The uncertain economic outlook led to a 61% year-over-year decline in major real estate transactions to $4.2 billion in the first quarter of the year, while major overseas real estate investments by local buyers tripled to $19.3 billion.

According to Knight Frank's latest report, total bulk real estate transactions in the first quarter were well below the $10.8 billion in the same period last year, slipping 10.1 percent from a year earlier and a new low since the second quarter of 2020.

Large real estate transactions refer to transactions involving the sale of buildings, real estate or large groups of units valued at $10 million or more. The transfer of ownership of large properties by their owners is also a type of large real estate transaction.

Commercial real estate transactions accounted for the largest share of transactions in the first quarter of this year, at 45.2%, but the transaction value fell 33.3% year-over-year to $1.9 billion.

The largest transaction was the acquisition of a 50.0 percent stake in NEX Mall by Frasers Centrepoint Trust and Frasers Property for $652.5 million.

Another large transaction was Yangzijiang Shipbuilding's $399 million joint venture with two other companies to buy an office building at 39 Lo Mansin Road.

Private residential transactions grew, up 16.7% to $1.6 billion, including a total of $583.8 million in private residential group sales.

In industrial real estate, transaction volume was 62.8% higher than the fourth quarter of last year, reaching $681.1 million. This included four Cycle & Carriage real estate projects acquired by M&G Real Estate for $333 million.

The report said that this is because investors are still waiting for commercial real estate prices to retrace, so the investment focus shifted to industrial real estate.

Despite the overall cautious local real estate investment sentiment, Singaporean companies are not shy when it comes to buying overseas real estate.

According to Real Capital Analytics (RCA), a real estate analyst firm, cross-border investments jumped 76.7% YoY to $19.3 billion, and 201.6% higher YoY.

One of the deals completed in the first quarter was City Developments' (CDL) acquisition of the St Katharine Docks project in London, UK, for S$636 million. Another was CapitaLand Investment's (CapitaLand) acquisition of Suning Life Plaza in Beijing for $553 million.

The bulk real estate market is expected to remain flat for the rest of the year.

The collapse of Silicon Valley Bank (SVB) in March this year, the merger of Credit Suisse and UBS, and high interest rates that have yet to stabilize, the investment market in Singapore is expected to remain cautious, and investors will be watching for signs of price correction before deciding on their next investment plans," said Tan Yen Huat, head of international real estate and industrial property at Knight Frank Capital Markets. The next investment plan."

He added that many buyers and investors are interested in freehold private homes in the core Central District, and they plan to buy such properties and pass them on to the next generation. In addition, Singapore is a suitable location for investment as its politics and economy remain stable despite growing global economic uncertainties.

The five successful transactions in the first three months of the year were all small to medium sized projects, three of which were private residential projects, including Holland House. (Courtesy of SRI)

The local collective sale market is showing signs of recovery, with five projects finding buyers in the first quarter of this year, two more than in the same period last year, while the total transaction amount fell 24.3% year-on-year to $730.76 million.

Analysts believe that this year's collective sale transactions will remain active, with smaller projects being the most popular, but the rate of transactions will depend on whether buyers and sellers can reach a consensus on price.

Figures provided to the Union-Tribune by List Sotheby's International Realty show that the five successful transactions in the first three months of the year were all small and medium-sized projects, three of which were private residential projects, plus an industrial project and an office building.

The highest-priced project was Meyer Park, which UOL and Singland acquired for $392.18 million.

Although only three projects were sold in the first quarter of last year, the total transaction value was higher than the total transaction value in the first quarter of this year, as it included Tanglin Shopping Centre, which was sold for $868 million.

Han Huanmei, head of international real estate research at Leith Sotheby's, said in an interview that three private residential projects were sold in the first quarter of this year, showing that developers are actively filling their land inventory, but tend to acquire smaller lots to better control costs.

In addition, housing prices have been rising for more than two years, and developers are worried that when they launch new private residential projects in a few years, prices will have peaked, swung sideways and may even decline, so they are being more cautious when acquiring land.

Han Huanmei said developers want to acquire lots at low prices because prices may fall in 12 months and they must make sure they can sell new projects at reasonable prices by then and also make a profit. But homeowners still want to sell at a high price in order to have cash left over after paying all the costs associated with the sale.

Zhang Minzhang, head of research at Savills, shares the same view. According to his observation, developers are more conservative in 2022 in terms of land purchases. As existing new projects are sold out, developers are re-filling their land inventory through collective sales, but the lots they choose are small and there are already potential buyers living nearby.

The private housing market has been active over the past few years, with overall private property prices rising for the 12th consecutive quarter in the first quarter of this year, up 3.2 percent from a year ago. According to Cushman & Wakefield's Head of Research, Huang Xian Yang, strong demand for new private homes and few unsold units left are among the reasons why developers are actively acquiring projects for sale. Nevertheless, developers are still very cautious in selecting lots and bidding for them.

Although there are still few unsold units, buyer demand is still affected by high interest rates, new cooling measures, and global economic uncertainties," said Wong Hin Yeung in an interview. In addition, high construction costs have led to higher risks in development projects, and residential prices continue to reach record highs amid the economic slowdown, increasing the risk of a pullback in prices."

Analysts are taking a conservative view on the future direction of the collective sales market, mainly because homeowners' asking prices are not in line with the increasingly moderate market environment and it will not be easy to close deals. According to Knight Frank's latest report, only 33 percent of the projects sold from 2021 to date have been sold, down from the previous round of sales in 2017-2018. At that time, the transaction rate was 63%.　

Even if 80% of the owners of a project agree to a collective sale, there is no guarantee that the sale will be successful," said Minmin Xie, head of real estate and collective sales at Knight Frank Capital Markets. At the peak of this market, the key to a successful collective sale is that the homeowner's asking price must raise the developer's interest and the developer must understand that the cost to the homeowner of purchasing a replacement home has increased significantly."

Due to the large price differences between buyers and sellers, Huang Xian Yang predicts that this year's private home sales transactions will range from $2.4 billion to $3.4 billion, which is lower than last year's transactions.

Han Huan Mei and Zhang Minzhang are more optimistic, they believe that this year's market will remain active, Zhang Minzhang even predicted that this year's transaction volume will exceed last year, and developers this year's acquisition of lots in 2024 or 2025 when the opening price (breakeven price), may set a new high.