Real estate investment sales in Singapore - which grew at a blistering pace in 2017 - is expected to scale greater heights this year. The growth will be driven by buoyant investor sentiment, as well as the anticipated multi-year upturn in the residential sales and office leasing markets.
Colliers International estimates that investment sales could rise by 10-20% year-on-year to SGD44-48 billion in 2018
, continuing the positive momentum witnessed last year. In 2017, investment sales in Singapore jumped by a staggering 55% from 2016 to SGD40.3 billion – marking the best year since 2007.
Property investment volume, which had been strong throughout 2017, perked up especially in the fourth quarter, rising by 43% from Q4 2016 to SGD12.5 billion. This way the strongest quarter since Q3 2013, according to Colliers’ research.
This year, we expect firm economic conditions and persistent low real interest rates to drive investment property markets in Asia, including Singapore. With the residential market on the cusp of a sustained recovery, developers are also likely to continue replenishing their land banks, via public land tenders and private collective sales.
2017: A year of new highs
New records were set along the way as investment sales hit the highest in 10 years in 2017. The commercial property sector achieved record deals which amounted to SGD12 billion last year, up 6.4% from 2016. The increase was largely driven by the sale of the Jurong Point mall, Asia Square Tower 2 in Marina Bay, a commercial land parcel in Beach Road and Chevron House in Raffles Place.
Meanwhile, residential investment sales spiked to SGD21.7 billion in 2017 – up markedly by 119% from 2016 and the highest since 2007. Developers’ strong appetite for development sites had revived collective sales and sparked bullish state land tenders. The award of the Jiak Kim Street site in December last year set a new price record for a residential Government Land Sales site at SGD1,733 per square foot per plot ratio.
In the residential collective sale market, 27 deals valued at a combined SGD8.13 billion were done last year – the best showing since 2007 where SGD11.6 billion was transacted. Based on Colliers’ projection, over 13,000 new units could be redeveloped on the 27 sites, and these could be completed between 2021 and 2023.
Shophouses – which did not hog media headlines as much – also booked a strong performance in 2017. Deals in the segment valued at SGD5 million and above touched SGD795.1 million last year, a new high since the SGD855.9 million recorded in 2013. Major transactions during the year included Naumi Loria which was sold for SGD75.5 million, The Club Hotel for SGD52 million and Chinatown Hotel for SGD31 million.
Sector spotlight for 2018
Against the backdrop of a stable global economy, rosier growth prospects in Singapore and a rising office market, Colliers expects investors to stay interested in commercial properties. According to Colliers’ Asian Market Snapshot Q4 2017 report, investment activities were buoyant across most markets and sectors, but the office segment in Hong Kong, Shanghai and Singapore stood out as a key focus for investors, signaling an improving business outlook on the back of a rebound in investment, trade and manufacturing.
Residential properties, which accounted for 54% of total investment sales in 2017, will once again top investors’ agenda, especially developers who are keen to build up a pipeline of development sites to take advantage of the upturn in the property market.
The current collective sale wave which started in 2016 looks set to continue this year, with many more developments in various stages of the collective sale process. The spate of deals will boost price recovery in the residential segment with immediate incremental demand from displaced sellers. Colliers expects average home prices could rise by 17% over 2018-2021, in line with Singapore’s economic growth.
Last year, Colliers has successfully brokered two collective sale deals – Jervois Gardens and Parkway Mansion – and sold Jervois Green which was held under single-ownership. More residential developments in prime locations are expected to be put on the market in this year.
With the positive outlook for residential and commercial property sectors, shophouses - which are hybrids of these two sectors and are scarce in supply – could remain as an attractive asset class for boutique investors.
Investor confidence is on the rise and this optimism, coupled with underlying strength in the real estate sector, will continue to establish Singapore as one of the most attractive investment destinations in Asia.