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Introduction

As we delve into the second half of 2023, the real estate market in Singapore stands at a crossroads, influenced by various economic and geopolitical factors. To provide a comprehensive perspective, we’ve gathered insights from experts in the field and consolidated their opinions on the current state and future prospects of Singapore’s real estate market.

1. General Outlook of Singapore’s Real Estate Market for H2 2023

The general outlook for the real estate market in Singapore for the second half of 2023 appears promising, contingent upon economic and geopolitical stability. Notably, Singapore’s economy exhibited resilience, with a year-on-year growth of 0.7% in the second quarter of 2023, up from 0.4% in the previous quarter, according to the Ministry of Trade and Industry (MTI) press release on July 14, 2023. However, several key subsectors require closer examination.

Source: MTI press release 14 Jul 2023.
https://www.singstat.gov.sg/-/media/files/news/advgdp2q2023.ashx#:~:text=14%20July%202023.,recorded%20in%20the%20previous%20quarter.

1.1 Residential Sector

The residential market is expected to experience dampened growth in H2 2023. Government initiatives aimed at curbing cost escalation and enhancing affordability will play a role in this trend. Additionally, the effects of the new Additional Buyer Stamp Duty (ABSD) will likely lead to lower transaction volumes due to supply constraints.

1.2 Commercial Sector

The commercial real estate market, particularly the office sector, has been profoundly impacted by post-Covid workplace changes. Many tenants have adopted hybrid work arrangements, leading to weakened demand, occupancy, and rental rates. Nevertheless, strata office sales remain strong as an investment asset class, and new demand is anticipated from new tenants establishing their presence in Singapore.

1.3 Other Sectors

In contrast, industrial asset classes such as logistics and data centers continue to thrive, benefiting from high yields relative to interest rates. Hospitality is on an upward trajectory, driven by increasing occupancy rates and the resumption of tourism and large-scale events.

Overall, the real estate market in Singapore is likely to experience a slowdown or plateau, with developers adopting a more cautious approach due to inflationary pressures and interest rate fluctuations.

2. Asset Classes Poised for Growth

To identify the asset classes expected to outperform others in the coming quarters, we turn to expert opinions:

2.1 Warehouse and Logistics

The warehouse and logistics sector is forecasted to perform exceptionally well due to a supply crunch, driving up rents and capital values. This, coupled with robust investor demand, maintains steady yields, even in a high-interest-rate environment.

2.2 Office

Office space, on the other hand, faces challenges as occupiers continue to adjust their office premises. Investment-grade office rent growth in the Central Business District (CBD) stagnated in 2Q2023, and capital values declined.

2.3 Residential

Despite market cooling measures, the residential sector is expected to hold up well, though a slowdown in the secondary market is anticipated.

2.4 Retail

Retail’s resilience, supported by a stable domestic market and consistent international tourism, is expected to drive rental increases and underpin retail asset prices.

Source: JLL Property Research 2Q2023
https://www.jll.com.sg/content/dam/jll-com/documents/pdf/research/apac/singapore/jll-singapore-property-market-monitor-2q23.pdf

3. Real Estate Market Outlook in Other Asian Regions

Beyond Singapore, experts weigh in on the real estate market outlook in other parts of Asia, primarily China and Southeast Asia (SEA):

The recovery of China’s real estate market is expected to benefit SEA countries such as Malaysia and Thailand. Despite challenges in China, some ASEAN nations like Indonesia, India, and Vietnam are positioned for growth. Japan continues to garner interest due to its low-interest-rate environment.

4. Impact of Family Offices on Singapore’s Real Estate Market

The influx of family offices into Singapore is poised to have a positive impact on the real estate market for several reasons:

(a) Increased funds management activity will lead to greater demand for office space and employment opportunities.

(b) Family offices are likely to allocate more funds to real estate fund management, both directly and indirectly.

With Singapore serving as the Global-Asia Pacific gateway for asset managers and investors, family offices will find opportunities in venture capital and start-up ecosystems, further stimulating investment in real estate assets.

5. Job Market Trends

In terms of job market prospects, certain sectors are expected to see increased hiring in the next few quarters:

– Fund management, including private and public funds, for both direct and indirect investments.

– Family offices, particularly in private funds.

– Asset and investment management.

– Project development.

– The hospitality sector.

These sectors are expected to drive job creation, supported by favorable economic conditions and increased investment activities.

Conclusion

The real estate market in Singapore for H2 2023 displays a mix of challenges and opportunities. While various factors will influence its trajectory, including government policies, economic stability, and global dynamics, experts remain cautiously optimistic about the industry’s resilience and adaptability. The performance of specific asset classes and the entry of family offices into the market are key trends to watch in the coming quarters, along with potential shifts in the broader Asian real estate landscape.

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