Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting to read:%0A%0A {0} %0A%0A {1}

Outlook on Singapore investment property remains bright in 2019

The investment property market continues to reel from the latest round of property measures announced in July 2018. Residential collective sales have taken the hardest hit as buyers and sellers take stock of the impact, re-doing their sums to assess the risks in this current climate. Nevertheless, developers are still motivated to hunt for good value buys to shore up their land bank, looking at either the Government Land Sales programme or the collective sales market. It explains why some collective sales committees have put their projects on the market again, three months after the property cooling measures were implemented.

Sellers of these collective sales projects have relaunched at somewhat lower reserve prices, in tune with new market conditions but it appears that developers are still not biting. The cooling measures will set new levels in land acquisition costs and we expect bids for residential plots to moderate in 2019.

In the short to medium term, the opportunities for residential real estate appear to be narrowing but this should not stop deep-pocketed investors with their eye on brick and mortar to explore other sectors including commercial assets.

For one, we are beginning to see increased appetite for residential plots with approval for change of use; in particular, for hotel development. The hospitality sector is poised to grow further on the back of healthy visitor arrivals. Room rates may rise as the stock of hotel rooms tightens. It is timely that the URA released a Club Street site for hotel use in its H2 2018 Government Land Sales programme, the first time in five years. Similarly, the recent collective sale launch of Waterloo Apartments with approval to redevelop into a hotel has met with resounding response. We expect appetite for these sites to continue in 2019.

2018 has been an active year for investors in commercial property. Quality buildings have had a good run, with several benchmark transactions inked to date: the sale of Twenty Anson at $516 million or $2,503 per square foot (psf) capped a robust first half of the year – the only Grade A office building sale. Other office deals include 55 Market Street ($216.8 million or $3,020 psf) and MYP Plaza ($247 million or $3,000 psf). The strength in office capital values is underpinned by a very strong rebound of Grade A office rents since 2017.

Cushman & Wakefield’s basket of Grade A office rents show an 18 per cent jump from the trough in the first quarter of 2017. This is just four per cent below the recent peak in the first quarter of 2015. In 2019, we expect investors to test benchmarks for premium commercial real estate as Grade A office supply remains very tight and demand for office space keeps at a steady pace. The government’s relentless focus on sharpening Singapore’s attraction as a hub for business operations will undoubtedly keep many corporates operating out of Singapore and lure many more to set up offices in the city-state. Barring any unforeseen events, capital values of Grade A CBD offices should grow by 14% in 2019.

Strata office sales took a beating in the run-up to the recovery in the office rental market in the second half of 2017 into Q1 2018. Prospective owner-occupiers were sitting on the fence, weighing the pros and cons of buying an office space against leasing one. With the proliferation of co-working spaces available in the market now, the appetite for buying a strata office unit has waned in favour of leasing co-working spaces.

Nevertheless, demand from institutional investors for strata units on full floors remains robust. With office rentals on an upward trajectory, the case for investing in strata offices has become clearer. There has been a considerable uptick in transaction volumes in the strata office markets year to date. Cushman & Wakefield’s data point to $681 million in total secondary transaction volumes between January and September this year, a tad lower than the $707 million for the whole of 2017. We expect the full year transaction value to exceed that of 2017. The momentum on strata office sales in 2019 will keep pace with 2018, a function of the very limited office supply on the market.

Family offices, particularly younger generations of family-owned businesses, are trading very actively in shophouses. This is an asset class that commands a premium because of their rich architectural heritage and lack of supply. Shophouses in the CBD are now priced between $7,000 – $9,000 (over Land Area) or $3,500 – $4,500 psf (over Gross Floor Area) depending on the location.

Transaction volumes for District 1 shophouses in the first three quarters of 2018 has already exceeded 2017’s full-year volume. With the cooling measures impacting the residential market, some investors have started to divert their capital to the shophouse market, which will lead to a further increase in prices and volume in 2019.

Latest transactions include the unit at 21 Boon Tat Street which was sold for $16.5 million earlier this month, and 40 & 41 Duxton Hill, which was transacted at $24.8 million (about $2,787 psf) with a balance tenure of 69 years, generating about 3.7% yield.

Market watchers are anticipating growing interest in District 7, especially within the Beach Road, Middle Road and Kampong Glam Region since the locale is an emerging alternative option to the CBD. There are numerous new developments within District 7 such as Duo, South Beach, Citygate, Concourse Skyline and Guoccoland’s new futuristic mixed development along Beach Road now under construction, all of which will likely generate more vibrancy within the area.

Commercial property investments typically carry higher risks than residential as they require active hands-on management of the assets. The capital outlay is usually higher too, and financing cannot be done through the use of Central Provident Funds. But over the medium term, some liquidity will still find its way back to these segments if Singapore’s economy keeps steady.

D1 Shophouse Median Price & Transaction Volume

Related Insights

main streets across the world 2023

Main Streets Across the World 2023

In this 33rd edition of Main Streets Across the World, we’ll explore the near-term outlook for the retail sector; headline rent and ranking changes for best-in-class urban locations across the world; key indicators and global main street rankings; and key trends to watch such as the cost-of-living crunch, e-commerce and more.
Dominic Brown • 21/11/2023
Reworking the office
Research • Workplace

REWORKING the Office Asia Pacific

Our ‘REWORKING’ series examines decision-making for occupiers under four key considerations: Cost, Carbon, Culture and Community – under which the changing demands, needs and impacts on office spaces and strategies can be examined.
Grant Carter • 03/11/2023
Insights • Economy

Cushman & Wakefield Comments on URA private residential price index Q3 2023

Overall sales volume declined by 3.5% qoq in Q3 2023, reversing the past two consecutive quarters of increase. The fall in overall sales volume was driven by the new sales market, which declined by 8.5% qoq to 1,946 units in Q3 2023.
Xian Yang Wong • 27/10/2023

Related Stories

Dexcom Philippines New Office Fit-out Project
Dexcom Philippines • Healthcare
Learn More
Cushman & Wakefield Stories Philippines Inc. • Travel
Learn More
Cushman & Wakefield Stories
OMD Philippines • Advertising
Learn More
With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Privacy & Cookies.
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All