Transcript Presentation by

Asia Pacific – facts, fictions,
realities and challenges – A real
estate practitioner’s perspective
Nicholas Brooke
Chairman
Professional Property Services
Map
of
Asia
Land Area :
42.35 mil sq km
Population:
3.7 billion
Key Figures
United States
United
Kingdom
Germany
Asia
9.63 mil sq km
244,820 sq km
357,021 sq km
44.6 mil sq km
(Land: 9.16 mil sq km)
(Land: 241,590 sq km)
(Land: 349,223 sq km)
(Land: 42.35 mil sq km)
Population
290.3 million
60.1 million
82.4 million
3.7 billion
GDP
10.45 trillion
1.53 trillion
2.16 trillion
16.86 trillion
GDP per
capita
US$36,300
US$25,500
US$26,200
US$4,969
Inflation
1.6%
2.1%
1.3%
1.4%
141.8 million
29.7 million
41.9 million
(unemployment rate:
5.2%)
(unemployment rate:
9.8%)
Size
Labour force (unemployment rate:
5.8%)
1.7 billion
Context – Asia
Accounts for over 50% of the world’s population
Mix of democracies and authoritarian regimes
Overall trend one of political development and
greater transparency
2004 year of elections
Higher growth forecasts in Asia than other
regions
China main engine of growth in region
Overall Economic Growth Trends
9.5
China
8
6.5
Hong Kong
Taiwan
Malaysia
5
Vietnam
Thailand
Philippines
Indonesia
3.5
Singapore
2
0.5
1999a
-1
-2.5
2000a
2001a
2002a
2003b
2004c
2005c
CHINA and SAR HONG KONG
China in 2003
Total Area : 9.6 billion sq km
Land Area : 9.3 billion sq km
Population : 1.3 billion
GDP per capita (US$ at PPP): 5,120
GDP growth : 9.1%
Labour cost per hour : US$0.92
Hong Kong in 2003
Total Area : 1,092 sq km
Land Area : 1,042 sq km
Population : 6.9 million
GDP per capita
(US$ at PPP) : 27,550
GDP growth : 3.7%
Labour cost per hour : US$5.40
China
Growth 2003 – 9.1% despite SARS
Concern of overheating due to fixed asset
investment bubble
FDI 2003 – US$53.5 bn – up 15% year on year
Little inflationary pressure
Serious attempts to slow credit and investment
growth
Possibility of property market corrections in
some major cities
Beijing
Shanghai, Mainland China
Hong Kong
Bounced back strongly after SARS
68 months of deflation ended July 2004
GDP growth 2004 – 7%+
Piggy-backing off China engine of growth
Stability maintained despite debate over
political reform
Property market on the move again
Hong Kong
JAPAN
Japan in 2003
Total Area : 377,835 sq km
Land Area : 374,444 sq km
Population : 127.2 million
GDP per capita (US$ at PPP): 27,604
GDP growth : 2.1%
Labour cost per hour : US$20.4
Japan
Enjoying modest economic revival
Exports to China at record level
Surprisingly robust private consumption
Fiscal situation a concern – deficit nearing 180%
of GDP
12th year of asset deflation, but end in sight
Structural weaknesses in banking sector have
still to be addressed
Aging population – a real worry
Tokyo
MALAYSIA
Malaysia in 2003
Total Area : 329,750 sq km
GDP per capita (US$ at PPP): 6,570
Land Area : 328,550 sq km
GDP growth : 4.8%
Population : 25 million
Labour cost per hour : US$2.20
Malaysia
Successor to Dr Mahatir well installed
Focused campaign on corruption and
crony capitalism
Currency pegged to US dollar
Highly dependent on exports
Relocation of administrative capital to
Putrajaya
Kuala Lumpur
INDONESIA
Indonesia in 2003
Total Area : 1.92 million sq km
GDP per capita (US$ at PPP): 3,470
Land Area : 1.83 million sq km
GDP growth : 4.1%
Population : 216.2 million
Labour cost per hour : US$ 0.50
Indonesia
In throes of election and no clear outcome
Concerns remain over physical security
Weak legal system and corporate
governance issues still have not been
addressed
Stands to benefit from increased oil prices
As economy drifts, so does property
market
No FDI of any significance
Jakarta
SINGAPORE
Singapore in 2003
Total Area : 693 sq km
Land Area : 683 sq km
Population : 4.2 million
GDP per capita (US$ at PPP): 27,270
GDP growth : 0.9%
Labour cost per hour : US$8.0
Singapore
Singapore
Signs of economic recovery under way but
weakness in SE Asia a constraint
Leadership transition to Lee Hsien Loong
very smooth
Office and residential markets flat
Take up of industrial space improving and
investment market strengthening
Health of the Asian Property Sector
Global uncertainty : Terrorism, natural
disasters, mobility of capital and debt
Acceptance of real estate as asset class
High liquidity / Low interest rates
Strong investor sentiment
Growing significance of REITS and other
investment vehicles
Challenges of sustainability
PPS
Overall Economic Growth Trends
9.5
China
8
6.5
Hong Kong
Taiwan
Malaysia
5
Vietnam
Thailand
Philippines
Indonesia
3.5
Singapore
2
0.5
1999a
-1
PPS
-2.5
2000a
2001a
2002a
2003b
2004c
2005c
The State of the Commercial Markets
Relatively weak occupational markets
Disconnect between occupational demand
and investment appetite
Inflexibility of existing supply
Future of CBD?
“City” approach to the attraction of major
space users
PPS
The State of the Residential Markets
Affordability issues
Higher aspirations as to quality
Provision of Social Housing
High rise / mixed use debate
Sustainable communities
Regeneration versus new build
PPS
Key Ingredients of a World Class City
Diversity
Education
Employment
Quality of life
PPS
Advent of Foreign Investor
Mainland China
– tightening of domestic credit. Greater dependence on
foreign investment, bringing with it more discipline
and more rigorous approach to asset management
Regional
– emergence of office and retail REITs. Entry vehicles
for both retail and institutional investors
Hong Kong, SAR
– launch of Housing Authority Link REIT. 180 centres, 1
million sq.m., 100,000 parking spaces, US$3-4 billion.
Precedent for other major privatisation exercises
PPS
Chasing the Tourism Dollar
National/city approach to creating world
class tourist destinations
Development of family tourism – Disney
Legalisation and/or growth of gaming
Emergence of Macau as the Las Vegas of
Asia
PPS
Macau – tourism and gaming
Sustainability
Governments now paying more than lip service
to sustainable development concepts
Majority of large projects now being put at least
to rudimentary tests
However lack of understanding as to the totality
of sustainability
Yet to see market recognize and reward
sustainable characteristics
Building for obsolescence debate
PPS
West Kowloon – Aerial View
West Kowloon Cultural Hub
Brown v/and Green Debate
Challenge of multiple ownership in urban areas
Attraction of green field approach
Ever growing demand for city living
Rural to urban migration
Absence of, and a reluctance to use, compulsory
mechanisms
Growing attention to quality of life capital
Reducing pressure on existing infrastructure
PPS
Urban Regeneration Area
Holistic Approach to Development and
Public Transport Planning
Joined up thinking – an integrated and
comprehensive approach
Phasing and implementation to maximise
returns to all parties
Ample evidence that good transport networks
enhance property values
Lifestyle, convenience and environmental
benefits
Significantly reduced land take for road and
other infrastructure provision
PPS
MTRC Mission
To develop and manage a world class
railway together with property and
other related businesses, to enhance
the quality of life in Hong Kong.
We are a company that builds and operates
railways and designs and builds
communities.
PPS
Facts & Figures
Total route length : 88 km
Total no. of stations : 49
Daily hours of operation : 19 hours
Total no. of passengers in 2003: 842M
Average daily patronage : 2.3M
(with a record high of 3.1M on
Christmas Eve 2002)
PPS
MTRC Portfolio by Railway Lines
Urban Lines
234,898 sq m
299,363 sq m
31,366 flats
Total GFA: 2.6 million sq. m.
Development
Management
126,490 sq m 130,367 sq m
28,729 flats
Airport Railway
611,968 sq m
307,880 sq m
28,896 flats
294,072 sq m
Development
Total GFA: 3.5 million sq. m.
Management
254,190 sq m
Tseung Kwan O Line
46,170 sq m
13,345 flats
Legend
Total GFA: 2.3 million sq. m.
Development
PPS
Office
Retail
Residential
103,130 sq m
132,014 sq m
28,800 flats
Hotel/Service Apt
Kowloon Airport Station - MTRC
Housing the Community
The role of Government
– Stabilising society
– Facilitation
– Financial support
– Social need
The role of the private sector
– Responding to market demand
– Assisting Government with physical provision
PPS
Maximising on the Value of a
Scarce Resource
Varying Dynamics:Challenge of the mega city
Land often in short supply
Convenience at a premium
Synergy of mixed use development
Attraction of bright lights
The success of high rise communities
Prevention of urban sprawl
PPS
Public Private Partnerships
In reality, traditionally in Asia, this has away
been the case given leasehold system
Also many jurisdictions require foreign investor
to venture with a local party or Government
Department
Unfortunately many deterred by shifting goal
posts as politics change
Now new models for large projects. Customised
hybrids of BOT, PPP and Private Sector Funding
PPS
Hong Kong :
Home Ownership – Public Sector
HA provided 649,000 pr flats for 2,019,000
persons representing 30% of Hong Kong’s
population
Sold 405,500 flats through various subsidised
home ownership schemes
Provided over 100,000 loans for flat
purchasers
Built 2.26M sq m of commercial/retail space
and 100,000 car parking spaces
PPS
Hong Kong – Government Housing in 1970
Hong Kong – Government Housing in 1970
Hong Kong :
Wind of Change (I)
HA supply intended to complement / augment
private sector but at times of high
unaffordable prices HA became prime
producer and competitor of private sector
Up to 100,000 units per annum at peak. Sold
at discount from market value, quality good
Collapse of property market. Private sector
now affordable. Rebellion by private sector
producers
PPS
Hong Kong :
Wind of Change (II)
Government now exited subsidised purchase
provision and focus is to facilitate cost
effective provision of quality public rental
housing
Also move away from physical provision to
financial assistance and entrusting private
sector developers with building units which
are then allocated to nominated Government
buyers / tenants. Voucher system rather than
physical provision under serious
consideration
PPS
Tin Shui Wai, Yuen Long
Hong Kong :
Home Ownership – private sector
Traditionally builds 25,000 – 35,000 units per
annum
Land obtained through purchase / lease
modification
In lead up to 1997 prices driven by speculative
attitude and opportunity to make quick profit, not
aspiration to own one’s home
Post 1997 market collapse – values fell by some
65%. Most families in negative equity
Correction lasted for best part of 6 years, now
seeing market revival driven by fundamentals
PPS
The Leighton Hill, Happy Valley
Thank you
Professional Property Services
PPS