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Slow start to 2023 for real estate investment sales amid market uncertainties: Knight Frank

By Jennifer Venkat

/ EdgeProp Singapore |

April 5, 2023 7:01 PM SGT

View of the CBD in Singapore (Photo: Albert Chua/EdgeProp Singapore)

SINGAPORE (EDGEPROP) - Global real estate firm Knight Frank reports that Singapore real estate investments got off to a “slow start” in 2023, with only $4.2 billion of investment sales recorded in 1Q2023. This was a marked decrease of 61% y-o-y compared to 1Q2022’s $10.8 billion.

It is also the lowest quarterly total since 2Q2020, when the government imposed the “circuit breaker” measures at the height of the pandemic, notes Daniel Ding, head of capital markets (land & building, international real estate) at Knight Frank Singapore.

Residential deals amounted to $1.6 billion during the first quarter of 2023, including the collective sales for Meyer Park, Bagnall Court and Holland Tower that totalled some $583.8 million.

The sale of Holland Tower is the first successful residential en bloc transaction in the Core Central Region (CCR) since property cooling measures were imposed in December 2021. This suggests “a nascent return” of interest for prime location development sites upon the reopening of China, observes Chia Mein Mein, head of capital markets (land & collective sale) at Knight Frank Singapore.

knight frank graph investment sales - EDGEPROP SINGAPORE

Source: Knight Frank

However, she concedes that the en bloc environment remains challenging, given the gulf in price expectations between sellers and developers. From 2021 until now, Chia notes that collective sales have had a success rate of around 33%. In comparison, en bloc sales had a success rate of 63% during the period of 2017 to 2018. (See potential condos with en bloc calculator)

“Even if owners achieve an 80% agreement to sell collectively, this does not guarantee a successful sale. Ultimately, the key for the collective sales mechanism to work in the current cycle lies with owners adopting reasonable expectations on price in order to pique the interest of developers, and for developers to appreciate that replacement costs for owners have increased substantially,” says Chia.

While the commercial market was mostly quiet in 1Q2023, the sale of 39 Robinson Road to Yangzijiang Shipbuilding for $399 million last week pushed total sales in the sector to $1.9 billion. Another noteworthy transaction was Frasers Centrepoint Trust and Frasers Property’s acquisition of a 50% stake in Nex for $652.5 million. (Find Singapore commercial properties with our commercial directory)

Meanwhile, the industrial sector saw an increase in investment sales in 1Q2023, rising 62.8% q-o-q to $681.1 million. Knight Frank attributes this to the market shifting focus while waiting on the potential repricing of assets in the commercial sector. Notable industrial deals last quarter include the acquisition of four Cycle & Carriage properties by M&G Real Estate at approximately $333 million, as well as the disposal of 12 and 31 Tannery Lane by Ho Bee Land for $115 million.

In terms of market outlook, Knight Frank predicts the pace of investment activity in Singapore “to get worse before it gets better” amid macroeconomic uncertainties and volatility in the global banking sector. “Financing has become more challenging for buyers, investors, developers and banks, and will remain so until there are visible signs of the global economy and financial conditions stabilising,” the consultancy states. Investors are anticipated to remain cautious as they monitor for signs of repricing before deciding on their next move.

To that end, Knight Frank has cut its projections for full-year investment sales from a range between $22 billion and $25 billion to a range between $20 billion and $22 billion

Check out the latest listings near Holland Tower

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