About 15 investors from Thailand were in Singapore recently on a familiarisation trip to gain insight into the country’s property market.
The group, comprising mainly institutional investors, were hosted by DBS Group to a three-day property roadshow, which included meetings with various S-Reit mangers, and viewings of several properties in different real estate sub-sectors across the island.
The site visits focused on both established and emerging hubs in Singapore, allowing the investors to gain a better understanding of forward trends for major real estate classes in Singapore.
During their few days in Singapore, they visited office buildings, retail malls, and emerging sub-urban business park hubs.
The Thais also saw a selected number of ramp-up warehouses, a unique asset class given the scarcity of land here and they went away with a better grasp of the current operating environment and outlook for each sector in the medium term.
In the meantime, the Singapore property market is approaching a cyclical bottom in 2018 on the back of abating supply risk, said analysts from DBS-Vickers Securities.
They said on Monday that with gross domestic product (GDP) projected to keep growing at 2.5 to 2.8 per cent per annum over the next two years, it bodes well for cyclical sectors such as hotels and office space, where demand ties in more closely to a more buoyant economic environment.
They believe that the property market will bottom out next year with a fall-off in supply in a majority of sectors such as office, hotels and industrial. This is supportive of higher rents going forward.
They also said that more cyclical areas such as hotels and office will lead the recovery, given that demand for rooms and office space is more closely tied to the economic outlook.
There will be slower additions as incoming hotel room supply tapers off to one to two per cent between 2018 and 2019, and the office sector will see minimal new supply additions up till 2020.
New industrial supply will also drop by close to half next year and further in 2019. The fall-off mainly comes from the warehouse and business park space where completions will peak this year.
Retail landlords are more generally cautious, given the ongoing challenges faced by retailers but they believe that suburban space could be more resilient in the medium term, especially for those with a large operational scale and located near train and bus interchanges.
Competition in this sector comes on the back of completions of major malls from this year to 2019, with large scale malls, such as Changi Jewel and Northpoint City attracting shoppers beyond their captive market and cannibalising traffic from surrounding malls.
Strong interest in real estate investment trusts (Reits) continues with the performance by Singapore-listed real estate investment trusts (S-Reits) catching up post first quarter of 2017 on the back of rotational interest. This was after a 25 per cent rise in the share prices of developers.
The positive GDP data from the Singapore economy also led to investors taking risker bets in the Reit space.
DBS-Vickers expects buying interest for S-Reits to continue in the immediate term driver by both a high-yield spread of 4.4 per cent and the continued strength of the Singapore dollar. It said outperformance will hinge on the S-Reits’ potential to post higher earnings growth, whether organically or through acquisitions.
DBS-Vickers’ picks include CDL Hospitality Trusts (CDReit), given the expected turnaround in its earnings and it continues to be vested in landlords such as Keppel Reit (K-Reit) and those attractive acquisition prospects such as Mapletree Logistics Trust (MTL) and Frasers Logistics Trust (FLT).