Strong economic fundamentals and the positive long-term outlook in Singapore underpinned property investment activity even in the uncertain global economic environment.
Singapore (PRWEB) March 29, 2008 -- Despite uncertainty over the global economic repercussions of the sub- prime crisis and the slowing US economy, the Singapore property investment sales market remained surprisingly active in the first two and half months of 2008, with a total of $5.91 billion (to- date) of investment sales recorded. Strong economic fundamentals and the positive long- term outlook in Singapore underpinned property investment activity even in the uncertain global economic environment.
CBRE's definition of investment sales includes real estate sales with a value of at least $5 million comprising government and private sales, buildings and land, strata and enbloc. It also includes the change of ownership of real estate via the sale of shares.
The private sector took the lead in investment sales in the first quarter of 2008, accounting for 55 per cent or $3.27 billion (to- date) of the quarter's total investment sales. Public land sales have so far contributed the remaining 45 per cent or $2.64 billion. The most significant public land sale in the first quarter so far was the award of a hospital site at Novena Terrace/Irrawaddy Road to Parkway Holdings for $1.25 billion ($1,600 psf/plot ratio). The winning bid was more than double the next bid submitted by Napier Medical Pte Ltd at $540.88 million ($695 psf/plot ratio). A commercial site comprising 17 conservation shophouses at Jalan Sultan, was awarded to Chiu Teng Estates Pte Ltd for $14.80 million ($974 psf/plot ratio). A total of 20 bids were submitted for this site, indicating investors' strong interest for commercial development sites. Other notable public sector sales in Q1 08 (to- date) includes a residential site at Simei Street 4 which was sold to a joint venture between UOL Group and Khe ng Leong for $236.05 million ($296 psf/plot ratio), an industrial site at Playfair Road which was sold to Trio Link Development Pte Ltd for $33 million ($142 psf/plot ratio) as well as a 15- year leasehold transitional office site at Mountbatten Road which was awarded to Mezzo Properties Pte Ltd for $14.89 million ($69 psf/plot ratio). In addition, the last condominium site at Sentosa Cove was awarded to a joint venture between Ho Bee Group and IOI Properties for $1.10 billion ($1,822 psf/plot ratio).
The office sector performed well during the first three months of 2008, accounting for 34 per cent of total investment sales or $2.01 billion so far. Despite signs of rising caution due to the impact of the US sub- prime mortgage problems, healthy office leasing momentum and Singapore's strong economic fundamentals continued to drive substantial investment activity in the office sector. Foreign investors showed no sign of scaling back office investment activity, as evidenced by some notable office sales during the quarter. This included the sale of Hitachi Tower to a foreign fund for $811 million ($2,901 psf) and Singapore Power Building was sold to Pacific Star Group for $1.01 billion ($1,820 psf). In addition, Auric Pacific Group sold One Phillip Street to New Star International (Singapore) Pte Ltd for $99.02 million ($2,749 psf). Going forward, strong office demand and potential for further rental escalation would lead to more acquisitions of office properties in 2008. The sustained influx of foreign investors should continue to lead to steady activity in the office investment market.
Investment activity in the residential sector slowed considerably in Q1 08, contributing $2.23 billion (to- date) in transacted value (including Good Class Bungalow sales) or 38 per cent of total investment sales. Compared with the heightened investors' interest in en bloc acquisition witnessed in 2007, investors' demand for private residential land continued to be lukewarm in the first quarter of 2008. Developers are no longer as keen to acquire more sites compared to last year as most of them have built a relatively strong inventory of freehold residential sites from the robust collective sales market in 2007. It was observed that developers have already taken the cue to act cautiously. The buying of sites has been so far limited to specific choice sites since the response to recent new launches has been subdued. In addition, the release of more affordable 99-year leasehold residential sites by the Government for sale in the first half of 2008 may sway some buying interest away from prime freehold residential sites in the private sector. The only successful collective sale deal in Q1 08 was Ban Guan Park which was acquired by Link THM Holdings Pte Ltd for $31.10 million ($870 psf/plot ratio). In March, a fund managed by ARA Asset Management purchased 53 units at Grange Infinite for about $400 million ($2,600- $2,700 psf).
Investment in the industrial sector has been largely driven by REIT- related purchases and accounted for 6 per cent of total investment sales or $333.66 million in the first quarter so far. Ascendas REIT (A- REIT) contributed the bulk of industrial investment sales by acquiring four industrial properties for a total of $176.70 million. MapletreeLog also continued to expand its portfolio size and value in the quarter by acquiring two properties for a total of $66.50 million.
The investment sales market is likely to see a challenging year in 2008. Amidst the global financial turmoil resulting from the US sub- prime crisis, real estate investors are expected to take a longer time to assess the market prospects before committing to an investment deal. As such, the investment market is unlikely to see a high volume of transactions in the first half of 2008. Nevertheless, continued strong growth in Asia, coupled with Singapore's position as a financial services hub and popular business destination for MNCs will help to maintain a healthy level of investment activity in the Singapore property market.
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