Foreign investments in Singapore property assets surged 441 per cent year on year in 2016 to US$4.1 billion on the back of mega deals such as Qatar Investment Authority's purchase of Asia Square Tower 1 for US$2.45 billion.
Excluding the abnormally large Asia Square deal, inbound investment would still have surged 117 per cent from US$760 million in 2015 to about US$1.65 billion in 2016.
Conversely, there was a 16 per cent drop in investments from domestic investors in Singapore assets in 2016 to about US$5.3 billion.
Explaining this difference, JLL's Singapore research head Tay Huey Ying said: "Domestic investors were quiet as they focused on diversifying exposure overseas. Singapore real estate investment trusts were also less active as they have already completed many transactions in recent years.
"Foreign investors' appetite remained robust as the price gap between buyers and sellers in Singapore has narrowed following recent price corrections, and many seized opportunities to purchase assets in the office sector at lower prices. Investors continue to be keen on Singapore's prime office and suburban retail assets, which are closely held and rare to access."
According to the latest official URA price index, office prices dipped 0.6 per cent in the fourth quarter from the preceding quarter, marking a sixth straight quarter of decline. They were mainly hit by a double whammy of financial and business services consolidating while the completion of large projects also caused a short-term supply overhang.
The full-year price decline of 2.8 per cent for office space was also steeper than the 0.1 per cent dip seen a year ago.
JLL added that foreign investors were mostly focusing on counter-cyclical play in the office sector because they were buoyed by Singapore's long-term stable geopolitical fundamentals.
On the flip side, outbound investment also grew from a year ago, up 26 per cent to US$12.2 billion, as Singapore investors sought to diversify abroad in terms of geography and sector, given the lack of investable assets locally. Greater real estate capital allocation has also increased the need to seek alternative markets and deploy capital overseas.
Overall, Asia Pacific's real estate investment market held up "remarkably well" in 2016, despite market volatility following the Brexit vote and US election results, JLL said.
"Most core regional markets saw strong activity relating to domestic real estate investors looking at their home markets. Inbound and outbound capital flows were mixed. Inbound investment to Singapore and Korea surged over the year on the back of a handful of mega deals. Outbound investment from China and Japan took off as local investors eye opportunities abroad."
Meanwhile, this year, reports have also recently said that CapitaLand may be in exclusive negotiations to acquire Asia Square Tower 2 from BlackRock, and has agreed to pay more than S$2,700 per square foot for the 46-storey prime commercial building in Singapore's Marina Bay district. If so, this would be another mega deal in the making, this time by a domestic investor.
This article was first published on March 28, 2017.
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