Published April 9, 2009

Q1 investment property sales plunge to just $153m

Residential sector accounts for largest share or 46% of the total sales


(SINGAPORE) Investment property sales shrank in the first quarter of this year to their lowest level since 1998, as fewer transactions of smaller value took place.

According to property consultancy DTZ, sales plunged 58 per cent quarter on quarter to just $153 million in Q1. They were spread over 10 deals, down from 15 in Q4 2008.

The poor Q1 showing is the third-worst ever. During the Asian financial crisis, sales dropped to $107 million in Q1 1998 and as low as $47 million in Q3 1998. Differing price expectations between buyers and sellers are making it difficult to close deals.

Knight Frank's director of research and consultancy Nicholas Mak said investors are wary because they expect capital values to fall further.

According to DTZ, there is 'a mismatch in bid-ask prices, hampered by tight credit and expectations of falling rents'.

The residential sector accounted for the largest share or 46 per cent of total investment sales in Q1.

Transactions included the $36 million sale of the four-storey furniture store Le Mercier House on Mohamed Sultan Road.

Two 19th-floor St Regis units also went. But the price was $2,153 per square foot - 21 per cent less than the developer received in June 2006. The office sector made up 34 per cent of Q1 investment sales.

The $27 million sale of Genesis Building in January - the first transaction involving an entire building since August last year - accounted for more than half of sales in this sector.

Investment sales in the industrial sector cooled most, DTZ said. The most significant deal was Premium Automobiles' $12 million purchase of a showroom site on Alexandra Road.

Major developers, funds and real estate investment trusts were absent from the market in Q1, DTZ said.

All investment sales also took place in the private sector, as government land sales through the confirmed list remained suspended and no reserve sites were triggered.

Although the year got off to a slow start, DTZ's senior director (investment advisory services & auction) Shaun Poh believes the investment market could pick up closer to year-end, when the economy could improve and lending conditions ease.

'The market is not short of interested investors with money on hand, looking for prime properties,' he said.

Knight Frank's Mr Mak is more cautious about outlook and expects the investment market to stay quiet for the rest of the year. 'It depends on the length of the downturn,' he said.