Mixed housing market in 3Q2020

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/ EdgeProp Singapore
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October 23, 2020 11:23 PM SGT

Prices in landed segment were up 3.7% in the three months from July to September while prime condo prices in the Core Central Region were down 3.8% q-o-q

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Year to date (YTD), CCR prices have fallen 3.4% and demand remains constrained due to loan curbs and cooling measures (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - Private residential prices were up for a second consecutive quarter to 0.8% in 3Q2020, after increasing 0.3% in 2Q2020. However, performance was uneven across the different segments, according to property consultants (See Figure 1).
The landed segment stood out last quarter with a 3.7% q-o-q price increase. On the other hand, the non-landed segment in the Core Central Region (CCR) fell 3.8% q-o-q in 3Q2020, reversing the 2.7% gain in the previous quarter. Year to date (YTD), CCR prices have fallen 3.4% and demand remains constrained due to loan curbs and cooling measures, says Wong Xian Yang, associate director of research for Singapore and Southeast Asia, Cushman & Wakefield (C&W).
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The landed segment stood out last quarter with a 3.7% q-o-q price increase (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Sporadic distress, selected discounts

“A closer look at the transactions during the quarter suggests that there were sporadic distressed sales in the secondary market,” notes Tricia Song, Colliers International head of research for Singapore.
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The decrease in 3Q2020 non-landed CCR prices could also be due to discounts offered at selected ongoing launches, reckons Song, pointing to Leedon Green, which recorded 15 caveats last quarter at a median price of $2,546 psf, compared to 35 units sold at $2,782 psf when it was first launched in January 2020. At 8 St Thomas, 26 caveats were recorded in URA Realis at a median price of $2,780 psf, compared to earlier units sold at $3,100 to $3,200 psf.
Fourth Avenue Residences sold 64 units at a median price of $2,258 psf, compared to its average launch price of $2,400 to $2,450 psf last year. The Avenir sold another 18 units in 3Q2020 at a median price of $3,019 psf compared to 18 units sold at a median price of $3,244 psf in 1Q2020 when it was launched, according to Colliers International.
The Rest of Central Region (RCR) saw non-landed price gains of 2.5% q-o-q and 0.3% YTD. The Outside Central Region (OCR) saw non-landed prices increase 1.7% q-o-q, bringing the total to 1.4% YTD. With borrowing limits and cooling measures still in place, the market continues to be characterised by demand for affordably priced units and those perceived as “good value”, adds C&W’s Wong.
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The Rest of Central Region (RCR) saw non-landed price gains of 2.5% q-o-q and 0.3% year-to-date (Photo: Samuel Isaac Chua/EdgeProp Singapore)

‘Price-sensitive’

Of the 3,517 units sold in the primary market in 3Q2020, 52.6% or 1,850 units were in the RCR, and 39.3% in the OCR, according to Ong Teck Hui, JLL senior director of research & consultancy. “More affordable units for sale in the OCR and RCR continue to draw price-sensitive home buyers to these submarkets,” he says.
Developers launched 3,791 new private homes for sale and sold 3,517 units in 3Q2020, double the volume released and transacted the previous quarter, notes JLL’s Ong. Compared to a year ago, new sales volume in 3Q2020 was up 7.2%, he adds.
Of the six new launches in 3Q2020, two projects in District 14 recorded take-up rates of above 60%, aided by their competitive pricing, says Lam Chern Woon, Edmund Tie senior director of research and consulting. They were the 50-unit freehold project NoMa, which saw 36 units sold (72% take-up) and the 566-unit Penrose, where 341 out of 566 units were sold on its first weekend of launch. As at end-3Q 2020, 389 units (69%) at Penrose were taken up.
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As at end-3Q 2020, 389 units out of a total of 566 units (69%) at Penrose have been taken up (Photo: Hong Leong Holdings)
In the first nine months of this year, developers managed to sell 7,379 new homes – just slightly below the 7,469 units sold during the same period a year earlier. “Primary sales volumes have outperformed market expectations in spite of the macroeconomic headwinds,” he comments. “Full-year primary market sales could come close to the 9,912 units sold in 2019.”
Similarly, secondary market sales staged a strong rebound in 3Q2020, with resale volume hitting a two-year high of 3,530 units compared to only 951 units changing hands in 2Q2020.

Softening rents, higher vacancy

While prices have held up and even showed a slight increase, the overall residential property rental index softened by 1.2% q-o-q in 2Q2020, and 0.5% q-o-q in 3Q2020, notes Nicholas Mak, head of research for ERA Realty. The CCR rental index declined sharply by 2.1% q-o-q, while the rental indices for RCR and OCR increased in 3Q2020.
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Travel restrictions likewise prevented foreign students enrolled in local education institutions from coming to Singapore, leading to lower leasing demand in locations with major institutions of higher learning (Photo: Albert Chua/EdgeProp Singapore)
“One of the main causes of the decline in the rental index was the Covid-19 travel restrictions that prevented the arrival of expatriates in Singapore, coupled with the departure of expatriates who had lost their jobs due to the deteriorating local employment climate,” notes ERA’s Mak.
Travel restrictions likewise prevented foreign students enrolled in local education institutions from coming to Singapore, leading to lower leasing demand in locations with major institutions of higher learning. “There are a few major educational institutions in the CCR such as Singapore Management University and Nanyang Academy of Fine Arts,” points out Mak.
Another indication of the weaker rental market in the CCR was the spike in vacancy rate to 9.2% in the quarter, relative to 7.5% in 2Q2020. Vacancy rate in the CCR was also higher than in the RCR and OCR, which stood at 7.4% and 4.2% respectively in 3Q2020, says Mak.
Sales gallery - EDGEPROP SINGAPORE
Sales gallery of the 1,206-unit JadeScape, the redevelopment of the former Shunfu Ville which Qingjian Realty purchased en bloc for $638 million in 2Q02016 (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Decline in unsold inventory

Based on URA data, there were 26,578 unsold private residential units as at 3Q2020, 5.6% lower than in 2Q2020 and a sharp 29.7% decline from the high of 37,799 units in 1Q2019. “Unsold stock has been declining for six consecutive quarters, given healthy primary market sales volumes and limited land sales activities during the past quarters,” says JLL’s Ong.
If unsold inventory continues to decline and the primary market remains healthy into 2021 with the possibility of a market upturn, “we could potentially see some revival in the collective sales market next year”, reckons Ong. “It is not necessary for unsold inventory to decline to very low levels before demand for residential sites picks up.”
Ong cites Shunfu Ville as an example. When the former privatised HUDC estate was sold in 2Q2016, the number of unsold units was 23,282, way above the trough of 16,929 units in 2Q2017. “A conservative supply under the Government Land Sales (GLS) programme could also contribute to a collective sales revival due to shortage of sites in certain segments of the market.”
The Linq - EDGEPROP SINGAPORE
The Linq @ Beauty World has just 120 freehold apartments ranging from one- to four-bedroom units (showflat pictured) and is scheduled to preview on Oct 31 (Photo: Albert Chua/EdgeProp Singapore)

Four to six projects slated for launch in 4Q2020

In a typical year, the fourth quarter is usually “a lull period”, due to school holidays and year-end festive period. Most people would also be travelling overseas then, points out Mak. Developers would also release fewer units for sale in the last quarter, leading to lower sales volume.
With most people likely to be spending their year-end holidays in Singapore due to travel restrictions, developers are taking the opportunity to roll out four to six residential projects with a total of 1,720 to 2,450 units in 4Q2020, notes Mak. They include the 120-unit The Linq @ Beauty World, the 660-unit Ki Residences and 640-unit Clavon. Furthermore, developers would also release additional housing units for sale in projects that were launched recently.
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Total private housing units launched for sale this whole year could be between 10,000 and 11,000 units, while units sold could end the year in the 9,700 to 10,500 range, estimates Mak. “The healthy buying demand would support the increase in housing prices,” he says. However, the recession could taper price growth to a modest 0.5% to 1.5% for the year.
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Ismail Gafoor, CEO of PropNex, sees the primary market driven by Singaporeans and HDB upgraders, who accounted for 81% of total new home purchases in 3Q2020 (See Figure 2 above). “This could suggest that many Singaporeans are still confident about their job security – partly helped by the various government support packages – or that many households are still flush with liquidity and have decided to enter the property market when they see good value,” he says.
For price trends, recent transactions, other project info, check out these projects' research page: NoMa, Penrose, The Avenir, Fourth Avenue Residences, Leedon Green, Shunfu Ville, The Linq @ Beauty World, Clavon