Singapore 'is in freefall'
The simple sign announces 'South Beach' and calls it 'Singapore's New Lifestyle Quarter' but there is little sign of life at the collection of dilapidated military buildings.
The abandoned camp was to become a $1.1 billion (Dh4bn) luxury hotel, office, retail and residential project known as South Beach.
Instead, it has become a symbol of the global economic downturn. Construction of South Beach has not yet begun.
Cautious Asian property developers are delaying some residential projects and reconsidering others during the worldwide crisis, which has tightened funding and crimped buyer interest, industry players said.
Singapore has been among the hardest hit. Two years ago global real estate firm Jones Lang LaSalle described the city-state's market as the world's hottest. Property prices surged 31 per cent overall in 2007.
Now the island nation is dealing with an over-supplied market, said Nick Brooke, of Hong Kong-based Professional Property Services.
"Singapore is in free-fall," said Brooke, chairman of the regional real estate consultancy.
Since the fourth quarter of 2007, the number of Singapore private residential units "in the pipeline" has decreased every quarter and more completion dates have been pushed back to 2012 and beyond, DTZ Research said in a new report.
Real estate firms "are already delaying construction and launches", the property consultancy said.
Tight lending conditions during the worst economic crisis since the Great Depression of the 1930s are partly to blame for deferrals, industry players said.
Pairote Sukjan, president of Buathong Property in Bangkok, said the crisis had prompted Thai banks to cut back on lending to both condominium developers and buyers.
"Several condominium projects were delayed or cancelled because developers could not get loans from banks easily," Pairote said.
Real estate firms are still having difficulty securing debt at reasonable spreads, Macquarie Research said.
According to media reports, China's biggest property developer by market value, China Vanke, said it postponed two residential projects last year, one each in Shanghai and Shenzhen.
The company's Shanghai-based spokeswoman, Li Yan, confirmed this without giving specific reasons.
China Vanke, in its third-quarter financial report, said that it would adopt a more cautious approach towards expansion. "Together with other strategies such as cutting prices, property developers are trying out all kinds of means to endure this cold financial winter," said Hui Jianqiang, an analyst with the research firm Shanghai E-house R&D Institute.
India's top listed property firm, DLF, recently reported consolidated net profit for the third quarter fell 68.7 per cent, hit by a liquidity crunch and a slowdown in large construction projects.
Rajiv Singh, the firm's vice chairman, said it would exercise caution and focus on timely completion of existing projects.
Singapore-based developers, key players in the regional property sector, said they were reviewing or have deferred projects.
"With the current tight credit crunch and economic slowdown, the majority of developers will naturally defer the development of their projects and delay launches," City Developments (CDL) said in November when it released third-quarter earnings and announced it would defer construction of South Beach, citing "economic turmoil" and high construction costs.
South Beach is perhaps the highest-profile Singapore project to be delayed.
"As the Singapore economy grows from strength to strength, South Beach will be a beacon signalling exciting times ahead," the CDL-led consortium said when it announced the development a little more than a year ago, with a targeted 2012 completion date.
There were, it turned out, miserable times ahead.
Only 107 new private homes were sold in Singapore in January, the lowest level since June 2007, acco-rding to an analysis of government data by Jones Lang LaSalle.
Singapore-based CapitaLand, one of Asia's largest property firms, recently reported a sharp drop in fourth-quarter net profit.
"We expect to delay some projects," said the firm.
Another Singapore developer with a regional presence is Keppel Land, whose spokesman said that deferrals were being considered, "and we are reviewing the projects".
Malaysia will face delays in completion as developers cope with a tight credit market and large future supply, said Chua Chor Hoon, senior director for DTZ Research.
But the situation in Hong Kong is more positive, analysts said. "In Hong Kong, the future supply is tight due to shortage of land supply. Hence there has been no delaying of projects recently," Chua said.
Still, analysts said the economic downturn has led to sharp price falls in Hong Kong's luxury market.
Local media reported last week that developers were engaged in a price war, slashing values by as much as 40 per cent.
The Standard newspaper quoted Richard Lee Chin-shing of Hong Kong Property Services as saying developers "are being forced to face reality and must sell properties at prices the market can bear".
In Singapore developers are focusing on the middle and mass markets during the downturn, wooing potential buyers with recently lowered prices and other financial incentives, said Jones Lang LaSalle.
Regionally, government stimulus measures introduced to fight the economic crisis could entice potential property buyers, Keppel Land said in its January earnings report.
For the moment, though, there is nothing to lure anyone through the battered and rusted gates of the South Beach site.
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