Real estate investment sales remain subdued in 2Q2020: Edmund Tie

By Valerie Kor / EdgeProp Singapore | July 30, 2020 3:20 PM SGT
Singapore’s real estate sectors have contracted across the board due to the pandemic, according to Edmund Tie’s Real Estate Times report.
Property investors have grown wary. In 2Q2020, real estate investment sales declined by 53.5% from the previous quarter to $1.9 billion. This could be due to the fact that there were no significant government land sale (GLS) sites being awarded.
However, a bright spot is investments in the office sector. In 2Q2020, $1.3 billion changed hands, a 68.9% increase from 1Q2020, thanks to notable deals such as the sale of a 50% stake of AXA Tower by Alibaba Group, and a 30% stake of TripleOne Somerset by Shun Tak Holdings.
Industrial investment sales declined by 80.9% q-o-q to $174.3 million in 2Q2020. However, demand for warehouse space remains strong due to increased e-commerce demand.
investment sales by category
A bright spot in the real estate investment sales is the office sector (Source: Edmund Tie Real Estate Times)
In the office market, occupancy rates decreased by 0.8% q-o-q to 92.8% in 2Q2020, largely due to lower demand in the CBD and CBD subzones. Rental rates declined across the board by between 0.4% and 2% q-o-q; Grade-B offices in the CBD showed the greatest rental contraction of 2% q-o-q. The report also states that the true impact of working from home has yet to be seen.
Manufacturing contracted for the fourth consecutive month in May 2020, leading to declines in monthly average rental rates for most segments in the industrial market in 2Q2020. However, the warehouse sector remains a bright spot as there have been more e-commerce and grocery sales.
As for retail, monthly average rents for upper-storey levels in Orchard Road and Scotts Road declined the most, by 3%, while the first-storey levels in suburban areas contracted the least, by 0.2%. Edmund Tie projects that an increase in retrenchments and a lack of tourism spending will continue to impact the luxury and discretionary retail segments the most.
For the residential market, private home prices went up by 0.3% q-o-q in 2Q2020, after a decline of 1% in 1Q2020. In June, transaction volume was 998, double that of May’s 486 units, indicating signs of pent-up demand. Due to low interest rates, housing loans grew for the third consecutive quarter by 49.2% y-o-y in 1Q2020.
New sales dominated the private residential market in 2Q2020. Nonetheless, new home sales also declined, by 27.1% y-o-y and 20.3% q-o-q to 1,713 units, in 2Q2020. Resale volume, on the other hand, fell by 55.1% on a q-o-q basis to 951 units in 2Q2020. On a positive note, all market segments except the Rest of Central Region registered growth in prices, with prices of non-landed properties in the Core Central Region and Outside Central Region increasing by 2.7% and 0.1% q-o-q respectively.