Demand for residential property rises amid dwindling supply
By Charlene Chin
/ EdgeProp Singapore |
(from left) Kelvin Fong, executive director at PropNex; Ong Choon Fah, CEO and head of research and consulting at Edmund Tie; Nicholas Mak, head of research and consultancy at ERA Realty Network; and Bernard Tong, CEO of EdgeProp Singapore (Credit: EdgeProp)
SINGAPORE (EDGEPROP) - The Singapore residential property market is currently like a pot of steel on a fire that is “boiling over”, describes Nicholas Mak, head of research and consultancy at ERA Realty Network. (See: Singapore ranks second as preferred city for Asia Pacific investors)
“That fire is fuelled by economic growth, household income, low interest rates and so on. And what the government is doing is putting more stones and bricks on top of the lid of the pot to try to keep it from boiling over, but the fire is still going on, and the government cannot cool the fire, because there is GDP growth,” Mak says in the “Homes For Tomorrow” episode in EdgeProp’s “Real As State” online series.
Despite news of the pandemic shuttering businesses and ravaging economies, the property market seemed to have held its own. In April, developers in Singapore sold 1,262 private homes, based on URA data. This is a slight dip from sales in March, when 1,296 units were transacted. However, compared to last April, new home sales (excluding executive condos or ECs) have jumped by 355.6%.
Property cooling measures are like the stones and bricks placed on the lid of a boiling pot, and there has been speculation in the property industry that the government is mulling over such measures to keep prices in check. (See: Fear of missing out and talk of cooling measures nudge new home sales up 32.2% in Jan 2021)
To that, Ong Choon Fah, CEO and head of research and consulting at Edmund Tie & Co remarks: “We are seeing mispricing of assets and so the government is concerned that there might be a misallocation. So I think... that’s why over the years they have introduced macroprudential policies such as the TDSR (total debt servicing ratio) as well as the LTV (loan-to-value) ratios.”
She adds that “the government has made it very clear that they would want to see a stable property market that is fundamentally supported by the economy”.
Consultants note that amid robust demand for properties, housing supply is falling. Mak observes: “Last year, developers launched about 28 residential projects for sale, but this year, even if developers were to launch all the projects that they have lined up, it will only number about 22 and most of them are small and medium-sized projects. Only one of them has more than a thousand units and that is Normanton Park.” (Discover all Singapore new launch condos in 2021)
“If you just apply economics, developers should be going out there to buy land right now and the government should be selling more land in the next upcoming GLS [government land sales] programme, but sometimes selling more land can be like adding fuel to the fire,” says Mak.
Construction delays, more flock to ready-built properties
With a delay in construction caused by the pandemic, buyers have also flocked to resale properties. “People are entering the market to buy because they do not want to wait,” notes Kelvin Fong, executive director at PropNex. He observes that instead of buying HDB build-to-order (BTO) flats, couples are turning to resale flats instead, which has caused prices to “rebound to almost 2012 and 2013 prices”. (See: Find HDB flats for rent or sale with our Singapore HDB directory)
With the pandemic shutting borders and disrupting the usual flow of construction workers into Singapore, many projects have been delayed. This will inadvertently lead to construction costs going up, and that has also fuelled demand for private properties now, because many people are worried that the cost will be borne by the consumer, eventually. “Because they reckon the land cost will go up, the construction cost will go up, the longer they wait. They’d think, ‘I’d rather buy something now,’” says Fong.
Ong notes that buyers have also been flocking to projects where the units are already completed. “Developers are starting to sell those units where you can move in immediately instead of those under construction, where the construction period will be longer than what it used to be,” she says.
Such delays could also lead to spillover effects in the rental market. “In the private housing market, if buyers have already sold their unit and are waiting to collect the keys to their next one, they might have to consider renting in the short term in anticipation of further delays for their new properties,” says Mak, who believes that construction delays will have to be expected moving forward.
Flexible spaces, smart furniture
With the increased practice of working-from-home, homes now require more flexible layouts. “I am always fascinated by the Japanese; their rooms are so flexible, so this is perhaps an idea that some of us can adopt,” says Ong. For instance, one can use smart furniture like Murphy beds, which can be folded up to allow the bedroom to be used as an alternative space.
“We use our bedroom probably for like eight hours a day, so the rest of the time the space is under-utilised,” she says, adding: “There’s quite a lot of innovation in smart furniture that I think buyers can look into.”
Another idea, Mak suggests, is to look into temporary partitions such as foldable walls. One other alternative is for residents to utilise the function or meeting room facilities in their condos, he notes.
One simple way is also to declutter, suggests Ong. “You can get rid of a lot of things that you don’t need, or put them in self-storage. If you travel once a year during winter, put the winter clothes in self-storage so that it frees up more space,” she says.
Ong also believes that with working-from-home being such a key part of our lives now, developers will focus on designing for more communal spaces, be it common study rooms or function rooms, “so that people can actually get out” of their house.
In addition, the pandemic has forced people to rethink their lives, and this translates into a question on what space means to everyone, Ong says. “It’s an entire rethink that the home is everything — it is your office, it’s your school, it’s an entertainment area, it is your cooking academy and your social space,” she elaborates.
With home being the primary residence and place in which most activities will converge, this will lead to other places becoming “third places”, says Ong. “The first place is usually our home, and the second place is the workplace, where you spend your time on weekdays,” she explains.
“Instead of just the CBD, we will see a lot of the sub-regions becoming an activity hub, and each hub can be a kind of a bubble, so you commute within your area when necessary,” she adds.
Sustainability
The real estate industry also has its part to play in sustainability. “The building and construction industry is responsible for 40% of the carbon emissions globally, so there is a lot that we can do,” says Ong.
She adds: “28% of [carbon emissions] actually comes from operational emission, so we’re starting to think not just in terms of construction, but in terms of the life cycle of a building — how can we make it more sustainable from construction through to operations.”
Mak is of the view that the en bloc concept in Singapore can be relooked at. This allows homeowners to sell off their existing developments collectively. Buildings over 10 years old require 80% consent, while for buildings younger than 10 years, 90% of homeowners must agree. (See potential condos with en bloc calculator)
“Many people do not realise that the manufacturing of cement leaves behind a very big carbon footprint, so ... is there a need to tear down buildings that are just 20 or 30 years old, and that are totally usable?” Mak questions.
“There are a lot of buildings in other countries, such as in Europe, that are more than 100, 1,000 years old and are still standing,” he adds.
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