Real News‎ > ‎2014‎ > ‎September 2014‎ > ‎

25th September 2014

Singapore Economy

S'pore one of most costly cities for young

Source: Straits Times / Money

SINGAPORE is one of the most expensive places in the world for young professionals to live, according to property firm Knight Frank yesterday.

The country came in 16th out of 20 cities ranked on the firm's inaugural Cost Of Living Index, mainly because of high rents.

The cities are ranked with the most affordable at the top (Frankfurt) and the most expensive at the bottom (Hong Kong). 

Knight Frank found that fresh graduates here have only 9.91 per cent of their net salary left at the end of every month once living expenses are covered.

In Hong Kong, graduates spend 4.61 per cent more than their actual take-home pay due mainly to the high costs in the territory.

Meanwhile, young graduates in Frankfurt had 59.8 per cent of their salary left at the end of the month.

The index is based on variables such as starting pay, rent, utility bills as well as the cost of a pint of beer, a cup of coffee and groceries. It focused on young graduates living in the areas surrounding central business districts, such as the Square Mile in London or New York's Downtown.

"In such a scenario, real estate is the largest expense for a Singaporean graduate. We're not looking at rents in the cheaper outlying areas but areas like Dhoby Ghaut and Newton, which you would be paying a bit of a premium for," said Mr Nicholas Holt, head of research at Knight Frank Asia Pacific.

"But the reality is that most young Singaporeans, fresh out of school, are likely to still be living with their parents," he said.

-By Jacqueline Woo

Singapore Real Estate

Investment sales of property up in Q3

Nearly S$5.4b worth sewn up - 13.6% higher than in Q2

Source: Business Times / Top Stories

[SINGAPORE] Investment sales of property - big-ticket transactions of at least S$10 million - have risen this quarter, on the back of a more than tripling in the value of hospitality assets sold, mainly in connection with the listing of Frasers Hospitality Trust.

Moreover, office transactions have continued to post stellar performance with rental recovery firmly in place and expected to continue amid tight supply.

According to figures from Savills Singapore, nearly S$5.4 billion of investment sales were transacted this quarter up to Sept 23. This is 13.6 per cent higher than the Q2 figure of S$4.7 billion and the best showing in four quarters. However, the Q3 number is 61.2 per cent down from a year ago.

CBRE too has a similar figure so far this quarter, reflecting 10.7 per cent expansion from its Q2 number. This takes the year-to-date number to S$15.3 billion and the group's executive director, Jeremy Lake, predicts that the year would end with S$18-20 billion.

-By Kalpana Rashiwala

Grade A office rents 'to hit six-year high'

At S$10.20 psf per month now, rents are 9.9% higher than a year ago

Source: Business Times / Property

[SINGAPORE] Singapore Grade A office rents are expected to rise to their highest levels since 2008 by year's end, commercial real-estate services firm Cushman & Wakefield predicted on Wednesday.

This comes as average Grade A overall rents have already risen to their highest in three years to S$10.20 per square foot per month - 2 per cent higher than a quarter ago, and 9.9 per cent stronger than a year ago.

The third quarter became the sixth consecutive quarter of rental increases, a result of the increasing scarcity of Grade A space in areas such as Marina Bay and Raffles Place.

New leases taken up during the quarter included advertising and marketing firm Publicis taking up 33,000 square feet (sq ft) of space at Income@Raffles.

-By Jamie Lee

Prime city markets to be shielded from US rate hike: Knight Frank

Capital values of offices expected to stay stable at least for the next year

Source: Business Times / Property

THE US Federal Reserve's raising of interest rates in 2015 is likely to shake up capital and property markets, but Knight Frank analysts believe that prime city markets will be somewhat shielded from their impact.

This is especially if higher rates are accompanied by a strengthening American economy or greater market optimism, they say.

Ian Loh, director and head of investment and capital markets, on Wednesday told reporters that while higher rates will narrow the spread of prime office yields over bonds and neutralise rising rents, he sees capital values of office spaces staying "relatively stable" at least for the next year or so.

Singapore office rents have been climbing up due to a supply constraint. Monthly rents for premium-grade offices shot up 6.1 per cent from the second quarter to the third to S$11.67 per square foot (psf), while Grade-A office rents rose 2.9 per cent to S$10.25 psf, according to a recent Colliers report.

-By Lee Meixian

Prime office rents set to rise by 25% in five years: Knight Frank

Source: Straits Times / Money

PRIME office rents here are expected to soar by 25 per cent over the next five years, global property consultancy Knight Frank Asia Pacific said in a report yesterday.

In terms of rental forecasts, Singapore took the lead with the highest level of growth in office rents among six Asia-Pacific cities, beating Tokyo and Hong Kong, ranked ninth and 12th respectively.

The Republic also climbed 10 places to take fourth spot among 15 leading cities globally, despite sitting at the bottom of the list from 2008 to the end of last year.

According to the inaugural Global Cities Report 2015, which assesses the impact on the office markets of these 15 cities, the world's top cities will see prime office rents reach "record highs" by the end of the decade.

Its Global Cities Index, which tracks the prime office rents of the 15 cities, is forecast to grow by 19.9 per cent over the next five years, rising even above its pre-global financial crisis level in 2008 around mid-2015.

"Looking ahead, prospects for the office market (in Singapore) are positive, in light of anticipated healthy demand from companies looking to set up business or expand in Singapore," said Ms Alice Tan, the head of consultancy and research at Knight Frank Singapore.

"Singapore is increasingly viewed as a strategic launch pad for more global companies to expand into South-east Asian markets, with our robust business, legal framework and physical infrastructure."

Ms Tan noted that the "fairly modest" supply of new prime-grade office space over the next few years would sustain prime office rental growth.

"This would fuel interest in Singapore office space investments with stable capital values."

By 2019, office vacancy rates will drop in the top 10 cities globally, including Singapore, reaching an average vacancy rate of 6.3 per cent. This is down from the 7.8 per cent average vacancy rate logged this year.

This is being caused by the "restricted supply of new office stock in conjunction with (a) heightened demand for commercial space", said the report.

Mr Nicholas Holt, head of research at Knight Frank Pacific Asia, said the technology sector has become a key driver of office space demand in Asia, while the financial services and banking sectors have stepped back.

-By Jacqueline Woo

Orchard-area retail rents seen softening

Source: Business Times / Property

THE average monthly gross rents for prime ground-floor retail space in Orchard Road will either stay flat or dip by one per cent for the rest of this year, following a mildly softer Q3 showing, according to a Colliers International report released on Wednesday.

This is because malls there are highly dependent on the tourist dollar and the weak visitor arrivals since March is likely to exert some pressure on malls in Orchard Road, said Chia Siew Chuin, the director of research and advisory at Colliers International.

Already, rents of prime retail space here have been kept in check this quarter - despite healthy leasing activities - as a result of weakness in tourist arrivals and weaker retail sales. The average monthly gross rents of prime retail space in Orchard Road softened by 0.5 per cent to S$36.25 per sq ft from the previous quarter.

Out in the regional centres, however, rents rose 0.3 per cent to S$33.72 per sq ft from the last quarter. Regional centres depend more on local traffic, so are expected to clock rental growth of one to two per cent for the year, explained Ms Chia.

-By Claire Huang

Downpayment for new flats halved for some rightsizers

New policy will benefit flat owners who have their funds tied up in their current flat: HDB

Source: Business Times / Singapore

THE Housing & Development Board (HDB) on Wednesday launched 4,630 new build-to-order (BTO) flats in September's exercise.

These flats are spread across six projects in the non-mature towns of Bukit Batok, Hougang and Jurong West, and the mature town of Kallang Whampoa. Application for these new flats can be submitted online from Sept 24-30.

Starting from this BTO exercise, existing flat owners who rightsize to a new two-room or three-room flat in a non-mature town can choose to pay half the downpayment for the new flat when they sign the lease agreement.

This is to help flat owners who wish to rightsize to a new flat but have their funds tied up in the existing flat, HDB said.

-By Lee Meixian

Pay less cash upfront for small BTO flats

Source: Straits Times / Top of The News

EXISTING Housing Board flat owners who move to small new flats can choose to pay half of the required down payment upfront, and the rest later.

This staggered down payment option is only for those looking to buy new two- or three-room flats in non-mature estates. They must be able to "unlock net sales proceeds" by doing this, meaning that their new flats must be cheaper than their existing ones.

For buyers of such flats who do not meet this criterion but have trouble making the full down payment, their cases will be assessed on a case-by-case basis by the HDB.

The change takes effect from this month's Build-To-Order (BTO) exercise, which began yesterday. The move aims to help flat owners who wish to "right size" to a new unit but have their funds tied up in their existing flats, said the HDB.

Those who are not taking a bank loan, or who are taking an HDB loan, need to pay only 5 per cent in down payment when they sign the Agreement for Lease, instead of the current 10 per cent.

Those taking loans from financial institutions need to pay only 10 per cent upfront, instead of the current 20 per cent.

The other half of the down payment needs to be paid only when the buyer collects the keys to the new flat.

In a blog post, National Development Minister Khaw Boon Wan noted that at his Meet-The-People sessions, he sometimes meets elderly people who want a smaller flat but have cash-flow problems.

Last year, 47 elderly people cancelled their new flat bookings because they were unable to raise the down payment, he noted.

To be eligible for the scheme, buyers should not have completed the sale of their existing flats when applying for the new ones.

Applying for the scheme is not required, as the HDB will extend it to those who are eligible.

The move was announced at yesterday's BTO launch of 4,630 new flats, across five projects in the non-mature towns of Bukit Batok, Hougang and Jurong West and one project in the mature estate of Kallang Whampoa.

Flats range from 36 sq m and 45 sq m two-room units to five-room units of up to 112 sq m and 115 sq m Three Generation flats.

Analysts expect a good response for the Kallang Whampoa project. It is in a mature estate and also close to Boon Keng MRT station, noted ERA Realty key executive officer Eugene Lim.

But pastor Chua Hock Lim, 71, is trying for a three- or four-room unit in Bukit Batok instead, as it is "cheaper than Whampoa" and closer to town than Jurong West.

As of 5pm yesterday, two-room flats in Hougang and four-room units in Kallang Whampoa were the most popular. Both had 1.3 applicants per unit, with singles accounting for most of the demand for the two-room flats.

-By Janice Heng

Cash-tight elderly looking to downsize to get help

Down payment halved for buyers of two- or three-room flats in new scheme

Source: Today Online / Singapore

SINGAPORE — To help existing flat owners looking to move into smaller flats but facing cash flow difficulties, the Housing and Development Board (HDB) has announced that those buying a two- or three-room flat in a non-mature estate can opt to pay half the required down payment for their new flat.

They need pay the other half together with the balance purchase price of the new flat only when they collect the keys.

The Staggered Downpayment Scheme kicks in from the latest Build-to-Order exercise launched yesterday, under which a total of 4,630 flats were offered for sale in Bukit Batok, Hougang, Jurong West and Kallang Whampoa.

Of these, close to 1,800 units are two- and three-room flats in the non-mature estates of Bukit Batok, Hougang and Jurong West.

The HDB said flat buyers do not need to apply for the scheme, as it would be extended to those who are eligible.

To qualify automatically, flat buyers will need to have applied to buy a two- or three-room flat in BTO or Sale of Balance Flat exercises from this month. The new unit has to be in a non-mature estate and buyers must not have sold their existing home.

In general, the purchase of a new flat under the scheme also has to help buyers unlock net sales proceeds for their retirement — in other words, the purchase price has to be lower than the sale price of a buyer’s existing flat.

In response to media queries, the HDB said if buyers do not meet this criterion, but face difficulty in making the full down payment, it would consider such cases on its merits.

It reiterated that the scheme is “intended to help flat buyers who wish to right-size to a new flat in preparation for retirement, but have their funds tied up in the existing flat”.

Currently, buyers who do not take loans or sign up for HDB loans are required to pay a down payment of 10 per cent of the purchase price, while those who are borrowing from financial institutions need to pay a down payment of 20 per cent.

These will be halved to 5 per cent and 10 per cent, respectively, under the new scheme.

Writing on his blog, National Development Minister Khaw Boon Wan said the initiative would help elderly residents who want to move into a smaller flat, but need to sell their existing unit first to raise funds for the new purchase.

“At Meet-the-People sessions, I sometimes meet elderly residents who intend to right-size to a smaller flat, but face some cash-flow difficulties in the process,” he said. “The sale proceeds for their existing (larger) flat will be enough to pay for the new (smaller) flat, but they need to sell the flat first.”

He revealed that the HDB had told him that, last year, 47 elderly residents cancelled their new flat bookings because they were unable to raise the down payment.

“They must have felt disappointed, having to abort their plans because of a cash-flow problem,” Mr Khaw said.

Property analysts whom TODAY spoke to noted that without an age criterion, the new scheme would benefit a large group of prospective buyers — including those in financial hardship looking to downsize their homes.

Losing one’s job and family issues such as divorce are some possible reasons a buyer could struggle to fork out the down payment, said Mr Mohamed Ismail, chief executive officer of PropNex Realty.

Chris International director Chris Koh noted that the scheme could also ease the financial outlay of those who are helping their aged parents pay the down payment for a smaller home.

Mr Colin Tan, Director of Research and Consultancy at Suntec Real Estate, said the root of the problem is high property prices.

Noting that a typical family does not enjoy the luxury of space in an HDB flat, he said: “If property prices were lower, we won’t have this problem ... If property prices were lower, (buying or living in) bigger flats is not a problem.”

Meanwhile, the HDB said that, in November, it would put up for sale about 4,290 BTO flats in Sembawang, Sengkang, Tampines and Yishun.

An additional 3,000 flats will be offered in a concurrent Sale of Balance Flats exercise.

-By Xue Jianyue

Property agent faces 27 'Do Not Call' charges

Source: Straits Times / Singapore

A PROPERTY agent from Huttons Asia was hauled to court yesterday to face 27 counts of violating the "Do Not Call" rules, making him the second person to be charged since the rules kicked in on Jan 2.

Kuan Chow Sheng, 32, allegedly sent unsolicited telemarketing messages advertising various property developments to numbers listed in the Do Not Call (DNC) Registry, between Feb 8 and March 2 this year.

Kuan is said to have done this without applying to the Personal Data Protection Commission to confirm whether the telephone numbers were listed in the registry.

He is also accused of sending the messages without getting confirmation within the prescribed duration that the numbers were not listed.

The registry was set up to let consumers block unsolicited marketing calls, SMS messages and faxes by listing their numbers. Over 600,000 phone numbers are on it.

Anyone convicted under the Personal Data Protection Act could be fined up to $10,000 per charge.

Kuan, who was unrepresented, indicated he would plead guilty. The case will be mentioned again on Oct 20.

Star Zest Home Tuition and its sole director, Law Han Wei, 35, were the first to be charged with breaching DNC Registry rules. Last month, Law and the agency were each fined $39,000, or $3,000 per charge, after pleading guilty to 13 of 37 offences committed between Jan 3 and 14.

-By Ian Poh

Property agent charged with breaching DNC Registry rules

Kuan Chow Sheng, a Huttons Asia agent, says he intends to plead guilty to breaching the DNC rules.

Source: Channel News Asia / Singapore

SINGAPORE: A property agent from Huttons Asia was charged on Wednesday (Sep 24) with breaching the Do Not Call (DNC) rules under the Personal Data Protection Act (PDPA).

Kuan Chow Sheng allegedly sent unsolicited telemarketing messages to advertise various residential developments in Singapore to telephone numbers registered with the DNC registry. Between Feb 8 Feb and Mar 2 this year, the 33-year-old sent text messages to a total of 27 locally registered numbers.

He told the court that he has no plans to engage a legal counsel and intends to plead guilty. The case will next be heard on Oct 20, 2014.

Kuan is the second person to be charged with breaching the DNC Registry rules. On Aug 27, Star Zest Home Tuition and its director, Law Han Wei, were the first to be charged for flouting the DNC Registry rules. The director and the agency were fined a total of $78,000.

Any person or organisation found guilty of sending unsolicited telemarketing messages to Singapore telephone numbers without checking the DNC Registry will be liable to a fine of up to $10,000 per message sent.

- CNA/kk

Training on data protection in place at real estate firms

Real estate agencies say they have put in place training sessions, policies and hardware solutions to help their agents comply with the Do Not Call Registry rules.

Source: Channel News Asia / Singapore

SINGAPORE: To prevent their agents from running afoul of Do Not Call (DNC) Registry rules that came into effect on Jan 2 this year, real estate agencies here have put in place training sessions, policies and hardware solutions to help them understand the rules under the Personal Data Protection Act (PDPA).

The Act, which came into full force on July 2, bars firms from marketing to phone numbers listed in the DNC Registry without first getting consent. On Wednesday (Sep 24), a Huttons Asia agent, Kuan Chow Sheng, was charged for breaching the rules after allegedly sending unsolicited telemarketing messages to telephone numbers registered with the DNC Registry.

Other real estate agencies such as PropNex and ERA said they hold compulsory briefing sessions for their property agents to ensure they understand the provisions of the PDPA.

“Our compliance officers will send emails regularly and speak at briefings for new projects to remind agents to comply with the DNC regulations,” said ERA Key Executive Officer Eugene Lim. He added that companies usually see a surge in telemarketing messages before new launches.

At the headquarters of both agencies, phones are linked to a system that bars calls from being made to numbers listed on the registry. The system updates itself as new numbers are listed. PropNex also encourages its agents to subscribe to SpiderGate, a paid service that screens their mobile phone contact lists for numbers listed on the registry.

PropNex Chief Executive Mohamed Ismail said about 1,000 sales agents in the company have subscribed to the service, which allows firms to filter out individuals listed on the company’s lists as having opted out of receiving telemarketing messages.

ERA’s Mr Lim said its agents are required to check their list of intended telemarketing recipients against the registry via an external vendor, which filters out phone numbers on the registry. However, every check costs money and some agents may decide to “cut corners” by doing it only once, he said.

He added that ERA has seen “minor cases of non-compliance”, where agents continue to market to past clients who have registered with the DNC Registry.

While these measures are in place, Mr Lim agreed that agents are primarily left to exercise their own discretion. “We have made these services available to help agents comply with the rules. I believe Kuan Chow Sheng’s case will wake everybody up,” he said.


Real Estate Companies' Brief

Ascendas Hospitality Trust in talks to sell Pullman Cairns hotel

Ascendas Hospitality owns 50 per cent of Pullman Cairns, which has 321 guest rooms and is valued at A$65 million (S$73 million).

Source: Channel News Asia / Business

SINGAPORE: Ascendas Hospitality Trust is in talks with a number of parties to sell the Pullman Cairns International hotel, the largest five-star hotel in the Australian city's central business district.

The hospitality real estate investment trust said on Wednesday (Sep 24) that the potential sale of the Cairns hotel is in line with its strategy of considering whether assets are ready for divestment to free up capital for more productive use.

It added that such discussions are preliminary and non-binding in nature, and there is no assurance that a definitive agreement will be reached.

Ascendas Hospitality owns 50 per cent of Pullman Cairns, which has 321 guest rooms and is valued at A$65 million (S$73 million).

- CNA/dl

Views, Reviews & Forum

Mechanised parking system used only as last resort

Source: Straits Times / Forum Letters

WE REFER to the letters ("New carparks: Cater for disabled drivers" by Mr Edmund Wan Fook Wing, last Friday; and "Review need for costly HDB carparks" by Mr Chua Tiong Guan, Tuesday).

To overcome the shortage of parking spaces in some existing carparks, HDB adopts a two-pronged approach to meeting residents' parking needs - managing parking demand and increasing the supply of parking spaces where possible.

In areas where it is not possible to build more multi-storey or surface carparks because of the lack of land space available, the mechanised parking system is a potential solution to increase parking capacity.


While the system will cost more to build and maintain because of the technology involved, it is more land-efficient and can be deployed in space-constrained sites where it is not possible to build a conventional carpark. For this reason, such systems are commonly adopted in space-constrained countries such as Japan and South Korea.

The pilot implementation of the mechanised parking system at the three sites in Changi, Yishun and Bukit Panjang will allow us to test-bed the suitability of such technology in Singapore's context and gauge users' acceptance of the system, before deciding whether wider-scale implementation should be considered.

The same parking charges will be retained for these three carparks in the pilot projects.

HDB is mindful of the need to be financially prudent.

Hence, the mechanised parking system will be implemented only as a last resort, when there are no other feasible parking solutions to resolve acute localised shortage of carpark spaces.

On Mr Wan's concern about the accessibility of the system for the disabled, parking spaces designated for the disabled have been provided in HDB carparks from the onset.

The additional parking spaces provided by the mechanised parking system are to address localised parking demand and not to replace conventional multi-storey or surface carpark spaces in the vicinity.

Motorists with special needs can continue to park at the designated spaces for the disabled within these carparks, which are more conveniently accessible.

Eng Soh Seng

Director (Car Parks)

Housing & Development Board

Global Economy & Global Real Estate

Iskandar launches hit by delays

Waiting for regulatory approval among reasons cited by S'pore developers

Source: Straits Times / Money

LAUNCHES by Singapore property players in the Iskandar Malaysia development zone appear to have stalled amid a subdued market.

For instance, CapitaLand said on Tuesday it is "waiting for the relevant regulatory approval for (its) Danga Bay project's masterplan". CapitaLand has yet to launch the first phase of its $3.2 billion development there, a high-rise 900-unit condominium being undertaken with joint venture partners.

In its annual report, it said the project would be "launch ready" this year. A spokesman said the developer has not sought an extension, contrary to a news report on Tuesday. The Straits Times understands CapitaLand's local partner, Iskandar Waterfront Holdings (IWH), on Tuesday called for a meeting with the Singapore firm to explore how best to expedite the approval. Temasek Holdings is a third partner in the joint venture.

Another Singapore developer to face delays is Rowsley, which is building the $2.2 billion Vantage Bay integrated project, including the 75-storey residential development Skies. Vantage Bay chief executive and Rowsley executive director Ho Kiam Kheong said in a report last year it would launch its residential units by this year's first quarter. But he said on Tuesday the firm is in the process of obtaining the advertising permit and developer's licence.

A third developer, Link (THM) Holdings, which is developing the $1 billion Media Village integrated project, seems to have held back as well.

Link founder and group chief executive Kenny Tan said in a report last year it expected to launch apartments and business suites for sale by the end of last year. Link had not responded by press time.

Sin-Hao Yuan Land, linked to Singapore developer Hao Yuan Investment, has also been fairly quiet since details of a $3 billion integrated development at Danga Bay with IWH were announced late last year. Its land is next to the CapitaLand site.

"The project is still in its planning stage (and) we do foresee some delay, not uncommon for a project of this nature and magnitude," a spokesman said.

What is going on? "Recent feedback on the ground is that the approval authorities are much slower in issuing the advertising permit and development licence," said Mr Johnny Chng, head of international projects at consultancy OrangeTee.

But he added it is possible developers are reviewing their launch strategy after the status of the first launch of Guangzhou R&F's Princess Cove, which has apparently suffered weak sales.

"The huge number of units launched would have significant impact on the investment environment in the vicinity. The growing presence of developers from China may have also raised concerns of a possible supply overhang in Iskandar," said Mr Chng.

Mr V. Sivadas of PA International Property Consultants said: "Nobody expected the large number of high-rise residences on the waterfront."

Other than Princess Cove, CapitaLand's project and Skies are also set to be on the waterfront.

"Waterfront units, which tend to be priced at a premium due to higher land costs, are having difficulty sustaining sales... Until developers of such properties have their target market right, it would make sense to hold back," said Mr Sivadas.

-By Rennie Whang

UEM Sunrise on the lookout for land deals amid sales slump

M'sia developer sees property rebound in 18 months; wants diversified locations

Source: Business Times / Malaysia

MALAYSIAN builder UEM Sunrise Bhd is banking on greater product and geographical diversification to tide over slumping property sales in the local market pending an expected rebound in about 18 months.

In the interim, its managing director and chief executive Anwar Shahrin Abdul Ajib said that the company would be on the lookout for land banking opportunities locally, as well as overseas.

He expects the sector to be stagnant in the coming months and to possibly revive towards the end of 2015 or in 2016.

"The situation isn't ideal . . . but we have enough launches to be ready for the next upswing," he said at a media "meet & greet" session .

-By Pauline Ng in Kuala Lumpur

US Aug new home sales race to 6-year high

Source: Business Times / World

[WASHINGTON] Sales of new US single-family homes surged in August and hit their highest level in more than six years, offering confirmation that the housing recovery remains on course.

The Commerce Department said on Wednesday that sales jumped 18 per cent to a seasonally adjusted annual rate of 504,000 units. That was the highest level since May 2008 and marked the second straight month of gains.

July's sales were revised to show a 1.9 per cent gain instead of the previously reported 2.4 per cent drop.

Economists polled by Reuters had forecast new home sales rising to only a 430,000-unit pace last month.

-From Washington, US

Brits get Disney fix as US banks lend to foreigners

Overseas buyers snap up US homes with foreign- national mortgages

Source: Business Times / Property

[WASHINGTON] Adele and Mark Lee, who live in England with their three children, said they got approved for a US mortgage without setting foot on American soil. The vacation home they're buying near Florida's Disney World would have been out of reach if they had to pay all cash.

"It would have been a stretch," said Adele, a 35-year- old nursery school teacher, speaking from the family's home near Birmingham. "We wanted to keep some money here just to fall back on."

The Lees are using a foreign- national mortgage, a loan for overseas buyers that required a 40 per cent downpayment, to purchase the five-bedroom house later this month for US$423,000. Adele and her husband, a construction worker, plan to rent the Orlando property when they're not living in it.

Lenders are providing greater access to credit for non-US residents to finance vacation houses and investment properties. Foreign buyers, who are helping to fill a void left by Americans facing high borrowing hurdles, spent about US$35 billion on US homes using mortgages in the 12 months through March - a 46 per cent increase from a year earlier, according to the National Association of Realtors (NAR).

-From Washington, US

Norway sovereign fund sops up US real estate

Second only to Canada in amount spent, it has blown US$3.2b this year

Source: Business Times / Property

[SEATTLE] Norway has vaulted to the top ranks of foreign buyers of US commercial real estate, with its US$870 billion sovereign-wealth fund, the world's largest, acquiring buildings from New York to San Francisco.

The country has spent more than US$3.2 billion on US real estate this year, including the assumption of debt, going by figures from research firm Real Capital Analytics Inc and statements from the wealth fund. This makes it the biggest international buyer after Canada. The total is more than double the amount spent all of last year, when Norway was ranked sixth for property purchases.

Norway, which has a smaller population than New York City, is spending billions of dollars on properties globally as its wealth fund seeks to meet a target to invest as much as 5 per cent of its assets in real estate.

In the US, prices for top-quality buildings in major markets are being driven up by foreign funds that often are more willing than domestic buyers to accept lower yields in return for a safe place to park their money, said research firm Green Street Advisors Inc.

-From Seattle, US

Norway Jumps to No. 2 Foreign Buyer of U.S. Real Estate

Source: Bloomberg / News

Norway has vaulted to the top ranks of foreign U.S. commercial real estate buyers as its $870 billion sovereign-wealth fund, the world’s largest, acquires buildings from New York to San Francisco.

The country has spent more than $3.2 billion on U.S. real estate this year, including the assumption of debt, according to research firm Real Capital Analytics Inc. and statements from the wealth fund. That makes it the biggest international buyer after Canada. The total is more than double the amount spent in all of 2013, when Norway ranked No. 6 for property purchases.

Norway, which has a smaller population than New York City, is spending billions of dollars on properties globally as its wealth fund seeks to meet a target to invest as much as 5 percent of its assets in real estate. In the U.S., prices for top-quality buildings in major markets are being driven up by foreign funds that often are willing to accept lower yields than domestic buyers in return for a safe place to put their money, according to research firm Green Street Advisors Inc.

“There’s an element of perceived safety in a hard asset in the United States, in New York City, that is harder to replicate in other alternatives,” said Michael Knott, a managing director at Newport Beach, California-based Green Street. Investors such as the Norwegian fund “have the ability to hold indefinitely and probably not be troubled at all by a low going-in yield.”

Manhattan, Boston

Norway’s most recent U.S. deal was the $1.5 billion acquisition last week of stakes in three towers from Boston Properties Inc. (BXP), the largest U.S. office real estate investment trust. The wealth fund agreed to buy 45 percent stakes in 601 Lexington Ave. in Manhattan, once known as Citigroup Center, and in Boston’s Atlantic Wharf Office Building and 100 Federal St.

The deal’s capitalization rate of 3.8 percent approaches the record-low investment yields from the prior property boom in 2007, according to Green Street. Cap rates are net operating income divided by purchase price.

Norway’s wealth fund began buying real estate outside Europe last year. It held $10.3 billion of property worldwide as of June 30, or 1.2 percent of total assets at the time. Norges Bank Investment Management said in June it plans to increase staffing by about 60 percent in the next three years to tackle increased investments in real estate.


Karsten Kallevig, chief investment officer for real estate at the Oslo-based fund, began his U.S. foray in February 2013, through a joint venture with TIAA-CREF for stakes in five office buildings. Earlier this month, Norges Bank Investment Management bought a 49.9 percent stake in San Francisco’s Orrick Building for $139.7 million through its alliance with the money manager.

Thomas Sevang, a spokesman for the wealth fund, declined to comment on its real estate purchases.

Demand from sovereign-wealth funds and foreign pension funds is driving cap rates lower “at the margin,” said Spencer Levy, head of Americas research at Los Angeles-based CBRE Group Inc. (CBG), the largest commercial brokerage. Such buyers have a strong appetite for prime real estate and can afford to pay more because of their low cost of capital, a trend likely to continue if fixed-income yields remain low, he said. The yield on the 10-year Treasury note has risen almost 20 basis points this month to 2.54 percent. A basis point is .01 percentage point.

“If the relative value of real estate -- notwithstanding the fact that the absolute price appears high -- is better than other alternatives, you’re still going to maintain strong price stability,” Levy said.

Canadian Stake

The Canada Pension Plan Investment Board in June spent $108 million to increase its stake in the One Park Avenue office building in Manhattan to 45 percent, from about 11 percent, through a joint venture with Vornado Realty Trust. (VNO) In May, a partnership led by the property unit of the Ontario Municipal Employees Retirement System agreed to buy five Boston-area office buildings from Blackstone Group LP for $2.1 billion.

Foreign investors account for about 20 percent to 30 percent of commercial real estate transactions in dollar terms in New York and Washington, compared with 10 percent to 20 percent in areas including Los Angeles, San Francisco and Houston, said Michael Sobolik, regional director of research for North America at Dallas-based Invesco Real Estate, which manages about $61.5 billion globally.

“Sovereign wealth funds tend to focus their transaction activity on large-sized assets,” he said. “Thus they exert more impact on this segment of the market.”

Foreign investors typically buy less than 50 percent of individual U.S. properties to avoid incurring taxes under a 1980 U.S. law when they sell.

Warehouse Acquisitions

In January, Norges Bank Investment Management bought stakes in 66 U.S. warehouse properties through a $1 billion venture with Prologis Inc. (PLD), the world’s biggest industrial landlord. In July, it bought a stake in One Beacon St., a Boston office property, through a venture with MetLife Inc., the largest U.S. life insurance company. Norges Bank Investment Management also holds shares of publicly traded U.S. REITs, including shopping-center landlords.

The fund, as a relatively new buyer to the scene, “does shrink the space available in an auction tent that was already crowded,” said Knott of Green Street. “Anytime you add in a motivated buyer with a big checkbook, that is going to at the margin increase asset values, but I don’t think it’s quantifiable.”

Canada has been the biggest foreign buyer of U.S. real estate since 2010, according to Real Capital. Canadian investors have acquired stakes in properties worth $8.3 billion this year, after $11.1 billion of deals in all of 2013, according to the New York-based company.

Norway, Western Europe’s biggest oil and gas producer, puts most of its petroleum revenue into its global pension fund, which invests 60 percent in stocks, 35 percent in bonds and 5 percent in real estate.

-By Hui-yong Yu

Foreigners buy Latvia property for right to stay

Source: Business Times / Property

[RIGA] Foreign investors have paid about US$1 billion buying up properties in Latvia in order to obtain temporary residence permits in the Baltic country, according to a report drawn up by the Latvian Interior Ministry.

The total value of property transactions related to the acquisition of residence permits in Latvia from July 1, 2010, to June 30, 2014, has come to 837.5 million euros (S$1.4 billion), the ministry said in the report to the Latvian government.

The Latvian immigration authority, the Office of Citizenship and Migration Affairs, received 12,000 requests for temporary residence permits in the four-year period, including 5,267 applications from investors and 7,160 from their family members.

The Latvian immigration authority granted the permits in 94.7 per cent of cases, the Interior Ministry said.

-From Riga, Latvia

Priciest NYC apartment's asking price: US$130m

Source: Business Times / Property

[NEW YORK] A triplex penthouse at Zeckendorf Development Co's tower under construction on Manhattan's Upper East Side will be offered for sale at US$130 million, making it New York's most expensive apartment listing.

The 12,394-square-foot (1,151- square-metre) property will span the top three floors at 520 Park Avenue, where sales will begin in the first quarter of next year, Arthur Zeckendorf said on Tuesday.

The tower's offering plan, which details units for sale and their prices, was approved by the New York State attorney general's office last week, allowing the developer to begin marketing the 31 apartments, Mr Zeckendorf said. The building, between 60th and 61st streets, will include seven duplexes of about 9,138 sq ft each, starting at US$67 million, according to the plans. Single-floor units of about 4,600 sq ft will start at US$16.2 million.

The triplex would be the most expensive listing for an apartment in New York history, Jonathan Miller, president of appraiser Miller Samuel Inc, said in an interview.

-From New York, US

NYC Luxury-Condo Buyers Awaits New Towers as Sales Slow

Source: Bloomberg / Luxury

Sales at One57, the ultra-luxury Manhattan condominium tower that set off a high-end residential construction boom, have slowed to a trickle amid competition from newer properties reaching the market.

Only two units at Extell Development Co.’s Midtown property went under contract this year through June 30, according to filings on the Tel Aviv Stock Exchange, where the company sells debt to investors. There were no sales in the final three months of 2013 at the building, which had earlier found buyers for two penthouses at more than $90 million each. About 25 of the 94 units on the market were unsold as of June 30, the filings show.

“This is not a normal pace,” Jonathan Miller, president of New York-based appraiser Miller Samuel Inc., said in an interview. “This building had many price increases when it was the only building out there, so maybe they overdid it. In other words, the sky is not the limit.”

The slowdown at One57, the 1,004-foot (306-meter) tower piercing the sky near the southern end of Central Park, indicates buyers are pulling back on deals at buildings already on the market in anticipation of more choices for new super-luxury homes. At least six residential properties aimed at multimillionaires, including Zeckendorf Development Co.’s 520 Park Ave. and Vornado Realty Trust’s 220 Central Park South, are under construction in or near Midtown, with plans to begin sales in the coming year.

Contracts Down

Contracts for newly built Manhattan apartments priced at $10 million or more declined 18 percent in the first half of the year from the same period in 2013, data from brokerage Corcoran Sunshine Marketing Group show. The number of available units jumped 74 percent to 129.

What’s offered for sale is also getting more expensive. For listings of at least $10 million in new developments, the median asking price climbed 3 percent from a year earlier to $16.5 million, the brokerage said.

“People are feeling that, at that kind of price, when they know and read about more new development coming, they’re slower to do a deal,” said Ryan Schleis, vice president of research and analytics at Corcoran Sunshine. “They want to see what the other options are.”

Across Manhattan and in all price ranges, 13,000 more new-development units will be brought to market from the third quarter through the end of 2016, according to the brokerage.

At One57, where sales began in 2011, the units that have been slow to find buyers are those adjacent to the construction crane, Extell filings on the Tel Aviv exchange show.

Buyer Views

Crews working on the 90-story skyscraper used those units to house building materials, making it difficult for potential buyers to view them, Extell said.

The tower’s condos sit atop a 25-floor Park Hyatt hotel, which opened in August and may become Manhattan’s first five-star lodging property in more than a decade.

“Certainly there is more competition at the very high end (although no other comparable project has a five-star hotel),” Jeff Dvorett, Extell’s vice president of development, said in an e-mail. The range of choices is affecting all ultra-luxury developments, not just One57, he said.

A slowdown in contracts is natural for an under-construction property that has sold as many as 70 percent of its units, Dvorett said in the e-mail. Deals will pick up once clients can enter the completed building and see actual homes rather than make decisions based on floor plans, he said.

After Crash

Extell was a pioneer when it broke ground on One57 in 2009, after the bankruptcy of Lehman Brothers Holdings Inc. ushered in the real estate rout. The building, planned as Manhattan’s tallest residential tower, reached $1 billion in sales after six months. Bill Ackman, founder of New York hedge-fund firm Pershing Square Management LP, is said to be part of an investment group that purchased one of the upper-floor duplexes for more than $90 million.

Extell raised prices at One57 at least twice, according to filings with the New York State attorney general’s office, which monitors condo transactions. A 6,200-square-foot (576-square-meter) apartment on the 88th floor, for example, was initially marketed for sale in June 2011 at $52.5 million. By September 2012, it was listed at $67 million. At the end of 2012, 53 of the building’s for-sale homes, or about 56 percent, were under contract, the Israeli filings show.

Less Urgency

“When you’re the only one offering apartments in this segment, then you have much more control over pricing,” said Miller, who is a Bloomberg View contributor. “When other choices start appearing, there’s not the same urgency.”

The building’s West 57th Street neighborhood, fringing Central Park, has emerged as a billionaires district, where developers are racing to build skyscrapers of record-setting heights aimed at buyers seeking an investment haven. Macklowe Properties and CIM Group’s 432 Park Ave. has surpassed One57 in height and is slated to reach 1,397 feet when completed. A penthouse there is under contract for $95 million.

The high-end construction boom has spread south. Adjacent to the Museum of Modern Art on 53rd Street and Sixth Avenue, Singapore-based Pontiac Land Group is joining Goldman Sachs Group Inc. and Hines to build a 1,050-foot condo tower with 145 apartments. Sales are starting in the first quarter. China Vanke Co., that nation’s biggest publicly traded developer, and Aby Rosen’s RFR Holding LLC are working on a 61-story property at Lexington Avenue and 53rd Street, where sales also will begin next year.

‘Five Seconds’

“In New York, a new club lasts like five seconds and then there is something new,” said Jacky Teplitzky, a luxury broker with Douglas Elliman Real Estate. “And then the old club, which is not really old, becomes old.”

Prospective buyers considering One57 or 432 Park Ave. increasingly are asking about pricing at Vornado’s 220 Central Park South, which broke ground this year, Teplitzky said. Ninety apartments are planned for that tower, according to the attorney general’s office. Sales haven’t started yet.

The dual-tower project has drawn interest because it will be located at the southern border of Central Park, compared with several blocks west of the park, where One57 and others are.

“It will have an unobstructed view,” Teplitzky said. “It’s row one. If you think of One57, it’s like row two.”

Cash-rich investors also are searching for properties beyond Midtown, she said. The same would-be buyers who are interested in towers along the park are inquiring about Silverstein Properties Inc.’s 30 Park Place in lower Manhattan, where 157 condos are being built atop a Four Seasons hotel.

The Best

“People are taking a bit longer to to pull the trigger,” Teplitzky said. “Whoever is buying 15, 20, 30 million-dollar apartments, they want to make sure they’re buying the best of the best.”

Other condo projects in the Midtown area include JDS Development Group and Property Markets Group’s planned 1,400-foot tower at 111 W. 57th St., half a block from One57, where sales of the 60 units will start in the second quarter of next year; and Zeckendorf’s 520 Park Ave., with sales beginning in early 2015. A triplex penthouse there will be offered for $130 million, Arthur Zeckendorf said in an interview yesterday, making it New York’s most expensive listing.

Extell also is building about 184 more units at 225 W. 57th St., a project that will reach 1,488 feet and have Manhattan’s first Nordstrom department store at its base, the developer said in its filings in Israel.

Same Pool

All those developments will be pricing units at more than $5,000 a square foot, putting them in competition for the same pool of ultra-wealthy buyers, said Donna Olshan, president of Olshan Realty Inc. and author of a weekly newsletter on the New York luxury market.

“There is a lot of building that is proposed for the Midtown corridor, and the question is how many units can be sold for north of $10 million at the same time?” Olshan said.

Buyers at One57 in 2013 agreed to pay an average of $6,333 a square foot, according to Extell filings. The two apartments that went into contract this year sold for $5,824 a square foot and $8,734 a square foot.

Extell expects the unsold units at One57 to find buyers by the end of the year, according to the filings. In the meantime, the developer refinanced its debt on the site, taking out a $337 million mortgage with Deutsche Bank AG in July.

Park Hyatt

Extell also sold its stake in the 210-room Park Hyatt to Hyatt Hotels Corp., rather than keeping a 33.33 percent interest as initially planned, filings show. Hyatt in an Aug. 5 statement said it acquired the entire hotel for about $390 million.

Extell declined to comment on the sale of the hotel stake to Hyatt. The Chicago-based hotel operator bought the property because of its prominent location in a top market, which will boost the brand’s visibility, said Jamie Rothfeld, a Hyatt spokeswoman.

The Park Hyatt’s opening may be the marketing jolt that helps Extell sell the remaining apartments above it, according to Olshan.

“If you’re really rich, you’re thinking, ‘This is a good place to park my money and I don’t have to wait around for the other stuff to be built,’” Olshan said. “It’s new, and it’s done.”

-By Oshrat Carmiel

KB Home Declines After Earnings Miss Analyst Estimates

Source: Bloomberg / Luxury

KB Home (KBH), the Los Angeles-based homebuilder, fell the most in nine months after reporting lower-than-expected quarterly earnings as the transition to a new mortgage partner delayed some deliveries.

Net income for the three months through August was $28.4 million, or 28 cents a share, compared with $27.3 million, or 30 cents, a year earlier, KB Home said today in a statement. The average analyst estimate was for earnings of 40 cents a share, according to data compiled by Bloomberg.

The homebuilder delivered 1,793 homes in the quarter, down from 1,825 a year earlier, a slowdown largely resulting from the changeover during the quarter to Home Community Mortgage LLC, a new joint venture with Nationstar Mortgage LLC.

“We anticipated some minor delays,” KB Home Chief Executive Officer Jeffrey Mezger said on a conference call with analysts today. “However, we experienced far more paperwork-processing and approval issues than we expected with the launch. The initial disruption is now behind us and while we have more work to do in fine-tuning this new business, we expect a smoother closing process within the mortgage venture going forward.”

The builder also was delayed in completing sales because of labor shortages and the inability of utility companies “to get new communities energized, or meters installed, on completed homes,” Mezger said. Most of the sales won’t be lost and were instead pushed into the fourth quarter, he said.

Shares Plunge

KB Home fell 5.3 percent to $16.07 today, the biggest decline since December. KB Home had the largest drop among the 11 companies in the Standard & Poor’s Supercomposite Homebuilding Index.

Rising employment and consumer confidence have given the new-home market a boost.Purchases (NHSLTOT) of newly built houses, tabulated when contracts are signed, jumped 18 percent in August to a 504,000 annualized pace, the highest level since May 2008, Commerce Department figures showed today. The results surpassed the top forecast in a Bloomberg survey of economists.

KB Home’s fiscal third-quarter revenue jumped 7 percent from a year earlier to $589.2 million, fueled by an average selling price that increased 9 percent. Net orders rose 5 percent to 1,827 homes.

-By Prashant Gopal

Saks to Open in Lower Manhattan as Hudson’s Bay Relocates

Source: Bloomberg / Luxury

Saks Fifth Avenue agreed to anchor the retail portion of lower Manhattan’s Brookfield Place and its parent company, Canadian retailer Hudson’s Bay Co. (HBC), will move its U.S. headquarters into office space at the complex.

Hudson’s Bay signed leases totaling 485,000 square feet (45,000 square meters) at the property, landlord Brookfield Property Partners LP (BPY) said today in a statement. The agreements will bring the occupancy level at the 8.5 million-square-foot Brookfield Place to 95 percent, its New York-based owner said.

The deals further Brookfield Property’s twin goals of filling about 3 million square feet left behind last year when leases originated by Merrill Lynch & Co. ran out, and repositioning Brookfield Place’s retail concourse, where $250 million of improvements have been planned. With work on the adjacent World Trade Center’s first phase approaching completion, the leases help show what downtown will look like once the construction fences come down.

The agreements “speak to the allure of downtown as both a retail and office destination,” Dennis Friedrich, chief executive officer of Brookfield’s global office division, said in the statement. “It’s another huge step forward for the area.”

A three-level Saks store will occupy 85,000 square feet at Brookfield Place. Its Toronto-based owner will have 233,000 square feet of office space at 225 Liberty St. and 166,000 square feet at 250 Vesey St. Brookfield Place’s name was changed from the World Financial Center in an effort to play down the complex’s historic role as a home to banks and investment firms.

Second Store

The Saks store at the base of 225 Liberty, to open by mid-2016, will be the second New York store for the chain, joining the longtime location on Fifth Avenue between 49th and 50th streets, near St. Patrick’s Cathedral, Hudson’s Bay said in a separate statement.

The new store “will cater to what we believe is an underserved and rapidly growing downtown luxury market,” CEO Richard Baker said in the statement. Leasing space in “this key center in Manhattan will strengthen our foothold as the ultimate luxury shopping destination,”

Hudson’s Bay also is planning a 55,000-square-foot Saks Off 5th discount store at 1 Liberty Plaza, another Brookfield building, across Church Street from the World Trade Center. That store is scheduled to open in 2017, the company said.

Earlier this year, Time Inc., publisher of Time, Fortune and Sports Illustrated, signed a lease for 700,000 square feet at Brookfield Place, and Bank of New York Mellon Corp. took 350,000 square feet. Both agreements are for space at 225 Liberty, formerly known as 2 World Financial Center.

Conde Nast Publications Inc. and the Port Authority of New York and New Jersey, the main tenants of 1 World Trade Center and 4 World Trade Center respectively, are expected to move into those new towers before the end of the year, authority officials said earlier this month. A Santiago Calatrava-designed transit hub at the trade center is set to open by the end of 2015.

-By David M. Levitt

Biggest Australian Pension Plans Investment Hiring Spree

Source: Bloomberg / News

AustralianSuper Pty, the country’s largest pension fund, will expand its investment team by as much as 40 percent over the next 12 months including hiring as many as 10 global equities managers.

The fund, which holds more than A$78 billion ($69 billion) in retirement savings, will also add a team focused on smaller Australian companies along with infrastructure and property managers, Mark Delaney, deputy chief executive officer and chief investment officer, said in an interview in Sydney yesterday. The number of staff in the investment team will increase to more than 130 from 100, he said.

AustralianSuper, which like its peers had previously paid external managers to invest nearly all its assets, wants to cut management costs by A$150 million a year within four years, it said in October. The fund already has in-house teams overseeing some of its Australian equities, infrastructure, property and cash holdings.

“Global equities is next,” he said. “ We have started the recruitment process. We think it could take up to a year.”

The pension fund will hire as many as 10 people to manage global equities, about three to invest in small-cap stocks, two each for infrastructure and property and about four people for its credit market assets, Delaney said. The rest of the additions will be in the manager’s back office, he said.

Global Equities

AustralianSuper’s largest investments in global stocks were Baidu Inc., Tencent Holdings Ltd. and Inc. as of August, according to its website. Its international holdings were bought through external managers including State Street Corp. (STT) and Vontobel Holdings AG as of December, the website showed.

International equities comprised a quarter of the fund’s assets as of June 2013, up from 18 percent the previous year, according to its latest annual report. Australian shares accounted for 29 percent of assets in June 2013 from 30 percent a year earlier.

The pension manager still favors global stocks, with U.S. equities the “most attractive”, while some credit markets were fully priced, Delaney said.

AustralianSuper has also tried to maintain a greater proportion of funds in property and infrastructure assets compared with the benchmarks that it tracks. “It has been hard to hold the weight in those asset classes as the equity market has gone up and the money has come in,” he said.

Longest Streak

The Standard & Poor’s 500 Index (SPX) is in the midst of its longest streak of quarterly gains since 1998 and is trading at 16.6 times estimated earnings, below its 20-year average of 17, according to data compiled by Bloomberg. The MSCI World Index of global developed-market equities touched 16.25 times projected profits this month, the highest since December 2009, as the Federal Reserve maintained its commitment to keep interest rates near zero for a “considerable time”.

Group of 20 finance chiefs and central bankers said Sept. 22 low interest rates could lead to a potential increase in financial-market risk, as major economies rely on monetary stimulus to bolster uneven growth.

“The two things which have really driven the strong equity market -- a global economic recovery and very low interest rates -- remain broadly in place,” Delaney said. “Unless interest rates rise substantially, I think, the search for yield is likely to continue.”

-By Narayanan Somasundaram

Additional Articles of Interest - Local & Overseas Real Estate

Local & Overseas Real Estate - Full Article

Source: Business Times