US-China trade spat, strong currency, rising interest rates could hurt more than expected A perfect storm of rising interest rates, a strong currency and trade war blues could be circling Hong Kong, and preparations for the worst are in order so the city can ride out the choppy waters. To set the context, Hong Kong's economy has had a strong showing - its economy outperformed forecasts to grow 3.8 per cent year-on-year in 2017. The growth was just 1.9 per cent in 2016. In the first quarter of this year, the economy continued on its upbeat momentum, clocking 4.7 per cent growth year-on-year and the government was bullish in its May forecast, estimating the growth rate to be 3 to 4 per cent this year despite concerns over a trade war between the United States and China. Many analysts remain relatively upbeat, believing the strong balance sheet will help Hong Kong weather the headwinds in the second half of the year - and that may well be true. But the combination of an impending interest rate hike and a strong Hong Kong dollar could end up hurting more than expected.
The real estate industry's business sentiment plunged after the latest round of property cooling measures, but the outlook of the services sector continued to hold firm even as manufacturing optimism waned. For firms in the services sector, a net weighted balance of 9 per cent expect more favourable business conditions, up marginally from the 8 per cent recorded in the previous survey. The net weighted balance is the difference between the proportion of optimistic and pessimistic firms. Real estate was the only industry within the services sector where firms felt that business conditions for the rest of the year would be less favourable, with a net weighted balance of -13 per cent compared to 9 per cent a quarter ago. In particular, real estate developers expect recent property cooling measures including the Additional Buyer's Stamp Duty and Loan-to-Value limits to slow down the property market.
Private home price increases to moderate rest of the year
The property cooling measures will tame the upswing in private residential prices in the first half of the year and moderate growth in the rest of the year, but as the pipeline of units eases in the near term, rentals and occupancy rates will find firmer footing, analysts said. Private residential prices in Q2 rose 3.4 per cent, its fourth straight quarter of increase. Transaction volumes soared to a five-year high, according to second-quarter real estate statistics released on Friday by the Urban Redevelopment Authority (URA). With that, private home prices rose by a cumulative 7.4 per cent in the first half of 2018. Landed properties led the way by rising by 4.1 per cent, compared with the 1.9 per cent increase in the previous quarter, while prices of non-landed properties rose by 3.2 per cent, compared with the 4.4 per cent increase in the previous quarter.
SP Setia moved 50 of the 80 apartments launched at Daintree Residence over the weekend, in the private property market's first new launch since latest cooling measures kicked in earlier this month. The first phase of the 327-unit Daintree's launch achieved an average selling price of $1,710 per sq ft (psf), the developer told The Business Times on Sunday, with two-bedders making up the bulk of apartments sold, followed by three-bedroom homes. The price tag at Daintree was slightly under the S$1,800 psf that Mr Neo quoted ahead of the launch. But that's not to say that the developer is holding a fire sale. Next-door neighbour The Creek @ Bukit sold out for less last year, at S$1,630 psf. Malaysia's SP Setia snagged the Toh Tuck Road site in a government tender last year at S$265 million, or S$939 psf ppr. The decision to hold back the rest of the units could reflect the expectation that rivals will go in with higher prices, as the nearby Goodluck Garden condominium was sold en bloc at S$1,210 psf in March.
The Albracca condo at Meyer Road was granted a sale order by the High Court on Friday afternoon, following proceedings last month to decide on the fate of its collective sale. The 11-unit development was sold for S$69.1 million to Sustained Land last July, but one owner - who represented himself in court - had objected to the sale. The Business Times understands the court ordered costs against the objector, who has to pay the legal fees and disbursements of the other owners. It is not known if the owner will appeal Friday's decision.
Fragrant Gardens, located off Upper Paya Lebar Road, has put itself on the market for a collective sale with a reserve price of $65 million. This translates to a land rate of approximately $1,204 psf ppr, said its marketing agent. With no development charge payable, and with the inclusion of a 10 per cent bonus balcony gross floor area, the land rate works out to about $1,094 psf ppr, subject to the authorities' approval. The 37-unit freehold development occupies a 38,576 sq ft plot, with a gross plot ratio of 1.4 and a maximum gross floor area of about 54,005 sq ft, the site can be redeveloped into 71 new units averaging 70 sq m each.
The Urban Redevelopment Authority (URA) granted provisional permission for several residential projects in the second quarter of the year. These include two large projects with well over 1,000 units each on sites sold through collective sales. Sim Lian won URA's provisional nod in June to develop a 2,225-unit condo on the Tampines Court site. In the same month, Kingsford Huray Development was granted approval for a 1,882-unit project on the Normanton Park site - comprising 1,863 apartments and 19 strata terrace houses. Normanton Park is near Science Park and Kent Ridge Park. In Q2 this year, URA also granted provisional permission to some developers for their projects on sites clinched at state tenders. Notably, Frasers Property received approval to develop a residential and serviced apartments project totaling 500 units on the former Zouk site in Jiak Kim Street. Market watchers note that Frasers Property's project combines developing apartments for sale with a long-term investment approach by also including a serviced residences component which the group is likely to retain for recurring income. In May, URA granted provisional permission to City Developments Ltd (CDL) to develop the 718-unit Whistler Grand on a site in West Coast Vale that the group clinched at a state tender earlier this year.
The halting of an en bloc purchase by Tee Land reflects the turn in sentiment among property developers in Singapore who have begun redoing their sums on the back of the latest cooling measures, industry observers told Channel NewsAsia. Singapore-listed Tee Land said it has decided not to exercise its option to purchase Teck Guan Ville via a collective sale that would have been worth S$60 million, forfeiting its 1 per cent deposit to “adopt a more prudent and circumspect approach towards new projects” to the impact of recent property curbs on market sentiment and purchasers’ interest. Experts have said that the unexpected policies announced on Jul 5 fuelled two worries for property developers. First, the prospect of higher land acquisition costs given an extra non-remissible five per cent Additional Buyer's Stamp Duty (ABSD) for residential land purchases. Second, the fear of a demand slowdown as home buyers face a hike in ABSD rates and tightened loan-to-value (LTV) limits. This worries developers, particularly due to an increase in the remissible ABSD rate to 25 per cent, which can only be waived if they sell all their units within five years.
Takashimaya Singapore, which is celebrating the 25th anniversary of the opening of its department store on Orchard Road, looks to achieve a 3 to 4 per cent increase in sales this year, after posting flat growth last year. For the year ended Dec 31, 2017, the operator of the popular Orchard Road department store saw sales inching up 0.3 per cent or S$2 million to S$644 million from the previous year. In both years, tourists accounted for a quarter of the store's sales - with Indonesians having the biggest share, followed by Chinese, Malaysians and Vietnamese. Takashimaya Singapore's operating profit rose 10 per cent to S$44 million last year from S$40 million in 2016.
Google opens third data centre in Singapore's Jurong West
US Internet giant Google announced on Wednesday that it will build a third data centre in Singapore to meet rapid user growth in the region, bringing its total long-term investment in such facilities here to US$850 million. A Google spokesman told The Business Times that this latest data centre adds another US$350 million to its spending in Singapore. The company said in a blog post that it has begun construction on the third facility in Jurong West, just down the road from its first two centres. Google said that its latest centre, expected to come online in 2020, will be built on a plot of land the size of the first and second centres combined.
Singaporean family puts Crowne Plaza resort on sale
Tourism complex Crowne Plaza Surfers Paradise in Australia has been put on the market by its owners - a Singaporean family - for more than A$100 million. Standing on a 1.2-hectare site, the resort complex comprises the 269-room Crowne Plaza Hotel currently operated by IHG, management rights for the 104-room Gold Tower, retail space, a tavern, 15 function venues and multiple food and beverage outlets, including Queensland's only revolving restaurant. The offering also comes with a development site which already has approval for 234 apartments in a 46-level tower. According to Australian media, the hotel is being sold by Xgenesis, a fund anchored by a Singaporean family office.