Singapore property market expected to hold steady in 2020

Singapore property market expected to hold steady in 2020

Singapore’s property market has been nothing but resilient in 2019.

In particular, the residential primary sales market stood out as demand strengthened in the second half of the year even as trade tensions between the United States and China escalated, and the 2019 economic outlook for Singapore dimmed.

Developers sold 29 per cent more new homes in the five months between July and November 2019, than they did in the six months from January to June 2019.

Meanwhile, the Urban Redevelopment Authority’s all-residential private property price index returned to growth in the second and third quarters of 2019, wiping out the losses recorded in the two quarters prior. These turnarounds took place despite the market cooling measures being still in place.

Although the office leasing market was spooked by dampened business sentiment from 2Q19 onwards, headline-grabbing deals were still taking place.

This includes UBS taking up all the 381,000 square feet of net lettable space available for lease in 9 Penang Road, and Dyson leasing the entire 110,000 sq ft space in St James Power Station which is currently being refurbished.

Even though rent growth for Grade A CBD space slowed to a halt in 4Q19 to end the year at an average of S$10.81 per sq ft, this is still 5.4 per cent higher than the S$10.25 per sq ft recorded a year ago.

Significantly, investors looked past the short-term skid in office rent growth and continued to inject capital into the sector, driving office property investment sales (defined as private sector deals worth S$5 million and above each, and all public sector deals) to S$7.16 billion for 2019 year-to-date (based on information collated as of Dec 17).

This is 36 per cent above the S$5.25 billion accumulated in full-year 2018.

Prominent office investment deals sealed in 2019 include the S$1.575 billion sale of 100 per cent interest in Ophir-Rochor Commercial that holds Duo Tower and Duo Galleria, as well as the S$1.025 billion sale of 100 per cent interest in Oxley Beryl that holds Chevron House.

Elsewhere, the retail and logistics property markets held relatively stable in 2019, a sign that they have hit the bottom.

Nonetheless, their road to recovery remains challenging and fragile. Retailers and mall landlords must continue to learn the art of new retailing, while the logistics sector remained exposed to the threat of a full-blown trade war between the US and China.

Singapore’s office and residential property markets are poised for relatively brighter prospects than the retail and logistics sectors in 2020.

The buying momentum in the residential primary sales market could be maintained if Singapore’s economic activity picks up pace as projected, and this would lend support for prices to remain stable in 2020. Developers could also be more forthcoming in launching new projects to capitalise on buying interest.

On the office front, occupiers’ cautious sentiment could extend into 2020, and there could be little impetus for Grade A CBD rent growth.

Still, there is opportunity for some rent uptick towards the tail-end of 2020 should Singapore’s economy strengthen as projected, and nudges up business confidence.

On the investment sales front, we expect Singapore to ride on global investors’ strong interest for Asian real estate, demonstrated by the impressive investment volumes garnered in recent years, including the record US$128 billion hit in the first three quarters of 2019.

The ongoing political and economic uncertainty around the world such as Brexit and the protracted trade tension between the US and China have reinforced Singapore’s strength as a safe haven given its transparency, political stability, relative neutrality and resilient currency.

All things considered, Singapore will continue to be a key market for global investors in 2020.

By Tay Huey Ying, head of Singapore research at JLL.