Singapore in third place for real estate investment prospects

Singapore’s ranking as an investment market has soared from next-to-bottom last year to third this year, according to the Emerging Trends in Real Estate Asia Pacific 2018 report jointly published by Urban Land Institute (ULI) and PwC.
Singapore’s position is reassuring, given the major projects in the pipeline that will transform the city, such as the development of Jurong Lake District as a second CBD and the doubling of capacities at its air and sea ports, says Khoo Teng Chye, chairman of ULI Singapore.
Investors believe Singapore’s commercial and residential markets are near their bottom, says the report. Office rents have firmed earlier than expected. The residential sector is also showing signs of recovery, with rising transaction volume and the first uptick in prices in four years. Sales of sites have also surged as developers seek to replenish their landbanks. The recovery is likely to be sustainable, owing to several years’ worth of pent-up consumer demand, according to the report.
The investment prospect rankings reflect the growing divergence between the growth- and yield- driven strategies adopted by investors (see table). Cities ranked highest are those in which investors seek to maximise returns through rental growth; look for returns that are safe but still higher than yields on sovereign bonds; or tap secular growth in emerging markets.
“Sydney and Melbourne combine the appeal of a stable investment environment with a combination of relatively good current yields and the prospect of strong rental growth,” says Seek Ngee Huat, ULI Asia- Pacific chairman and chairman of Global Logistic Properties.
The report also identified excess liquidity as the key influencer of the Asia-Pacific investment market for 2018. Increasing capital flows into the region mean more competition for assets, higher prices and lower yields. Fund managers and investors are therefore forced to turn from past dependence on macro-led strategies — which focus on total return or capitalisation rate compression — to asset management for returns. Low base rates and slim yields on sovereign bonds mean that the heat is on for Asia’s capital reserves to shift to higher-yielding assets such as real estate.
In the...