Ever since last June when Singapore government implemented a framework known as total debt servicing ratio (TDSR), which it capped an individual’s debt-to-income ratio at 60%, the real estate market in Singapore has begun to feel a crunch. It was reported by The Straits Times on Saturday 8 Feb 2014 that there are fewer home launches in the suburbs region. It was also reported that sales has plunged to their lowest levels since the depths of the financial crisis back in year 2008.
Inevitably investors will have to take prudence when putting their hard-earned money into real estate be it a physical house or in real estate related stocks. In my opinion, Singapore real estate market will have limited growth for this year unless there is a tweak in the cooling measures. To achieve strong growth, a real estate company will have to venture out of Singapore to seek opportunities overseas. CapitaLand is such a company.
CapitaLand’s foray into China began way back in 1994 and ever since it has entrenched itself to be a leading developer in China. Its competitors are domestic players such as Vanke and Evergrande. As of September 2013, China accounted for 39% ($14.2 b) of the group total assets. For example, the group’s unit CapitaMalls Asia has more than 60 shopping malls in China and it is expected to grow double-digit in their net property income year on year with the raising middle-income group driving consumption demand.
This year marks CapitaLand’s 20th year in China and announced that they are going to deepen their presence in five city-clusters spanning across the country namely:
1. North – Beijing and Tianjin
2. East – Ningbo, Suzhou, Hangzhou and Shanghai
3. West – Chengdu and Chongqing
3. South – Guangzhou and Shenzhen
5. Central – Wuhan
source: The Business Times 8 Feb 2014
I am glad to know that The Ascott Limited, CapitaLand’s wholly owned serviced residence unit, is looking to achieve its target of 12,000 apartment units in China by year 2015, deepening its presence in first-tier and high-growth cities. This is because Ascott REIT will stand to benefit from this growth, which is why I am still quite bullish about this REIT.
Last but not least, as the adage says “Do not put all your eggs in one basket”, CapitaLand besides focusing on their core business in China and Singapore, they will be nurturing and develop their business in other geographies such as Australia and Vietnam, which could potentially be a catalyst for future growth.
To conclude, in my opinion, I am bullish on CapitaLand future growth in the long-term. Although in Singapore they are expected to experience limited growth, a plethora of opportunities are present in their overseas portfolio. Having said that, you have to do your own research and form your own opinion before investing.
Have Fun~ 🙂