Singapore property rates drop and unlock deal surge

Keppel REIT and IOI deals added major weight to headline transaction totals.

Singapore’s property investment surge in 2025 was driven by a sharp fall in borrowing costs, with interest rates dropping from “around 3% in January” to “near a 1.2%” by December, unlocking deal activity and lifting transaction volumes, according to Jeremy Lake, Managing Director of Investment Sales and Capital Markets at Savills Singapore.

The decline in financing costs quickly translated into stronger acquisitions, as cheaper debt improved returns and encouraged investors to deploy capital. At the same time, a narrowing gap between buyers and sellers helped accelerate transactions. “The price gap… has largely disappeared,” Lake said, removing a key barrier that had slowed deals in prior years.

Government policy added further momentum. An active land sale programme increased supply, with developers moving to secure sites and “replenishing their land banks.” This pushed up bidding activity and supported overall capital deployment across the market.

Large transactions amplified the surge. Deals such as Keppel REIT’s “1/3 acquisition of Marina Bay Financial Center” and IOI’s purchase of “a 50.1% stake in South Beach” significantly boosted headline volumes, highlighting strong demand for prime assets.

The outlook for 2026 remains firm, supported by aligned market conditions. Lake noted that these conditions are “the ingredients for an active market.” This balance is expected to sustain deal flow even as global risks persist.

Property prices are also entering a recovery phase after bottoming in 2025. Lake said “prices are probably bottomed… and we expect prices to edge up this year,” with gains likely to be gradual as capital returns.

Investor demand remains broad-based, spanning S-REITs, developers, high net worth individuals, and property funds. Singapore continues to rank as “a high priority market” for regional investors, reinforcing its appeal as a stable destination for capital.

Risks remain tied to external developments. Lake pointed to recent tensions in the Middle East, but said they are unlikely to be “a major game changer” unless conditions escalate and affect investor sentiment or capital flows.

As financing conditions ease and pricing aligns, Singapore’s property market is entering a more competitive phase. Continued demand, improving liquidity, and rising prices are expected to intensify competition for assets and sustain strong deal volumes into 2026.