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Outlook for Singapore condo market
Analysis on where residential prices and sales volumes are headed to help you make better informed property decisions.
by Adam Rahman
Without a doubt, the cooling measuresimplemented during 2012 and 2013have applied the brakes to what manyhave begun to view as a dangerouslyoverheated property sector. Over thepast seven quarters, we have seen thereverse happening, with sluggish salesvolumes of private condominiumsappearing to be the norm, suggestingthat successive rounds of coolingmeasures have been very effective. Andwithout further indication from thegovernment if they will be maintained,market sentiment is that this trend couldcontinue for the time being.
Impact on price
It has been widely recognised that ofthe different regulations that wereimplemented, the Total Debt ServicingRatio (TDSR) and Additional BuyersStamp Duty (ABSD) have been the twomost effective measures to cool theproperty market.
In fact, since the implementation ofthe TDSR in June 2013, we have hadseven consecutive quarters of price fallsin the private condo market since itspeak in Q3 2013. TDSR limits borrowingto 60 percent of your monthly income,including all forms of debt, such ashousing, car, and personal loans. This isto prevent over-stretching ones finances.
ABSD, on the other hand, is thevehicle to curb speculation by Singaporeanswho can afford more than one home;as well as the influx of foreigners frombuying. Here are the rates for ABSD, ontop of the basic stamp duty of 3.0 percent:
Singaporeans: +0% / 7% / 10%(1st / 2nd / 3rd and more)
PRs: +5% / 10% (1st / more than one)
Foreigners: +15% for any number ofresidential property
Over the last seven quarters since thepeak in Q3 2013, the overall privateresidential property index has droppedby 7.2 percent. Across quarters, the fallhas been rather uniform, averaging 0.9percent per quarter. The first twoquarters in 2015 were not different, at-1.0 percent in Q1 and 0.9 percent inQ2 (see chart 1).
According to data from the UrbanRedevelopment Authority (URA), variousparts of Singapore were affected toadifferent extent, since Q3 2013.
Quick facts:
Core Central Region (CCR):
The Core Central Region (CCR)consists of districts 1, 2, 9, 10 and 11,stretching from Singapores CentralBusiness District to Orchard Road,Cairnhill, Tanglin, River Valley, Newtonand Bukit Timah. Due to its primelocation and convenience, the residentialdevelopments in the CCR are the highestpriced and most sought-after. It typicallyconsists of luxurious homes and isconsidered an enclave for the wealthy.
For the past half a year, the price indexof non-landed private properties in theCCR dropped the least among the threeregions, recording a decline of 0.9percent. This followed a rather turbulentfive quarters previously for the region, witha -6.2 percent drop in the price index. Itstarted with a big drop of 2.1 percent inQ4 2013, followed by an average of 1.0percent per quarter in 2014, and thensoftened to 0.4 percent and 0.5 percent inQ1 and Q2 this year respectively.
This is in line with general markettrends when a market slowdownhappens, the CCR will be the first to gethit the worst. Conversely, when themarket picks up, it is also this region thatwill move first with the strongest growth.
The presence of some new launchescould help to cushion the marketslowdown. Marina One Residences,launched in Q3 2014, has sold some 84percent of its launched units so far. Theprice drop in the CCR has now trickled tobelow 0.5 percent per quarter, possiblyshowing early signs of price stabilisation.
Rest of Central Region (RCR):
The RCR, traditionally known as themid-tier market, continues to be apopular area that home buyers oftenhave their eyes on by virtue of its relativeproximity to the CBD.
Popular areas include: Bishan, BukitMerah, Geylang, Kallang, Marine Parade,Queenstown and Toa Payoh.
The region is seeing a number of newdevelopments that are drawing buyers insearch of a greater selection of high qualitycondo options in smaller sizes, and atlower price points than those available inthe CCR, yet still within easy reach of thecity centre.
This offers savvy investors the opportunityto enter into a growing property marketin a popular area, without the price tagsassociated with the higher end of thecondo market in the CCR.
Amongst the three regions, the RCRwas the only one that didnt show adecline in Q4 2013. It managed to see a+0.4 percent increase over Q3, possiblydue to the shift of original buyers ofproperties in the CCR to consider theRCR.
Property prices took a bad turnthereafter moving into 2014, RCR wasthe worst-hit region, with a -5.3 percentprice drop for the full year. The declinecontinued into Q1 2015 at -1.7 percent,which then slowed down to -0.5 percentin Q2.
Outside Central Region (OCR):
The OCR is widely recognised as thesuburbs of Singapore, and includes thedensely populated neighbourhoods ofPunggol, Woodlands and Jurong, wherea wide variety of mass market condominiumsare located together with, in recentyears, an increasing number of executive condominiums (ECs).
Although traditionally seen as arefuge for those who cannot afford theprices associated with condos in theCCR or RCR, this view has begun tochange as new projects appealing tomore savvy and upwardly mobileinvestors are appearing across the OCRskyline.
Today, the lure of private developmentsin the OCR lies in the perfectcombination of price, location, size andsurrounding amenities.
With the private property price indexdropping 1.0 percent in Q4 2013compared to the quarter before, its pricemovement in 2014 was very subdued, atonly -2.2 percent. This was mainly due tomany new launches in the OCR, whoseprice points were very attractive to HDBflat upgraders. However, good thingsdont last going into just the first half of2015, prices have already dropped by-2.3 percent.
We see this as a natural progression.With prices in the RCR dropping by -7.1percent since the peak of Q3 2013 and-5.5 percent in the OCR, their prices areconverging.
Price trends:
The top left chart says it all propertiesin the OCR are overpriced. Takingthe base point (100) at Q1 2009, pricesin the CCR have grown +30 percent, +42percent in the RCR, and +60 percent inthe OCR. Coupled with the correlationbetween demand and supply, and withprice as the third factor, the land scarcityin the CCR and RCR should cause pricesto increase, and the prices in the OCR todecrease due to land abundance.
This could be due to successfulplanning on the governments part todecentralise the financial and servicesbusiness from the CBD towards thesuburbs, thereby increasing the popularityand demand of housing near to theseregional centres. Some examples of suchbusiness parks and business clusters areWoodlands Regional Centre and JurongLake District. With smaller businesszones identified outside the CCR, in timeto come, it may be irrelevant to compareprices across the three regions, butinstead, the distance from each businessor satellite town.
That said, there is still room for furthermoderation of property prices in the OCR.
Volume
Based on initial flash numberscollated, 3,748 units of non-landedprivate properties were sold in the firsthalf of this year - a 29 percent decrease incomparison with half-yearly results of H22014. It is worse when we compare ityear-on-year (H1 2014), at a 41 percentdecrease.
Of all the quarters since Q3 2013, wesaw more new launches sold than resale,except for Q1 2015.
Transaction volumes are greatlyaffected by the number of new launches and usually those that are priced for themass market. In the chart below, we seethat there is a direct correlation betweennumber of new units launched, and thenumber of new launches transacted.
In 2015, about 15,000 units areestimated to be launched by the end ofthe year. In the first half of 2015, only1,813 units for sale were recorded.
We expect an upswing in take-uprates, with more mass market-pricedprojects set to be launched in the secondhalf of the year. In the first half, four newprojects reported relatively good sales,namely:
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 | This article was first published in the print version The PropertyGuru News & Views. Download PDF of full print issues or read more stories now! | ||
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