Strong investment sales momentum to continue

/ EdgeProp
February 11, 2018 9:55 AM SGT
Investment sales in Singapore grew 55% y-o-y to $40.3 billion in 2017, the best year since 2007, according to Colliers International in a Feb 6 report on the investment sales market (see Chart 1). The strong momentum is likely to continue in 2018, it says, owing to good economic conditions, buoyant investor sentiment, persistently low real interest rates and the expected multi-year upcycle in residential sales and office leasing markets. “Singapore remains one of the most attractive investment destinations in Asia,” it notes.
The bulk of the investment sales (54%) in 2017 came from the residential sector, which chalked up transactions worth $21.7 billion. Residential investment sales grew 119% y-o-y on the back of an active collective sale market and keen bidding for Government Land Sales (GLS) sites as developers sought to replenish their landbanks.
According to Colliers, 27 residential collective sales totalling $8.13 billion were transacted in 2017, the best year since 2007 when $11.6 billion was transacted. Collective sales accounted for 37% of the residential investment sales in 2017. The residential collective sale market picked up further in 4Q2017 with 15 sites worth $4.5 billion being transacted, compared with the 12 sites sold in 9M2017 for $3.6 billion (see Chart 2). Most of the sites were sold at premiums, with some up to 30% above the asking prices, notes Colliers.
Given the spate of successful collective sales, Colliers expects the market to remain active in 2018 as more developments, including strata- titled commercial and mixed-use projects, jump on the bandwagon. “Developers may become more selective,” notes Colliers. It estimates that more than 13,000 units could be built on the sites sold in 2017. However, “reasonably priced sites with strong locational attributes would still appeal to developers”, it adds.
The collective sales market has remained active, with four developments launched for sale and two other sites sold in the week of Jan 22 to 28 alone, says Lee Nai Jia, head of research at Edmund Tie & Co (ET&Co). Some developments are also reportedly in private negotiations after their tenders closed, he adds. The public segment, or GLS sales, made up the second-largest slice of the residential investment sales market at 22%, according to Colliers. In 4Q2017, sales in the GLS segment grew 31.5% q-o-q and fivefold y-o-y to $1.5 billion. The strong performance is mainly owing to the Jiak Kim Street and Fourth Avenue sites, which drew 10 and seven bids, respectively. The Jiak Kim Street site was sold to Frasers Property at $1,733 psf per plot ratio and the Fourth Avenue site was awarded to Allgreen Holdings at $1,540 psf ppr.
The close of tenders for the three GLS sites on Jan 30 suggests that the “outlook for housing remains promising, and there is some evidence that subsequent sale prices can be supported when the projects are launched”, says ET&Co’s Lee.
Listed property giant City Developments clinched two of the three sites — the Handy Road site in prime District 9 for $212.2 million ($1,722 psf ppr) and the West Coast Vale site for $472.4 million ($800 psf ppr). The Handy Road site, located opposite Plaza Singapura and the Dhoby Ghaut MRT station, is “extremely attractive” and provides opportunity for the developer to showcase its product quality and innovation, says Lee.
The West Coast Vale site also offers opportunity, as there is little competition for the project and more announcements on the development of the Jurong Lake District are expected, adds Lee. Investment sales for shophouses hit a new high of $795.1 million in 2017, but this is still lower than the peak of $855.9 million in 2013, according to Colliers. Given the positive outlook for the residential and commercial sectors, shophouses, which are a hybrid of these two sectors and are scarce, are expected to remain an attractive asset class for investors, says Colliers.