Investment Sales Outlook For 2024 Projected to Perform 10% Better Than 2023; Residential & Retail to Lead the Charge

Savills Research projects total investment sales value to be around S$22 to S$23 billion this year, 10% better as compared to S$20.5 billion in 2023. While economic challenges persist, residential and retail investments are expected to lead, especially with more activity in the Government Land Sale (GLS) market and the prospect of interest rates falling in the second half of 2024.

Q4 investment sales figures dropped from S$7.3 billion achieved in the third quarter to S$5.4 billion. Factors contributing to the decline, other than the year-end holiday season, included weaker investor sentiment amid ongoing economic uncertainty, the high interest rate environment, mismatch of price expectations between buyers and sellers and rigorous due diligence checks to prevent money laundering.

The public sector, at 54.5%, was the largest contributor to Q4’s total investment value, with six land parcels under the GLS Programme awarded a total value of about S$2.9 billion. The private sector accounted for the remaining 45.5% of total investment value, recording S$2.4 billion of transactions in the quarter.

Residential investment sales remained robust at a transactional value of S$3.5 billion in Q4, which was on par with the previous quarter. Propelled by the award of nearly S$6.3 billion for the 10 GLS residential sites, the residential sector achieved S$10.3 billion in 2023. 82% of the sales value in Q4, totalling S$2.8 billion, was from the award of four GLS sites - three private non-landed residential parcels and one executive condominium site, with Clementi Avenue 1 drawing the highest number of bids for the private non-landed residential sites.

The commercial sector achieved a total of S$1.6 billion in investment sales in Q4, all from 13 transactions in the private sector. Although transaction volume has declined 35% from Q3, sales value slipped only marginally at 0.9% quarter-on-quarter (QoQ). This was largely attributed to a few block transactions, with the biggest deal being the collective sale of Shenton House – a 36,350-sq ft site zoned for ‘Commercial’ use, at a reported land rate of about S$1,885 per sq ft per plot ratio (psf ppr). In 2023, investment sales in this sector decreased from S$12.8 billion in 2022 to S$6.2 billion. The absence of mega deals played a critical part, coupled with weakening confidence in commercial properties due to economic uncertainty and compressed yields caused by rapidly rising interest rates, which led to the drop.

In 2024, the total number of GLS sites awarded is likely to see a higher number than 2023, with spillover tenders closing from the 2023 GLS Programme and those from the first half of the 2024 GLS Programme that are expected to close in the second half of the year.

Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore, comments, “The collective sales market for residential is likely to see another year where developers exercise caution and be more inclined to replenish their landbank from the GLS sites.”

Retail assets may see better transaction prospects this year with yields hovering at a high of 4%. Risks are lower for prime suburban malls and buyers may be motivated to commit to sales especially when prime stock available is scarce. Even for Orchard Road, the lack of new sites for retail development may bring about a sale or two of certain landmark malls in 2024.

Jeremy Lake, Managing Director, Investment Sales & Capital Markets, Savills Singapore, says, “I expect to see more investment activity in 2024 than in 2023 as investors come out of hibernation. Inflation is falling, interest rates have peaked and “the glass is half full” for some investors. I foresee deals across all the various asset classes with developers, UHNW private buyers and funds telling us they intend to buy in 2024. We just launched the very prime Scotts Square retail mall for sale and the interest we have received from potential buyers in Singapore and the region has been very strong, reaffirming our positive outlook for the investment market in 2024.”

Read the full Q4 Sales and Investment Briefing here.