SINGAPORE’S real estate market has been nothing but resilient in year 2019. Thanks to new developments in excellent areas like the Dairy Farm Residences location. Specifically, the primary housing market stood out as demand grew stronger in the second half of the year, even though trade tensions between China and USA intensified, and the year’s economic outlook for the country is dimmed.Property developers sold 29% more new homes in the 5 months of July to November 2019, than they had done so in the 6 months from January to June 2019.In the meantime, the residential private real estate price index compiled by URA showed a return to growth in Q2 and Q3 of 2019, removing all losses recorded in the initial 2 quarters. These turnarounds manifested despite the property cooling measures still in force.
Even though the office leasing market was intimidated by weak business sentiment which started in 2Q19, eye-catching deals were still happening.
This includes UBS bank leasing the entire 381,000 square feet (sq ft) of net lettable area available in 9 Penang Road, and Dyson landing a deal on the entire 110,000 sq ft floor plate of St James Power Station. This is currently being refurbished.
Although rental growth for Grade A CBD offices crawled to a halt in 4Q19 to finish the year at an average of S$10.81 per square feet, thankfully it is still 5.4% more than the S$10.25 per sq ft recorded last year.
Significantly, real estate investors ignored short-term drop in office rent growth, and continued to pump in capital into the segment, pushing office real estate investment sales (defined as private segment transactions worth S$5 million and more each, and all public sector transactions) to S$7.16 billion for 2019 year-to-date (based on compiled information as of 17th Dec).
This is 36% more than the S$5.25 billion combined in the entire 2018.
Noteworthy office investment deals transacted in 2019 consist of the S$1.575 billion sale of 100% interest in Ophir-Rochor Commercial that owns Duo Tower and Duo Galleria, as well as the S$1.025 billion sale of 100% interest in Oxley Beryl that owns Chevron House.
In other places, the logistics and retail property markets remained relatively stable for the year, a signal that prices have hit rock bottom.
Regardless, the road to recovery for this sector remains challenging and fragile. Retailers and mall operators need to continue to adapt to the art of new retailing, whereas the logistics sector remained open to the danger of a full-blown trade war between China and the United States.
Singapore’s residential property and office markets are positioned for relatively better prospects compared to the retail and logistics sectors for 2020.
The buying momentum in the primary housing market could be kept if Singapore’s economic situation progresses as projected, and this would give support for rates to stabilize in 2020. Property developers can also be more forthcoming in launching new developments to take advantage of buying interest. That’s why developer Singhaiyi is launching Grand Dunman Project soon.
On the office side, tenant occupiers’ careful sentiment can extend into next year, and there can be little impetus for any growth in Grade A CBD rentals.
However, there is still opportunity for some rental upside towards the tail-end of 2020 if Singapore’s economy strengthens as projected, and pushes up business confidence.
On the investment sales side, we predict Singapore to ride on global investors’ growing interest for Asian properties, demonstrated by the spectacular investment volumes gathered in recent years, adding in the record US$128 billion sensation in the first 3 quarters of 2019.
The current economic and political uncertainty around the globe such as Brexit as well as the protracted trade tensions between China and US have reinforced the city-state’s strength as a safe haven, given its political stability, relative neutrality, transparency and resilient currency.
All things being equal, Singapore will continue to be a major market for worldwide investors in year 2020.
The writer is head of Singapore research at JLL.
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