Investment sales rise by 33.8% in 3Q2019

SINGAPORE (EDGEPROP) - The total investment sales value in the property market jumped 33.8% q-o-q to $8 billion in 3Q2019, with private sector deals accounting for 76.5% of total investment sales. Public investment sales in the form of the Government Land Sales (GLS) Programme doubled in value to $1.9 billion due to the award of four residential sites

These include the site at Tan Quee Lan Street sold for $800.2 million ($1,535 psf per plot ratio or ppr) to a joint venture between GuocoLand and Hong Leong Holdings. Another site at Clementi Avenue 1 was awarded to UOL Group for $491.3 million ($788 psf ppr).

Investment sales in the hospitality sector declined by 2.5% q-o-q, but the period also saw more development sites transacted. Min Yuan Apartments was sold to Fragrance Group in a collective sale for $141 million ($2,613 psf ppr) including an estimated development charge of $19.6 million. The company also purchased the neighbouring Waterloo Apartments last November for $131 million. In June this year, the former Darby Park Executive Suites received written permission from URA to be redeveloped into a hotel, after it was sold for $92.71 million last November.

The total value of investment sales has already exceeded Edmund Tie’s earlier forecast, and the consultancy expects to see between $3 billion and $5 billion worth of deals this quarter. This will bring the total sales value this year to $22 billion to $24 billion.

While the latest URA flash estimates show that private non-landed prices climbed 1.7% q-o-q in 3Q2019, this does not imply that the private residential market is buoyant or that developers are necessarily profiteering, according to a market report by Edmund Tie.

New unit prices today have increased, given the higher land prices developers paid during the 2017 en bloc cycle. In addition, research by Edmund Tie shows that land cost as a percentage of the average selling price has been trending upwards. This means that developer’s profit margins are likely to be compressed, the report says.

About 41 new private residential developments comprising 12,000 units have been launched so far this year, and an additional 2,500 to 3,500 units are anticipated to be launch ready this quarter. However, the average sell-down rate of the new projects so far this year stands at 27% as of end-August, compared to the 47% sell-down rate of new projects that were launched in the year prior to the July 2018 property cooling measures.

Meanwhile, private resale volume is likely to decline by 9% in 3Q2019 to about 1,800 units, as buyers continue to prefer new units over older resale units given the wide range of new projects to choose from, says Edmund Tie.