While the Lion City’s residential property market is seeing a drop in demand and prices, its industrial property sector is showing signs of stabilisation signalling an opportune time for institutional investors to buy up industrial REITs.
Singapore’s red-hot residential property market appears to have fizzled out while its industrial property sector is now picking up steam, according to the third quarter data from the Urban Redevelopment Authority (URA) and analysts.
URA’s statistics showed that prices of private residential properties increased by 0.5 per cent in the third quarter of 2018 to reach 149.7 points, compared with the 3.4 per cent increase in the previous quarter.
Indeed, prior to the Singapore government’s announcements that it was increasing the Additional Buyer’s Stamp Duty (ABSD) rates and tightening loan-to-value (LTV) limits on residential property purchases in July this year, the Lion City’s residential property market was going through an en bloc fever with many deals going under the hammer.
Some notable collective sales concluded in the first half of 2018 were Pearl Bank Apartments and Park West which was sold for S$728 million to CapitaLand and S$840.89 million to SingHaiyi Gold Pte Ltd respectively.
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The en bloc fever had, therefore, prompted the Singapore government to step in to cool its residential property market.
Additionally, data from Cushman & Wakefield Inc showed that post the new cooling measures, collective sales market plummetted from S$3.8 billion of en bloc transactions in the second quarter to S$353 million in the third quarter.
“The collective sales market was decimated after the recent cooling measures,” Christine Li, Cushman & Wakefield’s head of research for Singapore told Bloomberg.
INDUSTRIAL MARKET PICKING UP
On the other hand, while Singapore’s residential property sector has taken quite a hit, its industrial and commercial property sectors are seeing an uptrend in investment sales.
According to data from Cushman & Wakefield Inc, industrial property deals soared 73 per cent to S$1.2 billion in the third quarter while office sales increased by 54 per cent to S$2.1 billion.
“Clearly these two sectors emerged as winners from the recent fallout in the residential sector,” Li told Bloomberg.
The former has seen regional players like e-Shang Redwood buying up industrial REITs like Cambridge and Viva Industrial Trust in Singapore.
Jones Lang Lasalle Singapore said this is because “Singapore’s industrial property market is showing signs of stabilisation following four years of decline.”
Citing data from JTC statistics, Tay Huey Ying, Head of Research and Consulting, Jones Lang Lasalle Singapore said islandwide all-industrial rental correction stayed modest at 0.1 per cent quarter-on-quarter for three consecutive quarters since the fourth quarter of 2017, while the second quarter of 2018 all-industrial price index flat-lined for the first time since trending down in the third quarter of 2014.
As such, this signals an opportune time for investors like e-Shang Redwood to enter the market.
A merger between e-Shang Cayman Ltd and the Redwood Group Asia Pte Ltd in January 2016, e-Shang Redwood now owns 56 industrial property portfolios in Singapore via ESR-REIT.
Formerly known as Cambridge Industrial Trust, the firm’s entry in the Singapore industrial market since June 2017 means it now owns 56 industrial property portfolios in Singapore via ESR-REIT and is now one of the largest logistics real estate platforms in Asia.
According to a statement from the firm, it now has “over 3.5 million square meters of projects owned and under development across China, Japan and South Korea, and capital and funds management offices in Hong Kong and Singapore.”
Meanwhile, another industrial property player, Mapletree Industrial Trust (MIT), said it has delivered a total return of 192.2 per cent since its listing on 21 October 2010, comprising a capital appreciation of 107.5 per cent and a distribution yield of 84.7 per cent.
“We continue to reshape and build a portfolio of assets for higher value uses through acquisitions, build-to-suit (BTS) projects and asset enhancement initiatives,” said a spokesperson from Mapletree Industrial Trust Management.
According to MIT, its BTS projects in Singapore such as at Depot Close and Sunview Drive and its asset enhancement initiatives at 30A Kallang Place “are representative of our strategic focus on growing the Hi-Tech Buildings segment, which will cater to changing needs of tenants and attract users From new growth segments.”
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