Real Estate Investment Sales Suffer in Disappointing Quarter

Several big-ticket commercial deals made up the bulk of investment sales in the second quarter of the year, while activity in the Singapore real estate market remained muted during the Covid-19 «circuit breaker.»

Physical restrictions on movement and economic uncertainty have had a material impact on capital markets in the past quarter – investment sales in the second quarter of 2020 totaled S$1.7 billion ($1.22 billion), a 73.4 percent year-on-year drop from S$6.4 billion in Q2 2019, and 41.4 percent lower than the first quarter of the year, according to new data from property consultancy Knight Frank, published on Friday.

The largest commercial deals were the divestments of Perennial Real Estate Holdings’ 30-percent stake in TripleOne Somerset to Shun Tak Holdings (S$155.1 million) and the 50-percent stake in AXA Tower to Alibaba Group's Singapore subsidiary (S$840 million), as well as the sale of the retail and commercial units of the former Chevron House by Oxley Holding and Oxley Beryl to Siriti R and Siriti C for S$315 million.

Cross-Border Sales Hit

Cross-border transaction volumes were also affected by the pandemic, but to a lesser extent. Singapore outbound investment sales in the second quarter fell 30.2 percent year-on-year to S$3 billion.

Key deals included City Developments Limited’s (CDL) acquisition of a 51.01-percent stake in Chongqing-based developer Sincere Property Group for RMB4.39 billion ($630 million) in April 2020, as well as the purchase of KSH Infra’s upcoming logistics park in Pune, India, by Mapletree Investments for Rs 300 crore ($40 million) in June 2020. 

Pent-Up Demand

Despite the slow quarter, sales are expected to increase with the onset of Phase Two, Knight Frank said. «Pent-up demand for properties across the various sectors could result in increased investment sales in the coming months upon the resumption of business activities in Singapore, especially in an environment of low interest rates and ample liquidity,» Ian Loh, from Knight Frank's Capital Markets division, said in the report.

However Knight Frank noted that despite the sharp fall in investment sales volumes, there is little evidence of distress sales. With buyers also looking for potential bargains, a widening price gap is emerging, reflecting the differing price expectations among interested parties, the report said.