http://www.theedgeproperty.com.sg/co...me-prices-next

Uptick in residential sales, are home prices next?

By Feily Sofian / The Edge Property | June 24, 2016 4:32 PM MYT


Homebuyers are swinging back into action. Three projects — The Poiz Residences, Kingsford Hillview Peak and Botanique at Bartley — moved at least 182, 164 and 157 units respectively in 1H2016, or more than 30 sales a month on average this year. Other best- selling projects include Kingsford Waterbay, Sims Urban Oasis and The Glades, with more than 20 units sold a month on average this year.

Take-up at newly launched projects has also been encouraging. Up until the second week of June, at least 320 units had been sold at GEM Residences, 210 at Cairnhill Nine and 167 at Sturdee Residences.

In the secondary market, buyers picked up 703 non-landed homes in the Core Central Region (CCR) between January and the second week of June, up from 648 in 1H2015. Developer sales at completed projects, namely OUE Twin Peaks, Ardmore Three and D’Leedon, topped the sales chart with at least 95, 32 and 21 units sold respectively.

However, this is just one part of the story. Developers have also dangled steep discounts, high commissions and other creative schemes to juice sales. Notably, Wheelock Properties is offering buyers up to 30% discounts at Ardmore Three while Wing Tai Holdings is understood to have offered a very attractive commission to agents for The Crest in April and May.

Retrenchment prospects and mortgagee sales are also on the rise. There were more than 22,000 vacant housing units in 1Q2016 in the non-landed segment alone, with another 20,000 units slated to be completed between 2Q2016 and 4Q2016.

Amid the mixed signals, what is the prognosis for the property market? Here are some insights from our panel of experts.



Alan Cheong, head of research, Savills Singapore

While the overall economic situation appears dour, on the property front, developer sales figures are expected to improve this year as more projects are launched. Resale volume in 2H2016 may hit 4,100 to 4,600 units, up 24% to 39% y-o-y, while primary sales numbers stayed flat at about 3,500, even if the number of units launched is expected to be lower this year compared with 2H2015. The reason primary sales figures are likely to remain at 2H2015 levels is that take-up from new launches is likely to be augmented by increasing sales from projects that were launched in previous years but progressing towards completion soon. Prices are also expected to be competitive, with lots of creative “sales packages”, as seen at OUE Twin Peaks (deferred payment scheme) and D’Leedon (stay-then-pay programme).

Judging from the take-up rate of projects some weeks after their initial launch, sales tend to peter out to a few units per week. This could suggest that while the market still has torque, it nevertheless may not have the horsepower to cause prices to accelerate, even if some of the measures are recalibrated to a lower intensity. For one, job insecurity these days would discourage households from taking on too much risk.

Still, the surprisingly healthy sales of late may suggest that the bearish sentiment towards the residential market has been overhyped. One reason could be that Singapore’s economic progress over the years has multiplied the savings pool of multi-generational households, which, in the compact and dense landscape of our real estate topology, short of a black swan, supports and augments real estate prices even under trying economic times.

Another possible factor supporting prices is that from 1975 to 2011, using the URA Private Residential Property Price Index as the benchmark, the average period of a downturn in a property cycle has been 8.4 quarters. By 1Q2016, it would have been 11 quarters since the URA Index starting turning down in 3Q2013. This time round, the downturn appears to be overextended and the market could be pining for a recovery. Therefore, 2H2016 may see the market exhibiting marginal price upside with volumes continuing to rise steadily.

High-end prices could increase 3% in 2H2016. In the city fringe and mass market, prices for new condominiums are expected to increase 3% while resale prices could soften by 2% and 3% respectively. Rents are expected to soften across submarkets by 2% to 5%. In general, whether it is in the CCR, Rest of Central Region (RCR) or Outside Central Region (OCR), new sale prices will be firm as developer sales are new product offerings and they have a strong marketing budget that individuals in the resale market lack.



Alice Tan, head of research, Knight Frank Singapore

The encouraging sales performance of some new project launches for 2H2016 and price recovery of private homes in the CCR for 1Q2016 stirred interest among homebuyers. Notwithstanding subdued economic growth, the possibility of a sustained low interest rate and fairly low unemployment rate in Singapore provides some support for private home demand in the near term. Property investors are also relooking at Singapore as a value proposition and a safe haven, coupled with tax and purchase regulatory changes and volatile property price performances in other global cities such as Hong Kong, London and Sydney.

Developers and homeowners alike have been adjusting their strategies to woo buyers in the face of the property cooling measures. As some developers explore ways to avoid the Qualifying Certificate (QC) extension charges or additional buyer’s stamp duty (ABSD), more developers and owners are likely to maintain or even increase prices especially for well- located and high-quality projects that are in limited supply.

The “green shoots” of recovery we had earlier predicted for 2H2016 could possibly bear fruit towards the last quarter this year, with price recovery or transaction volume extending to the city-fringe segment as pent-up demand from local and foreign home buyers materialise, assuming overall market conditions stay stable.

Private home prices in the CCR could move in the range of -0.2% to +0.5% y-o-y by 4Q2016, and for RCR homes, between -1.5% and +0.5%. Mass-market homes in the OCR are likely to see the highest risk, with -4% to -6% price adjustment owing to high upcoming supply and the weakest leasing demand.





Desmond Sim, head of research, Singapore and South East Asia, CBRE

Overall, the residential market will be muted for the next six months. The slowing Singapore economy has raised some concerns for job security, which have overtaken the earlier fear of rising interest rates. With more certainty that the government will not lift cooling measures in the near future, buyers sitting on the fence are likely to be nudged into making a purchase as more developers make price adjustments or offer incentives to boost sales.

There will be some activity in the prime segment. The softening prices of prime homes present a window of opportunity for investors looking for good buys in this segment. There are limited numbers of new project launches in 2H2016, which means unsold stock will steadily be reduced as buyers purchase units from existing projects. Expect minimal price corrections for the rest of the year and residential prices are likely to moderate by 3.0% to 5.0%, attracting more investors and end-users to enter the market. CBRE Research expects 6,000 to 7,000 new homes to be sold in 2016, slightly lower than in the last two years.

The leasing market will face headwinds this year. The flight to value will continue as tenants seek to source for better deals in terms of rental savings, newer developments, more recreational facilities and proximity to MRT stations. With a record number of new completions (23,000 units in 2016 expected) as well as the cutback in foreign hire owing to the slowing economy and employment restrictions, the decline in home rents is expected to escalate. Overall, home rents are expected to fall 5.0% to 8.0% through 2016.



Eugene Lim, key executive officer, ERA Realty Network

Economic growth in 2016 is expected to be moderate, with the Ministry Of Trade and Industry estimating GDP growth to be in the range of 1% to 3%. Meanwhile, the US is poised to continue on its path to normalising interest rates. Uncertainties are also present globally, namely the Brexit vote on June 23 and China’s slowing growth.

Against this backdrop, Singapore’s residential market is not expected to recover by end- 2016. In general, we are expecting it to perform largely similar to 2015. Prices will likely remain soft, with a forecast 1.5% to 2% decrease in prices in 2H2016, comparable to 2H2015’s 1.8%.

Recently, we have been seeing heightened activity in the prime segment, led by projects such as Cairnhill Nine and Ardmore Three. Buyers will bite if they perceive the properties to be value-for-money buys. In 2H2015, prices and rents of luxury units decreased by 1.5% and 0.7% respectively. We will probably see a similar situation in 2H2016 as property prices and rents are forecast to fall 1% to 2%.

The city fringe remains a popular area for homebuyers owing to their value-for- money units. GEM Residences saw quite a good take-up in its launch weekend, with about 50% of its total units sold. We expect further modera tion of prices and rents in 2H2016 of around 2%. This is comparable to 2H2015’s 2% and 2.4% decrease in prices and rents respectively.

Activity is set to pick up in the mass market segment, with the launch of several private condominium projects, including those at Tampines Avenue 10 and West Coast Vale. For 1H2016, we witnessed brisk sales at The Wisteria, which indicates that mass market projects are still very much on the radar of buyers. However, on the back of large supply, in 2H2016, we expect prices to moderate by 1% to 2% while rents are projected to fall by 2% to 3%.

Investment demand for local projects is still pretty strong, as seen from the popularity of one-bedroom units at recent launches. The resale market is also proving to be a draw amongst buyers. The proportion of resale buyers is typi cally hovering at about 50% in recent quarters, up from the 30% range a few years back.



Ku Swee Yong, CEO, Century 21 Singapore

Property rentals and prices will maintain their downward trajectory for the rest of 2016. On the supply side, we may expect about 15,000 units of private residences and executive condominiums (ECs) to be completed, adding to the more than 28,000 empty units island-wide.

A significant share of the new completions will be mass-market condos, particularly in the north-east. Investors may want to note that the proportion of shoebox units amongst these new completions will be high, with some projects having 30% of the apartments in studio or one-bedroom configurations.

The writing on the wall is clear: while supply is high, demand is weak. Manufacturing is in a prolonged slumber. Singapore’s total trade contracted y-o-y for 22 consecutive months between July 2014 and May 2016. Retrenchment is taking place in banks and stock broking firms. The retail trade and F&B services are shrinking despite an increase in foreign visitor arrivals of about 14% y-o-y. Jobs creation and the inflow of resident population have slowed.

The non-landed private residential rental index should drop by 4% to 5% and the price index will decline 3% to 4% in 2H2016.



Lee Nai Jia, regional head of research, South East Asia, DTZ

The overall residential market has reached a new equilibrium as prices have more or less stabilised across all segments. This is especially so with unsold inventory dwindling in the last quarter. We anticipate prices to ease further owing to pressures from demand. Uncertainty emanating from external events such as Brexit, the US Federal Reserve’s review of interest rate, China’s slowing economy and oil price movements is expected to spill over to the residential market, and the price gap may remain wide, especially for properties at choice locations.

High-end prices are expected to ease 2% to 3% by end-2H2016, as demand for such homes continues to be suppressed by the ABSD. Most buyers are on the sidelines, waiting for that cooling measure to be lifted. Notwithstanding, sellers have considerable holding power and are unlikely to budge from existing prices.

Homes at the city fringe will continue to attract demand. The primary market is likely to support prices of small units, and we anticipate prices to probably remain the same. Alternatively, in the resale market, homes around the $1.5 million range are likely to see prices remaining the same or even appreciate slightly, as more upgraders and investors are targeting this segment of the market. This is especially so for homes near MRT stations and good schools.

Overall, we anticipate mass-market unit prices to ease 3% to 4% by end-2H2016 as the bulk of potential launches are in this segment. However, we expect the prices for small units to be supported by demand in the primary market. For larger units, the downward pressure on price is higher as there is still a sizeable inventory of three- and four-bedroom units in the mass market.

Cooling measures are expected to stay till end-2016 as the existing market is stable. But there is now more interest in the Singapore market as purchasers are returning to see whether there are value buys. We anticipate auctions to remain vibrant, especially with more choice properties in the listings.



Ong Teck Hui, national director, research and consultancy, JLL

For 2H2016, the key question is whether the current improved sentiments that have translated into higher transaction volumes in recent months can prevail.

If current trends continue till end-2016, the outlook is an increase in transaction volume over 2015. Based on caveats lodged, sales of private homes in March and April almost doubled those in January and February, although the first two months of the year were impacted by the volatile stock market and the lull over the Lunar New Year. Again, on a positive note, there were 5,988 transactions of private homes as at June 10, compared with 5,005 for the same period in 2015.

A sustained improvement in sales volume would lead to a further moderation in price decline, possibly paving the way for an eventual end to the market down cycle. The decline in the URA residential property price index has been moderating from -4% in 2014 to -3.7% in 2015; it eased a gentle -0.7% in 1Q2016. The moderation in price decline is most obvious in the CCR, where the index fell -4.1% in 2014 and -2.5% in 2015, followed by an increase of 0.3% in 1Q2016 (owing to the uplift in prices by Cairnhill Nine).

In the RCR, the index dropped -5.3% in 2014, eased -4.3% in 2015 and remained flat in 1Q2016. The OCR, on the other hand, is seeing an opposite trend, with prices declining -1.3% in 1Q2016 and -3.7% in 2015, faster than the -2.2% in 2014. We may expect the URA residential property price index to moderate further in its decline this year, by 2% to 3%. Sales of new private homes, which recorded 7,440 units in 2015, may see an improvement in transactions of between 7,500 and 8,500 units.

However, there is a need to be cautiously optimistic about improving market conditions as there are still downside risks related to the economic slowdown that could alter the healthier trends that we are currently seeing. A sharper-than-expected economic decline in the subsequent quarters, accompanied by market shocks could affect sentiments adversely. If that happens, it would slow transaction volumes and protract the market down cycle.

The residential leasing market, which has been in decline since 2013, is likely to see a tougher year in 2016, with a record 23,400 new private homes to be completed, compared with almost 19,000 in 2015 and 20,000 in 2014. The strong addition to completed stock in the last few years has raised vacancy rates to 7.5% as at 1Q2016, significantly higher than the low of 5.2% in 1Q2013. As leasing demand remains weak owing to the econo mic slowdown and policy tightening in the hiring of foreigners, rents will continue to soften this year by about 5% to 10%.



Is the market at a turning point yet?

Historically, the residential property price index tends to correlate with GDP growth and the stock market index, more than with other variables such as vacancy and interest rates. The anaemic GDP growth projected for 2016 means soft property prices are here to stay at least until the year-end. However, there should not be a broad-brush price decline unless new recessionary threats emerge. City fringe projects priced below $1,500 psf have been well received and are unlikely to see any significant price cuts.

For new projects, buyers can expect discounts for those nearing their ABSD or extension charges deadlines. In the city fringe, there could be attractive deals in the Bukit Merah and Queenstown areas on the back of a large inventory of unsold units. In addition, there are two potential launches in the area later this year or in early 2017. The land price for one of the sites, the Alexandra View site, was 12% cheaper than that for Alex Residences next door.

On the other hand, the mass market could see the overall prices easing further. The slew of new launches on the cards, including Lake Grande, Parc Riviera, The Alps Residences, Lorong Lew Lian and Clementi Avenue 1 sites, on top of two new ECs, Treasure Crest and Northwave, would create more urgency to move the unsold units in existing projects. The land price for Parc Riviera was significantly lower than that for nearby Waterfront @ Faber although the latter has been fully sold. Prices for several sites in the mass market have also been a tad lower than those fetched by earlier sites in their vicinity.

Resale prices, meanwhile, are in the hands of individual sellers. At actively transacted resale projects island-wide, sellers’ resistance against further price decline appears to have kicked in, although there could be deals at rock-bottom prices now and then. Large units could drive some price decline as they tend to surface in auctions or flagged as unprofitable deals.


This article appeared in the The Edge Property pullout of Issue 734 (June 27) of The Edge Singapore.