2023 to be ‘underwhelming’ year for real estate investment market: Savills Singapore

Real estate investments up 75% q-oq in 3Q 2023, bolstered by GLS tenders: Knight Frank

The Singapore real estate investment market buoyed to new heights in 3Q2023, recording $7.13 billion in deals, more than double the $3.57 billion achieved in the previous quarter. Savills Singapore’s October research report provides a glimpse into a rosy outlook despite the ongoing headwinds such as geopolitical conflicts, supply chain rewiring and the latest terrorist attacks in Israel.

A slightly gloomier outlook lies ahead despite this massive increase in investment. Savills projects that the real estate investment market will dip from a previous forecast range of $24 billion to $25 billion, down to a range of $19 billion to $21 billion for 2023.

This dip is set to continue as institutional investors see a retrenchment in deals. Jeremy Lake, managing director for investment sales and capital markets at Savills Singapore, commented that while the outlook for 2023 appears uninspiring, the bottom may be in sight. He believes that interest rates are set to fall in 2024 and, as a result, global economic growth with pick up. This will help investors to focus on the positives rather than the negatives.

The Government Land Sales (GLS) Programme triggered the surge in investment deals, with seven land parcels valued at $4.16 billion accounting for 58% of total real estate investments in 3Q2023. The largest sale was for a residential site at Marina Gardens Lane which was awarded for $1.03 billion, followed by the residential site at Jalan Tembusu for $828.8 million and a commercial and residential site at Tampines. Avenue 11 for $1.21 billion.

Private sector investment deals totalled $2.97 billion in the last quarter, up 2.8% q-o-q. This was despite a 31.6% decrease in transaction volumes, attributed to the Lunar Seventh Month, higher ABSD rates, as well as a high-profile money-laundering case.

Of the total value, residential investment sales accounted for 48.1%, hitting $3.43 billion, while commercial investments totalled $1.69 billion which represented 23.7% of the investment market. Two of the key commercial transactions were the collective sale of Far East Shopping Centre for $908 million and the divestment of Changi City Point by Frasers Centrepoint Trust for $338 million.

In conclusion, Singapore remains a safe haven and there is a base level of transactions for those, particularly ultrahigh net worth individuals, looking for diversification and safety over risk. Alan Cheong, managing director for investment sales and capital markets at Savills Singapore, commented that while the global real estate industry may be hit by several issues, Singapore is still an attractive market for investments.