S’pore slips in property investment rankings

Singapore’s property market is looking relatively less attractive to investors as they worry about oversupply and overdevelopment on the island.

According to a joint survey by PricewaterhouseCoopers (PwC) and the US-based Urban Land Institute (ULI), Singapore is fifth in a ranking of Asia-Pacific cities’ property investment prospects, falling three notches from a year ago. In another ranking of development prospects, Singapore took 11th spot, down from seventh.

For the Emerging Trends in Real Estate Asia Pacific 2010 study, PwC and ULI gathered the views of more than 270 real estate investors, developers and other players from mid-September to early November. The report notes that sentiment across the region has improved but also warns against complacency, ‘with the prospects for Western economies precarious’.

One concern participants brought up about the Singapore market is the large supply of property coming on stream. For the residential sector, Urban Redevelopment Authority (URA) data in Q3 showed 59,700 private homes were in the pipeline and that, of these, 34,120 were unsold.

On the commercial front, CB Richard Ellis estimated last month that 7.72 million square feet of office space could be completed between Q4 this year and 2014.

Still, Singapore is one of the top five markets in the region to invest in, said Choo Eng Beng, PwC assurance real estate leader for Singapore. ‘This shows that despite issues with oversupply in Singapore, we are still recognised as a property investment hub.’

And while Singapore’s ranking dropped, its absolute rating actually improved marginally from 5.4 to 5.5 on a scale of one to 9.

Respondents were most optimistic about investing in the residential sector here, with 36.6 per cent of them believing at the time of the survey that it was time to buy. The hotel sector had the fewest supporters, with 21.9 per cent of respondents making a ’sell’ call.

In the ranking of investment prospects, Shanghai jumped four notches to the top of the table, followed by Hong Kong, Beijing and Seoul.

But PwC and ULI noted that ‘the key driver for outperformance in Shanghai, and indeed in China generally, is the government’s decision to inject liquidity into the economy, leading to a surge in bank lending to the property sector and a sharp rebound in commercial property prices’.

Singapore also slipped in the table of development prospects, reflecting concerns about overdevelopment, the report said.

ULI finance senior fellow Stephen Blank suggested another reason for the drop: foreign developers may find it hard to break into the local market, which is ‘dominated by a number of large public and private owners and developers who have a long historical relationship with the city’.

Shanghai also took top spot in the development prospects ranking, with Mumbai and Ho Chi Minh City in second and third places.

Source : Business Times – 9 Dec 2009