Over the last few months we have seen the Singapore authorities looking to cool the real estate sector which has risen by an astonishing 59% since mid-2009. If you recall, the US mortgage crisis occurred in 2008 and led to a real estate correction which for many countries is still prevalent today. However, the situation in Singapore has been very different with overseas investors looking to the region after getting over the initial shock of the US mortgage sector collapse.
The authorities attempt to cool the real estate market in Singapore have been partially successful with declines over the last two quarters although the market had risen for six consecutive quarters prior to the fall. The first quarter of 2014 saw a reduction of 1.3% in the value of the average private home in Singapore although rather bizarrely real estate companies quoted on the Singapore stock market have been hit rather harder.
Investors see more value in quoted companies
Over the last four months we have seen a record $7.94 billion worth of takeover transactions compared to just $10 million for the same period last year. The lion’s share of these transactions have involved real estate companies which have seen a reduction in their share prices as the authorities look to take more control of the market. There are examples of real estate company share prices falling by in excess of 10% prior to investors looking to take them private. So is this the way forward?
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In many ways Singapore real estate companies have been impacted by both reductions in real estate values as well as repatriation of foreign investment from the region. This double whammy has offered an interesting opportunity to more proactive investors looking to grab exposure to the Singapore real estate market, in large-scale terms, via the acquisition of companies which have perhaps struggled of late.
Do real estate share prices offer fair value?
If you’re looking to invest in Singapore real estate companies then you need to take professional financial advice to discuss your options and suitability. The fact remains that after a period of underperformance the share prices of many Singapore real estate companies have recovered as speculators consider the next potential takeover target. In the short term this will reduce the attractions of investing in Singapore real estate companies on the whole although individual circumstances will differ from company to company.
Experts have already pointed out the fact that shareholder activism in Singapore may be fairly high in historic terms at the moment but it is still way short of similar shareholder actions in the US. Nonetheless, this renewed interest in Singapore real estate could focus the minds of many local and foreign investors. It also comes at a time when the Singapore Central Bank is warning Singapore investors against excessive foreign real estate investment, much of which was prompted by the rise in Singapore real estate values. Are we about to see a turning of the tables? Will Singapore investors now look back towards their own real estate market?