Tuesday, July 29, 2008

House Prices Falling...Financial Markets Struggling......But US Economy Is Growing?

Source : The Straits Times, July 29, 2008

Is the US in recession? Tough call as GDP grows amid financial turmoil

NEW YORK - COULD this be the first US recession without a decline in economic output?

While house prices in America are tumbling, job losses growing and financial markets struggling with their worst shock in decades, the economy is expanding.

The Wall Street Journal in a report yesterday said economists are weighing the possibility of a United States in recession while enjoying economic growth.

The US economy is likely to show a growth rate of more than 2 per cent when the government gives its first estimate of the second-quarter performance on Thursday.

The country's gross domestic product (GDP) - its total output of goods and services - expanded at a 1 per cent pace in the first three months of this year, thanks to a rise in exports because of the falling US dollar.

This means a recession under the most common definition - two straight quarters of declining GDP - did not occur in the first half of this year.

But the non-profit National Bureau of Economic Research (NBER), which decides whether the US has slipped into a recession, uses a different gauge. It looks for 'a significant decline in economic activity spread across the economy, lasting more than a few months'.

Those gauges include GDP, incomes, employment, industrial output and retail and manufacturing sales, says the NBER's seven-member Business Cycle Dating Committee, which is composed mostly of economists from academic institutions.

The panel can declare a recession, even if GDP remains positive, based on other measures, said the Journal.

Most of those gauges have been especially weak in recent months and some are in outright decline, it said.

The job market, for instance, has been contracting all year and the government is expected to report on Friday that payrolls dropped this month, the seventh consecutive monthly decline.

Harvard University's Professor Martin Feldstein, president of the NBER until this month, told the Journal the US has been 'sliding into a recession' since January, when many monthly statistics peaked.

But a GDP decline is not necessary 'if there is enough other evidence that the economy is contracting', he said.

Whatever the case, the NBER committee will not be making the call any time soon. The 2001 recession went from March to November of that year, but the committee did not declare the start of the slump until November 2001 and did not call the end until 2003.

'We take our time,' Stanford University economist Robert Hall, chairman of the committee, told the Journal. 'We like to get things right.'

S'pore Developer Heeton Sees Overseas Projects Rise To 30%

Source : The Straits Times, July 29, 2008

HONG KONG - SMALL Singapore developer Heeton Holdings Ltd expects to do more property projects with JPMorgan, an executive with the company said on Tuesday.

Mr Danny Low, chief operating officer, said Heeton would push into overseas markets such as Thailand, Vietnam and China. He expects overseas projects to account for about a third of total revenue in 3 to 5 years times, compared to about 10 percent now.

The company's revenue was S$49.25 million in its 2007 financial year, up 6.2 per cent from the previous year.

Mr Low said a surge in Singapore property prices had allowed the company to record a growth margin of 100 per cent on its Lumos residential development in Singapore, where it had sold 19 of out its 53 units.

The company had just signed a deal with JPMorgan to jointly build a 28 apartment buildings in Singapore, and Mr Low was hopeful of more deals with the US investment bank.

'We hope to do more with them and on a bigger scale as well,' Mr Low said. 'JPMorgan's criteria is to work with a developer with a proven track record and they will start with a small project and then come in with more.'

The Singapore developer expects its revenue growth to grow 30 to 40 per cent annually this year and next year, thanks to soaring property prices in its home market.

'It will probabaly be 30 to 40 per cent,' Mr Low said. -- REUTERS

Builder Has Designs On Posh Condo Market

Source : The Straits Times, July 29, 2008

Heeton recruits style-setting design firm yoo for Grange Road apartments

A COMPANY once famed for its wet markets is now rubbing shoulders with one of the world's trendiest firms in a bid to build Singapore's most chic condos.

Heeton Holdings has roped in yoo - a design-focused property firm co-founded by French style-setter Philippe Starck and British developer John Hitchcox - for its 74 Grange Road project.

STARCK SIMPLICITY: A showroom designed by yoo, the 'Prada of the property industry', inspired by its co-founder Philippe Starck. The firm was behind Hong Kong's JIA hotel and has other residential projects in Thailand and Taiwan. -- PHOTO: YOO

It has also recruited investment bank JP Morgan, which will take a 45 per cent stake in the 28-unit condo.

But yoo does not come cheap. The 'Prada of the property industry' designed Hong Kong's JIA hotel and has hooked up with designers like Jade Jagger, daughter of Rolling Stone Mick.

Heeton is paying a flat fee of around $2 million, well over double the standard design fee, for the interior design of the units and the show suite, plus an undisclosed incentive bonus if yoo sells the units.

In return, yoo is offering a cutting-edge concept intended to draw buyers worldwide. 'This will undoubtedly set a new standard here. Our focus is to help developers achieve higher prices,' said yoo's London-based chief executive Chris Boulton. 'We do add value and ensure they sell in tough markets.'

Mr Boulton said that the firm's projects had achieved a premium of 10 to 30 per cent above market value by capitalising on innovative design and the yoo brand to drive more traffic towards the project.

'It's also about making more noise about the project' to raise its profile, he added.

Heeton's chief operating officer Danny Low said it recruited yoo to give the freehold condo an edge over others.

'The Singapore market is very competitive and buyers have become increasingly sophisticated. That is why we have to present a highly differentiated product for our targeted buyers, who are high-net-worth individuals and couples.'

These are the buyers who like spacious two-bedroom units of 1,600 to 1,800 sq ft or the two penthouses of 3,600 sq ft and 4,000 sq ft.

Heeton will meet yoo next week to discuss the design for the project.

This is yoo's first residential design job here and its services will be exclusive to Heeton until the middle of next year. It also has residential projects in Thailand and Taiwan.

The project will be launched late this year or early next year. Construction should start by the first quarter of next year.

Heeton declined to give a break-even price as it has yet to appoint a contractor. It bought Grange Court for $72.8 million or $1,706 psf per plot ratio, excluding development charge, in a collective sale last August.

Knight Frank, the sole marketing agent, helped introduce yoo to Heeton. Yoo's managing director for Asia, Mr Andrew Pang, used to work for Knight Frank.

Developer Collaborates With Starck For Luxury Residential Project

Source : Channel NewsAsia, 28 July 2008

Luxury-end private residences in Singapore are facing price pressures, and one developer hopes to get around that by having a famous brand-name designer work on its project.

Philippe Starck whose design works include the Eurostar

Heeton Realty – a joint venture between Singapore developer Heeton Holdings and JP Morgan – is counting on the collaboration with a company co-founded by well-known French designer, Philippe Starck, to draw in the buyers.

It is hoping that this marketing strategy will help sales at its upcoming development that is located just outside the prime Orchard Road area at Grange Road.

Danny Low, COO & executive director of Heeton Holdings, said: "For people who want to buy a brand, it's like buying a Mercedes Benz. If you want to buy a brand, you don't care what the market is. You want to be the first to own it and you must remember that Philippe Starck is a worldwide-acclaimed name."

The 28-unit development will have its interiors, common areas and landscaping exclusively designed by a company co-founded by Philippe Starck.

The collaboration with the French designer is costing Heeton Realty more than US$2 million. But developer believes it will be able to sell its units at a 15 to 30 per cent price premium over other properties in the area, despite the current slow sales in the high-end residential sector in Singapore.

Heeton Realty said it has seen strong interest from at least two serious buyers at this stage.

The joint venture is also planning for more developments here in the year ahead.

Bryan Southergill, executive director and head of Asia Real Estate, Global Special Opportunities, JP Morgan, said: "There's been some consolidation recently. We've got a global credit crisis unfolding right now.

"But in the long term, with the IR (integrated resorts), gaming, Marina Bay, F1, and everything else Singapore has going for it, there will be strong and stable demand for projects."

Construction on the luxury residential project will begin late this year or early 2009. - CNA/so

K-Reit's Distributable Income Up 173% To $14.2m In Q2

Source : The Business Times, July 29, 2008

K-REIT Asia said yesterday its second-quarter distributable income rose 173 per cent to $14.2 million, from $5.2 million a year ago.

Major boost: K-Reit's better showing was mainly due to income from its one-third stake in One Raffles Quay, which was absent in Q2 2007

The better showing was mainly due to income from its one-third stake in One Raffles Quay, which was absent in Q2 2007. Distribution per unit rose 1.9 per cent to 2.18 cents, from 2.14 cents in Q2 2007.

Net property income for the three months ended June 30, 2008 rose 26 per cent to $9.2 million, from $7.3 million the year before.

K-Reit also saw better rental income, with higher rents achieved for new and renewed leases, as well as improved occupancy. The average gross rental rate for investment property held directly by K-Reit rose to $5.66 per sq ft in June 2008, from $4.28 psf a year earlier.

For the first half of 2008, distributable income rose 169.8 per cent to $25.6 million, from $9.5 million in 2007. DPU for the first six months of the year rose 0.8 per cent to 3.94 cents, from 3.91 cents in 2007.

The trust also reduced its leverage to 27.7 per cent at June 30, 2008, from 53.9 per cent at Dec 31, 2007. Based on a 60 per cent aggregate leverage limit, this provides K-Reit with an additional debt headroom of $680 million to fund acquisitions and for working capital. Based on K-Reit's existing portfolio, there will be no debt re-financing requirement until 2011, the trust said.

For the longer term, the trust's manager is establishing a medium-term note programme to allow the Reit to swiftly tap the debt capital market.

K-Reit is upbeat about its prospects, even though the global economy is slowing. Some 35.4 per cent of its tenants are from the banking, insurance and financial services sectors. Most of these tenants have lease terms of six years or more, and 'provide very stable income going forward', said Tan Swee Yiow, chief executive of the trust's manager.

Mr Tan pointed out that despite the weaker external environment, Singapore's office rents rose slightly in Q2 2008, reflecting the tight supply of space.

'Office rents will be supported by continued demand for prime office space as Singapore transforms itself into a global city and with spin-off multiplier effects from the two integrated resorts currently under construction,' K-Reit said in a filing to the Singapore Exchange.

K-Reit's stock closed unchanged at $1.40 yesterday. The stock has shed 29.6 per cent since the start of the year.

Australand Hit By Revaluation, Writedown

Source : The Business Times, July 29, 2008

CapitaLand's Aussie unit's half-year earnings slide 79% to A$25.6m

PROPERTY revaluation and project writedown have resulted in CapitaLand's Australian subsidiary, Australand, reporting a 79 per cent year-on-year fall in net profit to A$25.6 million (S$33.4 million) for the half-year ended June 30, 2008.

Earnings per stapled security for the period - based on profit attributable to the stapled security equity-holders - was 2.8 Australian cents, down from the year-ago period's 12.9 Australian cents.

Dividends/distribution per stapled security for the half year were maintained at 8 Australian cents.

Australand said that investment property assets had been revalued at June 30, resulting in a net reduction in asset value of A$7.3 million.

It also said that carrying values of residential assets had been reviewed in light of the current market conditions resulting in a writedown of A$34.7 million (net of tax).

The assets are located predominantly in Sydney which Australand says has continued to 'suffer more difficult market conditions with no improvement forecast in the short to medium term'.

Excluding the unrealised losses arising from property revaluations and the writedown to the carrying value of residential development projects, half- year operating profit rose 6 per cent on the prior year to A$67.5 million, said Australand. Earnings per stapled security, on an operating profit after tax basis, were 7.3 Australian cents, up from 6.9.

Australand, which has businesses in various property segments, reported that revenue from continuing operations rose 6 per cent to A$436 million for H1'08 from A$410.1 million for H1'07.

Commercial and industrial development profit before tax (PBT) was A$46.4 million for H1'08, up 93 per cent from A$24.1 million for the year-ago period.

Investment property PBT for H1'08 was A$64 million, up 20 per cent from A$53.5 million for H1'07, excluding asset sales and unrealised gains/ losses in property revaluations.

Residential development PBT for H1'08 of A$34.2 million was down marginally from A$34.3 million for H1'07.

As at June 30, the commercial and industrial business arm had a pre-committed forward workload of 374,000 sq m, down from 424,000 sq m at end-December 2007. Australand attributed the decline to the high level of construction delivered during H1'08.

Australand's investment property business comprises a portfolio valued at A$2.18 billion of 63 income-producing investment properties and a further 10 investment properties under development.

Australand said fixed rental increases within the portfolio average 3.3 per cent for the next 12 months and the portfolio has a weighted average lease expiry profile of 7 years.

For its residential business arm, Australand said that sales volumes were lower compared with the same period a year ago. However, operating margins remained consistent.

Australand had announced a non-underwritten one-for-one renounceable entitlement offer at 60 Australian cents per stapled security to eligible security-holders and CapitaLand has committed to taking up its full entitlement.

Depending on the remaining level of participation, Australand said the entitlement offer will provide between A$302 million and A$557 million of additional capital that will be used to reduce gearing and fund projects in its development pipeline.

Lum Chang Gets $65m From Selling 2 Belmont

Source : The Business Times, July 29, 2008

3 Singapore firms controlled by Indian investors are the buyers

LUM Chang Holdings has sold all 16 units of its newly refurbished 2 Belmont for a total sum of about $65 million, BT understands.

The price is said to be in the $1,600 to $1,700 per square foot range.

Refurbished: The price for the freehold property is said to be in the $1,600-$1,700 per square foot range

Lum Chang bought the property, formerly known as Belmont Gardens, in 2006 for $22 million and has refurbished the apartments. At the time, the asset comprised 15 apartments but Lum Chang had said that it would convert a penthouse into two separate units.

Now, the 16 units in the four-storey freehold property are being purchased by three Singapore-registered companies controlled by Indian investors. Eight units (on the first and fourth levels) were bought for a total $36.36 million by a company controlled jointly by Govind Sahai Gupta of Kolkata and Amit Gupta, a Singapore permanent resident.

Another company controlled solely by Ashok Gupta bought four units on the third floor for a total $14.33 million, while the third company, owned solely by Asha Khatoria of Jaipur - the Indian city famous for gemstones - bought all four units on the second floor of 2 Belmont for a total $14.31 million.

BT understands that 2 Belmont's sale has been inked but has yet to be completed.

CB Richard Ellis is understood to have brokered the deal.

2 Belmont has a site area of about 54,800 sq ft, and is located in a designated Good Class Bungalow (GCB) Area. This means that if the property is completely torn down and the site redeveloped, it can be redeveloped only into GCBs, accommodating perhaps three bungalows at most given the minimum GCB plot size of 1,400 sq m (15,069 sq ft).

'So it made more sense for Lum Chang to refurbish the asset instead of redeveloping it,' an industry observer suggested.

The sellers are entities controlled by Lum Chang.

According to Lum Chang's 2007 annual report, three Lum Chang subsidiaries inked deals in 2006 to sell four units at 2 Belmont to a director of Lum Chang.

'These sales are expected to be completed at any time before June 30, 2008, after the completion of the redevelopment of 2 Belmont. Full consideration for the sale of these four apartment units has been received,' Lum Chang's 2007 annual report said.

Back in May 2006, when Lum Chang bought Belmont Gardens, the company had said that managing director David Lum would buy four units.

Heeton Project Getting The Starck Treatment

Source : The Business Times, July 29, 2008

His firm will design interiors of Grange Rd property

HEETON Holdings and its joint venture partner JPMorgan Global Special Opportunities Group will build the world's first Philippe Starck-branded housing in Singapore.

Mr Starck: His company yoo will not have an equity stake in 74 Grange Road

The project will be built on a site that the partners acquired last year at 74 Grange Road for $72.8 million.

The development, expected to be launched around year-end, will now come under the design, marketing and branding direction of Starck's yoo Inspired by Starck, a company co-founded with UK developer John Hitchcock in 1999.

While yoo has about 25,000 units of branded housing worldwide, it will not have an equity stake in 74 Grange Road. Nor will it be the architect.

Instead, it will provide interior design services and specifications for the interior finishes and fittings of the proposed 28-unit project.

It may provide landscape design, and buyers of the units may be offered furniture design packages for their homes.

The JV partners also hope to ride on yoo's marketing and public relations expertise, as well as draw on its pool of high net worth clients.

Heeton chief operating officer and executive director Danny Low said that yoo's services will cost about US$2 million, including the use of the 'yoo Inspired by Starck' brand.

The named of the development is yet to be finalised.

Mr Low added: 'This will be yoo's first residential design project in Singapore, and yoo's design services for the Singapore market will be exclusive to this project until mid-2009.'

Chris Boulton, CEO of yoo, said that it expects to announce more projects in the region soon. There are already yoo projects in Hong Kong and Phuket, Thailand.

Mr Boulton said that based on earlier projects, yoo developments can fetch 10-30 per cent more than market prices. According to him, yoo branding can help generate faster sales 'and sell in tough times'.

Prices for units at 74 Grange Road have not been confirmed. The break-even price was previously reported to be about $2,500 per square foot.

Chinese Sanguine About Potential Of Beijing Property Market

Source : The Business Times, July 29, 2008

Analysts remain confident it will hold up after the Games

(BEIJING) Chen Jingnian is a confident young man with a mission - ride the wave of Beijing's red-hot real estate market and buy a luxury car before he turns 30.

Riding on development: Completion of new lines and stations will also drive new property growth in less developed areas, says Jones Lang LaSalle report

Tempted by the promise of rich rewards, the 26- year-old quit a university course that laid out a path as an IT engineer to instead become a real estate agent.

'The salary of engineers is fixed, but the growth potential in the real estate agent industry is much bigger,' he said, adding that he planned to buy an Audi A6 worth around 500,000 yuan (S$99,600) within three years.

'Many of our investor clients have two or three apartments ... and a client I met last month holds more than 10.'

And like many analysts and industry observers, Mr Chen is confident that the Chinese capital's real estate market will not deflate following next month's Beijing Olympics - as has been the case with some other Games host cities.

'I will stay in the industry,' said Mr Chen, who focuses on selling apartments on the Olympic Green area with Century 21 Real Estate. 'Maybe I will open my own company in the future.'

Prices in the Chinese capital jumped by 11.4 per cent last year, compared with an average rise of 7.6 per cent in 70 major cities across the country, according to government figures.

New apartments now hit the market at an average price 3.5 times higher than in 2001, when Beijing won the Olympic bid, according to data collected by real estate agency 5i5j, which has more than 300 outlets in Beijing.

Suites near the Olympic venues and new subway lines, the best known projects covered by a US$40 billion government budget to improve infrastructure and clean the city's environment, are the hottest spots.

'The implications of ongoing infrastructure growth for Beijing's urban development and the property market are substantial,' said a report by real estate consultancy Jones Lang LaSalle.

Not only is navigating the city more convenient and less costly, the completion of new lines and stations will also drive new property growth in less developed areas, it said.

However, the fact that one square metre of a new apartment in Beijing costs about the same as China's average annual disposable income had stoked worries a bubble had developed that could burst after the Games.

Sales this year turned sluggish after China raised the downpayment requirement for second homes in 2007, after earlier hiking taxes and interest rates to prevent the market from overheating.

Debate on whether the property market nationwide was about to spiral downwards has been prominent in the Chinese media, particularly after prices in the south led the fall in the second half of last year.

Analysts attributed the current volatility to frenzied speculation during the market's rise, and an increasingly widespread 'wait and see' attitude this year that delayed buyers' activities.

But Beijing's massive population and the fact that the city is in its initial development phase, are fundamentals that will bolster demand and keep post- Games prices stable in the city, analysts said.

'Beijing is a young man in terms of its growth momentum and development stage,' said Zhang Yukun, a senior investment consultant at property agency Centaline China.

'The Olympics is just an accelerator for the city, not an engine without which the growth would stop.'

Even average consumers feel confident about the potential of the city, which has a population of 16.3 million people and is still growing quickly as people from around the country come to live in the nation's bustling capital.

'The demand is strong - Beijing has so many newcomers every year and many young people I know are still living with their parents and need their own house,' said Liu Jing, a 34-year-old export company executive from southern China who has her own apartment in the city. -- AFP

UK House Price Fall Biggest Since '01: Research Firm

Source : The Business Times, July 29, 2008

Average cost of residential property down 4.4 per cent in July from a year ago

(LONDON) UK house values fell by the most in at least seven years in July and the property slump will continue for months, Hometrack Ltd said.

Slump: Banks have raised mortgage rates and limited credit supply, reversing a decade-long property boom

The average cost of a residential property in England and Wales slipped 4.4 per cent from a year earlier to £168,500 (S$361,600), the London-based research company said yesterday in a statement. That's the biggest annual drop since the index started seven years ago. Prices fell 1.2 per cent from June.

'With no immediate end in sight to the current uncertainty, activity levels are likely to remain suppressed with prices remaining under pressure into the autumn,' said Richard Donnell, director of research at Hometrack, in an emailed statement. Prices 'are now back to levels last seen in October 2006'.

Banks have raised mortgage rates and limited the supply of credit, reversing a decade-long property boom in which prices tripled. The Bank of England kept the benchmark interest rate at 5 per cent this month on concerns that inflation is accelerating, even as the economy risks slipping into a recession.

The pound fell after yesterday's report to US$1.9869 from US$1.9906 on July 25. Against the euro, it fell to 0.2 per cent 79.14 pence as of 10.01am in London.

The majority of house-price declines were in southern England. Demand for housing has declined 20 per cent in the past three months, Hometrack said.

However, a shortage of housing supply will still drive prices up by 25 per cent by 2013, the National Housing Federation said in a report yesterday, citing research by Oxford Economics. Average home values will drop 4.4 per cent this year and 2.1 per cent in 2009 before they start rising again, the group, which represents 1,300 housing associations in England, said on its website.

Central bank policy-makers said this month that the housing downturn has 'gathered momentum', minutes of their monthly meeting showed last week. The Monetary Policy Committee split three ways in its interest-rate vote. Timothy Besley favoured an increase to help stem the fastest in inflation in a decade and David Blanchflower supported a cut to ease the economic slowdown.

Britain's economy grew 0.2 per cent in the second quarter, matching the slowest pace since 2001. Unemployment jumped the most in June since the aftermath of the last recession in 1992 as homebuilders and banks cut jobs.

Banks are curbing lending following the collapse of the US sub-prime mortgage market, which so far has cost financial institutions worldwide US$469 billion in writedowns and losses. UK mortgage approvals slumped in June to the lowest level in at least a decade, according to the British Bankers' Association.

Demand for farmland also declined for the first time since 2005 in the first half of the year, the Royal Institution of Charted Surveyors said in a separate report yesterday.

The deteriorating economic outlook has contributed to the pound's 12 per cent decline against a currency basket of Britain's main trading partners, making exports cheaper for overseas buyers.

The weaker pound 'won't prevent the credit crunch, a major housing downturn and a sharp retrenchment in corporate spending from sending the economy into recession', Roger Bootle, chief economic adviser to Deloitte & Touche LLP in London, wrote in a report published on Sunday. -- Bloomberg

Dubai Urged To Improve Property Dispute Resolution

Source : The Business Times, July 29, 2008

Emirate needs to do this to improve its ranking, says JLL

(DUBAI) Dubai needs to improve the way it handles dispute resolution in the real-estate industry if it is to improve its ranking in terms of transparency, said Jones Lang LaSalle Inc (JLL), the property and investment management company.

Internationally-recognised benchmarks that allow investors to compare performance across markets, and more financial instruments for real-estate investors will also help Dubai reach tier two in JLL's transparency rankings, Blair Hagkull, managing director for the Middle East and North Africa, told reporters in Dubai yesterday.

Dubai rose up JLL's bi-annual real-estate transparency ranking faster than any other market in 2008, to reach tier three, or semi-transparent, from tier four, or low- transparent, in 2006.

Dubai, the second-largest sheikhdom in the United Arab Emirates (UAE), became the first place in the Arab Gulf to allow foreigners to own property in 2002, sparking a US$2 trillion Gulf real-estate boom.

'Dispute resolution is a key aspect of what Dubai needs to do to reach tier two,' Mr Hagkull said. 'There also needs to be performance benchmarks and other ways to invest in real estate beyond buying actual properties.'

Dubai is the most transparent property market in the Middle East and North Africa, followed by Bahrain and Abu Dhabi, which are also tier three markets, and Saudi Arabia, which is tier four, according to JLL.

Dubai rental yields fell for a fifth straight month in July as the increase in property prices in the emirate outpaced gains in rents, a UAE-based investment bank reported.

Dubai's residential property prices rose 41 per cent from a year earlier, accelerating from an annual 40 per cent in May, Al Mal Capital PSC said on July 17. -- Bloomberg

High-End Projects Inject Life Into Berlin Property Market

Source : The Business Times, July 29, 2008

New developments offer flats with price tags around 10,000 euros per sq metre

(BERLIN) A new luxury residence going up in the heart of east Berlin promises airy lofts, a swimming pool, spa and a concierge service - the kind of luxury you would expect to find in London or New York.

Area in demand: A huge number of luxury properties are hitting the market at once - about 30 new developments in the Mitte area alone, by some estimates

The 'Fehrbelliner' complex is one of a growing number of high-end developments sprouting up in the German capital, injecting new life into a long-suffering real estate market better known for its graffiti-covered squats and prefab Soviet-style cement constructions.

Boasting exotic names like 'Fellini' and 'Oxford', the new developments offer apartments with price tags approaching 10,000 euros (S$21,432) per square metre, more than double the cost of the city's top offerings just a couple of years ago.

They amount to a high-stakes bet that Berlin, which disappointed so many investors after the fall of the Wall, is finally blossoming into a political and cultural hub capable of luring the affluent from other parts of Germany and abroad.

'The whole concept of luxury living in Berlin is new,' said Roman Heidrich, leader of a new Berlin-based residential property team at Jones Lang LaSalle that was established earlier this year in response to the emerging market. 'All of a sudden we are seeing a large number of high-end projects being built or in the pipeline. It remains to be seen whether they will all find buyers.'

While property markets in European capitals like Madrid, London and Paris boomed in recent years only to cool off in the face of a credit crunch spawned by the US sub-prime crisis, Berlin has confounded investors for nearly two decades by defying broader market trends.

Prices have remained stubbornly low, weighed down by the lowest home ownership rates in all of Germany, a lack of industry, high unemployment and a post-Wall sprawl that has upset the balance between supply and demand.

According to figures compiled by Deutsche Bank analyst Tobias Just, the average price of a flat in Berlin at the end of 2007 was 2,620 euros per square metre, compared to 3,700 euros in Munich, 4,780 in London and 5,352 in Paris.

While Paris, London and Madrid have enjoyed double-digit growth in prices over the past five years, Mr Just puts the rise in Berlin at a paltry 0.2 per cent.

Now this may be changing - at least in Mitte and Prenzlauer Berg, trendy districts in the former east whose leafy streets lined with art galleries, restaurants and cafes are Berlin's answer to New York's West Village and London's Notting Hill.

At the southern edge of Mitte, between the German foreign ministry and the picturesque Gendarmenmarkt square, a new neighbourhood of shiny townhouses and luxury apartments has risen up over the past year.

Maik Uwe Hinkel, a veteran Berlin property developer, says he could have sold each of the 17 flats in the gleaming 'Oxford Residence' there three or four times over. 'This area is very much in demand. We have Spanish, Italian, Polish and French buyers as well as Germans,' he said.

But even he is cautious about the huge number of luxury properties hitting the market at once - about 30 new developments in the Mitte area alone by his estimation.

Perhaps the biggest project of all is the ambitious 'Tacheles Quarter', a massive residential and commercial complex totalling 80,000 square metres that the Fundus Group, builders of Berlin's Adlon Hotel, aim to begin next year.

Smack dab in the heart of Mitte, next to a symbol of Berlin's early post-Wall era - the crumbling Tacheles art centre - the development will boast a 'Flatiron' building to rival the one on Manhattan's Fifth Avenue and a main residence meant to echo the iconic Dakota on New York's Central Park West.

'Every project has an element of speculation to it. In the end you have to go with your gut feeling,' said Thomas Schingnitz, who is overseeing the planning of the venture. 'We have seen how the Mitte area has developed over the past two years. We think the demand is there. We are convinced this project will work.'

Signs are already emerging, however, that Berlin's shift upmarket will be less than smooth and that the city may struggle to remain immune to market forces sweeping other European capitals.

Building of the Fehrbelliner complex, a brainchild of the Orco Property Group, whose glittery sale launch was timed to coincide with the 2007 Berlin Film Festival, ground to a halt in April as swelling costs forced Orco to seek out a new builder.

Andreas Steinbauer, head of sales at Orco Germany, remains confident he will find buyers for the property's 9,000-euro per square metre glass penthouses, with their unrivalled views of the Reichstag and television tower on Alexanderplatz.

But he concedes that the rising cost of raw materials, tighter credit conditions and competition from other new projects in Berlin have combined to cloud the project at the northern edge of Mitte.

'Our idea was to build at the very top end of the market,' said Mr Steinbauer, who hopes construction will resume soon and the complex of 160 luxury apartments, boasting a 'wellness' area and child-minding services, will be completed by the spring of 2010.

'But there is a problem when so many new projects come at once. In other German cities like Munich you can build a luxury building and you know what you're getting into. In Berlin there is uncertainty, a certain amount of risk involved,' he added. -- Reuters

Dubai's Emaar Hit By US Housing Slump

Source : The Business Times, July 29, 2008

'Development properties' forces S$61m writedown

(DUBAI) Emaar Properties PJSC, the Middle East's largest real-estate developer, wrote down 165 million dirhams (S$61 million) related to its US unit in the second quarter, Al Mal Capital PSC said, citing an analyst call.

The company's gross profit included a writedown related to its 'development properties' at John Laing Homes, while goodwill was unaffected, Al Mal said over the weekend.

Any writedown of goodwill in the second half will be offset by increased profitability, the Dubai-based investment bank cited Emaar as saying.

Emaar bought Newport Beach, California-based John Laing in 2006 for US$1.05 billion, about a year after a five-year US housing boom peaked.

The nation is now in its worst housing slump since the Great Depression.

Emaar had goodwill of 2.5 billion dirhams for its US operations at the end of last year.

One third of this amount may be written down this year, Stefan Schurman, analyst at EFG-Hermes Holdings SAE, Egypt's largest investment bank, said in a note issued earlier this month.

The Dubai-based company expanded its land bank in Turkey by approximately 73,500 square metres in the second quarter, at a cost of 400 million dirhams, Al Mal said.

Emaar sold 73 per cent of the international units released in the second quarter, Al Mal said.

Emaar is building the Burj Dubai, the world's tallest tower, and plans to construct six hotels, a theme park as well as 1,200 apartments as part of the Las Vegas-style Bawadi project in the desert outside Dubai.

The company, in which the Dubai government is the largest shareholder, is expanding into countries including India and Egypt to become less dependent on its home market.

The developer's second-quarter profit rose 6.4 per cent as costs fell and revenue stayed almost unchanged. -- Bloomberg

Aussie Sales Of Newly Built Homes Rise 4%

Source : The Business Times, July 29, 2008

Record immigration responsible for spike in demand in June

(SYDNEY) Australian sales of newly built homes rose in June as record immigration stoked demand for property even as living costs increased. Sales of homes advanced 4 per cent from May, the Housing Industry Association said in a report e-mailed to Bloomberg News yesterday. Detached house sales gained 2.6 per cent and sales of apartments surged 15.5 per cent last month.

Building boom: Home sales in New South Wales, Australia's most populous state, jumped 20.2% in June and sales in Western Australia climbed 16%

'Australia is seeing strong demand for housing, fuelled by record immigration,' said Harley Dale, chief economist at the Canberra-based association, which represents building companies.

Sales in New South Wales, the nation's most populous state, jumped 20.2 per cent in June and sales in Western Australia, centre of a resources boom, climbed 16 per cent. Still, total home sales across Australia over the first half of 2008 rose just 0.4 per cent as interest rates at a 12-year high and record fuel costs deterred purchases.

The report is compiled from a sample of Australia's 100 biggest residential builders to provide a leading indicator of housing. -- Bloomberg