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24 September 2012

24th September, Monday


Investment Sales


Big-ticket property deals reach $8.5b in Q3

Source: Business Times

Investment sales of property, buoyed by deals in the hotels/hospitality segment, have put in their best showing in five quarters, according to a consultancy. But the outlook for the rest of this year and the year ahead will be tempered by global economic concerns.

The sales, which cover big-ticket deals, reached $8.5 billion so far this quarter - up 13 per cent from the second quarter's $7.5 billion. They are also up 77 per cent from the third quarter of last year.

This quarter's numbers were boosted by hotel/hospitality deals - namely, Far East Organization's divestment of seven hotels and four serviced residences, worth a total of $2.1 billion, to its newly listed Far East Hospitality Trust. That more than offset declines in the residential, commercial and industrial segments this quarter, compared with 2Q.

The figures also include two 99-year leasehold private residential sites at Dairy Farm Road and Prince Charles Crescent that fetched a total of $761 million at state tenders last week but which have yet to be awarded.

In the year to date, almost $21 billion of investment sales deals have been done. The consultancy sees full-year 2012 numbers reaching $27-28 billion - just shy of the $30 billion done last year.

Next year, the consultancy projects a further dip in investment sales to around $25-27 billion. "The economies of the West are still in a moribund state and China's slowdown may gain momentum . . . In addition, the notion that assets are already fully priced with limited capital upside will prevent significant flow of opportunistic capital into the market, posing a challenge for the investment sales market," the consultancy said.

Investment sales of commercial and industrial properties in 3Q have fallen 38 per cent and 15 per cent, respectively, from the previous quarter. Investment sales in the residential sector totalled $3.52 billion in 3Q, down 13 per cent from $4.04 billion in 2Q, due to a decline in the public sector's contribution.

The majority of buyers were still local players, as the volatility in the global economic environment continues to deter investments in property, especially from foreign companies and funds.

On a brighter note, the consultancy said that, with the third round of quantitative easing by the US Federal Reserve (QE3), a fresh flood of liquidity is expected to spill into the real estate market. "We expect more capital to be chasing income-yielding assets, particularly office and hotel assets."


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