(HONG KONG) Chinese developer Glorious Property says it is cautious about the outlook for sales later this year, after the central government unveiled harsh measures to rein in the red-hot property sector.

The Shanghai-based developer logged contracted sales of 4.2 billion yuan (S$862 million) in the first six months of this year, up about a third from the same period a year earlier, senior executives said yesterday. In June alone, contracted sales were 890 million yuan, up from about 220 million yuan in May, they said, adding that there were uncertainties for the remainder of the year.

‘We are quite cautious about the second half. We’ll mainly be monitoring property policies – whether the government adopts a tightening or loosening attitude,’ CEO Cheng Lixiong told a news conference here.

In mid-April, China announced a series of property measures to tighten the market, such as raising minimum downpayments and mortgage rates for second homes, and raising downpayments for first-home buyers purchasing huge apartments.

Urban property prices rose an annual 12.4 per cent in May, easing from April when prices climbed at a record pace, government data showed. Compared with April, May prices were up 0.2 per cent, also trending lower.

The tightening measures, coupled with Europe’s debt crisis, are also prompting the developer to put its plans to issue a dollar bond on hold. ‘The debt market is too volatile now. We feel that it’s not the right time to issue the bonds because of demand uncertainty and the costs of issuing,’ Mr Cheng said. — Reuters

Source: Business Times, 6 Jul 2010

(HONG KONG) Hong Kong’s home sales fell to the lowest level in 14 months in June, as the city’s government tried to rein in rising prices with rules on new home sales.

Total sales of residential units fell to HK$33 billion (S$5.9 billion) last month from HK$42.8 billion in May, the Land Registry said on its website yesterday.

By volume, the number of residential units changing hands declined to 9,130 in June from 11,014 in May, according to the government department.

Hong Kong has been stepping up measures to curb home prices that have increased 8 per cent this year, adding to the 29 per cent advance in 2009.

Apart from raising stamp duty on luxury home transactions and increasing land supply, the government is also clamping down on developers’ sales tactics to boost transparency.

‘The fall is like a hiccup in the market in response to government’s rules on new home sales announced in April,’ Nicole Wong, a Hong Kong-based regional head of property research at CLSA Ltd, said yesterday in an interview.

‘There is no means for the government to reverse the imbalance resulting from short-term supply shortages,’ Ms Wong said.

Ms Wong expects home price in the city will rise 15 per cent for 2010.

Today’s sales from the Land Registry is a ‘lagging indicator’ of the property market as it showed data of transactions made in April and May, Ms Wong said.

The government asked developers to provide a show flat that will be in the exact same condition as when the home is built and ready for delivery, and to publish asking prices three days before starting to sell unfinished apartments, Financial Secretary John Tsang said on April 21.

Sun Hung Kai Properties Ltd, the city’s biggest developer by market value, on June 8 paid HK$10.9 billion for a residential site in the Ho Man Tin district.

The price, which beat a Bloomberg News estimate by 30 per cent, is the highest paid in a government auction in urban Hong Kong since the market peaked in 1997.

‘The record land sale in Ho Man Tin in June has boosted the housing market again,’ Buggle Lau, chief property analyst at realty company Midland Holdings Ltd, said in Hong Kong. ‘I expect the home sales volume will go up in July,’ he added.

Hong Kong’s home prices rose to the highest in five weeks, Centaline Property Agency Ltd said on July 2.

The index of existing home prices rose to 80.12 as of June 27, compared with 79.12 a week earlier, according to Centaline, one of the city’s biggest property agencies. — Bloomberg

Source: Business Times, 6 Jul 2010

Korean investors building up property holdings in Asia, including Singapore

SOUTH Korean investors are keen on a larger slice of their Asian neighbours’ real estate pie – and some of them have their eye on Singapore.

Korean investment in Asian real estate may currently be worth more than US$10 billion, estimates Derek Wong, director of real estate investment & finance at Woori, Korea’s largest financial group. This sum, he believes, has the potential to increase by 52-100 per cent over the next 3-5 years.

Forced to take rain checks for over a decade by not one but two financial crises, Korean investors can finally seek overseas investment opportunities under clear skies. And they are doing so with a vengeance.

‘With Korean National Pension Service (NPS) acquiring more than US$3 billion worth of overseas real estate in the last six months, we expect other Korean pension, insurance and investment funds to follow suit,’ says Mr Wong.

NPS plans to have 6.6 per cent of assets in overseas equities in 2011, compared with 5.1 per cent targeted for this year, and is considering establishing a fund that will focus on investments in Asia.

Besides the pension funds, Mr Wong names conglomerates with a lot of liquidity – such as Samsung, Daewoo and Hyundai – as well as insurance companies such as Samsung Insurance and Woori Aviva as other investors with pent-up interest and strong balance sheets.

‘Since the 1997 Asian financial crisis, when Korean conglomerates were badly hit, Korean corporates had to strengthen their corporate balance sheets and were discouraged by the Korean government from making any significant overseas investments,’ says Mr Wong.

As an indicator of how pent-up Korean interest can surge, he highlights how Korean investment in overseas real estate leapt from less than US$10 million in 2003 to US$750 million in 2006. It was about US$1.2 billion in 2008 before the global crisis halted all overseas investments again.

While China and Hong Kong are natural favourites for Korean investment, Singapore wins points for the transparency of its market – as well as for its political stability, strong legal system and clear tax structure without capital gains tax.

Korea was already making its presence felt in Singapore’s residential market before the crisis set in; in 2007, Koreans accounted for 7 per cent of all foreign buyers and were ranked joint fifth among foreign buyers in Singapore.

Post-crisis, Korean investment is not a one-way street. The sharp depreciation of the Korean won during the crisis attracted an influx of overseas funds, especially from the United States.

Despite the strengthening of the won, the success of these early-bird investors has garnered Korean real estate a steady stream of attention. Woori is currently stitching together about US$2-3 billion worth of deals in Seoul, as well as facilitating the investment of Malaysian conglomerate Berjaya in an integrated resort on Jeju Island.

Mr Wong estimates that a standing asset in Korea can fetch a yield of about 6 per cent per annum, compared to a much lower 4 per cent in Singapore.

Choice picks of Korean real estate include office buildings and retail malls, he adds. ‘These depend a lot on the economy of the country, and the Korean economy looks to be good for the next 10 years.’

The Korean government predicted last month that Korea’s economy would grow 5.8 per cent this year.

Of course, many investors remain leery of Korea due to the language barrier and the political tension between the North and the South, as well as a widespread perception of the Korean market as being insular and ‘closed off’.

‘It’s a misconception,’ says Mr Wong, who feels that the country is making an effort to reach out to the world, especially through its entertainment scene.

‘Now is a good time to break the Korean mystique,’ he concludes. ‘A lot of people say we’re going through ‘the golden decade of Korea’.’

Korean overseas investment leapt from less than US$10m in 2003 to US$1.2 billion in 2008.

Source: Business Times, 6 Jul 2010

Downgrade of credit rankings by ratings agencies makes borrowing costlier

(DUBAI) Syariah-compliant loans slumped to a five- year low in Europe, the Middle East and Africa in the first half on credit-ratings downgrades and falling property prices.

Islamic syndicated loans declined 40 per cent to US$2.2 billion, compared with a 5 per cent drop in total lending to US$304 billion, according to data compiled by Bloomberg. Real estate prices have dropped 50 per cent in the United Arab Emirates from their peak in August 2008, according to estimates from Colliers International.

‘Banks have plenty of liquidity but they have been very selective when it comes to where they would like to deploy it,’ Faisal Hijazi, business development manager of rating services and Islamic finance in Dubai at Moody’s Investors Service, said in a July 1 interview in Kuala Lumpur. ‘Real estate and investment companies seem to be the most seriously challenged when it comes to refinancing.’

Middle East property developers have been forced to renegotiate loans and bonds after they struggled to meet their obligations, prompting ratings companies to downgrade credit rankings and making borrowing more expensive. The last time banks made fewer Islamic loans was in 2005, when the total was US$75 million.

The UAE’s state-owned Dubai World, Saudi Arabia-based Saad Group and Investment Dar Co in Kuwait announced plans in the past year to restructure debt. Dubai Holding Commercial Operations Group, a real estate and hospitality company, had its rating cut to B2 on June 30 by Moody’s, five levels below investment grade.

Islamic finance transactions are based on the exchange of assets rather than interest to comply with the syariah principles.

Created in the 1970s, the industry’s assets may quadruple to US$2.8 trillion by 2015 from about US$700 billion in 2005, according to the Kuala Lumpur-based Islamic Financial Services Board, a standards-setting body.

Dubai Department of Finance’s sukuk, or Islamic bonds, have dropped since the debt was sold in October. The 6.396 per cent note maturing in November 2014 yielded 7.82 per cent, 145 basis points more than 6.37 per cent at the time of issue, according to Bloomberg bond trader composite prices. The rate reached a record high of 10.29 per cent on Feb 15. The securities’ spread over similar- maturity US Treasuries narrowed 187 to 624 in the same period.

The HSBC/Nasdaq Dubai US Dollar Sukuk Index, made up of sukuk from Indonesia to Saudi Arabia, gained 0.8 per cent in the three months ended June 30. The average yield on corporate and government sukuk dropped seven basis points, or 0.07 percentage point, to 6.29 per cent last quarter, according to the HSBC/Nasdaq Dollar Sukuk Index.

The yield on Malaysia’s 3.928 per cent Islamic notes due June 2015 fell one basis point last week to 3.57 per cent, according to prices from Royal Bank of Scotland Group.

Dubai companies may have to restructure loans due over the next 12 to 18 months, Moody’s said in a report on June 14. Arab companies in the Persian Gulf region have US$28 billion of debt maturing in 2012, Moody’s said.

The loan of Qatari Diar Real Estate Development Co, a unit of the Gulf state’s sovereign wealth fund, was one of four Islamic loans in Europe, Middle East and Africa so far this year, the data show. It borrowed US$300 million in April from banks led by HSBC Holdings plc, Europe’s biggest lender by market value, Bloomberg data show.

In Asia, the Malaysian government’s plan to spend RM230 billion (S$99.3 billion) on development projects from 2011 to 2015 may boost demand for financing, according to rating company RAM Holdings Bhd. Bank loans in Malaysia more than doubled to US$4.1 billion in the first half, the highest in two years, after the country climbed out of its first recession in a decade last year.

Malaysia’s economy is forecast by Prime Minister Najib Razak to expand as much as 6 per cent this year after shrinking 1.7 per cent in 2009.

Maybank Islamic Bhd, a unit of Malaysia’s largest lender Malayan Banking Bhd, expects to increase Islamic loans by 20 per cent to 30 per cent for the financial year ending June 2011, chief executive officer Ibrahim Hassan said in a message to Bloomberg on July 1.

Dubai World, whose unit Nakheel is building palm-shaped islands off Dubai’s coast, reached an agreement with its main creditor group in May to restructure US$23.5 billion of liabilities.

Saad Trading, Contracting and Financial Services Co, a unit of Saad Group owned by billionaire Maan al-Sanea and his family, defaulted on a US$650 million sukuk in November. Investment Dar, the Kuwait- based owner of half of Aston Martin Lagonda Ltd, was unable to meet obligations on its outstanding US$30 million debt in April last year, according to data compiled by Bloomberg.

The company and its creditors agreed to most commercial aspects of restructuring liabilities, the creditors committee said on June 14. It had 1.03 billion dinars (S$4.9 billion) of debt outstanding at the end of September 2008.

‘The quality of the creditors has deteriorated,’ Mr Hijazi of Moody’s said during an Islamic capital market forum in Kuala Lumpur. ‘So the uncertainty is still pretty much there.’ – Bloomberg

Source: Business Times, 6 Jul 2010

It believes focus on premium properties will place it ahead of competition

(KUALA LUMPUR) Sunway City Bhd (Suncity), developer of the Sunway Integrated Resort City in Bandar Sunway, expects prices at its property launches to increase by 20 per cent this year from 2008.

Its managing director of property development in Malaysia, Ho Hon Sang, said this was in line with the current market trend.

‘Suncity’s launches for this year will mainly be in the Klang Valley with a gross development value of RM1.5 billion (S$651 million),’ he told Bernama in an interview.

Suncity, Mr Ho said, believes that its premium pricing strategy of focusing on properties with ‘green initiatives’ that promote quality of life will place it well ahead of competitors.

‘Our property prices are usually 10 to 20 per cent above the competitors,’ he said.

According to Mr Ho, the Malaysian property market is not expected to enter a bubble stage despite rising prices due to the limited supply of land in prime areas, and availability of liquidity at the banks and institutions such as the Employees Provident Fund (EPF).

‘Malaysian property prices are still lower compared to Singapore,’ he said.

Suncity began its green journey back during its Sunway Integrated Resort City in Bandar Sunway, an iconic project which encompasses a township of medical, university, shopping and retail mall as well as resort and hotels.

‘We have also emphasised on security with the implementation of CCTV within strategic roads and location and auxiliary police to ensure proper surveillance,’ Mr Ho said. ‘Sustainable construction is certainly here to stay as Malaysians are becoming more environmentally conscious. Moreover, it is widely practised by other developers overseas,’ he said.

He also said that Lafarge Malayan Cement Bhd’s cement products such as the Phoenix complemented the group’s objective to promote sustainable construction.

The group’s efforts in going green were given recognition when the Sunway Palazzio development in Sri Hartamas, Kuala Lumpur, was awarded the Gold Award in High Rise Residential Development by Singapore’s Building and Construction Authority Green Mark Scheme.

Sunway Palazzio is the first high-rise residential development in Malaysia to receive the coveted award based on five criteria – energy efficiency, water efficiency, site/project development and management, good indoor environmental quality and environmental protection, and innovation. — Bernama

Source: Business Times, 6 Jul 2010

It will develop a 20-storey apartment building, with prices at about $1,400 psf

BOUTIQUE developer BS Capital has bought a freehold site at Kim Keat Road-Lorong Ampas for just over $36 million or $670 per square foot of potential gross floor area, including an estimated development charge of almost $25 million.

The Colourscan building now stands on the 32,544 sq ft site, but the Urban Redevelopment Authority has approved rezoning from Business 1 to residential use with 2.8 plot ratio – the ratio of maximum potential gross floor area to land area.

BS Capital plans to develop a 20-storey project with about 160 apartments – mostly studios, and one and two-bedders – ranging from about 400 to 700 sq ft per unit.

There will also be some four and five-bedroom penthouses, said the company’s chief executive, Chin Teck Chuan.

The plan is to launch the proposed District 12 residential project within six months.

‘We’re targeting an average price of about $1,300-1,400 psf,’ Mr Chin told BT yesterday.

The property was sold by Colourscan in a deal brokered by Colliers International.

Balestier has been gradually transformed into a vibrant and modern area, with a number of new residential projects and a commercial development slated to be completed in the next few years, said Colliers executive director of investment sales Ho Eng Joo.

In April, BT reported that the freehold Diamond Tower in Jalan Rajah, also in the Balestier area and District 12, was sold for $49.6 million or $652 psf per plot ratio including DC through a collective sale.

The Diamond Tower site is 27,323 sq ft and is zoned for residential use with 2.8 plot ratio.

Buyer EL Development plans to redevelop the site into a new apartment block with about 100 units comprising one, two and three-bedroom units.

BS Capital also developed The Lumiere off Shenton Way.

It plans to release for sale soon the final 55 apartments, which are on the 34th floor and above.

‘Most of the units will be priced at $2,500 psf or more,’ Mr Chin said.

The 99-year leasehold project, which is 45 storeys high, has ground floor retail space and 168 apartments.

The development is expected to receive Temporary Occupation Permit next month.

Source: Business Times, 6 Jul 2010

A PLUM freehold residential site at Dalvey Road has come on the market. Villa D’Este, being offered through a proposed collective sale exercise, has a land area of about 55,480 square feet. Its guide price of $115 million reflects a unit land price of about about $2,343 per square foot of potential gross floor area. No development charge is payable.

Currently Villa D’Este comprises 12 apartments sitting in an area approved by Urban Redevelopment Authority for the most exclusive housing form – Good Class Bungalows.

Based on a URA circular dated April 6, 2009 and its guidelines, Villa D’Este may be redeveloped back to apartments, provided there is no intensification of the existing approved gross floor area (GFA) and storey height.

The GFA has been verified by the URA to be about 49,071 sq ft and the developer can choose to build 13 to 14 apartments with an average size of about 3,500 sq ft each, says CB Richard Ellis, the property’s marketing agent.

Ten of the the 12 owners have signed the collective sale agreement.

Villa D’Este comprises a part three-storey and part four-storey apartment development sitting on a car park podium.

The site is located in tranquil surroundings overlooking mature trees and greenery. It is also within walking distance to the Singapore Botanic Gardens.

‘The new development is expected to draw keen interest from foreign buyers, especially the Chinese and Indians, who would like to live within the most prestigious Good Class Bungalow areas but are unable to own landed properties. Given its excellent attributes, several foreign parties have already expressed their keen interest to acquire the site,’ CBRE said in a news release yesterday.

Villa D’Este’s tender closes on August 4.

Source: Business Times, 6 Jul 2010

Purchasing Managers Index dropped to 51.3 in June from 52.2 in May

SINGAPORE’S manufacturing sector continued to expand in June, though at a slower pace from the month before as global manufacturing activity dipped.

The Singapore Institute of Purchasing & Materials Management (SIPMM) said yesterday the Purchasing Managers Index – a leading indicator for manufacturing – dropped to 51.3 in June, from 52.2 in May. SIPMM said the dip was due to lower new orders and a fall in production output and imports. In particular, output from the electronics sector moderated to 50.5 in June, from 53.7 in May.

A reading above 50 indicates an expansion in manufacturing activity, while a reading below 50 marks a contraction.

The moderation in Singapore’s factory output is in line with the global picture. Economic powerhouses the US and China have also seen slower growth in manufacturing. Economists here reckon the drop in pace is expected to continue given the more sombre global economic climate, but is unlikely to drag the local economy into recession.

OCBC economist Selena Ling said: ‘The pace of growth will definitely moderate in the next few months, especially since growth in the first five months was phenomenal. That kind of pace, given the headwinds from Europe and US, is not sustainable. Also, tightening measures in China seem to have taken effect.’

Credit Suisse’s Asian chief economist Joseph Tan said that while growth is tapering, the 50-plus reading indicates the sector is still on an expansionary curve. And while there could be a contraction in the second half, he does not think a recession is on the cards.

‘This moderation is to be expected given the very sharp v-shaped rebound that we saw,’ he said. ‘There may be some contraction for a few months – but it won’t be a sustained drop to recessionary levels.’

Last week, China’s PMI data showed the pace of manufacturing growth there slowed in June, as government moves to cool the property market and curb bank lending began to bite. China’s PMI fell to 52.1 in June from 53.9 in May. June’s reading was its weakest since February.

Similarly, factory output in the US grew at a slower rate in June, with the Institute for Supply Management (ISM) there saying its index of national factory activity eased to 56.2, from 59.7 in May.

Source: Business Times, 6 Jul 2010

CMA to grant CMMT right of first refusal to acquire Gurney Plaza Extension

METRO Holdings has announced that it exercised its put option to require CapitaRetail Gurney to acquire its interest in the 134,549-sq-ft retail property Gurney Plaza Extension in Penang for RM215 million ($92.9 million).

In 2007, CapitaLand acquired the 700,000-sq-ft Gurney Plaza for $336.8 million. At the time, it said it would form the seed assets for its proposed Malaysian retail real estate investment trust (Reit).

Metro Holdings said the consideration for the disposal of Gurney Plaza Extension was arrived at by negotiations on a willing seller, willing buyer basis and is to be wholly satisfied in cash.

Metro Holdings said that net proceeds of the divestment will be added to the working capital of the group and used to build on the group’s presence and investment in the region.

Gurney Plaza Extension is a nine-storey retail block located along Gurney Drive in Penang. It is part of the Gurney Park development.

Separately, CapitaMalls Asia (CMA) said yesterday that it will be granting CapitaMalls Malaysia Trust (CMMT) a right of first refusal to acquire Gurney Plaza Extension after the finalisation of all the terms and conditions of the acquisition.

CMA announced in June that it would make an RM848 million initial public offering (IPO) for Malaysia’s largest ‘pure-play’ shopping mall Reit.

CMA said that CMMT is still in the midst of its IPO and is likely to make a decision on whether to acquire Gurney Plaza Extension only after its listing on Bursa Malaysia Securities Berhad, the securities exchange of Malaysia.

The units for CMMT are tentatively priced at RM1.08 each, although the final price could change as it will be determined only after a book-building exercise undertaken by the listing’s joint global coordinators, CIMB and JPMorgan.

CMMT’s prospectus expects the trust to be the largest Reit on the Kuala Lumpur stock exchange with a market capitalisation of RM1.46 billion on an asset base of RM2.13 billion. It will also be the most liquid with a free float of up to 67 per cent.

Metro Holdings said that the divestment is not expected to have any significant impact on the consolidated net tangible asset per share and the consolidated earnings per share of the Metro Group for the year ending March 31, 2011.

Source: Business Times, 6 Jul 2010

This marks the 5th departure of a senior exec at the group in last 2 years

PROPERTY giant CapitaLand yesterday announced the resignation of Patricia Chia as CEO of its Singapore residential business ‘to spend more time with her family’.

Her job will be taken over by Wong Heang Fine, who will concurrently continue in his present role of developing CapitaLand’s business in the Gulf Cooperation Council (GCC) region.

Ms Chia’s resignation marks at least the fifth departure of a senior executive from the group in the past two years.

The departure train began to take off in September 2008, with the shocking announcement of the resignation of Pua Seck Guan, who was CEO of CapitaLand Retail and chief executive of CapitaMall Trust Management Ltd. The day after his resignation was announced, CapitaMall Trust lost over $300 million of its market capitalisation. Mr Pua now heads international operations at Indian real estate giant DLF and is based in Singapore; he has also set up his own property fund management outfit, Perennial Real Estate.

Then in December 2008, CapitaLand announced that its chief corporate officer Tham Kui Seng, was leaving, ‘to pursue personal interest’.

In June last year, the company announced that its chief investment officer Kee Teck Koon, was retiring. However, Mr Kee was recently named chairman of CapitaMalls Malaysia Reit Management Sdn Bhd, the manager of the soon-to-be-listed CapitaMalls Malaysia Trust.

In April this year, it was announced that CapitaLand Financial CEO Lui Chong Chee, would exit the company on June 1 to pursue his personal interests. Mr Lui, however, remains as chairman of CapitaLand’s Australian unit Australand.

Messrs Kee and Tham were members of CapitaLand Group president and CEO Liew Mun Leong’s ‘inner kitchen cabinet’ as he terms his inner circle. Market watchers note that another member in that league to have parted ways earlier was Hiew Yoon Khong. He was CEO of CapitaLand Commercial and CapitaLand Financial when he left the group in 2003. He is now CEO of Mapletree Investments, a fully owned real estate subsidiary of Temasek Holdings.

In its statement yesterday announcing Ms Chia’s departure, Mr Liew said: ‘Patricia has worked with me in various capacities over the years. She joined Pidemco Land in 1996 and, given her excellent execution skills, she has played a key role in establishing CapitaLand Residential Singapore as a leading developer in Singapore today. She has now requested to step down to spend more time with her family and I have acceded to her request.’

CapitaLand was formed in 2000 out of a merger between Pidemco Land and DBS Land.

Ms Chia is 55.

Her successor, Mr Wong, 52, holds degrees in mechanical engineering, and engineering production and management.

‘Heang Fine, with his track record in the areas of engineering and construction globally, will bring a new perspective to the Singapore residential business as we enter the next phase of growth,’ Mr Liew said.

Mr Wong joined the CapitaLand Group in 2006. He had previously been president and CEO of SembCorp Engineers and Constructors and prior to that, held the same post at Cathay Organisation Holdings.

Source: Business Times, 6 Jul 2010