Property investment deals in Singapore dropped 40 percent to S$7.2 billion in the first quarter, according to figures released by DTZ Research.
Deals tracked by DTZ Research on a year-on-year basis showed that investment sales reached more than twice the value seen in the first quarter last year and the overall total value invested in Q1 was still comparable to the level seen in Q3 last year.
DTZ said that the fall in investment value was broad-based, except in the retail and hotel segments.
In hotel sector, the total investment value in the first quarter reached S$562.5m. This comprises the acquisition of Studio M hotel by CDL Hospitality Trust and the three reserve GLS sites for hotels sold by the government.
Around 20 transactions worth more than S$100 million each were recorded in Q1, down from 27 transactions in Q4 last year. However, despite the falling volume and transactional values, the average deal size in the first quarter this year was still higher at S$90.6 million, compared to S$81.3 million in Q4 last year.
Foreign net sellers accounted for a fifth of the total value of all properties sold in Q1 2011 against 12 percent purchases. The proportion of foreign capital investing was also lower quarter-on-quarter in Q1 compared to the 17 percent in Q4 2010.
According to DTZ, investors tend to remain focused on their more familiar regional market or home country, which is particularly true in the Asia Pacific region, where 92 percent of capital targeting the region has been raised locally.
“With Asia Pacific benefiting from a greater increase in capital targeting the region, we expect to see more foreign investor participation in 2011,” said Ms. Chua Chor Hoon, Head of DTZ South East Asia Research at DTZ.
“Nevertheless, local investors will continue to dominate, as many are developers buying state land and private collective sites and REITS are increasingly on the acquisition mode after a two-year hiatus, with a few more listings in the works.”
Shaun Poh, Head of DTZ Investment Advisory Services and Auction, said the outlook for the investment market is “expected to be better than last year. Some funds intended for and from Japan could be diverted here. With limited assets for sale, we expect greater competition for investment opportunities.”
“We expect the markets to re-price at a faster rate and yields will likely face compression in 2011. Investors will need to look outside of the core markets for out performance,” he noted.