Brexit fallout muted in long term: Developers

Brexit fallout muted in long term: Developers

Singapore property companies with significant exposure to Britain are counting the cost of Brexit but they believe the fallout will be muted in the longer term.

Oxley Holdings, which is building Royal Wharf, a 363,000 sq m township development in East London, yesterday said it expects limited foreign exchange impact.

The project has an unbilled contract value of about $1.6 billion which will be recognised progressively over the next three to four years. The first phase is set to be completed next year.

The company also has an undeveloped plot at nearby Deanston Wharf as well as a 20 per cent stake in British developer Galliard Group.

British pounds are recorded in the group's book in terms of the building costs for Royal Wharf, the collection of payment from buyers and a large portion of bank loans for the project, it noted.

"As the cost of construction and the bank loans will be set off against the revenue in the same currency, depreciation of the pound on the group's revenue in Singapore dollar terms will be substantially mitigated, and the impact will only

be shown in the profit portion," it said.

City Developments last Friday said it "continues to have confidence in the long-term fundamentals of the UK economy and our strategy of targeting predominantly UK nationals for our residential developments".

All its residential acquisitions in the United Kingdom over the past two years were outside central London.

Its 65.3 per cent-owned London- listed hotel subsidiary Millennium and Copthorne Hotels has a diverse global portfolio, with just 22 of 126 hotels in Britain.

Mr Ronald Tay, chief executive of Ascott Residence Trust Management, also said on Friday that the firm's portfolio in Europe is "well diversified" and that it takes a long-term view of the markets.

Apart from potential losses via earnings translations from sterling to Singapore dollar, property players with British exposure could be affected by reduced buying sentiment from buyers in the UK due to economic uncertainty, though this would be offset by interest from overseas purchasers, said Mr Tata Goeyardi, Religare Capital Markets' director of ASEAN sales.

While the near-term impact has been largely felt in the equities and currency markets, fundamentals for developers are likely to remain quite stable for now, said Mr Derek Tan, DBS vice-president for group equity research.

He said: "For example, office rents aren't just going to fall 15 per cent because the market has changed. But, of course, the longer-term impact is still uncertain."

wrennie@sph.com.sg


This article was first published on June 29, 2016.
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