Singapore Investment Deals Down 61% From Year Ago as Buyers Turn Cautious

Investment transactions in Singapore’s real estate market fell 61 percent in the first quarter compared with a year ago, falling to just S$4.2 billion (now $3.2 billion) in the three-month period, according to a report by Knight Frank.

The first-quarter total also marked a slowdown from the S$4.7 billion in deals recorded in the last three months of 2022, the property consultancy said in its Singapore Investment Market Update. The residential segment led with S$1.6 billion in deals during the first quarter, driven by three collective sales amounting to S$583.8 million.

Knight Frank said Singapore continues to appeal as a haven despite the wait-and-see posture of investors, owing to the city-state’s safe and stable political and economic environment amid escalating global uncertainty.

“Although rising interest rates and economic disruptions have resulted in a more cautious market, high-net-worth buyers are purchasing properties for capital preservation and long-term appreciation, as well as income generation,” said Daniel Ding, head of the land and building division of Knight Frank’s Singapore capital markets team.

Collective Security

The first quarter’s trio of en bloc residential sales kicked off with Wing Tai Holdings’ S$76.3 million acquisition of Holland Tower in the posh Holland Village area. The developer’s winning bid marked the first successful residential collective sale in the Core Central Region since the imposition of property cooling measures in December 2021, Knight Frank said.

The period’s other collective sales included Bagnall Court on the Upper East Coast, picked up by a consortium led by Roxy-Pacific Holdings at a reduced price of S$115.3 million, and the Meyer Park condo complex on the East Coast, acquired by a UOL-Singland joint venture for S$392.2 million in Singapore’s biggest residential deal in the year to date.

The en bloc environment still remains challenging, with the current collective sales cycle of 2021-23 showing a success rate of 33 percent versus 63 percent during the cycle of 2017-18.

“Even if owners achieve an 80 percent agreement to sell collectively, this does not guarantee a successful sale,” said Chia Mein Mein, head of the land and collective sale division of Knight Frank’s Singapore capital markets team. “Ultimately, the key for the collective sales mechanism to work in the current cycle lies with owners adopting reasonable expectations on price in order to pique the interest of developers, and for developers to appreciate that replacement costs for owners have increased substantially.”

Frasers Far Out Ahead

The first quarter’s single biggest transaction was the acquisition of a 50 percent stake in the NEX shopping centre in suburban Serangoon district at a value of just over S$1 billion by a joint venture of Frasers Centrepoint Trust and Frasers Property. The deal involved Frasers paying S$652.5 million in cash for the stake while also taking responsibility for debt associated with the project.

The distant runner-up was Viva Land’s sale of 39 Robinson Road to China-based Yangzijiang Shipbuilding for S$399 million.

Rounding out the top five behind Meyer Park were a pair of industrial deals executed by M&G Real Estate: the purchases of 239/241 Alexandra Road, which serves as Cycle and Carriage’s regional headquarters, for S$142 million and the Mercedes-Benz Center, a few blocks away at 301 Alexandra Road, for S$131 million. Both were acquired from a unit of Hong Kong-based conglomerate Jardine Matheson.

The overall momentum of investment deals slowed in the first quarter of 2023, registering the lowest quarterly total since the second quarter of 2020 — when Singapore imposed the circuit-breaker in the early days of the COVID-19 pandemic.

“Following the collapse of Silicon Valley Bank and the merger of Credit Suisse and UBS Group that were announced in March 2023, and with interest rates not yet stabilised, the investment market in Singapore will likely remain cautious, monitoring for signs of repricing before investors decide on their next move,” Knight Frank said.