Red light, green light

May 26, 2023

Michelle Low

IN THE midst of signs pointing to a slowing housing market, one indicator tracking trading momentum is lighting up. Sub-sales are on the rise.

A property transaction is recorded as a sub-sale when a buyer resells a property bought directly from the developer, within the three to four years before the project’s completion.

Sub-sales are often taken as a proxy for speculative buying behaviour, and have recently surfaced from a trough in 2020 to reach their highest level in almost 10 years. The increased activity is nowhere near the volume seen at the market’s height in 2007, but has been creeping up over the past year.

The shift comes after sub-sales nosedived from 2009 onwards, after successive churns of government measures creamed the froth off the market with higher and higher stamp duties.

Have speculators come out of hibernation ahead of this year’s busy season for new launches? We take a look at the numbers in deals and gains made over the last year.

In the HDB resale market, prices flattened in February after 31 months of steadily climbing as transaction volume slid to a low. The number of million-dollar flat deals also fell, from 40 in January to 24 in February. There is some seasonality to the numbers, as February is typically a low-sales period. But analysts pointed to potential buyers who, having sold their private properties, had to wait out the 15-month period imposed in new rules in effect since end-September 2022.

The kink in the public housing sector tracks a curve in private property, where condo resale prices fell in February for the first time in over two years. March resale data will shed more light on whether the market is moving. This week, we’ll also see the latest data on developers’ sales of new units.

Easing prices spell relief for those in the market to buy a resale flat. Any contraction in the HDB market will squash the buying power of upgraders hoping to land a private property.

Profitability weighs on many decisions, including, one would hazard, the decision to buy an HDB flat in a mature estate. These coveted locations are well established, well connected, and well, profitable.

New build-to-order (BTO) flats in mature estates draw strong demand despite commanding higher prices than others. The potential capital gains are also larger than for HDB properties in non-mature locations. In The Level Ground, Leslie Yee considers what can be done to shorten queues for BTOs in mature estates in terms of pricing, removing the profit motive from the equation, and freeing up land to build more new flats.

In the residential leasing market, the luxury segment continued to chalk up outlier deals with rentals going into six figures. At The Marq on Paterson Hill, rental hit the S$100,000 mark in October 2022 - up from S$80,000 in July and S$40,000 in April. Demand at these levels has been propped up by high-net-worth individuals en route to Singapore citizenship, insiders say, although landlords are starting to face resistance as the wider market softens.

Those looking to rent are also grappling with an emerging trend of leasing agents collecting a commission from tenants to help them secure the lease. This involves mainly corporate clients and foreigners new to Singapore coming into a tight market where rentals have risen close to 30 per cent over the past year. The practice of the landlord’s and tenant’s agents sharing commissions has also changed.

In the industrial sector, major landlord JTC Corp is taking a closer look at the self-storage business, where operators typically lease or acquire warehousing space from JTC to provide storage units for consumers and businesses.

The JTC review has stalled plans of self-storage operators on an expansion streak as demand for their services grows. Changes in rules and regulations for industrial space usage may be in store.

A new office development in Pasir Panjang - Labrador Tower - is said to have signed up Prudential Singapore as a tenant for 150,000 sq ft of space. The insurer’s agency offices will move from their premises on Scotts Road, where they took up space on a “transitional office” site in part of a government pilot to sell land for commercial use on short 15-year leases.

Two large state land parcels have been put up for sale, which will yield 1,540 residential units. The tenders, for a 99-year-leasehold condo plot at Jalan Tembusu and an executive condo site at Tampines, will no doubt be closely watched. The Jalan Tembusu parcel sits across the road from City Developments Ltd’s upcoming Tembusu Grand, which is expected to start previews next week.