2023 to be ‘underwhelming’ year for real estate investment market: Savills Singapore

Savills projects 2023 investment sales to hit between $19 billion and $21 billion in Singapore, down from its previous forecast range of $24 billion to $25 billion, due to headwinds such as the possibility of new conflicts erupting and the contagion effect arising from the recent terrorist attacks within Israel. While 2023 may be an underwhelming year for the real estate investment market, there is the possibility that large ticket items may still be transacted for the rest of the year.

The Singapore real estate investment market saw a significant boost in 3Q2023, with deals worth $7.13 billion recorded – double that of the previous quarter. This was mainly due to seven land parcels under the Government Land Sales (GLS) Programme that were awarded for a total value of about $4.16 billion, making up some 58% of total real estate investments during the last quarter.

However, Savills Singapore has issued a gloomier outlook for the rest of the year, projecting 2023 investment sales to be between $19 billion and $21 billion – down from its earlier forecast range of $24 billion to $25 billion. This is due to headwinds such as the possibility of new conflicts erupting and the contagion effect arising from recent terrorist attacks in Israel.

The private sector saw $2.97 billion in investment deals in 3Q2023, a 2.8% increase quarter-on-quarter, albeit with a drop in the number of transactions of 31.6%. This was attributed to the Lunar Seventh Month, as well as the higher Additional Buyer’s Stamp Duty rates for residential properties and higher interest rates in the market.

Jeremy Lake, managing director, investment sales and capital markets at Savills Singapore, commented that “while 2023 will be an underwhelming year for the real estate investment market, it being a low point in terms of sales value may help 2024 see a strong rebound, barring unforeseen events.”

Residential investment sales in 3Q2023 totalled $3.43 billion, making up 48.1% of the quarter’s total investment sales. Notably, the collective sale of Far East Shopping Centre for $908 million and the divestment of Changi City Point by Frasers Centrepoint Trust for $338 million both gave a boost to the commercial sector in the last quarter.

Alan Cheong, managing director, investment sales and capital markets, noted that Singapore’s status as a safe haven could still attract investment, especially from those with ultrahigh net worth. He added that “the global real estate industry may suffer from a host of problems, but Singapore has that unique selling point.”

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Overall, despite the possibility of large ticket investments in the months to come, the investment sales outlook in Singapore remains weaker than the prepandemic decade, with the possibility of a strong rebound in 2024, provided no unforeseen events take place. Interest rates are likely to start falling in 2024, which could lead to investors viewing the situation more positively.