Downside risk in HK property puts S’pore developers on upswing

SINGAPORE — Analysts see the Singapore property market on the cusp of a multi-year upswing, a trend that has seen shares of real estate developers rise 33 per cent over the past year, after four years of decline.

By comparison, Hong Kong’s market appears to be headed for a major correction, making property counters in the Chinese territory a less attractive option.

According to the Singapore Exchange, all 31 of Singapore’s real estate investment trusts with property assets, in addition to the six stapled trusts, have averaged a 17.6 per cent total return for the year through to Aug 4.

Local developer CapitaLand said that property investors see Singapore as more attractive than Hong Kong, London, or cities in Australia.

CapitaLand and City Developments both say that Singapore’s residential market may be “bottoming out”.

Hong Kong home prices have shot ever higher, bouncing back from the global financial crisis and periodic bouts of government cooling, while Singapore residential prices have declined 12 per cent from a peak, dropping for 15 straight quarters.

A 70 per cent divergence in home prices in Singapore and Hong Kong over the past six years is due for a reversal, according to Morgan Stanley. Singapore developers score better in terms of affordability for buyers, a tight home supply, and a potential easing of policy measures, the bank said in a note.

The bank’s analysts forecast Singapore residential property prices to rise 5 per cent next year. In contrast, Hong Kong’s multi-year price decline could start with a drop of 5 per cent this year, it said. “The consensus is that Hong Kong’s housing prices may have more downside risk than upside,” said Ms Joyce Kwock, an analyst at Nomura Holdings.

Mr Nicholas Mak, head of Research and Consultancy Department at SLP International Property Consultants, was unconvinced about the price comparison between the residential property price movements of the two cities.

“Singapore and Hong Kong are two different cities located more than 2,500km apart.

“Why should the property price movement in one city affect the property prices in the other city? Real estate is the most immovable asset. Their prices are affected by many factors,” he said.

Mr Colin Tan, director of research and consultancy at Suntec Real Estate Consultants, disagreed that there is “tight home supply”, and pointed instead to an oversupply of housing and falling rents.

Market sentiment, however, is “good right now because new launches are doing well”, he said.

“So far only new launches are doing well … To the extent that the good sentiment spreads to the rest of the market, some sellers may get good prices, but this good sentiment cannot be sustained because of the general oversupply,” added Mr Tan. AGENCIES, with ADDITIONAL REPORTING BY TAN WEIZHEN