Singapore developers looking abroad as property cooling measures at home hit hard

ALL content used in this not-for-profit blog remain the property of their respective owners.
http://www.bloomberg.com/news/2014-11-30/singapore-firms-buying-new-york-to-tokyo-as-curbs-bite.html

Singapore developers struggling to sell apartments in their home market are buying property overseas, turning the island-state into the largest foreign investor from the region this year.

Companies including City Developments Ltd. (CIT) and Keppel Land Ltd. (KPLD) pumped $2.32 billion into overseas markets in the nine months through September, a threefold increase from the same period last year and the most in at least eight years.

This according to data from Real Capital Analytics Inc., a research firm that specializes in investments in commercial property.

The Singapore developers are looking abroad as government measures to rein in property values have caused residential prices to fall for four straight quarters, the longest period of declines since 2009.

At the same time, the developers have become increasingly vocal about the difficulties they face in Singapore, where their margins have been squeezed by falling property prices.

Government measures to stem growth in the market and prevent a speculative bubble have brought residential prices down about 4 percent from the peak in September 2013.

“In Singapore, the residential market is virtually dead,” said Desmond Woon, executive director at luxury-home developer Ho Bee Land Ltd. (HOBEE) “With the government measures in place, it has become very hard to do development of residential properties.”

The government’s curbs have included:

• A cap on debt at 60 percent of a borrower’s income.
• Higher stamp duties on home purchases.
• Additional taxes for foreigners buying residential property (raised to 15 percent in 2013)
• Basic buyer’s stamp duty rate of about 3 percent.
• 16 percent levy if home-sellers sell within the first year.

City Developments warned last month that Singapore’s housing market may face “fire sales” and mortgage defaults as sales and prices fall.

The flipside of the developers’ growing interest in overseas real estate has been a drop in bidding at Singapore land auctions as the market cooled.

Developers are willing to take on the additional risks associated with overseas investments, said Terence Tang, managing director of capital markets and investment services for Asia at Colliers International.

They are also finding higher yields. Profit margins for developing homes in Singapore are between 5 percent and 10 percent while margins in Australia are between 10 percent and 20 percent. Office properties in London can yield between 4 percent and 6 percent while Singapore office yields are about 4 percent.

The city-state has fallen out of a ranking of the top 20 cities for property investment, according to a report by Cushman & Wakefield.

Singapore, along with Toronto, Moscow and Seoul, was knocked out by Beijing, Shanghai, Miami and Stockholm, the report showed.