HK luxury homes sales climb a notch

Lack of supply, lower prices bolster deals. But analysts think it is too early to say market has stabilised

SALES of Hong Kong luxury homes rose to their highest level in six months in January, indicating that prices may have stabilised, according to a report by Centaline Property Agency Ltd, as buyers seek out bargains.

Completed transactions of existing properties increased 31 per cent from December, and the value of the deals rose 9 per cent to HK$2.7 billion (S$522.8 million), the highest since July, the property broker said on Thursday. Luxury homes are those valued at more than HK$10 million.

A lack of supply and lower prices bolstered sales of existing luxury homes amid a deteriorating outlook for Hong Kong’s property market as a recession hurts sentiment. Prices for luxury homes dropped 19 per cent in the fourth quarter from the preceding three months, Marcos Chan, an analyst from Jones Lang Lasalle, said yesterday.

‘Since the meltdown of the financial markets in the fourth quarter, it’s no surprise to see a rebound after a sharp drop’ in prices, said Mr Chan, head of research for the Pearl River Delta at Jones Lang Lasalle. ‘Most buyers are those with old money and who hardly need to get financing from banks.’

Billionaire Joseph Lau, chairman of developer Chinese Estates Holdings and the city’s fifth-richest man, spent HK$170 million buying a 5,657-square-foot duplex, local newspaper Ming Pao said on Thursday, citing unidentified people. The price is about 16 per cent less than what the seller had paid.

A total of 144 transactions were completed in January, the Centaline report said. The data excludes new properties released to the market last month. January was the second straight month that transactions for existing luxury homes rose, posting a cumulative increase of 82 per cent, Wong Leung-sing, an associate director at Centaline, said in the report. ‘With the lack of new luxury homes, buyers are turning to the second- hand market, rejuvenating activity there,’ he said.

Sun Hung Kai Properties Ltd, Hong Kong’s biggest developer by value, said it expects to fetch HK$50,000 per square foot for its three-storey penthouse units at a new property, the Hong Kong Economic Times reported yesterday, citing a company executive. Buyers from China, Australia, Europe and the US have expressed interest in the pre-launch sale of the property, called The Cullinan, the paper said, quoting Victor Lui, executive director of Sun Hung Kai Real Estate Agency.

Overall, January home sales gained 3.6 per cent from December, the Land Registry said this week.

Still, it’s ‘too early’ to say that the luxury property market has stabilised, Jones Lang’s Mr Chan said. ‘We will continue to see pressure this year, whether it’s luxury or mass market real estate, as there are still uncertainties in the economy and unemployment will shoot up.’

Source : Business Times – Feb 2009

YTL buys stake in Macquarie Prime Reit

 

$285m deal gives Malaysian group access to 2 Orchard Road properties

MALAYSIAN tycoon Francis Yeoh has just completed a $285 million acquisition that will give his firm a listed presence here as well as access to two prime Orchard Road properties.

The deal, which the managing director described as being made at the ‘right price’, involves buying a stake in Macquarie Prime Reit (MP Reit).

YTL Corporation will acquire from Macquarie Bank a 26 per cent stake in MP Reit and a 50 per cent stake in the holding company for the Reit’s manager and the Reit’s property manager. It will pay cash for 247.1 million units of MP Reit at 82 cents each. This is a huge discount of 49 per cent to the Reit’s net asset value per unit and reflects new valuations in light of the financial crisis.

This gives YTL – one of the Malaysia’s largest listed companies – an attractive 2009 yield of about 9.4 per cent.

The price represents a premium of 17 per cent over the Reit’s 30-day volume weighted average price and 52 per cent over its last traded price.

‘This historic transaction is the largest Singapore Reit merger and acquisition (M&A) deal to date and provides YTL Corp with a key vehicle for its regional and global growth ambitions in the Reit space,’ said Mr Keith Magnus yesterday. Mr Magnus is managing director and head of the Singapore and Malaysia investment banking unit at Merrill Lynch, YTL’s financial adviser. ‘It is also a strong endorsement of the intrinsic value of Singapore’s real estate sector.’

Dr Yeoh said he chose MP Reit as it has two prime properties here and is in a business he knows well, while Singapore is a very attractive investment ground. ‘We think, no matter what, Singapore will pull through this, out of this little turbulence. Like the last Asian crisis, Singapore was the first to pull through.’

YTL, worth US$9 billion (S$13.6 billion), has six listed companies under its umbrella, including Starhill Reit, which has four retail properties in the prime Jalan Bukit Bintang area in Kuala Lumpur.

MP Reit owns over $2.2 billion worth of prime retail and office space in Singapore, Japan and China, including a 74.23 per cent share of the strata lots in Wisma Atria and 27.23 per cent of the strata lots in Ngee Ann City.

Once the YTL deal is completed, MP Reit will be rebranded as Starhill Global Reit and Dr Yeoh will become executive chairman of its manager.

YTL took over KL’s Starhill Gallery and Lot 10 Shopping Centre in 1999 when times were bad and there were hardly any tenants, said Dr Yeoh. But the firm turned things around and put the properties into Starhill Reit, Malaysia’s largest real estate investment trust.

YTL’s plans could include further purchases of MP Reit shares and a merging of the two Starhill Reits.

In Singapore, YTL owns majority stakes in two Sentosa Cove projects – the 18 posh villas on Sandy Island and the yet-to-be launched villas called the Lakefront collection.

Last November, the group made history here by paying $2,525 per sq ft per plot ratio for Westwood Apartments in Orchard Boulevard, making it the most expensive site to be sold en bloc.

The price was all the more striking given that the $435 million deal came when the frenetic activities in the property market here were starting to slow.

The firm recently launched the Sandy Island project and sold three villas in a tight market. ‘Everybody knows the world is very tough but that doesn’t give you an excuse not to try,’ said Dr Yeoh.

YTL’s acquisition arose after MP Reit’s strategic review in mid-February and more than 10 parties had expressed interest. But there was no firm offer to acquire all of the Reit’s units or its investments due to the challenging market environment, MP Reit’s manager said.

Still, Mr Magnus said the YTL deal would kickstart the M&A pipeline for the region, as well as shape the regional Reit sector, as challenging equity and debt conditions due to the global credit crunch have led to attractive valuations.

The tycoon and his company

MALAYSIAN tycoon Francis Yeoh is managing director of YTL Corporation, one of the Malaysia’s largest listed companies.

YTL, worth US$9 billion (S$13.6 billion), has six listed companies under its umbrella, including Starhill Reit, which has four retail properties in the prime Jalan Bukit Bintang area in Kuala Lumpur.

In Singapore, YTL owns majority stakes in two Sentosa Cove projects – the 18 posh villas on Sandy Island and the yet-to-be launched villas called the Lakefront collection.

Last November, the group paid $2,525 per sq ft per plot ratio for Westwood Apartments in Orchard Boulevard, making it the most expensive site here to be sold en bloc.

Source : Straits Times – 29 Oct 2008

Singapore gets top marks in UN World’s Cities Report

 

The United Nations (UN) gave Singapore top marks in its latest report on the state of the world’s cities, and has said it is keen to deepen its collaboration with Singapore as a knowledge hub.

The UN also called on cities to take on pro-growth policies that support the poor and strengthen infrastructure. It said all these can make a difference when it comes to sustainable living.

The UN said people’s consumption and lifestyle patterns, and not urbanization, are to blame for climate change. To solve the problem, cities need to use less fossil fuel, maximise recycling and have a well-planned transport network.

Singapore, which set up an inter-ministerial committee on sustainable development in February, has been highlighted for its low per capita car ownership.

With its greening policy, Singapore has also been singled out as a country that absorbs more carbon dioxide than it emits. Another achievement is that Singapore is the only country with no slums.

Director of Monitoring and Research at UN-HABITAT, Banji Oyelaran-Oyeyinka, said: “Obviously, (the) government has taken pro-active steps over a long period of time because it has to be sustained.

“One of the problems you find in most countries is they actually start well, but you need constant investment, sustained effort (and) visionary leadership to sustain those kinds of actions.”

The latest UN report by UN-HABITAT, the agency working to boost the liveability of cities, studied 245 cities. The report is a lead-up to the UN World Urban Forum in Nanjing, China in November.

It noted another worrying concern of rising sea levels, and Southeast Asia in particular is at the highest risk due to its low elevation.

Singapore has said in parliament in September that it has taken measures in terms of building requirements on reclaimed land and drainage infrastructure. A two-year study to understand the specific implications of climate change, including rising sea levels, is also expected to be ready in 2009.

Director of Centre for Liveable Cities, Andrew Tan, said: “Moving forward, I would say that having achieved the level of environmental quality we have in Singapore, there is still a need for us to maintain these efforts.

“It’s necessary for Singaporeans to be proud of what they have achieved, but at the same time, to know that sustained efforts is required.”

The UN has lauded the 43-year-old city state as a model city. However, experts cautioned that as all cities progress, they will no longer be measured just by their level of economic, social and environmental progress.

Cities like Singapore will also have to look at its inclusiveness and its quality of life. Related to this, the report said cultural assets too should be protected to nurture the soul of the city.

Channel NewsAsia – 24 Oct 2008

Branded residences set to take off

COMING home to an immaculately kept apartment with all the creature comforts or having a beach retreat at your own private villa with all the attendant luxuries are all possible in a branded residential development – the marriage of a luxury residential development and a reputable brand.

Such brands are typically from the luxury fashion world of the likes of Armani and Bulgari, or from an established designer like Yoo or Starck. Then there are the luxury hospitality brands such as St Regis and the Ritz Carlton.

Branding is imperative to an individual seeking a specific lifestyle that the brand espouses. A branded residential development not only provides the investors ownership of a tangible real estate, it also encompasses the brand’s image and value-added services. Branded residences thus become the epitome of an affluent lifestyle given the exclusivity and recognition that these brands provide, in addition to the security, trust and extensive privileges and services which other unbranded luxury residential developments do not generally offer.

Branded residential developments could either be single or mixed use located within an urban or resort setting. They provide the buyers the opportunity to enjoy a full range of services rendered by a branded hospitality service provider.

The target market for branded residential developments is of course the well-heeled high end of society. These affluent individuals have experienced similar quality services elsewhere and now seek the same uncompromised high quality hospitality services in their home country.

Branded residential developments usually command a premium. This is because they offer the owners a distinguished appeal with exclusively designed developments and luxury hotel services and amenities. This premium is estimated to range from 20 per cent up to 40 per cent as compared to similar unbranded residential developments.

While the branded residential market in the US and Europe is quite mature, this market is relatively non-existent and is still in its developing stage in South-east Asia. It is therefore not impossible to expect countries such as Indonesia, Thailand and Singapore to witness the continual development of this market.

Branded developments prefer locating in areas with strong resort markets or cities that offer occupiers and investors the opportunity for a second home. For example, Bali and Phuket are favoured for their unique cultures and luscious beaches. Singapore on the other hand, offers the unique blend of a modern multi-racial city set in a tropical environment.

Rising affluence in Asia is another primary driver for this growth. According to World Wealth Report by Merrill Lynch and Capgemini, the number of high net worth individuals (HNWI) grew by 6 per cent while the Ultra-HNWI band grew by 8.8 per cent in population size in 2006 globally.

Asian countries recorded the fastest growth in terms of the number of HNWIs. India, China, South Korea, Indonesia, Singapore and the United Arab Emirates are in the top 10 markets in HNWI population growth. Other countries in this list include Brazil, Slovakia, Czech Republic and Russia. Collectively, Asia currently holds a quarter of the global high net worth individuals.

According to the same World Wealth Report, Asia’s high net worth wealth will grow at 7.9 per cent per annum and is projected to reach US$13.9 trillion by 2012. The Asia-Pacific region wealth market is expected to surpass Europe as the second wealthiest region after North America in the next five years.

Using real disposable income as an indicator of rising affluence, Asia as a region has the highest disposable income compared to West Europe and North America. As at 2007, the Asian disposable income has a 22 per cent and 47 per cent gap over North America and Western Europe respectively.

With rising affluence globally and regionally, demand for branded residential developments is likely to increase in tandem. Furthermore, it is the affluent from Asia Pacific that are most likely to spend on luxury items and judging by their investment portfolios, Asians have a greater affinity for tangible assets such as real estate and cash compared to their Western counterparts.

An investment in branded residential developments can be for personal occupancy or for income purposes which will help defray the carrying costs when these properties are leased. The demand for branded residential developments could therefore come from a mixture of high net worth individuals and institutions situated locally, regionally or across continents. Some examples of these investors include real estate funds, and individual investors from the Middle East, China, India, Indonesia and Eastern Europe.

It should be highlighted that investments in the branded residential development may differ from country to country.

With potential demand on the rise, the branded residential development market is set to grow in this region. While there is already an established market of branded residential developments in certain cities in South-east Asia, there is also a strong pipeline of branded residential coming on stream over the next few years. In terms of existing developments, the major players include St Regis in both Bali and Singapore and Four Seasons in Bali and Langkawi. Some other notable developments include Bulgari in Bali, Ritz Carlton in Bali and Marriott in Phuket.

Thailand seems to lead this market in terms of future supply. The St Regis Group and Regent Group will each open a branded residential development in Bangkok, Four Seasons and Shangri La in Phuket and Conrad in Koh Samui.

In addition, the St Regis Group and Regent Group is each developing a branded residential development in Kuala Lumpur while Singapore will welcome the completion of a Ritz Carlton branded residential development in the next couple of years.

The branded residential market in Asia is still in its infancy but the market has the potential to grow. We are already seeing a number of developments mushrooming around Asia.

There is also a strong investment demand from high net worth investors looking for branded products where price is not a major issue.

Desmond Sim is associate director of research and consultancy while Melissa Sng is research analyst, Jones Lang LaSalle

Business Times – 26 Sep 2008