SINGAPORE, 20 April 2022 – According to EDMUND TIE’s Q1 2022 quarterly report, Real Estate Times, Q1 2022 witnessed encouraging performance across most real estate sectors, which sets the stage for a positive year ahead.
Mr Lam Chern Woon (蓝振文), Head of Research and Consulting at EDMUND TIE, says, “While we recognize headwinds ahead, given the ongoing geopolitical uncertainties, supply chain disruptions, inflationary pressures and pressure on interest rates, overall real estate performance for this year should still remain resilient, as evidenced by Q1’s performance.
“This is on the back of expected stronger business and consumer confidence in the months ahead, based on Singapore GDP’s growth forecast for 2022 at 4%-6%, relaxation of safe management measures and April’s reopening of Singapore’s borders to all fully vaccinated travellers. The easing of borders should help alleviate the manpower crunch to some extent.
”Singapore’s economy grew by 3.4% YoY in Q1 2022; albeit a deceleration from the 6.1% registered in Q4 2021, but it was mainly due to a moderation in growth of the manufacturing sector. As the economy moderates towards trend growth in the year ahead, certain sectors – such as construction, retail and food services, aviation and hospitality – are expected to see a recovery.
Investment: Outperformance led by commercial sector
Total investment sales witnessed a notable 35% increase from Q4 2021 to nearly S$9.8 billion in Q1 2022. This was led by the retail sector which contributed 37% (or S$3.6 billion), followed by the residential sector at 32% (S$3.1 billion).
Sectoral contribution to Q1 2022 investment sales
Source: EDMUND TIE
Looking ahead, the easing of safety management measures at the workplace and social events, as well as border restrictions, will reinforce investors’ strong confidence in Singapore’s commercial market.
Mr Lam comments, “Developers’ interest in large residential sites are likely to be trimmed due to the higher Additional Buyers’ Stamp Duty, and the associated penalties on the inability to sell all units within a five-year time frame. They will most likely shift their attention to commercial-zoned sites, and also riding on the popularity of mixed-use developments, of which residential components of such sites are not subject to ABSD or Qualifying Certificate rules.”
“URA’s recent imposition of restrictions on strata subdivision to the commercial component is unlikely to cause any drastic impact on market sentiment, as investors’ profiles in recent times are mainly those of institutional with a mid- to long-term investment horizon,” adds Mr Lam.
He continues, “Meanwhile, sub-urban retail assets are expected to continue to be highly sought after. Interest in prime retail assets, especially strata-titled properties and units, may be renewed due to its scarcity, which may, in turn, spur higher transaction activity.”
Office: Riding on the back-to-office momentum
Limited supply of quality spaces continued to support office rental growth in Q1 2022, albeit to various extents. While rents of premium and Grade A offices at Marina Bay and Raffles Place sub-markets saw the strongest uptick, Grade B rents at Shenton Way/Robinson Road/Tanjong Pagar sub-market have also risen for the first time by 0.6% QoQ since Q1 2020.
Average monthly gross office rents (S$ per sq ft)
Source: EDMUND TIE
Looking ahead, the finance sector, particularly the wealth management industry, will remain a key driver for office demand. Following URA’s recent imposition of restrictions on strata subdivision to the commercial component in properties, rents and prices of strata office units are expected to rise, due to scarcity in future supply.
Industrial: Focus on decarbonisation and supply chain diversification
Amid robust manufacturing activity in Q1 2022, multiple-user factory rents rose by 0.3%-0.6% QoQ in the quarter. Average rents of first-storey space at multiple-user factory stands at S$1.88 per sq ft. Buoyant demand for spaces with modern specifications pushed up rents by 0.6% QoQ for hi-tech spaces in Q1 2022.
Amid heightened geopolitical tensions and supply chain risks, stockpiling requirements are likely to increase, which will further increase demand for logistics and warehousing facilities. This will also drive the push towards supply chain diversification to mitigate cost pressures and operating risks.
High-tech factories and city-fringe business parks will continue to be sought after, with rents and capital values expected to rise in tandem.
Mr Lam says, “Singapore’s net-zero caron emission ambition and the impending carbon tax raise in the coming years will encourage more occupiers to gear their business models towards decarbonisation and cost savings. We expect to see more redevelopment of ageing assets into future-proof properties with higher specifications and sustainability features.”
Retail: Brighter prospects with fresh easing of COVID-19 measures
In Q1 2022, prime first-storey retail rents for Fringe/Suburban submarkets continued to outperform and rose by 1.3% QoQ. This is compared to a slower growth of 0.5% QoQ in Orchard/Scotts Road and a marginal 0.3% growth in other City Areas.
Average monthly retail rents (S$ per sq ft)
Source: EDMUND TIE
The fresh easing of COVID-19 measures will improve retail sentiment and boost consumer confidence, which will in turn, further improve retail sales.
As a result of URA’s recent imposition of restrictions on strata subdivision to the commercial component in properties, demand and occupancy of prime retail assets may keep steady or even improve, amid the limited supply of existing strata malls.
Mr Lam opines, “The latest strata policy change may also improve malls’ tenant diversity and allow for more effective control of the mall’s positioning under a single ownership, which may drive higher footfall and spending. Consequently, malls in these designated areas may enjoy lower vacancy rates and command higher rents over time.”
Residential: Price growth to soften in the wake of cooling measures
Based on caveats lodged, new sales and secondary transaction volumes dipped 44% and 49% QoQ, respectively in Q1 2022. Within both new and secondary sales markets, the decline in activity was broad-based and similar across the market segments. Such price movements reflected the immediate impact of the cooling measures.
Mr Lam comments, “Although price growth is expected to moderate, we do not expect strong pressures on developers to reduce prices, especially for projects with limited unsold inventory. Looking ahead, the tightening of the Total Debt Servicing Ratio could divert some demand towards sub-urban homes, which are more affordable. There should also be some rotation of demand from RCR to OCR in 2022, given the strong price increases in RCR in 2021.”
Sales momentum is expected to slow, on the back of fewer units from new launches inn 2022. Nonetheless, the overall residential market will still be supported by a robust labour market, ongoing economic growth, and healthy demand-supply dynamics in the property market, with demand largely from local first-time home buyers and HDB upgraders who are least impacted by the cooling measures.
Primary home sales are projected to reach about 11,000 to 12,000 units for 2022.
For further information, please contact:
Seah Li Ching (Ms)
Head, Corporate Communications
+65 6393 2369
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