Singapore real estate offers best Asia-Pac bets: report

Transactions in Republic surged in H1 2019, with most activity driven by cross-border capital; volumes in H2 are expected to be strong

Wed, Nov 13, 2019


SINGAPORE's real estate now offers the best investment prospects in the Asia-Pacific but investors will have to work hard to clinch their prized asset.

Not surprisingly Hong Kong fared the worst, ranking 22 out of 22 cities in the region, according to the Emerging Trends in Real Estate Asia-Pacific 2020 report, by the Urban Land Institute (ULI) and PwC.

The Lion City witnessed a surge in transactions in the first half of 2019, with most activity driven by cross-border capital, and volumes in the second half of the year are expected to be strong, the report said.

Today, the office sector in the market has largely absorbed the oversupply of recent years and with vacancies now at an all-time low, and a limited amount of new supply in the pipeline, confidence in medium-term prospects has returned, it said.

Until recently, Singapore had experienced several subpar years across all property sectors in a slowdown that was out of kilter with the upward trajectory of the rest of the region, as economic woes and a glut of high-end supply saw vacancies surge and capital values and rents decline.

In the 2017 report, Singapore placed just 21st in the rankings, underlining how quickly the tides can shift, it said.

"Singapore has continued to climb up the rankings to claim top spot this year," added Ong Choon-Fah, chair of Singapore for ULI.

"This is for a number of reasons, including the fact that the office sector has largely absorbed any oversupply, transactions have surged in the city, and there is relatively little new space due to come to market in the near-to-medium term," said Ms Ong who is also Edmund Tie's chief executive.

"There is an increase in transaction value driven by cross-border capital in 2019 and an improvement in the commercial office sector," said Yeow Chee Keong, PwC Singapore real estate and hospitality leader.

"The city-state's pole position is a testament to its strong fundamentals and investors' needs for defensive assets with the uncertain economic climate," he added. "There are still investment opportunities, and we continue to see increased investors' interest in alternative asset classes, including data centres, purpose-built student accommodation and healthcare."

Prospects may be good but it is not easy for investors to find their piece of real estate in Singapore.

According to Real Capital Analytics, transaction volumes in the first half of 2019 for Singapore at US$4.9 billion was less than half of Hong Kong's US$10.6 billion.

Ms Ong said that's due to the difficulty of finding the asset at the right price. "We've a lot of enquiries, from institutional funds and especially family offices, but it's finding the asset at the right price," she noted.

Volume data includes apartment, hotel, industrial, office, retail and seniors housing transactions, with a minimum investment level of US$2.5 million, but excludes entity level or development site deals.

Entity level deals refer to buying a company that owns the assets rather than the assets themselves. Usually this would mean large portfolio-type deals. Development sites are land deals, including land bought from the government.

Singapore was one of the few markets regionally to see a surge in transactions in the first half of 2019, with most activity driven by cross-border capital. Many of this year's investments were big-ticket deals, with six acquisitions worth US$300 million or more in the first half of the year.

The report said although most analysts see little prospect of Hong Kong suffering a large exodus of businesses as a result of the recent street protests in the city, there has been a steady flow of Hong Kong capital migrating to Singapore in 2019 in search of a safe haven.

This has benefitted the luxury housing market, and to a degree has also boosted office occupancy.

"Private banking is a source of demand here in Singapore," said one locally based fund manager. "Landlords and agents are looking like crazy for space as private banking accounts have swollen."

Singapore has always been the first choice as an offshore destination for capital from South-east Asia, the report said. "Investors from Thailand have recently joined Indonesians as active players, with Thai asset-management companies recently greenlighted to invest overseas."

The report surveyed 463 individuals who represent a wide range of industry experts, including investors, fund managers, developers, property companies, lenders, brokers, advisers, and consultants. ULI and PwC researchers personally interviewed 94 of the individuals.

Tokyo, Ho Chi Minh City, Sydney and Melbourne round up the top five markets for investment prospects. Tokyo, Sydney and Melbourne reflect overall investor preference for regional markets that are large, liquid, and defensive while outlier Ho Chi Minh City, which is listed in third place, is the lone emerging market to be viewed favourably due to its strong economic growth as it absorbs Chinese manufacturing capacity moving offshore.