Forest City aims to reach out to International market

As China’s foreign exchange reserves dipped, the authorities have taken steps to stem the outflow of capital by putting restrictions on investments by their citizens outside of China. Their aim is to stabilise the Chinese yuan. And what effect does this have on Malaysia‘s Forest City development? Not as much as it was deemed to have been.

forest-cityPhoto credit: Forest City

The Forest City development in Johor is part of the overarching Iskandar Malaysia master plan. Country Garden, one of China’s largest developers has recently signed a joint venture with Damansara Realty Berhad to develop the mega Forest City project in Johor. Despite having to shut down the showrooms in China, the project is still garnering interest from investors in the region, with many making the effort to visit show flats. Though China’s capital controls might have an impact on the Forest City project, it only drives the developers to market more aggressively in the international and regional markets, in countries such as Myanmar, Vietnam, Dubai, Japan and Taiwan.

8,000 units in Forest City have been sold last year, making it the largest of the 60 projects with the Iskandar Malaysia development. Other China-backed projects include Princess Cove and Danga Bay. The former had sold more than half of its 3,000 units last year.

CountryGardenJohorPhoto credit: Danga Bay at Country Garden

Allaying fears of a possible housing supply glut, Iskandar Regional Development Authority chief executive Ismail Ibrahim has conveyed the need for 500,000 more homes in Iskandar to cater to the projected population of 3 million by 2025. Current housing stock stands at 70,000, with an estimated 20,000 t0 25,000 more being built. Taking into account the 7 to 8 per cent growth rate expected in Iskandar, whether a property bubble develops might be dependent on the various factors associated with economic growth.

Paying more for older resale flats – Aye or nay?

National Housing Minister Lawrence Wong has recently raised concerns about transactions of resale flats with less than 60-years on their lease for above-market values.

The increasing number of such transactions in the resale HDB flat market seem to indicate that buyers are putting aside factors such as age of the flat (HDB flats have a 99-year lease) and favouring others such as location, size of the flat and even the possibility of the blocks qualifying for the Selective En Bloc Redevelopment Scheme (Sers). Under Sers, certain blocks of flats built on or around sites where land has yet to be fully utilised or developed are acquired by the government and demolished. The residents are granted a fixed sum of $15,000 for singles and $30,000 for families in the form of a Sers grant and also guaranteed a replacement flat in new blocks with a full 99-year lease.

KallangWhampoaHDBflat

But the authorities are warning against paying too much for flats which are older than 30 years, or with less than 60 years left on the lease, especially for younger couples.  Many buyers may be under the impression that the value of the bigger resale flats, some in locations which are becoming more developed and hip, will increase as time goes by. Some have purchased rare terraced units such as those in Whampoa or Queenstown and are confident of flipping them within the next half a decade for more. There will be those who will are counting on location to be the prime draw when they finally sell. Older resale flats are usually in mature estates with well-established amenities, schools and transport available immediately. Some buyers could also be in urgent need of a flat and are unable to wait for the ballot and construction wait involved with new Build-to-order (BTO) flats.

Resale condominium prices slide in February

The latest private resale condominium sales figures seem to slightly challenge industry experts’ expectations of the market bottoming out this year.

Marina One ResidencesFebruary’s resale condominium prices fell 0.3 per cent following a 0.1 per cent in January from December last year, indicating further decline in the private non-landed resale property sector. While the numbers could mean the market has yet to bottom out, the slower rate of decline does point towards a state of stabilisation.

The biggest impact was felt in the central region (made up of districts 1 to 4, 9 and 10, the financial district and Sentosa Cove) where a 1 per cent fall was registered following a hopeful 0.5 per cent rise in January. Even in the small-apartments (units 506 sq ft and below) segment, prices fell 0.6 per cent. Resale units outside of the central region however fared better, coming back up top with a 0.3 per cent rise following a 0.6 per cent fall from December.

Oceanfront Sentosa Cove CondoThough market sentiment has been picking up, the overall economic outlook and rising interest rates may not be enough to completely turn the market on its head. Recent tweaks in the property cooling measures may give the industry a little push towards to the direction of recovery, but property analysts are still expecting a 3 to 4 per cent price-decline by end of 2017.

Asia-pacific investors offer high bids for London properties

Investors from Asia have shown renewed interest in London properties as they continue to seek out alternatives to stocks and bonds.

The_Leadenhall_BuildingPhoto credit: The Leadenhall Building

2016 saw Britain’s vote for Brexit resulting in just that, and property sales in Central London were at a 5-year low as uncertainty shrouded the country with effects that trickled down somewhat to the rest of the world. Property owners were wary about selling amidst fear that the Brexit might vote might lower property values. Chinese and Hong Kong investors have however been eager to put their bet on commercial properties in London, spending $2.9 billion on central London offices last year alone. It is not surprising since the weaker pound has lost almost 16 per cent against the Hong Kong since Brexit.

The recent sale of the Leadenhall Building, nicknamed the Cheesegrater Tower, by British Land and Oxford Properties to Chinese developer CC Land, run by the Chinese property magnate Cheung Chung-Kiu, for $1.5 billion has spurred on sales of other properties. Office buildings such as Walkie Talkie and 20 Canada Square in the Canary Wharf financial district have since been put up for sale.

20CanadaSquare

Photo credit: Brookfield Properties

Yields in London have continued to hold its own despite the negative atmosphere surrounding  Brexit and landlords of well-leased commercial buildings in prime locations can still look forward to offers from Asia-Pacific investors on the hunt for long-term investments.

 

Need for clear foreign property ownership laws in Myanmar

New emerging South-east Asian economies,  in countries such as Cambodia, Myanmar and Vietnam, are flourishing and investors have expressed interest in these growing markets as the rest of the world struggles with political and economic stability.

junctioncityyangonBut the demand is now and some confusion in Myanmar’s legal system may be stopping investors from bringing their investment monies into the country. Existing legislation concerning the permissibility of foreign ownership of private condominium units has put an obstacle in developers’ efforts in wooing investors. The uncertainty stems from the lack of clarity in whether the regulations apply to existing apartments and the specifications of a “condominium”. Under current laws, 40 per cent foreign ownership of a development is permitted.

While the Myanmar government scrambles to come up with by-laws, the real estate sector in Myanmar has lost a little of the shine following the bullish market since 2011 when the economy opened up to foreign investors. The residential sector in particular has been quiet over the past year and a half. The Department of Urban and Housing Development has been working hard to come up with the by-laws but they have yet to be sent to the Cabinet for approval.

GOldenCity1

Photo credit: D3 Capital

In the meantime, mid-tier condominium and luxury property prices have fallen 41 per cent and 22 per cent since 2014. That said, rental yields of 8 to 12 per cent can be expected in the current environment, though much more lies in potential yet untapped. Industry players are hoping the new rulings, when implemented, will open the market up to retail buyers from Thailand, Singapore, Hong Kong and China.

Penang raises minimum property price for foreigners

Besides Kuala Lumpur and Malacca, Penang is one of the more vibrant real estate markets within Malaysia. And as the ringgit continues to weaken, Penang’s housing committee has taken the step to increase the minimum price for foreign parties purchasing landed properties in the state from RM2 million to RM3 million (approximately S$948,000).

PenangHouseBungalowThe Malaysian government has recently announced that they were in the process of discussion with regards to raising the minimum floor price for foreigners purchasing Malaysian properties, but Penang has already gone ahead and made the change. Although strata-titled properties such as condominiums will continue to be sold at the minimum of RM$1 million to foreigners, the amount will be thrice that for landed properties.

Properties in Penang have long been favoured by buyers from Singapore, Indonesia and even Japan. Though the Penang branch of the Real Estate and Housing Developers Association has recently recommended that the floor prices for foreigners could be reduced to RM800,000, the state’s Cabinet minister in charge of housing, Mr Jagdeep has made a rebuttal stating the depreciation of the ringgit as a deciding factor.

THeMarinPenangCondoWhile the Federal government sets the minimum purchase price for foreign property buyers, each of the 13 Malaysian states are allowed to adjust the amount to suit their local supply and demand levels. The lowest minimum purchase price set by the Federal government currently stands at RM1 million.

 

Last HUDC privatised last month – Braddell View

HUDC – most who grew up after the 80s will have no idea what these 4 letters mean in relation to the local housing market. In their heyday, the HUDC or Housing and Urban Devleopment Company scheme consisted of selected flats were built  larger, better and fancier than their other public housing counterparts. They were a little like the executive condominiums (ECs) of Design, Build and Sell (DBSS) flats of their day, meant to bridge the gap between the public and private property markets.

BraddellViewMost of the HUDC projects have been privatised over the years, and the era officially drew to a close as the last of the 18 HUDC estate reached privatisation last month. Braddell View, the largest of all the HUDC estates consisted of 918 flats and 2 shops and will join the other 7,731 units which have been privatised since its implementation almost 40 years ago. The scheme ended in 1987 when demand for bigger public housing options diminished due to the availability of private housing which fulfilled the wants and needs of the ‘sandwiched’ classes.

Ironically, many now think that the government could do very well to re-establish a scheme in the same vein as the HUDCs to provide for families hoping to upgrade within the public housing sector, especially as the newer flats are often lacking in terms of space. The privatisation of Braddell View has taken almost 18 years due to the staggered timing of leases of land on which the property stands. What is left for these HUDC estates after privatisation? The rather lucrative possibility of a collective sale, quite naturally.

 

Condominium rents up, HDB rents down

A brieft respite in the rental market presented itself in January and February as increases in condominium rental rates were recorded for 2 consecutive months. HDB rents however slipped slightly.

Draycott8Condominium rents rose 1.1 per cent in February as demand from expatriates is usually high in the first few months of the year. Private residential properties in the prime districts were particularly in demand with a rise of 1.2 per cent in rental rates, while the city fringe and suburban sectors saw a 0.8 and 1.2 per cent rise respectively.

Property analysts are seeing an increase in leasing demand not only due to the influx of a foreign workforce in the beginning of the year, but also because rents are now at a affordable levels and more tenants may be willing to take on larger properties or properties in a more expensive location. Though rents are still 18.1 per cent lower than the peak in 2013, sales volume has increase by 12.6 per cent in comparison to the same period last year.

JurongWestCentralHDBFLatThe number of HDB flats being leased has also increased by 1.2 per cent with 1,477 units rented in February. HDB flat rents have however slipped by 0.8 per cent overall, falling 1.3 per cent in mature estates and 0.3 per cent in non-mature estates. Industry experts are expecting further decline in rents this year, while harbouring hope that 2017 will stabilise the market and bring about a recovery early next year.