Residential Market Watch Q3 2020
Strong demand upheld prices
Contrary to market expectations that demand for homes would slow and prices would cool in the midst of a recession hit economy, the Q3 2020 total home sales volume turned out to be the highest since Q2 2018 with the price index edging up for the second consecutive quarter. This shows that there is still liquidity in the market and that investors’ confidence in residential property is returning despite the recession.
After the two-month circuit breaker ended on 1 June, the government allowed the economy to reopen in stages. When property viewing resumed from 19 June onwards, the initial days saw all the places at several sales galleries fully taken by potential buyers. Starved by the low sales rate during the circuit breaker, developers offered special pricing packages to attract buyers which proved to be effective. Similarly, the resale market also saw a spike in demand.
In Q3 2020, the URA price index rose by 0.8% q-o-q, after edging up by 0.3% in the previous quarter. These increases reversed the -1.0% contraction in Q1 2020 and resulted in a net 0.1% gain nine months into the year.
The stronger gain in the Q3 2020 price index could be attributed to the robust growth of 3.7% q-o-q for landed homes while the index of non-landed homes edged up by a marginal 0.1%.
Within the non-landed segment, prices of prime homes in the Core Central Region (CCR) fell by 3.8% q-o-q after a gain of 2.7% in Q2 2020. The downside was due to the dominance of older resale homes sold compared to new homes. However, prices at the city fringe or Rest of Central Region (RCR) rose by 2.5% q-o-q, reversing the 1.7% fall in Q2 2020. Prices in the suburbs or Outside Central Region (OCR) rose by 1.7% q-o-q, after a marginal 0.1% gain in the previous quarter.
By locations, prices of non-landed homes in the prime Core Central Region (CCR) led with a 2.7% q-o-q increase, while those in the suburbs Outside Central Region (OCR) lifted by 0.1%. A price weakness of -1.7% showed at the city fringe Rest of Central Region (RCR).
When home buyers bought nearly 1,000 units from existing projects in the market in June, developers began to step up their new launches. A total of 3,791 new homes were launched for sale in Q3 2020, doubling the 1,679 units launched in Q2. 53% of the new homes launched were located in RCR, 39% in OCR and the remaining 8% were in CCR. It is therefore not surprising that of the 3,517 new homes sold, 1,850 units (53%) are located in RCR, 1,381 units (39%) are located in CCR and only 286 units (8%) are located in CCR.
The strong attributes and attractive pricing of some new projects led to brisk sales. Forett At Bukit Timah, a freehold condominium located within walking distance to Beauty World MRT station and Pei Hwa Presbyterian Primary School sold 246 units (39%). Penrose, a 99-year leasehold condominium located close to Aljunied MRT station, garnered 389 sales (69%) in one weekend. Its average price of $1,541 psf was perceived to be more affordable than other city-fringe projects.
The renewed buying interest also drove the sales at several ongoing projects such as mega-projects like Treasure At Tampines, Parc Clematis, Jadescape and The Florence Residences. While Jadescape has been on the market for two years, the other three have only been on the market for 15-18 months.
Demand for secondary homes surged by 272% in Q3 2020 to 3,467 units from 933 in Q2. Resale homes in OCR took a 55% share (1,897 units) of this number, followed by 26% (895 units) for the RCR and 19% (675 units) in the CCR. Demand for resale homes largely came from people who need a home immediately, those who want to swap their existing home for a bigger or smaller unit and those who saw the current softer market as an opportunity to pick up a good buy.
The luxury market also enjoyed an increase in deals in Q3 2020. In the bungalow market, there were 12 deals done in the Good Class Bungalow (GCB) areas and five at Sentosa Cove. In the previous quarter, there were only five deals in the GCB areas and none at Sentosa Cove. As for luxury apartments, Q3 2020 registered 69 deals, well above the 28 deals done in Q2.
The profile of all buyers in Q3 2020 comprised 82% Singaporeans and 18% of permanent residents (PRs) and foreigners (NPRs). While this is similar to the profile of buyers in Q2 2020, there was a significant increase in absolute numbers. There were 5,521 Singaporean buyers in Q3 2020, compared to 2,120 in Q2. The number of PRs and NPRs rose to 1,183 from 473 over the same period.
Buyers from China were ranked first, with 262 purchases, followed by Malaysians with 141 purchases. Buyers from India, USA and Indonesia bought 121, 60 and 46 homes respectively. This ranking of the top five foreign nationalities is the same for H1 2020 as well as the whole of 2019.
Rental market & vacancy
The overall rental market remained soft in Q3 2020 and the URA rental index eased by 0.5%, albeit milder than the 1.2% contraction in the previous quarter. The main drag came from non-landed homes in CCR which saw a 2.1% q-o-q decline. Landed homes also saw a marginal correction of 0.1% q-o-q in the rental index. However, rents in the RCR and OCR bucked the trend by showing a respective upside of 0.3% and 1.0% q-o-q in the rental index. These rents could hold because the bulk of them fell within $2,000 to $3,500 per month, which is very affordable to most foreign tenants as well families who could not move to their new homes due to construction delays.
By end-September, the overall vacancy rate was 6.2%, up from 5.4% in Q2 2020. The weak economy coupled with the government’s stricter policy on foreign hire led to a shrinking tenant pool. The number of vacant units in Q3 2020 was 23,171 units, up 15% q-o-q, despite a modest 570 new completions compared to 86 in Q2 2020.
Delays in project completion persisted in Q3 2020 as the government restricted the resumption of building activity due to the high rate of infections in all the workers’ dormitories across the island. Besides individual landed homes that were completed, three small apartment projects were also completed: Amber 45 (139 units), Fivenine (15 units) and 329 Changi Road (6 units).
Supply in the pipeline
Uncompleted homes with planning approvals totalled 50,369 units in Q3 2020, slightly higher than the 49,090 units in Q2 2020. Of the 50,369 units, 23,886 units (47%) have been sold. The balance of 26,483 unsold units comprised 17,013 units (64%) from projects that were either launched or not launched yet and 9,470 units (36%) from projects that did not have the prerequisites for sale.
In Q3 2020, new projects which obtained approvals for development included a 540-unit residential project at Irwell Bank Road, a commercial/residential project at Pasir Ris Central with 487 apartments, and two projects at Canberra Drive comprising 448 and 219 units.
With the economy almost grounding to a halt during the lock-down in Q2 2020, the government pushed back the tender dates for its land sale programme. This enabled developers to monitor the market and take stock of their inventory before they bid for the sites. The tenders for two confirmed sites at Yishun Avenue 9 and Tanah Merah Kechil Link were concluded in October, six months after the last batch of sites were sold. A third site at Jalan Anak Bukit, a commercial and residential site envisaged to be an integrated transport hub, has a tender date as late as March 2021. It will be sold via the Concept and Price Revenue Approach.
With the slowdown in the government land sales programme, more sites were offered for sale in the private sector. One of the prominent sites is Queen Astrid Gardens which is located within the Queen Astrid GCB Area. With an asking price of $126.8 mil, the 999-year leasehold site spans 5,783 sqm (62,243 sq ft). It can be developed into a single bungalow or subdivided into four GCB parcels, subject to approval by the relevant authorities. Separately, four apartment blocks at Geylang were also put up for sale in Q3 2020.
At least four investment deals were known to be closed in Q3 2020. The first of these was a row of 10 terrace houses at Teck Chye Terrace that was clinched by Aw & Sons for $39.00 mil or $1,088 psf/plot ratio. A second deal was the sale of Yuen Sing Mansion, a four-storey apartment block in Geylang, to East Asia Geylang Development for $15.20 mil or $690 psf/plot ratio.
Two other deals were inked in Balestier area. Coliwoo Balestier, a subsidiary of LHN Limited, paid $18.10 mil or $1,378 psf/plot ratio for Crescent Building. This is a four-storey commercial building. Victory Point, a two-storey conservation shophouse with a six-storey apartment behind was sold for $11.36 mil or $1,093 psf /plot ratio.
Although it is unclear whether these four properties will be redeveloped, the deals were reportedly closed at prices much lower than what the sellers had hoped to achieve. The current weak market conditions allowed more room for negotiation until buyers and sellers’ expectations are met.
Slower but steady pace to the end
The inventory of mass market projects had been selling at a brisk pace in the past five months, which probably gave impetus for developers to participate in the October land sales tender.
There is no certainty that the robust sales momentum in Q3 2020 will continue in the final quarter of the year. Overall, it is still a quantum game as caveat data shows that some 66% of the new homes sold were below $1.5 mil each. The sweet spot was the price band of $1.0-$1.5 mil in which the bulk of 45% of the transactions took place. Homebuyers who prefer locations that are closer to the city will have to contend with smaller living space. Right-sizing-right-pricing will remain an effective formula for new projects to sell well. For projects in CCR which have been moving at a slower pace, developers will continue to adopt creative marketing and offer special price packages to sell their units.
The final quarter is expected to be relatively slower than Q3 2020 in view of the holiday season. In early October, Hyll On Holland was opened for preview, to be followed by The Linq @ Beauty World. Other new projects in the line-up include Clavon, The Landmark and Liv @ MB.
With total new sales at 7,379 units and resale homes at 6,480 in the first nine months of 2020, Q4 2020 seems on track to achieve the anticipated sales target of 9,000 new homes and 8,000 resale homes. The price index is likely to remain stable as any price movements are likely to be minimal and project-specific.