http://www.businesstimes.com.sg/real...singapore-soil

China player on Singapore soil

Govt's cooling measures may have hit Qingjian's business, but it'll benefit in the long haul, says its GM.

By Lee Meixian

[email protected]@LeeMeixianBT

8 Oct


FOR an overseas Chinese developer that has operated in Singapore for the last 15 years, Qingjian Realty is rather empathetic towards the government's cooling measures which other local developers are wont to bemoan.

Qingjian Realty (South Pacific) Group general manager Li Jun told The Business Times (BT) why in a recent interview: "Cooling measures have indeed affected our business, but they are beneficial from a long-term perspective. In any market in which we want to do business for the long haul, we wouldn't want rapid price growth to result in a housing bubble that eventually bursts.

Singapore is the site of the company's South-east Asian headquarters; its offices in Malaysia, Indonesia and Myanmar offices report to it.

Qingjian had started out in Singapore as a construction firm before venturing into property development in 2008. To date, it has developed 25 HDB projects, executive condos (ECs) and private condos, including 12 ongoing ones.

Mr Li said in Mandarin: "No far-sighted company would want a burst bubble, although that may be what some smaller companies hope for. Then they can exit the market and switch to another business.

"But Qingjian Group (the Chinese parent company) has been around for 62 years, 15 of them here in Singapore, and we want to be here for very much longer. So of course, we hope the country will enjoy stable growth, and the cooling measures will work towards that end."

The one measure that has afflicted Qingjian the most is the government's pullback in its number of residential land parcels released for sale. The number of confirmed-list sites put up for tender (including mixed-use, part-commercial, part-residential plots) dwindled from 34 plots in 2011 to just 16 in 2014.

Mr Li noted that the government had boosted land supply in 2011, but had from last year trimmed this significantly as supply-demand approached an equilibrium.

"Three years ago, we saw EC projects almost fully sold out in just three months. That is abnormal, especially for a product as capital-intensive as property. It shows that something's not right, that demand far exceeds supply."

He expects the demand for ECs to dwindle over time, as the proportion of buyers with a gross monthly household income not exceeding S$12,000 - the ceiling which qualifies them to buy an EC - falls, given how quickly Singaporeans' wages are climbing.

Median monthly household wages rose from about S$5,000 in 2008 to about S$8,000 in 2013 - or 11 per cent in real terms. In 2013, about 68 per cent of families here were still drawing a monthly household income of under S$12,000 (excluding employer CPF contributions but including a 12th of annual bonuses).

Qingjian is possibly the single developer with the largest presence in the north-eastern region of Punggol and Sengkang; there, it has two mass market condos and four ECs.

Mr Li, when asked why the company had homed in on the north-east, replied: "Three to four years ago, we were also interested in Jurong, but at the time, homes there were reselling at S$500, S$600 psf, when we estimated they should be commanding above S$1,000. Their rentals were on par with Bishan and Ang Mo Kio's because there was little supply, but they were selling for cheap because the properties there were old. We tendered a few times, but didn't win anything.

"After that, the government started boosting the land supply in Punggol and Sengkang. As a developer, we always look five to 10 years ahead. We saw it as a sign that the authorities were heavily promoting the area, and believed that the region would undergo rapid growth.

"So we went against the tide to bid for many plots there, while other developers shunned them because of their remote location. And because others were not as bullish on these neighbourhoods, it increased our odds of clinching the sites there."

Mr Li said that, in hindsight, it was fortunate that the company foresaw problems with the high-end residential market, and so stayed away from those tenders. Today's prime condo launches have been hobbled by obstacles such as mortgage borrowing limits and additional buyer's stamp duties; new launches have taken to dangling discounts to draw buyers.

"We were more confident about ECs and mass market condos, and it proved the correct direction to take," he said.

He expressed hope that the company would take on commercial projects soon. Qingjian has been actively bidding for plots of commercial land, which are harder to come by. It has had little success so far. Its best result was a second place for a mixed-use site in Punggol in 2011. Frasers Centrepoint, Far East Organization and Sekisui House beat them to it, however, and have since built Watertown, a waterfront development with a retail mall, on the plot.

Qingjian has not aborted its plans to list in Singapore. Two years ago, it announced plans to list here in April 2013, began reorganising its operations and engaged UOB to assist in the initial public offering (IPO) process.

It had planned to offer a quarter of its shares to the public to raise about S$125 million, but these plans have since been laid aside because of the weak IPO market in Singapore.

Also, the Beijing-based Guotsing Group, which holds its parent company Qingjian Group, has been occupied with its acquisition of Hong Kong-listed contractor firm Sunley Holdings earlier this year.

Asked about the spike in foreign developers taking part in state land tenders in recent years, Mr Li said this has been a two-way phenomenon: "I enter, you exit."

Singapore developers have been in China far longer than China developers have been in Singapore, he said. Real-estate juggernaut Capitaland, for instance, now gets more than a quarter its revenue from China, including Hong Kong. On the other hand, Chinese developers have left their shores only in the last five years.

An August state tender for a Potong Pasir commercial and residential site set market players talking when the top four bids - out of 15 - were cast by China/Hong Kong players; an observer had remarked that it was as though the softening in the market had bypassed the top bidders.

Mr Li maintained that Singapore developers continue to win land parcels over their foreign counterparts, and that many Chinese companies have bid unsuccessfully for land.

This weekend, Qingjian's Bellewaters EC in Punggol opens for applications, following good response for its Bellewoods EC in Woodlands, which has attracted 700 applications for its 561 units since Sept 27. Meanwhile, it has only 70-odd unsold units left at its Ecopolitan EC, which is targeted for completion in 2016. All its other projects have been fully sold.

[email protected]

@LeeMeixianBT