Indian cities top in list of Asia’s property investment hotspots

India may not have previously come up as a potential goldmine for property investors, but real estate in some Indian cities have been creeping up the popularity charts and can now be viewed as some of Asia’s most prime investment real estate.

mumbaipropertyJust like in China, a huge country like India will no doubt have some cities which shine over the others. Mumbai and Bangalore have come up tops in a comparative table of 22 Asian markets. With many multi-national companies setting up regional headquarters or back offices in India, it comes as no surprise that commercial properties are key when it comes to real estate investment in India. The migration of locals from smaller cities and townships into these main cities and business hubs also mean a demand for rental properties are on the rise.

Singapore has fallen from its 11th place to 21st as residential property prices declined for 12 consecutive quarters. Even Tokyo, which topped the list at first place this year, have fallen to 12th place for next year as low interest rates see sellers holding on to their properties despite low vacancy rates. Japan’s declining economy also has a part to play in the market sentiments there.

newyorkapartmentThe mainland Chinese investors are some of the largest players in real estate markets across the globe, but they have begun to turn their attention away from Asia to markets further north such as London and New York. Property prices in China are soaring, and their yearning for foreign footholds and connections have brought them into both established markets in the West and emerging ones in the region.

Commercial property sector facing price and rent squeeze

As the supply of commercial spaces increase, demand has not unfortunately shown a proportionate growth, resulting in a squeeze on prices and rents. Across the board in the third quarter, prices and rental rates have fallen while vacancy rates are on the rise.

tuaswarehouseWhile things in the manufacturing sector has picked up, a bigger turnaround needs to happen before a corresponding uptake in the commercial property industry. The warehouse sector has taken the hardest hit apparently, with a 4.4 per cent fall in rent from Q2. Industrial property prices fell 1.7 per cent, a 7.8 per cent fall in a year-on-year comparison with Q3 of 2015. Rents in the same segment fell 2 per cent in the third quarter. Property experts are expecting similar market reactions for the next few quarters ahead.

kampunbahrushophouseMore rare commercial spaces such as shophouses are however entering the market at more reasonable prices than before. And with selling prices low, investors who might be looking at very long-term prospects of the commercial property market here might be picking off deals. The increase in industrial space – almost 3 million square metres – by end of 2017 will also put further pressure on prices, which could mean a market shift towards the tenants and investors while landlord struggle against the competitive grain.

Buyers on the lookout for Shophouses in Central districts

Property investors, local and foreign, are once again looking at shophouses with renewed interest, in particular freehold conservation shophouses.

kretaayershophouseInvestors’ preferred units are either freehold or 999-years leasehold, and can be fully leased. Some of the more popular units are in the Kreta Ayer Conservation Area of the Chinatown Historic District. Two 3-storey freehold conservation shophouses on 22 and 23 Mosque Street are looking for interested buyers and JLL reports the single land lot to have a gross floor area of around 7,800 sq ft with an indicative price of $23 million.

Centrally located, with the Chinatown and Telok Ayer MRT stations nearby, and a variety of boutique hotels and modern upscale eateries in the vicinity, these shophouses are primed for development and rental. Investors who buy into the shophouses here can no doubt enjoy reaping the fruits of their investments quickly.

mosquestreetshophouseJust a short walk away, CBRE is launching 3 adjoining shophouses at 77 to 80 Amoy Street for tender with an estimated pricing of $64.3 million which comes up to approximately $2,700 psf for the 3-storey units with attics. Up to row at 44, 45, 46 and 49 Amoy Street, OCBC has also put up four 999-year leasehold, 2-storey shophouses with attics for tender, marketed by Cushman and Wakefield. With this flurry or activity in the shophouse front, owners will do well to consider cashing out while the interests are high.

Has Brexit really affected UK property prices?

northcentrallondonNot yet, it seems. Though the recent Brexit event has had investors in a bit of fluster, with the lack of clarity of the horizon ahead for both the UK and other European nations, with many expecting some sort of a price drop in properties in the United Kingdom, the real punch of Brexit has yet to take effect – for the real estate sector at least.

Unlike the 2008 financial crisis, property owners are yet pushed to the point to having to dump their assets haphazardly. The risks for property owners and sellers are not extreme yet, thus most of the re-pricing of properties are in secondary assets, according to property analysts familiar with the UK property market. Britain’s real estate sector has remained strong thus far, with continued interest from Asian investors and buyers. Some of the most recent property investments include a£700 (S$1.2 billion) deal from Singapore’s GIC fund who has joined forces with student housing provider GSA in a student-acommodation property.

grovelaneukSome British funds who may be dealing with investors pull-out due to Brexit may however be looking to sell their property assets and buyers could look towards these properties for possible bargains. Most would however be commercial properties. Residential property hunters may also still be enticed by the weaker sterling and slight discounts.

Prime time for Shophouse Shopping

In the commercial property sector, shophouses have always been a rare commodity, and recently 3 adjoining units from 77 to 80 Amoy Street, have been put up for sale by York Management. Prices stand at around a total of $64.3 million or approximately $2,700 psf.

kretaayershophouseSome of the more popular and highly-priced shophouse units are in Chinatown and the surrounding streets up to Tanjong Pagar such as Ann Siang Hill, Pagoda Street, Neil road, Erskine Road and Boat Quay; as well as the Bugis and Beach road areas. Many of these are in the URA Masterplan‘s conservation areas and thus understandably scarce and priced as such. Joo Chiat, Tiong Bahru and Katong shophouses area also rare and in demand while more available and accessible are units in the Little India, Geylang, Bukit Merah and Jalan Besar. There are also more affordable shophouses in other districts which are not in conservation areas such as in Bedok or Upper Paya Lebar, suitable for office and business use.

jalanbesarshophouseConsidering that recent transactions in the shophouse market hovered around $3,000 to $3,350 psf, these three 3-storey adjoining units coming at $2,700 psf are highly attractive, though if the requirements are for a en-block purchase, the investor will have to think about the overall cost. However, the latter at $64.3 million is still lower than the $66.8 million which the sellers were asking for about a year and a half back.

 

 

Prime Marina Bay site expected to lure aggressive bids

The Urban Redevelopment Authority (URA) has recently released a 1.1 ha prime site at Marina Bay in Central Boulevard. Coupled with news that Asian banks are expected to strengthen their presence in Singapore, this could be an office development site developers hanker after.

Asia Square

Photo credit: www.thehumanbuilding.com

The last time a site at Marina Bay was put up for tender was in 2007 – Asia Square now stands on this site. With the Central Business District location and size of the site taken into consideration, it will no doubt yield a number of plum Grade A offices. Bids are expected to come from mid- to large-sized developers as well as real estate investment funds, at aggressively too, as the site holds the potential for an impressive building with a huge number of units.

Despite the softening commercial sales and rental market, the successful bidder will be likely to have the project completed by 2020, which allows sufficient time for a market upturn. The bid closes on 8 November and investment entities from China and the Middle East may show particular interest. In fact, China’s Nanshan Group is said to be the ones triggering the release of the site as it was originally on the Government’s reserve list and was said to have been released after a developer committed to bidding at least $1.536 billion. But as more buildings are seeing increased levels of commitment from companies looking to stake a presence in Southeast-Asia, developers may have more confidence taking on commercial projects.

Banking on Shophouses

Who would have knew half a century back that the humble shophouse would be worth millions today. As their numbers decreased and rarity grew, so did their value. If a few millions would have gotten you baulking a few years back, the most recent $10.8 million, approximately $3,750 psf, for an Ann Siang road shophouse would have you out of your seats by now.

AmoyStreet ShophouseForeigners and wealth funds are increasingly looking into investment opportunities in these rare commodities, especially those in the central business district (CBD). Shophouses’ popularity amongst the rich and affluent have leapfrogged in the past couple of decades despite rental prices having stayed stagnant. As some of these wealth funds are under pressure to utilise capital and expand portfolios, foreign purchases of shophouses in District 1 and 2 have picked up over the past couple of years. 99-year leasehold shophouses are now going for close to $3,000 psf.

Though the commercial leasing market has been on the downhill slide, tenants are still more willing to fork out say $18,000 for a renovated shophouse unit as compared to the higher rents in Grade A offices or shopping malls. It comes as no surprise then, that 2 shophouses in Pagoda street wold for $24.2 million at around $2,800 psf; and another 6 units in Amoy street went for $20.25 million or $2,411 psf to a Chinese and a Spanish investor respectively. The continued interest in this market segment will continue well into the year and next, as prices have risen by 10% despite a fall in transaction volume last year.

 

Re-zoning Geylang – Fewer residential properties

At first instance, this proposal may not sound promising, but it may actually bring good news for owners of existing condominiums in Geylang. The Urban Redevelopment Authority (URA) has recently announced a re-zoning of residential areas in Geylang for commercial use.

Rezi3TwoWhile this means that there may not be as many private residential properties in the area, the value of those which have already been built may appreciate as offices and businesses eventually move into the area. This proposal by the URA could be seen as mainly to facilitate the balancing of residential and commercial activities in the district. The over-building of residential properties in the red-light district could have a reverse effect and introducing more commercial properties and maintaining a suitable amount of residential properties in the area may in turn increase the rental yields and value of properties in its proximity.

With Geylang’s prime location putting it close to the city centre, Aljunied MRT station and the Singapore Sports Hub, rental yields here are already 1.5 per cent higher than those in other districts. With the area mostly made up of smaller land parcels, the likely tenants would be boutique developers and small businesses, with the possibilities of niche eateries and shops.

Some residents have however raised concerns over this re-zoning move as more commercial spaces here may mean an increase in the illegal and disruptive activities normally associated with this infamous district. What are the pros and cons of purchasing property in Geylang and does one outweigh the other?