reporter2
01-06-22, 10:53
Prices of mass market property launches could hit record high as developers face cost contraints
Jun 01, 2022
ELEVATED costs and limited inventory could result in new benchmark prices in the private residential market this year, with the average price of some suburban project launches seen trending close to, or crossing, the S$2,000 per square foot (psf) mark.
Land, construction and materials costs have risen while the number of unsold units have dwindled, especially in the Outside Central Region (OCR) or suburbs. Rising interest rates will also translate to higher financing costs for developers.
Wong Siew Ying, head of research and content at PropNex Realty, said: “We do anticipate suburban condo launches to see new benchmark prices, given the elevated land cost which is a big component of selling price.”
PropNex Research expects the average price of OCR launches to range from S$1,900 psf to S$2,300 psf. Core Central Region (CCR) launches could see prices averaging S$2,800 to S$2,900 psf and above, while average prices for Rest of Central Region (RCR) launches could range from S$2,400 to S$2,700 psf.
Contracts director of Unison Construction, Goh Boo Kui, told The Business Times that construction costs have generally spiked 20-30 per cent from pre-pandemic times, owing to labour and material costs. Transport costs have also increased.
Kenneth Loo, executive director of Straits Construction, puts construction costs for a suburban condo with 400-500 units at above S$400 psf of gross floor area (GFA) presently, depending on the finishings. This is up sharply from S$250-300 psf prior to the pandemic.
Demand, meanwhile, is being supported by buyers who are flush with liquidity, said Lee Nai Jia, deputy director at the National University of Singapore’s Institute of Real Estate and Urban Studies (IREUS).
Dr Lee added, however, that projects will need unique attributes to achieve new benchmarks, such as being part of an integrated development, being close to an MRT station or being situated in a mature estate with a lack of new launches. They could also be in areas where the HDB prices surpass those in new estates.
Going by PropNex estimates, the 99-year-leasehold AMO Residence at Ang Mo Kio Ave 1, which is being jointly developed by UOL Group : U14 -0.4%, Singapore Land Group : U06 0% and Kheng Leong, could register an average selling price of S$2,000 to S$2,100 psf.
GuocoLand : F17 -0.62%’s 99-year-leasehold Lentor Modern, a private residential project with commercial space on the ground floor, could see an average selling price of S$2,100 to S$2,200 psf. Both projects are expected to be launched in the third quarter of 2022.
The 268-unit Sceneca Residence, part of a mixed-used development along Tanah Merah Kechil Link, could clock S$1,900 to S$2,000 psf when it launches in the second half of 2022. The project is being developed by MCC Land (Singapore), The Place Holdings : E27 0% and Ekovest Development.
Analysts are mixed on whether such prices for suburban projects will face resistance from buyers. ERA’s head of research & consultancy, Nicholas Mak, said that the increase in property prices is due to cost-push inflation, as opposed to being demand-led. “Some buyers may be priced out of the market,” he noted, adding that home-buyers could always turn to the HDB market instead.
Dr Lee of IREUS, too, reckons that some buyers may bow out — especially those who are equity-constrained or risk-averse — but said that those who can afford to take the plunge may do so for fear of being priced out down the road: “These buyers are taking centre stage, and we should see more of such behaviour.”
OrangeTee & Tie’s chief executive Steven Tan suggested that some buyers may turn to real estate assets as an inflation hedge, while others may want to lock in interest rates before they rise further.
Tan also noted that inventory in the OCR is very low, which means buyers who are keen on new launches have limited choice. “If affordability is a concern, they still have to go for OCR. Many people may not be eligible for executive condominiums.”
According to ERA’s Mak, the number of launched and unsold private housing units for sale in the OCR stood at just 726 units in April. This was lower than the launched and unsold stock of 1,541 units in the CCR and 821 units in the RCR.
And with prices on an upward trend in the OCR, this could prompt pricing in other regions to follow suit. “Pricing for the RCR and CCR would creep up,” Dr Lee of IREUS said.
OrangeTee & Tie’s Tan also expects a chain effect, observing that the price gap between the 3 regions has been narrowing.
An OrangeTee report noted that upcoming launches in the RCR could start from S$2,200 psf. The report highlighted that many new city fringe condos at Queenstown, Potong Pasir and Eunos were launched at an average price of around S$1,800 psf, prior to the pandemic.
PropNex’s Wong, however, expects CCR prices to stay “relatively stable”, given substantial unsold inventory in the CCR vis-a-vis the RCR and OCR.
She added: “The recent healthy sales at Piccadilly Grand and Liv@MB launches — both in the RCR — at an average price of S$2,150 psf and S$2,387 psf, respectively, indicate that there are buyers still willing to pick up units at over S$2,000 psf on average.” She expects demand to come from genuine home buyers, although she said that many buyers will “right-size their purchase” in line with their budget, amid rising interest rates.
Following the latest cooling measures, Singaporeans and permanent residents buying second or subsequent properties are subject to a higher Additional Buyer’s Stamp Duty (ABSD), while foreign buyers now have to pay a 30 per cent ABSD. The CCR is generally popular with foreign buyers as well as investors.
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https://i.imgur.com/NqVFwXb.png
https://www.businesstimes.com.sg/real-estate/prices-of-mass-market-property-launches-could-hit-record-high-as-developers-face-cost
Jun 01, 2022
ELEVATED costs and limited inventory could result in new benchmark prices in the private residential market this year, with the average price of some suburban project launches seen trending close to, or crossing, the S$2,000 per square foot (psf) mark.
Land, construction and materials costs have risen while the number of unsold units have dwindled, especially in the Outside Central Region (OCR) or suburbs. Rising interest rates will also translate to higher financing costs for developers.
Wong Siew Ying, head of research and content at PropNex Realty, said: “We do anticipate suburban condo launches to see new benchmark prices, given the elevated land cost which is a big component of selling price.”
PropNex Research expects the average price of OCR launches to range from S$1,900 psf to S$2,300 psf. Core Central Region (CCR) launches could see prices averaging S$2,800 to S$2,900 psf and above, while average prices for Rest of Central Region (RCR) launches could range from S$2,400 to S$2,700 psf.
Contracts director of Unison Construction, Goh Boo Kui, told The Business Times that construction costs have generally spiked 20-30 per cent from pre-pandemic times, owing to labour and material costs. Transport costs have also increased.
Kenneth Loo, executive director of Straits Construction, puts construction costs for a suburban condo with 400-500 units at above S$400 psf of gross floor area (GFA) presently, depending on the finishings. This is up sharply from S$250-300 psf prior to the pandemic.
Demand, meanwhile, is being supported by buyers who are flush with liquidity, said Lee Nai Jia, deputy director at the National University of Singapore’s Institute of Real Estate and Urban Studies (IREUS).
Dr Lee added, however, that projects will need unique attributes to achieve new benchmarks, such as being part of an integrated development, being close to an MRT station or being situated in a mature estate with a lack of new launches. They could also be in areas where the HDB prices surpass those in new estates.
Going by PropNex estimates, the 99-year-leasehold AMO Residence at Ang Mo Kio Ave 1, which is being jointly developed by UOL Group : U14 -0.4%, Singapore Land Group : U06 0% and Kheng Leong, could register an average selling price of S$2,000 to S$2,100 psf.
GuocoLand : F17 -0.62%’s 99-year-leasehold Lentor Modern, a private residential project with commercial space on the ground floor, could see an average selling price of S$2,100 to S$2,200 psf. Both projects are expected to be launched in the third quarter of 2022.
The 268-unit Sceneca Residence, part of a mixed-used development along Tanah Merah Kechil Link, could clock S$1,900 to S$2,000 psf when it launches in the second half of 2022. The project is being developed by MCC Land (Singapore), The Place Holdings : E27 0% and Ekovest Development.
Analysts are mixed on whether such prices for suburban projects will face resistance from buyers. ERA’s head of research & consultancy, Nicholas Mak, said that the increase in property prices is due to cost-push inflation, as opposed to being demand-led. “Some buyers may be priced out of the market,” he noted, adding that home-buyers could always turn to the HDB market instead.
Dr Lee of IREUS, too, reckons that some buyers may bow out — especially those who are equity-constrained or risk-averse — but said that those who can afford to take the plunge may do so for fear of being priced out down the road: “These buyers are taking centre stage, and we should see more of such behaviour.”
OrangeTee & Tie’s chief executive Steven Tan suggested that some buyers may turn to real estate assets as an inflation hedge, while others may want to lock in interest rates before they rise further.
Tan also noted that inventory in the OCR is very low, which means buyers who are keen on new launches have limited choice. “If affordability is a concern, they still have to go for OCR. Many people may not be eligible for executive condominiums.”
According to ERA’s Mak, the number of launched and unsold private housing units for sale in the OCR stood at just 726 units in April. This was lower than the launched and unsold stock of 1,541 units in the CCR and 821 units in the RCR.
And with prices on an upward trend in the OCR, this could prompt pricing in other regions to follow suit. “Pricing for the RCR and CCR would creep up,” Dr Lee of IREUS said.
OrangeTee & Tie’s Tan also expects a chain effect, observing that the price gap between the 3 regions has been narrowing.
An OrangeTee report noted that upcoming launches in the RCR could start from S$2,200 psf. The report highlighted that many new city fringe condos at Queenstown, Potong Pasir and Eunos were launched at an average price of around S$1,800 psf, prior to the pandemic.
PropNex’s Wong, however, expects CCR prices to stay “relatively stable”, given substantial unsold inventory in the CCR vis-a-vis the RCR and OCR.
She added: “The recent healthy sales at Piccadilly Grand and Liv@MB launches — both in the RCR — at an average price of S$2,150 psf and S$2,387 psf, respectively, indicate that there are buyers still willing to pick up units at over S$2,000 psf on average.” She expects demand to come from genuine home buyers, although she said that many buyers will “right-size their purchase” in line with their budget, amid rising interest rates.
Following the latest cooling measures, Singaporeans and permanent residents buying second or subsequent properties are subject to a higher Additional Buyer’s Stamp Duty (ABSD), while foreign buyers now have to pay a 30 per cent ABSD. The CCR is generally popular with foreign buyers as well as investors.
https://i.imgur.com/VaUeelr.png
https://i.imgur.com/NqVFwXb.png
https://www.businesstimes.com.sg/real-estate/prices-of-mass-market-property-launches-could-hit-record-high-as-developers-face-cost