Friday Asia Digest: Singapore RE Market White-Hot, India Steps Up Its Game

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Singapore’s residential & industrial real estate sectors are on fire, despite government attempts to keep prices under control. July saw 1,946 new homes sales, a rise of 42 percent month-on-month. That puts the total sales figure for the first eight months of 2012 at 15,300 new properties, close to the full-year total of 2011. Savills anticipates a return of foreign investors into the Singapore property market. High-end home prices tracked by Savills, as well, rose two percent quarter-on-quarter in Q3. As a result, Singapore’s government announced its guidelines in the maximum number of units that will be allowed for all new developments in the outside central region. The aim is to manage the artificial increase in unit prices of new private apartments and control population density in certain areas.

Industrial property prices, as well, rose as investors looked to avoid earlier cooling measures in the residential market. The gains come despite rents flat-lining in the wake of slowing manufacturing activity. About 21 million sq ft of private industrial space is expected to be completed in Singapore by the end of next year, translating into an average annual supply of about 14 million sq ft.

Singapore’s property stocks, finally, have surged on average 48 percent so far this year, far outstripping the 15.5 percent gain on the broader Straits Times Index, and analysts say there is still more upside for the sector. Low mortgage rates, little impact from recent credit-tightening measures and still relatively cheap valuations are he main influences, stock market analysts claim.

Singapore is one of Asia’s most vibrant property markets, and home prices have gained more than 50 percent over 2007 to 2011. There are many, however, who warn of risks to the housing sector, despite the resilience, and advise investors to look beyond this segment. Others, however, argue the city-state’s property market’s stellar rise is stable, sustainable, and is the result of outstanding and prudent management by government officials and business leaders.

A prime example of the reality underlining this claim can be found in one of Singapore’s leading developer’s award winning trophy property portfolio – CapitalLand’s wholly-owned serviced residence business unit, The Ascott Limited (Ascott), has garnered several prestigious awards from leading international travel publications in recent weeks, recognizing it as the best serviced residence provider in Asia Pacific and Europe, and taking the total number of accolades won by the company to an astounding 60.

Ascott was named the ‘Best Serviced Residence Operator’ at the 23rd TTG Travel Awards held in Bangkok on 4 October 2012 – an award it has won for the eighth consecutive year. Ascott also won the ‘Best Serviced Residence Brand in Asia-Pacific’ award at the 2012 Business Traveller Asia-Pacific Awards held in Hong Kong. This marks the ninth year running that readers of Business Traveller Asia-Pacific magazine have chosen Ascott for the coveted accolade.

Decisive Action Boosts Investor Confidence in India

The Indian property market, portrayed in recent months on international media channels as unstable, swiftly decelerating, and rife with corruption and money laundering, is enjoying a slight, yet much needed upgrade to its image – thanks to educational, regulatory and exemplary efforts by industry leaders, who are taking decisive correctional and PR actions to correct the country’s perception.

The Confederation of Real Estate Developers’ Associations of India (CREDAI) and the Royal Institution of Chartered Surveyors (RICS) announced a joint initiative to address the learning needs of professionals in real estate and construction sectors in workshops to be held in Delhi, Mumbai, Bangalore, Ahmedabad and other metro cities. Some of these programs are in partnership with academic institutions, and are aimed to up-skill working professionals and place them at par with international standards. Amongst many challenges in Indian real estate, the immense shortage of skilled professionals leads to delay in project deliveries, cost runs and compromised quality.

At the same time, investors in Asia, Europe and the U.S. have flocked to and over-subscribed India’s first real estate investment trust. Singapore Stock Exchange-listed Ascendas India Trust (a-iTrust) closed when it reached $81.3 million (Singapore $100 million). The trust was initially looking to raise $70 million Singapore dollars. According to the company’s statement, the placement saw strong participation from Asian, U.S. and European investors and was about 2.6 times subscribed based on the upsized issue of S$100 million or 139 million New Units. The new units represent 18 per cent of existing units.

Another source of good news to the country’s struggling property market was an announcement from the Wyndham Hotel Group (whose “Emerald Plaza” property is pictured below), the world’s largest hotel company with over 7,170 hotels, that is has signed 16 new deals, 12 of which are in india, for new hotels. These properties will add to Wyndham Hotel Group’s 16 hotels already in operation and the 15 properties currently under development in the country.

Global Gossip

* Two additional firms worth following closely are Yishan Capital Partners Pte., a real estate asset manager, which plans to raise $250 million next year to invest in properties across Southeast Asia, and Centuria Capital, an australian funds manager which has just expanded its property business into Asia following an increase in appetite from Asian investors. Yishan, which has invested about $50 million in Indonesia and Cambodia, plans to start raising funds in the first quarter of next year, to invest in residential buildings, shopping malls and industrial projects such as warehouses in countries including Singapore, Indonesia, Thailand, Vietnam and the Philippines.

* Yishan’s suggestions and analysis of the south-east asian property market are also worth noting – the company’s spokesman was quoted as saying the nascent property markets in Vietnam and Myanmar have turned the countries into a “no-go” zone for the next few years at the very least. In Singapore, Yishan is focusing on shopping malls, while it will stay away from residential, office and industrial projects in the island city because prices are expensive and don’t offer value, he said.

* Forbes Asia – perhaps courting Asia’s super-wealthy, who in recent weeks have been charted as finding solace from the financial woes engulfing the corporate world in international property markets – have launched a series of articles highlighting the Asian/Gulf/Arabian Business/Real-Estate connections network. Highlighting property millionaires such as India’s P.N.C. Menon’s $600 million (revenue) real estate conglomerate that spans India and the Gulf, as well as the ever-deepening financial Asia-Arabia relationships, spanning property, oil and commodities markets – the articles (linked below) make for a fascinating and highly recommended read.

(Partial sources list – “Forbes“, “Forbes“, “CNBC“, “iRealty Times“, “4-Traders“, “Bloomberg“, “eTravel Blackboard Asia“, “Business Standard“, “World Property Channel“, “Investor Daily”, “Asia One“)

(Pic 1 – Singapore Skyline / Dinukshan Kuruppu, Pic 2 – Wyndham’s “Emerald Plaza” Hotel / Allan Ferguson)

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About Author

Ziv Magen (G+) is an Australian, and has been living alternately in Japan and Australia for the past decade. "Born and bred" an IT project manager, he has made the transition to full-time real-estate investing several years ago, and subsequently opened a buyers' and proxy agency - assisting others in remotely capitalising on Asia's booming property market.

4 Comments

  1. Sometimes when you hear of a “hot” market like Singapore – it almost makes you want to get on a plane and go there to get in on the action. Guess that is why gambler’s cannot quit. They get caught up in the swing of things and then just can’t quit.

    Dale

  2. Lol couldn’t agree with you more. :) speculative real estate purchases (or real estate centers, on a larger scale) are very similar to casinos from my perspective as well. Cashflow is king in my book.

  3. Singapore is one of Asia’s most vivid real estate asset markets. However, increase is constant, maintainable, and is the result of excellent and sensible control by government authorities and business controllers.

  4. I should hope so, Phillip, but there are many voices speaking out about Singapore’s RE market (the little bit of it that’s open to foreigners – let’s not forget it’s less than 20% at last count), and some of those say it’s mirroring Hong-Kong’s as a safe haven, and bubbling out, although at a slower pace.

    From a more distant perspective, curves tend to balance out over time, and Singapore’s been on the up for a long, long time. I, too, tend to advise waiting on the sidelines at this point in time, if only to let the market take its natural cooling measures naturally. Of course, if we’re all very wrong, we’re missing out :) But then, affordability’s the other issue…why buy one property when you can spread the same funds over 2-4 in other places and diversify/hedge?

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