NSW home sales soar

New South Wales Premier Nathan Rees revealed yesterday a record number of first home buyers in May showed there had never been a better time to enter the Australian property market.
About 7,300 first home buyers took advantage of government grants and stamp duty cuts, worth around A$178 million (S$207.9 million). It was the third record month in succession, with more than 21,000 first home buyers taking up the offers in that time, Mr Rees said.
‘We’re getting more young families into their first homes than ever before and helping them get on with establishing their lives,’ he said.
The biggest amount of grants, which are worth up to A$24,000 for those buying new homes, were handed out for properties bought in Sydney’s western suburbs.
Mr Rees noted the first home owner grants paid out in May were almost double those paid out in the same month last year.
Source : Business Times – 25 Jun 2009
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Savills Japan eyes debt advisory biz

Savills Japan said yesterday it plans to broaden its business from real estate management and consulting to helping clients restructure their debt as part of a global push into providing financial advisory.
The firm has hired former Citigroup executive Kelly Hayes to head an Asia corporate finance team in Tokyo and is looking to recruit one or two more bankers with experience in handling real estate transactions, Savills Japan CEO Chris Mancini said at the Reuters Global Real Estate Summit.
‘Today, given the very challenging debt environment, having a guy who’s familiar with how the banks operate will help us do our work better,’ he said, adding that parent firm Savills has already set up similar units in New York and London.
Mr Mancini said the corporate finance team led by Mr Hayes, who previously headed real estate corporate finance at Citigroup in Tokyo, will advise Asian clients on debt restructuring, fund-raising and managing non-performing loans.
The corporate finance unit will also help market property-related debt and equity.
Mr Mancini said real estate transactions in Japan could rise sharply in coming years as 95 per cent of commercial property was held by corporates, family offices and wealthy individuals, unlike in many developed countries where property funds were the dominant players.
Source : Business Times – 25 Jun 2009

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Asia developers eye new projects

Asian property firms are beginning to see light at the end of the tunnel and several are positioning for an upturn even as the world economy struggles to recover from its worst recession in decades.
The mood among US and European executives at this week’s Reuters Global Real Estate Summit is glum, but Asian counterparts are more upbeat with some revealing plans for new projects in anticipation of an upturn later this year.
For instance, Chinese commercial property developer SOHO said it has built up a war chest of US$1.9 billion to replenish its land bank and intends to start new projects in Shanghai and Beijing in coming months.
Indiabulls, India’s third-largest listed property developer, aims to launch six to seven residential projects in the financial year ending in March 2010 on the back of an expected recovery in demand.
‘The general mood has been cautious, but there is also optimism. Asian companies in general are in much better shape compared to their peers in other regions,’ said Ayala Land chief financial officer and Asian Public Real Estate Association president Jaime Ysmael.
Spurring the optimism in Asia is a recovery in residential markets, with price cuts drawing buyers in China, Hong Kong and Singapore, where saving rates are high and banks are prepared to lend.
The volume of transactions in these places are close to levels seen during the bull market of 2007 and residential property values have begun to edge upwards as developers such as Singapore’s City Developments raise prices.
Asian property values did not rise as much as in the US and parts of Europe this decade. In dollar terms, property in countries such as the Philippines are cheaper than before the onset of the Asian crisis in late 1997.
Interest rate cuts and government stimulus plans are also helping regional property markets recover.
Singapore residential prices were supported by mortgage rates that were below rental yields, a Bank of America Merrill Lynch report said this week.
‘At the current mortgage rate of around 2.75 per cent, our net cost of carry model implies that prices can rise by 30 per cent before home buyers enter negative carry,’ it said. The bank predicts Singapore home prices will rise 20 per cent next year.
Singapore’s housing market has been hit hard by the downturn, with home prices plunging nearly 14 per cent in the first quarter of this year, the steepest drop in over 30 years, according to government data.
Separately, Nomura said unemployment was stabilising in Hong Kong and forecasts home prices and rents in the Chinese territory will rise by 22 per cent and 11 per cent, respectively, this year.
A poll of 10 analysts conducted in conjunction with the Reuters Global Real Estate Summit showed China home prices are expected to gain an average of 10 per cent between now and the end of 2010.
The outlook for Asia’s office market remained negative but most developers said rents have stabilised after falling sharply in the fourth quarter of 2008 and earlier this year.
Some investors said any pick-up may not be sustainable.
Source : Business Times – 25 Jun 2009

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KSH wins 1st NUS contract worth S$83.4m

It will build 2 residential college blocks, 5 common facility buildings
CONSTRUCTION, development and property management group KSH Holdings has won its maiden contract from the National University of Singapore (NUS), worth $83.4 million.
KSH will build two residential college blocks and five blocks of common facility buildings for NUS University Town.
The contract has boosted KSH’s order book to $438 million, with projects expected to last until 2011.
KSH expects the NUS project to have a positive impact on its finances for the financial year ending March 31, 2010.
Construction work started yesterday and is expected to be completed within 22 months.
KSH executive chairman and managing director Choo Chee Onn said: ‘We are delighted by this first contract from NUS, which will strengthen our public sector experience. Having completed institutes of learning and schools such as Nanyang Polytechnic, Anchor Green Primary School and North Vista Primary School, we consider this an endorsement of the quality work we deliver.’
KSH’s has ongoing projects in the residential, commercial and industrial sectors. Notable completed projects include Tanah Merah Ferry Terminal, Choa Chu Kang Sports Complex and condominiums such as Montview and The Coast.
Mr Choo said: ‘The NUS project is in line with our strategy of maintaining a good mix of construction projects across multiple industry segments, and will be a great boost to our portfolio.’
KSH’s shares closed at 26.5 cents yesterday, up two cents from the previous day’s 24.5 cents.
Source : Business Times – 25 Jun 2009

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Aussie Reits equity might slow growth

Major Australian property trusts have recapitalised and are armed with stronger balance sheets, but some may have raised too much equity at the expense of future earnings growth.
In the first half of 2009, Australian real estate investment trusts (Reits) raised more than A$9 billion (S$10.52 billion) in equity to pare down debt, with banks reluctant to extend loans or demanding sharply higher interest rates amid a global financial crisis.
Many Reits have tapped the market twice in less than a year. There have been fewer asset sales as bidders and sellers disagreed on prices and potential investors found it hard to borrow.
But the massive fund raising has been at the expense of earnings per share, and brokers such as Citigroup see negative earnings growth for major Australian Reits such as GPT Group.
‘Was that better for unit holders for some of those vehicles to have these massively dilutive capital raisings or would it have been better off to sell top quality assets?,’ Darren Steinberg, head of property for Colonial First State Global Asset Management said at this week’s Reuters Global Real Estate Summit.
‘Some groups have done the math very well . . . other groups have taken a lot of money when potentially they did not have to take,’ said Mr Steinberg, who added that some groups will find it difficult to replicate the earnings they achieved in the past.
The capital-raisings came at the expense of earnings growth, analysts say. Citigroup expects core earnings per share (EPS), which is adjusted for non-cash items, for GPT to fall 67 per cent by the end of 2009 from 2008, with a further 12 per cent drop likely in 2010.
Other analysts project the overall property sector to post the biggest fall of more than 15 per cent in EPS among other sectors in the next 12 months.
‘The ones that have big rights issues will massively lag those that did not have, because they gave the upside away,’ said Simon Marais, managing director for Orbis Investment Management.
The core EPS for Stockland Group, Australia’s second-largest property trust, is projected to drop 19 per cent for the year to June and is likely to decline another 24 per cent by June 2010, according to Citigroup estimates.
Mirvac Group is expected to see its core EPS fall 43 per cent for the year to June and a further 24 per cent by the end of fiscal year 2010. Mirvac earlier this month moved to raise up to A$1.1 billion in fresh equity as it announced major asset writedowns and cut its earnings guidance.
As the economy continues to falter and halted development projects limits future rental growth, expectations are growing that mergers and acquisitions will be the next earnings driver.
‘If they’ve over raised, then they may be looking to do M&A opportunities which would then give them earnings growth,’ said Bob Johnston, managing director for Australand Property Group.
Still, Reits may not be ready just yet. In the last nine months, investors have been asked to shoulder the burden of the over-geared acquisitions that came from 2002 through 2006 as Reits expanded aggressively offshore in a bid to boost yields, according to JP Morgan.
‘Reit investors are only now paying for acquisitions made by the Reits up to five years ago,’ the brokerage firm said this month.
There are investors who see things differently. They say share prices are still cheap as the Australian Reit market, the third largest in the world after the United States and France, has faltered in the last six months.
The Australian Reit index is up around 35 per cent from a record low hit in March, but still down some 50 per cent from levels seen a year ago.
Some Australian Reits are still trading at a discount to their underlying assets.
And the fact that Reits have managed to complete their fund raising is a sign of investors’ confidence in Australian property and property trusts, said Ian Mackie, Asia CIO for LaSalle Investment Management.
‘One thing that has amazed me in the last few weeks is the amount of capital the Australian property trusts have been able to raise . . . It’s taken the market by surprise,’ he said.
Source : Business Times – 25 Jun 2009

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Ion Orchard, Orchard Central have healthy lease figures

Ion is 94% leased, Orchard Central is 80% leased, say their developers
ION Orchard, which is due to open in a month, is 94 per cent leased, the mall’s developer, Orchard Turn Developments, said yesterday.
Previously, the developer said the mall was 80 per cent leased and it was in advanced negotiations for the remaining space.
At the other end of Orchard Road, 80 per cent of space in Orchard Central is also committed. Previously, developer Far East Organization said the mall was 65 per cent leased.
Orchard Central is already open to shoppers. Tenants have progressively opened for business since early June. The mall’s soft opening is slated for early July, by which time about 100 shops should be open, Far East says.
As for Ion Orchard, management hopes many of the 333 shops will open in time for the mall’s soft opening on July 21.
‘They (the tenants) are rushing to finish renovations and we hope as many of them as possible will open with us,’ said Soon Su Lin, chief executive of Orchard Turn Developments, which is building the mall. Orchard Turn Developments is jointly owned by CapitaLand and Hong Kong’s Sun Hung Kai Properties.
To give tenants an incentive to open on time, Ion Orchard said in March that they would get 30 per cent rebates off base rents if they opened for business by July 21. The response has been ‘very positive’ so far, Ms Soon said.
Neither Ion Orchard nor Orchard Central have given a recent update on asking rents. Ion Orchard has said previously that its rents range from $20 to $80 per sq ft per month (psf pm). Rents at Orchard Central range from $20 psf pm to more than $70 psf pm, Far East Organization said late last year.
But industry watchers have said that signing rents at most existing Orchard Road malls have since fallen, which means asking rents at Ion Orchard and Orchard Central could also have edged down.
Ion Orchard said yesterday that more than 21 per cent of its 640,000 sq ft of retail space will be dedicated to food and dining – with many casual and fine dining outlets offering local and international fare, plus food and confectionary stores and a gourmet supermarket.
28 restaurants and cafes will be spread over different levels of the mall, with the largest clusters on level 4 for fine dining, and basements 2 and 3 for casual dining. In addition, basement 4 will feature a food hall, with 80 stalls offering a range of cuisines for all tastes.
Ms Soon said that Ion Orchard remains on the lookout for suitable retail and F&B concepts for the 6 per cent of space that has yet to be leased.
Source : Business Times – 25 Jun 2009

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Boom in resale homes

THE mini boom that started in the sale of new flats has now spread to the resale homes market, with transactions rocketing 71 per cent in the second quarter.
Sellers have quickly become attuned to the unexpected resurgence in demand and are jacking up asking prices, according to consultants Jones Lang LaSalle.
Much of the demand is coming from HDB upgraders who are still able to get reasonable prices for their flats, allowing them to move up the housing ladder.
The activity in the resale market follows strong sales of new private homes. Levels have exceeded 1,000 units every month since February compared with a monthly average of 330 units last year. Prices are also showing resilience amid the downturn, with resale prices beginning to rise in all categories.
The property sector rallies seem to contradict prevailing economic realities, industry experts acknowledge. DTZ’s head of Southeast Asia research, Ms Chua Chor Hoon, told a property seminar yesterday that it is too early to tell if the Singapore market is on its way to recovery: ‘Unlike Hong Kong, we don’t have a China behind us.’
Jones Lang LaSalle’s head of research for Southeast Asia, Dr Chua Yang Liang, told The Straits Times: ‘My concern is that the price rise in the resale market is not supported by economic growth or personal income growth.’ It is instead largely backed by money earned in the previous bull run, which is not sustainable, he said.
Resale demand, said Jones Lang LaSalle, is largely for finished projects, driven by the need for immediate occupation and good rental yields. Prelimary second-quarter estimates show HDB upgraders accounted for 46 per cent of resale deals, up 11 percentage points from a year ago.
HDB prices have not fallen much, so owners can still sell at attractive prices and upgrade to a private home. The demand has pushed up resale prices, even though affordability remains key.
While prices of freehold units were down 14.6 per cent on a per square foot (psf) basis in the second quarter, new mass market home prices were up nearly 7 per cent, said a CBRE Research statement yesterday. Subsale prices of 99-year leasehold apartments rose by 22 per cent in the second quarter.
When compared with prime market sectors, the mass market segment shows the highest rebound, said Jones Lang LaSalle. Average resale prices were up 9.4 per cent to $580 psf in the second quarter compared with the first quarter.
They are now 49 per cent above the low point of the second quarter of 2005 but remain about 17 per cent below the first quarter peak last year.
Average resale prices of prime luxury homes rose 7.8 per cent from the first quarter to $1,800 psf in the second quarter. But this is a fall of 45 per cent from the second quarter of 2008.
Some buyers are increasingly more willing to commit as they believe this discount is sufficient, said Jones Lang LaSalle. For instance, resale deals at Ardmore Park were done at an average of $2,146 psf in the second quarter compared with one deal at $1,976 psf in the first quarter.
Some analysts warn of too much exuberance given the ample supply and falling rents but others are more positive. A recent Credit Suisse report said that while new homes sales may slow, the resale market is likely to pick up the slack. An earlier UBS Investment Research report highlighted the rise in resale deals as evidence of sustainable recovery in the physical property market.
Source : Straits Times – 25 Jun 2009

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