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Developers in Singapore and Hong Kong, cities which last year implemented some of their most-restrictive curbs to rein in residential property prices, are shifting focus to the US, China and the UK as demand is stifled at home. |
OUE, the Singapore developer that last year agreed to buy California’s tallest building, is weighing investments in New York and Miami as it branches into the US Wharf Holdings, the Hong Kong builder of shopping malls and apartment buildings, is expanding in at least 14 mainland Chinese cities and Singapore’s Oxley Holdings plans 3,400 homes in London.
Property companies in Hong Kong and Singapore, the most-expensive Asian cities to buy a luxury residence, are venturing overseas as governments enact tighter lending restrictions and local mortgage rates are set to rise. Hong Kong home sales, which fell 38% in 2013 from a year earlier, will remain at similar levels this year, said broker Jones Lang LaSalle Inc. In Singapore, they may slide 30% after falling about 35% last year, according to brokerage UOB-Kay Hian Pte.
“Asian developers are diversifying into more mature markets; it helps them to tap more sophisticated capital markets and reduce risks,” said Nicholas Holt, Asia Pacific research director at Knight Frank in Singapore. Prime residential properties in the region have been affected by cooling measures, with Hong Kong and Singapore the most impacted, he said.
Singapore began introducing curbs four years ago with some of the strictest measures implemented in 2013, including a cap on debt at 60% of a borrower’s income, higher stamp duties on home purchases and an increase in real estate taxes. Hong Kong has raised the minimum mortgage down payment six times since 2010 and imposed taxes including a doubling of the stamp duty on deals of more than HK$2mn ($258,000) in February, plus an extra 15% levy on non-resident buyers.
The average loan-to-value ratio of new mortgages in Hong Kong was 54.5% in November, according to the Hong Kong Monetary Authority. The LTV ratio for outstanding home loans in Singapore was 47.3% as of the third quarter of 2013, the Monetary Authority of Singapore said in a report last month.
Fourth-quarter home prices in Singapore slid for the first time in almost two years, trimming annual gains to the smallest since 2008, data from the Urban Redevelopment Authority on January 2 showed. Residential prices in Southeast Asia’s fourth-largest economy will start falling in 2014 and may decline about 5% to 10%, UOB-Kay Hian forecasts.
Asian developers are seeking opportunities as developed economies recover and property prices jump. US home prices rose 13.6% in October from a year ago, the fastest pace in seven years and in London they rose about 11% in 2013 through November, according to the Land Registry.
Meanwhile, Wall Street firms including Goldman Sachs Group Inc and JPMorgan Chase & Co are seeing a prolonged slump in emerging-market assets that left equities trailing advanced- nation shares by the most since 1998 last year.
Singapore’s economy shrank for the first time in five quarters in the three months ended December 31. Hong Kong’s economy probably grew 3% in 2013, the government said in November, revising a forecast of as much as 3.5%.
“The motivation for Asian buyers to seek investments in the US and Europe is to diversify risk,” said Priyaranjan Kumar, the Singapore-based regional director of capital markets at Cushman & Wakefield Inc Cushman estimates more than $50bn of equity from Asia will be invested in Europe and North America by 2020, he said.
OUE, run by a son of Mochtar Riady, an Indonesian tycoon who founded Lippo Group with interests in property and banks, in June bought the US Bank Tower in Los Angeles for $367.5mn. The Singapore developer said in February that it sees limited growth opportunities on the island in the next two to three years. Only 17% of OUE’s Twin Peaks residential project in Singapore, scheduled for completion in 2015, has been sold, according to data from the Urban Redevelopment Authority.
The purchase of the Los Angeles tower was the start of the company’s plan to expand in the US, Mochtar Riady told Bloomberg Television in September. Future investments will be about the same size, he said, adding that he’s looking in California, New York and Miami for possible deals.
Instead of developed economies, some Hong Kong developers are seeking to tap growth in China where property prices have withstood government curbs.
About 13 cities have tightened their property policies over the past two months. China’s new home prices jumped 12% in December from a year earlier, the biggest gain in 2013, according to SouFun Holdings, the nation’s biggest real estate website owner. Home sales in November rose to the highest monthly value in almost two years. Wharf will develop a 70,227-square-metre (755,917 square-foot) residential site in Hangzhou in China’s Zhejiang province with Greentown China Holdings, Wharf said in December.
The developer’s projects and land reserve in mainland China accounted for 39% of its total assets at the end of 2012, up from 30% five years earlier. Billionaire Chairman Peter Woo said in 2011 he expected projects in China to make up 50% of the company’s asset by this year.
Sun Hung Kai Properties, Hong Kong’s second-biggest developer by market value, paid 21.8bn yuan ($3.6bn) for a site in Shanghai in an auction in September, a record for the city.
Hong Kong’s home prices have dropped about 4.6% since reaching a high in March, according to an index compiled by realtor Centaline Property Agency. Prices are expected to fall as much as 15% this year, said Jones Lang LaSalle. “Everyone is now more cautious about the impact of rising interest rates and also the possibility of more government curbs,” said Joseph Tsang, Hong Kong-based managing director at Jones Lang LaSalle. “In 2014, we’ll likely see transactions stay low and also more pressure on home prices.”
Hong Kong-based Great Eagle Holdings Ltd bought a 28-story office building and land rights to 123 Mission Street in San Francisco for $179mn in cash, the company said in October.
Some Hong Kong builders have approached Jones Lang LaSalle about investing in London and deals may happen in the next three to six months, Tsang said in an interview in October. Cushman also has said it is seeing interest from Hong Kong developers to invest in Tokyo and Bangkok.
Oxley, a Singapore-based property developer, plans to build 3,400 homes in London after buying the 40-acre (16-hectare) Royal Wharf site at the Royal Docks on the banks of the River Thames from Ballymore Properties Holdings Ltd for 200mn pounds ($330mn). Oxley will build homes, offices and shops, broker Knight Frank LLP said in statement in November.
