Wednesday, December 12, 2007

Investment sales of property have hit an all-time record of $50.8 billion so far this year - up 66 per cent from the whole of last year.

Goldman Sachs, Europe’s SEB and Dubai World also make big purchases.

Investment sales of property have hit an all-time record of $50.8 billion so far this year - up 66 per cent from the whole of last year.

And for the first time, a foreign player has emerged as the biggest buyer - Macquarie Global Property Advisors (MGPA) with $4.3 billion of purchases.

In fact, foreign institutional investors/property funds have been a dominant buying force this year, especially in the office sector, notes CB Richard Ellis executive director Jeremy Lake.

Besides MGPA, other big foreign investors in Singapore’s property market in 2007 include US heavyweight Goldman Sachs (with an investment of over $800 million), European pension fund manager SEB, which bought SIA Building and 12 floors at Springleaf Tower for a total $751 million, and Dubai World Group, with a total investment of over $500 million.

US-based Wachovia Development Corporation also entered the Singapore property market this year, with more than $700 million invested so far in the Farrer Court and Char Yong Gardens collective sale sites, and apartments at a new condo, Cliveden at Grange.

‘The Singapore property market has become much more appealing to global buyers over the last two to three years. In a reversal of the perfect storm, a series of factors have combined to create a sweet spot for Singapore: including the Integrated Resorts and F1 attractions, Singapore emerging as a wealth management hub and financial centre, the whole remaking of Singapore story, and an oversold property market, which made Singapore relatively attractive to global players,’ Mr Lake explains.

CBRE’s investment sales figures include land deals, collective sales, and transactions of entire office blocks and other buildings, as well as strata-titled units of at least $5 million.

The strong level of investment sales reflects major property players’ continued confidence in the mid to long-term prospects for the Singapore real estate sector.

With $50.8 billion done so far this year and another three more weeks to go, CBRE reckons the full-year figure may be about $52 billion.

The firm attributes the big jump over last year’s $30.6 billion to ‘the meteoric performance of the collective sales market in the first-half and the very strong office market’.

The residential and office sectors combined to account for about 90 per cent of the total value of investment sales so far this year.

Office investment sales more than doubled, from $4.4 billion in first-half 2007 to around $10.5 billion in the second half.

However, residential deals halved from $20.3 billion in H1 to $10.3 billion in H2, on the back of a drastic slowdown in collective sales.

With the current en bloc sales slowdown expected to continue, next year’s overall investment sales of property is likely to be lower, probably reverting to the 2006 level of around $30 billion, Mr Lake reckons.

‘However, the office market is likely to remain strong. We’ve not seen the pool of buyers diminish in the past few months,’ he added.

Jones Lang LaSalle’s regional director and head of investments Lui Seng Fatt too reckons 2008 will be a more stable year for investment sales.

He also projects that the public sector, comprising primarily Government Land Sales, will account for a bigger slice of total investment sales in 2008, at about 40 per cent - up from a share of about 22 per cent so far this year.

‘For the private sector, the strong en bloc sale performance seen in the first seven months of this year is unlikely to be repeated, but we still expect to see healthy land prices being maintained,’ Mr Lui suggests.

CBRE’s data shows that the biggest property deal in the public sector so far this year has been the $2.02 billion sale of Marina View Parcel A to MGPA, followed by the $1.69 billion sale of the former NCO Club and Beach Road camp grounds to a consortium comprising City Developments, Dubai World and Elad Group.

In the private sector, the top deal has been Farrer Court, which was sold for $1.34 billion to a consortium including CapitaLand, Hotel Properties, Wachovia and a foreign fund. The next biggest transaction was MGPA’s $1.04 billion purchase of Temasek Tower.

Mr Lake also observed that the $50.8 billion overall investment sales figure this year was close to the $54.9 billion in the eight years from 1996 to 2003.

Source : Business Times - 11 Dec 2007

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