Investment sales face headwinds.
Real estate investment sales in Singapore, which corresponds to the sale of land, buildings and multiple units valued above $5 million, plunged by around 74 percent to $1.75 billion in Q1 2016, from $6.7 billion in Q4 last year, according to a DTZ report.
The sharp decline is partially attributed to uncertainty in the global economy, arising from volatile oil prices, mixed signals on China’s economic growth, and the UK’s potential exit from the European Union.
Another factor is the disappointing economic data since January 2016, which further weakened investor sentiment, widening the price gap between cautious buyers and forward-looking sellers.
The sluggish local property market also contributed to the drop in sales, with the existing cooling measures continuing to discourage investment sales in the private residential market.
In the commercial market, the huge upcoming supply of office space in 2016 and 2017 further slowed down transaction levels.
In the first quarter, property investment volume in the private sector plummeted by around 90 percent to $521.9 million, compared to $5.1 billion in the previous quarter.
But it was the public sector that dominated the market, with Government Land Sales (GLS) accounting for about 70 percent of the overall figure.
The largest sale involved a 19,309.6 sq m site near East Coast Park to a consortium comprising Frasers Centrepoint, Sekisui House and KH Capital for $624.2 million, or $858 per sq ft per plot ratio (psf ppr).
Other state-owned sites transacted during the period include a land parcel at New Upper Changi Road / Bedok South Avenue 3 that was purchased for $419 million ($760.50 psf ppr), while an EC site at Yio Chu Kang Road was acquired for $183.8 million ($331 psf ppr).
Despite the dismal market activity, DTZ’s Senior Director for Investment Advisory Services, Swee Shou Fern, believes that Singapore is still on the radar of property investors.
“Although there were fewer transactions concluded in Q1, both local and foreign investors remain keen in Singapore properties and are on a constant lookout for interesting propositions. However, the negotiation process is longer due to the mismatch of expectations.”
Moving forward, GLS is expected to continue driving investment sales in the coming months. The sites remaining on the confirmed list include a land parcel at Martin Place, and a commercial / residential site at Bukit Batok West Avenue 6.
The proposed development of the site could attract potential HDB upgraders from Bukit Batok, and the catchment for the commercial component will come from upcoming public housing projects.
“The site is also attractive as it is likely to capture some positive externalities from the development of Jurong Lake District,” added DTZ.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
