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Property investment sales in Q3 down compared to Q2

Property investment sales in Q3 down compared to Q2.

Big-ticket property transactions, or what are termed investment sales of real estate, fell in the third quarter of this year from the high base in the preceding quarter (which was bolstered by the S$3.4 billion sale of Asia Square Tower 1).

That said, property consultants are looking beyond the quarter-on-quarter drop and highlighting a generally rosy forecast for the full year.

One of them estimates the value of investment sales in Q3 2016 at S$4.6 billion - down 36.8 per cent from S$7.27 billion in Q2 2016. It generally uses S$10 million as the minimum transaction size for its definition of investment sales, although it includes Government Land Sales (GLS) and private-sector collective sales that are below this value.

The property consulting group's tally for the first nine months is S$14.36 billion, surpassing the S$12.45 billion in the same period a year ago. The whole-year number could undoubtedly reach the high end of our forecast of S$17-19 billion, the group said. Last year's figure was S$17.2 billion.

Another consultancy, which defines investment sales as private-sector originating deals of at least S$5 million and all GLS transactions, put the Q3 2016 preliminary figure at S$4.61 billion (down from S$7.84 billion in Q2 2016).

The firm explained that the q-o-q fall in sales is expected as sizeable assets such as Asia Square Tower 1 are limited in Singapore. The few that are available are tightly held by their owners.

It added that the final lap of 2016 can expect to see the tender closing of the Central Boulevard GLS white site which we foresee to attract bids in excess of S$2 billion.

Other deals potentially in the pipeline include the sales of 77 Robinson Road and a half-stake in Capital Square. Given that the sales in the first nine months already amounted to some S$15.41 billion, barring unforeseen circumstances, there is a high likelihood that full-year property investment sales value could stage a rebound and hit the highest in three years, surpassing 2014 and 2015's S$20.62 billion and S$20.35 billion, respectively.

The residential sector was a star performer for the third quarter investment sales. It accounted for S$2.06 billion or 44.7 per cent share of the overall market. This is almost double the S$1.09 billion in Q2. Public-sector originating deals of residential property investment sales included the state land sales of a 99-year leasehold private housing site along Fernvale Road (at S$287.1 million) and an executive condo site in Anchorvale Lane (S$240.95 million).

Among private-sector originating deals, Roxy-Pacific inked a conditional agreement to buy the Harbour View Gardens site along Pasir Panjang Road for S$33.25 million. This is the second collective sale so far this year.

Besides developers' land-replenishment exercises, purchases of landed homes also featured prominently during the third quarter. Good Class Bungalows accounted for a substantial 36 per cent of landed home sales. The third quarter's biggest investment sales transaction was Mapletree Commercial Trust's S$1.78 billion acquisition of Mapletree Business City (Phase 1) comprising an office tower and three business park blocks.

Other big deals include Wing Tai's divestment of its half-share in the joint-venture company that developed the 156-unit freehold condo Nouvel 18 - to its partner City Developments for S$410.96 million.

In Little India, The Verge mall is finally being sold - for S$273 million, to a joint-venture beween Singapore-listed Lum Chang Holdings and a closed-end fund of LaSalle Investment Management Asia. Despite a slowdown in sales of office buildings in the third quarter, this by no means signifies the lack of or waning investor interest.

On the contrary, investors continue to eye Singapore office properties, particularly in the Central Business District. Of all the segments of Singapore's property market, high-end residential probably offers the best value.

It has posted the biggest price decline - about 20 to 25 per cent from the peak in 2007. That said, investors are still cautious given the slow economic growth and the weak rental market.

Adapted from: The Business Times, 4 October 2016