by Property Soul
Since the start of the year, cash-rich property developers from mainland China have been actively participating in Government Land Sales (GLS) tenders. Aiming to expand their footprint in Singapore, they have set new records in bidding prices for residential sites.
This is no doubt a big windfall for the government.
But not for local developers who may be involuntarily priced out of their hometown by the better-off counterparts from China.
Facing thin margins and depleting land bank, they may have to explore the collective sale market or venture abroad for greener pastures.
Aggressive globalization of Chinese developers
On the other hand, Chinese real estate companies are compelled to expand overseas amidst a competitive and slowing domestic market. It is also an important hedge against the possible depreciation of the Chinese yuan.
Starting from end of last year, the Chinese government has imposed tighter capital controls to discourage capital outflow. But bigger property developers may have already exported a significant amount of money outside the country.
According to Jones Lang Lasalle’s Global Capital Flows study, institutional investors from China snapped up office buildings, hotels and residential properties totaled $33 billion last year, up 53 percent from a year ago. The amount is excluding individual home purchases by Chinese buyers.
Knight Frank published its latest Asia-Pacific Residential Review in May. The chart above may show that Hong Kong is the biggest cross-border buyer between 2007 and 2016 with a lion share of 74.5 percent. But in reality, many of the so-called Hong Kong developers are subsidiaries of Chinese developers listed in Hong Kong. The actual picture should show the total of Hong Kong and China figures that represent an 80.2 percent of cross-border residential purchase volume. In contrast, Singapore-based developers are lagging far behind with only 7.3 percent of the total volume.
In terms of actual dollars, the total investment amount of Chinese developers in the purchase of overseas residential land has gone from practically zero in 2009 to more than US$2.5 billion in 2016. In the first three months of this year alone, they have invested over US$5.1 billion in the Asia Pacific residential market.
Between 2012 and 2016, the favorite country of the Chinese builders was Australia (36.5 percent), followed by Hong Kong (23.7 percent), Malaysia (19.7 percent) and Singapore (15.4 percent).
Report card of local versus Chinese bidders
Singapore may not be a major hotspot for overseas expansion of Chinese developers. Yet they still snapped up three out of the eight sites (Lorong 1 Realty Park, Stirling Road and West Coast Vale) for sale by public tender from January to August this year.
On average, there were as many as 13 bidders going after the same plot of land. Even big guys were easily outbid by foreign players. For smaller local builders, the chance of winning any tender was even slimmer.
Key Chinese players in Singapore’s property market
Who exactly are these Chinese developers? How are they different from local developers?
Below are five of them who are “regulars” at GLS tenders and have acquired GLS land parcels recently.
1. Qingjian Realty (中国青建)
Qingjian Realty (South Pacific) Group is the Singapore real estate subsidiary of Qingjian Group, a Qingdao-based conglomerate with different businesses including building and construction, consultancy, investment and logistics.
With 11 projects under its arm now, Qingjian’s expansion in Singapore was not all smooth sailing from the beginning.
It started as a sub-contractor of HDB flats in 1999 and became a main contractor in 2004. Their first development opportunity finally came in 2008. Natura Loft, the first DBSS project built by a foreign developer, was launched in the midst of a financial crisis. Coupled buyers‘ doubt about this first Chinese developer in the property market, only 80 out of 480 units were sold in the first month. Qingjian pushed the rest of the units using the incentive of a lucky draw to win a Volkswagen Tiguan and a Beetle Cabriolet.
When Qingjian launched the Punggol EC and condo projects in 2011 and 2012, again the market coincided with the introduction of cooling measures and sales were slow.
In May 2016, Qingjian closed the biggest en bloc deal in nine years by paying S$638 million for Shunfu Ville, a privatised HUDC estate in Thomson. In the same month, they paid the top bid of S$301 million for Le Quest, a mixed commercial and residential site in Bukit Batok.
To differentiate themselves in a market dominated by big local players, Qingjian introduced smart homes in recent EC projects iNz Residence and The Visionaire.
2. Nanshan Group (南山集团)
After the Chinese Economic Reform in 1978, Nanshan Group’s legendary founder Song Zuowen led the whole Shandong village from agriculture to the path of industrialization. It is now a highly-diversified conglomerate with operations in aluminum, textile, finance, tourism, aviation, education and real estate.
Nanshan Group Singapore Co. was under the leadership of the founder’s eldest son Song Jianbo whose family resided in Singapore. The company has been eyeing to expand in the Singapore property market for long. In the past 12 months, it participated in 8 out of 11 tenders in GLS auctions.
In 2013, the company bought Park Regis along Merchant Road for S$250 million. A year later, it acquired the former Midlink Plaza at S$270 million and redeveloped it into the 396-room Mercure Singapore Bugis.
In the same year, Nanshan submitted the highest bid of S$173.57 million to beat 17 other bidders and drove home the residential site at Sin Ming Avenue. The plot was used to build Thomson Impressions.
Following that, it spent S$160 million to acquire the old Irving Industrial Building in Tai Seng through a collective sale. The Singapore office of Nanshan Group also moved into the new building after it was completed.
3. Logan Property (龙光地产)
Headquartered in Shenzhen but listed in Hong Kong, Logan Property Holdings has three businesses: property development, property leasing and construction contracts. The Singapore subsidiary was incorporated in August last year.
Besides its residential property projects in China’s Pearl River Delta region, Logan Property is also well-known for having the world’s youngest (and prettiest) billionaire in Forbes’ 2014 billionaire list.
Hong Kong resident Perenna Kei Hoi Ting has a net worth of US$1.3 billion at age 24 when her father, Logan Property founder Kei Hoi Pang (Ji Haipeng), gave her 85 percent of the company through a family trust and multiple companies for taxation purposes.
In Singapore, Logan Property is well-known for partnering with Nanshan Group to submit the highest bid for the residential site in Queenstown Stirling Road. The bidding price of S$1.003 billion broke the record price at a government land auction.
Logan Property told the media that the price of S$1,050 psf was reasonable. The Chinese developer believed that the project would be profitable since it meets the company’s targets for internal margin and internal rate of return.
4. CSC Land Group (中国建筑)
CSC Land Group is a subsidiary of China Construction (South Pacific) Development Co Pte Ltd (CCDC) which is a regional branch of China State Construction Engineering Corporation (CSCEC).
The 60-year-old Beijing-based construction company CSCEC is ranked the third largest in the world and the 20th largest general contractor in terms of overseas sales.
Since 1992, CCDC has been a sub-contractor in Singapore before becoming a main contractor for condominiums, HDB projects, recreation clubs, tertiary institution campuses and other industrial projects.
In February, China Construction put in the top bid of $292 million to beat 8 other bidders, including fellow Chinese developers Nanshan Group and MCC Land (中冶置业) for the residential land parcel in West Coast Vale.
5. Fantasia Investment (花样年)
Fantasia Investment, a unit of Hong Kong-listed Chinese developer Fantasia Holdings, has only one project in Singapore – a 168-unit freehold project named 6 Derbyshire in Novena area. Recently, the company has an aggressive plan to invest in the US, Taiwan and Singapore property markets.
In June, the Chinese developer came under the limelight when it led the consortium with Sun Renwang and Yang Xinping that sent in the highest bid of $75.8 million for a landed housing site in Lorong 1 Realty Park in Hougang.
The winning bid was 22 percent above than the second-highest offer of $62.02 million from Singhaiyi Investments and Haiyi Wealth. Ten other bids ranged from $29.88 million to $62.02 million. International Property Advisor’s Ku Swee Yong said Fantasia “has probably done its feasibility studies using different metrics from other developers”.
Whatever the reason, at least Fantasia bagged its plot of land and the government should be happy about the high winning bid.
How reliable are Chinese developers?
In my book No B.S. Guide to Property Investment, I highlighted three critical factors to look for in a property developer: experience, reputation and attitude.
• How many similar projects have they built in the past?
• Do they specialize in commercial or residential development?
• Is this their first residential project in Singapore?
• Do they have the vision to build the best-in-class projects?
• How did they deal with complaints in the past projects?
A good developer focuses on every single detail of the project. It sets high standard in construction, offers professional workmanship, and provides good quality fixtures.
Regardless of the country of origin of a developer, buyers are advised to do their own homework for background check before committing on the purchase.
This blog post first appeared on 99.co.