Worst Not Over for Singapore Property, Billionaire Kwek Says

  • City Developments fourth-quarter profit declined 41%
  • Luxury home prices have dropped more than 35%, Kwek says

Is the Worst Over for Singapore Property Builders?

The worst isn’t over for Singapore’s property market, after government curbs helped push home prices lower for a third year in 2016, said Kwek Leng Beng, the billionaire chairman of City Developments Ltd.

“I do not believe the worst is over although I think the worst has slowed down,” Kwek said in a Bloomberg Television interview with Haslinda Amin.

Kwek Leng Beng

Photographer: Jonathan Drake/Bloomberg

Singapore home prices fell 3 percent in 2016, as the government held steadfast on cooling measures. Prices slipped for a 13th straight quarter in the three months ended Dec. 31, the longest streak since data was first published in 1975.

To see the interview with Kwek Leng Beng, click here

The government has signaled it is reluctant to ease property curbs, including capping debt repayments at 60 percent of a borrower’s income and higher stamp duties, as it wants to avoid the market overheating again.

City Developments fourth-quarter profit declined 41 percent to S$244 million ($172 million) due to the absence of substantial profits recognized the same quarter a year ago from its so-called Profit Participation Securities deal for office assets. Revenue for the quarter increased 37 percent to S$1.17 billion.

The developer sold 1,017 homes in Singapore last year, a 51 percent increase from 2015, for a total value of S$1.2 billion. For the year ended Dec. 31, profit declined 16 percent to S$653 million even as revenue climbed 18 percent to S$3.9 billion.

Luxury Homes

Residential prices may take up to nine months to show signs of a recovery, Kwek said. Luxury homes are a good buy because prices have fallen by about 35 percent since 2013, he said.

“A lot depends on the oversupply and the penalties we have to pay if we don’t sell in a certain time,” Kwek said. “In light of the lower interest environment the developer will try to hold on for as long as possible, after a certain point when he has no choice he will have to cut the price.”

War Chest

“We plan to be more acquisitive with a focus on finding in-place income in Singapore and overseas,” Kwek said in the earnings statement. “Our robust balance sheet and war chest place us in a strong position to deploy capital for acquisitions which can be in the form of physical assets, equities or debt instruments.”

The developer has more than S$3.5 billion in funds under management and is on track to achieve its target of S$5 billion by end-2018.

Singapore property demand remains "very resilient," supported by factors including low interest rates and a stable economy, National Development Minister Lawrence Wong said in an interview Tuesday. The cooling measures “have helped to achieve a soft landing in the property market,” Wong said.

Earlier this month, rival CapitaLand Ltd.’s chief executive officer said property curbs are set to stay in place for at least another year amid signs the city’s housing market is stabilizing.

“We see volume picking up and price declines have slowed,” Lim Ming Yan said Feb. 15. “We see this trend continuing for 2017. There is no compelling reason for the government at this point to make major changes” to property curbs, he said.

— With assistance by Anand Menon, and Niluksi Koswanage

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