Smaller property firms look abroad as costs rise

SINGAPORE - Higher land and construction costs and tougher property cooling measures are prompting smaller developers here to look abroad for new opportunities.

Big property companies such as CapitaLand and Keppel Land have long built a significant presence overseas in markets such as China and Australia. But small and medium-sized firms are increasingly spreading their wings too.

Last week, for instance, a Jurong site for an executive condominium drew a record offer of $418 per sq ft of gross floor area, or $273 million in total.

Last Thursday, home-grown developer Hiap Hoe's chief executive, Mr Teo Ho Beng, announced the firm's maiden foray abroad, buying a 3,795 sq m site in inner Melbourne for $33.6 million. It plans to develop a 425-unit residential-hospitality project there.

In the past three months, another smaller developer, mainboard- listed Oxley Holdings, has also made five acquisitions abroad.

The first was a mixed-development site in Kuala Lumpur on May 29. It has since ventured into other parts of Malaysia, Cambodia and China, investing an estimated $201 million.

Developers with a small presence abroad already are also set to extend their global footprint.

On Monday, the chief executive of property firm ECG Group, Mr Eric Cheng, told The Straits Times he intends to establish 50 per cent of his business overseas.

Another 25 per cent will be focused on developing local properties, and the other 25 per cent on local property services.

"A lot of Singaporeans are adopting a wait-and-see approach, expecting prices to drop, so developers need to look abroad for opportunities. Construction and land costs are going higher, margins getting leaner. We used to have margins as high as 40 per cent; now it's coming down to 10 to 15 per cent."

ECG first ventured into Thailand three years ago. Today, it is in talks to develop two projects in Bangkok, in a joint venture with a Thai developer.

Mr Cheng said the firm had struck a joint venture with a Japanese developer to buy a 650 sq m plot in Tokyo eight months ago.

It will contribute US$5 million (S$6.3 million) to build a 40-unit condo in the Shinjuku district. Last month, Sim Lian Group launched its latest mixed-use project in Kuala Lumpur, as part of diversification efforts. It has two other Malaysia projects: Taman Bukit Bayu and Desa Baiduri in Iskandar.

While the bigger players have a stiffer appetite for the risks associated with venturing abroad, smaller developers remain wary.

EL Development managing director Lim Yew Soon and Roxy-Pacific Holdings chief executive Teo Hong Lim agree that land sites here are getting costlier for smaller players to buy, but say it is prudent to understand foreign markets before committing.

Mr Lim said his firm had been unsuccessful in land bids since the launch of its development La Fiesta, in Sengkang, in January.

"Hence, besides the local development opportunities, we have also been exploring overseas opportunities, such as Malaysia, the United Arab Emirates and Myanmar. However, as sales transactions on properties overseas are not as transparent, we would need more time to evaluate if the site is suitable."

He said foreign exchange risks also need to be factored in.

ocheryl@sph.com.sg

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