Singapore investment sales to hit up to S$23b for full year 2024

Total sales are already at S$18.9b for the first three quarters of the year.

In a recent report, Savills noted that although the US Federal Reserve lowered its target rate to 4.75% to 5% in September, down from 5.25% to 5.5%, financial markets reacted nonchalantly as they had already priced in the rate cut. 

Thereafter, mainstream market observers expected further cuts on the way for 2024, believing that inflation was under control. 

Here’s more from Savills:

However, a stronger than expected US payrolls figures in September caused financial investors to readjust their views on the path of interest rates moving forward. The tech laden NASDAQ and S&P500 indices peaked on 10 July 2024 and 30 September 2024 respectively, they are now hovering just below those levels. Concerns now have turned to whether inflation is truly subdued and if a recession is looming beyond the 2024 horizon.

While financial markets grapple with predicting interest rates and economic directions, the property market at this juncture, in our opinion, is driven more by other factors. These factors include a relative scarcity of prime investible assets and non-economic considerations like capital safety. 

On the institutional end of the business, the availability of prime income producing commercial buildings for sale remains low. Many CBD Grade A office buildings and prime shopping malls around the island are held by REITs or landlords who intend to hold them for the long term. If ever there was a trophy asset for sale, a suitor would likely be found, even if the yield happens to be marginally below the total cost of debt. 

For properties that fall off the radar of institutional investors, their target audience is often less sensitive to the yields versus interest rate trade-off , focusing instead on the need for capital preservation or the need to buy for own use. With the impact of the money laundering crackdown of August 2023 fading, ultra high net worth investors are returning to the market, particularly for non-residential properties. 

Thus, we expect to see further momentum building on the strata offices, hospitality and conservation shophouses front. The industrial sector, however, may see limited transactions due to stringent government regulations regarding asset trading and the short-term nature of industrial land leases. 

For the first three quarters of this year, investment sales totalled S$18.85 billion, a 32.6% YoY increase over the S$14.21 million recorded for the same period last year. The big-ticket items transacted in Q3/2024 are unlikely to be repeated in Q4/2024, along with the rejection of the Jurong Lake District land bid (which was about S$2.5 billion), we maintain our forecast of S$22.0 to S$23.0 billion for the full year. 

Although interest rates have fallen, there is still a large spread between net yields and total borrowing costs. While one or two mega deals may conclude in the coming quarters, investment sales would generally be driven by the return of ultra-high net worth individuals, setting the narrative for 2025.