Q3 real estate investment sales lost the strong momentum

Q3 real estate investment sales in Q3 has lost the strong momentum which started in the 2nd Quarter of 2017 said a research report by Savills Singapore. The report noted that  Q3 real estate investment sales came in at S$7.10 billion, down 33.4% quarter-on-quarter (QoQ).

Q3 real estate investment sales for the residential sector raked in a total of S$2.83 billion, Savills said, adding: “the almost nonexistent sales of en-bloc sites and the slowdown in luxury apartment transactions resulted in volume falling 59.2% QoQ.”

On a quarterly basis, Q3 real estate investment sales of commercial properties rose 43.0% to S$2.22 billion in Q3. The biggest transaction in the private sector was OUE Commercial Real Estate Investment Trust’s (OUE C-REIT) S$908.0 million acquisition of the office component in OUE Downtown at Shenton Way.

Q3 real estate investment sales for the industrial sector was another bright spot in Q3/2018 with the investment sales volume for industrial properties surging 63.8% to S$1.09 billion.

The report said that if some office building deals are transacted in the fourth quarter, we may end the year with S$29 – 30 billion worth of investment sales. In 2017, the number was S$35.1 billion. The main cause of this year’s real estate investment sales decline is the 6 July release of new ABSD rates that stymied the collective sales market, the research said.

“With the collective sales market hitting an air pocket, the investment sales market can only rely on commercial sales as a partial fillip,” said Alan Cheong, Senior Director at Savills Research.

An earlier report by Colliers International said strong property prices growth have been reigned in by fresh cooling measures introduced in July. The Colliers report added that home values rose by 0.5% quarter-on-quarter in Q3 2018, following price increases of 3.4% in Q2 and 3.1% in Q1.

Cumulatively, private home prices have climbed by 7.9% in the first three quarters of 2018, 9.6% above the recent trough in Q2 2017. Home values are still 3.2% lower than the peak in Q3 2013, said Colliers.

Although the new measures have broadly weakened sentiment and arrested strong property prices increase, Colliers noted that market confidence seems to be improving on the back of relatively positive sales for new launches last month.

Colliers believe there are still genuine buyers in the market seeking suitable and competitively-priced units. “With a healthy pipeline of new launches coming up, developers who are better in recalibrating their pricing strategy will likely see better turnover,” said the report.

In the near-term, Colliers does not foresee developers offering deep discounts to move units, with home prices likely to remain flat in Q4 2018. Colliers projected strong property prices increase by 8% for the full year in 2018 and potentially climb by 3% in 2019, in line with the economic growth – barring any external shocks.

Colliers further said that properties in prime districts – especially Districts 9 and 10 – are in a better position to weather any potential slowdown in the market and that it also reflects the segment’s resilience and their appeal as trophy assets with potential for strong property prices growth.

Tricia Song, Head of Research for Singapore at Colliers said the prominent real estate company is maintaining its strong property prices growth forecast of 8% for the full 2018 as new launches ahead should lend support to home values.

“We expect a slew of new projects to be launched before the year-end festive season, and particularly after the encouraging take-up in September which showed developer sales growing strongly by 51% month-on-month to 932 units,” Ms Song said.

She added: “With regard to the recent revised guidelines on unit sizes announced in a circular by the Urban Redevelopment Authority, we think the new ruling should have little incremental impact on home prices as they would likely impact size configurations for projects completing beyond 2023. In the near-term, we believe the revised guidelines should not affect those developers which have already acquired land and obtained both Pre-Application Feasibility Study (PAFS) and planning approvals. Hence, the supply of residential units that is slated through 2023 – assuming a five-year construction period – should not be affected by the new guidelines.”

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