Singapore ranks second globally as source of cross-border real estate capital in 1H

In the first half of this year, Singapore emerged as the world's second-largest source of cross-border real estate capital, deploying US$11.019 billion (approximately S$14.2753 billion). Hong Kong, Japan, and Mainland China were also among the top 10.

Real estate consultancy Colliers recently published its Global Capital Flows report for the first half of the year. According to the report, Singapore accounted for US$3.898 billion in global cross-border capital and US$7.121 billion in regional cross-border capital, totalling US$11.019 billion and trailing only behind the United States.

Cross-border capital from Hong Kong reached US$8.221 billion, ranking fourth globally. Japan and Mainland China ranked eighth and 10th, with US$4.533 billion and US$3.161 billion respectively.

On the other hand, in terms of cross-border capital invested in land or development projects, Singapore was also among the top 10 investment destinations, ranking second with US$1.929 billion, behind Mainland China. Other Asia-Pacific markets on the leaderboard included India (third, US$1.492 billion), Vietnam (seventh, US$912 million), Malaysia (ninth, US$327 million), and Japan (10th, US$273 million).

APAC Q2 transaction volume down 29% year-on-year

The report pointed out that while transaction volume in the Asia-Pacific region held steady year-on-year in the first quarter, it dropped by 29% in the second quarter, falling noticeably below the five-year low. The report noted: "This is primarily due to a 30% drop in transaction volume for land or development sites in the Asia-Pacific region, of which Mainland China experienced a 40% decline."

In contrast, transaction volumes in North America were largely unchanged from the first half of last year, with the second quarter in particular trending slightly above the five-year low. Overall, North American transaction volume in the first half slipped just 7% year-on-year.

Market trends across Europe, the Middle East, and Africa (EMEA) closely mirrored North America, with second-quarter volume slightly higher than the same period last year. July figures reflected the typical summer lull, yet transaction volume was down only 5% year-on-year, demonstrating the stability of the regional market.

Interest rates and inflation remain pivotal factors affecting property market stability. The report noted that these metrics are improving, with headline inflation across all regions easing month-on-month to between 2% and 3.25%.

Global interest rate normalisation expected to trigger more market volatility

The report suggests that while the normalisation of global interest rates will introduce further market volatility, the property sector is nevertheless poised for a recovery. Last month, the Bank of Japan announced an interest rate hike, which sent the Nikkei tumbling 12% and caused the yen to surge 12% against the US dollar.

The report further noted that across sectors, investors continue to show a distinct preference for residential and warehousing over traditional office and retail commercial assets. Among global real estate funds raised this year, 42% targeted industrial assets, 30% focused on hospitality, and 19% on residential.

This is consistent with global investment activity over the past 24 months, where multifamily housing (residential developments built specifically for the rental market) and industrial properties led the transactions.

Meanwhile, robust fundraising in the hospitality sector indicates that the hotel industry will continue its recovery on the back of rising real incomes and visitor arrivals that are beginning to surpass pre-pandemic levels.