Weak local sentiment pushes Singapore-based developers to expand overseas

November 18, 2015 / By  

The sentiment of Singapore property developers continues to remain weak as evidenced by the recent joint survey by the Real Estate Developers’ Association of Singapore and the Department of Real Estate, National University of Singapore. The Singapore property market has been facing lower sales and softened prices since the release of seven rounds of government cooling measures between 2010 and 2013. The revenue squeeze and fewer development opportunities have pushed more Singapore-based developers, active across various property sectors, to look overseas for real estate investment opportunities in recent years.

Singapore-based developers have been venturing overseas since the 1990s, attracted by the promise of robust economic growth driving demand in countries such as China.  Cross-border real estate asset and land acquisition by development arms from 2010 to 2012 totalled SGD 3.5 billion. The bulk of this went into China, with smaller percentages into India, Vietnam and other countries. However, recent numbers have shown a shift of this trend. As China’s growth slows and local cooling measures gradually imposed from 2010 made their effects felt most intensely from 2013 onwards, a new wave of Singapore-based developers went overseas. Their investments almost doubled that of the earlier wave with SGD 6.8 billion invested between 2013 and mid-2015. As most of the reported deals do not have development costs factored in, actual investment commitments are expected to be much higher than shown in the graph (see Figure 1).

Figure 1: Cross-border investments by Singapore-based developers

Joining the recent wave is a number of local developers who were hitherto more focused on the Singapore residential market. These investments went to a greater diversity of recipient countries, including Australia, which saw the bulk of the investments at approximately 32%, followed by the UK at 19%, and then the US, Hong Kong and China at approximately 13% each (2013 to mid-2015). Some key uniting features of the majority of these markets are that they are mature and transparent, with strong legal and regulatory frameworks. These mirror the conditions that Singaporean players are used to at home. However, they will need to be nimble and flexible to accommodate unique local market characteristics, as well as user and buyer preferences.

While local sentiment is likely to remain weak with signals from the government that cooling measures are to remain, local developers’ exposure to a greater variety of global markets is likely to create players who are more nimble and able to diversify their business in different market cycles as they continue to make their mark in new locales.

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