Residential Market Watch Q3 2017
Positive sentiments drove sales and prices
The URA private residential price index finally showed a positive q-o-q change of 0.7% after 15 consecutive quarters of decline. This turnaround could be attributed to rising confidence in the residential market, which was evidenced by the improving sales volume in recent quarters.
Developers reportedly sold 2,663 new homes in Q3 2017. This is 13% lower than the volume in Q2 2017 but could be attributed to fewer new projects being launched in Q3 2017. It also shows that homebuyers have been buying from older projects thereby helping to clear the unsold backlog.
Nevertheless, the total new sales volume of 8,702 units in the first nine months of 2017 has exceeded that for the whole of 2016 by 9%.
The secondary market also saw strong sales in Q3 2017. 4,030 homes were sold, 5% more than the 3,828 homes sold in the previous quarter. For the nine months of 2017, 10,098 homes were sold, much higher than the 8,406 units sold in the whole of 2016.
The uptick in the price index was led by prices in Outside Central Region (OCR). Its 0.8% q-o-q rise could be attributed to the strong take-up of well located projects. The index for the Rest of Central Region (RCR) showed a 0.5% rise whilst that for the Core Central Region (CCR) reflected a marginal 0.1% rise.
Core Central Region
Based on the caveats lodged, 1,358 homes were sold in the CCR in Q3 2017, 17% more than the number sold in Q2 2017. Of this number, 158 were luxury homes comprising Good Class Bungalow (GCBs), bungalows at Sentosa Cove and apartments worth $5.00 mil and above. In Q1-Q3 2017, 319 luxury homes were sold, surpassing the 293 units sold in 2016.
Some notable deals were inked in Q3 2017. These included a 10,300-sq ft penthouse on the 35th/36th levels of Sculptura Ardmore which was sold at $60.00 mil/ S$5,825 psf, and another 7,287-sq ft penthouse on the 23rd level of Gramercy Park, sold for S$21.86 mil/ S$3,000 psf. It was reported that a unit of Lee Metal Group bought two Good Class Bungalows in Q3 2017: a brand new one at Maryland Drive for $20.98 mil/ $1,832 psf and an older one at Nassim Road for $23.69 mil/ $1,782 psf.
Caveat data also showed a 12% increase in the number of foreigners and permanent residents who invested in luxury properties, compared to 2016. Chinese nationals, Indonesians, Malaysians, Indian and North American nationals were the top five groups.
Although the residential rental index for Q3 2017 remained unchanged from the previous quarter, its performance was patchy. The non-landed rental index for RCR showed a 0.9% q-o-q rise. However, the indices for CCR and OCR dipped by 0.8% and 0.3% respectively. The stronger showing for RCR rentals could be due to the attractiveness of their city-fringe locations and smaller units sizes which translated to more affordable rents.
The number of vacant units rose to 30,136 units from 28,888 units in Q2 2017, pushing the island-wide vacancy rate up by 30 basis points to 8.4%.
Supply in the pipeline
In the pipeline supply, units under construction continued to decline as developers sold more units from existing projects. URA statistics showed that there were 16,031 unsold units as at end-September 2017, 22% lower than the unsold inventory a year ago. The number has declined from some 30,000 units in 2014 due mainly to the cutback in government land sales (GLS) since that year.
Developers’ insatiable appetite for land
As developers cleared their unsold stock, they were anxious to replenish their landbank. In the first nine months of the year, the government land sales programme supplied only nine sites for sale through the tender system. On the average, each site garnered 13 bids. Naturally, developers who were unsuccessful turned to private supply where there are more choices in terms of locations and plot sizes.
In the first half of 2017, three collective sites were sold, but in Q3 2017 alone, eight such sites were sold. Two of these, Jervois Garden and One Tree Hill Gardens, are located in the prime district and are expected to yield over 70 new homes.
The number of bids as well as the quantum of the bids for each site sold showed the developers’ appetite for development sites. The reason for their enthusiasm lies in the time they need to prepare the new projects for launch. Generally, the GLS sites need only six to nine months for plans to be submitted and approvals to be obtained.
Sites purchased through collective and private treaty sales will require an extra six to nine months for legal proceedings and transfer of titles before the submission of plans. As such, most of these new projects will only be launched for sale from H2 2018 onwards.
Are we out of the woods yet?
The government expects the Singapore economy to turn in a GDP growth on the higher end of the forecasted 2%-3% range. Unemployment numbers as at Q3 2017 have showed signs of stabilising.
Fewer new launches are expected in Q4 2017 as developers are scheduling more launches in 2018. The higher land prices paid for the sites acquired are likely to translate to higher product prices.
While the private homes market has improved, the public housing market is still lagging behind. The health of the public housing will likely impact the private sector because it makes up 72% of the total housing stock. It is still early days to confirm a market rebound since the resale price index of public homes posted a 0.7% contraction in Q3 2017. Total market recovery may take another three to six months.