Singapore property investment sales drop in Q4, but end stronger for full year

Singapore property investment sales drop in Q4, but end stronger for full year

Jan 12, 2023

INVESTMENT sales of Singapore property, which cover big-ticket deals of at least S$10 million, languished in the fourth quarter, according to separate figures from consultants CBRE and Knight Frank. 

Figures compiled by Knight Frank showed that on a quarter-on-quarter (qoq) basis, real estate investment deals totalled S$4.5 billion in the latest quarter, down 22 per cent. However, S$31.9 billion of investment sales of property were sealed in 2022, up 20.4 per cent from S$26.5 billion in 2021.

CBRE’s data showed that preliminary real estate investment sales declined 55.6 per cent qoq to S$3.2 billion in Q4, with sharp falls in retail and residential asset sales. Although investor sentiment softened over the second half of 2022, full-year investment sales came in at about S$30.3 billion, or a 9.8 per cent rise year on year (yoy), driven by strong sales in the first half of 2022.

Both CBRE and Knight Frank attributed the weak investment sales in Q4 to investors being cautious amid sustained interest rate hikes and worsening global macroeconomic conditions. 

Commercial deals accounted for a large portion of the total sales value through 2022, said Knight Frank. Key transactions include the purchase of Jurong Point and Swing By @ Thomson Plaza by Hong Kong-listed Link Real Estate Investment Trust (Link Reit) for a combined S$2.16 billion.

Investors’ appetite for strata office space remained healthy and demand for this asset class also did not appear to waver in Q4, said Knight Frank. In November 2022, two high floors at Springleaf Tower were sold for about S$53.9 million to Esteel Enterprise, while the fourth floor of 15 Scotts Road was sold for S$49 million to Cortina Holdings : C41 0% in October.

Office investment sales declined 32.2 per cent qoq and 63.8 per cent yoy in Q4 on a lack of big-ticket sales, CBRE said. Transactions included the sale of a 50 per cent stake in Lazada One in Bras Basah, and smaller strata office units purchased by non-real estate companies or private individuals for their own use or investment. 

Despite the slowdown in the second half of 2022, full-year office investment sales totalled S$7.3 billion, up 53.6 per cent from 2021, and the highest since 2016. 

Sales of assets in the hotel and retail sectors rose three-fold and five-fold respectively from 2021 in anticipation of tourism recovery, said CBRE. The industrial investment property sales value increased 28.7 per cent qoq in Q4 mainly on a portfolio sale, but full-year sales dropped on the absence of large Reit (real estate investment trust) mergers and acquisitions.

The residential sector saw sales value decline in 2022 as the increase in government land sales (GLS) sites was more than offset by declines in sales of Good Class Bungalows and luxury apartments, said CBRE. 

Similarly, Knight Frank saw a decline in the residential sector. The award of two GLS sites at Hillview Rise and Bukit Timah Link formed a significant share of the total sales value in Q4, contributing some S$520.8 million. 

Chia Mein Mein, Knight Frank head of capital markets (land and collective sale), said that there were no residential collective sales sites in the central area that were sold in 2022. 

More launches can be expected in 2023 with better success rates as long as sellers’ price expectations remain “realistic and are measured to a level that is within the risk profile of developers”. Higher sales value can be achieved if some of the larger sites are sold, said Knight Frank.

The outbound sector recorded a total of S$13.7 billion in sales in Q4, down 22.4 per cent from Q3. Gateway cities in Japan were popular among Singapore investors, and acquisitions include office and logistics buildings. 

Key deals include M&G Real Estate’s purchase of a prime-grade office building, Minato Mirai Center, in Yokohama, Japan for more than S$997 million. Capital market group Gaw Capital Partners also bagged a portfolio of logistics assets in Tokyo for some S$732 million. 

The overall investment sales climate continues to be challenging, given the rising interest rates, sticky inflation and the ensuing economic upheavals that have culminated in recessionary pressures, said Knight Frank. 

“This slowdown in investment activity is likely to remain in the first half of 2023 until there are more concrete signs of economic stabilisation and improving business conditions,” it added. 

CBRE expects investment volumes to pick up in the second half of 2023, and full-year volumes to be comparable with 2022’s. Similarly, Knight Frank projects that investment sales will hover within the range of S$22 billion to S$25 billion for the whole of 2023.

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