Singapore’s real estate investments got off to a “slow start” in 2023, with the amount of investment sales for the first quarter of the year amounting to only $4.2 billion. This marked decrease in sales compared to that of 1Q2022’s $10.8 billion, is the lowest quarterly total since 2Q2020, when the government imposed “circuit breaker” measures.
Residential deals in the first quarter of 2023 amounted to $1.6 billion, with three notable collective sales; Meyer Park, Bagnall Court and of Holland Tower, totalling to some $583.8 million.
The sale of Holland Tower is particularly significant as it is the first successful residential en bloc transaction in the Core Central Region (CCR) since property cooling measures were imposed in December 2021, signifying “a nascent return” of interest for prime location development sites, upon the reopening of China.
However, the return does not guarantee success for collective sales. Daniel Ding, head of capital markets (land & building, international real estate) at Knight Frank Singapore, noted the gulf in price expectations between sellers and developers. The success rate for collective sales from 2021 up to now has been around 33%, compared to the 63% success rate from 2017 to 2018.
Chia Mein Mein, head of capital markets (land & collective sale) at Knight Frank Singapore, commented that “for the collective sales mechanism to work in the current cycle, owners must adopt reasonable expectations on price in order to pique the interest of developers and for developers to appreciate that replacement costs for owners have increased substantially.”
The commercial market in 1Q2023 was mostly quiet, however two noteworthy transactions include the sale of 39 Robinson Road to Yangzijiang Shipbuilding for $399 million, and Frasers Centrepoint Trust and Frasers Property’s acquisition of a 50% stake in Nex for $652.5 million.
The industrial sector saw an increase in investment sales in 1Q2023, rising 62.8% q-o-q to $681.1 million. Knight Frank attributes this to the market shifting focus while waiting on the potential repricing of assets in the commercial sector. Notable industrial deals last quarter include the acquisition of four Cycle & Carriage properties by M&G Real Estate at approximately $333 million, as well as the disposal of 12 and 31 Tannery Lane by Ho Bee Land for $115 million.
Knight Frank forecasts that investment activity in Singapore “will get worse before it gets better”, due to macroeconomic uncertainties and volatility in the global banking sector. Financing has become more challenging, and will remain so until there are visible signs of the global economy and financial conditions stabilising.
Consequently, the consultancy has downgraded its projections for full-year investment sales, from a range between $22 billion and $25 billion to a range between $20 billion and $22 billion. Investors will remain cautious as they monitor for signs of repricing before deciding on their next move.