Singapore’s second golden age and its impact on real estate
September 18, 2013 / By Jason Lee
Grand plans are afoot in Singapore as the government gears up to ensure the long-term success of the economy. As early as last year, and during the recently televised National Day Rally 2013 in August, Prime Minister Lee Hsien Loong outlined major retail, housing and transport initiatives to ensure the competitiveness of the economy in the face of regional and global competition.
These plans include the consolidation of port operations to free up land for an exciting Southern Waterfront City, construction of Terminals 4, 5 and Project Jewel to enhance Changi Airport’s attractiveness to travellers, and ambitious housing plans for the East and North Eastern region of the country.
There has been continuous media coverage over these plans as 1,000 ha of land will become available to build a Dubai-esque waterfront, a purported 1,000 jobs will be created by Project Jewel, and passenger capacity of up to 85 million will be reached with the construction of Terminal 4. Also, enough housing units will be built to reach Singapore’s target of 700,000 more homes in the next two decades. These farsighted projects appear easy to achieve on the planning-board, but Singapore’s long term track record show that they will not simply be castles in the air.
Since the 1960s, Singapore’s record of completing mega projects is commendable. These include the unrivalled 40 year transformation of a sleepy little island to a global economic powerhouse, the development of Marina Bay Financial Centre and the construction of two world-class integrated resorts on what used to be the sea in the 1970s.
These visionary plans laid by the leaders of this city-state herald a new era for Singapore with real estate development at the forefront of activity. Wherever I go on the island, there seems to be some form of soil testing or construction and not a day goes by without price records being broken or deals being brokered. As a real estate researcher, I applaud and harbour great optimism for these ideas but what do these bold plans mean for those in the business?
For investors, real estate will make the transition from being an “alternative” to a “core” asset class and this view is becoming increasingly popular with both Singaporeans and those from overseas. In fact, we can see this shift happening already among big sovereign wealth funds such as Norway’s NBIM which announced in January this year a proposal to increase their global real estate allocation to 5.0%. This is no small figure considering NBIM’s total asset base is USD 747 billion. The region’s real estate sector may benefit when NBIM and other large funds focus their acquisition activities in this part of Asia. Along the value chain, developers are likely to buy up any land available for sale, creating a knock-on demand for feasibility studies and research work to support their investment forays. Construction firms will, on the back of the government’s push for productivity, invest in advanced construction techniques, lifting the overall quality of constructed buildings and workmanship in the sector.
The vision laid out by the government gives Singapore real estate market a concrete roadmap over the next two decades. As a participant in this transformation, I look forward to taking advantage of the wealth of opportunities likely to present itself in this new era of urbanisation in Singapore.
