Four years ago, developers wouldn’t think twice about choosing a Hong Kong property over one in Singapore. As the tables turn for the two cities, more and more investors are turning to Singapore over the world’s most unaffordable city for real estate shares.
According to Bloomberg Intelligence indexes, the position of Singapore-based and Hong Kong-based developers has not changed all that much. Hong Kong and Singapore both have prime real estate, and both of them are still number one choices for venture capitalism in the region. Hong Kong rates are still lower and thus more affordable than Singapore’s, operating at more than double the discount to net asset value. However, according to analysts from Nomura Holdings, Hong Kong real estate now trades at lower valuations for larger holdings, making it not only a less profitable venture than Singapore, but also a riskier one. “Investors now see more of a downside with Hong Kong, which makes Singapore properties more attractive,” says Joyce Kwock, an analyst with Nomura Holdings.
A few years ago Singapore and Hong Kong developers were in the same scenario, but now the roles seem reversed. During that time, Singapore developers suffered a hit and their Hong Kong peers benefited. Over the following years, rates in Hong Kong peaked while Singapore suffered multi-year market declines. In 2017, there has been a complete turn-around. Where the Hong Kong market shot up by 24% this year, developers in the Singapore bracket like Henderson Land Development recorded a spike of 33%. And according to Morgan Stanley, the turn-around will continue even after the year’s end. By the firm’s estimation, in fact, Singapore developers will enjoy about 5% added investment by the end of the year, whereas the Hong Kong market might take a hit of 5% decline in the price of the properties.
After years of decline, Singapore real estate development hit market bottom and now it’s expected to start on an upward market cycle. That’s good news for Singapore developers and bad news for Hong Kong’s.
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