Savills Research reports strong performance of the residential investment sales sector for the second consecutive quarter this year. Investment sales in the residential sector grew 6.6% Quarter-on-Quarter (QoQ) to S$3.58 billion extending the 7.4% QoQ growth in the previous quarter.
In Q3, residential investment sales constitute 72% of total investment sales value, a surge from the 45% in Q2. This is followed by the Commercial (14%), Industrial (13%) and Hospitality (0.6%) investment sales sectors. (Please refer to Graph 1)
Private residential investment sales increased by 77.2% QoQ to $2.48 billion in this quarter. This healthy performance is largely attributed to the larger collective sales deals, healthy take-up of new launches and dwindling unsold stock spurring developers to replenish their land banks, leading them to look to collective sales sites. As such, this quarter saw the largest residential collective sale transaction year-to-date – Chuan Park, sold to Kingsford Development and MCC Land for S$890.0 million.
Similarly, the proportion of investment sales in the industrial segment continued to increase for the second consecutive quarter, to S$673.4 million in Q3, more than tripling from the S$198.1 million recorded in Q2. This sales figure was also more than double of the S$256.9 million in the same period a year ago. This surge was attributed to more transactions and the size of certain transactions. The largest deal in the quarter was an acquisition of a Cold Storage facility by Ascendas Reit from PGIM Real Estate for $191.9 million, the first Cold Storage facility to be acquired by the Reit in Singapore.
On the other hand, residential investment sales in the public sector saw a contraction of 44.1%, amounting to S$1.09 billion. This was due to the smaller price quantum of the sites awarded under the Government Land Sales (GLS) Programme. While the number of GLS sites awarded in Q3 was slightly more than that in Q2, the scale of the sites was significantly lower this quarter.
Similarly, Commercial investment sales contracted from 30.3% in Q2/2022 to 14.4% this quarter. The significant fall in office investment sales was largely attributed to the lack of major transactions. There was only one block transaction in Q3/2022, which was for the sale of OCN Building for S$42 million from Lian Beng Group to an undisclosed and unrelated third party. On a Year-on-Year basis, the investment sales were also 26.1% lower than the S$972.7 million registered in Q3/2021.
Alan Cheong, Head of Savills Research, adds, “High interest rates and increased global political uncertainties are changing the profile investors away from large private equity towards family offices like corporate entities and traders.
Savills Research projects that 2022 will end the year with a total investment value of $24 billion to $25 billion, slightly below the Q2 forecast of $26 billion to $29 billion. How the market will develop in 2023 depends heavily on whether Central Banks pivot on their current stance of raising or keeping interest rates high. If rates do inflect, large private equity investors could resume acquisitive activity for big ticket item sales.
Savills Research provides in-depth analysis of property market trends, forecasts from our professional research team and market commentary to help you make the right property decisions. Please find the Sales and Investment Briefing for Q3 2022 attached, for your reference.