A tougher year ahead for overseas property launches

January 26, 2015 11:22 AM SGT

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SINGAPORE: The global launch of the third phase of Battersea Power Station was a star-studded affair, with pop star Sting gracing the event in London on Oct 31, and actress Kate Beckinsale in Los Angeles a week later.

Sting is said to have booked a unit at Battersea Power Station, where the latest launch features luxurious apartments designed by famed architects Norman Foster and Frank Gehry.

In Singapore, a launch party at ME@OUE on the rooftop of OUE Bayfront drew 300 guests.

Nearly half of the 539 units released in the third phase have been sold, says Rob Tincknell, CEO of Battersea Power Station Development, propin an email.

Prices ranged from £495,000 ($1.02 million) for a studio apartment to £3.2 million for a four-bedroom apartment, or an average of £1,600 to £1,700 psf.

The global launch of Battersea Power Station capped a year that saw intense competition in the overseas project marketing scene.

With Singapore’s residential sales wilting, more developers and realtors have been pushed to seek new markets offshore.

Gazing into the crystal ball, Doris Tan, JLL’s head of international residential sales, predicts that “2015 will be a very, very tough year”.

Gavin Sung, Savills’ head of international residential sales for Asia-Pacific, reckons that both Singapore and Hong Kong saw 30% more overseas property exhibitions this year compared with 2013.

While properties in the UK, Malaysia and Australia accounted for 91% of total transactions by value and 76% by number of units sold in 1H2014, there were also projects from Japan, the Philippines and Thailand that were launched.

There will certainly not be a shortage of new London projects being launched in Singapore next year, but that market has become “saturated”, notes JLL’s Tan.

If anything, the number of projects is likely to increase.

Tan anticipates more London projects from Chinese, Hong Kong, Malaysian and Singaporean developers that have invested in development sites there over the past two years.

According to Hanover Private Office in a recent report, based on units at application, permission or under construction stage, Asian developers make up 21% of the London newbuild market.

Many of these projects are largescale regeneration schemes.

A prime example is the £8 billion Battersea Power Station backed by a Malaysian consortium made up of S P Setia, Sime Darby and Malaysia’s Employees’ Provident Fund.

Construction is underway for about 3,000 housing units on the 42-acre site.

Another is Knight Dragon, backed by Hong Kong billionaire and New World Development chairman Henry Cheng Kar-Shun, which is developing 10,000 units on the Greenwich Peninsula.

Singapore-listed developer Oxley Holdings, which purchased a 16ha site at the Royal Docks in November last year, has already launched two phases for sale in 2014.

Called Royal Wharf, the first phase of 811 units in the development is fully sold while the second phase of 800 units is seeing “a steady take-up”.

Chinese state-owned developer, Shanghai-based Greenland Group, recently acquired two sites in Wandsworth and Docklands — both received planning consent for the development of about 600 units each.

According to JLL residential research, the number of units under construction in Central London is almost 22,000.

Project completions are predicted to hit 10,000 in 2015, the highest number since 2008.

Price growth is therefore projected to fall from 8% this year to 6% in 2015.

With the new stamp duty land tax (SDLT) introduced on Dec 4, the capital gains tax effective from next April coupled with the uncertainty about the outcome of the UK elections in May, 2015 is predicted to be “a year of two halves”, according to Alex Newall, managing director of Hanover Private Office.

Fears are that a Labour government will tighten planning rules, which have been relaxed under the Tories to enable the development of desperately needed homes, he says.

In the light of such uncertainty, he sees fewer transactions and less projects launched in the run-up to the elections.

Japan calling In Singapore, investors have also been drawn to properties in Japan.

Tokyo has been ranked the top market in Asia for investment and development, owing to the government’s massive economic stimulus plan that has fuelled property purchases in anticipation of rapidly rising prices, says a Dec 5 report by Urban Land Institute and PwC.

The property market has benefited from a weakening yen and prospects of the Tokyo 2020 Olympics, adds JLL’s Tan.

She sees more upside for the Tokyo property market, and also opportunities in cities such as Osaka and Yokohama, the next two biggest cities in Japan.

Tan also sees the popular ski resort of Niseko in Hokkaido attracting investors.

Other property agencies have also been trying to catch the wave of investor interest among Singaporeans in Japanese property.

Savills has established an international team in Tokyo to look at properties in Japan, says Sung.

Likewise, CBRE has recently set up an office in Tokyo to source for projects that can be marketed in Singapore and Hong Kong, notes Stephen Ho, the firm’s director of international project marketing.

Developers from Singapore, notably City Developments Ltd, have likewise ventured into Japan.

In September, CDL together with a USbased investment firm, acquired a prime freehold land site in Tokyo for $355.5 million from Seiko Holdings Corp.

The 181,000 sq ft site is located in the upscale residential enclave of Shirokane in Tokyo’s Minato ward, where many embassies and offices of multinational corporations are located.

Vietnam relaxes foreign ownership Last month saw Vietnam’s government relaxing foreign ownership rules in a bid to revive a property market in atrophy.

Prior to that, only foreigners married to Vietnamese or those considered to have made significant contributions to the economy are allowed to buy property.

The new rules allow foreigners with a valid visa as well as foreign companies and international organisations operating in Vietnam to purchase houses and apartments.

Foreigners will be allowed to buy property in Vietnam with a lease period of 50 years with the option of extending for another 50 years or, alternatively, a straight 70 years without further extension.

They will also be able to sell their properties 12 months after obtaining their ownership certificate, something disallowed before.

The change in policy could translate into more projects from Vietnam showcasing at weekend exhibitions in Singapore next year.

“It will definitely be on the cards, with the fence coming down for inbound investments into Vietnam, and more projects being activated,” says Savills’ Sung.

He sees demand being “slightly speculative”, as Vietnam’s cost of real estate is still relatively expensive, given that it is priced in US dollars.

Foreign banks are still unwilling to provide financing for foreign property buyers, which means they still have to pay for their purchases in cash.

While interest in Vietnam has increased, Sung does not expect a surge in buying “unless there is an enormous justification for it”.

Closer to home, Bangkok remains an attractive market for Singaporeans.

At end-November, JLL’s Tan launched the Four Seasons Private Residences Bangkok.

The 73-unit luxury residential tower is part of a mixed-use development that includes two hotels.

The property is situated on a 14.2-acre site with a 350m frontage of the Chao Phraya River.

The weekend exhibition attracted a crowd that was curious about the project, with some eventually buying.

Apartment prices at Four Seasons Private Residences start from $750,000.

Is Australia getting too hot? Australia, particularly Sydney and Melbourne, is another hotspot for investors and developers from Singapore.

Developers such as Chip Eng Seng, Far East Organization, Ho Bee, Hiap Hoe, Sim Lian Group and World Class Land have invested Down Under over the past two years.

Recent entrants include Roxy Pacific Holdings, which purchased an office tower in the Sydney CDB for A$90 million ($97.55 million), as well as a consortium made up of Heeton Holdings, KSH Holdings and Lian Beng Group, which jointly purchased a hotel and residential development site in Brisbane for A$150 million in August.

In November, World Class Land announced that it sold 133 out of 193 units (close to 70%) released in its maiden Australia project, a 100-storey residential skyscraper set to be the tallest residence in Melbourne.

Called Australia 108, it contains 1,105 units ranging from studio apartments to a super penthouse of 8,772 sq ft.

The most popular units snapped up by Singaporeans were said to be one-bedroom units priced at $410,000 to $580,000 and two-bedroom units from $520,000 to $898,000.

World Class Land’s parent company, listed jewellery retailer Aspial Corp, had purchased the site in Southbank in January for A$42.3 million.

Meanwhile, Malaysian developer UEM Sunrise launched its maiden project in Melbourne around the same time as Australia 108.

The Aurora Melbourne Central project saw 95% of the units sold within a fortnight of its global launch, according to UEM Sunrise.

The 92-storey tower is a mixed-used development with apartments, retail, offices, a hotel and serviced apartments.

The project is connected underground to the Melbourne Central Station within the CBD.

Australian property developer Crown Group likewise launched its Sydney by Crown project last month, and reported that 95% of the units were snapped up in launches in Sydney, Singapore and Jakarta.

The project was marketed by CBRE in Singapore.

Today, international investors make up 17% of total new homebuyers in Australia, according to a National Australian Bank survey.

Rumblings that foreigners are pricing out local middle-class families in the housing market have been growing louder in recent months.

Last month, a parliamentary committee suggested that the Foreign Investment Review Bureau (FIRB) impose a stiffer penalty on international buyers who flout Australia’s housing rules.

Foreign investors are allowed to purchase residential properties off-plan, but not on the resale market.

Foreigners can resell only to Australians or permanent residents in the secondary market.

Regulators have also called on banks to restrict loans to investors to 10% a year to reduce risks of a property bubble.

Venturing into the US Singapore investors and developers have also flocked to the US.

Listed developer Keppel Land invested US$70 million ($92 million) in a residential and retail property in Manhattan’s Upper East Side in July.

The property will be developed by New York-based Macklowe Properties.

Last October Pontiac Land made its foray into New York when it invested US$200 million in a landmark 1,050 ft tower that will house galleries of the Museum of Modern Art and 145 luxury apartments with views of Central Park.

The tower is designed by Pritzker Prize winner Jean Nouvel.

Next year could see more residential projects in the US being launched in Singapore.

Besides New York, cities such as Los Angeles, San Francisco and Boston continue to be popular with Singaporeans who are keen to invest long term or to send their children there for tertiary education, adds JLL’s Tan.

Asian investors who have invested abroad because of property cooling measures in their domestic housing markets are now confronted with tighter restrictions in these offshore destinations.

“In Australia, the locals are unhappy because they can’t get on the first rung of the housing ladder while the foreigners are snapping up property,” says JLL’s Tan.

“It’s a recurrent theme played out in every country — even in the UK now, just as it was in Hong Kong, and Singapore.

So, we have to identify the right city and the right country for investors to put their money in.” This year has seen more Singaporean investors turned sellers.

“Many of them had purchased properties in markets that saw heavy buying over the last few years — London, Sydney, Melbourne and Perth — and they now want to realise their capital gains,” notes Donald Han, managing director of Chesterton Singapore.

“We will be looking to help these owners.

In the UK, for example, with the upcoming elections and the prospect of higher taxes, some Singaporeans are saying that perhaps it’s a good time to take profit.”

This article appeared in the City & Country of Issue 658 (Dec 29) of The Edge Singapore.

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