Colliers International expects the real estate investment sales market in Singapore to maintain its positive momentum and grow 15 per cent year-on-year (YOY) to $46 billion in 2018. The latest report by the leading property services company said that it expects real estate investment to climb a further 5-10 per cent YOY in 2019.
The report noted that property developers and investors shrugged off concerns over a global trade war and heightened equity market volatility in Q1 2018. They have injected a staggering $11 billion into the Singapore investment sales market – up by 89 per cent YOY. The robust investment figure in Q1 was predominantly driven by the residential sector. Residential land sales, including several large collective sale transactions, accounted for about $9.15 billion or 83% of the total investment sales in the quarter.
Notably, the five largest deals in Q1 2018 were all residential collective sales: Pacific Mansion which went for $980 million; Park West at $840.9 million; Pearlbank Apartments at $728 million; Goodluck Garden at $610 million; and Brookvale Park at $530 million.
Ms Tang Wei Leng, Managing Director at Colliers International, commented, “Interestingly, barely five months into 2018, the transaction value of residential collective sale deals has caught up with that of 2017. Colliers noted that there were 24 transactions amounting to $8.12 billion as at May 03, close to the $8.13 billion from 27 deals last year.”
She added: “The collective sale market is likely to remain buoyant this year, barring any unforeseen events. That said, to get a deal across the line, it is also key that owners set realistic asking price. Owners’ expectations have risen in tandem with the rising property market – particularly so of late, as the cost of buying a replacement home has increased.”
Investment sales from other sectors – industrial, commercial, shophouse and hospitality – made up the remaining 17 per cent (or $1.85 billion) of the total transaction value in Q1 2018. While they are unlikely to overtake residential investment sales any time soon, Colliers believes there are some upsides ahead as most of these sectors have bottomed.
Everyone wants to know how to make money from buying and selling properties or making a rental yield. For those interested in real estate investment, the decision is between jumping in and buying (and perhaps overpaying for reading the market wrongly), and a long, hard wait where one might potentially lose a lot of capital in the process.
Real estate market sentiment at the all time high in Singapore
Understanding the property cycle and current market conditions would help those interested in real estate investment to determine if it is a good time to invest. In order to correctly understand the market, buyers of real estate investment properties need to properly model the market to capture all the inputs and outputs.
Those interested in real estate investment should only go for high quality properties in good location with historical strong rental demand. One important thing such prospective buyers should ask is, “if money is not an issue, where would you rent?”
The prospective buyer would only know where the rental demand is after speaking to 30 – 50 people. So, always buy in those areas where people want to rent (because when times are good, one can get good rentals and when bad, it is still rent-able at a lower rent), you will still be able to find tenants because of the desirable locations.
Look for units that have some price distortion or buy good facing units that are going for less premium during high market. (Note: Some more speculative projects have a price difference of 20 -30 per cent between good facing and average facing units. For example, between 2800 psf versus 2200 psf, during a low cycle, the difference could narrow to 5 to 10 per cent.)
Where possible, those interested in real estate investment should always go for landed residential housing for store of value (though yields for such investments are very low). Investors should, however, be mindful of your monthly installment load. Go also for condominiums in prime districts well known for rental demand if you are investing, and understand your tenant market so that you can target them well.
Always make sure you have the necessary skills to negotiate well to buy a property. Those interested in real estate investment, but do not have the time to do do proper homework before investing, may obtain a full detailed Property Research Report by writing to us at www.iCompareLoan.com/contact.