Total property investment volume up 2.8% YoY to $29.1b in 2022

The investment market may remain in “price discovery mode” in the first half of 2023.

The total property investment volume in 2022 increased by 2.8% year-on-year to $29.1b on the back of the active market in the first half of 2022, according to Colliers.

In a statement, Colliers said investment sales in the fourth quarter declined 10.8% quarter-on-year because of higher borrowing costs and macroeconomic uncertainties.

The market performance was pushed by some large transactions during the period such as the divestment of Jurong Point and Swing By @ Thomson Plaza by Mercatus Co-operative Limited for $2.161b and ARA Asset Management’s sake if 50% stake in Lazada One for $361.49b.

READ MORE: Property investment sales decline 33.4% QoQ in Q3

“Despite yield spreads narrowing, for those looking to invest in quality core assets, Singapore properties still offer long-term capital appreciation potential for decent total returns,” said Tang Wei Leng, managing director and head of Capital Markets & Investment Services, Singapore at Colliers.

For the first half of 2023, the investment market will likely remain in a price discovery mode as investors are still adjusting to higher interest rates and slower growth. Overall, it is expected to be down by around 15% YoY to $25b in the year.

The firm added that deals are expected to be more “bite-sized” as the larger acquisition would involve an extended time frame and higher leverage which is seen as unfavourable amidst uncertainty and volatility.

On the other hand, investments may increase in the second half as inflation and interest rates become more certain, it said.

Tang said attractive assets will still come into the market but owners will be choosing between higher operating and refinancing costs or lowering their price expectations.

“Hence, buyers could position themselves for opportunistic buys or move up the risk curve to look at core plus or value-add assets,” she said.

“With institutional investors taking a back seat, private wealth will become increasingly more prominent. Such capital, typically with less stringent underwriting hurdles, is expected to focus on the luxury residential market, strata-titled commercial space and shophouses,” she added.