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State land sales deals hit 11-year high of $7.7 billion in 2023


The Straits Times, 5 January 2024, Friday

SINGAPORE – State land tender activity hit an 11-year high in 2023, with 14 Government Land Sales (GLS) sites totalling $7.7 billion being awarded.

This was the highest annual value recorded under the GLS programme since 2012, when 51 GLS sites worth $10.6 billion were awarded, according to a report released by real estate firm Knight Frank on Jan 3.

Public-sector transaction values in 2023 were up nearly 40 per cent from 2022, when 11 sites amounting to $5.5 billion were sold.

Two large 99-year leasehold GLS sites in Tampines Avenue 11 and Marina Gardens Lane crossed the $1 billion mark in 2023, despite elevated interest rates and development risks.

Residential deals, comprising largely state land sales, formed the bulk of total investment sales activity in Singapore in 2023, totalling $10.3 billion.

This was, however, down 13.3 per cent from $11.9 billion in 2022 because of higher interest rates and increased additional buyer’s stamp duty rates from April 2023, said the Knight Frank report.

As a result, total investment sales fell 31.8 per cent to $21.1 billion in 2023, from $30.9 billion in 2022, crimped by a drop in residential and commercial property deals, the report said.

While investment activity slowed in 2023, the number of public deals transacted and their value increased as the Government launched more sites and raised residential housing supply to address demand, Knight Frank said.

The commercial and residential site in Tampines Avenue 11 was the largest GLS deal in 2023 – awarded at $1.21 billion, or $885 per sq ft (psf) per plot ratio, to a joint venture between a UOL-Singapore Land consortium and CapitaLand Development.

In second place was the GLS site in Marina Gardens Lane, which was awarded to Chinese developer Kingsford Huray Development and two other partners for $1.03 billion, or $1,402 psf per plot ratio. This site, which can yield 790 residential units and up to 8,073 sq ft of commercial space, will be the first to kick-start development of the 45ha Marina South precinct.

The attractive sites released under the GLS programme diverted attention from the residential collective sale market.

That, along with a mismatch in price expectations between developers and sellers in the market as well as heightened development risks, resulted in just seven collective sale deals totalling $2.1 billion in 2023.

That is a 44 per cent drop from 2022, when 16 such deals worth $3.8 billion were concluded, the report said.

Following the $392.2 million collective sale of Meyer Park in Marine Parade in the first quarter of 2023, subsequent deals shrank in price quantum and number. That was due in part to the April round of cooling measures, and because the higher cost of replacement homes pushed sellers to set reserve prices that were deemed too high by developers, said Knight Frank.

Other residential sites acquired en bloc by developers in 2023 included Kew Lodge in Kheam Hock Road for $66.8 million in May and Kartar Apartments in Thomson Road for $18 million in October.

Ms Chia Mein Mein, head of capital markets for land and collective sale at Knight Frank, said: “Small residential plots remain attractive to developers. Landed home plots for redevelopment are also sought by boutique developers.”

Elsewhere, commercial investment sales plunged 61.4 per cent to $6.1 billion, from $15.8 billion in 2022, according to Knight Frank. Even so, several large deals were inked, including the $1 billion acquisition of a 50 per cent stake in Nex shopping centre in Serangoon Central by Frasers Centrepoint Trust and Frasers Property.

Commercial sales also got a fillip from the $908 million collective sale of Far East Shopping Centre, a mixed-use project in Orchard Road with retail and office components, to a company linked to Chinese businessman Du Shuanghua in September. In November, Shenton House in the Central Business District was sold to IOI Properties Group for $538 million.

Property consultant Cushman & Wakefield said that despite the headwinds, strata offices, strata retail and shophouses, which have smaller price quantums, should see continued interest in 2024 owing to resilient demand from private wealth investors.

“Niche investments, such as co-living and student accommodation, are seeing an uptick in interest as investors look for ‘uncrowded’ sectors that have lower competition and potentially higher returns,” it added.

Cushman & Wakefield research head Wong Xian Yang expects Singapore real estate investment sales to pick up if US interest rates are cut significantly in 2024. But the recovery may be gradual, as the magnitude and timing of interest rate cuts remain uncertain, he said.

Developers are expected to remain cautious in land banking because take-up rates of new private homes have slowed in the face of higher prices and elevated interest rates, and after more new launches hit the market in 2023.

Larger new launches of projects with at least 100 units were, on average, 53 per cent sold in 2023. “While this is slower than the 2022 new-launch average take-up of 73 per cent, it is higher than 2019’s performance of about 23 per cent sold,” Mr Wong said.

As such, developers’ bids will likely be tempered by the continued ramp-up in supply in state land sales, slowing private housing price growth and intensified competition for home buyers as more new launches come on stream in 2024, he said.

Source: The Straits Times

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