Private Home Market Playbook: Unlocking H2
Amid a softer economic climate, residential property prices in Singapore are expected to continue on a growth trajectory, albeit at a more gradual pace.
The PropertyGuru Singapore Property Sale Price Index saw a 1.98% Q/Q increase in Q1 2022 compared to the earlier 5.07% Q/Q spike in Q4 2021. The dip in prices come as new cooling measures came into effect in December 2021.
“Price resistance may set in and price moderation could take place in H2 2022 as property seekers reckon with global economic headwinds and rising interest rates,” said Dr. Tan Tee Khoon, Country Manager, PropertyGuru Singapore.
“Price resistance may set in and price moderation could take place in H2 2022.”
Orange Tee & Tie’s, Senior Vice President of Research & Analytics, Christine Sun, flagged the risk of inflationary pressures and uncertainties surrounding the protracted Russia-Ukraine conflict.
“We remain sanguine about the general outlook for Singapore's property market. The market is picking up since our economy has gathered pace after the substantial reopening of our economy. Growing macroeconomic uncertainty may spur more investors to park their money in safe-haven assets like properties,” she said.
“Demand has picked up 6 months after the cooling measures, with more foreign buyers and Permanent Residents gradually returning. Supply is also low in the market which has helped prop up prices over the past year. “
Tight Supply Conditions
Amid dwindling inventory, the Government has raised the land supply for private housing on the Confirmed List under the Government Land Sales (GLS) Programme for H2 2022. A 26% jump from the previous 6 months.
Still, Dr. Tan believes that this will do little to ease the supply crunch in the near-term as he expects only a few non-landed new launches given the decline in existing developer inventory with fewer developers replenishing their land banks.
“Property seekers would likely have to fork out more for new homes or turn to the secondary market as an alternative especially for those who require immediate accommodation. This is despite the recent announcement of another 3505 units of new homes in the pipeline through the GLS program in H2 2022 as these homes would only be available for tender from August-December of this year,” Dr Tan said.
To this end, Ms Sun thinks government land bids and enbloc sale activity may pick up further in the second half of this year as more developers attempt to shore up their landbank.
For Alice Tan, Head of Consultancy at Knight Frank Singapore, the most interesting site from the H2 2022 GLS Program is likely to be the Marina Gardens Lane parcel, where almost 800 units can be developed.
“This first private residential site at the reclaimed land of Marina South, when completed, will have unobstructed views of the CBD, Gardens by the Bay, Marina Reservoir and sea views, as well as front-row seats to the fireworks at National Day events… at least, before other sites in the area are developed. This land parcel when launched for tender is expected to be hotly contested,” she said in a note.
While small-to-medium sized sites may be favoured in the en bloc market due to higher Additional Buyer’s Stamp Duty (ABSD) rates, en bloc hopefuls in bigger developments need not fret.
“The increase in ABSD to 35% could mean higher risk for developers, but we do not necessarily think that it has caused developers to shun bigger sites. Should the developers believe in the prospects of a big site, they could always form joint ventures to purchase the land together and share the risk,” commented Tracy Goh, Head of Investment and Collective Sales, PropNex Realty.
In the landed segment, Dr Tan foresees more resilience with buyers expected to pay a premium due to the finite inventory of some 73,000 landed properties available and rarely any GLS or en bloc sites for landed developments.
jump from the previous 6 months.
“We expect overall residential prices to continue rising.”
Gradual Price Rises
On the back of the moderate spate of collective sales over the past 18 months and relatively low residential supply from the GLS, EDMUND TIE foresees overall primary sales volumes likely to come in at around 10,000 units this year.
“Launch activity is likely to pick up in the second half of this year, as developers draw confidence from the recent positive launches. We expect overall residential prices to continue rising by 2%-4% for the year,” noted Lam Chern Woon, Head of Research and Consulting, EDMUND TIE.
Sharing a similar sentiment, PropNex projects that for the full year 2022, 9,000 to 10,000 new private homes (ex. ECs) could potentially be sold, while overall private home prices are likely to increase by 3%-5%.
“In fact, URA data showed that some 1,356 new private homes (ex. ECs) were sold in May, representing a 105.5% jump from the revised 660 units transacted in the previous month. We are likely to see new sales momentum being sustained, especially in months where there are fresh project launches,” noted Wong Siew Ying, Head of Research and Content, PropNex Realty
In a research note, Leonard Tay, Head of Research, Knight Frank Singapore, predicted that new sale volume this year will reach around 8,000 to 9,000 units with fewer launches in the pipeline. Meanwhile, overall private residential prices are projected to increase by around 1% to 3%.
Tay further elaborated that in the resale market, 16,000 to 19,000 units might be sold. This would reflect a total private home sales volume of about 24,000 to 28,000 units in 2022, some 16.6% to 28.5% less compared to the robust 33,557 units chalked up in 2021.
Value in Prime Homes
In the new home sales market, PropNex’s Wong expects the Rest of Central Region (RCR) to continue to perform well, with the Outside Central Region (OCR) picking up steam in Q3 as more projects come online.
Over in the Core Central Region (CCR), Wong opines that the ample unsold stock and the weight of the December 2021 cooling measures on investment demand could point to some opportunistic buys, particularly for first-time Singaporean home buyers.
According to EDMUND TIE’s Lam, with mass market prices having risen strongly over the past two years, there has been a narrowing price gap between prime and mass market premiums.
“Some homebuyers may find more value in prime homes. And with hybrid work arrangements here to stay, the preference for larger units remain, although affordability constraints would mean developers have to continue to provide a balanced mix of smaller units as well, but with flexible layouts to cater to the multi-varied needs of individuals and families,” he added.
“Some homebuyers may find more value in prime homes.”
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Rental Resilience
Based on URA data for the first quarter, vacancy rates in the rental market are low.
According to Ms Sun, the lack of supply and available housing stock has seen rents rising at a faster pace over the past two months. This is because inventory is low, and many homes are being snapped up.
“For instance, based on SRX rental data for condos from April 2021 to December 2021, monthly rental growth was below 1.6% for private condos. However, monthly rental growth has since risen between 2% and 3% in March and April this year. Just over the last four months, overall rents for condos have risen 9% from December 2021 to April 2022. Rents increased the most in OCR over the same period,” added Ms Sun.
SPI for Condo Rental Market
Index in 2021/12
Index in 2022/4
Increase in rents
Overall
125.5
136.9
9.1%
CCR
126.9
138.4
9.1%
RCR
124
134.8
8.7%
OCR
124.7
136.3
9.3%
Source: SRX, OrangeTee & Tie Research & Analytics
“The lifting of border curbs adds to a tighter rental market.”
Overall, OrangeTee & Tie predicts that rents are likely to rise by 8% to 11% this year.
In addition, the easing of travel restrictions, construction delays as well as a shift to a hybrid work model has also fuelled demand in both the HDB and private rental market.
“The lifting of border curbs adds to a tighter rental market. Foreigners, especially those who would have purchased homes for children’s education, may also resort to leasing given the higher ABSD to be paid after 16 Dec 2021,” concluded Dr. Tan.
With rents set to rise, read on to find out why you should buy a TOP condo and possibly enjoy immediate rental returns! Find out more.
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