Investment sales and office space cum residential sub markets remained resilient in a subdued 2019 says new Research
Notwithstanding a muted domestic economy, the on-going trade war and other geopolitical tensions, private investment in real estate and the demand for office space remained robust as the Singapore property market continues to position itself as a safe haven for investment and commerce.
In tandem with the slowdown in sites sold under the Government Land Sales (GLS) Programme due in part to the soft residential collective sales market, the overall investment sales value dropped to $23.2bn in 2019, down 22.2 per cent from 2018’s $29.9bn.
Private investment sales, however, gained momentum, accounting for 78.1 per cent of total sales compared 76.2 per cent in 2018. Activity was supported by notable transactions in the office and hospitality sectors.
With Chevron House’s $1bn transaction topping the list in 2019, and the sale of Bugis Junction Towers in Q4 for $547.5m, the office sector enjoyed a 53.5 per cent year-on-year (y-o-y) increase in total private sector deals and GLS sites.
Hospitality assets – underpinned by yet another record year in international visitor arrivals to Singapore – likewise enjoyed brisk deal activity, with investment sales value increasing 216 per cent y-o-y. Q4 2019 saw the sales of the luxury Andaz Singapore hotel for $475m and Liang Court for $163.3m.
EDMUND TIE’s chief executive officer, Ms Ong Choon Fah said: “Given escalating risks in equities and shrinking yields in the debt market, real estate presents itself as an alternative asset class in which investors can safely park their wealth over the mid- to long-term.”
“In addition to a stable political landscape, the historical strength and stability of the Singapore dollar also preserves the value of investments, hence making the country a highly attractive destination for investors,” she added.
Office space investment sales
Sound fiscal and pro-business policies, supported by strong economic fundamentals, have also catalysed activity for office space, with substantial demand originating from the information & communications and finance & insurance sectors, even as the co-working industry continues to expand its footprint here.
“As businesses here undergo digital transformation, there is a healthy demand for IT and digital solutions as well as sustained demand for payment processing services,” said Ms Alice Tan, EDMUND TIE’s head of research and consulting.
Notable movements in Q4 2019 included the relocation of First Abu Dhabi Bank to 22,000 sq ft of space in Asia Square Tower 2, technology firm Upgrade Pack’s setting up office at 9 Battery Road, and JustCo’s opening of its 50,000 sq ft co-working office in Manulife Centre.
Ms Tan added: “Firms providing asset management and legal services could also be on the lookout for office space since inbound investment to Singapore is expected to step up as investors search for safe haven investment destinations in Asia.”
Residential investment sales
While the total sales volume of private homes is anticipated to reach 19,000 units for 2019, lesser than the 22,139 units sold in 2018, residential demand nonetheless stayed remarkably resilient in spite of the soft economy and modest job market.
Well-conceptualised projects with good locational and site attributes enjoyed good sell-through rates. One Holland Village Residences, for example, achieved a sell-through rate of about 29 per cent one month after its launch in end November 2019, transacting 87 out of its total of 296 units.
Other integrated developments with residential units launched in the fourth quarter that saw encouraging responses include Midtown Bay, which saw a sell-through rate of 22 per cent since October 2019, and Sengkang Grand Residences, which enjoyed a 35 per cent sell-through rate since November 2019.
“Notwithstanding the new high pricing set by new launch projects in 2019, there is growing acceptance from homebuyers on the price premium factors accorded to well-located projects with concepts that appeal in lifestyle and convenience,” said Ms Tan.
Ms Ong added: “Home ownership as an aspirational goal has long been a key element of the Singaporean dream since the nation’s formative years. Barring severe shocks, there will always be latent demand that will respond positively to quality supply that comes on-stream. Developers, who continually seek to raise the bar and create more value for homeowners, will continue to outperform the market.”
Everyone wants to know how to make money from investment sales. For those interested in real estate investments, the decision is between jumping in and buying (and perhaps overpaying for reading the market wrongly), and a long, hard wait where one might potentially lose a lot of capital in the process.
Understanding the property cycle and current market conditions would help those interested in investment sales to determine if it is a good time to invest. In order to correctly understand the market, buyers of real estate investment properties need to properly model the market to capture all the inputs and outputs.
Those interested in real estate investment should only go for high quality properties in good location with historical strong rental demand. One important thing such prospective buyers should ask is, “if money is not an issue, where would you rent?”
The prospective buyer would only know where the rental demand is after speaking to 30 – 50 people. So, always buy in those areas where people want to rent (because when times are good, one can get good rentals and when bad, it is still rent-able at a lower rent), you will still be able to find tenants because of the desirable locations.
Look for units that have some price distortion or buy good facing units that are going for less premium during high market. (Note: Some more speculative projects have a price difference of 20 -30 per cent between good facing and average facing units. For example, between 2800 psf versus 2200 psf, during a low cycle, the difference could narrow to 5 to 10 per cent.)
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