It will help manage real estate portfolios of wealthy investors

FORMER Savills analyst Ku Swee Yong hopes to shake up the real estate scene here with his new agency International Property Advisor (IPA).

IPA aims to connect high net worth individuals to suitable real estate investment products.

‘We want to provide a service to represent the private wealth that goes into real estate investments,’ said Mr Ku.

He was most recently a director with SG Private Banking’s real estate division before he left early this year to set up IPA. Prior to joining SG Private Banking in 2008, he was director of marketing and business development at Savills Singapore for more than two years.

Mr Ku said that he set up IPA to fill a gap in the real estate advisory space. Right now, most property firms in Singapore employ agents who instruct clients on buying, selling or leasing physical real estate – without considering other classes of real estate investments such as equities.

But private clients – generally defined as clients who qualify for private banking accounts – require a different approach, says Mr Ku

‘We require consultants and brokers who are able to think on behalf of the private client, and this involves knowledge of the client’s portfolio and the wide range of investment products competing for the client’s attention,’ he said.

With IPA, Mr Ku expects to bridge the gap between bankers and real estate consultants.

‘Bankers are typically not equipped to deal with or cannot understand or manage real estate as part of their core work,’ he said. ‘And real estate professionals typically do not have enough financial knowledge. We bridge this gap and differentiate ourselves by providing a holistic solution for clients.’

IPA will help manage the real estate portfolios of wealthy investors to preserve and enhance value, tailor real estate portfolio strategies to clients’ objectives, such as estate planning to wealth creation, and broker transactions on the ground, which will give the team first-hand knowledge on prices and the demand and supply situation.

Mr Ku says that there is tremendous potential for such services. About a fifth of high net worth individual wealth in the Asia-Pacific is in real estate and there has been growing interest in property-related investments.

Mr Ku, who is already working on projects for clients, is looking to tie up with private banks and businesses in need of real estate expertise. He is also looking to hire and will increase IPA’s headcount from the current five to 12.

Source: Business Times, 22 Apr 2010

KepLand property fund unit positive on residential, office, retail and hospitality

EMERGING economies may be all the rage, but Keppel Land’s property fund manager Alpha Investment Partners still sees good returns coming from matured Asian markets.

Alpha is positive on the residential, office, retail and hospitality sectors in ‘core’ markets such as Singapore, Hong Kong, South Korea and Taiwan. The one sector that has not caught its fancy is that of logistics properties.

‘On a risk-adjusted basis, the returns are quite attractive,’ said Alpha managing director Loh Chin Hua yesterday, at the sidelines of the Asian Public Real Estate Association Property Leaders Forum.

Alpha adopts a barbell strategy for the Alpha Asia Macro Trends Fund, which is 70-80 per cent focused on core markets, and 20-30 per cent focused on fast-growing ones.

It is not for a lack of opportunities that Alpha is less involved in developing economies. Take China for instance – Mr Loh recognises that it is an important market offering much investment potential, but there are other downsides at play.

‘We always look at risk-adjusted returns, how easy it is to execute transactions, and right now, it is quite challenging for an institutional investor to be investing in China,’ he said.

During a panel discussion at the forum, Mr Loh spoke of changing regulations in China and the complexities that poses. A lot of these changes are retroactive and ‘you just have to accept them’.

But Alpha will continue to seek out deals in China, and it is confident that residences catering to middle income earners in second tier cities will still see demand.

In Singapore, Alpha is interested in the retail, hospitality and residential sectors. It has a fund which is part of a consortium owning Katong Mall. ‘We still believe that suburban malls generally will do well,’ Mr Loh said. ‘There will be a number of new subway lines coming up, so there could be more opportunities in that area.’

The office market here could surprise on the upside, he added. While a substantial amount of new office space will be coming up, rents have historically ‘responded more to demand changes than to supply changes’. Banks are hiring again, and ‘the analysts might be a little bit too negative on the office sector’, he said.

According to Mr Loh, Alpha is seeing a healthy deal flow and is working on a number of transactions. Around 30 per cent of its US$1.2 billion Asia Macro Trends fund has been invested, and this could rise to 50-60 per cent soon.

He also said that risk appetite has improved, and some investors have approached Alpha to start new funds.

Source: Business Times, 22 Apr 2010

Commercial real estate investment transactions in the Asia-Pacific region continued to grow in the first quarter of 2010 to hit US$38.6 billion, up from US$28.2 billion in Q4 2009, according to a report by DTZ.

The increase was due to better economic conditions and the prospect of tighter lending in China, which encouraged investors there to bring forward purchases, DTZ said. Transactions may tail off in coming quarters, it said.

The Q1 tally is a record, beating the previous peak in Q3 2007. Investment activity during Q1 was also boosted by the return of recapitalised real estate investment trusts (Reits), which spent about US$2.4 billion. They also sold almost US$2 billion of property, but Q1 was the first quarter since Q4 2008 that Reits were net buyers, DTZ said.

While domestic investors remained the most active players in the Asia-Pacific market, foreign investors are slowly returning, said David Green-Morgan, head of research for DTZ in the Asia-Pacific.

China again led the region with over US$25 billion of commercial real estate transacted during Q1, accounting for 65 per cent of overall activity in the region. Much of this was due to investors replenishing land banks.

The largest deal in Q1 was also in China – the sale of the Guangzhou Asian Games site to a local developer for US$3.7 billion.

Most of the markets covered by DTZ recorded higher transactional activity in Q1 than Q4 2009. Outside China, investors were particularly interested in the region’s more mature stable markets and cities.

In Singapore, AEW Capital Management bought Robinson Point in Robinson Road for US$145 million during Q1 – one of the biggest deals in Singapore in a year.

Source: Business Times, 20 Apr 2010

Property consultancy CB Richard Ellis (CBRE) said on Thursday total investment sales in the real estate sector grew to a whopping S$4.87 billion in the first quarter this year.

This was 18 times higher compared to the S$273.8 million in transacted value posted in the first quarter last year.

In its latest report, CBRE said the brisk sale of government land sale (GLS) sites in the first quarter, which amounted to about S$934.66 million, contributed significantly to the higher investment sales.

Real estate sales in the commercial and industrial sector also showed signs of interest and higher sales.

The commercial investment market chalked up 25.3 per cent of total investment sales in the quarter at S$1.23 billion.

Meanwhile, in the industrial sector, there were 26 known transactions, making up 23.8 per cent or S$1.16 billion of investment sales for the quarter.

Still, the star performer was the residential segment, with investments amounting to S$2.4 billion in transacted value in the quarter.

Out of the total amount in investment sales, private investors accounted for 79.3 per cent or S$3.86 billion. The public sector contributed the remaining 20.7 per cent or S$1.01 billion.

According to CBRE, the real estate investment sales market is looking positive, with a possible S$15 billion worth of transactions for 2010.

Source: Channel News Asia, 15 Apr 2010

I MET a friend for lunch this week. I’d won a treat from him. Back in September 2009, we each put down the level at which we thought the Dow Jones Industrial Index, the Straits Times Index and gold prices would close the year.

We weren’t that far off with our estimates, given that there weren’t any surprises in the final three months of the year. I was just slightly luckier.

Over lunch, my friend reviewed the market predictions he made in early 2008. Back then, he said that he had short positions in the UK housing market and sterling.

Sterling has depreciated significantly vis-a-vis the Singapore dollar in the two years since. But my friend said that he is surprised that the UK property market has not fallen as much as he expected.

I suggested that perhaps because of cheaper sterling, a lot more foreigners are finding London properties “cheap” and see them as a good place to park spare cash. Indeed, within my circle of friends – we who are not especially rich – one has bought a London apartment and another is considering doing so.

Our lunch conversation then turned to gold. My friend’s theory is that there is almost a fixed gold supply. “Annual gold production increases are very small – and sometimes they fall. And this is what makes gold such a perfect yardstick to measure the value of another asset against.”

After lunch, my friend did some calculations and came back with this: It takes 245 ounces of gold to buy the average London house today. Back at gold’s last peak in 1980, it took just 50 ounces of gold to buy the average London house. Gold was expensive or houses were cheap then.

“This suggests that gold will be a better investment over the next five years than London property,” my friend said.

Well, the conversation set me thinking about the relative value of UK and London properties vis-a-vis Singapore properties, and their prices in terms of gold ounces.

So I downloaded some numbers and did some crunching. And here’s what I found. UK’s Nationwide Building Society has a database of representative UK house prices from the last quarter of 1952 to the first quarter of this year. During that period, a typical house in the UK went from £1,891 (S$4,016) to £162,887. That’s compounded annual growth of 8 per cent a year in sterling terms. But the price appreciation came in spurts. One of the steepest climbs was the 12 years between 1995 and end-2007. During that period, price appreciation was 11.3 per cent a year.

So how does the price trajectory of a UK house compare with a private residential property in Singapore? In Chart 1, I set the prices of UK properties and Singapore properties to a common base in Q1 1975. Here, you can see that in local currency terms, a typical UK house has appreciated at a faster rate than Singapore private residential properties. The annual compounded rate is 8.2 per cent for UK and 7.8 per cent for Singapore.

However, as mentioned, sterling has weakened against the Singapore dollar. Hence, in Sing-dollar terms, Singapore properties have been a better investment in the past 30 years. Between Q4 1980 until Q1 2010, Singapore properties appreciated 5.8 per cent a year, while in Sing-dollar terms, a typical UK house managed only 3.8 per cent a year. (Bloomberg’s exchange rate data between Singapore and sterling pound only goes as far back as 1980.)

Chart 3 shows the absolute price of a typical house in the UK and the median price of a 100 sq m condominium in Singapore in US dollars. Here, you can see that private housing prices in Singapore are significantly higher than in the UK, although I don’t know how big a typical house in UK is.

How about a London flat? How do Singapore condo prices compare with those of London flats? From Chart 4, you see that a 100 sq m condo in Singapore is still more expensive than a representative London flat. A typical London flat, according to Nationwide, was valued at US$321,000 at end-March this year. In Singapore, the median price of a 100 sq m condo is US$754,000. Again, the question is how big is a typical London flat.

And finally, the interesting bit. How many ounces of gold does it take to buy a condo in Singapore, a flat in London and a house in UK?

At current prices, it will cost 222 ounces to buy a typical UK house, 289 ounces to buy a representative London flat and 680 ounces to buy a 100 sq m Singapore condo.

Of course, these numbers have to be viewed in relation to their respective historical range.

From Chart 5, you can see that at its peak, between Q2 1996 and Q2 1997, Singapore condos cost more than 2,000 ounces of gold. The cheapest a Singapore condo has been, in gold terms, was in Q4 1980 at 166 ounces – the earliest available data point for this series.

From that perspective, the 680 ounces of gold required to buy a condo now may not be too excessive.

As for a UK house, the range – going as far back as 1970 – is between 84 ounces of gold in 1980 and 682 ounces in Q2 2004. For a London flat, from 1990 until now, the range is between 184 ounces in Q1 1996 and 919 ounces in Q4 2001.

So the 222 ounces required to buy a typical UK house, and the 289 ounces required to buy a London flat now – can, from this point of view, be considered cheap now, and arguably offering more value than Singapore properties.

But of course, the gold price is subject to investor sentiment and increasingly to the buying and selling of hedge funds, exchange-traded funds, central banks and so on. The gold price also fluctuates in response to the overall level of confidence in the monetary system and the economy. For example, the equity bear market of 1966 to 1982 coincided with a bull market in gold and gold-related investments. Meanwhile, the equity bull market of 1982 to 2000 coincided with a bear market in gold and gold-related investments. And the equity bear market that began in 2000 has, to date, coincided with a bull market in gold and gold-related investments.

But between 2003 and 2007 and for the whole of last year, both gold and equity prices rose sharply. Between 1970 and now, the gold price has risen by 8.9 per cent a year, while the S&P 500 has gained 6.5 per cent a year.

Gold today, of course, is at its all-time high levels. The expectation is that it will continue to go further. The continued rise in the gold price will make real estate look even cheaper in relative terms. Conversely, a decline in gold will make property prices look expensive in gold terms.

Whatever happens, we can be certain of one thing. In the long term, both gold and real estate are without doubt a better store of value than fiat money.

Source: Business Times, 10 Apr 2010

AFTER three consecutive quarters of growth, the value of property investment transactions in Q1 2010 fell 8.5 per cent quarter-on-quarter to $2.64 billion.

The figures, compiled by DTZ Research, also showed that in contrast to last year when residential sales dominated the investment market, investments in the industrial segment stood out in Q1 2010.

Industrial property investments accounted for $1.02 billion or 38.5 per cent of the total value of transactions. The bulk of this was due to the sale and leaseback deals that were made by soon-to-be-listed Cache Logistics Trust with the owners of six industrial properties. These deals totalled some $713.2 million in all.

Residential investments came in second at $879.2 million. The majority of it (94 per cent) was from the sale of sites in the government land sales (GLS) programme. Private investment sales of residential property were noticeably crowded out. DTZ said that trend is likely to continue into Q2 2010 with the GLS programme expected to be the main source of land supply for residential development.

Investment by local companies continued to dominate the scene due to purchases by local developers and real estate investment trusts (Reits). However, there could be more foreign purchasers in the coming quarters, DTZ said.

Ongoing economic recovery is also expected to lead to increased investment activity in 2010.

‘Besides the purchase of land for residential development, acquisitions by Reits are resuming. More office buildings are also expected to be transacted for redevelopment into residential use for owner occupation or rental yield,’ said Shaun Poh, senior director for investment advisory services and auction.

DTZ’s figures comprise transactions that are more than $5 million each. They exclude $1.75 billion of transactions in single residential units, or lots that cannot be redeveloped or subdivided into more than one plot, as well as deals that are deemed to be interested person party transactions.

Source: Business Times, 7 Apr 2010

Investment sales in the property market finally slowed in the first quarter this year.

Property consultant DTZ Research said the value of investment transactions in the first three months this year fell 8.5 per cent on-quarter to S$2.64 billion.

It was the first drop after three straight quarters of increases.

The industrial sector leapfrogged the residential sector to account for the bulk of the investment transactions.

Sales in the industrial sector made up S$1.02 billion or 38.5 per cent of the total transacted value.

DTZ said the sector saw good sales due to the sale and leaseback deals that were made by soon-to-be-listed Cache Logistics Trust, racking up deals worth S$713.2 million.

Residential investments came in second at S$879.2 million or 33 per cent of the total investment value.

The majority of the residential investments was from the sale of sites in the Government Land Sales (GLS) programme.

DTZ noted that with just 6.3 per cent share of total residential transactions, private investment sales were noticeably crowded out.

It predicted that this trend is likely to continue with the GLS programme expected to be the main source of land supply for residential development.

This is due to the variety of GLS sites available and the speed at which they could be tendered for and put on the drawing block for sale in less than a year.

DTZ also forecast that there could be more foreign purchasers in the coming quarters.

This, it said, is evident from the major acquisitions of two office buildings, Robinson Point and One Finlayson Green, both of which were bought by foreign investors.

DTZ said an ongoing economic recovery is expected to lead to increased investment activity this year.

The figures compiled by DTZ Research comprise transactions that are more than S$5 million each.

They exclude S$1.75 billion of transactions in single residential units, or lots that cannot be redeveloped/subdivided into more than one plot, as well as deals that are deemed to be interested person/party transactions.

Source: Channel News Asia, 6 Apr 2010

It’s clear skies for the industrial investment market with the influx of foreign investors, say LEE PEI YING and DONALD HAN

THERE has been a change in foreign investors’ perception of the industrial market over the last 10 years. Industrial properties have evolved from being a non-core investment product to a preferred asset class. This became more marked around 2008. Before that, en bloc industrial investment deals were dominated by local players, primarily Ascendas, A-Reit, Cambridge Industrial Trust and Mapletree Logistics Trust.

Post-2008, foreign and institutional investors started paying more attention to this sector once ruled by the local Reits. For instance, prior to 2008, foreign investors accounted for only one per cent of the total value and number of en block industrial transactions.

The change in attitude came about in 2008, when the proportion of the total value and number of en bloc industrial transactions jumped to 52 per cent and 24 per cent in favour of foreign funds. In the first three months of this year, foreign funds were responsible for almost 60 per cent of the en bloc industrial sales value and 67 per cent of the transactions.

Higher yields derived from industrial properties were deemed as one pivotal reason. The lure of an improving economy is likely to see more foreign investors jumping on the bandwagon. This may lead to further yield compression in the medium term.

Let’s analyse the reasons behind the increasing appetite of foreign investors for this asset class.

Chasing higher yields

Traditional asset classes such as residential, office, retail and hospitality properties yield between 3.5 per cent and 5.5 per cent annually. Average cost of funds for foreign investors range between 3.5 per cent and 4.5 per cent for a Sing dollar loan. Investors from the US and Europe need a higher hurdle rate to justify investing abroad. In their respective property markets, they can achieve yields of 6 per cent a year. For investors to venture abroad, they need a buffer of 100-150 basis points above their 6 per cent yield to justify undertaking the risk of a foreign investment risk. Industrial properties here can provide such high returns, and are deemed a safer bet.

Syariah-compliant investments

The buyers’ landscape changed significantly in 2008, when JTC Corp offloaded $1.7 billion of its assets to Mapletree Industrial Reit and the Bahrain-based Arcapita Bank. It was the latter’s first foray into the Singapore property market.

Arcapita and its fund were on the lookout for Syariah- compliant investment opportunities in the region. Together with Mapletree, Arcapita bought into a majority 56.5 per cent stake. This comprised, among others, 39 blocks of flatted factories, six stack-up industrial buildings and three multi-tenanted business parks.

Under Syariah mandate, investors are not allowed to invest in properties where the tenants are involved in the sale or consumption of alcohol and cigarettes or are in the business of banking and finance, since Syariah laws prohibit the collection of interest. This leaves out market sectors such as prime offices (where tenants are mainly financial institutions), shops and hotels. Investments in industrial properties provide the perfect gateway. Another Middle Eastern investment group, Dubai-based Emirates Tarian Capital, recently purchased 29 Tai Seng Avenue for $53 million, with a leaseback to its vendor, Natural Cool, for 10 years. This would generate an annual yield in excess of 8 per cent.

Asset diversification

Core investors such as German funds SEB and Union Investments Real Estate invest in prime office premises in the financial district. SEB bought a 50 per cent stake in 79 Anson Road and 12 floors of Springleaf Tower in 2007. Union Investments Real Estate purchased Vision Crest Commercial, including the adjacent Chicago School of Business, in 2007. In 2008, these investors turned to industrial property as part of an asset diversification strategy. SEB paid $200 million to buy Starhub Green, a 412,000 sq ft high-tech industrial building at Ubi Avenue 1. Union Investment acquired Applied Materials Building, located at Changi Business Park.

Abundant industrial alternatives

There is a lot of money in the market chasing prime office assets. The recently reported sale of Robinson Point and 1 Finlayson Green clearly demonstrates the amount of ready cash, liquidity and available buyers in the market eyeing prime office properties.

Foreign (and local) investors are hungry for core office assets and there isn’t enough investment stock out there for sale. This inadvertently pushes up the sale price despite a softening rental environment, thus suppressing yields to the current sub-5 per cent level. It is estimated that there are no less than 20 foreign investors in Singapore looking for prime office investments (anything in the range of $20 million to $500 million) and they could not engage in serious negotiations over the past six months as sellers raised prices. The dearth of office investment deals has swung investors’ attention to industrial assets such as business parks and high-tech industrial buildings instead.

Long leases

Industrial properties, particularly owner occupied ones, are sold on a leaseback basis, often presenting investors with attractive long secured leases. Sale and leaseback premises offer the security of tenures from five years to as long as the land lease itself (up to 30 years). Such long leases are seldom found in office assets, and even if they exist, are seldom offered for sale.

In 2007, when office rents hit the stratosphere, major office users such as DBS Bank, Standard Chartered Bank and Citibank started looking at minimising occupancy cost and decentralising backroom operations to suburban business parks. They would build to suit, lease back (almost) in entirety and monetise the assets by selling them to institutional investors, funds and Reits. Such assets remain one of the favourite investment options of foreign funds. These properties are usually leased back to reputable occupiers, providing financial warranties and a stable income base. These assets present defensive characteristics to investors, minimising risk of short term space vacancies and rental cycles.

Niche asset play

Foreign fund managers are always looking for a growing niche sector to put their investors’ money in. A niche play has benefits. Firstly, it provides the necessary product differentiation that helps separate one fund from another. Secondly, if the right strategy is adopted, one can be a substantial player in a niche sector, enabling some control over market pricing.

Avery Strategic Investment did just that and invested in a niche asset class where there were hardly any competitors. They went in, took control of a niche market and raised standards. Their investment – workers’ dormitories – is classified under industrial use. The venture is controlled by US-based Morgan Stanley and Averic Capital Management, the asset managers with a stake of 97 per cent and 3 per cent respectively.

Together, they bought three foreign workers’ dormitories (Kian Teck Dormitory in Jurong, Woodlands Dormitory and Tampines Dormitory, totalling 13,544 beds) from JTC Corp in 2008 for $153 million. A $100 million ‘upmarket’ dormitory called Avery Lodge housing 8,000 workers was also built and is now the largest dormitory in Singapore. Amenities and features include dining and kitchen areas, bay windows, larger floor-to-ceiling heights and space per worker, gym, video game room, sick bay, Internet cafe, mini-mart, canteen, biometric card access and 24-hour guard patrols. Avery Strategic Investment is now one of the largest developers and owners of workers’ dormitories in Singapore.

Investors with bigger appetites can embark on an Arcapita-style acquisition by buying stakes in a company. Investing via the company route allows the investor to gain control of a larger asset chunk instead of slowly accumulating properties on an organic basis. AMP Capital Investors, headquartered in Australia, recently made headlines by acquiring 16.1 per cent of MacarthurCook Industrial Reit, listed on the Singapore Exchange (SGX). The Reit was later renamed Aims AMPCI Reit and its portfolio consists of 25 industrial properties in Singapore and Japan, with an appraised value of $637.4 million (as at Sept 30, 2009).

ARA Asset Management, an affiliate of the Cheung Kong group, recently made its maiden foray into industrial property through a joint venture with listed CWT. The company, known as ARA-CWT Trust Management and 60 per cent owned by ARA, will invest mainly in logistics properties in Singapore and the Asia-Pacific.

This new regional logistics real estate investment trust – to be called Cache Logistics Trust when listed on SGX – will initially have a portfolio of six high-quality logistics properties, injected into the Reit by its operators and owners as part of a sale and leaseback arrangement, with an aggregate gross floor area of 3.86 million sq ft and a value of about $730 million.

As Singapore strengthens its position as a premier logistics and value-add centre in the Asia-Pacific, we can expect more investment dollars to be pumped into this sector. More high value-add manufacturing businesses will be lured to set up operation in Singapore to take advantage of its seamless infrastructure and various tax incentives. Last year, the Economic Development Board brought in some $11.8 billion worth fixed asset investments. This figure is likely to rise in 2010 with the recovering economy.

We expect more foreign investors to start taking notice of the industrial sector here. Local developers too are taking the cue from the active industrial investment market by re-igniting a slew of industrial development projects.

Since July last year, three industrial sites have been successfully triggered and sold to private developers. Two more sites, in Woodlands and Yishun, have just been triggered after receiving minimum bids. Developers are likely to remain confident in the medium to long term with an improving leasing market. They can then offload completed projects to investors such as Reits and funds, ploughing funds back to develop more industrial properties.

Right now, it’s clear skies ahead for the industrial investment market with the influx of foreign investors. What a remarkable transformation this sector has undergone over the decade.

Lee Pei Ying is research analyst and Donald Han, managing director, of Cushman & Wakefield

Source : Business Times – 30 Mar 2010

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

77% of total sales of $4.4b came from private market

THE investment sales market strengthened further in the first quarter of 2010, as robust sales of residential government land sale (GLS) sites showed developers’ hunger for land.

Total investment sales came up to $4.41 billion in the first quarter, 16 times more than the paltry $273.83 million in Q1 last year, a CB Richard Ellis report said yesterday.

Of these, 77 per cent or $3.4 billion came from the private investment sales market, while investment sales in the public sector contributed the remainder.

CBRE’s Q1 tally includes land deals, collective sales, transactions of entire office and other buildings as well as strata-titled units above $5 million, which have taken place since the start of the year.

Residential investment sales – including good class bungalow (GCB) sales – chalked up $2.11 billion in transacted value, accounting for 48 per cent of the quarter’s total investment sales. This was 27 per cent below the $2.88 billion in residential investment sales recorded for Q409, but is significantly higher than the $149.91 million registered in Q109.

GLS sites sold in the quarter include the Sengkang West Avenue site awarded to City Developments for $200.5 million. A Tampines site sold to Sim Lian Land for $302 million while Far East Organisation was awarded the mixed residential Ten Mile Junction. Two executive condominium sites were also sold during the quarter.

To date, 18 GCBs have been sold for a combined total of $283.61 million. With the GCB market’s current momentum, CBRE says a possible 80 to 90 GCBs could be sold in 2010, which translates into $1.2 to $1.4 billion in value.

The commercial investment market was also active in Q1, with $1.08 billion in sales recorded to date, making up 24.5 per cent of total investment sales.

As for the industrial sector, 26 known transactions so far in the quarter made up 26.3 per cent of $1.16 billion of total investment sales.

The CBRE report noted that while many transactions in the industrial sector last year were from end-users, 2010 has seen the return of selective purchases by the real estate investment trusts (Reits) such as A-Reit and MapletreeLog. Cache Logistics Trust, also purchased the six properties which will make up its portfolio when it soon lists.

Jeremy Lake, executive director of investment properties at CBRE said: ‘While most of the major investment sales transactions in 2009 were dominated by Asian investors, there is now a diverse pool of buyers. Among these would include local as well as foreign developers competing for GLS sites for residential development. Investment funds are also looking for opportunities.’

Source: Business Times, 25 Mar 2010