Property investment sales recover after slow startShare

Property investment sales recover after slow startShare
2009 - PropertyGuru.com.sg

Investment sales of Singapore property recovered with a $9.4 billion year-to-date tally, after a slow start in the first quarter. CB Richard Ellis (CBRE) projects that the full-year figure will reach more than $10 billion after all transacted caveats in November and December have been lodged. However, the figure would only be around half of $17.9 billion in 2008.

Hitting investment sales deals of about $15 to $20 billion, property consultants anticipate 2010 to be a better year. Such transactions are the basis for the medium to long-term view of developers and investors to the property market.

Investment sales are defined by CBRE as transactions with a value of no less than $5 million, including landed residential property and apartments, private and government sales of buildings and land, both en bloc and strata. It likewise includes change of ownership of property through share sales.

“With 2010 expected to be a recovery year for the Singapore economy, investment sales could be in the region of $15 billion, similar to that of 2005. Economic fundamentals should start to catch up with the positive sentiments in the stock market and the residential market, with more stability in the financial and business sectors,” said Jeremy Lake, executive director for investment properties at CB Richard Ellis.

Chris Fossick, managing director of Jones Lang LaSalle (South East Asia and Singapore) said, “Investors are starting to focus on the recovery, and whilst still cautious about the short term, they are optimistic about the mid and long-term outlook of the Singapore real estate market.”

Most market watchers are expecting that the residential segment will lead the way for next year’s investment sales deals, with the Government scheduled to resume the sale of residential sites through its confirmed list from January. The collective sales market is also expected to be more active next year, after just one major deal this year (the $100.8m sale of Dragon Mansion).

According to Mr. Lake, investors' interest for retail malls in suburban areas continues to be strong.

“So the appetite for office space, which has been somewhat weak in the past 12 months or so, will pick up again. However, deal flow may be limited as many of the sellers who were keener to sell have probably already sold,” he said.

Shaun Poh, senior director for investment advisory services at DTZ, says there are reserved funds for office properties in 2010 but deal sizes will be limited to $200 to $300 million for each building. “Office investors are also more stringent, demanding initial property yields of at least 4-5 per cent, compared with 2-3 per cent during the 2007 boom. And they'll only look at buildings that are substantially leased, given supply overhang issues,” he added.

“The office market would likely see more investment activity next year as the rental slide eases or rents even begin to recover. And with credit loosening further, major institutions like real estate investment trusts could be priming themselves for further acquisitions, having addressed refinancing concerns,” said Karamjit Singh, Credo Real Estate managing director.