Singapore Investment Research Report Quarter 1 2019

Singapore Investment Research Report Quarter 1 2019

April 12, 2019

Investment Sales Improves in Q1 2019

Total Singapore investment sales in Q1 2019 rose by nearly 34% quarter-on- quarter (q-o-q) to $6.3 billion

Despite the slowdown in en bloc market, total investment sales went up by nearly 34% to S$6.3 billion in Q1 2019 from S$4.7 billion in Q4 2018. The increase in sales was partly attributed to the closing of State tenders in Q1, with public sales surging to S$ 3.1 billion in Q1 2019 from S$110 million in Q4 2018.

Although the outlook for private residential market was more subdued after the announcement of the eighth round of cooling measures in July 2018, developers were still actively seeking sites that have great connectivity and potential for future growth. For example, the Government Land Sale (GLS) site at Middle Road drew 10 bids from developers.

The sale of the Pasir Ris white site to the joint venture between Allgreen Properties and Kerry Properties for nearly S$ 700 million (S$684.50 per sq ft per plot ratio) was the largest deal sold through State tender.

Separately, commercial property sales came down from S$3.0 billion Q4 2018 to S$ 1.9 billion in Q1 2019. Notable deals in 2018 included the sale of the GLS hotel site along Club Street (S$ 562.2 million), Liang Court (S$400 million), and Rivervale Mall (S$230 million).

The interest in hotels and serviced apartments was keen because of the more optimistic outlook of the hospitality sector. A case in point was the State tender for the hotel site along Club Street that attracted eight bids.

While there was no major office building sales in Q1 2019, the strata office market remained active. ARA Asset Management sold 6 levels at Suntec City for S$ 160 million and the Oversea-Chinese Banking Corporation sold three levels of The Octagon along Cecil Street for S$45.5 million.

The strong performance of office rental market also contributed to the growing interest in commercial properties. For example, Oxley Holdings reportedly received a S$1.025 billion offer for Chevron House after owning for a year when they acquired the building for S$ 660 million.

Investors continued to seek opportunities in overseas market in Q1 2019, albeit at a slower pace. Outbound investment from Singapore dropped to about S$12.4 billion in Q1 2019 from S$20.7 billion Q4 2018.

Notable overseas investments included ARA Asset Management’s acquisition of Seoul Square in South Korea, CapitaLand’s acquisition of 70% of Pufa Tower in Shanghai, China in a 50:50 joint venture, and Keppel Corporation purchase of Shanghai Yi Fang Tower Complex at Shanghai’s Hongkou District.

Total Investment Sales by Public and Private Sales | Singapore Luxury Condominium

Building
Site / DevelopmentPrice (S$ mil)Area (sq ft)Estimated unit price (S$ psf)Buyer
White Site at Pasir Ris Central700.01,002,700 (gfa)684.5 (ppr)Allgreen Properties & KerrProperties
Hotel Site at Club Street562.2261,700 (gfa)2,148.5 (ppr)Worldwide Hotels Group
Land Parcel at Middle Road492.0337,400 (gfa)1,458.3 (ppr)Wingtai Group
EC Site at Tampines Avenue 10434.5751,500 (gfa)578.1 (ppr)Hoi Hup & Sunway Developments
Liang Court400.0447,400 (nla)894 (per nla)
Notable Transactions in Singapore in Q1 2019

Singapore Government Bond Rate

Market Outlook

The 10-year Singapore Government bond yields fluctuated between 2.0% to 2.5% between Q1 2018 and Q1 2019, and there were signs that the bond yields would be under pressure to decline. With the United States Federal Reserve announcing that they are unlikely to increase interest rates in 2019, we expect the rental and capital return of Singapore real estate to outperform the 10-year Singapore Government Bond rates. Demand for Singapore real estate assets is likely to increase as a result.

The draft Master Plan 2019 and the rolling out of the CBD Incentive Scheme and Strategic Development incentive schemes will offer opportunities for investors and landlords that own aging office or retail buildings to redevelop. The new incentives and draft master plan are likely to trigger investment sales in the commercial market.

We anticipate the cross-border investments from Singapore continue to grow, especially for gateway cities and cities that show upside growth potential.