Investment sales of property so far this quarter have plunged to their lowest levels in two years – to about $3.4 billion as at March 12, although the final figure for Q1 could rise to around $3.8 billion. The tally as at March 12 reflects declines of about 57 per cent from $7.7 billion for Q4 2011 and 60 per cent from Q1 2011’s $8.4 billion.
The decline in the Q1 2012 investment sales can be attributed to weaker market sentiment on the back of global economic uncertainty, compounded by the impact of recent government measures to stabilise the property market, such as the additional buyer’s stamp duty (ABSD) and rules for industrial developments on Government Land Sales (GLS) sites sold from 2012.
Investment sales reflect the confidence of major property players in the sector’s mid to long-term prospects. Investment sales are deals of at least $10 million but includes sales of GLS sites, acquisitions by real estate investment trusts (Reits) and residential collective sales below that amount.
The investment sales market is expected to remain tepid in the near term as caution reigns amid macroeconomic volatility. Despite ample liquidity and demand in the market, there remains a mismatch between buyers’ and sellers’ expectations. However, a slight improvement in investors’ sentiment and once macro-concerns begin to fade, there could be a resurgence in transaction.
Investors keen on Asia will not ignore Singapore, given its safe and transparent markets. 2012 could be a tale of two halves – with H1 seeing tepid investment sales dominated mostly by GLS, and H2, if there is an improvement in global macroeconomic stability, may see more private deals as the bid-ask gap closes. The year could end with $20 billion to $23 billion of investment sales, down from $29.5 billion last year and $31.4 billion for 2010. However, this would still be higher than $7.6 billion in 2009.
For the Q1 2012 figure (up to March 12), the public sector accounted for $2.2 billion or nearly 65 per cent of total investment sales.
The residential sector made up about $2.3 billion or 68 per cent of total investment deals. Residential deals emanating from the private sector dropped 71 per cent quarter on quarter to $429 million, while the figure for the public sector dipped just 0.4 per cent to $1.84 billion. Although developer sales of private homes slowed down after the introduction of the ABSD on Dec 8, sales have regained momentum quickly, especially in the mass market. This has spurred developers to remain active at GLS tenders.
However, for high-end apartments and condos, transaction activity has come to a standstill. Thus far this year, only two caveats above $10 million each have been lodged, down from nine in Q4 2011 and 18 in Q1 2011. It appears that the introduction of the ABSD has a greater impact on this sector, where overseas demand has been high. Effective Dec 8, 2011, foreigners have to pay a 10 per cent ABSD rate for any purchases of residential properties.
Market watchers say residential collective sales have also slowed down as developers must now undertake to complete developing projects on any residential sites purchased from Dec 8 and selling all the units within five years from the date of contract or agreement to purchase the site – if they don’t wish to pay the 10 per cent ABSD.
Just three en bloc sales totalling $145 million have been sealed since the start of the year, the biggest of which was $96.2 million for Seletar Garden. This is a marked drop from the nearly $745 million for Q1 last year and$789 million in Q4.
The year may end with about $1.5 billion to $2 billion of en bloc sales, down from $3.2 billion last year. Smaller sites will continue to find buyers given the lower risk.
Given the protracted sale process that comes with a collective sale, the additional duty is substantial and the developer can potentially erase all projected profits, and risks assuming a loss-making position if the market goes south. This year’s successful en bloc sales will be dominated mainly by smaller sites or sites with a commercial redevelopment component.
Total investment sales in the commercial sector (public and private) have amounted to $822 million so far in Q1, down 68 per cent quarter on quarter. The only notable deal this year has been Twenty Anson, at $430 million.
The office investment sales market is expected to be quieter this year as office rentals are expected to be soft in the first half. Rents are expected to stabilise in H2 and capital values and deals to increase.
Industrial investment sales (public and private) have totalled $260 million this quarter up to March 12 – an 8 per cent share of the total investment sales pie. Quarter on quarter, the figure was down 70 per cent due partly to the lack of industrial sites that were launched for sale under the GLS programme in Q1.
Source: Business Times – 14 March 2012
I will just quote what Warren Buffet says:
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
“You know, people talk about this being an uncertain time. You know, all time is uncertain. I mean, it was uncertain back in – in 2007, we just didn’t know it was uncertain. It was – uncertain on September 10th, 2001. It was uncertain on October 18th, 1987, you just didn’t know it. “