Ask The Charlotte Home Inspector

Your Charlotte Home Inspection Questions Answered!

Ask The Charlotte Home Inspector header image 2

Market Analyst Claims Prices Of Industrial Property Not Sustainable

July 15th, 2012 · No Comments

SINGAPORE: Forecast of higher investment yields are driving demand and prices of industrial properties.

The strong economic growth ever since the rebound from the US debt crisis in 2008 has produced a lot of additional economic activity. This has improved demand concerning industrial space in Singapore in the last two years.

Most recent data from URA shows industrial property prices have bucked the general downtrend and grew by 7.2 per cent in the first quarter this year, as compared to the preceding quarter. Cost of residential property for the meantime, dipped marginally by 0.1 per cent from the previous quarter.

Donald Han, special advisor to real estate company HSR, said: “In the last two years, rentals have gone up an average of 12 to 15 per cent per annum. This year in the first quarter, we saw a rental increase of 1.8 per cent quarter-on-quarter – even that is probably not sustainable.

“We expect rents to flatten in the second quarter, and may potentially dip by as much as about two to three per cent, making the increase for the entire year not more than five per cent.”

Singapore property experts said low-interest rates and high liquidity in the market have managed to keep industrial property prices on the high. Analysts further said that a “healthy” occupancy rate of industrial properties at 93 per cent put forward that a price correction is not yet possible.

Alan Cheong, head of research at Savills, said: “For the first quarter of this year, the strength of the price and rental increases will push that momentum into the second quarter. We expect to see prices for multi-user warehouse and multi-user industrial space to rise by six to eight per cent, a similar strength to what we saw for the first quarter of this year.”

For the time being, market analysts are careful, saying that the uptrend may not be sustainable.

The slowing economy may cause demand for industrial properties to loosen and cause prices to decrease lower as well. Whereas rentals may decline, yields could still be enticing at five per cent. This is due to the fact that an industrial unit could cost an investor as low as S$400,000, although the use of CPF is not allowed.

There are some who even suggested that the rising prices have raise concerns for the possibility of  a potential bubble .

Chia Siew Chuin, research director at Colliers, said: “The higher prices we see now is probably the result of a skew, because of higher prices that we have achieved due to smaller units for industrial premises being sold. The government has already put in subtle measures, but they are just development guidelines, in a way, to achieve a more stabilized market going forward.”

Analysts do not think that authorities will impose measures to cool the industrial property market, which incidentally is composed of about one-tenth of property transactions. They said any measures may have to be targeted on investors in order to safeguard businesses that have bought industrial property as a hedge against future rental increases.

Be Sociable, Share!
Share

Tags: Unusual Findings

0 responses so far ↓

  • There are no comments yet...Kick things off by filling out the form below.

Leave a Comment