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Q3 property investment sales dive to lowest level since Global Crisis
INVESTMENT sales of property - big-ticket transactions of at least S$10 million - have plunged to S$2.86 billion in the third quarter, less than half the S$6.07 billion in the previous quarter and the lowest level since Q2 2009 during the Global Financial Crisis when the figure was S$1.22 billion.
The latest number - compiled by Savills Singapore using Oct 1 as the cut-off date - also reflects a big year-on-year drop from the S$5.58 billion in Q3 2014.
Still, there was at least one bright spot in the July-September 2015 period: the collective sale - a rarity these days - of Thong Sia Building, a freehold commercial and residential property along Bideford Road, for S$380 million. However, Savills said the transaction is considered a one-off and does not expect many en-bloc sales in the near term.
Investment sales of real estate are often seen as a gauge of developers' and property investors' confidence in the medium to long-term prospects of the property market.
Savills blamed the quiet market in Q3 this year on weak global economic conditions and unexpected negative developments pertaining to the Chinese currency which then translated to increased volatility in the global financial markets.
"The expected hike in US interest rates this September which did not materialise also pushed markets to believe that economic conditions in the US were still weak," said Savills Singapore managing director (investment and residential services) Steven Ming.
The property cooling measures also continued to hem in transaction volumes, especially in the residential market. Moreover, the cutback in Government Land Sale (GLS) sites contributed to the drastic slowdown in big-ticket property deals in the July-September 2015 period.
While these gloomy factors continue to prevail, Savills pointed to a few major real estate deals in the pipeline such as Asia Square Tower 1 (which could fetch around S$4 billion) and CPF Building along Robinson Road (around S$450 million) that could boost the Q4 number.
"As we head toward the final quarter of this year, these two deals will determine whether we will end the year on the lower or higher end of our S$15 billion to S$18 billion forecast range," said Mr Ming.
"Having said this, it must be stressed that expectations are not whether these two major commercial deals will be successfully concluded, but ... when they will be consummated. If they are not concluded this year, then their entry will be in next year's investment sales log," said Mr Ming.
Savills's latest S$15 billion-S$18 billion full-year 2015 forecast is a scaleback of its earlier projection of S$17 billion-S$20 billion. Last year, some S$17.84 billion of property investment sales were transacted - a marked slowdown from levels of around S$30 billion for each of the preceding four years.
Jeremy Lake, executive director of investment properties at CBRE, said the property consulting group is "confident that 2015 will be on track to make a sound landing with a few major deals expected to conclude in the next few months". Should these deals close successfully in Q4, total investment sales for the whole of 2015 should exceed CBRE Research's initial projection of S$12 billion-S$14 billion. As at Sept 22, the group estimated the year-to-date tally stood at S$13.74 billion, inclusive of S$2.86 billion in Q3.
Based on Savills's analysis, deals originating from the private sector fell 28.7 per cent quarter-on-quarter to S$2.37 billion in Q3 - translating to an almost 83 per cent share of the total figure.
Deals originating from the public sector shrank at an even faster pace to S$487.8 million in Q3 from S$2.75 billion in the previous quarter.
Combining public and private sector deals, transactions in the residential sector fell 42.7 per cent quarter-on-quarter to nearly S$941 million. Residential transactions accounted for almost one-third of total investment sales value in Q3, Savills said. Major transactions included the sale of a 99-year leasehold private housing site along West Coast Vale for S$314.1 million or S$551 per square foot per plot ratio (psf ppr), and the sale of an executive condominium site in Choa Chua Kang Avenue 5 at S$156.2 million or S$295 psf ppr - both at state tenders.
Savills also said that 18 residential properties (condos/apartments and landed homes) changed hands for at least S$10 million each during Q3, a drop from 31 deals in Q2. One of the bigger landed transactions was the sale of an old Good Class Bungalow in Queen Astrid Park for S$32 million (S$1,169 psf on land area).
The quarter also saw a bulk purchase of 23 units at the Draycott Eight condo for about S$150 million by a privately-held vehicle of the Chiu family behind Hong Kong's Far East Consortium International Ltd group.
Terence Tang, managing director of Asia capital markets and investments at Colliers International, who brought in the buyer in that deal, highlighted that in the first half of this year, international investors were beginning to be very keen on the Singapore luxury residential market, which has seen a significant price correction from the peak. "The renewal in interest was also partly sparked by Blackstone's bulk purchases in Paterson Suites and 21 Anderson Royal Oak Residence. However, the China stockmarket rout that began in June has dampened sentiment all round," he added.
Going by CBRE's numbers, retail was the second largest contributor to total investment sales in Q3 with a 27 per cent share, thanks to the S$780 million acquisition of Bedok Mall by CapitaLand Mall Trust.
Offices accounted for 11 per cent of investment sales, including the sale of three strata floors at Prudential Tower for S$100.6 million (reflecting an average price of S$2,750 psf) to China Shipping. Another deal was the sale of 137 Cecil Street.
CBRE expects the office sector to make significant contributions to total investment sales for the rest of 2015. Said Mr Lake: "Foreign investors including those from China and Hong Kong are on the lookout for assets, still confident of the long-term fundamentals that Singapore offers."
That said, Colliers's Mr Tang noted that the impending surge in office completions on the island is weighing on office rents.
Moreover, global investor interest in the Singapore office market is very much affected by interest rates, he added. "The recent surge in SOR (swap offer rate) and Sibor (Singapore interbank offered rate) erodes net yields to office investors," said Mr Tang.