Source : The Business Times, March 10, 2009
Home prices said to have fallen 30% in 6 months; investors bet on currency gain
PROPERTY appears to be evolving into a currency play with investors hoping to benefit from the rise and fall of exchange rates.
Australian Property Group (APG), which took out a full-page advertisement in The Straits Times on Saturday to market a luxury condominium in Australia, say they have already sold 60 units of the 90-unit development.
A spokeswoman for APG said that most of the buyers were investors who were either Singaporean or foreigners based here.
She added: 'Australian property is a low risk investment with high returns. With the Australian dollar at the same rate as the Singapore dollar, this is the best opportunity to invest in Australian property as it is 30 per cent cheaper compared to six months ago.'
Perhaps what made it an even more attractive investment was that no deposit was required.
APG said that its managing director Sean Niven, who has more than 20 years of real estate experience and has worked with many developers in Australia, managed to negotiate this package with the developer for this promotion.
APG revealed that the 70 square metre units were sold for about A$396,000 (S$390,000) each but said that more details on the development would only be revealed to potential buyers.
Another Australian property, La Banque in Melbourne by the Brady Property Group, was launched over the weekend and marketing agents HSR International Realtors said: 'We had very good response from the general public, and the developers are very happy with the results.'
HSR executive director (overseas property investments) Donna Lim declined to say how many units were sold but added that interest came from investors looking for a high rental yield and good capital gain with some also buying for retirement or their children's education.
Ms Lim added: 'Demand for rental units are high and the supply low with less than one per cent vacancy rate. With the low Australian currency exchange and higher savings interest benefits, investors are taking advantage of the currency going back up to its normal $1.30 against the Singapore dollar in a projected period of time.'
Another consultant, DST International managing director Doris Tan, says that some of her clients committed to properties in London last year when the pound was higher. As they only had to put down a 10 per cent deposit then, the effective price is less today.
DST closed nine deals at an upscale London property for her high net-worth clients in the second half of 2008. The properties cost about £pounds;850 (S$1,820) per square foot.
'Most of our buyers are savvy investors who bought for medium to long-term investment. There is another group who bought for rental yield of about 5-6 per cent. Another group are those purchasing for their children who study in major cities in New York, London, Sydney etc,' added Mrs Tan.
Mrs Tan says that interest for overseas properties peaked in 2007. 'During the first half of 2008 we had a good run but of course everything came to a standstill after September 2008 when the announcement of Lehman Brothers' collapse saw a 50 per cent decrease in transactions compared to 2007,' she added.
DST said that prime Central London properties have fallen by 20 per cent and, coupled with the falling pound and interest rates at historical low levels, London property does look very attractive.
But no investment is without risks.
Jerry Tan, managing director of Jerrytan Residential which has marketed luxury properties in Australia, says buyers are not just looking at exchange rates.
'There has to be an equivalent correction in capital values too,' he added.
Not all properties are expected to sell well either.
Cushman & Wakefield managing director Donald Han said that only 'exceptional' projects will sell in today's market while most developments might see 10 per cent of units sold, if at all.
There are other potential pitfalls as well. Mr Han said that it is important to understand the tax structures of various markets as capital gains tax may apply.
He also noted that in some countries new developments will be built only after a certain percentage of it has been sold.
However, Mr Han says there has been an increasing number of investors who are scouring key cities for 'distressed assets'.
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