Singapore takes top spot for real estate activity in 2020

Singapore takes top spot for real estate activity in 2020

15 November 2019

According to the latest Emerging Trends in Real Estate Asia Pacific 2020 report, jointly produced by PwC and the Urban Land Institute, Asia Pacific real estate continues to produce strong returns.

However, as the clock ticks down towards the end of the current cycle, caution is increasingly embedded into investor strategies.

The report comments that this year’s investment prospect rankings reflect investor preference for regional markets that are large, liquid and defensive.

Yeow Chee Keong, Real Estate & Hospitality Leader, PwC Singapore said: “There is an increase in transaction value driven by cross border capital in 2019 and an improvement in the commercial office sector. The positive developments have contributed to Singapore’s ranking as the top city by investment prospect in 2020. The city-state’s pole position is a testament to its strong fundamentals and investors’ needs for defensive assets with the uncertain economic climate. There are still investment opportunities, and we continue to see increased investors’ interest in alternative asset classes, including data centres, purpose built student accommodation and healthcare.”

This year, Singapore rebounded from 21st place in 2017, reclaiming the top spot in city investment prospects for 2020, and second spot in city development prospects.

This is a result of Singapore’s office market oversupply being largely absorbed, vacancies at an all-time low and limited supply in the pipeline.

Singapore’s office yields, at 3.6%, are also some of the lowest in the region, and prices remain high by global standards. Rentals, meanwhile, driven by takeup from coworking operators, have been strong.

Singapore was also one of the few markets regionally to see a surge in transactions in the first half of 2019, with most activity driven by cross-border capital.

Tokyo came in second spot for investment and fourth for development. For years, Tokyo markets have offered some of the best returns in the region. With domestic interest rates remaining at rock-bottom levels, investors continue to flock there, although competition from local buyers means the market is tight.

Vietnam has emerged as the preferred emerging market destination in Asia, with manufacturers migrating to set up factories as an alternative to China. Risk is high, however, and good investment opportunities can be hard to pin down. Ho Chi Minh City was ranked third for investment and first in development.

Arch-rivals Sydney and Melbourne battled for fourth and fifth place. Sydney ranked fourth for investment and third for development and offers a liquid, stable, high-return market with low vacancies and good prospects for growth going forward. Depressed valuation of the Australian dollar only adds to the appeal.

Melbourne continues to be popular with investors for the same reasons as Sydney. Office assets are a little more than half the price, though, giving the city particular appeal for Asian buyers with an eye for long term capital appreciation. Melbourne ranked fifth for investment and fifth for development.