(Bloomberg) — Singapore is closing in on Hong Kong’s lead in real estate deals as the city-state benefits from its status as a wealth haven, while distressed property sales afflict the rival Asian financial hub.
So far this year, Hong Kong’s seen 107 entity-level property transactions across sectors including office, residential and hotels, and Singapore’s had 96, according to data from MSCI Real Assets. Deals in Hong Kong are 62% lower than in 2021, while Singapore has largely managed to hold its ground despite high borrowing costs. Figures include deals of at least $10 million.
This shift in transactions reflects the trend that’s seen Singapore boosted by an influx of wealth and talent resulting in strong demand for offices, climbing home prices and dramatic stories of surging rents. In comparison, Hong Kong has been beset by a prolonged property downturn, especially in the office sector, due to years of pandemic curbs, China’s economic difficulties and increased geopolitical tensions.
Real estate investment activity can also be used as a gauge of business outlook, said Benjamin Chow, MSCI head of Asia real assets research.
“In 2023, we are beginning to see a lot more Hong Kong assets traded at losses relative to what they were acquired for,” Chow said. “By contrast, the vast majority of Singaporean assets traded continue to feature strong capital growth relative to their acquisition prices.”
In one of Hong Kong’s biggest deals this year, receivers sold Goldin Financial Global Center to PAG and Mapletree Investments Pte in a distressed sale. The HK$5.6 billion ($717 million) transaction was “at a significant discount to replacement cost,” PAG and Mapletree said in a statement in January. In Singapore, Frasers Centrepoint Trust’s divestment of Changi City Point translated to a premium of 11% to the acquisition price and an exit yield of 4.3% based on net property income, according to analysts at Citigroup Inc.
In terms of investment volumes, Singapore has recorded $7.53 billion so far this year, while Hong Kong’s total is $5.27 billion.
A larger number of deals but smaller transaction volumes suggests that Hong Kong buyers are typically the users themselves as compared with Singapore’s purchasers, said CBRE’s Asia-Pacific head of research Henry Chin. For example, the Securities and Futures Commission last month agreed to buy 12 floors of an office tower for HK$5.4 billion, while a historic theater was reported by local media to have been bought by a church.
“Investors continue to deploy capital into Singapore commercial real estate at the current pricing,” said Chin. “When it comes to Hong Kong, investors become cautious — largely due to the imbalance of demand and supply at present and concerns over China’s recovery.”
The outlook for both cities has one thing in common: a challenging fundraising environment amid rising interest rates. Capitalization rates — the rate of returns expected to be generated on properties — are still trading beneath borrowing costs. Hong Kong’s current capitalization rate for Grade-A offices is hovering at 2.8%, while Singapore’s is at 3.75%, according to the latest CBRE data. Amid tight yields and high borrowing costs, investors are looking to enhance their assets or buy in alternative sectors that have higher returns.
Hong Kong is also hampered by its sluggish economy. Seized en-bloc assets, primarily those previously held by troubled mainland developers, are expected to be put on the market, but any sales may depend on how much banks are willing to lend given the current weak market sentiment and high loan-to-value ratios, according to brokerage Savills Plc.
Singapore may find relief in its position as a wealth haven, said Alan Cheong, executive director of research at Savills Singapore. There will still be a base level of transactions coming from rich families seeking to diversify from riskier assets and countries, he said.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
