mr funny
08-05-07, 09:40
Published May 8, 2007
Property boom sustainable, says Leng Beng
He points to 7-year cycle, so current phase could run till 2012 or beyond
By KALPANA RASHIWALA
(SINGAPORE) The property bull may keep on running until 2012 or even beyond, says Hong Leong Group executive chairman Kwek Leng Beng. Foreigners will keep pumping money into high-end housing. And businesses looking to get in on Singapore's fast-developing hub status will send office rents 'through the roof'.
'I believe that at least for the next few years, barring unforeseen circumstances, the boom is sustainable,' Mr Kwek told BT in a recent interview.
'If you believe in the seven-year property cycle, we will have a boom until 2012. Our economy, having been restructured, is strong and poised for growth even beyond that,' he said. 'I won't be surprised that we may be witnessing the biggest real estate boom in the history of Singapore.'
He added: 'If you follow the seven-year property cycle, there's still a lot of steam left, because we are only in the second year (of the high-end residential recovery). Mid-tier private home prices will move in sympathy, but the percentage rise is unlikely to be as high as in the luxury tier.
'If you are a strong believer of seven years, then I think it can go on from 2005 to 2012. But I personally believe it will extend longer. The US (property recovery) has gone on for 14, 15 years. Australia, also 14 to 15 years, 16 years, UK has gone on more than 10 years.'
The residential sector will be underpinned by a continuing influx of high net worth investors, says Mr Kwek, who is also executive chairman of listed City Developments.
And the office sector will be fuelled by limited supply in the short term and by strong demand as the various government efforts to promote Singapore as a hub for financial services and wealth management, healthcare, education and hi-tech research, bear fruit.
'A lot of analysts think we'll have enough supply of offices by 2010, but I don't think so,' he said. 'Just look at the rate at which we are going and able to attract businesses, especially in the financial industry and wealth management. They want a piece of the action in this part of the world. How can you have enough offices? It takes four to five years from planning to completion of a high-rise office building. I see that this is a place where office rents will go through the roof.'
Office rents did not go up for the most part between late-1996 and mid-2004. 'This must not be overlooked when we talk about rising rentals now,' he said.
But Mr Kwek does point out some caveats in his bullish predictions - an unexpected Sars-type disaster, a terrorist attack, the reintroduction of trade barriers and government intervention in the real estate market.
'In general, governments may introduce measures that are designed for a soft landing but which actually can turn out to be a hard landing,' he said. 'In Singapore I think the authorities will only intervene to prevent excessive speculation, and in so doing they will bear in mind that Singapore has become a global city.'
Mr Kwek believes the current property cycle is unlike any Singapore has seen previously because the economy has been restructured and has emerged leaner and stronger.
Also, a vast amount of money is being invested, such as at Marina Bay with its huge integrated resort, botanic gardens and other infrastructure. 'I can visualise the potential of this place,' he said. 'Singapore will be a bustling global city, a place to live, work, play.'
According to Mr Kwek, Singapore is starting to attract 'cosmocrats' - an emerging group of globe-trotting super-rich people who are flush with cash and are buying the best properties from London and Paris to New York and Hong Kong. 'We are just beginning to see them in Singapore,' he pointed out. 'To them, if you talk about yield, they'll laugh at you. Yield is of no concern to them.'
Mr Kwek reckons luxury home prices here are not over the top, pointing to historical data as well as international comparisons. The average highest-done residential price in Singapore recently is about $3,300 per sq ft, which is still about 40-50 per cent below the equivalent figures in London, New York and Hong Kong, he said.
This means there is room for growth in Singapore luxury home prices, and by 2012 the gap could narrow to about 10-12 per cent. During the previous bull run, the highest price achieved was about $2,200 psf, Mr Kwek noted. 'At 6 per cent interest rate (and this includes inflation, which is not big in Singapore), after 10 years, you know what should be your selling price? $3,400 psf. At 7 per cent, we should be selling $3,900 psf today.'
Property boom sustainable, says Leng Beng
He points to 7-year cycle, so current phase could run till 2012 or beyond
By KALPANA RASHIWALA
(SINGAPORE) The property bull may keep on running until 2012 or even beyond, says Hong Leong Group executive chairman Kwek Leng Beng. Foreigners will keep pumping money into high-end housing. And businesses looking to get in on Singapore's fast-developing hub status will send office rents 'through the roof'.
'I believe that at least for the next few years, barring unforeseen circumstances, the boom is sustainable,' Mr Kwek told BT in a recent interview.
'If you believe in the seven-year property cycle, we will have a boom until 2012. Our economy, having been restructured, is strong and poised for growth even beyond that,' he said. 'I won't be surprised that we may be witnessing the biggest real estate boom in the history of Singapore.'
He added: 'If you follow the seven-year property cycle, there's still a lot of steam left, because we are only in the second year (of the high-end residential recovery). Mid-tier private home prices will move in sympathy, but the percentage rise is unlikely to be as high as in the luxury tier.
'If you are a strong believer of seven years, then I think it can go on from 2005 to 2012. But I personally believe it will extend longer. The US (property recovery) has gone on for 14, 15 years. Australia, also 14 to 15 years, 16 years, UK has gone on more than 10 years.'
The residential sector will be underpinned by a continuing influx of high net worth investors, says Mr Kwek, who is also executive chairman of listed City Developments.
And the office sector will be fuelled by limited supply in the short term and by strong demand as the various government efforts to promote Singapore as a hub for financial services and wealth management, healthcare, education and hi-tech research, bear fruit.
'A lot of analysts think we'll have enough supply of offices by 2010, but I don't think so,' he said. 'Just look at the rate at which we are going and able to attract businesses, especially in the financial industry and wealth management. They want a piece of the action in this part of the world. How can you have enough offices? It takes four to five years from planning to completion of a high-rise office building. I see that this is a place where office rents will go through the roof.'
Office rents did not go up for the most part between late-1996 and mid-2004. 'This must not be overlooked when we talk about rising rentals now,' he said.
But Mr Kwek does point out some caveats in his bullish predictions - an unexpected Sars-type disaster, a terrorist attack, the reintroduction of trade barriers and government intervention in the real estate market.
'In general, governments may introduce measures that are designed for a soft landing but which actually can turn out to be a hard landing,' he said. 'In Singapore I think the authorities will only intervene to prevent excessive speculation, and in so doing they will bear in mind that Singapore has become a global city.'
Mr Kwek believes the current property cycle is unlike any Singapore has seen previously because the economy has been restructured and has emerged leaner and stronger.
Also, a vast amount of money is being invested, such as at Marina Bay with its huge integrated resort, botanic gardens and other infrastructure. 'I can visualise the potential of this place,' he said. 'Singapore will be a bustling global city, a place to live, work, play.'
According to Mr Kwek, Singapore is starting to attract 'cosmocrats' - an emerging group of globe-trotting super-rich people who are flush with cash and are buying the best properties from London and Paris to New York and Hong Kong. 'We are just beginning to see them in Singapore,' he pointed out. 'To them, if you talk about yield, they'll laugh at you. Yield is of no concern to them.'
Mr Kwek reckons luxury home prices here are not over the top, pointing to historical data as well as international comparisons. The average highest-done residential price in Singapore recently is about $3,300 per sq ft, which is still about 40-50 per cent below the equivalent figures in London, New York and Hong Kong, he said.
This means there is room for growth in Singapore luxury home prices, and by 2012 the gap could narrow to about 10-12 per cent. During the previous bull run, the highest price achieved was about $2,200 psf, Mr Kwek noted. 'At 6 per cent interest rate (and this includes inflation, which is not big in Singapore), after 10 years, you know what should be your selling price? $3,400 psf. At 7 per cent, we should be selling $3,900 psf today.'