The event – well attended by industry players and featured prominent real estate leaders in dialogue sessions – provided a platform for lively discussions on challenges and investment opportunities in the property sector. Colliers Review checks in with Tricia Song, Head of Research for Singapore, for her views on some of the questions put forward during the event.
1. ARE THE INVESTORS IN YOUR REGION (SINGAPORE) INVESTING LOCALLY OR OVERSEAS INCREASINGLY?
Tricia: Data from Real Capital Analytics (RCA) suggests that domestic real estate investments in Singapore investors had declined steadily since 2013, due mainly to the residential cooling measures such as Total Debt Servicing Ratio (TDSR), til 2017 with the comeback of residential collective sales. Domestic investments by Singapore investors nearly doubled YOY to SGD14.4 billion in 2017, and increased by 4.6% YOY to SGD15.1 billion in 2018.
On the other hand, Singapore investors’ outbound investments have been on a long term upward trend. Outbound investments by Singapore investors reached a record SGD41.9 billion in 2017, up seven-fold since a trough in 2009. In 2018, outbound investments dipped 7.4% YOY to SGD38.8 billion.
By sectors, Singapore outbound capital favored office, industrial and development sites, which altogether accounted for about 78% of total outbound investment volume in 2018. Of which, office properties in core markets remained the most sought-after in 2018, accounting for 37% of total cross-border investments from Singapore.
By geography, China and the US are the top two destinations for Singapore outbound capital. China regained the top spot for investment destinations by Singapore investors, displacing US, which was the top destination in 2017. Singapore capital appears to be unfazed by the trade war between China and the US, and continued to invest in China in 2018 and 2019-to-date. Singapore’s real estate investment volumes in China increased 32% YOY to SGD10.4 billion in 2018, driven by large acquisitions in commercial properties, and residential and mixed-use development sites.
After China and the US, developed markets – UK, Australia, Germany and Japan remained top destinations for Singapore outbound investments as they provide steady risk-adjusted returns with long good track record.
2. WHAT IS THE IMPACT OF US-CHINA TRADE WAR ON FLOW OF CAPITAL TO REAL ESTATE?
Tricia: Data from Real Estate Capital suggests no clear impact of US-China trade war on flow of capital yet.Compared to 2017, US outbound investments intensified into both Singapore and China in 2018 and 2019 YTD. However, China outbound investments declined across US and Singapore in 2018, possibly as a result of Chinese regulators tightening scrutiny of companies’ overseas investments since late 2016 amid concerns over excessive capital outflow and a build-up of corporate debt.
Compared to 2017 and 2016, global cross-border investments into US and China both increased in 2018. However, in 2019 YTD, global cross-border investments into US appeared to have slowed down significantly.
3. WHAT ARE THE POSSIBLE GAME CHANGERS FOR REAL ESTATE INVESTMENT?
Tricia: We think there are three game changers for real estate. Firstly, there is the “Sharing Economy” that has us sharing office space, homes and even wardrobes, kitchens etc. Building communal areas to encourage collaboration and peer-to-peer connectivity, and incorporating flexibility into buildings, have become the future of real estate.Secondly, real estate should try to incorporate the “Experience” that engages end-users. Jewel at Changi has a seven-storey waterfall with a theme park to cater across locals and tourists, individuals to families.
Last but not least, “Smart” and “Sustainable” real estate will be the future of real estate. Investors should invest in smart buildings which use sustainable energy sources and incorporate technology to improve productivity and quality of life.
All charts and tables above- Source: Colliers International Singapore Research, Real Capital Analytics (RCA)