Nicholas Spiro

As a global economic storm gathers, even Singapore may no longer be a safe haven for investors

Singapore’s commercial property market surged last year, largely because of foreign capital inflows. But this is now a liability, as cross-border investors take a sterner view of the impact of the coronavirus on the global economy

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Dark clouds loom over the Singapore skyline on February 10. Photo: Xinhua

Nicholas Spiro

Published: 12:07pm, 10 Mar 2020Updated: 12:07pm, 10 Mar 2020

In the world’s capital markets, the rush to safety is pervasive. Mounting fears over the economic impact of the rapidly spreading coronavirus have led to rampant demand for safe-haven assets, such as government bonds, as investors seek to preserve their capital and hedge themselves against the growing risk of a recession.

In Asia’s commercial property markets, where investment transaction volumes had already fallen significantly in the final quarter of last year, sentiment has deteriorated sharply. In a recent report, CBRE noted that the Covid-19 outbreak is “prompting many investors to postpone investment decisions and adopt a wait-and-see approach”.

JLL has been more explicit, predicting in a report published last month that transaction volumes in the first half of this year “are likely to be sharply lower year-on-year as investors re-examine investment pipelines and deployment”.

Many of the factors that have underpinned Asia’s real estate markets – historically low interest rates, which will decline further as central banks seek to counteract the virus-induced downturn, and record amounts of capital waiting to be deployed across the region – remain in place. Yet, investors are adopting more defensive strategies favouring the highest-quality assets in the most stable and resilient markets.

One of the countries that has long been perceived as a haven is Singapore. The Asian financial hub’s reputation for political and economic stability – its well-regulated and liquid real estate market and its success in attracting foreign investment – has helped cement its status as a refuge during periods of heightened risk aversion.

In a report published in January, JLL went so far as to describe Singapore as “an oasis of safety” in a late-cycle property market, with office rents and capital values in the city’s central business district expected to rise 20 per cent in the next five years, “amongst the strongest of any global city in Asia”.