S$9.38 billion of high quantum properties more than $10 million has been transacted during the third quarter of 2017. It is the most active quarter since the 3rd quarter of 2013. This amount is up about 4% from Q2 2017’s transactions of S$9.01 billion. However, this is still shy of Q3 2013’s record at S$13.84 billion.
The year-to-date transaction amount is worth about S$23.73 billion – higher than last year’s whole-year figure of S$22.66 billion.
The estimated final transaction amount for this year could be between S$26 billion and S$29 billion. This includes the award of the Beach Road reserve-list site on the Government Land Sales Programme which is triggered by an unnamed developer which has undertaken to bid at least S$1.138 billion for the site. The tender for that commercial site closes on Sept 28.
There is also a possibility that two prime 99-year leasehold residential sites on the reserve list – one each on Jiak Kim Street and Fourth Avenue – may be triggered for launch soon due to the pent-up demand for developers to replenish their land-bank. These land sales could fetch about S$1.37 billion in total, or about S$1,500 per square foot per plot ratio.
Collective sales of residential properties and the possible sales of commercial buildings could take the final transaction amount to a high of S$29 billion.
Deals from the private sector made up to 81 percent of the transaction amount in the Jan-1-to-Sept-25 period.
Mega deals helped to bring a 90% jump in the transaction amount from Q3 2016. The transaction amount $9.38 billion includes BlackRock’s sale of Asia Square Tower 2‘s office and retail space, and ExxonMobil’s S$1.971 billion purchase of one of the world’s biggest aromatics facilities – Jurong Aromatics Corporation’s Jurong Island plant.
Another major deal was the S$970 million collective sale of Tampines Court to Sim Lian. A Chinese developer also paid S$430.1 million for a collective sale for Citimac near Tai Seng MRT station. The industrial segment has contributed S$2.82 billion in total investment sales this quarter.
This is the highest quarterly figure for industrial transactions since Q1 2008. The figure for Q2 this year was around S$100 million. In all, industrial properties accounted for a 30.1 percent share of the property investment sales pie this quarter.
The residential sector consists of 41.2% of the total transaction amount. Between July 1 and Sept 25, developers acquired a number of private residential sites. These include six collective sales namely Serangoon Ville, Sun Rosier, The Albracca, six townhouses at Seraya Crescent and Toho Green.
The prices offered by the successful bidders at collective sales were generally higher than owners’ expectations, reinforcing the view that en bloc sale fever is rising in Singapore.
On the Government Land Sales (GLS) front too, the 99-year private housing sites along Woodleigh Lane and Serangoon North Avenue 1 garnered 15 bids and 16 bids respectively. The top bids were S$1,110 psf ppr and S$965 psf ppr respectively. Aggressive bids become the market norm, signaling that developers are more bullish of the residential property market. The developers’ appetite to replenish their land bank, together with limited supply from the GLS programme, will push them to look to the private sector, especially en-bloc sale sites. This will drive the demand for land and in turn intensify the competition and push up the land prices further in the near term.
Investment sales in the commercial (office and retail) segment hit S$2.56 billion so far this quarter, or a 27.3 percent share of the total transactional quantum.
Despite the transaction of Asia Square Tower 2, this is still down 29.3% from Q2 this year. Q2 saw the S$2.2 billion Jurong Point transaction, the sales of Sime Darby Centre and a half-stake in One George Street, forming the bulk of the transaction.
Expectations of interest rate hikes will be a key factor that will affect investment sales.
High asking prices in the office property segment remain a challenge but the price gap is narrowing.
Owners are still seeking high prices as they are encouraged by the recovery in Singapore office rents and not under much pressure from interest rates yet.
Despite compressed yields, buyers (including sovereign wealth funds, insurance and pension funds) are able to look beyond current cycles as they have a longer investment horizon.
The behaviour of the office market has also become more predictable; with rental cycles becoming shorter, and peaks to troughs, shallower.
Compared to other key Asian gateways, Singapore property prices across both residential and commercial sectors have not gone up much over the last five years. This is due to the office-supply situation and the government’s effective enforcement of property cooling measures.
On the other hand, cities like Sydney, Tokyo, Hong Kong and Shanghai have seen price increases of at least 20 percent over the past five years in the various sectors.
So comparatively, Singapore’s real estate is looking attractive – particularly on the back of encouraging economic growth.