cooling measures announced by the government on 5 July threw the residential
market into a frenzy. Within a span of five hours, over 1,000 units were sold
from three new projects as buyers rushed to beat the midnight deadline to avoid
paying the new higher Additional Buyer’s Stamp Duty (ABSD) rates.
The 1,000 units came from three projects that were launched that night: over 500 units from Riverfront Residences in Hougang, around 300 units from Park Colonial at Potong Pasir and some 200 units from Stirling Residences in Queenstown. For the rest of the quarter, response to new launches was patchy as potential home buyers weigh affordability with opportunity cost.
residential price index edged up by a mere 0.5% q-o-q, a far cry from rises of
3.4% in Q2 and 3.9% in Q1. This moderate
price increase shows that the key objective of the cooling measures, which is
to achieve a more gradual but sustainable price
growth, has been met.
By regions, only prices in the Core Central Region (CCR) reflected an increase of 1.3% in Q3. Prices in the Rest of Central Region (RCR) declined 1.3% q-o-q while those in Outside Central Region (OCR) eased by 0.1%. We attribute the bigger price correction in RCR to the large supply of new projects and developers’ competitive pricing to sell as many units as possible. Besides Park Colonial and Stirling Residences, six other projects in RCR were offered in Q3: Daintree Residence, Jadescape, Jui Residences, Mayfair Gardens, The Addition and The Tre Ver.
Sizing up the impact
the bounteous sales in July, new sales fell to around 500 units in August
(which coincided with the 7th month in the Lunar calendar) and 900
units in September. In all, 3,012 new
homes were sold in Q3, summing up to a total new sales of 6,959 units in the
first nine months of 2018, 20% lower than the volume in Q1-Q3 2017.
the secondary market, 2,672 resale homes were transacted, the lowest quarterly
volume since Q1 2017. Nevertheless, this totals up to 11,038 resale
transactions for Q1-Q3 2018, 12% higher than the 9,817 homes sold over the same
period in 2017.
total home sales in Q3 numbered 5,765 units, which is 20% lower than the volume
in on the luxury segment, 13 GCBs were sold along with 1 bungalow in Sentosa
Cove and 61 luxury apartments. This is a drop of 42% from the 8 GCBs, 4 Sentosa
Cove bungalows and 119 luxury apartments sold in Q2 2018. These figures show
that the cooling measures have a greater impact on the Sentosa Cove and luxury apartment
segments than on the GCB segment. The reduced sales in the first 2 segments
could be attributed to a drop in foreign and permanent resident (PR) buyers who
are hit by the higher ABSD rates. As GCBs are restricted properties which only
locals can buy, the segment was relatively more resilient.
at the market as a whole, the caveats lodged for all transactions in Q3 show
that 4,433 buyers (80%) were Singaporeans, 752 buyers (14%) were PRs and 307
buyers (6%) were foreigners. These numbers are lower than in Q2: 5,557
Singaporeans (79%), 1,034 PRs (15%) and 375 foreigners (5%).
cooling measures involve raising the ABSD for home buyers and reducing the
loan-to-value (LTV) ratio by 5 percentage points for all housing loans granted
by financial institutions. For Singaporeans and PRs buying a second, third or
subsequent residential property, the ABSD is raised by 5 percentage points. For
foreigners, the ABSD is raised by 5 percentage points; while for entities
including companies, it is raised by 10 percentage points.
for developers, they have to pay an ABSD of 5 per cent that is non-remittable upon
the purchase of residential development sites. If they fail to complete the
residential project as well as sell all its units within 5 years of acquiring
the site, they will be liable to pay another ABSD of 25 per cent with interest.
The hike in the costs of acquiring residential land not only shaved the prices which developers were willing to pay for land, it also brought the en bloc sale cycle to the end of its season. From 19 en bloc sales each in Q1 and Q2, only 5 deals were closed in Q3. Two of the en bloc deals sealed in first half of 2018 – Fairhaven at Sophia Road and Teck Guan Ville at Upper East Coast Road – were aborted. The reasons quoted were the dampening effect of the cooling measures on the market, higher acquisition costs and rising interest rates.
Rental market & vacancy
rental index continued its recovery for the third consecutive quarter, albeit a
marginal q-o-q rise of 0.3% in Q3. In total, it has gained a total of 1.6%
the rental index for RCR had the best showing of a 1.5% q-o-q rise, followed by
the OCR index with a 0.9% rise. The rental index for CCR, however, turned south
strengthening rental market could be attributed to a reduction of properties
for rent due to a rise in demolitions of developments which had been sold en bloc
as well as a smaller number of new completions. Only 1,088 new homes were added
to the housing stock, down from 1,327 units in Q2 and 1,977 units in Q1. As a
result, the number of vacant homes fell by 3.7% q-o-q from 26,064 units to
25,105 units, reflecting a vacancy rate of 6.8%.
completions in Q3 included The Wisteria (216 units), Thomson Impressions (288
units), Tre Residences (250 units) and Kallang Riverside (212 units).
Supply in the pipeline
the flurry of successful en bloc
sales in 2017 as well sites sold from the government land sales programme,
several new projects have obtained approval for construction in Q3. The major
ones are Amber Park (616 units), Cuscaden Road
(200 units), Mattar Road
(266 units), Silat Avenue (1,101 units), former Sixth Ave Centre (284 units),
former Tulip Garden (672 units), former Florence Regency (1,410 units) and
former Katong Park
Towers (290 units).
statistics showed that there is a supply pipeline of 50,330 units with planning
approvals. Of this number, 30,467 units remained unsold as at end-September,
13% more than the 26,943 units at end-June. The number of unsold units
comprised 12,207 units (40%) from projects that were either launched or not
launched yet and 18,260 units (60%) from those without prerequisites for sale.
Taking a more positive view, the cooling measures came at a good timing with regard to future housing supply. Supposing the annual demand for new homes is around 9,000 units, it will take at least 5 years to clear the 50,330 units. The cooling measures not only help to put brakes to developers’ insatiable appetite to acquire sites, they will help developers to focus on selling all the units and complete the projects by the end of 5 years so that they need not pay the 25% ABSD with interest.
Fundamentals remained healthy
economy is expected to achieve a GDP growth of 2.5% - 3.5% in 2018, and
unemployment rate to stabilise at 2.1%. The ability to keep jobs will enable
resident households as well as foreign skilled labour to continue to support
the demand for housing. The ease of doing business will continue to attract
foreign investors here.
the measures in place, home prices will grow at a moderate pace and homebuyers
are unlikely to over extend themselves.
expect home prices to grow by a total of 10% for the whole of 2018. Demand for
new homes is likely to fall short of 2017’s by some 10% to around 9,000-9,500
units while resale volume is expected to remain at a similar level of around