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28th October 2014

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Feasibility study for Singapore-China project to be concluded by 2015: DPM Teo

Singapore's Social and Family Development Minister Chan Chun Sing will co-chair a ministerial committee to study a possible third government-to-government project with China.

Source: Channel News Asia / Singapore

SUZHOU: Singapore aims to conclude a feasibility study into a third government-to-government project with China by next year. This includes establishing a concept, location and programmes, said Deputy Prime Minister Teo Chee Hean.

Mr Teo spoke to reporters in Suzhou after a meeting with Chinese officials on Monday (Oct 27). He said Singapore and China have agreed that the theme for the project - this time in China's western region - should be based on modern connectivity and services.

Mr Teo said that Singapore is looking for a project that is ground-breaking, and that will fit into China's current priorities.

He added: "China is undergoing a major transformation in its economy. Among other things, it wants to make sure economic development spreads from coastal areas to the western region, so this is one major priority of the Chinese. The Chinese are also looking for linkages beyond China with other countries... So we are looking to see how a project in the Western region can help the Chinese, work together with them, fit in with them, to catalyse, and to help them realise this vision."

Singapore's Social and Family Development Minister Chan Chun Sing will co-chair a ministerial committee to study this project. He said both sides will conduct exploratory studies, including visits to the cities being considered - it was previously reported that the three shortlisted cities are Chongqing, Chengdu and Xi'an.

He added that the project must fit in with China's development priorities for its Western region and break new ground for bilateral cooperation between the two countries. It must also be commercially viable.

Currently, Singapore has two government-to-government projects with China - Suzhou Industrial Park and Tianjin Eco-city.

"It's not just about developing an industrial park, because if that's the case, the Chinese are very capable of doing that." said Mr Chan. "We are trying to see which areas we can develop enablers for economic activities, for financial activities, to take off in the western region."

Mr Chan also noted that the previous two projects were geographically-specific, and that the third project being studied could be something different.

"Because we are talking about the entire Western region, we may be thinking how to work with the Chinese to develop a network based on a hub and spoke methodology, so there's much more we need to discuss," he added.

The proposed third project was among a number of issues discussed at a Joint Council for Bilateral Cooperation meeting, which also looked at ways to further enhance financial cooperation between the two countries.

Both sides also signed new agreements, including one on intellectual property protection, and also renewed some existing agreements.

Singapore will mark 25 years of diplomatic relations with China next year. It is a significant occasion and Mr Teo said he hopes to see some of the projects that both sides have been discussing reach a good point by then to mark this milestone. Mr Teo will wrap up his visit in Beijing on Tuesday.

- CNA/ac

Joint panel meets to firm up plans for third S'pore-China project

Source: Straits Times / Top of The News

A JOINT ministerial committee has met over the weekend to firm up the "terms of reference" of a proposed third government-led project between Singapore and China, said Deputy Prime Minister Teo Chee Hean yesterday.

With a focus on modern services and modern connectivity, it is expected to be located in one of three western Chinese cites: Chongqing, Chengdu or Xi'an.

"We aim to see whether we can reach a conclusion on the concept, location and some of the programmes by some time next year. That will be a good timeframe that both sides feel will be good to work towards," Mr Teo told reporters after the Joint Council for Bilateral Cooperation (JCBC) meeting in Suzhou, eastern Jiangsu province, yesterday.

The JCBC is the highest-level annual bilateral meeting between Singapore and China.

Singapore's point man for the project is Minister for Social and Family Development Chan Chun Sing, who co-chairs the committee for it with Chinese Commerce Minister Gao Hucheng.

Mr Chan said joint exploratory studies and site visits to understand the strengths and weaknesses of the various cities can be expected in the coming year.

"It's not just about the development of an industrial park, because the Chinese are very capable of doing that. We want to develop the enablers for financial and economic activity to take off in the western region," he added.

Yesterday, Education Minister Heng Swee Keat, who co-chairs the Singapore-Jiangsu Cooperation Council, and National Development Minister Khaw Boon Wan also gave updates on the two flagship bilateral projects under their charge.

Mr Khaw said the Tianjin Eco-City should be entering its "rapid growth stage" while Mr Heng said the next phase of the Suzhou Industrial Park's development will be towards an innovation- and service-oriented economy, particularly in the areas of talent development and research and development.

On this front, the National University of Singapore (NUS) Lee Kuan Yew School of Public Policy inked an agreement yesterday to open its first overseas education centre in Suzhou, said Mr Heng.

It will offer executive education and postgraduate degree courses aimed at equipping Chinese officials with the knowledge and skills required for China's developmental needs, NUS said in a statement yesterday.

-By Esther Teo, China Correspondent in Suzhou

HDB Lease Buyback Scheme needs better awareness: Halimah Yacob

Seniors are not aware of the various ways they can monetise their flat due to a lack of awareness of the scheme as well as a lack of financial literacy, Mdm Halimah said.

Source: Channel News Asia / Singapore

SINGAPORE: Within three weeks of changes being announced to the Lease Buyback Scheme on Sep 3, the Housing and Development Board (HDB) received 500 queries, almost thrice the number they receive in a typical month. The Lease Buyback Scheme allows eligible seniors to retain part of the lease on their HDB flat, and sell the remainder back to HDB for retirement income.

HDB says it has about 250 officers who are able to provide financial counsulting, but seniors have to apply for the scheme first, before such counselling sessions can take place.

Speaker of Parliament and Chairwoman of the People’s Action Party Seniors Group Halimah Yacob said it is a real challenge, building awareness of the scheme.

"In 2009, when they (HDB) introduced the Lease Buyback Scheme, what they did was they had these exhibitions at the housing estates. It is not useful for everyone - because the five-roomers, the executive flat, the private property owners, they are not going to benefit. They had exhibitions at specific areas like Bedok and MacPherson. I think that would be helpful. So that people can come and get a sense, ask the questions they want to ask," she said.

However Mdm Halimah said there is a larger issue at play - a lack of financial literacy among seniors, although there are existing programmes to help them better manage their money.

“But the problem is - the attendance is not so good. So again, it's a question of whether they are aware. Secondly, it is a question of whether they feel there is a need for them to attend. So making a compelling case for them to feel that there is a need for them, it is useful for them to attend, I think it is something we need to look at,” Mdm Halimah added. 

Mr Mohamed Eusope Kowlan, 78, joined the scheme this year after first getting to know about it five years ago, when the HDB informed him and his wife that they are eligible.

Before the agreement was signed, the couple had to go through financial counselling with HDB. The session laid out for them details such as the estimated proceeds received and CPF top-up requirements.

In their case, the couple’s three-room flat had a remaining lease of 69 years. They retained a 30-year lease on their flat and sold the remaining 39 years to the HDB for S$139,500. The proceeds were then split equally between them, who each get $69,750.

But the couple did not meet the CPF minimum sum of S$138,000 each, and so they used all the proceeds to top up their CPF accounts. As a result, they received an additional S$400 to S$500 each in monthly CPF Life payouts. The couple will get a S$20,000 cash bonus for participating in the scheme.

At the financial counselling sessions, the HDB officer Lina Lim also explained other monetisation options such as subletting and moving into a smaller flat. Mr Eusope said such sessions were helpful.

"The counselling was good, we understood everything. What we did not know, we got to ask about," he said.

Ms Lim, who is the Principal Estate Manager at HDB’s Bishan Branch, said she draws models to better explain the scheme. "With a diagram, it makes it easier to understand for the elderly," she said.

HDB said it will step up efforts to help seniors better understand the various ways they can monetise their flats. 

- CNA/dl

Singapore Real Estate

21st level of Samsung Hub sold at S$3,280 psf

Source: Business Times / Real Estate

The 21st level of Samsung Hub has been sold at S$3,280 per square foot - on strata area - setting a record for an entire floor in the 999-year leasehold office building along Church Street. This surpasses the previous whole-floor record in Samsung Hub of S$3,225 psf in September this year for the 18th level.

-By Kalpana Rashiwala

Estate agents move from selling houses to...

Survival instincts kick in as sluggish property market takes its time reviving

Source: Straits Times / Singapore

FACED with a tepid property market, Mr Nicholas Chia, 28, decided to go from selling houses to shining cars.

An estate agent since 2010, he decided to "jump ship" in the first quarter of this year, setting up car-grooming business Doorstep Detailer as well as a franchise of a pre-school enrichment centre.

"Because of the slow market, I need something to supplement my income and something in which I can tap the network I've made," he said.

Car-polishing was a natural choice: "Almost every property agent has a car, and image is important when they meet clients."

In today's sluggish property market, more agents are letting their licences lapse or trying their hand at other jobs, according to anecdotal reports.

Housing Board resale deals hit a record low of 18,100 last year. There were just 12,683 deals in the first nine months of this year, putting 2014 on track for a new low.

Private property deals this year barely hit 10,000 as of September, a number that was about the average of each quarter in 2012.

On top of more agents leaving, there is also less new blood entering the industry. According to the Council for Estate Agencies' annual report last week, there were 3,061 new registered sales professionals in the last financial year, down from 4,289 the year before.

Agents say the exodus began last year, but really gained momentum this year.

Some part-time agents have returned to their day jobs, said Dennis Wee Realty agent Priscilla Pang, who is still in the business.

Full-time agents simply took their skills elsewhere. Active PropNex agent Remus Koek said: "They are mostly still in sales, but different types of sales."

Dennis Wee Realty agent Aaron Lin said he has seen older agents turn to multi-level marketing or driving a taxi.

Alternative jobs beckon in the food and beverage as well as spa industries. Agents are also turning to forex trading, holding investment seminars and even setting up economy rice stalls.

A 41-year-old agent who wanted to be known only as Mr Ong returned to his previous field of engineering. "I'm not seasoned enough to weather the current lull," he said.

Another agent, who wished to be known as Ms Xie, 27, stopped actively advertising around April, a year after she got her licence.

"Ideally I would have continued my activities in real estate but it just wasn't viable."

Besides the slow market making it tough to close deals, the new Personal Data Protection Act has made it harder to get clients, she said. Potential leads must be checked, for a fee, against the Do Not Call list of people refusing unsolicited marketing requests.

Still, she has renewed her licence for next year - just in case.

Indeed, some agents are biding their time, noted Mr Michael Long, key executive officer of Spacez Real Estate. They have told their agencies they would let their licences lapse on the understanding they can return in 2016.

Property experts expect transaction figures to start recovering by the end of next year.

-By Janice Heng

Companies' Brief

Week-long pow-wow takes off on strong footing

125 firms join initiative to uphold and advance good standards

Source: Business Times / Companies & Markets

"Good corporate governance is the bedrock of a trusted and respected organisation; and we have been relentless in our efforts to put this in place in CapitaLand. Transparency towards our stakeholders has helped us to achieve long-term sustainable growth and enhance shareholder value." Lim Ming Yan,

President & Group CEO, CapitaLand Limited

Perennial Real Estate to make offer for remaining PCRT units

Source: Business Times / Companies & Markets

PERENNIAL Real Estate Holdings Limited (PREHL) has announced its firm intention to make a voluntary conditional offer to acquire the remaining units in Perennial China Retail Trust (PCRT) in exchange for PREHL shares.

Unitholders will be offered S$0.70 for each PCRT unit, to be satisfied by the issuance of 0.52423 PREHL shares at an issue price of approximately S$1.3353 for each PREHL share.

As at Monday, PREHL had a total direct and deemed interest of approximately 28.44 per cent of total outstanding units in PCRT. PREHL and its concert parties have a total direct and deemed interest of approximately 33.6 per cent of total outstanding units in PCRT. PREHL has also received irrevocable undertaking from investors who have committed to tender their PCRT units for PREHL shares, representing an additional 15.78 per cent of total outstanding units in PCRT.

Together, PREHL and its concert parties' total direct and deemed interest in the PCRT units amounts to 44.30 per cent of total outstanding units. The offer will become unconditional when this figure hits 50 per cent.

In a statement on Monday, PREHL said that this offer presents PCRT unitholders an opportunity to participate in an enlarged and diversified platform, with the China mixed-use assets comprising different components providing asset class diversification and the Singapore assets providing geographic diversification.

PREHL's net asset value, as an enlarged group including 100 per cent of PCRT post-delisting and assuming the completion of the acquisition of the Beijing Tongzhou Integrated Development and the remaining 51 per cent stake in Perennial Real Estate Pte Ltd, will grow significantly from its current S$1.26 billion to S$2.62 billion.

Its PRC portfolio has a gross development value of about S$13.1 billion and gross floor area of about 36.5 million square feet while its Singapore portfolio has a gross development value of about S$3.8 billion and gross floor area of over 2.0 million sq ft.

Noted chief executive officer Pua Seck Guan: "PREHL is a dominant commercial developer with large scale mixed-use development projects in the PRC, and owns two largest high speed railway commercial hubs in the country, being Chengdu East High Speed Railway Integrated Development and Xi'an North High Speed Railway Integrated Development which are well-positioned for growth.

"The portfolio is complemented by prime and iconic Singapore properties, such as CHIJMES, Capitol Singapore and TripleOne Somerset, which enjoy excellent transport connectivity and will provide steady income streams.

"Together with the trading income from the strata sale of mixed-use projects, rental income from long-term investment properties, and fee income from management business, PREHL is well-poised to grow its NAV over time."

Separately, the company also announced that it will be officially listed on the Singapore Exchange, following the successful completion of the reverse takeover of St James Holdings Limited by the sponsors of PREHL.

Trading of PREHL shares are expected to commence no later than Dec 31.

The firm has appointed DBS Bank, Standard Chartered Bank and United Overseas Bank as joint financial advisers in connection with the offer. DBS Bank and Standard Chartered Bank acted as joint financial advisers in relation to the reverse takeover of St James Holdings Limited which was completed yesterday.

The first closing date of the offer is expected to be on Dec 8.

The article originally stated that PREHL would be listed on the mainboard of the SGX. The revision reflects the supplemental announcement released last night, regarding the listing status of PREHL.

-By Mindy Tan

Perennial Real Estate completes reverse takeover of St James

Source: Straits Times / Money

A MAJOR property developer will soon be listed on the Singapore Exchange (SGX) after formalising the injection of its assets into nightlife firm St James Holdings.

The developer, Perennial Real Estate Holdings (PREH), which has assets in China and Singapore, completed a $1.56 billion reverse takeover of St James yesterday.

Under the deal, PREH will be listed on the mainboard, a step up from St James' Catalist board listing. The entertainment assets of St James are being taken private and sold to CityBar Holdings.

PREH's shares are set to commence trading by Dec 31. Its net asset value and issued share capital stood at about $1.26 billion and $1.07 billion respectively yesterday.

The group's portfolio includes Chijmes, TripleOne Somerset and Capitol Singapore here and 11 Chinese assets such as the Beijing Tongzhou Integrated Development and large-scale projects connected to high-speed rail stations in Xian and Chengdu.

Yesterday, as foreshadowed, PREH also announced that it has made a voluntary conditional offer to acquire all the remaining units of the PREH-sponsored business trust Perennial China Retail Trust (PCRT), in exchange for new PREH shares. The units will be swapped at 70 cents each.

Under the deal, PREH's net asset value is expected to grow to $2.62 billion, assuming the group also completes the acquisition of the Beijing Tongzhou Integrated Development and the remaining 51 per cent stake in Perennial Real Estate.

The enlarged group will manage properties in China that add up to about 36.5 million sq ft with an estimated gross development value of $13.1 billion, as well as Singapore developments spanning over two million sq ft that are worth about $3.8 billion.

PREH said in a statement that the offer will allow PCRT shareholders to participate in "an enlarged and diversified platform, with the PRC mixed-use assets comprising different components providing asset class diversification, and the Singapore assets providing geographical diversification".

"In addition, PREH will enjoy strong support from its key long-term shareholders, gain better access to funding and benefit from the combined management bench strength."

PREH chief executive Pua Seck Guan noted that its projects in China are "well-positioned for growth", while its Singapore properties will "provide steady income streams".

"Together with the trading income from the strata sale of mixed-use projects, rental income from long-term investment properties, and fee income from management business, PREH is well-poised to grow its net asset value over time."

He added: "With a strong consortium of sponsors who have extensive business experience and established relationships, coupled with an experienced management team with proven track record, the group is committed to delivering long-term growth to shareholders."

-By Jacqueline Woo

Perennial completes reverse takeover of St James Holdings

Perennial Real Estate Holdings completes reverse takeover of Catalist-listed night-spot operator St James Holdings. Trading of its shares on the mainboard of the SGX is only expected to start sometime in December.

Source: Channel News Asia / Business

SINGAPORE: Investors in Singapore will soon get a chance to own slices of iconic Singapore properties like Chijmes and Capitol Singapore. Perennial Real Estate Holdings, which owns these assets, has completed its reverse takeover of Catalist-listed night-spot operator St James Holdings on Monday (Oct 27).

However, the trading of its shares - which will be promoted to the mainboard of the SGX - is only expected to start sometime in December. 

Perennial also announced that it is making a voluntary offer to acquire the remaining units of Perennial China Retail Trust in exchange for new Perennial Real Estate Holdings shares. The company plans to take the trust private.

Perennial said it can turn into a property giant with a net asset value of S$2.62 billion.

Mr Pua Seck Guan, chief executive of Perennial, said: "We own the two largest high-speed rail commercial hubs in the whole of China - in Chengdu and Xi'an. In the case of Chengdu, we have a development area more than 12 million square feet. And in Xi'an, we have a development area of more than eight million square feet. These high-speed rail commercial developments also have local MRT and bus interchanges."

- CNA/ac

Ascott Residence Trust

Source: Business Times / Companies & Markets

ART is acquiring three serviced residence operated by Quest (Australia's largest serviced apartment provider) in Greater Sydney for A$83 million (S$93 million). This is expected to contribute to a 0.2-0.3 per cent increase to FY15-16 forecast distribution per unit (DPU); acquisition is funded by recent issue of perpetual securities.

OKP's profit falls 2.4% to S$281,000 in Q3 even as revenue rises 0.8%

Source: Business Times / Companies & Markets

Infrastructure and civil engineering company OKP Holdings on Monday reported a 2.4 per cent drop in net profit to S$281,000, while revenue rose a marginal 0.8 per cent to S$26.2 million for its third quarter ended Sept 30, 2014. Earnings per share was flat at 0.09 Singapore cent for the quarter.

-By Lee Meixian

Absence of fair value gain hits Second Chance's Q4 earnings

Source: Business Times / Companies & Markets

Second Chance Properties on Monday reported an 88 per cent slide in net profit to S$5.7 million, on the back of a 16.1 per cent decline in revenue to S$17.9 million for its fourth quarter ended Aug 31, 2014. This brings the property and retail group's full-year net profit to S$16.5 million, a 71.1 per cent fall from a year ago.

-By Lee Meixian

JLL revamps Singapore capital markets team

Greg Hyland to head Singapore capital markets, Karamjit Singh to take enlarged role. Tan Hong Boon to be seconded to M'sia

Source: Business Times / Real Estate

Property consulting group JLL has announced senior director changes in its Singapore capital markets business effective Nov 1, to sharpen the firm's edge. The changes are in line with the firm's plans to increase its focus on key local and institutional investor clients, and to have greater access to regional investors (including institutional and China investors) looking at Singapore, JLL said on Monday.

Views, Reviews & Forum

The case against easing Reit borrowing limits

Source: Straits Times / Forum Letters

THE Monetary Authority of Singapore (MAS) has proposed that real estate investment trust managers should have a statutory duty to prioritise unitholders' interests over those of the manager and directors, if a conflict of interest occurs ("Proposed Reit rule changes timely but can be better"; Oct 11).

The manager's role is to work for the unitholders. At its most basic, unitholders are the owners of the estate and the manager is paid to manage it.

Conflict arises if the manager takes it upon himself to make decisions for the owners, or increase his pay at their expense. This is what the MAS is trying to address with its proposals.

But I wonder why it is aiming to relax limitations on bank borrowing by Reits, and increase the development limit.

People invest in Reits to receive income from rent. It is an alternative to earning a fixed income from term deposits or bonds. Therefore, the Reit manager's job is to collect and distribute rental income.

Some Reit managers have been managing borrowed funds and performing asset enhancement initiatives. This causes Reits to compete among themselves to enhance their properties, resulting in higher rents for tenants.

Asset enhancement initiatives also increase costs, eating into the distribution per unit for unitholders.

As a unitholder, I just want a reasonably consistent fixed income and do not support the proposal to increase borrowing and development/redevelopment limits.

The same article carried several good suggestions by corporate lawyer Robson Lee on reducing the conflict of interest between majority shareholders and minority ones.

If the MAS is serious about protecting minority unitholders' interests, it should consider implementing his suggestions.

-By Geoffrey Kung

Striking a precious housing balance

Source: Straits Times / Opinion

FEWER applicants for new flats and five consecutive quarters of resale price falls have seen the Housing Board market going off the boil. The operative word is "going", denoting an incomplete market correction. National Development Minister Khaw Boon Wan's view that control measures for the sector as a whole should remain is the clearest word yet that real estate retains a capacity to cause an unwelcome wobble in the economy. Relative to the cumulative price run-up in the boom years, the considered judgment is that such cooling as has occurred has some way to go.

A planned 25 per cent reduction in the supply of build-to-order HDB flats next year, on top of a smaller trim this year, is a measured response in the sense that most people who currently need a flat have got one, although prices are only slowly coming off their peak. Young married couples and families wanting to live close together will continue to enjoy preference. This is pitching close to the golden mean.

But mindful of the last bout of frothiness, when cash over valuation became a burden to buyers, one could not be certain that the supply contraction will produce the desired price stability within a reasonable period. (In new and resale private housing, industry expectations of 10-15 per cent falls to more sensible price levels have not eventuated.)

Things are never that simple in real estate, especially in public housing planning. The HDB works to a gestation of four to five years, beginning with the number crunching of existing stock, marriage rates, foreigners granted residency and, yes, even emigration outflow to an extent. Anything could happen in the interim to necessitate a review.

Preserving a balance between holding fair value for existing owners and keeping prices reasonable enough for intending buyers and upgraders is part logic, part intuition. Singapore has seen extremes, sometimes unavoidably.

In the booming 1990s, HDB applicants had to contend with long queues despite strong supply. Finicky buyers undecided about location and flat-type waited for up to seven years. The Asian currency crisis that struck shortly after caused the market to seize up, leaving what became a dead stock of 30,000 flats. It took years to clear the surplus.

Disruptions can occur at any time. Unease about the current global growth slowdown is a reminder that asset volatility can be managed up to a point only. Imponderables include terrorist strikes and spikes in interest rates.

The HDB maintains a small buffer stock to act as a stabiliser, but even this is subject to variables. Hence, it would be a tall order to expect planners to always strike a perfect balance between supply and demand, and between affordability and eroding asset values.

Design HDB flats such that households can save energy

Source: Today Online / Voices

The report “HDB seeking to channel sunlight into basements” (Oct 27) stated that the Housing and Development Board (HDB) is seeking to use sunlight as a lighting or energy source, with the objective of slashing energy costs by half.

To reduce energy consumption, it must also look at wind flow and ventilation in its flats, as air-conditioners and cooling appliances take up a huge proportion of household electricity bills.

Many new HDB flat designs do little to reflect our tropical climate: Ceilings are low, units are small, many units face the setting or rising sun and many rooms have full-length windows. The last two factors combine to cause a greenhouse effect.

My five-room flat has two bedrooms with normal two-pane windows and one bedroom with full-length windows. All three get the morning sun.

There is a significant difference in temperature between the first two and the last room in the late morning and on bright, warm days. The latter room almost always needs air-conditioning to lower the temperature to a comfortable level.

The HDB should consider these points when designing its flats.

-By Edmund Augustine Loh Siew Kuan

Cost, resident feedback have priority in home upgrading schemes

Source: Today Online / Voices

We thank Mr Jolly Wee for his feedback on the Home Improvement Programme (HIP) and Neighbourhood Renewal Programme (NRP). (“Take more steps to conserve energy, reduce noise, HDB”; Oct 17)

The HIP focuses on essential flat improvements to address common maintenance problems related to ageing flats. The HIP items are selected carefully to offer the best value for money, so that the programme can benefit households fully.

With a limited budget, we have focused on providing more extensive items that are not easily carried out by individual households, for instance, the replacement of pipe sockets and waste pipes and upgrading of electrical load.

The NRP focuses on block and precinct improvements, about which the neighbourhood’s residents are consulted. Their feedback and suggestions will be considered in finalising the design proposals.

Some of the more popular improvements include covered links, drop-off porches and fitness stations. Some projects have begun to adopt energy conservation initiatives, such as installing light-emitting diode (LED) lighting and solar panels.

We will consider Mr Wee’s suggestions in our regular reviews of upgrading programmes to ensure they remain relevant to residents’ needs.

-By Lawrence PakYew Hock

Director (Upgrading Programmes)

Housing & Development Board

Global Economy & Global Real Estate

Pending sales of US existing homes rise less than forecast

Source: Business Times / Government & Economy

KLW to acquire stake in Mega Sun for 85m yuan

Source: Business Times / Companies & Markets

Home builders lead returns in China bond markets

Premier Li Keqiang opens financing channels and eases property restrictions to shore up slumping industry

Source: Business Times / Real Estate

Chinese developer gets extension to repay loan

Source: Business Times / Real Estate

London property market hit by uncertainty

Developers turn to Asia in an effort to boost sales; local house-hunters resist high prices of new homes

Source: Business Times / Real Estate

Mansion Tax Cutting London Luxury Prices Before It Exists

Source: Bloomberg / Luxury

Anup Pankhania had to cut the offer price for apartments he’s developing in London’s Bloomsbury district by as much as 500,000 pounds ($805,000) because of a luxury-home tax that doesn’t exist yet.

The discounts are just one example of price increases for the best London homes stalling after more than five years of gains as investors wait to see if the U.K.’s Labour Party will take power next year and impose a promised annual “mansion tax” on properties valued at 2 million pounds or more. Owners of second homes who are based abroad would pay more than those who possess a single U.K. property and live in it.

“There’s too much uncertainty and that rings in the ears of all the buyers,” Pankhania, managing director of developer Jaspar Group of Companies, said in an interview. “Foreign investors get worried and that’s a direct effect of all these politics to do with this mansion tax.”

Prices of the city’s most expensive homes gained at the slowest pace in more than three years in the third quarter, according to London-based broker Marsh & Parsons Ltd. A new tax will add to concerns among overseas buyers who are already contending with a rising British pound as well as a series of levies imposed by Prime Minister David Cameron’s coalition government.

Investors’ Choice

The eight apartments in Jaspar’s Bloomsbury project were valued at an average of about 2 million pounds before the price cuts, Pankhania said. The central London boroughs of Westminster and Kensington and Chelsea contain 46 percent of homes valued at 2 million pounds or more in all of England and Wales, broker Knight Frank LLP estimates.

“Every investor has a choice and they don’t need to choose London,” Nick Candy, the property developer who helped conceive the One Hyde Park apartment project, said at a conference this month. The luxury-home market “may have a slowdown toward the back end of this year, and maybe even a pause next year, before we know who’s going to be in power.”

One Hyde Park was completed in 2011 in the Knightsbridge neighborhood and it has secured some of the highest prices ever paid for apartments in the capital including one that was valued at as much as 175 million pounds when it sold in April.

Central Districts

High-value London homes, which rose even when average prices were still dropping across the U.K., now trail the rest of the capital’s residential market. The average price in the 13 neighborhoods that Knight Frank defines as prime central London rose 7.7 percent in the 12 months through August. Houses and apartments in the U.K. capital climbed by 19.6 percent on average in the same period, according to the Office for National Statistics.

A mansion tax “threatens to douse the growth at the top tiers of the market,” Marsh & Parsons Chief Executive Officer Peter Rollings said in an Oct. 23 statement. “In London especially, thousands of ordinary families would get swept up in its wake.”

Labour, which has backed a mansion tax since last year, stepped up its support this month in an article by Ed Balls, its finance spokesman, in the Evening Standard newspaper.

“Ordinary Londoners should be protected and wealthy foreign investors must finally make a proper tax contribution in this country,” Balls wrote on Oct. 20. Those who own homes worth 10 million pounds or more “should make a much bigger contribution.”

Campaign Issue

The party plans to raise 1.2 billion pounds from the annual tax. The amount would be about 3,000 pounds a year for London-based homeowners with properties valued from 2 million pounds to 3 million pounds, according to Balls. He wasn’t specific about how much more second-home owners would pay. Labour leads the Conservatives among voters by 32 percent to 30 percent, an ICM poll published by the Sunday Telegraph found Oct. 12.

Labour’s plan will raise 120 million pounds a year from homes valued at 2 million pounds to 3 million pounds, according to an estimate by Lucian Cook, head of residential research at broker Savills Plc. That will leave 57,000 homeowners who hold property valued at more than that having to pay the rest of the 1.2 billion-pound target, he said.

“The tax charge for the remaining, more expensive properties will have to be of a different order of scale, which suggests that it will have some impact on the market,” Cook said in an Oct. 20 statement.

The plan to tax all owners of luxury homes contrasts with a proposal in New York for a levy on non-resident holders of apartments valued at more than $5 million. The owners would pay a 0.5 percent surcharge at that level, which would gradually raise to 4 percent for units valued at more than $25 million.

Lower Valuation

If the U.K. mansion tax is introduced, apartments now valued at as much as 2.3 million pounds will probably sell for less than 2 million pounds, said Michael Lister, a lecturer at University of Westminster and a former head of U.K. property lending at Bank of Ireland Plc.

“One would expect developers to find sales at, say, 2.2 million pounds, very difficult,” Lister said in an Oct. 7 e-mail. “This could lead to reductions in sale prices and difficulty in selling.”

Foreign Investment

Values in London’s best districts have risen more than 70 percent since the last trough in 2009 as overseas investors sought a safe haven for their cash and the pound slumped in value. Prices in many parts of the city have now been driven beyond the reach of most Londoners, putting pressure on politicians to rein in values and making developers more dependent on continued foreign investment.

By April, Cameron’s Conservative-led government will have introduced or extended taxes on luxury homes at least seven times, according to broker Savills Plc.

The measures include a 7 percent stamp-duty tax on home purchases of more than 2 million pounds. Chancellor of the Exchequer George Osborne also introduced a 15 percent tax on empty homes owned by companies and he’s introducing a capital gains tax for overseas owners of U.K. homes.

Sales of upscale new homes in central London are declining. The number sold in core locations fell 33 percent in the first half of 2014 from a year earlier, Jones Lang LaSalle Inc. said last month. The broker defines core as Kensington to Canary Wharf on the north side of the Thames, including Bloomsbury, and from Nine Elms to Waterloo in the south.

Outer London

“Serious developers are now looking at peripheral areas of London, which we see as growing more,” Pankhania said in an interview near Berkeley Homes Plc’s 375 Kensington High Street project, where a two-bedroom apartment is priced at 2.1 million pounds. “Central London is sort of a transient place at the moment.”

Berkeley closed down 0.9 percent in London trading today at 2,236 pence, making it the biggest decliner in the 10-stock Bloomberg U.K. Homebuilder Index.

Pankhania said he’s changing focus to districts with prices of 600 to 700 pounds a square foot because that’s a level that local buyers can afford.

That compares with 2,757 pounds a square foot for homes valued at 10 million pounds or more in the city’s best districts and about 1,200 pounds for apartments in Nine Elms, where an SP Setia Bhd. venture is developing the Battersea Power Station. Three-bedroom apartments in the latest phase of the project are offered from 1.9 million pounds and four-bed homes are priced from 3.2 million pounds.

“We’ve put barriers in place to stop investors. We have taxes that change to stop investors,” Candy said at the conference. “We wouldn’t want to look back here in five years time and think ‘everyone’s gone to Dubai or Beijing or New York’.”

-By Neil Callanan

Tallest Twin Towers Part of Emaar Megaproject on Dubai Lagoon

Source: Bloomberg / Luxury

The world’s tallest twin towers will be the centerpiece of a new residential and business project in Dubai being developed by Emaar Properties PJSC (EMAAR) and Dubai Holding LLC.

The first phase will start Nov. 1 with the sale of 350 apartments in two smaller 40-story towers, according to the companies. Those buildings will take about 2 1/2 years to build, Emaar chairman Mohamed Alabbar told reporters today.

The companies didn’t provide a cost or a timeframe for the entire 6 million square-meter (65 million square-foot) Dubai Creek Harbour project or the buildings set to break the record held by Kuala Lumpur’s 88-story Petronas Towers. The two apartment buildings being constructed first are set to cost around 3 billion dirhams ($817 million), Alabbar told Al Arabiya TV in an interview.

Residential property prices in Dubai slowed since the start of the year as mortgages were restricted and the government increased a transaction tax to damp the market. Home prices surged at the fastest pace in the world last year, igniting concerns a bubble may be forming.

“The market’s cooling down is healthy,” Alabbar said. Increasing supply “is a good for our customers because it keeps prices at reasonable levels. In 2013, things went crazy because supply was limited and, as long-term developer, the spike scares me.”

Concerns about Dubai’s property market have abated since the spring, Masood Ahmed, IMF director for the Middle East and Central Asia, said in an interview in Dubai today. That’s thanks to the government “trying to impose a few bits of grit in the system of real estate transactions,” as well as more restrictive lending by banks, he said.

Dubai had one of the world’s worst property crashes in 2008 as home prices slumped by more than 65 percent across the city. The bubble burst as the global credit crisis caused speculative demand to wane and banks restricted lending.

Dubai’s economy is rebounding and the IMF expects it to grow 5 percent this year and next year compared with 4.6 percent growth in 2013, IMF’s Ahmed said.

-By Zainab Fattah

Israel Advances Plans for 1,000 Jewish Homes in Jerusalem

Source: Bloomberg / News

The Israeli government decided to advance planning for about 1,000 new homes in Jewish areas of east Jerusalem, a government official said, a move that could shore up support for Prime Minister Benjamin Netanyahu’s government and enrage Palestinians.

The official in Netanyahu’s office spoke on condition of anonymity because he wasn’t authorized to speak on the record. He said he had no further information when asked whether approval for the 400 homes in the Har Homa neighborhood and 600 homes in Ramat Shlomo was already in the pipeline. Planning for West Bank infrastructure, including roads that will be used by Palestinians as well as Israelis, will also be advanced, the official said.

The decision comes as Arab areas of Jerusalem seethe with unrest and Netanyahu’s governing coalition is beset by disputes, including over the direction of peacemaking with the Palestinians.

Late yesterday, Channel 2 television reported that the prime minister met last week with Economy Minister Naftali Bennett on a deal to build more homes for Jewish settlers and expand roads for West Bank settlements. In return, Bennett’s Jewish Home party, which opposes the creation of a Palestinian state, would offer continued support for Netanyahu’s government, Channel 2 said.

Finance Minister Yair Lapid, whose Yesh Atid party supports the creation of a Palestinian state as part of a final peace agreement, objected to the deal.

“This plan will lead to a serious crisis in Israel-U.S. relations and will harm Israel’s standing in the world,” Lapid said in an e-mailed statement following Channel 2’s report.

Jerusalem Violence

Senior Palestinian official Jibril Rajoub denounced the plan and said that the Israeli measures threatened to push the sides into a “vicious cycle of bloodshed and killing.”

“Mr. Netanyahu should not expect a white flag from the Palestinian people,” he said.

Palestinians want east Jerusalem and the West Bank to form part of a future Palestinian state and see Israeli construction on those lands, captured from Jordan in 1967, as undermining that goal. Violence has been festering in Jerusalem’s Arab areas for months and last week a Palestinian resident of the city rammed his car into a train stop, killing a baby girl and a tourist.

Palestinian leaders say the unrest is being driven by the failure of peace efforts, the influx of Jews into the city’s Arab neighborhoods, and attempts to allow Jewish prayer at a contested Jerusalem holy site. Palestinian President Mahmoud Abbas asked the U.S. to intervene to “stop the Israeli escalation in east Jerusalem,” the official Palestinian news agency Wafa reported yesterday.

Netanyahu said yesterday that the disturbances are being driven by Islamic extremists and that police forces have been reinforced in the capital to deal with the unrest.

-By Amy Teibel

Pending Home Sales in U.S. Increase Less Than Forecast

Source: Bloomberg / Luxury

The number of contracts to buy existing homes rose less than forecast in September, signaling demand will probably plateau heading into the end of 2014.

The pending home sales index increased 0.3 percent after dropping 1 percent in August, the National Association of Realtors said today in Washington. The median projection in a Bloomberg survey of economists called for a 1 percent gain.

Home resales have yet to regain last year’s peak as still-tight credit and low inventories remain hurdles for the industry, which means residential real estate will make a limited contribution to the expansion. The recent drop in mortgage rates and pickup in hiring will probably help underpin demand, even as first-time buyers struggle to enter the market.

Housing “just doesn’t look like it has that stamina to be a significant driver” for growth, said Kim Fraser Chase, an economist at BBVA Research in Houston, who projected a 0.5 percent rise in sales, among the closest in the Bloomberg survey. The housing rebound will probably be “just enough to get by, but not spectacular by any means.”

Stocks were little changed, following the biggest weekly rally since January 2013, as energy producers led losses after oil dipped below $80 a barrel while telephone and consumer-staples shares rose. The Standard & Poor’s 500 Index declined 0.2 percent to 1,961.63 at the close in New York.

Survey Results

Estimates in the Bloomberg survey of 41 economists forecasting pending home sales ranged from a decline of 1.5 percent to an advance of 2.5 percent.

Pending sales rose in two of four regions from the prior month, with the South up 1.4 percent and the Northeast advancing 1.2 percent. They declined 1.2 percent in the Midwest and 0.8 percent in the West.

Contracts climbed 3 percent in the 12 months ending in September after a 4.1 percent annual decline in August, the NAR report showed. Last month marked the first year-over-year increase since September 2013.

Economists consider pending sales a leading indicator because they track purchase contracts.Existing-home sales are tabulated when a deal closes, usually a month or two later.

Those resales rose last month to a 5.17 million annual rate, the highest level in a year, NAR data showed last week. Demand topped out at a 5.38 million pace in July 2013, an almost four-year high.

The rebound was cut short last year after Federal Reserve policy makers began discussing the possibility that the amount of monthly bond purchases, or quantitative easing, would diminish. The discussion of so-called tapering caused mortgage rates to jump.

Fed Policy

Fed officials meet over the next two days to decide how to proceed. Policy makers will probably bring an end to the bond-buying program while keeping their benchmark interest rate near zero, according to the median forecast of economists surveyed by Bloomberg ahead of the statement on Oct. 29.

Borrowing costs have plunged over the past few weeks as concern over slowing global growth pushed investors into the safety of Treasury securities, causing yields to drop on the benchmarks used to calculate home-lending costs.

The average rate on a 30-year, fixed mortgage fell to 3.92 percent in the week ended Oct. 23, the lowest since June 2013, according to Freddie Mac data. The rate has dropped by 0.27 percentage point over the past three weeks.

“The current spectacularly low mortgage rates should help more buyers reach the market,” NAR chief economist Lawrence Yun said in a statement.

Payroll Gains

Payroll gains on pace for their best year since 1999 also are bolstering potential home buyers. Employers have added an average 227,000 jobs per month through September. The unemployment rate has fallen to 5.9 percent from 6.7 percent at the end of last year. The Labor Department will release October figures Nov. 7.

A stronger pickup in wages would help keep housing within reach for more Americans even as credit standards remain tight. Average hourly earnings rose 2 percent in September from a year earlier, compared with a 3.1 percent advance in December 2007, as the past recession was starting.

Demand for rental housing is helping prop up construction. Housing starts climbed 6.3 percent in September to a 1.02 million annualized rate, supported by a bigger increase in multifamily projects than for single-family properties, figures from the Commerce Department showed last week.

Builder Outlook

Homebuilders such as Westlake Village, California-based Ryland Group Inc. are pointing to economic issues that are supporting the industry, while acknowledging the pace of improvement has been modest.

The industry is seeing advances “thanks to a strengthening employment picture, a favorable affordability dynamic and a low level of housing inventory,” Chief Executive Officer Larry Nicholson said on an Oct. 23 earnings call. At the same time, the housing market “still has a long way to go before returning to long-term norms.”

-By Michelle Jamrisko

Iraq Gets a White House as Kurdish Tycoon Builds Replica

Source: Bloomberg / News

Shihab N. Shihab reckons he’s going one better than U.S. President Barack Obama.

After admiring the White House in Washington for its “beauty and simplicity,” the Kurdish businessman is building a $20 million replica in the Iraqi city of Erbil replete with layers of Italian 21-carat gold leaf covering banisters and ceilings and Greek marble columns that grace the entrance.

“I get to keep my bedroom for the rest of my life while Obama has to vacate it when his term ends,” Shihab, 58, said with a chuckle during a tour of the premises last week.

Trophy homes and pet projects of wealthy Kurds stand out in Erbil as a budget dispute and the menace of Islamic State in neighboring towns cool construction in the Kurdish capital after a boom that transformed the skyline.

The house, due for completion in about four months, dominates the Dream City compound with sumptuous villas in a part of Erbil that realtors liken to a budding Dubai.

Across from Shihab’s White House, there are towers springing up in Empire World, which will cover a square kilometer when finished. Azad Sadollah, director of legal and business development at Falcon Group, which is running the project, called it “the biggest and most prime in Iraq.” It was started in 2003 and was slated for completion in 2017.

“There may be a little bit of delay with some of the projects and not the whole concept,” Sadollah said at his office in Erbil. “People are more cautious about spending and investing the way they would normally be.”

After Saddam

The semi-autonomous region of Kurdistan, and especially its capital Erbil, had seen exponential growth since the 2003 ouster of Iraqi dictator Saddam Hussein. The region was almost like a clean slate, with opportunities that Kurdish and foreign investors are taking advantage of at almost every turn.

New residential and office towers with gleaming glass facades have risen up, villas in various stages of completion flank major roads and brand-name hotels, like the Kempinski, Marriott and Hilton, made plans to open. Malls brought novelties, such as escalators, which had to be stopped at times because some people were afraid to get on them.

“There’s a lot of money to be spent,” Tania Toma, associate for strategic consulting at Jones Lang LaSalle, a firm specializing in commercial real estate services, said from Dubai. “The Kurdish people are very cash rich and they want to spend money. People want to buy something now because they think there’s a potential for growth.”

Foreign Money

Investment in Kurdistan’s real estate reached $42 billion since 2006, including $13.3 billion in housing units, said Sarbast Mantik, information director at Kurdistan Board of Investment. The United Arab Emirates has pumped $2.5 billion into property, followed by Turkish investors at $1.34 billion, said Mantik, citing the authority’s figures.

Shihab made his money from developing malls and other businesses, yet some Kurds haven’t been able to keep up with the monthly cash payments on new homes being built.

A budget row with the government in Baghdad has left hundreds of thousands of Kurds unpaid since end of July, while a failed attempt by extremist militants to advance toward Erbil in August has kept many expatriates away.

The International Monetary Fund forecasts gross domestic product in Iraq will contract by 2.7 percent this year after increasing 4.2 percent in 2013, according to the latest regional outlook for the Middle East and North Africa released today. Non-oil GDP growth is also likely to move to “negative territory” compared with a growth rate of 7 percent in 2013, the IMF said. While the report doesn’t give a separate forecast for the Kurdistan region, it noted the economic implications of this summer’s attacks by Islamic State.

Turkish Bath

The market had been “stellar,” said Sadollah, and he’s optimistic it will pick up again. Villas at Empire World originally priced at $220,000 to $240,000 in 2010 are now worth $750,000 to $950,000, he said. Three-bedroom apartments are up to $300,000 from $110,000 in 2011, he added.

Shihab said he also expects better times for Kurdistan. He plans to replace his Naza Mall, among the first in Iraq, with a 67-story residential and commercial tower. The problems “are temporary,” he added.

As he toured his 3,000-square-meter, three-floor White House, he showed off his 140-square-meter bedroom, bathrooms with imported fixtures, a movie theater and a swimming pool.

“Where we’re standing now used to be a military zone for Saddam’s soldiers that was off-limits for us,” Shihab said from one of the terraces.

At the Turkish bath, Shihab proudly pointed out the domed ceiling with intricate decoration and where the Ottoman-era faucets will be placed.

“They don’t have one in the White House,” he said.

-By Donna Abu-Nasr