REAL estate investment activity in Singapore has seen signs of picking up since the US Federal Reserve announced a 0.5 per cent rate cut in September, creating some optimism in the market, indicated a Knight Frank Singapore report on Tuesday (Oct 8).
Figures compiled by the property consultancy firm showed that total property investment sales amounted to S$8.3 billion in Q3, up 24.8 per cent from S$6.7 billion in the preceding quarter and up 30.5 per cent from S$6.4 billion in the year-ago period.
Out of the total sales in Q3, public sector sales amounted to S$2.3 billion while private sector sales totalled S$6 billion.
The value of residential deals fell 24.7 per cent quarter on quarter (qoq) to S$3.2 billion. Out of these, 74.2 per cent of the deals were for government land sales (GLS) sites, said Knight Frank. In August, two state plots at Zion Road (Parcel B) and Jalan Loyang Besar were awarded at S$730.1 million and S$557 million, respectively.
In addition, the sale of several Good Class Bungalows (GCBs) during the quarter also contributed to residential investment sales value. In July, a GCB at Tanglin Hill was transacted for S$93.9 million and two other GCBs at Belmont Road were sold for S$73.7 million and S$57.7 million, said Knight Frank.
While the collective sales market saw five launches in Q3, no successful collective sale deals were closed. Knight Frank noted that “collective sales for larger sites continued to be challenging, especially for residential developments”.
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The real estate consultancy said GLS sites present better opportunities for developers given “easing land prices” of such sites.
Chia Mein Mein, Knight Frank’s head of capital markets (land and collective sale), said: “With developers reticent towards the larger collective sale plots, landed houses with sizeable land areas or ‘mini landed en blocs’ of several adjoining houses continue to be sought after by boutique developers, especially in prime areas where the land size has the flexibility to be subdivided and redeveloped into multiple homes.”
In the commercial property segment, the acquisition of a 50 per cent interest in ION Orchard (including ION Orchard, ION Orchard Link, ION Art Gallery and ION Sky) by CapitaLand Integrated Commercial Trust from CapitaLand Investment for S$1.8 billion last month raised the total sales value in this segment to S$2.7 billion, up 37.2 per cent from Q2.
Meanwhile, industrial property sales activity surged 567.6 per cent qoq and 426.6 per cent year on year (yoy) to S$2.5 billion.
“This was due to the acquisition of a S$1.6 billion portfolio consisting of seven industrial properties by Lendlease and Warburg Pincus from a real estate investment trust owned by Blackstone and Soilbuild in August,” said Knight Frank.
The outbound sector recorded about S$3.2 billion in sales in Q3, down 29.3 per cent qoq and 39.1 per cent yoy. This was due to the ongoing global tensions and high interest rates.
But with the recent announcement of interest rate cuts, Knight Frank expects this to spur more activity in outbound investment from Singapore before the end of the year.
The overall market sentiment looks set to improve with the cut in interest rates.
“Deals that have been brewing prior to the interest rate cut announcement are now likely to surface, especially industrial properties and living sector assets,” said Daniel Ding, Knight Frank Singapore’s head of capital markets (land and building, international real estate).
“As the bid-ask gap narrows, and the prospect of positive carry returns, the brave will increasingly pull the trigger on deals,” he added.
Knight Frank noted that while collective sales remain challenging, commercial and mixed-use developments will have a higher chance of success in the prevailing market conditions.
The consultancy expects investment sales momentum to improve in the coming months and projects total property investment sales to fall between S$23 billion and S$25 billion in 2024.