Property investment sales plunge in Q3 amid waning business sentiment: Knight Frank

Oct 04, 2022

TOTAL property investment sales in Singapore dropped 48.9 per cent in the third quarter to S$4.8 billion, according to a Tuesday (Oct 4) report by real estate consultancy Knight Frank.

The market’s negative turnaround from previous quarters of growth was attributed by the company to a decline in business sentiment around the world, exacerbated by worsening economic conditions and rising interest rates.

“With downside risks looming for investors as the world edges towards recession, activity in the investment market has turned cautious with moderating business sentiments,” said the consultancy.

The latest Q3 data brings the investment sales market’s total transaction value for the first nine months of 2022 to S$26.2 billion.

Noting “mounting tentativeness for the rest of the year”, Knight Frank also lowered its forecast for total investment sales in 2022 to about S$30 billion to S$32 billion, from the earlier projection of S$32 billion to S$35 billion.

The largest transactions dealt this quarter include three sites under the Government Land Sales programme, comprising two non-landed residential properties in the Lentor area and an executive condominium in the Bukit Batok area, which totalled S$1.1 billion.

Residential en bloc sales made for some of the most significant transactions this quarter too, with total sales surpassing the previous two quarters. This was mainly due to the en bloc sale of Chuan Park – a 99-year leasehold condominium that was sold for S$890 million in July – which accounted for some 58.8 per cent of total en bloc sales value.

While most residential properties that were sold in 2022 are situated in the suburbs or outside central region, Knight Frank noted that there are still some en bloc options in the prime area or core central region (CCR), where boutique-sized properties costing less than S$200 million are situated.

“(These properties) provide more palatable choices where the risks associated with land costs are reduced,” it said.

Furthermore, it added that the progressive reopening of borders in the Asia-Pacific region could signal a potential increase in interest for properties in the CCR from international buyers.

According to Knight Frank’s head of capital markets (land and collective sale), Chia Mein Mein, the number of foreign homebuyers increased to 4.4 per cent and 4.8 per cent in Q2 and Q3 respectively, compared to the 2.8 per cent in Q1.

“It could be an opportune time for developers to explore land parcels in prime residential areas in preparation for a possible increase in foreign homebuyer activity, as a result of a flight to safety, given Singapore’s standing as a safe and secure haven,” she said.

Meanwhile, the group noted that commercial sales remained “muted” this quarter. Interest in the shophouse investment market had also dwindled, with sales totalling S$228.7 million, down 37.7 per cent quarter-on-quarter.

“While most owners are under no pressure to sell, the increasingly clouded economic outlook pushed buyers to adopt a cautious stance as fears of a recession spread across the globe,” it said.

“With a widening gap in price expectations, sellers should be cognisant of the shifting sentiment due to increasingly uncertain economic conditions.”

Despite this, Knight Frank highlighted that investor appetite for industrial properties and student accommodation remained strong – given increasing demand for industrial space as growth industries continued to expand, while student accommodation saw consistent demand and a lower price quantum.

A few notable deals in the industrial sector include the acquisitions of a logistics company for S$191.9 million and Philips Apac Centre for S$104.8 million, as well as the en bloc sale of BHL Factories for S$130.5 million.

Meanwhile, CapitaLand Ascott Trust’s purchase of student accommodation properties in the US and Japan were also underscored as key contributing acquisitions this year.