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Wednesday, March 22, 2023

Alex Shlaen on Key Actual Property Markets and Cash Flows

Feb 02, 2023 | By Alexander Okay. Shlaen

At first of a brand new 12 months, we need to know the place to place our cash and what to anticipate from the markets. Let me lay out a few of my expectations and observations as we hop into the Yr of the Rabbit. 

Final 12 months was a tricky 12 months for buyers, until you had been invested within the Singapore property market, which remains to be going sturdy into 2023. However I’ll return to discussing property later on this article. 

In 2022, there was numerous trough throughout the monetary and property markets all around the world. There have been only a few vivid spots. However that you already know already. Now, let’s attempt to look into the long run and predict the place is an efficient place to park your dough this hopping 12 months of the bunny.

In response to Professor Roubini of Stern Enterprise College of New York College (NYU), buyers should discover steady property that can hedge them towards inflation, geopolitical dangers and different market disruptors. Such property embrace short-term authorities bonds and inflation-indexed bonds, gold and different treasured metals, and actual property that’s resilient to environmental injury.

Certainly, but once more, property funding isn’t just achieved for the extra apparent benefits, similar to rental returns and appreciation, however on this new world of comparatively excessive inflation, the property, which is purchased in the proper locations, is an efficient hedge towards inflation.

As an investor, I’m all the time trying for funding targets that can develop in reputation and can entice extra buyers, making these investments extra precious.

I current to you the next knowledge:

In response to Financial institution of America’s annual Examine of Rich Individuals launched lately, which included interviews with over 1,000 Individuals aged 21 and older with investable property of over US$3 million. The interviews had been carried out in Might and June of 2022.

  • 75 per cent of wealthy millennials don’t suppose the inventory market can generate the returns they’re on the lookout for
  • The report discovered that 75 per cent of these surveyed aged 21 to 42 felt it was “not attainable to realize above-average returns solely on conventional shares and bonds.”
  • Solely 32 per cent of older buyers agreed with that assertion
  • Youthful buyers are flocking to cryptocurrency, non-public fairness, actual property, and even artwork

The rich millennials surveyed mentioned they allocate 25 per cent of their portfolios to shares, in comparison with 55 per cent of older buyers. They usually dedicate over thrice as a lot of their portfolios, 16 per cent versus 5 per cent, to various investments like non-public fairness, commodities, actual property, and even artwork. Cryptocurrency is well-liked amongst these millennials as effectively, accounting for 15 per cent of their portfolios in comparison with solely 2 per cent for older buyers.

My takeaway is that ultimately, the general share of investments of this age group will develop as older buyers money out or exit lively investing. 

For millennials, one in all their favorite funding targets is property, and therefore I discover it fascinating. One would suppose that younger buyers wouldn’t care a lot about probably the most conventional sort of funding, however that seems to be the other. The youthful buyers prioritise property and various investments over shares and bonds. Due to this fact I see the way forward for property investing to proceed rising or no less than staying on strong floor, pun supposed.

As all the time in my articles, I’ll focus on property and luxurious investing.

So, what’s the property market holding for us this 12 months?

In response to 100 or so housing market analysts polled by Reuters, housing costs in most main property markets will fall in 2023, however they predicted double-digit peak-to-trough declines won’t come shut to creating property reasonably priced. The reason being that residential property costs within the US, Britain, Canada, Germany, Australia, and New Zealand rose between 25 per cent and greater than 50 per cent for the reason that outbreak of the pandemic in early 2020.


Lion Metropolis’s property is now a well-established darling of buyers. Whoever learn and adopted my recommendation on the pages of this journal for the final a number of years ought to be in a reasonably place. The costs went up round 11 per cent within the final 12 months and about the identical in 2021.

Singapore’s non-public leases surged by 30 per cent in 2022. It’s the highest annual enhance since 2007, when the rental costs shot up over 41 per cent. The rental costs are anticipated to rise at a slower price of round 15 per cent subsequent 12 months, about half the earlier 12 months’s price, because of a rise in provide.

As any investor is aware of, if the rental returns go up so does the property worth. Conservatively talking, I can see the rise in worth reaching 4 per cent to six per cent throughout 2023.

The value enhance could be steeper for brand spanking new luxurious properties.

We’re seeing a wave of high-net-worth and ultra-high internet value mainland Chinese language residents who had been impacted by the extended Covid-19 closures in mainland China and in Hong Kong relocating to Singapore. Whereas we nonetheless shouldn’t have the figures, I’m predicting a big variety of rich and ultra-rich Chinese language residents to maneuver their cash, households, and residence and additional enhance the demand and thus the costs for higher-end properties. 

Add to this the large enhance in variety of household workplaces being established or moved to Singapore, and you may see a transparent development of the rising demand for high-end property. With these workplaces comes an influx of wealth, because the homeowners and the members of the family of those workplaces transfer to Singapore.

The resale apartment costs had been up round 10 per cent for 2022. The hole between new and resale property is method too huge for my part and there’s a nice alternative within the secondary market.

The info I see for the outlying districts reveals for instance, the median worth of a newly launched apartment unit was over S$2,000 per sq ft (psf), which is considerably larger than the worth of the resale apartment of round S$1,300.

For the savvy buyers, I like to recommend resale luxurious condos within the prime places of Singapore, that are very undervalued.


Credit score Researchers of Goldman Sachs predict the US property market to drop. Prime places like San Francisco are anticipated to fall some 13 per cent. Mainly they anticipate all the main cities to drop, aside from Miami. With nationwide costs anticipated to drop round 10 per cent.

Right here is an efficient place to focus on and clarify an uncommon and attention-grabbing development within the present recession.
This recession could be hitting the upper paid staff, particularly those within the high-tech sector and principally skipping the lower-end and blue-collar staff.

Current layoffs clearly present this development. In response to the US Securities filings, the median employee at Fb made round US$296,000 in 2021. The median employee at Twitter made US$233,000. Many of the newest layoffs at these locations and different tech giants similar to Microsoft and Google have largely been aimed toward white-collar staff.

So the excessive paid staff in high-tech are fired en masse and that explains why properties in locations similar to San Francisco and different prime places within the Silicon Valley, as effectively in London and to some extent in Tel Aviv will undergo or will falter, no less than within the quick time period. 

Hong Kong

Hong Kong mortgage functions from mainland Chinese language consumers rose to a file excessive within the fourth quarter of 2022. 

Mainland consumers with Hong Kong residency represented 11.4 per cent of the mortgage functions that mReferral Mortgage Brokerage Companies dealt with, the very best proportion for the reason that agency began monitoring the information in 2018.

Immigration curiosity from mainland Chinese language residents has spiked following the nation’s stringent lockdowns and considerations of a subsequent financial slowdown. Hong Kong stands as one of many prime relocation locations, particularly after the town’s authorities launched a programme to draw international expertise to reverse a mind drain following political upheavals and social unrest. Although a few of the newcomers to Singapore are these mainland Chinese language, who acquired disillusioned with Hong Kong’s epidemic strict insurance policies.

Hong Kong’s authorities’s effort to draw extra expertise from the mainland and the remainder of the world might also assist elevate the town’s rental market. Residential leases may rebound about 5 per cent in 2023 as extra folks relocate to Hong Kong, based on Bloomberg Intelligence.

Resale dwelling values declined about 16 per cent final 12 months, with mixed new and secondary dwelling gross sales slumping to the bottom stage since no less than 1996, based on knowledge tracked by Centaline Property Company. The border between the mainland and Hong Kong began to step by step reopen ranging from 8 January after being successfully sealed since early 2020 as each governments pursued a Covid Zero coverage by shutting themselves from the remainder of the world for a lot of the pandemic.

The view of Bloomberg Intelligence is that gross sales of recent residential tasks within the metropolis may soar 50 per cent to S$30 billion in 2023, from a nine-year low in 2022.


Round 135,400 pre-owned flats had been up on the market on the finish of October in Shanghai, a rise of seven.8 per cent from a month earlier, based on Fangdi.com.cn, the official web site of the native housing administration bureau.

There’s an exodus of types of center class folks from the nation. Many are heading to European international locations like Portugal or North America, the place they profit from citizenship schemes. 

The downward spiral is ready to proceed in Shanghai’s dwelling market as a rising variety of rich homeowners plan to promote their properties and go away the nation. 

As I talked about earlier, many wealthy households will probably be transferring to Singapore and to some extent to Hong Kong as effectively.


Some analysis analysts are getting bullish on the worth restoration right here. 

A report by Savills is anticipating the costs to go up by 24 per cent by 2026, which might see prime central London costs return to their 2014 peak. In 2022 alone, values rose by round 8 per cent.

The costs in London fell 20 per cent, since 2014 within the capital’s most prestigious postcodes, and now the restoration is well timed, mentioned the report.

The indicators are already pointing towards the town’s anticipated rebound, significantly on the very prime finish, and it’s spreading additionally to the smaller properties.

In October 2022, London noticed probably the most offers on properties priced at £10 million (US$13.5 million) or extra since July 2013. The variety of offers on properties priced at £5 million or extra, in the meantime, outpaced another October since 2014. 

Belgravia and Mayfair had many of the offers recorded, which reveals that the posh market is main the way in which to restoration within the capital.

Customisation is the Pinnacle of Luxurious

Bentley Flying Spur Hybrid
Picture: Bentley

And staying within the luxurious of the Nice Britain, it will be attention-grabbing to look into a few of the grandest manufacturers that the Kingdom acquired to supply.

British luxurious carmaker Bentley reported file car gross sales for 2022, with sturdy gross sales offsetting a 9 per cent drop in China attributable to the prolonged pandemic lockdowns.

That they had a rise of 4 per cent from 2021, which was itself a banner 12 months for Bentley.

“In what was one other 12 months of unpredictability, the enterprise overcame vital headwinds and demonstrated nice resilience to ship the third consecutive file gross sales 12 months,” Bentley CEO Adrian Hallmark mentioned in an announcement.

Bentley has more and more centered on customisation and that helped them to common pre-tax gross sales worth by almost 30 per cent to €220,000 a automotive in 2022 from €170,000 in 2018.

It doesn’t shock me that the uber-luxury automotive maker Rolls-Royce offered a file variety of automobiles in 2022 as demand for its US$500,000 autos remained sturdy, regardless of the recession and geopolitical state of affairs on this planet. They didn’t see any slowdown or downturn, based on their CEO.

Rolls-Royce Boat Tail
Picture: Rolls-Royce

Rolls-Royce delivered 6,021 automobiles final 12 months, up 8 per cent over 2021 and the primary time the corporate crossed the 6,000 mark. 

The corporate mentioned the common worth of a Rolls-Royce soared to US$534,000 final 12 months — guess what,  due to its customisation program referred to as “Bespoke”, which contains every part from silk embroidered headliners to personalised champagne chest. 

I consider we are going to see an increasing number of of this development increasing into higher demand for giant ticket luxurious objects.

Picture: Alex Shlaen

Alexander Karolik Shlaen, Government MBA, is the founding father of the Singapore-based Panache Administration Pte Ltd which represents Aston Martin Interiors, Tonino Lamborghini Casa and Formitalia design traces in Asia. Panache Administration is concerned in actual property and expertise funding tasks and offers luxurious interiors and designs for unique actual property, non-public jets and superyachts. Shlaen has appeared in numerous regional and international media and has written the Luxurious Professional columns of regional enterprise magazines since 2009. He was additionally the chairman of the judges’ panel for Asia Property Awards and is steadily sought to attend established enterprise boards. Be taught extra on PanacheManage.com

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