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Homebuyers Warmed Up To New Launches

Residential Market Watch Q3 2019

Highest new sales in 25 quarters

The third quarter of every year usually has a shorter sales period due to the inauspicious Lunar Seventh Month which occurs around the month of August. However, the attributes of new projects and their price points could still optimise the opportunity at hand.

In Q3 2019, developers focused the release of new projects in July and September, offering some 15 projects in all. Including new releases from earlier launches, a total of 3,638 new homes were offered for sale, 45% more than the 2,502 new homes launched in Q2 2019. A total of 3,281 new homes were sold. Not only was this 40% higher than the preceding quarter, it was also the highest sales volume since Q2 2013.

The warm receptivity of homebuyers helped to strengthen home prices, as reflected in the 1.3% q-o-q rise in the overall URA private residential price index. This brings the total climb in the price index to 12% since it bottomed out in Q2 2017. To put it plainly, in nine quarters, home prices have recovered the grounds they lost in 12 quarters.

By regions, the price index for the Core Central Region (CCR) rose by 2% q-o-q, supported by several high value sales of luxury apartments. Second in line was the price index of the Rest of Central Region (RCR) which was up by 1.3% q-o-q and finally, the Outside Central Region (OCR) price index which rose by a marginal 0.8% q-o-q.

More choices for homebuyers

Some of the significant launches in Q3 2019 included CCR’s Cuscaden Reserve, Haus On Handy and Nouvel 18. Mega-projects such as Avenue South Residence and One Pearl Bank in RCR were debuted in the quarter, as well as Parc Clematis in OCR. We observed that homebuyers were drawn to new projects at locations where there will be new initiatives under the Draft Master Plan 2019.

Parc Clematis was very well-received, achieving a take-up rate of 29% of its 1,468 units. It is located close to the evolving Jurong Lake District where there will be exciting business and employment opportunities. Data from URA-Realis shows that 20% of the buyers comprised permanent residents (PRs) and foreigners (NPRs), which is exceptionally high for a mass-market project. Avenue South Residence also saw a strong take-up of 33%, attributable to its proximity to the Greater Southern Waterfront, a new major gateway for urban living along the southern coast.

Sales activity in the secondary market remained steady with a sales volume of 2,378 homes, similar to the 2,371 properties sold in Q2 2019. Nouvel 18, a high-end development located close to the Ardmore Park enclave, was released for sale in July at the average price of $3,300 psf. Completed in 2014, most of the units have been leased out. Of the 16 units sold to date, 13 (81%) were bought by PR and NPR investors.

A total of 100 luxury apartments were sold in Q3 2019, slightly fewer than the 108 that were sold in the previous quarter. The most expensive deal was a penthouse at 3 Orchard-By-The-Park that was sold for $32 mil ($4,638 psf). Another significant sale was an 11th floor unit at The Marq at the price of $23 mil ($3,690 psf). Besides these, six other apartments at TwentyOne Angullia Park, Le Nouvel Ardmore, Sculptura Ardmore and Wallich Residence were sold between $9 mil and $17 mil, all above $4,000 psf. Clearly, there is still a strong interest in well-located, good quality luxury apartments.

In Q3 2019, 12 bungalows within the Good Class Bungalow (GCB) Areas were sold, compared to 10 in Q2 2019. The most expensive GCB sold in Q3 2019 was one located at Astrid Hill with a land area of 26,983 sq ft. It fetched $47 mil ($1,742 psf). Two other significant sales which was reported in media but could not be verified were a brand new GCB at Cluny Road which fetched $41 mil ($2,715 psf) and a huge GCB land at Nassim Road which sold for $230 mil ($2,720 psf). There was no known villa transaction at Sentosa Cove in Q3 2019.

As at end-September, the tally for the entire luxury segment stood at 311 deals. PRs and NPRs made up 70% of the homebuyers.

New high-end projects that will be launched in Q4 2019 include Eden, Hyll On Holland and Pullman Residences. New projects in other locations include Dairy Farm Residences, Mattar Residences and Urban Treasures.

Rental market & vacancy

URA’s residential rental index eased by 0.1% q-o-q in Q3 2019, compared to the 1.3% q-o-q growth in Q2 2019. The weakening could be attributed to the landed segment, which registered a -2.3% q-o-q change whereas the non-landed segment was up by 0.4% q-o-q. A further breakdown by regions revealed that only the non-landed rental index for RCR and OCR showed positive change of 1.6% and 0.8% respectively, the CCR rental index posted a negative 0.7% q-o-q change.

The poorer performance of the CCR leasing market was also reflected in its vacancy rate, which edged up to 8.2% from 7.8% in Q2 2019. On the other hand, vacancy rates for RCR and OCR improved by 40 basis points each from the previous quarter to 6.0% and 5.3% respectively. The islandwide vacancy rate stood at 6.1% with a total of 22,819 vacant units in Q3 2019.

The current lackluster business environment is probably the main reason for the weaker showing in CCR, traditionally a favourite location for expatriates. Besides trimming expatriate allowances, some MNCs had also repatriated their staff. As such, expatriates living in CCR either negotiated for lower rents or they moved to RCR and OCR where rents would be more affordable.

URA’s statistics revealed that another 2,440 new homes are due to be completed in Q4 2019. This will bring the total completions in 2019 to 7,669 units, lower than the 9,112 units completed in 2018. Estimated completions for 2020 is a low 4,653 homes. Thereafter, new completions are estimated to shoot up to 10,646 units in 2021 and 11,524 units in 2022, from the pool of new projects currently being sold in the market. 

Supply in the pipeline

As at end-September 2019, there were 50,964 private homes that were under construction, slightly higher than the 50,674 units at end-June. This comprised 19,016 units (37%) which have been sold and 31,948 unsold units. Of the 31,948 unsold units, 18,589 units (58%) were from projects that were either launched or not launched yet and 13,359 units (42%) from projects that did not have the prerequisites for sale. These 31,948 unsold units are more manageable than in Q2 2008, when the supply pipeline peaked at 43,400 units .

Major new projects which obtained approvals for development in Q2 2019 include the projects at former Brookvale Park (648 units), former Tulip Garden (638 units), as well as the sites sold by the government at  Bukit Timah/ Kampong Java Road (378 units), Middle Road (522 units) and Sims Drive (566 units).

The next batch of new supply will come from the sites that were sold in Q3 2019. From the private sector, a row of shophouses at Phoenix Road was sold for $42.6 mil. It could yield around 80 new homes. The government sold four sites located at Clementi Avenue 1, Tan Quee Lan Street, Bernam Street and one-north Gateway. They could contribute a combined total of 1,700 new homes. 

There is no land site for sale by the government in Q4 2019. The next two land tenders will take place in January 2020. By scheduling a later tender date, the government is indirectly easing the pipeline supply of residential homes.

Outlook

The Singapore economy narrowly avoided a technical recession in Q3 2019 based on the government’s flash estimates of a GDP growth of 0.1% y-o-y. However, the outlook is dim as global manufacturing momentum remains sluggish and labour market softens. As market sentiments turn cautious, coupled with the holiday season, we expect the Q4 2019 new home sales to be less than 2,000 units. Prices of high-end homes are likely to remain stable but suburban home prices would be under pressure. 


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