Overseas Buyers Boost Singapore Property Sales

The latest figures from the Urban Redevelopment Authority (URA) show that sales, excluding Executive Condominiums, soared in July, up almost 42% compared with the previous month.

Three out of the top four best selling projects were located in the suburban areas. They were Parc Centros in Punggol which sold 492 units last month, Parc Olympia located in Loyang at 204 units, and River Isles in Punggol with 86 units.The figures also showed that developers sold 253 units of new homes located in the core central region, 181 units at the city fringe, and 1,509 units in suburban areas last month. Including ECs, URA said a total of 2,067 units of new homes were sold in July.Private home sales in the month of July for Singapore’s Core Central Region (CCR) jumped by almost 80% month on month to reach 253 units.‘As the market prepares for the upcoming Ghost Month, all segments have seen a jump in sales. A notable rise was recorded in the CCR which saw home sales peak at 253. In fact, July’s home sales in the CCR were the highest in the last 15 months, only after April 2011’s sales volume of 306,’ said Tejaswi Chunduri, regional analyst at PropertyGuru.‘This reinforces the fact that location is the most important factor when considering property investment. This also indicates a return in developer investor confidence as investors are on the lookout for strategically located projects,’ she added.Meanwhile the URA has put up new residential sites for sale to provide developers and home-buyers with more choices for private housing with the expectation of creating 1,600 residential units.

Buyers from Indonesia, China and India are boosting demand for private residential properties in Singapore.

A site at New Upper Changi Road is described as being located within an established private housing estate and close to Tanah Merah MRT Interchange station. It is also easily accessible by East Coast Parkway and Pan Island Expressway.

Another at Prince Charles Crescent is located in an established residential area within the central region. It is located near Redhill MRT station and is also a short drive away from the Central Business District, Marina Bay and Orchard Road.And a land Parcel at Woodlands Avenue 6/Woodlands Drive 16 is situated within the HDB Woodlands estate, the site is near to Admiralty and Woodlands MRT stations. It is also easily accessible via Seletar Expressway (SLE).Tender for the residential sites at Prince Charles Crescent, Woodlands Avenue 6 / Woodlands Drive 16 and New Upper Changi Road and will close at 12 noon on 20 September 2012, 9 October 2012 and 16 October 2012 respectively. Selection of the successful tenderer will be based on the tendered land price only.

Why Real Estate Investments Should Start From Property Due Diligence?

Real estate is a great asset to accumulate wealth as it has much broader social meaning in our society.  We as human are dependent on a living space and conditions, no matter how small or big, cheap or expensive it is and that’s the main incentive to invest into this. Our population is growing at a speed that even most pessimistic authorities could not predict that a decade ago, land and properties based in central locations become scarce and competition to purchase them has increased.  More and more sophisticated investors becoming aware of the privileges owning real estate assets and incentives to own more scarce properties will increase over time further.  Real estate is the asset that will survive and drive no matter what global economic conditions we will face: recessions, natural disasters, war or global warming we are still dependent on a living space. On one hand of explaining all this is to draw investor’s attention on scarce properties that are still available on the market and on the other to be vigilant in acquiring them.

The role of due diligence:

The major objective of due diligence is to “prove the lie” by finding worst-case problems with the acquisition property, and if discovered, develop a strategy to mitigate any significant negative aspects that might adversely affect the investment. It is not enough to discover problems; there also have to be solutions. If there are no solutions, or they are inadequate, then the transaction should be terminated.

Managing the process:

Most due diligence activities are performed by independent, third-party authorities focusing on a core areas to be scrutinized (will discuss this below). No matter how big or small the investment deal is some personal due diligence on the asset must be carried upon. In some cases the terms of the Purchase Agreement can be negotiated to compensate the buyer for problems unearthed by the diligence process. This might be in the form of a lower price, a holdback of a portion of purchase funds until a problem can be corrected, a guarantee or warranty by the seller, or some other provision outlined in the Purchase Agreement. Changes in the Purchase Agreement obviously require approval of the seller, so it becomes entirely a negotiated situation.

Due diligence check list:

Due diligence process can be grouped into three core groups (physical, legal and business) on which accuracy and investment decisions will be based on.  Each group consists of a number of subgroups which needs be assessed individually to finalize transparency of the deal. I will discuss some of them very briefly. If you seek for more extended version of due diligence phases please contact HELIOS GROUP.BIZ for consultations, asset management, economics, portfolio management and property investments available.

Group Nr – 1:  Physical due diligence:

1.     Photos- property photos should include not only the subject property but surrounding land users as well. Investor’s attention should fall on actual property look and how it fits into the area, power lines condition, parking congestions and etc.

2.     Maps – master plan of the development or the area is very useful in determining your occupancy levels. This will give a clear view for investor on private and public institutions operating in the area, transport links, population density.

4.     Plans and Specifications – as built building plans and specifications, land use and circulation plans. This information will reinforce your understanding how it was constructed, what materials were in use, capacity layout, and service lines.

5.     Government authority approvals – building planning permission for off plan properties, designated parking locations for the property, Health and Safety compliance certificates. These documents tend to prove the sufficiency of the property to current government standards.

6.     Warranties – especially for new construction units. Completed concrete parts tend to have ability to deform to minor level; however exceptions are common where major cracks may occur on load bearing walls caused by foundation subsidence. Investor should pay close attention to a length and content of warranties for building structural parts and service systems.

Concluding this concise article on due diligence I would like to leave some tips that any investors can apply to his personal due diligence process:

1.     Check the property you have intention to buy on a different time period. Morning, daytime and evening. You need to be sure that’s going around your asset in neighborhood. If you agreed with a seller specific meeting date, arrive a day or two earlier and check the area. Check the buildings around for their condition, graffiti levels, business operating, traffic and noise levels. This will give you an insight what type of tenants will be occupying your property and what possible consequences may be.

2.     Talk to the neighbors in local grocery shop or apartment reception. Ask what are the good signs living in this area, is there any problems during the nighttime, who was living in your property, why they are selling it, what average running costs, what improvements are essential. Try to speak as many different people as you feel you have to. Arrange an appointment in local area council; explain your concerns about wellbeing of the area, what looks good and what needs to be improved.

3.     Carry on your own structural survey; you do not need engineering degree to identify major cracks in wall, foundations overall condition of the building.

4.     When meeting a seller ask for a summary of running costs for entire year or more. You need to compare this data with similar properties to understand how far or how close you are from the benchmarks. If running costs are extremely high, that should alert about poor condition of the service systems.

5.     Never sign any agreement when you are on inspection trip. That’s a trick that some desperate developers may use on reluctant investors. They will create an aura of happiness with wine and music, will try to take your focus away from important items you need to get details before you leave your signature on the contract.

It is important that aspects of future property ownership considered negative could be mitigated in some fashion, either before or after closing of the transaction. Having such a strategy prior to close is an important factor in the acquisition process.

To Be Continued…

Online Property Auction Launches in UAE to Attract Foreign Buyers

Real estate consultants Asteco Property Management is to launch an online property auction website in a bid to lure more international investors to the United Arab Emirates.

Asteco, which has been operating in the UAE since 1985, said it had signed a deal with US based LFC International Real Estate Brokerage to offer the service.

‘The real estate market in the UAE, particularly Dubai, continues to draw a significant amount of interest from institutional and private investors from overseas,’ said Elaine Jones, chief executive officer of Asteco Property Management.

‘Furnishing these financiers with the opportunity to invest in local property through a safe, secure and transparent online auction will undoubtedly make it more convenient and therefore even more popular,’ she explained.

Dubai’s property sector was hit hard by the economic downturn of 2008 with properties in some locations seeing prices fall by up to 60%. The market is starting to show signs of a recovery and interest from foreign buyers, which had all but disappeared, is now returning.

Indeed, figures from the Dubai Land Department shows that foreign buyers bought real estate worth AED22 billion in the first half of 2012.

Foreign buyers are dominated by Indians who bought 2,153 properties valued at AED3.751 billion while Pakistanis came second with a total of 1,814 properties worth AED1.713 billion. British investors bought a total of 1,564 properties worth AED2.529 billion, Iranians bought 1,057 properties worth AED1.515 billion and Russians bought 694 properties at a total value of AED1.438 billion.

Saudis, Americans, Canadians and Jordanians were also prominent investors in Dubai's real estate market, the figures showed.

‘The real estate sector performance is moving from strength to strength over the past two years. The market has been attracting more foreign investors, which reflects the solid national economy and its excellent growth potentials,’ said Majida Ali Rashid, chairwoman of the Real Estate Investment Promotion and Management Centre.

Sultan Al Akraf, senior director of the real estate registration services at the Land Department, said that the figures reflect ‘an ongoing upside trend and a positive growth in the real estate market performance in the emirate’.

New Global Fund Index For Real Estate Investment Performance Being Created

A new Global Fund Index which will measure real estate investment performance of non-listed real estate vehicles on a global basis for the first time is to be created.

The Asian and European Associations for Investors in Non-listed Real Estate (ANREV and INREV) and the National Council for Real Estate Fiduciaries (NCREIF) have agreed to co-operate to create the new index. It will reflect a substantial investment universe and allow the non-listed real estate sector to be analyzed and compared against other asset classes globally in addition to offering valuable new insights for investors and asset allocation. This is a great initiative. A global index will have far reaching benefits for the whole industry, particularly in terms of establishing universal performance benchmarks and standardization, which is a major focus for INREV. It will also help with specific issues such as improving asset liability modeling,ђ said Patrick Kanters, chairman of INREV and managing director of global real estate at APG Asset Management. Well established regional fund indices are already in place at NCREIF and INREV, and an inaugural Asian fund index launched by ANREV in Asia in 2011. The combined Global Index will have a potential of around 670 funds with a total estimated Gross Asset Value of 519 billion. The aim of this important new initiative is to improve transparency of real estate as an asset class and to help our members make more informed investment decisions. It is vital, as an industry, that we work towards being able to make more robust global and intra-regional comparisons, said Mark Roberts, managing director and global head of research at RREEF Real Estate and chairman of NCREIF. According to Peter Steil, NCREIFҒs chief executive officer it represents the logical integration of the organisations in terms of meeting the data collection and information needs of their expanding global activities and to serve as the basis for further collaboration in the future. The majority of large institutional investors already invest globally or have the intention to do so and in addition many are members of our three organisations. It makes sense for us to work towards a global index which we believe will be of great value and use to both our membership base and the wider industry,ђ explained Willem de Geus, Singapore based managing director of Morgan Stanley Real Estate and deputy chairman of ANREV. Global Index Working Group has been formed with representatives from all three bodies to guide the process, with the aim of presenting initial index results at the ANREV Annual Conference in Hong Kong in October, and the NCREIF Fall Conference in Florida in November.

Turkish Delight: Turkey is an Investment Sweetspot

The Turkish equity market has been one of the world’s best performing equity markets with a year-to-date return of more than 30% in dollar terms. Although there may be a short-term correction as the global stock market rally pauses for breath, optimism remains in the medium to long term as the country continues to emerge as a regional economic power.

Ercan Güner, manager of the US$172 million HSBC GIF Turkey Equity fund, managed from Istanbul, said the Turkish economy remained resilient to the global economic downturns witnessed in recent years, benefiting from low levels of public and household debt, favourable demographics and a solid and profitable banking industry.

A decade long disciplined budget policy reduced the debt to GDP ratio sharply. Following a slight increase in 2009, it came down to 42% in 2010 and this is expected to continue to fall in coming years. It is now one of the lowest in Europe. The low level of household debt at only 18% of GDP and an embryonic mortgage market will provide fuel for future growth potential of the Turkish economy. Furthermore, Turkey’s 72 million population is growing by 1.3% per annum. The average age is 28. Only 15% of the population is expected to be over 60 in 2025.

After posting strong GDP growth rates of 9% in 2010 and 8.5% in 2011, Turkey’s growth rate is expected to moderate to 3.6% in 2012, according to the latest survey of consensus expectations released by Central Bank of Turkey (CBT). This would represent a soft landing rather than a return to the “boom and bust” periods that the Turkish economy typically experienced in the 1990s.

Additionally, the country remains somewhat insulated from the economic crisis in Europe. Although Europe is a major export destination, Turkey managed to increase its export performance by gaining market share across EU markets where demand for cheaper quality products has increased. Another important factor behind the strong export performance was Turkey’s increasing penetration to MENA countries on the back of strengthening political and economic ties with the region.  Being highly dependent upon imports of energy and raw materials, the Turkish economy has also benefited from easing oil and commodity prices.

These combined factors have helped to reduce the sizable current account deficit, which reached 10% of GDP in 2011, whilst inflation has dropped to 9.1% from double digits in 2011 and is expected to decline further to 6.7% by year-end according to the CBT’s latest survey.  

“Although the large current account deficit constitutes one of the main risks for the Turkish economy, we remain encouraged by the government’s recently-introduced incentive scheme to tackle the structural and long standing current account deficit problem over the long term and also by CBT’s flexible monetary policy over the short-term,” said Güner.

Meanwhile, despite its strong year-to-date performance, the Turkish equity market remains inexpensive, according to Güner, with valuations trading on Price/Earnings Ratios of 10x, which is close to both the five-year historical average and the broader emerging market average.

US Home Prices and Rents Continue Upwards

Residential real estate values in the United States continued to climb in July, increasing 0.5% from the previous month, the latest index from Zillow shows.

Home values were up 1.2% year on year and 62% of the metros covered in the reports saw home values climb during the month, with only 49 of the 167 metro areas experiencing declines. Of the 30 largest metro areas covered, the Phoenix metro area experienced the largest monthly increase, with home values rising 2.2%. Other large metro areas with notable monthly increases include the San Francisco metro up 1.2% and the Denver metro up 1%. The firms Rent Index shows that last month residential rents also continued to rise, climbing 0.2% month on month and 5.4% year on year. Nationally, rents have increased in six out of the past 12 months, with 70% of metros experiencing rent increases from June to July. Rents have experienced double digit, annual increases in several large metro areas where home values continue to decline, including Chicago at 12.6%, Providence in Rhode Island by 12.1% and Baltimore by 11.9%. Zillow said this is likely due to both continued high foreclosure levels in these markets, which increases rental demand, as well as consumer reluctance to buy when home values continue to fall. ґThis summer, the housing market continued to heal, as home values experienced their eighth consecutive month of increases. Tight inventory levels are leading to bidding wars and multiple offers across the country, said Zillow chief Economist Stan Humphries. ґLooking ahead, we expect to see less aggressive increases in the fall as rising values lift some would be sellers out of negative equity, allowing them to place their homes on the market, he added. The index also shows that foreclosures continued to decline in July, with 5.7 out of every 10,000 homes in the country being foreclosed. That was down from 6.5 out of every 10,000 homes in June.

Chelsea Tops The Property Premiership League In The UK

As the UK Premiership football season gets underway tomorrow (Saturday 18 August) research shows that property around leading club bases has a mixed fortune and outlook.

An analysis of average property values around each Premier League stadium has found that success on the pitch does not necessarily match that of the local property market.

The 2012 Property Premier League report from Zoopla shows that Chelsea is top with average home values around Stamford Bridge currently at £1,467,803.

London based clubs occupy the next three spots on the list with Fulham in second place, where the average property around Craven Cottage is currently valued at £862,250. Arsenal and Queens Park Rangers complete the top four, with average property values of £544,502 and £495,491 near to their stadiums respectively.

Those living close to the Etihad Stadium may be basking in their team’s glory following league victory last season, but local residents might be hoping for an injection of the club owner’s money into the local area.

Property values around Manchester City’s stadium average just £98,088, leaving the defending champions third from bottom in the Property Premier League. Everton are bottom of the property premiership with average home values around Goodison Park standing at just £66,137.

When looking at the performance of local property values over the last season, Queens Park Rangers come out on top with average values of local properties rising 5.84% over the last twelve months. Wigan has had the worst performance over the last season with local property values falling by 8.74% on average.

‘Millionaire footballers may live in some of the country’s most exclusive areas, but average property values around the stadiums in which they make their living are in stark contrast to WAG hotspots like Oxshott, Cobham and Alderly Edge,’ said Zoopla’s Nigel Lewis.

‘For fans of Manchester City, knowing that local property values are lower than the majority of their Premier League counterparts may be somewhat disheartening but diehard fans of Fulham and Arsenal might well be willing to trade a few pounds off their property values in exchange for some silverware in their club’s trophy cabinet,’ he added.