Hong Kong housing curbs may give Singapore property some relief

Singapore’s three-year decline in home prices could see relief from an unexpected quarter in 2017: Hong Kong.

So says Cushman & Wakefield Inc., which expects the slide in the city-state’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 Ltd., said Singapore house prices are approaching their trough, with a forecast price move of flat to minus 2 percent. Savills Plc forecasts Singapore prices will rise 1 percent on average this year.

“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 percent for foreigners makes Singapore’s 18 percent 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 percent this year, according to the average estimate of five analysts surveyed by Bloomberg. Home prices have fallen 11 percent 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 percent, 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 percent in what is already the world’s most expensive office market according to Knight Frank Plc. That contrasts with a forecast of an average 6.2 percent 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 percent 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.” Pooja Thakur & Frederik Balfour, Bloomberg