A DTZ report shows that property investment sales during the fourth quarter of 2008 plunged to its lowest level since 2003, with more players sidelining as credit tightened and prices weakened,
The total transaction value was $352 million, a decrease of 74 percent from Q3 of 2008. As sales fall apart toward the end of 2009, the total transaction volume last year fell to $15.8 billion, merely one-third from 2007 and two-thirds from 2006.
DTZ said that investment market is expecting to remain dormant during the first two quarters of 2009 as most investors are waiting for the prices to decrease further and for the ease of credit conditions.
Transactions are confined within the private sectors as the government land sales through its confirmed list are suspended and the reserve sites are not likely to be triggered.
“The second half of 2009 is likely to see more deals as the price gap between sellers and buyers closes,” said DTZ Senior Director of investment advisory services Shaun Poh.
“How much the investment market recovers will depend on the depth and length of the economic and property downturns.”
Although there are no major deals during the second half of last year, office sectors are still in control of the investment sales in 2008 with 35 percent or $5.6 billion total sales, an increase from 24 percent in the previous year. All major transactions are recorded during the first half of 2008 and less than $30 million office deals were recorded by the second half of the same year.
Year 2008 shows a tremendous drop for residential sector as interest for collective sales decreases. Residential transaction volume fall to $3.9 billion from 82 percent year-on-year, accounting for 25 percent total sales compared to 49 percent in 2007.
Only seven residential collective sales are recorded in 2008 compared to 150 in the previous year. “With high construction cost, financing difficulties and weak market sentiments, developers are shunning residential collective sales,” DTZ noted.
Meanwhile, transactions from industrial sector increased in 2008 as many of the investors turned away from high prices of office buildings. Some $3.4 billion industrial properties were recorded, or doubled the amount of that in 2007.
About half of the deals in 2007 came from the divestment of JTC’s industrial properties in the second quarter and despite of the suspended transaction mood in the fourth quarter, significant industrial transactions were still recorded including, the acquisition of Applied Materials Building by Union Investment.
Investment by real estate investment trusts (REITs) were also subdued by the second half of 2008, as they changed attention from purchases and focus more on deleveraging and refinancing, DTZ said.
Only three purchases by REITs were recorded in the third quarter of 2008 and only one in the fourth quarter as compared to the 22 purchases in the first half of 2009.