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Govt measures on property market 'not a worry for now' though demand is softening: DBS

DBS analysts believe demand is likely to taper off in 2023 with the natural cooling effect from a rise in mortgage rates.

Government measures on Singapore’s residential property market are “not a worry for now”, say DBS Group Research’s analysts. Hopeful investors should watch upcoming launches, however, as the analysts already note a general softening of demand.

DBS’s Derek Tan, Rachel Tan, Dale Lai and Geraldine Wong note recent media coverage of a spike in sub-sales within the primary market, or “flipping”, hitting a high of 7% in 2022 after years of decline. While this suggests heightened investment demand, the analysts believe demand is likely to taper off in 2023 after considering the natural cooling effect from a rise in mortgage rates.


“We thus believe that it will be premature for the government to act again to curb speculation for now,” note DBS’s analysts on March 16.

The analysts also note “a general softening of demand for launches”, with past project sell-through rates in the 40%-50% range. DBS believes this will be the “new normal” for upcoming new launches in 2023.

Upcoming launches to watch will be larger projects, including the 638-unit Tembusu Grand by CDL-MCL, 816-unit The Continuum by Hoi Hup Sunway in the eastern part of Singapore, and the 265-unit Blossoms by the Park by EL Development near one-north. These will be a test of the continued appeal of property to the locals, say DBS’s analysts.

Wing Tai wins Holland Tower site

Wing Tai W05 announced last week that the group is a successful tenderer for the collective sale of the Holland Tower site for $76.3 million, translating to a land rate of $1,746 per sq ft per plot ratio.

“We note that Wingtai’s winning bid is close to the tender asking price. The group intends to redevelop the site into a luxury condominium with unblocked views of Holland Park and Singapore’s skyline,” notes DBS’s analysts.

Holland Tower sits on a freehold 27,878 sq ft site with a total built-up gross floor area (GFA) of 43,691 sq ft, implying that it is built up to its existing plot ratio of 2.0x. It is situated on an elevated site overlooking the unlocked greenery of the Holland Park Good Class Bungalow (GCB) area, is a 15-minute stroll from Dempsey Hill and Holland Village, and is in close proximity to Nanyang Primary School, Fairfield Methodist School and ACS international.

DBS believes the estimated launch pricing will be within transacted range, implying some buffers for Wing Tai. “Wing Tai has moved again in the collective sales space and has now made the second addition to its land bank after Lakeside Apartments, which was acquired at $274 million and an all-in land rate of $1,200 per sq ft.”

This time round, the group has added more inventory at the luxury end of the market in District 10 within the Core Central Region (CCR), notes DBS. “This is probably one of the few CCR projects the group has pursued after its 520-unit The M Condo in Bugis V 70% of its units were cleared over the launch weekend back in February 2020.”

Based on DBS’s estimates, the land price is close to transacted prices for collective sales projects back in the last en bloc upcycle of 2018-2019, where four nearby projects were sold in the range of $1,712-$1,850 per sq ft.

“As such, we believe that Wing Tai has bought itself some buffer room, although construction costs/interest costs have risen much higher since then, and estimate that breakeven for this project would be close to $2,350-$2,450 per sq ft. Assuming a 10%-15% margin, this implies a launch price of close to $2,900-$3,000 per sq ft.

As at 10.22am, shares in Wing Tai are trading flat at $1.48.

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