Published June 26, 2009

Current quarter sees big jump in property investment sales

By KALPANA RASHIWALA

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(SINGAPORE) Investment sales of Singapore real estate so far this quarter have hit $953.9 million, a jump of 248 per cent from $273.8 million in the first quarter, says CB Richard Ellis (CBRE).

The increase came as residential investment sales quadrupled on the back of a growing number of high-end condo purchases, a pick-up in transactions of Good Class Bungalows (GCBs) and the acquisition of a few small residential sites.

The sale of three office blocks - Parakou and VTB buildings on Robinson Road, and Anson House - for a total of $259.6 million also helped breathe some life into the moribund office investment sales market.

Investment sales are a gauge of developers' and investors' medium to long-term confidence in the property sector. The pick-up in Q2 was against the backdrop of a dramatic stock-market rally that has led to an improvement in home buying.

CBRE defines investment sales as transactions with a value of at least $5 million, comprising government and private sales of land and buildings, both strata and en bloc. It also includes change of ownership of real estate via share sales.

With a tally of $1.2 billion so far in the first half, CBRE executive director (investment properties) Jeremy Lake reckons full-year investment sales could come in at $2 billion to $2.5 billion, 'depending on how long the burst of activity in the residential sector lasts'.

The figure for the whole of last year was about $18 billion, down from the record $54 billion in 2007.

As for the latest Q2 showing, 63.5 per cent or $605.6 million was from the residential sector.

This sum included 14 GCB deals, up from just three GCB transactions in the first quarter.

'For the Singapore investment market, the first movers are the Asian private investors who are willing to buy at current prices which they deem reflect an attractive discount from the peak,' Mr Lake said.

'Their sweet spot is $20 million to $85 million and their focus is office and/or residential investments.'

On the other hand, institutional investors are mostly adopting a wait-and-see strategy for Singapore, judging that the fundamentals are weak and better opportunities will arise in six to 12 months.

'For second-half 2009 there will be more investment deals, although most of the owners who wanted or needed to sell have already done so, and accordingly the choice of investment opportunities could be limited,' Mr Lake said.

Agreeing, DTZ's senior director for investment advisory services Shaun Poh said investment sales activity may ease slightly in Q3 because of a limited supply of small investment-quantum commercial properties available for sale.

'However, we may see some deals that are currently cooking being sealed in Q3,' he said.

'For the residential sector, some developers who have enjoyed strong sales at their showflats over the past few months are looking to restock their residential land bank selectively,' he added.