In 3Q2023, real estate investments increased 75% q-o-q, helped by GLS tenders

Singapore property investment witnessed a rise in the 3Q2023, with the growth rate in the amount of 74.8% q-o-q to clock in at $6.9 billion, as per the report from October published by Knight Frank. This is also an 19.4% improvement y-o-y. This is the first quarter of improvement after five quarters of decline since 1Q2022.

A total of $4.1 billion (over 60%) of the traded value was derived out of Government Land Sale (GLS) sites which were granted during the past quarter, which included sites located at Tampines Avenue 11, Marina Gardens Lane and Jalan Tembusu.

Hillock Green main contractor Forsea Residence Pte. Ltd, Soilbuild Group Holdings Ltd and UED Alpha Pte. Ltd, the consortium were awarded this site at Lentor Central, Hillock Green.

Residential deals comprised $3.3 billion in investment value during 3Q2023 mostly due to the awarding to five homeowners GLS tenders. This is the increase of 93.5% q-o-q, but an increase of 12% over the same period. In the same way private residential properties saw a decline in sales activity. This Knight Frank attributes to the rise in the Additional Buyer’s Stamp Duty (ABSD) rates that came into effective in the month of April.

Commercial property deals grew in 3Q2023, increasing 27.4% q-o-q and 23.3% in a year-over-year period to reach $1.5 billion. The increase in value comes after selling of Changi City Point by Frasers Centrepoint Trust for $338 million in August and the mall was reported to have been purchased through the Zhao family from mainland China. In addition, the combined selling of Far East Shopping Centre for $908 million to Glory Property Developments last month added to the value of commercial investment as did the sale of the mixed-use residential and commercial GLS site in Tampines Avenue 11 for $1.2 billion.

However the value of industrial transactions plummeted at $252.2 million in the 3Q2023 the figure that Knight Frank notes is the lowest amount for a quarter from the previous quarter, which was $174million reported in 2Q2020, during the period of circuit breakers.

The collective sales market faced challenges in the face of the uncertain outlook for the market. “The growing gap in expectations between developers and owners developers remains the most significant problem, which was further exacerbated by the rising prices, interest rates and the astronomical rises of ABSD prices, and all within an environment of economic uncertainty,” Knight Frank states in its report. The report was released in July. Wing Tai announced its abandonment of the deal to sell Holland Tower, following the sale being valued with a price of $76.3 millions in the month of March of this year.

Chia Mein Mein, head of capital markets (land and collective sale) at Knight Frank Singapore, adds that rising costs have led developers to consider GLS sites. Yet, despite the fact that there are the fact that there are lots of plots in prime locations she says that developers are now less keen in recent tender exercises, as there were fewer applicants and more cautious bids made during recent GLS tender exercise.

Looking in the future, Knight Frank expects slower investment activity over the course of the year, based on the general mood and difficulties within the property market. “In the next few months the capital market space will be defined by investors who are on the lookout for assets that are primarily focused on enhancing the value of properties to increase the return. This is in order to justify the more expensive borrowing costs associated in the purchase of this property,” the report states.

The company has reduced its projections for the year-end of 2009 for investment sales, reducing projections from $20 billion to $22 billion, and reducing them to $18 billion and $20 billion.

“Due in the present rate of interest that is high buyers are forced to increase their risk-to-return curve by boosting the value of their investment portfolios to get more sustainable returns. this is a case of acquisitions for enhancement or redevelopment” adds Daniel Ding, head of capital markets (land and construction international real property) in Knight Frank Singapore.