Pricing On The War Path?

Residential Market Watch Q1 2018

Strengthening prices

The URA price index surprised the market with an upswing of 3.9% q-o-q, gathering pace faster than the 0.7% and 0.8% gain in the two preceding quarters. The price index is now 5.5% above the trough in Q2 2017.

The steep spike in price index was a result of simple supply-demand imbalance: improved buyer sentiments against time lag in the launch of new projects.

All segments of the market saw price growth. The price index for landed and non-landed homes increased by 1.9% and 4.4.% q-o-q respectively. Prices of non-landed homes in Outside Central Region (OCR) rose by 5.6%, followed by a 5.5% increase in Core Central Region (CCR) and a 1.2% increase in the Rest of Central Region (RCR).

Pricing on the war path?

Developers continued to sell the units in existing projects and launched only 921 new homes for sale. Of the 1,581 new homes sold, 30% (442 units) were from the new launches and 70% (1,139 units) were from existing projects. With limited new launches and limited choice units from existing projects, the Q1 2018 sales volume was 15% lower than that in Q4 2017.

The Tapestry, located in Tampines Street 86, was the best-seller with 329 units sold. The achieved median price of $1,408 psf was 30% above the launch price of neighbouring The Alps Residences in Q4 2016.

Another mass market project, Kingsford Waterbay, sold 95 units at $1,365 psf, 20% pricier than two years ago.

Home buyers warmed up to two new launches In the Core Central Region (CCR). They bought 40 units of New Futura at the average price of $3,228 psf and 15 units of 8 Hullet at $3,490 psf. Martin Modern reported 41 units sold at $2,703 psf, which is 20% higher than its initial launch price nine months ago.

Pricing on the war path?

Buyers favoured resales

The resale market continued to draw buyers. In Q1 2018, buyers bought 3,666 resale homes, which was more than twice the number of new homes sold. Some of the reasons for homebuyers’ preference for resale homes could be the larger unit sizes compared to new condominium projects, relatively lower pricing due to age and their availability for immediate occupation.

Pricing on the war path?

Statistics released by the URA showed that 51% (1,885 units) of the resale volume are located in Outside Central Region (OCR), 28% (1,035 units) are located in the rest of Central Region (RCR) and 20% (746 units) are located in CCR.

In comparison, back in Q1 2017 as the market was about to bottom out, there were only 2,170 resales distributed as follows: 44% (964 units) in OCR, 28% (606 units) in RCR and 28% (600 units) in CCR.

A total of 112 luxury apartments were sold in CCR, of which only 22 were new units while the rest were resales. Some prominent resales in the CCR included 14 luxury units of The Nassim that were sold between $2,600 psf and $3,700 psf. These units were probably part of the 45 units that were bought by Kheng Leong Company in January 2017 for a total of $411.60 mil or around $2,325 psf. Another luxury development, Gramercy Park, reported 13 units sold in Q1 2018 at $31,77 psf. The average price of this development has been progressively raised from $2,670 psf a year ago.

Pricing on the war path?

Luxury bungalows were also transacted in the resale market in the absence of new-builds. During the quarter, two bungalows at Sentosa Cove and nine Good Class Bungalows were sold.

Profile of buyers

Caveats lodged for non-landed homes across the island show that 1,228 units were bought by permanent residents (PRs) and foreigners. This is lower than the 1,335 units in Q4 2017 but higher than the 1,169 units in Q1 2017. However, the proportion remained at 25%-26% of the total non-landed sales volume. This shows the stability of the confidence level of locals, PRs and foreigners as the residential market recovers.

The top five foreign buyers (including PRs) in Q1 2018 came from China, Malaysia, India, Indonesia and the USA, as was the case in 2017. However, in the CCR alone, the top five groups of foreign buyers were from China, Indonesia, Malaysia, the USA and Taiwan.

Rental market & vacancy

For the first time in 17 quarters, the rental index turned in a positive q-o-q change of 0.3% in Q1 2018. This followed a 0.7% decline in Q4 2017 which led to a total fall of 13.3% from the market peak in Q3 2013.

As landed rents remained weak, the rebound was anchored by the rents for non-landed homes. The rental index for OCR led the recovery with a 0.7% q-o-q rise followed by a 0.6% rise in the CCR rental index. The RCR rental index softened by 0.3% q-o-q.

The turnaround could be due to two factors. Firstly, only 1,977 new homes were completed compared to a quarterly average of 4,760 units between 2014 and 2017. Secondly, there was an increase demand for rental homes from both owners and tenants in developments which were sold en bloc in 2017.

Pricing on the war path?

This would also explain the improvement in vacancy by 40 basis points to 7.4% and the reduction of vacant units by 5.8% q-o-q to 26,906 units.

Among the 1977 homes completed in Q1 2018 were projects like Highline Residences (500 units), Sophia Hills (493 units), 8 Saint Thomas Walk (250 units) and Victoria Park Villas (109 units).

Supply in the pipeline

Developers’ unsold inventory started to increase again as they acquired more development sites in 2017. By the end of March, developers held 23,514 unsold units that were under construction, up from 18,891 units in Q4 2017. Of this number, 4,818 units (20%) were from both launched projects and those not launched yet. Another 18,696 units (80%) were from projects with planning approvals but without prerequisites for sale.

Pricing on the war path?

Going forward, we expect the supply pipeline to increase as more of the en bloc sale sites obtain the relevant approvals for construction and sale. 

More CCR en bloc sales in Q1 2018

The momentum of en bloc sales which started in the second half of 2017 continued in Q1 2018. As expected, the heightened pace also led to more aggressive bids by developers as well as the emergence of ‘new’ players.

Pricing on the war path?

A total of 22 development sites were sold in Q1 2018, of which three were from the government land sales programme. The 19 en bloc sale sites included nine located in CCR, six in RCR and three in OCR.

Worthy of mention is the acquisition of Pacific Mansion at River Valley Close by GuocoLand and the Hong Leong Group. At $980 mil, it was the most expensive en bloc deal in this wave, surpassed only by the sale of Farrer Court at $1.34b in 2007. Another significant deal was the sale of Cairnhill Mansions which achieved the highest land rate of $2,311 psf/plot ratio in this wave. However, it is still below the record of $2,526 psf/plot ratio held by Hampton Court which was sold in 2013.

Some of the ‘new’ players in this en bloc wave include Japura Development who acquired City Towers, FEC Properties who acquired Hollandia and Lafe Corp’s Gioia Fund who bought Fairhaven.

Avalanche of new launches

Developers are lining up several new project launches through the rest of the year. They have the potential to launch up to 14,200 units from the sites bought more than a year ago.

Besides Park Place Residences (Phase 2) which was launched in early April, upcoming launches include 120 Grange, Amber 45, Margaret Ville, Riverfront Residences, The Garden Residences, The Woodleigh Residences, Twin View and more. With some pent up demand from the lull in 2014-2016, fresh demand from owners of recent en bloc sales and increase in foreign investors, new home sales could reach 10,000–12,000 units in 2018.

Given the higher land prices, new norms will set in for the new projects, particularly in OCR and CCR. Home prices are expected to increase by 7% to 10% in 2018.

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