Singapore private property market set to face demand tests in 2019

The Business Times - Jan 26
The private residential property market here could face some demand tests ahead as higher interest rates and heftier duties from the authorities' cooling measures weigh on buyers' wallets.

As it is, property curbs unleashed in July have already sent the private property market on roller-coaster year in 2018.

Prices in the third quarter rose just 0.5 per cent, and slipped 0.1 per cent in the fourth quarter.

Tricia Song, Head of Research:
Prices of private residential properties dipped by 0.1% from Q3 to Q4 2018 - unchanged from initial estimates released earlier this month. Overall private residential prices are now 3.2% below the peak in 2013.

The price growth last year was largely fueled by pent-up demand for homes, attractive new launches, and a more positive economic outlook for Singapore. However, we do not expect private home prices to continue to rise rapidly in view of the new property curbs implemented last July. 

We estimate that overall private home prices could potentially climb by 3% in 2019, in line with the economic growth – barring any unforeseen events. The rise in home values in 2019 would likely be led by the Core Central Region (CCR), which will potentially see several new project launches. Read our analysis.

URA office rental index grows at slower clip in Q4, points to smaller hike in office rents this year

The Business Times - Jan 26
Office rents are poised for a smaller hike this year than the increase last year, going by the slowdown in the pace of growth in office rents in the fourth quarter of 2018.

The Urban Redevelopment Authority's rental index for office space in Singapore's central region rose by 0.5 per cent during the quarter over the previous three months. In Q3 2018, the rise had been by 2.5 per cent.

For the whole of 2018, the rental index rose 7.4 per cent, compared with the increase of 0.4 per cent in 2017.

Duncan White, Head of Office Services:
Colliers Research forecasts that with a higher base for comparison in 2018, CBD prime office rents will likely grow at a slower pace – at about 8% - in 2019. Meanwhile, Grade A and Premium CBD office vacancy is expected to continue to trend below 6% until 2022. 

We believe the growth momentum in the office property sector will continue to carry through from 2018 into 2019, supported by healthy occupier demand. The limited availability of new office stock in the city centre over the next couple of years should remain supportive of Premium and Grade A rents in the CBD. In addition, the government’s push to promote technology, innovation and R&D in Singapore will continue to help feed growth in the office market. 

Broadly, we expect reduced new CBD Grade A office supply over 2019–2021, with annual expansion averaging 2% of stock, and the continued tightening of vacancy should support rental growth. Read our analysis.

Retail property market may be on stronger recovery footing

The Business Times - Jan 26
A wave of cautious optimism has washed over the retail property market. This follows quarter-on-quarter upticks of above 1 per cent in the Urban Redevelopment Authority's retail rental and price indices for Singapore's central region. This was the first time both indexes had risen by this much since the series began in 2011.

But some industry watchers caution that given the generally tepid consumer spending in physical retail stores (among other factors), significant hikes in retail rents may be untenable.

The URA's rental index for retail space in the central region rose by 1.2 per cent in the fourth quarter of 2018 over the previous three months. There had been a drop of 1.2 per cent in the third quarter.

Tricia Song, Head of Research:
Consumer spending has remained cautious. Based on figures released by Singapore Department of Statistics, the retail sales index (excluding motor vehicle sales) increased by 0.6% YOY in October 2018 and decreased by 0.2% YOY in November 2018. 

Colliers believes retail landlords have done a commendable job in 2018, proactively optimising the trade-mix and leveraging on technology and digitalisation of their malls. So far, shopper traffic and tenant sales appear to have stabilised or improved slightly. Landlords need to continuously engaging shoppers with new offerings and enhanced experiences in the new era of omni-channel shopping lifestyles. Read our analysis.

Outlook for S'pore industrial space stable: analysts

The Business Times - Jan 25
The latest industrial property market statistics from JTC Corporation point to the best annual performance in four years, according to some property consultants who suggest that the segment may have bottomed.

However, others expect the current stabilisation phase of the market to continue, possibly for a couple of years.

The industrial land and infrastructure agency's latest data shows that rentals and prices of overall industrial space in Singapore remained unchanged in the fourth quarter of 2018 over the preceding quarter. Compared with a year ago, the price index was also unchanged while the rental index eased 0.3 per cent.

Dominic Peters, Senior Director of Industrial Services:
We think the industrial rents in general have bottomed, but recovery would likely be two-tiered with high-specs and business park space to fare better due to the spillover effect from a sharp office rent recovery in 2018 and further office rental upside in 2019.  
With more than 80% of the total upcoming supply being factory space, rents in this category would likely remain pressured. 

Following the completion of two data centres in Q4 2018, we expect more major data centre projects in the pipeline to arrive in the coming years such as the ones built by Google, ST Telemedia Global, Equinix and Facebook. Read our analysis.