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Investment sales dropped 10.8% q-o-q to $5 billion in 4Q2022, owing to borrowing costs and uncertainty in macroeconomics slowed business, according to research conducted by Colliers. However, the firm says that the total amount of investments in 2022 was $29.1 billion, which represents an 2.8% increase y-o-y, which was boosted by an active beginning in the calendar year.
Despite the slowdown in 4Q2022, this quarter saw several large transactions happen. This includes the sale of Jurong Point and Swing By @Thomson Plaza by Mercatus Co-operative for $2.161 billion as well as the sale of 50% part of Lazada One by ARA Asset Management for $361.49 million in addition to a number of private residential land sales.
The divestment undertaken by Mercatus helped boost commercial sales during 4Q2022 as the segment recorded the 87.7% q-o-q surge to $2.8 billion. The full year commercial sales rose 78.7% y-o-y to $11.4 billion.
Residential sales fell 51.7% q-o-q to $1.3 billion, aided by a decrease in the collective sales process and the luxury sales, according to Colliers. In 2022 as a whole the sales of residential properties fell 18.1% y-o-y to $10.5 billion.
In contrast, industrial sales fell 39.7% q-o-q to around $400 million. The consulting firm attributes to a number of significant deals that are still awaiting JTC approval. The full year’s industrial sales declined 59.7% y-o-y.
Colliers expects the market for investment to be in price discovery mode for the first quarter of the year as investors adapt to the new norm of lower rates of interest and slow growth. The company is predicting that investments sales to reach about $25 billion by 2023, which represents a drop of 15% per year. It also expects transactions to be “bite-sized” due to larger deals usually require more time and more leverage.
The consultancy believes an increase in activity as likely to be seen in the second half of 2023 when the trajectory of interest rates and inflation become more clear. “Despite the fact that yield spreads are narrowing for those who want to invest in high-quality fundamental properties, Singapore properties still offer long-term capital appreciation and decent returns on all investments,” remarks Tang Wei Leng who is the chief executive officer and director of capital markets and investment services at Singapore in Colliers.
Tang says private wealth investors could become more prominent on the market in the coming year, due to tighter financing requirements as well as other macroeconomic headwinds force institution investors to be forced to step down or take a position. She predicts that private wealth capital to concentrate on the residential market for luxury as well as strata-titled commercial spaces and shophouses.
In the meantime, Catherine He, Colliers director and head of research in Singapore says that prime office and prime logistics capital value will be supported by positive growth in rental and abundant liquidity. Additionally the prime value of retail assets is likely to increase over the next few months. “As as a result the net yields are likely to stay relatively steady until sales pick up during the latter half of 2023.” she adds.