2023 to be 'underwhelming' year for real estate investment market: Savills Singapore

By Atiqah Mokhtar

/ EdgeProp Singapore |

October 18, 2023 11:52 AM SGT

Far East Shopping Centre was sold in 3Q2023 for $908 million (Picture: Savills Singapore)

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SINGAPORE (DGEPROP) - The Singapore real estate investment market recorded $7.13 billion in deals in 3Q2023, double the $3.57 billion achieved in the previous quarter, according to an October research report by Savills Singapore.

However, a gloomier outlook lies ahead given headwinds that include "the possibility of new conflicts erupting, the rewiring of supply chains, political purges and the contagion effect arising from the recent terrorist attacks within Israel."

“While there is a probability that large ticket items may still be transacted for the rest of 2023 to possibly 1H2024, the likelihood of such is lower than the prepandemic decade and institutional investors will likely see a retrenchment in deal counts,” Savills continues. The firm is projecting 2023 investment sales in Singapore to drop from its previous forecast range of $24 billion to $25 billion, down to between $19 billion and $21 billion.

“While 2023 will be an underwhelming year for the real estate investment market, it being a low point in terms of sales value may help 2024 see a strong rebound, barring unforeseen events,” comments Jeremy Lake, managing director, investment sales and capital markets, at Savills Singapore. “Interest rates are likely to start falling in 2024 and global economic growth will pick up, leading to investors to conclude that the bottle is half full rather than half empty.”

In terms of 3Q2023 figures, investment deals were bolstered by seven land parcels under the Government Land Sales (GLS) Programme that were awarded for a total value of about $4.16 billion. This makes up some 58% of total real estate investments in the last quarter.

GLS sites sold include the residential site at Marina Gardens Lane which was awarded for $1.03 billion, the residential site at Jalan Tembusu awarded for $828.8 million, and the commercial and residential site at Tampines Avenue 11 awarded for $1.21 billion. “This is the highest quarterly value recorded under the GLS Programme since 3Q2011,” Savills says.

The private sector recorded $2.97 billion in investment deals in 3Q2023, up 2.8% q-o-q. Nonetheless, there was a 31.6% drop in the number of transactions, which Savills attributes to the Lunar Seventh Month as well the increase in Additional Buyer’s Stamp Duty rates for residential properties, along with the high interest rate environment. “The recent investigation of a high-profile money-laundering case may have also dampened market sentiment,” the firm adds.

Residential investment sales totalled $3.43 billion in 3Q2023, making up 48.1% of the quarter’s total investment sales. Meanwhile, commercial investment sales totalled $1.69 billion last quarter, or 23.7% of total sales. Savills notes commercial sales got a boost from two big-ticket transactions during the quarter, namely the collective sale of Far East Shopping Centre for $908 million; and the divestment of Changi City Point by Frasers Centrepoint Trust for $338 million.

“While the global real estate industry may suffer from a host of problems, Singapore has that unique selling point that being a safe haven, there will still be a base level of transactions coming from those, especially the ultrahigh net worth families, seeking to diversify from riskier assets and countries,” says Alan Cheong, head of research and executive director of Savills Singapore.