The buzz in Singapore’s capital marketJuly 21, 2016 / By
After numerous quarters of slow activity, Singapore’s capital market[i] stirred to life with some 162 deals sealed in 2Q16, up 32% from the 123 concluded in 1Q16. The sales value amounting to SGD 7.49 billion is the highest since the last peak in 3Q13, representing a 162% surge from the SGD 2.86 billion recorded in 1Q16, and equivalent to a 66% increase from the SGD 4.51 billion in 2Q15.
Figure 1: 2Q16 Sales Value Highest Since the Last Peak in 3Q13
Source : JLL Research
Major deals in 2Q16 included the acquisitions of two office buildings – Asia Square Tower 1 for SGD 3.4 billion by sovereign wealth fund Qatar Investment Authority and Straits Trading Building for SGD 560 million[ii] by Indonesian tycoon Dr Tahir, and the collective sale of the residential estate Shunfu Ville for SGD 638 million to Chinese developer Qingjian Realty.
The buzz in Singapore’s capital market continued even after Britain’s vote to exit the European Union (Brexit) heightened macro-economic uncertainties. For example, on 29 June, a prime residential State land site had attracted 13 bids at closing and the top bid of SGD 1,239 per sq ft was the highest received for a purely residential site under the Government Land Sales Programme. Other major deals concluded following Brexit included Mapletree Commercial Trust’s acquisition of the office and business park components of Mapletree Business City Phase I for SGD 1.78 billion and City Developments Ltd’s acquisition for SGD 411 million of Wing Tai’s interest in Summervale Properties – the owner and developer of Nouvel 18, a prime residential development in Singapore.
Indeed, Singapore’s capital market appears to be witnessing a turnaround in investor sentiment. This has been fuelled partly by the value proposition of assets given the price adjustment over the past year or more. Also, there is the expectation of a market recovery to be led by the prime residential segment, potentially from 1H17. Investors with long-term investment horizons are also attracted to Singapore’s sound fundamentals and are confident of the city-nation’s prospects.
These factors are likely to continue to drive Singapore’s capital market over the next 6 to 12 months. In fact, the Asia Square Tower 1 transaction represented the largest single-asset real estate deal in the Asia-Pacific region and the second largest single-tower real estate deal globally since 2004[iii]. This has raised Singapore’s profile as a choice destination for cross-border investments and put the country firmly back on the radar of international investors. Together with Singapore’s conducive business environment and political stability, this could put the country in good stead to vie for some of the global funds looking for a safe haven in the wake of Brexit.
Price mismatches, however, will remain a key obstacle hindering transactions but, nonetheless, the recent rise in deals should provide buyers and sellers with enough reference prices against which to benchmark their expectations. This could help narrow the price gap and improve deal prospects.
And with more owners putting their properties up for sale to take advantage of the current buying momentum, the buzz in Singapore’s capital market looks likely to continue.
[i] Encompassing private transactions above SGD 5 million and all government land sales.
[ii] Translating to a record unit price of SGD 3,520 per sq ft for office space in Singapore.
[iii] The year in which JLL started collecting data on global capital flows.
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