Rents and capital values down, risk appetite up

Chesterton's Mr Han says that it is more prudent to save than invest now as there is uncertainty in global markets.
Chesterton's Mr Han says that it is more prudent to save than invest now as there is uncertainty in global markets.PHOTO: GIN TAY FOR THE SUNDAY TIMES

MR DONALD HAN

Chesterton Singapore's managing director

Q What were the best and worst things (financially) that happened to you this year?

A It's been a bittersweet year. I was instrumental in one of the largest commercial lease relocations (100,000 sq ft) at Marina Square involving a top educational firm.

Another high point for me was being appointed by a major telco for a consulting job and being able to execute the onward recommended strategy/transaction process.

 
 
 
 

Financially, it is more prudent to save now than invest as the global markets are in uncharted territory as major political blocs/powers become protectionist.

Economists can predict economic direction but no one can predict political changes and how these affect economic outcomes.

Q How has 2016 been for the real estate industry?

A There were highs and lows in 2016. The lows are continued decline of capital values and rents in all segments of the market, including office, retail, residential and hospitality and industrial sectors.

Several highs achieved included near record-breaking land prices achieved for Government Land Sales (GLS) residential sites in Fernvale Road and Margaret Drive and a commercial/white site at Central Boulevard.

Of course, there's that single largest commercial investment transaction in the Asia-Pacific involving the sale of Asia Square 1 for $3.4 billion to Qatar's sovereign wealth fund.

Q How do you see 2017 panning out?

A Despite eroding fundamentals for both rents and capital values in the shorter term, developers' risk appetites for the longer term have grown with more bidders placing higher bid prices for each GLS site tender.

Investment sales en bloc in District 9 have gathered pace with the sale of 8 Hullet Road, 120 Grange Road and 3 Cuscaden Walk.

BEST TIME TO SELL

The market for sellers/owners is likely to hit an inflection point some time in 2017, barring any unforeseen economic or technical recession in Singapore.

If you need to sell, it's likely better to sell in 2017 than in 2016 (not that we have many days left), although 2018 is probably the most opportune time.

MR DONALD HAN

Unsold inventory in the core central region has been reduced, which should set the stage for a price recovery in the area, led primarily by District 9 properties.

Based on developers' land bid prices this year, I think these projects when launched in 2017 may see a 3 to 5 per cent price uptick compared with current levels. Not all new projects will enjoy good take-up. Those located near shopping malls, MRT and amenities (like parks and waterways) will see better success.

All eyes are on the Committee on the Future Economy's recommendation early next year. I hope some new prudent land policies will be revealed then.

Q Going into 2017, please give some tips to home buyers, sellers, owners?

A For home buyers, some good deals can be found in the secondary market. Auction sales, especially those offered by the banks via mortgagee sales, could be a good source.

The market for sellers/owners is likely to hit an inflection point some time in 2017, barring any unforeseen economic or technical recession in Singapore.

If you need to sell, it's likely better to sell in 2017 than in 2016 (not that we have many days left), although 2018 is probably the most opportune time.

A version of this article appeared in the print edition of The Sunday Times on December 25, 2016, with the headline 'Rents and capital values down, risk appetite up'. Print Edition | Subscribe