Vancouver property market sizzles with China cash

Chinese investors’ global hunt for real estate is helping drive Vancouverhome prices to record highs and the city, long among top destinations for wealthy mainland buyers, is feeling the bonanza’s unwelcome side-effects.

 

The latest wave of Chinese money, linked in part to Beijing’s anti-graft crackdown, is flowing into luxury hot spots. But it has also started driving up housing costs elsewhere in a city which already ranks as North America’s least affordable urban market.

 

For decades, Vancouver, along with Hong Kong, Sydneyand Singapore and, more recently, New York and London has been attracting Chinese and other Asian buyers.

 

And just like those other cities, Vancouvergot caught in the most recent buying frenzy, which realtors say has intensified after President Xi Jinping announced his anti-corruption crusade in late 2012.

 

“In the last year, there’s been the corruption crackdown in China and a lot of people have seen their wealth evaporate over there because of that,” said Dan Scarrow, a vice-president at MacDonald Realty. “So they want to put it somewhere they perceive as safe and there’s nowhere safer than the West.”

 

Canada does not track foreign property buyers, but analysis of city assessment data carried out by a leading urban planner and made available to Reuters helped identify Vancouver’s hottest neighbourhoods. Interviews with realtors active in those areas confirmed the perception that Chinese buyers were largely behind the latest rally.

 

City-wide home values are already up more than 35% since 2009 and realtors are saying that more than half the buyers in prime markets are mainland Chinese.

 

The impact of the latest inflow of foreign cash is particularly acute for Vancouver, its market is already tight because of limited building space and a decade-long nationwide property bull run fuelled by low borrowing costs. 

 

The money flow has also transformed the DNA of the city. Condo towers in Vancouver are now built without a fourth floor, as that number is unlucky in Asian cultures, and wok kitchens – a second kitchen for cooking with a smoky wok – are standard in most new homes.

 

The influx is also having a trickledown effects as people sell out in prime locations and move to other neighbourhoods, driving up prices and widening the gap between housing costs and the condition of the local economy.

 

Vancouver has been ranked the second least affordable major city after Hong Kong for the past three years in an annual survey by think tank Demographia, which tracks housing costs and incomes in top markets such as New York, Sydney, Singaporeand London.

Info Source: Reuters

 

As long as there is a need for Mainland Chinese to park their money and Hongkongers continue to snap up apartments because these are deemed much more affordable than back home, the property market in Vancouverwill probably stay “hot” for quite awhile yet. 

 

 

 

UK home prices: More signs of market easing…

British house prices rose at the slowest pace in August, according to a survey on Thursday that suggested speculation about higher interest rates has dampened buyer confidence.

The Royal Institution of Chartered Surveyors’ monthly house price balance fell to +40 last month, its lowest level since last August, and falling short of forecasts for +47 in a Reuters poll of economists. July was revised down slightly to +48.

Agreed sales fell for the first time since September 2012 and there was a second consecutive fall in buyer inquiries.

“Some of the momentum has come out of the housing market of late reflecting in part concerns over a likely rise in teh cost of borrowing at some point in the not too distant future,” said Simon Rubinsohn, chief economist at RICS.

Bank of England governor Mark Carney said on Tuesday that the bank may start to raise interest rates next spring if the labour market continued to recover from the financial crisis.

The RICS survey of chartered surveyors added to evidence that London’s housing market is cooling off after fervent price growth earlier this year. The London house price balance eased to +9 in August from +11.

Mr Rubinsohn said: “There are signs that the Londonmarket is gradually moving on to a more sustainable footing with a modest increase in the number of instructions coming through slowly helping to create a better balance with demand, and in the process, taking the edge off price gains.”

Britain‘s biggest house-builder Barratt Developments on Wednesday predicted a return to “more normal” trends in Britain’s housing market.

Source: Reuters

Yet another sign of easing in the British property market but then again, one has to take such survey with a slight pinch of salt as depending on who does it and how it is done, the results can most always be subjected to interpretations.
 

However, the fact remains that the amount of new housing stock is currently rising at a much faster pace compared to say, 2 years ago. This is especially within the prime areas around London. Market analysts have estimated that 48% of the nearly 23,000 new homes priced at more than GBP1,000psf are located in the six key clusters along the River Thames. And some 13,000 units could enter the rental market over the next few years. 
 

But with a combination of increasing number of new homes coming onto the market, increasing sound bites about upward revision of interest rates and the implementation of capital gains tax come April 2015, these are certainly factors that potential investors (especially overseas) should take into consideration before putting ink to paper on that investment property in London…

 

 

 

Foreign property purchase: Uncle Sam’s a calling!

The real estate market in the United Stateshas become one of the latest contenders for a slice of Singaporean investors’ growing interest in overseas properties, joining the ranks of traditionally popular markets such as Malaysia, Australia and Britain. 

In recent months, Singaporedevelopers, including Keppel Land and PontiacLand, have flocked to the US, taking stakes in American projects as they seek alternative sources of revenue amid a lacklustre market back home. 

On their part, USdevelopers, including Millennium Partners, have also set up shop here, in an attempt to attract more individual investors for their properties in the States. 

 

“We first came to Singapore and a few other Asian cities in 2009 to market our project Millennium Tower in San Francisco … We’ve seen interest grow and our hope is that it will continue to grow; that’s why we’re here,” said Mr. Richard Baumert, a partner at Millennium Partners. Mr. Baumert was in town to kick-start marketing for the company’s latest project – Millennium Towerin Boston. 

 

Overseas properties are becoming increasingly popular with Singapore investors, who face tough property curbs and high entry prices at home. The Monetary Authority of Singapore said Singaporeans poured S$2 billion into foreign properties last year based on deals done by real estate agencies here, a 43% increase from the S$1.4 billion invested in 2012. And analysts said this figure could increase further. 

 

Mr. John Stinson, Cushman and Wakefield’s executive managing director of capital markets in the Asia-Pacific, said: “There has been an overall surge in interest from the Asia-Pacific in investing in the United Kingdom, Europe and the US for almost two years. This trend has really gathered momentum from Singapore and other parts of South-east Asia this year. Many investors with portfolios highly concentrated in Singapore… are executing strategies to diversify offshore. 

 

“The UShas reached the top of many investors’ target lists of offshore country targets. The markets showing the most appeal have been New York, San Francisco and Los Angeles … The US markets are generally coming off a low base in almost every sector; interest rates are historically low and the US dollar has again become a safe-haven currency.” 

 

Mr. Sean Tan, general manager of real estate portal iProperty, agreed that the US is emerging as a viable investment destination, especially among investors who are seeking a diversified portfolio, but noted that its popularity still pales in comparison with that of Malaysia, Australia and the UK.

 

“As with any investment, there are risks. The USis so far away; investors may not be familiar with the market so they may buy into areas that are not so good … but cities such as San Francisco and Bostonare not bad as their economies are quite promising.” 

 

Mr. Tan also said overseas developers are drawn to Singaporefor its status as a regional hub and gateway to affluent individuals in Asia, a sentiment that Mr. Baumert shares. 

 

“We have two more projects coming up after this one, so we thought we should just set up an office here. We started in summer, so that’s around June. From a branding perspective, it also helps to tell people that we have a presence in Singapore,” said Mr. Baumert.

Source: CNA

 

Coincidentally the wife and I have been exploring the US property market for the past year. Property prices in some of the US cities are still very attractive currently, with some purportedly selling at “distressed” levels. And if you are looking at properties outside of the major cities like New York, Boston and San Francisco, the purchase quantum can be rather modest – we are talking about the US$100K range.

However, we are not yet comfortable enough to put money in the US market due to the following reasons: 

• The US market is still one that is relatively “undeveloped” with Singaporean buyers compared to traditional markets like UK, Australia and even New Zealand. It is until recently that you find US projects/properties being marketed in Singapore but this is still few and far in between. As such, the level of education/information on US properties is still low, which raises the level of uncertainty and risks. 

 

• Although there are supposedly bargains to be had in cities such as Houston or Detroit, these are cities that we have heard about but totally unfamiliar with – especially in regard to the property sector. So although the cost of entry may be low, the prospects on rental yields and capital appreciation may be similarly low. This is not helped by the horror stories of illegal squatting or even burglary (dismantling of fittings and furnishings within the property) that we have come across from the internet while doing our research. 

 

• The complex nature of US taxes that one has to navigate through for property purchase and sale are supposedly rather mind-blogging. We have not looked into what/how much taxes one needs to pay for purchase and subsequent resale yet, but we have marketing agents telling us that they themselves are confused by the myriad of taxes that are payable.

 

So with US developers such as Millennium Partners (and hopefully more to follow) setting up shop here in Singapore, the wife and I are looking forward to be “better educated” on the US property market.

London property remains hot with Asians

London property is hotter than ever, with Asian investors – especially those from Singaporeand Hong Kong – and increasingly confident British buyers snapping up units, consultants say.

But although prices continue to rise, there does not appear to be a bubble forming.

Average prices in prime Central London have risen 10.09% over the past four quarters to about GBP1.64 million ($3.4 million), property consultancy London Central Portfolio (LCP) said last week.

Long-term growth has averaged 10.5% a year since January 1996.

LCP noted that prime Central London transactions are at their highest level since 2007. There have been 6,546 transactions over the past four quarters, up 19.34% year-on-year.

Prices in Greater London are also on the rise, posting an annual growth rate of 8.53%, which brings average values to about GBP530,000.

Transactions here for London properties are at their highest level since 2007 as well, with 116,551 sales over the past four quarters, up 28% year-on-year.

“People buying now can see the benefit of slightly fringe locations, looking at them for the longer-term prospects,”said Mr Liam Bailey, global head of residential research at Knight Frank.

He added that while it has been a well-established trend for foreigners to buy in London, new buildings in recent years have seen especially strong take-up among Asian investors.

Singapore buyers have long been keen on London property.

“It’s almost like a commodity that people buy and sell… investors here like London as it’s a tested and proven market,” said Ms Doris Tan, head of international residential properties at JLL.

London developments continue to stage launches here because of the high level of interest they garner.

Principal Tower, a 50-storey, 243-unit luxury residential building located in the City of London, was launched on Friday.

The prject is part of Principal Place, a mixed-use development that will feature a 15-storey commercial building and retail outlets as well as a piazza that could become a neighbourhood centre, said W1 Developments.

It is being jointly developed by W1 Developments, Brookfield Office Properties and Concord Pacific.

Principal Tower is being exhibited at the St Regis Singapore hotel. Apartments range from 500sqft for one-bedders to 2,500sqft for three-bedders, for about GBP1,450sqft. Price start at GPB600,000.

As at Friday, more than 30 units had already been sold through pre-sales.

“It’s unusual to have an exclusively residential high-rise building at such a prime address,” said W1 Developments managing director Christopher Murray.

The Landau, a 89-unit luxury building in Fulham, London, was also exhibiting yesterday, at the Regent Singapore hotel. Prices start at GBP915,000 for a one-bedroom apartment.

 

Overall, the pound sterling is likely to remain stable in the short to medium term, and should not strengthen significantly against other currencies during the remainder of teh year, noted Mr Bailey.

“As the major issue in Britainis deflation rather than inflation, the bank is unlikely to raise rates.”

Source: ST

Much has been said and written about the current state of the Londonproperty market and more importantly, whether a bubble is forming (if not already). While many have acknowledged that the bull is running a tad slower these days – prices have fallen for the past 2 consecutive months – home prices in London are currently still hovering at its peak. If long-term price growth for Central London has averaged 10.5% a year since 1996, current prices are already more than 6 times what it was 18 years ago (if our maths are correct)!

So with transactions for both Central and Greater London being at their highest levels since 2007, the much bigger investment quantum needed given that prices are at their peaks and properties being labelled as “a commodity that people buy and sell”, the underlying risk has definitely become greater when come to investing in a Londonhome.   

Having said that, there is always money to be made in any kind of market. Key to this is always the “right” timing of entry and more importantly, exit. While the wife and I do not think that the Londonproperty market will crash anytime soon, we do believe that a bubble is forming slowly but surely. Going forward, it will be increasingly challenging to make money out of this market.

 

This is mainly the reason why we have decided to exit the London market… but not discounting the UK altogether… yet.

 

 

Start of the GIS (Great Iskandar Sell-off)..?

It looks like cracks are starting to show in the once-booming property market at Iskandar Malaysia.

UEM Sunrise Bhd, considered a bellwether to Iskandar, last week slashed its sales target for 2014 to RM2billion ($792 million) from RM3.2 billion, citing weakness in the market for homes in the economic corridor south of Johor.

This comes as a slew of high-rise apartments – many of them from the Chinadevelopers, and many of them on the waterfront – are set to flood the market. And things could get worse before they get better. It is believed that about half of the condominiums in Country Garden Danga Bay, which last year rolled out a record 9,000 high-rise units, have remained unsold, and the Guangdong-based property giant is now looking increasingly desperate to unload its stock by either hiking discounts of dropping prices, although the exact quantum is unknown.

The Danga Bay project was launched with much fanfare last year at an average of RM900psf. Most of the real estate firms in Johor Baru have been roped in to sell homes for Country Garden Danga Bay, and it is dangling commissions of up to 8% versus the typical 2 – 3% as an added incentive.

In fact, according to an agent, three people were spotted carrying sandwich boards near a bank in Johor Baru last month advertising units in Country Garden Danga Bay. It is not clear who they were representing, but property executives speculate they could be acting for Country Garden’s foreign buyers.

Checks with agents reveal that the Phase 2 units are going for the same price for all floors, a departure from the usual practice of pricing the topmost levels at a premium.

Buyers can opt for the promotion price, which in some instances adds up to a 40% discount, provided they pay for the property in cash over several transactions. Doing so will shave RM300,000 off the price of a single-room unit measuring between 400 to 500sqft, which would normally cost RM800,000.

Country Garden hasn’t raised its maximum discount beyond 21% since launch day, say agents familiar with the matter, but it may not be long before the company has to dump prices. Right next door, China’s state-owned Greenland Group will soon launch 2,478 units of apartments and townhouses. Also, R&F’s Princess Cove project will introduce about 3,000 units of apartments in the first phase and another 30,000-plus units thereafter.

“There are also a few other projects in the Danga Bay area being prepared for similar types of developments,” he said.

The problem here is clearly one of mismatch between demand and supply. Demand remains strong for affordable homes costing below RM400,000, yet much of the new supply is heavily skewed towards high-rises. Records have indicated that slightly more than 100 high-rise projects scattered throughout Johor Baru and Iskandar Malaysia, comprising a little over 100,000 units, are expected to come onstream in the next few years. One-third of that is within the R&F site, and another 10% within known projects at DungaBay, where CountryGarden and Greenlandare based. 

The proposed Forest City at the Second Link in Nusajaya is another huge project on the horizon.

All that has led to a visible slowdown over the past 10 months. Many investors, particularly foreigners appear to be adopting a wait-and-see attitude. This is not helped by the changing policies and price threshold limits.

Sentiments could get worse in 2015-16, when a large number of the high-rises sold during 2012 and 2013 are handed over. The problem may be especially acute in hot spots such as Nusajaya, Medini and Danga Bay.

Info source: BT

Looks like Iskandar Malaysiais going to be raining condos come 2015-16, much like what is expected in Singapore. And the blood-letting by China developers seemed to have begun even earlier than what the wife and I had predicted before (refer to our previous blog posts below).

And if our rusty memories served us right, GIC had recently announced that they will enter into the fray to invest in residential projects in Iskandar Malaysia. Maybe they know something that we don’t but that decision may warrant a re-think. Then again, we are mere laymen while GIC are run by … professionals.

 

What Iskandar really need is not more “Star Power” (aka Mainland Chinese actress Tang Wei and some of our own Mediacorp artistes), rather the army of Mainland Chinese buyers/ investors that the China developers have been saying will come to snap up homes in Danga Bayand the likes soon.

The wife and I are not holding our breaths on that one though…

 

 

 Click on link below to read our previous post on Iskandar Malaysia:

http://sgproptalk.blogspot.sg/2014/07/chinese-developers-are-flocking-to.html

http://sgproptalk.blogspot.sg/2014/06/iskandar-still-good-buy-now.html

 

EcoHouse: More refute from Brazilian government!

London-based developer EcoHouse on Tuesday (Aug 19) provided documents to try to show it has official links with a federal housing programme in Brazil and a state-owned bank, but the Brazilian Embassy here questioned the authenticity and relevance of the papers.

The documents, which EcoHouse chief operating officer Deen Bissessar sent to TODAY, included letters with what appeared to be letterheads of state-owned bank Caixa Economica Federal (CEF) and the state of Rio Grande do Norte, which oversees the Minha Casa, Minha Vida (MCMV) housing programme.

Written in Portuguese and translated into English, the letters largely commended EcoHouse founder Anthony Armstrong Emery for having sound character and recognised his work with the MCMV.

One letter, purportedly from CEF, said Mr Emery had been a client with an “excellent relationship” with the bank and had, “through the company under his administration, contributed to putting into practice the MCMV programme, conducting himself in a distinguished and professional manner”.
Another one, which has the letterhead of the state of Rio Grande do Norte, said Mr Emery was of “irreproachable personal, social and professional conduct”.

On Monday, Brazilian Ambassador to Singapore Luis Fernando de Andrade Serra called on EcoHouse to prove its links to the Brazilian government. After looking at the documents, Mr Serra said they do not conclusively show that the developer has any links with CEF or MCMV.

“We cannot attest to the authenticity. But even if they are real, the information is not relevant and does not determine if EcoHouse is linked to the government,” he said.

Pointing to the letter purportedly by CEF, he said that it does not represent an agreement between Mr Emery and the bank. “It shows that he has an account in the bank, but it doesn’t show the firm is a partner of the bank,” Mr Serra added.

The ambassador also pointed out that the people who signed off on the letters do not have the authority to comment on whether EcoHouse has any link with CEF or the MCMV programme. For instance, the CEF letter was signed by an account manager.

“These sound like reference letters. The people who wrote these letters are not responsible for the programme. The only agencies who can speak on behalf of MCMV are the Ministry of Cities or Caixa,” he said. “Mr Emery may have a wonderful relationship with the bank, but he has so far not proven a real and credible link between EcoHouse and the government.”

Last week, the Brazilian Embassy here issued a statement saying that the Brazilian government has no dealings with EcoHouse, which had touted itself as the only United Kingdom company picked by the Brazilian government to build homes under MCMV.

In response, Mr Bissessar called the matter a “misunderstanding”, which led to Mr Serra calling on EcoHouse to furnish proof of its links to the Brazilian government.

One disgruntled investor, Mr Brijesh Vora, 37, who came forward after reading TODAY’s reports, said he recently received notification that the project which he had ploughed money into last year will be delayed by about six months to a year, due to reasons such as slow and poor construction work. He added that he had invested in several units.

Various media reports have put the number of Singapore investors in EcoHouse projects at between 800 and 1,500.

Up to S$70 million had reportedly been put into three housing projects. Reports have been filed against EcoHouse with the police and the Commercial Affairs Department.

Source: TODAY

Double oh oh… Seems like the money that Singaporean investors have put into EcoHouse is now 冻过水 (Cantonese idiom literally translated as “colder than water”, which is used to describe a situation getting from bad to worse).

And speaking of Cantonese idioms, below is an “explained list” (some even with pronunciations) for those who are interested:
http://www.scribd.com/doc/237269352/Cantonese-Idioms-and-What-They-Mean

London home prices: Is the bull-run ending?

Home sellers in London cut asking prices by the most in more than 6 years this month, adding to signs that the property market in the British capital is coming off the boil.

London values fell 5.9% from the previous month to an average £552,783 (S$1.1 million), the biggest drop since December 2007, property website Rightmove said yesterday.

Nationally, prices declined 2.9%, an August record.

While property demand usually weakens during the summer, Rightmove said the slump this year was steeper than it expected.

Tougher new mortgage rules introduced by Bank of England (BOE) Governor Mark Carney, as well as anticipation of higher interest rates, are putting pressure on the market after a surge in value raised concerns that a bubble may develop.

“Buyers and sellers are becoming increasingly aware about personal finances, given that the cost of mortgages are going up and regulators are trying to bring availability down,” said Rightmove director Miles Shipside.

“This limits what buyers are willing or able to pay, and helps moderate sellers’ price expectations.”

Some of the biggest price declines in London were recorded in affluent boroughs including Kensington and Chelsea, Camden, Hammersmith and Fulham, according to the report.

“Top-end sellers are very much discretionary ones, so can delay marketing till a more active time of year,” Mr Shipside said.

“That tends to depress property prices more in the higher-priced boroughs, with those that need to sell in summer pricing lower to attract holiday-distracted buyers.”

Mr Bruce Dear, head of real estate at law firm Eversheds, said the main problem in London remains a shortage of housing supply, which has pushed property prices to more than 16 times the average salary.

“Urgent policy measures are required to reduce that gap, ” he said in a statement.

“The only answer is for the government and local authorities to urgently build more.”

Nationally, the annual pace of growth in prices slowed to 5.3% in August from 6.5% in July. The average asking price was £262,401.

Rightmove said the drop in monthly prices is a “lead indicator of a slower market in the second half”.

Out of the 10 regions tracked by Rightmove, all but the north of Englandshowed a decline in home values in August from July.

London led the drop, followed by East Anglia with a 4% drop and the south-east with a 2.5% fall.

Source: Bloomberg

So it looks like the law of gravity for so long defied by the Londonprivate home market appears to be reasserting itself. So are buyers finally going on strike?

According to a report in The Observer (a British newspaper), the mundane answer to that question may be that prospective buyers simply cannot amass the finance to buy for now. The mortgage market review (MMR), imposed by regulators to avoid a repeat of the lax lending and “liar loans” common before the financial crisis, has already curtailed borrowers from taking jumbo-sized mortgages.

And then there are also others who are repelled by fears of interest rate rises.  

However, British households remain heavily indebted, making the BOE deeply hesitant about raising rates. Given that there are no sign of wage rising, and that the Eurozone economy is heading into reverse, the prospect of an early rate rise is receding yet again.

In addition, the fundamentals that have driven the Londonprice spiral – deeply restricted supply, a fast-growing population, cash buyers, investor-landlords and the capital’s role as a safe haven for the global elite’s billions – are still largely in place.

The irony is that the cheerleaders for a price crash want only one thing: to buy. With such a large reservoir of potential buyers, it’s difficult to envisage much more than a pause in prices.  

 

 

 

Property investment in Tokyo (and Japan): Some "good to know-s"

The wife and I were at a Japanreal estate seminar organized by Sumitomo Realty and Development Co., Ltd yesterday.

 

 

Sumitomo Realty is one of the largest developer in Japan with over 400 years of history behind them. They are responsible for the first condominium development in Japanback in 1964 and had built more than 5,000 condo unit in 2013.  

Sumitomo is also one of the first Japanese developer that has started engaging foreign buyers. The wife and I always liken them as the “Far East Organisation” of Japan, both in terms of profile and pricing. 

Below are some “takeaways” from the seminar: 

Some useful information about buying a property in Japan 

1. All residential properties in Japan are of freehold tenure. 

2. Contrary to popular belief, there are no restriction on foreign purchases of residential properties. 

3. Prices of apartments are based on nett usage area – you do not have to pay for the balcony and PES spaces. 

4. Japan is still pretty much a non-speculative market – depending on how you look at it, this either mean better price stability or big potential upside in capital gains as more foreign participations enter the market. 

5. Demand for apartments are increasing due to the growing population in the cities. More elderly, for example, are moving to live in the cities due to better access to amenities and healthcare. 

6.  The Japanese are known for their strict building codes and standards, primarily because of the country’s susceptibility to earthquakes.  

7. Facilities (i.e. swimming pool, gym and sometimes even car-park lots) are uncommon in Japanese condominiums. 

8. The toilets and bathrooms in a Japanese condo unit are mostly always separate. And a typical unit usually come with just one or maximum two toilets and only one bathroom. This is the case even for big units. 

9. The “sinking fund” system is adopted by most condominiums. This is different and separate from the monthly maintenance payment, and involves an initial lump-sum payment (for new properties) plus a monthly payment subsequently. 

10. The purchase of properties in Japan typically do not require the involvement of a lawyer. 

11. Commission is payable by BOTH the buyer and seller to an agent for purchase of resale properties in Japan. The typical commission rate is 3% each.

Specifically for Tokyo

1.       Potential buyers are typically interested in properties within the 23 major wards. And the most prestigious (also = expensive) residential land are found in the Chyoda and Minato areas within Tokyo.

2.       Toyko currently has a population of about 13 million, which is approximately 10% of the total population in Japan.

3.       The number of foreigners living in Tokyo has increased from about 306,000 in 2001 to 390,000 in 2012.

4.       The Japanese government has designated special zones for Asian headquarters in various area within Tokyo. Generous incentives are provided to attract Asian companies to setup shop in these zones. The special zones are located in          

·         Area around Shinjuku Station

·         Area around Shibuya Station

·         Area around Shinagawa

·         Central Tokyo/Waterfront area

       So residential properties within these zones are especially in demand.

The different type of taxes applicable for property ownership

1. Property Tax – This is approximately 1.7% of the “Appraisal Price” annually. The “Appraisal Price” is different from the purchase price  and much lower (i.e. similar to our “Annual Value”).

2. Acquisition Tax – This is similar to our stamp duty, calculated at 3% of the Appraisal Price. 

3. Inheritance Tax – This is typically 10 – 15% of the total inheritance value, minus some basic deductions. Inheritance tax may not be applicable for most foreign purchases. 

4. Capital Gains Tax (for non residents) – This is a hefty 30% of the total profit  for property sold within 5 years of purchase and reduced to 15% for property sold at/after 5 years of ownership. 

5. Income Tax – As per Singapore, the income tax system is progressive in nature and starts at 5%. Rental derived are taxable as income even for non-residents.

General Note

1. The main documents (S&P etc) that one needs to sign on are typically in Japanese. But the developer/marketing agent will provide translated copy for one to understand what he/she is signing for. 

2. Payment for purchase is done in Japanese Yen. 

3. It is mandatory to set up a bank account in Japan after purchase of property. This is to facilitate payment of maintenance and other fees, which will be deducted monthly from this account. 

4. Registration of property is necessary for one to maintain all rights to the purchased property. 

5. All relevant taxes must be paid else hefty penalties may be imposed.

 

 

The wife and I have been looking at the Tokyo residential market for the past year or so. Unlike UK or Australia, the Japanese private home market is still considered the “new kid on the block” when comes to foreign purchases and investments. Matter of fact, it is only up till recently that some of our local banks are willing to provide mortgage loans for foreign property purchases in Japan. The current financing quantum is up to 70% with loan tenor of up to 30 years. The current interest rate is slightly above 3%. 

Here are our takes on the “plus and minuses” of investing in a property in Tokyo (or Japan):

Plus

1. The rental market is strong and stable – we were told that tenants generally prefer to stay put when they have found their “ideal rental home”. And it is fairly easy to find tenants especially in the major wards. 

2. The Yen is currently very low against the S$ – it was about 59 Yen to the S$ in 2012 and the exchange rate is currently at around 82! Many currency analysts are putting their monies on a Yen rebound in the near future. So it is probably a good time to buy, with a potentially high upside for forex gains when you sell the property in future.

     The wife and I only fully appreciate the extent of such gains when we started

     investing overseas – a 1 cent appreciation on S$ against another foreign currency

     for a S$100K sum automatically translates to an additional gain of S$1K!

 

3. As long as the project is developed by one of the top-tier developers, the investment is generally safe. Investors are also protected by the local legal system in case of contract disputes.  

Minus

1. We are not overly “excited” about the capital gain potential of Japanese properties. We were told that the real estate market especially in the Tokyo area have experienced strong revival over the past few years, but we are concerned about whether such recovery is sustainable and for how long. This is especially when we are seeing a deluge of new developments coming up all over Tokyo. So those seeking huge capital gains within say, 12 – 24 months, may not find the Japanese market too sexy. 

2. Rental yields is currently a tad shy of 5% (gross) and around 3.5% (net). While stable, the yield is on the low side especially compared to Australia or UK.  

3. The capital gains tax, even at 15% should one decides to hold on to the property for 5 years, is rather prohibitive.  

4. The lack of Mainland Chinese interests in Japanese residential properties, due to political stand-off, may continue to stifle resale gains. Whether one choose to subscribe to the notion, it is generally true (at present) that wherever the Chinese buyers flock in doves, property prices there will generally shoot through the roof.

An for those who are interested, Sumitomo conduct regular property viewing tours of their new projects in Tokyo. The next tour is scheduled for September 12, 2014 (Friday). You will have to get to Tokyo at your own expense (of course). Sumitomo will designate a meeting point in the morning and bring you around to their various new properties. You will have to RSVP by Sep 3, 2014 to confirm a place for the Sep 12 tour. Do drop us an email if you require the necessary contact.

 

The wife and I hope the information above may be useful to those who are considering to purchase into the Japanese property market.

 

 

 

Details of properties that may feature in the tour:

http://www.scribd.com/doc/237009723/Sumitomo-Properties-Upcoming-new-reesidential-projects-Tokyo 

 

 

EcoHouse: Brazilian government has no knowledge of nor dealing with the company!

Hundreds of investors here, who ploughed millions of dollars into the hands of a developer claiming to be working with the Brazilian government on a social housing programme, were left fearing the worst after the Brazilian Embassy said on Thursday (Aug 14) that its government had no dealings with the company.

In fact, it was not even aware until recently, when complaints from Singapore investors mounted, that the United Kingdom-based company operated in Brazil.

EcoHouse, which has abruptly shut down its Suntec offices, is neither affiliated with the Brazilian national housing programme nor registered as a partner of its state-owned bank.
“In view of allegations by Singapore investors regarding EcoHouse Group, a company linked to executives in the UK, the Embassy of Brazil would like to state that the Embassy had no prior knowledge of the existence of EcoHouse’s operations in Brazil,” the embassy said in response to TODAY’s queries.

Some of the investors had approached the embassy. After contacting several agencies within the Brazilian government, the embassy found that there was “no record of any agreement with any company bearing the name ‘EcoHouse’ related to ‘Minha Casa, Minha Vida’ (Brazil’s national housing programme), or any other federal programme”.

The embassy added that “Bosque Residencial” in Natal, State of Rio Grande do Norte – one of the housing developments offered by EcoHouse for investment – is not listed in the records of Brazil’s state-owned bank, Caixa Economica Federal.

On its website, EcoHouse claims that it was chosen by the Brazilian government as “the only UK company to date officially authorised to build developments under Minha Casa, Minha Vida”, which aims to provide three million homes for the country’s growing middle class.

The company was founded in 2009 by Mr Anthony Armstrong Emery. Various media reports have put the number of Singapore investors in EcoHouse projects at between 800 and 1,500. Up to S$70 million had reportedly been ploughed into three housing projects.
Some investors have begun legal action against EcoHouse to recover their capital investments, which amounted to a minimum of £23,000 (S$47,810) per unit.

EcoHouse had promised a 20% fixed rate of return for a 12-month investment contract, but many investors said they have not received their returns or their capital despite their contracts reaching maturity.

The company was recently put on the Monetary Authority of Singapore’s (MAS) Investor Alert List, which lists unregulated companies that may have been wrongly perceived as being licensed or authorised by the MAS.

Reports have been filed against the company with the police and the Commercial Affairs Department (CAD). On whether EcoHouse is under probe, a CAD spokesman would only say: “It is inappropriate to comment on police investigations, if any.”

In response to TODAY’s queries sent on Tuesday, EcoHouse chief operations officer Deen Bissessar said on Thursday that the closure of its offices in Suntec Tower 2 was part of measures to “consolidate into our Brazil operation and managing global affairs from our global headquarters in London”.

He added that “the position remains unchanged” and the company is trying to “improve the situation with regard to construction and payments”.

“We absolutely remain committed to our clients and if that was not the case, we would simply shut all doors – which is something we have no intention of doing,” added Mr Bissessar. The company was unable to respond to queries about the Brazilian Embassy’s comments on Thursday by press time.

The developer’s registered address with the Accounting and Corporate Regulatory Authority is in Cecil Street. When TODAY visited the premises, it was occupied by a company called MC Corporate Services.

For companies regulated by the MAS, investors could seek redress at the Financial Industry Disputes Resolution Centre. However, such a recourse is not available for EcoHouse investors.

The Brazilian Embassy has urged potential investors considering putting their money in Brazil’s property market to carry out due diligence when they encounter any developers claiming to have projects supported by the Brazilian government.

Consumer watchdog CASE advised consumers to be mindful of the high risk involved when investing in overseas properties.

CASE executive director Seah Seng Choon pointed out that the laws in other countries are different from Singapore’s and investors may not enjoy the same degree of protection. “Seeking redress in the event of dispute can be cumbersome and in most cases consumers are not able to get their money back,” he said.

Source: CNA

Oh oh….

Tchau, EcoHouse?

The ST reported today that Brazilian property developer EcoHouse has closed its Singapore office. The move came shortly after the firm was put on the Singapore central bank’s investor alert list just last month.

 

EcoHouse Group’s office on the 42nd storey of Suntec Tower Two was opened with much fanfare in February of last year. The company builds social housing projects for former slum dwellers in Brazil.

 

The latest turn of events has left some of EcoHouse’s investors in Singaporeworried about whether they will get the returns they were promised. This is after the Brazilian firm had netted millions from investors in Singapore by offering returns of about 20% after just one year, on investment sums as low as $46,000. However, several investors have claimed that they have not been paid despite their contracts having reached maturity.

 

Some Singapore investors in EcoHouse told ST on Friday last week that the firm had not informed them that it was closing its office here.

 

 

The wife and I did a quick search and found that news of the office closure was already reported in The PropertyGuru website some 4 days ago. In a statement released by Chief Operations Officer for EcoHouse Deen Bissessar:
 

“I can confirm that we have taken measures to consolidate into our Brazil operation and managing global affairs from our global headquarters in London.

 

This will not only help to reduce costs, but to fix administrative and communication issues.

 

Singapore investors should ideally view this as a further measure to improve the overall company position, thereby allowing us to complete our contracts with them faster.

 

Their contract is with Braziland the position remains unchanged. We are doing everything we can to improve the situation with regard to construction and payments.”

 

In recent months there have been reports that unsatisfied investors have commenced legal action against EcoHouse for recovery of their capital investments along with promised returns. EcoHouse has previously denied it is in breach of any of its client contracts, although has admitted construction delays have resulted in delayed payments to its investors.

 

Bissessar added that EcoHouse remains committed to its clients. “If that was not the case we would simply shut all doors – which is something we have no intention of doing, he said.

 

He added that all client communications should be directed to sales.support@ecohousegroup.com where a member of the EcoHouse U.K. team will respond.

 

Now that the Singapore operation had suddenly shut its doors, allegedly without much of a notification to its clients, it does not reflect very well on the company’s pledge of being “committed to its clients”. It remains to be seen how responsive the email communication channel in the UK will be.

 

With this EcoHouse saga, the wife and I believe that the original intention of the project was genuine in nature and purpose. But along the way, it has morphed into a pyramid scheme of sorts. And the reason for the quick exit from Singapore is more due to the impending legal tussle that EcoHouse expects from disgruntled local investors and less because of consolidation. But that’s our humble “layman” opinion as per always…

 

 

 

Click on link below to read our previous post on EchoHouse:

http://sgproptalk.blogspot.sg/2014/07/property-investment-in-brazil-ecohouse.html