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26-03-14, 11:35
http://www.businesstimes.com.sg/archive/saturday/specials/property/q1-investment-sales-property-remain-sluggish-20140325
Published March 25, 2014
Q1 investment sales of property remain sluggish
Deals originating from public sector make up majority of transactions. Final figure to be a bit higher than Q4's $3.9b: Savills
By kalpana rashiwala [email protected]
INVESTMENT sales of Singapore property - which cover big-ticket deals of at least $10 million - have continued to languish in the first quarter, according to separate figures from CBRE and Savills.
Deals originating from the public sector accounted for the lion's share of transactions - the first time this has happened in nearly three years. This was on the back of state land sales. Sale of residential sites under the Government Land Sales (GLS) Programme made up 49 per cent of the $3.8 billion total investment sales volume in this quarter (up to March 21), said CBRE.
Savills's figures reflect the tally as at March 20 at $3.8 billion, and the property consultancy predicts the final figure will come in slightly higher than the $3.9 billion clocked in the fourth quarter of last year. Both figures are the lowest since Q4 2009's $3.3 billion.
Savills blamed the weak investment sales showing in the first quarter partly on a slowdown in transactions arising from the Chinese New Year festivities but more significantly, the Total Debt Servicing Ratio, as well as still-high asking prices resulting in a price gap between buyers and sellers.
Savills said in January-March 2014, the public sector accounted for 61.3 per cent, or $2.3 billion, of investment sales - treble the $757 million in October-December last year - on the back of strong state land sales. However, investment sales originating from the private sector halved to $1.46 billion in Q1 from $3.1 billion in Q4.
The residential sector accounted for the lion's share of 58.6 per cent, or $2.2 billion, of total Q1 2014 total transaction value, a big jump from the $862 million in the previous quarter. The strong showing was on the back of three 99-year leasehold private residential and five executive condominium (EC) housing sites being awarded by the state in Q1. In Q4 last year, only two private housing sites (and no EC sites) were awarded, said Savills.
"Notwithstanding the latest measures announced in December last year that made it more difficult for people to buy EC units, developers continued to exude confidence in this market segment. For example, the tenders for EC sites at Westwood Avenue and Anchorvale Crescent attracted 12 bids each," said Savills deputy managing director Steven Ming.
"Nevertheless, developers have turned edgy about the slowing residential property market and this is reflected in the moderation of bid prices for Government Land Sales (GLS) tenders. The average gaps between the top bids have also narrowed significantly this quarter to 2.7 per cent for private housing sites, compared with 14.4 per cent in Q4 last year, 3.8 per cent in Q3 2013 and 6.3 per cent in Q2 2013. For EC sites, the average winning margin narrowed to 1.6 per cent in Q1 this year, from 1.9 per cent in Q3 last year and 6.1 per cent in Q2 last year.
"We believe that developers will continue to replenish their land bank in the future, but become more selective and moderated in their bidding."
Total investment sales in the commercial segment slipped 57 per cent quarter on quarter to $771.4 million in Q1. Key transactions include Westgate Tower in Jurong, 700 Beach and a half-stake in Finexis Building along Robinson Road.
The hotel sector recorded a 4.1 per cent decline in transactions to $477.8 million, while investment sales for industrial property fell 57.7 per cent to $314.6 million.
The overall investment sales climate continues to be challenging, given the expected slowdown in property deals across all sectors owing to the TDSR framework, cooling measures and current historical high capital values, said Savills. "Anticipated interest rate rises also weigh down on the feasibility of buying into assets that are priced at compressed yields," it added.
CBRE Research associate director Desmond Sim said deals originating from the public sector are expected to continue dominating the investment sales market for the rest of the year. "Developers are expected to remain hungry (for) land, so the number of bids at each land tender is likely to remain healthy; but the outlook for the market will be reflected in bid prices," he said.
Savills' Mr Ming said that unless there is a marked pick-up in end-unit residential sales, further moderation in bid prices for state land sales can be expected to buffer in anticipated higher construction and holding costs.
On a brighter note, Mr Ming said: "Major investment deals are expected to come from funds of the 2006/07 vintage that would need to see an exit on their assets soon." The office sector is another bright spot, underpinned by rental growth amid tight supply in the next two years.
Agreeing, CBRE executive director Jeremy Lake said: "Investors are convinced that there is an office rental growth story to be enjoyed for the next two years at least. This optimism will fuel sustained interest in the office sector and we expect to see more strata office sales of completed properties and also some en bloc office building sales in 2014."
In addition to next month's scheduled closing of a major commercial site in Woodlands, expectations are running high that the Sims Avenue/Tanjong Katong Road commercial site on the reserve list may be triggered.
CBRE has trimmed its investment sales forecast for 2014 to around $15 billion from $20 billion previously, though Savills is sticking to its $20-25 billion forecast. Last year, $29.8 billion of investment sales deal were sealed.
Published March 25, 2014
Q1 investment sales of property remain sluggish
Deals originating from public sector make up majority of transactions. Final figure to be a bit higher than Q4's $3.9b: Savills
By kalpana rashiwala [email protected]
INVESTMENT sales of Singapore property - which cover big-ticket deals of at least $10 million - have continued to languish in the first quarter, according to separate figures from CBRE and Savills.
Deals originating from the public sector accounted for the lion's share of transactions - the first time this has happened in nearly three years. This was on the back of state land sales. Sale of residential sites under the Government Land Sales (GLS) Programme made up 49 per cent of the $3.8 billion total investment sales volume in this quarter (up to March 21), said CBRE.
Savills's figures reflect the tally as at March 20 at $3.8 billion, and the property consultancy predicts the final figure will come in slightly higher than the $3.9 billion clocked in the fourth quarter of last year. Both figures are the lowest since Q4 2009's $3.3 billion.
Savills blamed the weak investment sales showing in the first quarter partly on a slowdown in transactions arising from the Chinese New Year festivities but more significantly, the Total Debt Servicing Ratio, as well as still-high asking prices resulting in a price gap between buyers and sellers.
Savills said in January-March 2014, the public sector accounted for 61.3 per cent, or $2.3 billion, of investment sales - treble the $757 million in October-December last year - on the back of strong state land sales. However, investment sales originating from the private sector halved to $1.46 billion in Q1 from $3.1 billion in Q4.
The residential sector accounted for the lion's share of 58.6 per cent, or $2.2 billion, of total Q1 2014 total transaction value, a big jump from the $862 million in the previous quarter. The strong showing was on the back of three 99-year leasehold private residential and five executive condominium (EC) housing sites being awarded by the state in Q1. In Q4 last year, only two private housing sites (and no EC sites) were awarded, said Savills.
"Notwithstanding the latest measures announced in December last year that made it more difficult for people to buy EC units, developers continued to exude confidence in this market segment. For example, the tenders for EC sites at Westwood Avenue and Anchorvale Crescent attracted 12 bids each," said Savills deputy managing director Steven Ming.
"Nevertheless, developers have turned edgy about the slowing residential property market and this is reflected in the moderation of bid prices for Government Land Sales (GLS) tenders. The average gaps between the top bids have also narrowed significantly this quarter to 2.7 per cent for private housing sites, compared with 14.4 per cent in Q4 last year, 3.8 per cent in Q3 2013 and 6.3 per cent in Q2 2013. For EC sites, the average winning margin narrowed to 1.6 per cent in Q1 this year, from 1.9 per cent in Q3 last year and 6.1 per cent in Q2 last year.
"We believe that developers will continue to replenish their land bank in the future, but become more selective and moderated in their bidding."
Total investment sales in the commercial segment slipped 57 per cent quarter on quarter to $771.4 million in Q1. Key transactions include Westgate Tower in Jurong, 700 Beach and a half-stake in Finexis Building along Robinson Road.
The hotel sector recorded a 4.1 per cent decline in transactions to $477.8 million, while investment sales for industrial property fell 57.7 per cent to $314.6 million.
The overall investment sales climate continues to be challenging, given the expected slowdown in property deals across all sectors owing to the TDSR framework, cooling measures and current historical high capital values, said Savills. "Anticipated interest rate rises also weigh down on the feasibility of buying into assets that are priced at compressed yields," it added.
CBRE Research associate director Desmond Sim said deals originating from the public sector are expected to continue dominating the investment sales market for the rest of the year. "Developers are expected to remain hungry (for) land, so the number of bids at each land tender is likely to remain healthy; but the outlook for the market will be reflected in bid prices," he said.
Savills' Mr Ming said that unless there is a marked pick-up in end-unit residential sales, further moderation in bid prices for state land sales can be expected to buffer in anticipated higher construction and holding costs.
On a brighter note, Mr Ming said: "Major investment deals are expected to come from funds of the 2006/07 vintage that would need to see an exit on their assets soon." The office sector is another bright spot, underpinned by rental growth amid tight supply in the next two years.
Agreeing, CBRE executive director Jeremy Lake said: "Investors are convinced that there is an office rental growth story to be enjoyed for the next two years at least. This optimism will fuel sustained interest in the office sector and we expect to see more strata office sales of completed properties and also some en bloc office building sales in 2014."
In addition to next month's scheduled closing of a major commercial site in Woodlands, expectations are running high that the Sims Avenue/Tanjong Katong Road commercial site on the reserve list may be triggered.
CBRE has trimmed its investment sales forecast for 2014 to around $15 billion from $20 billion previously, though Savills is sticking to its $20-25 billion forecast. Last year, $29.8 billion of investment sales deal were sealed.