Boston, MA -- (SBWIRE) -- 11/22/2013 -- We believe that the Singapore commercial real estate sectors are still showing relatively strong growth, despite recent government-led cooling on a market particularly susceptible to global dynamics. We continue to perceive this as a key potential growth area - driven by increasing activity on the part of international investors - and there is also still a great deal of potential in the domestic market.

Despite 2012 reports of a decrease in market volume and activity, the underlying attractiveness of the real estate market has come through over 2013 with various deals and a number of REIT acquisitions testifying to the attractiveness of the market as a whole. With sound fundamentals and investor demand anchoring performance, we see the retail real estate sector as offering the most opportunities, though the office sector is also showing sturdy growth.

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However, that being said, the construction opportunities are somewhat limited by a relatively mature real estate market. A combination of lacklustre trade activity, fresh property-development curbing measures and lower fixed spending by the government have tampered the growth potential in Singapore's construction sector. We therefore maintain our view that construction activity in Singapore will moderate in 2013 and continue to decline until the end of this decade. We are forecasting real growth for Singapore's construction sector to reach 6.2% in 2013 and average 3.7% per annum between 2014 and 2020. This has resulted in a number of companies opting to look elsewhere in Asia for construction contracts and commercial real estate deals, particularly India and Vietnam.

Key Points

- Singapore has enacted a harsh set of real estate cooling measures to date, in an effort to keep a lid on skyrocketing property prices. While the measures are likely to result in considerably lower property transaction volumes over the coming months, we do not believe that a substantial sell-off is nigh. Instead, the real trigger for a correction in the market is more likely to be the eventual normalisation of interest rates, which will stretch the affordability of mortgage payments and negate rental profits. However, we believe that the city's property market boasts strong underlying fundamentals which will continue to support price appreciation over the long term.
- UK-based real estate consultancy Savills expects numerous major retail projects to open in Singapore in 2014. The consultancy estimates that over 2.6mn sq ft of retail space will be completed over the next four years with three malls.

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