Sales of investment property stagnating

Source : Straits Times - 19 Sep 2008

SALES of investment property are in the doldrums with the global financial mayhem and credit crisis slowing buying interest so far this quarter.

Nearly all sectors have been ‘relatively quiet’ apart from the hospitality industry, which has ‘remained healthy’, said a CB Richard Ellis (CBRE) report yesterday.

CBRE said a total of $3.17 billion worth of investment transactions have been recorded so far this quarter - the period actually runs until Sept 30 - down from $4.86 billion in the April-June quarter.

The figure is also a fraction of the $16.51 billion recorded in the third quarter last year, and likely to mark the fourth consecutive quarter that investment transactions have dropped.

Total investment sales for 2008 so far have totalled $17.12 billion.

CBRE’s director of investment properties, Mr Jeremy Lake, said this year will likely round up at about $18 billion, a third of 2007’s bumper $54.02 billion.

‘If you look at the freak year of 2007, yes, it is a huge drop. But if you look back to 2004, it’s still the third highest result of the last five years,’ said Mr Lake.

The second highest total for investment sales occurred in 2006 when transactions hit $28.38 billion.

CBRE’s report said the latest results are because tighter credit measures have brought about a temporary halt to major investment decisions as investors take stock of the local property market.

Mr Lake also said the spectacular failure of two large US banks this week will ‘compound the slowdown that is evident in the statistics’ and ‘exacerbate the uncertain outlook’.

CBRE defines investment sales as real estate sales with a value of at least $5 million. It includes private and government sales, buildings and land, strata and en bloc, as well as the change of ownership of real estate via share sales.

The report said the industrial sector has accounted for 61 per cent of sales so far in this quarter. Retail investment sales contributed the least, just $215.04 million, or 7 per cent, of sales.

CBRE blamed rising construction costs, higher interest rates and tighter lending measures for the inactivity.

It added that investors are expected to ’stay on the sidelines’ in view of the cautious market conditions.