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Foreign Buying of Residential Land Soars

(SINGAPORE) Foreign investors have pumped $885.5 million into residential land purchases here so far this year, outstripping the $651.84 million for the whole of last year.

And CapitaLand said yesterday that it hopes to redevelop the $420 million Char Yong Gardens with US-based Wachovia Development Corporation, so the sum invested by foreigners is set to increase further.

According to an analysis of data by CB Richard Ellis (CBRE), purchases by foreign investors so far in 2007 amount to 11.4 per cent of a total of $7.13 billion, excluding Char Yong Gardens.

For the whole of 2006, they accounted for 7.12 per cent of a total of $8.17 billion.

Significant acquisitions with foreign investment include Horizon Towers by Hotel Properties Ltd (HPL) and Horizon Investments, an entity owned by funds managed by Morgan Stanley Real Estate and Qatar Investment Authority, the investment arm of the Emirate of Qatar. Two unnamed private funds, with HPL, also bought into CapitaLand’s Gillman Heights site.

On the marked increase in foreign investment, CBRE’s Jeremy Lake said: ‘The Singapore residential growth story has spread further afield. What was a secret 18 months ago is no longer a secret.’

On tie-ups with foreigners, Patricia Chia, chief executive of CapitaLand Residential Singapore, said: ‘Partners come along with us because they share our vision on the Singapore residential market and the sites that we have. More often than not, they do not have development and execution capabilities, but have real estate knowledge globally.

One of the consequences of so much global capital is that it could raise price expectations for prime collective sale sites.

CBRE’s analysis of data also shows that although the number of transactions overall is increasing, the number in prime districts appears to be dropping. In 2006, 30 of 76 collective sale deals were in District 9 alone, representing 39 per cent of all transactions.

This percentage has now dropped to 16 per cent or 10 out of 62 transactions done year to date.

The percentage of transactions in the prime districts of 9, 10 and 11 combined has also dropped, from 68 per cent for the whole of 2006 to 47 per cent year to date.

Prices, availability and location combine to make a site attractive. But as Mr Lake puts it: ‘Developers won’t buy a site if they don’t think they can make money on it. You only have to look at the sites that have been launched but not sold.’

The shift to non-prime districts is not necessarily a bad thing. As Mr Lake notes, it suggests that the recovery, supported by demand, has spread beyond traditional high-end areas.

In 2006, districts 5, 12, 19, 21 and 27 combined made up only 13 per cent of the collective sales pie. For the first five months of 2007, district 19 (Serangoon) alone made up 10 per cent. Other districts highlighted by CBRE include the combined districts 15 and 16 (19 per cent) and districts 2,4,5 and 8 (13 per cent).

Mr Lake believes one possible outcome of a more even spread of transactions across all districts is that the gap between prices for different districts could shrink.

Currently the gap can be extremely wide, even if the sites are just minutes apart. CBRE, for instance, is marketing Grangeford Apartments for $2,000 per sq ft per plot ratio and Alexandra Centre for around $300 psf ppr.

City Developments is one outfit that believes in paying the right price for the right property at the right time. ‘We have consistently maintained a valuable land bank which includes a fine range of sites in all parts of Singapore,’ said group general manager Chia Ngiang Hong.

‘With this strategy, CDL has the advantage of creating more value by being able to respond quickly to the market and selectively launch the most appropriate project at any given time so as to best maximise its investment returns.’

CDL’s most recent acquisition was Thomson Mansions in the Thomson/Balestier area.

Developers will now have to look harder. Lippo Realty executive director Thio Gim Hock said: ‘I believe en bloc asking prices are getting quite high. However, Lippo is always on the lookout for opportunities both in prime and other areas.’

Source: Business Times 13 Jun 07

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