About 70% of transactions from office sector

(SYDNEY) Australian commercial property transactions are climbing as the country’s economic growth draws investors seeking income and capital growth, CB Richard Ellis Group Inc said.

About A$2.6 billion (S$3.3 billion) of properties changed hands in the third quarter, 75 per cent more than a year earlier, the world’s largest commercial real-estate broker said in an emailed statement yesterday.

Office properties accounted for about 70 per cent of the transactions, when on average they make up 50 per cent, it said.

‘This type of stock is ready to sell, with a large number of new office buildings featuring long leases and attractive depreciation benefits available for incoming investors,’ Kevin Stanley, executive director for global research and consulting at CBRE, said in the statement.

Investors are drawn by the ‘bright prospects for income and capital growth in the office sector’ driven by recent employment growth, he said.

Australian job growth exceeded forecasts in August, with employers adding 30,900 workers, sending the unemployment rate down to 5.1 per cent, the lowest since January 2009.

While the gain in property transactions hasn’t pushed rents up yet, the increase in vacancy rates in major markets has slowed, Mr Stanley said.

Industrial property deals accounted for 23 per cent of third-quarter sales, and retail for 7 per cent, CBRE said. Overseas investors purchased 42 per cent of the properties up for sale in the quarter and 36 per cent in the year to date, according to CBRE. On average they account for about 15 per cent. — Bloomberg

Source: Business Times, 30 Sep 2010

Supply constraint overshadows some of the shorter-term demand problems

(SYDNEY) China could struggle to keep a lid on its property market as urbanisation piles pressure on the major coastal cities, making land scarcer and driving up prices, an executive of international real estate consultancy DTZ said.

‘The speed of urbanisation is very, very fast, which means that they are running out of land,’ DTZ Asia-Pacific chairman Leung Chun-ying told Reuters on the sidelines of a conference. ‘Cities such as Shanghai, Shenzhen, Dongguan, Guangdong, these are the cities of south, they are now all grey on the Google satellite map.’

Mr Leung said that the long-term constraint on supply of new land for development overshadowed some of the shorter-term demand problems, such as a lengthy and inefficient buying process.

The Chinese government has rolled out a slew of measures to tame rapid rises in property prices since April, including higher downpayments and mortgage rates for second homes.

There is also now media speculation that Beijing will impose a property tax soon. But Mr Leung said that in addition to increasing urbanisation, increasingly wealthy Chinese were trading up to bigger homes.

‘We are talking about 30 per cent, 40 per cent, 50 per cent increases in salaries a year,’ he said.

Home prices in some of the Chinese cities went up as much as 30 per cent last year, and the sizzling property market has created concerns about a potential crash in the market.

But Mr Leung said that he does not see a crash, adding that if speculators left the market, real demand would take up the slack.

‘Demand catches up very quickly,’ he said, noting that fast economic growth had also helped to improve home affordability.

He also noted that tight government control of capital inflows and outflows contributed to a stable property market.

‘Capital, including bank lending, cannot leave this crust in mainland China and go back to say Japan, Hong Kong or Singapore quickly, because it’s a closed system,’ he said.

‘Banks are also more tolerant because most of the banks are ultimately owned by the state, and the state does not want to see the market collapse,’ he added.

The ruling Communist Party has identified rising property prices as a threat to social stability as more and more people are priced out of the housing market.

This month, it said that it would intensify efforts to draw factories inland from crowded coastal regions. — Reuters

Source: Business Times, 30 Sep 2010

Majority of buyers S’poreans; most popular were 2- and 3-bedroom units

HOI HUP and Sunway sold nearly 90 units at their Vacanza @ East condo by the end of Tuesday, when the project previewed to those who had registered interest with the appointed marketing agents DTZ and Huttons. A VVIP preview was held on Monday for staff/directors of Hoi Hup and Sunway as well as their special guests.

The average price for the 12-storey freehold project is about $1,090 per square foot.

Buyers were mostly Singaporeans and the most popular units were two- and three-bedroom units, said Hoi Hup Realty director Wong Sjew Hung. ‘The majority of buyers are Singaporeans looking for a home for their own occupation or as long-term investment. This is a freehold project in a quiet estate amidst a landed housing enclave,’ Ms Wong added.

In absolute-price terms, units sold range from nearly $550,000 for a 484 sq ft one bedder to slightly above $2 million for a three bedder penthouse of over 1,900 sq ft.

Initially two blocks comprising 141 units were released but as potential buyers started requesting for apartments in other stacks in the 473-unit project, the developers began releasing more units.

The project comprises one- to four-bedroom units as well as penthouses. It will have a clubhouse, gymnasium, a tennis court, a lap pool, fitness station and lawn.

Market watchers point out that the project, located at Lengkong Tujoh, is next to the Pan Island Expressway, near the Singatronics Building and Bedok Industrial Estate. It is about a kilometre away from Kembangan MRT Station.

Hoi Hup and Sunway are developing Vacanza on a 207,000 sq ft site which they bought in October last year for $158 million, or about $445 per square foot of potential gross floor area, including an estimated development charge of about $36 million at the time.

The site, which was vacant at the time, was sold by Lee Tat Development. The residential site has a 2.1 plot ratio (ratio of maximum potential gross floor area to land area) and a 12-storey maximum height under Master Plan 2008.

Source: Business Times, 30 Sep 2010

Inaccurate valuations caused property fund crisis: fund manager
(FRANKFURT) More appraisers qualified to survey specialised segments of the real estate market are needed to prevent future bubbles that could trigger a double-dip in the economy from forming, a fund manager told Reuters on Tuesday.

‘In an industry where everything is becoming increasingly specialised, it is simply not possible for a single surveyor to make an accurate valuation judgement of an office block in New York, a factory in Sydney and a family home in Frankfurt,’ Ingo-Hans Holz said. ‘It’s like going to the dentist with a knee problem.’

Mr Holz manages the first property fund for German corporate real estate – the BEOS Corporate Real Estate Fund Germany 1 – and is the director of BEOS, a German construction management association which has been developing property since 1997.

The fund, which started up earlier in September, has raised 200 million euros (S$356 million) from institutional investors, an amount Mr Holz plans to double. He sees half of the fund being held in equity.

About 10 major open- ended real estate funds in Germany closed at the peak of the global financial crisis two years ago, because they were afraid of investors pulling money out and being left with no liquidity.

‘These fund closures shook investor confidence, but it is important to remember the nature of our investor clientele and therefore the relative associated risk,’ Mr Holz said.

Funds at KanAm Group, Aberdeen Immobilien and Morgan Stanley – which have been frozen for two years and are battling to retain investors when they reopen in October – chiefly attracted investors with short-term interests.

The investor base of the BEOS Corporate Real Estate Fund, however, is made up mainly of savings banks with sufficient liquidity to stay on for the long term, Mr Holz said.

The fund, which is not yet measured against a benchmark index, has bought buildings in Berlin, Hamburg, Mainz, Karlsruhe, Frankfurt, Cologne and Stuttgart.

Mr Holz said he favours properties in ‘B-locations’, with high development potential but without top-end price tags.

‘We are particularly interested in properties in the so-called ‘Mittelstand segment’ – the middle class and mid-cap sector,’ Mr Holz said, adding they can be used as offices, laboratories or other facilities.

According to him, this reduces the chance of the building remaining vacant for a sustained period of time. — Reuters

Source: Business Times, 30 Sep 2010

Factors cited include price plunge, interest rate fall, govt boost, credit

(NEW YORK) The US housing market has reached its lows and will expand slowly as the economic recovery remains subdued, said the S&P/Case-Shiller index co-creator Karl Case.

The index of property values in 20 US cities increased 3.2 per cent in July from 12 months earlier, the smallest year-over-year gain since March.

The gauge is a three- month average, which means the July data are still being influenced by transactions in May and June that may have benefited from the government homebuyer tax credit incentive.

‘It’s bouncing along the bottom, it stopped that free-fall,’ Prof Case said in an interview on Tuesday on ‘Bloomberg Surveillance’ with Tom Keene. ‘The combination of the tremendous drop in prices, the fall in interest rates, the government going all in and buying mortgage-backed securities to keep mortgage rates low, and the credit, of course – it’s not surprising that it’s come to an end.’

A government tax credit of as much as US$8,000 gave housing a temporary lift in late 2009 and early this year. The incentive required contracts be signed by the end of April and closed by June. The closing deadline has since been extended to the end of this month.

‘I don’t think anybody is predicting that it’s going to go up very much in the next couple of years unless we see a resurgence of economic growth,’ said Prof Case, professor emeritus of economics at Wellesley College in Wellesley, Massachusetts. Prof Case and Robert Shiller, a Yale University professor, created the index based on research from the 1980s.

The Obama administration said last month it planned to announce a proposal for an emergency loan programme to help the unemployed avoid default. The plan would also include a government mortgage refinancing effort to lower monthly mortgage payments for Americans facing foreclosure. — Bloomberg

Source: Business Times, 30 Sep 2010

Property agents said the sale of private residential homes have dipped between 10 per cent and 20 per cent in September.

This comes exactly a month after the government rolled out a slew of new measures to help cool the property sector.

Some observers said transaction volumes could trend lower in the coming months, as there could be a lag in the full impact from the new rules.

Foreign visitors have been adding to the numbers at showflats over the weekend, making it slightly more crowded than usual.

That is according to property agents who said many of the visitors were here for the F1 Grand Prix and a slew of business conferences over the past week.

Property group ECG, for example, said it has seen a 10 per cent increase in visitor numbers.

But despite the increased numbers, industry players said buyers are holding back.

CEO of ECG Property, Eric Cheng, said: “Though there is an increase in the viewing rate, it does not mean that there is an increase in transactions. The last two weeks, we have seen that a lot of developers have not been advertising aggressively, because a lot of buyers out there and even investors have this wait and see approach…”

Observers said a key factor is the tighter restrictions introduced last month to curb property speculation.

This appears to have made buyers more cautious, and has lengthened the typical time taken to complete a transaction.

Agents said that on average, the turnaround time between a viewing and a sale is taking twice as long, with some buyers holding out hoping for better prices.

A sale on the primary market usually takes about two weeks, while a sale on the secondary market can take more than a month.

The number of transactions handled by HSR have dipped 10 per cent from the average 1,500 sales it usually sees every month. ECG said it has seen about a 20 per cent dip from its usual volume of 500 sales.

Industry players said mass market homes have been the hardest hit from the new rules, with prices for that segment sliding by up to 10 per cent in September.

CEO of HSR International Realtors, Patrick Liew, said: “We have seen a few properties selling below the normal market value, but by and large, most prices are holding steady and in fact my prediction, in a short while’s time, the prices should continue to increase again.”

Some observers like HSR are expecting property prices to stay flat for the next six months, before starting to climb moderately by about 5 per cent for next year.

However, others like ECG are more pessimistic and believe prices could drop by 10 per cent before bottoming out.

Source: Channel News Asia, 30 Sep 2010

Rents at some prime projects already feeling the impact of the new supply of private homes

Some recently-completed prime condominium developments are commanding above-market rents and thus helping to prop up the average rentals in existing prime projects, said a recent report from Jones Lang LaSalle.

But other properties in the central areas as well as those in alternative locations are already feeling the impact of the new supply, it said.

The consultancy’s preliminary estimates showed that average prime non-landed residential rents rose 1.1 per cent quarter-on-quarter to $4.65 per sq ft (psf) a month in the third quarter.

Yet, average rentals in popular central areas such as the Central Business District remained unchanged in the third quarter while rentals in the popular East Coast districts slipped 4.3 per cent quarter-on-quarter to $3.30 psf per month.

Overall, the rental market is likely to remain largely flat in the coming months, experts said.

The new prime supply in the market includes projects such as Skypark at St Thomas Walk, Ardmore II in the posh Ardmore Park area and Belle Vue Residences in Oxley Walk.

Jones Lang LaSalle said that from the beginning of this year to last month, about 1,520 new units have been completed in prime districts 9, 10 and 11.

While it is unable to release the deals done due to confidentiality, average rentals around the Ardmore area remain stable at around $18,000 per month (or about $5.50 to $6.50 psf), with some units fetching less due to construction work in the vicinity, it said.

According to OrangeTee head of research and consultancy Tan Kok Keong, the recent completion of projects means that tenants now have more choices.

‘As a result, rents at better located projects are holding firm while rents at those that are affected by temporary inconveniences are softening.’

For instance, the asking monthly rent for a unit at Ardmore II was reduced from $14,000 to $11,000 due to the construction noise in the vicinity, he said.

New completions will intensify competition in the leasing market, as better located or newer units will command a rental premium, said Cushman & Wakefield’s senior manager of research, Asia Pacific, Mr Ong Kah Seng.

This is especially so as there are more new developments that come with more unusual designs and exclusive lifestyle concepts.

Still, tenants will choose newer premises only if the rental premium is minimal, he said.

‘Some slowdown in leasing activity leading to a muted pace of rental recovery is in sync with the moderation in economic recovery,’ he said.

While the recent round of cooling measures is targeted at speculators, the leasing market may also see some spillover effect.

‘Given that the private residential market will undergo a temporal softening after the slew of government measures, tenants are unlikely to be willing to accept significantly higher asking rents,’ said Mr Ong.

Looking further ahead, experts said a substantial upcoming supply of prime homes in the next few years is expected to keep prime rents in check.

As more of these new prime projects come onstream, rents of some older properties are likely to be hit, said Jones Lang LaSalle’s head of South-east Asia research Chua Yang Liang.

‘Over time, the rental premium in new projects may ease if tenant demand is unable to keep pace with the supply coming onstream,’ added Dr Chua.

An estimated 14,000 more units are scheduled for completion from the third quarter to 2015, which translates to around 2,500 units per annum on average or 1.5 times the historical 10-year average of around 1,600 units per annum, he said.

Source: Sunday Times, 26 Sep 2010

Where do you see this?

In articles on HDB resale flats and online or classified advertisements.

What does it mean?

COV is short for cash- over-valuation. It refers to the cash amount that buyers typically pay on top of the valuation of an HDB resale flat. It occurs when buyers choose to pay more than the market value of the flats as determined by an HDB panel of independent professional valuers.

COV payments are not compulsory, though they can be the norm in a booming market.

Why is it important?

It affects the price of a resale flat; it has to be paid upfront in cash as the amount the HDB or the banks will lend is based only on the flat’s valuation.

So you want to use the term. Just say…

‘I am waiting for COV to drop before I go flat-hunting.’

Source: Sunday Times, 26 Sep 2010