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Property has been at the heart of development in Asia for a long time. Property speculation has made millionairres in Hong Kong, Singapore and other Asian countries, and to many, was one of the major reasons behind the Asian crisis. The Asian crisis flattened property markets region-wide, and a recovery in the industry has just begun. The following articles represent a catholic collection of reports and research on the Asian property industry.
But is fire the issue ...? The problems of managing multiple ownership buildings in Hong Kong In common with many other cities in the world, Hong Kong has a large number of older and less well-maintained buildings which, for predominantly economic reasons, are still highly utilised by a variety of mixed and non-compatible uses. In these circumstances, a comprehensive approach to ensuring high standards of Property Management is essential, but recently a series of disastrous fires have highlighted some of the difficulties of managing property in this environment. The Government's response to fire disasters has been to enact additional fire safety legislation. While the promotion of a safer environment in older buildings is to be applauded, it is arguable that such an approach merely addresses the symptoms - the fires - and not the underlying cause - the management of such buildings. An examination of Property Management practice in Hong Kong indicates there are two important systemic factors which influence the standards and quality of services provided. The first is the way in which the Property Management industry is currently structured, the barriers to entry and the lack of regulation of property managers. The second is the way in which the responsibilities and relationships between owners and property managers are dictated by the method of ownership in multi-ownership property. It is the impact that this method of ownership has on the twin issues of safety and Property Management which is examined in this paper.
Keywords: Fire safety, Hong Kong, Legislation, Multiple ownership, Property Management
Volatility in the residential housing market: an international perspective There is a substantial literature on property-market cycles, but not on the related, though distinct, issue of volatility. Focuses on the nature, causes and effects of volatility in the residential property market. Begins with a look at the negative impact of volatility, followed by a brief historical perspective. In an analysis of the mechanics of the property market, considers supply and demand in terms of their specific characteristics in this market context. Then analyses the psychology of the property market, with an emphasis on mass psychology. Further issues are the role of banks in exacerbating the existing market volatility, speculation, population influxes as a source of instability and, finally, counter-cyclical policy which may achieve the opposite of what is intended. Takes a deliberately international perspective. Keywords: Marketing theory, Real estate, Supply and demand
Leadership style for managing a real estate marketing team: an oriental perspective Considers the application of oriental philosophy Lao Tzu's Tao Te Ching - to real estate marketing management, in order to enhance the effectiveness of the manager's leadership role.
Keywords: East Asia, Leadership, Management styles, Marketing, Philosophy, Real estate
Crisis management: a survey of property development firms A study of property developers in Singapore showed that their crisis management capabilities are influenced by their size and opinion. Developers generally concentrate on preparing formal procedures to deal with crises pertaining to breakdowns. Explicit procedures to deal with crises in the areas of psychopathology and human resource factors were often found lacking. Few developers implement damage containment mechanisms for external information attack and human resource factors, much less effect the same for psychopathic attacks. Developers have identified the key personnel, tasks, services and products necessary to conduct business operations. However, the ability of developers to recover from crisis situations is hampered by the lack of alternative sites for their critical operations and backups to crucial business function. Although it is the requirement of the developers to discuss the lessons learned for those involved in accidents and crisis, the ability to learn from past mistakes is often impeded by the assignment of blame.
Keywords: Crisis, Crisis Management, Strategies, Property Development, Singapore
Percentage lease agreement as a shopping center management tool: a panacea for Singapore's retail industry woes? The retail industry of Singapore has been in a depression since 1993, as a result of structural problems which are a function of, among other things, over-supply of retail space vis-ŕ-vis retail performance, and rising rentals. This paper argues that percentage lease agreements (also called "turnover rents"), by fostering partnerships between landlords and tenants, could be a viable shopping center management tool for salvaging the retail industry of Singapore. Keywords: Landlord, Leases, Management, Shopping centres, Singapore, Tenant
Conservation and the Chinatown pilot project in Singapore Following the implementation of conservation programmes in Singapore's built environment over the last two decades, much attention was paid to the concept plans and rationale behind these programmes. There were few studies which examine the managerial and technological issues associated with conservation projects. Most conservation projects in Singapore relate to the restoration of two- and three-storey pre-war shophouses in densely populated areas. Using the Chinatown pilot project as a case study, highlights the complex operations involved as well as the management approach adopted to overcome some of the difficulties encountered in the project. Suggests that conservation is demanding and requires close co-operation between members of the building team. Keywords: Chinatown, Conservation, Management, Project planning, Singapore, Technology
The management of large-scale upgrading programmes for public housing in Singapore States that unlike other developed countries where upgrading works have been in place for many years, the upgrading programme mounted by the Housing and Development Board (HDB) is still in its infancy stage in Singapore. Notes, however, that, unlike the upgrading experience in other developed countries, the programme undertaken in Singapore is on a more massive scale involving a larger proportion of the population. In view of these two major differences between the HDB's experience and of the developed world, sets out to examine: the rationale for upgrading older public housing estates in Singapore; the various phases implemented by the HDB for its upgrading programmes in Singapore; and the measure adopted by the HDB and its contractors to minimize hazards and inconvenience to residents. Keywords: Construction management, Housing, Public relations, Refurbishment, Singapore
Management of urban residential districts in China China's property industry in the past few years has made great progress and it is now vital to improve its management processes. Explains the traditional system of management for urban residential districts (urban living quarters) in China and the professional management pattern now becoming popular in the southern part of China. Comparing these two different management patterns, claims that the professional management pattern will sooner or later be adopted and accepted for all urban residential districts throughout China. Keywords: China, Residential Property Management
Property investment in China during the changing economic system Starting from the analysis of the regular pattern of the change in the increase of China's property investment as well as the analysis of the relationship among the increased quotas in the same period of time, e.g. the circulation period, GDP, annual interest rate, savings in towns and in the countryside, total fixed asset investment etc., this paper reveals the quantitative characteristics of China's property investment in the course of the changing economic system in China. Based on the above analysis, the authors conclude that the change of the whole national economic structure will result in the change of the property investment structure in China and more efforts should be made to dispel the adverse impact caused by the blind investments made in the past, thus ensuring that the property investment business in China develops in a healthy way.
Keywords: China, Property investment, Economic conditions, Housing
Industrial property, market initiative and planning policy: Restructuring obsolete industrial properties in Hong Kong Industrial restructuring has led to increasing obsolescence of old industrial properties in many cities. Transformation of these properties to meet the requirements of modern industrial operations is becoming an imminent task for property managers and industrial landowners. This paper reviews the experience of the private sector in restructuring obsolete industrial properties in Hong Kong. In particular, we focus our discussions on a recent market initiative (composite industrial-office property development in Hong Kong) as an innovative attempt to make better use of urban industrial space. We argue that this new property type has not been successful because of the institutional constraints imposed under the planning policy. It again confirms that the industrial property market is characterized by market imperfection, owing largely to government policies, which precludes a smooth market adjustment to respond positively to changing demand. This problem, if allowed to continue, will ultimately damage the competitiveness of the cities.
Keywords: Industrial property, Land use planning, Property development, Property markets
Caveat emptor: adverse selection in buying properties under construction This paper examines the adverse selection problem associated with the pre-completion marketing of property developments. When developers choose to finance their projects by pre-selling in a pooling equilibrium, they pass on the risk of failure to the buyers and increase expected profits. Pre-selling not only places buyers at a potential disadvantage if unexpected negative price shocks occur, but encourages more less-profitable projects to be undertaken by bad developers. In addition, pre-selling aggravates the building boom and bust cycle. However, the adverse selection problem can be eliminated if good developers choose to separate themselves by not pre-selling under the appropriate conditions. This paper also examines interesting comparative statics and policy implications.
Keywords: Finance, Property development, Property market
Property Management in China: opportunities and problems The development of the real estate market in China has been well-documented, but one of the most interesting, yet chaotic issues in this market has not been fully covered. It is the problems and opportunities arising from the needs for the management of existing properties. Supply of prime office buildings in the major cities in China has been unprecedented owing to the strong demand from local and overseas companies. To preserve the investment value of the building, there is a great need for good management. However, those who have worked in a socialist country will understand that service industry is always the weakest point of the economy. It is, nevertheless, exactly for this reason that there is a great opportunity for established Property Management companies to expand their service not only in Property Management but also in the training of the new generation of local property managers in this potential market.
Keywords: China, Premises management, Property, Real estate
Land law in the kingdom of Cambodia Cambodia has been undergoing a seemingly continual metamorphosis over the last 200 years. During that time, the government has changed from the traditional Khmer feudal system; through periods of colonialism; independent self-rule under a monarchy; republicanism; agrarian socialism during the horrendous Khmer Rouge period; socialism under the Vietnamese-controlled government; and finally an evolving democratically-elected government. Along with the changes in overall governance of Cambodia, there have been major changes in the control of its resources, particularly land. Cambodia's economy has also undergone periods of radical transition, none more so than since 1993 with the surge towards free market operations. The major challenge for Cambodia is to establish the rule of law and create the effective property rights which are a prerequisite for a market economy. There now exists an opportunity for the Cambodian people to refine their legal system and other major institutions. Such changes cannot be made in isolation from the lessons and the legacies of the country's history. Summarizes the history of land law and its related institutions in Cambodia and examines the implications of this history for the current state of land laws in the Kingdom of Cambodia. Keywords: Cambodia, History, Land, Law
Practice Briefing - A note on valuation accuracy: an Australian case study Having considered the quantitatively analytical literature concerning valuation accuracy, a number of practical limitations are identified. Such limitations are then addressed in a small sample case study concerning the simultaneous valuation and sale of a portfolio of seven commercial, retail and industrial properties. The level of valuation accuracy observed is compared to that noted in the quantitatively analytical literature and found to be supportive at the portfolio level, suggesting that such practical limitations may have relatively little effect on the results given in such literature. However, having regard to the range and consistency of accuracy at the individual property level, it is contended that further research into the influences on accuracy at the individual property level could be worthwhile. Keywords: Appraisal, Efficiency, Negligence, Valuation
Aborted property transactions: seller under-compensation in the absence of legal recourse Property purchasers who rescind on their contracts and forfeit the initial deposits are exercising their right to not proceed with the purchase. The deposit to purchase endows on the buyer an implicit call option that is valuable and the value exceeds the face value of the deposit. As such, real estate sellers and developers are not adequately compensated for the abortion risk, especially when there is no legal recourse for the sellers to seek specific performance and damages in the event of default. The historical value of this call is estimated by inferring a time-varying volatility from Singapore residential price data over the last 20 years. The results show that real estate prices are more volatile in up markets than down markets, and that under-compensation persists in both market conditions. This paper further highlights some measures to reduce the risk of aborted sales and the under-compensation problem. Keywords: Buyers, Compensation, Sellers, Singapore
A cointegration approach to the price dynamics of private housing. A Singapore case study This paper looks into the dynamics of private housing prices in Singapore from the first quarter of 1985 to the fourth quarter of 1995. Employing the cointegration analysis, the paper shows that overall private housing price is cointegrated with real gross domestic product, prime lending rate and private housing starts. An error-correction mechanism is also incorporated in the estimation of changes in the overall private housing price to account for the short-run deviations from the equilibrium relationship among these variables. Keywords: Cointegration, Housing (domestic property), Singapore
Estimating the market value of a proposed townhouse development An appraisal by an accredited appraiser is often necessary before a proposed development can receive a commitment for financing from a financial institution. Such pre-construction appraisals are often more difficult to complete than those where the subject property is already developed and accessible for inspection. In this article we are performing a valuation of a proposed townhouse complex prior to its construction. Hedonic estimation is used to estimate the market value of the proposed development. The estimated value of the complex as a whole, and of the individual units, is compared to the prices obtained as the townhouses were built and sold. Insights with respect to the feasibility of the approach for the estimation of the gross retail value of proposed developments are discussed. Keywords: Real estate valuations, Estimation, Linear models, Appraisal
Lag vacancy, effective rents and optimal lease term This paper analyses the choice of the optimal lease term of office property in relation to expected lag vacancy, periods of rent-free and expected rental income growth. The optimal lease term is the one that minimizes the expected costs of contract negotiation from the perspective of landlords. Specifically, it presents an analysis of how to estimate effective rents based on the lease term, expected lag vacancy and rent-free periods. This study shows that the optimal lease term tends to increase under the following conditions: when the expected rate of rental growth decreases, the discount rate increases, or the expected lag vacancy increases. A longer contract duration is less costly when future rentals are discounted at a higher rate. Altering the lease length will change the risks taken by the landlord. Thus, contract length can be used as a device for insuring vacancy risk. Moreover, we find that the optimal lease length is more sensitive to the lag vacancy when the discount rate is at a relatively high level. Keywords: Lease, Rent, Risk
Spectral analysis of real estate and financial assets markets Understanding cyclical activity is an important component of efficient portfolio management. Property appraisal models that do not explicitly take into account cyclical fluctuations may produce unrealistic valuation estimates resulting in property assets being incorrectly added to or removed from the general investment portfolio. In this paper we use conventional spectral analysis techniques to examine property and financial assets for evidence of cycles and co-cycles. One finding is that the very pronounced cyclical patterns that appear in direct real estate markets and the economy as a whole are very much less obvious once they have filtered through to securitised property markets and financial assets markets. Keywords: Assets, Markets, Real estate
As always we have only skimmed the surface of relevant articles this week and only those that are particularly relevant for Asia-Pacific managers. Many other articles are available as well including those focusing on other countries and international perspectives.
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