Upbeat outlook on luxury market

WHEELOCK Properties (Singapore) CEO David Lawrence remains upbeat about prospects for Singapore's luxury residential property market, as the island is increasingly attracting rich people and businesses.

'The interesting thing is that more and more people are becoming PRs and citizens,' he says. 'A lot of them are very rich and want the best product. So you've got to be a good developer producing good products like Wheelock or SC Global or Hotel Properties Ltd (HPL).'

Wheelock owns about 16 per cent of SC Global and almost 21 per cent of HPL. 'We're happy with our stakes in these companies,' Mr Lawrence said in a recent interview with BT.

In April last year, he apologised to shareholders at an annual general meeting for having bought a stake in SC Global at the top of the market in 2007. But now he lets on: 'I should tell you that I have had approaches from Middle Eastern investors recently to buy our stake in SC Global and I said: 'Not interested. Thank you very much'.'

Wheelock acquired its SC Global stake at an average price of $2.35 a share. SC Global's stock price fell from a high of $3.40 in June 2007 to a low of 29.5 cents in March this year. It has since been recovering, ending at $1.41 yesterday, down one cent from Thursday's closing price.

The focus of the Singapore Government's recent measures to stabilise the property market are on the mass and mid segments, which Mr Lawrence reckons 'went out of control a little bit'. 'I don't think the government needs to be concerned about the luxury sector,' he said.

The government has done enough to cool the private residential property market - for instance, by promising to release more land in the first half of next year, he feels.

The recent phenomenon of developers chasing sites and paying high land prices has been fuelled by low interest rate loans to developers by banks. 'If this liquidity gets out of hand, the government can just release more sites. They've got plenty of sites ready to go,' Mr Lawrence said.

Around this time last year, he urged investors to buy Singapore property stocks because they were looking cheap after being battered during the financial crisis. Now that property stocks, along with the overall market, have surged - in some cases 100 per cent or even more - Mr Lawrence advises investors to switch out of property stocks and into real or physical assets. 'Property is one class of real assets and will provide a long-term hedge against inflation,' he argued.

'I am not saying the property markets are going to shoot up, because the Urban Redevelopment Authority is there to stabilise the market. But now is the time to take profit on paper assets and move into physical assets, which are still the best long-term hedge against inflation. And inflation will be coming back in the next few years.'

Sovereign wealth funds and savvy investors are already following this strategy, Mr Lawrence says.

Source: Business Times, 31 Oct 2009