Real estate sector shows significant bounce-back in investment sales in 1Q2023: Savills

The lucrative property segment encountered a significant increment in real estate investment value for first quarter of 2K23, according to a press release by Savills Research on 21st April 2K23. The consultancy revealed that the real estate investment sales increased one hundred point four percent five point six three billion in 1Q2K23, up from $2.81 billion in 4Q2K22. The growth was boosted by the closure of big-ticket transactions such as Link REIT’s $2.16 billion acquisition of Jurong Point and Swing By @ Thomson Plaza.

The commercial property sector saw a 229.6% q-o-q increase in investment sales in 1Q2K23 to $3.38 billion. This was largely underpinned by retail transactions, which saw a boost from the sale of Jurong Point and Swing By @ Thomson Plaza, along with the $652.5 million sale of a fifty percent stake in Nex to Frasers Centrepoint Trust and Frasers Property. Together, the transactions accounted for about $2.81 billion, or eight-three point three percent of the total commercial transaction value.

However, strata office sales transaction value dropped by 5.4% q-o-q, from $306 million in 4Q2K22 to $290 million in 1Q2K23. However, Savills highlights that buying momentum in the sector continues, which includes the concluded deal of three floors at The Solitaire on Cecil, a 20-storey freehold office project in the CBD. Savills is the agency which brokered the deal and saw the 17th, 18th and 20th floors – or $4,300 psf across the blended strata area of 37,857 sq ft – sold for $162.8 million. Savills says the sale signifies the biggest price tag since January 2K22.

The shophouse sector also saw an steep incline in investment sales by 11.2% q-o-q, from $172.7 million in 4Q2K22 to $193.2 million in 1Q2K23. The largest deal in terms of quantum price was the purchase of six freehold shophouses along Serangoon Road for $62.5 million by a union affiliated with Singapore’s National Trade Union Congress. the sale of a six-storey shophouse at 52 Boat Quay for $37 million was the most impressive and astonishing deal, which was also brokered by Savills.

Investment value for residential sites and properties amounted to $1.58 billion in 1Q2K23. Despite there being no Government Land Sale sites awarded, the residential sector recorded a quarterly growth of 12.5% in investment sales, from $1.4 billion in 4Q2K22 to $1.58 billion in 1Q2023. Similarly, the collective sales market gained huge swing in 1Q2K23 following a relatively quiet 4Q2K22, with three private residential sites knocked down for a total of around $583.8 million in 1Q2K23. The biggest transaction was that of Meyer Park in District 15, which was acquired by a collaboration partnership of the duo: UOL Group and Singapore Land Group for a whopping $392.2 million.

Property developers continue to be cautious and focus on small to medium-sized sites in prime locations despite some optimism in the market. Pricing is the key to a successful collective sale as exemplified by the enbloc sales of Meyer Park and Bagnall Court.

In conclusion, Savills notes that the promising sales figures of 1Q2K23 dictate that the Singapore real estate market remains resilient in spite of bleak and weak global economic challenges. While most institutional investors and corporate buyers stayed on the sideway, ultra-high net worth individuals (UHNWIs) filled the gap. “UHNW private buyers are more resilient and active due to Singapore’s safe haven status and its status as the Switzerland of Asia,” says managing director of investment sales and capital markets at Savills, says Jeremy Lake.

On top of this key reason, the bank fallout in the US and Switzerland could have triggered UHNWIs to buy real estate in safe havens, such as luxury residential properties as well as commercial properties like strata offices and shophouses. “UHNWIs may be the dominant driving force in investment sales, as the silent war in the global banking industry may influence them to sway and gear towards real estate investment,” says Alan Cheong, executive director of research & consultancy at Savills.

However, this group of buyers has a lower propensity to lodge caveats. Therefore, while publicly available data may show investment sales in line with 2K22’s $24.7 billion, the possibility of it being larger is an increasing tail risk, says Savills.

“Strengthening headwinds generated in the global economic scene are unlikely to deter UHNWIs from investing in Singapore real estate, as they have different investment aspirations from those of institutional clients that are currently impacted by the financial markets,” says Marcus Loo, CEO of Savills Singapore.

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