S'pore loses top spot in real-estate trends survey

S'pore loses top spot in real-estate trends survey
PHOTO: S'pore loses top spot in real-estate trends survey

SINGAPORE - The Republic has slipped from first to third place in the latest rankings of Asia-Pacific cities based on their prospects next year in two areas - real-estate investment and real-estate development.

In the rankings published by Urban Land Institute (ULI) and PricewaterhouseCoopers (PWC), Jakarta emerged as the city with the most promising prospects in 2013 for both the rankings.

It is the first time the Indonesian capital has topped the annual rankings, which are into their seventh year.

On the investment scorecard, Shanghai was placed second.

For development prospects, a group of "secondary cities" in China were ranked second. These are second or third-tier cities such as Chongqing, Tianjin and Shenyang.

The rankings, contained in ULI and PWC's Emerging Trends in Real Estate Asia Pacific 2013 forecast, covers 22 Asia-Pacific cities.

In a statement issued out of Hong Kong yesterday, ULI and PWC said that despite continuing global economic uncertainty, real- estate investor sentiment in the Asia-Pacific remained relatively positive.

They said: "However, while steady economic growth, rising incomes and stable or increasing property values are contributing to an overall sense of optimism, the outlook is tempered by concerns among investors that prime assets in key real estate markets in the Asia-Pacific are becoming overpriced."

As a result, markets outside core cities are becoming attractive for investment and development.

This is reflected in Jakarta being named the top choice for both investment and development in the coming year, the statement said.

Singapore retains its popularity among real estate investors who see it as a "safe haven offering solid, but not spectacular, returns underpinned by the city's position as a global financial hub".

ULI and PWC said: "The city's office market has recently run out of steam with significant amounts of new Grade A office space drawing tenants away from existing buildings, a problem which is compounded by a shrinking headcount in the local financial sector. Rising vacancies and falling rents are causing problems for some international funds looking to exit the market."

The statement noted that Jakarta lacked investment-grade stock and its economy - though growing - lacked the enterprise, scale and infrastructure of its more developed neighbours.

However, many real estate professionals identify it as the region's most favourable emerging market, with business transactions generally easier and more transparent than in frontier markets such as Vietnam.

Indonesia's interest rates and inflation are stable; its gross domestic product is growing steadily, and foreign direct investment grew by 39 per cent in the first half of 2012.

"Demand for property is strong, resulting in year-to-year office rents leaping by 29 per cent. Despite some challenges, such as difficulties securing bank debt and locating reliable local partners, Jakarta holds significant promise."

ULI Trustee and North Asia vice-chairman Richard Price said: "With high rents, high capital values, low yields, and an abundance of local capital, many international investors are struggling to see attractive investment opportunities in the Asia-Pacific's prime real estate markets."

Mr Price, who is also chief executive, Asia Pacific, for CBRE Global Investors, said it is why investors are seeking compelling investment opportunities, for example, in frontier markets such as Indonesia, or in overlooked capitals such as Kuala Lumpur and Bangkok; this explains these cities' strong showing in this year's report.

Secondary markets such as Kowloon in Hong Kong and second-tier Chinese cities are also experiencing increased interest from international buyers, he added.

In the report a year ago which put Singapore in top position for both real estate investment and development prospect rankings, Shanghai was No 2 on the development scorecard, followed by Chongqing, Beijing and Jakarta.

Last year's investment ranking listed Shanghai second, followed by Sydney, Chongqing and Beijing. Jakarta was in 11th position.

US-based ULI is a 76-year-old global, non-profit research and education organisation representing the entire spectrum of land use and real estate development disciplines in private enterprise and public service.

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