Property investment market to rebound next year

2020 sees the lowest investment sales volume since the 2009 financial crisis. CBRE Research assures that Singapore’s investment market “has always been resilient”, as proven by past cycles in its ability to recover strong from “crisis situations”.

Singapore saw preliminary real estate investment sales volume for 2020 year-to-date drop 56.8% to $10.03 billion from the previous year, making it the lowest investment sales volume since the 2009 financial crisis, revealed CBRE Research.

On a quarterly basis, real estate investment volume for the fourth quarter of 2020 eased 23.9% to $2.14 billion.

Given the pandemic, it was unsurprising that investors preferred to sit by the sidelines as they wait for value to emerge, said Desmond Sim, Head of Research for Singapore and Southeast Asia at CBRE.

He also attributed the low volume to zero sizeable deals, which refer to transactions of over $1 billion.

“Due to the widening gap between buyer-seller expectations, some deals were unable to materialize. In fact, 68.9% of the total deals in 2020 year-to-date were bite-sized transactions of less than $25 million,” noted Sim. 

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With the global travel restrictions, CBRE revealed that foreign capital inflows fell 53% year-on-year to $3.18 billion this year. This was more pronounced during the second quarter of 2020 when government-imposed restrictions hindered market activity.

This year’s real estate investment sales were propped up by the luxury residential market as well as government land sales.

Residential sales accounted for 42.5% of the total investment sales volume for this year at $4.26 billion, of which $1.52 billion is contributed by government land sales for residential use. 

“Encouraged by the strong sales in project launches, as well as the declining inventory of unsold units, developers have turned to government land sales and even the private market to acquire land,” said CBRE. 

“This is evident from the strong bidding activity on the most recent tender close (Yishun Ave 9 and Tanah Merah Kechil sites), as well as the spate of en-bloc activity in Districts 14 and 15, where residential sites along Guillemard Road, Haig Road and Katong Road were sold.” 

Meanwhile, the industrial and office sectors also came in strongly, accounting for 14.5% and 22.4% of total investment sales, respectively.

Industrial assets witnessed a surge in demand this year due to e-commerce and stockpiling. Prime office assets in Singapore, on the other hand, continued to be attractive to investors for their yield and stability, despite telecommuting trends.

Looking ahead, CBRE expects next year’s real estate investment sales “to get a shot in the arm as vaccination programs are rolled out, with business sentiments picking up and border restrictions gradually eased”. 

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“The Singapore investment market has always been resilient, and it has demonstrated in past cycles of its ability to recover from crisis situations. This was apparent post Global Financial Crisis when real estate investment sales volume improved by a strong 265.4% in 2010,” said Michael Tay, Head of Capital Markets for Singapore, at CBRE. 

While he expects investors to remain discerning at the start of 2021, he believes that investors will still be in constant search of investments that provide higher returns, spurred by ample liquidity and low interest rate environment.

“As an investment destination, Singapore fits this bill perfectly given its proven ability to handle the pandemic, macroeconomic stability and political-neutral stance,” he said. 

With this, CBRE expects investment sales volume for next year to rebound led by residential, industrial and office sales.

“There will also be renewed interest in retail and hospitality assets, as investors are on the prowl to buying these assets on the cheap,” added CBRE.

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