Singapore property losing some shine: UBS

Singapore is less likely to be on the radar of institutional real estate investors this year compared with other developed regional cities, especially those in Australia and Japan, said a UBS report.

It cited the oversupply in the office and logistics sectors here amid weak consumer sentiment and a housing market dealing with cooling measures.

The Monetary Authority of Singapore noted last November that property transactions, prices and mortgages could have been higher by as much as a third had these measures not been implemented.

Mr Graham Mackie, managing director and head of global real estate for Asia Pacific at UBS Asset Management, said yesterday that there is certainly no rush to exit Singapore and some global investors still perceive the country as a relatively safe market.

Real Capital Analytics data noted that while capital of about US$28.7 billion (S$39 billion) from Singapore was invested in overseas real estate last year, up 49 per cent from 2014, total inbound capital rose 157 per cent to US$3.4 billion.

Globally, investors are increasing their exposure to real estate, Mr Mackie noted. Property traditionally formed about 5 per cent of investors' portfolios but this seems to be going up to 10 to 15 per cent.

Most expensive real estate markets worldwide

  • 1. Monaco

    According to the Wealth Report 2016, Monaco remained the world's most expensive residential real estate market on a square-meter basis, with US$1 million buying only 17 square meters, or 183 square feet.

  • 2. Hong Kong

    Hong Kong was the second most-expensive market, with US$1 million buying 20 square meters, or 215 square feet.

  • 3. London

    London ranked third with 22 square meters, or 236 square feet.

  • 4. New York

    New York once again ranked as the most expensive US city on a per-meter basis, with US$1 million buying 27 square meters, or roughly 290 square feet.

  • 5. Geneva

    US$1 million buys 40 square metres.

  • 6. Sydney

    US$1 million buys 40 square metres.

  • 7. Singapore

    Singapore is the 7th most expensive real estate market in the world, in the list which looked only at "prime" real estate.

  • 8. Shanghai

    According to the report, Shanghai saw the third most substantial rise in property prices last year.

  • 9. Paris

    US$1 million buys 57 square metres.

  • 10. Beijing

    US$1 million buys 58 square metres.

  • 11. Los Angeles

  • 12. Rome

  • 13. Miami

    Miami ranked third among US cities, with 6 per cent price growth.

  • 14. Moscow

  • 15. Tokyo

  • 16. Istanbul

  • 17. Berlin

  • 18. Mumbai

  • 19. Sao Paulo

    Brazil's economic crisis means that US$1 million now buys 203 square meters, or 2,185 square feet of prime real estate. That compares with 142 square meters, or around 1,500 square feet, last year.

  • 20. Cape Town

    In Cape Town, US$1 million buys 255 square meters, or 2,745 square feet.

The report said there appears to be greater capital value in Australia and Japan now, relative to Singapore, Hong Kong and China.

Property yields in Australia are significantly higher than risk-free rates in the market.

Mr Mackie said: "It is a relatively efficient market with strong rule of law... The Australian dollar has depreciated significantly against the US dollar and investors who are more swayed by currency considerations see Australia as relatively cheaper."

In Japan, while negative interest rates will be a short-term "sugar rush", propelling asset price inflation, offices in Tokyo are still attractive and will outperform on the back of strong rental growth, said Mr Toh Shaowei, director of research and strategy (Asia Pacific) for global real estate at UBS Asset Management.

Inbound tourism in Japan continues to be strong, thanks to the cheap yen, which should prop up retail real estate, he added.

"Especially in Tokyo, the residential market still has some runway. The Tokyo resident population has been growing, but 45 per cent of households there do not own their own dwelling - (presenting) a huge room for rental opportunities and residential sales to grow."

Economic conditions in the region will remain challenging over the near term, the report said.

Easier credit conditions could lead to a rise in asset prices that may not be backed by fundamentals, while Asian currencies could fall further in the next six months to a year.

But Asia's growth continues to be higher than the rest of the world, and its dynamics - the rising middle class and increasing proportion of working age adults in some of its cities - will still be very supportive of real estate, said Mr Toh.

wrennie@sph.com.sg


This article was first published on April 5, 2016.
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