Prices of new homes across all segments still at historical highs, says OrangeTee

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November 21, 2018 3:57 PM SGT
Despite the slew of new property cooling measures, the private residential sector remained resilient in the 3Q2018, according to Christine Sun, head of research & consultancy at OrangeTee & Tie.
A few new project launches continued to see healthy buying interest during the quarter after the property cooling measures imposed on July 6, says OrangeTee. In the quarter, according to URA data, overall new home sales (excluding executive condos) rose 27% q-o-q to 3,012 units. The spike in new sales could be attributed to many projects being launched in the city-fringe, or Rest of Central Region (RCR), as well as the more than 1,000 units sold on the eve of the implementation of the cooling measures, adds Sun.
Credit: URA, OrangeTee&Tie Research & Consultancy
The number of new home sales (completed and uncompleted) in the RCR surged to 1,765 units, up 91% q-o-q and 106% y-o-y, in the quarter. More new projects were launched comprising 2,338 new units, 187% higher than the preceding quarter.
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The resale market suffered the greatest impact from the cooling measures in the quarter. Overall resale transactions fell by 43% q-o-q to 2,672 units in 3Q2018; and in the suburbs or Outside Central Region (OCR), resales dipped 45% to 1,051 units.
OrangeTee’s Sun attributes the decline in resales in the OCR to reduced demand from HDB upgraders as their affordability is limited by the 5% cut in Loan-To-Value (LTV) ratio that was part of the July property cooling measures. A relatively weaker HDB resale market is also affecting sellers’ proceeds, she adds.
Prices of residential homes (landed and non-landed) continued to rise, but at a slower rate of 0.5%, in 3Q2018. For the first three quarters of this year, prices of residential homes increased 7.9%.
Credit: URA, OrangeTee&Tie Research & Consultancy
Sale of condos in the prime districts and city centre, or Core Central Region (CCR), fell 41% q-o-q to 569 units in 3Q2018. But demand for luxury units priced at $3 million and above, remained healthy. In the three months from July to September, 187 such units were sold, which is higher than the five-year average of 173 units, points out Sun.
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Home prices across different market segments reached new highs in the first three quarters of 2018. According to URA Realis data as of 14 November 2018, the average price of non-landed homes in the CCR was $2,133 psf; in the RCR, it was $1,592 psf; and in the OCR, $1,189 psf. in Q1-Q3 2018 (Table 1), all of which are new peaks since 1995, (See Chart).
On a quarterly basis, the average price of non-landed new homes in CCR rose 30% y-o-y to $2,819 psf in 3Q2018, which is a new high for the segment. Meanwhile, resales rose 10% y-o-y to $2,063 psf. New sales in the RCR rose by a modest 1% y-o-y to $1,718 psf, while new sales in OCR rose 4% to $1,354 psf over the same period.
New Futura (Credit: City Developments Ltd)
Despite the cooling measures, six transactions above $10 million were observed in 3Q2018, indicating foreign buying despite the higher additional buyer’s tax. “Some may have considered properties here to be still cheaper than countries like Hong Kong,” reckons Sun.
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In the non-landed segment of the CCR, the most expensive unit sold was a 4,715 sq ft apartment at Urban Resort Condominium that fetched $13.9 million ($2,948 psf), followed by a 2,939 sq ft unit at Bishopgate Residences for $11.5 million ($3,913 psf) and a 3,122 sq ft unit at Twentyone Angullia Park that fetched $11.06 million ($3,524 psf).
The rental market was also on a “healthy trend” last quarter, says Sun. URA’s non-landed rental index shows that rents rose 0.3% q-o-q, and 0.4% y-o-y. Rentals rose 0.9% and 1.5% respectively in the OCR and RCR, but fell 0.9% in the CCR.
Credit: URA, OrangeTee&Tie Research & Consultancy
Overall occupancy rates reached 95.5% in the OCR. In the RCR and CCR, it was 92% and 90% respectively. The highest volume of rental transactions in 3Q2018 was seen at Commonwealth Towers, where 205 units were leased at a median rental rate of $4.65 psf per month. This was followed by The Sail @ Marina Bay with 158 transactions at $4.99 psf per month, and D’Leedon with 151 transactions at $3.91 psf per month.
According to OrangeTee, 17,000 to 19,000 new private residential units could be launched next year. Meanwhile, Sun reckons between 10,000 and 12,000 new homes could be absorbed by the market next year, given the current sales momentum. “Well-located projects and small apartments will draw buying interest as new sizing guidelines limit the future supply of small apartment units,” she says. Her forecast is for prices to rise at a “more moderate pace” of 1% to 3% for the full year 2019.