Investors should consider Vietnam, Malaysia, Hong Kong, Singapore, the UK and Australia when growing their portfolio

SIGNS of renewed confidence for global investors are very apparent today, after the global recession last year. Here are six markets that we would recommend to investors seeking to grow their property portfolio.

Vietnam

Vietnam’s export economy and growing aspirational population makes it a strong market for growth potential. Also, demand for residential accommodation is outgrowing supply at a rapid rate. There are about 60,000 units scheduled for completion through to 2012 versus the 110,000 homes required in the same period.

Vietnam has a dynamic and cyclical property market that is heavily influenced by its stock market, so this is often a barometer for tracking the performance of the property sector. Over the past few months, the property market looks to be levelling out and there has been a significant rise in supply as developer confidence returns. The fourth quarter of 2009 saw twice as many launches of new schemes as the previous period.

For international investors who don’t know the market, choosing the right property can be a daunting task. Buyers would be wise to look for projects by reputable international developers.

Malaysia

For investors who want lower risk with solid yields and capital growth at affordable prices, I always recommend including a property in Kuala Lumpur in their portfolio. Malaysia is an export-based economy with strong fundamentals and will grow steadily as the global economy continues to recover.

The government encourages little speculation and recently introduced a real property gains tax of 5 per cent on any property sold within five years of purchase. The best time to buy is when interest rates are low and banks are lending freely. Currently, loan to values of 70-80 per cent are easily achievable. The property market is transparent with laws based largely on the UK legal system which makes investing in property very simple. For a private investor, there are thousands of websites to visit that have all the relevant information to compare and contrast the various opportunities available.

KL is Malaysia’s most developed and liquid property market with international appeal and considerable domestic demand. When buying, consider the location of the property carefully. Traffic can be tiresome and it is best to buy close to a public transport node. While property ownership for foreigners can be freehold title, it is also important to note that there are restrictions for foreigners buying property in Malaysia. For example, purchases of under RM500,000 are not permitted.

Hong Kong

The best time to buy in Hong Kong is when land supply is short and interest rates are low. The past 12 months have seen a massive 33 per cent rise in the property market, making it the highest growth rate in the developed world.

The property market responds rapidly to stock market performance, and as the China economy continues to grow, so too will Hong Kong’s. A direct result of this growth is that there are a number of mainland Chinese residents buying property in Hong Kong who are happy to pay higher prices. Sustained buying interest from cash-rich individuals and the tight supply in the luxury sector will push up property prices by 10 per cent over the next 12 months.

With strong liquidity in the banking system and a further drop in funding costs, average prices in the traditional luxury districts grew 9.6 per cent quarter on quarter at end-November 2009, showing there is still growth in the market.

Like Malaysia, Hong Kong’s property market is relatively transparent and sourcing a good deal is simple if you have the time to do your research. Keep away from off-plan developments in Hong Kong, as you will get a better yield from the secondary market. Look for areas that are built up and continuing to show growth such as Sheung Wan. Do be aware of the buildings going up in the vicinity of any development. If you are buying your apartment for the view, make sure that nothing can be built in front of it.

Singapore

The Singapore government is very nimble when it comes to changing regulations on buying property, which can both be a disadvantage and an advantage to investors.

Singapore had a robust residential market in the midst of the economic recession, and 2009 saw about 14,500 new homes sold, second only to 2007. This compares starkly against the 4,382 units sold by developers in 2008. In Q4 of last year, the government added a number of regulations to prevent a property bubble forming, and earlier this year added a 3 per cent stamp duty for investors who sell their residential property within 12 months of purchase. I believe that 2010 holds a lot of promise for the luxury sector, as demand from more confident buyers is being answered by developers.

Singapore has a very transparent property market and for those buyers lucky enough to live locally, sourcing property is simple. However, for those based outside Singapore, deals are snapped up very quickly by the local market. So it’s best to fly there and spend some time looking yourself. Look out for a reputable developer with a proven track record and projects in the most sought-after areas – districts 9, 10 or 11.

London

London is one of the most internationally traded property sectors in the world and is seen as a barometer for the global economy. The best time to buy London property for international investors is now.

London presents opportunities when supply is low, mortgage finance is difficult for local investors limiting their buying power and when the pound is weakening. All of these factors conspire to allow savvy international investors to pick up deals that normally wouldn’t be available to buyers overseas.

This means that there are a large number of opportunities for investors in Asia. However, quantity often does not equal quality. Deals that reach the Asian market are often lower quality, mass market developments. For international investors, it is best to seek advice from property investment groups who can source quality deals by conducting thorough research and underwriting a tranch of units. Investors should be wary of off-plan property in areas with a lot of supply. Look for projects in a quality central location with good transport links to the city.

Australia

Due to its population growth and geography, Australia is experiencing an undersupply of housing. In 2008, Australia’s population grew by 2.6 per cent – which is the equivalent of the entire population of Canberra – in one year. Occupancy rates are always very dependable, with figures such as 98 per cent in cities like Melbourne becoming the norm. These trends are creating great opportunities for foreign investors right now.

Another factor currently contributing to the success of the economy is Australia’s extremely successful export relationship with China. Last year, Australia exported more coal to China than any other country in the world and 2010 is set to exceed last year’s numbers. While the resources sector accounts for only 2 per cent of Australia’s economy, it has a very positive trickle-down effect on sectors such as the property market.

There are a number of factors to consider when purchasing property in this market. Perhaps the most important is to make sure you buy where local Australians want to live. As an international buyer, you are restricted to only buying new property. Also, note that Australia has strict and tight deadlines for the purchase process and local agencies are much less likely to understand the logistical issues for international investors.

There is likely to be a significant increase in funds invested in property markets globally this year. Right now, Asian markets, Australia and the UK are showing the most appeal and we would strongly recommend conducting further research in these areas.

Tim Murphy is managing director and founder of IP Global, a property investment company specialising in acquiring property in emerging, distressed and recovering markets

Source: Business Times, 27 Mar 2010

HEALTHCARE services provider Parkway Holdings could see a $60 million boost to its top line this year, fuelled by the sale of medical suites at its new Parkway Novena Hospital.

All 100 suites launched over the past two weeks have been taken up, the group said yesterday. The units ranged from 452-1,431 sq ft. Going by the price – $3,588-$3,828 per sq ft excluding GST – this could add up to sales of more than $200 million.

However, revenue from the sales will be recognised progressively. Typically, a buyer pays a 5 per cent booking fee for an option to purchase. The buyer then has to put down a further 15 per cent on signing a sale-and-purchase agreement. An additional 10 per cent is collected on completion of piling work.

All in all, about 30 per cent of the money from the sale of suites so far will be booked this financial year. Subsequent payments will flow over the next two years as construction progresses.

Parkway CEO-designate Tan See Leng said demand for phase one of the medical suites came largely from cardiac science, orthopaedics, neuroscience and supporting disciplines. There is a mix of doctors from public and private sectors, but Dr Tan was unable to say what the split is.

Many of the doctors who have booked the units practise outside of Parkway’s system, at locations such as Lucky Plaza, Paragon or Camden Medical Centre.

‘These doctors do not necessarily admit patients to our hospitals at this point in time,’ said Dr Tan. ‘So what we did was that we target this group of doctors. They come into Novena. It becomes a very good, very seamless type of referral structure where they actually operate within a hospital complex.’

Expected to open in the second quarter of 2012, Parkway Novena Hospital will house a specialist centre with 259 medical suites. The group will launch phase two of the sale of suites in the next few days.

It is yet to decide on pricing or the number of units to be made available. But it intends to hold on to some suites to retain flexibility for collaboration with foreign or public institutions down the track.

At a media briefing yesterday to give an update on the Novena project, Dr Tan introduced Lee Hong Huei, 39, as CEO-designate of Parkway Novena Hospital. Dr Lee joined Parkway in 2000 and was most recently CEO of Mt Elizabeth Hospital. He is stepping up hiring to form a team that will help plan operational details at the new hospital.

‘At the moment, it’s mainly the planning operations team,’ said Dr Lee. ‘Moving along, there will be some clinical positions. We are already looking at nursing staff, ancillary support staff.’

He projects a headcount of about 700-800 clinical and non-clinical staff at the hospital when it opens in 2012. By then, about 100-150 doctors are expected to practise at the specialist centre. When it is fully operational, Parkway Novena Hospital will be about the size of Mt Elizabeth today, with about 1,000-1,200 staff.

Parkway posted a net profit of $118.9 million on revenue of $979.2 million last year. It will award the tender for construction of the new hospital by the end of April. Construction is estimated to cost about $400 million.

Source: Business Times, 27 Mar 2010

MR SIMON Cheong, president of the Real Estate Developers’ Association of Singapore (Redas), raised government hackles this week when he questioned the need for government intervention to halt the rise of private home prices.

He had asked if the state should be so concerned with the prices of private home prices, when the segment serves only 16.5 per cent of the population.

The Government recently introduced cooling measures in the private and public property markets after observing signs of speculative activity.

Mr Cheong, who is also chairman and chief executive of developer SC Global, said the Government should shoulder some of the responsibility for short land supply and escalating property prices.

He cited two recent government land tenders to illustrate his point. A single bid for a Tampines site was rejected in June 2008 for being too low, but was awarded in March at a price that was about 3.6 times higher. A Ten Mile Junction mixed-use site also had a failed bid in April 2008, but went for 2.7 times higher last month.

‘Had the two sites been awarded back then at ‘market prices’, the current demand-supply mismatch scenario in the residential market may have been smoothed and price increases for such mass market projects more muted overall,’ he said.

The Ministry of National Development (MND) rebutted Mr Cheong’s claims the next day, pointing out the Government’s objective was to maintain a healthy property market. ‘A property market bubble, if allowed to form, may not only impact housing affordability, but also severely impact the economy when it bursts,’ it said.

MND said it was arguable if awarding the two sites at the low bid prices in 2008 would have moderated property prices, or simply allowed the bidders to achieve a fatter profit margin.

The sites could yield about 800 homes. Against a total supply pipeline of 60,476 uncompleted units of private housing at the end of last year, of which 34,234 units are still unsold, it was ‘questionable if the added supply from these sites in 2008 would have affected prices today in any way’, MND said.

Source: Straits Times, 27 Mar 2010

NATIONAL Development Minister Mah Bow Tan yesterday emphasised that the Government has a role to play in the property market, but any intervention is ‘done sparingly’.

‘We try not to intervene but when we do, we do it only because we want the market to work better,’ he told The Straits Times in an interview. The Government wants to see a stable, healthy market, where prices are generally moving in tandem with the fundamentals of the economy, he added.

He was responding to recent comments by the president of the Real Estate Developers’ Association of Singapore, Mr Simon Cheong, who questioned the need for government intervention to halt the rise of private home prices.

Mr Cheong also commented on Wednesday that the Government should shoulder some of the responsibility for short land supply and escalating property prices. (See: Redas chief had questioned need for govt intervention)

The Ministry of National Development issued a statement on Thursday to rebut his claims, noting that the Government’s role in ensuring a stable market ‘matters to the well-being of Singaporeans and the economy’.

Mr Mah said yesterday that Mr Cheong’s argument that the Government should not interfere in the market, or that it may be intervening too much, was ’strange’.

‘It’s not the intention for us to replace the market… it’s like the HDB (resale) market, we don’t set prices. We let the market set the prices, but we intervene to make sure the price is in line with fundamentals and there is no excessive demand from excessive speculation,’ he said.

The Government wants to ensure, for example, that demand is driven by people who want to live in the property, or invest for the long term, he added.

‘That’s the position we take. We don’t intervene unless we have to (and) only when we think the market is not working well.’

Mr Mah also said that a property bubble is not good for the market and the public should be sceptical of developers who say otherwise.

Mr Justin Chiu, executive director of Hong Kong’s Cheung Kong (Holdings), said this week that contrary to what some believe, bubbles can be good as they fuel sales volumes and price rises.

But Mr Mah said yesterday: ‘When developers start talking and say bubbles are good for the market, I just wonder, why are they saying that?

‘It may be good for developers, but it’s certainly not good for people who want to buy, because of affordability, nor for investors… because when the bubble bursts, everybody gets hurt.’

The irony, he added, was that ‘if developers talk up the market, and people believe them, and prices go up and spiral out of control, then the more we will be forced to act. So I hope people realise that’.

Reacting to Mr Cheong’s comment that the reserve price system is unable to respond quickly enough during periods of high volatility, Mr Mah said the system is not new and has worked well.

‘So many sites have been sold by that system, and we’ve sold sites where people have bid below the reserve price,’ he said.

But in the case of two tenders cited by Mr Cheong which were not awarded at the time, Mr Mah noted the bid prices ‘were so ridiculous’.

‘It was a few bidders who were trying their luck because no one else was interested,’ he said. Even if developers obtained land at a low price, he thought it unlikely that they would sell cheaper homes to buyers.

When the market is high, developers will not sell for less than the market price, he added.

‘So it’s a really strange argument. But we’ve made our reply, let’s leave it at that.’

Source: Straits Times, 27 Mar 2010

PENDER Court, off West Coast Highway, has been relaunched for collective sale at an asking price of about $100 million.

That is about 20 per cent above the price the condominium fetched in an ultimately abortive sale in the 2007 property boom. Buyer Bravo Building Construction called off the deal in early 2008.

The firm had, by then, also pulled out of two other collective sale deals – Tulip Garden near Holland Road and Makeway View in Newton.

Now, the sellers of the freehold 48-unit development are expecting offers in the region of $100 million to $108 million, said marketing agent Credo Real Estate’s executive director of marketing Yong Choon Fah.

On this basis, the asking price range translates to a land price of about $992 per sq ft (psf) to $1,071 psf on the potential gross floor area, she said.

At this level, a developer may expect to break even at about $1,480 psf to $1,570 psf, Ms Yong added.

This price is for a total gross floor area of about 100,840 sq ft, including an additional 10 per cent space set aside for balconies.

Pender Court was sold at the peak of the last boom in July 2007.

Bravo agreed to pay $80 million or about $872 psf of potential gross floor area. No development charge was payable then.

It decided in April 2008 to cut its losses on the deal, rather than pump in more money and make a bigger loss by pursuing the development.

The property market had slowed considerably by then, from the boom days of the previous year.

Pender Court owners got to keep the $12 million deposit, which worked out to an average of $250,000 per unit.

Meanwhile in the east, Teakhwa Real Estate launched Changi Complex at the junction of Bedok Road and Upper Changi Road for collective sale on Thursday.

Owners are expecting prices of about $45 million to $48 million. This works out to $563 psf to $598 psf of potential gross floor area, including the estimated development charge of $3.6 million.

The tenders for Changi Complex and Pender Court close on April 20 and April 27 respectively.

Source: Straits Times, 27 Mar 2010

SIXTEEN freehold terrace houses at Fort Road in the Tanjong Rhu area are said to be close to being sold for about $86 million.

Construction and property group Chip Eng Seng is believed to have been granted an option to buy the houses. However, this is still subject to one of the sellers – a company which owns a few of the houses – securing approval from its shareholders for the sale, BT understands.

The 16 houses have a land area of nearly 37,000 square feet and the party that’s buying could potentially purchase from the state a cul-de-sac or dead-end road, which has a land area of about 11,000 sq ft. This would increase the total site area to about 47,900 sq ft – large enough to be redeveloped into a new condominium project with about 90 units averaging 1,100 sq ft.

The terrace houses, which make up a development named Fort Terrace, are owned by several parties who have come together for the proposed sale. The site is zoned for residential use with a 2.1 plot ratio (ratio of maximum potential gross floor area to land area) under Master Plan 2008.

Back-of-the-envelope calculations show that the price of $86 million could work out to about $1,100 per square foot of potential gross floor area, inclusive of development charge (DC), for intensifying the site and estimated payment for the state land.

Going by this unit land price, analysts estimate the breakeven cost for a new condo development on the site would be about $1,450-1,550 psf.

While that hardly leaves any profit for the developer based on current selling prices in the area, Chip Eng Seng’s strategy would probably be to build a high proportion of smallish units to achieve higher per square foot selling prices, said a property consultant.

Fort Terrace was put on the market back in February 2008 with an indicative price of $95 million or $1,238 psf per plot ratio inclusive of DC prevailing at the time and the estimated cost for purchasing the state land.

But it was not sold back then. 2008 was a weak year for the property market, which was reeling from the effects of the US sub-prime crisis that began in 2007 and escalated to a global financial crisis in 2008, culminating in the collapse of Lehman Brothers in September that year.

Source: Business Times, 27 Mar 2010

THE property market may be hot for new launches, but the fervour has not spilled over to collective sales.

BT understands that two residential sites put up for sale in December last year are unlikely to find new owners soon. The tender for Mayfair Gardens at Rifle Range Road closed in January, but no winner emerged and the collective sale agreement (CSA) has lapsed. Nearby, Green Lodge at Toh Tuck Road has also failed to find a buyer and the CSA is close to expiring.

The CSA is a crucial document in the collective sale process. From the time that the minimum 80 per cent consent level is secured for a CSA, agents have up to 12 months to find a buyer and submit an application to the Strata Titles Board for an order for the sale. If the CSA expires before an application, home owners have to convene extraordinary general meetings again to restart the sale process.

An industry source told BT that there were several bidders for Mayfair Gardens but their offers were below the asking price. The owners had hoped for at least $210 million. On top of this, a developer would have to pay $40 million to restore the lease to 99 years, from the current 72. This means that the cost would have come up to $857 per square foot per plot ratio (psf ppr).

The CSA for Mayfair Gardens was signed in March last year and has expired, the source said. The deal did not go through because of the ‘price gap’.

The story is similar for freehold Green Lodge. BT understands that several bids were received during the tender but they failed to meet the reserve price. The owners were looking for $135 million. Add a state charge of about $9.5 million and the price would be $683 psf ppr.

A majority of the owners agreed to sell the property in April last year. Another market insider said that the CSA is close to expiring, and agents are unlikely to have enough time to find a buyer and submit an application to the authorities.

Apart from Mayfair Gardens and Green Lodge, Laguna Park at Marine Parade failed to find a buyer last year. Laguna Park’s sales committee called off the collective sale in November after lower-than-expected bids came in.

These cases reflect the challenges in selling en bloc in today’s market, where there is a gap in price expectations between buyers and sellers.

According to HSR investment sales assistant executive director Jeffrey Goh, many home owners are not keen to reduce asking prices and are in no hurry to sell. They have seen how well new property launches have done and this has ‘given them a lot of excitement’, he said.

But Credo Real Estate managing director Karamjit Singh believes that Mayfair Gardens and Green Lodge are ‘not necessarily representative of the fate of en blocs to come’.

For properties where sufficient consent from owners was obtained some time back, asking prices may not be in line with market conditions, he said.

‘But we are about to see a new wave of en bloc launches by tender in the months ahead, and these will be projects that would have got started end of last year or early this year.’

Source: Business Times, 27 Mar 2010

The government is exploring how it can further tie a person’s CPF to the purchase and sale of an HDB flat.

The aim is to strengthen the message that property is an asset for one’s old age.

Prime Minister Lee Hsien Loong said this at a forum organised by REACH, the government’s feedback unit.

It is a growing trend that has got authorities concerned: Home-owners selling HDB flats to pay off debts, only then to ask their MP for help in getting a rental unit.

Prime Minister Lee said this goes against the aim of these homes as assets for life.

“When we help people to own a home, it’s really for you for life,” Mr Lee said. “When you’re not so old, and you’ve bought the house, and now you see that the pot of gold is down there and you ignore the ‘please don’t break the glass sign’ and you break the glass and take the money out straightaway, then what happens to you? Or more importantly, your children and your dependents? Where do they go?”

Hence, the government wants to strengthen the CPF route in the buying and selling of flats.

“Like what we’ve been doing with the Additional Housing Grant – that grant we give you into your CPF, you can use it to buy a house,” explained the Prime Minister.

“If you sell the house, the money goes back into the CPF. So if you’re buying another house, you can use that for another house. If you’re not buying another house, the money is there for your old age.”

On tackling income inequality, the Prime Minister said the point was not to measure the size of the gap, but to look at how the poor can be made better off.

Access to a good education and a high rate of home ownership are two of the best things the government has done.

However, Mr Lee noted there are some people who will be left behind.

“And my advice is, please try to help yourself. And particularly, please help your children to break out of this cycle,” he said. “The government will help them, but you must help them too.”

Said Dr Vivian Balakrishnan, Minister for Community Development, Youth and Sports: “It’s not just about dollars. It’s how you deliver the dollars, how you deliver assistance so that people make the right decisions for themselves and their children.

“If you were a poor person, anywhere on this planet, Singapore is the one place where you will have a roof over your head, where you will have food on the table. Even if you can’t afford it, we will have meals delivered to you. You will get healthcare.

“Do not lose sight of the fundamentals. And I am confident that we have done our duty for the people who need our help.”

The hour-long dialogue also saw questions on the teaching of the Chinese language, and more help for singles.

In response to a question on casino entry fees, Mr Lee said the aim was not to prevent Singaporeans and permanent residents from gambling. He added that gambling was not harmful if seen as a form of entertainment, but it does become a concern when people get addicted.

The dialogue session is part of a forum on securing Singapore’s future.

Source: Channel News Asia, 27 Mar 2010

WHEN financial adviser Hu Yaoqian heard of the policy changes, she felt elated. It meant that her decision to apply for citizenship last October was right.

The 26-year-old permanent resident (PR), who came to Singapore to study in 2003, says she realised the benefits of becoming a Singaporean when she learnt about housing policies here.

As a citizen, she would qualify for a $20,000 grant to buy an HDB resale flat. Moreover, a citizen would enjoy subsidised rates for upgrading schemes compared to a PR who has to pay the full cost.

Her software engineer husband, who is her high school sweetheart from China, came to Singapore in 2008 and is also a PR. The couple are hoping to buy a four-room or five-room flat in the Bishan or Serangoon area.

In Ms Hu’s line of work, she meets middle-income Chinese, who are mostly PRs typically around age 30 and married with young children.

Where government policy is concerned, she says, ‘their only consideration is property’ as their children are not old enough to go to school, and their health insurance covers medical fees.

Ms Hu notes that property ownership is a typical Chinese priority.

She says Singapore’s PR system is still better than China’s household registration or hukou system, which denies rural migrants access to employment, housing, cheap education and health care in the cities.

Source: Straits Times, 27 Mar 2010