Singapore public residential investment sales predicted to decline in 2H13

The new TDSR framework is partly to blame.

According to Knight Frank, GLS sites have been garnering interest from developers in the past three years, especially foreign developers who are looking to diversify geographically or local developers who are diversifying across industries or the various real sectors.

However, with the recent government initiatives to moderate land bid prices and to promote financial prudence by property purchasers with the new Total Debt Service Ratio (TDSR) framework, we expect developers to be more measured in choosing and bidding for GLS sites.

The upside for developers’ profit margin is likely to be affected due to more constrained selling prices with the TDSR assessment on property purchasers. In addition, the initiative from URA to release a few land sites simultaneously on the same day requires developers to be more prudent in their selection of land sites.

The lack of plum sites at well located areas;with most sites at far-flung suburban locations available under the 2H 2013 GLS Programme would also translate to lower land bid prices and overall investment value.

As such, public investment sales for residential sector is projected to trend lower in 2H 2013.

Continuing Interest from Investors, especially in the Commercial and Hotel Sector: The commercial and hotel investment market remains active as both local and foreign investors show continuing interest in this sector.

Hotel and retail developments are sought after though availability remains a quandary. While foreign investors are still observed to enter the local market, some of the local investors are also expanding their foothold in other Asian countries in view of more available developments in the market and the potentially more attractive yields.

While liquidity in Singapore’s investment sales market remains for now, the compressed yields on the back of high selling prices, coupled with limited commercial properties available for sale, continue as key obstacles for the conclusion of successful deals

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