Real estate investment sales are off to a slow start in 2023 due to market uncertainty

The global real estate company Knight Frank reports that Singapore real estate investments went to an “slow beginning” in 2023, with just $4.2 billion in investment sales being recorded in 1Q2023. This is a significant decline of 61% from 1Q2022’s $10.8 billion.

The Myst developer City Development Limited (CDL) has acquired the condo at 798 and 800 Upper Bukit Timah Road, Bukit Panjang.

It’s also the smallest amount for a quarter since 2Q2020 in which the government implemented measures known as “circuit breaker” measures during the peak of the epidemic, according to Daniel Ding, head of capital markets (land and construction and International real estate) at Knight Frank Singapore.

Residential sales totalled $1.6 billion in the quarter that began in 2023’s first. including the combined deals of Meyer Park, Bagnall Court and Holland Tower that totalled some $583.8 million.

This sale at Holland Tower is the first residential en bloc deal within the Core Central Region (CCR) since property cooling measures were introduced at the end of December. This could indicate “a emerging returning” of the interest in prime development sites following the reopening of China as per Chia Mein Mein. the head for capital markets (land and the collective sales) for Knight Frank Singapore.

She admits the en bloc market is difficult, due to the gap in expectations for price among sellers as well as developers. Between 2021 and now, Chia notes that collective sales have achieved a rate of about 33%. Comparatively, en bloc sales saw a successful rate of 63% from 2017 until 2018.

“Even when owners sign the 80% acceptance to market their shares collectively but this isn’t a guarantee for the sale will be successful. In the end, the most important factor for the mechanism of collective sales to function in the current economic climate lies in the owners’ ability to set reasonable expectations about price to attract the curiosity of developers and to get developers to recognize the fact that replacement costs for owners have significantly increased,” says Chia.

The commercial market was generally still in 1Q2023 The deal to sell 39 Robinson Road to Yangzijiang Shipbuilding for $399 million this week brought total sales for the sector up to $1.9 billion. Another noteworthy deal is Frasers Centrepoint Trust and Frasers Property’s purchase of a 50% part of Nex to $652.5 million.

The industrial sector experienced an increase in the number of investment sales in 1Q2023, soaring 62.8% q-o-q to $681.1 million. Knight Frank attributes this to the shift in focus of the market as it waits for the possible repricing of assets within the commercial market. Some notable industrial deals in the last quarter included the purchase from four Cycle & Carriage properties by M&G Real Estate at approximately $333 million, as being the sale of the 12 as well as 31 Tannery Lane by Ho Bee Land for $115 million.

Regarding market outlook, Knight Frank predicts the rate of investment activity in Singapore “to become worse before it improves” due to macroeconomic uncertainties and the volatility of the global banking industry. “Financing is now more difficult for investors, buyers, developers and banks, and will continue to be so until there are signs in the direction of global economic growth and market improving,” the consultancy states. Investors should be cautious while they watch for indications of a repricing, before making a decision on the next step.

In this regard, Knight Frank has cut its forecasts for the full year of investments from of $22 billion to 25 billion down to of $20 billion and $22 billion.