Asia Real Estate Report: Philippines, Myanmar, China
Myanmar sought on Monday to drum up investment in a stalled multi-billion-dollar seaport project at the heart of the former junta-ruled country’s efforts to revive its impoverished economy.
Thai Prime Minister Yingluck Shinawatra and a host of Thai business leaders flew to Dawei on Myanmar’s southern Andaman coast for talks with President Thein Sein and other officials about the joint development.
Former general Thein Sein voiced a “strong desire” at the meeting to implement the project.
But “it is not possible using only our two nations’ strength,” he said in televised remarks. “We have to invite other countries who would like to come and invest.”
In July, the two countries signed a memorandum of understanding to create a special economic zone for Dawei, with Bangkok agreeing to provide assistance in areas including security, infrastructure and logistics.
The huge project — led by Thai industrial giant Ital-Thai — would bring foreign investment for Myanmar as it emerges from decades of military rule, and provide Thailand with a gateway to the Indian Ocean and Western markets.
But it has faced funding difficulties and resistance from local villagers.
“Thai investors are afraid and hesitating about Myanmar’s political policies and the funding,” Ital-Thai marketing manager Pravee Komolkanchana told AFP in Bangkok ahead of the visit.
“Thai banks are less likely to lend money if it is to invest in other countries, especially in Myanmar.”
He said a number of Japanese investors were also due to join the trip, which the company hopes will put the project back on track.
Potential Myanmar investors are also wary, according to a businessman in Yangon who did not want to be named.
“We dare not invest there because of the costs,” he said. “We would have to pay Thai salary rates.”
“The project won’t benefit Myanmar much but mainly Thailand,” he added.
Work has yet to progress far beyond the construction of new homes for the thousands of villagers due to be resettled.
Next year the developers hope to begin work on infrastructure and factories in a planned industrial zone.
Opponents to the plan were emboldened by Thein Sein’s decision last year to suspend construction of a $3.6-billion Chinese-backed hydropower project in the northern state of Kachin in a rare response to public outcry.
But local resistance to Dawei appears to have eased, although some villagers are still reluctant to move despite the offer of new homes.
“We understand that we cannot stop the whole project,” said a local environmental activist who did not want to be named, adding that campaigners had instead vowed to oppose any coal-fired plant or chemical factory.
The office space market in the Philippines is setting new records, led by demand from business process outsourcing (BPO) companies and multinationals, indicating growing business confidence, according to one of the country’s largest property consulting firms.
In a briefing on Monday, Jones Lang LaSalle Leechiu’s (JLLL) director for project leasing, Sheila Lobien, said that from January to November 2012, demand for office space rose to a total 425,000 square meters, and may rise further by yearend.
This level is at least 18 percent higher than the annual average demand of 360,000 sqm recorded in 2011.
Non-BPO firms consisting of multinational and local companies accounted for 100,000 sqm, or 25 percent of current demand, she said.
More importantly, companies are already committing to take up space even before office buildings are completed, indicating strong optimism and higher business activity projected for 2013.
Pre-commitments are backed up by signed lease agreements between parties, and advanced rent and security deposits are paid by the lessee.
Lobien said pre-commitments more than doubled in January to November 2012 as compared to the same period last year.
“In the 11 months of 2011, we recorded pre-commitments of 68,358 square meters,” said Lobien. “In 2012, the figure over the same period shot up to 175,922 square meters.”
JLLL studies also noted that a number of companies pre-committed to office space that would be completed as far forward as 2014.
The consulting firm’s findings confirmed a recent study of 22 cities in the Asia-Pacific region conducted by the Urban Land Institute entitled “2013 Emerging Trends in Real Estate.”
The study noted the increased attractiveness of Manila in terms of both investment and development prospects vis-a-vis investors, developers, property company representatives, lenders, brokers and consultants.
China will continue to tighten its real estate policies next year, ruling out the possibility of surging home-price growth in 2013, industry analysts said.
At the weekend’s two-day Central Economic Work Conference, the central government vowed to continue the tightening policies to constrain speculative home purchases while quickening the construction of affordable housing.
“As the housing market gradually stabilizes and the government continues the existing tightening measures, we expect that national house prices will increase modestly by 3 to 5 percent in 2013,” said Zhu Haibin, an economist with JPMorgan Chase & Co.
“A strong rebound or sharp decline in house prices is unlikely in the near term.”
However, a general easing in economic policies has changed market sentiment, and supported renewed housing demand, according to a research note from JPMorgan.
After declining by about 3 percent between the third quarter of 2011 and the second quarter of 2012, housing prices have gradually edged up since June.
But the rebound in transactions is more remarkable: between July and October, home sales rose 10 percent over the same period in 2011, and sales value rose 23.7 percent. This is in sharp contrast to the decline of 10 percent in home sales and fall of 6.5 percent in sales value in the first half of 2012 year-on-year, industry statistics show.
A survey by the real estate advisory firm Ligent showed most industry experts believe property prices in first-tier cities will climb by about 10 percent next year, but the increase in smaller cities with a sufficient supply of homes will be much slower.
Zhang Zhiwei, chief China economist with Nomura Securities, said the government’s statement indicates that a modest increase in home prices next year can be tolerated.
His assessment stems from different wording used at this year’s conference and the one held last year.
A year ago, top leaders spoke of “keeping a tight policy in the property sector firmly in place and pushing property prices back to a reasonable level”. This year, they repeated the first part of the sentence but dropped the second part on property prices.
“We interpret this as meaning that new measures may not be introduced to fight the resurgence in property prices in recent months,” Zhang said.
Home prices in China next year depend also on the country’s monetary and urbanization policies, said Qin Hong, director of the policy research center affiliated with the Ministry of Housing and Urban-Rural Development.
“We are looking forward to more detailed policies related to urbanization,” Qin told a forum organized by Go-high Capital.
Urbanization is expected to be one of the main drivers of China’s economic growth in the coming decade.
China’s urbanization ratio first exceeded 50 percent in 2011. However, excluding the urban population who do not have hukou, or urban resident permits ― and so do not enjoy the privileges that urban citizens do ― the urbanization ratio is still below 40 percent, much lower than the average figure for developed economies.
The statement at the economic conference said an active fiscal policy and prudent monetary policy will be pursued.
The conference also called for an “appropriate expansion” of social financing in 2013 and for “genuinely” lowering financing costs for businesses.
Property tax, experimented with in Shanghai and Chongqing, is likely to be extended to other cities in the second half of 2013, but the effect on the housing market will tend to be small, according to JPMorgan’s research.
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