Residential investment sales surge 23% to a whopping $10.6b in 2011

The residential investment market amounted to $2b in 3Q11, accounting for a significant 45% of market share.

Accrording to CBRE’s report, real estate investment sales in the residential sector totaled $10.6 billion in the year-to-date (up to 28 September), exceeding the turnover in the same period last year by 23 percent. However, Q3 2011 residential investment sales represented $2.0 billion, less than half of previous quarter’s $4.7 billion. Residential investment sales represent a sizeable share, usually around 35-50 per cent of the overall Singapore real estate investment flows. In the third quarter, residential investment sales still contributed a significant 45 per cent of the investment pie.

Ms. Petra Blazkova, Director, Head of Research said, “The residential investment market was resilient in the first half despite the property cooling measures introduced in January. Given the recent global economic uncertainties increasing, the investment mood has turned cautious and this is reflected in the slowdown in sales momentum.”

She continued, “In the en bloc residential market, $477.4 million worth of transactions over six deals was a shade of the $1.0 billion worth of deals transacted in the previous quarter. Even so, this is a reasonably strong showing in any quarter, accounting for a significant 24 percent of Q3’s total residential sales. The recent sale of the Hong Leong Garden Shopping Centre apartments for $171.0 million was the biggest en bloc deal in the year so far. Unlike the last two quarters, participation by foreign players, especially Chinese developers, was visibly absent this quarter and all the buyers were local developers.”

Another residential submarket – the Good Class Bungalows – also saw reduced sales this quarter. Only four GCBs were sold compared to 19 in Q2 2011. However, a GCB at Chatsworth Road set a new price record at $2,083 psf, beating the previous high at $2,038 psf in February this year.

Six residential Government Land Sales totaling $1.1 billion this quarter were transacted. The residential GLS still accounted for the major share of the residential investment market at 56 percent in Q3 2011. Ms. Blazkova added, “A residential GLS site near an MRT station would still command strong interest among big developers. This is demonstrated by the surprising 15 bids received for the Pheng Geck Avenue site which is near the Potong Pasir MRT. For developers who prefer not to go through the cumbersome process of en bloc acquisition, the GLS programme offers a less time-consuming route of acquiring land bank. In the coming quarter, developers can choose from at least nine residential GLS sites to bid.”

The anti-speculation measures introduced in January this year has driven more investor interest to the commercial property sector. This quarter’s office investment turnover accounted to $656.0 million.

Ms. Blazkova added: “There are more office buildings for sale in the market and healthy investor appetite for such assets assuming the price is correct. The office strata market remained active with 4 strata floors in Samsung Hub and several office units in The Adelphi, totalling $120.0 million and $26.5 million respectively, were sold this quarter. The largest en-bloc office deal – RCL Centre – was transacted at $175.0 million.

Amongst the most active buyers were the private Asian and Singapore investors as well as non-property related listed companies, whose allocating surplus cash to real estate. Other most active groups were new real estate funds as well as insurance companies. Excluding the recent $311.8 million GLS site at Robinson Road/Cecil Street, private office investment sales to date totals $344.1 million this quarter which is a far cry from the $1.2 billion private sales in Q2 2011.”

CBRE estimates that total real estate investment sale (both commercial and residential) totaled $21.2 billion year-to-date in Q3 2011, which exceeded the turnover in the same period last year by 20 per cent. It is expected to fall short of last year’s $29.1 billion level by 10 per cent to 20 per cent). CBRE estimates that overall investment volumes at the end of the year will be between $23 and $26 billion.