Slide in property investment deals continues in Q3

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Published September 19, 2008

Slide in property investment deals continues in Q3

Global financial instability, stock market volatility hit sentiment: CBRE

By EMILYN YAP


PROPERTY investment sales continue to soften in Q3 2008 and global financial instability could keep investors out of the market, said a CB Richard Ellis (CBRE) report.

According to latest figures from CBRE Research, property investment transactions in Q3 (up to Sept 18) reached $3.17 billion. This is a 35 per cent drop from $4.86 billion in Q2 and a 65 per cent slide from $9.09 billion in Q1 this year. On a quarterly basis, property investment sales last peaked in Q3 2007 at $16.51 billion.

'The lingering worldwide impact of the US-spawned credit crisis has compounded financial instability in most global economies, compelling many regional investors to adopt a cautionary attitude,' said CBRE's report.

Many are holding back on major investment decisions as credit conditions tighten, and stock market volatility has also hit investor sentiments, it said.

Driving property investment sales in Q3 was the industrial sector, which accounted for 61 per cent or $1.92 billion of transaction value. However, most of the sector's contribution came from a single $1.71 billion deal, in which JTC Corporation divested its industrial property portfolio to Mapletree Industrial Trust.

The residential sector was the next largest contributor, registering 26 per cent or $807.79 million of property investment sales in Q3. There was only one successful collective-sale deal in the period, where an unnamed developer bought Ruby Apartments for $11 million.

'Developers' ability to acquire sites was dampened by rising construction costs, rising interest rates and tighter lending measures,' said the report. Investment activity in the retail and office sectors was also quiet in Q3, with transaction values of $215.04 million and $142.84 million respectively.

While the hospitality sector accounted for just $100 million of property investment sales, CBRE noted that the limited supply of hotel rooms today would attract greater investor interest in the medium term.

Property investment sales chalked up in the year to date stood at $17.12 billion, with 65 per cent coming from the residential and office sectors. While this is some distance from the $54.02 billion achieved for the whole of 2007, it has already exceeded the $14.66 billion in 2005.

'Looking ahead, investors are expected to stay on the sidelines in view of the cautious market conditions that are likely to prevail until the end of the year,' said the CBRE report. Nevertheless, it noted that demand for quality assets as a hedge against inflation may provide some support for investment activity the rest of the year.

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Sep 19, 2008 Friday

Sales of investment property stagnating

By Michelle Tay


SALES of investment property are in the doldrums with the global financial mayhem and credit crisis slowing buying interest so far this quarter.

Nearly all sectors have been 'relatively quiet' apart from the hospitality industry, which has 'remained healthy', said a CB Richard Ellis (CBRE) report yesterday.

CBRE said a total of $3.17 billion worth of investment transactions have been recorded so far this quarter - the period actually runs until Sept 30 - down from $4.86 billion in the April-June quarter.

The figure is also a fraction of the $16.51 billion recorded in the third quarter last year, and likely to mark the fourth consecutive quarter that investment transactions have dropped.

Total investment sales for 2008 so far have totalled $17.12 billion.

CBRE's director of investment properties, Mr Jeremy Lake, said this year will likely round up at about $18 billion, a third of 2007's bumper $54.02 billion.

'If you look at the freak year of 2007, yes, it is a huge drop. But if you look back to 2004, it's still the third highest result of the last five years,' said Mr Lake.

The second highest total for investment sales occurred in 2006 when transactions hit $28.38 billion.

CBRE's report said the latest results are because tighter credit measures have brought about a temporary halt to major investment decisions as investors take stock of the local property market.

Mr Lake also said the spectacular failure of two large US banks this week will 'compound the slowdown that is evident in the statistics' and 'exacerbate the uncertain outlook'.

CBRE defines investment sales as real estate sales with a value of at least $5 million. It includes private and government sales, buildings and land, strata and en bloc, as well as the change of ownership of real estate via share sales.

The report said the industrial sector has accounted for 61 per cent of sales so far in this quarter. Retail investment sales contributed the least, just $215.04 million, or 7 per cent, of sales.

CBRE blamed rising construction costs, higher interest rates and tighter lending measures for the inactivity.

It added that investors are expected to 'stay on the sidelines' in view of the cautious market conditions.