3Q2022 investment sales decline 38.5% y-o-y: Knight Frank

By Hailey Yu

/ EdgeProp Singapore |

October 4, 2022 6:17 PM SGT

Singapore investment sales (Credit: Knight Frank)

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EDGEPROP (SINGAPORE) - Singapore investment sales in 3Q2022 declined by 48.9% q-o-q and 38.5% y-o-y, according to the Knight Frank 3Q2022 Investment report. This marks a turnaround from the first half of the year, brought about by dampened global business sentiments amid deteriorating economic conditions and rising interest rates in the third quarter.

Despite headwinds, developers continued to acquire land as seen from the three Government Land Sale (GLS) sites awarded, notes Chia Mein Mein, the head of capital markets (land and collective sale) at Knight Frank.

GLS sales totalled $1.1 billion in investment volume, representing the largest deals transacted in the quarter - a sharp contrast to a buoyant first half of the year. The three GLS sites consist of two non-landed residential parcels at Lentor Central and Lentor Hills (Parcel B), and an executive condominium plot at Bukit Batok West Avenue 5.

“Investment sales totalled $4.8 billion in 3Q2022, reaching $26.2 billion year-to-date in 2022,” the report states.

Commercial deals were muted in the quarter, particularly with limited saleable stock of quality office space and buildings. The shophouse investment market, while continuing to draw interest, declined by 37.7% q-o-q. Shophouse investments totalled $228.7 million, suggesting elevated prices were met with resistance. (Find Singapore commercial properties with our commercial directory)

Meanwhile, the fears of a global recession have pushed buyers to adopt a cautious stance. “With a widening gap in price expectations, sellers should be cognisant of the shifting sentiment due to increasingly uncertain economic conditions,” warns Daniel Ding, the head of capital markets (land and building) at Knight Frank.

Investors’ appetite for industrial properties remained strong in the third quarter, given the resilience of the sector. Notable deals included the acquisitions of a logistics property at 1 Buroh Lane for $191.9 million, Philips Apac Centre for $104.8 million by Ascendas REIT, and the en bloc sale of BHL Factories for $130.5 million.

Non-JTC buildings with longer tenures are of particular interest as the extended investment holding period could mitigate the prevailing risks, notes Ding.

Hotels and serviced residences have risen in prominence in the quarter, with enquiries increasing as tourist activity revived and businesses regained traction, which pushed up demand for short and medium-stay accommodation. Ding anticipates sales in the hospitality market before the end of the year.

Collective sales

Successful residential en bloc sales also accounted for some of the most significant transactions in 3Q2022. Quarterly collective sales activity was the highest thus far this year, primarily due to Chuan Park changing hands for a substantial $890 million, accounting for 58.8% of the total en bloc sales value in the quarter. (See potential condos with en bloc calculator)

Most of the residential collective sale sites sold this year are situated in the Outside Central Region, observes Chia. Nevertheless, the prime Core Central Region (CCR) has palatable options for boutique-sized sites of less than $200 million.

Foreign home buyers' participation is hindered as certain countries in the region have yet to reopen borders. Chia anticipates potential international buyer interest to return to the prime CCR as cross-border travel gradually eases to pre-pandemic days.

Foreign homebuyer volume rose to 4.4% and 4.8% in 2Q2022 and 3Q2022 respectively, after Singapore reopened borders from April 2022, compared to 2.8% in 1Q2022, according to the report.

“It could be an opportune time for developers to explore land parcels in prime residential areas in preparation for a possible increase in foreign home buyer activity, as a result of a flight to safety, given Singapore’s standing as a safe and secure haven,” says Chia.

Outbound investments

Student accommodations and industrial infrastructure continued to be highly sought-after by investors in the quarter due to the consistent demand from both local and international students for private rental apartments, coupled with a lower price quantum. In August, Ascott Residence Trust acquired an additional 45% stake in the student accommodation property, Standard in Columbia, in South Carolina, US, for $27.7 million. This follows the acquisition of another student housing in Osaka, Japan, in March.

Industrial properties are also attractive for many Singapore investors. This is due to resilient demand, given the long-term expansion of growth industries, increased stockpiling activity and the flight to quality developments by space users. Key deals in the third quarter included the acquisition of a distribution centre in Tokyo, Japan, by ESR-Logos REIT for $183.5 million, as well as Ascendas India Trust’s purchase of two industrial facilities in Chennai, India, for $28.5 million.

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