Property investment sales boosted by Chinese Nationals

Q2’s property investment sales rise 49.2% and is boosted by increased demand by Chinese nationals (including permanent residents) for the super-luxury category of private non-landed properties

Savills research says strong showing was bolstered mainly by the commercial property sector, which saw a few block transactions of privately-owned properties concluded in the reviewed quarter.

• The property investment sales value for residential lands and units reached S$1.85 billion in Q2/2019, up nearly 50% quarter-on-quarter (QoQ).
• A check of URA’s statistics for buyers’ nationality, as well as ground information from agents regarding property investment sales, pointed to increased demand by Chinese nationals (including permanent residents) for the super-luxury category of private non-landed properties.
• In Q2/2019, the commercial property sector raked in a total of S$3.84 billion in investment sales, surging 270.8% from the previous quarter.
• In recent months, the market has witnessed efforts by institutional investors—private equity funds or corporate entities—to deploy capital into the Singapore office market.
• Investment sales in the industrial property sector totalled S$615.9 million in Q2/2019, down 37.5% QoQ.
• In the quarter, the mixed-use and hospitality property sectors contributed S$605.3 million and S$360.0 million of investment sales, respectively.

“This time, souring economic conditions worldwide are not having any deleterious impact on investment sales
because investors are looking for stability when deploying capital,” said Mr Alan Cheong, Executive director of research and consultancy at Savills Singapore.

The research said: “A check of URA’s statistics for buyers’ nationality, as well as agents’ feedback, pointed to increased demand by Chinese nationals (including permanent residents) for the super-luxury category of private non-landed properties. Non-landed residential units with high absolute prices in the Core Central Region (CCR) have seen increased activity by Chinese buyers. The US-China trade war, recent political unrest in Hong Kong, and the stability of the Singapore dollar could have made these buyers choose Singapore as an alternative safe haven to park their money.”

The research by Savills mirrors that of Colliers Research which said that the total property investment sales shows that Singapore is an investment magnet amid macroeconomic uncertainties.

Colliers International on July 30 released its latest quarterly research report Robust Commercial Transactions which showed that real estate investment sales in Singapore recorded the first quarter-on-quarter (QOQ) increase in Q2 2019, after three straight quarters of QOQ declines.

Based on data tracked by Colliers Research, total investment sales came in at $8.2 billion in Q2 2019 – representing a 56% QOQ growth – supported by the commercial and residential sectors. On a year-on-year (YOY) basis, investment sales still posted a 33% decline in Q2 2019 from the $12.4 billion in Q2 2018, which was driven partly by the stronger residential collective sales activity then.

Colliers’ definition of “investment sales” include a) all private property sales at transaction prices of $5 million and above; and b) all successfully awarded state land tenders.

This brought the total investment sales volume for the first half of 2019 (H1 2019) to $13.5 billion, a steep 42% decline from the $23.3 billion transacted in the corresponding period in 2018.

Ms Tricia Song, Head of Research for Singapore at Colliers International, said, “Singapore real estate investment sales saw improvements across all major sectors in Q2, and this growth momentum should carry into the second half of 2019, barring any unforeseen events. In particular, we expect the flurry of commercial investment activities to continue for the rest of the year and into 2020 as REITS and institutional investors consolidate or reconstitute their portfolios. Despite the global macroeconomic headwinds, we think the Singapore real estate sector has growth potential and remains an investment magnet for investors owing to its strong fundamentals, such as transparent regulatory framework, good infrastructure, and stable political environment.”

Commercial and residential sectors remained the main drivers of property investment sales in Singapore during the quarter, accounting for 83% of the total volume with the commercial sector increasing its share of the total from 22% in Q1 to 55% in Q2 2019. Contributions from the residential sector, however, trimmed from 32% in Q1 to 28% of the total volume in Q2 2019.

Colliers Research has maintained its forecast for investment sales to reach $38.2 billion in 2019, matching the transaction volume in 2018. The commercial sector is expected to continue to power ahead, picking up the slack in the residential segment.

Mr. Jerome Wright, Director of Capital Markets & Investment Services, Colliers International, said, “We recommend investors to stay focused on commercial assets, supported by favorable fundamentals and outlook in their underlying markets. For qualified investors, industrial assets in niche segments such as data centres, high-specification facilities, food factories and cold stores can offer rewarding returns.”

Other factors that could support real estate investment sales in the coming quarters include the more favorable interest rate outlook and rising capital allocation among global investors to Asia Pacific property assets.

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