Asia Real Estate (Part II)

Rent and value
Capital flows to the Asian region have increased tremendously since 2005, mainly into major economic sectors such as manufacturing, services and oil and gas, and opportunities remain abundant in the property sector.The US is among the largest sources of investment inflows into the region; nevertheless, the largest increases in the availability of capital for real estate are expected to come from the Middle East, China and India. The main sources of capital for property investments in 2007 and 2008 remain private equity investment funds, institutional investors and real estate investment trusts (REITs).Since 2006, the Asia region has experienced strong demand in the residential sector despite high interest rates that led to higher house prices. In mainland China and Hong Kong, strong economic growth continues to support the residential market. Beijing and Shanghai continued to attract high levels of foreign investment that entailed a higher number of expatriate professionals which led to higher demand for luxury residential property.Residential real estate prices have shot up particularly in Singapore. Singapore’s residential price change in 4Q07 stood at 31.4%. Concurrently, Malaysia witnessed stable prices and rentals for 1H07. Strong demand for high-end residential units in prime cities such as Hong Kong, Kuala Lumpur and Singapore has escalated with the launch of new high-end residential units throughout 2007.The most expensive residential segments in Asia continue to be Hong Kong, Tokyo and Singapore at over US$10,000 per sq m.In Hong Kong, the real estate scene has not been very different from other countries in the region with house prices trending higher at 8.78% y-o-y in 2Q07 compared to 0.65% negative growth in 2Q06. The real estate market has been gradually recovering since the country’s downturn in the property market last year, following the housing slump in the US.

(The Star 5-4-2008)

Navigating the storm: Asia’s real estate (Part 1)

THE confluence of economic uncertainty brought on by the deepening subprime crisis has posed a real risk of a systemic financial event and a prolonged global economic slowdown. This, coupled with another round of de-leveraging in the structured credit market has led to further pressure and deterioration in real estate prices, predominantly in the US and Europe. Given that the pendulum swung as far as it could in the direction of reckless mortgage lending, it will now swing back towards the quaint notion of buyers being lent only the amount they can reasonably be expected to pay back.Whilst the rout has largely been confined to markets outside Asia, we see considerable softening in real estate markets with high foreign participation and in certain high-end segments. Opportunistic investors are pulling back from Asian property given more scope for acquiring distressed assets in their home markets, and loans remain elusive in Japan and Singapore, one of their favourite markets.In Hong Kong, strong economic growth continues to support residential market. Hedge funds have stopped dabbling in property in the region, and although private equity players will continue to develop property in India and China, they are more likely to buy buildings cheaply in Western countries than in Asia.We expect values for US commercial real estate to fall by 23% in the next five years from their 2007 peak, causing losses of about US$1,600bil, including those on commercial mortgage backed securities.London office values have dropped 12% from a peak in the middle of last year, and will be under further pressure from forecasts of a 15% decline in rental values through 2009.In 2007, total direct investment in Asia jumped 27% to US$121bil – a sixth of the global total –with approximately half invested in Japan and Singapore.Real estate stock in Asia currently stands at US$9.5tril, growing on average by 6% - 7% p.a (except in China which grew by 15% p.a). China and India make up 50% and 12% of the total stock respectively while Japan constitutes 20% of the total.

The demand for real estate is dependent on the health of the economy, which in turn is affected by financial markets.In 2008, we expect prospects for Asia’s real estate to remain lukewarm, especially in traditional FDI led markets like Singapore. The global economy still faces major uncertainties as to how a further unravelling of the credit crisis will affect the availability of credit and asset pricing.The resilience of Asian economies and the real estate market will be truly tested in 2008. Buoyant domestic consumption is expected to help the region weather a substantial economic slowdown as weaker global demand impacts Asian exports.Overall, despite the risks inherent in the region, we believe opportunities remain in Asia’s real estate market, mainly in grade-A office space, driven by sound GDP growth (projected at 8% y-o-y) underpinned by sustained private consumption, higher public and private investments; a re-rating of property as an asset class, sustained domestic demand and on-going infrastructure development.We remain bullish on India and Vietnam, with a cautious view on China, Malaysia and Singapore.

(The Star 5-4-2008)

Real Estate Cycle (Part II)

But the slower take-up rate for luxury properties should not be viewed as an across-the-board phenomenon as foreign individual buyers, experts said, were still scouting for local assets. A downside in demand for larger transactions like en bloc commercial property acquisitions by overseas institutional buyers is, however, possible as investors adopt a wait-and-see attitude to safeguard their portfolios. “Foreign direct investment is going to be sustained but definitely there will be a wait-and-see attitude in certain industries especially on the bigger ticket purchase items like en-bloc sales. “Foreign individual investors are still coming in,” real estate consultancy Zerin Properties chief executive officer Previndran Singhe told The Edge on the sidelines of a forum discussing the impact of the recent national elections on the country’s real estate sector. The forum was organised by the Malaysian chapter of the International Real Estate Federation or better known as Fiabci. Speaking at the event earlier, Asian Strategy & Leadership Institute chief executive officer and director Datuk Dr Michael Yeoh said foreign investors were still deliberating on the Malaysia’s investment climate following the unprecedented outcome of the recent elections. “We cannot exclude any possibility,” Yeoh said.

(The Edge 4-4-2008)

Real Estate Cycle (Part I)

KUALA LUMPUR: The country’s real estate cycle is expected to peak in late 2008 as the pace of rental increases begin to lag price increases, particularly in the high-end property segment in the vicinity of Kuala Lumpur City Centre. OSK Investment Bank said compression of rental yields from high-end condominiums could prompt existing owners to lock in capital gains in anticipation of more new luxury units hitting the market at a time when the real estate cycle was peaking. Its latest property market outlook report indicated that additional supply of condominiums in KLCC would make it more difficult for investors to rent out their residential units. “If most buyers are mere speculators and investors, risk of a potential bubble burst in KLCC condos will be rather high by late 2008,” OSK said, adding that the current upward trend in the local real estate cycle may begin to taper off in 2009 when more properties hit the market. It was reported in February that prices of upmarket condominiums may reach a new high of RM3,000 a sq ft this year as new products hit a niche market driven mainly by foreign demand for local luxury units which are deemed one of the cheapest in the region. According to property consultancy Knight, Frank, Ooi and Zaharin Sdn Bhd, residential properties in KLCC had fetched between RM1,300 a sq ft and RM2,000 a sq ft last year (2007) while rentals ranged between RM5.50 a sq ft and RM6.50 a sq ft. The rising prices of these top notch homes, essentially, translates into lower rental yields as prices advance at a quicker pace than rental hikes. Meanwhile, foreign demand for high-end real estate here may dip on investors’ cautious sentiments surrounding the country’s new political landscape following the recent general elections.

(The Edge 4-4-2008)

High end properties still attracting foreigners

MALAYSIA'S property sector will continue to attract foreign investors, especially the high-end segment, despite the recent changes in the local political landscape, Asian Strategy & Leadership Institute (ASLI) chief executive officer Datuk Dr Michael Yeoh said yesterday.However, the foreign investors are bound to adopt a “wait and see” attitude for now until the political scenario is much more clearer, he said.The wait-and-see attitude is more likely to affect the high end properties that depend on foreign purchases like those in the KLCC areas or those above RM2,000 per sq ft.Presenting a talk in Kuala Lumpur yesterday on the “Impact of The Recent General Election on the Real Estate Industry”, organised by the International Real Estate Federation Malaysia (FIABCI-Malaysia), Yeoh said a more clearer political picture was expected after the UMNO General Assembly in December and this will result in a relatively more stable property market.

(Bernama 2-4-2008)

Klang-Shah Alam corridor a future hub

THE Klang-Shah Alam corridor has the potential to grow into a robust regional hub for well-sought-after residential and commercial addresses, judging by new property developments underway or planned by developers.For the past two decades, property projects remained pretty much unchanged but the landscape is fast changing with the launch of planned community projects such as Bandar Bukit Tinggi, Setia Alam, Setia Eco Park, Aman Perdana and Bandar Botanic.Klang has outgrown its image as an old port town and a new village in the past decade with improved infrastructure connectivity that opens up the western corridor of the Klang Valley.Its proximity to Port Klang, one of the world’s busiest seaports, and Selangor's administrative city, Shah Alam, has been a boon to Klang.Today, Klang is the second largest city in the country after Kuala Lumpur with a population close to 900,000 people. It is also 10 times the size of Petaling Jaya.Shah Alam has also seen a spurt of new township developments. Its population of 600,000 is among the highest in Selangor.The Klang-Shah Alam corridor is today one of the more exciting corridors in Malaysia and the entrance of big developers have significantly changed the property landscape.Read more

Evolution in housing industry

Developers, conscious of the need to fulfil the requirements of a very discerning house-buying public, have made many improvements.This include giving quality ceramic tiles and timber strips replacing old-fashioned broken marble and parquet, double-volume ceiling height to houses and some offices, high ceilings (some 14ft high) to even link houses to give them a majestic look, and more interesting facade and interior layout.Eco-friendly homes (like those in Mulpha's Leisure Farm Resort in Gelang Patah, Johor, whose Pinggiran Bayou Village Homes won the FIABCI Malaysia Property Award 2007 for best residential development (for low-rise category) and “back to nature” themes have become very popular, especially among the younger generation who have grown up in barrack-styled houses.Gated and guarded communities, green street concept (underground cabling), and zero-lot concept have mushroomed over the past decade.And in recent years, the Safe City concept where CCTV cameras and other security surveillance systems are incorporated into a development have become the trend in view of the rising crime rate. read more

(The Star 31-3-2008)

Going for community building concept

INSTEAD of merely building properties, developers should embrace the concept of building communities by envisioning the process from a “community builder’s” viewpoint.
According to Abbey Woods Sdn Bhd chairman and managing director Datuk Wong Choon Kee, this is a more holistic approach to building as the builder evaluates how the development could impact people’s lives as he constructs. “Every developer must optimise construction standards by offering quality facilities, better security measures and higher standard of living, because they are part of the process of building a nation. “Sustainable property development must be practised as we move forward, as we should remember that building is always about the future, and the future is something we borrow from our children. “Developers must start looking seriously into eco-friendly designs and buyers and investors and buyers can support this by making educated purchases,” Wong said. He reminded developers that they have to do their best to provide property buyers with the best value they can possibly enjoy. “The new generation of homebuyers is extremely savvy and hands-on on real estate matters; demanding good craftsmanship, quality designs, prime locations and the best value for every ringgit spent. “As a property developer, I would like to see more innovations in the property projects developed in the country in terms of architecture and design, and emphasis given to quality,” Wong said. He observed that the country would continue to face strong competition “as every other country is racing to pull in foreign real estate investors.” “We have to raise the country's rating in various aspects, including quality of life index and international-standard property offerings. We have to capitalize on our advantages, including having one of the lowest property prices in the region, a comparable cost of living and transparent land and property ownership laws.” Read more

(The Star 25-3-2008)

Property on investors' radar

GIVEN the volatility in the equity and financial markets since late last year, investors, both retail and institutional, are looking for safer places to park their money. Inflationary pressure also plays a role in where the money goes. Property is an asset class that, in recent times, has entered the radar of investors seeking capital gains, yields or as a hedge against inflation. For example, in tandem with economic growth, the property markets of Ireland and Spain were booming until recently while in metropolises such as Hong Kong, London, Mumbai, New York, Shanghai, Singapore and Sydney, commercial and residential property prices have risen due to their roles as global or regional financial hubs. Read more

(The Star 25-3-2008)

Investors adopt 'wait and see' approach in Penang

PROPERTY transactions in Penang appear to have come to a standstill as investors wait and see how the state's economic landscape will unfold."We have received many concerned calls from our foreign investors, counterparts and clients, who are anxious to get a better feel of the ground on the implications for the property market," Henry Butcher Malaysia (Penang) Sdn Bhd director Dr Teoh Toh Puat told Business Times yesterday.He said that improving living conditions in Penang would help to attract foreign investment in properties and those looking for a second home."Attracting investments, tourism arrivals and residents, however, will be a greater challenge today in view of the growing Asia-Pacific real estate market offering alternative opportunities for investors in 2008," Teoh said. Henry Butcher Malaysia (Seberang Prai) senior manager Fook Tone Huat expects investors to take a few months to observe the new political developments before making any decision to continue their investments."Right now, I believe they will wait and see before they decide on their next move, and this will definitely slow down investments."However, if the new state government implements the 'transparency and fair to all' administrative strategy, it may create more market confidence," Fook said. Read more

(New Straits Times 20-3-2008)

Firm targets China and Vietnam

VENTURING overseas has become a viable option for many Malaysian property companies to widen their earnings base and establish a stronger brand image in the region. Developers with good track records and interesting project concepts to “export” to other emerging markets are making a beeline abroad. According to Malton Bhd chief operating officer Yeoh Teng Tatt, the company is eyeing China and Vietnam to introduce its brand of properties to the growing middle class and newly rich population. “We are talking to potential partners in those countries for possible joint ventures to undertake projects. Having established its name in building townships and niche residential projects, including gated and guarded projects in the Klang Valley, Malton is looking forward to replicate its success in other potential markets outside the country,” Yeoh pointed out. Read more

(The Star 17-3-2008)

Foreign investors may wait and see

PETALING JAYA: Foreign investors may take a wait and see approach following the dismal performance of the ruling coalition Barisan Nasional in the 12th general election, until the state and federal governments are well established, said local property consultants. In the polls, Selangor, Penang, Kedah and Perak fell to the opposition.However, they said investments in the property sector and in other sectors would improve in the long run if there are signs of better corporate governance and transparency in doing business here.Zerin Properties CEO Previndran Singhe expects an overall positive impact as real estate is a long-term investment."The outcome of the elections proved that the country is democratic and its citizens, politically matured. I do not foresee any negative affect on foreign investments, as investors will notice thatMalaysia is democratic and practises good corporate governance," he said. Read more

(12-3-2008 The Sun)

Firms with overseas jobs more resilient

PETALING JAYA: Construction firms that rely mostly on government jobs would be the most vulnerable to political changes but some companies will be better positioned to weather the uncertainties. OSK Research analyst Jeremy Goh said earnings of companies such as Hock Seng Lee Bhd, whose projects are mainly in Sarawak, should remain resilient. “We also remain positive on companies like IJM Corp Bhd and Zelan Bhd, whose operations are focused mainly in the oil-rich Middle East.” he said. Read more

(11-3-2008 The Star)

Malaysia Property Mart Outlook 'Very Bright'

Prospects for the Malaysian property market this year continue to be bright, with the residential sector expected to be the star performer yet again, says top real estate services company CH Williams Talhar & Wong (WTW).The commercial sector, however, is set to become increasingly important as property trusts actively look to expand and foreign property funds continue to show keen interest here.As usual, the Klang Valley is expected to lead the market, but things are also looking good in places like Johor Baru (Johor) and Butterworth (Penang)."Overall, the outlook is very bright. Property prices haven't peaked. Foreign interest is helping drive the market, but there's also a lot of local interest," WTW managing director Goh Tian Sui said yesterday at the launch of its property market and CEO opinion survey for 2008.

(New Straits Times 7-3-2008)

Property market to keep drawing foreigners

KUALA LUMPUR: The property market will continue to attract strong foreign interest, says international property consultant CH Williams Talhar & Wong Sdn Bhd (WTW). Managing director Goh Tian Sui said the economic slowdown in the US and Britain had drawn investors to Malaysia due to the higher dividend yield compared with its regional peers. The exemption of the real property gains tax (RPGT) announced in Budget 2008 was also another pulling factor, he told reporters at the release of the WTW Property Market Outlook for 2008 & CEO Opinion Survey yesterday. According to the survey results, 90% of respondents said the RPGT exemption would have a positive impact on the local property industry, while 96% thought the exercise would increase the volume of transactions in the industry. Read more

(The Star 7-3-2008)

Tourism, office and retail properties look good for 2008

REAL estate consultants believe that the local hospitality market will continue to enjoy more upside driven largely by the tourism market growth and foreign investments.Zerin Properties chief executive officer Previndran Singhe said the country’s hotels and resorts will soon be experiencing new trends that have been taking place on the international front.On the office market segment, CH Williams Talhar & Wong Sdn Bhd managing director Goh Tian Sui said that the segment’s benchmark selling price would be boosted to a new level above thatof RM1,230 psf recorded by the upcoming Menara YNH along Jalan Sultan Ismail.For the investment and retail market’s performance for 2007 and outlook for 2008, executive chairman of Regroup Associates Christopher Boyd feels confident that the rental rates in shopping centers in the Klang Valley have the potential to reach RM100 psf.

(The Sun 29-2-2008)

Promising yet cautious property market for 2008

KUALA LUMPUR: The outlook for the property market this year is expected to remain promising yet cautious due rising oil prices, the possible increase of inflation rates and growing concerns in financial markets worldwide.“The government’s move to allow EPF contributors to make monthly withdrawals from the balance in Account 2 for the financing of one house (effective 1 Jan, 2008) as well as the establishment of one-stop-centres (OSC) are expected to give a positive effect,” said Datuk Abdullah Thalith Md Thani, directorgeneral of the Valuation and Property Services Department, Ministry of Finance. Abdullah was presenting an overview of the Malaysian property market at the 1st Malaysian Property Summit 2008 organised by the Association of Valuers & Property Consultants in Private Practice Malaysia (PEPS) yesterday.Other topics presented at the conference included the performance of Malaysian real estate investment trusts (REITS) and the high-end condominium market for 2007 and their outlook for 2008.On Malaysian REITS, chartered surveyor Datuk Mani Usilappan said the market is expected to be aggressive in acquisitions this year, with additional injections of assets.

(The Sun 28-2-2008)

Rising Population Puts Stress On Infrastructure

INFRASTRUCTURE around the KLCC area has seen much improvement over the years with better road accessibility and public transport facilities such as the light rail transit and the monorail. There is an increasing number of people commuting by public transport in the KLCC area. However, many have voiced concern that the infrastructure is still inadequate. Real estate consultants are urging the Government to improve the infrastructure and amenities to meet the rising population and workers in the area.

(4-2-2008 The Star)

Cautinous Optimism On Property Sector

Property consultants say the property sector is more resilient compared to 10 years ago Property consultants are cautiously optimistic that the local property sector would remain healthy despite a possible recession in the United States. DTZ Debenham Tie Lung (M) Sdn Bhd executive director Brian Koh said the property sector was more resilient than 10 years ago. He noted that when the 1997 economic crisis occurred, the Malaysian economy, including the stock market, took a massive plunge.

(4-2-2008 The Star)

Property to rise above stock market volatility

PETALING JAYA: There is still growth potential in the local property market although the prevailing volatility of the stock market has turned property consultants and analysts more cautious of the upside. While concerned that the recent stock market jitters, which saw the benchmark Kuala Lumpur Composite Index (KLCI) tumble 54.12 points or 3.84% last Tuesday, would affect property stocks in the near term, they are upbeat that the sector is able to ride out the negative investor sentiment. Property consultant DTZ Nawawi Tie Leong Sdn Bhd executive director Brian Koh said volatile markets would present both threats and opportunities to institutional funds, who may view real estate in Malaysia as an attractive asset class, given a lack of alternatives in volatile markets elsewhere.

(29-1-2008 The Edge)