Singapore landlords are tapping the fourth-lowest local borrowing costs in Asia to fund record overseas purchases of hotels, office blocks and luxury apartments as property prices fall at home.
CapitaLand Ltd’s Ascott Residence Trust and Malaysian tycoon Quek Leng Chan’s (郭令燦) GuocoLand Ltd were among real-estate companies that sold the equivalent of US$5.04 billion of Singaporean dollar-denominated notes so far this year, the most for the same period in any year, data compiled by Bloomberg show.
Singapore’s 10-year government bond yield has tumbled 30 basis points since Dec. 31 last year to 2.24 percent, the lowest rate in Asia after Taiwan, Japan and Hong Kong.
Singaporean developers have spent more than US$9.8 billion on foreign purchases this year, almost double the same period of last year, snapping up real estate from malls in Beijing to luxury apartments in Sydney and London.
Singapore’s housing prices fell 0.7 percent in the third quarter and shop values dropped 0.2 percent, its Urban Redevelopment Authority said last week.
Property companies’ “upside potential is limited in Singapore amid an increasingly challenging operating environment,” Singapore-based Credit Suisse equity analyst Yvonne Voon said. “The lower cost of funds in Singapore has allowed local corporations to bid more competitively for overseas acquisitions, particularly in higher-yielding markets like Australia and the UK.”
Ascott REIT sold US$150 million of perpetual notes to yield 5 percent to fund a ¥8 billion (US$74 million) hotel purchase in Tokyo and three serviced apartments in Sydney, Australia, for A$83 million (US$73 million), according to a Moody’s Investors Service report on Friday last week.
Singapore-based Frasers Centrepoint Ltd, controlled by Charoen Sirivadhanabhakdi — who is among Thailand’s richest businesspeople — issued S$800 million (US$640 million) of bonds this year in Singapore. The developer last month acquired Sydney-based Australand Property Group in a deal that valued the company at A$2.6 billion.
Frasers derives more than half its revenues from properties outside Singapore, according to its first-quarter report.
“Singapore banks and investors are quite willing to lend at good levels to these companies because of the familiarity,” Singapore-based Moody’s analyst and assistant vice-president Jacintha Poh said. “In some of the markets where they are investing, not only are rates higher, selling bonds is also much more difficult.”
Average yields on Singaporean dollar bonds sold by companies and the government are at 2.35 percent, close to the one-year low of 2.33 percent on Oct. 16, according to HSBC Holdings PLC indices.
Construction firm Chip Eng Seng Corp sold S$150 million worth of three-year notes at 4.25 percent on Oct. 9. The company is completing 581 apartments in Tower Melbourne on Queen Street in Melbourne, Australia.
“As the property market continues to soften due to global economic uncertainty, pockets of opportunity may emerge within the property and construction arenas,” Chip Eng Seng chief executive Lim Tiam Seng said in a release on Oct. 10. “In order to scale up our business at such opportune times, we would require a ready amount of funds in hand.”
Singaporean developers buying land offshore have been mindful of the foreign-exchange risk they are getting exposed to, so they have been hedging their revenues and trying to fund locally, Poh said.
The Singaporean dollar has fallen 0.9 percent against the US dollar this year, behind a 0.8 percent advance by the Thai baht and 0.1 percent gain by the Indonesian rupiah. Singapore’s economy expanded an annualized 1.2 percent in the third quarter after contracting a revised 0.1 percent in the previous period.
Between 2009 and the middle of last year, the Monetary Authority of Singapore implemented eight rounds of property cooling measures to address its concerns the low interest rate environment would lead to a property price bubble, Moody’s said in an Oct. 6 report.
“Most developers in Singapore know it is not easy here, with all the property curbs,” Singapore-based UOB Asset Management Ltd analyst Adeline Tan said in an interview. “So many developers are being squeezed in Singapore. And in a bid to diversify, they head overseas.”
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