Analysts say cash-rich investors ready to enter property market

By Valarie Tan, Channel NewsAsia | Posted: 21 April 2009 2012 hrs

SINGAPORE: Singapore's property market turned in a poor showing in the first quarter as developers and home-buyers braced themselves for a prolonged downturn.

But analysts said there are cash-rich individuals out there who might inject life into the Singapore market in the coming months.

They said these individuals with deep pockets have been doing their homework in recent months and are now ready to close in on good deals.

Analysts said developers are also not looking to buy now.

Brandon Lee, investment analyst, DMG & Partners Securities, said: "Developers are also more focused on developing and selling their current backlog of units, so from that end, they'll not look to acquire more assets for residential space and also if you look at REITs, they're currently more concentrated and focused on capital preservation as well as organic growth.

"If you look at yields right now, they're trading in historically high of about 12 per cent, so it's going to be very tough for them to make yield-accreditative acquisitions."

Instead, analysts said developers are more open to joint ventures with private investors who have the cash.

Steven Ming, director, investment sales, Savills, said: "It could be transactions ranging from 10 million to 100 million. It could be individuals buying it or a few friends coming together with a pool of funds to buy into the right investments.

"These could be residential block opportunities - buying into unsold units within a launch development or potential joint venture opportunities with existing developers.

"Developers have amassed quite a sizable land bank in the last two to three years. If anything, they would welcome joint venture partners. So there are investors out there who are exploring opportunities or perhaps undertaking to buy off, say, half a project."

Analysts said such investors look for opportunities where prices have been discounted by 30 to 40 per cent from their peaks.

With gaps between buying and selling prices narrowing, analysts expect to see more deals being forged this quarter, if not the next. - CNA/vm