98% Drop in Property Investment Sales (25 Mar 2009)

SINGAPORE – Property investment sales have plunged since the start of the year, and could get even worst.

CB Richard Ellis (CBRE)’s latest figures show that sales to this point have only reached $184.6 million. This is a 98 percent drop on the same period for the past year and a 56.4 percent more depleted than the fourth quarter of 2008.

The consultancy warned the previous day that the total investment sales have the tendency to drop to levels not encountered for over a decade, with sellers and buyers held in an impasse and far apart in terms of price expectations.

The first quarter of 1998 is the sole quarter that encountered lower investment sales with just $49.28 million, as well as the Q3 during the same year as they reached $110.62 million. To date, isolated individual deals were seen by the market, though collective sales or public sales were zero.

During the period, 51.5 per cent of total sales came from residential sector sales.

Fragrance Properties spent $25 million for a freehold Pasir Panjang site, which they intend to cultivate into a residential apartment building. Besides this recent acquisition, the developer previously bought three good-class bungalows for $18.2 million as well.

This kind of development will be uncommon this year as the majority of the developers concentrate on their current projects and they seemed not to be interested to look for new sites, according to CBRE.

CB Richard Ellis also added that minimum bid applications from the developers for some of the Government land sale sites have been completely ignored.

So far in the present quarter, there have been $77.3 million total sales in the commercial market. With it, the $35.8 million deal for Le Mercier House in Mohamed Sultan Road is the only major sale, which is around $900 psf.

The Loyang Crescent site that went for $6.2 million (or about $74 psf) was the only transaction in the industrial sector. The report indicates that this year’s total investment sales could revert to the 1998 levels, when $1.35 billion was the total annual quantum.

CBRE said  “The lack of volume will continue to feature until such time when price expectations between buyers and sellers meet”.

Making new acquisitions in the current year are also implausible for real estate investment trusts due to the significant increased in dividend yields. And it would be quite risky to make acquisitions that are yield accretive.