http://www.businesstimes.com.sg/arch...ector-20140930

Published September 30, 2014

GLOBAL REAL ESTATE AND CONSTRUCTION CONFERENCE

Vivian: Innovation offers strategic opportunities for property sector

Minister also highlights adverse effect of ageing of populations on real estate prices, economy

By Lynette Khoo

[email protected] @LynetteKhooBT


HOW a slump in property prices coincided with changes in Japan's demographics offers sobering lessons for countries such as Singapore. But at the same time, mega-trends such as urbanisation and technological advances present strategic opportunities for the property sector.

Vivian Balakrishnan, Minister for the Environment and Water Resources, shared these observations on Monday at the 15th KPMG Global Real Estate and Construction Conference.

While the demographic dividend post-World War II positively impacted economic growth rates and land prices globally, the reverse is taking place now with an ageing population and declining old-age support ratios.

"Between now and 2040, ageing of the world's population will take place at thrice the historical speed observed between 1980 and 2010," Mr Balakrishnan added. "The number of people aged 65 and above will triple from half a billion to 1.5 billion in 2050."

And unprecedented rates of ageing are most acute in East Asia and South-east Asia. When a significant proportion of the population draws down savings and liquidates investments to fund consumption, there will be implications on economic growth and real estate prices, he said.

"Continued innovation can turn vulnerabilities into strategic opportunities," he added. For instance, trends in urbanisation and climate change are prodding the industry towards sustainable building solutions and smart cities.

There is, however, a mismatch between the interests of the developer and those of tenants - while tenants want energy efficiency to save costs, developers want to build as cheaply as possible. This is why the government has to step in to incentivise developers through the BCA (Building and Construction Authority) schemes, Mr Balakrishnan said.

The most cost-effective way is to design and develop a building with energy efficiency at the outset, and not a retrofit, he noted.

He urged industry players to lead sustainability, collaborate and innovate, and export solutions to other parts of the world.

Some 220 attendees at Monday's conference comprised senior executives, developers and investors from the real estate and construction sector, as well as partners from KPMG's global member firms.

Other speakers at the conference also highlighted risks and bright spots in the property market.

Chia Boon Kuah, president of Real Estate Developers' Association of Singapore, noted that while hotel and office segments are looking up, increased divergence between the residential property price index and corporate earnings is something to watch out for.

Kim Wright, managing director of Global Real Estate Strategist and head of Asian Real Estate at UBS, noted that the office segment in this region is emerging from the bottom of the cycle and showing signs of rental growth amid current low funding costs.

Ms Wright is positive about the office sector in Tokyo and the residential market in Indonesia in the near term, given pent-up demand from a huge population and undersupply of housing. But the risk of a Fed rate hike still looms, with a typical 18-month lag between the rate hike and real estate values.

Ms Wright projected a 100 basis-point hike in the Fed rate next year, but noted that Asian central banks have implemented measures to safeguard their markets.

According to Singapore Management University professor of economics and finance Yu Jun, cooling measures by the Singapore government have been effective in nipping early signs of a property bubble seen between the fourth quarter of 2006 and the first quarter of 2008.