Singapore’s property investment sales may hit a three-year high this year as deal momentum remained positive after third-quarter sales climbed 16 percent to reach S$4.61 billion, according to preliminary estimates from JLL Research.
“The uplift in investor sentiment witnessed in the second quarter that translated into the conclusion of several headline deals including the S$3.4 billion Asia Square Tower 1 and the S$638 million collective sale of Shunfu Ville wassustained into the third quarter,” says Greg Hyland, Head of Capital Markets at JLL Singapore.
Total sales for the first nine months of 2016 reached S$15.41 billion, up 6.3 percent from the same period a year ago.
“Sales tally aside, the triggering of the Central Boulevard Government Land Sales (GLS) White site, the sheer number of bids received, as well as the neck-to-neck
bids submitted for recent GLS residential sites further attests to the upbeat investor sentiment,” says Tay Huey Ying, Head of Research for JLL Singapore.
“The Anchorvale Lane Executive Condominium GLS site received 16 bids while the Fernvale Road non-landed GLS site (both in northeast Singapore) received 14 bids when their tenders closed in August and September, respectively. In what is likely the most intense competition ever seen for a GLS site, the top three bids for the Fernvale Road land parcel were less than 0.1 percent apart,” she adds.
On a quarter-on-quarter basis, however, total investment sales value in the third quarter was 41.2 percent lower than volume registered in preceding three months. Second quarter sales received a huge lift from the S$3.4 billion sale of Asia Square Tower 1. Excluding this deal, third-quarter sales volume was just 3.8 percent higher than the second quarter.
The largest deal sealed in the third quarter was the S$1.78 billion acquisition of the office and business park components of Mapletree Business City (Phase 1) by Mapletree Commercial Trust. This is also the second largest property deal in Singapore this year after Asia Square Tower 1.
“This quarter-on-quarter fall in sales is expected as sizeable assets such as that of Asia Square Tower are limited in Singapore. The few that are available are tightly
held by their owners,” says Hyland.
Brisk bungalow sales
Singapore’s residential sector dominates investment sales in the third quarter as it had opened up a lot of investment opportunities. The residential sector accumulated some S$2.07 billion worth of sales in the third quarter. This accounted for a majority 45 percent of all of the quarter’s total investment sales value, placing the residential sector at the top of Singapore’s third-quarter investment quarterly sales chart.
Residential investment sales were dominated by landed home purchases (32 percent) and developers’ landbanking activities (31 percent). A substantial 36 percent of landed home sales came from the Good Class Bungalow (GCB) segment as high net-worth individuals capitalised on the current soft GCB pricing environment and picked up a total of S$242 million worth of GCBs in the third quarter 2016.
This is a whopping 2.7 times the SG$90 million transacted three months ago for GCBs. In fact, including the Nassim Road land parcels acquired by OUE Limited for S$56.6 million, the total sales value of GCBs that changed hands in the third quarter would rise to S$298 million.
In the development land segment, land-hungry developers snapped up some S$649 million worth of development land. Although this is 50 percent below the S$1.3 billion amassed in the preceding quarter, it is 28 percent higher than the S$508 million accumulated a year ago.
“Developers are seeing a gradual depletion of their land stock given the recent pick up in home sales. They are thus actively seeking to replenish their land bank. The scaling back of land supply by the Government for residential development had also led to developers turning to the private sector for opportunities. This has lent support to the private sector land sales market, including the collective sales market,” says Karamjit Singh, Head of Residential at JLL Singapore explained.
The second largest contributor to investment sales in the third quarter is the mixed-development sector. Made up solely of the Mapletree Business City (Phase 1) deal, the sector contributed some 38 percent to total investment sales. The retail, office and industrial sectors contributed 9 percent, 4 percent and 2 percent of third quarter 2016 investment sales, respectively.
“Although sales of office buildings dipped in the third, this by no means signify the lack of or waning investor interest. On the contrary, investors continue to eye Singapore’s office properties, particularly those located in the CBD,” says Hyland.
While 2016 started on a low note, it is expected to end on a high, according to JLL.
“The final lap of 2016 can expect to see the tender closing of the Central Boulevard GLS white site which we foresee to attract bids in excess of S$2 billion,” says Tay.
“Given that the sales tally to-date already amounted to some S$15.41 billion, barring unforeseen circumstances, there is a high likelihood that full-year property investment sales value could stage a rebound and hit the highest in three years, surpassing 2014 and 2015’s S$20.62 billion and S$20.35 billion, respectively,” Tay concluded.
Head of Singapore Capital Markets, JLL