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Asian Insights Conference 2015
Asia Property Outlook
Moderator: Mr. Chew Chong Lim Managing Director, Institutional Banking Group, DBS Bank
Panel Speakers: Mr. Marc Giuffrida
Executive Director, Capital Market, CBRE
Ms. Carol Wu
Head of Research, DBS Vickers (Hong Kong)
Mr. Derek Tan
Head of Property Research, DBS Bank
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3 CBRE | DBS ASIA INSIGHTS CONFERENCE 2015
Source: CBRE Research
Increase to $125 billion in 2014, up 39% y-on-y
Cross-Regional Capital Flows into Global Real Estate
4 CBRE | DBS ASIA INSIGHTS CONFERENCE 2015
ASIAN OUTBOUND INVESTMENT INCREASED 23% Y-O-Y TO US$40 BILLION
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9
5
12
0
5
10
15
20
25
30
35
40
45
2007 2008 2009 2010 2011 2012 2013 2014
US
$ b
illio
n
Asia intra-region
Pacific
America
EMEA
Cross-border investment by Asian investors
Note: all the figures are based on transactions over US$10 million on standing investments which include, but not limited to office, retail, industrial hotel and mixed-use properties Source: Real Capital Analytics, CBRE Research
5 CBRE | DBS ASIA INSIGHTS CONFERENCE 2015
Top five destination as a % of total Asian cross-border investment
EXPERIENCED ASIAN INVESTORS ARE MOVING BEYOND TRADITIONAL MARKETS
Note: all the figures are based on transactions over US$10 million on standing investments with include, but not limited to office, retail, industrial hotel and mixed-use properties Source: Real Capital Analytics, CBRE Research
6 CBRE | DBS ASIA INSIGHTS CONFERENCE 2015
Asian cross border investment by asset class obvious
LIKEWISE ASSET CLASSES
Note: all the figures are based on transactions over US$10 million on standing investments with include, but not limited to office, retail, industrial hotel and mixed-use properties Source: Real Capital Analytics, CBRE Research
7 CBRE | DBS ASIA INSIGHTS CONFERENCE 2015
INTEREST RATES MAY MOVE BUT YIELDS SPREADS WILL CUSHION ANY SPIKES
Spread of prime office yields over 10 year government bonds
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
New
Delh
i
Taip
ei
Shanghai
Hong K
ong
Beiji
ng
Sin
gapore
New
York
Mum
bai
Seoul
London W
E
San F
rancis
co
Bosto
n
Chic
ago
London C
ity
Los A
ngele
s
Zurich
Sydney
Oslo
Paris
Tokyo
Madrid
Sto
ckholm
Mila
n
Lis
bon
Barc
elo
na
Melb
ourn
e
Hels
inki
Vie
nna
Dublin
Edin
burg
h
Munic
h
Ham
burg
Rom
e
Birm
ingham
Berlin
Dalla
s
Fra
nkfu
rt
Brisbane
Copenhagen
Bru
ssels
Am
ste
rdam
Perc
enta
ge
Asia Pacific Americas EMEA
8 CBRE | DBS ASIA INSIGHTS CONFERENCE 2015
AND NOW WE ARE SEEING RENTAL GROWTH 5 Years to end 2019, annual average % change
Disclaimer: The information contained in this document is intended only for use during the presentation and should
not be disseminated or distributed to parties outside the presentation. DBS Bank accepts no iability whatsoever
with respect to the use of this document or its contents.
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Money flow out of China is still insignificant
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Company Stock code Overseas expansion
Vanke 000002.CH Has another platform (1036.HK) to grow HK portfolio
2202.HK Has exposure in Singapore and US
Also eyes opportunities in London
COLI 688.HK Owns three office buildings in London (injected from parentco)
Also eyes opportunities in greater New York area
Wanda 3699.HK Has projects in London, Madrid, Chicago, Los Angeles, Golden Coast,
Sydney
Fosun 656.HK Has projects in HK, Japan, US, UK and Australia
Sino-Ocean 3377.HK Invested in Australia and US through Gemini (174.HK)
Greenland n.a. Invested in 14 cities in 9 countries including Korea, Thailand,
Malasia, Australia, UK, France, Spain, US and Canada
Targets 2015 overseas sales of Rmb30bn
Fantasia 1777.HK Has a project in Singapore and owns a hotel in US
Eyes opportunities in Southeast Asia
GZ R&F 2777.HK Has projects in Malasia and Australia
Country Garden 2007.HK Has projects in Malasia and Australia
Agile 3383.HK Has projects in Malasia
BJ Cap Land 2868.HK Has projects in Australia
But developers are diversifying into different asset
classes
12
0
1
2
3
4
5
6
7
8
Industrial Office Shopping Center
Residential
Beijing Shanghai
%
Beijing and Shanghai Property Market Yields (Q1 2009-Q4 2013)*
*Yields for the residential sector are from Q1 2009 to Q2 2013.
Source: CBRE Research, Q4 2013.
There are also new business adventures
Property management
– Fantasia
– Vanke
– COLI,
– Country Garden and more
New business lines
– P2P lending: Greenland HK
– Others: water/culture/plastic surgery; health care: Evergrande
13
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated
or distributed to parties outside the presentation. DBS Vickers Securities accepts no liability whatsoever with respect to the use of this
document or its contents.
15
16
Residential market outlook
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Source: DBS Bank
Singapore Residential Market
DBS Forecast a 12-15% drop in property prices over 2015-2016
But Luxury Market is finding a bottom
Falling Market
Bottoming Market
Rising Market
Peaking Market
Singapore (Mass Market)
Singapore (Luxury)
Mass Market: Weakening affordabilityMass Market: Weakening affordability
Upgrader Demand is curbed Housing Market in a “net surplus “ situation
180.0 40,000 Surplus/Deficit230.0Index (x)
140.0
160.0
20,000
30,000
(units) Surplus
170.0
190.0
210.0
230.0Index (x)
HDB Resale Index
PPI (Non-Landed)
80.0
100.0
120.0
(10,000)
-
10,000
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
110.0
130.0
150.0
170.0
20.0
40.0
60.0
(40,000)
(30,000)
(20,000)
50 0
70.0
90.0
110.0
-
20.0
(50,000)
(40,000)Change in Dwellings URA PPI (RHS)
50.0
Mar-0
6
Sep
-06
Mar-0
7
Sep
-07
Mar-0
8
Sep
-08
Mar-0
9
Sep
-09
Mar-1
0
Sep
-10
Mar-1
1
Sep
-11
Mar-1
2
Sep
-12
Mar-1
3
Sep
-13
Mar-1
4
Sep
-14
Mar-1
5
Widening Gap between HDB resale and Private Housing Net Surplus in housing units to mean vacancy rates reaching 9-10% and rentals to drop
18
Source: Manager , Colliers, JLL, DBS Bank
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Source: Manager , Colliers, JLL, DBS Bank
Luxury: Signs of bottoming
Price Discounts to Homes in Core Central Region at near/at 10-year lows Premium for new homes (CCR) at near 10-year lows
Improved Relative Value vs RCR and OCR Relative attractiveness of new uncompleted homes in CCR
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14
(%) S$ psf
Median Price of Homes (Core Central Region)
Pricing Spread for existing and new Homes (Core Central region)
41%
28%
59%
34%
0%
10%
20%
30%
40%
50%
60%
70%
Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14
(%) Discount
Price Discounts for homes in Rest of Central (RCR) Region
Price Discounts for homes in Oucside of Central (OCR) Region
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Office market outlook
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Source: JLL, DBS Bank
Singapore Office Market
Market Rents / Capital Values approaching a peak
Falling Market
Bottoming Market
Rising Market
Peaking Market
Seoul
Boston
Los Angeles
United States
New York
Singapore
Sydney
Delhi
Tokyo
Hong Kong
Beijing
Shanghai
Kuala Lumpur
Jakarta/Guangzhou
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
-2
-1
0
1
2
3
4
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F >2018F
S$ psf pm 'm sqft Net Demand Net Supply Rentals (S$psf/mth)
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Source: JLL,CCT, DBS Bank
Singapore Office Market Looming supply completions (CBD) in 2016/2017 a key uncertainty
Period
Average Net Supply (m sqft)
Average Net Demand (m sqft)
2004-2013 (10 year through market cycle) 0.8 m sqft 1.1 m sqft
2009-2013 (5 years during post Global Financial Crisis) 1.2m sqft 1.0m sqft
2014- beyond (Forward) 1.0m sqft -
Annual Supply 1.0 sqft Post Asian Financial Crisis, SARS, demand picked up only in 2005 onwards (mainly Financial institutions)
Post Global Financial Crisis, demand mainly other sources
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Source: Manager , Colliers, JLL, DBS Bank
Office Transactions (2011 – YTD)
REITs / Insurance / Non-traditional investors have been buyers
Insurance 12%
REITs 43%
Funds 8%
Foreign buyers 5%
Non traditional investors
18%
Companies 14%
But will this continue?
24
Source: Bloomberg Finance LLP, REITs, DBS Bank
REITs: Harder to make new accretive acquisitions
Rising cost of capital to impact returns from acquiring
7 11
15 15 19
23
29 30 33
35 36
30%
29%
34%
31%
32%
34% 34%
33% 32%
34% 34%
26%
27%
28%
29%
30%
31%
32%
33%
34%
35%
-
5
10
15
20
25
30
35
40
2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F
(%) S$'bn Total Debt (S$'m) Gearing Level (%)
0
1
2
3
4
5
6
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
(%)
3Mth Swap Offer Rate
Debt fueled
Acquisitions
25
Interest Rates : Where it hurts?
26
Source: CapitaLand, Keppel Land, DBS Bank
Negative Impact of Rising Rates
Home-Buyers
• Reduced affordability
• Refinancing to hurt
Property Developers
• Softening demand for new homes
• Eroding profit margins
REITs
• Higher interests costs to hit distributions
• Cost of capital to rise as yields rise
27
Source: NUS, DBS Bank
Home Buyers : A 1% hike will result in ..
Affordability weakens when interest rates rise and lower residual income for other expenses
Debt Servicing Ratios for (HDB) to rise by 1.9%-2.4% Debt Servicing Ratios for Condos and Landed to rise by 2.9% and 5.3%
10%
12%
14%
16%
18%
20%
22% Debt Servicing Ratio (%)
3 room flat 4 room flat 5 room flat
10%
15%
20%
25%
30%
35%
40%
45%
50%
55% Debt Servicing Ratio (%)
Condo and Apartment Landed (excl detached)
28
Source: Manager , Colliers, JLL, DBS Bank
Property Developers : Forced to diversify
Moderating Revenues; Higher gearing levels
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
8.0
10.0
12.0
14.0
16.0
18.0
2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F
(%) S$'bn
Developers Revenue Trends Gearing (%) RHS
Developers have been running down existing inventories, land bank selectively and focus on deploying more capital overseas (UK / Australia / Japan) to diversify
29
REITs : Refinancing Costs to rise over time
Rolling over interest hedges over 2016-2017 to hit distributions
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Years (%) Cost of Debt (%) LHS Debt Maturity (Years) RHS
77%
73%
75% 75%
78%
80%
78% 77%
78%
80%
68%
70%
72%
74%
76%
78%
80%
82%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(%)
% Fixed Rates
Shorter Tenure
Longer Tenure
Source: Bloomberg Finance LLP, DBS Bank
30
Source: Bloomberg Finance LLP, DBS Bank
Higher cost of Equity as yields increase
REITs : Higher Cost of Capital
3.9%
6.5%
14.0%
7.2%
5.0%
6.8%
6.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Yield Spread S-REIT Yield Mean - 1 SD +1 SD
Disclaimer: The information contained in this document is intended only for use during the presentation and should
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with respect to the use of this document or its contents.
Q&A
32
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