Thursday, October 29, 2009 - Cold Water for Asia Property Market

Also read it here

Published: October 28, 2009

HONG KONG — Almost four years after swelling property prices started to collapse in the United States, giving rise to the most severe global financial and economic crisis in decades, the housing market remains depressed in many parts of the world — except in much of Asia.
Here, property prices have defied the global gloom, soaring this year as buoyant economic growth and low interest rates prompted an inflow of money into apartments and houses — as well as stock markets — across the region.

Earlier this month, a Hong Kong luxury apartment sold by the developer Henderson Land grabbed headlines when it sold for $55.6 million, at a price per square foot that had never before been seen in a city renowned for some of the world’s most expensive housing.
And property developers have been taking advantage of the boom by lining up to tap the financial markets with a wave of stock market listings.
But is the party set to last?
Over the past few weeks, regulators across the region have begun to announce small steps to keep a lid on property prices. Some investors are also now indicating that they are ready to take a break from the frenzy.
This week, Excellence Real Estate, a property developer based in the southern China city of Shenzhen, announced it was putting on ice its planned stock market listing in Hong Kong, which had been expected to raise as much as $1 billion.
Excellence cited “the current market conditions” for its decision — a reference to fading investor appetite for the flood of new offerings that has swamped the increasingly sated stock markets in China and Hong Kong.
Similarly, Yuzhou Properties, based in Fujian, priced its planned Hong Kong I.P.O. at the bottom of its previously indicated range, Reuters reported Wednesday. A person who answered the phone at Yuzhou declined to comment.
To be sure, many analysts still expect property prices to rise next year in many major markets, and half a dozen other property companies are still lining up for initial public offerings. Among them are Evergrande Real Estate Group and Longfor Properties.
But analysts, who have started to worry about an asset bubble in the making, are welcoming the newfound sense of moderation as a healthy development in the market. “I think it’s a good thing that the listing was pulled,” said Paul Schulte, head of multistrategy research at Nomura in Hong Kong. “For several weeks now, there’s been a lot of concern that too much paper is coming onto the market too quickly.”

So far this year, residential prices in Singapore are up 15.9 percent, according to analysts at Macquarie. In Hong Kong, they are up 23 percent, and back at their March 2008 peak. Residential prices in most Chinese cities are at least 15 to 25 percent above the lows of a year ago, Macquarie estimates.
The odd man out in Asia is Japan, whose economy is struggling to emerge from the deep slump it has been in for much of the past two decades. Urban land prices in Tokyo, for example, fell 8 percent in the second quarter of this year from the previous quarter, according to data compiled by Global Property Guide.
One factor driving the property boom in the rest of Asia, though, is low interest rates and ample lending — reminiscent of the origin of the U.S. boom that went bust. “Policy makers in 2009 waved their collective magical wands and, hey presto, turned a financial meltdown into an Asian property bubble,” said analysts at Macquarie in a recent research report.
Another factor driving the boom: Western capital is flowing to Asia in search of better returns, according to Mr. Schulte. “Hong Kong and China are on fire because of a shift in leverage,” he said.

The rally has extended to emerging Asia’s stock markets, which have easily beaten Wall Street and Europe in their performance this year. As a result, Asia has also dominated global I.P.O. activity — though as Excellence’s decision and the lackluster performance of numerous recent debuts show, the oomph has now gone out of that market.
“Things start to get a bit overheated when the amount of new supply gets to about 2 percent of overall market capitalization within six months,” said Ajay Kapur, head of global strategy and economics at Mirae Asset Securities in Hong Kong. “We’re at about 1.5 percent now, so there’s a bit of indigestion creeping in now.”
Macquarie says that much of the property market growth one would have normally expected to see in 2010 has simply been brought forward into 2009 — leaving less room for prices to rally as much next year.
It is a view that is gaining traction.
“We believe the market will normalize next year, but also, that it is unlikely to fall sharply again, despite increased regulatory controls by the authorities,” said Kevan Tsang, an analyst at the ratings agency Moody’s, referring to mainland China’s property market.
Policy makers in China and elsewhere, unnerved by the rapid price rises, have begun to announce measures aimed at taming the market.
Most countries are reluctant to raise interest rates — and mortgage rates — quite yet, for fear of stifling nascent economic recovery. But they have plenty of other tools in their arsenal.
Last Friday, for instance, regulators in Hong Kong raised the down payment required for homes costing more than 20 million Hong Kong dollars, or $2.6 million. In South Korea, the financial regulator plans to tighten regulations on nonbanking finance companies’ lending to households.
“I think we will see more of that sort of thing across the region going forward,” Mr. Kapur said.

Saturday, October 24, 2009

Real Property Gain Tax is BACK!

In the 2010 budget which was announced recently by Najib Razak, the Prime Minister and Finance Minister, it looks like Real Property Gain Tax (RPGT) which was suspended by then Prime Minister Abdullah Badawi in 2007 to boost the property market is now back.

"The Government needs to ensure that the Malaysian tax system is equitable and able to generate revenue for development purposes. In line with this, the Government proposes that a tax of 5% be imposed on gains from the disposal of real property from 1 January 2010. However, the existing tax exemption wll be retained for gifts between parent and child, husband and wife, grandparent and grandchild. This exemption will also be given on disposal of a residential property once in a lifetime."

What does this mean? Speculators, i.e. people who buy to flip once the property is completed are screwed.

Friday, October 23, 2009

Renovations at Pangsapuri Subang Jaya

Following the success of the 1st apartment at Subang Jaya SS15, I was fortunate enough to buy another unit, which coincidentally is directly beneath the 1st one.

Thus, embarking on another journey of renovations and furniture shopping. I am also fortunate enough to come across a very understanding seller who is willing to give me vacant possession when I paid the booking fee. (N.B: However, this arrangement is risky and not encouraged and only possible if there is this element of trust between buyer and seller). A tenant was found also on the same day and we have exactly 1 month to deliver the apartment to the tenant.

Below are some pictures of the apartment before and during renovations. I will post pics after renovations in exactly 1 month to show you the results. Keep posted...

pictures above and below: Bedroom 4 before and during renovation

pictures above and below: Bedroom 3 before and during renovations
pictures above and below: Dining Area before and during - the dining area will become the kitchen

pictures above and below: The Kicthen before and during - the kitchen will become another bedroom with a balcony. It is important this is done carefully as this balcony serves as a fire escape. Safety is first!

pictures above and below: Master bedroom before and during renovations

pictures above and below: One of the 2 bathrooms before and during renovations

The major part of the renovation is the electrical wiring and plumbing. It was discovered during the inspection that the Electric DB was not able to support 4 air-cons. This apartment was constructed almost 20 years ago when homes typically only have 1 air-con (When air-cons were expensive!). The kids rooms can only accomodate fans. The piping was done using Galvanised Iron Pipes which has since rusted and blocked.

The parquet was removed some time ago due to termite infection. I do not like the tiles and tiles are really not suitable for bedrooms. The 1st thing your feet touches when you wake up must not be cold. Over years, one would develop arthritis. Hence, we are going to cover the bedroom floors with termite-free teak wood (laminate... hahaha!).

The door of the master bedroom is also adjusted to give common access to its' bathroom so that the ratio of tenants to bathrooms will be 2:1. The sink will be relocated out of the bathroom so that people who are just applying make-up or brushing their teeth will not get in the way of those with more pressing or desperate agendas!

Keep posted for the results!

Private home prices up 15.8% in Q3; HDB resale prices up 3.6%

Is this real or speculative? And is this effect affecting Malaysian properties?

Channel NewsAsia - Saturday, October 24

SINGAPORE: Private home prices rose 15.8 per cent in the third quarter compared to the second quarter — slightly lower than the initial forecast of a 15.9—per—cent rise made by the Urban and Redevelopment Authority (URA) in early October.

The rise in prices between July and September is a sharp turnaround from the 4.7—per—cent fall seen in the second quarter, and snaps four straight quarters of decline.

According to the URA, non—landed private homes in the city fringe areas saw the highest increase in prices of 18.5 per cent in the third quarter, while the prime districts saw private home prices rising 15.2 per cent. In the rest of Singapore, private home prices climbed 16.1 per cent.

In the second quarter, all three regions had seen a decline in private home prices of between 2 and 5 per cent.

Meanwhile, property prices for office, shop and industrial properties decreased by between 1.2 and 2.1 per cent.

Rentals of private residential, office, shop and industrial properties also fell, with the decline ranging from 0.9 to 4.1 per cent.

URA said that the fall of rental rates for all property types in the third quarter moderated compared to the second quarter.

Meanwhile, prices of HDB resale flats rose 3.6 per cent in the third quarter. Resale transactions increased by about 14 per cent from the second quarter to 11,649 cases.

The Housing & Development Board (HDB) said the median Cash—Over—Valuation (COV) amount among all resale transactions has risen to S$12,000. It said in tandem with this trend, cases transacting above valuation has also increased to 79 per cent.

HDB said that in the next two months, the public can look forward to another 4,000 Build—to—Order flats in Punggol, Bukit Panjang, Sembawang and Dawson.

Together with other sale exercises, as well as flats offered under the Design, Build and Sell Scheme, the total flat supply for 2009 would be about 13,500 units.

HDB said it is monitoring demand and would adjust its building plan accordingly to ensure an adequate supply of new flats.

— CNA/sc

Friday, October 2, 2009

Property Headlines and Sentiments in Singapore

The Straits Times of Singapore reported today that HDB is ramping up flats supplies up to 7000 units over the next 3 months.

At the same time, it is also reported that private home prices have soared 15.9% in the 3rd quarter. This have wiped out half the losses since mid-2008. However, the Straits Times quoted experts warned that this could be due to excessive speculation. The government may intervene if the price rise continue to be unsustainable.

A number of property launches are also advertised including overseas projects such as the Gold Coast, New Zealand, London and our very own D'Tiara. Amanah Raya advertised D'Tiara with a lucrative 10:90 scheme and a dubious 35% guaranteed rental return. Prices for D'Tiara at KL Brickfields area start from SGD228,000. However, Singaporeans may not have a problem choosing large luxurious Auckland City Apartments in New Zealand which comes with a car park starting from SGD225,000. The Kiwis also offer a more realistic guaranteed rental return of 7%.

London's Woodberrypark project is also advertised in the Straits Times with starting prices at GBP199,950. These are 1,2 and 3 bedroom units located in Zone2, 5 minutes from the Picadilly Line. Despite the hefty starting price for a 1 bedroom unit, it should not be far off the reach of many Singaporeans as that price would get the same size unit in central Singapore.

High-Rise Demolition

This old condo at Orchard Road Singapore is in the process of being demolished.

Several tractors are working on it from the top floor and slowly working on their way down. There is no more empty parcels of land in Orchard Road, so the only way to build new is to demolish old.

Thursday, October 1, 2009

Win Win Lose Situation - Guaranteed Rental Return
Posted: Fri Oct 02, 2009 11:55 am Post subject:

cblau wrote:
Visit dua residency the other day and there is this landlord selling his f/f unit 2.3ksft @ 1k psf and willing to guarantee 12k rental per month ... Non furnish units i still see ads asking Rm 850 psf ... Actually this is not a bad place to stay consider the asking price ...

Sinleong: This guarantee high rental rate is an old trick... I hope you guys think about it.

2300sf @ RM1000psf = RM2.3million

Normal price is RM850psf i.e. RM1.955million

Difference is RM345,000.

Rental guarantee is worth RM12k x 12months = RM144,000.00

I can get my friend to sign the tenancy agreement with you. After 12 months, my friend moves out. He gets to stay in Dua Residency for 12 months and I get RM200k more for my sale. WIN WIN LOSE Situation. Haha!

Don't forget, you pay maintenance fees over this 12 months... RM0.40 x 2300sf = RM920/month or RM11,040 per year.