More switching to commercial property: banks

Business Times: Wed, Dec 14

SOME banks which have been seeing more investors switch to commercial properties say that they expect the pace to pick up following the latest cooling measures in the residential property market.

Bankers say that the interest in commercial real estate has been growing for several months fuelled by low interest rates and higher yields versus expensive residential properties.

According to one property agent, the yield for commercial property can be as high as 7 per cent against 2-3 per cent for residential. ‘I’ve more (investors) looking towards commercial,’ the agent said.

According to a United Overseas Bank spokeswoman, ‘both corporate and retail customers have expressed interest in investing in the commercial property market over the past few months’.

A DBS Bank spokeswoman said that from an investment point of view, there is still a lot of liquidity in the market. ‘Following the large rise in prices in the residential property market, some investors have switched from that segment to the commercial and industrial property market.’

Many factors are at play here, one of which is the low interest rate environment in Singapore compared to neighbouring countries, said Raghu A, head of commercial banking at Maybank Singapore.

‘This helps in the take-up of both residential and commercial property loans. With the government’s introduction of the additional buyer’s stamp duty (ABSD) just last week, we can expect investor interest shifting even more from residential to commercial property.’

And commercial property sellers are stepping up their marketing to cash in on the greater interest.

‘For business owners, more are keen to own their own commercial property, given that there are now smaller units being built, which are more affordable to the businessmen,’ noted Mr Raghu. ‘Coupled with rising commercial rentals, more businesses may then prefer to own their own commercial properties.’

Some businesses which are leasing office space are also taking advantage of new launches in the commercial property market to purchase units where this will result in longer-term cost savings, added the DBS spokeswoman.

Developers and agents selling small strata-titled commercial and industrial units are stepping up their marketing efforts in anticipation of increased demand from investors who might be looking to bypass the ABSD introduced by the government last Wednesday.

One banker cautioned, however, that the buoyant commercial property market may not last given the global slowdown.

‘Overall, we are seeing a moderation in loan growth as businesses are adopting a cautious outlook amid the global economic uncertainties,’ said Samuel Tsien, head of global corporate bank at OCBC Bank.

Source: Business Times © Singapore Press Holdings Ltd.

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