Singapore property investors ditch home region, eye greener pastures abroad

Outbound investment by Asian investors hit US$30b.

According to Colliers International’s latest regional white paper release, “Riding the Next Wave of Asian Buying Spree”, while Asian real estate investors traditionally focused on their home country or region, they are extending their geographical boundaries to include the United States, Australia and countries in Europe, as they pour increasing amount of money from their home markets to overseas.

The total value of outbound investment by Asian investors has continuously grown from approximately US$1 billion in 2001 to more than US$30 billion in 2013. The onset of the first round of quantitative easing in 2009 further accelerated the momentum.

Colliers noted that Singapore contributes about 27% of the total value of Asian outbound real estate investments.

The main pull factors are the higher yields available in the United States and European markets, the growth potential created by economic recovery in them, and the appeal of real estate assets in prime gateway cities of the US, Europe and Australia, due to the high level of transparency in those markets.

Mr Terence Tang (鄧文傑), Managing Director of Capital Markets and Investment Services | Asia, Colliers International, says, “Capital today is very mobile. Singaporeans are alike other Asian investors, always in search for higher returns and better risk-adjusted return opportunities.

Given the liquidity and lack of such opportunities at home, these capitals have to be invested elsewhere.

Mr Terence Tang adds, “One of the earliest waves of outbound Asian investments is made by the institutional investors, which include sovereign funds, insurance companies and financial institutions.

This group of investors, like the GIC, generally takes a much longer term view in their investments and is often the first mover.

The second wave is by the high net worth individuals and listed investment companies. This second group are prepared to take higher risk for a medium term investment horizon, as they required higher returns than the first group. An example of this group is Ho Bee Land.

The last group is the developers, who take even greater risks, as they require much higher returns than what they can get at home. Normally, this group of investors/developers will go into a market where there are signs of economic growth/recovery and the motive is for short term trading profit. One such developer is Oxley Development.”

The cooling measures that the several Asian governments (such as Singapore, Malaysia, Korea, and China) have put in place to control escalating real estate prices in their markets, as well as new policies to encourage offshore investments (as in Korea, Taiwan and China), serve as the push factors affecting the reversal flow of capital from Asia.

Hong Kong, Mainland China and Singapore are the region’s biggest buyers in real estate outside Asia, accounting for 71 per cent of the total amount the region invested in 2013. They are set to remain the keysources in the next few years.

Of the US$30 billion worth of outbound investments made by Asian investors in 2013, approximately 27 per cent was contributed by Singapore. Mr Terence Tang comments, “Asian outbound property investments beyond Asia really took off in 2009 –led by the Chinese investors who achieved a record investment of US$9 billion in 2013, followed closely by Singapore investors.

While Singapore investors invested some US$5.3 billion within Asia, their investments outside Asia were higher at an impressive US$8 billion.”

Outbound real estate investments by Singapore investors has begun its uptrend since 2011, with some US$2 billion worth of investments registered in 2011 and approximately US$6 billion in 2012.