The tally of big-ticket property transactions of S$10 million and above across all sectors tumbled 42 per cent to S$6.5 billion in the third quarter from S$11.2 billion in Q2 – after the July property curbs put the brakes on residential collective sales.
However, a pick-up in activity for the commercial and industrial property segments helped to mitigate the drop in the residential sector.
The preliminary Q3 investment sales tally, based on information as at Oct 3, also reflects a 39.5 per cent decline from the S$10.7 billion in Q3 last year.
Investment sales for the residential sector totalled S$2.0 billion during July to September this year – down 72 per cent from the nearly S$7.3 billion in Q2 2018 and also 52 per cent below the S$4.3 billion in Q3 last year.
The declines came after the latest property curbs practically halted the residential collective sales market.
The value of residential collective sales plunged to S$370 million in the third quarter of this year – about a tenth of the S$3.87 billion in the preceding quarter. The number for Q3 last year was S$2.1 billion.
The most notable residential collective sale in Q3 2018 was that of Casa Meyfort in Meyer Road; the S$319.9 million deal was inked at the eleventh hour before the new stamp duty rates kicked in on July 6.
Developers have to pay the new 5 per cent non-remittable additional buyer’s stamp duty (ABSD) upfront when acquiring housing development sites.
Moreover, the remissible ABSD of 15 per cent has been hiked to 25 per cent; among the conditions developers have to fulfil in seeking upfront remission is an undertaking to complete the project and sell all units within five years of the site purchase.
The measures changed three things in relation to developers’ appetite for en blocs.
Their purchase cost went up by 5 per cent. Market sentiments and demand for homes have dropped. And lastly, the risks associated with large en blocs in particular have gone up with steeper penalties for failure to sell out the new project in five years.
On a more positive note, the value of investment sales for commercial property (office and retail sectors) rose 54 per cent quarter on quarter to S$2.1 billion in Q3. The biggest transaction announced was OUE Commercial Reit’s S$908 million acquisition of the office components of OUE Downtown in Shenton Way from sponsor OUE.
The office market remains the most actively traded segment – on the back of a rental recovery amid tightening supply of new CBD office completions.
Another bright spot in Q3 was industrial property, which posted a 73 per cent q-o-q rise in investment sales to S$1.2 billion.
Real estate investment trusts (Reits) were particularly active buyers in Q3, accounting for the biggest deals in the office, retail and industrial sectors.
Total investment sales for the first nine months of 2018 stand at S$27.7 billion – ahead of the S$25.9 billion in the year-ago period.
The momentum in the office segment is expected to continue in the fourth quarter – with ARA reported to be in advanced negotiations to buy Manulife Centre at 51 Bras Basah Road. A deal for Robinson 77 may also be stitched – riding on the current buoyant office market.
Investors, both local and overseas, are still keen on the Singapore office market; the issue is a lack of buildings available.
In fact, more of the traditional Singapore developers who had previously been wanting to buy more residential land, are now considering purchasing recurring income-producing office assets here.
The positive sentiments in the office and industrial sectors are expected to continue in the near-term with liquidity aplenty and developers diversifying portfolios to mitigate the risks.
On the residential collective sales front, developers – especially those with no or low inventory – will continue to bid, albeit cautiously. There could be a handful of deals – mainly small and medium-sized – trickling back in the first half of next year.
There has also been a pick-up in investor interest in the hospitality sector, due to improving tourist arrivals and demand for hotel rooms.
Full-year 2018 investment sales volume is predicted to be in the range of S$33-35 billion – close to the nearly S$37 billion last year.
Adapted from: The Business Times, 5 October 2018