2Q2023 real estate investment sales fell 50.7% year on year to $3.29 billion

Investment sales in real estate fell 50.7% q-o-q to $3.29 billion in the 2Q2023 according to research conducted done by Savills Singapore. The decline was triggered by a decline in both commercial and residential segments and the residential segment being hit by an 9.8% q-o-q fall in investment sales, which amounted to $1.56 billion and commercial investment sales plummeted 77.9% q-o-q to $940.7 million.

Watten House was recently purchased for an astonishing $550.8 million, a whopping 10% above its initial asking price, highlighting its enormous potential in its outstanding location.

However, the industrial segment saw an increase in investment sales during the quarter, increasing 14.6% q-o-q to reach $791.2 million. Notable deals include the sale of six industrial assets that were not core located in Singapore from ESR-LOGOS Reit $327.3 million.

In the residential sector, Savills attributes the fall in the value of transactions to a variety of reasons, such as the shifting habits of ultra high net worth (UHNWI) as well as family offices, and developers who are prudent in purchasing properties through as well as GLS and private collective sales markets. Government Land Sales (GLS) Program as well as the private market for collective sales.

However, residential transactions comprised the majority of investment transactions during 2Q2023, accounting for 48.3% of the investment volume.

In the commercial sector, Savills highlights that sales of shophouses grew in 2Q2023, increasing 43.1% q-o-q to reach $390.3 million in sales. The total number of shophouse deals were recorded in the quarter, compared to 10 deals recorded in 1Q2023.

The firm says that the sales of strata offices have remained steady with $298.5 million recorded in transactions in the last quarter, across eight deals. This includes the total sales on levels 10, 14 of Solitaire in Cecil to companies that are part of The Thye Hua Kwan (THK) Group of Charities. The transaction was valued at $103.2 million, or $4140 per sq ft according to the area of strata.

Shophouses and strata offices in 2Q2023 were driven mainly in part by UHNWI or family office purchasers. Savills says that the recent increase in additional buyer’s stamp tax (ABSD) that foreigners are required to pay up to 60% might have diverted investor attention from residential properties to commercial properties.

Alan Cheong, executive director of Savills Research and Consultancy, believes that the conservation shophouses and strata offices will be able to continue to record an impressive amount of transactions due to growing demand from UHNWIs and family offices. However, Cheong notes that such buyers tend to not abide by lodging requirements, which makes it difficult to have an accurate picture of the amount of demand.

Marcus Loo, CEO of Savills Singapore notes that while the rising interest rates have affected the market for investment sales for high-end items, it remains strong for smaller-sized deals. “The current low interest rate environment continues to stifle demand from institutions and investors are naturally more cautious when looking at larger sites. As long as there is no confirmation that interest rates are at their highest in the near future, we expect that investment sales will be limited mostly to shophouses, Strata-titled offices, and government land sales,” he remarks.

Savills has maintained its full-year projection for Singapore real residential investment sales, which is about $24.7 billion.