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Real estate investment sales fall 31.8% in 2023 amid tepid market: Knight Frank

By Nur Hikmah Md Ali

/ EdgeProp Singapore |

January 4, 2024 6:03 PM SGT

The year 2023 saw a tepid real estate investment market due to inflation, high interest rates, increase in additional buyer’s stamp duty rates since April, and geopolitical tensions, says Knight Frank Singapore (Photo: Samuel Isaac Chua/EdgeProp Singapore).

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SINGAPORE (EDGEPROP) - Real estate investment sales reached $5.4 billion in 4Q2023, bringing total investment sales for 2023 to $21.1 billion, a 31.8% drop from $30.9 billion in 2022, according to Knight Frank’s Singapore Investment Update 4Q2023 report dated Jan 3.

This comes on the back of a tepid real estate investment market due to inflation, high interest rates, increase in additional buyer’s stamp duty rates since April, and geopolitical tensions.

Still, the sales transaction value in 2023 crossed the $20 billion mark and exceeded Knight Frank's 3Q2023 adjusted projection of $18 billion to $20 billion.

Residential deals made up 47% of investment sales activity in 2023, totalling $10.3 billion. This is 13.3% lower y-o-y, from $11.9 billion in 2022. Knight Frank’s report attributes the decline to elevated interest rates and property cooling measures. The total residential transactions in 4Q2023 alone were at $3.4 billion, a 1% decline q-o-q.

Most of the residential deals were from Government Land Sales (GLS). Fourteen GLS sites were awarded in 2023, amounting to $7.7 billion. This is about 39.9% up from the $5.5 billion generated from the sales of 11 GLS sites in 2022. It is also the highest number of GLS sites awarded since 2012, when 51 GLS sites adding up to $10.6 billion were awarded. This signals that developers’ appetite in the local market remains intact, the report says.

On the other hand, commercial property deals declined 61.4% y-o-y, from $15.8 billion in 2022 to $6.1 billion in 2023. Only seven collective sale deals amounting to $2.1 billion were successful in 2023. This is a 44% decline y-o-y, compared to the 16 collective sale deals ($3.8 billion) in 2022.

Chia Mein Mein, Knight Frank’s head of capital markets (land and collective sale), notes that it remains challenging for sellers to maintain reasonable selling prices in view of the current geopolitical and economic headwinds.

“Small and bite-sized residential plots remain attractive to developers who are facing obstacles such as bullish asking prices for larger plots of land. Landed home plots for redevelopment are also sought after by boutique developers, given the longstanding stable domestic demand for this limited prestige property type in land-scarce Singapore,” Chia observes.

In terms of outbound investment from Singapore, the sales totalled about $1.5 billion, a 57.2% drop q-o-q and 87% decline y-o-y, according to Real Capital Analytics. Knight Frank cites the cautious market sentiment and global investors’ intent to wait for interest rate cuts in 2024 as the reasons for the decline.

Looking forward, the global real estate firm says that there may be a cut in interest rates and a pick-up in the acquisition of core properties, such as industrial assets. Investors are also expected to undergo value-adding works to more older developments as they mitigate risks and maintain revenue streams while the buildings are being improved.

Overall, the firm foresees a more positive outlook for the capital markets space, with the total investment sales for 2024 projected to add up to $23 billion to $25 billion.

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