London still hot as demand
cools
Rush
to buy property there slows, but market still attractive to S'porean investors
Source: Straits Times / Invest
Price growth slows for prime areas
Singaporeans
are less keen on London property after the rush to buy last year but the
British capital still is a buoyant market for local investors.
The pull
factors that initially put London in the sights of local buyers remain strong -
the relatively weaker pound, the robust rental market, the ease of entry and
exit, Britain's transparent tax system and the positive economic outlook.
There is
also the powerful push factor of cooling measures in Singapore that are forcing
investors to look farther afield.
Mrs Doris
Tan, JLL head of international residential properties, reckons that about 450
units of British property have been sold this year through 25 projects marketed
by her company.
"Last
year was a record year in terms of launches and sales volume; this year, it is
about 30 per cent less," she said.
There have
still been at least 50 launches of British property in Singapore this year,
including those of Quintain's North West Village near Wembley Stadium and the
third phase of the Battersea Power Station project.
Mrs Tan
noted that a prime two-bedder costs around £1.5 million (S$3 million), while
one- and two-bedders in the outer areas go for £350,000 to £500,000.
Mr Richard
Levene, director of international properties at Colliers International, said
smaller units are typically more popular, given their potential for higher
rental return.
Singaporeans,
who buy mainly for investment, are particularly keen on property by a developer
with a strong track record as well as units in good areas with long-term growth
prospects and links to public transport.
"They
will also look at future infrastructure improvements to the area, such as the
new Crossrail system in London," said Mr Levene.
While
cooling measures have hit the local market and banks' mortgage books, there has
been an upside as well.
"The
challenging local market conditions have spurred investors to cast their nets
abroad...Our portfolio has doubled compared with two years ago, and quadrupled
compared with three years ago," said Ms Phang Lah Hwa, head of consumer
secured lending at OCBC.
Sales of
British property fell after the implementation of the total debt servicing
ratio (TDSR) in June last year in line with the softening of the market here,
she added.
According to
figures released by the Monetary Authority of Singapore in its latest Financial
Stability Review, the value of foreign residential properties bought in the
first half of this year was about $1.1 billion compared with $1.6 billion for
the same period last year. The TDSR framework applies to purchases of overseas
property financed here.
Prices have
climbed rapidly since 2008 and are now 30 per cent above levels in 2007,
according to the Nationwide House Price Index.
Price growth
has slowed, especially in prime central London. Values in the Greater London
market have risen 23 per cent over the past two years but only 13 per cent in
the prime zone, said Savills.
Prices in
prime parts of central London and south-west London rose just 0.4 per cent in
the second quarter of this year.
Even so,
Savills has pencilled in 10.4 per cent price growth for London property over
the next five years.
"London
remains an under-supplied market, although it is more fully supplied in more central
locations," said Ms Yolande Barnes, director for world research at
Savills.
Rents should
also rise, given the inflow of people moving into the city to work and mortgage
regulations limiting home ownership, she added.
"We
anticipate that rental growth will be higher than capital growth in London over
the next five years."
What
should potential foreign investors look out for?
An investor
can expect to pay service charges for maintaining a property plus letting
costs, which can vary depending on the level of service demanded of a letting
agent.
These fees
could generally take 1 to 1.5 percentage points off the gross yield, Ms Barnes
said.
Investors
should also bear in mind the capital gains tax on non-British residents, which
will be implemented from April 1 next year.
Financing
for a British property can be obtained in either Singapore dollars or sterling.
As the TDSR
framework applies to purchases of overseas property as well, buyers should
assess their eligibility for a loan before committing themselves to a purchase,
banks said. Buyers taking loans in sterling should take into account foreign
exchange risks that may arise, said Ms Chia Siew Cheng, head of secured loans
at United Overseas Bank.
Of the $1.1
billion shelled out for overseas residential property in the first half of this
year, about 91 per cent went to real estate in Britain, Malaysia and Australia,
the MAS review noted.
-By Rennie Whang
http://www.straitstimes.com/archive/sunday/premium/invest/story/london-still-hot-demand-cools-20141130
Richest London Areas See First
Home Price Dip Since 2009
Source: Bloomberg / Luxury
Home prices in London’s wealthiest neighborhoods fell on a monthly basis for the first time in four years as uncertainty over property taxes and national elections next year deterred buyers.
Values in the 13 neighborhoods including Chelsea and Mayfair that Knight Frank LLP defines as prime central London declined 0.2 percent in November from October, the first drop since October 2010, the broker said in a report today.
London’s luxury-home market is running out of steam after outperforming the rest of the U.K. since 2009. The opposition Labour Party plans to raise 1.2 billion pounds ($1.9 billion) from an annual tax on homes valued at more than 2 million pounds if it wins the election next year. Labour and Prime Minister David Cameron’s Conservative Party were tied with 31 percent support in a YouGov/Sun poll published Nov. 28.
“It is difficult to rank individual reasons for the decline in order of importance, but anecdotally they appear to include the looming U.K. general election, the proposals for a mansion tax and the impact of capital gains tax reform for non-residents,” Tom Bill, head of London residential research at Knight Frank, said in the statement.
Annual price growth in the prime areas has slowed to 6.1 percent in November from a high this year of 8.1 percent in June, Knight Frank reported. The average gain for the U.K. was 8.5 percent, Nationwide Building Society said yesterday.
Buyers from Asia and the Middle East and Russia, who helped drive price growth in the central London market, are now facing a rising U.K. pound as well as series of levies imposed by Cameron’s government. The pound has strengthened 3.8 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies.
-By Patrick Gower
http://www.bloomberg.com/news/2014-11-29/richest-london-areas-see-first-home-price-dip-since-2009.html
U.S. Retailers Seek to Sustain
Holiday Shopping Momentum
Source: Bloomberg / News
U.S. retailers lured millions of shoppers to their stores and websites on Thanksgiving and Black Friday with some of their best deals of the holiday season. Now they have to win over those who weren’t extreme bargain seekers.
Merly Hernandez was one such holdout. She waited until yesterday 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.”
The National Retail Federation forecast that about 140 million shoppers would hit the stores or shop online from Thanksgiving through today. So-called Cyber Monday arrives tomorrow, 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.
Key Season
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.
In Washington, President Barack Obama ventured out with his daughters yesterday to the Politics & Prose bookstore, where they bought 17 books ranging from children’s and young-adult fiction to National Book Award winner “Age of Ambition” by Evan Osnos and Joseph Conrad’s classic “Heart of Darkness.” The trip was aimed at encouraging consumers to patronize small businesses on what has become increasingly known as “Small Business Saturday.”
Online Sales
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 Amazon.com 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 in the 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 Nov. 28, and Target Corp. rolled out pre-Black Friday deals of up to 60 percent off on some items.
Thanksgiving Wave
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. (BBY) 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.
“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.”
Online Sales
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.
To capture those trends, both Toys “R” Us Inc. (AAPL) and Wal-Mart Stores Inc. (WMT)advertised on the front pages of their websites yesterday that something called “cyber week” had begun. Best Buy Co., which had to shut down its website temporarily on Black Friday after a surge in traffic from customers’ mobile devices hurt performance, said yesterday on its website that many of its deals from that day 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 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 on Nov. 28. “I just love shopping.”
-By Matt Townsend, Duane D. Stanford and Lindsey Rupp
http://www.bloomberg.com/news/2014-11-30/u-s-retailers-seek-to-sustain-holiday-shopping-momentum.html
New York Hops on $15 Billion
Israeli Corporate Bond Boom
Source: Bloomberg / News
U.S. real-estate developers are joining the largest wave of local debt issuance on theTel Aviv Stock Exchange bond trading platform since 2007, capitalizing on yield-starved investors to obtain financing.
Companies have sold $14.6 billion of bonds this year through Nov. 20, up from $8.7 billion in the same period of 2013, according to bourse data. New York real-estate firms, including Extell Development Co. and Zarasai Group Ltd., have joined the boom, issuing a total of $436 million. It’s now about 0.12 percentage point cheaper for borrowers to sell bonds in shekels and convert to dollars than it is to issue in greenbacks directly, data compiled by Bloomberg show. A year ago, shekels were about 0.69 percentage point costlier to borrow.
Attractive borrowing costs and investor demand for higher-paying debt securities are luring foreign issuers. Buyers have responded by pouring into Israel’s $86 billion corporate bond market, driving the Tel Aviv Bond 40 Index to near a record. New York-based companies benefit from Israeli traders’ familiarity with that market and increased interest for deals that may be considered small in the U.S., according to Israel Shimonov, founding partner at Shimonov & Co. Advocates.
“Institutional investors and pension managers are thirsty for investment as money in the bank hardly yields anything,” Shimonov, whose firm has helped U.S. real-estate companies issue bonds in Israel, said in an interview this month. “The government does not issue enough bonds, and equity listings are limited.”
Benchmark Rate
The surge in issuance comes as the TASE is trying to reverse a dearth of new equity offerings on Israel’s only bourse. At the same time, government notes and the Tel Aviv 25 Index (TA-25) have soared, pushing investors to look for future income in corporate debt. The index declined 0.2 percent to 1,474.60 at the close of trading today.
The cost of borrowing in shekels has dropped as the Bank of Israel lowered the benchmark interest rate 12 times since 2011 to a record. Initially combating the currency’s appreciation amid offshore natural gas findings, policy makers continued cuts in an attempt to revive economic growth after the 50-day Gaza war in July and August.
The average premium of the Tel Aviv Bond 60 Index over indexed government notes was about 1.5 percentage points last month, according to Bank of Israel data. The spread touched a low of 0.99 percentage point in May.
“Nobody is coming to Israel because of pretty eyes,” Shimonov said. “The underlying economics works for them.”
Debt Swap
Local investors are attracted to the U.S.-based issuers for their yield and the chance to spread bond holdings beyond Israel, according to Yair Lapidot, founder and chief executive officer of Tel Aviv-based Yelin Lapidot Investment House. His firm is the biggest holder of Extell’s 0.1 percent sinkable notes maturing in December 2019, according to data compiled by Bloomberg.
“This is a chance to diversify our investments in real estate outside Israel,” Lapidot, whose firm manages 44 billion shekels, said by phone on Nov. 26. “This is not a hit-and-run. We expect these companies to keep the relationship going and stay in touch with us.”
Gary Barnett’s Extell, the developer of one of the tallest residential buildings in New York on West 57th Street, raised 1.05 billion shekels ($270 million) from the sale in June. It was the largest foreign debt sale this year. Total demand for the notes reached 1.7 billion shekels, it said in a statement.
Because U.S. developers and their operations are not as familiar to Israeli investors as are local real estate companies, first-time U.S. issuers pay a higher coupon over similar rated Israeli developers, said Lapidot.
‘Appetite Is There’
At least four more international companies will issue shekel bonds by the end of 2014, according to Noga Knaz, vice chairman of Rosario Capital Ltd., which helped underwrite some of the debt issuances. Debt sales by companies from the U.S., Russia and Canada are expected in the first quarter of next year, she said.
“The appetite is there,” Knaz said by phone on November 26. “But the market may be more selective going forward.”
-By Yaacov Benmeleh
http://www.bloomberg.com/news/2014-11-30/new-york-hops-on-15-billion-israeli-corporate-bond-boom.html