Real estate investments up 75% q-o-q in 3Q2023, bolstered by GLS tenders: Knight Frank

Commercial real estate packages raised in 3Q2023, climbing up 27.4% q-o-q and 23.3% y-o-y to arrive at $1.5 billion. The higher value complies with the sale of Changi City Point by Frasers Centrepoint Trust for $338 million in August, with the shopping mall apparently acquired by the Zhao family from mainland China. In addition, the cumulative sale of Far East Shopping Center for $908 million to Glory Property Developments last month likewise strengthened industrial investment worth, together with the sale of the mixed-use, commercial and residential GLS area at Tampines Avenue 11 for $1.2 billion.

Residential offers made up $3.3 billion of assets value in 3Q2023, predominantly steered by the award of 5 residential GLS tenders. This represents an increase of 93.5% q-o-q, nevertheless a reduction of 12% y-o-y. Additionally, private homes registered a decline in sales activity, which Knight Frank attributes to the surge in Additional Buyer’s Stamp Duty (ABSD) rates that happened in April.

The collective sales market likewise continued to encounter headwinds amidst the unpredictable market overview. “The broadening gulf in desires between owners and property developers continued to be the biggest obstacle, intensified by improving costs, rates of interest and the excessive surges in ABSD rates, all in a climate of financial depression,” Knight Frank specifies in its record. In July, Wing Tai announced its withdrawal from the sale of Holland Tower, after the offer was made at $76.3 million in March this year.

Some $4.1 billion (over 60%) of the transacted worth originated from Government Land Sale (GLS) locations that were awarded in the pas quarter, consisting of sites at Tampines Avenue 11, Marina Gardens Lane and Jalan Tembusu.

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Chia Mein Mein, head of capital markets (land and collective sale) at Knight Frank Singapore, includes that increasing prices have triggered developers to turn towards GLS sites. Nonetheless, notwithstanding plots in prime sites, she notes that developers’ desires have actually diminished, with a lot fewer participants and more conventional bids sent in latest GLS tender exercises.

Alternatively, industrial deal value plunged to $252.2 million in 3Q2023, in which Knight Frank observes is the lowest quarterly amount recorded as the $174 million listed in 2Q2020 during the circuit breaker duration.

“Due to the current high rate of interest expense, purchasers find themselves having to move up the threat turn by incorporating value to their investments to acquire greater sustainable earnings, and this consists of acquisitions for enhancement and redevelopment,” remarks Daniel Ding, head of capital markets (land and building, international property) at Knight Frank Singapore.

Looking in advance, Knight Frank anticipates slower investment activity for the remainder of the year provided the reigning belief and obstacles in the real estate market. “In the upcoming months, the capital markets space will be qualified by capitalists on the hunt for assets being mostly focused on adding value to the estates to attain higher yields. This is to warrant the greater borrowing expenses entailed with the procurement of the property,” the report adds.

The firm has tempered its full-year approximations for investment sales, reducing forecasts from between $20 billion to $22 billion to between $18 billion to $20 billion.

Singapore property financial investment event saw an improvement in 3Q2023, registering a rise of 74.8% q-o-q to clock in at $6.9 billion, according to an October research study credit report by Knight Frank. The amount likewise represents a 19.4% development y-o-y. This notes the initial quarterly development after five consecutive quarters of decrease from 1Q2022.

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