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Total property investment sales in Singapore ends soft in 2018

by • March 4, 2019 • InvestmentComments (0)166

Based on Colliers International’s data as of 3 January 2019, total property investment sales in Singapore fell 17% qoq and 47% yoy to SGD6.7 (USD4.9) billion in Q4 2018, mainly due to a sharp decline in residential investment sales and a lack of public land sales across all sectors. The Colliers’ International’s quarterly report said that weaker residential contribution was partially offset by stronger commercial, industrial and hospitality sectors.

The report said that for the full year, total property investment sales in 2018 declined slightly by 5.1% from a very strong 2017 to SGD38.0 (USD27.9) billion.

It added that 2019 started strongly with the announcement of CapitaLand’s acquisition of Ascendas-Singbridge for SGD11.0 (USD8.0) billion together with a few major office and hospitality deals, signalling investors’ interest and confidence in Singapore’s real estate market.

In the longer term, investors should continue their portfolio rejuvenation through selective acquisitions of commercial, industrial and hospitality assets which are offering attractive yields or strong income growth, the report suggested. Colliers said that it expects the residential sector to pick up after mid-2019 as developers focus on their new launches.

Total property investment sales growth in 2019 to moderate

The report noted that according to advanced estimates from the Ministry of Trade and Industry (MTI), Singapore’s GDP grew 2.2% yoy in Q4 2018, easing slightly from the 2.3% in Q3. It added that the manufacturing sector remained the growth driver, rising to 5.5% yoy from 3.7% in Q3, mainly due to expansion in biomedical and electronics.

The report observed that for the full year 2018, Singapore’s GDP grew by 3.3%. Oxford Economics forecasts GDP growth to moderate to 2.5% in 2019 due to a potential slowdown in China’s domestic economy, trade protectionism and concerns for a trade war.

This observation is in line with MTI’s earlier November 2018 outlook which forecast 2019 GDP growth in a range of 1.5–3.5%. Colliers said that the five largest deals in 2018 comprised two public land sales (one mixed use and one residential), one industrial transaction, one residential transaction and one commercial transaction.

total property investment sales

Screengrab Colliers International Total Property Investment Sales by Sector

Colliers report on total property investment sales said that the total residential investment sales continued their downward trend, slumping 67% qoq and 86% yoy to SGD1.1 (USD0.8) billion in Q4 2018, mainly as a result of the cooling measures in July 2018 that raised taxes for investors and developers in the residential sector, and the absence of residential public land sales during the quarter.

The quarterly report on total property investment sales by Tricia Song, Director and Head of Research at Colliers International Singapore, and Nathan Nguyen, Assistant Manager of Research, noted:

“However, due to the record level witnessed in the first half, 2018 full year residential investment sales still surpassed 2017 by 1.4% to register the highest residential investment volume on a yearly basis, at SGD22.1 (USD16.2) billion.

We expect residential investment sales to remain subdued in the first half of 2019 as developers adopt a cautious approach and focus on their new launches instead. Facing a quiet collective sales market, owners of some enbloc projects with the potential to be sold have become more measured recently, adjusting their asking prices down.

With healthy take-up in new launches, we believe the private residential investment volume and sentiment will pick up towards the middle of 2019.”

Based on Colliers International’s research on total property investment sales, no mixed-use property or site was transacted in Q4.

Nevertheless it noted that the total mixed-use investment sales for the whole year 2018 more than doubled yoy, to reach SGD2.7 (USD1.9) billion.

“This is the highest level on a yearly basis since 2013, mainly comprising a few very large GLS sites – the commercial and residential sites at Holland Road in Q2, Sengkang Central in Q3, and the white site at Rochester Park in Q1. The concept-and-price tender for Pasir Ris Central, which is another large commercial and residential plot, closed on 14 December 2018 with 3 bids submitted and final award pending.”

The report further noted:

“In Q4 2018, the Good Class Bungalow (GCB) segment saw volumes decline by 28% qoq and 15% yoy to SGD256 (USD188) million from a total of 12 transactions. This brings the full-year 2018 tally to 42 transactions in GCB Areas worth SGD1.0 (USD0.8) billion, up 16% from 2017. Based on our research, this is the highest level since 2012 when 50 GCBs totalling SGD1.1 (USD0.8) billion were transacted.”

Based on Colliers International’s research, shophouse transactions with a value of SGD5 million and above grew 7% qoq and 23% yoy to SGD212 (USD156) million in Q4 2018. Total shophouse transactions in 2018 hit an all time high of SGD1.2 (USD0.9) billion, following a rising trend which started in 2015 and indicating strong demand for this class of asset in the aftermath of the cooling measures in the residential sector.

“We foresee demand for shophouses to remain consistent in the next three years, especially from boutique investors due to the low capital quantum required. Shophouses, which are hybrids of the residential, commercial and hospitality sectors, are not subject to the recent tax hikes in residential sector and should remain attractive as a safe haven with intrinsic value due to their vintage charm.”

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