Thursday, May 27, 2010

China developers target residential segment in Singapore

Developers from China are looking to break into the Singapore property sector by building mass market and mid-tier residential homes.

Observers said the new entrants want to diversify from their home market, while seeking opportunities in Singapore’s growing property sector.

Since late 2007, China-based developers have been trying to cut themselves a slice of the pie.

While they account for no more than 5 per cent of the market, market watchers said they have been gunning for land.

“The success rate has been quite low for them – about 20 per cent of the bids turn into a successful construction project for them. Nonetheless, of all the bids they have put in, about 13 or 45 per cent of those bids, are in the top three running order, so they are quite aggressive on that front,” said Chua Yang Liang, head of Research (SEA) at Jones Lang LaSalle.

Market watchers said China developers are most active in bidding for mass market residential sites – the market they are most familiar with.

And some with deep pockets bid aggressively – such as China Sonangol Land buying the Parisian site at Paterson Road in October last year for some S$283 million.

While margins for China developers are lower, at around 20 per cent compared to the 30 per cent they can find in their home market, observers said they are willing to sacrifice a little for diversification.

But analysts also warn that China players may not stick around if the market turns down.

“When you go into a market like Singapore where there are a lot of local players, that margin could slow down to some 10-12 percent. At some point in time, they might find that there might not be good opportunities here in Singapore,” said Donald Han, MD of Cushman & Wakefield.

Some observers said that more developers from China could mean more buyers from China.

Developers coming from the mainland could bring with them client lists for investors looking to buy into Singapore property.

Source: Channel News Asia, 27 May 2010

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