Wednesday, October 22, 2008

Property Funds Seek To Reassure Market

Source : The Business Times, October 22, 2008

Three property and infrastructure funds issued statements on Wednesday in a bid to reassure investors of their financial positions.

The Macquarie International Infrastructure Fund Limited (MIIF) said that its businesses are performing strongly in line with management's expectations.

The fund revealed that it has no bilateral dealings with known troubled financial institutions, and the earliest maturity date for borrowings held by underlying businesses stands at 2011.

Facing a possible rating downgrade by Moody's, MacarthurCook Industrial Reit (MI-Reit) said that its income is secured by a long lease expiry profile, head lease arrangements and quality and diversified tenants.

MI-Reit added that it is in negotiations to refinance debt maturing in April 2009. Negotiations should be finalised in January next year.

The MacarthurCook Property Securities Fund also highlighted its commitment to further reduce debt and prudently manage its underlying portfolios.

CMT Puts Works At Three Malls On Hold

Source : The Business Times, October 22, 2008

Trust's fundamentals strong, rents not likely to bottom out

CAPITAMALL Trust (CMT) yesterday said that it will put upgrading plans for some of its properties on hold because of high construction costs.

The Atrium: CMT's third-quarter distributable income rose 14.2 per cent to $60.8 million, from $53.2 million a year earlier, as contributions kicked in from this new acquisition

Singapore's biggest property trust also said that its third-quarter distributable income rose 14.2 per cent to $60.8 million, from $53.2 million a year earlier, as contributions kicked in from new acquisition The Atrium. Q3 distribution per unit (DPU) rose to 3.64 cents a share, from 3.4 cents a year earlier. Net property income rose 13.1 per cent to $86.9 million, from $76.8 million in Q3 2007.

The earnings were in line with expectations, analysts said. The news pushed CMT shares to their highest level in more than two weeks. The stock rose as much as 16 cents or 7.8 per cent to $2.21 before ending the day at $2.11.

Looking ahead, CMT will be cautious, will review new commitments carefully and will not sacrifice liquidity for new projects, said Lim Beng Chee, chief executive-designate of the trust's manager. For now, enhancement programmes that have not started at three malls - Funan DigitaLife Mall, Tampines Mall and Jurong Entertainment Centre (JEC) - have been put off. Works at JEC were projected to cost about $170 million.

The trust's fundamentals are strong as rents are not expected to bottom out in the next few quarters, said Pua Seck Guan, CMT's outgoing chief executive. So far this year, CMT has renewed 289 leases - which make up 15.4 per cent of total net lettable area - at a 9.3 per cent increase to preceding rental rates. There is also a $12.2 million projected increase in net property income from ongoing asset enhancement works.

Analysts agreed with Mr Pua. Singapore's retail sector remains resilient, as evidenced by CMT's latest results, Macquarie Research Equities analysts said in a note yesterday. 'CMT remains one of our top Singapore Reit (real estate investment trust) picks, with growth from active leasing, asset enhancements and acquisitions,' it said. Citigroup also issued a 'buy' call on CMT, citing its steady income stream.

CMT has already secured refinancing for $187.5 million and $80 million of loans due in December 2008 and May 2009 respectively and is in the midst of negotiating refinancing for $673.7 million due in August 2009. Both the trust and analysts are confident funding will be secured.

'CMT exists within the enlarged CapitaLand group, and the group as a whole is well supported by local and foreign banks,' said UOB Kay Hian analyst Jonathan Koh. Earlier this month, CapitaLand said that with its various listed entities, it has raised more than $5 billion of debt year-to-date. In May this year, the trust raised its target asset size to $9 billion by 2010, from an earlier forecast of $8 billion. CMT agreed in May to buy The Atrium along the Orchard Road shopping belt for $839.8 million, boosting its assets to $7.2 billion at June 30.

Yesterday also marked Mr Pua's last results briefing at CMT's helm. He quit in September to pursue personal interests. His resignation is a 'big loss' and could threaten the group's ability to grow in the longer term by acquiring under-utilised assets, said Citigroup analyst Wendy Koh. 'However, his departure is unlikely to affect the rental income stream from existing portfolio and major asset enhancement pipeline for existing properties,' she added.

Mr Lim acknowledged that Mr Pua has left 'big shoes' to fill, but is confident that the management team can fill them.

Property Sub-Sales Net $95m Profits

Source : The Straits Times, Oct 22, 2008

Third-quarter showing still strong but market will soften soon: Experts

PRIVATE home prices may have slid in the third quarter but the sub-sale market was still going strong.

Ninety-six per cent of owners who resold an uncompleted home between July and last month pocketed profits from the deals, according to new data by property consultancy Savills Singapore.

These transactions, officially known as sub-sales, occur when you buy a home and resell it before it is built. They are used as a proxy for property speculation because the owner resells the home without ever living in it.

Only 12 sub-sale transactions out of the 306 that Savills analysed in the quarter incurred a loss, amounting to just under $1 million of red ink. The rest made a total of $95.1 million in gains, Savills said.

This continues the trend in the first half of the year, when 97 per cent of such deals turned in profits. But the profits seen in the third quarter were considerably narrower as home prices started softening more quickly.

Profitable sub-sellers made an average of $323,420 in the third quarter, but this was skewed upwards by a single large deal: a whopping $6.7 million profit from the sale of a 63rd-storey penthouse at The Sail @ Marina Bay.

Excluding this sale, the average gain was $301,784 - almost 40 per cent lower than the average gain in the first half of the year. It works out to an average profit for each seller of about 30 per cent over the purchase price.

Still, 'to be able to achieve such gains in a year when the property market has gone into a standstill is highly commendable', said Mr Ku Swee Yong, director of business development and marketing at Savills Singapore.

But in case would-be speculators become tempted by these gains, other consultants noted that the bulk of these deals probably occurred before the Sept 14 collapse of United States investment bank Lehman Brothers, which caused the financial crisis to take a sudden turn for the worse.

'The real estate market typically lags behind the stock market by six months or more, so we will probably start to see the real effect early next year,' said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

'These profitable sub-sale transactions took place before the market hit the skids. It is extremely risky to go and speculate in the market right now.'

Most sellers who made a profit in the third quarter had originally bought their units in the last two years and benefited from the sharp run-up in prices in the period, said Mr Ku. While values have weakened somewhat this year, they are still generally higher than in 2006.

Sellers who held on to their units for a longer time before reselling them in the third quarter made more gains, Savills' data showed. Even those who had bought a unit as late as this year and offloaded it in the third quarter made an average gain of $98,600.

If they had sold the unit in the first half of the year, however, they would probably have doubled their gain.

The biggest profits of more than $1 million each were for units at The Sail @ Marina Bay, St Regis Residences and Cairnhill Residences.

On the flip side, sub-sale losses for the quarter averaged $76,820 for each loss-making deal. A unit at Watermark Robertson Quay chalked up the biggest loss of $207,552, while units at Soleil @ Sinaran, 8 @ Mt Sophia and One Amber were also sold at losses of more than $100,000 each.

All the losses were for units that had been bought last year or this year, according to Savills' data. Sub-sellers who had bought their units at the peak of property fever, between June and September last year, bled the most.

'In any case, there are always desperate sale cases even during good times,' Mr Ku noted.

The Sail @ Marina Bay had the largest number of sub-sales in the quarter - 19 - with each deal netting its seller an average profit of $1.1 million. There was one loss, of $62,890, for a second-floor unit.

Other projects with more than 10 sub-sales included Parc Emily in Dhoby Ghaut, Park Infinia at Wee Nam, Riveredge in Tanjong Rhu and The Esta in Marine Parade.

But the profits were not just confined to developments in the prime districts.

At Casa Merah in Tanah Merah, 10 sub-sales yielded an average profit of $100,351, while Atrium Residences in Geylang saw four sub-sales with an average gain of $54,556.

Construction Sector In For Tough Times

Source : The Straits Times, Oct 22, 2008

Industry hopes the Govt will resume deferred public-sector projects

THE construction sector will not escape the global financial turmoil but the Government will help cushion an anticipated fall in demand, said National Development Minister Mah Bow Tan last night.

'Accordingly, we must all be prepared to face some tough and challenging times ahead,' he told an industry gathering.

'Fortunately, we have had a good run so the momentum is sustaining us one year and, if we are lucky, another year.'

Domestic construction demand is estimated at $30 billion this year, but it is expected to fall, he said.

The global crisis has not caused any disruption or slowdown so far and progress payments of projects have remained prompt and stable.

'But we still need to be watchful because the situation is very fluid and can deteriorate as the financial crisis feeds into the real economy over the next few months and quarters,' warned Mr Mah, who was speaking at the Singapore Contractors Association's annual dinner.

The financial meltdown overseas has brought rapid changes to the once red-hot construction sector.

While there remains a lack of capacity, raw material prices have already started to come down, said industry experts.

Mr Jon Button, director of Gammon Construction, said: 'There'll be a levelling off of demand for the next couple of years. Quite a few (private-sector) projects are already deferred.'

He added that contractors continued to tender for work.

Association president Desmond Hill told the gathering that they hope to see the Government bring back deferred projects by next year or in 2010 as existing jobs will be coming to completion.

Mr Mah said in his speech the Government is prepared to consider suggestions that it resume deferred public projects.

'It is something that we are in a position to consider and will certainly do so, should the need arise. However, we must consider the timing carefully,' he said.

The Government has since last November deferred $4.7 billion worth of public- sector construction projects to ease the pressure on building costs.

Mr Mah said the Government will monitor the situation closely, taking into account construction demand, contracts awarded and cost trends.

Injecting some of the deferred projects back into the market now, when the availability of skilled manpower, equipment and other resources is still 'pretty tight', will not help, he said. 'It will only drive already high construction costs up.'

But there was a brighter note from Mr Mah: 'Look beyond the gloom...and see whether the slowdown presents an opportunity for the industry to consolidate and strengthen its capabilities after recent years of strong growth.'

The industry, he said, must start preparing to tackle the increasingly challenging business environment, as well as exploit future opportunities and 'continue to stay relevant and remain sustainable'.

URA Rejects Sole Bid For Mohd Sultan Office Site

Source : The Business Times, October 22, 2008

THE Urban Redevelopment Authority has rejected the sole bid - submitted by RSP Architects Planners & Engineers - for a transitional office site in Mohamed Sultan Road, as the price offered was too low. The tender for the site closed a week ago, with RSP bidding $4.65 million.

Based on the 66,482 sq ft site and maximum permissible gross floor area (GFA) of 99,727.5 sq ft, RSP's bid equated to $46.67 per sq ft per plot ratio (psf ppr).

Only one other transitional office site, at Aljunied, has drawn a lower bid - of $38.37 psf ppr in January. This site was also not awarded.

DTZ senior research director Chua Chor Hoon said: 'URA's decision not to award is expected because of the very low and lone bid. The low bid reflects the poor sentiment in the office sector, which is facing weakening demand and substantial supply in the pipeline.'

According to DTZ, island-wide average office occupancy eased 0.6 of a percentage point in the third quarter of this year to 96.3 per cent on a quarter-on-quarter basis.

The average office rent also peaked in Q3, with no rental growth during the quarter, DTZ noted.

On the need for alternative office space, Ms Chua said: 'Transitional office sites are like Executive Condominiums. They have a part to play only during certain stages of a property cycle, when office rents and residential prices rise too much and become out of reach for some occupiers. Now the office sector is weakening and the concern is about falling rents and prices, transitional office sites would not be relevant.'

The rejection of RSP's bid does not bode well for the future of transitional office sites.

'The sale of transitional office sites, which started last year, was a novel idea but has less relevance today,' said Cushman & Wakefield managing director Donald Han. 'The operating environment has changed from one that is of a supply crunch to one of sustainable demand - all within the past 18 months. That being said, for demand to sustain, business costs, such as occupancy costs, should be kept affordable to ensure the viability of businesses.'

Asked to comment, a URA spokesman said yesterday: 'There is an ongoing tender for another transitional office sale site in Mountbatten Road, which closes on Nov 18. The government will be evaluating the market response to recent tenders and the demand for transitional office sites as part of the process of planning the next Government Land Sales programme.'

Construction Demand Set To Fall: Mah

Source : The Business Times, October 22, 2008

Govt may inject public projects that have been deferred if need arises, but care over timing essential

THE construction sector here must be prepared to face tough and challenging times ahead as demand is expected to decline, said Minister for National Development Mah Bow Tan yesterday.

Mr Mah: 'Progress payments of projects have remained prompt and stable'

'The construction sector will also not be spared the turmoil of the financial markets and weakening economic climate,' said Mr Mah, who was speaking at the Singapore Contractors Association Limited (Scal) anniversary dinner last night. 'While the domestic construction demand this year is estimated to reach between $27 billion and $32 billion, it is expected to decline as we go forward.'

Mr Mah also said that industry regulator Building & Construction Authority (BCA) has been monitoring the industry situation closely. 'From the feedback BCA has gathered from developers, contractors and professionals in recent weeks, we have not seen any disruption or slowing down of work progress due to the crisis so far,' he said. 'Progress payments of projects have remained prompt and stable.'

Mr Mah's assurances come as the industry has been hit by negative news, with several projects being pushed back due to high construction costs and a resources squeeze.

In view of the expected economic downturn, there have been suggestions that the government should inject some $4.7 billion worth of public projects that had been deferred earlier to ease demand. Such measures have been adopted in previous economic crises.

In response to this, Mr Mah said that the government will certainly do that if the need arises. However, the timing must be considered carefully, he said: 'Doing so now, when the availability of skilled manpower, equipment and other resources is still constrained, will not help. It will only drive the already high construction costs up.'

Mr Mah also called on builders to exercise greater prudence in managing their financial resources and watch out against over-extending themselves on business risks. At the same time, they should also redouble their efforts to improve their productivity and upgrade their capabilities, so as to be better placed to leapfrog competitors and exploit future growth opportunities, he said. In particular, a greater emphasis on manpower development is needed, he said.

Lower Profits For Property Developers Expected

Source : The Business Times, October 22, 2008

They may have to write down their assets and make provisions

HURT by slowing sales, increasing difficulty in obtaining credit and under pressure to cut home prices, most developers here are expected to announce lower earnings during the current reporting season.

Analysts do not have high hopes for the property sector.

'We can expect to see some drop-off (in earnings) as the rate of launches has fallen off compared to 12 months ago,' said Kim Eng Research analyst Wilson Liew. Keppel Land will report its earnings today.

On Friday last week, GuocoLand, which has been dogged by negative news all year, reported a net loss of $2.8 million for its first quarter ended Sept 30, compared with a net profit of $27.7 million a year earlier.

It attributed the poor result mainly to an unrealised mark-to-market foreign exchange loss.

The chief concern now is that tighter credit and declining capital values in all sectors may force companies to write down their assets and make provisions for land acquired at high prices.

This happened during the crises of 1998 and 2001.

DBS Vickers analyst Adrian Chua, who recently downgraded six property stocks including CapitaLand, City Developments and Ho Bee Investment, said asset devaluation is a concern.

Deutsche Bank analysts Gregory Lui and Elaine Khoo similarly expect continued earnings downgrades on weak sales and average selling prices (ASPs) and the risk of provisions.

'We believe CapitaLand and Allgreen face greater risk of land bank provisions this time around, followed by Wing Tai and City Developments,' the analysts said.

'Keppel Land has not bought anything in Singapore over the past two years, but offshore investments might be riskier.'

All developers except City Developments, which reflects investment properties at cost, also face the risk of revaluation losses against investment properties, analysts have said.

Another area of concern is overseas exposure, which could affect top lines. At GuocoLand, for example, group revenue fell 20 per cent to $153.1 million from a year ago due mainly to lower revenue recognised from development projects in China.

Analysts are split on the effect of weak property markets abroad.

Some say this will lead to falls in revenue, while others believe fundamentally sound developers are now being punished by investors for going overseas.

In an Oct 16 report, Goldman Sachs acknowledged that the real estate market outlook is deteriorating at home and overseas - in markets such as China and Vietnam - for Singapore developers.

'However, we think the market has been too punitive on well-capitalised players with strong overseas operational track records such as CapitaLand and Keppel Land,' said analysts Leslie Yee and Paul Lian.

London Home Buyers Hold Out

Source : The Business Times, October 21, 2008

Outlook dims despite steepest price fall in 16 years; borrowers face higher downpayments, mortgage rates

OLIVER Fisk and his girlfriend have been hunting for a one-bedroom apartment in London for four years and they're further away than ever from getting onto the property ladder. 'We're definitely holding out for a bit longer, especially with the things that are going on with the banks,' the 28-year-old information- technology specialist said. Mr Fisk has moved in with his girlfriend's parents to save for the 21 per cent deposit that most lenders now insist on.

No takers: The rising cost of financing caused UK home sales to fall to the lowest in at least three decades in the three months through September, with the biggest decline in London

The steepest drop in London home prices in 16 years is deterring prospective buyers and worsening the rout in the property market. Higher mortgage rates mean the first-time buyer of a two-bedroom home is spending 12 per cent more per week than a year ago, said Richard Donnell, director of research at property data company Hometrack. And that doesn't take into account higher downpayments.

The number of loans granted to first-time buyers fell an annual 55 per cent in August to 15,600, according to the Council of Mortgage Lenders, whose members provide about 98 per cent of all UK mortgages. That was the lowest since the CML began compiling the data in 2000. The typical loan to such purchasers fell to £106,754 (S$274,414), the lowest since May 2006.

Borrowers took loans that accounted for 84 per cent of the value of the property and 3.18 times their income, down from 90 per cent and 3.39, respectively, in August 2007.

The property slump has been exacerbated by the worst banking crisis since the Great Depression, which has caused demand from the 400,000 people who work for banks, insurers and other financial-services companies to collapse.

Residential property prices in London probably will fall about 14 per cent this year, with the biggest declines in homes costing about £1 million or more, Knight Frank LLP estimates. In 2009, houses and apartments will lose another 11 per cent of their value, according to Knight Frank, Europe's biggest closely held property broker by revenue.

'It is futile at the moment to try and forecast the scale of house-price declines,' said Michael Coogan, director general of the Council of Mortgage Lenders, which has a membership of 158 banks, building societies, and other mortgage lenders, according to its website. 'Some of our members are forecasting up to 25 per cent falls from peak to trough.' The rising cost of financing caused UK home sales to fall to the lowest in at least three decades in the three months through September, the Royal Institution of Chartered Surveyors said on Oct 14. The biggest decline was in London, where brokers and surveyors sold an average of 8.3 homes in the quarter, compared with 11.5 for the whole country.

'We're just ducking and diving,' said Guive Emami, a broker at Savills plc in East London. 'I had a client, a lawyer on £50,000 a year and with an £80,000 deposit saved up, who struggled to find a mortgage.' Mr Fisk, who was living in Clapham, looked at apartments across south-west and was prepared to spend as much as £150,000. He gave up the search at the end of last year and is in no rush to start house-hunting again. 'Things are only going to get worse,' Mr Fisk said.

Prices for apartments and houses across London fell 9.4 per cent in the third quarter from a year earlier, Nationwide Building Society said on Oct 2. That was the biggest decline since 1992. The largest drop was in the borough of Hammersmith and Fulham in west London, where prices fell 13 per cent.

In October, asking prices for homes in London fell 2 per cent from a year ago, according to a report by Rightmove plc. Rightmove is Britain's most-used property website.

London was overtaken by Monaco as the world's most expensive location for luxury homes in the second quarter as banks slash jobs and the prospect of lower bonuses discouraged buyers. Average prices for houses and apartments in London's nine most expensive neighbourhoods fell for the first time in five years in August, an index compiled by Knight Frank showed.

Banks may cut 62,000 jobs in London by the end of 2009, reducing employment in the industry to the lowest level in more than a decade as the credit crisis worsens, the Centre for Economics and Business Research said in an Oct 13 report. Bonuses for this year will probably slump by 60 per cent to £3.6 billion, the CEBR estimates.

HSBC Holdings plc, Europe's largest bank by market value, is cutting about 550 UK jobs and Zurich-based UBS AG said on Oct 1 it would eliminate 2,000 positions from the European investment banking unit.

Banking and financial services in London account for about a fifth of the city's economy and employ 7 per cent of the workforce. London's financial-services industry contributed more than 4 per cent to the UK's £1.3 trillion economy, research firm Oxford Economics estimates.

'The industry drives a lot of the general economic well-being of London,' said John Forbes, head of UK real estate at PricewaterhouseCoopers LLP. 'If business volumes are substantially down and firms are reducing headcount, that has a knock-on effect right across the board.'

Lenders now won't issue a mortgage of more than 79 per cent of the value of the property, compared with 90 per cent a year ago, according to personal finance website Moneyfacts. The number of available mortgages has sunk to 3,123 from 15,599 at the peak of the market in July 2007.

The housing market needs to get worse to end the stalemate between sellers and buyers over price, said brokers covering south-west London, where values jumped fourfold since 1997 on demand from finance professionals priced out of Chelsea and Kensington.

'People are going to start distress sales, but we're not there yet,' said Simon Albertini, managing director of Friend & Falcke, a broker with offices in Clapham, Barnes and Fulham.

Pressure is already mounting as owners rent out their homes while holding out for a better price, creating a glut that has begun to depress rents across London, according to a survey of brokers by the Royal Institution of Chartered Surveyors.

'Maybe it takes four, five or six years for the market to bounce back,' said George Franks, area director for Douglas & Gordon in Battersea. 'Are the people who say they're going to rent out their homes prepared to be a landlord for that long?' Gregory Besterman, a broker in south-west London for 27 years who runs Fulham-based Sullivan Thomas, estimates the busy rental market shows there is 'two years of pent-up demand' from potential buyers.

'As ever, London is first to fall and first to recover,' said Jeff Doble, managing director of Dexters, a broker specialising in Putney, Chiswick and Richmond. 'Demand for property in London's suburbs is relentless and, regardless of the financial sector's woes, by 2012 prices will have recovered lost ground.' If the UK government's £500 billion package, presented on Oct 8, fails to revive mortgage-lending in time, Oliver Fisk and his partner may find themselves back where they were a year ago.

'It got to the point we thought we had to get on the ladder and buy a pokey flat for a ridiculous multiple so we can start thinking about starting a family,' he said. -- Bloomberg

China Wants To Stabilise Property Market

Source : The Business Times, October 21, 2008

(BEIJING) China endorsed local measures to stabilise the real estate market and will work out a nationwide policy based on their results, state media reported yesterday.

More than a dozen cities, including Shanghai, Hangzhou and Nanjing, rolled out new measures to encourage house purchases, such as offering cash subsidies for home buyers and lowering taxes and fees for developers.

'Local governments should be allowed certain freedom in formulating real estate policies,' the China Daily quoted Qiu Baoxing, vice-minister of housing and urban-rural planning, said at a forum in Shenzhen.

'We will issue standard opinions at an appropriate time on which of these measures should be kept and which should be ended,' Xinhua news agency quoted him as saying.

A State Council meeting led by Premier Wen Jiabao on Friday concluded that China should build more affordable housing and reduce taxes on residential property transactions, state media reported.

Real estate investment, the second-largest contributor to the country's urban fixed-assets investment, dropped in recent months due to sluggish sales, falling property prices and developers' funding difficulties. -- Reuters

Berjaya Land Confident Of Target

Source : The Business Times, October 21, 2008

(KUALA LUMPUR) Berjaya Land Bhd expects to sell over RM300 million (S$126 million) worth of properties in its financial year ending April 30, 2009, its chief executive officer Francis Ng Sooi Lin said. He said the company, which inked a RM150 million deal with Hanju Savanna (M) Sdn Bhd yesterday, has already sold close to RM200 million worth of properties, and it will launch three new development projects soon.

He said the company was confident of achieving its target with the projects in line, namely Berjaya Park in Shah Alam, Taman Semutih high-end bungalows and a condominium in Bukit Jalil.

On its overseas projects, Mr Ng said the company has received the licences to start four development projects in Vietnam worth over US$2 billion. He said the firm has commenced work on a property in Thac Ban City, Hanoi but for others like the Vietnam Financial Centre, Dong Lai mixed development and a university township - construction had yet to start.

He said despite the economic slowdown, property development prospects remained good in Vietnam which has a large population. -- Bernama

Sept Gross Mortgage Lending In UK Down 10%

Source : The Business Times, October 21, 2008

(LONDON) Gross mortgage lending fell 10 per cent in September to the lowest level for any month since January 2005, hit by weak demand and the global financial crisis, Britain's Council of Mortgage Lenders said yesterday.

Banks and building societies loaned £17.7 billion (S$45.5 billion) in September, down 42 per cent from the same month last year. It was the lowest gross lending figure for September since 2001, the council said.

'The mortgage market is open for business,' CML director-general Michael Coogan said. 'But weakening consumer demand and ongoing funding restraints will dampen monthly lending figures for the rest of this year and into the first quarter of 2009.'

The gross lending figure for 2008 is expected to be around £255 billion, compared to £363 billion last year, he added.

Britain's economic growth ground to a halt in the second quarter, while inflation and unemployment are rising.

Asking prices for houses in England and Wales fell 4.9 per cent in October, according to separate figures released by property website Rightmove yesterday. -- Reuters

LaSalle Eyes Plum Asia Deals From Troubled Landlords

Source : The Business Times, October 21, 2008

(SYDNEY) LaSalle Investment Management is keen to snap up property bargains in Japan, China and Australia, and is also drawing more investors looking for stable, long-term returns in the region, an executive said yesterday.

The property fund unit of Jones Lang LaSalle unveiled a US$3 billion Asia 'opportunity' fund in August, which will be boosted by borrowing to US$12 billion of spending power.

The fund hopes to pick up buildings on the cheap, as landlords who borrowed heavily are squeezed by a clampdown on bank lending, said David Edwards, Asia-Pacific director for LaSalle Investment Management.

'In about five years' time, people will look back on 2008 and 2009 and think, 'Gee, that was a buying opportunity. Why didn't I do more?',' Mr Edwards told Reuters in an interview.

'We are seeing opportunities in Japan, China and, ironically because of the heightened distress, we're looking at Australia,' he added.

Although investors are demanding higher returns from property, as the global financial crisis heightens risk, deals can be easier than before the turmoil, Mr Edwards said.

'The negotiating power of international equity is much stronger,' he said. 'Maybe, therefore, the price of entry is much lower than it was 12 months ago.'

Several money managers have braved the financial markets crash to raise closed-end funds for Asia property this year, touting their long-term nature.

Merrill Lynch, which is being taken over by Bank of America, said last week it had raised a US$2.65 billion property fund for the region. And MGPA, a firm partly owned by Macquarie Bank, also raised US$3.9 billion this year.

Economic growth forecasts for Asia are being cut, but are still higher than for the West. This month, UBS said it expected 6.1 per cent gross domestic product (GDP) growth for Asia excluding Japan for 2009, compared with 0.3 per cent growth for the United States and Europe.

Mr Edwards said more investors were looking to Asia for 'core' property - top-grade buildings with stable income - as well as the riskier high-return investments the region had attracted.

'I think there's a shift in perception among investors,' he said. 'They still want some opportunistic investing in Asia but they want balance and to get some core as well, as they would in Europe or the US.'

LaSalle and Prudential Property Investment Management (PruPIM) launched an open-ended 'core' Asia property fund at the end of 2006, which has grown to US$2.5 billion and advertises returns of 8-10 per cent. The fund can also make 'core-plus' investments, taking on more country risk or buying buildings that may not yet be full, in the hope of returns of over 10 per cent.

Meanwhile, LaSalle's opportunity fund is keen to buy warehouse and logistics buildings, especially in Japan.

'The logistics market has got many years of growth,' Mr Edwards said. 'Some markets are seeing short-term oversupply, and Osaka is one. But the Tokyo bay is still in good shape,' he added.

In China, assets are likely to spring up as developers have been squeezed by a clampdown on bank lending and other government austerity measures aimed at stamping out property speculation.

Australian companies laden with hefty debt are also unloading properties, with nearly A$15 billion (S$15.3 billion) worth of assets now up for grabs. But property fundamentals are fairly healthy because the commodities boom has driven up demand for office space, although vacancy rates are starting to creep up.

The aggregate vacancy rate across Australia's main business districts rose to 4.9 per cent in the third quarter of this year from 4.2 per cent in the previous three months, according to a LaSalle report issued last week.

'Interest rates have been brought down in Australia, and the pressure on cap rates to rise has diminished,' Mr Edwards said. -- Reuters