With interest rates on the rise, trades of income earning real estate assets fell 61 percent in Australia this year and 57 percent in South Korea, with Singapore suffering less of a slowdown with a 29 percent drop, according to MSCI, at the same time that asset values in the city-state have held steady.
Speaking in a panel at the Mingtiandi Singapore Forum on Tuesday, top decision-makers from Oxford Properties, Ivanhoe Cambridge, KIC Singapore and Savills attributed the city-state’s relative resilience to its rising stature among global financial centres, while cautioning that markets may need time to rebound as interest rates remain elevated.
Speaking in the keynote panel of Mingtiandi’s annual Singapore Forum on Tuesday, Alessandro Fiascaris, head of Asia Pacific for Oxford Properties, while acknowledging that the market has slowed from the pace of recent years, noted that the city-state has grown in importance as an investment hub, while demand for assets in the Lion City has been more resilient than in many other major centres.
“If you look globally and throughout Asia, in Singapore, clearly you’ve seen less of a decline (in property transactions) than the rest of the market. Secondly, this is a safe haven and I think there is capital dedicated only to Singapore,” Fiascaris said. “Notwithstanding this very good background, I would say volumes are still down and my guess, values are a little off than what they may have been last year.”
First Pull and Now Push
Ongoing demand for property assets in the Lion City are part of a long-term evolution of Southeast Asia’s wealthiest country, while also benefiting from turmoil in other locations around the region, according to Jeremy Lake, managing director for investment sales and capital markets at Savills.
“Singapore perhaps has had many pull factors for 10, 20, 30 years,” Lake said. But perhaps what has changed a little bit more recently, is some push factors from elsewhere, and that has resulted in more companies choosing to set up here or relocate here or expand here. And I suspect that will continue.”
While market data shows a drop in transactions, Lake said in the session, which was sponsored by Yardi, that he sees properties continuing to change hands, potentially below the radar of many market watchers.
“There have been deals done across the various asset classes, whether it be hotel or industrial, or office or sites or even retail — all have enjoyed some degree of activity,” Lake said. “I think it is a case of buyers with capital, looking for opportunities and where they can match their capital with those opportunities. They are probably willing to commit, (since) real estate’s the long game.”
Waiting for Rates
Sangwook Kang, a senior director with the real estate group at KIC Singapore agreed with many of Lake’s sentiments regarding Singapore’s appeal as a regional hub, but cautioned that the market is likely to remain slow until interest rates start to decline.
He acknowledged that the common market wisdom holds that interest rates are likely to begin falling later next year, which will help revive investors sentiment. However, he predicted that there may be some lag time from the start of rate decline and any upswing in deal activity.
“So pricing is basically not there yet to make investors active again, Kang said. “With various factors moving together, I’m still expecting a difficult year to deploy capital for the coming year. But at the same time, I think it (next year) would be better to deploy than last year as it gets closer now to the peak of interest rates compared to last year.”
George Agethen, who co-heads Asia Pacific for pension fund Ivanhoé Cambridge, shared Fiascaris’ view on Singapore’s growing role as a pan-Asia hub for real estate investment, while pointing to India as a growth market.
With the property investment division of Caisse de dépôt et placement du Québec in February having committed C$2.5 billion (then $1.86 billion) to an office joint venture with Singapore’s Mapletree Investments, Agethen sees the development of both the real estate and the financial markets in India supporting opportunities in the country.
“I just feel it is a growth market and it is an emerging market that is institutionalizing right now. There’s a window for it, there’s an establishing REIT market that seems to be reasonably healthy. And I think the choices to get emerging market exposure are narrow for people like us who have reduced exposure in China,” he told the panel. “Certainly [India is] a market that has bucked the trend.”
Agethen’s counterparts on stage echoed many of his views on India, with Fiascaris joining the Ivanhoe Cambridge boss in selecting India logistics as the most interesting sector to pursue in 2024.
Kang pointed out that KIC plans to open an office in Mumbai next year to establish an on the ground presence in India, and expect the sovereign fund’s presence in the country to gain momentum along with that milestone.