Singapore Property Investment Research Q4 2021

Strong Investment Volume In A Year of Recovery

Luxury Condo Picture

In a year where a raft of measures were unleashed to contain the rate of infections as well as activity in the red-hot residential market, some S$7.3 billion of investment deals were recorded in Q4 2021, bringing the total for the whole year to S$25.8 billion. This reflected a growth of 5.3% from the total amount of S$24.5 billion last year.

The investment volume in Q4 was primarily led by residential sales, amounting to about S$2.8 billion, as demand remained healthy for prime residential homes. This included the sale of a penthouse unit at Les Maisons Nassim for S$75 million (S$6,201 psf) in late October, as well as a Good Class Bungalow (GCB) within the Kilburn Estate GCB Area (GCBA) where it was reported that crypto billionaire Zhu Su was in the process of acquiring the detached house at S$48.8 million (S$1,532 psf on land).

The collective sale market also started to gain momentum in Q4 2021, comprising five en bloc deals that were sealed from October to December. This included the sale of Peace Centre and Peace Mansion topping the list at S$650 million, acquired by a joint venture (JV) of CEL Development, Sing-Haiyi Crystal and Ultra Infinity. Watten Estate Condominium was sold for S$550.8 million to a UOL-SingLand JV. Despite the encouraging en bloc activity with homeowners of ageing projects growing increasingly hopeful, the imposition of cooling measures on 15 December 2021 has given pause to the market. In addition to the risks of escalating construction costs, developers also have to contend with pressure stemming from the increased Additional Buyers’ Stamp Duty (ABSD) rate for entities from 25% to 35%.

Nevertheless, the lack of a substantial increase in the potential number of residential units in the H1 2022 Government Land Sales (GLS) lists may prompt land-starved developers to continue to consider acquiring private parcels going the collective sales route. Even so, developers are likely to adopt a more cautious approach, preferring modestly-sized sites with a potential of about 200 units or less, in order to mitigate the risk of not qualifying for the 35% ABSD remission within five years.

The commercial market segment stayed relatively buoyant in 2021, as the upcoming supply of such space remains limited. A key commercial deal in Q4 included the divestment of CapitaLand Integrated Commercial Trust (CICT) and FWD Group’s JV stakes in One George Street for a total consideration of S$1.3 billion (S$2,875 psf) to a JV between Nuveen Real Estate and JP Morgan Asset Management. Strata offices together with shophouses continued to retain its lustre, with these assets regarded as safe havens for investment. With cooling measures casting a pall of uncertainty in the residential market, there might be some spill-over investor demand into the commercial arena that is exempted from ABSD. This could possibly translate into interest in the CBD Incentive Scheme sometime in 2022 where older commercial buildings are acquired in anticipation of a possible long-term global rebound from 2023 when air travel worldwide is expected to return to pre-pandemic levels.

Riding on the stable growth momentum in 2021, the sale of 71 Tagore Lane and 351 On Braddell in Q4 for S$272.8 million and S$121 million respectively formed the bulk of the total investment value in the industrial sector, amounting to some S$752.2 million.

Outbound Investment from Singapore

According to data from Real Capital Analytics (RCA), outbound investment deals from Singapore investors totalled S$20.2 billion in Q4 2021, marking an expansion of 231.7% on a y-o-y basis. The growth was primarily driven by the acquisition of logistics and office properties overseas. Some of Singapore’s key real estate players ventured into the Australia market to geographically diversify their asset portfolio. Notable deals that made the headlines included CICT’s purchase of two Grade A office buildings in Sydney for about S$330.7 million, as well as Keppel REIT’s acquisition of a similar grade freehold building in the same city for some S$322.2 million.


Market Outlook

Towards the end of 2021, more mixed-use and commercial properties the likes of Orchard Hills as well as Lazada One have been put up for sale. As institutional investors search for core and core-plus assets to reinforce their portfolios, more commercial properties are expected to be acquired in the year ahead. On the luxury residential market front, some investors may turn conservative, adopting a wait-and-see approach in 2022 given the higher ABSD rates for foreign buyers. Nonetheless, should borders across the globe reopen, demand for prime non-landed homes in Singapore should increase with a larger pool of globally mobile private capital eyeing Singapore’s stability.

With the recently announced cooling measures shaking up the en bloc market, homeowners looking to collectively sell their homes will now have to recalibrate their price expectations to align with the increased risks developers face if a sale is to be successful. In similar vein, demand for luxury private homes might also turn conservative with buyers expecting price increases to slow. Thus, the investment market in the year ahead is projected to post a more moderate performance, with total transaction value for the whole of 2022 forecasted to hover within the range of about S$20 billion to S$22 billion.

Share the Knowledge!

Leave a Reply

Your email address will not be published. Required fields are marked *