SINGAPORE (EDGEPROP) - Real estate investment sales fell 50.7% q-o-q to $3.29 billion in 2Q2023, according to research by Savills Singapore. The drop was driven by declines in both the residential and commercial segments, with the residential sector seeing a 9.8% q-o-q fall in investment sales to $1.56 billion, while commercial investment sales plunged 77.9% q-o-q to $940.7 million.

In contrast, the industrial segment saw growth in investment sales last quarter, rising 14.6% q-o-q to reach $791.2 million. Noteworthy deals include the divestment of six non-core industrial assets in Singapore by ESR-LOGOS REIT for $327.3 million.

For the residential segment, Savills attributes the fall in transaction value to several factors, including the changing preferences of ultra-high net worth (UHNWI) and family office buyers, as well as developers exercising prudence in acquiring lands from both the Government Land Sales (GLS) Programme and the private collective sales market.

Nonetheless, residential transactions still made up the bulk of investment deals in 2Q2023, representing 48.3% of the investment volume.

For the commercial segment, Savills highlights that sales of shophouses saw an increase in 2Q2023, rising 43.1% q-o-q to reach $390.3 million worth of sales. A total of 16 shophouse deals were recorded last quarter, up from 10 deals in 1Q2023.

The firm adds that sales of strata offices remained resilient, with $298.5 million in transactions recorded last quarter across eight deals. This includes the combined sale of levels 10 and 14 in Solitaire on Cecil to entities affiliated with the Thye Hua Kwan (THK) Group of Charities. The deal was priced at $103.2 million or $4,140 psf based on the strata area.

Shophouses and strata office deals in 2Q2023 were predominantly driven by UHNWI and family office buyers. Savills adds that the recent hike in additional buyer’s stamp duty (ABSD) imposed on foreigners to 60% may have diverted some investor interest from residential to commercial properties. (Find Singapore commercial properties with our commercial directory)

Alan Cheong, executive director of Savills Research and Consultancy, believes that conservation shophouses and strata offices could continue to register healthy transaction volume on the back of demand from UHNWIs and family offices, though he notes that such buyers tend to avoid lodging caveats, making it difficult to get a good grip on the size of the market.

Marcus Loo, CEO of Savills Singapore notes that while rising interest rates have impacted the investment sales market for big-ticket items, activity remains healthy for smaller-sized deals. “The current high interest rate environment continues to discourage institutional demand and investors have naturally turned more cautious when evaluating larger sites. Until there is clarity that interest rates have peaked, we expect investment sales to be confined mostly to shophouses, strata-titled offices and government land sales,” he remarks.

Savills is maintaining its full-year forecast for Singapore real estate investment sales volume at around $24.7 billion.