Demand rising for homes in 3 Asian cities

But Singapore, HK and Tokyo office markets will continue to to be depressed

DEMAND for residential property is seen picking up in key Asian cities but economic recession will continue to depress the region’s office markets, pushing Grade A rents in Singapore and Tokyo down nearly 40 per cent in the next 18 months, a Reuters poll shows.

‘The office market is driven more by headcount and employment issues,’ said Aaron Fischer, head of property research at CLSA. ‘On the residential side, liquidity in the market place is affecting property, in Hong Kong and Singapore, particularly at a time when interest rates are low.’

Hong Kong looks to be the healthiest of the three markets covered in the poll as apartment prices have rebounded 15 per cent this year from a slump.

Analysts, however, warn that the rally is driven mostly by liquidity and is losing steam as the economy could shrink up to 6.5 per cent this year based on the government’s forecast. The poll showed Hong Kong home prices will be flat for the rest of this year but rise 10-15 per cent in 2010.

In Singapore, demand is picking up but strong supply means apartment prices are poised to decline 6.8 per cent between now and the end of the year before recovering 4 per cent in 2010.
Tokyo residential prices are forecast to drop 10 per cent between now and the end of the year and fall 6.3 per cent in 2010.

House prices in Hong Kong, Singapore and Japan have fallen so much that they are starting to look attractive given the added incentive of very low interest rates, analysts say.

In Singapore, monthly flat sales have tripled since February as apartment prices are down 20 per cent since the middle of 2008.

Developers including City Developments and UOL have stopped discounting new projects and in some cases are raising prices slightly although overall prices remain weak.

Tokyo residential prices are only 10 per cent off last year’s peak, but have more downside than the other markets as falling wages and rising unemployment will dampen demand.

Economic recession will continue to depress office rents although in Hong Kong they are poised to stabilise next year amid dwindling new supply.

The city’s biggest new project, International Commerce Centre – a 118-floor skyscraper in Kowloon – has lured Morgan Stanley, Credit Suisse and other multinationals across the water from Hong Kong Island, and is 80 per cent leased.

The poll forecasts Hong Kong Grade A office rents will drop 10 per cent by the end of this year and then be flat next year.

Singapore, on the contrary, faces a rush of new supply and prime rents, already 40 per cent off their peak, will skid 20 per cent by the end of this year and 18.8 per cent in 2010.

‘Next year, the new supply will hit and rents will start falling again,’ said David Lum, Singapore property analyst at Daiwa Institute of Research.

Tokyo Grade A rents – already down 29 per cent from a peak in late 2007 – are poised to fall 10 per cent between now and the end of the year and drop 15 per cent in 2010, according to the poll.
New supply, however, is relatively limited and analysts expect companies to take advantage of the weak market and upgrade to better quality office space at little or no increase in rent.

Source: Business Times, 13 Jun 2009

Property sector outlook ‘uncertain’

DESPITE the recent uptick in property interest in some countries, the outlook for the sector remains uncertain, an Asian real estate conference heard yesterday.

Speaking at Cityscape Asia 2009, Mr Stuart Labrooy, chief executive of Malaysia-based Axis Reit Management, said the full effects of the credit crisis ‘have not yet reached Asia’.

Property valuations in Asia, he said, will probably bottom out in the second half of the year, but there was no telling when the recovery will come.

Also speaking during a panel discussion on the impact of the downturn on Asian real estate, Mr Blake Olafson, Arcapita’s head of Asia real estate group, said the industry was now focusing on the basics.

He added: ‘If you’re a pension fund manager, that’s what you’ll do – not suddenly try to become a real estate developer in some Tier 3 city in China. There’s a greater sense of realism in the market, and a return to looking at fundamental cash flows, not just internal rate of return deals.’

Invista Real Estate chief executive Duncan Owen said Singapore, Hong Kong and Tokyo are attractive over the medium to long term as they have ‘quite large commercial markets’, sustainable economies and increasing market transparency.

The fact that the Singapore market is now badly affected like other markets is an opportunity for them, he added.

Invista, Britain’s largest-listed property fund manager, recently bought the Asian real estate business of Babcock & Brown, which gave it offices in Singapore and Hong Kong.

In his keynote address, Singapore’s Urban Redevelopment Authority group director (strategic planning) Richard Hoo acknowledged that the economic climate was now more challenging than during last year’s Cityscape Asia.

Today’s focus, he said, was on ‘enhancing our readiness’ when the economy improves.

Yesterday’s Cityscape Asia exhibition was quieter than previous events. Just 40 exhibitors have set up booths this year, and the organiser is expecting more than 3,000 people to visit over its three-day period ending tomorrow.

Last year, it attracted 5,520 real estate professionals and 70 exhibitors.

The 2007 event – inaugurated by National Development Minister Mah Bow Tan – drew 4,689 participants and 125 exhibitors.

Source: Straits Times, 20 May 2009

Property issues hog spotlight

THE large capitalised property counters put in a good showing last week, undeterred by the news that home prices here had shrank 14 per cent in the first quarter of this year.

News that pending home sales in the United States had risen while home prices in Britain rose last month for the first time since October 2007 gave local property developers a fillip.
CapitaLand was up 11.6 per cent in just a week, rising from $2.42 to $2.70. City Developments climbed 12.6 per cent in the space of a week.

These property counters outperformed the benchmark Straits Times Index, which rose by only 4.3 per cent over the same period.

One call warrant issued by Macquarie Securities on CapitaLand would have given the holder a whopping return of 53.8 per cent. Expiring next month, with an exercise price of $2.816 and a conversion ratio of 1,000 shares to 1,657 warrants, the CapitaLand warrant rose 3.5 cents to 10 cents. But only 10,000 units changed hands for this particular warrant.

An active warrant which offered a conversion ratio of 1,000 shares to 1,657 warrants and an exercise price of $2.319 was 3.5 cents higher at 29 cents. Nearly six million units were traded.

Keppel Corp was another counter on the rise. It rose 9 per cent in just a week, closing at $5.75 on Friday. A call warrant issued by Macquarie rose 23 per cent or 1.5 cents to eight cents. About 50,000 units were traded. The warrant expires in October, has an exercise price of $6.80 and a conversion ratio of one share to 12 warrants.

A call warrant lets an investor buy into a stock or index at a preset price over three to nine months. A put warrant lets an investor sell the stock or index at a preset price.

LEE SU SHYAN

Source: Straits Times, 6 April 2009

Global property investment expected to slide further

(EDINBURGH) Global real estate spending on office buildings, stores and apartments may fall another 5.3 per cent this year to US$412 billion as lenders keep a tight rein on credit, property broker Cushman & Wakefield Inc said.

Lack of credit pushed commercial property acquisitions down 59 per cent to US$435 billion last year, the lowest since 2004, New York-based Cushman said.

‘Although virtually all global markets had a decline in investment, it’s been the mature markets which have suffered most,’ David Hutchings, Cushman’s London-based head of research for Europe, the Middle East and Africa, said in a statement yesterday. ‘Emerging markets now account for 22 per cent of global investment when as recently as 2006 they only accounted for 9 per cent.’

Banks have been reluctant to lend or refinance real estate loans as they try to conserve cash after losses and write-downs totalling US$1.1 trillion. Recessions in the US and some European countries have crimped demand for office and retail space, causing values to drop because landlords cannot command as much in rent.

Commercial property values have fallen most in Europe, where yields rose 111 basis points, compared with an average 31 basis point increase in North America, Cushman said. The yield on property moves inversely to prices. One basis point is 0.01 percentage point.

‘Pricing in many countries at the market peak was aggressive and became divorced from the reality of underlying growth and income,’ Mr Hutchings said. ‘Pricing may now be becoming too conservative in some markets.’

Source: Business Times – 12 Feb 2009