Property Investment Recovery

Property Investment Recovery To Be Propelled By Vaccination, Among Others

SINGAPOREProperty investment transactions in the city-state is expected to recover next year as the COVID-19 vaccine is administered to the population, with business sentiments improving and international travel restrictions are gradually relaxed, according to a press release published by CBRE on Monday (21 December).

The property consultancy believes that the rebound in investment would be led by residential, office, and industrial deals. There could also be renewed interest in hospitality and retail assets as investors seek cheap properties.

“Investors are likely to remain discerning at the beginning of next year. Nonetheless, spurred by the low interest rate environment and ample liquidity, investors will still be constantly in search of investments that provide them with higher returns, coupled with stability and value at the top of their minds,” said CBRE’s Head of Capital Markets for Singapore, Michael Tay.

He pointed out that as a real estate investment destination, the city-state fits the criteria thanks to its efficient handling of the health crisis, macroeconomic stability, and geopolitical neutrality.

“The Singapore investment market has always been resilient, and it has demonstrated in past cycles of its ability to recover from crisis situations. This was apparent post Global Financial Crisis when real estate investment sales volume improved by a strong 265.4 percent in 2010,” noted Tay.

But so far this year, initial property investment sales in Singapore plunged 56.8 percent year-on-year to S$10.03 billion, the lowest since the aftermath of the 2008 Global Financial Crisis when investment volume plummeted to S$7.7 billion in 2009. On a quarterly basis, investment sales fell by 23.9 percent to S$2.14 billion.

“As a result of the pandemic, it was unsurprising that investors preferred to sit by the sidelines as they wait for value to emerge,” said CBRE’s Research Head for Singapore & Southeast, Desmond Sim.

The lacklustre investment volume for 2020 is also due to the absence of deals costing over S$1 billion, as 68.9 percent of transactions were valued at under S$25 million. Some deals also failed to materialize due to the broad gap between the price expectations of sellers and buyers.

Another factor is that foreign capital inflows to Singapore plunged by 53 percent year-on-year to S$3.18 billion in 2020 due to worldwide travel restrictions. This was more notable during Q2 when market activity was impacted by restrictions imposed by the authorities.

Of the S$10.03 billion property investment volume for 2020, residential investment sales made up the lion’ share of 42.5 percent, while the office and industrial segments accounted for 22.4 percent and 14.5 percent respectively.

“Despite telecommuting trends, prime office assets in Singapore remain attractive to investors for their stability and yield. This appeal is further strengthened by the redevelopment potential of core office assets under the Central Business District (CBD) Incentive scheme, where properties are eligible for a bonus plot ratio of 25-30 percent if redeveloped into mixed-use,” CBRE added.

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