Singapore investment property sales rise in Q2 despite muted market: Knight Frank

Residential deals chalk up S$4.2 billion in sales value and account for a large portion of activity

Jul 3, 2024

REAL estate investment activity in Singapore rose considerably in the second quarter of 2024, despite the market remaining subdued in the first half of the year amid high interest rates.

Q2 figures compiled by Knight Frank Singapore showed that total investment sales were up 63.3 per cent to S$6.4 billion, from S$3.9 billion in the year-earlier period.

On a quarter-on-quarter (qoq) basis, total investment sales were up 41.2 per cent. Residential deals chalked up S$4.2 billion in sales value and accounted for a large portion of investment activity, said Knight Frank.

The award of four government land sales sites in Zion Road, Holland Drive, Upper Thomson Road and River Valley Green topped the list of total sales value in Q2, contributing S$3.2 billion.

While activity in the collective sales market inched up with six launches in the recorded period, Knight Frank noted that successful collective sales for residential developments “remain extremely challenging in the current market”.

The real estate consultancy attributed this to the price gap between owners and developers, as well as foreign owners’ reluctance to sell due to the doubling of the Additional Buyer’s Stamp Duty (ABSD) rate that has driven up replacement costs.

Chia Mein Mein, Knight Frank’s head of capital markets (land and collective sale), said: “Developers continue to be cautious, taking a wait-and-see posture when evaluating collective sale sites, especially those with large areas.”

However, she highlighted that “mini landed en blocs” that are effectively the joint sale of adjoining landed residential plots in good locations will appear attractive to developers.

She added that as domestic demand for landed developments “remains evergreen”, adjoining landed properties provide a “more manageable risk profile” for smaller developers catering to homebuyers who are less willing to undertake reconstruction.

Investors’ appetite for commercial property increased as demand for this asset class rose by 21.1 per cent qoq to S$1.8 billion in Q2, said Knight Frank. In May, commercial building Mapletree Anson was sold to private equity firm PAG for S$775 million.

Knight Frank also noted that shophouses remained the preferred asset type among foreign investors and high-net-worth families, as the ABSD “culled much interest” in properties with residential use. On the other hand, industrial investment value shrank 24.8 per cent qoq and 67.2 per cent year on year (yoy) to S$330 million in Q2.

The outbound sector recorded about S$3.7 billion in sales in Q2, up 165.6 per cent from the first quarter. But on a yoy basis, sales value fell 34 per cent. This comes as global investors are expected to delay their next actions until interest rates fall and global tensions ease, explained Knight Frank.

It also said that more property groups and asset managers have expanded their portfolios to include purpose-built student accommodation, which are typically counter cyclical with stable cash flow.

The overall market sentiment continues to remain at muted levels as buyers and investors continue to wait for interest rates to drop and for prices to be rerated, said Knight Frank.

Noting that the hospitality and retail sectors show the “greatest potential” due to normalising tourist patterns, the consultancy added that deals waiting in those areas can be expected once interest rates start to ease.

It pointed out: “There is every chance that deals can materialise in an environment where there are currently more sellers than buyers, once interest rate cuts begin that cause the expectations between buyers and sellers to narrow. This could set off the deals that are simmering below the surface.”

Hence, the real estate consultancy estimates that investment sales momentum could improve in the second half of 2024, with the annual total sales value to range between S$23 billion and S$25 billion.

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