24th Jan 2008
Chong Jin Hun
KUALA LUMPUR: Malaysian property developers are scrambling for a slice of the Singaporean real estate pie to maximise global exposure albeit near home, when geographical diversification is deemed crucial for home-grown firms to sustain long-term earnings.
The fact that Singapore, being a global financial centre where scores of expatriates call home, and its proximity to Malaysia, makes the island nation an ideal choice for Malaysian firms wishing to tap a readily available pool of international buyers at minimal cost, according to real estate experts. Another key attraction, they say, is Singapore’s clear legal framework which offers assurance to foreign players wanting to do business there. “Singapore represents a growing market for Malaysian developers because developers don’t only sell to Singaporeans but buyers of different nationalities there. “From the budget point of view, it is more cost efficient for Malaysian players to expand to Singapore (to gain global exposure) compared to places like Hong Kong,” said real estate consultant Henry Butcher Malaysia Sdn Bhd director Dr Teoh Poh Huat. Malaysian firms including IOI Properties Bhd (IOIP), YTL Corp Bhd, and Selangor Dredging Bhd (SDB) have made headlines for their ventures into the Singaporean luxury property market. “It is very close by, and it is very natural for us to go to Singapore which is a global market,” said SDB managing director Teh Lip Kim. IOIP’s wholly-owned IOI Properties (Singapore) Pte Ltd and its partner Ho Bee Investment Ltd, a developer listed in Singapore, had last week won a bid for a 2.1ha leasehold land in Singapore in a RM2.5 billion deal. The site is intended for a condominium project of up to 20 storeys within Sentosa Cove. Earlier, the IOIP-Ho Bee team had also successfully tendered for a piece of 1.4ha leasehold land, also within Sentosa Cove in March 2007. The buyers plan to build condominiums on the tract. In November 2007, conglomerate YTL paid RM1.01 billion for an en bloc purchase of Westwood Apartments, comprising 50 high-rise units at Orchard Boulevard. “Apart from geographical diversification and increase in YTL’s existing property development landbank portfolio in Singapore, the proposed acquisition will enable the group to enhance its earnings potential from the high sale and rental rates expected from the renewed interest in the property sector in Singapore,” YTL said. SDB’s ventures, meanwhile, include the RM221.3 million purchase of Gilstead View comprising 64 apartments along Gilstead Road in May 2007, and the acquisition of Mount Emily Tower for RM49.3 million in January 2007. “The main reason is still geographical diversification from a single local market where a cyclical property sector can lead to volatile earnings. “While a growth market like Vietnam is deemed riskier, a more matured Singapore real estate market is safer as the island state’s rules and regulations are in place,” said a foreign stock brokerage analyst. Moreover, Malaysian developers are also capitalising on attractive capital upsides for Singapore real estate assets, the analyst said. Fitch Ratings, in a note dated Jan 17, 2008, said although IOIP and Ho Bee’s latest land purchase was done at the peak of the Singaporean luxury property cycle when prices had appreciated, the rating house expected the venture to be fruiful based on the site’s attractive location, and the respective corporate profiles of IOIP and Ho Bee. “This concern is partly mitigated by the attractive location of the property, (IOIP) management’s track record of managing risks arising from large acquisitions, and Ho Bee’s experience in developing luxury properties in Singapore,” said Kalai Pillay, senior director of Fitch in Singapore.
