Asian Insights Conference 2015

Transcription

1 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 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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3 Cross-Regional Capital Flows into Global Real Estate Increase to $125 billion in 2014, up 39% y-on-y Source: CBRE Research 3 CBRE DBS ASIA INSIGHTS CONFERENCE 2015

4 US$ billion ASIAN OUTBOUND INVESTMENT INCREASED 23% Y-O-Y TO US$40 BILLION Cross-border investment by Asian investors Asia intra-region Pacific America EMEA 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 4 CBRE DBS ASIA INSIGHTS CONFERENCE 2015

5 EXPERIENCED ASIAN INVESTORS ARE MOVING BEYOND TRADITIONAL MARKETS Top five destination as a % of total Asian cross-border investment 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 5 CBRE DBS ASIA INSIGHTS CONFERENCE 2015

6 LIKEWISE ASSET CLASSES Asian cross border investment by asset class obvious 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

7 New Delhi Taipei Shanghai Hong Kong Beijing Singapore New York Mumbai Seoul London WE San Francisco Boston Chicago London City Los Angeles Zurich Sydney Oslo Paris Tokyo Madrid Stockholm Milan Lisbon Barcelona Melbourne Helsinki Vienna Dublin Edinburgh Munich Hamburg Rome Birmingham Berlin Dallas Frankfurt Brisbane Copenhagen Brussels Amsterdam Percentage INTEREST RATES MAY MOVE BUT YIELDS SPREADS WILL CUSHION ANY SPIKES Spread of prime office yields over 10 year government bonds Asia Pacific Americas EMEA 7 CBRE DBS ASIA INSIGHTS CONFERENCE 2015

8 AND NOW WE ARE SEEING RENTAL GROWTH 5 Years to end 2019, annual average % change 8 CBRE DBS ASIA INSIGHTS CONFERENCE 2015

9 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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11 Money flow out of China is still insignificant Company Stock code Overseas expansion Vanke 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 11

12 But developers are diversifying into different asset classes % Beijing and Shanghai Property Market Yields (Q Q4 2013)* Industrial Office Shopping Center Beijing Shanghai Residential *Yields for the residential sector are from Q to Q Source: CBRE Research, Q

13 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

14 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.

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16 Residential market outlook 16

17 Singapore Residential Market DBS Forecast a 12-15% drop in property prices over Singapore (Mass Market) Peaking Market Falling Market Rising Market Bottoming Market Singapore (Luxury) But Luxury Market is finding a bottom Source: DBS Bank 17

18 Mass Market: Weakening affordability Upgrader Demand is curbed Housing Market in a net surplus situation Index (x) HDB Resale Index PPI (Non-Landed) 40,000 Surplus/Deficit (units) 30,000 20,000 10,000 - (10,000) (20,000) Surplus (30,000) Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 (40,000) (50,000) Change in Dwellings URA PPI (RHS) Widening Gap between HDB resale and Private Housing Net Surplus in housing units to mean vacancy rates reaching 9-10% and rentals to drop Source: Manager, Colliers, JLL, DBS Bank 18

19 Luxury: Signs of bottoming Improved Relative Value vs RCR and OCR Relative attractiveness of new uncompleted homes in CCR 70% (%) Discount 59% 60% 50% 41% 40% 34% 30% 28% 20% 10% 0% Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 1,800 S$ psf (%) 1,600 1,400 1,200 1, Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% Price Discounts for homes in Rest of Central (RCR) Region Price Discounts for homes in Oucside of Central (OCR) Region Median Price of Homes (Core Central Region) Pricing Spread for existing and new Homes (Core Central region) Price Discounts to Homes in Core Central Region at near/at 10-year lows Premium for new homes (CCR) at near 10-year lows Source: Manager, Colliers, JLL, DBS Bank 19

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21 Singapore Office Market Market Rents / Capital Values approaching a peak Singapore Shanghai Jakarta/Guangzhou Kuala Lumpur Hong Kong Beijing Tokyo New York Boston Los Angeles United States Delhi Peaking Market Rising Market Falling Market Bottoming Market Sydney Seoul Source: JLL, DBS Bank 21

22 Singapore Office Market Looming supply completions (CBD) in 2016/2017 a key uncertainty 4 3 'm sqft Net Demand Net Supply Rentals (S$psf/mth) S$ psf pm F 2016F 2017F >2018F Post Asian Financial Crisis, SARS, demand picked up only in 2005 onwards (mainly Financial institutions) Post Global Financial Crisis, demand mainly other sources Annual Supply 1.0 sqft Source: JLL,CCT, DBS Bank Average Net Supply (m sqft) Average Net Demand (m sqft) Period (10 year through market cycle) 0.8 m sqft 1.1 m sqft (5 years during post Global Financial Crisis) 1.2m sqft 1.0m sqft beyond (Forward) 1.0m sqft - 22

23 Office Transactions (2011 YTD) REITs / Insurance / Non-traditional investors have been buyers Companies 14% Insurance 12% Non traditional investors 18% Foreign buyers 5% Funds 8% REITs 43% But will this continue? Source: Manager, Colliers, JLL, DBS Bank 23

24 REITs: Harder to make new accretive acquisitions Rising cost of capital to impact returns from acquiring S$'bn Total Debt (S$'m) Gearing Level (%) (%) 34% 34% 34% 34% 34% 32% 33% 32% 31% 30% % F 2015F 2016F (%) 3Mth Swap Offer Rate Debt fueled Acquisitions 35% 34% 33% 32% 31% 30% 29% 28% 27% 26% Source: Bloomberg Finance LLP, REITs, DBS Bank 24

25 Interest Rates : Where it hurts? 25

26 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 Source: CapitaLand, Keppel Land, DBS Bank 26

27 Home Buyers : A 1% hike will result in.. 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% 22% Debt Servicing Ratio (%) 20% 18% 16% 14% 12% 10% 55% Debt Servicing 50% Ratio (%) 45% 40% 35% 30% 25% 20% 15% 10% 3 room flat 4 room flat 5 room flat Condo and Apartment Landed (excl detached) Affordability weakens when interest rates rise and lower residual income for other expenses Source: NUS, DBS Bank 27

28 Property Developers : Forced to diversify Moderating Revenues; Higher gearing levels 18.0 S$'bn (%) 40.0% % 30.0% % 20.0% 15.0% 10.0% 5.0% F 2016F 0.0% 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 Source: Manager, Colliers, JLL, DBS Bank 28

29 REITs : Refinancing Costs to rise over time Rolling over interest hedges over to hit distributions 4.50 (%) Cost of Debt (%) LHS Debt Maturity (Years) RHS Years % 80% 78% 76% 74% 72% 70% 68% (%) 80% 80% % Fixed Rates 78% 78% 77% 77% 78% 75% 75% 73% Shorter Tenure Longer Tenure - Source: Bloomberg Finance LLP, DBS Bank 29

30 REITs : Higher Cost of Capital Higher cost of Equity as yields increase 16.0% 14.0% Yield Spread S-REIT Yield Mean - 1 SD +1 SD 14.0% 12.0% 10.0% 8.0% 6.0% 6.5% 7.2% 6.8% 6.2% 5.0% 4.0% 3.9% 2.0% 0.0% Source: Bloomberg Finance LLP, DBS Bank 30

31 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. Q&A

32 Important Notice and Disclaimer This material is strictly confidential and may not be disseminated, distributed or disclosed by you publicly or made available to any third parties. This material may not be reproduced, or disclosed to any other person without the prior written consent of DBS Bank Ltd (DBS). Although the information contained herein is believed to be reliable, we, DBS, make no representation as to the accuracy or completeness of any information contained herein or otherwise provided by us. We are not acting as your advisor or agent and do not hold ourselves out to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction. Any opinions expressed in this material are subject to change without notice, may differ or be contrary to opinions expressed by other business areas or the subsidiaries, related corporations, associated companies or affiliates of DBS (collectively, the DBS Group) as a result of using different assumptions and criteria and we shall not be under any obligation to update the contents of this material. This material is not prepared with regard to any specific investment or financial objectives, financial situation or the particular needs of any specific person. The material is prepared for information only and should not be used in substitution for the exercise of independent judgment. You should make your own independent evaluation of the relevance and adequacy of the information contained herein and such other investigations as you deem necessary, including obtaining independent financial advice. You should consult with your own financial advisors and without reliance upon us or our affiliates, the economic risks and merits, as well as the financial, legal, tax, accounting or other material characterisations and consequences of the information as necessary. 32

33 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. THANK YOU