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Investments in Singapore’s real estate One Sophia market got off to a slow start in 2023, with only $4.2 billion of investments recorded in the first quarter. This marked a 61% decrease compared to the first quarter of 2022. The quarter recorded the lowest investment sales since the circuit breaker measures in the second quarter of 2020.
Residential deals amounting to $1.6 billion took place in the first quarter of 2023, with collective sales for Meyer Park, Bagnall Court and Holland Tower making up much of the total at $583.8 million. The sale of Holland Tower was the first successful residential enbloc transaction in the Core Central Region since property cooling measures were installed in December 2021, suggesting a return to prime location development sites with the reopening of China.
However, the gulf in price expectations between sellers and developers continues to be a challenge, with a collective sales success rate of only 33%. This is in comparison to a success rate of 63% in the years of 2017-2018. The key to revive the collective sales mechanism, Chia Mein Mein, head of capital markets (land and collective sale) at Knight Frank Singapore, states, is for owners to adopt reasonable price expectations, and for developers to appreciate the increased replacement costs of owners.
The commercial sector was relatively quiet in the first quarter, despite the sale of 39 Robinson Road to Yangzijiang Shipbuilding worth $399 million, and the acquisition of a 50% stake in Nex by Frasers Centrepoint Trust and Frasers Property worth $652.5 million. On the other hand, the industrial sector experienced an increase in investment sales, rising 62.8% q-o-q to $681.1 million.
As for the market outlook, Knight Frank predicts it to worsen before it gets better due to macroeconomic uncertainties and volatile global banking sector. This is leading to tougher financing for buyers, investors, developers and banks, meaning visible signs of global economic and financial stability are necessary before there is likely to be an uptick in investments. The consultancy has consequently adjusted its projections for full-year investment sales, from a range of $22 to $25 billion to a range of $20 to $22 billion.