Published December 4, 2009

S'pore's rich bullish about property investments

High net worth investors here plan to increase their exposure: survey


(SINGAPORE) SINGAPORE'S rich are among the most optimistic of investors when it comes to property investments, and are planning to raise their exposure to the asset class in the next two years, a new study shows.

The study, by Barclays Wealth and the Economist Intelligence Unit, found that 53 per cent of high net worth investors in Singapore expect an increase in the value of their property investments over the next two years. This is slightly more than the 49 per cent of respondents who hold the same view globally.

After bottoming in Q2 2009, private home prices in Singapore rose 15.8 per cent quarter on quarter in Q3. Analysts expect property prices to stay firm for the year ahead, and are especially upbeat about the high-end segment.

Wealthy investors here are also planning to allocate a larger proportion of their investment portfolios to property in future. Real estate investment among wealthy individuals in Singapore is set to rise to 28 per cent of the average portfolio over the next two years from 25 per cent now, according to the report. That excludes properties used as a principal residence.

Some 125 high net worth investors were surveyed in Singapore. They were part of the more than 2,000 high net worth individuals - with investable assets ranging from £pounds;500,000 (S$1.1 million) to more than £pounds;30 million - who were surveyed globally in August and September this year.

The survey showed that the high level of confidence in the potential of real estate was global, with investors in nine of the 10 markets covered - including the US, UK and Hong Kong - planning to increase their property allocation over the next two years.

'High net worth investors are picking up on signs of a gradual economic recovery, yet continue to remain cautious of potential dangers, after many have fallen precipitously from earlier heights,' said Didier von Daeniken, chief executive of Barclays Wealth for Asia-Pacific.

Property has always an asset of choice for Asian and Singaporean investors; and with the current recovery, interest in real estate will pick up, bankers said.

'Property is an important asset class for Asian high net worth investors,' said Olivier Denis, head of OCBC Private Bank. 'The interest in the Singapore property market has always been strong and investors are constantly scanning the market for opportunity. Moving forward, we expect the interest to stay positive provided that the overall economic climate remains stable.'

Investors are once again eyeing property as prices in many markets have fallen from earlier highs, the survey found. Barclays Wealth's survey showed that 75 per cent of high net worth investors in Singapore continue to see opportunities in the property sector.

Transactions of high-end homes - generally thought to be the domain of wealthy investors - started to pick up in Q3. The number of units transacted at more than $2,000 per square foot (psf) during the quarter is just below the number of units seen in Q1 2007 prior to the last run-up in the high-end market, noted DBS Group Research analyst Adrian Chua.

And even as the overall property market cooled in October, the high-end segment held up. Some 285 homes with a median price of more than $1,500 psf were sold in October 2009, compared with 115 in September.

'The high-end investors are coming back but it is not the same volumes of transactions we have seen in the past (during the last boom),' said Knight Frank chairman Tan Tiong Cheng.

He pointed out that the profile of investors buying high-end apartments in Singapore has changed. The previous boom was driven by financial sector employees flush with cash. This time around, interest is coming mostly from traditional investors who are sinking their funds into real estate as they consider those assets to be safe, Mr Tan said.

The survey also showed that more than half of Singaporean investors - 54 per cent - feel that tight credit conditions are preventing them from capitalising on opportunities. They also expect home prices to climb once credit starts to flow freely through the global economy.

But bankers cautioned against overexposure to property. 'While it can be tempting to seek refuge in property as a safe haven, investors must be careful to avoid overexposure to an asset class that has traditionally proven to be susceptible to economic cycles,' said Barclays' Mr von Daeniken.

Manpreet Gill, Barclays Wealth's strategist for Asia, called for diversification and said that Singaporean investors' propensity to invest outside the country is positive as it reduces risk. In the survey, the investors identified the US, India, the UK and China as attractive foreign markets.

Mr Gill also added that wealthy investors here can look at real estate investment trusts (Reits) as alternatives to brick and mortar investments.