Government intervened to rein in price hikes
Advanced estimates showed that the Singapore economy grew at 4.4% in 2022Q3 in the midst of rising inflation and interest rates and geopolitical tensions. A technical recession was averted as the economy grew 1.5% quarter on quarter (q-o-q) on a seasonally adjusted basis, a turnaround from the 0.2% contraction in 2022Q2.
The private residential market also showed resilience despite the headwinds, with decent sales in the new and resale segments. The consistent housing demand supported a 3.8% q-o-q rise in the private residential price index, faster than the 3.5% gain in 2022Q2.
The hike in prices was led by non-landed homes, which rose by 4.4% q-o-q while landed homes rose by only 1.6% q-o-q. Prices of non-landed homes were generally driven by new launches whereas those of landed homes were largely driven by the resale market as new supply is few and far between.
The main driver of the non-landed price index in 2022Q3 was the Outside Central Region (OCR) which chalked up the biggest rise of 7.5% q-o-q. The surge was underpinned by three new launches – Amo Residence, Sky Eden @ Bedok and Lentor Modern – achieving a new benchmark of above $2,000 psf for OCR. The price index for Rest of Central Region (RCR) took the second place with a 2.8% q-o-q gain followed by the Core Central Region (CCR) with a 2.3% q-o-q rise in the price index.
Year-on-year (y-o-y), prices in the OCR posted a total gain of 18.6%, followed by 13.5% for RCR and 6.9% for CCR. This led to a blended gain of 13.6% y-o-y in the prices of all non-landed homes while landed home prices grew by 13.2% over the same period. Overall, the residential price index climbed by 13.6% y-o-y.
The double-digit growth despite rising loan rates and darkening economic circumstances sounded the alarm which resulted in fresh cooling measures being introduced on the last day of the quarter.
CYCLES OF THE URA RESIDENTIAL PRICE INDEX
The main focus in 2022Q3 was the launch of three major non-landed projects in OCR, which saw the last major launch – The Commodore – in November 2021. Buyers comprising a mix of owner-occupiers, HDB upgraders and investors zoomed in on Amo Residence, Sky Eden @ Bedok and Lentor Modern in the first weekend of launch, turning in take-up rates well over 70% for each project. Another notable point was that these were the first 99-year leasehold suburban projects to be launched at above $2,000 psf on the average, a new benchmark for OCR.
The three projects sold a total of 995 units in 2022Q3. Based on the caveats lodged, 42% of the units were priced between $1.5 mil and $2.0 mil, 25% of the units were in the $1.0-1.5 mil price band while another 23% were in the $2.0-2.5 mil price band. The remaining 10% were priced above $2.5 mil.
The strong take-up of Amo Residence could be attributed to its being the first major residential launch in Ang Mo Kio after eight years. Its proximity to Mayflower MRT station is a plus. Both Sky Eden and Lentor Modern are mixed used projects with a retail component. Sky Eden is located in Bedok Central where there are various amenities as well as Bedok MRT station. Lentor Modern will have a mall with over 96,000 sq ft of F&B and retail shops, a 12,000 sq ft supermarket and a childcare centre. The project will be directly linked to Lentor MRT station.
The total of 2,187 new and 3,719 resale homes sold in 2022Q3 were lower than the corresponding 2,397 new and 4,236 resale homes sold in 2022Q2. The decline was unsurprising in view of rising prices and interest rates.
On September 29, 2022, the government released a slew of measures to promote sustainable conditions in the property market which included:
1. raising the medium-term interest rate floor used to compute the total debt servicing ratio (TDSR) and mortgage servicing ratio (MSR) by 0.5 percentage point for loans from private financial institutions;
2. Imposing a wait-out period of 15 months for current and former owners of private residential property to buy a non-subsidised HDB resale flat.
The first measure will crimp the loan amount for home buyers while the second will bar private homeowners from buying HDB resale flats for 15 months, which will in turn shrink the pool of HDB upgraders for private homes. These measures took effect from September 30, 2022 and are widely expected to slow down home sales in 2022Q4.
For the nine months in 2022, a total of 18,302 homes have been sold. URA statistics showed that 79% of the homes were bought by Singaporeans, 17% by permanent residents and 4% by foreigners. The top five foreign buyers came from China, Malaysia, India, USA and Indonesia.
Some 151 luxury homes were sold in 2022Q3, slightly lower than the 156 deals in 2022Q2. In the first nine months of 2022, there was a total of 416 transactions. The most expensive property sold in each segment in 2022Q3 was a GCB at 80 Belmont Road which fetched $55.5mil, a villa at 256 Ocean Drive which fetched $34.5 mil and a penthouse at Les Maisons Nassim which was sold for $59.8 mil.
PROJECTS THAT SOLD WELL IN 2022Q3
The rental market remained robust in 2022Q3 and led to an 8.6% q-o-q rise in the rental index, higher than the 6.7% q-o-q gain in 2022Q2. This is the biggest quarterly increase since 2007Q3. Supporting factors included the re-opening of borders, new policies to attract professional talent as well as locals in need of interim housing. Landlords have also been eager to raise rents to offset higher mortgage costs and property taxes.
By property types, rents of landed homes rose significantly in 2022Q3 as seen by the 10.9% q-o-q jump in its rental index, much faster than the 3.2% rise in 2022Q2. Similarly for non-landed homes, swiftly rising rents translated to a 8.3% q-o-q rise in the rental index, higher than the 7.1% increase in 2022Q2. Rents for non-landed homes in RCR led the increase with a 9.6% q-o-q gain, followed by rises of 8.8% for OCR and 7.0% for CCR. Based on caveat data, the highest rental deals in 2022Q3 went to a bungalow at Dalvey Road at $85,000 per month and a penthouse in One Shenton at $80,000 per month.
A smaller number of 1,602 new homes were completed in 2022Q3, compared to the 2,682 new homes completed in the previous quarter. In total, the residential stock stood at 386,953 units at end-September. Prominent projects completed in the quarter were Parc Esta (931 out of 1,399 units), The Jovell (428 units) and Sycamore Tree (96 units).
There were 21,898 vacant homes in 2022Q3 reflecting a vacancy rate of 5.7%. Although this was slightly higher than the 20,765 vacant homes in 2022Q2, supply was still tight, homes for rent in particular.
RENTAL INDEX & VACANT UNITS
UNSOLD UNITS IN THE PIPELINE
Supply in the pipeline
The pipeline of housing units inched up as developers acquired new development sites. At the end of 2022Q3, developers had 49,384 uncompleted private homes in the pipeline with planning approvals, compared to 48,836 units in 2022Q2. Some 15,677 units (32%) remained unsold, slightly lower than the 15,805 units at end-June. The 15,677 unsold units comprised 4,398 units (28%) from projects that were either launched or not launched yet and 11,279 units (72%) from projects without the prerequisites for sale.
Weighed down by rising interest rates and inflation, mounting risk of global recession, potential job losses and government intervention, developers exercised caution when acquiring development land. In 2022Q3, developers bought four private residential sites by the collective sales route and three sites from the government land sales (GLS) programme.
The biggest deal, Chuan Park, was reportedly sold to Kingsford Group/ MCC Land for $890 mil or $1,254 psf/plot ratio in July. The sale was subject to approval by Strata Titles Board. Two smaller developments – Euro-Asia Apartments and Park View Mansions – were also sold in the same month. A fourth site comprising a small apartment block at Jalan Ulu Siglap was sold to be developed into landed homes.
In the GLS tender, two parcels at Lentor Central and Lentor Hills Road received only three and two bids respectively. The corresponding top bids of $1,108 psf/plot ratio and $1,130 psf/plot ratio were very close. The muted response could be attributed to the supply buildup of some 3,000 units from six parcels in the location even though the first of these – Lentor Modern – was 85% sold when it was launched in September.
So far, the new projects to be launched in 2022Q4 are expected to be smaller projects like Hill House (72 units), Kovan Jewel (34 units) and Sophia Regency (36 units). There was no announcement of any major project launch. The Fed hiked interest rates by 75 basis points again in November. Coupled with the fresh limits on home loans in the latest cooling measures, sales momentum is expected to slow down even as any increase in home prices is likely to be marginal.
We estimate the total housing demand for the year will be around 8,000 new and 15,000 resale homes and the price index to rise by a total of 9%. This is unlike 2021, when some 13,000 new and 20,000 resale homes were sold, achieving a 10.6% y-o-y rise in the price index. Nevertheless, with sound economic fundamentals and close monitoring by the government, the residential market should stay the course in 2023.