Issaree Suwunnavid Asian Real Estate Report
An increasing number of Chinese are investing in overseas property because it is more difficult to buy at home due to a campaign to curb real estate speculation by preventing multiple home purchases.
There is also an emerging trend of younger Chinese buyers purchasing bigger apartments or luxury properties in Canada, rather than those with one bedroom or two.
This new dynamic is helping property prices around Asia and is set to continue.
Tesco List a Thai Property Fund
British retailer Tesco has raised 18.4 billion baht ($602 million) from the listing of a property fund in Thailand, completing the country’s largest market debut for six years and raising funds for the retailer’s future expansion there.
Tesco said on Monday the initial public offering of its Tesco Lotus property fund was priced at 10.4 baht per unit, the top end of its offer range, confirming a Reuters report from March 3.
The fund is part of a growing trend among retailers to squeeze more value from their real estate assets. They bundle some of their supermarkets and shopping malls into a property fund and sell the fund units to investors, leasing back the property.
The Tesco Lotus fund comprises 17 shopping malls anchored by a Tesco Lotus hypermarket in cities including Bangkok and tourist destinations such as Krabi and Koh Samui. Tesco has said it plans to use proceeds of the IPO to fund future expansion in Thailand.
The IPO, Thailand’s biggest since Rayong Refinery’s $710 million offering in May 2006, received about $40 million in commitments from Capital Research and Management, a unit of U.S. fund manager The Capital Group Companies, according to the prospectus of the fund.
The deal was also the second largest equity offering in Asia in 2012 so far, behind the $794 million listing by China Communications Construction in Shanghai in February.
Tesco said the offering drew strong demand, with more than 10,000 retail investors taking part, and the institutional tranche of the offering around 15 times covered.
The fund, which will begin trading on the Thai stock exchange on March 19, will pay a yield of 6.5 percent a year, Tesco said.
The yield on the property fund, which is similar to a real estate investment trust, or REIT, helped to lure investors reeling from ongoing volatility in global markets and concerns over Europe’s debt troubles.
Bank of America Merrill Lynch, Nomura Holdings Inc , Phatra Securities and Royal Bank of Scotland managed the IPO.
Property developers and consultants from Penang to Johor are generally bullish about the residential property market and do not think there is a bubble.
They are of the view that there are two types of buyers, one who is buying out of need and the other out of fear that prices would go up further. The speculative element which was evident a few years ago has dissipated.
Real Estate and Housing Developers’ Association (Rehda, Penang) chairman Datuk Jerry Chan said: “Buyers have money which they would like to park somewhere.
“Sales this year have been better than last year, driven by fear rather than the speculative element,” said Chan who is also group managing director for Penang-based Asas Dunia Bhd.
Chan was commenting on a report Debunking the property bubble myth by CIMB which said that talk of a property bubble was overstated as the sharp rise in residential property prices over the past few years was confined to selected areas.
“Affordability is near its all-time high and prices have to surge 50% to 100% before affordability falls to pre-Asian financial crisis levels,” the report said.
The report said it was surprising that residential prices had not risen at a faster pace as new supply had fallen significantly over the past few years.
Chan said tourism was also very big in Penang and if China and Indian nationals were to buy in Penang, it would “turn the market upside down.”
“So I foresee Penang prices would continue to rise because of inadequate supply of land, not because of inadequate developments,” he said.
In the Klang Valley, Reapfield Properties Sdn Bhd chief executive officer Gerard Kho said domestic demand for residentials was expected to be strong until the middle of this year.
Managing director for the Khong & Jaffar group of companies Elvin Fernandez said “it is not a question of whether there is a bubble or not but whether prices in certain areas are tied in to fundamentals or not.
“And we know in certain hot spots, they are not,” Fernandez said.
In Johor, KGV International Property Consultants Samuel Tan said the state was undergoing a transition because of the Iskandar Malaysia factor.
“New houses entering the market are priced a lot higher than three years ago but the market is accepting it,” he said.
A foreign national in Singapore has purchased a home for a record 39 million Singapore dollars ($31.2 million), local media reported Friday.
The sea-side bungalow in Sentosa Cove on Sentosa Island is a massive estate with prime real estate and an immaculate view. According to the Straits Times, it consists of five bedrooms, an entertainment room and its own pool.
It is believed to have been bought by an Indian national from the energy sector, local media reported without giving names.
The buyer will have to fork out an additional 10 percent of the price in government levies alone for the privilege of buying the home.
In December, the government imposed the additional duty on foreign property buyers as part of its measures to cool the heated property market.
Under Singapore’s property ownership rules, Sentosa Cove is the only place where foreigners not living in the country can buy landed homes. Each transaction still needs to be approved by the government.
Sentosa Island is Singapore’s premier entertainment hub and is home to one of the country’s only two casinos, several up-market hotels and Universal Studios.
Local real estate agent Maggi Ohn told Bikyamasr.com that the sale was a sign that “Singapore has the ability to attract the wealthiest people in the world.”
She said that “right now, the economy here is pretty solid and we believe that these kind of sales are a positive for the country and making us able to create the high-end market that we know Singapore can.”
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