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