This week further measures were introduced to stem the flow of Chinese outbound capital. With regards to the Hong Kong property market specifically, Chinese buyers from mainland China are not permitted to use their UnionPay Cards (issued in China) for the acquisition of Hong Kong Property. In fact in accordance with UnionPay’s regulations, the practice of using UnionPay for cross-border transactions for property in Hong Kong has been and is strictly prohibited. However, the use of UnionPay cards and other credit cards has been a practice adopted by some mainland buyers to partially pay for property. Some agents in the market have been advised by some financial institutions that they will no longer accept this form payment. How this will impact the HK real estate market remains to be be seen, but it signifies Beijing’s continued effort to stem the flow of outbound capital, which stood at over USD 700bn last year. While official figures suggest that only a small percentage of Hong Kong’s real estate is acquired by buyers from mainland China, the reality is that figure is likely to be significantly higher. The clampdown on the use of UnionPay for HK property follows Beijing’s measure in late 2016 to ban the use of mainland Chinese using UnionPay to buy investment-related insurance products.
Housing prices in HK have rise significantly this year, despite local measures to cool the market. However, in an environment of low interest rates and high liquidity, the market continues to be strong, especially for new developments, where many key projects are oversubscribed. The secondary market remains slower, with fewer numbers of transactions. At the ultra high-end of the market, due to such limited supply, the HK market continues to be set new pricing records.
The GBP today has hit its lowest level against the USD since 1985. The spot rate today is around 1.27-1.28. The chart below tracks the GBP vs USD Spot Rate since 1975. For our international clients and real estate investors looking at London and the wider UK market, does this present an opportunity?
Following Brexit we have had a mixture of reactions from clients. Some have decided not to invest in the market while they wait for calmer waters and have had sufficient time to assess Brexit’s effect on the UK economy. Other clients, especially those with limited or no exposure to the UK real estate market, see this a potential opportunity to enter it – with a prime focus on London. Our key advice is to not just base any purchase purely on the weakness of the Sterling, but really look at the underlying asset and its performance. We think this period of uncertainty may present buyers with the opportunity to acquire assets which may not have otherwise traded. For our Asian and international investors, owning prime assets in London remains a key part of their long term strategy. The Sterling’s weakness makes this an interesting time to assess acquisitions, as the pricing reflects a significant discount in their home currency relative to the previous 12-18 months.
London – a city once known for its low-rise architecture – is fast becoming a modern metropolis with a new wave of skyscrapers which are transforming the city’s skyline.
The latest addition to London will be a 294.6m, 73-storey skyscraper. Located in the heart of the City of London, London’s main financial district, the building is set to accommodate 10,000 workers and have a public square at the base of the building and a free public viewing gallery at the top. It will have an elevated lobby area and 1,800 sqm of shops and restaurants in the basement area.
1 Undershaft has been designed by Eric Parry Architects. The rectangular tower will be the second tallest building in London after the Shard. The developer is Singapore-based Aroland Holdings. The announcement of the building follows the recent announcement from Axa Investment Managers for its new 278m 62-storey office tower at 22 Bishopsgate, also in the City of London.
All images are copyright of their respective owners / architects
Here are some of the winners for the China Property Awards 2015. Developers from across the region are creating iconic buildings that not only push the boundaries in terms of architecture, but raise the bar in terms of sustainability and cutting-edge design.
Ping An Finance Centre, Shenzhen, PR China
Tower 535, Causeway Bay, Hong Kong
Chi 130, Hong Kong (Image for reference only)
Global Trade Square, Wong Chuk Hang, Hong Kong
One Shenzhen Bay, PR China
The China Property Awards 2015 culminated in an awards ceremony on 7th December 2015 at the JW Marriott in Hong Kong in conjunction with the China Real Estate Chamber of Commerce HK Chapter’s (CRECCHK) annual dinner. The event was attended by over 400 guests from across the real estate sector in Hong Kong, Macau and Greater China and included developers, investors, hoteliers, funds, banks, architects, designers and financial institutions.
The China Property Awards showcases and recognises the region’s top developers and their projects across the residential and commercial real estate sectors. The judging panel consisted of 11 industry-wide experts and was led by Chairman Ivan Ko (Chairman of the CRECCHK) and Vice Chairman Shaman Chellaram (Director, Evantis Group). Winners included One Shenzhen Bay for Best Residential Development, Taikoo Li Chengdu for Best Commercial China, Tower 535 by Phoenix Property Investors for Best Commercial Hong Kong, Ping An Finance Centre for Best Commercial Shenzhen and Global Trade Square by Henderson Land for Best Office Building Hong Kong. Other residential development winners included The Amethyst in Shanghai and Chi 138 and Ultima in Hong Kong. Real Estate Personality of the Year was awarded to Dr. Allan Zeman by the organizers of the China Property Awards, Ensign Media.
The French hotel group, Accor SA, has agreed to buy FRHI Holdings for USD 2.9bn in a deal which is part equity and part cash. FRHI Holdings (Fairmont Raffles Hotel International) is the owner of some of the top luxury hotels and brands in the world including Fairmont, Raffles and Swissotel. Iconic hotels in the deal include the Raffles Hotel Singapore, Savoy in London, Shanghai’s Fairmont Peace Hotel, and the Plaza in New York.
FRHI Holdings’ owners are QIA (Qatar Investment Authority) and Kingdom Holding. They will both become Accor shareholders as part of the deal with a 10.5% and a 5.8% stake in the share capital respectively. The deal will add 155 hotels and resorts (of which 40 are under development) to Accor’s portfolio. The move is set to strengthen Accor’s presence in the luxury segment of the hospitality market.
The final luxury apartment at Swire Properties exclusive residential development – Opus Hong Kong – sold earlier this week for HK$509.6m (approx. USD 65.4m), making it one of Asia’s most expensive residential transactions. The 5,444 sqft unit is located on the top floor of this exclusive 12-storey Frank Gehry-designed building and comes with a private 1,508 sqft roof terrace and 2 parking spaces The price equates to HK$93,608 per sqft (just over USD 12,000 per sqft). While the Hong Kong residential market shows signs of slowing, the transaction underscores HNWI and Ultra HNWI’s continued appetite for luxury residences in Hong Kong.
The acquisition comes at a time when most industry analysts have suggested Hong Kong is due for a price correction due to the possible interest rate hike in the US. While the mass residential market will likely see a few bumps and some reductions, at the luxury and ultra-luxury end of the market Hong Kong’s housing supply remains extremely tight, making some of the cities exclusive luxury residences extremely sought after.
Marriott International has agreed to acquire Starwood Hotels & Resorts for US$ 12.2bn. The groups will combine to create the world’s largest hotel company globally with over 5,500 hotels with 1.1 million rooms across 30 brands in over 100 countries. A number of companies were rumoured to be part of the initial offer process including major Chinese groups, but according to news reports, the final bidding was down to Hyatt and Marriott.
With Marriott’s strong US presence and Starwood’s strong international presence, the merger is positioned to unlock future value for the group and its shareholders. The range of luxury, lifestyle and select-service brands will enable the group to cater to a wider group of guests. The combined pro forma fee revenue for the 12 months ended September 2015 totals over US$ 2.7bn
Arne Sorenson, President and Chief Executive Officer of Marriott International was quoted as saying: “The driving force behind this transaction is growth. This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace. This greater scale should offer a wider choice of brands to consumers, improve economics to owners and franchisees, increase unit growth and enhance long-term value to shareholders. Today is the start of an incredible journey for our two companies. We expect to benefit from the best talent from both companies as we position ourselves for the future. I know we’ll do great things together as The World’s Favorite Travel Company.” (source: Marriott News Centre).
The merger is subject to worldwide shareholder approval.
In May this year, Shaman Chellaram, Director of Evantis Group, took park in the PERE Family Office Conference in Hong Kong. As a guest panelist on the European Real Estate Investment Panel, the panel covered the opportunities and issues facing private family offices looking to invest in the UK and Europe.
The UK continues to attract foreign investment, despite its introduction of new tax regulations. London remains a key target market, but interestingly, other key cities across the UK also seem to be extending their appeal to overseas capital. Cities such as Birmingham, Manchester, Liverpool and Edinburgh have witnessed increased interest from Asian developers and investors alike.
For mainland Europe, Germany and Spain seem to be drumming up more interest for different reasons. Germany is growing and slowly moving towards a culture of investment and ownership in the residential sector. This is foreign stimulating investment into this sector. On the commercial real estate side, yields are relatively stable, and while not overly exciting from a capital appreciation standpoint, they provide a good source of cash protection, inflation hedging and positive cash flow. For Spain, the story is still about the the ability to acquire distressed opportunities. The markets and Spanish banks have woken up to the fact that many of the US Private Equity Funds are hunting down opportunities, so the reality is that pricing in Spain in core locations of Madrid, Barcelona and Marbella is creeping upwards, with significant yield compression in the last 12 months. Yields for prime assets in Madrid and Barcelona are around 4% – 5%. However, the banks continue to be ladened with debt, so more real estate opportunities will come out in the wash. For Shaman Chellaram, the key opportunities in the Spanish market for Asian investors lie in the following sectors: 1) Hospitality Market (i.e.: hotel investment) to cater to the growing number of Asian outbound travellers 2) the Value-Add Sector in Madrid and Barcelona (repositioning/conversion of older buildings to prime residential, mixed-use or hotels) and 3) Distressed Residential Investment on the Costa del Sol.
The commercial RE market in Europe remains extremely active. The secret now is accessing and identifying the right opportunities.
*image is copyright of PEI Media / PERE
We love to look at real estate and hospitality-related opportunities which address a market need and drive innovation. A certain company is starting to redefine the hotel guest transfer market in the Maldives. SeaShuttle, through is Maldivian subsidiary, is truly making waves in this sector with its unique STEALTH Yachts.
Transferring guests in style from Male International Airport to their resort hotel has often been the missing piece of the puzzle for many luxury resort owners and operators in the Maldives. Jumeirah Vittaveli has chosen to break the mould and raise the bar with its new range of luxury catamarans which glide guests to its resort in pure comfort. The high-speed yachts have luxurious interiors and are fitted with additional amenities such as a/c, wifi, night-vision and AV systems ensuring the guests arrive at the resort in style. These stunning yachts also do their part for the environment and in improving safety in due to their unique design, operational efficiency and inboard engines.
Jumeirah Vittaveli in the Maldives has really set the bar high ensuring its guests’ experience truly begins upon arrival at Male Airport and en-route to the stunning resort.
While luxury hotel brands continuously strive for new ways to differentiate themselves, this initiative is truly a game-changer in The Maldives’ guest transfer sector.