Singapore property investment sales 'muted' in Q1 at S$3.02b: Cushman & Wakefield

PROPERTY investment sales in Singapore remained "muted" in the first quarter of 2020 at S$3.02 billion, down 37 per cent from the previous quarter, said Cushman & Wakefield on Monday.

Sales volume was dominated by the residential sector at S$2.02 billion, which was double the previous quarter's volume. The surge was mainly due to the award of numerous residential government land sales sites during the period.

Next was the industrial sector which stood at S$606.8 million and fell 22 per cent quarter on quarter, followed by the commercial sector which fell 81 per cent from the previous quarter to S$183.4 million.

The muted investment activity comes as big-ticket transactions were nowhere in sight during the quarter due to decreased market sentiment from the novel coronavirus outbreak and the rapid sell-off in global stock markets.

"Sellers were unwilling to lower prices significantly, hoping that the impact on the economy would be temporary and that market confidence would recover rapidly after the pandemic was contained," said Christine Li, Cushman & Wakefield head of research for Singapore and South-east Asia.

On the other hand, buyers were waiting to enter at more attractive prices amid the likelihood of a global recession.

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That said, there were several strata deals of "palatable quantum". These include the S$49.8 million acquisition of the 11th floor of Samsung Hub, where its S$3,800 per square foot (psf) price set the record for a 999-year leasehold property in Singapore, from a previous high of S$3,500 psf.

Another notable strata deal was Hong Realty's S$37.1 million divestment of the 10th floor in Suntec Tower, which represents S$2,580 psf and a 26 per cent gain from its purchase price of S$29.5 million in 2018.

Ascendas Reit was also noted as an active player in investment sales during the quarter due to its S$102.9 million acquisition of a 25 per cent stake in Galaxis. The real estate investment trust also sold Wisma Gulab to Heap Seng Group for S$88 million and 25 Changi South Street 1 to Hao Mart for S$20.3 million. 

Cushman & Wakefield said the muted tone in the investment market is expected to continue, as the second quarter's investment activities take a hit from Singapore's government-imposed restrictions on non-essential services from April to May.

In addition, with a global recession looming, 2020 investment volume will likely tumble to between S$10 billion and S$15 billion as buyers stay on the sidelines.

However, the decline in interest rates may lead to a rapid return on investment activity in 2021 once investor sentiment recovers.

"We are probably going to see more bite-sized investment deals in the second quarter and into the second half of 2020," said Shaun Poh, Cushman & Wakefield executive director and head of capital markets Singapore. 

Fundamentally, there is still appetite, particularly for office, hotel and logistics assets, he added. 

The real estate consultancy has not seen any distressed assets at the moment, largely due to the various stimulus packages unveiled by the government to help the hospitality as well as the retail-related industries, along with the sound financial position of most asset owners.

"Launch activity might resume after the 'circuit-breaker' measures are lifted as investors begin to have a better grasp of the market situation and are in a better position to calculate their sums," said Mr Poh. 

Cushman & Wakefield defines investment sales transactions as deals which include all awarded state land tenders and private property sales which transacted for S$10 million and above.