EVEN with a doubling of Singapore’s real estate investment sales value in the third quarter of 2023, Savills Singapore has cut its full-year projections in view of a dimmer macroeconomic outlook.

The real estate services provider now forecasts total investment sales in Singapore at S$19 billion to S$21 billion, down from the previous S$24 billion to S$25 billion range.

This is due to the possibility of new conflicts erupting, the rewiring of supply chains, political purges and the contagion effect arising from the Israel-Hamas conflict, Savills said on Wednesday (Oct 18).

Potential rebound in 2024

Though Savills continues to foresee large-ticket transactions for the rest of 2023 to potentially H1 2024, it expects overall values to be lower than in the pre-pandemic decade, with institutional investors likely to see a cutback in deal counts. 

“While 2023 will be an underwhelming year for the real estate investment market, it being a low point in terms of sales value may help 2024 see a strong rebound,” said Jeremy Lake, managing director of investment sales and capital markets at Savills.

In Lake’s view, investor sentiment may improve in 2024 as interest rates fall and global economic growth pick up, with Singapore remaining a favoured market for both private and institutional investors from the region and beyond. 

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Savills’ lower 2023 projection comes despite a strong showing for the real estate investment market in Q3, in which S$7.1 billion worth of deals were achieved, compared with S$3.6 billion in the previous quarter.

Public sector drove Q3 performance

Total investment value for Q3 largely comprised public-sector transactions, with seven government land sales (GLS) land parcels awarded for S$4.2 billion, or 58.3 per cent of the total value.

Savills noted that this is the highest quarterly value recorded under the GLS programme since Q3 2011. This is mainly due to the sale of several large sites, including the commercial and residential site at Tampines Avenue 11, which went for S$1.2 billion.

Residential sites and properties made up almost half (48.1 per cent) of Q3’s total investment sales value at S$3.4 billion, or twice that of the S$1.7 billion recorded in the previous quarter.

Private-sector transaction values were up quarter on quarter by 2.8 per cent, amounting to nearly S$3 billion in Q3.

Volumes were, however, down by 31.6 per cent from the previous quarter, which Savills said was likely due to the inauspicious Hungry Ghost Festival, higher Additional Buyer’s Stamp Duty (ABSD) rates and a continued high interest rate environment.

“The hefty 60 per cent ABSD for foreigners has sharply curtailed demand from this group of buyers, in particular the high-end market segment. The recent investigation of a high-profile money-laundering case may have also dampened market sentiment,” said Savills of the private housing sector.

“For locals and permanent residents, it has been the rising mortgage rates and economic challenges that have affected market activity. Consequently, for developers when it comes to the bidding of land, caution prevails.”

Commercial investment sales values rose as well, growing 62.2 per cent quarter on quarter to S$1.7 billion, despite fewer deals being done.

This made up 23.7 per cent of overall Q3 investment sales value and was largely due to the S$908 million collective sale of Far East Shopping Centre, as well as Frasers Centrepoint Trust’s S$338 million divestment of Changi City Point.

“While the global real estate industry may suffer from a host of problems, Singapore has that unique selling point that being a safe haven, there will still be a base level of transactions coming from those (safe-haven investors) – especially the ultra high-net-worth families seeking to diversify from riskier assets and countries,” said Alan Cheong, executive director of research and consultancy at Savills.