Singaporeans spent US$4.6b in cross-border real estate transactions

The Business Times - Aug 24
Singaporean investors have spent in total US$4.6 billion on cross-border real estate transactions in the 12 months through the second quarter of 2018, according to a report released by Real Capital Analytics (RCA).

The real estate and market intelligence provider ranked Singaporean investors as the second-most active in the Asia-Pacific during the reported period. It noted that Singaporean investors have chiefly concentrated on Chinese and Australian real estate.

Real estate investment flow from Singapore to Australia alone had risen 32 per cent year on year to hit US$3.3 billion, the fourth-highest cross-border flow in the Asia-Pacific.

Tricia Song, Head of Research: 
The real estate investment flow from Singapore to Australia continued to be buoyed by Singapore developers and REITs which explored beyond Singapore shores for diversification and higher returns. Singapore REITs continued their asset reconstitution strategies -- Cache Logistics Trust acquired a nine-property portfolio in Melbourne from Blackstone for AUD177.6 million, and in turn divested its Singapore property 40 Alps Avenue for SGD73.8 million in first half 2018.  AREIT bought two industrial properties in Melbourne worth SGD50.9 million during first half of 2018, and a suburban office in Brisbane in late 2017. In turn, AREIT continues to divest some properties in Singapore.  Developers such as Frasers Property, Ho Bee, Chip Eng Seng, OKP Holdings, Wing Tai have also been on an acquisition mode in Australia, acquiring across office, hotel, retail segments and development land.  

Ground-floor retail rents to lead gradual recovery

The Business Times - Aug 23
Singapore's retail rental market is expected to see a gradual recovery over 2018-2022, led by ground-floor rents, a Colliers International report said.

Based on data from the Urban Redevelopment Authority, overall Central Region rents dipped by 1.7 per cent year on year in 1H18, although ground-floor rents appeared to have stabilised.

According to Colliers' research, Orchard Road ground-floor rents remained flat year-on-year at S$40.39 per square foot per month (psf pm) in H1 2018, while the Regional Centres saw a marginal increase of 0.3 per cent to S$33.50 psf pm.

Tricia Song, Head of Research: 
Orchard Road ground-floor rents stayed flat year-on-year (YOY) at SGD40.39 per square foot per month (psf pm) in H1 2018, while the Regional Centres saw a marginal uptick (+0.3% YOY) to SGD33.50 psf pm. This marked some stabilisation in ground-floor rents. Colliers expects ground-floor rents to lead the gradual recovery, but overall retail rents should continue to flatten out and stabilise over 2018-2022 as sector headwinds precipitated by e-commerce have not materially subsided.

Island-wide vacancy decreased by 0.2 percentage points quarter-on-quarter (QOQ) to 7.3% in Q2 2018. On a YOY basis, vacancy has fallen by 0.8ppt since Q2 2017. The fall in retail vacancy combined with a sustained rental decline is evidence of the sector’s re-balancing act as retail landlords trade off historically high rents for more stable occupancy amidst challenging market conditions.

Of note, activity-based tenants made a comeback in the retail scene in H1 2018, as landlords sought to inject more lifestyle components and entice patrons back to malls. This trend was observed in both Orchard Road and suburban districts. In eastern Singapore, the newly-opened Bedok Djitsun Mall welcomed amusement centre Fat Cat Arcade, while the Korean carom billiards bar Thirsty4Balls opened its first outlet in Singapore at The Cathay. Meanwhile, gym operators Fitness First and GymmBoxx opened new centres at SingPost Centre and JCube respectively. Click here to view report.

Pasir Ris white site up for sale by public tender

The Business Times - Aug 28
A white site at Pasir Ris Central, spanning 3.8 hectares, was launched for sale off the government land sales (GLS) confirmed list in a dual-envelope public tender on Monday.

The 99-year leasehold site went on the market with the Housing & Development Board (HDB) calling for a mixed-use commercial and residential development, as part of its "Remaking Our Heartland" plan to rejuvenate Pasir Ris Town.

The land parcel next to Pasir Ris MRT station must be integrated with a bus interchange, a polyclinic and a town plaza, and can yield up to 600 private homes, said HDB. The maximum permissible gross floor area is 95,010 sq m (1.02 million sq ft), with a proposed gross plot ratio of 2.5.

Tricia Song, Head of Research: 
The white site in Pasir Ris Central is part of the Government’s plans to rejuvenate the Pasir Ris district. Its proximity to the Pasir Ris MRT station and large population catchment should appeal to developers. It would also be the first mixed-use development – commercial and residential –  in the Pasir Ris town centre.

However, given the substantial size of the plot and various tender conditions, we think this site could likely attract larger developers or a consortium of them working together. Tender conditions include integrating the mixed-use development with a bus interchange, a polyclinic and a town plaza as well as constructing a link bridge and underground linkway. Click here for the full analysis.

Singapore real estate will endure as popular asset class

The Business Times - Aug 22
Singapore property is likely to retain its lustre as a preferred choice for long-term wealth creation due to the city-state's regional hub status, solid growth prospects and Asians' deep-seated desire to own property.

Analysts gave this affirmation as the dust starts to settle on the latest cooling measures which took effect on July 6. The amended rules saw higher Additional Buyer's Stamp Duty (ABSD) and lowering Loan-to-Value (LTV) limits in a pre-emptive strike to prevent prices running "ahead of economic fundamentals" and "the risk of a destabilising correction later".

While the residential property market is expected to be resilient, still there are those who see more excitement in other property asset classes in the Republic. Reits are likely to "fare better amid heightened risk aversion", while property developers' share prices are likely to "trade range-bound" due to heightened policy risk.

Tricia Song, Head of Research:
Historically, residential property has yielded returns higher than inflation and probably shares, although this depends on the timing and investment horizon. The residential price index increased a compounded 5.1% per annum over the last 30 years (second quarter of 1988 to first quarter of 2018). But these annual capital returns narrowed to 2.4% the past 20 years and to just 1.3% over the past decade, excluding any rental yield. With the cooling measures in place, the higher costs of actually buying an apartment and the lower rental yields mean that residential property is admittedly not as attractive as an investment. Nonetheless, it could still be a viable asset class for Singaporeans with a portfolio of investments. As such, residential property could still form part of the asset allocation strategy. Savvy investors may look towards other physical assets such as shophouses and strata offices but they typically require larger quantum and are scarce in availability for sale. Yields have also compressed to very low levels. Residential property may remain the most transparent and accessible to the man on the street