From a strong first place finish in 2011 to 2012, Singapore slipped to third place on the Emerging Trends in Real Estate Asia Pacific survey in 2013.
Jointly conducted by the Urban Land Institute and PricewaterhouseCoopers (PwC), the study provides a property outlook for the Asia Pacific region.
This year, Jakarta took top spot in terms of markets to watch for, followed by Shanghai and Singapore.
The report noted that “several second-tier cities have emerged as favoured investment and development destinations—including, in particular, Jakarta, but also Kuala Lumpur, Bangkok, and secondary cities in China. This is probably at least partly a result of ongoing yield compression in the bigger, more developed markets”.
Nonetheless, these second-tier cities are still challenging to penetrate while opportunities are limited. “In addition, these locations usually carry a significantly higher degree of implied risk. In practice, therefore, most investors will find opportunities in these destinations restricted.”
For Singapore, it is generally regarded as a safe haven, although returns are not that great, said the report.
Predictions are that the city-state “will generate ongoing demand for high-grade office space. In addition, there is always a steady stream of government land sales and a strong pipeline of new projects”.
While this is good news for developers, opportunistic investors with a short-term view may not see the same benefits as there will be “almost unlimited supply down the track as the government will release land to ensure that businesses have what they need”.
Meanwhile, the survey also found that Singapore’s commercial sector had recently “run out of steam” as tenants exited some new Grade A offices. But capital rates are healthy and buildings are still “quite fully priced”, which creates a standoff between buyers and sellers.
For now, strata-titled properties look to be more attractive, with many investors shifting their attention there after the government implemented new measures aimed at cooling the residential sector.
Romesh Navaratnarajah, Senior Editor of PropertyGuru, wrote this story. To contact him about this or other stories email romesh@propertyguru.com.sg
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