2013 sales may be similar to past three years'; lower 2014 figure expected
The year-to-date tally is around $29 billion - with a possibility that the final number could touch $30 billion as more caveats of transactions are lodged. This figure would be similar to each of the preceding three years.
The figures cover big-ticket items of at least $10 million. Investment sales reflect the confidence of major property players in the sector's mid to long-term prospects.
Property consultants expect next year's investment sales to be lower, on the back of a cutback in the Government Land Sales (GLS) Programme for the first half, among other factors. Savills Singapore predicts $20 billion-$25 billion, and CBRE, around $20 billion, in investment sales in 2014.
On the sharp contraction in the Q4 2013 investment sales number, Savills highlighted that this was from a high base in Q3, which was bolstered by three major real estate investment trust (Reit) flotations - SPH Reit, OUE Hospitality Trust and Soilbuild Business Space Reit - with a combined $5.7 billion initial property portfolio.
Also contributing to the Q4 decrease is the absence of big-ticket land parcels sold by the government. The third quarter had seen two big GLS transactions - a commercial site at Telok Ayer/Cecil streets and a mixed-use site in Yishun.
Hotel deals, which posted a stellar performance in Q3, have also dried up in Q4.
Jeremy Lake, executive director at CBRE, said the "distraction" of looking at overseas properties continued in Q4, in the absence of compelling deals in Singapore. "Developers are less sanguine about the outlook for the local residential sector due to the total debt servicing ratio (TDSR) framework and additional buyer's stamp duty (ABSD). When sentiment is a bit lukewarm, people tend to look for excuses to kick the can further down the road - and look at the overseas market or go on holidays."
Savills Singapore, citing statistics from Real Capital Analytics as at Dec 4, said Singapore buyers have invested about US$15.3 billion in overseas properties this year, up 24.4 per cent from US$12.3 billion in 2012. The US, UK and Malaysia were the top three markets, with US$3.5 billion, US$3.48 billion and US$2.1 billion respectively. Steven Ming, deputy managing director at Savills Singapore, said: "In addition to providing local developers an opportunity to continue growing their business, spreading their wings overseas offers asset-risk diversification."
New foreign entrants, most notably from China, have also been making their presence felt here, sometimes giving strong competition to local players for residential sites at state land tenders. According to Savills, China players have in all bought nearly $3.3 billion of buildings and land parcels here this year - triple last year's figure of $1 billion. The figures exclude joint ventures with local/ other foreign investors and companies.
CBRE highlighted that Reits were active buyers of Singapore real estate this year, investing around $7.2 billion (as at Dec 3), up around 70 per cent from $4.2 billion for 2012.
Giving a segmental analysis of investment sales up to Dec 21 this year, Savills said the commercial (office and retail) sector, with $10.4 billion of transactions, has overtaken the residential sector ($8.4 billion). The year-to-date tally for the commercial segment is 30 per cent higher than the nearly $8 billion last year.
A key source of commercial building transactions in 2013 has been asset divestments by foreign funds that had been big-time buyers in 2006-2008, as the fund-life approaches an end, noted Mr Ming. Examples include Goldman Sachs' sale of its remaining 51 per cent stake in 16 Collyer Quay and AEW's divestment of 2HR in Havelock Road. GLS sites also contributed to the strong numbers, as did collective sales of commercial buildings such as the $400 million sale of Serangoon Plaza.
CBRE observed that resale activity of completed strata office and retail units has remained resilient post-TDSR. It highlighted SEB's sale of 12 floors in Springleaf Tower on Anson Road this year at $2,200-$2,400 psf to five China parties, an Indonesian party (all buying for own use) and two other parties purchasing for investment.
The residential sector saw a 36.1 per cent drop in investment sales to $8.4 billion this year from $13.2 billion in 2012. This was partly due to the government staggering the release of private housing sites on the confirmed list; the first sites in the H2 2013 slate were launched only in September. In all, only 17 private housing (including executive condo) sites totalling $5.54 billion have been transacted this year - against 35 sites totalling $8.64 billion in 2012, Savills noted.
Buying activity of residential properties in the private sector was also lukewarm, due to the combination of ABSD and TDSR. Only 115 homes costing at least $10 million have been transacted this year, down from 170 in 2012.
The factors that will weigh down 2014's investment sales volume - besides the cutback in the GLS Programme - will include rule changes by JTC effective Nov 15, said Mr Ming. These entail a longer holding period for industrial properties on JTC-leased sites, and an extension of the minimum occupation period for anchor tenants.
Mr Ming envisages limited hotel transaction activity as the buyer-seller price gap has widened and cap rates softened. Furthermore, hotel assets are tightly held.
"On the positive side, transactions for prime residential properties, which have been languishing for the past few years, could kick-start in 2014 if prices undergo further adjustment or if, say, Chinese investors decide to accept paying ABSD and launch into this segment in a big way," Mr Ming said.
Mr Lake said the outlook for next year will depend partly on whether the scale of Reit flotations can match 2013's solid showing.
"The strata office market for completed properties will continue to remain healthy because there are end-users and more seasoned investors who still like this sector and by and large do not seem to be affected by TDSR. In view of the more positive outlook for the office rental/occu-pation market, we may also see a few more office-building transactions."
Source from Business times