Overseas land: Getting a foot in the door

Source : Sunday Times - 26 Apr 2009

Investing in land overseas used to be the domain of the extremely wealthy, but landbanking companies have put an end to that.

Such firms buy large parcels of undeveloped land that they feel has development potential. They keep part of the land for themselves and divide the rest into smaller plots for sale to individual investors.

The hope is that the land later attracts the interest of developers. The company then sells the plots on behalf of individual investors.

Companies like Edgeworth Properties offer sites in Western Canada while Profitable Plots deals mainly in land in Britain. The minimum investment for a plot varies but usually ranges from $10,000 to $15,000.

The main attraction of these projects is the hefty payouts investors can expect to reap, with some firms promising returns of around 20 per cent.

‘Land is a hard asset that will always appreciate in value with time and development,’ said Mr Michael Yap, vice- president (Asia Pacific) of Edgeworth Properties.

Edgeworth selects land that has the prerequisites for sustained economic and population growth and is situated next to developed neighbourhoods, added Mr Yap.

Landbanking companies typically give customers an estimate of how long they have to wait before the land is bought. This can be from three to seven years.

However, there is no guaranteed figure and it is possible that customers may have to wait longer.

Most landbanking companies provide detailed information on the land they are offering so investors can get a fair idea of what they are buying.

But there are also risks involved.

‘The first thing that comes to my mind is liquidity - landbanking does not provide much liquidity,’ said Mr William Cai, director of GYC Financial Advisory.

‘As there’s a lack of liquidity, it is hard to say if investors are overpaying for the piece of land in the first place.’

Mr Cai also cited exchange rate fluctuations as a risk in this kind of investment.

Landbanking is also unregulated, which could be a problem if disputes arise between the company and individual investors.

Despite the possibility of getting their fingers burnt, response from Asians has been ‘very encouraging’, said Mr Yap.

Edgeworth’s land lots are sold in Singapore, Malaysia, Taiwan and the Philippines, with Singaporeans constituting about 63 per cent of buyers.

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Lure of high returns

The main attraction of investing in land overseas is the hefty payouts investors can expect to reap, with some firms promising returns of around 20 per cent.

London (homes) calling

Source : Sunday Times - 26 Apr 2009

London property may be among the most coveted in the world, but it has still not been immune to the global economic fallout.

But while falling prices are giving home owners sleepless nights, they spell good news for buyers who have always yearned for that London address.

Experts point to a couple of reasons why homes in the British capital are calling out to investors all over the world, particularly Singapore:

For starters, London prices have plunged about 20 per cent to 30 per cent since their peak, says property consultancy Knight Frank in a recent report.

And the Singapore dollar has appreciated by 20 per cent to 30 per cent against sterling in the past year or so, giving investors more bang for their buck.

Mr Nicholas Barnes, Knight Frank’s partner of residential research in London, told The Sunday Times that two trends will emerge in the first half of this year:

One is that the balance of power has moved from sellers to buyers, while the number of sales will start to rise as more owners accept that the downturn is not going to be followed by a quick rebound.

There is already evidence that buying opportunities are emerging from the slide in prices and some buyers are biting despite the recession.

Ms Jacqueline Wong, head of residential, Singapore, at Jones Lang LaSalle (JLL), said the firm tested the waters in Singapore last weekend by launching two projects with a leading London mixed-use developer, St George.

The launches attracted ‘very good response’ and saw more than 80 visitors, with 12 units sold, she said.

One project, 14-storey Aquarius House, part of the St George Wharf development in Vauxhall, offered 85 one- and two-bedroom apartments ranging from 364 to 851 sq ft and will be completed early next year.

Prices start from &pound399,950 (S$880,000), which works out to about S$2,417 psf - comparable to prime properties in Singapore such as Ardmore Park.

This is a 15 per cent discount on prices launched at the peak of the market, said Ms Wong.

Another firm, DST International, is also tapping the current sentiment and will be launching a London project in Singapore next month.

On offer is The City Peninsula, a 20-storey project at Greenwich, one stop from Canary Wharf, which is offering one- to three-bedroom units ranging from 495 to 840 sq ft.

Prices start at &pound250,000, which works out to about S$1,111 psf, which is comparable to city-fringe home prices here.

DST’s London specialist Doris Tan said that as Greenwich is one of the main destinations of London’s 2012 Olympics, properties at that location have the potential for capital appreciation.

For buyers looking at super- prime properties, locations like Belgravia, Mayfair, Chelsea and Knightsbridge offer some of ‘the world’s most attractive urban environments’, says Knight Frank.

Emerging property hot spots include Marylebone - it recently pushed past the &pound1,000 psf mark but is still far cheaper than neighbour Mayfair - Bloomsbury, Paddington, Bayswater and the South Bank.

Knight Frank is also marketing 1,024 sq ft flats at Canary Wharf in East London for S$880,000 upwards each. A year ago these were going for more than $1.2 million each.

Mr Barnes said the worst of the price slide is over. But analysts are ‘not yet sure where and when the bottom of the market is’. Also, there is a possibility that the pound may weaken over the next six to 12 months.

JLL’s director of residential investments, Mr Julian Sedgwick, said he anticipates a strong medium- term residential price recovery, led by London, from next year.

It might pay to wait a little longer before investing, although JLL’s Ms Wong cautioned that trying to time purchases with the bottom of the market could mean all the choice units will be gone.

She pointed out that London property has always been a good investment proposition: ‘There is no (capital) gains tax, there’s a lot of transparency and it is a location popular with many Singaporeans due to its top universities.’

One more thing to note is that London still offers strong rental yields of up to 7 per cent currently, as the capital values of stock have fallen further than rental rates, said Hong Kong-based property investment firm IP Global’s managing director, Mr Tim Murphy.

‘It is important to factor in the yield of a property as well as its potential capital gains when considering an investment,’ he said.

Knight Frank’s Mr Barnes thinks the prime residential market will bottom out this year, remain fairly flat for much of next year and begin to tick upwards towards the end of next year.

‘We do not, however, foresee a significant ‘bounce’ in values - rather we think a steady and more sustainable uplift over the medium term is more likely.

‘We also believe that prime will emerge from the recession ahead of the general market.’