Investors target Singapore real estate boom

Investors target Singapore real estate boom
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Real estate markets have their ups and downs, and while a number of the mature markets in Europe and the US are seeing stagnant growth, Singapore continues in leaps and bounds.

According to a recent report in the Asia Wall Street Journal, private residential property values in Singapore rose 4.8% in Q1 2007 on the previous quarter, and gained 10% overall in 2006. Specific market segments such as the mid market are reportedly seeing higher growth in values.

Much of this upward trend in residential values is mirrored in the commercial market and associated rental rates.

So, why is Singapore going against the global trend and turning in regular growth in real estate values? Some believe it is due to the change in positioning of the city-state.

There are wholesale changes in the city-state’s prime focus of development with a shift away from the manufacturing sector into the tourism and financial services sectors, with marinas and casinos neighbouring office skyscrapers home to large multi-nationals.

Such a change is bringing high-end tourists and international residents, fuelling the growth in real estate prices and growth in the luxury end of the market – both residential and commercial.

Singapore-based property developers are benefiting from this boom and are positioning themselves for what is hoped to be a long growth cycle. And this in turns is attracting international investor interest in local developers. Most listed Singapore developers have seen considerable share price increases over recent times as the market recognises the potential ahead, but a number of the small developers, according to industry analysts, are considered to be targets ripe for international investment.

Noting the recent share price increases, Peter Wong, a fund manager at Phillip Capital Management in Singapore, was reported in the Asia Wall Street Journal recommending investors look at building material companies or media conglomerates such as Singapore Press Holding, which benefits from the real estate sector growth through increased advertising revenues.

Similarly, other financial analysts are recommending the bank sector which has three strong locally-born financial groups – DBS Group Holdings, United Overseas Bank and OCBC Group. All of which are well positioned to benefit from the property sector boom.

There are nearly two dozen Singapore REITs which are also proving attractive to investors as valuations are not as high as property developers, yet are expected to see strong growth in value as the overall property sector continues on the up.

Whichever way you look at it, the Singapore property market appears set to continue its growth and international investors are beginning to circle.