Real News‎ > ‎2014‎ > ‎November 2014‎ > ‎

28th November 2014

Singapore Economy

Financials are sound, but watch growing debt: MAS

Source: Straits Times / Money

SINGAPORE'S financial markets and banking system have stayed resilient amid muted economic growth, but growing debt among companies and households, and elevated property prices, continue to warrant close monitoring.

This encapsulates the Monetary Authority of Singapore's (MAS) view of the state of financial stability here.

Corporate and household balance sheets are still healthy overall, the MAS said in its latest Financial Stability Review, which it published yesterday.

But it reiterated a warning it has sounded before, that highly indebted households could be vulnerable should interest rates rise or the economy slow down.

Private residential property prices have moderated, but remain at an elevated level, it said, adding that it will continue to monitor the market and take appropriate action when needed.

Property developers have recently begun calling on the Government to review, and maybe ease, some of the cooling measures that have led to home sales and prices to dropping this year.

On Wednesday, the president of the Real Estate Developers' Association of Singapore, Mr Chia Boon Kuah, warned the property sector could be heading for major trouble unless the Government took "supportive measures".

But the MAS made no indication that it was about to change its stance on the property curbs it has put in place.

"Property developers are not crying wolf," said Mizuho Bank senior economist Vishnu Varathan.

"Transactions have dropped quite a bit, but price adjustments have been quite modest.

"I think the MAS sees that the price run-up was prolonged and acute, and they are quite happy for this modest pace of price reductions to continue."

Meanwhile, local banks' asset quality is healthy, capital buffers are well above regulatory requirements and liquidity positions are sound, the MAS said.

However, foreign currency exposures in the banking system have risen alongside the growth in cross-border lending, it noted. A tightening of global liquidity conditions could pose funding risks to the banks.

OCBC economist Selena Ling said this would happen if foreign investors start pulling their money out of Asia and putting it back into developed markets.

"In the last three to five years, foreign funds came to Asia for higher returns and foreign exchange appreciation," she noted.

"But now, with weakening Asian currencies and monetary easing in Japan and China that's causing rates to fall, that draw is no longer there."

-By Yasmine Yahya, Assistant Money Editor

Singapore Real Estate

Private property prices still elevated: MAS

This could mean call to roll back cooling measures premature

Source: Business Times / Banking & Finance

THE cooling measures in the property sector have had a clear drag on demand in housing loans, yet private home prices simply have not fallen enough, data from the Monetary Authority of Singapore (MAS) suggested on Thursday.

This likely backs the government's case for keeping the regulations in place - despite calls from the property industry to relax certain measures - particularly as the banking industry appears to be able to handle potential stresses in the market.

Prices in the private housing market have declined for four consecutive quarters, by a cumulative of nearly 4 per cent since the fourth quarter of 2013

As a result, household wealth in Singapore - which is close to S$1.5 trillion - rose just 1.4 per cent in the third quarter compared to a year ago, slower than the five-year average rate of 7.9 per cent per annum.

Still, the lower prices compare with a 62 per cent jump in prices from the post-crisis trough in the second quarter of 2009.

"While prices have moderated following the series of property measures introduced since 2009, they remain at an elevated level," MAS said.

The Real Estate Developers' Association of Singapore this week called on the government to "stand ready to take supportive measures to prevent a tipping point" if the market turns sour.

Housing loans grew just 6 per cent in September 2014 from a year ago, compared to the peak of 23 per cent in August 2010. Borrowers who took more than one housing loan accounted for 15 per cent of all new housing loans as at the third quarter of this year, half of the 30 per cent in 2011.

Volume of new housing loans, which follows housing transactions, contracted from S$11.4 billion in the second quarter of last year to S$6.7 billion in the third quarter of this year. The banking system's housing non-performing loan (NPL) ratio - referring to loans that are more than 90 days past due - ticked higher to 0.36 per cent in the third quarter of this year, compared to 0.28 per cent in the first quarter of the year.

But this was due mainly to a handful of defaults for high-end housing projects - some of which were reflected in the publicly available loan books of UOB. Overall NPL ratio for housing loans remains very low.

Under MAS's stress test - which could include a collapse of US economic growth, a eurozone crisis, and a pallid Chinese economy - the housing NPL ratios would remain under 6 per cent. Banks would also still meet their minimum regulatory total capital adequacy ratio requirement of 10 per cent in that situation.

There are no clear data points that show how affordable a private home should be, when measured against income. Between 2008 and 2013, the median monthly household income of residents rose by 11 per cent in real terms, but this is likely more useful when comparing against the rise of prices of HDBs flats. Eight in 10 in Singapore live in public housing.

MAS also warned of the risks behind overseas property purchases, loans for which make up less than 2 per cent of total housing loan exposures for banks based here.

One safeguard, though, is that these loans would still be subject to the TDSR (Total Debt Servicing Ratio), since they are taken in Singapore.

MAS also noted that S-Reits, or Singapore's real estate investment trusts, have shown better debt management. During the crisis, S-Reits experienced refinancing pressure when about one-third of their debt matured within the same year in 2009.

The weighted-average debt maturity of the S-Reit sector has increased to 3.2 years in 2013 from 2.1 years at the end of 2008. They have also used derivatives to hedge against the risk of rising interest rates.

-By Jamie Lee

Fewer buying overseas homes as rate hike looms

Cooling measures and softening economy also dampening demand

Source: Straits Times / Top of The News

A SOBERING mix of property curbs, a softening economy and the prospect of higher interest rates seems to have cooled the Singaporean fervour for property, both at home and abroad.

On the home front, the growth in outstanding property loans moderated and the volume of new loans shrank considerably.

Overseas, Singaporeans bought about $1.1 billion worth of residential properties in the first half of this year, down from about $1.6 billion in the same period last year, the Monetary Authority of Singapore (MAS) said.

For the whole of last year, Singaporeans had snapped up $3 billion worth of overseas homes, up from $1.9 billion in 2012.

"Nonetheless, real estate agencies in Singapore have seen increased interest in overseas property purchases, from across a broader spectrum of Singapore buyers," MAS said in its Financial Stability Review yesterday.

Properties in Britain, Malaysia and Australia accounted for 91 per cent of total transactions by value in the first six months of this year and 76 per cent by number, MAS said. Singaporeans also bought homes in Japan, the Philippines and Thailand.

The data is based on an MAS survey that collected figures on overseas properties transacted by real estate agencies in Singapore.

Mr Getty Goh, director of property research firm Ascendant Assets, said he has seen a pullback in the number of Singaporean clients committing to foreign property this year.

"The market is less certain these days with things like stimulus tapering taking effect in the United States and an interest rate hike coming up," he said. "On top of that, local investors see the Singapore market cooling and so they are actually saving their bullets as they anticipate that at some point they may want to re-enter the Singapore market when prices come down enough, rather than commit to an overseas property now."

Despite the strong take-up of foreign homes over the past few years, local banks' exposure to foreign property loans remained low, MAS said, comprising less than 2 per cent of their total housing loan books.

At home, property cooling measures have tempered the growth of outstanding housing loans, it noted. At its peak, the volume of outstanding property loans grew 23 per cent year on year in August 2010. But in September this year, outstanding property loans grew just 6 per cent from a year ago.

The volume of new housing loans, which generally track housing transactions, contracted from $11.4 billion in the second quarter of last year to $6.7 billion in the third quarter of this year.

Singaporeans are also more prudent when taking out loans. For example, the average tenor of new private housing loans has declined, from 30 years in 2012 to 25 years in the third quarter of this year.

A slight uptick in the banks' non-performing loans (NPL) ratio from 0.28 per cent to 0.36 per cent between the first and third quarters of 2014 was due to "a handful" of defaults for high-end housing projects, MAS said.

United Overseas Bank said in its third-quarter results last month that its overall NPL ratio held steady from a year ago, but the value of bad housing loans as a share of its housing loan book had risen. Still, investor relations head Jimmy Koh said: "Even with a possible rise in the interest rate environment, no material deterioration is expected."

OCBC said last month non-performing housing loans rose 20 per cent from a year ago, but the ratio of such loans to its total mortgage book fell to 0.5 per cent from 0.6 per cent a year ago. DBS' third-quarter housing NPL was 0.2 per cent, down from 0.25 per cent a year ago.

-By Yasmine Yahya, Assistant Money Editor

Top bid for GLS site with new building rules beats expectations

Offer for Serangoon plot of S$276.8m is 15% higher than the next highest bid

Source: Business Times / Real Estate

Asset Legend, believed to be a unit of Li Ka-shing's Cheung Kong Holdings, has put in the highest tender price for the first government land sales site that comes with new buildability and productivity regulations. According to the Urban Redevelopment Authority's tender results on Thursday, it offered S$276.8 million, or S$848.84 per square foot per plot ratio (psf ppr), for the 99-year leasehold mixed-use site at Upper Serangoon Road.

-By Lee Meixian

Bullish bid tops 11-way tussle for Upper Serangoon site

Source: Straits Times / Money

AN AGGRESSIVE bid from a Hong Kong heavyweight emerged tops in an 11-way tussle for a 99-year leasehold site in Upper Serangoon set to yield 340 homes as well as commercial space.

The bid by Asset Legend, which is controlled by billionaire Li Ka Shing's Cheung Kong Holdings, was for about $276.8 million, or $848.8 per sq ft per plot ratio (psf ppr) - 15.3 per cent higher than the next highest offer of $736.1 psf ppr by Sustained Land's SL Capital Ventures.

A tie-up between City Developments and Hong Leong subsidiaries - Verwood Holdings, Intrepid Investments and TID Residential - came in third at $719.5 psf ppr. The lowest bid of $529.7 psf ppr came from Koh Brothers' KBD Ventures.

The roughly 10,000 sq m site can yield about 340 homes, with commercial units on the first storey. Kovan City, Heartland Mall and Kovan MRT station are nearby.

Market watchers found the top bid bullish, given a nearby commercial and residential site at Meyappa Chettiar Road had in August sold for $775.2 psf ppr. The gap between top and second for that site "was only some 2.4 per cent", said JLL head of South-east Asia research Chua Yang Liang. "(The gap this time round) is rather surprising especially in the light of current market sentiment," said Dr Chua.

Still, observers hailed the strong turnout as an affirmation of confidence in Singapore's long-term growth.

"Land bids so far have been quite aggressive, which is a good sign for the market. There's still a lot of interest in good sites near MRT stations," said Rodyk & Davidson partner Lee Liat Yeang.

The top bidder could also have factored in a premium for the site with the view that the Government could start to lift cooling measures affecting private residential properties in the second half of next year, said R'ST Research director Ong Kah Seng.

Residential prices for the site could pan out to $1,300 to $1,400 psf, considering nearby Kovan Regency has achieved average prices of $1,200 to $1,300 psf in 2012 and last year, said Dr Chua.

The site will be the first Government Land Sales (GLS) site to come under new requirements to develop using prefabricated pre-finished volumetric construction (PPVC). This involves assembling whole rooms or apartment units that are manufactured off-site, and is meant to raise productivity in the construction sector.

"As this is a new move, the economies of scale have yet to be tested and the breakeven price for this project could be higher as it is the first adopter of this new requirement," said ERA key executive officer Eugene Lim.

While Asset Legend has featured in few GLS tenders to date, Cheung Kong Holdings' Best Desire Investments placed bids for the Meyappa Chettiar and Lorong Puntong sites in the second half of this year.

Cheung Kong's projects here include The Vision in the West Coast area, Thomson Grand in Upper Thomson, Costa Del Sol in Bayshore and Cairnhill Crest. It has also developed Marina Bay Suites and Marina Bay Residences jointly with Hongkong Land and Keppel Land.

-By Rennie Whang

Upper Serangoon mixed-use site draws top bid of S$276.8m

Parcel is first Government Land Sales location mandated to meet new BCA requirements

Source: Today Online / Business

Singapore — Despite the slow property market, a mixed-use land parcel in Upper Serangoon Road has drawn a better-than-expected top bid of S$276.8 million in a tender contested by 11 firms and consortiums, attesting to the attractiveness of such sites.

The bid placed by Asset Legend at the close of tender yesterday for the 108,685 sq ft site was 15 per cent more than the second-highest offer by SL Capital Ventures at S$240 million and 60 per cent higher than the lowest bid by KBD Ventures at S$172.7 million, said a statement released by the UrbanRedevelopment Authority (URA).

On a per square foot per plot ratio (psfppr) basis, the 11 bids ranged from S$529.70 psfppr to S$848.80 psfppr.

While the number of bids was in line with what property analysts had forecast, the top bid surpassed their expectations. Mr Eugene Lim, key executive officer of ERA, had projected a top bid of around S$750 psfppr.

The 99-year-lease site, located near Kovan MRT station, is for residential and first-storey commercial use. Launched under the Confirmed List of the Government Land Sales (GLS) by the URA, it has a maximum gross floor area of 326,060 sq ft and can yield an estimated 340 housing units.

Mr Chris Koh, director of Chris International, said the interest shown in the tender is a sign that developers are keen to bid for mixed-use sites.

“Developers have the confidence to bid for the site as it is a mixed development. For a site like this, the commercial units will typically attract buyers first and this will then have a spillover effect on buying interest for the residential units,” Mr Koh said.

Thus, bidders were expecting that the development could attract a wide range of buyers, he added.

Mr Lim said: “Asset Legend could be bullish about the site’s prospects because of its proximity to Kovan MRT Station, and its main-road frontage, which works well for the commercial units that have to be built on the first storey.”

The top few bids also indicated that there are developers who have enough financial reserves to selectively participate in tenders.

“There are developers who have accumulated a bit of wealth when the market was still buoyant. They are waiting for the right opportunities to place bids,” said Mr Koh.

The tender period for the site was extended by two weeks until yesterday to allow potential bidders to take into account new construction requirements.

Introduced by the Building and Construction Authority (BCA) on Nov 1to improve the industry’s capabilities and productivity, the requirements include higher minimum Buildable Design and Constructability standards, more use of prefabricated components and the adoption of productive technologies in GLS projects.

Mr Lim noted that the Upper Serangoon Road parcel is the first GLS site that has to meet the new requirements, which the winning bidder will have to consider when pricing the units.

“As this is a new move, the economies of scale have yet to be tested and the break-even price for this project could be higher as it is the first adopter of the new requirements,” he said.

-By Vernon Lee

UOL Group considering bid for mixed-use site land parcel in Paya Lebar Central

Property firm UOL Group, which recently opened OneKM Mall in the vicinity of Paya Lebar Central, is considering a bid for a mixed-use site land parcel in the area.

Source: Channel News Asia / Business

SINGAPORE: Property firm UOL Group on Thursday (Nov 27) said it is assessing whether or not to bid for another land parcel in Paya Lebar Central.

A mixed-use commercial site at Paya Lebar Central was placed out for tender last month, and according to some estimates, the bids could go to as high as S$1 billion.

UOL had recently opened OneKM Mall in the vicinity. The three-storey mall, with more than 150 shops, has a range of shopping, edutainment and culinary offerings. It will also house a central kitchen to serve three restaurants, to help meet manpower shortages faced by eateries.

The Government wants to develop a regional centre in Paya Lebar as part of efforts to create commercial clusters outside the city centre, and provide job opportunities closer to homes.

Mr Liam Wee Sin, president of property at UOL Group, said: "Paya Lebar interchange is a very important transportation hub. It is only natural that you want to maximise the plot ratio and the buildability so that it can become a vibrant centre or fringe-city centre for life, work and play."

- CNA/ac

Rental yield for shoebox units in suburbs comparable to those in the city: Analysts

938LIVE reports: With the Urban Redevelopment Authority projecting that there will be about 11,000 shoebox units in Singapore by the end of next year though, analysts say landlords may not get the kind of rental income they expect.

Source: Channel News Asia / Business

SINGAPORE: Property analysts said the rental yield for shoebox units in the suburbs are comparable to their counterparts in the city. But going forward, they warn that landlords may not get the kind of rental income they expect.

This is because the Urban Redevelopment Authority (URA) projects that there will be about 11,000 shoebox units in Singapore by the end of 2015. In turn, this would provide tenants options from which to cherry-pick.

Shoebox units are homes that are less than 500 square feet in size, and are typically one-bedder units with a bathroom.

In 2012, Minister for National Development, Khaw Boon Wan cautioned investors against the influx of shoebox units in the heartlands, and said he would not hesitate to intervene should there be clear evidence of unsustainable investor demand.

However, the experience has been positive so far. Senior director at Savills Singapore, Mr Alan Cheong, said shoebox units in the suburbs have a reasonably high rental yield of around three per cent, which is higher than the two to three per cent yield for other types of private homes.

Mr Cheong added that shoebox units are especially popular with single expatriates because their companies have either increasingly reduced their housing budgets, or because they are hired on local employment terms.

A search on property portal Property Guru, found that the average rent for a shoebox unit in areas like Geylang and Paya Lebar is S$2,500 per month, while prices go up to S$4,000 in prime areas such as Mount Sophia.

Mr Cheong said shoebox units that are in the price range of S$2,000 to S$3,000 have the upper hand: "Today, people coming to Singapore to work... They have that limited budget to spend and S$4,000 seems to be a price where you fall into no man's land territory. Hence, it may be rather difficult to rent out at that price."

Analyst Chris Koh, Director of Chris International, said the appeal of shoebox units remains strong with investors due to its lower capital outlay and rental appeal, but he also cautioned that tenants have other options. "With a budget of S$2,500 to S$3,000, there are some outskirt condominiums with two and three bedrooms that they can rent. So, they do make comparison with these shoebox units because these units are rather small," he added.

- 938LIVE/ac

ERA offices in industrial building to relocate

Realty's moves put to rest any question of legal use of such space

Source: Straits Times / Money

SINGAPORE'S largest real estate agency is relocating some of its offices from an industrial building.

ERA Realty has been using industrial space at two Storhub buildings in Toa Payoh for commercial activity such as customer service counters, training and as offices for agents.

But Urban Redevelopment Authority rules state that at least 60 per cent of total gross floor area in such buildings must be set aside for industrial activity while up to 40 per cent may be used for "ancillary office" or "storage" purposes. 

ERA was previously a subsidiary of Hersing Corporation, which also owned Storhub, a self-storage business.

Hersing sold a 62 per cent stake in Storhub to developer CapitaLand for $39.2 million in 2010.

Hersing was later acquired by private equity firm Northstar Group in August last year in a deal estimated to be worth $130 million.

Both Storhub buildings are on Housing Board land.

They were previously approved for ERA's use on grounds that the firm's real estate marketing business could be considered a supporting function of Hersing's warehousing business.

But under the new arrangement, it is debatable if the property firm's businesses can be seen as being related to the buildings' master lessee, Storhub.

In any case, ERA has not renewed the leases at either building, which end on March 31.

ERA chief executive Jack Chua told The Straits Times on Tuesday that the firm has secured 30,000 sq ft of office space at Mountbatten Square and 12,000 sq ft at the SLF Building in Thomson Road.

"We have quite a big space requirement, that's why we took some time to look for this space," said Mr Chua.

Market watchers said rents at properties slated for light industrial use, such as the Storhub buildings, are about $3 per sq ft (psf) each month.

The Straits Times understands that ERA also has 183 office units, about 60 sq ft each, in the Storhub building at 615 Lorong 4 Toa Payoh. Mr Chua said the units are being let to agents for about $5 to $6 per sq ft (psf) a month.

Under the Council for Estate Agencies' guidelines for "ethical advertising", property agents must advertise the use of the property as approved by the URA or relevant authority. Developments on land earmarked for industrial use, for instance, must not be marketed for "business" or "office" use.

-By Cheryl Ong

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 Koh Bock Swi

Global Economy & Global Real Estate

S'pore office market fundamentals top in Asia-Pac

Cushman's 10.9% estimated growth in Grade A office rental value here this year highest among 13 markets

Source: Business Times / Real Estate

SINGAPORE offers the strongest office market fundamentals for Grade A office space among core Asia-Pacific markets, in terms of rental growth as well as low vacancies for next year, according to Cushman & Wakefield. This follows a strong showing by the Republic this year. Cushman's 10.88 per cent estimated growth in its average Grade A office rental value this year is the highest among the 13 core markets in the region tracked by the property consulting group, ahead of gains of 7.69 per cent for Tokyo and 3.02 per cent for Hong Kong, among the major financial centres in Asia-Pacific.

-By Kalpana Rashiwala

UEM Sunrise hopes Aussie devt will take up slack

Source: Business Times / Real Estate

Australia MPs seek higher fines for illegal home-buying

Source: Business Times / Real Estate

Re/Max to tap retirees, housewives for growth

Source: Business Times / Real Estate

Mitsubishi Estate to accelerate Marunouchi development

Source: Business Times / Real Estate

Australia may tighten rules for foreign home-buyers

Source: Today Online / Business

SYDNEY — Foreign investors may soon need to cough up an application fee of up to A$1,500 (S$1,670) when buying an Australian home, while those who breach ownership regulations would forfeit their capital gains and face civil penalties under proposals to tighten rules on foreign purchases unveiled yesterday following a government-backed inquiry.

Although the inquiry is not focused on investors from any particular country, cash-rich buyers from China have been blamed by locals for ramping up home prices in Australia’s major cities. The move may also affect Singaporean buyers — one in five of those who invest in overseas property hold Australian residential real estate — as well as Singapore-based developers, which have been stepping up their investments Down Under.

The parliamentary inquiry into foreign investment in residential real estate, chaired by ruling Liberal Party lawmaker Kelly O’Dwyer, began in May this year in the wake of widespread community concerns that foreigners, mostly Chinese nationals, were pushing up house and apartment prices, particularly in Melbourne and Sydney.

It found that rules on foreign purchases, which limit overseas non-citizens to buying newly-built homes instead of established properties, were not being enforced. Ms O’Dwyer said there was a systems failure within the Foreign Investment Review Board (FIRB), with the regulator failing to penalise or prosecute a single foreign investor since 2008.

That led the committee to make 12 recommendations, including the collection of a fee from foreign property investors to fund the FIRB investigation and enforcement operations.

The Parliamentary Budget Office said that an A$1,500 fee would raise about A$158.7 million over four years.

Among the other recommendations, penalties would also be imposed on third parties — such as lawyers, real estate agents and mortgage brokers — who knowingly assist a foreign investor to breach the rules. Any capital gains from the sale of an illegally held property would be forfeited to the government.

The committee also called for a national register of land title transfers that records the citizenship and residency status of all home buyers, and better coordination between immigration authorities and the FIRB.

Developers will need a certificate to sell homes off-the-plan overseas and they must market the project in Australia for the same period of time.

“Serious Singaporean investors will not be put off by the application fee, which is quite small compared to the typical A$500,000-and-above purchase. They may even be happy knowing it contributes to better policing of the rules, as Singaporeans are typically rule-abiding,” said Mr Ku Swee Yong, chief executive of property agency Century 21 in Singapore.

Industry observers, including Mr Ku, said that even when fully implemented, the tighter rules will still be less onerous for foreign buyers compared with the additional buyers’ stamp duties for investors in Singapore. The impact of the tightened rule regime is expected to be more significant on developers than on buyers, they said.

Developers routinely launch their new Australian projects in Singapore, China, Hong Kong and Malaysia.

Mr Ku said: “Developers targeting Asian buyers have been able to secure high prices for part of the development when marketing Aussie homes overseas and using these as a marker to market the rest of the project. To have to market the same property in Australia for the same period will tend to keep prices in check.” 

-By Florence Chong

Carlos Slim to Be Biggest Investor in Spanish Builder FCC

Source: Bloomberg / Luxury

Carlos Slim, the world’s second-richest man, agreed to become the biggest shareholder in Fomento de Construcciones & Contratas SA (FCC) as part of a capital increase that will be used to cut the construction company’s debt.

Slim’s holding company will acquire about 26 percent of FCC, while controlling shareholder Esther Koplowitz and her family will own about 22 percent, the Barcelona-based builder said in a regulatory filing today. The shares rose to the highest in about four months.

FCC shareholders met a week ago to approve the 1 billion-euro ($1.25 billion) capital increase to partly refinance a payment-in-kind loan that was put in place as a stop-gap measure this year as part of an almost 5 billion-euro restructuring. The company, which sold assets and cut jobs to stem more than two years of losses, now gets most of its earnings from environmental services such as waste management after moving away from the construction industry.

Slim, a Mexican telecommunications mogul who has a fortune valued at $79.7 billion, will invest as much as 700 million euros in FCC, he and Koplowitz said in a statement. Slim said he will keep the stake for at least four years.

FCC was up 3.5 percent at 15.84 euros at the close in Madrid, giving the company a market value of about 2 billion euros.

-By Andrew Blackman

Cheyne Capital Plans Fund to Invest in Homes for U.K.’s Poorest

Source: Bloomberg / News

A hedge fund based in one of London’s wealthiest districts is starting a fund to invest in housing for the U.K.’s poorest.

Cheyne Capital Management (UK) LLP, which manages about $6 billion, will buy and develop homes for low-income workers and lease them to charities and other organizations. The Cheyne Social Property Impact Fund is backed by Big Society Capital, a 600 million-pound ($945 million) institution that funds U.K. community groups, the firm said in a statement today.

“The reduction in government grants and the altered market structure provide an opportunity for alternative investment managers such as Cheyne to enter the sector and to be providers of responsible private capital,” said Jonathan Lourie, chief executive officer and co-founder of Cheyne Capital. “Financial and social returns are complementary.”

Soaring home prices and sluggish wage growth have made houses less affordable, while the government has cut back on the number of properties it provides for those on low incomes. The number of subsidized homes provided by London’s municipal government fell 45 percent in the 12 months through March to fewer than 9,000 from the same period two years earlier, according to the Greater London Authority.

“The shortage of suitable accommodation for people on low incomes, or who need specialist housing, is an enormous challenge,” Nick O’Donohoe, Big Society Capital’s CEO, said in the statement. “This fund will enable charities and other organizations that address this need to access many more properties and deliver their specialist services.”

Investment Team

The fund will total about 300 million pounds initially, said a person with knowledge of the firm’s plans who asked not to be identified because they weren’t authorized to speak publicly.

Cheyne, based near Buckingham Palace in London’s St. James’s district, was founded in 2000 by Lourie and Stuart Fiertz, the firm’s president. It invests in real estate debt, corporate credit, equities, convertible bonds, high yield bonds and leveraged loans. The firm’s social property investment team is headed by Shamez Alibhai, who has helped to run the firm’s real estate debt business since 2008.

-By Lindsay Fortado and Neil Callanan

Mitsubishi Estate to Accelerate Marunouchi Development in Tokyo

Source: Bloomberg / News

Mitsubishi Estate Co. (8802), Japan’s biggest developer, announced plans to redevelop part of Marunouchi in central Tokyo, the country’s most expensive business district.

The area of at least 11,240 square meters (121,000 square feet) consists of three office buildings, the company said in a statement today. It will sell the property rights to one of the buildings, the former Mizuho Bank head office, to Mizuho Financial Group Inc. (8411) for 159 billion yen ($1.4 billion) and book 36.5 billion yen as a one-time gain. Mitsubishi Estate will use the proceeds for further development work in the area.

Mitsubishi Estate, the biggest landlord in Marunouchi, is accelerating the development of the area as the Japanese real estate market has picked up in the two years since Prime Minister Shinzo Abe took office in 2012. Real estate prices in Tokyo have risen about 20 percent from two years ago, according to an estimate by Deutsche Asset & Wealth Management.

GIC Pte, Singapore’s sovereign wealth fund, paid $1.7 billion for a building in the business district, next to the Tokyo Station, in October.

The three Marunouchi buildings -- Ginko Kaikan, the Tokyo Ginko Kyokai building and the former Mizuho Bank head office -- will be demolished by March 2017, according to the statement. The land will be jointly developed by Mitsubishi Estate, the Japanese Bankers Association and Mizuho, it said.

The average assumed achievable rent for Marunouchi, home to global financial companies such as JPMorgan Chase & Co. (JPM), UBS AG (UBSN) and Citigroup Inc., is about 30 percent higher than in Tokyo as a whole, according to CBRE Group Inc. (CBG)

Mitsubishi Estate left its net income forecast unchanged at 60 billion for the year ending March 2015.

-By Kathleen Chu

Additional Articles of Interest - Local & Overseas Real Estate