_Singapore Real Estate Investment Sales Market – Trends and Prospects
Brisk inbound investments in 2021
COVID-19 is an unprecedented ‘black swan’ pandemic and has upended economic activities and impeded people mobility throughout the world. The real estate investment sales market in Singapore was similarly impacted in 2020; but not for long as we saw a return of positivity and transactional activity in the following year. A total of S$26.1 billion1 of big-ticket investment sales was transacted in 2021. Singapore’s enduring safe haven status still holds with globally mobile private capital eyeing stability, compared to other countries having shown mixed results to contain the spread of the virus. As institutional investors redeploy capital as part of their asset allocation strategies, the hunt for core income-producing assets and development opportunities in Singapore remained robust.
1. Source: Knight Frank Research
The residential sector constitutes 40% of 2021 investment sales with a total estimated value of S$10.5 billion. Five sizeable residential land transactions of S$300 million and above were contributed by the Government Land Sales Programme, while there were three collective sale deals with pure residential or mixed-use development types exceeding S$500 million apiece. Commercial investment sales totalled S$6.4 billion with One George Street as the top transaction clocked last year at S$1.28 billion.
Singapore’s outbound capital flows
Despite the border controls to contain Covid-19, Singapore-based entities ratcheted up their externally oriented diversification strategies and invested a total of US$42.9 billion2 of property assets outside of Singapore in 2021. This is 133% higher from the previous year, with 35% in Asia-Pacific, 26% in Europe and 38% in the US. Industrial property was the most popular asset type garnering the highest proportion of outbound investment sales in these three regions, with investors having channelled their funds to purchase mainly at the portfolio level.
2. Source: Real Capital Analytics, Knight Frank Asia-Pacific Research
Key drivers in real estate asset selection
As we move into the third year of the pandemic, year 2022 could well be a year of transition with recovery in commercial property asset investments gathering pace. The prospects of office property are likely to be strengthened by the gradual return of the workforce to work in office, hybrid workspace solutions to enable use of office space and the transforming purpose of the office to bring vitality, connectedness and a sense of community among colleagues. The ‘physical retail pivot’ amid the e-commerce proliferation is poised to quicken as landlords seek to reposition their malls to bring relevance to brick-and-mortar space. Well-located and high-quality office buildings and retail spaces are prime targets, and coupled with the rising trend of sustainable investing, prime commercial properties that are also ‘greened’ with environmental sustainability certifications are poised to be sought after by institutional investors, including well-funded family offices. Conversely, land sales for residential developments are envisaged to be moderated due to the December 2021 cooling measures; albeit likely for the short term as unsold private residential inventory has fallen below the 20,000-unit mark as of the second half of 2021. Under the scenario of a steady pace of new sales going forward notwithstanding the higher Additional Buyer Stamp Duties, the ‘itch’ to capture future residential demand through land site investments is envisaged to return as early as by the second quarter this year for developers.
For more information on the presentation, contact:
Alice Tan
Head of Consultancy, Knight Frank Singapore
alice.tan@sg.knightfrank.com
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