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Cooling measures driving developers overseas

Overseas investments by Singapore-based developers from 2013 to mid-2015 were S$6.84 billion, almost double that for 2010-2012.

AFTER the global financial crisis, the Singapore residential property market recovered strongly on the back of pent-up demand, undersupply and low interest rates. Urban Redevelopment Authority's Private Home Price Index surged 38 per cent, from the low seen in Q2 2009 to Q2 2010 in an over-heated market which led to concerns that an asset bubble was in the making. This prompted the government to introduce as many as seven rounds of cooling measures between 2010 and 2013, culminating in the Total Debt Servicing Ratio (TDSR) framework and resulting in a drastic decline in transaction volume and eventual softening in prices.

Developers began to feel the squeeze on revenue as projects under marketing encountered poor sales progress. New development opportunities became increasingly hard to come by due to the difficulties in buying collective sale sites as well as residential sites under the Government Land Sales programme. The programme had been cut back with fewer sites on offer, making it more competitive for bidders. Faced with these challenges, many developers began to explore overseas investment opportunities following in the footsteps of others who had already established an overseas presence in previous regionalisation efforts since the 1990s.

China - the focus of previous overseas investments

Recognising the limited size of the Singapore real estate market and the growth opportunities available in new markets, Singapore-based developers had begun investing overseas in countries such as China, India, Vietnam and others since the 1990s. They ventured into China in order to capitalise on its robust economic growth that was driving demand for real estate and provided significant investment opportunities.

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After the global financial crisis, cross-border investments by Singapore-based developers picked up. Between 2010 and 2012, overseas investment value totalled S$3.46 billion with the bulk invested in China, especially in residential and commercial projects. These were led by large establishments and government-linked companies. Notable investments during that period included Mapletree's purchases of Beijing Gateway Plaza for S$593.9 million in 2010 and Silver Court in Shanghai for S$449.6 million in 2011. Chengdu was another popular investment destination, attracting S$518.4 million from Singapore-based developers.

More recent forays

Although the cooling measures were imposed gradually from 2010, their effects were felt mostly from 2013 onwards which also marked a new wave of Singapore-based developers venturing to overseas markets.

While some investments between 2013 and 2015 were made by seasoned regional players like Keppel Land, Mapletree and Ascendas, a number of local developers, who were more focused on the residential market in Singapore, became more active overseas.

These included Far East Organization, City Developments Ltd (CDL), Oxley Holdings, Sim Lian Group, Lian Beng Group, Roxy-Pacific Holdings, Ho Bee Land, Hiap Hoe, Fragrance Group and Aspial Corporation, although some of them had invested overseas previously.

Overseas investments by Singapore-based developers between 2013 and mid-2015 amounted to S$6.84 billion, almost double that for the 2010 to 2012 period.

Australia was the top investment destination accounting for 32 per cent of total investments while significant investments were also made in the UK (19 per cent), followed by US, Hong Kong, and China, at approximately 13 per cent of the investments volume each.

As most of the reported deals do not have development costs factored in, actual investment commitments from Singapore-based developers are much higher than illustrated in the graph. Almost all of these markets are mature and transparent, having established legal and regulatory frameworks - conditions that Singapore-based developers are used to at home and appreciate having in new markets - so as to minimise risks and operational uncertainties.

Investment in overseas markets also allowed Singapore-based developers to diversify their business based on different market cycles, which could smooth their revenue flow and improve earnings.


From 2013 to Q2 2015, Singapore-based developers invested in Australia more than any other country. Most of the investments were in commercial and mixed-use properties in the key markets of Melbourne, Sydney, Brisbane and Perth. As a large number of these are redevelopment sites where development costs form a large component of the total investment commitment, actual investment values by Singapore-based developers into Australia are even higher than those captured in these numbers.

Some high-profile deals include Far East Organization's acquisition of Harbour Town Shopping Centre in Perth for S$230.8 million and Ausgrid Building in Sydney for S$177.2 million. In May 2015, Far East Organization and its Hong Kong-based sister company Sino Land jointly acquired The Westin Sydney and its adjoining Heritage Retail podium. Aspial Corporation also made its mark via its property arm, World Class Land, by building the tallest residential tower in Australia, Australia 108 in Melbourne, as well as investing into large-scale development sites in Brisbane and Cairns.

Singapore-based developers have been attracted to the Australian property market because of its transparency, the availability of quality assets, higher yields with net returns of 6 to 10 per cent, foreign demand for prime residential assets and investment-friendly environment, and of late, the weakened Australian dollar. The time difference of one to three hours and travel time of four to seven hours from Singapore is favourable and a major consideration.

United Kingdom

The UK market also attracted attention from Singapore-based developers who invested S$1.27 billion between 2013 and Q2 2015. Some significant investments include that of Oxley Holdings in the Royal Wharf Township development at a sum of S$418.2 million (excluding development costs), where more than 3,000 homes would be built alongside commercial, retail, leisure and educational facilities, and Ho Bee's purchase of 1 St Martin's Le Grand in London for S$358.5 million. Far East Orchard has also has acquired a portfolio of student accommodation properties in the UK for S$86.6 million.

These properties are in the northern city of Newcastle and are located close to local leading educational institutions. As a leading global city and a financial centre, London attracts global banks and financial institutions, which support the demand for office space. Triple net leases - wherein the tenant is responsible for property tax, insurance, and maintenance - coupled with longer lease terms could also provide landlords with favourable returns - these are additional factors that attracted foreign investments in office properties. The UK property market allows investors to generate net returns of 4 to 6 per cent.

London's tradition and position as a hub for culture, arts, entertainment and education is also a strong draw for foreign investors in the hospitality, residential and student accommodation sectors. These are supported by a general housing shortage in the UK market, bolstered by immigration.

In addition to market transparency and an established rule of law on property investment and ownership, favourable exchange rates also contributed to increased investments by Singapore-based developers. The Singapore dollar strengthened by 27 to 40 per cent against the British pound in the past two years compared to the period before the global financial crisis. The recovering UK economy is also seen in a positive light and is likely to continue attracting foreign investments.

United States

Although the US saw fewer investments from Singapore-based developers, some of the deals were significant. S$456.5 million was paid by OUE for US Bank Tower in Los Angeles while in Manhattan, Pontiac Land acquired a freehold luxury residential property for S$253.3 million. Both the investments were made in 2013 and since then, the investments would have gained 10 to 15 per cent on exchange rate. The US market has not drawn Singapore-based developers traditionally but its high degree of transparency, improving fundamentals, economic recovery and prospects of good returns have made it an increasingly popular option for foreign investors. The time difference and travel distance are a deterrent.


The attraction of Tokyo is that it is a leading city in Asia and an established financial centre with a mature and large real estate market. The improvements made under the Abe administration have also bolstered confidence among businesses and foreign investors while a weaker Japanese yen against the Singapore dollar has enticed investors from Singapore. For example, in 2014 CDL purchased a prime residential site in the capital for S$356 million. At that time, the Japanese yen had weakened 46 per cent against the Singapore dollar compared to 2011 when the yen was at its strongest. In recent years, Tokyo residential property prices have been rising and this has attracted further foreign investments into this market. However, prior to the pick-up, the Japanese property market experienced a prolonged period of deflation which led to muted property investments among locals, thereby encouraging a renting culture. Concerns over a shrinking and ageing population remain.


Every market is cyclical. Seasoned residential developers in Singapore would have gone through at least one major stormy downcycle, which typically lasts one to two years, coinciding with external factors such as economic recessions. During this period, most local developers keep their heads down and stock up while waiting for opportunities, as domestic markets have historically recovered relatively quickly. While some developers during such cycles have chosen to diversify to spread market risks, most find it sufficiently acceptable to remain totally rooted in the domestic market.

This current downcycle in the Singapore residential market differs from previous ones, primarily owing to the unnatural cause (government policy-induced). The fact that the government implemented several strong and incremental steps to wrestle the market does suggest it would not loosen its grip too quickly. Developers interpreted this forecast early, which accounted for the increasing trend of developers investing abroad, and hiring permanent employees there. Moreover, most Singapore residential developers have greatly benefitted from the strong local market post-GFC, and hence are riding high on confidence and equity to be regarded as a formidable force overseas, despite being new. As they dig deep and learn more of the respective market nuances, this forced change in mindset is likely to result in a community of developers that is more nimble and diversified.

  • The writers are international director and research analyst respectively at JLL