UK estate agents report increased demand

Estate agents in the UK have reported a surge in demand for new property ahead of the Easter Holidays.

According to the National Association of Estate Agents (NAEA), there has been a sharp increase in the number of house-hunters searching for a bargain ahead of the religious celebration.

"The significant growth in demand for homes reported by our agents suggests that house hunters are searching for a good deal on property before the traditional spike in activity over the Easter holidays," NAEA president Michael Jones said.

However, despite the increase interest from UK property buyers, the number of houses available for sale decreased slightly from 70 per branch in February to 68 in March.

The positive news comes in the wake of a recent report from Rightmove which said that the number of sellers currently active in the market far exceeds the number of buyers.

A weekly average of 28,390 properties entered the market in April - up nine per cent on 2009 figures, Rightmove said.

World's tallest building developer, Burj Khalifa's 1Q profits down 45%

DUBAI, United Arab Emirates: The Dubai developer of the world's tallest building says its first-quarter profit dropped 45 percent as it handed over the keys to far fewer new homes than it did a year earlier.

Emaar Properties posted quarterly earnings of 421 million dirhams ($114.7 million) Sunday, down from 760 million ($207.1 million) in the same period a year earlier.

The company says it handed over about 270 housing units during the quarter, compared with more than 1,300 in the first quarter of last year.

Revenue slumped 31 percent to 1.98 billion dirhams ($539.5 million).

Emaar is the developer of the more than half-mile high Burj Khalifa. It also runs Dubai Mall, the biggest shopping center in the Middle East

Is Hong Kong pricing itself out of the market?

Cushman & Wakefield, the world’s largest privately owned real estate service firm has released a research report that questions if Hong Kong is pricing itself out of the market. The report states that Hong Kong’s Central Business District has been ranked as the world’s most expensive office market in 2010, due to strong demand and limited new supply. The average rent of the Prime Office Buildings in Central has climbed over % from 2009 to $20.04 (HK$155.90)* per square foot per month. In 2011, sustained economic growth and a shortage of new supply  fuelling more competition for office space and a steep uptrend in rental costs.

Recognizing the rapidly growing prices and lack of supply, The Hong Kong SAR Government has recently announced significant measures to provide more supply for Grade A office space in Hong Kong in an attempt to keep prices reasonable and maintain the city’s competitiveness with other regional financial centres.

Nevertheless, many investors are turning to other central business districts throughout Asia, including Singapore to invest in.  Last month, Cushman & Wakefield represented the vendor and sold one of  Singapore CBD’s prime office and retail landmarks, Capital Square, for US$715 million (HK$5.563 billion) – the highest price achieved for a sale of a single property in Asia Pacific (excluding Japan) this year.

Purchased by a joint venture between Alpha Investment Partners and NTUC Income, Capital Square achieved an average price per sq ft of approximately US$1,843 (HK$14,339), a record price for Singapore’s CBD office market in 2011. Capital Square is in fact the 2nd largest broker-led sale globally this year  and  the highest capital value per square foot of building achieved globally this year for an A grade building. This record sale in Asia reflects the growing demand in commercial property from investors for Asia.

Looking at Hong Kong, with the limited supply in prime commercial space, many global enterprises and investors are also looking at Grade B offices with rents expected to rise even higher this year. The average rent for Prime Office Buildings per square foot per month in Hong Kong’s CBD has reached around US$19.15 (HK$149)* per sq ft per month in the first quarter of this year while similar locations in Singapore and Shanghai are averaging one third of that price, at around US$ 6.30 (HK$49)  per sq ft per month.

John Stinson, Managing Director, Capital Markets, Asia Pacific, Cushman & Wakefield says “There is growing demand for top-tier office buildings within Asia, especially in Singapore and Hong Kong, regions that have become prominent destinations for global institutions. Rental growth in in Hong Kong’s CBD Grade A office space is expected to rise by another 20 – 25% this year”.

With very limited new supply, Hong Kong is set to have the steepest increase in office rents over the next two years while other regional locations are expected to catch up in 2012.

* Rent is inclusive of Management Fee & Government Rates

Inflation and demand to lift property prices 10%-20% this year

KUALA LUMPUR: Malaysian property prices are expected to increase at an average of between 10% and 20% this year, in light of rising inflation and increase in demand for local properties from foreigners, said Deputy Finance Minister Datuk Donald Lim Siang Chai.

“Inflation in 2010 stood at 2.2% and was at 2.4% in the first two months of this year. We expect it to be higher this year due to escalating food and oil prices,” he said after the launch of the National Property Information Centre's (Napic) property market report 2010 yesterday.

Lim also said many foreigners were looking to purchase property here because the prices of properties were cheaper than in neighbouring countries such as Singapore.

“And Malaysia, because of the ETP (Economic Transformation Programme) has attracted a number of investments from overseas. Investments last year were four times higher than 2009.

“We also expect more foreign companies to set up base here. Our Islamic banking is No. 1 in the world (so) all this will attract foreigners to come into Malaysia,” Lim said, adding that this would also contribute towards pushing up prices of properties in Malaysia.

He said rising oil prices would also cause prices to escalate.

“There's a lot of uncertainty in the Middle East. It's beyond our control and that (rising oil prices) will affect the other things,” he said adding that property prices in Malaysia were currently at a “manageable position.”

According to Napic's statistics, the Malaysian property market recorded 376,583 transactions in 2010 worth RM107.44bil.

Both the volume and value of transactions registered double-digit growth of 11.4% and 32.6% respectively from 338,089 transactions worth RM81.02bil in 2009.

Napic valuation director-general Datuk Abdullah Thalith Md Thani said 2010's (RM107.44bil) value was a new high for the Malaysian property market.

“In 2008 and 2009, we (Malaysian property market) suffered a bit. The volume of property transactions will go up (this year) but the margin will not be as high as last year.

“We had a good year last year because we rebounded from the sub-prime experience,” he said.

Abdullah added that Malaysia's fundamentals were still good, despite the uncertainties.

“People are worried about oil prices now but bear in mind, we are oil producers too. I will not say that property (by volume and value) will be better than 2010. There will be an increase. The question is the rate of increase.”

Napic expects the property market to remain promising in 2011, supported by various measures proposed under the Tenth Malaysia Plan and Budget 2011.

It said projects such as the Kuala Lumpur International Financial District, Mass Rapid Transit in Greater KL, the 100-storey Warisan Merdeka, the development of the Malaysian Rubber Board land in Sungai Buloh and the redevelopment of Pudu prison were expected to have positive spill-over effects.

Napic also said the Government's Skim Rumah Pertamaku to assist young adults to own homes below RM220,000, together with other incentives such as stamp duty exemption of 50% on instruments of transfer on a house not exceeding RM350,000 for first time buyers, would increase transaction volumes of homes in this price range.

“With the cessation of the Foreign Investment Committee's approval for the acquisition of properties by foreigners which took effect in June 2009, property investment in Malaysia will be more attractive to foreigners,” said Napic in a statement.

“Given that foreigners are only allowed to purchase commercial and residential properties priced above RM500,000, it is anticipated that more activities will be recorded in the high-end housing units in sought-after neighbourhoods,” it said.

Record year for Malaysia property market

Malaysia’s property market enjoyed a record year in 2010 with RM107.44 billion (US$35.78 billion) worth of properties sold, according to The Business Times.

“There will be an increase this year, but marginally,” said National Property Information Centre (NAPIC) director-general Datuk Abdullah Thalith Md Thani.

The property market experienced double-digit growth in 2010, with transactions expanding 11.4 per cent to 376,58 and value expanding 32.4 per cent to RM107.44 billion.

Residential property dominated the overall market, taking 60.2 per cent of total volume and 47.1 of the value of transactions.

Abdullah Thalith said NAPIC expects the property market this year to benefit from the various economic initiatives undertaken by the government.

Projects such as the Kuala Lumpur International Financial District, mass rapid transit in Greater Kuala Lumpur, Warisan Merdeka, the development of federal land in Sungai Buloh and the redevelopment of Pudu prison, which are expected to be implemented this year, will have positive spillover effects, he said.

Abdullah Thalith said the unrest in the Middle East and Japan, which was hit by tsunami, will not dampen growth as he expects the Arabs and Japanese to continue buying here.

The report showed that in terms of pricing, the Malaysian All House Price Index surged by 8.9 points to 140.7 points.

Lim said Malaysians should not worry about a property bubble as the situation is under control. He urged all states to speed up the process of approving property transactions, especially for leasehold units.

“A lot of states, especially Selangor, are slow in doing this. We have a lot of foreigners buying leasehold properties here. We must address the issue as the foreigners are bringing in money. This will lift the economy,” he said.

Hong Kong secondary home market picks up steam

The average price per square foot of a unit at Sun Hung Kai's One Regent Place development is HK$6,383 (US$821).

Hong Kong home sales jumped upwards recently with a push from developers to market new projects having a spillover effect and fuelling interest in the secondary market.

A total of 270 apartments were sold in the secondary market from Apr 4 to 10, up 14 per cent from the 237 transactions in the previous week, according to data compiled by Ricacorp Properties from sale and purchase agreements signed in the 50 housing estates that it monitors.

“The secondary market had been stagnant due to rising interest rates. But it is now rebounding and showing signs of recovery,” Ricacorp director David Chan told The South China Morning Post.

Sales were particularly strong on Hong Kong Island, which recorded a growth in transactions of 36 per cent from a week earlier to 57 deals done. Major housing estates such as Taikoo Shing, South Horizons and Island Resort performed the best.

Sales in Kowloon rose 23 per cent with 85 flats changing hands. Telford Garden in Kowloon Bay saw five flats changing hands during the week, up from just two the previous week.

Park Central in Tseung Kwan O, and Banyan Garden and The Pacifica in Cheung Sha Wan recorded a combined 16 deals done. Sales in the New Territories edged up 2 per cent to 138 transactions.

With more new projects to be offered for pre-sale, potential buyers could be lured to both the primary and secondary markets in coming weeks, Chan said. This could unlock pent-up demand and lift the number of deals in the secondary market back above 300 a week.

On Monday, Sun Hung Kai Properties announced the price list of all 323 flats in its development One Regent Place in Yuen Long at an average price of HK$6,383 (US$821) per sq ft. A 1,727 sq ft flat on the top floor with a 1,000 sq ft roof top was pitched at HK$20.05 million (US$2.58 million), or HK$18,000 (US$2,315) per sq ft.

Residential property prices to grow by 10pc

Residential property prices are expected to grow 10 per cent this year given the rebound in transaction volume and higher replacement costs, AmResearch says.

The research unit of the AmInvestment Bank group said its previous forecast was a growth of five per cent.

It said replacement costs were on the rise due to escalating land cost as well arising prices of building materials from timber, aluminium, cement to steel.

The recent aggressive bids for land surrounding mature neighbourhoods would solidify the strong pricing trends as land traditionally accounted for between 25 and 30 per cent of residential prices, it said in a research report today.

"The expected reacceleration in residential prices would also be preceded by a sustained expansion in transaction volume, which is already underway now," it said.

It said developers had revealed that demand rebounded strongly in the past month as evident from the strong response to recent launches.

"We reaffirm our overweight stance on the property sector with SP Setia and IJM Land as our deep convictions buys," the research house said, raising its fair value for SP Setia from RM7.38 to RM8.10 and IJM Land from RM3.88 to RM4.00 per share.

Office rents in Tokyo expected to fall following the Tohoku Earthquake

Rental Value of Grade A Office Space in Tokyo

Rental values in the Tokyo office market are expected to fall by 3-5% in 2011 as a result of the slowdown in demand caused by the deterioration in corporate profits following the Tohoku Earthquake, as well as the relocation and withdrawal of multinational companies. The earthquake has also increased awareness of the seismic compliance of buildings with companies moving to Grade A buildings with better seismic design, according to a research report by Jones Lang LaSalle, a professional services firm specializing in real estate.

On 11 March, a major earthquake and tsunami hit Eastern Japan. According to official statistics, the number of deceased had surpassed 13,000 as at 14 April. While major damages occurred in the Tohoku district, the direct damage to Greater Tokyo was limited. However, disruptions in the supply chain due to damaged production plants in the Tohoku district, as well as electricity shortages following the nuclear plant crisis in Fukushima, have impacted the economy of the entire nation. The damage generated by this major earthquake is expected to surpass that of Hanshin-Awaji Earthquake in 1995.

The earthquake was followed immediately by turmoil in the financial market, as the Nikkei 225 slid and the yen hit a record high against the dollar surging to JPY 76.25 per USD. However, with the coordinated yen intervention by G7 nations, the yen has retreated modestly against the dollar. (Figure 2). Meanwhile, despite continued volatility the steep downturn was brief and stock market analysts were quick to point out buying opportunities. The Nikkei was, at market close on 14 April, 7.5% below its level prior to 11 March.
In the meanwhile, the electricity shortages in Greater Tokyo, offline production in Tohoku and lost tourism revenues have directly impacted economic activity. Accordingly, the International Monetary Fund and Global Insight have revised their GDP growth projections for Japan, downwards for FY 2011 and upwards for FY 2012.
The effects of this tragedy are still unfolding, many of the supply and production disruptions have still not been resolved, nor are the actual damages calculable, let alone the costs of recovery. Nonetheless, there are some fundamental impacts for the Tokyo office market which we explore below.

Tokyo Office Market
At the start of 2011, leasing activity had been picking up as companies emerged from the Global Financial Crisis. Businesses could take advantage of the fact that rental values had decreased considerably and were, in fact, past their lowest point and starting to grow. However, following the earthquake, rolling blackouts have dampened economic activities including those that were not directly affected by the earthquake. Furthermore, the widespread jishuku, or voluntary restraint, has suppressed already stagnant consumption activity, and thus the impact on profit margins and consequently on investment and expansion plans is still fairly uncertain. Under the circumstances, risk averse tenants will likely lay aside expansion and/or consolidation plans and adopt a wait and see approach, resulting in reduced take-up and additional space on the market. In the midst of uncertainty, even those tenants that are under pressure to relocate or contract space are unlikely to move.

As a precaution against earthquakes and as a reflection of the fear of nuclear contamination, enterprises, multinational companies in particular, have been looking at relocating from Tokyo. The most favored potential sites are located in Western Japan including Osaka and Fukuoka, in particular Osaka. Although the majority of the tenants have opted for a short-term agreement of under one year, some tenants have decided on a permanent relocation. This will provide some long awaited dynamism for the office market in Osaka, which previously had been facing a particularly large volume of supply scheduled in 2013. In addition, in terms of business continuity planning (BCP), many companies are considering the option of splitting their headquarters functions between Tokyo and Osaka, potentially reversing a multi-decade trend of consolidating operations in the capital. These developments will weigh negatively on the Tokyo market, both in terms of rental levels and capital values.

The earthquake has increased awareness of the seismic compliance of buildings. Tenants are moving out from buildings conforming to the former seismic standards. Under the new seismic standards implemented in 1981, buildings will be unbreakable against the Japanese scale-5 earthquake and in case of the scale-6 buildings will not collapse, ensuring the safety of the people inside. Notably, some tenants are leaving buildings conforming to the current standards in favour of Grade A buildings with better seismic design. Furthermore, on the back of the electricity supply shortages that have been crippling businesses, demand has increased sharply for buildings with in-house power generation.

Nevertheless, due to elevated construction costs such buildings are almost always made-to-order by the tenant and their numbers are limited. Going forwards we expect a Flight to Safety and a Flight to Quality to be apparent in all corporate location decision making in Tokyo. With a relatively small supply of the latest in seismic design which also boasts in-house power, there are a number of refurbishment opportunities which present themselves to the owner of Grade A or Grade B space that can be upgraded to meet this demand for safety and quality.
The earthquake inevitably has led to a hiatus in the investment market. In some cases this was caused by the cancellation of funding due to the turmoil in financial markets immediately following the earthquake, but in most cases, it was because of the need for a physical damage survey to assess the impacts of the earthquake. Not all but most, foreign investors have expressed positive views towards investment in Japan, and have flagged potential opportunities and their intention to increase their presence in the market.

As to the debt market, foreign lenders have not demanded an increase in the risk premium for Japan in the form of wider JGB spreads. Nor are lenders warning us of any appreciable change in domestic financing conditions, now or over the medium term.

Outlook
In the short term, rental values in the Tokyo office market are expected to fall as a result of the slowdown in demand caused by the deterioration in corporate profits following the earthquake, as well as the relocation and withdrawal of multinational companies. Thereafter, as the economy emerges on the back of demand related to the reconstruction of the Tohoku district, we expect office demand to pick up, and in part supported by affordable rental values, leasing activity in the office market to recover. As to rental values, we expect Grade A office buildings to lead the recovery, with a 3-5% decrease in 2011 and a 5-10% increase in 2012. The recovery of Grade B buildings is expected to lag.

China mulls ban on foreign investment in villa construction

China is set to ban foreign investment in the construction of villas as part of ongoing efforts to cool the property sector.

Planned revisions to the Catalogue Guiding Foreign Investment in Industry listed foreign investment in the construction and management of villas in the “prohibited” category. It was previously only “restricted”.

“There will be some impact, but it will not be very big,” Albert Lau, Managing Director of Savills Shanghai told Reuters. He added that foreign exchange curbs and difficulties in acquiring land already limited some foreign investment in villas.

David Ng, an Analyst at the Royal Bank of Scotland, said: “This is just a gesture you see from time to time. Supposedly if you want to cool the market, you should increase the supply. It is counter-intuitive to try and limit money going into the sector.”

Global real estate consultant Jones Lang LaSalle said last month that foreign players were apparently not concerned by China’s policy tightening spree, and were returning to invest in troubled domestic developers or buy distressed assets.

Foreign investors outside Asia accounted for a record 33 per cent of China property investment in 2007. That more than halved in 2008 to 12 per cent, before falling to a mere 2 per cent in 2009. The ratio has recovered slightly since, rising to 7 per cent last year, Jones Lang LaSalle said.

Gradual rise in Penang property prices seen

GEORGE TOWN: The rise in residential property prices in Penang will be a more gradual this year, according to real estate valuers.

Henry Butcher Malaysia (Penang) director Dr Teoh Poh Hua t said this was because residential property prices on the island increased phenomenally last ye ar by between 10% and 20%.


»The market demand will be more focused on smaller units that are competitively priced« HENRY BUTCHER DIRECTOR DR TEOH POH HUAT

“The demand for residential properties from investors is expected to grow more gradually this year in view of the efforts by the central government to cool off speculation such as the cap imposed on the loan value ratio for third property loan onwards. We expect more genuine buyers rather than speculators due to such efforts ,” he toldStarBiz.

Teoh said condominiums on the island were now facing competition from overseas properties, where prices had dropped more significantly and a strong ringgit had made acquisition of such properties more affordable.

“Large condominiums in particular are very difficult to rent out and are unable to generate attractive yields.

“The market demand will be more focused on smaller units that are competitively priced,” he said.

On Malaysia's second home programme, Teoh said the country needed a strong and consistent branding strategy to reach out to those parts of the world with interest of investing in a second or retirement home in Malaysia.

“This is lacking although a lot of work has been done to promote Malaysia as a second home destination at the private and government levels,” he said.

Raine & Horne senior partner Michael Geh also said that residential property prices would rise more gradually this year co mpared with 2010.

“Last year developers were targeting their properties, priced from over RM300,000 to over RM4 00,000, at bulk-buyers, who are speculators willin g to buy three to 10 units at one go.

“So far this year we can see that developers are tryi ng to reach genuine home buyers who are queueing up to buy their properties.

“This is probably because there is anticipation that the interest rates for housing loan will increase soon,” he added.

Real Estate and Housing Developers' Association chairman Datuk Jerry Chan said residential properties prices were expected to rise this year again due to higher land and raw material costs.

“Land prices in prime areas such as Pulau Tikus and the Jesselton neighbourhood have increased to about RM400 per sq ft, while the land in Tanjung Tokong and Tanjung Bungah are now priced from RM300 per sq ft onwards.

These prices are 15% to 20% higher than a year ago.

“Cement price had also gone up by about 6% recently to RM16 in mid-March,” he said.

“Cement producers have also withdrawn rebates, which are normally given to customers for prompt and early payment.

“The cost to build a terraced unit on the island would increase by 6% to 10% to about RM500,000, depending on th e location.”

Chan added that the rise in property prices last year took many people by surprise.

“They are now more discerning in their approach to buy properties,” he said.

Meanwhile, Wabina Holdings Sdn Bhd managing director Datuk Loh Geok Beng said in order to stay competitive in the business, developers were now coming up with innovative designs for their housing projects.

“The southwest district still has vacant land which all ows developers to come out with innovative designs.

“For example, we are introducing the first high-end living condominium scheme, the Pavilon Tower, in the southwest district, which comes with a variety of life-style facilities,” Loh said.

Going up, down or sideways?

Mont’Kiara, predominantly an investor proposition, is facing a high rate of vacancy.

Is there a softening in the condominium market? Some locations seem to be doing better than others while others are not doing as well as before.

ABOUT two to three weeks ago, a developer promoted a friend-bring-friend sale, whereby if a friend were to buy a condominium unit, the introducer will get a small reward. That project, located in a desirable location, was launched last year, amid much fanfare.

In another project, a developer is offering a 20% rebate. This enables buyers to pay 10%, enjoy a 20% discount off the purchase price and get a 70% loan. This 30:70 ratio satisfies Bank Negara's ruling (announced last November) which requires buyers of third and subsequent residential properties to fork out a 30% down payment.

In another part of Kuala Lumpur, a developer launched a condominium and had 80% sales on the first day, prompting the company to open up its second block just a few days after the launch of the first block.

At the same time, analysts are reporting that there will be a re-rating of property prices and that prices will go up. If their judgement call is correct, why are developers coming up with innovative schemes in order to sell their high-rise condominiums while other projects are selling like hot cakes?

Says SK Brothers Realty Sdn Bhd general manager Chan Ai Cheng: “The term softening property prices' is selective, it depends on location, type of properties and pricing. That 30:70 ruling by Bank Negara has not affected the market where buyers buy to stay, but it has affected those who are buying for speculation, or buy in order to flip it after it is completed.”

Chan says that ruling has been very well-implemented because most of her buyers now are those who buy in order to stay, and that 30% downpayment is not an issue with them.

“Most of our buyers are serious buyers, they buy to occupy and when you buy to stay, that 30% down payment is not an issue. It is only when you are buying to invest, or to speculate that you think many times before forking out that 30% money up front,” Chan says.

Much of SK Brothers' work involves helping developers to market their projects.

Like S K Brothers, Reapfield is also seeking good sales from their negotiators. Senior vice-president Gerard Kho says the fact that the company increased its negotiators from 700 last year to 800 this year testifies that the market is good.

Unlike S K Brothers who help developers to market their projects, Reapfield's sales are from the domestic, secondary market.

“When Bank Negara announced that ruling, we were concerned but our agents told us not to worry, that developers and buyers will work around it and today, that is what we are seeing. Overall, the market is adjusting to it, and a rebate is one of the ways to do it,” he says.

Nevertheless, there are certain things to note in the condominium market, excluding the KLCC market because that market is different, a real estate professional says.

“Condominium prices are not the only things to watch out for, although that is one of them. The rate of rental and its rate of increase or decrease says a lot about a location,” he says.

Mont'Kiara, predominantly an investor proposition, is facing a high rate of vacancy. “You can see that when you go by that area at night. Although the “how many units are lit up” principle may not be entirely accurate, it provides a good gauge of how popular a condominium project is.

“The next thing to look out for is rental rates are they sliding? We are seeing that happening here in Mont'Kiara. Investors are accepting a lower rate of returns, of about 4% compared with 7% to 8%. Will it go down to 2.5%. I hope not, but how much further will investors go?”

He says these are signs of a market going down. Right now, because it is location-specific, there is not much concern. The company he works for is nevertheless, keeping tabs on that market. Mont'Kiara, on average, is priced about about RM600 to RM650 per sq ft today, although some may be launched at about RM800 per sq ft.

While Mont'Kiara offers mostly high-end condominium units, over at Damansara Perdana, the situation is slightly different. Prices are lower at Damansara Perdana and because of this, it enjoys a bigger market with both owner-occupiers and tenants. Because of its proximity to good amenities, it has a good rental market with a 430 sq ft studio unit at Ritz Perdana being rented out for RM1,200 to RM1,300. The older blocks in Perdana Exclusive (two rooms with 860 sq ft built-up area) are rented out for RM1,400 to RM1,500.

“The studio is doing better in both the rental and in the for-sale market,” he says.

In the event there is a softening, the condomininium market will be affected first, he says. Over at the KLCC market, there was much euphoria there and prices just escalated. Today, although prices have come down, that location seems to be holding well.

“The KLCC condominium market offers a different product and it is a market that does not follow the trend,” says Reapfield's Kho.

RAM Rating Services Bhd head of real estate and construction ratings Shahina Azura Halip says demand for residential properties will remain healthy. This is supported by domestic economic growth, healthy demographics with 40% of the population aged between 20 and 44 years and 37% below the age of 20, rural-urban migration (urbanites as a percentage of the total population in Malaysia increased from 68% in 2005 to 71% in 2009) and low unemployment rates (less than 4% between 2006 and 2010).

“The high-end condominium market is envisaged to be more challenging given the substantial incoming supply. In Kuala Lumpur, where the bulk of such properties are located, the inventory of high-end condominiums summed up to almost 31,000 units as at the end of the third quarter of last year. This is projected to be joined by over 7,000 units in the next five quarters. This is expected to cap the potential upside for the prices of these high-end abodes.

“The demand and supply dynamics vary according to location. The outlook on the broad sector may not necessarily translate into similar views on different locales. Areas such as Mont'Kiara and KL central business district are facing huge incoming supply, which probably explain the incentives that may be offered to push sales for certain developments. According to statistics from Ho Chin Soon, the incoming supplies in these two areas are expected to increase by a respective 24% and 25% between 2010 and 2012.

“Prices of high-end units in these areas had fallen in 2009 and had only shown slight increase in the second half of last year. Dampened by the supply situation, rental rates for high-end condominiums in these areas have also been reportedly declining in the last few years.

“We think they are unlikely to recover this year due to the large incoming supply. Rental rates for luxury condominiums in KLCC, for example, have fallen from about RM5 per sq ft in 2007 to around RM4 per sq ft in the third quarter of last year,” Shahina says.

Monaco still most expensive but Asia is catching up

Monaco has retained its title as the world’s most expensive place to buy a high-end house, although Asian cities are quickly climbing the leader board.

For an outlay of US$1 million a property investor can expect to buy just 15 sqm of luxury real estate in Monaco, according to Knight Frank and Citi Private Bank’s Annual Wealth Report.

The largest property deal recorded in Monaco last year was the €240m sale of La Belle Epoque to an unnamed Middle Eastern investor. The penthouse was sold by the Candy brothers, who also made £140m from the sale of the penthouse at One Hyde Park in London – the second most expensive city for luxury property. An investor with $1m can buy around 18 square metres of space in the complex. (May’s edition of Property Report South East Asia will feature an interview with Nick Candy).

The Asian cities of Shanghai, Mumbai and Singapore saw the biggest price rises during 2010, with prices for high-end properties in Shanghai increasing by an average of 21 per cent. The Chinese city is now the 23rd most expensive city for real estate.

New York is the most economically active and influential city according to the report, with London coming in a close second.

Downtrend in property loans

PETALING JAYA: Bank Negara's move to require house buyers to pay a higher deposit seems to be weeding out speculation in the property market, some analysts said.

Its monthly statistical bulletin last week showed that for fourth consecutive months since November, the number of loan applications to buy residential property has reduced.

On Nov 2 last year, the central bank announced a 70% loan-to-value (LTV) cap on a borrower's third and subsequent house-financing facility, meaning that these buyers would have to fork out 30% of the purchase price.

The move was prompted by fears of a retail credit bubble fuelling speculation on the prices of residential properties. Certain areas reported price spikes that are indicative of speculation and multiple-unit purchases by individuals.

However, analysts cautioned that the data was not conclusive.

Some analysts said the decline in the first couple of months might be seasonal and believed data from March would accurately show the effects of the LTV rule.

RAM Rating Services Bhd's head of financial institutions ratings Promod Dass said: “Household financing facilities now account for approximately 55% (or RM489bil) of the local banking system's loans, with loans for the purchase of residential property comprising about half (RM238bil) of total household loans.

“Although the full impact of this move has yet to filter through given the short time since its implementation, loan applications for residential property purchases have started slowing down in the last two months of 2010 and January.

“The heftier down payment because of the more stringent 70% LTV cap is aimed at discouraging excessive over-leveraging in the property market. While the early signs are that this move has weeded out a degree of speculation in the residential property market, it will take at least six more months to gain a conclusive feel on whether such speculation has been curbed,” Promod said in an e-mail.

Malaysian Rating Corp vice-president and head of financial institutions ratings Anandakumar Jegarasasingam said the LTV ruling was insufficient to control the level of household sector debt in the economy or an unhealthy property price appreciation.

“Any individual who is purchasing a third residential property is either likely to be affluent or a reasonably savvy property speculator. If property speculation is to be curbed, the authorities should perhaps explore more direct measures involving taxes and prudential restrictions,” he said.

Another issue was whether the current trend of lower applications for housing loans could eventually lead to a softening of the property market.

ECM Libra said in its banking report yesterday that “residential property and non-residential loans approved have shrunk and are set to continue their downtrend.”

ECM Libra's analyst Bernard Ching said “loans growth are expected to taper off due to our expectation that property sales growth may slow down later this year as a result of the imposition of loan-to-value cap.”

Another analyst said the drop in housing loan applications, and the reduction in the number of loans approved, would eventually lead to a softening of the property market. “Increasingly, developers will find it more difficult to push sales and this will lead to a softening,” he said.

Singapore property prices nearing record highs

Property prices in Singapore edged closer towards a new record high in the first quarter despite government tightening measures, the Associated Press reported Friday.
According to numbers from the Urban Redevelopment Authority, private residential property prices rose 2.1 per cent Q1 2011, down from 2.7 per cent growth in Q4 2010.
The URA said that property prices have climbed for seven straight quarters and jumped 18 per cent last year after falling 25 per cent in the 12 months up to mid-2009.
THe Housing Development Board said prices of public housing apartments where about 80 per cent of Singaporeans live rose 1.6 per cent in Q1 2011.

Thailand’s Raimon Land awards 185 Rajadamri contract to Bouygues

Thailand’s luxury property developer Raimon Land has awarded the THB 2.4 billion (US$79.3 million) building contract for its 185 Rajadamri condominium project to Bouygues Thai, the local subsidiary of leading international construction firm Bouygues.

Bouygues Thai will be responsible for the overall building construction including the management of sub-contractors for mechanical, electrical and plumbing installations. Construction began April 1.

According to chief executive officer Hubert Viriot, the 185 Rajadamri is Raimon Land’s most luxurious project to date, which is poised to become a landmark in Rajadamri area. It was, therefore, quite critical for the company to select a contractor with a proven track record in delivering top quality residential projects on time and within the budget.

Scheduled for completion in late 2013, the 185 Rajadamri is Raimon Land’s sixth project in Bangkok,  located on the last remaining freehold land plot on Rajadamri Road. It will feature 268 units for a total value of THB9.6 billion (US$317.4 million), lifting the total value of Raimon Land’s project pipeline to THB28 billion (US$926 million)over the next three years.

“185 Rajadamri is the second project we launched in less than six months,” said Viriot “This demonstrates our strong financial health and long term confidence in the market. With this construction contract now signed and with more than 35 per cent of the project already pre-sold, we can comfortably set our sights on further projects in Bangkok and elsewhere.”

Bouygues is one of the world’s largest construction groups. It has been the force behind several international landmark buildings including The Sail@Marina Bay in Singapore and the SkyCity Marriott Hotel in Hong Kong. In Thailand, Bouygues Thai enjoys a wealth of experience in the construction of Grade A residential projects, and has been a partner for several Raimon Land projects such as The River in Bangkok and the recently-completed Northpoint condominium on Wongamat Beach in Pattaya.

Knight Frank: Dubai the worst performing housing market in the world, Hong Kong the best

Dubai has the worst housing market in the world according to Knight Frank.

Over the past six months, the desperately tumultuous housing markets of Greece, Spain and Portugal have all successfully surpassed Dubai’s rock bottom real estate sector, according to a survey published by property consultancy Knight Frank.

Although global house prices have increased by 2.8 per cent in the last six months, Dubai has seen a dismal decline of 10.1 per cent, compounded by last year’s drop of 6.1 per cent. This decrease is slightly below Jones Lang La Salle’s projected figure of 12 per cent, however it stills demonstrates the lingering frustration of the emirate’s property sector.

In contrast to other nascent markets where capital inflow from the U.S Federal Reserve has propelled investment in property, the decline is severe. Additionally, petrodollars in the Gulf region have failed to boost prices in the Dubai real-estate market.

Hong Kong was the best performing market of the last six months, with an increase of 10.1 per cent and an overwhelming rise 20.1 per cent in the last year. The combined markets of Shanghai and Beijing have also seen an impressive growth of 15.3 per cent in the year.

“In Q2 2010 the proportion of countries in our index recording negative quarterly growth was less than a third at 31%, in Q3 the figure was 35%, in our most recent Q4 figures the proportion is 41%,” said Liam Bailey, Head of Residential Research at Knight Frank. “The impact of ‘hot money’ created by quantitative easing may be dissipating, especially in Asia, where the 30 per cent, 40 per cent, 50 per cent and even higher annual rates of growth, which were common in some Chinese and Indian cities a year ago, have now cooled considerably.”

Jones Lang La Salle expects an additional 25,500 residential units to emerge in Dubai during 2011, further affecting prices. There have been recent pockets of stabilisation, yet the residential market will endure the issue of over-supply, with prices not expected to recover before 2012, allowing emerging, mainly Asian markets, to catch up. However, Knight Frank believe many of these former “hot markets” will see price drops later in the year.

With Dubai’s housing supply showing no signs of waning, it looks like the hard time will continue in the coming quarters.