Singapore’s office property market has lost its appeal as an investment, according to real estate firm DTZ.
DTZ said demand for office space has declined, and the sector is now considered “cold”.
It defines “cold” as property that is more than 5 per cent overpriced, with potential yield below expectations.
“Singapore has traditionally been a volatile market, and our rental outlook has been impacted by the global slowdown, resulting in lower expected returns over the next five years,” DTZ said in a statement.
It also lowered its forecast for rental growth in industrial property to 3.1 per cent over the next five years.
“With key export markets in turmoil, the downside risks facing Asia Pacific industrial remain significant. Trading hubs such as Singapore and Taipei are at particular risk from the likelihood of another recession,” DTZ said.
For all grades of property, DTZ’s Fair Value index, which tracks the relative attractiveness of current pricing, slumped by 17 per cent to 58 index points in the third quarter from the previous period.
However, DTZ noted the markets generally kept their allure for investors in the third quarter, with the index maintaining a level above 50.
It said the majority of markets in Asia Pacific still offer excellent prospects and investors taking a medium- to long-term view can access several high yielding and high growth markets at a discount, relative to pricing elsewhere.
DTZ said investors are set to benefit from stronger rental growth associated with a more positive economic backdrop than in the United States and Europe.
Source : Channel NewsAsia – 23 Nov 2011