Bigger is Better

In Singapore, bigger is better. Its buildings are getting higher and higher. People are moving to the city from all over the region and all over the world. Australians and Chinese are ready to support the city’s growth. And it’s growing, up and out, as the investment in real estate proves.

Singapore real estate investment trusts (REITs have grown into a $48 billion market since they first hit the ground running in 2002. In fact, they are the sixth-largest determining market capitalisation, according Bloomberg data. More than half of the 35 REITs listed in Singapore have a market capitalization of less than $1 billion, the data show. The city-state’s largest REIT, with assets of $5.6 billion, is the CapitaLand Mall Trust.

The trust has a market capitalization of S$730.5 million ($536 million). It focuses on industrial real estate assets. Read more about the gritty numbers on Bloomberg.

Last year, Singapore Exchange Limited (SGX: S68) launched a number of new stock market indices.

SGX S-REIT 20 Index, a market capitalisation-weighted index measures the performance of the twenty biggest, most influential, and most tradable REITs in Singapore’s stock market.

The index registered 5.2% in total returns from the start of 2016 to April 6th of 2016.

The REIT-focused index is diversified according to sector. The largest group are the Retail REITs.  These account for nearly 30% of the index. Thie big retailREITs to know are CapitaLand Mall Trust (SGX: C38U) and Mapletree Commercial Trust (SGX: N21U). Also, the index last year had a dividend yield of 7.2% with the highest yielding being CDL Hospitality Trust (SGX: J85) and Frasers Commercial Trust (SGX: ND8U).

Why is this important to acknowledge?

REITs matter. They need to be part of the overall system, as REITs that excluded from the broader index are significantly disadvantaged. Now that markets are bifurcating, many investors will only consider REITs included in indexes. For good reason. In Singapore, look out for these leaders!

 

The Impact of Singapore Real Estate

singapore real estate

There are 18 total real estate management and development firms in Singapore. The total market capitalisation of the group comes out to be $90 billion. Just how big is this overall? The combined $152 billion capitalisation of the Real Estate Sector compares to $97 billion for the three Singapore banks.

Over the past fifteen years the Real Estate Index generated nearly double the price gains of the Residential Urban

Redevelopment Authority Property Price Index.

Who are the leaders of the pack?

Hongkong Land Holdings Limited (SGX: H78), CapitaLand Limited (SGX: C31), Global Logistic Properties Ltd (SGX: MC0), and City Developments Limited (SGX: C09), are all heavily involved with the development of real estate in the city.

How strong is their influence? What should investors know?

The stocks that of the Real Estate subsectors comprise a mix of Singapore real estate and international real estate and combination of holders of local and international properties.

Income investors should know that the largest dividend among Singapore’s real estate management and development companies comes from Frasers Centrepoint Ltd (SGX: TQ5). Oxley Holdings are the top performing stock of the group. With a 66% total return over the past three years, this is a good stock to watch. On the other hand, blue chip companies such as City Developments and Global Logistic Properties recorded negative total returns of 36.2% and 33.4%, respectively, over the same timeframe.

With a market cap of $21 billion, Hong Kong Land Holdings leads the list. Founded in 1889, the Group owns and operates nearly 800,000 sq. m. of luxury retail property and office space in key Asian cities, primarily Hong Kong and Singapore. The group is incorporated in Bermuda with a standard listing on the London Stock Exchange as its primary listing.

CapitaLand is headquartered and listed in Singapore. It focuses Singapore and China, while identifying Malaysia, Indonesia, and Vietnam as new growth markets.

To learn more, read the Singapore Exchange Limited February 2016 report.

The Strength of Singapore’s Real Estate Market

Singapore is a global city.  In a world tense with harrowing geopolitical tension and economic insecurity, it’s a great place to live. It’s not just a great place to live for one or two years while doing business, but it’s an ideal country to make a permanent home. This is something the country has learned as more people come looking at high-end real estate.

Despite the levying of duties intended to cool Singapore’s market, demand for luxury homes remains high. 

CNBC recently reported on this predicted growth. They spoke with Ong Chih Ching, executive chairman of KOP, in a recent article. She stated, “We are talking about 8 to 10 million [Singapore] dollar ($5.59 to 6.99 million) properties, so that’s a lot of money.”

This revenue leaves more than enough profit more than enough for renovation, according to Ong Chih Ching.

She estimates it will take Singapore another two or three years for the city to fully get on track with world markets. 

One company invested in luxury projects is the ten year old Singapore-based real estate and hospitality company KOP. Their portfolio of high-profile projects such as the Ritz Carlton Residences, Singapore’s Prudential Tower, Franklyn Hotels & Resorts, and Hamilton Scotts, to name a few.

Dubai Holdings was the major shareholder in KOP. When Ong made a management buyout of the 51 percent stake that the group held in KOP, she launched her visibility as one of the most powerful entrepreneurs in Asia.  She was even named one of 50 Power Business Women in Asia by Forbes in 2014.

With big dreams and the spirit to realize visions in real estate, Ong is a powerful leader in Singaporean real estate. Her next project is a colossal indoor winter resort in anticipated to open 2019 in Shanghai. With an estimated building cost of 3 billion yuan ($455.89 million), KOP is working with Chinese developers and city developers toward its completion. 

With KOP and Ong at the helm, luxury real estate in Asia is alive and well.