Singapore’s property market may be closer to a bottom than Hong Kong, according to LaSalle Investment Management, which oversees more than $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 percent 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 percent since September. Prices in Singapore have fallen 1.2 percent since September and 9 percent from the peak in 2013 as property curbs cooled demand. Singapore prices had surged 92 percent from 2003 until the record set in September 2013.
Hong Kong’s office market is still seeing strong demand from Chinese investors for core office buildings in the central business district, Chow said. LaSalle has been stepping back from investments in Hong Kong for a few years, even though they may yield good returns, because the risk is not justified at the current level, he 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,” Chow said.
LaSalle is focusing on investments in China and Japan, especially in the logistics sector, 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 percent of the total stock, so there is potential for upgrading demand, he said.
As of March, LaSalle had about $7 billion of its assets invested in the Asia-Pacific region. LaSalle plans to raise its fifth Asia Opportunity Fund after it has almost fully invested the fourth fund. It raised $585 million for the fourth fund in 2014, targeting investments in China, Japan, South Korea and Australia.