2011-04-06

Singapore

The latest research numbers gathered by Colliers International revealed that developers manifest unwavering upbeat sentiment and optimism in the Singapore property investment sales market, which amassed a healthy sum of S$9.77 billion1 in 1Q 2011 – clearly riding through the Government’s property cooling measures, the political unrest in the Middle East and North Africa, and the recent catastrophe in Japan.

Although the quarter’s sales value of S$9.77 billion is a 20.3 per cent moderation from the S$12.26 billion garnered in 4Q 2010, it is still notably 67.9 per cent stronger than the sales attained in 1Q 2010 when the Singapore investment sales market was on its nascent phase of recovery.

Ms Chia Siew Chuin (谢岫君), Director of Research & Advisory of Colliers International, says, “The fact that the figure for 1Q 2011 was still 67.9 per cent stronger than that for 1Q 2010 indicates that market fundamentals remain largely positive despite all the uncertainties.

In fact, we have observed developers’ confidence in the investment sales market when they set four record prices in the government land sales (GLS) market – despite the introduction of further property cooling measures during the quarter.”

The first record price was set – in terms of unit land price – for non-landed residential sites in the Rest of Central Region, when a consortium led by CapitaLand Limited defeated 18 other bidders in a keenly-contested tender exercise for a 1.2-ha residential plot located at Bishan Street 14 with its price offer of S$550.1 million.  This works out to S$869 per sq ft per plot ratio, which far surpassed the previous record of S$639 per sq ft per plot ratio received for the Ascentia Sky site in the Alexandra Road/Tiong Bahru Road locality in December 2007.

The top bid of S$170.1 million, or S$320.86 per sq ft per plot ratio, submitted by City Developments Limited for a site in Choa Chu Kang designated for the development of an Executive Condominium (EC) project also edged out the previous record of S$320.58 per sq ft per plot ratio achieved for the Austville EC site at Sengkang East Avenue/Buangkok Drive in May 2010.

The third record was set by the sale of a 60-year leasehold hotel site located on Robinson Road/Boon Tat Street to Royal Group Holdings Pte Ltd.  At S$80 million, or S$1,072 per sq ft per plot ratio, this was the highest unit land price ever achieved for a State land sale of a hotel site – surpassing the previous record of S$813 per sq ft per plot ratio set for the site located at Clemenceau Avenue/Havelock Road in September 2010.

Oxley Holdings Limited also put in the record winning bid of S$72.2 million, or S$217 per sq ft per plot ratio, for a 60-year leasehold GLS industrial site at Ubi Road 1/Ubi Avenue 4.  This again exceeds the last benchmark of S$170 per sq ft per plot ratio for the One Commonwealth site located at Commonwealth Drive/Commonwealth Lane in November 2007.

Besides the aggressive bid prices, developers’ appetite for development land was also evident from the award of the 3-ha site for mixed residential and commercial development at Punggol Walk/Punggol Central to a joint venture between Frasers Centrepoint Limited, Far East Organization and Sekisui House Limited.  At S$1.02 billion, or S$753 per sq ft per plot ratio, this is the largest GLS transaction in 1Q 2011 in terms of absolute price quantum.

The Government awarded a total of six residential sites (including a site designated for EC development and two sites for Design, Build and Sell Scheme), three hotel land plots, four industrial sites, a site for petrol station use and a land parcel for mixed residential and commercial development in 1Q 2011.  These amounted to a healthy value of S$3.38 billion, which is not far off from the S$3.98 billion achieved by the Government in 4Q 2010.

Ms Chia continues, “At the same time, the private sector land sales market also reflected the same upbeat sentiments, where sales picked up momentum in 1Q 2011 and some S$992.58 million worth of private development sites were sold.  This is a significant 94.7 per cent improvement from 4Q 2010.

In particular, the collective sale of seven existing projects for re-development chalked up a total value of S$588.88 million in 1Q 2011, up from the S$427.2 million contributed by 11 transactions in 4Q 2010.  The conclusion of the higher-value albeit fewer collective deals in 1Q 2011 is an encouraging sign of developers’ growing appetite for collective sale sites.”

Leading the collective sales market in 1Q 2011, in terms of quantum price, was Novelty Group’s acquisition of Newton View at Newton Road for S$147.6 million, or S$1,403 per sq ft per plot ratio.   This is also the largest collective sales transaction in terms of absolute value quantum since the collective sales market turned after the peak in 2007.  

In all, developers picked up a total of S$4.37 billion worth of development land in 1Q 2011.  Although it is a slide of 2.7 per cent from the S$4.49 billion in 4Q 2010, it is nonetheless a considerably-robust sum, given the increased level of uncertainties within the property investment environment.

Meanwhile, institutional investors, particularly real estate investment trusts (REITs), took a momentary breather in 1Q 2011, following the aggressive acquisition trail in the previous quarter.

Total purchases by institutional investors fell by 31.8 per cent quarter on quarter to S$2.37 billion in 1Q 2011 – with investments by REITs totaling some S$0.86 billion, down 73.4 per cent from S$3.22 billion in 4Q 2010.  On the other hand, investments by non-REIT institutional investors including funds were up 5.7 times to S$1.52 billion during the same period.

Commercial properties were the most favoured asset class by institutional investors in 1Q 2011, with some S$1.79 billion worth of such properties being sold.

Ms Chia concludes, “Looking ahead, looming uncertainties stemming from the political unrest in the Middle East and North African regions, and the possible impact of the disaster in Japan on global economies could potentially temper market sentiments.

At the same time, the ample availability of development sites from the GLS program and concerns on further market cooling measures – on the back of healthy home sales albeit moderated rising home prices – may lead to more cautious acquisition of private residential lands and collective sale sites.  The higher development charge announced in March by the Ministry of National Development also serves as a call of prudence for developers.

Nevertheless, the mid-term outlook for the Singapore investment sales market remains positive – on the back of Singapore’s healthy economic fundamentals, conducive investment environment and the prevailing low interest rate environment which will continue to set the stage for property investments.

With REITs increasingly becoming an important real estate capital raising channel, the Singapore REITs sector is expected to continue attracting capital inflows and is likely to continue new asset acquisitions in 2011.

Against this backdrop, the investment sales market is expected to remain brisk in 2011.”