Although a soft economy and weak fundamentals continue to affect Singapore, investors are now beginning to look for a turnaround in a market with an abundance of the type of core assets that are currently in demand across the region, according to Emerging Trends in Real Estate® Asia Pacific 2017, a real estate forecast jointly published by the Urban Land Institute (ULI) and PwC.
The beaten-down core space in Singapore has seen revived interest, although prices have yet to fall enough to attract serious buyers. As the only major market in Asia currently in a down cycle, funds are looking for reasons to invest there. A single big purchase has boosted transacted values from an otherwise low base, while Chinese investors were rumoured to be looking in Singapore and may be early buyers given their relatively low level of price sensitivity.
On a total-return basis, benchmarks are proving more resilient across the region, although they have registered significant declines in China, Hong Kong (where mainland capital is active), and Singapore. Several experts predict that the city state will see moderate, if any, upward rent adjustments in the next 12 months.
“Singapore’s low ranking in this year’s report has been attributed to various factors including over-capacity in office space, falling retail sales and a residential market correction ” said Dr. Seek Ngee Huat, Chairman of ULI Asia Pacific, and Chairman, Global Logistic Properties. “However, the report findings indicate that Investors still believe in the long term fundamentals of Singapore and are on the look out for investment opportunities.”
“Singapore’s decline in ranking, largely due to over-capacity and decline in demand, is not unexpected. Focusing on the positive, we could be close to the bottom of the cycle and we are seeing opportunities to invest. I hope, given the uncertainties in local and global economy, there will be an increase in transactions across asset classes over the next 12 months,” said Yeow Chee Keong, Real Estate and Hospitality Leader, PwC Singapore.
This year’s Investment Prospects survey shows a strong shift away from last year’s favorites, which featured core markets in Japan and Australia, in favor of emerging-market destinations, with two Indian cities topping a list, which also includes Vietnam and the Philippines and Shenzhen in 5th position. Other major survey findings include steep declines in the popularity of gateway cities with the exception of Shanghai, which has seen a resurgence in foreign investment over the last couple of years, despite high prices. This overarching shift reflects the difficulty in sourcing core assets in an environment where owners have few other places to invest their capital if they sell, together with the growing urgency of investors’ ‘quest for yield’ as returns are squeezed ever lower.
Emerging Trends, which is being released at a series of events across Asia over the next several weeks, provides an outlook on Asia Pacific real estate investment and development trends, real estate finance and capital markets, and trends by property sector and metropolitan area. It is based on the opinions of 604 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
The full report is available HERE.