SINGAPORE — Singapore asset manager Keppel is looking deeper into emerging markets like India to drive investments even as China, long a source of business, struggles with a property crisis that threatens to dampen growth for the country.

Keppel, which counts Singapore state investor Temasek as a major shareholder, will send a management team to India in November to “examine the market more closely” in order to establish a foothold.

Louis Lim, chief executive officer for Keppel’s real estate division, told Nikkei Asia in an interview that this is being done as the company aims to balance its portfolio across the region, with India “looking attractive.”

“This is a good time for India,” he said. “There’s a lot of impetus for growth across sectors, not just real estate. … We see opportunities there to grow our infrastructure and our connectivity businesses.”

In Mumbai, Keppel and Indian real estate developer Rustomjee Group in May jointly launched high-rise apartments in a project named Lavie. The condos form part of the Uptown Urbania integrated township in the city’s Thane West.

Uptown Urbania sprawls over 100 acres (40 hectares), with the Lavie project spread over 8.5 acres with eight high-rise towers. It offers amenities for residents such as a swimming pool, gymnasium, business center, yoga deck and whirlpool baths.

In China, Keppel in early October announced an agreement to divest a 35% equity stake in Chengdu Taixin Real Estate Development. This joint venture between Keppel and mainland real estate developer Vanke Enterprise owns V City, a 16.7-hectare residential project in Chengdu.

Vanke is paying out about 94 million Singapore dollars ($69 million) for Keppel’s divested stake. Keppel said the V City development was completed in 2020, and all 5,399 residential units and 356 street-front shops have been fully sold.

“In the case of the more recent Chengdu divestment, that is an amount of money that we can deploy because actually the project is almost completed,” Lim said. “In terms of the value that we’ve been able to capture, the profits have already been banked and we felt it was time to take those monies and deploy them elsewhere.”

In China, Lim noted that the property sector has been through a rout and assessed that it is unlikely that the real estate space will experience a fast recovery.

The world’s second-largest economy, after the U.S., has of late been pressured by troubles from beleaguered property developers.

For instance, China Evergrande Group, once the largest developer in the country, is struggling under heavy debts accumulated over a number of years, and a sales slump has hit its cash position following a government crackdown on the sector.

In August, Evergrande filed for bankruptcy protection in America. At the same time, Country Garden Holdings, the mainland’s largest property developer by revenue, experienced a worrying cash crunch.

The World Bank in October cut its growth forecast for China into next year as Asia’s largest economy struggles with the brewing property crisis, which has spelled bad news for its gross domestic product.

Growth is now pegged at 4.4% for 2024, down from the 4.8% figure the institution forecast in April. Oxford Economics, in an August report, noted that property-related debt accounts for at least 43% of China’s GDP by estimates.

Keppel’s Lim noted that industry watchers do not believe China will see a turnaround from its property troubles next year, with his company “hunkered down” to focus on spaces that are a priority.

“We do have a residential program for China that we will continue to invest in,” he said. “We work with the local partners to buy into attractive micro-market real estate opportunities in residential.”

Keppel has a China Urban Development Investment Programme that backs residential developments in Chinese gateway cities alongside co-investors. In 2022, through this program, Keppel invested in a residential site in Shanghai with another partner.

Lim said that Keppel has been in the Chinese market for over 30 years, and it will continue to be an important place for his company in the future, even though the real estate sector is currently laden with uncertainty.

Apart from this, the company is also eyeing opportunities in ASEAN members, including countries like Vietnam, Indonesia and Malaysia.

Diving into sustainable developments is a key aspect of Keppel’s approach, Lim highlighted, and this has been seen in a few projects that the company has within its portfolio.

International Financial Centre, located in Jakarta’s central business district, is a Keppel-developed project that comprises office space and retail outlets. The development uses energy-efficient technologies and has management systems to minimize power consumption.

Over in Vietnam, the company has a stake in Saigon Centre, a mixed-used development located along Le Loi Boulevard in Ho Chi Minh City’s central business district. The project uses energy generated from solar panels to reduce carbon emissions.

“We have demonstrated that sustainability produces financial results,” Lim said. “You may be paying more in rent, but you may be paying less in energy … [if] we are able to provide technology to help your office space run more efficiently.”

Source : NikkeiAsia

The post Singapore’s Keppel Looks to India Amid China’s Property Woes appeared first on Amora Escapes.

There are many examples of resilience and outperformance in the global property industry. In residential markets, house prices in the United States hit a record high last month amid a rise in mortgage rates to their highest level since 2000. In commercial markets, industrial and logistics assets accounted for 37 per cent of global cross-border investment in the first half of this year, the highest half-year share on record, according to CBRE.

Yet, the ones that stand out are those that have stood the test of time or involve markets that are defying major trends in the global economy. Three of the biggest trend-defiers are in Asia, one of the reasons parts of the region’s real estate industry – particularly the office sector – have fared better than in the US and Europe.

The first trend-defier is Singapore’s remarkably resilient housing market. Although cross-country comparisons should be treated with caution, given that 80 per cent of Singaporeans live in public housing – 90 per cent of whom own their apartments – the city state has bucked the downturn in residential real estate in spectacular fashion. Last year, private property prices rose 8.6 per cent, compared with 10.6 per cent in 2021.

According to Knight Frank’s Global Residential Cities Index, home values in Singapore grew 7.5 per cent on an annualised basis in the second quarter of this year, the second-fastest rate among global gateway cities after Dubai. Singapore’s performance is all the more striking given that one-third of the 100 cities tracked by Knight Frank were still experiencing price declines.

While a number of factors are at work – the city state’s safe-haven appeal, pandemic-induced delays in construction and strong demand from Singaporeans – the one that is the most compelling is often viewed as the biggest threat to prices.

Successive rounds of cooling measures implemented over a 14-year period prevented excessive speculation, ensuring that the growth in prices never got out of hand. While increasingly draconian, the restrictions have targeted second-home buyers and foreigners alike. “If it wasn’t for the cooling measures, prices would have been far more volatile, causing a boom-and-bust cycle,” said Nicholas Mak, chief research officer at property portal MOGUL.sg.

A man waves from a bridge in front of the skyline of the Yeouido business district in Seoul, South Korea, in April 2020. The fundamentals of the capital’s grade A office market are the envy of landlords in the West. Photo: AFP

The second trend-defier is Seoul’s exceptionally strong office market. At a time when offices have been hit hard by the Covid-19-induced shift to hybrid working and the dramatic rise in interest rates, South Korea has emerged as the poster child for the traditional workplace.

A survey conducted by Nicholas Bloom of Stanford University earlier this year revealed that South Koreans worked from home an average of just 0.4 days a week, the lowest among 35 economies surveyed. Even in office-oriented Asia, the office occupancy rate in Seoul is the highest along with Beijing and Shanghai, having reached “normal” levels (90 per cent or more) in mid-2022, data from JLL shows.

The fundamentals of Seoul’s grade A office market are the envy of landlords in the West. The vacancy rate stood at a negligible 1.1 per cent in the second quarter of this year due to persistent undersupply, net take-up has remained in positive territory for the past three years while rents continue to rise at a brisk pace. “There is no Covid discount,” said Rob Wilkinson, deputy managing director at CBRE in Seoul. “Quite the opposite. Landlords are increasing rents.”

Investment in Seoul’s office market has soared. According to data from MSCI, transaction volumes reached US$3.4 billion in the second quarter, 15 per cent higher than the average for a second quarter during 2015-19. The sharp fall in office deals in the US, Europe and the rest of Asia in the second quarter meant that South Korea was the world’s second most actively traded office market.

The third trend-defier is Japan, and in particular what sets its economy apart from the rest of the world. For starters, Japan is not China, which matters significantly to global investors seeking a large and liquid market in Asia without the economic and geopolitical risks that China presents.

Second, Japan is the odd man out in global monetary policy. Despite a long-awaited rise in inflation and the dramatic increase in borrowing costs in almost all other major economies, the Bank of Japan (BOJ) has kept its ultra-loose policy firmly in place.

Super-low interest rates and higher loan-to-value ratios compensate for lower rental yields on commercial properties, allowing investors to generate positive cash-on-cash returns. Furthermore, Japan is stable and predictable, a rarity today. “It’s the place to ride out the storm [and] the only real investible market in Asia with depth and liquidity,” said John Howald, head of international capital, Asia-Pacific, at Colliers.

Efforts to reshape global supply chains away from China are benefiting Japan. In August, ESR, Asia’s largest real asset manager, began construction on what is expected to be the largest logistics park in Japan, partly to capitalise on “an increase in manufacturing activities spurred by reshoring from Asia back to Japan”.

To be sure, an abrupt tightening in policy by the BOJ – or sharper falls in property values in the US and Europe that make Japanese assets look expensive – could undermine sentiment. Singapore’s housing market, meanwhile, is slowing significantly while competition for prime office space in Seoul is fierce.

Yet, these are risks that either may not materialise or are relatively inconsequential given the much bigger threats faced by the property industry. Asia’s sources of resilience are likely to remain resilient for some time yet.

Source : SCMP

The post Why Singapore, Seoul and Japan Are Defying the Real Estate Downturn appeared first on Amora Escapes.

A Chinese buyer reportedly bought 20 residential units of CanningHill Piers, which is part of an integrated development near Clarke Quay. (Picture: CDL & CapitaLand)

SINGAPORE (EDGEPROP) – Residential properties in Singapore are popular with foreign buyers due to its reputation as a safe haven for their assets. Singapore is also known for having a stable property market with strong capital appreciation, a pro-business economy as well as a transparent and corrupt-free government.

Sales caveats lodged with URA as at February 2 indicates that foreign buyers made up 19.7% of total sales for condominiums in 2002; increased to 23.9% in 2012 but dipped slightly to 22.4% last year.

Impact of ABSD and COVID-19 on foreign buyers
The Singapore government first implemented Additional Buyer’s Stamp Duty (ABSD) for foreign buyers in January 2013 at a rate of 15% of purchase price or market value of the residential property, whichever is higher. The ABSD rate for foreign buyers was increased to 20% in July 2018 and again to 30% in December 2021.

The initial implementation of the ABSD in 2013 had minimal impact on the popularity of Singapore residential properties among foreign buyers, who purchased 25.5% of all condominiums sold in 2013, up from 23.9% in 2012. After the ABSD rate was increased in mid-2018, the percentage of foreign buyers dipped slightly from 24.7% in 2017 to 23.1% in 2018. However, foreign buyers seemed to shrug off the second round of ABSD rate increase and accounted for 22.4% of all condominium sales last year, up from 19.7% in 2021 when the increase was implemented.

Singapore recorded its first case of COVID-19 in early 2020, leading the government to impose the first circuit breaker in April of the same year. Restrictions and travel curbs were gradually lifted starting from March last year.

The COVID-19 travel curbs and restrictions had a greater impact on demand from foreign buyers than the introduction and revisions of the ABSD rate. The percentage of foreign buyers of condominiums in Singapore fell below 20% for the first time since 2002 in 2020 and 2021.

However, as Singapore and other countries gradually ease their COVID-19 restrictions and travel curbs, foreign buyers seem to be returning. Despite the significant increase in the ABSD rate for foreign buyers since December 2021, foreign buyers accounted for 22.4% of total sales transactions for condominiums in Singapore last year. This renewed interest could be due to a flight to safety by high net-worth individuals.

Deep-dive into nationality of foreign buyers
The nationalities of top five foreign buyers of Singapore residential properties have seen few changes in the last 20 years. Malaysia, Indonesia, China and India are consistently in the top five list.

However, there have been some changes in the ranking of the top five foreign buyers. China and India have moved up the ranks while Malaysia and Indonesia have slipped down. The United Kingdom was previously on the list but has been replaced by USA since 2012.

American buyers have benefited from the Free Trade Agreements (FTAs) signed between Singapore and USA, which accord Americans the same stamp duty treatment as Singaporeans. Citizens from Iceland, Liechtenstein, Norway and Switzerland also benefit from similar FTAs.

No change in nationalities of top foreign buyers for the last five years
From 2018 to 2022, the top five foreign buyers collectively accounted for 13% to 17% of total sales for condominiums in Singapore. This group of foreign buyers also represented 66% to 76% of all condominiums sold to foreigners.

Among the foreign buyers, the Chinese bought the most number of condominiums in Singapore for the period between 2018 to 2021. This is followed by buyers from Malaysia, India, Indonesia and USA. Last year, the top three spots went to same countries but USA moved up a spot to fourth place, replacing Indonesia who slipped down to fifth position.

Return of the Chinese buyers?
Chinese buyers have consistently been among the top five foreign buyers of condominiums in Singapore. The number of units purchased by them have grown from 157 units (5.6% of total number of units bought by foreigners) in 2002 to 1,344 units (30.7%) last year. China has also firmly supplanted Malaysia as the top foreign buyer since 2016.

The five-year average (2013 to 2017) for the number of condominiums units purchased by the Chinese was 1,298 units, down from the previous five-year average of 1,548 units. The introduction of ABSD coupled with a weaker global economy and higher residential property prices could have dampened demand. The five-year average price (2013 to 2017) for condominiums in Singapore was $1,354 psf; $270 psf higher than the earlier five-year average of $1,084 psf.

COVID-19 seemed to have limited impact on Chinese buyers who bought 1,047 and 1,738 condominium units in 2020 and 2021 respectively. The Chinese bought 1,344 units last year representing 30.7% of all condominiums sold to foreigners, which was an improvement over 30% last year. The decline in numbers of units purchased by the Chinese is likely due to the limited number of residential properties that were available for sale last year rather than the increase in ABSD rates from 2021.

Demand from the Chinese is widely expected to strengthen after the relaxation of COVID-19 restrictions and travel curbs by the Chinese government late last year as well as projected stronger economic growth for China this year.

According to the IMF’s World Economic Outlook update in January 2023, real GDP for China grew 3% last year and is expected to rebound to an estimated growth of 5.2% this year. However, IMF cautioned that China’s economic recovery could be weaken by another COVID-19 outbreak fuelled by its persistently low vaccination rate.

The return of demand from the Chinese is expected to have a positive impact on Singapore’s residential property market because they are the top foreign buyer. Since 2014, the Chinese accounts for about 30% of all condominium sales to foreign buyers.

A number of Chinese buyers have been observed to bulk buy high-end condominiums in Singapore. It was widely reported that a Chinese buyer bought 20 units in CanningHill Piers in mid-2022 for over $85 million. This trend is expected to continue into this year, which will give a boost to demand.

Demand for condominiums in Singapore by foreign buyers has remained robust over the years, accounting for at least 20% of total sales transactions since 2002. However, the percentage dipped below 20% in 2020 and 2021 due to the COVID-19 pandemic, weaker global economic conditions, and geopolitical tensions.

Last year, foreign buyers returned to the market with 22.4% of all condominium sales made by foreigners, despite the increased Additional Buyer’s Stamp Duty (ABSD) of 30% for foreign buyers from December 2021. The easing of pandemic restrictions and renewed interest in Singapore’s residential property market from foreigners may have contributed to the rise in demand.

The Chinese are expected to lead foreign demand this year, as the relaxation of COVID-19 restrictions by the Chinese government and Singapore’s reputation as a finance and education hub are expected to attract more ultra-rich Chinese to the city-state. The Chinese have consistently been the top foreign buyers of condominiums in Singapore, accounting for approximately 30% of all sales to foreign buyers in the last two years.

According to URA, 4,528 condominium units were launched for sale last year, and market observers estimate that 10,000 to 15,000 units from 40 projects will be launched this year, which should bring relief to the tight supply market and slow down the pace of price growth.

IMF’s latest World Economic Outlook projects global GDP growth to ease from 3.4% last year to 2.9% this year before rebounding to 3.1% in 2024. Global inflation is expected to fall from 8.8% last year to 6.6% this year and 4.3% in 2024, higher than pre-pandemic levels.

The renewed interest from foreign buyers, especially the Chinese, in Singapore’s residential properties will boost demand and prices, but the pace of price growth will be moderated by the surge in new launches, weak global economic outlook, inflation-driven high interest rates, geopolitical tensions, and ongoing pandemic.

Source: edge prop

The post Singapore’s overseas property investors’ changing demographics appeared first on Amora Escapes.