Residential Market Watch Q1 2021

VIGOUR IN RESIDENTIAL MARKET

Robust sales fuelled price growth

Market sentiments continued to improve with the successful roll-out of the vaccination programme alongside Phase 3 of the reopening of the economy. More employees are allowed to return to the workplace to better support work and business operations. 

This renewed confidence was also reflected in the vigour of homebuyers as they drove the new and resale home volumes in Q1 2021. A total of 3,493 new homes were sold, the second highest quarterly volume since Q2 2013; 4,519 resale homes changed hands, the highest volume since Q2 2018.

The strong sales volume drove up home prices, as evidenced by the 3.3% q-o-q rise in the price index. This is the fourth consecutive quarter of positive growth in the index and its biggest gain since Q2 2018.

Prices of landed homes jumped 6.7% q-o-q, reversing the 1.6% contraction in Q4 2020. The spike could be attributed to sellers of detached and semi-detached houses who raised their price expectations when they saw demand picking up.

The increase in non-landed home prices was a smaller 2.5% in Q1 2021. It was driven mainly by prices in the city fringe, or Rest of Central Region (RCR), which hiked 6.1% q-o-q, compared with 4.4% in the previous quarter. In the suburbs, or Outside Central Region (OCR), home prices rose by 1.1% compared to a rise of 1.8% in Q4 2020. As for the prime location or Core Central Region (CCR), prices moved marginally by 0.5% q-o-q, following the 3.2% q-o-q rise in Q4 2020.

Overall, home prices have been resilient and have risen by a total of 19% since bottoming out in Q2 2017.

Market dynamics

Developers launched 3,716 new homes for sale in Q1 2021 through six new projects and units from ongoing projects. This was slightly more than the 3,147 units launched in the previous quarter. Homebuyers bought 3,493 new homes, 34% higher than the 2,603 units sold in Q4 2020. 

Of the six new projects, Midtown Modern, Normanton Park and The Reef At King’s Dock stood out. All three projects were very well-received mainly because of their location. Midtown Modern is located within the Downtown Core and is directly linked to Bugis MRT Interchange station. Normanton Park’s city fringe location is adjacent to Science Park and a five minutes’ drive to One-North and National University of Singapore. The Reef’s seafront location and its proximity to Harbourfront Centre and VivoCity, where the Harbourfront MRT station is situated were the main pull for buyers. Ongoing projects like Treasure At Tampines, Ki Residences, Amber Park and Parc Clematis continued to see healthy sales.

Further analysis of the new homes sold revealed that quantum play was key to their brisk sales. More than half or 54% of the units were priced from below $1 mil to $1.5 mil. These were mostly studios, one- and 2-bedroom units that were priced at a palatable quantum for singles, young couples and investors. Another 28% were priced between $1.5 mil and $2 mil.  The remaining 18% were those who bought larger units, landed and more upmarket market homes.

Homebuyers were equally enthusiastic with homes in the secondary market in Q1 2021. The 4,519 homes they bought was 6% more than the 4,249 units bought in Q4 2020. The advantage of buying resale homes is that they are ready for immediate occupation and there are more choices of freehold properties and landed homes.

Based on caveat data, the proportion of foreign buyers (including permanent residents) in Q1 2021 was 20%, a slight recovery from the 19% level in 2020 when the pandemic was full-blown and travel restrictions kicked in. Prior to that in 2019, the proportion of foreign buyers was 22%. From 2019 to 2020 to Q1 2021, the top five foreign buyers remained unchanged, namely Chinese, Malaysians, Indonesians, Indians and Americans.

The luxury market did surprisingly well in Q1 2021 with 132 deals, compared to 114 deals in Q4 2020. This encompassed 103 luxury apartments, 23 bungalows in the Good Class Bungalow areas and six bungalows at Sentosa Cove. There were three record deals in March. An old bungalow at Nassim Road was sold at $128.8 mil which reflected a record land rate of $4,005 psf. A bungalow at Cove Drive with a land area of 19,551 sq ft and built-up area of 10,000 sq ft was sold for $43.3 mil, the highest price achieved for a bungalow at Sentosa Cove. A Taiwanese family paid $293 mil or $4,827 psf for all 20 luxury apartments in Eden at Draycott Park.  These are signs that Singapore’s luxury homes are still attractive to ultra-high-net-worth investors.

Rental market & vacancy

Riding on the wave of the Covid-19 pandemic, the leasing market strengthened in the past two quarters as foreigners who were unable to leave the country had to make more permanent housing arrangements. Home rents grew by 2.2% q-o-q following a 0.1% uptick in Q4 2020. The growth was largely contributed by CCR where the rental index chalked up 2.9% q-o-q, followed by 2.1% in OCR and 2.0% in RCR. Upmarket apartments in CCR saw a spike in demand as more well-healed foreigners decided to seek refuge in Singapore where the pandemic seemed to be under control and health facilities are adequate. Delays in housing completion also led to a need for interim housing by families affected.

The number of vacant homes fell by 8% from Q4 2020 to 24,229 units. The vacancy rate as at end-March was 6.4%, down from 7.0% in Q4 2020.

Three major projects were completed during the quarter: The Tapestry (861 units), Seaside Residences (841 units) and Kandis Residences (130 units). Including landed homes, a total of 1,852  homes were completed. After taking into account demolitions, the total private housing stock rose by 0.5% q-o-q to 377,817 homes.

Supply in the pipeline

There were 48,139 uncompleted properties with planning approvals in the pipeline by end-March, down from 49,307 units in Q4 2020. Of this number, 21,602 (45%) were still unsold, lower than the 24,296 unsold units in the previous quarter. The unsold units included 15,142 units (70%) from projects that were either launched or not launched yet and 6,460 units (30%) from projects without the prerequisites for sale.

Among the new residential projects which obtained planning approvals in Q1 2021 were the ones located at New Upper Changi Road (160 units), Tanah Merah Kechil Link (268 units), Haig Road (32 units) and Institution Hill (30 units).

There was no land sale under the government land sales (GLS) programme in Q1 2021. From private sources, three development sites were sold. A joint venture led by Macly Group purchased two plots at Institution Hill off River Valley Road for $33.6 mil. It was reported that the group was planning to buy an adjacent plot to combine with the two plots. ZACD Group bought a development site at Mt Emily Road for $18.0 mil. A third development site located at Surrey Road was sold to a consortium led by Amara Holdings for $47.8 mil.

The need to replenish their land bank is becoming more acute as new projects continue to sell. The steady take-up rate has been partly motivated by the fear that new cooling measures might be introduced, and partly by the awareness that future launches will be priced higher due to higher costs. With the lack of GLS sites for sale, developers are looking to en bloc sales by private home owners. 

However, there is a certain impasse in the en bloc sales market as sellers’ price expectations have risen but developers are not prepared to bid too high for land because the stamp duties introduced in July 2018 and current labour shortages have driven up their costs. Moreover, any potential new cooling measures might dampen housing demand in the future.

What lies ahead

The demand for new homes is likely to persist in Q2 2021, especially for projects located close to MRT stations and those with unique attributes. These include Irwell Hill Residences, One-North Eden, One Bernam and Park Nova. Depending on how many new units are launched, new home sales volume could be around 2,000-3,000 units.

Weighing the uncertainties due to the pandemic and the possibility of impending cooling measures, we expect a more muted hike in home prices in Q2 2021.

The upcoming GLS sites at Northumberland Road, Ang Mo Kio Avenue 1 and Jalan Anak Bukit will be keenly contested by developers. In addition, a couple of en bloc sale sites could be successfully closed, particularly those that are priced below $200 mil.


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