Property investment deals on the rise and outlook for Q4 2021 remains sanguine says Colliers International
- Investment sales continued to improve in Q3 2021, growing 6.9% QOQ and 79% YOY to SGD7.5 billion, driven by higher Government Land Sales. Colliers continues to expect a strong showing in Q4 2021.
- Residential sales grew 11.6% QOQ, while commercial sales declined 12.1% QOQ, despite strong retail transactions.
- Industrial and shophouse sales declined 91% QOQ and 47% QOQ, respectively, after a strong performance in Q2 2021.
- Investors should focus on assets with long-term growth drivers, such as CBD offices with redevelopment potential, high-spec space, logistics assets, and shophouses.
Property investment deals closed in Q3 provides optimism in a difficult situation brought on by Covid-19
Mr Paul Ho, chief officer at iCompareLoan, said: ““The property investment deals closed in the last quarter shows that the Singapore market is resilient. In its past cycles the market has demonstrated its ability to recover from crisis situations. This was apparent post Global Financial Crisis when real estate investment sales volume improved strongly.”
Colliers International, in releasing its Investment Q3 2021 Report, said the real estate scene in Singapore remains positive. The quarterly report on investment sales in Singapore’s real estate market provides an outlook for the market and expert recommendations.
A thriving market for property investment deals to be closed in Singapore
Investment sales continued to improve in Q3 2021, rising 6.9% quarter-on-quarter (QOQ), driven by Government Land Sales (GLS). Looking ahead, Q4 2021 could see stronger commercial sales, driven by the likely shareholders’ approval for the privatisation of Singapore Press Holdings and the potential conclusion of a few major deals.
Mixed-use transactions surged 816% QOQ, while residential sales rose 11.6% QOQ. In the quarter, total commercial sales fell 12.1% QOQ, despite strong retail transactions, which surged 100% QOQ.
Snapshot of total investment sales
Industrial sales declined by 91.3% QOQ in the absence of major deals, but Colliers remains positive on this segment, particularly in the B1 space, given the limited supply over 2021 to 2024. Meanwhile, shophouse sales declined 47.4% QOQ after a strong rebound in the previous quarter.
Steven Tan, Executive Director, Investment Services | Singapore, commented: “We believe that the investment deals will likely continue to be robust at least until H1 2022. Given the strong residential demand and depleting developers’ landbank, we expect collective sales to continue to grow. Separately, we are also seeing more investor interest in the suburban malls.”
Residential property performed well
Residential asset sales rose 11.6% QOQ to SGD3.4 billion (USD2.5 billion) in Q3 2021, owing to the collective sale of Flynn Park and awarding of three GLS sites. Year-to-date residential volumes in the quarter rose to SGD8.1 billion (USD6.0 billion), which reflects a 148% year-on-year (YOY) increase from a low base, as property viewings were prohibited for most of Q2 2021.
Commercial property still attractive despite lower sales in Q3
In the commercial space, asset sales declined 12.1% QOQ to SGD1.2 billion (USD0.8 billion), despite strong retail transactions. Year-to-date, sales volume declined 12.6% YOY to SGD361 billion (USD2.7 billion). Several commercial deals remain in the pipeline, which reflects the attractiveness of office properties with redevelopment and Gross Floor Area upgrade potential.
Industrial assets saw a decline in sales
In the absence of big-ticket industrial property sales, industrial assets declined 91.1% QOQ to SGD178 million (USD131 million) in Q3 2021. However, the two previous quarters have seen strong sales driven by a REIT privatisation and the establishment of an industrial fund. Colliers believes that investor interest should remain on the back of the accelerated growth in e-commerce and the technology companies.
Hospitality saw no movement in asset sales
The needle did not move for asset sales in the hospitality sector in the quarter and no deal has been recorded year-to-date. However, in the longer term, Colliers expects that the sector’s fundamentals should remain supported by a relatively limited supply pipeline and a series of new attractions and infrastructure projects planned through 2030.
Shophouse sales took a breather
After a strong showing in Q2 2021, shophouse sales came down by 47.4% QOQ to SGD163 million (USD120 million). Year-to-date shophouse sales volume at the end of Q3 2021 amounted to SGD607 million (USD446 million), which is a whopping increase of 238% YOY. Shophouses continue to be an attractive asset class, as they offer a stable rental income and capital appreciation potential at a palatable investment quantum, as well as the flexible use of property.
Mr Ho said, “Those who want to close property investment deals, should stay focused on commercial assets. Supported by favorable fundamentals and outlook in their underlying markets, they look attractive.”
“Those who are looking at property investment deals should also get on a path where they can get a mortgage loan in a quick and seamless manner. Time is money,” he added.