Property investment sales jump 42% to a whopping S$7b in 4Q11

The commercial sector is the star performer for the quarter, surging 153% to S$3 billion.

As of 13 December, investment sales amounted to a total of S$6.8 billion in Q4/2011, up 42.4% from S$4.8 billion in Q3/2011. Savills estimates that the total value could range between S$7.0 and S$7.2 billion for the last quarter, bringing the whole-year number to almost S$29 billion.

Uncertainties arising from the eurozone sovereign debt crisis and the threat of economic recession have inevitably affected the investment climate in Singapore. However, the market performed better than expected in the reviewed quarter, mostly due to the resumed buying activity in en-bloc office space and developers’ strong acquisition of land parcels under the GLS programme.

In Q4/2011, private sector accounted for a bigger share of total investment sales at 59.6% or S$4.1 billion, while the public sector chalked up the remaining 40.4% or S$2.7 billion. For the whole of 2011, the private sector accounted for 55.9% of total investment sales, down from the 69.4% in 2010. On the other hand, the public sector market share increased from 30.6% in 2010 to 44.1% in 2011 thanks to more land parcels sold under the GLS programme.

In terms of sector performance, the commercial sector accounted for the highest share of 37.0% in total investment sales. It surged by 153.1% quarter-on-quarter from S$995 million in Q3/2011 to S$2.52 billion in Q4/2011, with several CBD office buildings changing hands in the reviewed quarter. The notable transactions include the sale of an 87.5% share in Ocean Financial Centre (S$1.57 billion), Robinson Centre (S$293 million) and Commerce Point and One Phillip Street (S$283 million).

Following closely behind is the residential sector where investment sales totalled S$2.50 billion in Q4/2011. Transaction value in the public sector surged by 50.3% quarter-on-quarter, mainly due to the higher number of state lands awarded in the reviewed quarter. In contrast, private residential investment sales declined 27.0%, suggesting weakening market sentiment in a turbulent global economy and volatile stock markets.

Industrial investment sales accounted for 12.3% of total investment transactions. It declined by 36.8% from S$1.3 billion in the preceding quarter to S$838 million in Q4/2011. The drop is partly due to the higher base in Q3. Investment activity in industrial properties remained resilient as S-REITs, end users and investors continued to show their interest in acquiring industrial properties.

The softening global and local economies will inevitably shake market confidence. The fifth set of cooling measures recently introduced by the government in the private residential market could induce potential investors to stay on the sidelines. Although the investment sales market is expected to moderate in the next few quarters, there is still ample liquidity and demand in the market as investors/funds generally favour Asian real estate due to its better economic performance compared with Europe and the US. Singapore is well positioned to attract such investors and the cooling measures in the residential market may divert investors’ interest to the other sectors.