Investment in Singapore’s property sector cools

Singapore real estate

Singapore’s total real estate investment volume in Q3 2022 moderated to $4.78 billion – a substantial 70.2% drop as compared to that in the previous quarter given more cautious market sentiments amid heightened macroeconomic headwinds, according to a report by Cushman & Wakefield.

Investment sales across all sectors dropped to S$4.78 billion ($3.35 billion) in the July through September period from S$16.1 billion booked in the second quarter, and posted a 39% decline compared to the S$7.9 billion of transactions closed in the third quarter of last year.

The commercial sector accounted for much of the slowdown in deals, with trades of office and retail assets falling 95% from the second quarter total, as sales of smaller assets like strata offices and shophouses dominated the market and investors backed away from mega-deals requiring large scale borrowing.

“The commercial investment sales market tumbled in Q3 2022 given the scarcity of quality commercial assets amid more challenging market conditions,” said Xian Yang Wong, research head for Singapore at Cushman & Wakefield. “Many property owners / long-term investors would prefer to keep the high-quality assets in their portfolio instead of divesting them, especially during such a volatile environment.”

Despite the slowdown over the past two quarters, overall real estate transactions for the January-September 2022 period still hit S$26.9 billion to exceed the S$26 billion recorded in 2021, by 3 percent.

Looking ahead Cushman & Wakefield predicts investment in the city-state’s real estate will cool still further in the fourth quarter due to stronger headwinds, but does not expect asset owners to start lowering prices.

“Capital values are expected to stay robust amid rising rents and strong seller holding power,” the report added.

With borrowing costs rising and economic uncertainty growing, Cushman & Wakefield now projects that property investment in Singapore this year will total no more than S$31 billion, down from their prediction last quarter of S$34 billion for all of 2022.