Singapore property investment sales hit S$8.2b in Q2

Big ticket deals in the commercial sector were the key growth drivers.

Despite the possibility of a recession, Singapore’s real estate investment sales market has been promising thus far. Data from Knight Frank reveal that the investment sales market recorded some S$8.2 billion of transactions in Q2 2022 (Exhibit 1). 

This brings the total for the year thus far to S$20.2 billion, already 88.7% more than the S$10.7 billion registered in H1 2021. A significant proportion of deals were private ones, accounting for 76.1% of the total in Q2 2022. 

Here’s more from Knight Frank:

The main driver for the string of deals in the second quarter is the commercial sector, as large ticket deals topped the list. These included the sale of Westgate Tower (S$677.5 million), Twenty Anson (S$600 million), as well as a freehold luxury commercial development at 28 and 30 Bideford Road (S$515 million). 

Against the backdrop of current economic conditions, with the prolonged Russia-Ukraine war, hiking interest rates and inflation, coupled with increased raw materials and construction costs, many investors increasingly diverted their focus towards commercial assets. Key factors that could influence such investment decisions are the likelihood of capital appreciation and organic growth through recurring rental income, as well as the lack of Additional Buyer’s Stamp Duty (ABSD) rates incurred for commercial developments – a defensible asset class against looming economic uncertainty. 

On the residential side, with investors starting to stream into Singapore as travel measures eased, foreign investors have made the headlines in the quarter. In the month of June 2022, 20 units at CanningHill Piers were purchased by a Chinese national for about S$85 million, while another 22 units at Draycott Eight are reportedly in exclusive due diligence to an Indonesian family for a substantial S$168 million. Singapore offers private wealth and corporate investment a stable and conducive location in what is often a volatile world. 

Collective Sales

Interest in the enbloc market picked up in the second quarter, as land-hungry developers ventured for sites beyond the Government Land Sales (GLS) Programme. “While bite-sized land parcels might be preferred due to its palatable quantums, recent events have pointed to developers’ increasing willingness to explore larger land sizes,” notes Chia Mein Mein, Head, CapitalMarkets (Land & Collective Sale). 

With the sale of Lakeside Apartments for S$273.9 million to Wing Tai Holdings, and an offer for Chuan Park by a developer for S$860 million in Q2, nascent interest in larger plots of land can translate into sales in the second half of the year. Sites that possess attractive attributes such as close proximity to amenities like MRT stations and good views from new housing units could generate more interest, especially so for those that can potentially yield up to 300 units. 

The expanding appetite of developers is also supported by the latest closing tenders of the GLS land parcels at Dunman Road and Pine Grove (Parcel A). The winning bids reached as high as S$1.3 billion (S$1,350 psf ppr) and S$671.5 million (S$1,318 psf ppr) respectively.

Outbound investment from Singapore

Office and industrial developments remained the top-choice overseas for Singapore investors in the second quarter. The acquisitions of prime freehold properties – a commercial asset in London by Sinarmas Land for about S$334 million and a logistics development in the United Kingdom by Frasers Logistics & Commercial Trust at some S$171.7 million – made up some of the largest deals transacted in Q2. As such, these drove the total outbound investment sales from Singapore to S$13.5 billion in the quarter according to data from the Real Capital Analytics (RCA).

Market outlook

Investment sales in the second quarter was for the most part led by the commercial sector as investors looked for ways to mitigate the effects of uncertainty. Nevertheless, with the encouraging pace of sales and keen interest from both local and foreign stakeholders, total investment sales for the whole of the year could surpass expectations to hover within the range of S$32 billion to S$35 billion, barring any other major external headwinds that could drastically alter overall business sentiment. 

Given the successful sale of commercial developments with a hospitality component such as 28 and 30 Bideford Road, interest in the Singapore real estate market will continue throughout the remaining half of the year in spite of a looming recession. Hospitality asset owners as well as existing collective sale owners have reason to be hopeful as long as price expectations remain realistic.