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Singapore real estate investment benefits from flight-to-safety among investors

/ EdgeProp Singapore |

November 24, 2022 5:26 PM SGT

The surveyed real estate players highlighted multifamily, hotels, senior living, and logistics sector properties as defensive havens. (Picture of the Singapore skyline, by Samuel Isaac Chua)

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SINGAPORE (EDGEPROP) - Singapore, Tokyo, and Sydney rank as the top three markets among investors. Singapore benefitted from the redirection of capital that might otherwise have been deployed to assets in Mainland China and Hong Kong.

Meanwhile, Tokyo continues to enjoy a zero interest rate environment which ensures lower relative borrowing costs and a more positive spread over the cost of debt.

These were the findings from the 17th edition of the Emerging Trends in Real Estate Asia Pacific Report by the Urban Land Institute and PwC., which was published on Thursday November 24.

The report is based on a survey of 233 real estate professionals and 101 interviews with investors, developers, property company representatives, and lender brokers.

Overall, the report noted a downtick in investor sentiment amid concerns over the rising cost of debt, higher inflation, and a looming recession. These factors saw many investors opt to suspend acquisition activities until projections of global rate hikes become clearer.

“Rising interest rates and the slowing global economy are beginning to impact regional asset valuations and changing the way investors assess potential deals,” says David Faulkner, president of ULI Asia Pacific.

This lacklustre sentiment was reflected in a 38% y-o-y fall in regional transaction volumes in 3Q2022 to US$32.6 billion. This was the lowest 3Q volumes for a decade in the region, the report says.

Investors should take a more cautious approach on new asset purchases in some Asian markets and pivot their focus from conventional asset classes towards a variety of niche areas that offer brighter outlook, the report says, adding that this could include defensive havens and new-economy themes.

The surveyed real estate players highlighted multifamily, hotels, senior living, and logistics sector properties as defensive havens. Meanwhile, defensive real estate would feature favourable characteristics such as rent indexation, shorter lease term, and reliable recurrent incomes.

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