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Nicholas Brooke Chairman Professional Property Services

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. Context – Asia .

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Nicholas Brooke Chairman Professional Property Services

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  1. Asia Pacific – facts, fictions, realities and challenges – A real estate practitioner’s perspective Nicholas Brooke Chairman Professional Property Services

  2. Map of Asia Land Area : 42.35 mil sq km Population: 3.7 billion

  3. Key Figures

  4. 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

  5. Overall Economic Growth Trends China Vietnam Hong Kong Thailand Taiwan Malaysia Philippines Indonesia Singapore

  6. CHINA and SAR HONG KONG 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$5.40 China in 2003 Total Area : 9.6 billion sq km Land Area : 9.3 billion sq km Population : 1.3 billion GDP per capita (US$ at PPP): 5,120 GDP growth : 9.1% Labour cost per hour : US$0.92

  7. 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

  8. Beijing

  9. Shanghai, Mainland China

  10. 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

  11. Hong Kong

  12. 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

  13. 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

  14. Tokyo

  15. MALAYSIA Malaysia in 2003 Total Area : 329,750 sq km Land Area : 328,550 sq km Population : 25 million GDP per capita (US$ at PPP): 6,570 GDP growth : 4.8% Labour cost per hour : US$2.20

  16. 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

  17. Kuala Lumpur

  18. INDONESIA Indonesia in 2003 Total Area : 1.92 million sq km Land Area : 1.83 million sq km Population : 216.2 million GDP per capita (US$ at PPP): 3,470 GDP growth : 4.1% Labour cost per hour : US$ 0.50

  19. 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

  20. Jakarta

  21. 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

  22. Singapore

  23. 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

  24. 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

  25. Overall Economic Growth Trends China Vietnam Hong Kong Thailand Taiwan Malaysia Philippines Indonesia Singapore

  26. 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

  27. 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

  28. Key Ingredients of a World Class City • Diversity • Education • Employment • Quality of life

  29. 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

  30. 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

  31. Macau – tourism and gaming

  32. 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

  33. West Kowloon – Aerial View

  34. West Kowloon Cultural Hub

  35. 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

  36. Urban Regeneration Area

  37. 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

  38. 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.

  39. 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 onChristmas Eve 2002)

  40. MTRC Portfolio by Railway Lines Urban Lines 234,898 sq m 299,363 sq m 31,366 flats Development Total GFA:2.6 million sq. m. Management 28,729 flats 126,490 sq m 130,367 sq m 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 46,170 sq m 13,345 flats Legend Office Retail Residential Hotel/Service Apt Tseung Kwan O Line Total GFA:2.3 million sq. m. Development 103,130 sq m 132,014 sq m 28,800 flats

  41. Kowloon Airport Station - MTRC

  42. 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

  43. 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

  44. 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

  45. 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

  46. Hong Kong – Government Housing in 1970

  47. Hong Kong – Government Housing in 1970

  48. 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

  49. 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

  50. Tin Shui Wai, Yuen Long

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