Real Estate

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

(Updated )

Almost exactly 13 years ago, Kwek Leng Beng, the billionaire chairman of City Developments Ltd., then Singapore's biggest builder by market value, did something outlandish.

Together with partner AIG Global Real Estate, he launched Sail@MarinaBay, an ambitious, 245-meter-tall waterfront skyscraper in a market that was down 45 percent from its 1996 peak. The city-state's home prices, ravaged first by the Asian financial crisis and then by the SARS epidemic, would rise between 5 percent and 10 percent annually for seven years, he predicted.

In the end, prices increased at a compounded annual rate of 7.5 percent for the next nine years.

The reason for that history lesson isn't to give Kwek a medal for accuracy, but to ask, "Where's Singapore's next Sail?"

From analysts to homeowners and developers, there's growing optimism that Singapore's property market is about to emerge from its four-year slump. City Developments' shares are up 40 percent this year; CapitaLand Ltd.'s have risen 24 percent. But talk is cheap. The end of one property cycle, and beginning of another, needs a defining shift in animal spirits, marked by someone like Kwek committing to iconic, long-gestation projects that take years to fully complete and sell.

Bottomed Out?
Singapore property prices are down 12 percent from their peak
Source: Urban Redevelopment Authority

Such a breakthrough isn't in sight. CapitaLand, now Singapore's biggest developer by market value, just closed a $300 million fund to invest in Grade A commercial real estate in -- yes -- Vietnam, where it sold 656 units in the first half versus 185 in its home market. City Developments is collaborating with Abacus Property Group and KPG Capital to push into Australia.

The big display of muscle this year has come from Shenzhen-based Logan Property Holdings Co. and Chinese conglomerate Nanshan Group Co., which have offered to pay S$1 billion ($735 million) for a site to build 1,110 apartments, the highest price ever paid for a residential land parcel in the city. Why aren't more builders making bolder bets, especially when too-hot-to-touch Hong Kong is boosting the investment appeal of Singapore's condos?

Maybe the government is keeping a lid on land supply to ensure builders don't get carried away before the market has bottomed. New-home supply peaked in 2016, and will probably drop "drastically" over the next few years, according to Patrick Wong at Bloomberg Intelligence; the glut of unsold homes eased by 21 percent in the first six months of 2017.

There would be more developer interest in land parcels if harsh penalties on foreign-owned firms  hoarding unsold units were eased, as City Developments' Kwek has been arguing for.

Still Too Cheap
Singapore interbank rates, to which most mortgage charges are linked, are below Libor
Source: Bloomberg

The government has its reasons for being cautious. If capital inflows reverse and the currently depressed Singapore interbank rate surges, mortgage demand will stumble. Singapore could still unwind the many restrictions on home buyers, but before any such thumbs up, authorities will likely wait for global monetary policies to normalize.

Singapore's "Sail" moment is still a ways off.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Updates share prices in fifth paragraph. An earlier version of this column corrected the time reference in deck.)

  1. This also applies to Singapore builders with foreign ownership.

To contact the author of this story:
Andy Mukherjee in Hong Kong at

To contact the editor responsible for this story:
Katrina Nicholas at