Optimism is running high in Singapore’s property investment sales market – a market that is defined by private assets worth SGD 5.0 million (US$3.7 million) and above, and all government land sales (GLS).
Investors have snapped up more assets in value terms in the first nine months of 2017 than they did for the full-year of 2016. Based on preliminary estimates, total investment sales from January-September 2017 reached SGD 30.1 billion, (US$22.0 billion) exceeding the SGD 25.8 billion (US$18.8 billion) of the whole of 2016.
Residential and office properties have been investor hotspots. Together, these two sectors accounted for more than 75 per cent of the value of the investment deals concluded from January-September 2017.
Figure: Composition of Investment Sales by Value (Jan – Sep 2017)
Note : Assets are classified according to their predominant use
Source : JLL Research, September 2017
Residential
With prime home prices at the inflexion point after having corrected by 11.6 per cent since end-2013, this sector remains a hotspot for investors looking to bottom-fish in safe-haven Singapore.
Developers’ appetite for land has surged as their unsold stock dwindles amid the robust home sales market. Given the limited state land supply from the GLS programme, developers have turned their attention to the private sector, particularly the collective sales market. 12 such deals worth SGD 3.6 billion (US$2.6 billion) have taken place from January-September 2017, far exceeding the three transactions totalling SGD 1.0 billion (US$0.7 billion) concluded in the whole of 2016.
Developers and investors sunk SGD 13.6 billion (US$10.0 billion) in residential investment assets (including land) by end-September 2017, 33 per cent more than what they committed to in the whole of 2016.
Office
CBD Grade A office assets were also sought after, buoyed by the nascent recovery in the leasing market. JLL’s research showed that Grade A CBD office rents climbed 4.3 per cent on a quarter-on-quarter (q-o-q) basis in 3Q17 following the modest 0.7 per cent q-o-q rise in 2Q17 that ended eight consecutive quarters of rental decline.
The two largest deals sealed in 2017 were the sale of Asia Square Tower 2 in the Marina Bay financial district for over SGD 2 billion (US$1.5 billion), and the Beach Road GLS site for SGD 1.6 billion (US$1.2 billion). Both deals took place in September. So eager are developers to secure land for office development to ride the rental upturn that the top bid of SGD 1,706 (US$1,245) per sq ft per plot ratio received for the Beach Road GLS site located on the fringe of the CBD surpassed the SGD 1,689 (US$1,233) per sq ft per plot ratio paid for a CBD site in the Marina Bay financial district in November 2016!
These two deals boosted the 2017 year-to-date’s total sales value of assets with a predominantly office component to an estimated SGD 9.5 billion (US$6.9 billion), just 1.5 per cent shy of 2016’s full-year quantum.
Conclusion
Singapore’s property market has largely turned the corner. Against this backdrop, and underpinned by a brightening economic outlook, investor sentiment is expected to stay elevated. Residential and prime CBD Grade A office assets are poised to remain as investors’ hot picks in the rest of 2017 and 2018. Nonetheless, yield-accretive industrial assets and quality retail assets such as the Jurong Point, a suburban mall, which changed hands for SGD 2.2 billion (US$1.6 billion) in April, are likely to remain on their radar.
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