Property investment sales could hit $46b this year: Colliers

May 8, 2018

Residential segment main driver in Q1; market may grow further 5% to 10% next year

Fuelled by the ongoing collective sale fever and a possible upturn in other segments, the property investment sales market here could grow 15 per cent year-on-year to $46 billion this year.

This would beat 2007's $40.187 billion, according to Colliers International in a report released yesterday, and the market could grow a further 5 to 10 per cent next year.

The first quarter of this year alone has already seen an 89 per cent year-on-year increase in total investment sales to $11 billion.

The residential segment was the main driver, increasing 233 per cent year-on-year to $9.1 billion, the highest since the $9.5 billion recorded in the second quarter of 2007. It also comprised 83 per cent of the total investment sales in the first quarter of this year.

"Following the revival of collective sales from mid-2017, developers continued to search aggressively for suitable sites to replenish their depleting land banks, leading to an active collective sale market and keen bidding for sites offered through state land tenders in Q1 2018," wrote Colliers director and head of research Tricia Song and assistant manager for research Nathan Nguyen in the research note.

Notably, the five largest transactions in the quarter were all residential collective sale deals - Pacific Mansion ($980 million), Park West ($840.9 million), Pearl Bank Apartments ($728 million), Goodluck Garden ($610 million) and Brookvale Park ($530 million).

In all, 17 residential collective sale sites with a value of $5.83 billion were transacted in the first quarter. This helped the private residential segment grow 16 per cent quarter-on-quarter to $7.9 billion.

Colliers noted two trends in the residential collective sale market.

Developers' interest is shifting to the prime region from suburban locations, and premiums may have weakened, from 10.5 per cent last year to an average of 4.9 per cent in the first quarter of the year.

The latter, however, is not a sign that the collective sale market is starting to cool, as attractive sites with realistic asking prices still find ample bidding interest, the analysts said.

The quarter also saw the public residential segment record $1.24 billion in investment sales, from Government Land Sales sites including Sumang Walk in Punggol and Handy Road.

The commercial segment saw fewer deals, with total sales sagging 86 per cent quarter-on-quarter to $437.4 million, or just 4 per cent of the total pie in the quarter.

Colliers said the only major transaction in the first quarter was Perennial Real Estate Holdings' acquisition of Pontiac Land affiliate Chesham Properties' 50 per cent stake in Capitol Singapore for $528 million, of which Colliers attributed the retail component to be worth $349.5 million.

But Colliers said more deals could be in store in the coming quarters, given rising office rents.

Investment sales for industrial sites were flat quarter-on-quarter at $641.1 million, or 6 per cent of total sales for the quarter, much of it due to the public land sale of a white site at Rochester Park for $365 million.

But Colliers also noted that there is increasing interest from industrialists in acquiring prime space for their operations.

Shophouse transactions stood at $478.6 million, or 4 per cent of all investment sales in the quarter, while hospitality transactions in the quarter stood at about $283 million, or 3 per cent of the total for the quarter.

"We expect the overall investment sales momentum to pick up further over the rest of 2018, as Singapore remains attractive as a safe haven in uncertain times," said Colliers, citing concerns over a global trade war and increased equity market volatility.

Colliers believes that most property sectors have bottomed out, and that residential and office properties would be the most attractive for investors, thanks to "an expected multi-year upcycle in the underlying residential sales and office leasing markets, and an increased availability of choice properties".