Most say domestic market is at or near bottom, survey of 244 major institutional and private global investors shows

REAL estate investors in Asia think that their domestic markets are already at or near the bottom of the property clock and they expect the region’s markets to recover by the fourth quarter of this year, findings of a new survey show.

Meanwhile, investors in Canada, Latin America and Eastern and Western Europe expect recovery by Q1 2011, and those in the United States in Q2 2011, the survey by real estate firm Colliers International found.

The survey, conducted between February 2010 and March 2010, compiled views from 244 major institutional and private global investors with a combined portfolio exceeding US$300 billion.

It referred to a ‘global property clock’ which equates the market cycle to specific times – 12 o’clock represents the peak of the market and six o’clock represents the bottom. Each six-hour period symbolises rising (from 6.00 to 12.00) and declining (from 12.00 to 6.00) cycles.

Findings revealed that most investors think their domestic market is at or near the bottom, with 41 per cent indicating the market is between 5.00 and 6.00 on the global property clock, while 19 per cent feel their market has already moved from the bottom and is now sitting at 8.00.

Asia was viewed to be at the market’s bottom (6.00).

‘Investors worldwide clearly see the market re-setting in general and about to enter the next up-cycle,’ said Piers Brunner, Colliers’ chief executive for Asia.

The survey also revealed that two out of three respondents are looking to expand their real estate portfolios in the next 12 months – indicating the investors have developed much more confidence in the market.

But a majority of them are still cautious and have expressed a higher comfort level in engaging in just domestic investments. Emerging markets such as Brazil, India, Poland, Ukraine and Vietnam were also singled out as countries for possible future investments.

Mr Brunner said: ‘The tendency to invest domestically is most likely a short-term phenomenon. Cross-border investments will take place once investors have a greater comfort level in the global economy and the global financial system.’

Other findings revealed that investors worldwide believe the availability and ease of getting finance for purchases is still a major concern, and that there is a shifting preference from properties with a ‘high risk’ profile towards high-quality and well-performing assets.

Source: Business Times, 17 Apr 2010

Asset bubbles have already formed in Singapore, Hong Kong and mainland China, but any correction in prices should be manageable and won’t precipitate a severe crash that derails Asia’s economic recovery, DBS Group chief executive Piyush Gupta said yesterday.

‘There are asset bubbles in Asia. That’s true of Singapore property, of Hong Kong property, of Shanghai property – there’s no question,’ Mr Gupta said at the annual general meeting of the American Chamber of Commerce in Singapore, where he was the keynote speaker.

‘But the nature of the bubble is not very different from previous cyclical bubbles we’ve seen around Asia. So I think there will be a correction – markets will level off – but I don’t think we’ll see a crash which brings everything back down on its knees.’

Asian central banks are likely to tighten monetary policy by raising borrowing costs more quickly than expected this year, partly in response to the asset bubbles, he told reporters afterwards.

‘Most Asian central banks might be a little bit behind the curve on raising rates, but I think we’ll start seeing that pretty quickly. I think you’ll see more tightening this year than people expect.’

On average, DBS analysts expect interest rates across most of Asia to rise by 1-1.25 percentage points by the end of this year, he said.

But he stopped short of criticising governments and central banks for not acting sooner to cool the property market in Singapore and elsewhere in Asia.

‘In hindsight it’s easy to say that we could have done more. Given where the economies are coming from, being prudent about withdrawing monetary easing and stimulus was the right thing, but I think now is when you might want to see a faster pace of tightening.’

Here, analysts are split over whether the Monetary Authority of Singapore (MAS) will shift its neutral stance on the Singapore dollar in its monetary policy statement tomorrow by nudging the currency higher, or keep it unchanged.

But many economists believe that Singapore’s economic output surged in the first quarter – by as much as 14 per cent – compared to the same period last year, making it likely that MAS will tighten monetary policy later this year, if not this week, to cool inflationary pressures stemming from the rapid growth.

‘Asia, in particular, has rebounded in a convincing manner,’ Mr Gupta said, citing anecdotal evidence from DBS’s operations across the region.

Credit-card spending is rising for various goods and services, including luxury items – signalling genuine optimism among consumers in Asia, he said. ‘This is not about people who’ve been able to get some money from a government voucher programme and are going out to buy groceries. People have confidence that things are good around here.’

Source: Business Times, 13 Apr 2010

Investors should buy real estate assets and funds that invest in property in the UK and Asia because a potential rebound in prices and economic growth will counter inflation risks, Aberdeen Asset Management Plc said.

While UK properties offer ‘attractive’ yield, real estate in Asia is supported by the strength of the region’s economic growth, Michael Turner, head of global strategy and asset allocation at Aberdeen, said on Tuesday.

He recommended buying into real-estate investment trusts and funds that hold property, without giving specific names.

‘People should allocate more money than they do now in real estate as a hedge against inflation,’ Mr Turner said. ‘Real estate, whether or not there’s inflation as a result of macro policy, is attractive in its own way.’

China, India and Australia have tightened monetary policy to curb inflation as the global economy recovers from the worst recession since World War II. Interest rates in advanced economies can remain accommodative for an ‘extended period’, while policy in ‘a number of emerging economies’ may have to be tightened ‘relatively soon’ because of signs of accelerating inflation or credit booms, the International Monetary Fund said in a Jan 19 staff note.

Minutes from the Australian central bank’s March meeting, released on Tuesday, said that policymakers raised borrowing costs this month for the fourth time in five meetings because the risk of faster economic growth stoking inflation outweighed the potential for renewed financial market turmoil.

In the US, where the housing market is still flat, the Federal Reserve on Tuesday repeated its pledge to keep its main interest rate near zero for an ‘extended period’.

It is a different story in Asia and Britain. UK house prices rose in February at the fastest pace in more than seven years, research group Acadametrics Ltd said on March 12. Nine of 10 Britons say that buying a home is a ’sensible investment’ even after the nation’s worst housing slump in three decades, a survey by YouGov Plc published on March 2 showed.

In Asia, property prices have risen as economic growth in the region outpaces the rest of the world’s. Hong Kong’s home prices surged almost 30 per cent last year, Centaline Property Agency Ltd said this month. Australian home prices jumped 13.6 per cent in 2009.

The World Bank forecast in January that the global economy would expand 2.7 per cent this year. China’s economy, the world’s third biggest, will top last year’s 8.7 per cent growth rate in 2010, the nation’s central bank estimated this month.

Singapore’s gross domestic product is forecast by the government to grow between 3 per cent and 5 per cent this year.

Source: Business Times, 18 Mar 2010

ASIAN buyers of luxury real estate may be raising their profiles in New York and London by picking up luxury homes at eye-popping prices, but they haven’t been neglecting the property markets closer to home either.

While property prices in more mature Asian markets such as Singapore, Hong Kong and Thailand are still some way from their historical highs – courtesy of the beating they took due to global financial crisis – they have been moving up in tandem with stock markets, and attracting interest from individuals in the upper end of the high net-worth range.

‘The very affluent go where they choose to,’ says William E Heinecke, chief executive of Thai conglomerate The Minor Group, which among its diverse interests is a key player in the hospitality and lifestyle industries, with hotels, resorts and residential properties throughout the region. ‘A lot of people come to Thailand for the weather,’ he says. ‘As a result, if you can afford it, you have homes where you spend time.’

Minor launched its first high-end residential property project in 1995 at the Four Seasons Residences in Chiang Mai. Its growing portfolio of luxury developments includes The Estates Samui in Koh Samui, and the high-rise St Regis Residences in Bangkok is slated for completion next year. Prices for its various properties range between US$2 million and US$6 million.

Mr Heinecke says that Indian and Chinese nationals, who may have domicile in key major cities around the world, have emerged as strong players in the mega-luxury bracket, but traditional buyers from other Asian countries as well as Europeans and Americans are also active in the region. ‘As long as people have money and lifestyle is important, they are going to continue to buy in great locations,’ he says.

He adds that a significant new trend involves branded luxury residences which are located within a hotel property and can be part of the rental pool, commanding rates of several thousand dollars a night. ‘When owners visit their properties once or twice a year, it makes sense to have them professionally managed,’ says Mr Heinecke.

Mr Heinecke says that the quality at the luxe end of the market continues to improve, and there is also no shortage of high-end properties and people who are willing to buy them.

‘The bar continues to go up, and competition raises the bar,’ he says.

The luxury investment bar continues to go up as well in Singapore, where the recent launch of hotel and property developer YTL Corporation’s Kasara – The Lake collection at Sentosa Cove has yielded a highly positive result. The boutique development’s 13 villas have all been sold, at prices ranging from S$14 million to over S$25 million.

Of the buyers, seven were foreigners from Asia while six were locals. In general, there are several types of high-end buyers, says Kemmy Tan, director of international real estate at YTL Singapore.

Asian buyers are typically from Hongkong, Indonesia, Malaysia and China, with an increasing number of expatriate Indians as well. ‘American buyers may hold US passports but may not be living in the US, or they may be in places like Hongkong and have some interest in Asia,’ says Ms Tan. At the peak of the market, there were also investors from places such as Ireland. ‘When they invest, they invest with a longer-term view.’

Despite – or even because of – its restrictions on foreign ownership, Singapore has long been a significant target for investors. ‘They are property investors who own homes in key cities,’ she says. ‘If values are expensive in their home countries and Asia looks attractive, they will come here – these are definitely people with multiple homes in different cities and resorts.’

Buyers of properties in resort destinations are different from those who buy in Sentosa Cove, says Ms Tan. ‘They buy in Phuket and Bali for the resort lifestyle – those who buy here want the best of both worlds. They might have business interests and they want the comfort of city living. For wealthy investors, especially during the financial crisis, they are looking for good buys in ’safe’ locations.’

The proportion of foreign investors versus locals has increased tremendously in the past few years, she adds. And the good news is there is still some upside.

‘Real estate has always been a good hedge against inflation,’ says Ms Tan. ‘For luxury property, we are at least 10 to 15 per cent below the peak, so there’s room to move up.’

Elsewhere in Asia, there have been recent reports of a US$45 million riverfront mansion on the market in Shanghai’s financial district – an indication of the real estate boom in China. If those kinds of prices look a little scary, then there are always less heated up markets like Taiwan, where analysts report that foreign investors make up less than one per cent of the property market. Where opportunities go, of course, the money will always follow.

Source: Business Times, 13 Mar 2010

Recent measures to cool the property market in China, Hong Kong and Singapore are seen as the right moves to temper speculation and rapidly rising prices.

Still, industry watchers said that prices will have room to move upwards over the next two years.

This is because interest rates in Hong Kong continue to be low, and high-end property prices in Singapore are still below their peak.

Private home prices in Singapore rose by 24 per cent in the second half of last year, causing the government to step in.

Over in Hong Kong, the government also announced measures to avoid an asset bubble – after property prices rose by some 30 per cent last year.

The Chinese government is also doing its part to cool its red-hot property sector by tightening credit.

Analysts said these moves will limit price growth this year, but overall, they still expect prices to move upwards, even if at a slower pace.

Donald Han, managing director, Cushman & Wakefield, said: “With the introduction of these measures, and the fact that the government is keeping a lookout on the market, they may continue to intervene.

“We would expect the market currently to come down to between 8-15 per cent, depending on what market you are in in Asia Pacific. So it would probably come down by a few percentage points in terms of price increases.”

Analysts note that Singapore’s high-end residential market remains below 2008 peaks by some 20 per cent.

Meanwhile – they also say, the measures are only aimed at moderating the price increases.

Karamjit Singh, managing director, Credo Real Estate, said: “The measures that were announced by the Singapore government on February 19 do not address the root cause of the problem yet. The root cause of the problem is a short-term supply crunch at the lower end of the market, but it definitely helps mitigate the risk of bubbles being formed in the future.”

Experts said the factors set to drive prices higher this year are investors searching for higher yields, continuing hot money inflows and continuing low interest rates causing lower borrowing costs for buyers.

Source: Channel News Asia, 2 Mar 2010

Bank of America plans to raise new money for Merrill Lynch’s Asia property funds business instead of selling it due to a recovery in the real estate sector, sources said.

BoA was in talks with several private equity firms, including Blackstone Group and Apollo Investment Management, to sell management rights to its US$2.65 billion Asia Real Estate Opportunity Fund which the bank regarded as a non-core business, Reuters reported in July.

Despite negotiations lasting more than six months, no deal was reached because of disagreements over financial terms and the complicated structure of Merrill property funds, sources with direct knowledge of the matter told Reuters yesterday.

BoA has hired people in Beijing to raise money for a new Asia-focused property fund, the sources said, adding China remains a focus for the Merrill funds.

In China, Merrill invested a few years ago in the development of the Beijing Yintai Centre, a top-end complex where the luxury hotel Park Hyatt Beijing is located on the historic Chang An Avenue.

The sources, who were involved in the bidding process and have business ties with BoA, declined to be identified as they were not authorised to speak to the media.

‘Basically there was a lack of interest from Merrill Lynch’s part to go forward with the process,’ said a prospective bidder, who asked not to be identified.

A BoA spokesman in Hong Kong declined to comment.

Bank of America took over Merrill at the end of 2008 during the financial crisis.

In October 2008, just two months before the deal went through, Merrill closed and launched the Asia property fund with focus on Japan, China, India and South Korea.

Investors, also known as limited partners, in the Merrill property fund include many rich families and some sovereign funds in the region, said one of the sources.

Property market transactions in Asia have risen in recent months as investor confidence improves and banks start lending.

A research report released last week by property consultancy firm DTZ, for instance, showed the value of property transactions in South-east Asia rose 25 per cent in the last three months of 2009 from the preceding quarter.

Despite a clear recovery in the sector, some analysts and government officials are worried that asset bubbles were forming due to the sharp rises in property prices.

Merrill is not alone making property investments in Asia.

Rivals, including Goldman Sachs and Morgan Stanley, are long-time players in some key Asian markets like China.

In March, Morgan Stanley raised US$6 billion for a new global property fund, including money from China Investment Corp, the sovereign wealth fund.

Source: Business Times, 28 Jan 2010

Fourth quarter net profit jumps 56%; group on the prowl for more land

KEPPEL Land, which saw fourth-quarter earnings jump 56 per cent as property markets across Asia recovered, said it plans to launch more than 5,500 homes across the region for sale this year.

‘Keppel Land is moving into 2010 with optimism on the back of its stronger financial position, improving residential sales and office space take-up together with expectations of continued recovery of Asia and a return of capital flows from the West,’ chief executive Kevin Wong said yesterday.

In Singapore, KepLand will sell more units in two upmarket projects – Marina Bay Suites and Reflections at Keppel Bay – to capitalise on the opening of the integrated resorts, which is expected to boost the high end market.

And in China, the group will launch two projects in Shanghai as well as phase one (comprising about 1,700 units) of its 35.4 ha project in the Sino-Singapore Tianjin Eco City.

The developer yesterday reported that net profit for the quarter ended Dec 31, 2009, rose to $106.9 million from $68.5 million a year ago. Revenue rose 52 per cent to $300.5 million from $197.4 million.

‘Residential sales in Singapore and overseas have recovered, encouraged by signs of economic recovery and improved market sentiments,’ Keppel Land said. Revenue rose as the company saw progressive revenue recognition from the newly launched Madison Residences and The Promont in Singapore.

Higher revenue was also recognised for projects in Vietnam, India and China. Riviera Cove in Ho Chi Minh City has also recorded robust sales since its launch in November 2009, KepLand said.

The property group, however, recorded a net fair value loss of $12 million at the pre-tax level for fourth quarter 2009, mainly from completed investment properties owned by its listed office trust K-Reit Asia.

For the full year, Keppel Land’s profit rose 23 per cent to $280.4 million from $227.7 million in 2008. Revenue rose 10 per cent to $923.9 million compared with $842.2 million for 2008 on the back of higher sales.

Earnings per share for the full year rose to 24.2 cents from 22.4 cents in 2008.

Keppel Land is on the lookout for land to purchase. The company last year carried out a rights issue which raised gross proceeds of $708 million. ‘This ensures the group is well-positioned to capitalise on opportunities to acquire attractive assets at competitive prices in Singapore and overseas,’ it said.

The company also said the commercial segment is showing signs of bottoming out.

‘A flight to quality has been observed with Marina Bay Financial Centre (MBFC) and Ocean Financial Centre (OFC) chalking increased pre-commitment occupancy rates,’ Keppel Land said. MBFC saw a take-up of about 213,000 sq ft in 2009. Phase One of MBFC is now 79 per cent pre-committed and the overall occupancy for the entire MBFC stands at 68 per cent.

UBS Investment Research on Jan 22 issued a fresh ‘buy’ call on KepLand and upgraded the stock’s target price to $4.38 from $3.50.

‘On account of the higher office and luxury residential price assumptions, we upgrade our RNAV (revalued net asset value) estimate for Keppel Land by 25 per cent to $4.40 a share,’ said analyst Regina Lim.

Keppel Land shares gained one cent to end at $3.44 yesterday.

Source: Business Times, 26 Jan 2010

Move to Asia fuelled by new tax plans, more industry curbs in US, Europe

Bank of America Merrill Lynch is helping more than a dozen multibillion dollar international hedge funds set up or re-establish a presence in Hong Kong and Singapore as the US and Europe increase industry regulation.

A number of funds of hedge funds are also planning offices in the Asian cities, Dan McNicholas, head of Asia financing sales at Merrill Lynch said. Mr McNicholas spoke in a Bloomberg Television interview without mentioning any names.

Hedge-fund managers have been tempted by Hong Kong’s regulatory environment, the region’s economic growth and potential investment opportunities as US and Europe have proposed to increase taxes on the financial industry.

London Mayor Boris Johnson said that as many as 9,000 bankers may leave the UK capital’s financial district as a result of a 50 per cent tax on bonuses announced last month.

‘When you compare to New York or London, the business environment has been very friendly for managers,’ he said. In New York and London ‘you are seeing tax proposed and other restrictions on business that may make Hong Kong and Singapore attractive.’

Asia is also expected to absorb a larger proportion of global hedge fund inflows than it historically received as funds need to correct their under-allocations to the region, he said. More than 15 per cent of the US$50 billion to US$100 billion of hedge fund inflows expected in the first quarter may go to Asia, Mr McNicholas said.

Soros Fund Management and GLG Partners are among those planning a Hong Kong office, people familiar with their plans told Bloomberg last week.

‘Unlike 2006, when we often just saw junior research staff and execution traders coming to Asia, we’re seeing more senior staff choose to make the move,’ said Mr McNicholas.

The UK last month imposed a 50 per cent tax on banks for bonuses of more than £25,000 (S$56,600). It is also raising taxes on residents earning more than £150,000 a year to 50 per cent from 40 per cent.

In 2008, it introduced a fee of £30,000 for non- domiciled residents who had previously escaped its tax system.

The European Union is preparing rules for hedge funds that would restrict the amount they can borrow and force them to use banks domiciled in Europe.

In the US, President Barack Obama proposed raising taxes on fund executives in his first Budget last year. An increase would affect general partners at buyout firms, hedge funds, venture capital firms and other partnerships including real estate, oil and gas investments.

Asian equities outperformed the US in 2009, with the MSCI Asia Pacific Ex-Japan Index advancing 68 per cent last year compared with the Standard & Poor’s 500 Index’s 23 per cent gain.

Asia is leading the world’s emergence from its deepest recession since the 1930s after governments boosted spending, cut taxes and slashed interest rates.

China, South Korea, Taiwan, Hong Kong and 10 South-east Asian economies may expand 6.8 per cent in 2010 from 4.2 per cent last year, according to a report last month by the Asian Development Bank’s Office for Regional Economic Integration in Manila.

Emerging markets will become a leading source of investment and credit as Western economies take longer to recover from the financial crisis, Tony Tan, deputy chairman of Government of Singapore Investment Corp, said yesterday at the Commonwealth Economic Forum in Taipei. GIC manages more than US$100 billion of the city-state’s foreign reserves.

Source: Business Times, 19 Jan 2010

China’s Dec property price surge steepest in 18 months

Real estate prices in China, Singapore and Hong Kong need monitoring for signs of bubbles forming as Asia continues to grow rapidly this year, said Fred Hu, Goldman Sach Group’s chairman of Greater China.

China, Singapore and Hong Kong need to be watched for asset bubbles, especially real estate prices, Mr Hu told a conference in Taipei yesterday. He also warned of inflationary pressures in China and said that China and India would lead the way in economic growth.

Home prices in Hong Kong are at their highest in 12 years, while residential and commercial real-estate prices in 70 cities in China climbed 7.8 per cent in December, the fastest pace in 18 months. In Singapore, a record number of private homes were sold last year.

China’s economy is overheating as asset bubbles and inflation pressures build, posing a ‘major risk’ to global growth, the World Economic Forum said on Jan 14.

Hong Kong residential property prices will rise about 5 per cent this year, Credit Suisse Group AG analysts led by Hong Kong- based Cusson Leung said last week. Prices of existing homes in Hong Kong, which rose 29 per cent last year, advanced further to reach their highest in almost 12 years as at Jan 10, according to Centaline Property Agency Ltd, one of the city’s biggest.

Record-low mortgage costs, near-zero interest rates on savings deposits and buying from rich mainland Chinese stoked demand even as Hong Kong Chief Executive Donald Tsang said on Jan 14 there is no ‘obvious bubble’ in the city’s property market.

In November, Mr Tsang had warned that asset prices in cities including Hong Kong and Singapore were ‘going up to levels that are incompatible or inconsistent with the economic fundamentals.’

To help ease a shortage of homes, Hong Kong will hold its third land auction in the current financial year next month, it said last Friday.

In China, property prices rose at the fastest pace in 18 months in December, with residential and commercial real-estate values in 70 cities climbing 7.8 per cent from a year earlier, the National Development and Reform Commission said last week.

To cool speculation, the government this month reimposed a sales tax on homes sold within five years of their purchase, after cutting the taxable period to two years in January 2009 to bolster a market that was then flagging.

The central bank also raised lenders’ reserve requirements from yesterday, seeking to rein in liquidity from record lending without stalling a recovery.

A total 14,991 units were sold in 2009 in Singapore, according to Bloomberg calculations, beating the historical high of about 14,800 units set in 2007.

Source: Business Times, 19 Jan 2010

* 2009 Apac investment sales US$67b, up 22% from 2008
* Q4 2009 sales US$21.6b, down 9% from Q3

Investment sales in the Asia Pacific region’s commercial property market will keep rising in 2010, buoyed by returning economic growth and a stable banking system, global property advisor DTZ said on Monday.

Deal activity in the region totalled US$67 billion in 2009, up 22 per cent on 2008. On a quarter-by-quarter basis this marked a return to 2007 levels, DTZ said, adding fourth-quarter volumes were US$21.6 billion, down 9 per cent year-on-year.

‘Despite the fall in activity over the (fourth) quarter, we expect the upward annual trend in activity to continue into 2010,’ said David Green-Morgan, head of DTZ Asia Pacific Research, in a report.

He said this would be partially driven by economic growth returning to the majority of economies in the region, and the relatively stable banking system, which would ‘help to stimulate lending together with improving institutional allocations’.

China, Australia and Japan were the most active markets within the region, accounting for 80 per cent of fourth-quarter investment sales volumes.

Growth in the Asia Pacific commercial property market in 2009 stands in contrast to Europe, which saw investment sales more than halve in 2009 to US$112 billion, from US$53 billion.

Source: Business Times, 21 Dec 2009