Real estate investment sales in Singapore projected to reach $40 billion in 2018

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Colliers International in releasing its latest quarterly investment sales report ‘Keeping Up The Momentum’ on August 13 said the real estate investment sales in Singapore is projected to reach $40 billion in 2018. The leading commercial real estate services company said commercial and industrial properties could pick up part of the slack in the second half of 2018 to keep the momentum of real estate investment sales as new cooling measures dampen residential investment sales outlook.

Colliers’ latest quarterly investment sales report which tracked all private property sales at transaction prices of Singapore Dollars (SGD) 5 million and above, and all successfully awarded state land tenders across all property segments in Q2 2018 in Singapore.

Real estate investment sales in Singapore grew by 19% year-on-year (YOY) and 11% against the previous quarter to SGD 12.2 billion in Q2 2018, led mainly by the residential sales which accounted for 67% of total investment sales during the quarter.

Five largest transactions in Q2 2018

Name of Property Sector Transacted Price (SGD million) Price psf (SGD)
Tulip Garden Residential 906.9 1,790 psf ppr
Twenty Anson Commercial 516.0 2,503 on NLA
Dunearn Gardens Residential 468.0 1,914 psf ppr
Chancery Court Residential 401.8 1,610 psf ppr
Park House Residential 375.5 2,910 psf ppr

Residential

real estate investment sales

Residential sales surged by 60.7% YOY to SGD8.2 billion, driven by brisk collective sales which made up nearly half of the investment sale volume in Q2. The strong performance in Q2 brought H1 2018 residential investment sales to SGD17.3 billion – the highest half-yearly figure on record.

A total of 16 residential collective sales with a combined value of SGD3.9 billion were transacted in Q2 2018, bringing the H1 2018 tally to 33 deals valued at SGD9.7 billion. Based on Colliers’ research, this is 19% above total residential collective sales in the whole of 2017.

Ms. Tricia Song, Head of Research for Singapore at Colliers International, said, “In view of the latest cooling measures which would raise taxes for investors and developers in the residential sector, we foresee a slowdown for the residential en bloc market in the near-term. However, commercial and industrial real estate could pick up the slack in the second half of the year, on the back of healthy commercial properties deal pipelines and rising interest from real estate investment trusts (REITs) and institutional investors for industrial assets.”

Meanwhile, three Government Land Sales (GLS) sites – in Mattar Road, Cuscaden Road and Silat Avenue – worth a total of SGD1.7 billion were sold in Q2 2018. In particular, the SGD410-million winning bid for the Cuscaden Road site set a new per square foot per plot ratio record for a GLS residential site at SGD2,377.

Commercial (Office and retail)

After a quiet Q1, the commercial sector sprang back to life in Q2 with a few major whole-building transactions, including Twenty Anson which was sold for SGD516 million, Sembawang Shopping Centre for SGD248 million, MYP Plaza for SGD247 million, and The Rail Mall for SGD63.24 million. The total real estate investment sales in this sub-sector came in at SGD1.4 billion in Q2 2018, up nearly three-fold from Q1 but down 59.3% from the corresponding period in 2017 which saw mega deals such as Jurong Point (SGD2.2 billion) and 50% stake in One George Street (SGD591.6 million).

Sembawang Shopping Centre sold for $248 million

Industrial

There was improved demand for industrial properties in Q2 as sales value jumped 295.1% YOY to SGD797.4 million, largely due to strong private investment sales which accounted for 95.7% of total sales volume in the industrial sector. Major deals included the sale of 99% stake in Kingsland Data Centre for SGD295.1 million to Keppel DC REIT and Admirax for SGD106 million to BlackRock.

Property auction market down led by lack of big-ticket items for sale

Ms. Song added, “REITs have remained active in reconstituting their portfolio, divesting their non-core assets and recycling proceeds into potentially higher growth ones. As industrial rents and prices are expected to bottom out and stabilise, we notice a growing institutional interest to acquire more industrial spaces, especially in niche sectors such as data centres, hi-spec facilities and modern ramp-up logistics buildings. As such, we foresee a pick-up in interest from institutional investors for this class of asset in the remaining of 2018.”

Mixed use and Shophouses

Mixed-use properties remained popular. In Q2 2018, mixed-use investment sales rose 30.2% YOY to SGD1.5 billion, comprising mainly the public land sale of a commercial and residential site in Holland Road for SGD1.2 billion and private investment sale of Chinatown Plaza for SGD260 million.

Meanwhile, shophouses are fast emerging as an alternative asset class among high net worth individuals, property funds and investment companies, especially in the light of the fresh cooling measures implemented on the purchase of residential properties from July 06 this year. Based on Colliers’ research, shophouse transactions with value of SGD5 million and above grew 13.4% YOY to SGD305.7 million in Q2 2018. This brought total shophouse transactions to SGD784.3 million in H1 2018, surpassing full-year shophouse investment sales from 2014-2017.

Outlook

With the bumper sales already clocked in H1 2018, Colliers expects 2018 real estate investment sales to still match 2017’s record SGD40 billion.

This projection was revised from an earlier forecast of a 15% YOY increase in investment sales to SGD46 billion for this year following the introduction of new cooling measures in July.

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