Foreign investment in Singapore real estate surges in Q2, but size of market may limit further gains

[SINGAPORE] Foreign investment in Singapore property jumped in the second quarter of this year to US$2.3 billion, 572.5 per cent higher than the US$342 million from the same period in 2024, led by mixed-use and industrial real estate, according to real estate consultancy Knight Frank. This was also the biggest increase in the Asia-Pacific (Apac).

However, it is uncertain that this pace of growth will be sustained, said Christine Li, head of research for Apac at Knight Frank, to The Business Times.

“Foreign investors always have an interest in Singapore’s assets, but the market proves challenging as Singapore does not have a large pool of institutional-grade assets available for acquisition, unlike some larger economies in the region. Asset owners also hold Singapore assets for (a) longer-term horizon,” she noted.

PGIM Real Estate, which manages US$210 billion of property assets globally, agrees.

“This is a market which we like, but it’s a relatively small market, and it’s difficult to deploy capital,” PGIM’s Raimondo Amabile, co-head of real estate and global chief investment officer, told BT recently. 

Still, the Newark-based firm bought Stamford Court with Elevate Capital Group for S$132 million in October 2024. The building is currently being redeveloped into a mixed-use lifestyle hub that will feature a co-working space by Singapore-based co-working brand The Great Room when it opens in the second half of 2026.

For overseas investors seeking to deploy funds in the city-state, Li suggested looking into value-add opportunities to reap benefits, given the number of ageing assets, in sectors such as office, industrial and hotels.

Knight Frank’s data covers completed and pending transactions. These include City Developments Ltd’s agreement to sell its 50.1 per cent stake in the South Beach mixed hotel-office project to its Malaysian partner, IOI Properties Group, for about S$834.2 million. Another sizeable deal is Mapletree Industrial Trust’s sale of three industrial assets for S$535.3 million to Canada’s Brookfield Asset Management. Both are scheduled to be completed in the current quarter.

JLL is slightly more bullish, seeing the return of so-called core funds – owned or managed by the likes of pension funds, insurance companies and those with a low-risk profile – to Singapore.

Dominance of funds with higher risk

“Core funds that are geography-agnostic are divesting office assets elsewhere with plans to invest into Singapore. Post-capital recycling, 2026 will likely see core funds re-enter Singapore,” it said in a July report.

Currently, capital in the city-state is dominated by value-add and opportunistic players, referring to those with a medium-to-high risk appetite, it noted. These usually include the likes of private-equity players, real estate investment trusts and high-net-worth individuals comfortable with higher risks.

JLL’s data on foreign investment in Singapore property shows similar strong growth. In the nine-month period ended Jun 30, overseas investors pumped US$3.7 billion into Singapore – a year-on-year surge of 442 per cent. Global investors accounted for 68 per cent of the inbound volumes.

Apart from Singapore, Australia and Japan were among the top three biggest recipients of foreign investments in Apac during Q2 2025. 

While American investors are driving the majority of the interest in the Apac region, European buyers have also been active, particularly as they seek to diversify away from the US.

“We are seeing an increase in interest from European investors in the Asia-Pacific region, with many considering reducing their exposures to the US market and reallocating it to other regions,” said Guy Sainsbury, head of investment operations, Asia-Pacific, at Savills Investment Management.

Comprising mostly pension funds and private-equity funds, and family offices on a smaller scale, these European investors are most interested in Australia and Japan when considering investments in the region, he added.

Australia captured US$3.8 billion worth of foreign investment in Q2, according to Knight Frank. Apart from being a 118 per cent jump from the same period in 2024, it was also almost a third of the total US$12.1 billion in cross-border activity for Asia-Pacific, noted the real estate consultancy.

“One of the best propositions”

“Australia is one of the best propositions right now,” PGIM’s Amabile said. A growing population, positive net immigration and low unemployment are spurring demand for residential sectors such as co-living. He added that PGIM is investing a lot of capital in the country, particularly in the build-to-rent sector.

It also appears to be positive on Australia’s retail sector. In June, PGIM teamed up with Australia’s Assembly Funds Management to buy the Woodgrove Shopping Centre in Melbourne for A$440 million (S$366.5 million). 

Rising net immigration, as well as an anticipated increase in foreign students, is also driving optimism in Australia’s student accommodation market.

Earlier in August, the Australian government said the country will lift its cap on foreign students by 9 per cent to 295,000 next year. It will also prioritise applicants from South-east Asia. The announcement led the shares of Wee Hur, a Singapore-listed operator/owner of purpose-built student accommodation (PBSA) in Australia, to jump 6.5 per cent to a record high on Aug 6.

Growing optimism is leading overseas investors, including those from Singapore, to “actively” form joint ventures with local players to buy assets in the PBSA sector, said the JLL report.  

These include Temasek’s Mapletree Investments, which said in July that it had started looking at opportunities in Australia, where it said there is growing demand and structural under-supply in the asset.  

Australia’s office sector has also been drawing foreign investors, particularly from Japan. During Q2, Odakyu Electric Railway bought a 10 per cent stake in Salesforce Tower, Sydney’s tallest office building. That follows a US$375 million purchase by Daibiru of 135 King Street at the end of March.

Foreign investors are likely to continue favouring the country, particularly if the Reserve Bank of Australia sticks to the path to lower interest rates, said market players. The central bank cut the main cash rate by a quarter point to a two-year low of 3.6 per cent on Aug 12.

Active Japanese market

Japan was also a top pick for foreign investors during Q2. Knight Frank’s data showed foreign investors buying around US$2.4 billion in assets, mostly in the residential and industrial sectors. This was despite a 14.8 per cent year-on-year drop in transaction volumes.

Given the push by the Tokyo Stock Exchange for companies to restructure their balance sheets to enhance shareholder value, some real estate assets have been made available. The restructure has also fuelled dealmaking in Japan, with mergers and acquisitions hitting a record US$232 billion in the first half of the year.

Reforms to tackle chronic low valuations among Japanese firms are fuelling a flurry of foreign and activist-investor interest. The appetite for more deals remains strong, bolstered by Japan’s low interest rates.

The active private-equity market in Japan is spilling over to real estate, said PGIM’s Amabile.

And the foreign investors include those hailing from Singapore. CapitaLand Investment in June announced that its private fund, CapitaLand Ascott Residence Asia Fund II, bought a prime mixed-use asset in Tokyo for more than 30 billion yen (S$267.2 million)

European investors are also drawn to the residential and multi-family build-to-rent market in Japan, said Savills’ Sainsbury.