Q3 Real Estate Investment Value Up 100% Quarter-on-Quarter (QoQ)

Total investment sales value in Singapore is projected to drop from the forecasted S$24 billion - S$25 billion to S$19 billion - S$21billion. This is due to the possibility of new conflicts erupting, the rewiring of supply chains, political purges and the contagion effect arising from the recent terrorist attacks within Israel. While there is a probability that large ticket items may still be transacted for the rest of 2023 to possibly H1/2024, the likelihood of such is lower than the pre-pandemic decade and institutional investors will likely see a retrenchment in deal counts.

Nonetheless, the real estate investment market recorded S$7.13 billion worth of deals in the third quarter of 2023, double the S$3.57 billion achieved in the previous quarter.

In the public sector, seven land parcels under the Government Land Sales (GLS) Programme were awarded for a total value of around S$4.16 billion, contributing 58.3% of the quarter’s total investment value. Because of the sale of several large sites, such as the residential sites at Marina Gardens Lane (S$1.03 billion) and Jalan Tembusu (S$828.8 million), and the commercial and residential site at Tampines Avenue 11 (S$1.21 billion), this is the highest quarterly value recorded under the GLS Programme since Q3/2011.

The private sector was up 2.8% QoQ and bagged S$2.97 billion in Q3. However, there was a 31.6% drop from the 98 transactions in Q2/2023 likely due the Hungry Ghost Month, the increase in Additional Buyer’s Stamp Duty (ABSD) rates for purchasing residential properties on foreign buyers and local investors, as well as the continuation of a high interest rate environment.

The investment value for residential sites and properties amounted to S$3.43 billion in Q3/2023, making up almost half (48.1%) of the quarter’s total investment sales. This is also two times more than the S$1.71 billion recorded a quarter ago.

Private housing market activity has begun cooling in recent months. The hefty 60% ABSD for foreigners has sharply curtailed demand from this group of buyers, in particular the high-end market segment. The recent investigation of a high-profile
money-laundering case may have also dampened market sentiment. For locals and permanent residents, it has been the rising mortgage rates and economic challenges that have affected market activity. Consequently, for developers when it comes to the bidding of land, caution prevails.

Commercial investment sales totalled S$1.69 billion in Q3/2023, making up 23.7% of the overall investment sales. It grew by 62.2% QoQ on the back of two big-ticket block transactions despite having fewer deals done. The biggest block transaction in the reviewed quarter was the S$908.0 million collective sales of Far East Shopping Centre to Glory Property Development, a company linked to Bright Ruby Resources and Chinese businessman Du Shuanghua.

The second most expensive deal is Frasers Centrepoint Trust’s divestment of Changi City Point, a shopping mall located in Changi Business City, to an undisclosed third party in August. The divestment consideration of S$338 million translates to a unit price of S$1,621 psf based on the net lettable area of around 208,453 sq ft and an exit yield of 4.31% based on the net property income for FY2022.

Alan Cheong, Managing Director, Investment Sales & Capital Markets: “While the global real estate industry may suffer from a host of problems, Singapore has that unique selling point that being a safe haven, there will still be a base level of transactions coming from those, especially the ultra-high net worth families, seeking to diversify from riskier assets and countries.”

Jeremy Lake, Managing Director, Investment Sales & Capital Markets: “While 2023 will be an underwhelming year for the real estate investment market, it being a low point in terms of sales value may help 2024 see a strong rebound, barring unforeseen events. Interest rates are likely to start falling in 2024 and global economic growth will pick up, leading to investors to conclude that the bottle is half full rather than half empty. A lot of investors have large war chests to deploy and are itching to resume buying and Singapore will continue to be a favoured market for private and institutional investors from the region and beyond. In addition, there will be sellers and thus the environment will be conducive to deal making.”

Read the full report here