By Romesh Navaratnarajah: Real estate investment activity in Singapore surged 48 percent to S$6.9 billion in Q2 2012, according to DTZ Research.
However, for the first-half of 2012, investment deals fell 32 percent year-on-year to S$11.6 billion from S$17.1 billion. Government land sales also declined to 43 percent, down from the historical average of 48 percent seen in the last four quarters.
Reits, which were net buyers in Q1, became net sellers last quarter. This is attributed to divestments made to achieve greater value for the unit holders.
Meanwhile, acquisitions done by Reits declined 61 percent to S$290.1 million.
Only two investment acquisitions by Reits took place in Q2, with K-REIT expanding its stake in Ocean Financial Centre and Cache Logistics Trust acquiring Pandan Logistics Hub.
In addition, cross-border activity improved by 43 percent, due to inter-regional fund purchases, which comprised 57 percent of Q2 cross-border investment.
"Although we see an increase in enquiries from foreign investors, they are also looking to other countries, such as China, Japan and Australia, for growth opportunities and higher yields. Against this backdrop, 2012 investment sales activity is likely to be less than 2011′s S$28.6 billion," said Chua Chor Hoon, Head of Asia Pacific Research at DTZ.
DTZ's analysts expect Reit activity and developers purchasing GLS sites to dominate 2H2012 investment activity. This includes the expected listings of Ascendas Hospitality Trust and Far East Hospitality Trust and the divestment of Somerset Grand Cairnhill by Ascott Resident Trust.
"Deals are taking longer to complete as there are more sellers than buyers in the market and there is still a pricing gap between sellers' and buyers' expectations," noted Shaun Poh, Head of DTZ Investment Advisory Services and Auction.