According to Knight Frank, Singapore saw real estate investments totalling $6.9 billion in 3Q2023 (Picture: The Edge Singapore)
SINGAPORE (EDGEPROP) - Singapore real estate investment activity saw a boost in 3Q2023, registering an increase of 74.8% q-o-q to clock in at $6.9 billion, according to an October research report by Knight Frank. The amount also represents a 19.4% improvement y-o-y. This marks the first quarterly growth after five consecutive quarters of decrease since 1Q2022.
Some $4.1 billion (over 60%) of the transacted value came from Government Land Sale (GLS) sites that were awarded in the pas quarter, including sites at Tampines Avenue 11, Marina Gardens Lane and Jalan Tembusu.
Residential deals made up $3.3 billion of investment value in 3Q2023, predominantly driven by the award of five residential GLS tenders. This represents an increase of 93.5% q-o-q, but a decrease of 12% y-o-y. At the same time, private residential properties registered a decrease in sales activity, which Knight Frank attributes to the increase in Additional Buyer’s Stamp Duty (ABSD) rates that took effect in April.
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Commercial property deals increased in 3Q2023, climbing 27.4% q-o-q and 23.3% y-o-y to reach $1.5 billion. The higher value follows the sale of Changi City Point by Frasers Centrepoint Trust for $338 million in August, with the mall reportedly purchased by the Zhao family from mainland China. In addition, the collective sale of Far East Shopping Centre for $908 million to Glory Property Developments last month also bolstered commercial investment value, along with the sale of the mixed-use, commercial and residential GLS site at Tampines Avenue 11 for $1.2 billion.
On the other hand, industrial transaction value plummeted to $252.2 million in 3Q2023, which Knight Frank notes is the lowest quarterly amount recorded since the $174 million registered in 2Q2020 during the circuit breaker period.
The collective sales market also continued to face headwinds amid the uncertain market outlook. “The expanding gulf in expectations between owners and developers remained the biggest obstacle, exacerbated by increasing costs, interest rates and the prohibitive increases in ABSD rates, all in a climate of economic pessimism,” Knight Frank states in its report. In July, Wing Tai announced its withdrawal from the sale of Holland Tower, after the deal was made at $76.3 million in March this year.
Chia Mein Mein, head of capital markets (land and collective sale) at Knight Frank Singapore, adds that rising costs have prompted developers to turn towards GLS sites. Nonetheless, notwithstanding plots in prime locations, she notes that developers’ appetites have shrunk, with fewer participants and more conservative bids submitted in recent GLS tender exercises.
Looking ahead, Knight Frank expects slower investment activity for the rest of the year given the prevailing sentiment and challenges in the property market. “In the coming months, the capital markets space will be characterised by investors on the search for assets being primarily focused on adding value to the properties to achieve higher returns. This is to justify the higher borrowing costs involved with the acquisition of the property,” the report adds.
The firm has tempered its full-year estimates for investment sales, cutting projections from between $20 billion to $22 billion down to between $18 billion to $20 billion.
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“Due to the current high interest cost, buyers find themselves having to move up the risk curve by adding value to their investments to obtain higher sustainable returns, and this includes acquisitions for enhancement and redevelopment,” comments Daniel Ding, head of capital markets (land and building, international real estate) at Knight Frank Singapore.