Ravi Chandran
A report by CBRE highlighted that Singaporean real estate investors are leading Asian outbound investment in the first half of 2018. Asian outbound capital deployment remains robust amid a recent slowdown in Chinese outbound real estate investment. In the first half of 2018, outbound investment activity totaled US$25.3 billion, led by Singaporean capital, which accounted for 36 per cent of the region’s total, according to recent data compiled by CBRE.
London continued to be a preferred destination for Asian real estate investors, accounting for 26 per cent of the region’s total outflows.
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Substantial funds flowed from both Hong Kong and Singapore into London to capitalize on the more favorable yields and longer rental periods presented by commercial properties that are unattainable domestically.
Yvonne Siew, Executive Director of Global Capital Markets, Asia Pacific at CBRE said, “Singaporean investors favored Europe as a location for portfolio diversification, investing US$3.4 billion into the region in the first half of 2018. Singaporean investors were also active in the US logistics sector, building a portfolio to the tune of US$2.27 billion during the period.
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“Many of our clients in Singapore continue to look for opportunities in the region and beyond, particularly in the office and logistics sectors. For many of them, this is a long-term growth strategy as they seek to diversify their portfolios and enhance their yields given limited opportunities and compressed yields in the domestic market.”
Tom Moffat, Head of Capital Markets, Asia at CBRE commented, “Intra-Asian capital flows accounted for almost one third of global outbound investments made by Asian capital in the first half of 2018 at US$8.5 billion. The biggest beneficiaries of these capital flows were Hong Kong, China and Japan, but we expect several high-profile transactions in Singapore in the second half of the year.”
Despite the deceleration in Chinese outbound activity, it is expected that Asian real estate investors will continue to be active abroad. Added Mr Moffat, “Asia Pacific investors are becoming increasingly recognized players and continue to expand portfolios strategically. The slowing of Chinese investment has prompted the emergence of more diverse capital sources, which illustrates the depth of liquidity and appetite for offshore deployment.”
In the first half of 2018, Chinese real estate investors decelerated acquisition of overseas assets and began disposals, particularly in the US and Europe, to improve balance sheets and to lock in profit for their early investment.
Disposals are expected to continue with some Chinese real estate investors under finance strain looking to strengthen their balance sheet.
Property companies were the most active investor class and accounted for half of total Asian outbound investment, compared to 27% in the first half of 2017. REITs also accelerated outbound investment with two Singaporean REITs making their maiden investments in Europe. On the contrary, institutional investors, who accounted for 45% of the region’s total outbound activity in the first half of 2017, were less active this year and comprised 13% of the total.
The report by CBRE mirrors another recent report by Colliers International which said that the real estate investment sales in Singapore is projected to reach $40 billion in 2018. Colliers said commercial and industrial properties could pick up part of the slack in the second half of 2018 to keep the momentum of real estate investment sales as new cooling measures dampen residential investment sales outlook.
Colliers’ nvestment sales report which tracked all private property sales at transaction prices of Singapore Dollars (SGD) 5 million and above, and all successfully awarded state land tenders across all property segments in Q2 2018 in Singapore, noted that real estate investment sales in Singapore grew by 19% year-on-year (YOY) and 11% against the previous quarter to SGD 12.2 billion in Q2 2018, led mainly by the residential sales which accounted for 67% of total investment sales during the quarter.
Residential sales surged by 60.7% YOY to SGD8.2 billion, driven by brisk collective sales which made up nearly half of the investment sale volume in Q2. The strong performance in Q2 brought H1 2018 residential investment sales to SGD17.3 billion – the highest half-yearly figure on record.
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A total of 16 residential collective sales with a combined value of SGD3.9 billion were transacted in Q2 2018, bringing the H1 2018 tally to 33 deals valued at SGD9.7 billion. Based on Colliers’ research, this is 19% above total residential collective sales in the whole of 2017.
With the bumper sales already clocked in H1 2018, Colliers expects 2018 real estate investment sales to still match 2017’s record SGD40 billion.
This projection was revised from an earlier forecast of a 15% YOY increase in investment sales to SGD46 billion for this year following the introduction of new cooling measures in July.
There are however some concerns in certain quarters that the excess funds flowing into the Republic is invariably distorting the Singapore real estate market. Chinese property developers have bid aggressively for Government Land Sales (GLS), which ramps up government coffers, but may be bad news for the Singapore property market and home-buyers, as additional costs may be headed their way. There is fear that as land bids go up, so will prices for homes.
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