Property investment sector performance in Q2 2019 comes in strongly

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Author: Ravi Philemon

Property investment sector performance in Q2 2019 came in strongly said CBRE. The property investment sector performance showed strong Quarter-On-Quarter (QoQ) growth in Q2 2019, it added.

The report showed that preliminary investment sales came in strongly for Q2 2019, rising 30.7% q-o-q to S$5.846 billion. This was after lacklustre performance of S$4.474 billion in Q1 2019. I added that the market received a boost from several heavyweight office deals such as Chevron House, 7 & 9 Tampines Grande and Frasers Tower.

property investment sector performance

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The property investment sector performance for Q2 showed that office segment remains robust, with office deals driving investment sales.

Office deals accounted for 47.1% of overall investment sales in Q2 2019. On the back of four major deals in the quarter, office transaction volume surged by 9.6 times to S$2.752 billion in Q2 2019.

The largest deal was the sale of Chevron House for S$1.025 billion to AEW Asia. However, the completion of the deal is still subject to several conditions; such as the completion of its current asset enhancement works and the divestment of the retail and banking hall space. Another major deal was the sale of a 50% stake in the newly completed Frasers Tower for S$982.50 million. The other two deals were the sale of 7 & 9 Tampines Grande for S$395.00 million and the collective sale of Realty Centre for S$148.00 million.

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Mr Jeremy Lake, Managing Director of Capital Markets at CBRE, said, “Investors continue to be keen to invest in the Singapore office market in anticipation of further rental growth and capital appreciation. Investors also feel that interest rates are likely to go down rather than up and this has helped buoy sentiment. We have seen a pick-up in enquiries for strata offices as well as for entire office buildings. With a few more deals in the pipeline, office investment volumes are likely to be very strong for 2019.”

The property investment sector performance Q2 revealed that residential sales was spurred by luxury deals. Preliminary residential sales volume rose by 30.5% q-o-q to S$1.599 billion in Q2 2019 to make this sector the second highest contributor for Q2 2019. Despite the lack of residential collective sale transactions, two sites from the Government Land Sale program were awarded for a total of S$875.53 million, while another two vacant sites at Jervois Road and King Albert Park were sold for S$40.75 million in the private market.

In addition, the luxury market witnessed some healthy buying activity; 16 units of the newly launched Boulevard 88 were sold above S$10.00 million in Q2 2019 and the GCB transaction volume increased by 27.9% q-o-q to S$143.28 million.

The property investment sector performance data for Q2 suggested that foreign investment volume remains strong in Singapore.

Preliminary numbers showed that foreign investment volume rose 5.4 times q-o-q to S$2.936 billion, accounting for half (50.2%) of the overall investment sales volume. The Singapore market continues to feature favorably with foreign investors and attract new entrants to the market. An example is the buyer of Chinatown Point, PAR Chinatown Point, a special purpose vehicle managed by Pan Asia Realty Advisors, which is a joint venture formed between Mitsubishi Estate Co and CLSA.

Real estate investment sales holding up despite property curbs

Mr Desmond Sim, CBRE’s Head of Research for Southeast Asia, said, “While it is still too early to quantify the capital flows to Singapore arising from the global trade war, Singapore continues to attract global capital allocations due to its stability and security. This is especially so for the residential market where the government monitors closely with measures in place to safeguard against excessive speculation from foreign capital.

“While capital appreciation may be stifled, capital preservation is the strong decisive factor in today’s uncertain climate. Meanwhile, with more deals in the pipeline, we expect the momentum in the commercial market to gain further traction and to continue boosting investment sales volume over the next six months.”

CBRE’s report showed that property investment sales in Singapore has made a U-turn from its slow start in Q1.  The property investment sector performance data for Q1 2019, showed that it racked up $5.3 billion worth of deals across all property sectors – representing a 21% quarter-on-quarter (QOQ) decline.

The earlier report suggested that property investment sales activity should pick up in the coming quarters, including potentially more commercial (office and retail) deals to be concluded towards the end of the year. It added that for the whole of 2019, total property investment sales volume is estimated to be$38 billion, on par with 2018’s level.

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