Real estate investments climb 5.3% YoY to $25.8b in 2021

The collective sale market gained momentum in Q4, Knight Frank says.

Real estate investments jumped by 5.3% year-on-year (YoY) in 2021, reaching $25.8b from $24.5b in 2020, according to Knight Frank.

Investments in the fourth quarter (Q4) of 2021 reached $7.3b, lower than the $14.5b recorded in the same period last year. This was driven by the investment volume by residential sales which amounted to $2.8b “as demand remains healthy for prime residential homes.”

It also added that the collective sale market also started to gain momentum during the last three months of the year, composed of five en bloc deals sealed.

“Despite the encouraging en bloc activity with homeowners of ageing projects growing increasingly hopeful, the imposition of cooling measures on 15 December 2021 has given pause to the market,” he said.

The government raised the Additional Buyer’s Stamp Duty (ABSD) and tightened the Total Debt Servicing Ratio threshold starting 16 December. It also tightened the loan-to-value limit for loans from the Housing and Development Board from 90% to 85%.

Knight Frank also said that the lack of a substantial increase in the possible number of residential units in the first half of 2022 Government Land Sales lists “may prompt land-starved developers to continue to consider acquiring private parcels going the collective route,” it said.

The commercial market remained “relatively buoyant” in the last year because upcoming supply space remains limited, it said.

“With cooling measures casting a pall of uncertainty in the residential market, there might be some spill-over investor demand into the commercial arena that is exempted from [ABSD],” it said.

“This could possibly translate into interest in the CBD Incentive Scheme sometime in 2022 where older commercial buildings are acquired in anticipation of a possible long-term global rebound from 2023 when air travel worldwide is expected to return to pre-pandemic levels,” it added.

The industrial sector, meanwhile, sustained its stable growth momentum, reaching $752.2m.

Outbound investment deals from Singapore investors amounted to S$20.2b in the Q4 quarter, a 231.7% YoY due to the acquisition of logistics and office properties abroad.

For 2022, Knight Frank said more commercial properties are expected to be acquired as institutional investors search for assets to reinforce their portfolios. Some investors on the luxury residential market, however, may turn conservative dude to the higher ABSD rates for foreign buyers.

“With the recently announced cooling measures shaking up the en bloc market, homeowners looking to collectively sell their homes will now have to recalibrate their price expectations

to align with the increased risks developers face if a sale is to be successful,” it said, noting that the demand for luxury private homes might also turn conservative as buyers expect price increases to slow.

“Thus, the investment market in the year ahead is projected to post a more moderate performance, with total transaction value for the whole of 2022 forecasted to hover within the range of about S$20 billion to $22b,” it added.