HK's housing curbs could help end Singapore's property slump

Commercial and residential buildings in Hong Kong, China.
Commercial and residential buildings in Hong Kong, China.PHOTO: BLOOMBERG

SINGAPORE/HONG KONG (BLOOMBERG) - Singapore's three-year housing slump could see relief from an unexpected quarter in 2017: Hong Kong.

So says Cushman & Wakefield, which expects the slide in Singapore's home prices to end this year as foreign investors turned off by Hong Kong's move to increase the stamp duty for overseas buyers look to Singapore instead. Desmond Sim, head of research for Singapore and Southeast Asia at CBRE, said Singapore house prices are approaching their trough, with a forecast price move of flat to minus 2 per cent.

"The fallout from the stamp duty could be beneficial for Singapore," said Sigrid Zialcita, managing director for Asia Pacific research at Cushman & Wakefield. "Singapore is always seen as a place where you can preserve capital and we are expecting interest from foreign nationals to come back."

Hong Kong's November increase in stamp duty to 30 per cent for foreigners makes Singapore's 18 per cent rate more attractive to overseas buyers, particularly mainland Chinese who are seeking investments abroad to help shield them from a further weakening of the yuan.

That will help limit the decline in Singapore property values to about 1.5 per cent this year, according to the average estimate of five analysts surveyed by Bloomberg. Home prices have fallen 11 per cent since 2013, when the island-state's government implemented the strictest of its own cooling measures.

The outlook for Hong Kong is more bearish, with prices in the secondary-housing market seen dropping 8 per cent, according to the average of seven analyst forecasts. While figures for new homes aren't available for Hong Kong, early indications are that prices in this segment will be more resilient as developers offer incentives to offset higher stamp duties.

The markets for Grade-A office space in Asia's two competing financial hubs are set to diverge further in 2017. Scarce supply in Hong Kong's Central district and strong demand from Chinese financial companies for premium office space could push rents up as much as 5 per cent in what is already the world's most expensive office market according to Knight Frank. That contrasts with a forecast of an average 6.2 per cent drop in Singapore due to ample supply and an uncertain economic outlook.

Retail rents in both cities will also remain challenging this year. Singapore mall owners are bracing for another weak year as the sluggish economy weighs on retail activity and consumers shop online more. In Hong Kong, a two-and-a-half year slump in mall rents may continue as retail sales remain subdued. Marcos Chan, head of Hong Kong, Taiwan and Southern China research at CBRE, sees prime mall rents falling as much as 5 per cent amid declining tourist arrivals and softer domestic demand.

"We see no particular reason why the retail market or retail property will rebound anytime soon," said Chan, who still expects rents to stabilize by mid-year. "We will have to wait for some other triggers for the retail market to pick up before retail rents go back to an upward trend."