Property investment volume ‘respectable’ despite 31.8% drop in 2019: CBRE

Singapore’s total real estate investment volume fell 31.8 per cent to S$22.83 billion as at Dec 13, the lowest volume since 2016, according to CBRE on Thursday.

This was due to a slower collective sales market this year compared with a year ago. The previous year saw a few large collective sale sites being transacted, along with the award of two Government Land Sale (GLS) sites worth over a billion Singapore dollars each, CBRE told The Business Times.

Despite the drop, CBRE said 2019’s performance was still considered “respectable” due to sizeable asset transactions that occurred in the year. This includes Duo, Mapletree Business City II and 30 Raffles Place (formerly known as Chevron House).

This year, the residential sector drove investment volume, taking up 32.1 per cent of investment volume. This was due mainly to public sales where nine GLS sites with residential components were sold.

However, CBRE said the trend is unlikely to continue given the build-up of unsold residential stock. Moreover, land for residential development has also been reduced in the first half of 2020 GLS programme.

Following closely was the office sector, which took up 31.1 per cent of investment volume this year.

Notably, investors were found to have turned their focus to the hospitality sector – which saw hotel-related transactions almost quadrupling in volume to S$2.15 billion, from S$544.7 million a year ago. This was driven by rising tourist arrivals from new attractions, and major events, conferences and exhibitions held in Singapore.

CBRE senior executive director of capital markets Michael Tay said investment volume in 2020 is likely to “remain resilient” due to anecdotal evidence of investors showing interest in Singapore assets, that will likely provide a boost to foreign capital inflows.

This is evidenced by a higher proportion of foreign capital this year at 31.1 per cent, compared with 24.3 per cent a year ago.

Lower interest rates will likely support robust capital flows into real estate, with cheap debt and active fundraising in the capital markets, Mr Tay said.

This is despite the “shrinking universe” of investible assets, creating challenges in deploying capital which may result in fewer mega transactions crossing the billion-dollar mark, he added.

A JLL report on Tuesday noted Asia-Pacific real estate investment reached US$125 billion in the first three quarters of 2019, up 10 per cent year on year. The real estate services firm said foreign investments into the Asia-Pacific are at a decade-high, making up 35 per cent of total volumes in 2019 and mostly driven by private equity funds and large-scale transactions.

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