Real estate investment activity in Singapore saw a substantial increase in the second quarter of 2024. Despite a slow market in the first half of the year due to high interest rates, investment sales rose by 63.3% in Q2, reaching SGD 6.4 billion ($4.73 billion), up from SGD 3.9 billion ($2.88 billion) in the same period the previous year. This significant jump indicates renewed investor confidence in the Singaporean real estate market.
The dominance of residential property deals in Singapore’s property market
Residential property deals were the main driver of increased investment activity. In the second quarter of 2024, residential sales reached SGD 4.2 billion ($3.11 billion), constituting a large portion of the total investment activity. The surge was largely due to government land sales in strategic locations such as Zion Road, Holland Drive, Upper Thomson Road, and River Valley Green, amounting to a total of SGD 3.2 billion ($2.37 billion). This strong performance in the residential sector highlights the high demand for housing and development opportunities in Singapore.
Challenges in the collective sales market
Despite the overall positive trend, the collective sales market for residential developments continues to face challenges. Knight Frank has noted that successful collective sales remain difficult due to the price gap between property owners and developers, compounded by the doubling of the Additional Buyer’s Stamp Duty (ABSD) rate. As a result, foreign owners are reluctant to sell due to the increased costs driving up replacement expenses. Additionally, developers are taking a cautious approach, particularly for large-area collective sale sites. They prefer smaller “mini landed en blocs” with a more manageable risk profile.
Singapore sees increased demand for commercial properties
In the second quarter of 2024, there was a significant increase in investment activity in the commercial property sector, with a 21.1% quarter-on-quarter rise in demand to SGD 1.8 billion ($1.33 billion). One notable transaction was the sale of Mapletree Anson, a commercial building, to the private equity firm PAG for SGD 775 million ($572.96 million). Shophouses continued to be attractive to foreign investors and high-net-worth families, offering an appealing alternative given the high ABSD rates on residential properties.
Muted market sentiment and future outlook
The overall market sentiment in Singapore is currently subdued as investors and buyers are awaiting a decrease in interest rates. However, there is potential for increased activity in sectors such as hospitality and retail, which are showing the greatest potential due to the normalization of tourist patterns. Knight Frank expects the momentum of investment sales to improve in the second half of 2024, with the annual total sales value projected to range between SGD 23 billion ($17 billion) and SGD 25 billion ($18.48 billion). This optimistic outlook is based on the anticipation of interest rate cuts, which could narrow the expectations gap between buyers and sellers, potentially triggering a wave of deals.
In summary, the second quarter of 2024 has seen a significant increase in real estate investment activity in Singapore. This surge is largely due to residential property transactions and a rise in demand for commercial properties. While challenges persist in the collective sales market, the overall outlook for the rest of the year is positive. There is potential for growth in the hospitality and retail sectors. Property buyers and owners can anticipate a more dynamic market as investor confidence continues to strengthen.
