The property sector in developing Asian countries got their fair share of the market recovery, with surprising results.

Shanghai skyline

The rise of mainland china
Taking the lead, China's property sales have reached an astounding 4.4 trillion yuan (US$644 billion) with an increase of 75.5% in bank loans last year. Property prices in 70 cities went up an average of 7.8% in December last year alone, the fastest pace in 18 months. But the amazing increase showed up in major cities – new apartments in Beijing and Shanghai jumped by 50%-60 % from 2008 prices.

The Palais de Fortune gated development, which lies just off the expressway north of the city, consists of three-storey opulent French-style villas of about 1,500 square metres per unit. Tagged at about US$5 million, each villa comes with a ‘panic room’ in the event the four security guards for every five villas cannot be summoned in emergencies – a high selling point for the rich and famous.

Peking House, the only development inside Beijing's Central Business District, is developed and constructed by the Forte Group – one of China's 10 top real estate companies. There are 168 townhouses, each ranging from 370 sq metres to 550 sq metres, and residences that are sold for about 50,000 yuan per sq metre. Local celebrities, including actress Li Bingbing and actor Huang Xiaoming, have added glamour to this prestigious address.

In Shanghai, a villa of about 700 sq metres at Forbes Park estate in the Gubei area was recently sold to an anonymous buyer at about 190,000 yuan per sq metre. An all-time high for residential properties in Shanghai, it is almost double the earlier record of 100,000 yuan per sq metre for the Tomson Riviera apartments in Lujiazui financial centre of Pudong district. Developed by Wan Te Yuan, a relatively unknown company, 18 of the 21 villas have been sold and the apartments in the two tower blocks have either been sold or are for rent, with most of the tenants being Chinese investors from Hong Kong and Taiwan, plus a few expatriate executives in multinational firms.

The Sun Ville in Shanghai stands on the high-grade type of holiday villa. Surrounded by hills and water, the development includes 13 isles that are connected to each other by European-style coloured steel bridges. A fully-developed community with all the required amenities, the villas start at 15 million to 40 million RMB yuan; three of the villas have been sold for over 100 million RMB yuan.

Peking House

But with such speedy rebound, surely came cries of a ‘bubble burst’ by analysts worldwide. In addressing such concerns, Premier Wen Jia Bao announced in late December that the Chinese government has taken steps to prevent over-speculation by implementing a number of preventive measures such as a sales tax on second homes and on homes sold within five years of their purchase.

This, however, has not prevented foreign investors from getting a share of the pie.

No stranger to Shanghai property development having arrived about 15 years ago, Singapore's CapitaLand recently announced that it would be buying over the real estate business of Hong Kong-listed Orient Overseas International for US$2.2 billion. The purchase includes seven sites in Shanghai, Kunshan and Tianjin, with about 1.48 million square metres of floor space.

At the same time, Hong Kong companies including Cheung Kong (Holdings) Ltd, Kerry Properties and Hang Lung Properties are continuing with their developments on the mainland. Not to be left out, leading local private developer SOHO China plans to turn around its developments at a faster rate to meet the growing demands.

Meanwhile, China is speculated to replace Japan as the world's second largest economy. The World Bank has forecast that world economy will rise by about 2.7% this year, with the Chinese economy due to grow at a spectacular 9%.

Hong Kong 'Limited'
Last October, just hours after Hong Kong's chief executive Donald Tsang warned that the city might be facing a real estate bubble, one of the city's largest real estate developers, Henderson Land, announced that it had sold a duplex apartment on the 68th floor of the Conduit Road 39 building for a record HK$439 million (US$57 million), or HK$88,000 a square foot, excluding parts of the building shared by all residents. The apartment on Hong Kong Island, near the top of a skyscraper overlooking Victoria Harbour, is a two-storey unit with five bedroom suites measuring 6,157 square feet, with a garden of 340 square feet.

Hong Kong skyline

To meet the demands of a growing market, the Hong Kong government auctioned a series of luxury homes in November last year - The Government Property Agency earned HK$30.2 million from an Elm Tree Towers flat, the most expensive lot sold, for which there were 25 bids. The HK$14,892 per square foot price for this unit was also the highest. Seven other homes at The Beverly Hills, Elm Tree Towers and Baguio Villa were sold for between HK$16.1 million and HK$23.2 million.

Colliers International Hong Kong announced in December last year that the luxury residential sector saw record sales in new properties in the first 11 months of 2009, with mainland China buyers taking up about 40%, followed by upgraders, expatriates and investors. The broker predicts that with very limited new supply, low interest rates and capital inflow for 2010, a rise of about 10% is expected for this year.

A recent announcement by CB Richard Ellis Group Inc (CBRE), the world's largest real estate services firm is more optimistic – fuelled by rich mainland Chinese, the rise is expected to be about 20%. CBRE further reported that luxury home prices soared 51% last year to average an exorbitant HK$18,713 per sq foot!

Meanwhile, local property developer Cheung Kong (Holdings) Ltd, owned by billionaire Li Ka-Shing, predicts a rise of about 15% this year. With home sales in Hong Kong, China and Singapore targeted to exceed HK$100 billion pending government consent for all projects, Cheung Kong looks set for taking the world by storm.

The fact that home prices in Hong Kong are now at an all-time high in 12 years has led the World economic Forum and Goldman Sachs Group Inc to caution against a bubble burst.

But even with the preventive measures recently imposed by the Chinese government to curb speculation, the demand for properties will still be there. With record-low mortgage rates, near-zero interest rates on savings deposits and cash flow from the mainland, land-scarce Hong Kong moves on.

Singapore swings
High-end and luxury home prices have started to climb up this year, and developers and analysts are confident that further growth, even in the mid-end sector, is expected. And among property consultants, the expected price growth is 5%-10% for the most part, although others are predicting an increase of as high as 30%. Sales were also fuelled by the low interest rate climate.

The smooth year began in mid-January as CapitaLand sold 60 apartments in the 165-unit Urban Suites condominium in the Cairnhill area, with prices ranging from an impressive S$2,400 to S$2,700 per sq ft.

Urban Suites

Data released by real estate consultants, Savills Singapore showed that prices of high-end homes in areas including Holland, Shenton Way, Orchard, Bukit Timah and Newton have been climbing since the second quarter of last year.

At the start of 2009, the average unit price of high-end homes dropped to S$1,174 per sq ft in the first quarter from S$1,621 per sq ft in the second quarter of 2008, one property firm said. However, home prices had rebounded and the average unit price of high-end homes towards the end of last year was S$1,543 per sq ft.

Savills is very upbeat about the luxury-home sector as this segment is still lagging in terms of prices compared to the mass and mid-range markets, which have surpassed the previous peak. For the luxury properties, prices are still 25%-30% off the peak.

What with a liberal immigration policy with foreigners now making up about 36% of the population, a relentless influx of well-heeled foreigners into the island state will most likely keep property prices on the upswing.

Vietnam, A gold mine
Experts are predicting that the property market will start to ‘make waves’ towards the later part of the year for investors. And despite the economic difficulties and changing tax policies, developers and investors have managed to come out ahead. In Ho Chi Minh City and Hanoi, construction projects are being sped up to capitalise on improved public infrastructure which include building inter-connecting roads, bridges and highways.

My Phuoc

Foreign investments are also on the rise, with Singapore taking the lead in local real estate. Keppel Land International Limited recently announced their third joint-venture project with Tien Phuoc Company to develop the Dong Nai township, an 11-hectare waterfront residential site for 175 villas along the Saigon River in Ho Chi Minh City. The two other projects are located in District 2 – The Estella, a prime 1,393-unit condominium development and a 30-hectare waterfront residential township developed together with another Vietnamese partner, Tran Thai Co, Ltd.

Following suit is one of Malaysia's property market leaders, SP Setia Bhd. The company teamed up with Becamex IDC Corporation, one of Vietnam's top state-owned conglomerates, to develop the Ecolakes My Phuoc township. Spanning 226 hectares within the MyPhuoc Industrial Park, just 40 km north of Ho Chi Minh City, it will be an eco-friendly sanctuary complete with a town centre catering to the needs of its residents.

Berjaya Land Bhd launched the Canal Park Apartments, an integrated development of villas and condominiums with amenities such as shops, hotels, offices and international schools to cater to the needs of its residents.

Local real estate magnate Chi Thanh Company Limited has introduced The Bong Lai Residential Estate, an exclusive development set on the lakeside of the Bong Lai lake system located in Dien Ngoc, Central Vietnam. Fully-furnished designer villas and country homes, flanked by two 18-hole international golf courses and two natural lakes, await the well-heeled.

But for Vietnam’s emerging property market to grow into a sustainable environment, legal and financial frameworks must be improved to encourage more foreign investments into the domestic property market. Meanwhile, the closure of all gold trading floors by the end of March is expected to lead to several trillion dong from the gold exchanges pouring into the stock and property markets.

Prices set to reach 2007 high again?
According to a survey taken during the Thomson Reuters Global Property Outlook 2010 conference held in December last year, property investors are likely to be more interested in developing Asian real estate markets for 2010 than traditional countries like the UK and the US. Some 85% of the attendees said they expected developing Asian markets like China to deliver total returns in excess of 10% in 2010 as economic growth feeds demand for homes, shops and offices.

With more upbeat notes from several developments around the Asian region, there is also talk that prices of luxury homes are predicted to come back to its 2007 high by the end of 2010 or perhaps next year. According to Singapore's City Developments Executive Chairman, Kwek Leng Beng, this positive outlook is based on the assumption that the world economy will continue to improve. His prediction regarding the increase of high-end prices is not new. Other property consultants have also been tipping an increase in the high-end sector this year. Kwek also said that the opening of the integrated resorts (IRs) in the Sentosa-Marina Bay area will help boost the arrival of many foreigners, especially mainland Chinese and some of them may decide to purchase a home in the country.

On the local front, the experts are also looking at a positive move. CIMB Economic Research said that with a recovery in the world economy, prices should start to rise again this year. Despite the re-introduction of the Real Property Gains Tax (RPGT) at the start of the year, the Malaysian government has set aside more than RM20 million to be spent over the next five years to promote Malaysia as an investment destination under the Malaysia My Second Home programme. REHDA has welcomed this package. And with interest rates remaining low and banks giving out attractive home financing packages, and with a growing supply of properties around the country and beyond, you'll be spoilt for choice.

Sources: bloomberg.com, property-report.com, businessweek.com, channelnewsasia.com, reuters.com, businesstimes.com.sg, nytimes.com, chinadaily.com, dailyfinance.com

Source: http://www.starproperty.my/PropertyGuide/Finance/6083/0/0

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