Residential Market Watch Q2 2019
Price index turned around
Developers actively launched new projects in the second quarter in the midst of a deteriorating external demand. Some projects were warmly received and achieved a fairly high take-up rate.
A total of 2,502 new homes were launched in Q2 2019. Although this was 16% lower than the 2,989 units launched in Q1, the sales volume of 2,350 units showed a 28% improvement from the 1,838 units sold in Q1. For the half year ended, a total of 5,491 and 4,188 new homes were launched and sold respectively.
The stronger sales volume, comprising a good number of high-end sales reversed the direction of the URA’s private residential price index to a positive 2.0% q-o-q growth. This surprising spike which wiped out the 0.7% decline from the previous two quarters was led by a 2% q-o-q growth in the non-landed segment. Prices in the Rest of Central Region (RCR) took the lead with a 3.5% rise in the price index, followed by a 2.3% rise in the price index of the Core Central Region (CCR) and a marginal 0.4% lift in the price index of the Outside Central Region (OCR).
The uneven performance of home prices since Q3 2018 could be attributed to the selective buying behavior of home buyers. The more budget-conscious buyers chose to buy properties that are both attractively priced and easily accessible. The high-net-worth (HNW) buyers went for good quality and unique properties in prime locations and paid a premium for them.
Developers offered some 16 new projects for sale in Q2 2019. Of the nine new launches in RCR, two projects stood out: Amber Park which sold 157 units at $2,475 psf and Sky Everton which sold 131 units at $2,523 psf. Amber Park’s popularity lies in its location at the east, being close to amenities and the upcoming Tanjong Katong MRT station. Sky Everton is located at the fringe of the CBD, within the Greater Southern Waterfront, and is a short walk from the future Cantonment MRT station.
Sales at other projects in the RCR which were priced more affordably began to move briskly with the success of these two projects. Notably, The Tre Ver, Parc Esta and Stirling Residences moved over 100 units each.
The announcement of the Cross Island Line In the early part of the year stimulated the sales of projects in the OCR. The future stations at Serangoon North and Hougang will benefit the future residents at Affinity At Serangoon, the Garden Residences, Riverfront Residences and the newly launched The Florence Residences. The latter two projects moved over 100 units each in Q2 2019.
The secondary market saw an improvement in sales volume in Q2 2019. A total of 2,371 properties were sold, 28% more than the 1,858 transactions in Q1 2019.
In the luxury market, 10 bungalow deals within Good Class Bungalow (GCB) Areas took place in Q2 2019, including a newly built bungalow at Belmont Road that was sold at $39.8 mil. The unit rate of $2,653 psf is among the highest done for GCBs in recent times. During the same period, two villas at Sentosa Cove were sold. One of these is the famed ‘Copper House’ which was sold at $32 mil. This brings the tally for the first half of 2019 to 17 GCBs and three villas in Sentosa.
A total of 105 luxury apartments were sold in Q2 2019, compared to 70 that were sold in the previous quarter. Worthy of mention were the five penthouses that were sold. They comprised three penthouses at Boulevard 88 which fetched between $28 mil and $31 mil, a penthouse at 3 Orchard-By-The-Park sold at $31 mil and a super penthouse (11,098 sq ft) that was sold at $52 mil. These purchases signalled a vote of confidence in the Singapore residential market amidst our slowing economy.
With a total of 175 luxury apartments sold in H1 2019, the tally for the entire luxury segment stood at 195 deals.
Overall, this segment of the luxury market is still largely supported by permanent residents and foreigners, as high as 70% of the purchases. In light of the geopolitical tensions in Hong Kong and United Kingdom, there could be an increased interest from foreign UHNW investors going forward. Singapore’s solid economic fundamentals, sound financial framework, ease of doing business, quality education and racial harmony make it a destination of choice for these investors.
Rental market & vacancy
In line with the sales market, the leasing market also posted a positive 1.0% q-o-q growth in Q2 2019 following a similar 1.0% q-o-q in Q1 2019. This was supported by rise in rentals in all areas. The rental index for CCR rose by 1.5% q-o-q, followed by a 1.4% q-o-q rise for the RCR and1.2% q-o-q rise for the OCR rental index.
The stronger rental market could be attributed to tighter supply as more households from successful collective sales looked for interim accommodation. They had to compete with new and existing expatriates who were also in need of accommodation.
The vacancy rate edged up marginally from 6.3% in Q1 2019 to 6.4% in Q2 2019, as the number of vacant homes rose slightly by 279 to 23,636 homes.
New completions numbered 1,874, fewer than the 2,262 new homes completed in Q1 2019. This brings the total residential stock to 371,807 units from 370,944 units in Q1 2019. Botanique at Bartley (797 units), Lake Grande (710 units) and Citadines Balestier (166 units) were among the new projects completed in Q2 2019.
Based on URA’s statistics, another 3,867 new homes are due to be completed in H2 2019, totaling up to 8,003 units for the whole year. Estimated completions for 2020 is a low 4,637 homes. Thereafter, new completions are estimated to balloon to 13,275 units in 2021 and 18,885 units in 2022, which are coming from the new projects that are currently selling in the market.
Supply in the pipeline
The URA reported that the total supply of uncompleted homes was 50,674 units at end-June. Major new projects which obtained approvals for development in Q2 2019 include the project at former City Towers (230 units), former Eunos Mansion (237 units), former Hollandia/The Estoril (321 units), former Landmark Tower (360 units), former Goodluck Garden (669 units) and Sengkang Central (682 units).
Of the 50,674 units in the supply pipeline, 17,001 units (33%) have been sold by end-June. The remaining 33,673 unsold units comprised 20,013 units (60%) from projects that were either launched or not launched yet and 13,660 units (40%) from projects that did not have the prerequisites for sale.
For now, this supply in the pipeline is unlikely to see a sharp increase as land sales activity is largely confined to the government land sales (GLS) programme. Two sites were sold n Q2 2019. One at Sims Drive which can be developed into 570 units and another at Middle Road, into 375 units, with a commercial component on the first storey.
The only development site sold in the quarter from private supply is located at Cavan Road. The front and side of the building have to be conserved. The rear part can be developed up to six storeys, subject to the government’s approval.
In June, the government released the land sales programme for H2 2019. Five residential sites will be put up for sale in the later part of the year. They can supply around 1,715 new homes. This is a 15% reduction in the confirmed supply, signalling that the government is aware that demand for new homes is slowing down.
Among them, the Irwell Bank Road site looks the most attractive. It is located within prime district 10 and has two frontages, one along Irwell Bank Road and one along River Valley Road. It is within walking distance to the future Great World City MRT station which is scheduled to be open in 2021/2022.
Resilience despite uncertainties
As the world awaits the outcome of Brexit and US-China trade war, several economies have been hurt by the fall in demand as trade slows down. In the latest development, the proposed extradition law in Hong Kong has erupted into political unrest in the region. Several media had reported on the increase in enquiries by Hongkongers on setting up foreign accounts and family offices in countries like Singapore, Australia and Canada. There is a possibility that Singapore may benefit from the inflow of more foreign investors as well as companies and businesses relocating to Singapore.
The government has forewarned that the economy will slow down further in H2 2019, affecting market sentiment. This could mean a lower home sales volume in H2 2019. Nevertheless, home prices could still see a small upside, premised upon the launch of more new projects with strong locational and product attributes such as Eden, Cuscaden Reserve and Midtown Bay.