Residential Market Watch Q4 2020
Burst of Activity
The confidence which crept back slowly after the economy reopened in late-June gained speed as the strict enforcement of safe distancing measures help to reduce the community spread. As more new projects were launched, buyers returned with fresh enthusiasm.
The burst of activity seen in new projects launched from August onwards helped to push new home sales in H2 2020 to 1.6 times of that in H1 2020 and the price index to rise by 2.9% over the same period.
Extraordinary take-up rates were seen at some much-anticipated new project launches. This return of confidence could be attributed to a confluence of factors: government’s support measures which helped to preserve jobs, businesses that thrived amidst the pandemic, strengthening HDB resale market and low interest rates. A total of 9,982 homes were sold in 2020, outdoing 2019’s sales volume by 1%.
Prices of non-landed homes rose faster than expectations. It was noteworthy that home prices in the Rest of Central Region (RCR) rose by 4.4% q-o-q in Q4 2020 following a 2.5% q-o-q rise in Q3 2020. In the Outside Central Region (OCR), home prices rose steadily by 1.8% and 1.7% in Q4 2020 and Q3 2020 respectively. In the prime location of Core Central Region (CCR), the 3.2% q-o-q rise in Q4 2020 hardly recovered the lost grounds caused by a 3.8% decline in Q3 2020.
The overall result was a 2.1% q-o-q rise in the residential price index in Q4 2020, building on the 0.8% q-o-q rise in the preceding quarter. For the whole year, the price index gained 2.2%, encouraging though lower than the 2.7% gain in 2019.
A total of 2,603 new homes were sold in Q4 2020. Although this number was 26% lower than the volume in Q3 2020, new homes sold for the whole year summed up to 9,982 units, beating expectations of 6,000-8,000 units in the early days of the Covid-19 outbreak. It was also a better showing than the 9,912 units sold in 2019.
Six new projects were launched in Q4 2020: Hyll On Holland (CCR), The Linq @ Beauty World and The Landmark (both in RCR), Ki Residences, Clavon and Phoenix Residences (all three in OCR). All 120 units of The Linq were sold within the quarter as buyers were attracted to its freehold tenure, direct link to Beauty World Mass Rapid Transit (MRT) station and connection to the future transport hub adjacent to it. The units were priced at $2,170 psf on the average.
Another project which was hugely popular was Clavon at Clementi Avenue 1. 442 units or 70% of the 640-unit project were sold in the first weekend of sales. The strong take-up could be attributed to its proximity to NUS High, University Town, Clementi Mall and Clementi MRT station.
Projects that were already in the market for more than a year continued to sell, benefitting from the momentum started by new launches. In particular, Treasure At Tampines sold a total of 826 units through the year, the most units by a single project. Parc Clematis took the second place with 558 units sold.
Demand for homes in the secondary market in Q4 2020 registered 4,249 units, 23% higher than the 3,467 sold in the previous quarter. For the whole year, there were 10,729 resale transactions, exceeding the 8,949 resale homes sold in 2019. This shows that resale volume contributed a bigger proportion to the higher demand in 2020. Reasons for the preference of resale homes include readiness for immediate occupation, a bigger pool of freehold supply and landed homes, as well as bigger living space compared to new projects. As working from home and studying at home increasingly become the norm, bigger families found resale homes a better answer to their space needs.
An analysis of the profile of buyers showed that foreign buyers fell to 4% in 2020, from 6% (2018-2019) and 7% (2015-2017). The proportion of Singaporean buyers made up 80% in 2020 compared to 76-78% and 72-75% over the same periods respectively. Some of them could have ploughed back from investing in overseas properties due to the severity of the pandemic.
In the luxury segment, 16 deals were done in the Good Class Bungalow (GCB) areas in Q4 2020, compared to 12 in Q3 2020. Over at Sentosa Cove, four bungalows were sold, one less than the five sold in Q3 2020. For luxury apartments, 75 properties changed hands in Q4 compared to 69 in Q3. Through the year, a total of 287 luxury homes were sold, the lowest volume since 2016, attributable to the significant fall in foreign investors.
Rental market & vacancy
The rental market experienced many challenges in 2020 due to the Covid-19 pandemic. When the Singapore economy locked down during the circuit-breaker in April-May, there was a squeeze on rentals as several employers scrambled for short-term accommodation for their employees. Then there were several lease cancellations because travel restrictions prevented new expatriates from coming to Singapore while existing expatriates who were laid off had to terminate their leases prematurely. The rental index contracted by 1.2% in Q2 2020 and by 0.5% in Q3 and finally managed to show a marginal 0.1% uptick in Q4 2020 as the economy opened up gradually. Year-on-year, the rental index fell by 0.6% in 2020, as opposed to a 1.4% gain in 2019.
By location, rents in the CCR suffered three quarters of decline and registered a 2.4% contraction through the year. Rents in RCR and OCR saw only one contraction in Q2 2020. While the rents in RCR fell by 0.1% through the year, rents in OCR gained 3.0% by end-2020.
A total of 1,249 private homes were completed in Q4 2020, bringing the total stock to 376,040 units. Two of the projects completed in Q4 2020 were Forest Woods (519 units) and Grandeur Park Residences (720 units). 26,394 units were vacant, up from the 23,171 units in Q3 2020, reflecting a vacancy rate of 7%.
Supply in the pipeline
Some of the new residential projects which obtained approvals for development included a 130-unit project at Jervois Road, a 38-unit project at Sophia Road and a 115-unit project at Jalan Bunga Rampai.
The lack of large development sites being sold coupled with strong sales of projects under construction led to declining supply in the pipeline. At the end of 2020, there were 49,307 uncompleted units with planning approvals, lower than the 50,369 units in Q3 2020. Of this number, 25,011 units (51%) have been sold. The remaining 24,296 unsold units comprised 17,471 units (72%) from projects that were either launched or not launched yet and 6,825 units (28%) from projects without the prerequisites for sale.
The government has decided to provide a moderate supply of new homes based on its concern for the continued uncertainties in the economy and job market. In Q4 2020, there was only one private residential site for sale under the government land sales (GLS) programme. Located next to the Tanah Merah MRT station in Bedok precinct, there were 15 bidders vying for the site, an evidence of how many developers were looking to buy land. MCC Land emerged the top with a bid of $249 mil. The site can yield some 265 new homes.
Some developers were successful in acquiring sites from the private supply. A total of seven sites were reportedly sold in Q4 2020. The most prominent of these is the former MediaCorp headquarters at Andrew Road, within the Caldecott GCB Area. The 99-year leasehold site has a balance lease term of 73 years and MediaCorp has been granted an Outline Approval by Urban Redevelopment Authority (URA) to develop two-storey bungalows on the site. The site was sold at $281 mil to Pre 10, an entity jointly owned by Perennial Real Estate and its chairman, Mr. Kuok Khoon Hong. Separately, Roxy-Pacific Holdings clinched a 37,131 sq. ft. site at Guillemard Road for $93 mil. Around 137 apartments can be developed on the site.
In H1 2021, three sites from the 2020 GLS programme will be put up for sale. Coming up in March is the tender for a site at Jalan Anak Bukit. It will be closely watched because it is going to be an integrated transport hub with commercial-cum-residential use. Bids are expected to come in at above $1,000 psf/plot ratio. Next up in April is a site at Northumberland Road within the Little India district. The future residential development with commercial use on the first storey is expected to attract bids above $800 psf/plot ratio. Finally, in May, the tender of a residential site at Ang Mo Kio Avenue 1 is expected to attract bids above $700 psf/plot ratio.
We expect developers to continue to look for development sites from the private supply to supplement the supply from the GLS programme.
Will the robust residential demand continue?
Advance estimates for Q4 2020 saw a milder than expected 3.8% y-o-y decline in the Singapore economy. Preliminary estimates for 2020 put the full-year contraction at 5.8% y-o-y. Against this backdrop, economists are forecasting a 4% to 6% y-o-y growth for 2021, aided by the very low base in 2020. At the same time, Singapore’s recovery is also vulnerable to the global scenario even with the dissemination of the vaccines well underway. The emergence of new, more infectious strains of the virus also makes it less likely that cross border travel can happen within this year.
Nevertheless, Singapore is sill able to attract foreign investors because they found assurance in the way the government responded to the Covid-19 pandemic in terms of its support and fiscal policies to businesses, job security and residents’ health and safety. This would bode well for the high-end market which is generally targeted at ultra-high-net-worth foreign investors.
Another key factor for demand would be the attributes of the new projects to be launched. Based on the supply pipeline, around 8,000 new homes across 35 projects can be offered to the market in 2021, along with new releases from ongoing projects. Location, price point and lifestyle are crucial to a project’s success, as seen in the first two major launches this year: Normanton Park (over 600 units sold at $1,750 psf) and The Reef At King’s Dock (280 units sold at $2,330 psf).
Right-sizing-right-pricing is still a formula that works and developers are mindful to price the bulk of the units below $1.5 mil to cater to the masses and upgraders. Interest rates will remain favourable to buyers for now.
We expect 8,000-10,000 new homes to be sold in 2021 and prices to remain stable at current levels. While the economy is not out of the woods, the government will keep a close eye on the market and will adjust policies if necessary, to maintain a stable and sustainable property market.