Keppel Land sees China home sales rising on big-city demand

[SINGAPORE] Keppel Land, the real estate arm of conglomerate Keppel Corp, sees sales of its homes in China rising this year compared to last year, its CEO said, helped by a focus on larger cities where demand has been strong.

China is Keppel Land's biggest residential market and is gaining in importance to the conglomerate. Keppel Corp's reliance on the property arm for profits has increased as its main rigbuilding business is under pressure from slumping oil prices.

Property contributed 46 per cent to Keppel Corp's second-quarter profit, compared with 26 per cent a year ago.

Singapore developers such as Keppel and CapitaLand have benefited from rising demand in countries such as China and Vietnam, while the pace of growth at home has slowed, hurt by cooling measures.

In China, the property market began to recover late last year thanks to government stimulus, fuelling rapid price gains mainly in the bigger cities. National sales are rising despite authorities tightening home and land purchase requirements in major cities to rein in price increases.

Average new home prices in China's 70 major cities rose 7.9 per cent in July from a year earlier.

And while many of the smaller cities hold large inventories of unsold homes, Keppel Land CEO Ang Wee Gee said he was seeing signs of inventory reducing in some so-called "tier two" cities.

"We see sales picking up (there) and we see prices consolidating and moving up," Mr Ang told Reuters in an interview, declining to give specific numbers. Keppel sold 3,280 homes in China last year, mainly in the bigger cities.

He was also optimistic about its Vietnam business where strong economic growth and easing restrictions on foreign buying are boosting the property market. Keppel Land is mainly focused on Ho Chi Minh City and Hanoi.

Keppel also sees potential opportunity in the United Kingdom as property there becomes cheaper due to a slump in the pound after Britons voted in June to leave the European Union.

"It might be an opportunity for us to do more, leveraging on the weaker pound now, to do more in the UK. But we have not come to a conclusion," Mr Ang said.

Keppel owns an office building in London. It would consider any expansion in the UK only in segments that it has experience in - such as residential developments and high-quality offices.

"It could be an investment of a completed asset, like the current office building," Mr Ang said.

REUTERS