The investment market is likely to shift into a price discovery mode for the first half of 2023
Singapore, January 18, 2023 – Leading diversified professional services and investment management firm Colliers (NASDAQ and TSX: CIGI) today releases its Q4 2022 Investment Market Report. Key highlights include:
- Close to S$5 billion of investment sales were recorded in Q4 2022, a 10.8% decline QoQ and 37.1% decline YoY.
- Total investment volume for FY2022 was S$29.1 billion, a 2.8% increase over 2021 due to an active market in the first half of 2022.
- The year also saw a significant inflow of foreign capital, including some new entrants, a testament to Singapore’s attractiveness as a global investment destination.
- Investment sales is expected to decline by around 15% YoY to S$25 billion in 2023.
In Q4 2022, investment sales declined by 10.8% QoQ due to higher borrowing costs and macroeconomic uncertainties. Investment activity is expected to slow down until the trajectory of interest rates becomes clearer. The market performance was boosted by a couple of large transactions – the divestment of Jurong Point and Swing By @ Thomson Plaza by Mercatus Co-operative Limited for S$2.161 billion and the sale of 50% stake in Lazada One by ARA Asset Management for S$361.49 million as well as some public residential land sales.
Source: Colliers, URA, RCA
The investment market is likely to remain in a price discovery mode in the first half of 2023, as investors adjust to the new normal of higher interest rates and slower growth. Consequently, investment sales is expected to decline by around 15% YoY to S$25 billion in 2023.
Deals are likely to be more bite-sized as larger acquisitions would generally involve an extended time frame and higher leverage, which are unfavorable in the current environment of higher uncertainty and volatility. Nonetheless, investments could pick up in the second half of 2023 as the course of inflation and interest rates becomes more certain.
Ms Tang Wei Leng, Managing Director and Head of Capital Markets & Investment Services, Singapore at Colliers says, "Despite yield spreads narrowing, for those looking to invest in quality core assets, Singapore properties still offer long term capital appreciation potential for decent total returns.”
“With institutional investors taking a back seat, private wealth will become increasingly more prominent. Such capital, typically with less stringent underwriting hurdles, is expected to focus on the luxury residential market, strata-titled commercial space and shophouses,” adds Ms Tang.
Ms Catherine He, Director and Head of Research, Singapore at Colliers says, “On the investment front, prime logistics and prime office capital values will continue to be supported by positive rental growth and ample liquidity, while prime retail capital values are expected to recover over the next few quarters. As such, net yields are likely to remain relatively stable until transactions pick up in the second half of 2023.”
View our Q4 2022 Investment Market Report here.
