HK firms flex their muscles
Local developers see the city state as a way to diversify their Chinese exposure, writes Tama Lung
From the glittering office towers of Marina Bay Financial Centre to the luxurious 54-storey Orchard Residences and the restored colonial-era buildings of the Fullerton Heritage precinct, Hong Kong property developers have become a prominent fixture on the Singapore skyline. Hongkong Land, Sun Hung Kai Properties, Cheung Kong Property Holdings and Wheelock Properties are also looking to expand their reach in the city state through land acquisitions or new projects.
"Hong Kong developers have expanded significantly in the mainland over the past decade given the attractive investment returns, size of the market and their familiarity with the market. They see Singapore as a way to diversify their Chinese exposure, and
one which offers similar characteristics to Hong Kong which makes it a viable alternative," explains Tan Min Lan, head of the Apac Investment Office at UBS CIO Wealth Management.
In addition to diversification, Tan sees many advantages for Hong Kong and other foreign developers despite Singapore's declining property prices.
"Firstly, Singapore has a stable government and political backdrop," she says.
"Secondly, Singapore offers an established regulatory environment for investors.
"Thirdly, Singapore continues to attract foreign home buyers and investors thanks to its status as a financial and wealth management hub in Asia, and robust macro fundamentals which underpin the long-term value of the Singapore dollar as a store of wealth," she says. "While the property price correction is still ongoing, strategically, Singapore remains attractive as a key gateway city and Asian hub."
Tan says it is relatively easy for new foreign players to target the mass-market residential segment in Singapore. Local developers have stopped bidding aggressively for land, opening a window of opportunity for firms from Hong Kong, the mainland and elsewhere.
Wheelock Properties (Singapore), a subsidiary of Hong Kong's Wheelock and Company, is listed in Singapore and focuses on luxury residences. Its portfolio includes Ardmore Park, Orchard View and Parc Oasis.
Hongkong Land - whose Singapore properties include the office block One Raffles Quay and mixed-use development Marina Bay Financial Centre (developed together with Cheung Kong and Keppel Land) - also maintains the residential property group MCL Land. The Singapore-based company has an extensive residential portfolio, including The Grange, Waterfall Gardens and Uber 388.
Other Hong Kong developers with a significant presence in Singapore include Sino Land, developer of the Fullerton Heritage precinct;
Sun Hung Kai Properties, joint owner of retail and residential project Orchard Turn; and Cheung Kong Property Holdings, developer of several commercial and luxury residential projects including Cairnhill Crest, The Vision and Thomson Grand.
Given the present environment, Tan sees potential for further expansion by Hong Kong developers depending on their assessment of various market factors.
"From a rental yield perspective, Singapore residential properties could still command an average yield of about 3 per cent versus a borrowing cost of around 1.8 per cent," she says. "This is relatively attractive compared to Hong Kong, where the yield pickup is probably just 50 to 80 basis points currently.
"In terms of the cycle, property price correction in Singapore, especially at the high end, is now quite well advanced. Selected projects such as the St Regis Residences are down almost 40 per cent from the 2007 peak, and trading close to S$2,200 (HK$12,397) per square foot. Similar properties in Hong Kong are still very much near their all-time peaks, trading closer to HK$22,000 per square foot or about S$3,900 per square foot."
The key impediment to more foreign buying, Tan says, is the tight macroprudential policies including the additional buyers' stamp duties of 15 per cent for foreigners. Such measures could be among the first to be eased, however, if prices continue to fall significantly.