Real News‎ > ‎2014‎ > ‎November 2014‎ > ‎

29th November 2014

Singapore Real Estate

Shoebox units 'hit by weak leasing market'

Resale prices fall, some units up for mortgagee sale

Source: Straits Times / Money

A WEAK leasing market may be hitting prices of shoebox units - long seen as a stronghold for rental yields.

Consultants note that while prices of new flats have risen marginally, resale prices have fallen.

In another sign of the weaker market, four shoebox units - apartments of up to 506 sq ft - were put up for auction by mortgagees in the first 10 months of this year, consultancy JLL found.

There were no mortgagee sales of shoebox units in the same period last year or in 2012.

"The weak residential leasing market has resulted in the lower ability of borrowers to finance their mortgages, and higher loan defaults," said Ms Mok Sze Sze, head of auction and sales at JLL.

Mr Alan Cheong, research head at Savills Singapore, said it has been a "tale of two markets" for "shoeboxes" - one for new sales and the other for resale and sub-sale units.

While transactions have plummeted for new homes, prices rose 1.1 per cent from the first quarter of last year to the middle of this month.

Prices in the secondary market are down 4.8 per cent over the same period, with transactions falling as well.

The decline in the number of sales of new homes has been greater than that in the resale and sub-sale markets.

This supports the hypothesis that prices of new units are holding firm, as developers have reached a point where they cannot cut further as it would mean negative margins or below-normal profits, said Mr Cheong.

"With no crisis brewing currently and from the healthy profits they made in previous years, they cannot be cowed into selling below cost," he added.

But prices in the secondary market have fallen more as individuals have weaker holding power. The four shoebox units put on sale by lenders were at Estilo in Wilkie Road in Rochor, Casa Aerata in Lorong 26 Geylang, Parc Rosewood in Woodlands and Eis Residence in Haig Avenue. None has been sold. Two other shoeboxes were put up for auction by their owners - at Jupiter 18 in Lorong 102 Changi Road and The Verve in Jalan Rajah in Whampoa - but these have not been sold either.

Residential vacancy rates are expected to exceed 10 per cent in the next 18 months, so the pressure on owners with recently completed shoeboxes lacking a tenant will grow, said Mr Ku Swee Yong, Century 21 chief executive officer.

He noted that units in outer areas, where owners are competing for low-budget tenants, are particularly at risk. At Parc Rosewood, for example, asking rents are from about $1,600 a month for a 431 sq ft unit, close to the roughly $2,000 rent for a 800 sq ft three-room Housing Board flat.

Overall, experts regard the outlook for shoebox units as being relatively positive.

"The increase in supply of shoebox units over the years has generally been well absorbed in a high liquidity and low interest rate environment... More affordable shoebox units will continue to appeal to singles, couples without kids, and investors looking for higher- than-market rental yields," said Ms Chia Siew Chuin, director of research and advisory at Colliers.

-By Rennie Whang

Rise in private home resale prices 'not sign of recovery' 

Marginal increase could belie stress points in the market, says expert

Source: Straits Times / Money

RESALE prices of private non-landed homes inched up last month after slumping in September, according to numbers out yesterday.

Flash estimates from the National University of Singapore's residential price index showed that values increased 0.3 per cent in October over the previous month. That represents a turnaround from September when prices fell 0.7 per cent from August.

Prices of apartments in the central region increased 0.6 per cent over September while those in the non-central region edged up 0.1 per cent. Shoebox unit prices - apartments of up to 506 sq ft - rose 0.3 per cent.

The index compiled by the NUS Institute of Real Estate Studies tracks a basket of completed homes across the island.

Property consultants said the rosy numbers do not point to a possible recovery in the ailing real estate market as they were partly due to investors timing their purchases.

"Investors are willing to offer slightly higher prices than before, as they feel that a unit bought around September to November will mean that it will be ready for renting out in a couple of months, around early 2015, when the sale is fully completed," said R'ST Research director Ong Kah Seng.

"There could be better chances of leasing it out as more expatriates tend to arrive in the early part of the following year."

Mr Ong also noted that the price increase was "marginal", pointing to cooling measures such as the Total Debt Servicing Ratio (TDSR) that continue to "limit buyers' interest in resale homes".

He expects resale prices to dip again next month amid the festive season and into early next year.

Mr Alan Cheong, senior director of research and consultancy at Savills, said October's better figures could "belie stress points in the market", such as the growing number of mortgagee sales.

"This could give (homebuyers and investors) a false sense of security," he said.

In one sign of the increasing stress, 98 homes were put up for auction sale by mortgagees, or lenders, in the January to October period - well above the 14 recorded in the same period last year, according to Colliers International.

Mr Cheong also said transaction volumes could pick up slightly next year.

"It would be about 19 months since the TDSR was implemented, and those interested in real estate would have collected two rounds worth of bonuses in salary," he noted.

"Transaction volumes have been languishing not because people cannot afford to buy property, but because they're just put off by the negative talk surrounding the real estate market, and they're just waiting for prices to fall further."

-By Jacqueline Woo

Country Garden treading cautiously

Source: Business Times / Real Estate

Under its drive to expand overseas, Chinese developer Country Garden is keeping its eye on development projects in Singapore's city fringes and in Indonesia, where it is studying a few sites. But given the headwinds in Singapore's residential market and the deterrent effect of the high stamp duties on foreign buyers, the Guangdong-based, Hong Kong-listed group has said it will tread cautiously.

-By Lynette Khoo

Country Garden upbeat about Iskandar, opens sales gallery here

Source: Straits Times / Money

HONG Kong-listed developer Country Garden is upbeat about the prospects for real estate in the Iskandar region despite demand cooling at some projects recently.

Mr Kayson Yuen, its regional president of the Malaysian project, said the upcoming high-speed rail between Malaysia and Singapore will drive inter-city travel as well as cross-border investments.

"Investment in the region has been growing," he added in Mandarin.

Mr Yuen was speaking at the opening of the firm's sales gallery in Cecil Street where its latest development, Bay Laurel at Danga Bay, was launched.

The region logged RM9.72 billion (S$3.8 billion) in new investments in the second quarter of this year - more than double that of the first three months of the year, according to the Iskandar Regional Development Authority.

While sales took a slight knock after Malaysia's property cooling measures kicked in earlier this year, Mr Zhen Yu Liu, regional general manager of sales and marketing at Country Garden, noted that the market is "sensitive" to such policy changes. Foreign buyers face capital gains taxes as well as minimum purchase amounts and stamp duties.

"But there will be as many ups as there will be downs," he said, adding that he believes more Singaporeans will be drawn to the region as it develops.

Country Garden has set up a sales gallery here as an "important base" for its projects to draw investors from across the world, it said in a statement yesterday.

"Singapore, as everyone knows, is an international hub," said Mr Rodrick Loh, its sales and marketing director.

"Having our sales gallery here would allow us to capture a huge number of foreign investors," he said, adding that the projects would allow Singaporean buyers to have a "second option in real estate investment", given the tight property regulations here.

About 6,000 of the 9,400 units at the firm's Danga Bay project have been sold at average prices starting from RM720 psf since the first phase was launched last August.

The Bay Laurel development, which comprises seafront units, is on part of the 57-acre project.

Around 30 units at Bay Laurel were sold at its launch yesterday, where Singaporean buyers were offered discounted rates.

-By Jacqueline Woo

Retail ready in Seletar

Source: Straits Times / Singapore

Singapore's latest shopping mall - in Sengkang West Avenue - opened officially yesterday.

Seletar Mall houses more than 130 brands as well as a Shaw Theatres cineplex.

The mall is a joint venture by Singapore Press Holdings and United Engineers Development.

Tanjong Katong mall to add vibrancy

Source: Straits Times / Money

HOME prices in the Tanjong Katong and Paya Lebar areas have fallen in tandem with islandwide trends, but the official opening of new mall OneKM this weekend may slow the pace of softening.

The mall in Tanjong Katong Road will feature more than 150 retail units, with Cold Storage and Food Junction as anchor tenants, along with brands including Uniqlo, Esprit and Adidas.

It offers a convenient shopping venue for those living in the vicinity, including the 216-unit Butterworth 8, 72-unit Esta Ruby and 49-unit Butterworth View.

Average residential prices in new sale, resale and subsale markets fell in the third quarter, with the biggest quarter-on-quarter drop in the resale market, slumping 9.7 per cent, an analysis by Knight Frank found. It rose 0.4 per cent in the second quarter and fell 1 per cent in the first.

New sale prices in the area declined 7.5 per cent, after falling 1.7 per cent in the second quarter and rising 3.3 per cent in the first.

New sale average prices in the Tanjong Katong and Paya Lebar areas are set to keep softening, given tepid demand in the overall private residential market, but OneKM's vibrancy will help boost the attractiveness of upcoming new launches here, said Ms Alice Tan, head of consultancy and research at Knight Frank Singapore.

"This is, in turn, likely to push up potential demand and help cushion the price weakening of new project launches here."

On the other hand, in a buoyant market - for example from 2010 to 2012 - the opening of such a large mall could have raised prices of private homes here, to a premium of up to 5 per cent compared with homes in surrounding areas, said R'ST Research director Ong Kah Seng.

Median rents have fallen by an average of 5 per cent over the past year, and is expected to be about $3.10 per sq ft per month as of the third quarter of this year, he said.

"OneKM should help landlords of private homes in the area better attract tenants in the currently soft residential leasing conditions, without helping raise rentals; and help landlords get slight rental premiums when times are better."

Other strata-titled retail properties in the area include City Plaza and shophouses. But as these target different types of shoppers, OneKM is not expected to affect prices and rents, he said.

OneKM may draw some crowds to the area, but as the "retailing climate is fairly weak islandwide, landlords are unlikely to raise rents unnecessarily".

-By Rennie Whang

Views, Reviews, Forum

Analysis should discount HDB households

Source: Straits Times / Forum Letters

WHILE Dr Siriwan Chutikamoltham discounted the correlation between growing debt levels and the ratio of debt to gross domestic product ("S'pore not headed for debt disaster"; Tuesday), we must be mindful of certain characteristics of Singapore's residential property sector.

More than 80 per cent of Singaporeans live in public housing, with most buying their flats for occupation and not for investment.

Most HDB home owners are financially conservative and were able to afford their flats because of the Government's foresight. As a result, most of their resources are parked as liquid assets.

Our surging property market is clearly a result of the exponential growth of the private property sector. This has resulted in oversupply as developers rushed to meet demand and cash in on rising prices.

This will cause major cash-flow issues for borrowers who are over-leveraged and took an overly optimistic view of the private property sector.

So, while I agree that Singapore seemingly does not have a looming debt disaster on the macro-economic level, a more accurate analysis should exclude HDB households.

The conclusion will be quite different if we look at the balance sheets of thousands of over-leveraged middle-class households.

The average mortgage amounts for private homes have ballooned over the past few years. The cracks are showing, with more property foreclosures affecting the luxury property sector ("More homes go under the hammer in weak market"; Nov 21).

Then there are the private properties being held as "investments", which will suffer declining capital values.

Major economies such as Japan and the euro zone are on the verge, or in the midst, of a recession. Growth in China is slowing, and the United States is facing a fragile recovery.

These circumstances will put a dampener on Singapore's prospects and affect our employment.

-By Raymond Kok Bock Swi

Companies' Brief

Ready for the Smart life?

Insight looks at what stands in the way of Singapore becoming a Smart Nation and why it matters

Source: Straits Times / Insight

IMAGINE commuter transport synchronised to your personal needs, roads of driverless cars, robot-run restaurants, and even sensors that alert public officers that someone is smoking where they should not.

This could be the scenario of a Singapore running even more efficiently than ever, in a vision for a Smart Nation spelt out on Monday by Prime Minister Lee Hsien Loong. It involves individuals, government and businesses alike working in concert via the nationwide, integrated use of data analytics, sensor networks, information communication and phone apps.

This new goal - with a 10-year target - builds on initiatives to be a smart city, and also an Intelligent Nation 2015. But before jaundiced types wonder if Singapore is not already smart or intelligent enough, the latest drive, if successful, would take things up a notch amid the current batch of smart cities of the world.

Showing how much it matters, the Smart Nation Programme Office has been put under the Prime Minister's Office, with a minister in charge, Dr Vivian Balakrishnan, rather than coming under a statutory board, the Infocomm Development Authority (IDA), as previous smart city efforts were. No wonder. At stake is a potential loss of economic competitiveness, not to mention a missed opportunity to improve Singaporeans' lives, say experts.

"If Singapore does not try new things, it will slip behind other global cities, because innovations will not happen here but elsewhere, like Silicon Valley," said the executive director of the Agency for Science, Technology and Research's (A*Star) Science and Engineering Research Council, Dr Tan Geok Leng.

What stands in the way

TO BECOME a smart nation, Singapore must overcome two problems. The first is to do with analysing big data - the massive volume of data created by every digital process and social media exchange, which can yield groundbreaking insights and solutions to longstanding problems. Are these systems secure, and can citizens maintain their privacy?

Several incidents have called the robustness of Singapore networks' security into question: Some government websites were vandalised last year, while 1,500 SingPass accounts were accessed illegally in July.

PM Lee acknowledged at the Smart Nation launch: "I don't think (our cyber-security functions) are as strong as we would like them to be." Indeed, the IDA just announced that it is rolling out two-factor authentication for SingPass next year.

Then there are the inevitable concerns about privacy.

The public sector is excluded from the Personal Data Protection Act, but as more private companies come on board the smart nation push, more data will be made available to them and citizens, intentionally or not.

For example, the United States-based, non-profit Electronic Frontier Foundation has flagged the possibility of smart meters - which provide real-time readings of household energy use - revealing changes in a person's routine and the types of electronic equipment in the home.

This has implications for personal privacy and home security, but A*Star's Dr Tan, who was instrumental in drawing up Singapore's road map for infocomm development for the next 10 years, thinks such concerns can come at great cost for the country. "The fear of privacy (loss) can't be so strong that you tie yourself up and don't do anything," he tells Insight. "We must protect the rights of the individual, but also use technology to improve the city. If you're constrained, you cannot move."

The second problem is that Singaporeans - especially in business settings - can be overly conservative in adopting new technologies.

It is a daily frustration for Mr Raj Singh, director of cloud-based IT firm Vanpeak, who gripes that many local companies are resistant to cloud-based data-storage solutions, preferring to use paper. This results in unnecessary duplication and costs, he says. "People have to change their mindsets," he says. "Technology isn't just for people in their private lives. Nor does it mean sophisticated robots. Sometimes it's just about better ways of doing business."

At the same time, a smartphone does not a "smart person" make - despite the high penetration of smartphones and broadband access here, there may not be enough people with the right skills.

Consulting firm McKinsey estimates the US alone faces a shortage of 140,000 to 190,000 people with analytical expertise, and another 1.5 million managers who can make decisions based on analysis of big data. Over here, computer science degrees were shunned in the aftermath of the bust of the early 2000s, according to university enrolment figures.

However, good salaries and a fun work culture have recently pushed up demand - the number of National University of Singapore applicants listing the School of Computing as first or second choice jumped about 50 per cent over the last three years.

With higher demand come higher cut-off scores: Previously, A-level students could enter with three Bs. Now, they need at least two As.

But even as the calibre of such students rises, "in the States, the best programmers have years and years of programming experience under their belt before they move into college",says Mr Wee Yeong Wei, 25, who works at a leading data analytics software firm.

The Government is all too aware: On Monday, PM Lee urged schools to expose students to IT and programming, and added that, in some countries, learning the basics of coding is mandatory.

Living in a smart nation

SOME fear that the less tech-savvy, especially the elderly, will get left behind. This is why building a smart nation "should not be just about adopting new and 'cool' technologies", but about meeting the unique needs of people, says IBM's public-sector business development manager Khoo Peng Han. "Like a good highway, the value of connectivity to a smart nation is not about the speed that can be achieved, but the destinations it serves and the services along its path that benefit its users," he says.

One way to serve seniors, for example, is to make sure information is accessible to them, not just through a smart device, but also electronic signs, says Forrester Research telco analyst Clement Teo.

For example, there could be boards with text that can be updated, or speakers that can play a message in different languages, at void decks.

Citizens can get on board too, such as coming up with creative ways of analysing official data themselves, says tech blogger Alfred Siew.

For example, people can come together to write apps or even launch start-ups, using data shared by the Government. Over 8,000 government datasets are available on the website under the Open Data initiative. Since 2011, over 130 apps have been created with such data.

These include The Great Singapore Rat Race, which helps users visualise their starting pay according to university or course of study.

What we have going for us

THE fact that while other cities talk about becoming smart cities, the Republic is envisioning being a smart nation illustrates Singapore's two key advantages.

First, the smart nation push is a national effort, with the weight of the Government behind it.

PM Lee emphasised the importance of a cohesive effort, saying: "Today, the government departments are all doing their own things: LTA (Land Transport Authority), URA (Urban Redevelopment Authority), MOM (Ministry of Manpower) and so on. Our research institutes are doing their own things. We need to bring them together. And we can go much further if we can put it together, deploy them effectively to benefit the whole nation."

In this way, Singapore overcomes the problem of different groups hoarding their own data for reasons like sensitivity, says A*Star's Dr Tan. "The more you're able to aggregate the data, the more you're able to see what's going on. By setting up this smart nation platform under the auspices of the Prime Minister's Office, we can make sure we can collate the data. That gives us an advantage over other people, who may not have the vehicle to bring about this sharing."

Others also point to the speed at which the Government makes and implements decisions. "Some nations or cities may argue forever about privacy concerns that come with the use of big data. Singapore tends to be less bogged down by such things," says Professor Bernard Tan of the National University of Singapore's Information Systems Department.

Second, Singapore's small size means that infrastructure can be quickly deployed, say experts like Professor Lim Ee Peng, director of the Singapore Management University's Living Analytics Research Centre.

In fact, the World Economic Forum's annual Global IT Report consistently ranks Singapore as the second most ready country in the world to make use of its big data and infocomm infrastructure. It has held its rank since 2010, beaten to the top spot only by Sweden or Finland.

The report looks at a country's mobile network coverage, international Internet bandwidth, secure Internet servers, and electricity production, among others.

But while "Singapore offers a finite, well-defined environment to test and experiment, we also encounter a disadvantage compared to larger countries with multiple cities", says Mr Shrinivas Kowligi, who leads IBM's Smarter Cities initiative for Asean.

With a smaller consumer base, it is harder to attract the investment needed to adopt technology in a big way, he says.

Still, A*Star's Dr Tan says this is not a problem, as other countries and firms partner research institutes here on projects for technology solutions that can also be applied elsewhere.

The future is also on Singapore's side if it learns to "fail fast and learn quickly", as PM Lee said on Monday.

"We will encourage experimentation. When we fail, we will learn quickly and try again," echoes Mr Tan Kok Yam, head of the Smart Nation Programme Office in a statement to Insight.

Dr Andrew Hudson-Smith, who heads University College London's smart cities and urban analytics course, tells Insight that "smart cities will grow naturally over time via new apps, personal devices and data from citizens". "So even if the first early trials fail, the next 50 years will see the rise of the smart city as a truly automated, networked system".

All in all, Singapore has much of the makings of a smart nation, argue those optimistic about its prospects - the runway is there. What remains is the take-off.

-By Charrisa Yong & Rachel Au-Yong

SPH Reit has 'first right of refusal' on Seletar Mall

Source: Business Times / Companies & Markets

SPH Reit will have the "first right of refusal" on The Seletar Mall when its sponsor decides to divest it. The real estate investment trust management said this on Friday in response to a question at its inaugural annual general meeting which attracted some 300 unitholders.

-By Lee Meixian

Brick-and-mortar shopping 'still key'

This is even as retailers embrace e-commerce opportunities

Source: Straits Times / Money

BRICK-AND-MORTAR shopping still plays an important role even as retailers embrace e-commerce opportunities, said SPH Reit Management chief executive Susan Leng.

Speaking at the inaugural annual general meeting (AGM) of the Reit (real estate investment trust) yesterday, Ms Leng said malls have to evolve with the times and make the shopping experience a multi-sensory one.

"The 'touch-and-feel' (aspect of retail) still has a big part to play," she noted, adding that brick- and-mortar shopping can complement the convenience of e-commerce.

Ms Leng was responding to queries from unit-holders who expressed concerns about the impact of online shopping on foot traffic at The Clementi Mall and Paragon, the two properties in SPH Reit's portfolio.

The malls have not been hit in a big way by the e-commerce trend and occupancy rates remain at 100 per cent, she said.

"Our tenants are established retailers who have embraced e-commerce as an opportunity."

Ms Leng also noted that e-commerce allows retailers to offer a wider range of merchandise online, which can aid tenants in optimising their use of retail space.

SPH Reit made its debut on the Singapore Exchange mainboard on July 24 last year. Yesterday's AGM, held at the Singapore Press Holdings News Centre, was attended by about 300 unit-holders.

In addition to the impact of e-commerce, unit-holders asked about the potential acquisition of the newly opened The Seletar Mall by the Reit.

SPH Reit will have the "right of first refusal" should its sponsor, Singapore Press Holdings, decide to sell the mall, said Ms Leng.

The Reit will "evaluate the opportunity" when its sponsor decides that it is time to divest itself of the property.

"We will do due diligence... and look at location, the tenancy mix... The Reit's objective is to provide unit-holders with regular and stable distributions," said Ms Leng, adding that the Reit will also continue to look for other acquisition opportunities.

The four-storey The Seletar Mall, which officially opened yesterday, houses the area's first cinema and is aimed at catering to young families.

SPH Reit has released its first annual report, detailing its performance from its listing date to Aug 31 this year - slightly longer than the usual 12 months.

Distribution per unit for the period was 5.99 cents on the back of strong rental growth, exceeding forecasts by 3.8 per cent. Rents rose by about 8.5 per cent.

Valuations for the Reit's portfolio properties have gone up by 3.4 per cent to $3.16 billion since the initial public offering.

Tenant sales in the period were hit by weak retail industry sentiment and a decline in international tourist arrivals, said Ms Leng. But visitor traffic in both The Clementi Mall and Paragon still held steady.

Acknowledging that "the retail scene is competitive", Ms Leng said SPH Reit actively manages its properties to "keep them at the forefront of evolving retail mall trends and stay relevant to consumers".

-By Chia Yan Min

Sime Darby Q1 profit up 2.4% at RM500.7m

Source: Business Times / Companies & Markets

Despite a nearly 9 per cent fall in the price of crude palm oil between July and September, Malaysian multinational Sime Darby has reported a 2.4 per cent  rise in earnings for the period, boosted by productivity gains at its plantation division and robust sales at its motor and property businesses.

-By S Jayasankaran

OUE H-Trust acquires Crowne Plaza Changi and extension for S$495m

Source: Business Times / Real Estate

OUE Hospitality Trust (OUE H-Trust) has agreed to acquire the hotel Crowne Plaza Changi Airport (CPCA) and its adjacent extension for a total of S$495 million from its sponsor OUE Ltd. The conditional agreement was entered into by OUE H-Trust and OUE Airport Hotel Pte Ltd (OUEAH), a subsidiary of OUE.

-By Lynette Khoo

OUE Hospitality Trust

Source: Straits Times / Money

OUE Hospitality Trust has agreed to acquire Crowne Plaza Changi Airport and the Crowne Plaza Changi Airport Extension for nearly half a billion dollars.

The manager of the trust said OUE H-Reit will pay $290 million for the 320-room hotel and $205 million for the extension, currently under construction. A linkway connects the hotel and the extension, an adjacent rooms-only building.

OUE H-Reit is buying the properties from OUE Airport Hotel, a subsidiary of its sponsor, OUE. This is OUE H-Trust's first acquisition since listing in July 2013.

The extension will add 243 hotel rooms to the integrated complex, bringing the total number of rooms to 563.

OUE H-Reit will be leasing the properties back to the vendor under master lease arrangements upon the completion of the respective acquisition phases. The combined properties is estimated to yield 4.6 per cent annually.

Keppel Land

Source: Business Times / Wealth

Keppel Land (KPLD) announced its wholly owned subsidiary, DC Reit Holdings Pte Ltd, has entered into a subscription agreement with Keppel DC Reit Management Pte Ltd, the manager of Keppel DC Reit, to subscribe for about 43.3 million units in Keppel DC Reit at a price per unit equal to the issue price in the upcoming offering.

Lian Beng Group

Source: Business Times / Wealth

Lian Beng is in good stead for earnings expansion given strong property development sales and growing recurring income. It is currently trading at consensus FY2015F price earnings 6.0x, lower than its peers' average of 14.3x. Consensus expects FY2015F dividend yield of 3 per cent on the assumption of an 18 per cent payout ratio.

Ascendas Hospitality Trust

Source: Straits Times / Money

Broker: DBS Group Research

Call: Hold

Target price: 72 cents

ASCENDAS Hospitality Trust comprises Ascendas Hospitality Business Trust and Ascendas Hospitality Reit. We believe its Australian portfolio, especially hotels in Sydney and Melbourne, will continue to underpin growth.

This is due mainly to increasing tourist arrivals in Australia and the limited supply of new hotels in Sydney and Melbourne. These drivers should also offset any weakness experienced by the Brisbane hotels which are facing more competition.

Earnings should be boosted by its recent acquisitions, namely the Park Hotel in Singapore and Osaka Namba Hotel in Japan.

It is also exploring opportunities in China and Japan. Japan should continue to benefit from healthy tourist arrivals ahead of the 2020 Tokyo Olympics; China provides exposure to rising affluence over the medium/long term.

Global Economy & Global Real Estate

What other smart cities are doing

Source: Straits Times / Insights

RUNNING on an 8.67-million-euro (S$14 million) budget and backed by the EU, this northern Spanish city is the first comprehensive "smart city" in Europe.

A central database - fed by more than 12,000 sensors on lamp posts, in gardens and cellphones - is responsible for coordinating municipal services.

For example, sensors in bins measure how much rubbish they contain, and notify waste management services for collection when almost full.

The city has also opened up about 75 data sets to citizens and businesses, so that they can develop apps and new services.

Santander is also looking at introducing technologies to enable the city to be even more efficient in the delivery of services, to "do the same things with less budget", and to involve businesses in the process.


THIS South Korean city, 56km from Seoul, was built from scratch: on 607ha of reclaimed land sits the largest private real estate development in the world.

By its completion next year, its 80,000 apartments, 4.6 million sq m of office space and 930,000 sq m of retail space will be linked to each other virtually, through its information systems.

Every home in this S$47 billion project will have a telepresence system, allowing users to control heating and locks remotely, as well as use video-conferencing to deliver and receive education and health care.


THE Big Apple uses a city- wide, data-sharing platform from 20 agencies and external organisations, which can be then translated into a visual map for city managers to study.

For example, the Mayor's Office of Data Analytics worked with tech firm IBM on an algorithm, which directs the city's fire department to inspect over 300,000 buildings in the city and identifying those with similar characteristics of having had serious fires historically.

This "risk map" means that the fire department is able to cut its response time to inspecting the worst conditions by nearly two-thirds.

The city also makes available to entrepreneurs a "business atlas", allowing them to create business plans based on data like economic activity, demographics, and foot traffic.

-By Rachel Au-Yong

Malaysia Properties (Pg 83 – 87)

Wuhan - China's entertainment mecca

Developer Dalian Wanda has spent 50b yuan on the project to transform the country's industrial heartland.

Source: Business Times / Opinion

Sacyr to Sell Real Estate to Bad Bank for $509 Million

Source: Bloomberg / News

Spanish construction company Sacyr SA (SCYR) agreed to sell real estate to Sareb, Spain’s bad bank, for 409 million euros ($509 million).

The assets, owned by Sacyr’s Vallehermoso Division Promocion unit, include land and unfinished property developments, according to a regulatory filing today. The deal will enable the unit to cancel outstanding debt that it owes Sareb.

Sacyr is selling assets to reduce debt, which totaled 6.3 billion euros as of September. Spain set up Sareb in 2012 to absorb 50.8 billion euros of real estate assets from lenders including the Bankia group that took state aid after the property market crashed.

Investment in Spanish commercial real estate more than doubled in the first half from a year earlier to 3.23 billion euros, according to data compiled by CBRE Group Inc. About 10.1 billion euros was invested in commercial properties when the Spanish market last peaked in 2007.

-By Sharon Smyth

Australia in No Rush to Cool Housing Market Amid Mortgage Risks

Source: Bloomberg / Luxury

Australia is still working on possible tools to strengthen mortgage-lending practices and cool an unbalanced housing market, the chairman of the nation’s banking regulator said today.

The Australian Prudential Regulation Authority is looking at the ability of borrowers to repay in a rising interest-rate environment, interest-only loans and “extremely” long tenure mortgages, Wayne Byres said. The supervisor is also examining an increase in landlord housing loans and the potential need to raise bank capital requirements if risks rise, he said. While regulators would like to unveil measures before the end of this year, there wasn’t a deadline, Byres said.

“I’d much rather make the right decision than just adhere to an internally imposed deadline,” Byres said at a parliamentary committee hearing today in Canberra. “I don’t want to get rushed into doing something then find that it’s actually not the right thing to do and unwind things.”

The measures are meant to temper speculative buying, which is creating a housing market that the central bank has called “unbalanced.” Outstanding mortgages to investors and interest-only loans climbed to a record in the September quarter, APRA data show. House prices across the country’s capital cities soared 8.9 percent in the year through October, according to data provider CoreLogic Inc.

Given housing’s importance to the health of the banking system, APRA has been encouraging lenders to reinforce sound lending standards, as well as discussing possible measures with other Australian authorities, he said.

RBA Discussion

The Reserve Bank of Australia, whose decision to keep its benchmark cash target at a record low of 2.5 percent since August 2013, said in September that it was in discussion with other regulators about possible measures to strengthen lending practices. Governor Glenn Stevens said that he was open to using such measures even while expressing “certain skepticism about macroprudential tools as a panacea.”

APRA was unlikely to start with loan-to-value ratio limits or loan-to-income limits that have been adopted by some overseas regulators, Byres said.

The Bank of England in June said mortgages at 4.5 times income cannot make up more than 15 percent of a lender’s new home loans and also required banks to decline loans to those who fail a new repayment test. New Zealand in October last year imposed limits on the number of mortgages with a loan-to-value ratio of more than 80 percent.

Canada has been tightening macro-prudential policy since 2008, with steps including minimum down-payment demands and maximum debt limits for insured mortgages. Sweden and Norwaycapped loans as a share of a property’s value and asked banks to protect themselves against losses. Hong Kong limited the size of loans too and took steps to curb some purchases by foreigners.

Adjusting Capital

If APRA were to reach a conclusion that risk is rising within the financial system, then it would be appropriate to think about how to adjust capital settings in response, Byres told lawmakers. Such adjustments could be made either across the board or to individual banks, he said.

Australia has the world’s most overvalued housing market on a price-to-income basis after Belgium, according to the International Monetary Fund. Residential mortgages make up 60 percent of the banking system’s domestic loan portfolio, which is high by historical and international standards, APRA said in its 2014 annual report.

Housing credit climbed by 7 percent in the 12 months through October, the fastest pace since January 2011, according to RBA data released today.

Macroprudential measures would help absorb the pressures of house price strength and reduce the potential risk to the stability of Australia’s financial system, ratings agency Standard & Poor’s said yesterday.

Housing “has traditionally been the source of stability that has enabled banks to keep the ship upright and sail forward,” Byres said. “ Our objective is to make sure that remains the case. To make sure those portfolios are a source of stability rather than a source of risk.”

-By Narayanan Somasundaram

Holiday Deal Search Draws Millions to Stores

Source: Bloomberg / Luxury

The annual holiday shopping season is under way in the U.S., with retailers working to keep consumers flocking to stores after a flurry of spending on Thanksgiving and Black Friday.

Retailers’ efforts to spread out their promotions, instead of concentrating them all on Black Friday, worked on Merly Hernandez, who waited until today to start shopping at the Paddock Mall in Ocala, Florida. She knew good deals would still be available and wanted to avoid the crowds.

“I took the time to look around before,” said Hernandez, who was visiting from Puerto Rico and had nabbed items at 50 percent off. “I know right where to visit.”

Retailers will have to draw shoppers like Hernandez and sustain brisk sales throughout the season in order to maintain their profit margins, said Charlie O’Shea, an analyst at Moody’s Investors Service in New York. Chains that can’t maintain momentum may have to offer massive discounts before Christmas and cut prices even more after the holiday, he said.

“The retailers that have the best holidays are the ones that manage” balancing promotions and profitability, O’Shea said in a telephone interview. “Minimizing the discounting, that’s the tough part.”

Holiday Forecast

The National Retail Federation forecast that about 140 million shoppers would hit the stores or shop online from Thanksgiving through tomorrow. So-called Cyber Monday arrives on Dec. 1, when websites offer even more promotions. The rush kicks off a holiday season that the NRF projects to be the best in three years, with sales growing 4.1 percent, helped by falling unemployment, rising wages and lower gas prices.

Holiday shopping is key for retailers, with sales in November and December accounting for about 19 percent of annual revenue, according to the NRF. The term Black Friday is believed to derive from the myth that retailers didn’t become profitable until the day after Thanksgiving each year.

While O’Shea cautioned that it’s hard to draw conclusions from his limited checks of stores in northern New Jersey on Thanksgiving and Black Friday, the season looks to be “off to a pretty good start.” He said he monitored the same locations as last year and saw busier parking lots, longer lines and fuller shopping carts.

Online Boost

Although most retailers won’t report holiday results until January, some data on e-commerce sales already is available. Online sales gained 14 percent on Thanksgiving Day and 9.5 percent on Black Friday, according to International Business Machines Corp.’s Digital Analytics Benchmark.

Comparable sales at Inc., the world’s largest online retailer by revenue, rose about 26 percent on Thanksgiving and 24 percent on Black Friday, according to ChannelAdvisor Corp.

Consumers had the opportunity to start their shopping earlier this week as retailers experimented with spreading their deals over a longer period. Express Inc. (EXPR) began offering 50 percent off everything starting Nov. 25 through noon yesterday, and Target Corp. (TGT) rolled out pre-Black Friday deals of up to 60 percent off on some items.

Still, the main wave of in-store deals started on Thanksgiving as many retailers expanded their hours on the holiday. J.C. Penney Co. (JCP) opened at 5 p.m., compared with 8 p.m. in 2013. Macy’s Inc. (M) and Target opened at 6 p.m., two hours earlier than last year.

Terrance Martin, a 42-year-old truck driver, lined up at a Best Buy Co. store in Paramus, New Jersey, at 7 a.m. on Thanksgiving for its 5 p.m. opening to score an almost $350 discount on a 50-inch Panasonic television.

‘Worth It’

“It was worth it for that kind of deal,” said Martin, who’s from nearby Fair Lawn. Even though he spent almost 10 hours waiting for the store to open, he didn’t miss the holiday entirely: His sister brought him turkey and yams.

Even with traditional doorbusters like heavily promoted televisions drawing some shoppers, others know they can get steep discounts throughout the holiday season, and are adjusting their shopping accordingly, said Simeon Siegel, a New York-based analyst at Nomura.

“You can’t outsmart the consumer anymore,” he said in a phone interview. “You need to pander to where the consumer wants to shop and when.”

More purchases also are taking place online instead of in brick-and-mortar stores. Shoppers plan to do 44 percent of their gift buying on the Web, the highest percentage ever, the NRF said last month.

Cyber Week

To capture those trends, both Toys “R” Us Inc. and Wal-Mart Stores Inc. (WMT) advertised on the front pages of their websites today that something called “cyber week” had begun. Best Buy Co., which yesterday had to shut down its website temporarily after a surge in traffic from customers’ mobile devices hurt performance, said today on its website that many of its Black Friday deals still are available.

Retailers’ sales have been getting a hand from consumer sentiment that’s the highest since before the recession. Consumer spending, which accounts for about 70 percent of the economy, grew at a 2.2 percent annualized rate last quarter, exceeding estimates for a 1.8 percent improvement. The gain was spread across durable and non-durable goods.

Lower gasoline prices also are leaving more money in consumers’ wallets. The average cost of a gallon of regular gasoline was $2.81 earlier this week, the lowest in four years, according to the automobile group AAA.

‘Better Mood’

“All the economic data is better than it was this time last year, and gas prices on top of that,” said Brian Yarbrough, an analyst at Edward Jones & Co. in St. Louis. “The consumer seems to be in a better mood.”

Pieranyely Figuero, a 25-year-old administrative assistant from New York City, already has done some shopping and may be enticed to open her wallet again. She spent less on Thanksgiving and Black Friday than planned because some of the deals she wanted had sold out. She said she still wants a pair of headphones from Apple Inc.’s (AAPL) Beats unit.

“Maybe on Cyber Monday,” Figuero said as she unloaded her shopping cart, which was full of items including an $18 chair, at a Target store in Brooklyn yesterday. “I just love shopping.”

-By Matt Townsend, Duane D. Stanford and Lindsey Rupp

Richest German Woman Buys Frankfurt Office Development

Source: Bloomberg / News

Susanne Klatten, Germany’s richest woman, bought the Winx office building that’s planned in Frankfurt’s MainTor waterfront development from DIC Asset AG.

Construction on the 29-story tower, which will cost about 350 million euros ($435 million) to build, will begin in early 2015, Frankfurt-based DIC said in a statement yesterday. Union Asset Management Holding AG has agreed to rent more than half of the 42,000 square meter (452,000 square feet) total space, DIC said in a separate statement last week.

“This is Ms. Klatten’s first big real estate investment,” Joerg Appelhans, her spokesman, said by phone. “We’re doing it for portfolio diversification and because Frankfurt has terrific prospects as a center of finance.”

Klatten, a member of the Quandt family, owns about 12 percent of Bayerische Motoren Werke AG, the world’s largest maker of luxury vehicles. Through investment firm Skion, she controls chemical company Altana AG and owns stakes in carbon producer SGL Carbon AG, where she holds the post of supervisory board chairman. Her net worth is about $16.2 billion, making her the world’s 50th richest person, according to data compiled by Bloomberg.

Office acquisitions in Frankfurt are soaring as investors take advantage of declining vacancies. Buyers are turning to real estate in the hunt for yield as interest rates hover near record lows. Office property values rose 4 percent in the third quarter compared to a year earlier, to 9,032 euros per square meter, according to Jones Lang LaSalle.

Attractive Option

“There are hardly any other investing options,” said Sven Carstensen, a Frankfurt office analyst at Bulwiengesa AG. “Yields here, even if they’re not very high, are still more attractive than leaving your money in the bank.”

Demand in Frankfurt “is coming from a wide range of buyers,” said Carstensen. “We don’t just have Ms. Klatten who’s buying but also Korean pension funds. Frankfurt is the only market where you can spend three or four hundred million euros in one swoop.”

Construction is also booming. Developers will build about 303,000 square meters of offices in Frankfurt this year, 49 percent more than in 2013 and the most since 2003, according to Jones Lang.

The Winx building is part of DIC’s 108,000 square-meter MainTor development zone, which is marketed as Frankfurt’s new “Riverside Financial District,” with 11 office, apartment and retail buildings that will cost 750 million euros to build over six years.

-By Dalia Fahmy

U.K. House-Price Growth Cools to Weakest in Almost a Year

Source: Bloomberg / Luxury

U.K. house price growth slowed in November as demand for property continued to weaken, Nationwide Building Society said.

Annual price gains cooled to 8.5 percent from 9 percent in October, the lender said today in a statement on its website. That’s the smallest increase in 11 months. Prices gained 0.3 percent from the previous month, when they rose 0.5 percent.

Tougher mortgage rules introduced this year and affordability concerns have damped housing activity recently after a surge in prices over the previous year. The Royal Institution of Chartered Surveyors said this month that its index of new-buyer demand has fallen to a six-year low.

“Housing market activity levels have remained relatively weak in recent months,” Robert Gardner, chief economist at Nationwide, said in the statement. “There is something of a disconnect between the slowdown in the housing market in recent months and broader economic indicators, which have remained relatively upbeat.”

The average house price in November was 189,388 ($298,000), according to Nationwide.

Gardner said while forward-looking indicators such as new buyer enquiries point to “further softness in the near-term,” continued economic growth and labor-market strength mean activity “is likely to pick up in the quarters ahead.”

-By Fergal O’Brien

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