House HUNTERS

With global eco­nomic un­cer­tain­ties loom­ing and prop­erty cool­ing mea­sures stay­ing put, ex­perts share their pre­dic­tions on the res­i­den­tial prop­erty mar­ket With Lynn Tan

Prestige (Singapore) - - CONTENTS -

ex­perts share their pre­dic­tions on the res­i­den­tial prop­erty mar­ket

Since the last round of cool­ing mea­sures im­ple­mented by the gov­ern­ment in the se­cond half of 2013, the res­i­den­tial prop­erty mar­ket has seen sub­dued per­for­mance, which has con­tin­ued into the first half of 2016. Ac­cord­ing to Alice Tan, di­rec­tor and head of Con­sul­tancy and Re­search at Knight Frank Sin­ga­pore, Q1 2016 marks the 10th con­sec­u­tive quar­ter of price de­cline with an over­all 9.1 per­cent drop since Q3 2013, af­ter the To­tal Debt Ser­vic­ing Ra­tio (TDSR) rul­ing came into ef­fect. Ad­di­tion­ally, in Q1 2016, the URA Pri­vate Res­i­den­tial Price In­dex fell 0.7 per­cent quar­ter-on-quar­ter, or 3.4 per­cent year-on-year.

Ac­cord­ing to Ong Teck Hui, na­tional di­rec­tor for Re­search & Con­sul­tancy at JLL, a pro­fes­sional ser­vices and in­vest­ment man­age­ment firm of­fer­ing spe­cialised real es­tate ser­vices, the volatil­ity in the stock mar­ket at the be­gin­ning of the year, to­gether with the Lu­nar New Year lull, may have re­sulted in low trans­ac­tion vol­umes in Jan­uary and Fe­bru­ary. How­ever, sen­ti­ments im­proved, with 96 per­cent more trans­ac­tions in March and April, com­pared to the pre­ced­ing two months.

In Q1 2016, de­vel­op­ers launched a to­tal of 953 pri­vate res­i­den­tial units, a 28.5 per­cent quar­ter-on-quar­ter (or a 19.8 per­cent year-on-year) de­cline. “As the over­all mar­ket sen­ti­ment re­mains fairly soft, de­vel­op­ers are highly cau­tious in launch­ing new projects,” says Tan. This is also a trend that Ken Lim, exclusive li­cen­sor at Re/max Sin­ga­pore, which man­ages over 40 fran­chisees/ as­so­ciate com­pa­nies within a global net­work that spans 100 coun­tries, has no­ticed. “Each time there is an ex­pected slow­down in the econ­omy, de­vel­op­ers hold back, thereby re­duc­ing the sup­ply of homes. But de­mand re­mains rel­a­tively con­stant so this helps

prices stay on par,” he analy­ses.

De­spite a drop in the num­ber of new units launched, the num­ber of those sold rose 8.2 per­cent year-on-year to 1,419 units in Q1 2016. Tan at­tributes this im­prove­ment in sales vol­ume to the suc­cess­ful launch of two highly an­tic­i­pated mixed de­vel­op­ments: The 268-unit Cairn­hill Nine in Or­chard Road and the 216-unit The Wis­te­ria in Yishun.

Yet, the gov­ern­ment has re­it­er­ated that it is still pre­ma­ture to lift or ease cool­ing mea­sures. Ac­cord­ing to Tan, this an­nounce­ment, cou­pled with height­ened eco­nomic un­cer­tain­ties, is ex­pected to limit home-buy­ing de­mand for the next few months. “Amid global macroe­co­nomic un­cer­tain­ties and muted home­buy­ers’ sen­ti­ment, de­vel­op­ers are seen to be pric­ing their res­i­den­tial prop­er­ties more re­al­is­ti­cally to drive sales and avoid in­cur­ring hefty ex­ten­sion charges over un­sold in­ven­tory,” she adds.

Where res­i­den­tial prop­erty sales is con­cerned, Ong pre­dicts de­vel­op­ers could sell be­tween 7,500 and 8,500 pri­vate homes this year, com­pared to 7,440 units in 2015. “Im­prove­ment in trans­ac­tion vol­ume could lead to a mod­er­a­tion in price de­cline in 2016 which would be a pre­cur­sor to prices even­tu­ally bot­tom­ing,” he ex­plains.

Over the past two to three years, many buy­ers have stayed on the side­lines wait­ing for prices to cor­rect sig­nif­i­cantly or for cool­ing mea­sures to be re­moved, both of which have not oc­curred. There is a pent-up de­mand and gen­uine buy­ers are re-en­ter­ing the mar­ket, so de­vel­op­ments with good lo­ca­tion and ameni­ties should see stronger sales per­for­mance.

Lim’s take is that the res­i­den­tial prop­erty mar­ket will re­main sta­ble be­cause of the way our econ­omy is struc­tured and how prop­erty sales are reg­u­lated. “The bulk of res­i­den­tial prop­er­ties in Sin­ga­pore are owned by Sin­ga­pore­ans, who pur­chase homes us­ing their CPF. Our em­ploy­ment rates re­main high, so as long as they have a job, they do not have to worry too much about their mort­gage pay­ments,” he ex­plains. For for­eign­ers and in­vestors, how­ever, the eco­nomic out­look and Ad­di­tional Buyer’s Stamp Duty (ABSD) may be a de­ter­rent and they may de­cide to hold off their pur­chases.

In line with the gen­eral per­for­mance of the res­i­den­tial prop­erty mar­ket in the first half of 2016, the prime mar­ket picked up in March af­ter a quiet start to the year. Chia Ngiang Hong, group gen­eral man­ager of City De­vel­op­ments Lim­ited (CDL), has no­ticed signs of in­creased ac­tiv­ity in the high-end res­i­den­tial seg­ment with rea­son­able take-up, so CDL con­sid­ers it timely as it pre­pares for the launch of Gramercy Park, a pres­ti­gious 174-unit free­hold development on a 170,000sq-ft site along Grange Road. “It is in­creas­ingly dif­fi­cult to se­cure prime land of this size in land-scarce Sin­ga­pore. Even if it is avail­able, the price would be ex­or­bi­tant. CDL

is for­tu­nate to have se­cured this plot ear­lier, which gives us the abil­ity to mar­ket Gramercy Park at at­trac­tive pric­ing,” says Chia.

Cairn­hill Nine was launched in March 2016 and sold 210 of the 268 units that were launched at a me­dian price of $2,441 psf.

The un­sold in­ven­tory in the Core Cen­tral Re­gion (CCR) has been de­clin­ing steadily for eight con­sec­u­tive quar­ters. Based on the lat­est data re­leased in the Q1 2016 URA Quar­terly Sta­tis­tics, the num­ber of un­sold units (com­pleted and un­com­pleted) in the CCR fell by 5.8 per­cent quar­ter-on-quar­ter, to ap­prox­i­mately 6,000 units in Q1 2016 (re­fer to Ex­hibit 1).

“Look­ing for­ward, based on URA sta­tis­tics, about 20,500 pri­vate res­i­den­tial homes will be com­pleted over the next three quar­ters end­ing Q4 2016. How­ever, the CCR will only con­trib­ute about 17 per­cent of this up­com­ing sup­ply,” Tan projects. She ex­pects the nar­row­ing un­sold stock and rel­a­tively lim­ited up­com­ing sup­ply in the CCR to gen­er­ate in­ter­est among home­buy­ers who be­lieve in the ris­ing value propo­si­tion of high-end homes. Prices of lux­ury homes will thus re­main ro­bust in the long-term.

Un­like mass mar­ket prop­er­ties that are bet­ter sup­ported by de­mand from up­graders, in­clud­ing HDB res­i­dents, the high-end seg­ment is pre­dom­i­nantly an in­vestor mar­ket so the pool of buy­ers is smaller. “This group com­prises mainly lo­cals who al­ready own other prop­er­ties, as well as for­eign­ers, so mea­sures such as ABSD will af­fect them more,” says Ong. But de­spite the fact that cool­ing mea­sures have raised the cost of pur­chas­ing prop­er­ties in Sin­ga­pore, es­pe­cially for for­eign­ers, when you take into con­sid­er­a­tion fac­tors such as eco­nomic risk, po­lit­i­cal cli­mate and safety and se­cu­rity, Lim feels Sin­ga­pore re­mains at­trac­tive to high-net-worth in­vestors.

Sin­ga­pore ranks among the top global cities with Lon­don, New York, Paris, Tokyo and Hong Kong. Many in­vestors con­tinue to be at­tracted by Sin­ga­pore’s po­lit­i­cal and eco­nomic sta­bil­ity, ex­cel­lent in­fra­struc­ture, safety and se­cu­rity. Ac­cord­ing to Chia, Gramercy Park has been very well-re­ceived at re­gional road­shows. He feels this is an in­di­ca­tion that in the cur­rent mar­ket sit­u­a­tion, for­eign buy­ers find high-end res­i­den­tial de­vel­op­ments in Sin­ga­pore even more ap­peal­ing be­cause while prices in other cities have con­tin­ued to climb in re­cent years, prices in Sin­ga­pore have mod­er­ated sig­nif­i­cantly.

“As over­all mar­ket sen­ti­ment re­mains fairly soft, de­vel­op­ers are highly cau­tious in launch­ing new projects” – Alice Tan

prop­erty

Cairn­hill Nine of­fers a myr­iad of lux­u­ri­ous facilities con­ducive for recre­ational ac­tiv­i­ties and com­mu­nity bond­ing

Be­low from left: De­signed by the world renowned ar­chi­tec­ture firm NBBJ, Gramercy Park fea­tures two tow­ers with a unique sculp­tural de­sign; In the bed­room, sen­si­tive spa­tial de­sign and a seam­less lay­out com­bine to cre­ate a ver­i­ta­ble pri­vate re­treat

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