Singapore Property Investment Activity Faces Slowdown Amid Global Uncertainties

Singapore, known for its robust economy and real estate market, is experiencing a decline in property investment activity due to higher interest rates and turmoil in the US banking sector.

A Significant Drop in Real Estate Investment Volume

In the first quarter of 2023, Singapore saw its real estate investment activity decrease to around $4 billion, marking the lowest quarterly volume since Q4 2020. This represents a plunge of over 63% compared to the same period in 2022 when the investment volume reached $10.9 billion. The volatile interest rate environment, the recent collapse of Silicon Valley Bank, and the merger of Credit Suisse and UBS Group are contributing factors.

However, Singapore’s safe-haven appeal remains intact due to its strong economic and property market fundamentals.

Residential Investment Sales on the Rise

During the first quarter, residential investment sales in Singapore rose by 17.4% on a quarter-to-quarter basis, amounting to almost $1.6 billion. This increase was driven by three freehold condominium collective sales, such as Meyer Park in Marine Parade, Bagnall Court on Upper East Coast Road, and Holland Tower in Holland Heights, collectively accounting for $583.8 million.

According to Catherine He, Head of Research for Colliers, and Tang Wei Leng, Managing Director and Head of Capital Markets and Investment Services, developers are increasingly looking to acquire freehold sites. As a result, the second quarter’s residential investment activity is expected to be dominated by government land sales and luxury properties, as buyers in this segment are less affected by higher mortgage rates.

Commercial and Industrial Sales Performance

Commercial sales experienced a 53.4% drop in Q1 2023, totaling around $1.3 billion, due to macroeconomic uncertainties and higher interest rates, which make more considerable assets less attractive. Notable deals in this segment include selling 39 Robinson Road to Yangzijiang Shipbuilding for $399 million and the 50% stake sale in Serangoon Mall Nex for $652.5 million to Frasers Centrepoint Trust and Frasers Property.

Conversely, industrial sales surged 91.9% in the first quarter to $0.8 billion. Major deals included the sale and leaseback of Jardine Cycle & Carriage’s warehouse/showroom portfolio for $333 million and Ho Bee Land’s disposal of 12 Tannery Road and 31 Tannery Lane for $115 million.

Outlook and Projections for 2023

Despite the cautious mood, outbound real estate investment from Singapore remained active in Q1 2023, reaching $19.3 billion, a 76.7% increase quarter-on-quarter. This trend may be due to the attractive pricing of assets in gateway locations amidst the tumultuous global economic situation.

However, Knight Frank has lowered its projections for Singapore’s investment sales to between $20 billion and $22 billion for 2023, compared to earlier estimates of $22 billion to $25 billion. Financing will remain challenging until clear signs of global economic and financial stabilization emerge.

Colliers predict a recovery in overall transaction volumes towards the end of 2023, provided that more certainty arises around interest rates. As more assets approach their refinancing and exit timelines, there may be increased opportunities and motivated sellers in the market.