The Singapore economy expanded by 4.4% year-on-year (y-o-y) in Q4, bringing full-year growth to 3.7%, an improvement over 2012’s growth of 1.3%. While domestic cost pressures remain due to the tight labour market, economic restructuring efforts and higher costs, the Ministry of Trade and Industry (MTI) expects the Singapore economy to grow by 2-4% in 2014 as the global economic environment improves.
Real estate investment activity fell by about 73% quarter-on-quarter (q-o-q) in Q4, but reached $28.5bn for the whole of 2013, similar to 2012’s volume. The mixed-use sector was the most invested sector in 2013, accounting for about 24% of activity. Foreign investments increased nearly 30% y-o-y, driven largely by Asian investors. Activity in 2014 could moderate despite a more positive outlook for the office sector, as deals could take longer to complete.
Despite a slow start, the office market ended 2013 on a positive note with high occupancy rates supporting an increase in rents across the different areas. Rents in the Central Business District (CBD) are projected to continue to increase as the supply of good quality office space remains tight.
Industrial capital values remained stagnant in H2 as buyer sentiment was muted over government measures while average gross rents for first- and upper-storey conventional industrial space grew 2.3% and 2.9% q-o-q in Q4 respectively as manufacturing activity picked up.
Average rental values of prime retail space in all regions registered flat q-o-q growth in Q4 but declined as a whole in 2013. The price growth of resale strata retail units was approximately four times slower in H2 as compared to H1 after transaction volume dropped due to the implementation of the Total Debt Servicing Ratio (TDSR) framework in June 2013.
The residential sector began 2013 with a set of cooling measures but it was the permanent and structural TDSR framework that led to a significant reduction in transaction volume and slower price growth. Downward pressure on resale prices is expected to continue going forward, amidst a weak transaction volume and competition from projected completions in 2014. However, a major price correction is not expected given that the drivers for the residential market remain relatively healthy, but buyers will become more selective.
Source :DTZ (Groupe UGL)