Knocked out: Strata-titled retail unit transactions dramatically dropped 70.4%

TDSR punched it right in the face.

Prices of and transactions within the Singapore property market are slowly crumbling under pressure brought by the government's cooling measures. Strata-titled retail units weren't spared and were among those who were heavily knocked out by TDSR.

According to Colliers International, URA’s latest statistics revealed that islandwide retail prices fell by 0.3% QoQ in 2Q 2014 after remaining flat in 1Q 2014, as investment interest in retail units continued to be restrained by the effects of the Total Debt Servicing Ratio (TDSR).

Here's more from Colliers International:

The total strata-titled retail sales in the first half of 2014 accounted for about 190 transactions. Compared to the first half of 2013, when sales volume of strata-titled retail units chalked up an impressive 642 transactions before the imposition of the TDSR, the number of transactions have shrunk by about 70.4% in 1H 2014. In the space of a year, the strata-titled retail sales market has had the wind dramatically taken out of its sails.

In the leasing market, retail space registered an increase of 0.6% QoQ in 2Q 2014, after falling 0.3% in the previous quarter. Given the cautious sentiment evident in the first half of 2014, as well as retailers’ resistance to rental increases in a highly challenging and competitive trading environment, retail rents generally plateaued in the first half of 2014.

Despite some uncertainties in the first half of 2014, some factors could still lend strength to the retail sector in the second half of 2014. The Singapore economy is expected to grow at a modest pace in 2014 and new stores and F&B outlets will continue to make inroads by setting up shop in a variety of locations. Nonetheless, retail rents and prices are not expected to increase by any substantial degree due to the lingering challenges in operating environment.

In Orchard Road, the growth in the average monthly gross rent for prime ground floor retail space should remain within a range of -1% to 2%, while the popular Regional Centres could exhibit comparatively better rental growth of between 1% and 3%, in 2014.

Likewise, activity in the strata-titled retail space market (including those in mixed-use developments) is unlikely to improve significantly as it remained spooked by the TDSR framework. As a result, capital values are expected to continue to trend sideways in the second half of the year, as it did in the first half.

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