Almost $2b spent on buying condos this year
(SINGAPORE) Institutional investors and foreign individuals have been bulk-buying 10 to 50 condominium units at a time here, with such deals expected to have hit almost $2 billion so far this year.
CB Richard Ellis (CBRE) Research says at least 16 deals worth a total of about $1.7 billion have been done in the first eight months.
And CBRE executive director (investment properties) Jeremy Lake believes 20-25 per cent more deals could also be going undetected.
The deals are usually registered as acquisitions by companies. More detailed data is held by the Inland Revenue Authority of Singapore but is not available to the public.
The Urban Redevelopment Authority releases quarterly figures on purchases by companies but these are only for sold, uncompleted private residential projects.
The figures nevertheless show that companies bought 279 units in the second quarter of this year - six times more than the 39 units in Q2 2006.
Societe Generale (SG) said in April that it had set up a property fund that had already raised $20 million that was quickly invested in 10-15 properties in prime districts.
These transactions were not captured by CBRE. And when contacted recently for more information, SG said that because the fund is a private one, it could not give details.
Other institutional investors said to have made bulk-buys recently are Kuwait Finance House and Goldman Sachs.
According to CBRE, only three deals were done in 2006. Citadel Equity Fund, for one, bought 25 units at One Tree Hill Residence.
The trend is not new. Mr Lake said Pramerica made bulk-buys at Avalon, Holland Hill and Duchess Crest in early 2002.
The current buoyancy in the property market is the major factor behind the resurgence of such deals.
As Mr Lake pointed out: 'You can participate in this market as a developer - as Lehman Brothers is doing through joint ventures with Chip Eng Seng. The other route is to buy units.'
The returns may be less, but Mr Lake said: 'There is also less risk compared to a development project.'
The investment in a development project is also much larger. 'Some of these investors are not looking to spend large amounts of money,' he said.
According to CBRE, most bulk-buying was by individual foreign investors. Their identities are not readily available, as they could have bought through companies. But Mr Lake believes these high net worth individuals are 'primarily driven by confidence in the market and personal interest in a particular project'.
Bulk purchases at Reflections @ Keppel Bay included one such private investor as well as a Middle Eastern fund, he said.
He reckons these buyers are looking for either rental returns or capital appreciation. 'In either case, they expect prices to increase.'
They may also want to diversify their portfolio and spread risks, he said.
But in light of the global credit crunch, investors everywhere will be re-evaluating risk.
And according to Mr Lake, it is 'unlikely' that the same number of investors - institutional or otherwise - would choose to park their money in real estate in the months ahead. 'They will be more selective now,' he said.
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