Singapore property market hits rock bottom

Investment picked up 50% to $7.68b after a number of large deals.

After two years of declining rents caused by a sluggish economy and a glut of supply, investors believe Singapore’s commercial and residential markets is near its bottom, thinktank Urban Land Institute (ULI) and PwC revealed.

In their "Emerging Trends in Real Estate Asia Pacific 2018" report, Singapore ranked third in terms of investment prospects 2018. It previously ranked first in 2011 and 2012 and then 21st in 2017.

Meanwhile, it rose to sixth place in terms of development prospects.

Singapore saw a 50% pickup in investment to $7.86b (US$5.8b) after a number of large deals. Development site activity has also been strong, signalling the bottoming of the market after being stuck in the doldrums.

Singapore has shot up the office rankings this year. ULI and PwC said investors anticipate a rebound in a market that has been in decline for several years.

Singapore also ranked 15th amongst cities likely to see rental growth in 2018 with a score of 5.47 out of 9.

However, some remain sceptical that fundamentals in Singapore are really improving.

The report said there was a balance of opinion towards the market and cited a fund manager who said, “Singapore tends to be quite cyclical. Rents have come off 20-something percent since the peak in this current cycle, so we think we’re now at the bottom, and that suggests rental growth going forward for a couple of years.”

Meanwhile, the Singaporean story on the residential side mirrors that of office one. The market has seen a prolonged downturn but has possibly now bottomed, thanks to the partial lifting of government cooling measures.

Singapore has been the only market in Asia in which government efforts to contain prices rises have actually been successful, the report said.

Property taxes introduced in 2010 led to a market downturn beginning in 2013 that is only now showing signs of reversing, following the easing of some government tariffs early in 2017.

The peak-to-trough adjustment for mass-market housing has been only about 11%, which is considered a fairly modest decline.

"Notably, the main difference between Singapore and elsewhere in Asia is the government’s tighter control over the land sales process, serving to underscore the role that supply/demand imbalances are playing in residential pricing dynamics," the report said.

"Since this seems an intractable issue in most jurisdictions, upward pricing pressures are likely to persist for the foreseeable future," it added.

However, extra costs still come in the form of applicable stamp duties, dragging returns of investments.