Real estate investment volume to remain resilient in 2020: CBRE

The backdrop of lower interest rates is one of the reasons that will likely support robust capital flows into the sector

Fri, Dec 20, 2019

VIVIENNE TAY


SINGAPORE'S real estate investment volume is likely to remain resilient in 2020, said CBRE on Thursday.

The property consultancy added there has been anecdotal evidence of investors showing interest in Singapore assets due to the country's macroeconomic stability and environment for mid- to long-term capital value appreciation.

This will likely provide a boost to foreign capital inflows, as evidenced by a higher proportion of foreign capital this year at 31.1 per cent, compared with 24.3 per cent a year ago, said CBRE senior executive director of capital markets Michael Tay.

The backdrop of lower interest rates will also likely support robust capital flows into real estate, with cheap debt and active fundraising in the capital markets. This is despite the "shrinking universe" of investible assets, creating challenges in deploying capital which may result in fewer mega transactions crossing the billion-dollar mark, Mr Tay added.

The property consultancy on Thursday said Singapore's total real estate investment volume fell 31.8 per cent to S$22.83 billion as at Dec 13, the lowest volume since 2016.

This was due to a slower collective sales market this year compared with a year ago. The previous year saw a few large collective sale sites being transacted, along with the award of two Government Land Sale (GLS) sites worth over a billion Singapore dollars each, CBRE told The Business Times.

Despite the drop, CBRE said 2019's performance was still considered "respectable" due to sizeable asset transactions that occurred in the year.

This includes Duo, Mapletree Business City II and 30 Raffles Place (formerly known as Chevron House).

This year, the residential sector drove investment volume, taking up 32.1 per cent of investment volume. This was due mainly to public sales where nine GLS sites with residential components were sold.

However, CBRE said the trend is unlikely to continue given the build-up of unsold residential stock. Moreover, land for residential development has also been reduced in the first half of 2020 GLS programme.

Next to drive investment volume was the office sector, which took up 31.1 per cent of investment volume this year.

Notably, investors were found to have turned their focus to the hospitality sector - which saw hotel-related transactions almost quadrupling in volume to S$2.15 billion, from S$544.7 million a year ago.

This was driven by rising tourist arrivals from new attractions, and major events, conferences and exhibitions held in Singapore.

A JLL report on Tuesday noted Asia-Pacific real estate investment reached US$125 billion in the first three quarters of 2019, up 10 per cent year on year. JLL said foreign investments into the Asia-Pacific are at a decade-high, making up 35 per cent of total volumes in 2019 and mostly driven by private equity funds and large-scale transactions.

This year, the residential sector drove investment volume, taking up 32.1% of investment volume. This was due mainly to public sales where nine GLS sites with residential components were sold.