Homebuyers’ market

Developers are now recalibrating pricing strategies and planning their product and unit mix. They are reaching out to a market made up of predominantly first-time homebuyers whose affordability has been crimped by the latest property cooling measures.

Singaporean entrepreneur and real estate investor Eugene Loh and his wife purchased a 635 sq ft, two-bedroom unit at The Tre Ver on Potong Pasir Avenue 1 last weekend. The newly married couple paid $1.02 million ($1,606 psf) for the unit. According to Loh, they like the unit because it is located in one of the low-rise blocks that have “dual views” of the Kallang River and landscaped garden as well as swimming pool. They also like the fact that the project was designed by renowned architect WOHA.

“The timing was right, as we were looking for a new home,” says Loh. He and his wife are currently staying with his parents-in-law in Bishan. “Potong Pasir is quite a short driving distance from Bishan,” he points out.

Buyers at The Tre Ver on launch day on Aug 4 (Credit: UOL Group)

His only concern initially was the reduction in the loan-to-value (LTV) ratio from 80% to 75% since the property cooling measures were introduced. “That was a bit of a stretch, as that means we had to come up with more cash and CPF,” he says. “But since my wife and I are both working, we redid our sums and found that, based on the purchase price, it was a comfortable amount.”

Loh was one of the buyers at The Tre Ver on Aug 4, when 141 units were sold within three hours by balloting. The 729-unit private condominium was the second project to be launched post-property cooling measures on July 6.

The sales buoyed market sentiment, as they reflect “strong underlying demand, especially from Singaporean first-time homebuyers”, says Liam Wee Sin, deputy group CEO of Singapore-listed UOL Group, joint developer of The Tre Ver with its subsidiary, United Industrial Corp (UIC). Following the launch of the first phase of 200 units last weekend, the developer says it has released the second phase of units for sale.

Crowd at the balloting tent on the morning of the launch of The Tre Ver on Aug 4 (Credit: UOL Group)

Property consultants attribute the healthy sales at The Tre Ver to a combination of factors: pricing, product and location. The average price was $1,550 to $1,600 psf, about 9% lower than the average price of $1,732 psf achieved at Park Colonial so far.

Park Colonial, located on Woodleigh Lane, was launched on July 5, on the eve of the latest and ninth round of property cooling measures. A total of 311 units were snapped up that evening. The developer, a consortium led by listed property and construction group Chip Eng Seng Corp, closed the showflat a fortnight later, after selling 51% of a total of 805 units in the project.

UOL and UIC also offered a $5,000 discount for buyers at The Tre Ver for one day only, on Aug 4. Ahead of the launch, the number of marketing agencies was doubled from the original three — ERA, Huttons and PropNex Realty — to six, after taking on board Knight Frank, OrangeTee & Tie and Savills.

A total of 141 units at The Tre Ver were sold in three hours on launch day (Credit: UOL Group)

‘Decent sales’

“We think [the sales achieved at The Tre Ver] are a fairly good outcome, especially given that they came after the fresh round of cooling measures in July and after Park Colonial’s launch, which probably absorbed some of the pent-up demand in the Potong Pasir-Woodleigh area,” says Tricia Song, Colliers International head of research for Singapore.

The average selling price of $1,550 to $1,600 psf at The Tre Ver is “realistic”, given its distance from the MRT station compared with Park Colonial, which is next to Woodleigh MRT station, adds Song.

The “decent sales” at The Tre Ver reflect genuine owner-occupier demand, notes Song. “Buyers could be attracted to its serenity — given its location away from the main road — and the river views,” she adds. WOHA de- signed the project as a sustainable development with a multi-tiered landscape and capitalised on its 220m river frontage.

The crowd at the launch of Park Colonial on Jul 5, where 311 units were snapped up on one evening (Credit: Timothy Tay/EdgeProp Singapore)

The weekend before, July 28 and 29, marked the launch of the 327-unit Daintree Residence by Malaysian property giant S P Setia. About 50 units at the private condo were taken up on the first day, at an average price of $1,710 psf. The project on Toh Tuck Road was designed by renowned architectural firm ADDP Architects.

Daintree Residence was the first project launched since the property cooling measures came into effect. The government introduced a five percentage point hike in additional buyer’s stamp duty (ABSD) for second- and subsequent-home buyers, and a 10ppt increase for developers, with an additional 5ppt that is non-remittable. Borrowing limits have also been cut with LTV ratios reduced by 5ppt.

‘Distorting the market’

“What the cooling measures have done is to distort the market by curbing demand,” says Alan Cheong, Savills Singapore head of research. “The cooling measures in themselves are becoming predictable. It’s like watching reprised movie series such as Die Hard, Rambo or Terminator. You sort of know what to expect.”

At the launch of Daintree Residence where 50 units were sold at an average of $1,710 psf (Credit: S P Setia)

The government measure that had the greatest impact on the market was the total debt servicing ratio (TDSR) loan framework that was implemented in late June 2013. There was a lull in new launches subsequently.

One of the first projects to test the market after the TDSR kicked in was UOL Group and Singapore Land’s joint-venture project, the 445-unit Thomson Three, in October 2013. A total of 160 out of 200 units released were sold on the first day of launch at an average price of $1,350 psf. The developers had adjusted their prices to take into consideration the property cooling measures then.

Developers are not taking the latest property cooling measures lying down — they have been swift to act. According to property agents, of 18 projects launched so far this year prior to July 6, about 10 have started offering discounts of 2% to 5% to offset the hike in ABSD, or absolute discounts ranging from $5,000 to $18,000.

‘Recalibrate pricing strategies’

“Developers will continue to monitor sales to recalibrate their pricing strategies,” says Colliers’ Song. “[They] are likely to benchmark their future selling prices to the current realistic price levels.”

Average selling prices of fresh launches would be “far less optimistic” than what developers originally intended before July 6, notes Ong Teck Hui, JLL national director of research and consultancy.

The main beneficiaries of the property cooling measures are homebuyers. “The cooling measures give them the opportunity to take advantage of the sweet deals offered by developers,” says Alice Tan, Knight Frank Singapore director of residential project marketing. “It’s a good time for both investors and owner-occupiers, as developers are willing to adjust prices.”

Riverfront Residences - where 510 units were taken up on the first day of launch on Jul 5 (Credit: Oxley Holding)

According to Tan, shopping for units at new launches today would turn up more deals than in the resale market. “Owners in the resale market are less willing to lower prices unless they are affected by economic conditions and are under pressure to sell,” she says. “They are not as quick to adjust their prices the way developers have.”

While there is still healthy underlying demand for private homes, the hardest hit by the property cooling measures are the second-home buyers. “This group is very much affected,” says Tan. “Even for aspiring first-home buyers, the additional 5ppt down payment makes a difference.”

This has also had an impact on demand for properties priced above $1.5 million, especially for the city-fringe and suburban projects. “Even HDB upgraders will have to rework their sums and consider fresh injection of financing if they want to buy private property,” notes Tan.

Close to 200 units were sold at Stirling Residences on the night of Jul 5, with another 180 units sold since (Credit: Charlene Chin/EdgeProp Singapore)

Purchases sized down

Based on caveats lodged over the past three weeks since the property cooling measures were implemented, Colliers’ Song has noticed that “average floor sizes of units sold — in districts that have seen new launches in July — have shrunk significantly”. She points out that the median floor size (for non-landed projects) of units transacted in District 21 in July was 73 sq m (786 sq ft), compared with 113 sq m (1,216 sq ft) in 1H2018, probably owing to the launch of Daintree Residence. In District 19, the median floor size transacted in July was 57 sq m (614 sq ft), compared with 90 sq m (969 sq ft) in 1H2018, probably owing to the launch of the 1,427-unit Riverfront Residences on July 5. In District 13, the figure was 62 sq m (667 sq ft), from 93 sq m (1,001 sq ft) in 1H2018, owing to the launch of Park Colonial.

Nicholas Mak, executive director of ZACD Group, expects 3Q2018 new home sales to be around 2,500 units, which is higher than the 2,366 units recorded for 2Q2018 (see “Private residential property market launches and sales” table). “This is because [the figure] was bumped up when there was a rush to purchase, with three projects bringing forward their launches to July 5, in reaction to the announcement of the property cooling measures that evening,” he says.

Besides Park Colonial, Logan Property and Nanshan Group brought forward the launch of their 1,259-unit Stirling Residences, and the Oxley-led consortium also brought forward its launch of the 1,427-unit Riverfront Residences. While Park Colonial sold 311 units that night, Stirling Residences closed almost 200 units and Riverfront Residences chalked up sales of 510 units. This brought total sales in that one evening to more than 1,000 units.

“Many people brought forward their purchases,” says Mak. “There was this fear — partly fuelled by agents as well — that if they didn’t buy now, they could miss out on the opportunity to buy a choice unit.” However, the increase in sales in 3Q2018 is likely to be followed by much slower sales in 4Q2018, he adds.

Launch or hold

Some developers may hold back their launches while others are going ahead with their planned launch pipeline, depending on their outlook, notes JLL’s Ong. “Those with more favourable margins are in better shape to launch at a more competitive price level,” he adds. Oxley Holdings, for one, has said it will proceed with all its launches as planned. Oxley Holdings executive chairman and CEO Ching Chiat Kwong says: “The important thing now is location and pricing strategy. We are left with five projects [to launch] and they are all in mature residential areas.” The projects include the en bloc sites of Mayfair Gardens on Dunearn Road, Vista Park on South Buona Vista Road and a development on Tessensohn Road in the Farrer Park-Balestier neighbourhood.

Oxley Holdings intends to launch the new project at Vista Park en bloc site by end of this year (Credit: Teakhwa Real Estate/EdgeProp Singapore)

Roxy-Pacific Holdings, which reported its 1H2018 results on July 31, said while the cooling measures may slow market activity, things are not at a total standstill. “A majority of the group’s buyers are first-timers who are less affected by the cooling measures in terms of ABSD hikes, discounting the slight reduction in [mortgage] borrowing limit,” says Teo Hong Lim, Roxy-Pacific Holdings executive chairman and CEO.

Following Roxy-Pacific’s acquisition of a freehold site at 27 Moulmein Rise in May, it currently has eight development sites in its pipeline, of which five are planned to be launched for sale in FY2018. “We’ve replenished our sites relatively early [in] the cycle, before the en bloc fever, at very reasonable prices,” commented Teo in his results announcement.

As for property giant City Developments Ltd (CDL), it launched the first project in January 2018, namely the 124-unit, freehold New Futura on Leonie Hill Road. The project still managed to chalk up a handful of sales following the property cooling measures, despite the average price being above $3,500 psf. The development is 74% sold so far.

First new launch of 2018 was City Developments' luxury condo New Futura, where 74% of the 124 units have been sold to date (Credit: Samuel Isaac Chua/EdgeProp Singapore)

At 3 Orchard By-the-Park, three units have been sold at VIP previews that started at end-June. Prices are said to start from $3,490 psf. Based on the sole caveat lodged on July 17, a 1,152 sq ft, two-bedroom unit was sold for $4.25 million ($3,686 psf).

As for SDB Asia’s 64-unit One Draycott at 1 Draycott Park, two units have been sold: a 1,346 sq ft unit for $3.5 million ($2,599 psf in June and a 732 sq ft unit for $2.7 million ($3,689 psf) in July, according to caveats lodged. Two other luxury projects are scheduled for public preview in late 3Q2018 or 4Q2018: Bukit Sembawang Estates’ 250-unit 8 St Thomas Walk and CDL’s 190-unit South Beach Residences. “We have yet to see the launch of a high- end project since the property cooling measures,” says Knight Frank’s Tan. “Some high- end projects might be previewed over the next few months, and some launched after the Hungry Ghost Month.”

Earlier launches set new benchmarks

The first launch of a suburban project this year was CDL’s 861-unit The Tapestry in Tampines. A total of 478 units were sold at an average price of $1,350 psf from its launch at end-March to July 5. Since the property cooling measures, another seven units have been sold, at an average price of $1,379 psf, according to caveats lodged so far. Units sold were a mix of one- to three-bedroom units between 474 and 990 sq ft.

The Tapestry at Tampines by City Developments which was the first major launch of a suburban condo in 2018 (Credit: City Developments Ltd)

Lendlease launched the second phase of its 429-unit Park Place Residences at Paya Lebar Quarter in late March. Up to July 5, 187 units were sold, at an average price of close to $2,000 psf, or 10.4% higher than the average price of $1,800 psf achieved at the first phase, when 200 units were launched and sold in a single day in March 2017.

Currently, there are only 25 unsold units at Park Place Residences. Recent transactions are of the larger, three-bedroom premium units and hence, the lower average psf price, according to Lendlease. According to caveats lodged, a handful of these larger three-bedroom units have been sold at $1.78 million to $1.96 mil- lion, or an average price of $1,680 psf.

UOL Group’s Amber 45, which saw 81 units sold since its launch in May, has achieved an average price of $2,355 psf. Even a unit sold post-cooling measures was transacted at 2,028 psf, according to a caveat lodged on July 16.

Park Place Residences Phase 2 was launched in March and only 25 units are available today (Credit: Lendlease)

The next project to watch out for will be the launch of Qingjian Realty’s 1,206-unit Jade Scape, a redevelopment of the former Shunfu Ville that was purchased en bloc in 2016. The project is expected to be previewed at end-August, with its launch scheduled for mid-September.

More ‘fluid’ demand for RCR projects

While all market segments are affected by the property cooling measures, the segment where demand is “most fluid” is the city fringe, or Rest of Central Region (RCR), notes ZACD’s Mak.

“Not only is there ample supply in terms of new launches, but there are also buyers who could afford projects in the Core Central Region (CCR) but who are now switching to RCR instead,” he says. “And there are also those in the suburbs, or Outside Central Region (OCR), who may now be looking at RCR.”

The segment where demand is “most fluid” is the city fringe, or Rest of Central Region (Credit: Samuel Isaac Chua/EdgeProp Singapore)

Many of the projects in RCR feature a wide mix of unit types, with quite a high proportion of one- and two-bedroom units that are popular with investors, notes Mak. With the property cooling measures in place, these units may become more sought after, owing to the reduction in affordability, he adds.

This could explain why Riverfront Residences and Stirling Residences continue to see steady sales after July 5. So far, Oxley has sold a total of 650 units at Riverfront Residences. With transaction prices averaging $1,301 psf, Riverfront is the most affordably priced project launched so far this year.

At Stirling Residences, the developer has sold 180 units since July 5, at an average price of $1,719 psf. According to the developer, no discount was given.

Given that developers are pricing their pro- jects more realistically, Loh, the buyer of a unit at The Tre Ver, says, “It’s a great time for first-time homebuyers like me to be house-hunting.”

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