[SINGAPORE] Singapore's mid-tier property developers are laying the first stones of their overseas business as domestic sales plunge, land prices climb, and foreign rivals bet high stakes on the city-state's long-term prosperity.
Hiap Hoe Ltd and Oxley Holdings Ltd followed sector leader CapitaLand Ltd this year by going abroad. At home, government action to slow the rise of record-high prices led to a 50 per cent drop in third-quarter private home sales.
Official plans for a significant supply of new homes over the next decade make the price outlook even dimmer. Yet land prices have rallied, pushed up by foreign developers drawn by political and economic stability.
Oxley Holdings bought property and invested in developers in Britain, Cambodia, China and Malaysia. Sim Lian Group Ltd added to its overseas portfolio by buying property in Australia.
SingHaiyi Group Ltd, which earns 98 per cent of revenue in Singapore, bought two properties in the US this year and appointed Neil Bush, brother of former US president George W Bush, as non-executive chairman. The company shifted focus to Singapore two years ago in response to property-price cooling measures in its native Hong Kong.
Seventy-two developers participated in this year's nine private residential-use land auctions, including at least eight from abroad. That made 2013 the most competitive year since at least 2008 in terms of average number of bidders per auction, showed data from the Urban Redevelopment Authority of Singapore.
Local developers outbid foreign rivals and their partners in five of the nine auctions, their lowest win ratio in at least five years.
Kingsford Development Pte Ltd, from China, bid at four of the auctions and won two. In one of the auctions it offered as much as 16 per cent above the bid of the closest competitor, despite soft home sales at its maiden Singapore project on a site purchased last year.
"We have confidence in the Singapore market," said Victor Yao, Kingsford's senior business development manager and architect. "Singapore's government is very good at maintaining property market stability."
Strong rule of law, a steady economic outlook and cultural similarity made Singapore ideal for Kingsford's first sally abroad, Mr Yao said.
China's property market has been shaken in recent years by government measures to curb runaway prices, leaving developers wary of further intervention. "The profit margins here aren't as good as in China, but the market is more stable," Mr Yao said.
The other two foreign winners were subsidiaries of Metallurgical Corporation of China Ltd and Malaysia's Sunway Bhd.
The URA's Private Residential Property Price Index has climbed over 30 per cent since the end of 2009, rising 3.9 per cent in July-September from a year earlier.
Sales, however, nearly halved to 2,430 units after the government in June curbed personal housing loans. That compared with 4,538 in April-June and 5,916 a year earlier, URA data showed.
"Developers are beginning to cut their prices in existing and new projects," City Developments Ltd said in its quarterly results.
Yet land prices have risen on an island smaller than New York City. Singapore has grown over 20 per cent in the past 50 years and the government projects an extra 8 per cent growth by 2030 to accommodate economic activity.
Every five years, the URA issues a land-use plan for the next 10 to 15 years. A draft last month showed land reserved for up to half a million mostly public homes, enough to house two million people. Public homes can be sold in the open market after varying years of occupancy.
This has exacerbated concern of oversupply as the government projects population growth of up to 1.6 million people, or 30 per cent, to 6.9 million by 2030 from 2013.
The government regards current supply as "adequate" while the Real Estate Developers' Association of Singapore said it supported the government's "calibrated approach". "For the next five years, everyone is feeling concern whether our residential supply will be too much," said Alice Tan, head of consultancy and research at Frank Knight. - Reuters
Source from Business Times