Singapore developers build overseas as foreign firms splash out on land


* At least four mid-tier developers venture abroad this year

* Home sales drop after government price-curbing action

* Official home-building plan exacerbates oversupply concern

* Foreign developers win most land auctions in five years,drawn by economic stability

By Rujun Shen and Anshuman Daga

SINGAPORE, Dec 23 (Reuters) - Singapore's mid-tier propertydevelopers are laying the first stones of their overseasbusiness as domestic sales plunge, land prices climb, andforeign rivals bet high stakes on the city-state's long-termprosperity.

Hiap Hoe Ltd and Oxley Holdings Ltd followed sector leader CapitaLand Ltd this year bygoing abroad. At home, government action to slow the rise ofrecord-high prices led to a 50 percent drop in third-quarterprivate home sales.

Official plans for a significant supply of new homes overthe next decade make the price outlook even dimmer. Yet landprices have rallied, pushed up by foreign developers drawn bypolitical and economic stability.

"The Singapore market is now very tough," said Teo Ho Beng,Hiap Hoe's chief executive officer. "Getting new land is achallenge, because there is so much competition."

Hiap Hoe made its first foray abroad by buying threeproperties in Australia in the past four months. In comingyears, most of its revenue will likely come from outside theisland-state, Teo said.

Oxley Holdings bought property and invested in developers inBritain, Cambodia, China and Malaysia. Sim Lian Group Ltd added to its overseas portfolio by buying property inAustralia.

SingHaiyi Group Ltd, which earns 98 percent ofrevenue in Singapore, bought two properties in the United Statesthis year and appointed Neil Bush, brother of former U.S.President George W. Bush, as non-executive chairman. The companyshifted focus to Singapore two years ago in response toproperty-price cooling measures in its native Hong Kong.


Seventy-two developers participated in this year's nineprivate residential-use land auctions, including at least eightfrom abroad. That made 2013 the most competitive year since atleast 2008 in terms of average number of bidders per auction,showed data from the Urban Redevelopment Authority of Singapore.

Local developers outbid foreign rivals and their partners infive of the nine auctions, their lowest win ratio in at leastfive years.

Kingsford Development Pte Ltd, from China, bid at four ofthe auctions and won two. In one of the auctions it offered asmuch as 16 percent above the bid of the closest competitor,despite soft home sales at its maiden Singapore project on asite purchased last year.

"We have confidence in the Singapore market," said VictorYao, Kingsford's senior business development manager andarchitect. "Singapore's government is very good at maintainingproperty market stability."

Strong rule of law, a steady economic outlook and culturalsimilarity made Singapore ideal for Kingsford's first sallyabroad, Yao said.

China's property market has been shaken in recent years bygovernment measures to curb runaway prices, leaving developerswary of further intervention.

"The profit margins here aren't as good as in China, but themarket is more stable," Yao said.

The other two foreign winners were subsidiaries ofMetallurgical Corporation of China Ltd andMalaysia's Sunway Bhd.


The URA's Private Residential Property Price Index hasclimbed over 30 percent since the end of 2009, rising 3.9percent in July-September from a year earlier.

Sales, however, nearly halved to 2,430 units after thegovernment in June curbed personal housing loans. That comparedwith 4,538 in April-June and 5,916 a year earlier, URA datashowed.

"Developers are beginning to cut their prices in existingand new projects," City Developments Ltd said in itsquarterly results.

Yet land prices have risen on an island smaller than NewYork City. Singapore has grown over 20 percent in the past 50years and the government projects an extra 8 percent growth by2030 to accommodate economic activity.


Every five years, the URA issues a land-use plan for thenext 10 to 15 years. A draft last month showed land reserved forup to half a million mostly public homes, enough to house 2million people. Public homes can be sold in the open marketafter varying years of occupancy.

This has exacerbated concern of oversupply as the governmentprojects population growth of up to 1.6 million people, or 30percent, to 6.9 million by 2030 from 2013.

The government regards current supply as "adequate" whilethe Real Estate Developers' Association of Singapore said itsupported the government's "calibrated approach".

"For the next five years, everyone is feeling concernwhether our residential supply will be too much," said AliceTan, head of consultancy and research at Frank Knight. (Editing by Christopher Cushing)

View Comments (0)