According to Cushman & Wakefield on Monday (13 April), in Q1 of 2020, property investment sales stayed “muted” at S$3.02 billion, as sales declined 37 per cent from the last quarter.
Residential sector primarily makes up the sales volume at S$2.02 billion, which doubled from the volume of the previous quarter. The doubling was caused mainly by the transfers of many residential government land sales sites in the quarter.
Next, the industrial sector, which valued at S$606.8 million, also dropped 22 per cent quarter-on-quarter. Following this is the commercial sector, which declined by 81 per cent to S$183.4 million, compared to the previous quarter.
The gloomy market sentiment caused by the COVID-19 pandemic and the rapid sell-off in global stock markets led to the absence of big-ticket sales in the previous quarter. This, in turn muted investment activity.
Christine Li, who is Cushman & Wakefield Head of Research for Singapore and Southeast Asia, reasoned that “Sellers were unwilling to lower prices significantly, hoping that the impact on the economy would be temporary and that market confidence would recover rapidly after the pandemic was contained.”
However, buyers could be waiting for their preferred prices in the wake of a looming global recession.
Even so, several strata deals of “palatable quantum” did take place. For instance, the S$49.8 million acquisition on 11th floor of Samsung Hub fuelled per square floor (psf) price from S$3,500 psf to S$3,800 psf, making it the record for a 999-year leasehold property in the Singapore.
The Hong Realty’s S$37.1 million divestment of the 10th floor in Suntec Tower is another notable strata deal. The deal reflected a 26 per cent increase from the purchase price of S$29.5 million in 2018, with psf price now sitting at S$2,580.
During the quarter, another active player in investment sales is Ascendas Reit with its S$102.9 million acquisition of a 25 per cent stake in Galaxis. Both Wisma Gulab and 25 Changi South Street were sold by Ascendas Reit to Heap Seng Group for S$88 million and Hao Mart for S$20.3 million each respectively.
Due to the measures imposed by the government on non-essential services from April to May, investment activities in Q2 will dampen, making it more likely that the muted outlook of investment to persist, according to Cushman & Wakefield.
Furthermore, 2020 investment volume will possibly decline to between S$10 billion and S$15 billion as buyers hold off on buying, in the midst of an imminent global recession.
Nonetheless, investment activity next year could quickly return once invest sentiment perks up due to lower interest rates.
Cushman & Wakefield Executive Director and Head of Capital Markets Singapore, Shaun Poh stated that: “We are probably going to see more bite-sized investment deals in the second quarter and into the second half of 2020.”
Mr Poh believed that fundamentally, there is still demand, especially for logistics assets, office and hotel.
There are no distressed assets yet, courtesy of the government’s stimulus packages to assist the hospitality and retail-related sectors alongside the sound financial standing of most asset holders, Cushman & Wakefield stated.
He opined that “Launch activity might resume after the ‘circuit-breaker’ measures are lifted as investors begin to have a better grasp of the market situation and are in a better position to calculate their sums.”
Investment sale transactions are defined by Cushman & Wakefield as deals that include all private property sales and awarded state land tenders whose transaction value totals S$10 million and above.