- Collective sales continued to grow in Singapore in Q2 2018; will likely face headwinds from fresh property cooling measures in second half of 2018
- Hong Kong residential demand remains high
- China retail activity sees uptick
- Competition grows for prime Seoul offices
SINGAPORE, 16 July 2018 – Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services today released its Asia Market Snapshot Q2 2018 report with a detailed overview of all property segments’ performance across 14 Asian markets during the second quarter of 2018.
Mr. Terence Tang, Managing Director of Capital Markets and Investment Services at Colliers International, Asia, commented, “Despite signs of a slowdown in some areas, such as the flow of Chinese capital into Hong Kong’s property market, or sales in the Indonesian residential and office sectors, investors are still eager to seize on opportunities in this fast-growing region. We will continue to see Asian capital returning to Asian markets in a big way as the yield compression in the E.U. and the U.S. continues and growing optimism in the Asian real estate markets.”
Singapore’s investment market remained active with acquisitions in both the residential and commercial sectors in Q2 2018 on the back of strong economic performance and an improving business outlook.
Ms. Tang Wei Leng, Managing Director, Colliers International Singapore, said, “Investment sales were especially robust in the residential segment as developers acquired sites to replenish their land bank amid healthy demand for homes and more positive market sentiment. However, there may be a pause in land acquisition activities in the months to come following the implementation of new cooling measures by the Government on July 6, 2018. Developers will now have to reassess the market, evaluating the supply and demand conditions in the wake of the new measures before deciding on further land acquisition via collective sale.”
“In particular, the hike in additional buyer’s stamp duty rate to 25% (from 15%) plus an extra 5% that is non-remittable for entities buying property has altered the operating environment, and developers would have to consider how to best mitigate any additional risk - either through re-evaluating land price or via more careful site assessment and selection. That said, well-located sites that are competitively priced – taking into consideration new market realities - should still garner some interest,” Ms. Tang added.
In Q2, the residential market saw strong acquisition interest from local and foreign developers for both state land tenders and collective sales. China developer Yanlord Land Group and MCL Land, a unit of Hongkong Land Holdings, jointly acquired a prime freehold collective sale site at Tulip Garden for SGD906.889 million (USD692.84 million), reflecting a SGD1,790 per sq ft per plot ratio (psf ppr). The deal represents the second highest collective sale value in Singapore in 2018.
On the commercial front, Sembawang Shopping Centre was sold to Lian Beng-Apricot (Sembawang) Pte Ltd by HSBC Institutional Trust Services (Singapore) Limited for SGD248 million (USD189.2 million) in Q2. This transaction represents the highest value achieved for a stand-alone 999-year leasehold retail mall in Singapore in recent years. Strong economic fundamentals together with a rental recovery could drive further interest in commercial assets in Singapore.
Demand for residential sites remains high in Hong Kong
Meanwhile, continued strength in the highly sought-after Hong Kong residential market could prompt more collective sales. A recent government tender for a residential site in the Kai Tak area set a record of USD2,265 per square foot, for a total of USD3.2 billion.
Airport expansions spur tourism growth
Much-needed expansions of airports serving key tourism destinations are enhancing the outlook for the leisure sector. In the Philippines, the leisure segment is expected to benefit from a new terminal at Mactan-Cebu airport set to boost capacity to some 12.5 million passengers annually. Meanwhile, the international airport in Phuket, Thailand, has recently been expanded to accommodate higher visitor numbers, and the domestic terminal is also under renovation, which should heighten the island’s appeal to hotel groups and other investors.
Retail fuels investor interest in China
Authorities in both Beijing and Shanghai have made upgrading local retail offerings a priority, fuelling investor interest in the sector. In Beijing, retail accounted for half of the recorded transactions in Q2, and restrictions on the conversion of retail properties in the city core are likely to create more opportunities going forward. In Shanghai, while the office market remains the most active in terms of investment, a government plan to turn the city into an international consumer destination helped prompt an 80% surge in retail deal value from the previous quarter.
Competition for prime assets on the rise in South Korea
While many uncertainties have yet to be resolved, the apparent success of the recent North Korea-U.S. summit in Singapore could prompt foreign investors to reassess the risk levels in the South Korea real estate market and compete more aggressively for prime assets. Competition in sought-after office markets such as Seoul’s Gangnam business district is already fierce, with the pending sale of the Centropolis Towers expected to fetch some USD1 billion -- a new record for a domestic office transaction. Activity is also likely to pick up as the investor base grows more diverse.
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