QUESTION

REIT
Who are the major players in Singapore market?
Who are the major players in the global market?
How  is the market structure like as in who set the prices?
What sort of macroeconomic factors tend have a strong impact on the industry?
Salary paid to management :is it justifiable?
Apply SWOT, Michael Porter’s 5 forces and MAKENT model onto the industry and relevant companies.
Highlight and graph out the specific and relevant financial ratios.
Within each industry, there will be a list of specific pointers to be uncovered. The objective is to generate a report that will narrate head to toe of how the industry works, where the profits concentratred as well as the future outlook.

SOLUTION

Major players in Singapore markets

Asia has witnessed a robust growth in last decade or so led by India and China. Singapore has the strategic presence in the Asian market acting as the gaetway to the investors and accesses the opportunities that lie in and around the region. With the growth of the Asian markets there are opportunities in the real estate industry as well. The major players of Singapore Real Estate Industry have been   Capitaland, Centrepoint, Far East Organization, City Development Limited, GuocoLand, Keppel Land, Wheelock Properties, Allgreen Properties, Ho Bee and SC Global that have build world class retail complexes, industrial estates and office developments.

Major players in the global market

Apart from the real estate players of Singapore that have attracted investments across the world there have been major players in the global market that have impacted the real estate investments across the globe.

Below is the list of major players of various regions across Asia and the world

Market Structure

The government agencies, property agencies, developers and most importantly the banks are the major players of the real estate market in Singapore (Propwise, 2010). The policy changes are governed by the government agencies that determine the attitude of the investors in the market.

The policies are developed to control the prices that are prevalent in the market and to reduce the uncertainty in the market.

The key authorities having different roles in framing and implementation of policies are Building and Construction Authority, Housing Development Board, Singapore Land Authority, Urban Redevelopment Authority.

Developers are the major role playing group who have to develop the real estate and the various related activities which include starting from buying the land to developing drawings and finally to selling of property.

The property agents are the intermediaries for the selling the property that has been developed by the developers. The main property agents of Singapore are Propnex, ERA, HSR, DTZ, Knight Frank and Dennis Wee.

Banks: They play a major role in providing the financing for the real estate projects.

Macroeconomic factors impacting the industry

The main macroeconomic factors that have huge impact on the industry are, inflation, interest rates and Investments in the industry. There has been huge growth witnessed in this sector in Singapore as the sector has been boosted by these factors over the years.

Salary paid to management: is it justifiable?

The salaries in the management level have been in the range of $50000 to $80,000. The real estate sector has seen a rise in salaries owing to the huge growth. This might not be justifiable as the spur in the sector has resulted in the openings but with the growing uncertainty in the market this rise in salaries might be lowered leading to high attrition in the industry.

Michael Porter’s 5 forces onto the industry (Bond, Karolyi and Saunders, 2003)

Porter 5 forces are

Threat of New Entrant: The huge opportunities in the sector attract the new entrants but in the present global scenario it becomes very difficult for new entrants to sustain as the real estate industry is capital intensive and it is very difficult to attract the investors and afford the huge cost associated with it.

Threat of Substitute

Threat of substitute here can be referred to the other opportunities that are available with investors. As the huge opportunities are there in Singapore the investors can be attracted by other industries if the policies framework is stringent. But as of now the investors are looking at Real Estate as a possible sector to meet the targets

Bargaining Power of Customers: There is huge demand in Singapore thus the bargaining power of customers is very little.

Bargaining power of suppliers: This is completely opposite of the bargaining power of customers as huge demand increase the cost of suppliers

Competition amongst Competitors: Although here are huge opportunities but the competition amongst competitors is also immense thereby eating up the profits of the real estate firms.

Financial ratios Analysis

The relevant financial ratios of the real estate firms are shown below by the mean value of the ratios:

The Enterprise value and the ratio of Enterprise Value and Operating Profits of major Singapore firms is shown below

The above table clearly shows that the Enterprise Value is expected to be lowered as the ratio is expected to reduce in the next twelve months. This may be due to losing interest of the investors or the slump in demand is expected by the industry experts

References

Lim Hng Kiang. (2007). Review of the property sector in Singapore and Asia . Available: http://www.bis.org/review/r070423e.pdf. Last accessed 18th Apr 2012.

Banyan. (2011). Singapore Industry Focus: Singapore REITs. Available: http://www.remisiers.org/cms_images/research/Research-12Dec-16Dec_2011/sgreit_by_DBSV_141211_all.pdf. Last accessed 18th Apr

Vinod Kothari. (2011). Introduction to Real Estate Investment Trusts. Available: http://www.vinodkothari.com/reits%20presentation%20by%20vinod%20kothari.pdf.

Chiang, Y.H., Chan, P.C.E and Hui, C.M.E., (2002), Capital Structure and Profitability of the property and construction sectors in HongKong, Journal of Property Investment and Finance, 20(6), 434-453

Bond, S., Karolyi A. and A. Saunders, (2003), International real estate returns: a multifactor, multicountry approach.

Propwise. (2010). Major Players in the Real Estate Market. Available: http://www.propwise.sg/singapore-property-beginners-guide-part-3-major-players-in-the-real-estate-market/. Last accessed 18th Apr

Einhorn, David M. Emmerich, Adam O. Panovka, Robin Shapiro, David E. Silva, David B.. (2004). Real estate investment trusts (Forecasts and trends). Real estate investment trusts (Forecasts and trends). 29 (1)

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