A total of S$36 billion worth of investment sales were concluded in 2017 based on figures compiled by Savills. This is an increase of 59% compared to the S$23 billion concluded a year earlier.
Compared the fourth quarter of 2017 with the earlier quarter, investment sales grew 8.3% to S$10.8 billion. THis was driven by the sale of a commercial site at Beach Road and residential sites at Jiak Kim Street and Fourth Avenue.
The residential segment was the standout performer in 4Q2017, contributing about 66% of S$7.1 billion of total investment sales volume.
Over the quarter, two government land sales (GLS) sites and 24 private land parcels were acquired by developers for a total of S$6.3 billion.
In spite of the government’s cooling measures still being in place, domestic and foreign developers continued to bid aggressively.
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For example, the winning bid of S$1,733 psf per plot ratio for a Jiak Kim Street plot was the highest recorded for residential sites.
In the same breath, en-bloc transactions such as Parkway Mansion in East Park (S$1,536 psf per plot ratio) and Royalville in Bukit Timah (S$1,960 psf per plot ratio) transacted at record levels in their respective micro-markets.
The two largest commercial sector deals concluded in 4Q2017 were the sale of the Beach Road commercial site and Chevron house according to Savills.
The commercial site at Beach Road was from the 2H/2017’s GLS reserve list. A joint venture of GuocoLand and Guoco Group beat four other competitors in the state tender, putting a bullish bid of S$1,706 psf per plot ratio.
This deal set a market record that beat the price of S$1,689 psf per plot ratio registered by IOI properties for a white site along Central Boulevard in Nov 2016.
Investment Sales Outlook
Savills foresees that investment levels may revert back to those seen in 2016.
A range of between S$25 to S$27 billion of investment sales is anticipated to be completed in 2018.
One driver for the decreasing investment sales volume is the stipulation of a traffic study for en-bloc transactions. The government mandated such a study late in 2017 to ensure that developers of en-bloc sites do not overbuild and place undue pressure on existing infrastructure.
The decline in investment sales volume is also anticipated to be driven by the lack of investible stock, according to Savills.
The availability of large, good quality investible assets is becoming a rarity. and unless developers construct such buildings, there is unlikely to be the huge deals seen over the last year.