As the saying goes “No pain, no gain,” likewise for property investments, the riskier the asset, the higher the yield one can expect to receive. In Singapore’s context, the attractiveness of each asset classes can be viewed in the following hierarchy:
The net yields presented above are based on broad level trends in each market and will differ across specific assets from time to time. Nonetheless, it offers us an idea as to how risky these assets are viewed in the local property scene (Lower Risk = Lower Return, vice versa). Across the sectors, these yields have been shaped over time by factors including asset volatility and investor sentiments.
These yields also represent the typical net yield expectations of institutional investors such as REITs and private equity funds, where information on the cap rates being applied for property valuations are publicly available for the former. For reference, I have provided an excerpt below (boxed in red) from the CapitaMall Trust's quarterly presentation slides.
As seen in the example above, the initial yield/cap rate attached to individual properties vary depending on a combination of factors comprising location (I.e. economic attractiveness and proximity to population catchment and transport nodes) and nature of the development (mixed or single use).
Lastly, it is important to note that these are valuation based yields and it will certainly not represent the dividend you will get when buying into a REIT, which is determined by the REIT’s Distribution per Unit (DPU) and transacted Share Price. Nonetheless, the cap rates applied by the different REIT types (i.e. Starhill Global – Office/Retail, Cambridge Industrial – Industrial etc) will offer investors a benchmark on net income to expect when making a property purchase.
Do feel free to leave your comments below or drop us an email at [email protected]. To get started with your real estate investment for less than $1,000, sign up on FundArealty, check out our blog or follow us on Facebook or twitter @Fundarealty.
Another competitor in the real estate crowdfunding space - Crowdbaron in Hong Kong
In a sign that the crowdfunding movement is not stopping in the US alone, we've come across Crowdbaron, a real estate crowdfunding company based in Hong Kong.
It looks like crowdfunding is reaching the end of the innovators section in the Everett Roger's diffusion of innovation theory in chart above. While not entirely mainstream, the idea of crowdfunding is beginning to creep into public consciousness (much like bitcoin, and in the last week alone when it went viral).
Once it goes mainstream, every industry is going to have some form of crowdfunding. There's even crowdfunding for higher education now?? See also - univerisities need to get smart on crowdfunding, ufunded and commercialization of university research.
Crowdbaron is the first real estate crowdfunding company to set up base in Asia, and definitely not the last.
If the successful funding of a skyscraper in Colombia is anything to go by, the space is getting very crowded. At the same time, this is testament to the validity of the business model.
To get started with your real estate investment for less than $1,000, sign up on FundArealty, check out our blog or follow us on Facebook or twitter @Fundarealty.
$2.7b invested in crowdfunding in 2012 - $5b in 2013?
A recent article on Channelnewsasia about crowdfunding gaining momentum with $2.7 billion invested in 2012 appeared on their website today.
While very popular in the US, crowdfunding in the traditional sense of the word has not taken off in Asia. Sites such as Crowdonomic, Cliquefund and Togather.asia have not fared very well. On the contrary, Pozible in Australia have raised quite a bit of money.
Western economies, capitalist in nature and very open to individualistic and non-mainstream pursuits tend to lend itself well to such ventures.
However, I believe that equity and real estate crowdfunding will take off in a very big way. The main reason is because the 'backer' in many cases does get something in return that far exceeds his 'investment'.
The return in this case being the regular income reaped from the company/property and the outright capital appreciation in future.
There are risks of capital loss for sure, but putting one's cash into such an investment sure beats putting it with a band and getting what, a first row ticket to an indie 50 people performance? Or a limited edition t-shirt signed by a graffiti artist?
2013 might very well turn out to be dominated by news on equity and real estate crowdfunding (besides the Bitcoin bubble).
Q: How is owning shares with FundArealty different from owning shares with a REIT?
A: The main difference is that owning shares with FundArealty gives you exposure only to properties and geographies of your choice and no others. Ownership of a REIT share generally gives you exposure to multiple properties, geographies and the overall stock market
Q: Who’s in charge of managing the property?
A: FundArealty is not in charge of managing the property. Rather, we appoint accredited and experienced property managers to handle the day-to-day affairs of the property, leaving us to spend time sourcing great deals in the market.
Q: How does an investment get listed on FundArealty?
A: FundArealty is constantly on the lookout for potential investment opportunities in South East Asia that offer great returns. Once a potential investment is spotted, due diligence is done with regards to the acquisition. The property gets listed if FundArealty feels the potential can be realized.
Q: How does FundArealty vet investments?
A: FundArealty performs a thorough research report on the property, looking at both macro and micro factors that are likely to have an impact on the investment return.
Q: Are there fees for investors?
A: Joining FundArealty and browsing the investment properties is free. There is however a fee associated with each investment that helps us cover administrative and miscellaneous costs
Q: Are the investments risky?
A: Yes. Similar to investing in the stock market, there is no guarantee of a full return of capital when you are investing in real estate. That said, real estate is different from owning a stock of a company which can go bankrupt. In extreme cases, investors in stocks can lose their entire capital. With real estate, as long as the building is still functional, there is a chance to get back a certain portion of the capital invested.
Q: Who owns the deed to the property?
A: Each property will be owned by a Limited Liability Company (LLC) validly registered with the Singapore Government, of which you will be an owner. When you invest in a property via FundArealty, you are purchasing shares in the LLC. These shares entitle These shares entitle you to a percentage share of ownership in the asset as well as profits generated from the Managers operation of the asset.
Q: If something happens to the property, can I end up owing more than I invested?
A: No, not as a law abiding member of the Limited Liability Company. The purpose of holding each investment offered on RealtyShares through a single asset Limited Liability Company is to limit your liability with respect to any particular investment to only the amount you invested. In this way, if there is a lawsuit involving the property or the owner of the property (the LLC), any legal and financial liability accruing to the LLC cannot pass through to you or your personal assets. You can only lose the amount you invested.
Q: How do I make money?
A: You make money primarily in by the appreciation of the property and regular dividends paid from rents that exceed expenses. Most property tends to increase in value over time and this is driven by general inflation (of which property is a good hedge against), as well as increasing demand for places to live, work and shop etc. A well operating real estate asset will take in more in rent than it takes to run the building. This excess money will distributed to the investors every quarter.
Q: Is there a minimum investment requirement?
A: The minimum is $100, but may change depending on the specific investment being offered.
Q: How will unexpected expenses be handled?
A: Each property will be initially funded with a reserve to protect against unexpected expenses. In addition, a portion of the rents will be set aside for unexpected expenses as will be called for in the business plan. If at the time of sale there are excess funds in the reserve pool, these will be distributed to the investors. Should the unexpected expenses ever surpass the reserves, the property will be subject to sale, unless more than 50% of the voting interest votes to fund the expenses with additional capital. If greater than 50% of the voting interest votes to invest additional capital instead of selling the property, no investor will be required to invest additional capital, but existing shares (i.e. the existing ownership interests) will be diluted to the extent additional capital is invested.
Q: How long is the investment for?
A: There are several types of real estate investments that call for different investment periods depending on the investment objectives. Ownership of a property in the long term (6-8 years) is the most secure and prudent way to invest in real estate as it offers an opportunity for capital appreciation and regular income. A “value-add” form of investment occurs when modest improvements is made to a property for greater income to be realized and which can then be sold as and when a potential gain is achievable. A “flip” is the most risky form of investment which occurs when a property is bought, fixed up immediately and sold for short term gain.
Q: What is a typical return that I can expect?
A: This depends very much on the overall real estate market, economic growth, sector popularity and spatial factors. On a very general basis, real estate investments across different sectors will yield cash returns of between 3-7% per annum, and expected appreciation of about 3-5% per annum.
Q: What kinds of real estate will I be able to purchase?
A: FundArealty offers the opportunity to own properties across the residential, retail, commercial and industrial sector in South East Asia.
Q: Can I sell shares early?
A: Investment in real estate is generally for longer periods due to the illiquidity of the market. There is no secondary market as of now but FundArealty will likely partner with a secondary market service provider in future to allow you and other investors to buy and sell shares in the secondary market.
The article below puts it very well that despite being a massive market, the real estate sector is stuck in the past.
In this part of the world, hand drawn methods are still used in some building designs and quantity surveying work.
We could truly use some advice from the US with regards to making it mandatory to teach some form of programming and technology literacy.
I feel one reason Silicon valley is so successful is its leverage of technology to disrupt old-world industries. The blog article below further shares some industries ripe for disruption.
Personally, real estate is an industry in Singapore and SE Asia that is ready for disruption. However, it'll take a couple of years before the infrastructure and ecosystem gets built up.
Fundarealty is seeking to ride the growth wave early and when the legal architecture catches up, we'll hopefully be one of the big boys up there.
In conclusion - identify old-world industries still entrenched in past mindsets and that still use tools that worked in the past. Introduce some level of technology that can disrupt the way things are done.
The post below is copied in full from The Realty Shares blog.
US real estate ranks among the world’s largest asset classes with a total market cap exceeding $27 Trillion (by comparison, the US Stock Market is almost half the size at $14 Trillion). In 2012, close to $1 Trillion worth of US real estate traded hands and this number is expected to increase in 2013.
However, despite being a massive market, real estate is stuck in the past and those in real estate don’t know or don’t care (business as usual is in their best interest) how disconnected real estate and technology truly are. This has created lack of access, market inefficiencies and also tremendous market opportunity. It isn’t surprising that those making the most progress towards eradicating these inefficiencies are innovators rather than core real estate people. And their entrance into this market has in some cases been accidental and in others simply because they haven’t been tainted with how real estate works today and thus see an opportunity to disrupt this multi-trillion dollar market through technology.
As a founder of RealtyShares (www.realtyshares.com), a real estate crowdfunding platform focused on eradicating the inefficiencies of investing in and raising capital for commercial real estate investments, I have had the pleasure of engaging with many of these innovators personally. Although they come from a variety of backgrounds, they have one thing in common: they are all leveraging technology to disrupt real estate and make it more efficient. And after careful consideration, below are my picks for the five that I believe are (or will soon be) the most disruptive.
AIRBNB: Annual revenue for the global hotels and resorts industry is in excess of $550 billion and Airbnb, an online marketplace for short term rentals, has been busy disrupting this industry since 2008. And its success speaks for itself. As of November 2012, Airbnb had over 250,000 rental listings in 30,000 cities and 192 countries and had raised approximately $120 million in funding at a valuation north of $1B. The concept behind this P2P short term rental marketplace is simple: individuals want greater choice on where they stay when they travel or are away from home than hotels. The Founders aren’t hoteliers, leasing brokers or landlords. Rather, they are innovators, techies and designers that understand that lack of choices for consumers beyond hotels has created tremendous market opportunity. And it isn’t surprising that their biggest critic is the American Hotel & Lodging Association, an association pegged as serving the interests of hoteliers both on the front line and behind the scenes.
DOTLOOP: The US residential real estate market is over $16 trillion in size and purchases of existing homes in 2012 increased by 2.1 percent to a 4.79 million annual rate. Yet, if you have ever bought or sold a home you know first-hand how inefficient and broken the process really is. Dotloop, a company that assists agents, buyers and sellers through this process, is on the verge of changing that. Dotloop’s value proposition is simple: make the residential real estate transaction process efficient and paperless. Dotloop does this by utilizing a cloud based technology focused on inviting people to the transaction documents rather than passing around multiple versions. As of 2012, Dotloop served more than 200,000 agents in 700 cities in the US and Canada and had raised over $7 million in funding.
STOREFRONT: In the US alone, there is more than 9.9 billion square feet of leasable retail space with an average rental rate of $15.15 sq. ft/year (a market cap in excess of $140B). Although there are a growing number of startups giving brick-and-mortar retailers an avenue to build their own online ecommerce stores (i.e. Shopify), the process for retailers to find and lease space offline is inefficient and lacks transparency. San Francisco based early-stage startup and Angelpad grad “Storefront” seeks to change that. At its core, Storefronts product is an online marketplace for short term retail leases. However, the coolest thing about this startup is that it propagates the pop-up shop phenomenon (i.e. giving online retailers a presence in the brick-and-mortar market). You can find a video of one of their latest pop up shops here: http://www.youtube.com/watch?v=P7ponQ6JeNs.
42FLOORS: 42Floors is for office space what Storefront is for retail space. The demand for office space is on the rise and in 2011 was at its highest level since 2007 with 50.4 million square feet of net absorption. 42floors is a search engine for the office rentals market that is turning the inefficient office leasing process into a transparent online user friendly experience. The founding team is a group of coders, developers and innovators (rather than brokers or real estate professionals) looking to capitalize on an inefficient yet huge market. To date, this Y Combinator-Backed startup has connected over 1,000 businesses with over 2 million square feet of office space and has raised more than $17 million in funding and is now looking to expand internationally.
ZUMPER: The US Apartment rental market has not only fully recovered since the start of the real estate recession, but is now expanding (with vacancies expected to fall from 5.5 to 5.2% in 2013 and 5.1% after that). However, anyone that has ever looked for an apartment knows the apartment hunting process (especially in SF or NYC) is time consuming, unreliable, overly competitive and inefficient. For the last decade, craigslist has been the only real online solution (although lack of consistency, spam listings and its utilitarian design have left users wanting more). SF based early stage startup Zumper vows to change that through a more efficient, user-friendly online apartment rental marketplace that will help apartment hunters find their next great apartment. Zumper is currently operating in NYC, San Francisco and Chicago with expansion plans into additional markets in the very near future.
Real estate is ripe for disruption and each of the above listed companies are a testament to the fact that this disruption can come from anywhere. Personally, I am excited for their prospects and they are worth keeping an eye on. You can catch a few of them at RealTech SF 2013 at the end of April (www.reesio.com/realtech). The event will be hosted by Reesio, a realtech startup that streamlines the real estate transaction process through an interactive online workflow.
Selling of hotel rooms individually have been popular for some time in the US and Europe, but it hasn't been well received recently in HK as reported by Bloomberg, the South China Morning Post and The Standard.
I don't think it'll pick up steam in Singapore given the tightly regulated market and low supply of hotel rooms. The potential for 'small time' property investors to enter the market with capital of less than $10,000 is huge with crowdfunding and the internet democratizing the investment process and lowering the barriers to entry and middlemen such as banks and agents.
There have been some delays to the crowdfunding industry with the JOBS acts in the US facing some obstacles.That doesn't seem to stop the number of 'real estate crowdfunding' search hits to rise to 7.09mil and definitely counting.
Check out the article in full below on how real estate investment is becoming available for the masses.
Room to grow for Asian property
Evolving culture of property investment is such that
it's no longer a rich man's game
- PHOTO: CASTLEWOOD
New options have become available within tourism hotspots such as Thailand with starting prices of as little as S$35,000. Notably, the key for these opportunities is still primarily situated around the old adage: location, location, location.
Chris Comer
CEO & Property Developer,
Castlewood Group
THE facts are simple: Alongside Asia's dramatic rate of growth lies the inherent problem of property prices skyrocketing. Even Singapore is trying to reverse a situation where the market was threatening to price itself over and above what its own citizens could pay. Meanwhile, buy-to-let property is simply not giving back the promised or indeed even the required returns.
Everyday investors are starved of available and affordable options for their dollar. Yet even here there are exciting options. Previous options that only the super-rich could afford are becoming available to the savvy investor. A case in point is buy-to-lease hotel rooms.
Buying to lease is a simple concept. It involves buying a second property or maybe more, funded by the leverage of equity in existing properties already owned, or simply borrowing by way of a mortgage from a high-street bank.
The rent received by the owner would service the loan taken against the property in question. The property will then be kept by the owner until it has increased in value sufficiently enough to re-sell at a profit.
The concept of selling of rooms/suites in hotels has been an investment opportunity in Europe and the United States for many years now, and was pioneered by world-renowned developer and investor Donald Trump as the backbone of the Trump organisation for more than a decade.
Other major five-star hotel brands, such as Ritz Carlton and Four Seasons, have been utilising this type of property investment product to garner stunning returns for investors over the years, but it has also spread to the lower end of the scale, such as the Holiday Inn and other less expensive hotel chains.
However, it has always been at extremely high entry points averaging around US$1 million, and therefore still out of reach of the everyday investor, and the culture tended to make the rich richer.
On average, the yields generated from hotel-room investments are higher than traditional buy-to-let investments, and hotel rooms are hassle-free. No agents are required as they are fully managed. No maintenance costs are needed either as all the maintenance costs are borne by residents of the hotel. Room rates can be adjusted to factor in inflationary increase and market demand, unlike signing a tenancy agreement where once signed you are pinned down to a fixed amount of money for normally two years. However, with all of these benefits as compared to normal real estate investment, the problem remained that it was incredibly expensive to invest. This has changed.
Once only a rich man's game, there is an evolution in the culture of property investment in Asia. No longer is this type of profitable investment sanctioned purely for ultrahigh-net-worth individuals to participate in. New options have become available in tourism hotspots such as Thailand with starting prices of as little as S$35,000.
Notably, the key for these opportunities is still primarily situated around the old adage: location, location, location. Let's take the obvious example of the jewel in Asia's tourism crown - Phuket.
Phuket has established itself as one of the leading resort destinations in Asia. It has become an economic role model and object of desire for other leisure emerging markets. The facts speak for themselves:
2012 - Phuket International Airport received 9.5 million passengers. In the last eight years, the airport has grown at a compound annual rate of 9 per cent.
Strong market-wide performance with occupancy of 75 per cent. Average room rates and RevPAR spiked upwards by 5 per cent and 8 per cent, respectively.
Active hotel investment climate across the industry with total transactions valued at US$170 million in H1 2012.
With figures such as these coupled with no low season, and instead a "super-season" over the Christmas break, savvy investors are able to do their due diligence, and potentially choose options such as higher-end luxury hotel investments, and other "recession-proof" investing due to the wealthy nature of their clientele. Other factors that come into play are the hotel features and management.
With such a volatile economic climate, and with ever-increasing property prices, choosing wisely on options such as buy-to-let hotel rooms in Asia's tourism hotspots can be seized as an immediate opportunity for investors.
As Asia's turn to rule the next century becomes more and more evident, the very nature of property investment in this part of the world has to evolve and change in tandem, taking advantage of tried-and-tested options that are suddenly on our very doorstep.
Singapore Investors Fearless Despite Easing Prices - Precisely these kind of headlines that fuel a bubble (Share your thoughts)
A recent article by CNBC declaring the fearlessness of Singaporean investors in the face of seven cooling measures is what bubbles are made of.
Feels a little other-worldy to read about Theresa Low who just purchased her fourth apartment in the city-state while the median income (Source: Department of Statistics, Singapore) of resident employed households is S$7,570 or affordability of a S$767,704 loan or S$1 mil private property (Source: Propertyguru affordability calculator).
That's more than enough to buy you a quarter of a decently sized unit in the prime districts of 9, 10 or 11; half a unit in the city fringe area, or if you're not fussy - a whole unit in the suburbs.
Even then, private house prices in the suburbs are hardly below S$1mil and reaching levels never seen before.
Despite having 188,000 millionaire households households in the country, the remaining 83% or 1.1mil households do not have such investable income.
Real estate Crowdfunding is for these people.
They call them the 99% in the US. While not technically 99%, the remaining households in this country do not have the network or access to prime deals. Crowdfunding will open up a great deal of opportunity in this industry.
I extract some snippets of the article below.
--"The property market is still hot here. There are a lot of investors in Singapore; they don't know where to park their money. Property will always go up here," she added"--
I agree that house prices in Singapore usually trend upward, at a rate of about 2-4% depending on inflation. Even on a downside, the correction is short lived (2-4 quarters max - '08 financial crisis) but may be major ('97 Asian financial crisis)
--"Another Singapore resident, who purchased her first home before the January cooling measures, is also bullish on the sector. "In my opinion if you have luxury of time, prices will always appreciate especially in Singapore where land is so scarce"--
Not too sure about this statement once interest rates start to rise and the leveraged investors get caught out cold with their pants down.
Having read the ludicrous comments above, would you invest in property if you have the chance to do so with just S$1,000?
Ecohouse has been in the news quite recently, having been covered in various forums, UK's home and travel website and on Yahoo. I called Ecohouse to enquire about their real estate investment program and to do some research on how the developer goes about 'crowdfunding' for their Brazil projects.
This is how the whole investment scheme works.
An investor has to put down about S$46,000 to buy a unit in the program. The S$46,000 is put into an escrow account held in trust by a local law firm. The law firm opens a local S$ account, as told to me by the lady on the line, and places the money in there.
When the developer in Brazil requires money to build the home, he will draw down from this account, after producing the necessary receipts and documentation to prove that his building plan has been accepted, material has been shipped, labour has been booked etc.
The building process takes about 6 months, after which the building will be sold to the federal government of Brazil. Why isn't it sold to the locals who need to stay in there? The reason is that the federal government provides 100% mortgage loans to the locals, but pays to the developer upfront the cost of the house.
At the 6 month mark, give or take 2-4 months, the money paid by the federal government goes to the developer. Though not told to me by the lady, I'm sure the developer keeps a little bit of money and passes on the rest to the Singaporean investor. Viola! This is how an investment of S$46,000 grows by 20% to roughly S$55,200 in slightly less than a year.
The website claims a return of 20% a year, but in effect it is less as the building period takes 6 months + 2-4 months of administrative work.
Now, how believable and realistic is this investment scheme? I came across an forum posting that pours cold water on this scheme and comparing it to a scam by the name of Langton Roche.
I'm more inclined to be wary than optimistic on this scheme and have yet to dig fully into the whole scheme. The dearth of information on their website does not help, nor does the relevant government's agency not using English.
That said, I think the idea of equity Crowdfunding from the masses is a viable solution for a company/developer/startup needing finances. What the crowdfunder will definitely need is good social standing, in today's age that means positive coverage on social media. That will trump adherence to legal and regulatory requirements though being accredited by the relevant authorities will be more than helpful.
URA released their flash numbers for the Singapore property market. The index gained 0.5% compared to 1.8% the previous quarter.
A report from Bloomberg states that the cooling "measures have taken effect" while CNBC writes about the dampened market demand from foreign and non-singaporean buyers.
Across the rest of the island, the price gains are as follows
Core Central Region - 0.4% vs 0.7% last quarter
Rest of Central Region - 0% vs 0.9% last quarter
Outside Central Region - 1.7% vs 3.8% last quarter
See also:
Singapore Private home price growth slows - Fox News
Is 2013 turning out to be the year of the Crowdfunding gold rush?
A recent article in Forbes declares 2013 to be the year of the crowdfunding gold rush. Is it turning out to be so?
It apparently is turning out to be so, given the number of websites and searches on google pertaining to crowdfunding for real estate, private startups and even the supply chain.
A list of fairly comprehensive crowdfunding websites can be found here, with, I'm sure, plenty more that have not been covered.
A few events have contributed to the rise of crowdfunding, not just for the arts & culture, bakeries, pet projects vertical but for also real estate and private company startups. These include the passing of the JOBS act in the US and the embracingof Crowdfunding by the European Union.
The only region that has not caught on the bandwagon is that in Asia. Numerous websites that have focused on the art & culture, bakeries, pet projects vertical include togather.asia and crowdomic which have not fared too well. These websites admittedly will never take off in this part of the world for the simple fact that the Return on Investment (ROI) for backers is zilch, save for the souvenir/goody the project creator gives.
What will really take off a la crowdfunding is very likely the real estate vertical, and possibly the opportunity to invest in private startup companies. Why so? The ROI on such projects are immediately visible (and are definitely not souvenir/goody style) in terms of a backer (or investor) receiving cash. Cash, in the case of a real estate crowdfunding project; Future cash/plenty of capital appreciation in the case of Crowdfunding for a private startup.
FundArealty is seeking to be the first mover in the real estate vertical in this part of the world. In a month's time, we'll be giving out invite only passes for you to start really owning your piece of real estate. Watch this space.
Real estate and private company crowdfunding - Thoughts
There've been plenty of private company crowdfunding websites offering investors the chance to plow their cash into star Y-combinator, Techstars, 500 startups companies. There has also been a rising number of crowdfunding websites offering real estate investments.
What is the major difference?
In all cases, putting cash into a startup does not immediately yield cash (cash on cash) because it's well, a startup. It doesn't generate cash yet, and in some cases, the business model isn't tried and tested.
In real estate crowdfunding, depending on the property purchased, the investment is immediately cash accretive. The investor, now a part landlord, starts drawing on the rental income paid by the tenant.
First signs of real estate crowdfunding in the Singapore market
Check out Ecohouse's "Why get involved" video (http://www.ecohousegroup.com/) that explains their preference for financing directly from investors aka go directly to investors (vs. financing from banks or go to the bank which is the traditional route for developers seeking to build houses) - aka crowdfunding!
Observe also their use of a term such as "less bureaucratic process" which is a veneer for crowdfunding.
Ecohouse's financing method is going directly to investors, in this case, Singaporeans. They then crowdfund from them in in exchange for a 20% annual return (with strings attached of course).
While I remain skeptical on their 20% return, I'm all for their method of financing directly from investors, skipping banks in the process. This is how the internet, globalization and the shrinking of the world has caused the democratization of financing. The regulatory oversight has to be absolutely robust in any case. That said, lawmakers are still lagging in this aspect.
I'll be interested to see what regulatory loopholes Ecohouse had to go through to register operations in Singapore and whether investors really get their 20% return in a year's time.
Their home page
Open project
Some of their closed projects
Full article below
A housing project to help slum dwellers in Brazil move into better homes has drawn interest among property investors here, said its developer.
Brazilian developer EcoHouse Group told The Sunday Times that the 2,176-unit Bosque Residencial project in Natal, in the north-east of the country, is one of three housing projects in Brazil that have netted $70 million from Singapore investors.
They paid as little as $46,000 each to book units in the development which was promoted most recently at Suntec City this month.
But they will not get the homes for themselves. The project is a social housing project - a public- private partnership in which the Brazilian government offers homes built by private developers to poor families at subsidised rates.
So investors being wooed here pay only to help fund the cost of building units in the project.
The promised returns of about 20 per cent - which means investors get about $55,200 per unit after just one year - are generated when the unit is resold to a Brazilian buyer at a higher price.
A key risk however, is that if buyers dry up, investors may find themselves stuck with a property that is hard to sell, given the unfamiliar environment.
The sales and purchase agreement gives an investor rights to a specific property which will be built and then sold to a Brazilian buyer, said Mr Jason Purvor, the international commercial director of EcoHouse Group, one of the private partners in the scheme.
The company's headquarters is in Natal, but EcoHouse also has offices in London, Toronto, Singapore and Dubai.
Investors can track the progress of the development by looking at pictures and videos on the company's website, or go to Brazil to see for themselves.
EcoHouse has already held two public exhibitions here. Mr Purvor, who is based in London, said more than 1,500 units in the three projects have been sold here.
Retiree Kishore Dharamsi, who is in his 50s, told The Sunday Times that he has invested about $500,000 in the Bosque Residencial project and another development. He owns property in the Philippines as well.
He said he was cautious initially about the Natal project because Brazil is so far away, and invested just a small amount. But a trip to Brazil last November with a dozen other investors to see the development convinced him to put more money down.
"There is a huge demand for social housing in Brazil where there is a rising middle class moving out of poverty. I managed to see first-hand the people living there," said the former general manager at a Swedish multinational company.
"As the investment is also placed in an escrow account, there is an added layer of security to the investment."
An escrow account, in general, ensures that a seller is paid only after certain conditions, set out as previously agreed, are fulfilled.
Financial advisers noted, however, that aside from the risk of being stuck with an overseas property that is hard to manage and gain access to, investors may also be unfamiliar with Brazilian laws that might also apply
THREE residential sites have been put on the market, with the potential to yield about 850 new homes across various housing styles.
Of the three, the keenest interest will centre on a 2.1 ha executive condominium (EC) site in Woodlands Avenue 5 - likely to feature about 590 units.
Executive director of property consultancy firm CBRE Joseph Tan said: "The level of interest for this EC site is expected to be fairly keen as ECs are not affected by the anti-speculative property measures, the Additional Buyers' Stamp Duty (ABSD) and the Loan-to-Valuation measures.
He added: "With four more EC sites to be released for the rest of 2013, the Government is showing its commitment to further regulate the pricing of ECs to ensure their prices remain affordable."
A second site, at Coronation Road, spans 3.8 ha and can fit about 140 landed housing units, the Urban Redevelopment Authority said.
Director of R'ST Research Ong Kah Seng expects five to eight bids for this plot. He said: "The primary strength of the site is good schools in the vicinity - Nanyang Primary and Hwa Chong Institution. Developer interest is expected to be warm as there should be sufficient affluent buyers interested in having a well-positioned home near good schools for convenience and potentially higher resale."
He added: "The recent measures mean that Singaporeans can only buy one ABSD-free private property so affluent buyers having a penchant for landed homes are likely to be very stringent in their selection and opt for choice landed homes in strategic locations."
The third site, at Jalan Bunga Rampai in Bartley, is 0.47 ha. The site, on the city fringe, can accommodate around 115 housing units. Mr Nicholas Mak, research head at property firm SLP International, expects six to 12 bids for the plot. "The likely land price is $520 to $570 psf per plot ratio, and could attract smaller developers due to its small size."
All three sites have a 99-year lease period.
The tender for the land parcel at Woodlands will close on May 9, while the deadline for the plot at Coronation Road is on June 20.
The site at Jalan Bunga Rampai was made available for application yesterday on the reserve list. This means it will be put up for tender only if a developer makes an acceptable initial offer.
Cooling measures drive property investors to look to Europe
COOLING measures in Singapore and Hong Kong have forced investors in both places to look to Europe for their property fix.
The key cities of Munich, Berlin and London have emerged as the main centres for Asian buyers, said IP Global, a Hong Kong-based property company.
"The recent cooling measures in Hong Kong and Singapore have made investors, especially non-residents, think twice about the additional costs (of buying properties there)," said Mr Tim Murphy, founder and chief executive of IP Global, which buys and manages international real estate for clients.
"Most Singaporeans look for $1 million to $3 million price points for overseas developments," he said.
"They prefer one- and two-bedders for these investment properties and are looking for strong rental yields and capital growth. "Some factors that investors consider before taking the plunge include foreign ownership, market performance, ease of buying and financing."
Munich is particularly attractive to investors as its population is expected to grow by about 11 per cent to 1.5 million by 2025.
Office vacancy rates are also low compared with other major cities, thanks to global and medium-sized businesses driving the strong service-based economy.
Munich residents have purchasing power of about €25,200 ($40,000) per capita per year - one of the highest in Germany.
Berlin is also a popular pick for investment properties.
Tourism is a mainstay of the residential sector with nearly half of the 11 million visitors each year opting for private apartment accommodation instead of hotels, said the report.
Demand for homes and rentals is also attributed to the influx of people into the city.
The report said that 30,000 to 35,000 people move to Berlin every year, creating demand forup to 20,000 new homes annually.
London properties continue to attract foreign investors, lured by the city's status as an investment safe haven.
Mr Murphy said: "Buyers from Singapore and Hong Kong accounted for 40 per cent of purchasers of new-build property in central London in 2011 and 2012."
Homes in Mayfair, Kensington and Chelsea still attract the most investment, while the private rented sector is drawing attention as a potentially undertapped market. The report also indicated that the Crossrail project - which will be completed in 2018 - is expected to boost real estate values in the city's outer districts.
IP Global also tipped Istanbul, Turkey, as Europe's real opportunity market.
"Half the city's population is under 29 years old and global firms are setting up local bases there due to its strong economic potential," said Mr Murphy.
Investment in real estate in Istanbul is expected to grow by US$5 billion (S$6.2 billion) a year as the city eases restrictions on foreign ownership, said the report.
Another strong driver of European real estate comes from Chinese investors.
They have pumped in US$10 billion annually in recent years, up from US$1 billion in 2007.
THE rise of casinos in Asia and of Iskandar Malaysia are two factors that should encourage investors to keep placing their cash in high-yielding Asian real estate.
That is the assessment of Singapore-based real estate investment house Pacific Star Group in its latest report on the sector's outlook.
The firm also said structural shifts in industrial production will spur real estate growth.
In the past 12 years, it has transacted US$12 billion (S$14.9 billion) of property deals for clients.
It said upscale casino resorts will propel the next phase of tourism growth in Asia beyond Macau and Singapore.
Multibillion-dollar integrated resorts are being planned in South Korea and the Philippines, and on a smaller scale in Vietnam and Cambodia, said the report.
Casinos could also be legalised in Japan and Taiwan.
With the rise of China, Pacific Star said the shifting production model for quality industrial and logistics sectors will present investors with interesting options.
This applies to production lines moving to inland China, Thailand and Vietnam, it said.
Iskandar Malaysia is another reason for investors to park their money in Asian real estate.
Last year, the Malaysian development received cumulative committed investments of RM106 billion (S$43 billion), 6 per cent more than its target set in 2006.
The report attributed Iskandar's success to government-backed companies, major investors, its strategic proximity to Singapore, bilateral governmental support and the active participation of developers.
Pacific Star vice-president of research and strategic planning Lam Chern Woon said: "It is now opportune for investors to cast the net wider beyond traditional markets and sectors while riding on Asia's growth story.
"There are opportunities... in new markets like Iskandar Malaysia, Jakarta and Manila."
For the office sector, Hong Kong and Singapore remain favourites for their sound political fundamentals and business competitiveness, said the report.
Mr Lam said: "Investors should also continue to keep an eye on quality assets in the gateway markets of Hong Kong and Singapore where pricing may be contained in the near term due to rental correction."
250 or 43% of the 99-year leasehold 582-unit Urban Vista condominium project located at the junction of New Upper Changi Road and Tanah Merah Kechil Link has sold been at an average of $1,350 psf after a 7% discount. Units sold were mostly one- to three-bedroom units. There are 135 one-bedroom units, 249 two-bedroom units, 160 three-bedroom units and 37 four-bedroom units. Prices start from $588,000, $768,000, $1.1 million and $1.5 million for one-bedroom units (average area of 450 sq ft), two-bedroom units (average of 600 sq ft); three-bedroom units (average of 900 sq ft) and four-bedroom units (average of 1,050 sq ft), respectively. The take-up rate reflect genuine demand though had there not been the latest round of cooling measures, the developer could have sold even more units at a price of more than $1,400 psf.
(Source: Business Times)
What do the above sales at Urban Vista mean?
1) Properties at good locations, in the above case Urban Vista, always command better prices and greater demand. Urban Vista is located near Changi Business Park and Changi Airport, upping its convenience ante for expatriates and renters.
2) The cooling measures won't have much impact on properties in good locations.
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99-year D’Nest sells 500 of 650 released units
99-year leasehold 912-unit D’Nest at Pasir Ris Grove near Pasir Ris MRT station and White Sands shopping mall has sold 500 of its 650 released units at an average price of $990 psf or $920 psf after discount. It has since increased by 2%. It consists of one-to-four bedroom units, five-bedroom dual key units and 10 dual-key penthouses with five or six bedrooms in 12 blocks of 11- to 13-storey and three clubhouses sitting on a 444,284 sq ft site. Prices start at $498,000, $680,000, $820,000 and $1.15 million for one-bedroom, two-bedroom, three-bedroom and four-bedroom units respectively. More units of each type have been progressively released in response to the strong demand. 80% of the buyers are Singaporeans, with remaining being foreigners and PRs largely from Malaysia, China, and Indonesia.
(Source: Business Times)
What do the above sales at D'Nest mean?
Sub-$1000 psf units are still much welcomed by buyers. As much as possible, developers will try to price units lower than this, especially in far out mass market locations
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HDB launches 3,898 BTO flats in non-mature estates
3,900 BTO flats have been launched in four projects three non-mature towns: Bukit Batok, Punggol and Sengkang.
SkyPeak @ Bukit Batok located between Bukit Batok Street 21 and Bukit Batok East Avenue 6 offers 1,430 units of two-room to five-room flats with prices starting from $117,000 to $411,000.
Matilda Portico bounded by Punggol Field and Punggol Way comprises 470 four-room and five-room flats with prices starting from $294,000.
Compassvale Cape located along Compassvale Crescent near Cheng Lim LRT station offers 1,400 flats including studio apartments as well as three-room to five-room flats. Prices start from $88,000 for a studio apartment and $189,000 for a three-room unit.
Compassvale Helm, located between Compassvale Bow and Buangkok Drive, near Buangkok MRT Station. It has 598 flats comprising studio apartments, as well as four-room and five-room units. Prices start at $88,000 for studio apartments, and $304,000 for a four-room flat.
Most projects are expected to have application rates of two to three. Compassvale Helm, however, is expected to have application rates of three to four given its proximity to several schools, the MRT station and other amenities.
