Residential Market Watch Q2 2021

HOUSING: A SAFE HAVEN IN PANDEMIC TIMES

Homebuyers undaunted by spike in infections

Demand for private homes stayed on course in the midst of rising infections as it rode on the wave of the economic recovery in Q2 2021. Advanced estimates showed that the Singapore economy grew by 14.3% year-on-year, an improvement from the 1.3% growth in the previous quarter. While this strong growth was due to the low base in Q2 2020, it was premised on an expansion in the manufacturing sector and the information & communications, finance & insurance and professional services sectors collectively. 

The emergence of several clusters of infections led to the implementation of additional restrictions and measures to minimise transmission of the virus from 16 May to 13 June under Phase 2 (Heightened Alert). As developers held back from launching new projects, home buyers continued to buy from existing launches and the resale market. The buying boom was also fuelled by low mortgage rates and a shift in desired housing type due to the pandemic.

The residential price index made a modest gain of 0.8% q-o-q, compared to the 3.3% hike in Q1 2021. The rise was mainly supported by the steady demand in Outside Central Region (OCR) where HDB upgraders have benefited from the robust performance of the HDB resale market.  In addition, some high-value transactions in Core Central Region (CCR) during the quarter also boosted the overall price horizon.

Prices of homes at the city fringe or Rest of Central Region (RCR) and those of landed homes remained relatively flat in Q2 2021 after a spike of 6.1% and 6.7% respectively in the previous quarter.  

As at end-June, home prices have chalked up 7% y-o-y and a total of 20% since they bottomed out in Q2 2017.

CYCLES OF THE URA RESIDENTIAL PRICE INDEX

Market dynamics

Seven new projects were debuted in Q2 2021 and at least half reported robust sales in the first weekend of  launch before Phase 2 (Heightened Alert) took place. First off the shelf was Irwell Hill Residences which sold nearly 280 units (51%) at the average price of $2,630 psf. Next up was One-North Eden reported a strong take-up of 140 units (80%) at around $2,000 psf. Then there was One Bernam which sold 80 out of the 100 units that were released for sale at $2,470 psf.

These projects did well because of their location, proximity to transport node and amenities as well as the absence of recent new launches in their immediate neighbourhood. Yet another new project, Park Nova, reportedly sold five units in the first weekend, achieving a new benchmark of nearly $5,500 psf for the luxury segment. The biggest penthouse was sold for $34.44 mil ($5,838 psf) and a smaller one was sold for $26.03 mil ($5,784 psf). By end-June, another eight units were sold including the final penthouse at $17.18 mil ($5,320 psf).

Quantum play continued to be the main driver of new sales. However, in the absence of new launches in the OCR in Q2 2021, the proportion of units priced below $1 mil fell to 5% compared to 13% in Q1 2021. Units priced at $1mil-$1.5mil made up 38% of the units sold, compared to 40% previously. Another 32% were priced in the $1.5mil-$2mil price band, higher than 28% in Q1 2021. The remaining 25% of the new homes sold in Q2 2021 were those priced from $2 mil onwards, as opposed to a lower proportion of 18% in Q1 2021. A total of 2,996 new homes were sold in Q2 2021, 15% lower than the 3,493 units sold in the previous quarter.

Home buyers were drawn to resale properties as they allow immediate occupation and are deemed as better value for money in terms of living space compared to new homes. 5,333 resale homes were sold in Q2 2021, 18% higher than the 4,519 units sold in Q1 2021, and the highest sales volume since Q3 2009. 

Based on caveat data, nearly 21% of the home buyers in H1 2021 made up of foreigners and permanent residents, similar to the level in the whole of 2020 when the pandemic was full-blown. However, in absolute numbers, this group numbered 697 in H1 2021, catching up with the 794 in 2020. The top five foreign nationalities in H1 2021 were Chinese, Malaysians, Indians, Indonesians and Americans.

The luxury market strengthened further in Q2 2021 with 174 deals, up from 138 deals in Q1 2021. This included 140 luxury apartments, 30 bungalows in the Good Class Bungalow (GCB) areas and four bungalows at Sentosa Cove. In May, a partially completed GCB at Cluny Hill near the Singapore Botanic Gardens, was sold for $63.7 million, translating to a record $4,291 psf on 14,843 sq ft land area. Another significant deal was a 6,577 sq ft four-bedroom apartment at Les Maisons Nassim that was sold for $39 mil or $5,930 psf. To be completed around 2023, this exclusive ultra-luxury project at Nassim Road comprised only 14 units.

PROJECTS THAT SOLD WELL IN Q2 C2021

HOMES SALES VOLUME

LUXURY SALES VOLUME (New & Resale)

Rental market & vacancy

Home rents rose for the third consecutive quarter as shown by the URA rental index. The q-o-q rise  of 2.9% in Q2 2021 extended the rise of 2.2% in the previous quarter. Support came from homeowners in need of interim housing as their new homes were hit by construction delays and from foreigners who were stranded here due to travel restrictions. The increase in rents was seen across the island with a rise of 3.1% in CCR, 2.8% in RCR and 3.6% in OCR over Q1 2021.

Some 3,550 new home were completed in H1 2021 with another 3,700 units expected to be ready by end-2021. Although this total is more than double the 3,400 completions in 2020, it is still a far cry from the annual average completion of 14,000 homes in the five-year period of 2015 to 2019. The number of vacant homes fell slightly to 23,854 homes from 24,229 in Q1 2021. This reflected a 10 basis point-drop in the vacancy rate to 6.3% by end-June.

Among the 1,696 homes that were completed in Q2 2021 were Martin Modern (450 units), The Garden Residences (613 units) and Twin View (520 units). At end-June, there were 379,462 homes in the private housing stock.

Supply in the pipeline

Some of the new residential projects which obtained Written Permission in Q2 2021 were Canninghill Piers (696 units), Jervois Mansion (130 units), Sophia Regency (38 units) and  a project at Holland Road (42 units).

URA reported 47,097 uncompleted residential units with planning approvals in the pipeline in Q2 2021, lower than the 48,139 units in Q1 2021. Of this number, 19,384 (41%) were still unsold, down from 21,602 units in the previous quarter. Unsold units from projects that were either launched or not launched yet made up 13,376 units (69%) and those from projects without the prerequisites for sale made up 6,008 units (31%). With a reducing pool of unsold units, developers are actively on the look out for development sites.

In Q2 2021, two land parcels were sold under the government land sales (GLS) programme and one other is pending. City Developments and MCL Land jointly won a residential site with commercial use on 1st storey located at Northumberland Road with their bid of $445.89 mil or $1,129 psf/plot ratio. A pure residential site at Ang Mo Kio Avenue 1 was clinched by UOL/UIC/Kheng Leong for $381.38 mil or $1,118 psf/plot ratio. These prices were on the upper end of market expectations and could translate to a launch price of $2,000 psf or higher for the new projects. The third site at Jalan Anak Bukit, zoned for commercial and residential use, received five concept proposals from three parties. URA would first evaluate the concepts and later assess the shortlisted proposals by price to determine the successful bidder.

RENTAL INDEX & VACANT UNITS

UNSOLD UNITS IN THE PIPELINE

From the private sector, at least five development sites were known to have been sold. The most prominent one was Maxwell House which was acquired by Chip Eng Seng Corp/SingHaiyi Group/Chuan Holdings at $276.80 mil. The acquisition was pending URA’s approval to raise the plot ratio from 4.3 to 5.6 for a commercial-residential development and an upgrade of the existing lease to a full 99-year term.  

Looking ahead

The current pace of housing demand is likely to persist in the second half of 2021, driven mainly by HDB upgraders and the current cheap financing. On the supply side, developers’ thirst for development sites will continue, resulting in higher land bids. This means that home prices would rise further in H2 2021.

There is still a risk that the government may introduce some measures to cool demand and rein in prices, in order to curb the exuberance in the market.

Nevertheless, the luxury market will perform well, as ultra-rich investors are less affected by cooling measures. The emergence of new millionaires in the tech sector will not only lead to more bungalow and luxury apartment sales in H2 2021, but also set new benchmarks in prices.

LAND SALES IN Q2 2021

EXPECTED PRIVATE RESIDENTIAL LAUNCHES IN H2 2021


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