Q4 investment sales up 42% so far

Business Times: Tue, Dec 13

(SINGAPORE) Investment sales of property have hit about $6.8 billion so far this quarter, up 42 per cent over the Q3 figure of $4.8 billion.

The latest figures from Savills Singapore also show that since the start of 2011, $28.5 billion of such deals have been sealed, and the property consultancy group estimates that the year will end at nearly $29 billion. This would be a little shy of last year’s $31.4 billion.

‘The investment sales market is expected to moderate in the next few quarters, taking into account softening macroeconomic conditions,’ says Savills executive director (investment sales) Steven Ming. ‘However, there’s still ample liquidity and demand in the market. At the same time, investors/funds may favour Asian real estate due to better economic performances compared with Europe and the US. Singapore is well positioned to attract such investors.’

CBRE executive director (investment properties) Jeremy Lake predicts that the figure for 2012 could come in at $20-25 billion.

In the residential sector, developers will continue to be active in buying mass- market private housing sites supplied through the Government Land Sales Programme, although land bids are likely to be lower as developers work in the potential cost of absorbing the newly introduced additional buyer’s stamp duty (ABSD) and providing other soft discounts such as furnishing vouchers.

Mr Lake predicts that after the initial knee-jerk reaction of holding off purchases for a few weeks, aspiring buyers upgrading from public to private housing would return to the market. ‘As buyers in this segment are predominantly Singaporeans and more likely to purchase for owner occupation, they may not even be affected by the ABSD; even if they are, the ABSD rate for them is only 3 per cent.’

Property consultants predict that the ABSD, which applies to residential properties, will lead property investors to further switch to strata industrial, office and shop units.

Savills defines investment sales as deals of at least $10 million but includes sales of GLS sites, acquisitions by real estate investment trusts (Reits) and residential collective sales below that amount. Investment sales often reflect the confidence of major property players in the sector’s mid to long-term prospects.

The commercial sector (office and retail) has chalked up $2.52 billion of investment sales so far this quarter, more than twice the $995 million in the preceding quarter. Sizeable office transactions in Q4 include Keppel Land’s $1.57 billion sale of an 87.5 per cent stake in Ocean Financial Centre to K-Reit Asia and the sale of Robinson Centre for $293 million.

In the retail property sphere, Suntec Reit sold Chijmes at Victoria Street for $177 million.

Residential investment sales totalled nearly $2.5 billion this quarter, up about 10 per cent from Q3. The increase was on the back of a pick-up in GLS deals, with nine residential sites sold for $1.6 billion – up from $1.1 billion in Q3 – according to Savills.

Figures from Credo Real Estate show that 47 collective sales have been transacted for a total $2.8 billion so far this year, up from 36 deals at $1.8 billion for full-year 2010.

Analysts expect developers’ appetite for big residential en bloc sale sites to fall, with the new five-year deadline for developers to build and sell all units in residential projects on sites bought from Dec 8 – if they wish to avoid paying a 10 per cent ABSD. Nonetheless, Credo deputy managing director Tan Hong Boon predicts that the figure for next year should be able to cross $1 billion and potentially even hit $2 billion, driven by small and medium-size deals, if owners’ price expectations are realistic.

Industrial properties accounted for $838 million of investment sales in Q4, reflecting a 36.8 per cent drop from $1.3 billion in Q3, when the figure was buoyed by JTC Corp’s $688.6 million divestment of two tranches of properties.

Hotel investment sales reached $459 million in Q4, more than twice the $194.1 million in Q3. Park Regis Singapore at New Market Street/Merchant Road was sold for $270 million while Chip Eng Seng bagged a hotel site next to Ikea at Alexandra Road for $189 million.

Looking ahead, CBRE’s Mr Lake predicts a fillip in demand for strata office and industrial units not just from investors switching from the residential sector but also from owner-occupiers seeking their own business premises instead of renting them. ‘In fact, for the office segment, the strata market is expected to be more active whereas demand for office buildings will depend on the occupational (rental) outlook, for which there are mixed views.’

Source: Business Times © Singapore Press Holdings Ltd.

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