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

Singapore realty investment activity viewed an improvement in 3Q2023, signing up an increase of 74.8% q-o-q to reach at $6.9 billion, according to an October study report by Knight Frank. The amount also stands for a 19.4% enhancement y-o-y. This marks the first quarterly growth after 5 consecutive quarters of decline since 1Q2022.

Chia Mein Mein, head of resources markets (land and cumulative sale) at Knight Frank Singapore, includes that rising prices have actually triggered builders to change towards GLS spots. However, notwithstanding plots in prime sites, she mentions that builders’ appetites have shrunk, with a lot fewer participants and even more conventional bids sent in recent GLS tender exercises.

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

The cumulative sales market also continued to encounter headwinds in the middle of the unpredictable market overview. “The broadening gulf in desires between owners and property developers stayed the largest obstacle, exacerbated by growing prices, rates of interest and the prohibitive increases in ABSD rates, done in an environment of financial pessimism,” Knight Frank mentions in its record. In July, Wing Tai revealed its drawback from the sale of Holland Tower, after the offer was made at $76.3 million in March this year.

Residential offers made up $3.3 billion of investment value in 3Q2023, mainly pushed by the award of 5 residential GLS tenders. This stands for a rise of 93.5% q-o-q, but a decline of 12% y-o-y. At the same time, private residential properties signed up a decrease in sales event, which Knight Frank attributes to the surge in Additional Buyer’s Stamp Duty (ABSD) rates that took effect in April.

The company has tempered its full-year assessments for investment sales, cutting forecasts from in between $20 billion to $22 billion to in between $18 billion to $20 billion.

Moreover, industrial purchase value plummeted to $252.2 million in 3Q2023, in which Knight Frank notes is the lowest quarterly amount recorded since the $174 million listed in 2Q2020 during the circuit breaker duration.

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Business estate packages increased in 3Q2023, climbing up 27.4% q-o-q and 23.3% y-o-y to hit $1.5 billion. The greater price adheres to the sale of Changi City Point by Frasers Centrepoint Trust for $338 million during August, with the mall supposedly purchased by the Zhao family group from mainland China. On top of that, the collective sale of Far East Shopping Centre for $908 million to Glory Property Developments last month likewise strengthened industrial investment worth, along with the sale of the mixed-use, business and non commercial GLS site at Tampines Avenue 11 for $1.2 billion.

Looking ahead, Knight Frank anticipates slower financial investment event for the remainder of the year offered the prevailing belief and obstacles in the estate market. “In the coming months, the capital markets area will certainly be qualified by investors on the search for assets being mainly concentrated on bring in worth to the estates to achieve greater yields. This is to validate the greater borrowing prices included with the purchase of the property,” the report adds.

“Due to the present high interest cost, purchasers end up having to go up the threat curve by adding worth to their investments to get greater sustainable earnings, and this includes procurements for growth and redevelopment,” remarks Daniel Ding, head of capital markets (land and building, global real estate) at Knight Frank Singapore.

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