Blue Skies for Residential Market

Residential Market Watch Q3 2021

Sales volume and prices continued to rise
The pace of private residential sales continued unabated despite the spike in Covid-19 infections from August onwards. Singapore is trying to live with COVID-19 and containment measures were eased as part of a phased reopening since the national vaccination rate hit 80%. Advanced estimates showed that the Singapore economy grew by 6.5% year-on-year, much slower than the 15.2% growth in Q2 2021. Nevertheless, the Monetary Authority of Singapore kept the forecast for the year at 6-7% on the basis that economic output has returned to its pre-pandemic level in the third quarter.

Besides the improving market sentiment and continuing low interest rates environment, the third quarter also witnessed a boom in the HDB resale market. A total of 8,433 HDB resale flats were transacted, the highest since Q2 2010, pushing the HDB resale price index up by 2.9% q-o-q.  

The private homes market mirrored this vitality. The strong sales enabled homes prices to continue their up-ward trend. The URA price index rose by 1.1% q-o-q, higher than the 0.8% rise in Q2 2021. It is the 6^th consecutive quarter of price increase. This was mainly supported by landed homes prices which rose by 2.6% q-o-q,  after a 0.3% contraction in Q2 2021. Terrace and semi-detached houses were largely responsible for the price increase. In the non-landed segment, prices rose by 0.7% q-o-q in Q3 2021, down from a 1.1% rise in Q2 2021. This smaller increase could be due to weakness in the Core Central Region (CCR) and Outside Central Region (OCR) where home prices eased by 0.5% and 0.1% respectively from Q2 2021, dampening the 2.6% increase in Rest of Central Region (RCR).

At 163.5 points, the URA price index was at the highest point, surpassing all the previous market peaks. Overall, home prices have gained 5.3% from end-2020 and a total of 21% since they bottomed out in Q2 2017.

CYCLES OF THE URA RESIDENTIAL PRICE INDEX

Market dynamics
The third quarter began on high note with the launch of Pasir Ris 8, a residential-commercial project which is integrated with the Pasir Ris MRT station. 85% of its 487 units were sold at its launch weekend, despite multiple rounds of price hikes. This overwhelming response sped up the sales and catalysed price increments of 1% to 3% in some existing launches like Midwood, Normanton Park, Parc Clematis and Sengkang Grand Residences.   

In Q3 2021, developers launched 2,149 new homes for sale. They sold over 1,500 new homes in July alone followed by nearly 1,200 units in August before it dipped to around 800 in September. A total of 3,550 new sales were sold in Q3 2021, 20% more than the 2,966 units sold in Q2 2021. it is also the highest quarterly sales volume since Q2 2013. This brings the total new home sales in the first three quarters of 2021 to 10,009 units, surpassing the 9,982 units sold in the whole of 2020. Some 34% of the 10,009 units were from the new launches in 2021 and 66% were from existing projects.

As prices of new projects moved up and with a lower number of studios, one- and two-bedders available for sale in OCR projects, only 9% of the new sales in Q3 2021 were priced below $1 mil. Units priced at $1mil-$1.5mil made up 37%, and those priced in the $1.5mil-$2mil price band was 30%. The remaining 23% of the new homes sold were priced from $2 mil onwards.

The resale market remained strong with 5,362 homes sold, marginally higher than the 5,333 units sold in Q2 2021, the highest volume since Q3 2009. Landed homes made up 15% of the resale volume in each quarter of 2021, averaging at 780 homes. This is a build-up from the average of 644 landed homes sold in Q3 and Q4 of 2020, after the circuit breaker in Q2 2020. Due to the need to spend more time at home, landed homes are ideal because they offer more living and open space for bigger and multi-generational households.

A total number of 4,453 homes were bought by foreigners and permanent residents in Q1 to Q3 of 2021. This is some 24% more than the 3,577 who bought homes in the whole of 2020. This shows that foreign buyers are back, though not to pre-Covid levels yet. The top five foreign nationalities in 2021 were from China, Malaysia, India, Indonesia and USA.

The luxury market remained active in Q3 2021 with 176 deals, slightly lower than the 188 deals in Q2 2021. This included 146 luxury apartments, 10 bungalows in Sentosa Cove and 20 bungalows in the Good Class Bungalow (GCB) areas. Significant deals included a 6,049 sq ft four-bedroom apartment at Les Maisons Nassim that was sold for $35 mil ($5,786 psf) in August, a GCB at Queen Astrid Park bought by Tik Tok CEO for $86 mil ($2,704 psf) in July and a bungalow at Lakeshore View, Sentosa Cove, that was sold for $28 mil in September. All in, a total of 484 luxury homes had been sold in the first nine months of 2021, way above the 288 deals in the whole of 2020.

PROJECTS THAT SOLD WELL IN Q3 2021

HOMES SALES VOLUME

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LUXURY SALES VOLUME (New & Resale)

Rental market & vacancy
Home rents continued to rise for the fourth consecutive quarter as shown by the 1.8% q-o-q rise in the Q3 2021 URA rental index. This is smaller than the 2.9% rise in Q2 2021 and could be attributed to a tapering of rents across the island after having chalked up by 5.5% in H1 2021. The rents in CCR showed the smallest rise of 0.7% q-o-q, followed by 1.6% for RCR and 2.6% in OCR. Continuing demand from local households in need of interim housing as well as new leases and renewals by expatriates helped to drive rents. 

A total of 24,199 homes fell vacant in Q3 2021, slightly higher than the 23,854 vacant homes in Q2 2021. Thus, vacancy rose to 6.4% from 6.3% in Q2 2021.

The labour crunch in the construction sector is taking its toll and only 783 new homes were completed in Q3 2021. Nonetheless, this brings the total to 4,333 completed homes in the first nine months of 2021, higher than 3,433 units completed in 2020.  The main projects completed in Q3 2021 were Uptown @ Farrer (356 units), The Verandah Residences (170 units) and Jui Residences (117 units). The total private housing stock at end-September stood at 380,187 homes.

Supply in the pipeline
Some of the new residential projects which obtained Written Permission in Q3 2021 were an apartment block at Cairnhill Rise (75 units), Royal Hallmark (32 units), and Gems Ville (24 units). Major projects that have received provisional permission include the ones at Anson Road (484 units), Northumberland Road (407 units), Ang Mo Kio Avenue 1 (372 units) and Shenton Way (268 units).

Statistics from the URA showed 47,715 uncompleted private homes with planning approvals in Q3 2021. Of this number, 17,140 (36%) were still unsold, a reduction of 30% from 24,296 units at end-2020. The 17,140 units comprised 11,377 units (66%) from projects that were either launched or not launched yet and 5,763 units (34%) from projects without the prerequisites for sale.

Based on recent take-up trends, the 17,140 units would not be able to meet two years of demand for new homes. Hence the hunger of developers and the high bids seen in recent government land tenders.

In July 2021, a residential site located at Lentor Central, with commercial use on the first storey, garnered nine bids. The top bid of $784.11 mil by GuocoLand showed a record land rate of $1,204 psf/plot ratio for a suburban leasehold project thus far. GuocoLand was confident of this site because it has a commercial component and can be integrated with the adjacent Lentor Central MRT station to provide seamless travel. Another tender which closed on the same day was for an executive condominium (EC) at Tampines Street 62. A joint venture between Qingjian and Santarli beat eight other contenders with their bid of $422 mil. Similarly, the land rate of $659 psf/plot ratio was a record for an EC site.

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Q3 2021 also saw the successful collective sale of Flynn Park. The site was sold to a joint venture between Hoi Hup and Sunway Developments at the price of $371 mil. Including the development charge payable, the land rate works out to $1,318 psf/plot ratio.  

The government increased the development charge rates for landed by 6.3% and 10.9% for non-landed residential use groups on the average. This will add to the development costs of new condominium projects, and in turn, lead to higher property prices for buyers.

Looking ahead
Residential demand is expected to remain strong in Q4 2021. However, as developers’ stock of unsold units is running low, new home sales would be lower than the previous three quarters. Home buyers could choose to wait or buy resale homes. We expect around 2,000 new homes and 3,000-4,000 resale homes to be sold in Q4 2021, bringing the full year’s sales to around 12,000 new homes and 18,000-19,000 resale homes.

The strong demand will drive home prices but any increase will be marginal as developers would not want to risk the introduction of cooling measures. We expect the price index to rise by around 6% in for the whole year.