Singapore property market closer to bottom than Hong Kong, says fund manager

Blocks of flats in Commonwealth.
Blocks of flats in Commonwealth. PHOTO: MATTHIAS HO FOR THE STRAITS TIMES

SINGAPORE (BLOOMBERG) - Singapore's property market may be closer to a bottom than Hong Kong, according to LaSalle Investment Management, which manages more than US$58 billion in real estate funds.

Governments in Asia's two most expensive residential markets have imposed curbs in recent years to tame prices and improve affordability. As demand has dropped amid a slowdown in the region's economies, home prices in both cities are in the midst of a correction.

"Hong Kong and Singapore are in a different cycle," LaSalle's Chris Chow said in an interview. "Although Hong Kong also has government austerity measures for residential, that hasn't really translated into actual price correction until recently even though the measures came in a couple of years before."

In Hong Kong, prices surged 370 per cent from their 2003 trough through a peak in September before the correction began, as fears of a slowing economy in China damped sales. Home prices in Hong Kong have dropped about 13 per cent since September. Prices in Singapore have fallen 1.2 per cent since September and 9 per cent from the peak in 2013 as property curbs cooled demand. Singapore prices had surged 92 per cent from 2003 until the record set in September 2013.

In Hong Kong, LaSalle has been stepping back from investments for a few years even though they may yield good returns, because the risk is not justified at the current level, Mr Chow said.

A turning point in Singapore's property cycle "is probably closer and more advanced than Hong Kong, so we feel the market is bottoming out," Mr Chow said.

LaSalle is focusing on investments in China and Japan, especially in the logistics sector, Mr Chow said. The asset manager, which has three logistics funds in Japan, is planning more investments in the country as modern warehouses are less than 10 per cent of the total stock in Japan, so there is potential for upgrading demand, he said.

As of March, LaSalle had about US$7 billion of its assets invested in the Asia-Pacific region. LaSalle is planning to raise its fifth Asia Opportunity Fund after it has almost fully invested its fourth fund. It raised US$585 million for its fourth fund in 2014, targeting investments in China, Japan, South Korea and Australia.