_Singapore: Resurgence seen in 2017 strata commercial resale market amidst the collective sale fever
Strata-Titled Offices:
Total number of caveats posted 331 records in 2017, a 23.5% increase from 268 caveats in 2016. The resale market also saw transactions double in the second half of 2017. Strata office stock is projected to remain relatively unchanged with no new office project launch envisaged in the short term. With the support of rising office rentals especially in the Central Area, we could see higher enquiries for strata office purchases from interested buyers who desire to own office spaces instead of rent.
Exhibit 1: Caveats Lodged and Average Prices of Leasehold Strata Office Units
Source: REALIS (as at 1st February 2018), Knight Frank Research
*Leasehold refers to properties with 99-year lease tenure.
**Subsale transactions are not shown.
Strata-Titled Retail:
While total number of caveats saw a 14.1% year-on-year (y-o-y) decline in 2017, the number of resale caveats registered an increase of 29.0% from 2016. Total transaction value increased by 57.2% in H2 2017 ($277.2 million) from ($176.4 million) in H1 2017. The significant jump in transaction value was largely led by an increase in the value of resale transactions. Small units of lower price quantum at $1.5 million and below are expected to see sustained interest from individual investors.
Exhibit 2: Retail Transactions by price quantum, by proportion (%)
Source: REALIS (as at 1st February 2018), Knight Frank Research
Shophouses:
Both the number of caveats lodged and total transaction value saw a rise in 2017 due to returning interest from foreign buyers. District 8 (Little India, Rochor) was the most sought-after district for shophouses in 2017, making up 23.7% of the total transactions. Companies continued to dominate as top buyers of shophouses, representing 62.8% of the buyers in 2017. Singaporeans made up 29.7% of the buyers, with Foreigners making up the remaining 7.6% of the buyers.
Exhibit 3: Shophouse Transactions by buyer profile, by proportion (%)
Source: REALIS (as at 1st February 2018), Knight Frank Research
Going into 2018
With the elevated office capital values, advent of the gig economy and the burgeoning availability of co-working spaces could moderate the appeal of office space ownership. strata office price is likely to register a marginal upside of 2.0% to 3.0% by end 2018. The strata retail segment continues to face weaker occupancy, as the retail sector grapples with ongoing challenges such as threats from e-commerce, influx of new retail space and manpower challenges, and is likely to persist in 2018. Total transaction volume for H1 2018 is projected to range from 80 units to 100 units. The limited stock and lack of well-located shophouses will continue to drive its buying interests in Singapore into 2018. Shophouses is a unique asset property class that will likely remain highly sought-after by high net-worth individuals, foreign investors and boutique property funds.
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