:00:00. > :00:00.We got there in the end with the weather! Now it's time for a look at
:00:00. > :00:08.talking business. What makes a city a global property
:00:09. > :00:12.hotspot? Where are house prices headed? And, is art a good
:00:13. > :00:14.investment? Here in Singapore, I'm Linda Yueh, these are my guests, and
:00:15. > :00:41.we're Talking Business. A warm welcome to the programme.
:00:42. > :00:45.It's a favourite dinner party topic: where are house prices headed? And
:00:46. > :00:49.why have they risen so rapidly in some cities? Before I find out the
:00:50. > :00:53.answers from my guests, I was in London to investigate what makes a
:00:54. > :00:55.city attractive to foreign buyers. In other words, what makes a global
:00:56. > :01:01.property hotspot? Potential home-buyers know all too
:01:02. > :01:08.well in cities like London that house prices are skyrocketing
:01:09. > :01:11.despite the tepid economic recovery. And it's not just London, you see
:01:12. > :01:20.this across global property hotspots. Here, prices have more
:01:21. > :01:26.than doubled since 2005. In Asia, Singapore has seen price rises by
:01:27. > :01:29.more than 230%. In Hong Kong, they now have the most expensive homes in
:01:30. > :01:34.the world. In New York, despite the housing crash, prices are up nearly
:01:35. > :01:41.50%. So, why are house prices rising so rapidly?
:01:42. > :01:44.Out of the reach of most people, high-end flats like this one, which
:01:45. > :01:51.is attached to a hotel, are a sign of how much demand there is for
:01:52. > :01:53.housing in places like London. Record low interest rates and even
:01:54. > :02:00.government schemes to help home-buyers are some of the reasons
:02:01. > :02:03.why house prices are rising. And London is an attractive place to own
:02:04. > :02:09.property because there is no annual tax based on the value of that
:02:10. > :02:12.property. So, if you owned one of these $15 million homes, you would
:02:13. > :02:16.pay an annual tax of $16,000 and that includes the local property
:02:17. > :02:17.tax, but a tax based on property value does exist in other global
:02:18. > :02:29.cities. Peter, who is buying in London? Are
:02:30. > :02:34.they Brits or are they foreigners? Everyone is buying in London at the
:02:35. > :02:37.moment. I'm proud to say that the British are probably 40% of our
:02:38. > :02:42.business. Next is probably Russia and the satellite CIS states, which
:02:43. > :02:47.is about 20%. We have an equal 15% with the Middle East and Europe, and
:02:48. > :02:50.then Asia. Different cities are concerned about foreigners coming in
:02:51. > :02:57.to buy properties, so in Asia there are taxes on foreigners buying and
:02:58. > :03:03.selling homes. In London, a similar measure comes into effect from 2015.
:03:04. > :03:07.All who are worried about house prices will be following those
:03:08. > :03:10.measures closely. Joining me today to discuss the global housing market
:03:11. > :03:14.are three experts from the biggest estate agents. David Green-Morgan,
:03:15. > :03:20.Global Capital Markets Research Director at Jones Lang La Salle.
:03:21. > :03:23.He's an expert on the value of cross-border property investments
:03:24. > :03:26.around the world. Nicholas Holt, Asia Pacific Head of
:03:27. > :03:29.Research at Knight Frank. He leads a team of over 50 and has worked
:03:30. > :03:34.extensively on projects in the UK, Europe and throughout Asia-Pacific.
:03:35. > :03:40.Yolanda Barnes, director of Savills World Research, based in London. She
:03:41. > :03:47.has analysed world markets for over two decades. Welcome to all of you.
:03:48. > :03:50.I'm going to start with you, David. How overvalued are some of these
:03:51. > :03:51.property markets in these kind of key cities?
:03:52. > :03:58.That's the million-dollar question, are any of them actually overvalued?
:03:59. > :04:01.I think it all comes down to demand and supply and at the moment in many
:04:02. > :04:07.major cities around the world, demand is outstripping supply.
:04:08. > :04:10.What about you, Nicholas? We have certainly seen a big upswing
:04:11. > :04:14.in some of the global cities, notably London, Hong Kong,
:04:15. > :04:21.Singapore. We have seen prices in Hong Kong go up 120%. At the same
:04:22. > :04:24.time, we have seen low interest rates, which has led to significant
:04:25. > :04:31.amounts of money coming into the market. In places like Singapore and
:04:32. > :04:35.Hong Kong, we certainly expect a correction in the next 12 months.
:04:36. > :04:42.It is such an interesting question because the nature of demand has
:04:43. > :04:44.actually changed. We used to value property in relation to people's
:04:45. > :04:47.incomes, it was all about debt finance. What we have seen since
:04:48. > :04:50.quantitative easing started, the buying up of bonds, the
:04:51. > :04:52.disappearance of safe assets for investors and the diversification
:04:53. > :04:55.into other asset types in the investing community, means that
:04:56. > :04:58.there is now a huge demand coming in on world cities which is very
:04:59. > :05:09.different to what a lot of those cities have experienced in the past.
:05:10. > :05:17.We have equity rich, cash-rich investment buyers competing with
:05:18. > :05:22.locals. So the old methods of evaluation just don't hold true any
:05:23. > :05:25.more. David, which of these cities would
:05:26. > :05:29.you say has really been the beneficiary of this cheap money?
:05:30. > :05:31.I think the cities in Asia have benefited and really seen the
:05:32. > :05:40.capital flows, Singapore, Hong Kong, to a lesser extent Chinese cities. A
:05:41. > :05:46.lot of that money has then fuelled investment, particularly into
:05:47. > :05:51.London. The flow of money from Asia into London has been I think
:05:52. > :05:54.probably unprecedented. I don't think we have seen this level of
:05:55. > :06:02.capital flows into property in general since the financial crisis.
:06:03. > :06:04.The point that Yolanda makes is very important. There has been a real
:06:05. > :06:09.psychological shift, particularly on the investment side. So many people
:06:10. > :06:13.got burned by the financial crisis, but they want to hold assets that
:06:14. > :06:17.they can see and touch and go and live in if needs be. I think that
:06:18. > :06:20.has really changed the investment habits.
:06:21. > :06:24.Nicholas, are there particular cities that you would isolate?
:06:25. > :06:28.We talk about "hot money" in markets. I don't think we have hot
:06:29. > :06:36.money in property. Property is a very illiquid asset, ie you cannot
:06:37. > :06:39.sell it quickly. However, touching on the issue quantitative easing,
:06:40. > :06:43.Singapore and Hong Kong are joined at the hip to what happens in the US
:06:44. > :06:48.in many ways. Because their currencies are pegged effectively to
:06:49. > :06:51.the US dollar. So, if we do see interest rates start to rise in the
:06:52. > :06:55.US, that will impact in Asia-Pacific, certainly Singapore
:06:56. > :06:58.and Hong Kong the most. It is interesting on that point,
:06:59. > :07:01.maybe for the first time or certainly in the last 15 or 20
:07:02. > :07:07.years, the Singapore and Hong Kong governments have acted out of sync
:07:08. > :07:10.with what is happening in the US. With all of these cooling measures,
:07:11. > :07:13.we're really starting to see an impact on pricing in Singapore and
:07:14. > :07:17.Hong Kong. Yolanda?
:07:18. > :07:19.I think there is also a real question about interest rates
:07:20. > :07:21.rising, I think there is an increasing disconnect between
:07:22. > :07:26.central banks' base rates and the investment environment. In other
:07:27. > :07:29.words, the sort of returns investors are after. If you have a shortage in
:07:30. > :07:32.global assets, increasing wealth, and this desire amongst the world's
:07:33. > :07:35.ultra-high net worths to put money into real estate, then you have a
:07:36. > :07:38.situation where you could have rising interest rates but still a
:07:39. > :07:43.huge demand for quite low-yielding assets.
:07:44. > :07:47.Before hearing house price predictions from panel, I caught up
:07:48. > :07:52.with the founder of CapitaLand, one of the largest property developers
:07:53. > :07:55.in Asia. I asked Liew Mun Leong what makes a city attractive to
:07:56. > :07:58.investors. My definition of "hotspot" is what I
:07:59. > :08:06.see as transcending capital, targeting high return, but high risk
:08:07. > :08:09.investment. You mention money going in, seeking
:08:10. > :08:12.high and in some cases fast returns, is there a danger that some of the
:08:13. > :08:18.cities could be experiencing hot money inflows and then therefore a
:08:19. > :08:22.bubble? In the first place, in this city, I
:08:23. > :08:29.hate to say it is not like America, you have some control over how much
:08:30. > :08:32.you can pay your mortgage. The leverage cannot be 100% or even
:08:33. > :08:38.110%, as in America, because they go beyond the capital value of the
:08:39. > :08:47.home. But in Asia, right now in Singapore you only can borrow 60%.
:08:48. > :08:50.This makes a bubble less likely to happen because unless the value
:08:51. > :09:00.drops beyond 40% then it will not burst.
:09:01. > :09:03.In your 20 years of experience, I want you to share with us the best
:09:04. > :09:10.insider tips for investing in property.
:09:11. > :09:13.My own view, whether that is at company level or through my own
:09:14. > :09:16.involvement with real estate, the first thing is can you afford in
:09:17. > :09:25.terms of your capital outlay or mortgage? If you can, trust your
:09:26. > :09:33.guts. Because every property is different. Even at a corporate
:09:34. > :09:36.level, when I buy a building or a big project, on land, for that
:09:37. > :09:47.matter, once I have the price and my stomach says this is good, I'll go
:09:48. > :09:51.and buy it. I'm sorry, but I don't rely entirely on calculations, of
:09:52. > :09:53.course we do checks, but if I can afford it and I like the price, I'll
:09:54. > :10:05.go buy it. That was Liew Mun Leong, the
:10:06. > :10:08.recently retired founder of CapitaLand.
:10:09. > :10:11.Whether there is a housing bubble in key global cities has become a
:10:12. > :10:15.pressing question as this month marks the beginning of the end of
:10:16. > :10:18.the era of cheap money. For five years, the US central bank has
:10:19. > :10:23.injected cash into the economy, but starting now, the Fed is tapering or
:10:24. > :10:26.cutting back its monetary stimulus. As a result, global interest rates
:10:27. > :10:30.are heralded to rise, and those mortgage costs. These are key
:10:31. > :10:34.factors for the housing market. So, I went along to two of the most
:10:35. > :10:38.expensive cities in the world to investigate the impact.
:10:39. > :10:46.Two of the priciest cities in the world. These views help make Hong
:10:47. > :10:47.Kong and Singapore as desirable as Monaco, Geneva, and London to the
:10:48. > :10:56.global jetset. In Singapore, it costs about $20,000
:10:57. > :11:04.to buy one square metre, or 2.5 million for a high-end property like
:11:05. > :11:08.this one. What makes it such a property hotspot?
:11:09. > :11:13.Politics, security, the legal system, language. What we're seeing
:11:14. > :11:18.now is a global shift in many of these global cities, and we're all
:11:19. > :11:21.going to the same point. Eventually, perhaps. But Singapore
:11:22. > :11:27.is cheaper than many established cities, like New York. The only cost
:11:28. > :11:32.of occupying a ten million-dollar home is 300,000. Here, it is one
:11:33. > :11:37.fifth of that. It is why prices have more than doubled since 2007. But,
:11:38. > :11:40.are Singaporeans worried? No, it doesn't bother me because I
:11:41. > :11:43.already have a property, fully paid for, so I'm happy.
:11:44. > :11:47.It is a concern for Singaporeans. It's a bit too high now, it is very
:11:48. > :11:50.difficult, but it's coming down, I think?
:11:51. > :11:52.It helps that more than 80% of Singaporeans living quality social
:11:53. > :11:58.housing, which taken by the government-subsidised mortgages.
:11:59. > :12:05.Singapore is an attractive place to work and to live and to buy a
:12:06. > :12:08.property. That is because there is no capital gains tax and that is
:12:09. > :12:12.rather appealing to foreigners as well. But the government is worried
:12:13. > :12:14.about frothy markets and has begun to impose taxes to deter some
:12:15. > :12:24.investment and speculation. It's a similar tax system in the
:12:25. > :12:31.world's most expensive property market, Hong Kong. Foreign buyers
:12:32. > :12:36.now pay a tax equal to a quarter of the purchase price. Prices are
:12:37. > :12:39.falling about but are still high. So, who is buying?
:12:40. > :12:42.Previously we had a broad mix of buyers, investors, mainland Chinese,
:12:43. > :12:48.expats, as well as local Hong Kong people and people buying for self
:12:49. > :12:50.use of course. Though, since the government cooling measures have
:12:51. > :12:53.been put into place, the transaction costs involved in purchasing a
:12:54. > :12:55.property have become so high that it has made Hong Kong a less attractive
:12:56. > :13:07.place to invest. It is hard not to wonder: is there a
:13:08. > :13:13.bubble? House prices are estimated to be overvalued by 30 to 40%.
:13:14. > :13:17.That's one of the most overvalued markets in the world.
:13:18. > :13:22.When the last bubble burst in 1997, during the Asian financial crisis,
:13:23. > :13:29.house prices fell by 60% and continued to decline for six years.
:13:30. > :13:36.The trouble with bubbling markets is that once interest rates rise, so
:13:37. > :13:38.does the risk of collapse. But the director of Hong Kong's richest man,
:13:39. > :13:47.Li Ka-Shing's property company, thinks it's different this time. If
:13:48. > :13:50.you compare the cost of buying a property or holding a piece of
:13:51. > :13:54.property, which is very low right now, in 1997 I think the interest
:13:55. > :13:57.rate was in excess of 10%. Now the interest rate is only about three%,
:13:58. > :14:01.so I think that the buyers or property owners will find that very
:14:02. > :14:10.affordable. House prices are 13 times the average salary, higher
:14:11. > :14:13.than even during the last bubble. It's hardly affordable, as a young
:14:14. > :14:17.professional who is staying with a friend in a typical Hong Kong flat
:14:18. > :14:21.told me. I work in a professional field, in
:14:22. > :14:30.hotels, and even I spend around 50 to 60% of my whole salary to pay for
:14:31. > :14:42.my mortgage. Even if I spend nothing, I would have to save about
:14:43. > :14:45.two whole years for the deposit. Unlike Singapore, there is a bigger
:14:46. > :14:52.social impact, because public housing is inadequate. It only
:14:53. > :14:59.covers 30% of the population. I visited the home of Mrs Wong. She
:15:00. > :15:03.tells me the flat is too small. 400 square feet is the size of a studio
:15:04. > :15:09.flat, but he resides a four person family.
:15:10. > :15:14.TRANSLATION: The rent is really high. It is our biggest expenditure.
:15:15. > :15:20.It takes up half of our monthly income and we don't earn much money.
:15:21. > :15:28.Homes may be unaffordable, yet new properties continue to be launched,
:15:29. > :15:31.targeting house-buyers. TRANSLATION: Even houses fell by
:15:32. > :15:35.10%, we can't afford to buy property or pay the mortgage because that is
:15:36. > :15:38.the way we can afford it with your current income. Prices are really
:15:39. > :15:47.too high, especially for newlyweds like us.
:15:48. > :15:51.Even so, it is not easy to buy a property. Potential buyers have to
:15:52. > :15:56.see how they come out in a ballot system. Other are those who can
:15:57. > :16:02.afford to live anywhere in the world. The global Bridgetown to buy
:16:03. > :16:05.in cash in places with a good quality of life and favourable
:16:06. > :16:09.taxes. For the rest of us, it means that house prices are more out of
:16:10. > :16:16.reach if we live in a global property hotspot.
:16:17. > :16:18.Still with me are: Yolanda Barnes, director of Savills World Research,
:16:19. > :16:21.David Green-Morgan, Global Capital Markets Research Director at Jones
:16:22. > :16:24.Lang La Salle, and Nicholas Holt, Asia Pacific Head of Research at
:16:25. > :16:28.Knight Frank. All right guys, this is the million-dollar question:
:16:29. > :16:34.where are house prices headed? Yolanda?
:16:35. > :16:37.It all depends where. There is a huge difference between Detroit and
:16:38. > :16:43.New York and quite a few interesting things in between. I think we will
:16:44. > :16:49.see the most growth is the second-tier cities, going forward. I
:16:50. > :16:52.think a lot of the biggest global cities are pretty fully valued and
:16:53. > :16:55.if you look at London at the ultra prime market, transactions are still
:16:56. > :17:04.high and growth is undeniably still there. It is actually slower than
:17:05. > :17:08.the more suburban prime markets. What about you, David?
:17:09. > :17:10.I think here in Asia we will see house prices declining, particularly
:17:11. > :17:17.Singapore and Hong Kong, while the governments keep up with these
:17:18. > :17:20.cooling measures. The most effective ones seem to be the ones which have
:17:21. > :17:26.influenced the mortgage market, interestingly. While that's
:17:27. > :17:33.happening, we continue to see Asian money flowing into the US and
:17:34. > :17:37.Europe. I think that will continue to have a positive impact on pricing
:17:38. > :17:41.in those markets. What is your prediction, Nicholas?
:17:42. > :17:44.I am bullish on Australia, Sydney and Melbourne, I think we're going
:17:45. > :17:47.to see some price growth over there in the next 12 months. I'm bullish
:17:48. > :17:53.on Tokyo, central Tokyo condominiums and increasing numbers of foreign
:17:54. > :17:58.investors going into those markets. Finally, the US is, I think,
:17:59. > :18:01.certainly on the upward curve. We'll see some good price growth there.
:18:02. > :18:06.What about Singapore and Hong Kong? I agree with David. I think we will
:18:07. > :18:08.see corrections they are over the next 12 months.
:18:09. > :18:13.Here is the question which will be most telling for me, I think. If you
:18:14. > :18:21.were to buy a house now, which city would you buy it in? Yolanda?
:18:22. > :18:24.I'll take Chicago. I would bet on Chicago being the next US city to
:18:25. > :18:27.start moving. OK, David?
:18:28. > :18:29.I'd say Tokyo. I think with urbanomics and the Olympics, it
:18:30. > :18:34.looks incredibly cheap internationally.
:18:35. > :18:39.OK, Nicholas? I'd still choose London. There was a
:18:40. > :18:42.chronic housing shortage in the south-east of England but I think
:18:43. > :18:47.the fundamentals are good and I'd still buy London.
:18:48. > :18:51.Great selection, but I noticed that none of you actually picked
:18:52. > :18:54.Singapore! I think that's going to cause some people here to be a
:18:55. > :18:58.little bit worried! I'd like to thank my panellists: Yolanda Barnes,
:18:59. > :19:00.director of Savills World Research, David Green-Morgan, Global Capital
:19:01. > :19:03.Markets Research Director at Jones Lang La Salle, and Nicholas Holt,
:19:04. > :19:05.Asia Pacific Research Director at Knight Frank.
:19:06. > :19:12.Property isn't the only real asset that investors worried about cheap
:19:13. > :19:16.cash and inflation are looking at. Art is another asset catching the
:19:17. > :19:20.eye of investors. But by one measure, art prices rose by only
:19:21. > :19:26.two% last year against a backdrop of global stocks rising by over 10%.
:19:27. > :19:30.Yet last year saw the sale of the most expensive piece of art ever. A
:19:31. > :19:35.Francis Bacon painting went for over $142 million. It is those
:19:36. > :19:39.contemporary and modern pieces, rather than the classical ones, that
:19:40. > :19:45.make up the bulk of the global art trade, accounting for nearly 70%.
:19:46. > :19:51.And it's a big global market, generating $60 billion worth of
:19:52. > :19:56.sales each year. Who are the figures buyers? The Chinese are vying with
:19:57. > :20:02.the Americans and Europeans for the title. I went to see what kind of
:20:03. > :20:15.art is being sold and how the market is doing now.
:20:16. > :20:21.You probably recognise this image of Queen Elizabeth II of Britain - it
:20:22. > :20:25.was on the cover of Time magazine. I'm here with renowned light artist,
:20:26. > :20:30.Chris Levine, to find out how this work came to be. Chris, you're here
:20:31. > :20:33.in Asia, showing some of your work. Tell us about your use of light in
:20:34. > :20:38.that portrait. Thank you. I was commissioned by the
:20:39. > :20:41.island of Jersey in 2004. It was 800 years since Jersey broke away from
:20:42. > :20:42.France and they wanted a modern portrait to signify that
:20:43. > :20:45.relationship. When you look at this image, it
:20:46. > :20:48.actually gives you different perspectives. Tell us a little bit
:20:49. > :20:53.about how you managed to do that. It is shot with multiple cameras, so
:20:54. > :20:59.different views. It is a lenticular process and is pretty much visible
:21:00. > :21:02.in all conditions. So in every image, you basically see
:21:03. > :21:06.two frames? Yes, as you move from left to right
:21:07. > :21:12.you're going three whole series of stereoscopic pairs.
:21:13. > :21:20.I see you have a few other pieces here. That looks like Kate Moss.
:21:21. > :21:25.This is Kate Moss: model, cultural icon, some would say. Chris, you
:21:26. > :21:33.have brought these portraits to Asia. Tell us why you are here.
:21:34. > :21:39.Light crosses all language and it is about the experience and goes beyond
:21:40. > :21:43.culture. What we're looking at is something that takes seeing into the
:21:44. > :21:47.experiential realm. Kate represents so much on so many different levels,
:21:48. > :21:49.but I wanted to get to the beauty that is within, and it is a light
:21:50. > :21:53.thing. In terms of the market for art, is
:21:54. > :21:56.it very global these days? Yes, especially with an image of
:21:57. > :21:58.Kate, it is international, created in the UK, but the cultural aspect
:21:59. > :22:07.of it is multidimensional and crosses borders.
:22:08. > :22:13.How have you found the reaction in Asia?
:22:14. > :22:19.Incredibly receptive. I'm fine to create something that goes beyond
:22:20. > :22:20.the word, into human experience. So hopefully it is appreciated by
:22:21. > :22:32.people all over the world. That's certainly another
:22:33. > :22:37.eye-catching portrait of Grace Jones. What were you trying to do
:22:38. > :22:42.with this portrait? Grace is a living legend, another
:22:43. > :22:46.icon. You think of all the energy and dynamism of Grace and what I was
:22:47. > :22:49.trying to do was to pull her to a point of stillness and somehow in
:22:50. > :22:53.doing that it increased the whole dimension of the experience. Is
:22:54. > :23:06.contemporary art a good investment, versus, say, the Masters?
:23:07. > :23:09.You're asking an artist! You need to talk to the gallery for that but I
:23:10. > :23:11.think it has been shown that the right selection can be a really good
:23:12. > :23:15.investment. That was Chris Levine, who assures
:23:16. > :23:19.me the light bulbs in those pieces last a long time. Whether it is art
:23:20. > :23:21.or property, investing in real and tangible assets becomes more
:23:22. > :23:28.enticing when is greater concern about inflation. It is now that the
:23:29. > :23:33.end of the era of cheap money appears at hand. Working out if
:23:34. > :23:37.house prices are going up, though, is the million-dollar question.
:23:38. > :23:42.That's all we have time for this week. Check out our website and me
:23:43. > :23:44.on Twitter @LindaYueh. Join us next week or more Talking Business with
:23:45. > :24:06.me, Linda Yueh. The radar tells the story over the
:24:07. > :24:08.evening. Largely dry in eastern England. Elsewhere, it has been
:24:09. > :24:09.pretty wet and