Office investments drag Singapore’s property sales volumes down in Q3

Office investment sales plummeted by 88.7% during the quarter.

Investment sales volumes in Singapore declined for a second consecutive quarter by 43.9% QoQ from nearly S$7.51 billion in Q2/2022 to S$4.21 billion in Q3/2022. According to Savills, investment sales volume was also 43.2% lower than the same period a year ago. 

All sectors except the industrial sector recorded quarterly declines in investment sales. 

Here’s more from Savills:

Following a 64.7% quarterly decrease in commercial investment sales in Q2/2022, there was a further quarterly decline of 70.7% in Q3/2022 to S$665.6 million. This was led by a 88.7% plunge in office investment sales. The significant fall in office investment sales was largely attributed to the lack of major transactions. There was only one block transaction in Q3/2022, which was the sale of OCN Building for S$42 million by Lian Beng Group to an undisclosed unrelated third party. 

Block transactions of office assets have been declining since their peak in Q1/2022, as investors, particularly from overseas, have become increasingly cautious as rising interest rates are making any investment case difficult to justify. Although there were fewer block transactions, more strata office deals were inked in Q3/2022. Eight strata office transactions totalling S$169.7 million were recorded in the quarter, in contrast to the three transactions which amounted to S$63.1 million in the second quarter. 

In more positive news, retail investment sales rebounded in Q3/2022, increasing by 12.8% QoQ to nearly S$453.9 million after falling sharply in Q2/2022. While shophouse sales constituted most of the retail investment sales, the quarterly growth in retail investment sales was attributed to one block transaction in the quarter, for a 10% stake of Waterway Point acquired by Frasers Centrepoint Trust, increasing its effective interest in the retail mall from 40% to 50%. There were no such transactions in the previous quarter. 

Like the decline in commercial investment sales, residential investment sales fell by 10.1% QoQ in Q3/2022, a reversal from the 7.4% increase in Q2/2022. The decline was led by a significant drop of 61.3% in public residential investment sales as smaller sites were sold under the Government Land Sales (GLS) Programme.The largest GLS site sold in Q2/2022 amounted to S$1.28 billion, while in Q3/2022 the highest quantum was S$481.0 million for a site which was awarded to a consortium comprising China Communications Construction Co, Soilbuild Group Holdings and United Engineers. 

On the other hand, private residential investment sales continued to increase for a second consecutive quarter by 61.3% QoQ to S$2.26 billion. The collective sales market continues to see activity, with three developments transacted. The largest deal in the quarter, which was also the largest transaction year-to-date, was the sale of Chuan Park for S$890 million to Kingsford Development and MCC Land. 

However, individual transactions (of S$10 million and above) declined by 11.4% to S$889.5 million in Q3/2022. The higher interest rates and inflation risks, alongside the higher Additional Buyer’s Stamp Duty rates, may have deterred buyers from acquiring properties.