Developers from China and Hong Kong have emerged as major players in Singapore’s property market, accounting for three out of five top foreign land bidders over the last 12 months, reported Channel NewsAsia.
In fact, a consortium consisting of China’s Nanshan Group and Hong Kong-based Logan Property submitted a record bid of S$1 billion in May to successfully acquire a residential plot at Stirling Road in Queenstown.
With Chinese developers making up five of the nine bidders for a development site in Tampines, questions have arisen on why these companies are willing to pay a high price to purchase development sites in the city-state.
According to Yen Chong, Deputy General Manager of Qingjian Realty, a property player from Qingdao in China with over 10 projects in Singapore, they decided to expand into the city-state in 2008 due to its stable market and the country’s good governance.
Singapore-based developer GuocoLand also commented that the strong interest by Chinese property players in the city-state is not surprising.
“For any major regional investor, Singapore is almost like an asset class. It’s very often part of the diversification of assets… so it is actually extremely competitive whether it is residential, mixed-development or commercial,” said GuocoLand Group Managing Director Cheng Hsing Yao.
However, the high bids of Chinese developers appear to be pushing up the prices of developments sites and is reducing the profit margins of Singaporean developers.
Based on data from Cushman & Wakefield, the average number bids per site have increased to about 13 in 1H 2017 from around eight in the same period a year ago, while the average premium paid for comparable sites surged from -4 percent to 29 percent over the same period.
However, the property consultancy’s Research Head Christine Li thinks that the higher premiums for development sites is due to the rising confidence in Singapore’s property market.
“Over the past three years, if you look at the developers’ balance sheets, they are overall healthy because they’ve cleared off the most of their unsold units – the figure is at a historic low,”
“The recovery in the market has prompted developers from all countries to bid higher. They are going in with the mindset that they will be selling within 12-18 months. That’s why they are bidding ahead of market fundamentals.”
Meanwhile, Savills’ Senior Director for research and consultancy Alan Cheong thinks that the high bids of Chinese developers for Singapore sites could have been influenced by the spiralling home prices in China.
“It’s rubbed off from their experiences in China. They may bid at zero margins but by the time they launch it, they make a handsome profit out of it. So they translate that to Hong Kong, they translate that into Singapore (and) that’s why we have aggressive pricing here in Singapore. It’s the mindset.”
Another trait of Chinese developers is their quick decision-making process that enables them to be more successful in bidding for land in Singapore, added CBRE’s Research Head Desmond Sim.
“Most of the time, they would have a single approval person and it is faster than, for example, the Japanese or some other (companies).”
Image sourced from The Star
This article was edited by the editorial team of PropertyGuru. To contact them about this or other stories email Editorial-MY@propertyguru.com.my
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