Residential Market Watch Q2 2017
Q2 2017 Highlights
Sentiments in the residential market remained fairly positive in Q2 2017 as evidenced by the smaller q-o-q declines in the price index as well as the healthy take-up of new homes.
The URA residential price index for Q2 2017 continued to descend for the 15th consecutive quarter, registering the smallest q-o-q decline of 0.1%. This is by far the longest downcycle for the residential property market yet its magnitude of correction is the smallest at 11.6%. It is possible that home prices are stabilising and will bottom out soon.
The sales momentum of new launches from Q1 2017 spilled over to Q2 2017. The best selling project in Q2 2017 was Seaside Residences which sold 452 units (54%) at a median price of $1,730 psf.
The warm reception could be attributed to its proximity to the beach along East Coast Parkway and to an upcoming MRT station which will be ready by 2023.
Another new project launched in Q2 2017, Artra, sold 150 units (37%) at the median price of $1,650 psf. Located adjacent to the Redhill MRT station, Artra comes with some 21,500 sq ft of retail use on the first storey.
A total of 3,077 new homes were sold in Q2 2017, 4% more than the 2,962 units sold in Q1 2017. This brings the new homes volume for H1 2017 to 6,039 units, which is 76% of the total sales in 2016. Based on the caveats lodged, only 30% of the new sales came from the new launches in 2017 while 70% came from projects already in the market. Of the 285 new homes sold in the Core Central Region, 125 units were from Sophia Hills, 38 units were from Cairnhill Nine and 28 units were from Corals At Keppel Bay.
The improving sales volume was also seen in the secondary market with 3,828 units sold in Q2 2017, 71% higher than the 2,240 units sold in Q1 2017.
The total residential demand for H1 2017 stood at 12,107 units, just 26% short of the 16,378 units sold in the whole of 2016. This improved volume underlines the return of confidence to the market.
Core Central Region
A total of 1,171 homes were sold in the Core Central Region in Q2 2017, a 61% gain q-o-q. This is the first time since Q4 2012 that the sales volume crossed the 1,000th mark.
Zooming in on the luxury sector, 123 luxury homes – apartments priced above $5 mil each, Good Class Bungalows and Sentosa Cove bungalows – were sold in Q2 2017, compared to 78 units in Q1 2017. In total, 201 units were sold in H1 2017, on track to surpassing 2016’s total of 267 units by the end of the year. These include 21 Good Class Bungalows, bungalows in Sentosa Cove and 171 luxury apartments.
The developments which sold the most units in H1 2017 were Leedon Residence (46 units), Gramercy Park (31 units) and Ardmore Three (15 units). There was a 27% y-o-y increase in the number of permanent residents and foreigners who bought homes in Core Central Region. Buyers from China and Malaysia were the top two groups of investors.
In line with home prices, residential rents have also been heading south for the past 15 quarters, chalking up a total decline of 12.5%. The Q2 2017 rental index moderated by 0.2% q-o-q, the smallest decline so far.
By regions, the rental index for Outside Central Region and Rest of Central Region fell by 0.6% and 0.4% respectively, while the index for the Core Central Region showed a gain of 0.1% q-o-q.
However, unlike prices, there is less certainty that the rental market will recover soon because the large number of vacant units far exceeds the pool of tenants. As at end-June 2017, there were 28,888 vacant units reflecting a vacancy rate of 8.1%.
In the landed segment, the bulk of the sales activity is in the resale market as new launches are generally scarce. 77 new landed homes were sold compared with only 37 in Q1 2017. These include 18 units each for Belgravia Villas and Watercove and 17 units for Victoria Park Villas. The semi-detached houses of Victoria Park Villas were sold between $3.85 million and $4.46 million. In the resale market, 542 homes were sold compared with 301 in Q1 2017 Totalling up, the 114 new landed homes sold in H1 2017 were just a tad lower than the 117 homes sold in the whole of 2016 while the 957 resale homes sold made up 70% of the 1,382 homes sold in 2016.
Supply in the pipeline
Overall, new supply in the pipeline has declined considerably. According to URA statistics, the number of unsold units from projects with planning approvals numbered 15,085 units as at end-June 2017. This is 30% lower than the unsold inventory a year ago and is the lowest number of level of unsold units ever recorded. The main reasons for the declining inventory are the slowdown in government land sales programme and the pick-up in new home sales since 2016. As developers cleared their unsold stock, they were in need of replenishing their land bank, hence the recent flurry of collective sales and high participation rate in government land tenders.
Developers will continue to participate actively in the forth coming government and private land tenders to secure sites, particularly those in the Core Central Region.
In H2 2017, the residential sales momentum will continue to be led by new projects launches. This could push the total year’s residential sales volume up by some 20-30% from 2016’s level. While the strengthening sales volume and increase in permanent resident and foreign investors pointed to a return of confidence in the residential market, it did not imply that the residential market will recover any time soon. Concerns for economic growth, employment climate and the impact of rising interest rates still cast a shadow over the residential market in the short term.