reporter2
08-12-15, 16:37
http://www.businesstimes.com.sg/real-estate/interest-in-singapore-property-seen-waning-in-2016
Interest in Singapore property seen waning in 2016
By Lee Meixian
[email protected]
@LeeMeixianBT
Dec 2, 2015
SINGAPORE has been slipping in its real estate investment prospect rankings over the past few years, falling from first place in 2011 and 2012, to third in 2013, seventh in 2014 and ninth in 2015.
It is expected to fall further to 11th place in 2016, halfway down the list of 22 regions studied by PwC and Urban Land Institute. In other words, most investors are showing little interest in Singapore next year.
Tokyo, Sydney and Melbourne took the top three spots for investment prospects in 2016, in that order.
Tokyo has topped the list for the last three years as ongoing quantitative easing in Japan led to unbridled asset price growth, while its local banks offer cheap financing.
For Australia, the magnets are relatively high cap rates with room still to run, a depreciated local currency, and plenty of office-to-residential redevelopment opportunities.
Colin Galloway, principal author of the Emerging Trends in Real Estate Asia Pacific 2016 report, said Singapore's ranking is not a terrible result, considering its rather weak economy and declining residential sector.
He remains sanguine, believing that institutional investors will like Singapore for its status as a key gateway city, its liquid market and the availability of some good assets.
"You're going to see assets appearing on the market. A number of assets (in funds) are reaching the end of their life span and will be put up for sale and they'll probably fetch a pretty good price. I don't think it's going to be a market on fire (in 2016) but it will probably drift with the currents and sustain itself over the medium term," he said.
In spite of the quietness on the transaction front, he knows some counter-cyclical global investment funds that are interested to buy Singapore high-end residential assets in the next 18 months, viewing the bottom of the market as a good entry point after prices of luxury homes tanked.
Office properties - long a perennial favourite as an asset class - aren't faring any better in Singapore either.
The report quoted one fund manager as saying that the offshore financial services and wealth management sectors, such as regional and global banks here, have seen their growth slowing.
"So you've got an absorption problem, but with much less of a domestic scale to support it."
An impending supply of close to four million square feet of office space next year is also pressuring rents and occupancy levels.
"Volume has been thin over the last six months," said a broker. "Sellers have not been eager to divest, so they're trying to maintain pricing. At the moment, we're still trading at the 3 to 4 per cent level."
Singapore is an exception among Asia-Pacific markets whose banks' borrowing rates have mostly remained unchanged.
Borrowing rates in Singapore have increased since the start of the year, with the three-month Singapore interbank offered rate more than doubling to 1.07 per cent, and swap offer rate almost doubling to 1.39 per cent.
At the same time, Singapore and Hong Kong have seen their cap rates plateau at very tight levels over the last 12 months. This puts them at the greatest risks when interest rates go up, because their cap rates are so compressed, the report said.
In terms of capital outflows, this year has seen a cash migration from Asia to other parts of the world that surpassed even last year's record levels. This exodus is set to continue, even increase.
The main contributor to this trend is China, where institutional, corporate, and private capital is buying both within Asia and outside. The Chinese are responsible for a quarter of all Asian commercial real estate outbound capital.
Surprisingly for its size, Singapore is also a major exporter of capital, partly because the city-state tends to be an aggregator of global funds - which are not essentially Singapore monies, but regional and global capital pooled in funds based here.
"But recently it has also been a large exporter of funds in its own right, with local property companies, real estate investment trusts, and investment funds currently finding little appeal in their home market," the report said.
Mr Galloway does not expect Singapore to descend the list any more than it already has.
Chee Keong Yeow, real estate and hospitality practice leader at PwC Singapore, agreed, adding that institutional investors will continue to strike deals here at the right price.
Other than funds selling assets at the end of the fund cycle, not many others are, going by a survey of the industry's recommendations. About 80 per cent advocate buying and holding across the sectors.
"There are people who still want to come into this market, so it's not that bad," he said.
Interest in Singapore property seen waning in 2016
By Lee Meixian
[email protected]
@LeeMeixianBT
Dec 2, 2015
SINGAPORE has been slipping in its real estate investment prospect rankings over the past few years, falling from first place in 2011 and 2012, to third in 2013, seventh in 2014 and ninth in 2015.
It is expected to fall further to 11th place in 2016, halfway down the list of 22 regions studied by PwC and Urban Land Institute. In other words, most investors are showing little interest in Singapore next year.
Tokyo, Sydney and Melbourne took the top three spots for investment prospects in 2016, in that order.
Tokyo has topped the list for the last three years as ongoing quantitative easing in Japan led to unbridled asset price growth, while its local banks offer cheap financing.
For Australia, the magnets are relatively high cap rates with room still to run, a depreciated local currency, and plenty of office-to-residential redevelopment opportunities.
Colin Galloway, principal author of the Emerging Trends in Real Estate Asia Pacific 2016 report, said Singapore's ranking is not a terrible result, considering its rather weak economy and declining residential sector.
He remains sanguine, believing that institutional investors will like Singapore for its status as a key gateway city, its liquid market and the availability of some good assets.
"You're going to see assets appearing on the market. A number of assets (in funds) are reaching the end of their life span and will be put up for sale and they'll probably fetch a pretty good price. I don't think it's going to be a market on fire (in 2016) but it will probably drift with the currents and sustain itself over the medium term," he said.
In spite of the quietness on the transaction front, he knows some counter-cyclical global investment funds that are interested to buy Singapore high-end residential assets in the next 18 months, viewing the bottom of the market as a good entry point after prices of luxury homes tanked.
Office properties - long a perennial favourite as an asset class - aren't faring any better in Singapore either.
The report quoted one fund manager as saying that the offshore financial services and wealth management sectors, such as regional and global banks here, have seen their growth slowing.
"So you've got an absorption problem, but with much less of a domestic scale to support it."
An impending supply of close to four million square feet of office space next year is also pressuring rents and occupancy levels.
"Volume has been thin over the last six months," said a broker. "Sellers have not been eager to divest, so they're trying to maintain pricing. At the moment, we're still trading at the 3 to 4 per cent level."
Singapore is an exception among Asia-Pacific markets whose banks' borrowing rates have mostly remained unchanged.
Borrowing rates in Singapore have increased since the start of the year, with the three-month Singapore interbank offered rate more than doubling to 1.07 per cent, and swap offer rate almost doubling to 1.39 per cent.
At the same time, Singapore and Hong Kong have seen their cap rates plateau at very tight levels over the last 12 months. This puts them at the greatest risks when interest rates go up, because their cap rates are so compressed, the report said.
In terms of capital outflows, this year has seen a cash migration from Asia to other parts of the world that surpassed even last year's record levels. This exodus is set to continue, even increase.
The main contributor to this trend is China, where institutional, corporate, and private capital is buying both within Asia and outside. The Chinese are responsible for a quarter of all Asian commercial real estate outbound capital.
Surprisingly for its size, Singapore is also a major exporter of capital, partly because the city-state tends to be an aggregator of global funds - which are not essentially Singapore monies, but regional and global capital pooled in funds based here.
"But recently it has also been a large exporter of funds in its own right, with local property companies, real estate investment trusts, and investment funds currently finding little appeal in their home market," the report said.
Mr Galloway does not expect Singapore to descend the list any more than it already has.
Chee Keong Yeow, real estate and hospitality practice leader at PwC Singapore, agreed, adding that institutional investors will continue to strike deals here at the right price.
Other than funds selling assets at the end of the fund cycle, not many others are, going by a survey of the industry's recommendations. About 80 per cent advocate buying and holding across the sectors.
"There are people who still want to come into this market, so it's not that bad," he said.