modus asia edition q4 2015

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IN THIS ISSUE

TENSION BUILDINGCounting the cost of construction conflicts / 16

LOCKED OUTHow to combat the global housing crisis / 24

AN OLD AGE PROBLEMDefusing the retirement homes timebomb / 34

#RICSmodus

ITS A SMALL WORLDMicro-homes: the next big thing / 20

MODUS_Asia_Q4.15_P1_Coverv2.indd 1 12/10/2015 10:40

MODUS_Asia_Q4.15_P02_Exactal ad.indd 2 12/10/2015 10:42

Q4 2015_MODUS ASIA 03

16 FIGHT CLUBCounting the cost of Asias rising bill for construction disputes

20 COVER STORYFlexible, compact homes are here to stay

24 HOUSES UNFIT FOR PURPOSEConfronting our affordable living crisis

32 HOME BUYERS REPORTGlobal housing market in numbers

34 SEARCH FOR A SILVER LININGHow will we accommodate the worlds rapidly ageing population?

40 NEW DAWN IN VIETNAMRule change on inward investment could spark real estate resurgence

42 APPLIANCE OF SCIENCEPhase three of Hong Kong Science Park turns convention and layout on its head

06 DIFFERENCE OF OPINIONWill Shanghai ever replace Hong Kong as Chinas financial capital? We hear two points of view

07-15 NEWS IN BRIEFEssential industry news, advice and information for RICS members

08 THINKING: STEVEN MCCORDChinas recent economic turmoil is part of a wider transition towards a more market-driven economy

13 PRESIDENTS COLUMNMartin J Brhl FRICS reflects on the 30-year journey that has brought him to the presidency of the Institution

Generalisations are always dangerous but in Asia, there is a real focus on cost rather than value. Accepting the lowest cost leads us down a rather confrontational route

NICK TOWNSEND MRICS, TURNER & TOWNSENDDISPUTES, P16

Views expressed in Modus are those of the named author and are not necessarily those of RICS or the publisher. The contents of this magazine are fully protected by copyright and may not be reproduced in any form without the prior permission of the publisher. All information correct at time of going to press. All rights reserved. The publisher cannot accept liability for errors or omissions. RICS does not accept responsibility for loss, injury or damage or costs that result from, or are connected in any way to, the use of products or services advertised. All editions of Modus are printed on paper sourced from sustainable, properly managed forests. This magazine can be recycled for use in newspapers and packaging. Please dispose of it at your local collection point. The polywrap is made from biodegradable material and can be recycled.

MODUS ASIA Q4 2015RICSASIA.ORG

Contents

44-45 CAREERSGetting the most out of LinkedIn; Savills Vietnams Neil MacGregor FRICS

46 BUSINESSDont get caught in a conflict of interest

47 LEGAL 101Five things Asian investors should look out for when buying in the UK

48 BRAIN GAINManaging assets in the public sector

50 MIND MAPFast Future Researchs Rohit Talwar on how hotels can adapt for the future

PLUS49 Events

Intelligen

ce

Features

Foundations

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MODUS_Asia_Q4.15_P03-05_Contents_v2.indd 3 12/10/2015 12:31

0 4 RICSASIA .ORG

Asia Pacifi c Real Estate:

Revisit real estate fundamentals, rethink retail perspectives and network with top executives at MIPIM Asias 10th edition.

Vision 2025

1-2 December 2015

Grand Hyatt Hotel,Hong Kong

Special keynoteaddress by

Dr. Allan ZemanChairman at LanKwai Fong Group

The evolution and prospective of Entertainment and Lifestyle in Hong Kong and China: 10 years back-10 years ahead.

mipimasia.com

Register earlyand save up to USD 350Platinum Sponsor

Gold Sponsors

Silver Sponsors



FOR SUNDAY Editor Oliver Parsons / Art Director Christie Ferdinando / Contributing Editor Alex Frew McMillan / Production Editor Andy Plowman / Senior Designer Isabella Fernandes / Creative Director Matt Beaven / Account Director Karen Jenner / Advertisement Sales Director Emma Kennedy / Advertisement Manager Karren Cook / Asia Advertising ROF Media, Bryan Chan, +852 3150 8912, [email protected] / Production Manager Michael Wood / Managing Director Toby Smeeton / Repro F1 Colour / Printers ROF Media / Cover Image Hattie Newman; Ania Wawrzkowicz / Published by Sunday, 207 Union Street, London SE1 0LN wearesunday.com / For RICS James Murphy and Kate Symons [UK] / Jeanie Chan [Asia]

WAFFLLY SORRYSir, Although reference is made to the Belgian photographer, I feel most sorry to see that a quality magazine lends itself to yet another round of Belgium bashing (Intelligence, p10, Q2 2015). It must be said that some other countries residential areas are not exactly the benchmark for aesthetic architecture either. Id rather like to focus on architectural gems as can be found in my home town, Antwerp, and in many other Belgian cities as well.Eric Tavernier MRICS, Valorem, Belgium

LOFTY AMBITIONSir, As a reader of Modus and an APC assessor, I am often reminded about the importance of the professionalism of RICS members. I was therefore rather surprised recently to be on the other side of the fence.

As a homeowner balancing a residential sale and purchase, I arranged a mortgage survey with a large surveying firm, who agreed to call beforehand to ensure that I was available. After the allotted time slot had lapsed, the surveyor arrived, conceding that he should have rung, but it was OK, as I was in. I was then asked to supply a ladder, as he couldnt get into the loft. I was a little surprised he didnt have the necessary equipment to carry out the job, and that he hadnt even noticed there was a ladder in place.

Its all very well talking about professionalism but lets see it being put into practice.Name and address supplied

Join the

debateDo you have a comment about this

issue of Modus? Email your letters to [email protected]. If you would like

to contribute to future articles, please contact us first to discuss your idea

BOAT OF CONFIDENCESir, Even though my practice is focused on things that float, rather than bricks and mortar or the ground on which they are situated, I always look forward to receiving my copy of this excellent magazine.

While focused solely on admiralty and maritime, my practice was recently appointed as the technical adviser and consultant to the superyacht marina thats in the planning stages for Ocean Village in Gibraltar. From a recent hearing with the local planning commission, it is clear that the professionalism, commitment and dedication to excellence of our organisation and its members was a key factor in its decision.

In a small way Ive been able to draw attention to the importance of RICS-accredited valuations of superyachts and commercial ships in an recent article I wrote for the Superyacht Report, which received such positive feedback that the Royal Institution of Naval Architects requested permission to republish it.

Regardless of whether a surveyor deals in buildings or land, or yachts and ships, Modus is definitely a must read. Keep up the good work! Capt ES Geary FRICS, Gibraltar

Feedback

USEFUL RICS NUMBERS CONTACT CENTRE +852 2537 7117 Enquiries / APC guidance / Subscriptions / Events / Training / Bookshop REGULATION HELPLINE +852 2116 9713 CONFIDENTIAL HELPLINE +44 (0)20 7334 3867 DISPUTE RESOLUTION SERVICES +44 (0)20 7334 3806 UK SWITCHBOARD +44 (0)20 7222 7000

MODUS ONLINERead the latest and all previous issues of Modus Asia edition at ricsasia.org/modusasia. To reduce your carbon footprint, unsubscribe your hard copy and receive a digital edition only by emailing your name and/or membership number to [email protected] with the subject line Unsubscribe Modus Asia.

PERFORMANCE REVIEWSir, The PPP [public-private partnerships] article in Modus (p20, Q2 2015) argues that the whole-life value afforded by PPP is attractive to governments struggling to fund infrastructure projects, but who are also guilty of moving the goalpostsas parties change, and terms in office either conclude or become jeopardised.

Neglecting whole-life performance of built assets, regardless of size or stature, is route one towards constraining such value and social benefits. We are expected, as professionals, to plan and maintain our own whole-life performance with respect to our duty towards society. Therefore, we can only be expected to do the same justice to those assets through which we act out our duty.

We are, generally, too quick to consider large-scale built-asset creation as a massive cost. Surely an important part of our duty is to help change this mindset towards the belief that our existing and future assets are investments that will benefit all. And, as with any investment, being able to draw out and articulate the long-term or whole-life benefit is the clincher.

To give our politicians compelling reasons to commit and society reasons to support investment that transcends party politics and term in office, not only must we implement whole-life performance as a matter of value for our clients, but use it as a mechanism to articulate the long-term cost/benefit of our investment decisions.John Robertson MRICS, EC Harris, London

Asia Pacifi c Real Estate:

Revisit real estate fundamentals, rethink retail perspectives and network with top executives at MIPIM Asias 10th edition.

Vision 2025

1-2 December 2015

Grand Hyatt Hotel,Hong Kong

Special keynoteaddress by

Dr. Allan ZemanChairman at LanKwai Fong Group

The evolution and prospective of Entertainment and Lifestyle in Hong Kong and China: 10 years back-10 years ahead.

mipimasia.com

Register earlyand save up to USD 350Platinum Sponsor

Gold Sponsors

Silver Sponsors


06 RICSASIA .ORG

KENNY SIU CHI-YIU MRICS ASSISTANT DIRECTOR OF SALES AND MARKETING, HSIN CHONG PROPERTY DEVELOPMENT, HONG KONG

ALTHOUGH I HAVE A SPECIAL LOVE FOR MY HOMETOWN, HONG KONG WILL descend into a second-tier city. Look at the volume of stock trading in

China compared with Hong Kong. The difference will continue to widen, and that means Hong Kong is going to go downhill.Even if you do not think Chinas economy will get better and better, lets not forget there

are 661 major cities in the country. Just as we choose stocks, everyone wants to choose a champion. It used to be HSBC and Sun Hung Kai Properties that were the market leaders. Now weve got Tencent and China Construction Bank.Beijing, Shanghai, Guangzhou, Shenzhen and Hong Kong

are still the most significant cities. But centuries ago, Xian, Luoyang, Yangzhou and Nanjing shone brilliantly. After the relentless march of history, they now have to face the fact that they are second-tier cities. Hong Kong succeeded because China was closed off.

Nearly every mainland city set up a window company in Hong Kong, using the city to allow state-owned enterprises to go global as red chips. Now that the Chinese state has its own markets, they dont need the platform in Hong Kong.During Japans period of isolation, its most prosperous

city was Yokohama. But after the country opened up, Tokyo and Osaka rapidly surpassed it. I think Hong Kong will have a similar experience. Shanghai will be the centre of the stock exchange, like New York, but Hong Kong will be like Chicago, which boasts a world-leading futures and options exchange.

ALAN CHILD FRICS CHAIRMAN, KNIGHT FRANK HONG KONG

TO ANSWER THIS QUESTION, IT IS NECESSARY TO LOOK AT THE two cities in the context of their present positions in the financial markets. In terms of volume, Shanghai is without

doubt at the core of Chinas financial operations. Hong Kong, on the other hand, occupies a key position as an outlet for international capital, a position that it has occupied for many years.In terms of truly global international financial centres, London and New

York occupy the top positions in the Western hemisphere. But in the Asia-Pacific region, Hong Kong is as close as it gets to being a global financial centre. Tokyo has trading volume, but it is mostly domestic. Singapore competes strongly with Hong Kong to be Asias financial capital, but so far it has been mostly serving south-east Asian economies.Hong Kong holds its role as a world-class financial centre because it

benefits from a well-established and open legal system, transparent financial regulation, unrestricted capital flows, strong international connections and a fully convertible currency. It is largely free from government intervention, is still Chinas gateway to the world and, given the recent sudden devaluation of the yuan as a result of intervention by the Chinese government, will remain so until the Chinese currency becomes fully convertible.As Chinas financial controls continue to ease, Shanghais influence and

financial dominance will expand internationally. However, in the near future, it is not inevitable that Shanghai will replace Hong Kong as the nations international finance centre. But never say never.

Shanghai times ahead or Hong Kong still king?Whats your view? Join the discussion on LinkedIn at rics.org/linkedin, or email [email protected]

Will Shanghai ever replace Hong Kong as Chinas financial capital? Discuss.

DIFFERENCE OF OPINION

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MODUS_Asia_Q4.15_P06-15_Intel.indd 6 12/10/2015 11:15


1009London

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281Paris

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126Amsterdam

107Frankfurt

104Barcelona

76Berlin

1979 1984 1989 1994 1999 2004 2009 2014 2019

11.3%$250

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7.7%$109

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Density/sq mile% Growth

Density

15,87872.7% 76,985

32.8%

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RISE OF SAUDI ARABIAN OUTBOUND CAPITALThe kingdom was the fastest growing source of outbound Middle Eastern capital in 2014

Source: CBRE, Real Capital Analytics

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RICS co-hosts symposium on revitalising Japanese cities

More than 300 Japanese real estate investment practitioners discussed the funding options and determining factors that could speed up the revitalisation of Japanese cities on 22 May, at a symposium in Tokyo co-hosted by RICS, the Association for Real Estate Securitization (ARES) and Japan Real Estate Institute (JREI).

Regional revitalisation is an important part of the five-year strategy plan announced last year by the Japanese government. Through revitalising local regions, the government aims to create job opportunities, new towns and nurture talents. The symposium aimed to explore the role of real estate investment in regional revitalisation and how to start a regeneration project, using case studies from UK and Japan.

The symposium started with Ralph Luck FRICS, director of real estate at Kings College, London, sharing his experience of revitalisation projects in the city, and the gap-funding model that funded them. Making reference to the regeneration of Greenwich Peninsula and other projects he worked on while at English Partnerships a government agency that promoted the development of vacant, derelict and contaminated land Luck pointed out the benefits of gap funding where public-private partnerships were employed.

Yosuke Sano, senior director of JREIs research and study department, and Junichi Kageyama, vice-president of FinTech Global Incorporateds investment banking division, then discussed Japans real estate law reforms and what they mean for regional revitalisation.

TAKE THE LEED Parkview

Green, a 2m ft2 (185,800 m2)

mixed-use scheme in

Beijing, was certified LEED

Platinum in 2009

THE DATA

Intelligence

NEWS IN BRIEF


SKYSCRAPER PRIME OFFICE GROWTH SINCE JULY 2014 AND CURRENT RENTS ($/ft2)

OECD*countries

Ho Chi Minh2010 2011 2012 2013 2014

Hanoi Hanoi Hanoi Hanoi Hanoi

France Germany Ireland

24DAYS

Other Europe &Central Asia

27DAYS

Middle East &North America

33DAYS

Sub-SaharanAfrica

59DAYS

Latin America & Caribbean

65DAYS

East Asia &Pacific

81DAYS

99DAYS

South Asia

34.6 31.4 29.8

EU average

24.6

Italy

28.3

UKDenmark

40.3

Sweden

37.4

22.3

Spain

21.3

Slovenia

15.6

Greece

14.6

Portugal

13.1

Poland

8.4

Hungary

7.3

STAMPDUTY

3,620+87%

ESTATEAGENTSFEES

5,214+61% SURVEYORSFEES

607+51%

CONVEYANCINGCOSTS1,419+37%

REMOVALS1,034+21%

Qatar

2,167m

2013 2014

4,327m

Saudi Arabia

361m

2,305m

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3,785m

1,800m

Kuwait

5,365m

615m

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2,167

2013 2014

4,327

Saudi Arabia

361

2,305

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3,785

1,800

Kuwait

5,365

615

Bulgaria

3.8

Ho Chi Minh Ho Chi Minh Ho Chi Minh Ho Chi Minh

25,00022,50020,00017,50015,00012,50010,0007,5005,0002,500

LuxuryHigh-endMid-endAffordable

Source: Knight Frank

A groundbreaking report on green certification in China has revealed the scale of the rental premium an environmentally friendly development can command.

In Shanghai, the rental premium for a building with LEED (Leadership in Energy & Environmental Design) certification is 12.8%, according to a white paper published mid-year by professors Eddie Hui, Eric Chan and Yu Ka-hung at Hong Kong Polytechnic University.

The research revealed that green certification was the most important building-related factor in causing a rental premium. Only accessibility issues, such

as whether the building is in the central business district, or has access to the subway, matter more.

That tallies with less formal research by CBRE, which estimates a 13.5% rental premium for LEED buildings in Shanghai and as much as 25.7% in Shenzhen.

The research would suggest that the LEED certification is worth the money. The paper concludes it costs on average 3% extra in construction to install the necessary green features. Given that average rents, at RMB229/m2 ($3.35/ft2), are around RMB26/m2 ($0.38/ft2) higher for a green building, and the average construction cost is around RMB10,000/m2 ($146/ft2), it takes just less than a year to recoup the additional cost.

Since green certification in China is relatively rare the research compared 23 LEED-certified buildings with 36 that did not have the rating the report concludes that green certifications are a critical feature for commercial buildings to remain successful.

REPORT: BUILDING GREEN WORTH THE COST CHINA


08 RICSASIA .ORG

In mid-August, Chinas stock markets experienced a sudden and steep decline, causing widespread concern about the health of Chinas economy. To understand what this might mean for the real estate industry, first it is important to note that there is only a limited amount of institutional investment in Chinese stocks, and very little investment from overseas. This means that stock markets are driven mostly by amateur investors. Furthermore, the average company in China does not depend on the domestic stock market for financing. Equally, the average individual does not depend on the market as an investment tool only a tiny fraction of personal wealth is held in stocks, in contrast to bank deposits and property.A rising stock market was desirable to increase

equity-financing opportunities for companies. The Shanghai-Hong Kong Stock Connect scheme and interest-rate cuts laid a solid foundation, but the rally quickly became highly speculative. It did not take long for price-to-earnings ratios to become unrealistically high. Individuals invested with confidence in the belief that the bull market had the backing of the government. However, official efforts to rein in margin financing raised questions about the level of government support behind the market, leading to a series of sell-offs.There have been no recent, significant economic data

announcements, other than a drop in exports, which by itself is not unusual. In fact, Chinas economic data is mixed, just as it has been for quite some time. Overseas equity investors saw stocks slumping in China, and there was a knee-jerk reaction, causing sell-offs internationally.

The devaluation of the yuan was an important catalyst in the global sell-off. But it was widely misunderstood. Overseas markets saw the devaluation as a reflection of poor economic performance. However, the devaluation was part of an ongoing exchange-rate liberalisation, as China moves away from a fixed-rate regime in a bid for the yuan to become a global reserve currency.The direct effects on the property market are relatively

limited. China is moving towards a consumption-based economy, and recent events do not change this. During the stock market boom, there was no corresponding boost in retail sales or consumption. Similarly, we cannot expect a negative effect on retail sales because of declining stock

prices. In the office sector, wealth management firms and small financial companies with stock market exposure account for only a tiny share of occupied space in first-tier markets. However, demand fundamentals in second- and third-tier cities face the same challenges as before the crash. For institutional investors, Chinas first-tier cities still represent an opportunity to gain exposure to a market with deep and wide occupier demand, particularly for offices.In short succession after the yuan devaluation, the government made an

unrelated announcement to loosen home purchase rules for foreign individuals investing in property. This is part of a long line of incremental measures to nudge homebuyers, who may be waiting on the sidelines, back into the market. Given the recent weakness in housing in second- and third-tier cities, any form of policy loosening is well timed. However, the reality is that most foreigners live in first-tier cities. All residents in such cities foreigners included are still subject to restrictions that limit homebuyers to one or two units, once they have met a defined residency period and with proof of tax payments. Therefore, any potential boost in demand for residential property is very limited.What the devaluation of the yuan and the loosening of foreign investment

laws have in common is that they are part of ongoing structural reform. China continues to move away from an economy managed by administrative measures and towards a market-orientated economy. Policymakers are trying to find the correct timing to roll out these changes, with the fewest negative results.

What the devaluation of the yuan and the loosening of Chinas foreign investment laws have in common is that they are part of ongoing structural reform

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Whats that? It is the biggest open-source model of the worlds energy system ever built. Available as an online interactive tool, the calculator models global energy, land and food systems up to 2050 in order to explore and cost our options for tackling climate change. It then predicts what the consequences of these decisions might be as far ahead as 2100.Who is it aimed at? Anyone who is interested in exploring what a low-carbon world could look like in the near future. Businesses could find it particularly useful for understanding how their sector will evolve at a global level as the world moves to a low-carbon economy the markets that will grow and what opportunities may arise. For example, food producers could use it to ask what might be the global demand for food in 2050 depending on population growth or dietary preferences. Or bioenergy producers could use it to speculate on how production could be affected by future yield rates.Whos using it? Organisations such as Mott MacDonald, Shell, the World Energy Council and the Chinese government have used the tool to inform their views of how the world should reduce carbon emissions. The calculator also allows you to design your own vision of the future energy, land and food system to 2050 by combining choices of 40 levers to create pathways. tool.globalcalculator.org

The Global Calculator

COUNTING CARBON

The Chinese government has used the tool to

inform how it reduces carbon

emissions in the country

Tony Ho is new East Asia Managing Director

Tony Ho is now Managing Director of RICS in East Asia and is responsible for overseeing RICS business development, as well as the recognition of RICS standards and qualifications for the region, covering Hong Kong, Japan, Taiwan, South Korea and Macau. A graduate of Indiana State University, Ho has worked in real estate and asset valuation consultation for 20 years and was previously Deputy Director of RICS North Asia.

New Regulatory Board chair reports for duty

Stephen Haddrill has been appointed the new independent chair of RICS global Regulatory Board. He succeeds Eve Salomon, who has stepped down after six years in the role.

Haddrill was previously chief executive of the UKs Financial Reporting Council, an independent regulator focused on promoting high-quality financial reporting and corporate governance. Before this he was a member of the high-level Financial Crisis Advisory Group and director general of the Fair Markets Group at the UKs Department of Trade and Industry.

Haddrill said: Im delighted to take up this role and bring my experience to help ensure the practice, professionalism and quality of RICS members are recognised worldwide. Justifiable trust, achieved through strong, proportionate regulation and governance is essential to deliver continued confidence to the users of these services.rics.org/regulation

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281Paris

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126Amsterdam

107Frankfurt

104Barcelona

76Berlin

1979 1984 1989 1994 1999 2004 2009 2014 2019

11.3%$250

20%$150

0.8%$92

4.8%$124

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1

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2.9%$69

-1.2%$68

7.7%$109

5.1%$51

8.3%$65

20.9%$38

13.2%$58

15,68829.7%

Density/sq mile% Growth

Density

15,87872.7% 76,985

32.8%

20,86766.6% 21,068

45.3%20,72646.2%

38,63497.3%

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BURSTING AT THE SEAMSPopulation density in Salvador forecast to almost double in a generation (1995-2025)

Source: Bloomberg, Demographia, IMF, UN

NEWS IN BRIEF


Securing the next instruction is as important as the deal in hand

Tim Gilbertson MRICS, director, FHP Property Consultants, NottinghamAgency is urgency is a quote used to pinpoint the key to success in commercial property marketing.

But I think agency is thoroughness would be more appropriate.

In a strengthening market with limited supply, any agent knows the deal in hand is key, but securing the next new instruction is just as important. Therefore, a thorough approach to chasing enquiries, keeping in touch with parties

in the market and liaising with solicitors to push deals over the line not only results in successful deals, but also secures a pipeline of new instructions.

Companies who are possible purchasers or tenants today, through thoroughness and regular contact, can become your clients tomorrow.


10 RICSASIA .ORG

First RICS Library outside UK opens in Tianjin

The first RICS Library outside the UK was officially opened in Tianjin, China, on 15 June. Co-sponsored by RICS and Tianjin University of Technology (TJUT), the TJUT-RICS Library is an archive of RICS knowledge and comes fully equipped with state-of-the-art technology.

The facility is the worlds largest library that specialises in construction and real estates. It holds a collection of professional standards and research reports in construction, real estate, land, and other fields published by RICS. In essence, the library embodies the wealth of professional knowledge RICS has accumulated over its near 150-year history.

The library holds 1,300 RICS publications from across six professional areas: project management, management consulting, facilities management, real estate, assessment and environment.

It provides rich resources to TJUT students from construction disciplines, in particular those studying quantity surveying. It is also an important facility for members in China, from which they can gain access to global knowledge in engineering concepts and professional standards.

Highly automated to increase its efficiency, the library boasts 24-hour self-service kiosks, auto-circulation book machines, self-service reading machines, and various digital platforms and equipment to enable easy searching and lending.

RICS CEO Sean Tompkins, president of TJUT Jing Hongyang and Yin Yilin, dean of the School of Management at TJUT, officiated the opening ceremony, which was attended by 200 members and professionals from construction, real estate, land and other industries across the country.

SECRET SURVEYORNEWS IN BRIEFricsasia.org/modusasia

O ver the last several years, I have stayed at a number of four- and five-star hotels. When viewed in terms of guest satisfaction, without exception, all have been excellent. What I have also observed,

however, is: trees growing out of chimneys and being fertilised by bird droppings; broken downpipes and blocked gutters with rainwater spilling over, staining the masonry, splashing on the ground and spattering mud on painted walls; windows jammed shut from painting in overheated bedrooms; poorly fitting external doors and windows, with the consequential continuous loss of heat; woodland planted when the hotel was built about 25 years ago that has never been maintained which is now an eyesore littered with broken tree supports and plastic tubes; and paved areas that have been laid on an inadequate base, resulting in slabs that present a hazard to pedestrians and the potential for personal injury claims.I know that, in the short term,

these defects have little or no

effect on guest satisfaction and could appear trivial but, in the longer term, the consequences could be dire. Is money spent on maintenance perceived as reducing profits on a yearly basis? It should be remembered that many of the hotels are part of international groups, whose policies are decided in other countries and therefore may not necessarily be compatible with local conditions. The managers I talked to did not appear to focus on such matters as maintenance and energy conservation.Should the profession be doing

more to market the specialist expertise of its members to the hotel industry, particularly in relation to maintenance and energy efficiency?Do our members have any input

to hotel management courses in the universities? I have no doubt their expertise would be beneficial to the long-term sustainability and viability of hotels.

ARE YOU INTERESTED in writing a future Secret Surveyor column? Email [email protected]

Should the profession be doing more to market the specialist expertise of its members to the hotel industry?

RUSH TO BOOK INTO SPANISH HOTELSHotel investment in Spain is at its highest level for nearly seven years, and is on course to surpass the 1.6bn ($1.8bn) recorded at the previous peak in 2006, says CBRE.

Investment in Spanish hotels last year was at its highest since the crash of 2008 up 63.4% on 2013 and totalling 1.09bn ($1.23bn).

CBRE found this investor appetite continued in 2015. Transaction volumes for the first quarter were up 283% on the same period in 2014, stemming partly from a rise in investment from the Middle East, Asia and the US.

Traditional hotel markets such as London and Paris

have notoriously high barriers to entry and a scarcity of investable stock, particularly in the luxury segment, said Joe Stather, EMEA hotels intelligence manager at CBRE.

[By contrast] the key Spanish cities are currently proving much more liquid. Direct flights to Spain from the emirates, China and Singapore heighten the countrys appeal further and those investing in real estate are eligible to obtain residency by investment.

INVESTMENT

CHECKING INChinese group

Chongqing Kangde paid

50m in May for Hotel Barcel

Santiago in Tenerife



Intelligence

HIGH CULTURE WITH A VERY HIGH PRICE TAGStrange things happen when you build a concert hall on top of a 1960s warehouse. On the positive side, the Elbphilarmonie Hamburg, designed by architect Herzog & de Meuron, looks like no other concert hall ever built and is likely to drastically boost the tourist appeal of Germanys second city. On the negative side, with a final price tag of 789m ($881m), the project will have cost more than double the original budget, and even when completed in January 2017, it will have taken a decade to be constructed. Whether it will all have been worth it in the end is a question that the citys inhabitants will only know when it all is finished.


12 RICSASIA .ORG

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12 RICS.ORG/MODUS



The Asia regions improvement in terms of environmental, social and governance issues has been described as impressive, by the 2015 Global Real Estate Sustainability Benchmark (GRESB) report, issued at the start of September. Performance is up 18% to an average score of 54, the report found. That puts the region on a par with US-based companies, and just behind Europes score of 55.

The report goes on to state that real estate companies in Asia have cut greenhouse-gas emissions by 68,000 tonnes the equivalent of taking 14,316 cars off the road. In terms of energy reduction, Asia-based property companies have reduced energy consumption by 143GWh, or the equivalent of 229,000 barrels of oil.

The improved figures are the result of a serious review of energy use. The 2015 findings show that 78% of study participants in Asia undertook technical building assessments over the last four years, 76% of which then implemented energy-saving measures. The figure is significant because operational costs account for 85% of a buildings life-cycle cost.

The report also highlights corporate leaders by property type. It praises CapitaLand as the leading diversified property manager. Keppel REIT, also based in Singapore, is the industry leader in Asia in the listed office space. Invesco Real Estate Fund is top dog in terms of private office funds. The Australian group Lend Leases Asian retail fund is the leader in the retail sector.

Several Japanese companies garnered praise. Sekisui House is the industry leader in residential development, GRESB found, while Japan Prime Realty Investment Corp leads the way among developers with a diversified portfolio of office and retail property. Tokyo-based Hulic came out top among developers with a diversified portfolio of office and residential.

The Goodman Japan Core Fund is the best privately run industrial fund, while Mumbai-based Mahindra Lifespaces Developers is the leader on the listed industrial side.

ASIAN REAL ESTATE CATCHES REST OF WORLD

SUSTAINABILITY

INFO

GR

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IC IA

N D

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ALL

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STR

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N B

ERN

D S

CH

IFFE

RD

ECK

EROECD*

countries

Ho Chi Minh2010 2011 2012 2013 2014

Hanoi Hanoi Hanoi Hanoi Hanoi

France Germany Ireland

24DAYS

Other Europe &Central Asia

27DAYS

Middle East &North America

33DAYS

Sub-SaharanAfrica

59DAYS

Latin America & Caribbean

65DAYS

East Asia &Pacific

81DAYS

99DAYS

South Asia

34.6 31.4 29.8

EU average

24.6

Italy

28.3

UKDenmark

40.3

Sweden

37.4

22.3

Spain

21.3

Slovenia

15.6

Greece

14.6

Portugal

13.1

Poland

8.4

Hungary

7.3

STAMPDUTY

3,620+87%

ESTATEAGENTSFEES

5,214+61% SURVEYORSFEES

607+51%

CONVEYANCINGCOSTS1,419+37%

REMOVALS1,034+21%

Qatar

2,167m

2013 2014

4,327m

Saudi Arabia

361m

2,305m

UAE

3,785m

1,800m

Kuwait

5,365m

615m

Qatar

2,167

2013 2014

4,327

Saudi Arabia

361

2,305

UAE

3,785

1,800

Kuwait

5,365

615

Bulgaria

3.8

Ho Chi Minh Ho Chi Minh Ho Chi Minh Ho Chi Minh

25,00022,50020,00017,50015,00012,50010,0007,5005,0002,500

LuxuryHigh-endMid-endAffordable

Intelligence

AVERAGE TIME TO REGISTER PROPERTY Slow registration of land perpetuates informal use and blocks sales and development

Source: McKinsey Global Institute

*Organisation for Economic Co-operation and Development

Three decades ago, when my father thrust into my hand a copy of the Frankfurter Allgemeine Zeitung, little did he know it would lead me to the presidency of this wonderful professional body. There, in the corner of the business section was a short, barely noticeable paragraph extolling the RICS. To a young student in Germany, the concept of a royal institution was exotic. The title chartered surveyor was totally alien and impossible to translate. But my natural curiosity had been ignited and soon my mind was made up: I was going to be a chartered surveyor. Thus began an amazing career that has taken me around the world. I have

met many excellent colleagues, some of whom are active on RICS committees and working groups. But my principal engagement was as a professional benefitting from the assurance of the RICS brand, access to high-quality guidance, and the status that goes with it. So my route to the presidency has been unusual. Although I have served for three years on Governing Council, I have not been steeped in committee machinations. I will, therefore, look to others to guide me on processes and procedures. My own contributions will bear the hallmark of personal experience gained across five continents. With that experience in mind, I am convinced we must redouble our

efforts to attract the best talent, to place ethics at the heart of all we do, to create successful and sustainable future cities, to embrace technology and big data, to take new opportunities, and to lead. I shall focus on three key themes over the coming year. First, sustainable

investment. As head of global transactions for a fund manager, I have a duty to my clients to invest their savings sustainably and responsibly. For our profession, that means appropriate standards, analytical tools, training and education. It also means a collaborative approach across our professional groups, and between RICS and our many stakeholders. Second, as President I shall emphasise the fiduciary duty of fund managers. RICS can lead thinking in this area. For example, how can we behave rationally and responsibly in an environment of historically low interest rates engineered by central banks? Third, standards, diversity and inclusion. These were all central themes for my predecessor, requiring sustained effort over many years, and I intend to do all I can to take them even further.

INAUGURAL ADDRESS

Martin J Brhl became RICS

President on 29 June. To read his

full inaugural address, go to rics.org/

martinbruehl

MARTIN J BRHL FRICS RICS PRESIDENT

My curiosity was ignited: I was going to be a chartered surveyor


14 RICSASIA .ORG

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Leaders of the profession know that Continuing Professional Development (CPD) is essential to keeping skills and knowledge up to date and relevant. In joining the profession we have all committed to maintaining and enhancing our competence, knowledge and skills during the course of our careers.

This commitment to continued learning and professionalism is a vital component in building our collective reputation with clients, regulators, governments and many other stakeholders.

As an RICS member, you probably exceed the expected 20-hour minimum learning required each annual year. We recommend setting aside a small amount of time to record your professional development for the year, while continuing to promote the benefits of the profession to your fellow RICS members, staff and colleagues.

The RICS designation represents leaders in the field from all over the world, and participating in CPD is an integral part in enhancing and protecting the reputation of our profession for many decades to come.

Leading the way

rics.org/cpd

19696 MODUS CPD AD-202x274mm-AW.indd 1 09/07/2014 12:19MODUS_Asia_Q4.15_P06-15_Intel.indd 14 12/10/2015 11:16


Hong Kong Jockey Club references RICS guidance

Congratulations to the Hong Kong Jockey Club (HKJC) on its recent publication of Property Asset Health Management Framework, which references materials from RICS guidance notes.

With a capital replacement value of more than HK$30bn ($3.87bn), consisting of 1.15m m2 (12.4m ft2) of land and more than 700,000 m2 (7.5m ft2) of covered floor space, the health and cost effectiveness of the clubs property asset portfolio is a key focus of its activities.

The document was a result of two years research involving international leaders in this field. The review referenced material from RICS measured surveys of land, buildings and utilities guidance notes. Referencing RICS standard building schedule allowed the club to align its asset condition assessment to globally recognised industry standards.

Comprised of seven levels, the Work Breakdown Structure is based on our standard building schedule, an industry standard for categorising construction components of a building.

Reports highlight potential of BIM in built environment

RICS has released three new reports focused on building information modelling (BIM). The research papers aim to share insights and experiences from various stages of the real estate life-cycle and examine aspects of how and where BIM technologies are employed to improve project coordination.

BIM was originally developed by the architecture, engineering and construction sectors but, as these research papers illustrate, it also has its uses in other areas and sectors where it can influence project costs and facilitate better information flow.

Download all three reports at rics.org/bim.

Identical 15% taxes on homes purchased by foreign buyers have produced startlingly different results in Singapore and Hong Kong, causing prices to tank in the Lion City, but having little effect in Hong Kong.

The situation is unusual in that both economies are very open. But the financial hubs of south-east Asia and greater China have recorded wildly divergent performances, spelling out very different challenges for developers and property professionals.

Knight Franks prime global cities index ranked Singapore last out of 35 global cities as of the first quarter of 2015, with prices down 12.6% in 12 months. Hong Kong,

where prices rose 5.5% in a year, ranked in the top half of the index.

The Singaporean government has responded by restricting the number of sites released for sale. Only 567 units were completed in the second quarter of 2015, 23% lower than the three-year quarterly average.

Hong Kong, by contrast, continues to increase supply. The Transport and Housing Bureau estimates that 83,000 units will come to the market in the next three to four years on a quarterly basis, 10 times the rate of completions in Singapore.

The ratio of foreign buyers has undergone a similar decline in both cities, dropping from 35% of new flat sales in central Singapore in 2011 to 14% in 2015, while Chinese buyers alone in Hong Kong have dropped from 42% in 2011 to 11%.

Ong Teck Hui, director of research and consultancy at JLL in Singapore, forecasts that prices will continue to decline through 2016 and will not stabilise until the governments cooling measures ease. The tough market is pushing local developers into markets such as Australia, the UK, the US and elsewhere in Asia.

Ratings agency Standard & Poors has been surprised by Hong Kongs steady growth, causing it to reverse a call of a fall of 5%-10% in 2015 to a rise of the same amount. Still, it anticipates a decline in sales next year, forcing developers to adopt more flexible pricing models.

RISING MARKETHong Kongs

Transport and Housing Bureau estimates that

a further 83,000 units

will come to the market in the

next four years

Intelligence

RULES ON FOREIGN BUYERS HAMMER SINGAPORE HOMES BUT NOT HONG KONG

RESIDENTIAL

status

nceexcellence

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atioreputatiorreputation

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ds stanndards

stanndards

leadership

professionalism

excellence

excellence reputations a usu

nreputation

competence

competence

competence

professionalism

smprofessionalismp

alprofessional

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confidence

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status status

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competenceessionalism

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leadershippp

t

leaders

pleadership

leadershipt

pleadershippp

leadershipll

ipleadershipp

preputationp

nreputationp

reputation

mprofessionalismprofessionalism

Leaders of the profession know that Continuing Professional Development (CPD) is essential to keeping skills and knowledge up to date and relevant. In joining the profession we have all committed to maintaining and enhancing our competence, knowledge and skills during the course of our careers.

This commitment to continued learning and professionalism is a vital component in building our collective reputation with clients, regulators, governments and many other stakeholders.

As an RICS member, you probably exceed the expected 20-hour minimum learning required each annual year. We recommend setting aside a small amount of time to record your professional development for the year, while continuing to promote the benefits of the profession to your fellow RICS members, staff and colleagues.

The RICS designation represents leaders in the field from all over the world, and participating in CPD is an integral part in enhancing and protecting the reputation of our profession for many decades to come.

Leading the way

rics.org/cpd

19696 MODUS CPD AD-202x274mm-AW.indd 1 09/07/2014 12:19

NEWS IN BRIEF


Water plays a vital role in shaping our built environment. This book explores the historical relationship between water and architecture or aquatecture. How has this relationship changed over time, and how will new

methods revolutionise the way we think about water, design and urban planning?

Using international case studies to bring these new theories to life, practical and technical advice is presented alongside

ground-breaking ideas for the future.

For example, solutions such as amphibious housing, wet-proof buildings, zero-carbon development, rain gardens, flood storage and new methods of waterfront design are discussed and their effectiveness assessed.RIBA Publishing, $54

AQUATECTURE: BUILDINGS AND CITIES DESIGNED TO LIVE AND WORK WITH WATERROBERT BARKER AND RICHARD COUTTS

PAGETURNER


16 RICSASIA .ORG

Disputes

T he figures are damning. The average cost of a construction dispute in Asia last year was to $85.6m more than double the rate in 2013 according to Arcadis 2015 Global Construction Disputes report. The typical spat drags on for just over a year. The cost is more than twice that in North America and Europe. Only the Middle East, averaging $76.7m, comes close. The report is revealing, since

only small disputes tend to make their way into public courts. Serious claims almost always end up in arbitration, which is not only binding, but also confidential. Neither client nor contractor wins business by being litigious. The simplest explanation as

to why disputes are bigger in Asia is that the projects are bigger. Many regions are still developing, which requires massive investment in infrastructure. These mega projects often run to $1bn or more, and are incredibly complex.The leading cause of disputes,

the report suggests, is a failure to administer the contract properly. Mike Allen FRICS, global leader of contract solutions at Arcadis, suggests this is often the fault of both employer and contractor. It can be the simplest of things that snowballs: failing to notify the other party of a delay within the timeframe in the contract, and failing to then approve it, which results in further delays.

For Kenneth Kwan FRICS, managing director of Rider Levett Bucknall in Hong Kong, there are four chief causes of dispute: prolongation or delay; design variations; disruption; and acceleration. Acceleration is a particular

issue in China, Kwan notes, where the economy occasionally overheats. Heavy demand for contractors and labour also increases the likelihood of lapses in quality control. In China, Hong Kong and Macau, the programme is usually very tight, and everyone is in a rush, he says. The communication is not thorough enough. So there is a higher chance of not making the best use of resources.At the root of all disputes are

two issues: time and money. Changes made during a project often have unintended consequences. So it is important to write a contract that allows for adaptation. The more work spent on getting the details right up front, the less likely a problem, dispute-resolution experts say. Unfortunately, Asia may have some of the most sophisticated projects and most antiquated ways of going about them. Generalisations are always

dangerous but in Asia, there is a real focus on cost rather than value, posits Nick Townsend MRICS, managing director of Turner & Townsend in north-east Asia. Accepting the lowest cost leads us down a rather confrontational route.

Asia is the worst region in the world when it comes to construction disputes. Why? And how can we set it straight?

FIGHT CLUBWords Alex Frew McMillan Illustrations Neil Webb

FRICS

201585602013767010Mike Allen FRICS

Alex Frew McMillan Neil Webb

MODUS_Asia_Q4.15_P16-19_Conflict_v4.indd 16 12/10/2015 11:22


Disputes


18 RICSASIA .ORG

Disputes

T here also exists in Asia an ingrained adversarial culture between client and contractor, each one trying to get the most out of the other. The exception to the rule is Japan, where contractors and clients have exceptionally long and deep relationships, and claims are very rare. Clients and contractors in Britain, North America and Australasia are also now starting to approach projects as partnerships. There is an intransigence in

partnering in Asia, suggests Townsend. It is uncommon to involve a contractor early in the relationship. But construction professionals advise bringing the contractor in on architectural plans, engineering, procurement as early as possible. Many Asian companies are

more hierarchical and family run than their western counterparts. Generally, the most senior person in any organisation makes the decisions, says Townsend. Without devolution of decision-making and contract assurance, you have a bottleneck.This problem can be mitigated

by appointing independent and capable project managers. Kwan says that, through active management, 90% of disputes can be resolved on the ground between project teams. In a surprising number of

disputes, there is disagreement about what actually happened, let alone how it should be resolved. Memories fade. People change jobs. And no one can figure out quite what went wrong, or why. Its not uncommon to have a

situation where all of the

personnel have left the project, so you have a dispute about the records rather than the issue, says Allen. It is vital to keep track, in writing, of all decisions made on the fly. I have never really found a project that has too many records.When an issue does come up,

it is tempting to avoid it. That issue doesnt go away, Allen says. It will come back. And when it comes back, typically the parties have lost control of the situation.One other reason that

construction disputes end up being large and nasty in Asia is that projects are still typically awarded on a lump-sum basis. This may work for smaller

90%AllenAllen Allen

Nick Townsend MRICS

Townsend Townsend

llClients ask me: What is the maximum amount for claims that I can put in the contract? That will give me a headachell

HUMPHREY CHEUNG FRICS Humphrey & Associates



FRICS Humphrey & Associates

projects, but on large-scale assignments, it requires incredible foresight, or luck, to get the pricing correct. Youre asking the contractor

to take on a lot of risk by estimating all costs up front, says Allen. To make matters worse, in some sectors it is standard practice to roll many small projects into large-scale programmes of work.

A common practice is to underbid to win a job but build enough room into a contract to exaggerate claims and negotiate them down. Clients will ask me: What is the maximum amount [for claims] that I can put in the contract document? says Humphrey Cheung FRICS, who runs the law firm Humphrey & Associates. That will give me a headache. Some of the claims are not supported by the evidence. Part of his job is to get those clients to be more realistic. It is also wise to settle on an

interim method of contract resolution so that minor issues can be resolved before they become major problems. The security of payment concept ensures that contractors and consultants are paid correctly and on time. It also outlines the procedure for resolving disputes. Singapore and Malaysia are at

the forefront of introducing security of payment legislation. It provides a framework for a variety of dispute-resolution methods, including adjudication and the use of dispute boards, which are reducing the incidence and duration of disputes. The Hong Kong government already adopts the security-of-payment approach in many of its departments. By 2017, it aims to be using it for all public works and any private project of more than HK$5m ($645,000). Ensuring your contract is

watertight in the first place should lessen the likelihood of disputes arising. The New Engineering Contract (NEC) was

introduced in the UK in 1993 and is also used in Hong Kong. The suite of contracts address how to handle key construction issues: cost overruns, quality issues, claims, and timeframes. In Asia, though, many clients seem nervous about using it, says Townsend. Its not a panacea for construction problems. But it is one of the tools in our armoury.Another method aimed at

heading conflicts off at the pass involves appointing a mutually agreed dispute resolution adviser, who can attempt to resolve issues, escalate them to management if that does not succeed, and pass them into arbitration if all else fails. The process is designed to be speedy typically, no dispute should take longer than three months. One thing is for sure: only

lawyers are likely to gain from becoming embroiled in a formal claim. High Court cases involving expert witnesses take at least 18 months to resolve. But at least a court provides a set location and can compel witnesses to appear. Arbitration requires all parties, the arbitrator and all expert witnesses to settle on a date and a venue. This alone can take more than a year. While this is the most popular method of settling disputes in the UK, in Asia, parties generally attempt to solve disputes amicably and only proceed to arbitration if that is not successful. Asias record on conflict

management is, at face value, very poor. But learning from the experience could result in new approaches to dispute resolution and contract construction. Those disputes are, after all, the result of doing business in the most dynamic continent on earth. As Allen says: We are constructing some of the most challenging projects in the world. n

RISING COSTS are on the agenda at the first Asia Construction Conference, in Hong Kong on 8 January 2016. Details on p49

Humphrey & Associates FRICS2017500645,000

1993Townsend

18Allen

18RICS49


20 RICSASIA .ORG

Cover story

BY GEORGE!A concrete box flat in Barcelona (above and opposite) makes the most of its limited space by tucking appliances and furniture behind panels, and impressed architect and broadcaster George Clarke

MODUS_Asia_Q4.15_P20-23_Too small.indd 20 12/10/2015 11:28


Spiralling populations, sky- high prices and a shortage of land demand a big idea in city living: the micro-apartment. Amanda Birch reports

Cool, tech savvy and fluent in the new foreign language of social media, the millennial generation has much to envy. But when it comes to buying a home of

ones own, especially in global cities, that appears to be where their luck runs out, with affordability becoming a problem for even the most skilled young professionals. In this context, the emerging micro-

apartment segment offers a real alternative. Small units are being built in cities across the globe that are distinctly different from the cramped flats found in badly converted houses around London, or Hong Kongs notorious metal cage homes. Specialist developers are creating centrally located, compact, well-designed homes that appeal to young people and, crucially, are affordable. If we dont develop smaller units where

space is critical, the population will be driven out into the suburbs or to other cheaper cities, cautions Ben Derbyshire, managing partner at London-based architect HTA Design. The economy of industrialised or post-industrialised countries now rests on the success of knowledge-based industries in our cities and this requires people to live and work in close proximity so they can share their knowledge and skills.As people flock to developed cities and the

population continues to grow, land will inevitably become even more in short supply. To alleviate this crisis, the housing produced will therefore have to be efficiently designed and affordable, and this is where the emerging micro-home comes into play. George Clarke HonRICS, architect, builder

and broadcaster whose popular UK series Amazing Spaces was inspired by small-scale buildings, sees a huge amount of pressure on cities for space.Ive seen many small spaces that have

been designed by incredibly talented and inventive people, says Clarke, who has travelled the world visiting micro-units, such as an imaginatively designed, multi-level flat in Paris that employed raised beds and dining areas. He was also impressed by a rooftop concrete box in Barcelona, the size of a hotel room, that could be reconfigured for different uses as required. These examples have taught him that building smaller spaces in a creative way is an approach that should be adopted. In larger, high-cost US cities, such as New

York, Boston, San Francisco, Seattle and Washington DC, there is a growing interest in micro-units. The American Urban Land Institute (ULI) published a report, The Macro View on Micro Units, last year that suggested micro-units appeal to city dwellers

in high-cost markets who are willing to trade space for improved affordability and closer proximity to the city centre. Although there is no standard definition

of a micro-unit, the report defines it as a small studio apartment, typically less than 350 ft2 (32 m2), with a kitchen and bathroom. However, the size can range from less than 250 ft2 to 500 ft2 (23-46 m2), depending on the city building code requirements. More than 400 rental apartment communities, comprising more than 90,000 units, built in 2012-13 in 35 US metropolitan areas were analysed as part of the research. Stockton Williams, executive director of

the Terwilliger Center for Housing at ULI, says the report highlighted a range of factors in the US underpinning the demand for smaller units. At a macro level, American families and household sizes are getting smaller and particularly in our larger cities, more households consist of one person, says

Williams. More Americans are living alone and the emerging micro-units are a reflection, in part, of those demographic trends. Williams acknowledges that the other

contributing factor is that many American cities have severe affordability problems, creating pressure to add to the supply of lower-cost housing. This doesnt mean, however, that micro-units are restricted to those on lower incomes, he adds. Micro-units also represent a new product at the high end to the millennials [those born after 1980] that have a significant disposable income and are attracted to urban living.


22 RICSASIA .ORG

Cover story

If nArchitects vision for its nearly complete My Micro NY project is realised, tenants on different income levels and of all ages will soon live there. The project is New Yorks first micro-apartment complex and comprises 55 prefabricated modules. Each unit ranges from 260 ft2 to 360 ft2 (24-33 m2) and rents are $2,000-$3,000 a month. My Micro NY will also provide

community spaces, including a gym, studies and small gardens for tenants to share. This is a very similar concept to one embraced by the Collective, a London developer of a new form of private-rented, shared living accommodation aimed at young professionals. The Collectives Old Oak development, still under construction, will provide gyms, bars, a games room, cinema and outdoor space for its tenants, who will live in studios of 160-215 ft2 (15-20 m2) .The UK capital, where prices have risen

11% in the last year and the average cost per square metre of a city centre flat is 14,500 ($22,270), is also seeing a vogue for micro-housing. Theres more micro design happening in

London now than theres ever been, says Clarke. I think people have become fairly bored of very, very expensive standard apartments and are rethinking how they want to live.Clarke argues that the trend for smaller

spaces in cities has started to influence how the British approach the appraisal of a flat. Like continental Europeans, they are increasingly describing how many square metres a flat has, rather than the number of bedrooms. If building costs are based on the amount of square metres, then that has to have an impact on the sales cost, he adds, so the smaller we make them, hopefully the more affordable they will be.

Figures from the UK Department for Communities and Local Government reveal that less than 20,000 homes were built in London in the 2013-14 financial year, while its population is growing by 52,000 households a year. And the average price paid by a first-time buyer in London was 8.8 times the average wage in 2014 the highest level since records began in 1983 according to building society Nationwide.

Given these startling statistics, it is no surprise that Pocket, a developer of compact apartments in central London, has a waiting list of 18,000 prospective buyers. As the name suggests, Pocket builds smaller than average units in central locations with good public transport infrastructure. The flats are sold at 20% below the prevailing market value to key workers who meet the necessary affordability criteria, and the discount is passed on to subsequent purchasers. Russ Edwards, Pockets design director,

emphasises that they are not building micro-homes. Micro tends to refer to units that are below the appropriate space standards and often rely on gimmickry to work as a functioning home, he argues. Our homes are compact and they fully comply with Londons space standards but, importantly, they rely on good design strategies to provide a fantastic home.The main Pocket product is a 410 ft2

(38 m2), one-bedroom unit with full-length windows, generous floor-to-ceiling heights and sensibly shaped rooms. Efficient design means that no space is wasted. To date, Pocket has completed seven schemes around London, and sold about 200 homes with a further 500 units in the pipeline.In London, only 1.7% of the entire

housing stock is of intermediate tenure, where we feel the greatest demand is, says Edwards. Theres a huge squeeze in the middle who are poorly catered for and struggling to get home ownership. Our business is catering for that intermediate niche, and is targeted at first-time buyers, typically in their late 20s to late 30s.Alix Green MRICS, residential director

in JLLs affordable housing team, is working with Pocket and providing independent valuation advice to its funding partners, Lloyds Bank and the Greater London Authority. She can see why the Pocket model appeals to prospective, first-time buyers because the product is simple and affordable: Pocket puts location at the top of the list. Its very much a city product and, clearly, market values are driven by location and proximity to central London, to

SHARINGS CARINGMy Micro NY in New York (below) and the Collectives Old Oak in London (bottom) sacrifice floor space in units for shared facilities such as gyms, gardens, games rooms and bars

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services and public transport hubs. Its fair to say that unit size comes second to location with the Pocket product.Green is keen to point out that the Pocket

units dont feel cramped or too small. There are some design features that have been very carefully thought through, which gives the feeling and illusion of space and this can make for a very efficient unit, she says.So do the Pocket flats live up to the hype?

Debra Stein thinks so. The 37-year-old project manager moved into Pockets W9 development in Westbourne Park in 2012. She works for a financial services firm in nearby Paddington, and paid 200,000 for her one-bedroom unit. Stein loves her flat and considers herself exceptionally lucky to have noticed the email offering full ownership of a Pocket property. There are only 32 flats in our development

and they went extremely early. If I hadnt read that email, I dont know what I would be doing today, probably still renting, she says. I was able to buy something, which meant I didnt have to sacrifice price for distance. I would have greatly missed living in central London. Without solutions like this, no ones going to get anything. Its quite frightening. Building micro-units may be a relatively

new phenomenon in London, but in Hong Kong, often considered the birthplace of micro-living, it is a way of life. In a 426 square mile territory where around 7.2 million people jostle for space, Simon Smith MRICS, head of research and consultancy at Savills Hong Kong, has explored the trend for building shoebox apartments in Asia. The demand for shoebox apartments has

risen over the past few years in Hong Kong as an increasing number of the younger generation and single-person households have shown an interest in the sector, says Smith. Traditionally, shoebox apartments are single-block apartments located in core locations such as Central, Wan Chai, Causeway Bay and Island East and attract mainly executives, lawyers, bankers and accountants. In non-core areas, the demand is mainly from first-time home buyers, young couples and single-end users.

Smith says that the housing situation in Hong Kong is more buoyant than in Tokyo and Singapore. Developers in Hong Kong have completed some high-quality apartments of between 250 ft2 and 350 ft2 (23-32 m2) in established residential clusters. For example, the area around Kowloon station features developments such as the Arch, Harbourside, the Waterfront, Sorrento and the Cullinan. More than half of the apartments in

Hong Kong do not have a mortgage, and 52% of households own their home, of which 60% do not have a mortgage or a loan, says Smith. Mortgage-tightening measures, which favour small lump sums for properties, have meant that mortgage borrowers and lenders have changed their preference for shoebox units.Savills has noted that demand in micro-

units has developed in two ways. They are now included in large-scale developments, not just in single-block schemes, and they are now being built in many emerging new towns, such as Tseung Kwan O and Kai Tak, and not just in key business districts.But is the rise of the micro-unit merely a

symptom of urbanisation or actually a long-term cure? Will the novelty of living in a more compact space with fewer personal belongings lose its allure? As long as major US cities remain

appealing to single households and, as long as these places remain relatively high cost, there will be interest in innovative ways to expand supply, says Williams. Whether

[micro-units] become a mainstream product mostly depends on the health of US urban real estate markets and whether any significant regulatory progress can happen at a local level. There are some fundamental barriers that have to be worked through before the micro-unit becomes a common housing type. For example, locally imposed minimum sizes and limitations on building density, which are common in US cities, can create obstacles to multi-family development in general and micro-units in particular.In the UK, experts argue that the market

needs a lot more choice in terms of unit sizes, and the space standards are key to that process. Edwards says: Weve lost in the UK the ability to move through the property market, from bedsits, to one-beds, trade up to two-beds and then to a house in the suburbs. We are providing extra rungs in the ladder to fix that process and our view is that thats true with a lot of Western cities. n

READ THE ULI REPORT, The Macro View on Micro Units, at bit.ly/uli_macromicro

SPACE INVENTORSA fluid approach to fixtures means this Hong Kong apartment (left) can be configured into 24 different rooms, while Pockets concept (below) sacrifices a little of the flexibility for floor space

llPeople have become bored of very expensive, standard units and are rethinking how they want to livell

GEORGE CLARKE HonRICS Architect and broadcasterIMAG

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24 RICSASIA .ORG

BY 2025, 1.6 BILLION

PEOPLE WILL BE LIVING IN HOMES THAT ARE

UNFIT FOR PURPOSE

...but how can you build sufficient housing on such a large scale, while keeping it affordable? Kate Murray investigates how three countries are attempting to meet that challenge

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Affordable housing

CHINA ORDERS FROM THE TOP

The sheer scale of the efforts China has made to tackle its affordable housing shortage is what makes it remarkable. Although a target of 36 million

new social homes over five years might seem staggering, the Peoples Republic is firmly on course to meet that goal.The social housing drive, spurred on by

the ambitious target embedded in the 12th Five-Year plan in 2011, marks a big shift away from the marketisation of recent decades. A desire to head off unrest from the urban poor, who had been increasingly priced out of ownership after public housing was sold off, was partly responsible for the change of direction. But so, too, was an integrated view of housing, economic growth and urbanisation which means that, for China, building new, affordable housing is part of a bigger strategy for the countrys future. Firm direction from Beijing has been

crucial, for although local government has been expected to deliver and manage the homes, there is a national commitment and pressure to build. As a report for RICS by the Centre for Housing Research at the University of St Andrews put it: Strong, sustained public intervention is perhaps the most noticeable feature of Chinas housing system Policy, strong policy, matters in China. Dr Albert Cao, a senior lecturer in the department of real estate and construction at Oxford Brookes University, says that, in reversing its withdrawal from housing provision, the Chinese government has succeeded in tackling what was becoming a huge political and social issue.When theres a major shortage, the

market mechanism is unlikely to deliver enough to meet social needs, he says. If you look at the UK [private sector] housing industry, it has never built sufficient housing that can meet the needs of this country. From the 1950s to the 1970s, most new housing was built by councils. In China, the government made a decision to prioritise affordable and social housing. They set a very ambitious target but used the power of central government to push it through.


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Although Chinas housebuilding drive has done tremendous good for the urban poor, Cao says problems remain. Funding, manpower and construction capacity have all been there but, as his study of the Chinese affordable and social housing sector for RICS last year pointed out, the rush to build big has meant some homes are poorly located or suffer from management problems. But, he adds, the Chinese have managed to deliver while they can. In 10 years time, they will have lost some of their capacity to deliver because wages will rise to the extent that it becomes expensive. They are making the best of a situation while labour costs are still low, he says. And it all links in to the overall economy. China produces half of the worlds steel, for example, and the housing sector is a big user of steel, so its been cleverly woven into a big system to boost economic growth.Chinas next challenge is to balance the

capacity it has already created with any anticipated future demand. Cao says the government is now looking at a further housebuilding programme, targeting rural migrants who do not have the same residency rights in cities and therefore have not benefited in the same way as the urban poor. The general direction is very clear they want to extend affordable and social housing to include all people, says Cao. There are more people to be housed, but the glut they have created could then become a shortage. Targeting the right people will be the key issue because, if you extend it to everyone, there are hundreds of millions of people who could potentially migrate.

llThe general direction is clear China wants to extend affordable housing to include all peoplell

DR ALBERT CAO Oxford Brookes University

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Affordable housing

SOCIAL SERVICEMcIntyre Drive Social Housing, in the Melbourne suburb of Altona, was built for Victorias Department of Human Services and is a rare example of recent, affordable housing development in Australia

AUSTRALIA NEW TRANSFER POLICY

The Great Australian Dream a suburban home, a garden, perhaps even a pool has for decades been a key part of the nations identity. But for many that dream has turned sour. Australia may be one of the worlds top 10 advanced countries, but it is a lowly 51st in the global Social Progress Index on the availability of affordable housing. Indeed, the International Monetary Fund records Australia as the third least affordable place in the world to buy a home. For those priced out of the market, soaring private rents and a lack of social housing are compounding the squeeze. The problem is rising up the political

agenda. A long-awaited report on affordable housing from the Australian senates economics references committee, published in May, called for a big increase in affordable housebuilding. And some states are responding. New South Wales has recently announced a A$1bn ($707.8m) fund for new affordable housing although it is not yet clear how that commitment will be made up.

But in the absence of large-scale federal government investment, after funding for affordable housing development was scrapped last year, efforts are now being made to expand the community housing sector. Already a series of stock transfers have taken place, whereby public housing is handed over to community providers. In this way, housing experts hope, more not-for-profit providers will be able to develop the new homes the country needs, by borrowing against the property portfolios. Last year in Tasmania, one-third of the

states public housing was handed over to community providers. Australias largest ever stock transfer, in the Brisbane suburb of Logan, is expected to take place imminently, as part of plans to hand over 90% of Queenslands public housing portfolio or more than 50,000 homes to the third sector by 2020. Australian providers could even take on stock internationally, some having expressed interest in plans to transfer public homes in Christchurch, New Zealand. Transfers, according to the City Futures

research centre at the University of New South Wales, are increasingly seen by industry insiders as a crucial fix for

SHARED EARTHTulou in the Chinese city of Guangzhou (opposite) is an affordable housing alternative to standard high-rise blocks, aimed at migrant workers and inspired by traditional earth houses in rural communities

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28 RICSASIA .ORG

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Graduate and Executive hub packed full of knowledge and guidance to support your career development.

Get access to leading companies who are looking for RICS members like you who have the right skills and knowledge.

Access RICS Recruit via your smartphone or tablet to search and apply for jobs.

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Affordable housing

Australias rundown public housing, enabling community providers to access additional funding to improve existing homes, as well as build new ones. Professor Hal Pawson, associate director

at the centre, says that even under current public spending settings, community housing providers will be developing in the next few years. The promised A$1bn fund [in New South Wales] is anticipated as funding some modest expansion over the next few years. Any such development will be taking place alongside a modest amount of debt-funded, affordable housing construction already planned by community housing providers over the next few years as a quid pro quo for receiving title to 6,000 new government-built properties. If community housing providers are to be

an increasingly important route for delivering new homes, there is certainly an appetite among lenders to get involved. Westpac has already said it will make A$2bn ($1.4bn) available for social and affordable housing by 2017. The Australian bank sealed its biggest ever deal, worth A$61m ($43.2m), with New South Wales housing provider St George Community Housing last October to build homes across Sydney. Jon Ross, head of government and education at Westpac Institutional Bank, says the landscape is now being reshaped by the growing role of

community housing providers. The bank, he adds, is keen to strike more deals with the sector to build more affordable homes. Our strategy is focused on partnering

with key industry stakeholders, including not-for-profit community housing providers, government and asset managers to develop these innovative solutions in a sustainable and replicable way, Ross says.

UNITED KINGDOM PUBLIC-PRIVATE PARTNERS

W hen Jonathan Dunk heads into work on the train every morning, he catches a glimpse of a relatively small building site that is part of a much bigger picture. For the 99-home scheme in the Bensham area of Gateshead, north-east England, is part of the first phase of a regeneration scheme which, its backers believe, offers an effective way of building high-quality new homes at a time of shrinking public investment. The Gateshead Regeneration Partnership,

comprising Gateshead Council, the housing association Home Group and housebuilder Galliford Try, plans to build 2,400 homes over 15 years across 19 sites. The 350m ($536.7m) programme will be rolled out in

THEORY OF EVOLUTIONTrilogy I in Saltwell is one of 19 sites being regenerated by the Evolution Gateshead partnership, with the aim of creating 2,400 homes many of which will be affordable units over a 20-year period

RICS Recruit is the UKs No. 1 built environment job recruitment board. It gives you unparalleled access to the surveying and property sectors with almost 1,100 active vacancies in the UK and around the world.

Graduate and Executive hub packed full of knowledge and guidance to support your career development.

Get access to leading companies who are looking for RICS members like you who have the right skills and knowledge.

Access RICS Recruit via your smartphone or tablet to search and apply for jobs.

Find your future job todayricsrecruit.com

RICS RecruitMatching the right talent to the right projects

ricsrecruit.com@ricsrecruit RICS Recruit

20365 Recruit-MODUS Full Page ad-202x274mm.indd 1 19/03/2015 14:08 MODUS_Asia_Q4.15_P24-31_Housing.indd 29 12/10/2015 14:41

30 RICSASIA .ORG

Affordable housing

A decent,

modus asia edition q4 2015

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