Singapore property investment sales could hit record in 2018

JLL sees private home prices, office rents and prices continuing to rise for the next couple of years.

Sat, May 12, 2018

Tay Huey Ying

SINGAPORE'S property investment sales market rebounded in 2016, surged to a 10-year high in 2017 and could end 2018 on a record high, according to recent JLL data.

Investors continue to be drawn to Singapore by its unique proposition - the opportunity to reap returns not only in the short-term, but also in the long-run, thanks to the city-state's future-proofing features that help maintain its competitiveness over time and economic cycles. This is a powerful combination given today's turbulent political and uncertain economic climate and against a backdrop of rapid technological transformation.

Indeed, in JLL's 2018 City Momentum Index, Singapore is the only city in the Asia-Pacific region, and one of only two globally along with Seattle, to be ranked in the top 30 for both short- and long-term dynamism out of 131 established and emerging business hubs across the globe.

Short-term dynamism

Singapore's short-term growth prospects are encouraging. Economic growth accelerated from 2 per cent in 2015 to 2.4 per cent in 2016 and 3.6 per cent in 2017. The Ministry of Trade and Industry is projecting that growth could come in at above the middle of their forecast range of 1.5-3.5 per cent in 2018, while most economists are forecasting an above 2.5 per cent growth for 2019 and 2020.

This will continue to stoke business confidence and further lift sentiment in the real estate market which is already going from strength to strength as indicated by 1Q18 statistics from the Urban Redevelopment Authority (URA) and JTC Corporation. Barring adverse external shocks and government intervention, JLL forecasts that the uptick in private home prices could last for another couple of years, with the URA private all-residential property price index potentially chalking up quarterly growth in the 3-5 per cent range for the rest of 2018.

Office rents and prices are similarly expected to continue to chart higher ground until the next wave of supply comes on stream from 2020, with rents for Grade A buildings in the CBD potentially hitting their previous peak of S$10.56 per sq ft per month, recorded in 1Q15, within the next 12 months. Prices are expected to move in tandem with rents given the current sticky yields.

After three challenging years of battling the intense competition brought on by technological disruption amid high operating costs and weak consumer sentiment, the retail property market appears to be finally emerging from the slump. Rents and prices entered positive territory for all regions tracked by the URA for the first time in three years in 1Q18.

Similarly, the industrial property market is showing signs of bottoming out, with the JTC islandwide rental index clocking two consecutive quarters of modest 0.1 per cent quarter-on-quarter correction in 4Q17 and 1Q18.

Long-term focus

Today, Singapore is a fertile ground for innovation and a magnet for talent and startups. Several of the world's largest technology companies, including Microsoft, LinkedIn, Twitter, Facebook and Airbnb, have set up their regional headquarters here, while Google, HCL and Infosys have set up their R&D centres here.

A robust education system will also ensure a pipeline of talent to maintain a stronghold in research.

Clearly, Singapore is positioning itself to stay competitive in a rapidly changing global economic landscape. This will form the bedrock for a steady real estate market in the long-term.

The writer is head of research and consultancy, JLL Singapore