That being said, the Republic remains a favoured market in Asia, holding considerable investment and development appeal, due to its vibrant economic growth and strong emphasis on community livability, according to the Emerging Trends in Real Estate Asia Pacific 2014, a property forecast survey of over 250 real estate professionals.
"Varying market phenomena have stirred contradicting views towards (Singapore's) real estate outlook," said Choo Eng Beng, partner and real estate leader, PwC Singapore, noting this is the first time Singapore has slipped off the top five spots since the report started in 2007. "On the one hand, investing in real estate is getting more expensive due to expected higher interest rates, compressed cap rates and tighter regulations. On the other hand, some see room for better returns with low vacancy rates and potential for higher rentals," he added.
One of the perennial issues faced in Singapore, as with the rest of Asia, is the acute shortage of investable stock. "In Singapore, the fundamentals may have hit bottom after several years of weakness, and in the short term should find support from a relatively modest pipeline of supply," noted the report. "Statistically, investment in core property rebounded in 2013 and some see it now at the bottom of the cycle."
This is in part due to Singapore being increasingly seen as a more attractive financial centre than Sydney because of its location, suggested a fund manager.
That being said, most of the recent action has been driven by left-pocket/right- pocket Reit (real estate investment trust) flotations and government land sales, while cap rates for high- quality buildings are now in the 3-4 per cent range, pricing many investors out of the market, said the report.
Overall, the top investment market for 2014 was Tokyo - for the first time since 2009 - buoyed by a wave of optimism over the positive impact of "Abenomics", followed by Shanghai, Jakarta, Manila and Sydney. For investment prospects by property type, the industrial/distribution sector was the top-rated property sector for investment potential, followed by residential, office, retail, and hotel.
In Singapore, the residential sector saw the greatest dip in confidence, with only 11.1 per cent of respondents saying they were looking to buy versus 30 per cent a year ago.