Investment Landscape Remains Challenging
Singapore’s economic growth is expected to slow to about 0.5% to 2.5% yoy in 2023, from 3.6% yoy in 2022. The Federal Reserve delivered a small rate hike by a quarter of a percentage point in late March, providing a signal that the rate-hiking cycle may be near its end. While China’s unexpected reopening may be a shot in the arm, investors remain cautiously optimistic. Amid the recent banking turmoil in the United States and fears of contagion, business confidence may dampen, limiting capital expenditure and investors’ ability to deploy capital. Given increasing economic uncertainties, flight to safety for global capital is expected to continue, and this could benefit ‘safe havens’ such as Singapore.
Q1 2023’s Investment Volume Lowest Since Q4 2020
Total investment volumes in Q1 2023 fell by 32.2% qoq to $3.5 billion (b). Investment volumes were led by the private residential ($1.5b), followed by commercial ($1.3b) and industrial ($0.5b) sectors. As caution prevailed amid elevated financing costs and economic uncertainties, Q1 2023’s total investment volume was the lowest figure recorded since Q4 2020 ($3.3b). The largest deal in the quarter was Mercatus’ sale of 50% stake in NEX to Frasers Property and Frasers Centrepoint Trust for $652.5 million (m). Another significant deal was the acquisition of 39 Robinson Road for $399m by a subsidiary of Yangzijiang Shipbuilding. While the sale of 39 Robinson Road was done at a significant discount, we believe this to be a one-off event. Office capital values are broadly expected to remain unchanged.
Despite the lack of awarded Government Land Sales (GLS) sites in the quarter, total residential transaction volume rose by 12% qoq to
$1.5b, which is expected to witness a further uptick during the next quarter in line with tender closing of the Marina Gardens Lane and Lentor Gardens sites. The residential en bloc market witnessed a pick-up in activity with three successful deals sealed in the quarter, namely, Meyer Park ($392.2m), Bagnall Court ($115.3m) and Holland Tower ($76.3m). This is evident of developers’ appetite to replenish their depleting land banks despite heightened development risks. That said, developers remain largely cautious and selective in their bids. Nonetheless, prime residential sites remain highly sought after as seen from the robust tender for three adjoining freehold bungalows at Chancery Hill Road and Dyson Road, which were eventually sold for $61.1m.
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