Small Businesses Like Residential Property

Over 50 per cent of owner-managed businesses consider residential property to be the most attractive investment option, according to research from the Bank of Cyprus UK.

Despite the recent implementation of stamp duty changes for landlords in Engand and Wales, the figure (53 per cent) marks a rise from the Bank’s previous research in early November 2015.

It was found that residential property was the overwhelming investment choice for owner-managed businesses, as a mere 8 per cent see commercial property as an attractive investment. Cash investments were preferred by 16 per cent of respondents, whilst stocks and shares came in at 13 per cent.

Lakis Kasapis of Bank of Cyprus UK said: ‘Despite the new measures making life harder for buy-to-let landlords, demand for residential property as an investment is still strong, and surprisingly people are even slightly more bullish about buy-to-let investments than six months ago. We saw a rush to buy in the first quarter of this year as investors capitalised on buy-to-let property purchases before the stamp duty increase took effect in April.

‘It remains to be seen, however, if this appetite for investing in the residential market will now come to a hard stop following the stamp duty increase, or whether it will continue given the scheduled personal tax relief changes and the continued uncertainty surrounding a potential Brexit.’


Resource: http://www.residentiallandlord.co.uk/

Sharjah’s residential property rents set to drop further

Rents in Sharjah’s residential property market are set to continue to decline throughout 2016, following an average fall of 5.7 per cent during Q1 which has dragged the annualised rate of change in rents down to -8.3 per cent, according to international real estate consultancy Cluttons.

Cluttons’ Sharjah Spring 2016 Property Market Outlook report shows that unlike last year, the fall in villa rents has accelerated, with average rates declining by 13.2 per cent in Q1 2016 alone, whereas average apartment rents fell by 1.5 per cent in the first quarter, leaving them 7.7 per cent down compared to Q1 2015 figures.

The report also highlights the growing awareness amongst tenants to seek out well managed properties, with good quality facilities and rents that are perceived to be ‘fair’.

Suzanne Eveleigh, the Cluttons' head of Sharjah, said: "This sentiment among tenants creates an opportunity for landlords to differentiate themselves by undertaking refurbishment and modernisation of properties while the market works its way through the current slowdown."

"We have already seen numerous instances of this being done during the last downturn in the market and it is these properties that are now fully let and in high demand. That said, even in our portfolio of managed properties, voids have crept up to around three per cent, up from the usual average of 0.5 per cent to one per cent, reflecting the softening conditions. The situation is far more challenging in buildings where landlords haven't been proactive," she noted.

Cluttons research shows that demand for suburban-style living continues to rise in Sharjah, predominantly because of the relative affordability when compared to Dubai.

Developers are conscious of the demand for more luxurious gated accommodation and are continuing to rush new schemes to the market.

"These emergent high-end communities will help cater to the strong demand from both residential investors and tenants who are seeking out this type of housing in Sharjah," remarked Eveleigh.

"Al Zahia and the Dh2.4-billion ($653 million) Tilal City are examples of such communities that are progressing quickly. We expect to continue seeing larger and more elaborate residential communities built on the outskirts of the city, with a specific focus on the Airport Road corridor," she stated.

According to the report, the weaker conditions in the market are expected to persist as the year wears on, with rental falls of between three per cent and five per cent likely, on average.

Faisal Durrani, the head of research at Cluttons, pointed out that the rents across Sharjah’s more affordable areas remained linked to the performance of Dubai’s rental market.

"With a weak short-term outlook for Dubai, we do not expect to see any turn around in rental value growth until jobs linked to the World Expo in 2020 start to materialise, which we should start to see in the next 12 to 18 months. Until then, the rental market in Sharjah is expected to remain subdued," noted Durrani.

On the office market, Cluttons said rents across Sharjah’s main submarkets have stayed flat over the past six months, with all three of the city’s main areas (Al Soor, Al Majaz fringe areas, and Al Majaz prime areas) experiencing no change.

The only market to have showcased any change in the past 12 months is the fringe areas of Al Majaz, where office rents increased by 7.7 per cent between Q1 2015 and Q1 2016 and currently stand at Dh70 per sq ft, up from Dh65 per sq ft in 2015.

“While the silver lining for Sharjah’s office market is the relative stability in the level of prime office supply, the level of requirements has continued to dwindle. The vast majority of requirements that we have been recording are from the emirate’s important SME (small and medium enterprises) sector; which is usually for space in the region of 1,000 sq ft.” said Durrani.

Aside from this core demand driver, Cluttons has noted a handful of requirements from oil and gas linked occupiers, who, alongside the public sector and quasi government sector, continue to drive larger space requirements.

"Despite the relative stability in the emirate’s office market, we are expecting to see rents decline this year between Dh5 per sq ft and Dh10 per sq ft across the board," stated Durrani.

"With entry level rents in comparable, desirable and sought-after office submarkets in Dubai such as Deira, Bur Dubai, Garhoud, Jumeirah Lake Towers and Business Bay currently standing at between Dh60 per sq ft and Dh75 per sq ft, it is likely that Sharjah’s office landlords will be left with little option but to drop rents to below those in Dubai in order to entice demand," he added.-TradeArabia News Service.

Resource: http://www.tradearabia.com

Dramatic shifts herald a new era in residential property

There have been two sudden and dramatic shifts in the Sydney apartment market, which are set to spread to Melbourne, Brisbane and other markets.

It may herald a new era in Australian residential property.

The first shift is that the level of Chinese buying of Sydney apartments has fallen dramatically. The largest Sydney developer, Meriton’s Harry Triguboff, estimates that in the last month or so Chinese buying has halved.

The Chinese and other Asian buyers have been buying over 80 per cent of Sydney apartments in recent years so this is a huge and dangerous development.

But just as everyone began to prepare for the resulting calamity, a second dramatic shift has taken place in the last few weeks: There has been a surge in Australian buying of both existing and ‘off the plan’ apartments.

The increased buying has been so sudden that there has not been time to fully analyse the trend, but it seems that two forces are driving it.

First, the Coalition’s retrospective (see footnote) decimation of superannuation as a savings mechanism for up-and-coming executives and salary earners has turned Australians towards negative gearing as a savings mode.

And, secondly, this trend was accelerated by the fall in interest rates as well as the signal by the Reserve Bank that if inflation remains at current levels or moves lower, further interest rate cuts would be in the pipeline.

The latest surge in local buying includes first home buyers but increasingly young Australians are negatively gearing investment properties and either living at home or renting. Indeed, it has become the modern fashion for young people to be investors rather than first home buyers.

As we know, the ALP plans to confine negative gearing to new developments and reduce the capital gains tax. Australians who are suddenly buying apartments either don’t expect Bill Shorten to win the election and/or are setting up their negative gearing prior to a change in the legislation should Shorten win. An ALP win is now a real possibility. (Business should prepare for a Shorten win, May 11.)

Why have the Chinese stopped buying in Sydney? We don’t know the full answer but almost certainly it will be a combination of the fact that it is becoming increasingly difficult to transfer money out of China and Australian banks have withdrawn the welcome mat for overseas buyers.

Those who bought apartments ‘off the plan’ 18 months to two years ago are settling well because the higher values enable them to gain bank finance, but there is a fear that when more recent ‘off the plan’ purchases come up for settlement in 18 months to two years the funding to complete the purchase may not be available.

We are therefore set for a fall in apartment development and/or prices unless the local buying surge gathers momentum.

While Brisbane shows similar trends to Sydney, Chinese apartment buying in Brisbane has not been nearly as dominant as Sydney. In Melbourne, Asian buying has been at least equal to Sydney and may have been greater.

Whereas Meriton dominates Sydney, Melbourne is a far more complex market and on July 1 the state government is set to raise the levy on foreign purchases of apartments from 3 per cent to 7 per cent. That is causing a surge of apartment developments to be brought forward so there is intense marketing to foreign buyers suggesting they buy before the July 1 tax increase.

Melbourne’s foreign apartment buying is closely aligned with education and, unlike Sydney, there are far more properties that have been bought by the Chinese and left empty. (In Sydney, Meriton exerts great pressure on foreign buyers to rent and there are few empty apartments.)

Once the July 1 rush is out of the way Melbourne will almost certainly follow Sydney and see a decline in Chinese buying. Already in Melbourne older apartments are selling for lower prices than new apartments. This two-tier market is very dangerous and lowers the level of bank financing for new apartments.

The sudden fall in Chinese buying in Sydney is of great long-term significance to the nation. The Chinese buyers not only underpin the market values but have also enabled the nation to adjust to the fall in mining investment. They have been a key element in our prosperity. If it continues to be difficult for the Chinese to buy apartments it may also affect our tourism and education, which have been key export markets for Australia.

Meanwhile, Meriton reports that the rental market is strong in Sydney and the Gold Coast but Brisbane has dropped by 5 per cent because of a very big increase in units.

What about Harry Triguboff as Australia’s largest apartment owner? What is he doing?

“We in Meriton are well placed whatever takes place. We have pending sales for $1.5 billion, which will probably be mostly honoured by the banks. We sold a lot of our old stock, so we are debt free,” he says.

Footnote: There has been considerable debate about whether Scott Morrison’s budget changes to superannuation represent retrospective legislation. The first change, the $1.6 million asset level that triggers pension taxes, is debatable but if you declare it ‘retrospective legislation’ you must also declare the ALP’s superannuation changes retrospective. But there is no doubt whatsoever that the lifetime cap of $500,000 on non-concessional contributions which goes back to 2007 is retrospective legislation of the worst kind.

Resource: http://www.theaustralian.com.au

Mumbai, suburbs' residential property prices rose only 3.3% in 2015: JLL India

MUMBAI: Mumbai, the country's most expensive property market, is maturing and sharp appreciation in real estate prices may not be a scenario likely to be witnessed soon. The average residential property prices in Mumbai and suburbs witnessed an appreciation of 3.3% in 2015 as against average 7% in 2014.

Unlike the pre-global financial crisis (GFC) times - when prices saw double-digit growth (y-o-y) across the city and suburbs - the market has seen a rather subdued growth in prices ov er the last couple of years, showed a JLL India study. The subdued rise indicates the maturing residential market, which should be a good news for end users who wish to buy home.

"A sign of any residential market's increasing maturity is evidenced by gentler price appreciation - a process which has been very much in evidence in the country's financial capital...The forecasted increase in residential property prices in 2016 is expected to be 6%. While a price rise of 6-7% (y-o-y) was predicted for 2015, the actual increase should come as a pleasant surprise to home buyers," said Ramesh Nair - COO - Business & International Director, JLL India.

At the sub-market level, south-central Mumbai and the eastern suburbs saw the maximum appreciation at 4.3% and 4% respectively, followed by north Mumbai and western suburbs at 3.9% and 3.5% respectively. Outside the city and suburbs, Thane saw a 3% appreciation in capital values, while the figure for Navi Mumbai stood at 6% However, Navi Mumbai also has a lot of unsold inventory in many of its pockets and only few precincts are witnessing good demand.

According to JLL India, smaller units are in demand lately due to their relatively affordable ticket sizes, and several builders are now offering them even in premium locations.

A JLL study in 2Q15 had showed that 69% of the apartments in the city and suburbs were priced above Rs 1 crore. The number came down to 65% in 4Q15, showing how developers are trying to bring in affordability.

The 2015 figure also reflects how developers have shown unprecedented flexibility and kept costs stable by absorbing some of the increased holding costs. Some home buyers reciprocated by jumping the fence and buying houses at attractive prices. Moreover, developers started to gauge market dynamics with greater precision and adapted their product offerings as per changing demand.

Resource: http://economictimes.indiatimes.com

Real Estate Bill is an act now, may protect home buyers

NEW DELHI: The Real Estate (Regulation and Development) Bill, 2016, became an act on May 1, kick-starting the process of making rules as well as putting in place institutional infrastructure to protect the interests of home buyers in India.

While acknowledging that the act is a positive development, property experts said the new rules should address problems faced by builders in getting sanctions and approvals in a timely manner. "Government authorities should also be made accountable for timebound approvals through the rules that will be made," said Anshuman Magazine, managing director of property advisory firm CBRE South Asia.

He said that if this happens, it will be one of the major steps towards the recovery of the Indian real estate market and will improve the confidence of both consumers and institutional investors - domestic or foreign. "Of course, it should not become another hurdle for development, which will then raise property prices in the long term," said Magazine.

The Ministry of Housing & Urban Poverty Alleviation notified 69 of the act's 92 sections that come into force from May 1. Rules for implementing the provisions of the act have to be formulated by the central and state governments within six months - by October 31 - the maximum period stipulated in Section 84 of the act.

The housing ministry will make the rules for Union Territories while the Ministry of Urban Development will do so for Delhi.

The key to providing succour to home buyers will be the setting up of Real Estate Regulatory Authorities, which will require all projects to be registered, and the formation of Appellate Tribunals to adjudicate disputes.

According to Section 20 of the act, state governments have to establish the regulatory authorities within one year of the law coming into force. These authorities will decide on the complaints of buyers and developers in 60 days.

The act seeks to protect the rights of home buyers, mandates registration of projects, including those that have not got completion or occupancy certificates.

Registration will require builders to set aside 70% of the funds collected from buyers and pay interest in case of delays. Any officer, preferably the secretary of the department dealing with housing, can be appointed as the interim regulatory authority.

Once the regulators are set up, they will get three months to formulate regulations concerning their functioning. Real Estate Appellate Tribunals need to be formed within a year - by April 30, 2017. These fast-track tribunals will decide on disputes over orders of the regulators within 60 days.

A committee chaired by the secretary of the housing ministry has started work on formulation of model rules so that states and UTs can frame their rules quickly, besides ensuring uniformity across the country. The ministry will also will come out with model regulations for the regulatory authorities.

The remaining sections of the act that have to be notified relate to aspects such as the functions and duties of promoters, rights and duties of allottees, prior registration of real estate projects with the regulatory authorities, recovery of interest on penalties, enforcement of orders, offences, penalties and adjudication.

Considering that there 12 months left for the regulatory authorities to be set up by the states, builders are expected to speed up work to avoid the stringent provisions of the new real estate regulatory act.

Resource: http://economictimes.indiatimes.com

Will the new Real Estate Act be a game changer?

The new Real Estate Regulation and Development Act has just come into force. It is being hailed as a positive step. The Act envisages that the states and Centre will formulate specific rules for real estate regulation.

Broadly, every state will set up regulatory authorities for oversight of real estate projects, all of which will be registered. Guidelines and timelines will be laid down for projects and penalties imposed if those are not adhered to. Instead of legal disputes being processed slowly through normal courts, Appellate Tribunals will adjudicate disputes with time limits of 60 days.

There are time limits for states to pass new laws and set up the boards, etc. The process will, if timelines are adhered to, take about a year or so. Most likely, since state-level governance is very uneven, this will work patchily. Some states will set up efficient Tribunals and Regulatory Boards; others will not.

Many politicians have interests in real estate. That could work both for, and against the concepts of the new Act. Some smart and not-so-crooked politicians will back the new act and use it to accelerate activity. Others will try to hold up the new legislation or subvert it.

The real estate sector has endemic issues. Recessive conditions in the past three years have made things worse. For one thing, actual prices and “official” prices are often wildly at variance, with huge amounts of black money kept off the books. Builders are perpetually cash-strapped. Banks have been cautious about lending to builders because the Reserve Bank of India demands very high-risk weightage since there are high chances that such loans will go sticky.

Rentals are generally low as a percentage of price, while prevailing interests rates are high. A property owner could sell it, park the proceeds in a fixed deposit and rent the property back with a comfortable margin of profit. This makes the landlord model less than attractive.

Many builders used to rely on the booking amount to fund projects. But, over-supply means that builders have not been able to raise sufficient booking amounts. That in turn, has meant incomplete projects. Distress caused by two drought years has also cut demand in the rural and semi-urban segment.

Builders also notoriously divert funds. The new Act envisages forcing builders to use at least 70 per cent of booking amount for the specific project where the booking has been done.

Finally, real estate is too expensive. This is true in absolute terms. Indian property prices match and often exceeds that of real estate in most First World countries. It is even more true in relative terms, considering low median incomes prevalent across India.

Nevertheless, this Act along with the development of financial vehicles such as Real Estate Investment Trusts (REIT) will encourage investments into real estate. The new Act should force more transparency and disclosure from builders. It may trigger a shakeout and consolidation where only builders with deep pockets will survive.

It will take a few quarters before the enabling legislation is written and implemented and there will be a sequence of messy defaults and mergers and acquisitions. Also, in all probability, prices will have to drop to realistic levels, or interest rates will have to sharply reduce, before the inventory starts to clear. But, this could, hopefully signal the bottom of the real estate market.

There is one last caveat. Good legislation doesn't necessarily lead to good outcomes. The Electricity Act 2003 was excellent, for example. But, it was never properly implemented for a variety of reasons including political reluctance. One hopes that this new Act does not go the same way.

Resource: http://www.business-standard.com

Top 10 biggest real estate projects coming to NYC

Manhattan developers struck back in April after a handful of slow months, dominating the list of the month’s largest development permit filings. Big-name players including L+M Development and Joseph Chetrit’s Chetrit Group made waves with major projects in the borough, as did smaller firms such as Sumaida + Khurana and Kenneth Horn’s Alchemy Properties.

On the whole though, developers in April continued their several-months-old pattern of slower, less intense filing activity. As in March, only half the projects on the list crossed 100,000 square feet, though two more just missed the mark, according to data from PropertyShark.

Half of April’s filings were for residential projects. A pair of hotels, a pair of school expansions and a single Brooklyn office project rounded out the list.

23 Park Row, Manhattan

L+M Development Partners, one of the city’s most prolific affordable developers, filed a permit application for a 59-story, 266,000-square-foot residential tower in the Financial District, which it’s building in partnership with Joe and Rachelle Friedman, the founders of J&R Music and Computer World. The building will hold 108 apartments, though it’s not yet clear whether the partners are planning condominiums or rental units. COOKFOX Architects is designing.

540 Fulton Street, Brooklyn

The Dushey family’s Jenel Management is planning a 19-story, 174,000-square-foot Downtown Brooklyn office building with three levels of retail space at the base. The retail-focused, Midtown-based developer, led by David Dushey, bought the property in 1981. It demolished the two-story, 26,000-square-foot retail building there last year. Marvel Architects is the project’s architect of record.

609 West 56th Street, Manhattan

Chelsea-based Sumaida + Khurana and LENY – based in Tel Aviv, Israel – are planning an 80-unit, 34-story, 123,000-square-foot condo tower in Hell’s Kitchen, with retail on the ground floor. The partners bought the site in Feb. 2015 for $55 million from developer and sometime-politician John Catsimatidis of Red Apple Group, along with the adjacent 823 11th Avenue.

249-263 West 34th Street, Manhattan

Joseph Chetrit’s Chetrit Group filed a permit application for a 300-key, 33-story, 122,000-square-foot hotel with retail at the base near Penn Station in Midtown. The developer, in partnership with Shifra Hager’s Cornell Realty Management, acquired a handful of retail properties on the block late last year in a swap with investor Charles D. Cohen. Chetrit and Cornell ultimately dissolved their partnership and split the assemblage.

2002 Surf Avenue, Brooklyn

Midtown-based developer and real estate finance firm iStar is planning a 135-unit, 107,000-square-foot supportive housing building just off the Coney Island boardwalk. iStar leased the site – adjacent to the 5,000-seat amphitheater and restaurant the company is building at the Childs Restaurant in Coney Island – from the city’s Economic Development Corporation last year. The developer plans to build a total of 1 million square feet of housing in the area, according to its website.

40-10 99th Street, Queens

The New York City School Construction Authority is planning a five-story, 96,000-square-foot expansion of P.S. 19 in North Corona, also known as the Marino P. Jeantet School. The new structure, which will sit just north of the school’s main academic building, will house administrative offices, cafeterias, a gymnasium and classrooms. Burnham & Buttrick Architects, based in Midtown, is the architect of record.

2251-2259 Broadway, Manhattan

The Carlyle Group and Kenneth Horn’s Alchemy Properties filed an application to build a 32-unit, 95,000-square-foot condominium building on the Upper West Side. The partners bought the site in February for $51 million. The new Goldstein, Hill & West-designed building will have retail at its base and a terrace on the roof.

1056 Manhattan Avenue, Brooklyn

Joseph Brunner and Abe Mandel’s Bruman Realty filed a permit application to build a seven-story, 74,000-square-foot residential building in Greenpoint. The property will contain 90 apartments, as well as a 12,300 square feet of retail space on the ground floor. Brunner bought the site in November for $18.5 million from J. Josephs & Sons. Karl Fischer is the architect of record on the project.

2760 Briggs Avenue, Bronx

The New York City School Construction Authority, in its second school renovation filing of the month, plans to add another five-story, 67,000-square-foot building at P.S. 46 Edgar Allen Poe branch in Fordham. The building will hold a 280-person auditorium, offices, and classrooms, as well as outdoor playground on the fourth floor. Mitchell Giurgola Architects of Hell’s Kitchen is designing the project.

38-15 9th Street, Queens

Crown Heights-based investment firm Brooklyn North Capital filed a permit application for a new 198-key Red Lion hotel in Long Island City, to open in 2019. The building is slated to stand 14 stories and span 61,000 square feet of space. Brooklyn North bought the four-parcel site in March for $4.7 million.

Resource: http://therealdeal.com