store offers different experiences. Male grooming service Sultans of Shave and cult beauty brand MD Dermatics will have a presence in Metro Centrepoint, while the store's bedshop will also offer monogram services. "We have a Bosch kitchen that focuses on engaging customers and we have a wellness room that is complete with anti-allergy, anti-dust mite and anti-bed bug products," Mr Kwan added. Industry watchers said that the department stores along Orchard Road are already facing increasing competition, with new retail and food & beverage outlets opening ahead of the upcoming festive season. Steven Goh, executive director of the Orchard Road Business Association, said: "We have seven department stores catering to families, young people and children. These seven department stores are very competitive. Each has its own identity. Each shopping centre and each department store will definitely, using window space and merchandising, create a differentiated experience." NEW STORE GIVES METRO OPPORTUNITY TO REDEFINE TARGET MARKET: EXPERTS Retail experts said that having the new outlet at Centrepoint gives Metro the opportunity to redefine its focus as it seeks to attract shoppers. S Ramaswami, Associate Professor of Marketing (Education) at Singapore Management University, said Metro has had some difficulty positioning itself in the local market. "Metro's old store was in Paragon, and from what we saw, it is not a very good match for Metro, as it is not quite an upscale department store, and in Paragon, it is surrounded by upscale stores. So by moving to a new location in Orchard Road, they have a chance to completely rebrand themselves," he said. Mr Ramaswami added that Metro could be looking for a different target market, either younger upscale consumers or family consumers. "They need to decide exactly who they are going to be for which consumer, and this is a great opportunity for Metro to capitalise on this location. In the long run, I think it is a good move for Metro but perhaps a bad phenomenon for the old Metro, which will slowly have to lose its consumers to the new store," he said. Across the retail industry, experts said the traditional one-stop shop department store concept is becoming outdated amid the growth of e-commerce. To stay competitive, they said department stores must offer a unique customer experience, perhaps through loyalty promotions and highly personalised services. - CNA/dl http://www.channelnewsasia.com/news/singapore/metro-s-new-centrepoint/1495220.html Companies' Brief Suntec Reit up again as it joins SiMSCI Trust replaces commodity group Olam International as a component of the MSCI Singapore IndexSource: Business Times / Companies & Markets Shares in Suntec Real Estate Investment Trust (Suntec Reit) extended their gains on Wednesday, hitting a new one-year high as the stock joined the MSCI Singapore Index (SiMSCI). Suntec Reit had on Wednesday replaced commodity play Olam International as a component of SiMSCI. -By Clarie Huang http://www.businesstimes.com.sg/companies-markets/suntec-reit-up-again-as-it-joins-simsci Suntec Reit Source: Business Times / Companies & Markets A huge volume of 129.3 million units in Suntec Reit changed hands just minutes after the 5pm closing on Tuesday, sending the counter to the top of the most actives list - 180.2 million units were traded, nine times Monday's trading volume. http://www.businesstimes.com.sg/companies-markets/brokers-take-24 Keppel DC Reit closer to IPO as it lodges preliminary prospectus Source: Business Times / Companies & Markets The much-awaited Keppel DC Reit initial public offering came a step closer to fruition after the firm lodged a preliminary prospectus on Wednesday for an offer to raise between S$496.5 million and S$513 million, which will make the listing the second biggest this year on the Singapore Exchange. -By Anita Gabriel Views, Reviews & Forum Govt's role to avert chaos in property market Source: Straits Times / Forum Letters LAST Friday's report ("More homes go under the hammer in weak market") was attention-grabbing but unlikely to cause any ripples in the financial and property markets. The situation today is completely different from the sudden and massive property meltdown in the mid-1980s. Back then, the Government stepped in quickly to calm the situation after a few commercial and residential property mortgages ended in grief as a result of hasty foreclosures by banks. The banks were told to show restraint, restructure mortgage loans, forgo calling in additional securities or margins, and defer loan repayments. The decisive government intervention averted a chain reaction in the jittery financial and property markets, and saved Singapore from chaos. In contrast, during the recent sub-prime property crisis, the United States government failed to act swiftly and decisively, causing a worldwide financial meltdown. A responsible government must be ready to reassure banks that it will step in as a last resort to fund the default repayments for owner-occupied properties (and not those of speculators) rather than let them go under the hammer. The government should retain liens on the properties, and the owners should repay the government on deferred terms with conditions attached on resale, possession and settlement. It is the government's responsibility to intervene with decisive initiatives to calm financial and property markets.
While the situation here has not reached crisis levels, I hope our Government will monitor it closely and not be caught off-guard. -By Tan Kok Tim Market conditions will ensure new equilibrium for property prices Source: Today Online / Voices The Property commentary “TDSR running out of steam?” (Nov 21) suggests the current decline in property prices of only 5.2 per cent from their peak could mean that the Total Debt Servicing Ratio (TDSR) is losing effectiveness in reducing prices further. The writer offers the radical view that the only way to ensure a further drop in private non-landed prices is to increase supply, especially as current demand is seemingly not waning and is, therefore, supporting present price levels. However, my take is that it is still the early days of a major correction in residential property prices; the signs suggest that this will happen in the next two years. Already, certain facts are evident. First, interest rates are on the rise. This will contribute to higher borrowing costs, particularly for the highly leveraged. Second, new buyers still face challenges in meeting the TDSR cap, which reduces the pool of potential buyers. Third, rental vacancies are rising, with more demanding tenants. While it is more difficult to rent out older homes, newer ones face the prospect of lower rents. Both will affect the cash flow for landlords to repay their mortgages. Fourth, the number of bank auctions for residential properties have jumped fivefold from last year. Even high-end homes and those in prime districts are not spared. (“More luxury homes go under the hammer as defaults spike”; Nov 15) Fifth, more than 80,000 private homes are coming on stream, with most to be completed next year and in 2016. This will aggravate the high vacancy level of more than 20,000 units. Singapore is potentially facing an imminent oversupply. Sixth, the global outlook remains fragile, with major economies such as the European Union and Japan bordering on recession, the United States showing a fragile recovery and China having its slowest growth in decades. In our highly-connected world, the misfortunes of major economies will have negative consequences for a small country such as Singapore. The biggest worry is unemployment. If this should rear its head here, one of the first casualties will be the property market and, hence, property prices. I expect the road ahead to be tough and uncertain. Prudent investors should be fine, but the more aggressive ones would pay the price of asset deflation, which may come sooner rather than later. The Government is wise not to dismantle the TDSR framework.
There is no need for fresh initiatives either. Market conditions will ensure a new equilibrium for property prices, which had risen too high and been unsustainable for the average Singaporean. -By Raymond Kok Bock Swi http://www.todayonline.com/voices/market-conditions-will-ensure-new-equilibrium-property-prices Global Economy & Global Real Estate Asia-Pac family offices put up weaker showing: survey Family offices in the region that missed expectations rose to 10 this year from none 12 months agoSource: Business Times / Real Estate For the first time in three years, some Asia-Pacific family offices have underperformed their investment benchmark, the first global study by UBS and Campden Research showed on Wednesday. This comes as family offices in the region, including those in Singapore, allocate more money to emerging economies than developed markets, compared to their global peers. -By Jamie Lee http://www.businesstimes.com.sg/real-estate/asia-pac-family-offices-put-up-weaker-showing-survey Property developers sell bonds to fund projects, spurn shadow banking Financing through sale of notes boosts transparency in sector flagged as the No 1 risk to the economySource: Business Times / Real Estate China's builders are selling more bonds and spurning shadow banking, boosting transparency in an industry flagged by regulators as the No 1 risk to the economy. Property companies have raised a record US$40 billion through international and domestic notes this year, up 31 per cent from 2013, data compiled by Bloomberg show. PBOC interest rate cut seen halting home sales slide as sentiment turns Cut is equivalent to 2.5% reduction on a 1m yuan apartmentSource: Business Times / Real Estate China Rate Cut Seen Halting Home Sales Slides as Sentiment Turns Source: Bloomberg / Luxury China’s first interest-rate cut since 2012 is set to halt a slide in property sales, reducing developers’ stock of unsold homes that has weighed on prices. The central bank’s surprise reduction in its benchmark rate on Nov. 21 adds to discounts of as much as 12 percent on mortgages banks are already offering to first-home buyers, according to SouFun Holdings Ltd. China’s home sales and prices have declined this year after four years of property curbs to stem speculation. Sales slumped 10 percent in the first 10 months from a year earlier and prices fell in all but one of the 70 cities tracked by the government in the past two months. The rate cut “is a strong catalyst for the China property sector,” said Johnson Hu, Hong Kong-based property analyst at CIMB Securities Research. “Home buyers may see it as a signal of property market stabilization, lifting sentiment and thus boosting home sales and lowering housing inventory.” The PBOC pared its benchmark for loans longer than five years, on which Chinese banks price their mortgages, by 40 basis points to 6.15 percent. Lenders’ weighted average mortgage rate climbed 76 basis points over two years, amid higher funding costs and default risks, to 6.96 percent in the third quarter, Essence Securities Co. analysts led by Beijing-based Wan Zhi wrote in a Nov. 24 report. With the world’s second-largest economy heading for its weakest annual growth since 1990, economists at JPMorgan Chase & Co., Barclays Plc and UBS AG predicted more rate cuts by the People’s Bank of China after regional authorities’ easing of local curbs failed to stem a slide in sales and prices. More Cuts“If interest rates are cut a few more times, as is the expectation now in the market, the impact will certainly be bigger,” said Gao Jian, a Shanghai-based analyst at Northeast Securities Co. “Should sales keep rising, prices surely will go up too.” He predicted single-digit growth in home sales next year. The PBOC cut is equivalent to about a 2.5 percent reduction on a 1 million yuan ($162,900) apartment, according to Barclays. China’s average new-home prices fell 1.9 percent this year through October, according to SouFun, which tracks 100 cities. The central bank in September made it easier for people to obtain mortgages to stem the slide in property prices. It extended preferential treatment originally available to first-home buyers, including a 30 percent down payment and mortgage-rate discounts of as much as 30 percent, to people buying a second home as long as they’ve paid off existing debts. Cheaper MortgagesIn the four-year campaign to stem a surge in home prices, the government raised the down payment for second-home buyers to 60 percent and suspended lending to people buying a third property. Many cities also imposed restrictions on the number of homes residents could buy. Most of those measures have been eased or removed this year. In Beijing, more than half of the banks have started offering discounts of as much as 10 percent on first-home mortgages, according to Bacic & 5i5j Group, the city’s second-biggest realtor for existing homes. Some banks in Qingdao in eastern Shangdong province provided 12 percent reductions, according to SouFun. Major banks in Shanghai, which are granting discounts of about 5 percent to first-home buyers, are likely to increase them to about 10 percent early next year, CIMB’s Hu said. Buying IntentionsMore than 40 percent of respondents in a SouFun online survey said they would bring forward their home-purchase plans after the central bank’s rate cut, according to results published by the nation’s biggest real estate website owner as of Nov. 24. Almost 60 percent of the participants in the survey said home prices will rebound in Shanghai after the rate reduction. Prices in the city fell 0.6 percent in October from the previous month and 2 percent from a year earlier, official data show. “Developers may gradually narrow the price discounts at new launches, or even start to raise prices” in the first quarter of next year, Bocom International Holdings Co.’s Hong Kong-based analystAlfred Lau wrote in a Nov. 24 report. The rate cut will ease developers’ financing costs, potentially saving them a combined 4.6 billion yuan in annual interest payments, equivalent to 3 percent of the 136 listed homebuilders’ net income this year, according to UBS. It’s time to overweight property stocks as housing sales may rise 5 percent next year, according to China International Capital Corp. Vanke, PolyDevelopers such as China Vanke Co. (2202), Poly Real Estate Group (600048) Co. and CIFI Holdings (Group) Co. will benefit the most because they focus on residential, mass-market housing and have a higher portion of their total borrowings from domestic banks, according to Moody’s Investors Service. “The rate cut should spur residential property sales in the next few months in conjunction with the PBOC’s mortgage-policy relaxation” on Sept. 30, Moody’s senior analyst Franco Leung wrote in a report. As mass-market buyers generally rely on mortgage financing, “expectations that borrowing costs will decline will likely encourage them to purchase homes, which will boost sales volumes for developers.” Moody’s expects developers’ sales will likely move closer to their 2014 full-year targets. Developers should view the PBOC easing as a “good opportunity” to clear inventories rather than raise prices, Haitong International Securities Co.’s Hong Kong-based analyst Hugo Hou wrote in a report on Nov. 24, citing widespread oversupply and uncertainties, including a potential property tax. It’s “time for destocking, not celebrating.” -By Bloomberg News Vietnam relaxes foreign property ownership rule It expands criteria for foreigners to buy homes with the aim to create favourable conditions to draw foreign investmentSource: Business Times / Real Estate http://www.businesstimes.com.sg/real-estate/vietnam-relaxes-foreign-property-ownership-rule Vietnam Expands Foreign Property Ownership to Boost Economy Source: Bloomberg / News Vietnamese lawmakers approved a law allowing broad foreign ownership of property, as the government seeks to boost an ailing real-estate market and accelerate economic growth. Foreigners with a valid visa as well as foreign companies and international organizations operating in Vietnam now will be permitted to purchase houses and apartments, according to the National Assembly’s website yesterday. Current laws restrict ownership to foreigners married to Vietnamese and those foreigners deemed to make significant contributions to the nation’s development. The law is the latest government move to help bolster the property market, following a housing stimulus program and a low-cost home loan package. Vietnam is stepping up efforts to boost economic growth to 5.8 percent this year and clear up bad debts in the financial system, some of which are tied to property. “It is a very helpful move, a good change of policy to open up the real estate sector not only for overseas Vietnamese, but also for foreigners,” said Alan Pham, the Ho Chi Minh City-based chief economist at VinaCapital Group. “It projects an image of an opening of the economy to foreign capital, and it might help the bad debt problem.” Real estate stocks rose. Khang An Investment Real Estate JSC leading gainers, jumped 6.7 percent, and Ba Ria-Vung Tau House Development JSC rallied 5.3 percent as of 12:16 p.m. in Ho Chi Minh City trading. The benchmark VN Index (VNINDEX) climbed 0.1 percent. More Attractive“It makes the market more attractive to Vietnam-based expats that want to buy in Vietnam,” Marc Townsend, the Ho Chi Minh City-based managing director of CBRE Group Inc.’s Vietnam unit. “The residential market is already improving so the actual implications may not be felt for a long time.” The new rules also allow maximum foreign ownership of 30 percent in any apartment building or 250 houses in a ward. Vietnamese property inventories dropped about 13 percent to 82.3 trillion dong ($3.85 billion) as of Aug. 20 from a year earlier, according to the construction ministry. The number of unsold apartments was about 17,000 units nationwide. The real estate market remains frozen and parts of the sector are unlikely to bounce back soon, the World Bank said in a July report. “Expanding the criteria for people to buy and own houses in Vietnam aims to create favorable conditions to draw foreign investment,” Uong Chu Luu, National Assembly’s vice chairman said in a statement released at the legislature yesterday. Under Vietnam’s constitution, all land belongs to the state. Land-lease certificates good for a maximum of 50 years are granted in real-estate purchases. -By Nguyen Dieu Tu Uyen and Mai Ngoc Chau Al-Futtaim to invest US$700m in Egypt Source: Business Times / Real Estate http://www.businesstimes.com.sg/real-estate/al-futtaim-to-invest-us700m-in-egypt Rockefellers to give up office occupied since 1933 Source: Business Times / Real Estate http://www.businesstimes.com.sg/real-estate/rockefellers-to-give-up-office-occupied-since-1933 US luxury home sales slowing from Miami to Los Angeles Rising prices, strengthening currency discourage foreign investors, who helped lead the recovery, from buyingSource: Business Times / Real Estate http://www.businesstimes.com.sg/real-estate/us-luxury-home-sales-slowing-from-miami-to-los-angeles Newly built financial district a veritable Potemkin Wall Street Vacancy rates have become acute as its problems reflect the broader issues in the Russian economySource: Business Times / Real Estate 'Not the best time' to open Europe's biggest mall Source: Business Times / Real Estate http://www.businesstimes.com.sg/real-estate/not-the-best-time-to-open-europes-biggest-mall UK mortgage lenders' profit growth faltering Potential homebuyers are pulling back before next year's elections, regulators have tightened financingSource: Business Times / Real Estate http://www.businesstimes.com.sg/real-estate/uk-mortgage-lenders-profit-growth-faltering U.K. Mortgage Lenders Face Earnings Slowdown on Housing Source: Bloomberg / Personal Finance Britain’s biggest mortgage lenders face weakening earnings growth as potential homebuyers pull back before next year’s general election, regulators tighten financing and the economy slows. Nationwide Building Society, the U.K.’s third-largest mortgage lender, yesterday reported a 36 percent slump in home loans in the six months through September, an indicator that other banks may encounter a similar slowdown. Lloyds Banking Group Plc (LLOY), the country’s largest mortgage provider, this month had its shares rating cut twice in less than a week and faces the greatest risk to its earnings’ growth, according to analysts. “A meaningful slowdown in mortgage activity is likely to lead to faltering earnings growth and certainly higher-end earnings estimates are probably under threat,” said Simon Willis, an analyst at Daniel Stewart Securities Plc in London. “A slowing housing market has to have a drag effect, particularly for Lloyds because they’ve got the biggest market share.” Lloyds shares were unchanged at 79.59 pence at 1:25 p.m. in London. They have increased about 1 percent this year, while Royal Bank of Scotland Group Plc has gained 14 percent. Europe SlowsDemand for homes is falling as more stringent lending criteria make it harder for buyers to get mortgages. The slowdown is led by London, where sluggish wage growth and the possibility of a tax on homes valued at more than 2 million pounds ($3.1 million) after the election pushed demand to a six-year low. U.K. lenders issued 2 percent fewer home loans last month compared with September, according to the British Bankers’ Association. The cooling comes as the Bank of England cut its economic forecasts for the country this month because of weak global expansion and the “specter” of stagnation in Europe. “There’s lot of reasons for consumers to be a little bit cautious and uncertain,” Nationwide Finance Director Mark Rennison said by telephone. “There was a lot of speculation on whether house prices were overheating. Now there’s increasingly speculation about the general election and what housing policy might be depending on which party gets elected.” ‘Further Moderation’Loans and advances to customers at Lloyds, which includes mortgages and unsecured lending, fell 2 percent to 486.3 billion pounds by the end of September, the bank said Oct. 28. The stock of home loans at Santander UK Plc, the nation’s No. 2 mortgage lender, rose 1 percent to 150 billion pounds at the end of September from a year earlier, the company said this month. A spokesman for Santander said Britain’s economy would continue to grow, though at a slower pace than earlier this year, to help boost the housing market. He didn’t comment on the impact on the bank. Housing demand has slowed since the summer, while a “further moderation in house price growth is likely next year,” said Martin Ellis, housing economist at Halifax, a unit of Lloyds. A spokeswoman for Lloyds didn’t comment on the impact on the bank. BOE Governor Mark Carney announced measures to limit mortgage lending as climbing house prices outpace wage growth. These include curbs on how much banks can lend relative to a borrower’s income, and requirements that banks refuse loans to homebuyers who fail a stress test that assumes an immediate 3 percentage-point increase in the benchmark interest rate. New CompetitionMortgage rates are being squeezed lower by increased competition among banks to win customers, hurting the profit lenders can make on home loans. “Competition from lenders is significantly greater now than it has been for some time,” said Ray Boulger, senior technical manager at mortgage broker John Charcol Ltd. in London. “A few new lenders are coming in, some are expanding their propositions and we have a market that’s flat-lining -- that brings about more competition.” Smaller lenders such as the Paragon Group Cos. and Coventry Building Society are seeking to win customers, while Britain’s biggest banks want to lend more after a period of slow loan growth to help preserve capital to meet regulatory requirements. Prices ClimbNew lending at Coventry rose 17 percent to 3.4 billion pounds in the six months through June from the same period a year earlier, it said Aug. 1. Lloyds plans to increase its core loan book by 30 billion pounds over the next three years, it said last month. “Banks were in the market and then decided to take a step back,” said Nationwide’s Rennison. “All of that has fallen away and everybody is now competing in quite normal terms.” House prices in the U.K.’s 20 largest cities climbed by five percent during the 12 months through October, according to property researcher Hometrack Ltd. That’s more than three times the average growth in U.K. earnings. The opposition Labour party plans to raise 1.2 billion pounds from an annual tax on homes valued at more than 2 million pounds, with overseas-based owners of second homes paying more than those in the U.K. Buyers from the Middle East and Asia are already being squeezed by a rising British pound as well as levies imposed by Prime Minister David Cameron’s government. In a further sign that the housing market is cooling, the BBA said its members granted 37,076 home loans in October, down from a revised 39,127 the previous month. “This appears to extend a trend of softening demand, which is not encouraging,” Ian Gordon, an analyst at Investec Ltd. in London, said in a note to clients. “A tightening of lending criteria has been the most significant factor in choking off demand. Political instability ahead of the 2015 general election may also prove unhelpful.” -By Richard Partington and Patrick Gower Italy home sales rebound as prices continue to fall Source: Business Times / Real Estate http://www.businesstimes.com.sg/real-estate/italy-home-sales-rebound-as-prices-continue-to-fall Italian Home Sales Rebounding After Eight-Year Slump Source: Bloomberg / Luxury As home prices in Italy fall for the seventh year, buyers have stopped waiting for the bottom. Sales of existing homes will increase 3.7 percent this year, marking the first gain since 2006, researcher Nomisma Institute said in a report in November. Purchases in Rome, Florence, Genoa and Bologna rose more than 10 percent in the third quarter from a year earlier, Italy’s revenue agency said. Homebuyers are taking advantage of the lowest mortgage costs since 2011 even as the economy contracts and prices continue to fall. An increase in sales may help lenders begin to shore up balance sheets burdened with real estate collateral that’s been losing value. “If the property market recovers, it will be possible to review the value of collateral of nonperforming loans,” Carlo Messina, chief executive officer of Intesa SanPaolo SpA (ISP), Italy’s second-biggest bank, told reporters on Nov. 18. “This will improve the lenders’ relative positions.” Mortgage rates have lured Italians back to the market. The average rate for new loans fell in September to 3.27 percent, according to data provided from the European Central Bank. That was the lowest level since the first half of 2011, before the country’s longest economic contraction on record began. Rates have been declining steadily since 2012 and the drop accelerated this year as the effect of lower ECB rates filtered down to the countries. Italy’s average mortgage rate is still 0.3 percentage point higher than the euro-area average. Price DeclinesHome purchases rose 3.6 percent in the third quarter from a year earlier, the revenue agency said on Nov. 20. Sales in Italy’s biggest cities increased an average of 9.6 percent. The gains come as Italy’s recession enters its fourth year, with unemployment at record highs and youth joblessness of more than 40 percent. The Organization for Economic Cooperation and Development said in a report this week that it expects Italy’s home values to drop 4 percent in 2014. Prices have fallen 16 percent since 2008, data compiled by Bloomberg show. Fitch Ratings predicted a further decline before the market stabilizes in the next two years. “While the drop in values was enough to convince some to invest, many others still find it hard to get a mortgage and prices will keep falling,” said Luca Dondi, director general of Bologna-based Nomisma. “The increase in sales may go on, although at a contained pace.” Mortgage ApplicationsNomisma estimates that there will be about 400,000 transactions this year, and Dondi said sales in 2015 will be at least that high. Purchases exceeded 800,000 at the 2006 peak. The recovery in home buying this year is much weaker than previous rebounds in 1976, 1985 and 1997, Nomisma said in a report this month. “It’s far too early to say whether such a rise in transactions, which is mainly due to more favorable credit conditions, precedes a full recovery of the real estate market,” said Loredana Federico, a Milan-based economist for UniCredit SpA. In October, home mortgage applications rose 22.1 percent from a year earlier, the biggest increase since 2009, credit adviser CRIF said in a report. Lending for home purchases climbed 6.2 percent in the first quarter from the same period of 2013, the most recent data available, CRIF said in June. Bank Burden“This shows that there is a rising demand for credit,” Nomisma’s Dondi said. “The growth outlook in coming months may be key to make banks more confident and prompt them to ease the financial conditions in order to meet that demand.” Consumer confidence unexpectedly fell in November to the lowest since February as households remained pessimistic about job growth, statistics agency Istat said in a report today. A rebound in purchases is poised to help some of Italy’s big banks, which are suffering from bad loans backed by real estate that has lost value over 13 quarters of economic decline. Following the ECB’s asset quality review, Italian lenders had to raise provisions by 11.8 billion euros, more than any other nation in the euro zone, according to Bloomberg Intelligence. Intesa had to increase the amount it sets aside against loan losses by 88 percentage points after including collateral in the second quarter, the BI analysts said. “The mortgage market is recovering, the potential growth of transactions is gaining strength,” said Messina of Milan-based Intesa. “We may have to wait until after 2015” for prices to rebound, “but it’s clear that a path is now laid out towards recovery.” Property TaxThe government could add to the market’s momentum through its property-tax policy. A recurring tax on first homes has been introduced twice and halted twice since 2008 and the prospect of a new levy is creating uncertainty that weighs on property sales, Rome-based Bank of Italy said in its financial stability report on Nov. 13. “Demand for homes is still very much weakened by the high and ever-changing taxation of main and non-main residences,” said Paolo Righi, head of Italy’s FIAIP real estate federation. “The government could effectively favor a recovery of the market by reducing or at least making the taxation more owner-friendly.” Less than one-third of the nation’s real estate agents expect conditions in the housing market to improve over the next two years, according to a quarterly survey based on 1,395 interviews, a Nov. 11 report by the Bank of Italy showed. -By Lorenzo Totaro http://www.bloomberg.com/news/2014-11-26/italian-home-sales-rebounding-after-eight-year-slump.html Fewer New U.S. Homes Sold in October Than Economists Forecast Source: Bloomberg / Luxury New homes in the U.S. sold at a slower pace than forecast in October as builders focused on meeting demand at the upper end of the market. Purchases climbed 0.7 percent to a 458,000 annualized pace from a revised 455,000 rate in September that was lower than initially reported, data from the Commerce Department showed today in Washington. The median forecast of 73 economists surveyed by Bloomberg News called for the pace to accelerate to 471,000. The median price of a home surged to a record. Strict lending rules and slow wage growth have hampered first-time buyers, prompting builders to cater instead to upper-income customers who are able to get financing or pay cash. Bigger gains in employment and wages would stoke a more-rapid and balanced recovery. “You’re dealing with the aftermath of the crisis,” Jacob Oubina, senior U.S. economist at RBC Capital Markets LLC in New York, said before the report. “Builders have been optimistic for quite a while now but they haven’t seen that translate into actual activity.” Other reports today showed consumer spending climbed in October at the same pace as incomes, more Americans than forecast filed for unemployment benefits last week, and demand for capital goods unexpectedly dropped in October for a second month. Household expenditures increased 0.2 percent last month after being little changed in September, according to Commerce Department Incomes also rose 0.2 percent, less than projected, showing households are staying within their means as the holiday-shopping season begins. More ClaimsJobless claims increased by 21,000 to 313,000 in the week ended Nov. 22, the highest since early September, from 292,000 in the prior period, indicating the pace of improvement in the labor market has cooled, according to figures from the Labor Department. Orders for non-military durable goods excluding aircraft, a proxy for future business investment in new equipment, fell 1.3 percent last month, the same as in September, a report from the Commerce Department showed. Economists’ estimates for new-home sales in the Bloomberg survey ranged from 425,000 to 505,000. Sales rates were revised down from July through September. The median sales price of a new house surged 15.4 percent in October from a year ago to $305,000, the highest on record, today’s Commerce Department report showed. Regional BreakdownPurchases rose in two of four U.S. regions, led by a 15.8 percent gain in the Midwest. The stock of new homes hasn’t kept up with population growth since the recession, giving builders reason for optimism, said Brent Anderson, vice president at Meritage Homes Corp. (MTH) For every housing unit in the U.S. there are 2.6 jobs, more than double the historical number, Anderson said. “That suggests there is quite a bit of pent-up demand that has not been satisfied yet,” he said at a Nov. 20 conference. The builder, based in Scottsdale, Arizona, has 225 communities in nine states, including California and Texas. “We think that we’re still in the early stages of the recovery,” Anderson said. “The underlying drivers of demand, which are population growth, job growth, affordability, household formations are strong arguments for that growth to continue.” New-home sales, which last year accounted for about 5 percent of the residential market, are tabulated when contracts are signed, making them a timelier barometer than transactions on existing homes. Existing HomesPurchases of previously owned houses reached a one-year high in October, selling at a 5.26 million annual pace, the National Association of Realtors reported Nov. 20. It was the fifth consecutive month that the pace of sales topped 5 million. While the housing recovery has been held back by stringent mortgage underwriting, borrowing costs are near historic lows for those who can obtain credit. The average 30-year, fixed-rate mortgage was 3.99 percent in the week ended Nov. 20, down from 4.22 percent a year ago, according to data from Freddie Mac in McLean, Virginia. In November 2012, the rate fell to 3.31 percent, the lowest since records began in 1971. -By Lorraine Woellert Markets Need Builders Not Traders for Stability: Sabia Source: Bloomberg / News Markets need more investors acting like builders than looking for short-term gains to reduce expected volatility in the coming years, said Michael Sabia, who runs Canada’s second-largest pension fund manager. “You have a world of uneven growth, a fragile economy, not a world in crisis, but one that is hanging onto growth by its fingernails,” Sabia, chief executive officer of the Caisse de Depot et Placement du Quebec, said today in a speech in Toronto. Long-term investors like the Caisse are willing to weather the short-term fluctuations in the market, and help encourage CEOs to look past near-term gains in favor of building a sustainable business. “We’re builders, not traders,” Sabia said. Montreal-based Caisse oversees C$215 billion ($191 billion) in assets, and has been scouring the globe for real estate, infrastructure and other businesses opportunities. Such investments should provide stability through the volatile markets he expects in 2015 and 2016 as central banks scale back on their stimulus plans, Sabia said in an interview at Bloomberg’s headquarters in New York on Nov. 20. Ivanhoe Cambridge Inc., the Caisse’s real estate arm, has been particularly active in the U.S. this year. Ivanhoe agreed earlier this week to acquire two adjoining office buildings in downtown Seattle for $280 million. Ivanhoe last week also agreed to buy Manhattan’s 1095 Avenue of the Americas, a 42-story office tower on Bryant Park, from Blackstone Group LP for about $2.25 billion, Sabia confirmed during his speech. Sabia has said there are plenty of investment opportunities in the U.S., in particular in developing its crumbling infrastructure, if state governments would only open the doors to outside investors like the Caisse. “Even in the face of volatility and slower global growth there are opportunities if you know where to look, know what you’re doing and have the right partners,” Sabia said. -By Scott Deveau http://www.bloomberg.com/news/2014-11-26/markets-need-builders-not-traders-for-stability-sabia.html Irish Home Prices Surge as Payrolls Rise to Highest Since 2009 Source: Bloomberg / Luxury Irish home prices rose at the fastest pace in October since June, as employment rose to the highest since the end of 2009. Home prices rose 2.9 percent from September, the Central Statistics Office said today. Prices climbed 16 percent in the year. Ireland’s economy is showing signs of recovering from the worst recession on record. Payrolls climbed 1.5 percent in the third quarter from a year earlier, the statistics office said in a separate report, as companies from Google Inc. (GOOG) to Facebook Inc. help underpin jobs growth in the Irish capital, Dublin. “The labour market data provide the most unambiguous indication of the growth in the Irish economy,” said Dermot O’Leary, an economist at Goodbody Stockbrokers in Dublin. “While the annual rate of growth has slowed in recent quarters, it is impressive nonetheless.” Ireland exited its international bailout program in December and the economy is growing faster than anywhere else in the euro region. At 1.45 percent today, Irish 10-year bond yields were lower than those of Spain, Italy and the U.K. -By Dara Doyle Wolseley Posts Record Growth in U.S. as Housing Market Recovers Source: Bloomberg / Luxury Wolseley Plc (WOS) said first-quarter U.S. sales remained “strong” as the British distributor of building materials and bathroom supplies gained market share amid signs of sustained growth in the U.S. housing market. Revenue from the Reading, England-based company’s U.S. unit gained 11 percent in the three months ended October to 2 billion pounds ($3.1 billion), the company said in statement today. Sales in Central Europe and France declined 14 percent to 225 million pounds, paring group sales growth for ongoing businesses to 5.2 percent at 3.5 billion pounds. Wolseley has been pursuing growth in its U.S. division, where the market is growing at a rate of about 5 percent, and where the company has been able to to reduce margin costs, boost market share and expand with small bolt-on acquisitions. “We’re growing strongly in a decent market and taking good market share gain,” Chief Financial Officer John Martin said in a phone interview. “These results are just in line, they’re exactly where we should be at this time in the year and in a sense we’re pleased with that.” Sustained growth in the U.S. housing market has encouraged homeowners to spend on renovations, sales figures from Lowe’s Cos. showed last week. The second-largest U.S. home-improvement retailer reported Nov. 19 that receipts climbed 5.6 percent in the three months through Oct. 31 from a year earlier. France DraggingFeeble demand has stuttered the company’s sales in Central Europe even as the European Central Bank has attempted to stir growth with record-low interest rates. The company’s business in France was dragging, as the country’s number of new construction projects slowed to below 300,000, Martin said. “It’s certainly very tough, particularly France is really difficult,” Martin said. “The good news for us is it’s by far the smallest segment. We have to be better and better to carry on making the same returns essentially in Europe, just because the underlying market growth is so much lower.” The company’s net margins across operations in North America, the Nordic region, U.K. and continental Europe, were approaching record levels, Martin said. Plans for further acquisitions, to add to the four purchases made in the first quarter, will predominantly support U.S. growth. “We have a really great balance sheet, we have plenty facilities, so we can do those acquisitions which come up and to which we can add value,” he said. The company’s stock was little changed at 10:33 a.m. in London at 3,567 pence. The shares have gained 4 percent this year for a market value of 9.3 billion pounds. -By Benjamin Katz Starwood Waypoint Said to Prepare Its First Sale of Bonds Source: Bloomberg / Luxury Starwood Waypoint Residential Trust (SWAY), a U.S. single-family home landlord, plans to offer $505 million of debt tied to its rental properties in its first bond sale, according to a person with knowledge of the transaction. The company, whose chairman is Barry Sternlicht, is working with JPMorgan Chase & Co., Citigroup Inc. and Deutsche Bank AG to sell the securities, which will be marketed starting next week, said the person, who asked not to be identified because the plans are private. The debt will have a floating interest rate and a loan-to-value ratio of 70 percent, and will be rated by Moody’s Investors Service Inc., Kroll Bond Rating Agency and Morningstar Inc., the person said. Jason Chudoba, a spokesman for Oakland, California-based Starwood Waypoint; Amanda Williams, a Deutsche Bank representative; Jessica Francisco, a JPMorgan spokeswoman; and Danielle Romero-Apsilos, a Citigroup representative, declined to comment on the offering. Corporate single-family landlords already have issued more than $6.5 billion of securities backed by mortgages on about 46,000 rental homes in the past year, data compiled by Bloomberg show. The first of these bonds were sold a year ago by Blackstone Group LP’s Invitation Homes. Private-equity firms, hedge funds and other institutional investors started a $25 billion home-buying binge in 2012, seeking to benefit from low property prices and rising demand for rentals. Starwood Waypoint controls about 10,430 homes and 4,695 non-performing loans, with a focus on Florida and Texas and a total value of almost $1.57 billion, as of Sept. 30, according to regulatory filings. More OfferingsThe supply of bonds backed by mortgages on rental homes has outpaced demand, with investors seeking greater yield spreads over benchmark rates. Bond offerings stand to increase when firms such as Blackstone, Cerberus Capital Management LP and Colony Capital LLC bundle their loans to smaller landlords into bonds resembling multiborrower commercial mortgage-backed securities, which the firms expect to begin marketing next year. The market for bonds tied to rental homes has the potential to grow to as much as $65 billion, with about $30 billion of new issuance a year, as the industry expands and securities are refinanced, Jade Rahmani, a Keefe, Bruyette & Woods Inc. analyst, said in a report last month. That compares with about $550 billion for the commercial mortgage-backed securities market. -By Heather Perlberg and John Gittelsohn Additional Articles of Interest - Local & Overseas Real Estate |
