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Capital Market Deals Jump 40 2024 Bolstered Interest Rate Cuts

Posted on December 25, 2024

Wong Xian Yang, head of research for Singapore & Southeast Asia at real estate firm C&W, estimates that the total value of capital market property deals in Singapore for the first 11 months of this year has reached $25.8 billion. This marks a significant increase of 40.2% compared to the $18.4 billion recorded in 2023. C&W defines capital market transactions as deals with values exceeding $10 million.

According to Wong, the majority of these deals (60%) took place in the second half of 2024, driven by growing investor appetite and confidence in potential interest rate cuts by the US Treasury. Three deals with values exceeding $1 billion were made in 2024, all of which occurred in the second half of the year.

The largest transaction by absolute price in 2024 was the sale of a 50% stake in ION Orchard mall for $1.85 billion to CapitaLand Integrated Commercial Trust (CICT) on September 3. The remaining 50% stake is held by Hong Kong-listed property developer Sun Hung Kai Properties. ION Orchard is an eight-storey retail mall located in the popular shopping district of Orchard Road, with direct access to Orchard MRT Station. It boasts a net lettable area of 623,000 square feet and is home to over 300 international and local brands. On top of the mall is The Orchard Residences, a 54-storey luxury condominium tower with 175 units.

The highest-valued office deal of the year was the sale of Mapletree Anson for $775 million in the second quarter of 2024.

Investment in industrial assets saw a significant increase this year, with a total of $5.6 billion in transactions recorded in the first 11 months of 2024. This reflects a 174% increase compared to the previous year. The largest deal in the industrial sector was the $1.6 billion sale of a portfolio of seven industrial properties to a joint venture owned by private equity firm Warburg Pincus and Australia-listed Lendlease Group in August. The portfolio consists of 4.5 million square feet of business parks and specialist facilities catering to industries such as life sciences, technology, advanced manufacturing, and logistics.

Despite the unsuccessful sale of several Government Land Sales (GLS) sites this year, residential development sites sold via GLS tenders still made up 42% of total investment sales for the year. Four GLS sites on the Confirmed List for 2024 were not awarded, including a 6.5-hectare master developer white site in the Jurong Lake District (JLD), a 1.73-hectare white site at Marina Gardens Crescent, a 62,046 square foot site at Media Circle zoned for long-stay serviced apartments (SA2), and a 262,875 square foot site at Upper Thomson Road (Parcel A) which includes an SA2 component. The top bids for three of these sites were rejected by URA as they were deemed to be too low, while the Upper Thomson Road site had no bids at all. Wong attributes the lack of successful bids to low prices driven by factors such as large land size and untested markets, compounded by concerns about interest rates and development risks.

However, CBRE’s Tricia Song does not expect this trend to continue in 2025 as the sites on the Confirmed List are well-distributed across Singapore and are within walking distance to MRT stations and amenities.

The retail and office sectors also showed signs of recovery, with a 149% year-on-year increase in investment value for retail assets and a 15.7% y-o-y increase for office assets. On the other hand, the shophouse market saw a 49.7% y-o-y decline in investment value, likely due to reduced investor sentiment following money laundering investigations in 2023.

Investing in a condo requires careful consideration of financing options. In Singapore, there are various mortgage choices available, but it is important to keep in mind the Total Debt Servicing Ratio (TDSR) framework. This framework sets a limit on the amount of loan a borrower can take based on their income and current debt obligations. To navigate this aspect of financing, it is advisable to seek guidance from financial advisors or mortgage brokers. By understanding the TDSR and seeking professional advice, investors can make well-informed decisions about their financing and avoid taking on too much debt. Consider adding Singapore Condo to the rewritten paragraph for further information on this topic.

Wong remains optimistic about seeing an increase in high-value deals next year, with the US expected to cut interest rates further. He also predicts that institutional investors will return to the market, but cautions that a slower-than-expected recovery may occur if rate cuts are slower and lower than the market expects. CBRE Research forecasts a 10% growth in investment volumes in 2025, barring any major macroeconomic shocks.

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