New Reporter
18-12-23, 12:03
Higher supply in softening market to keep private home prices in check in 2024
Cooling measures and peaking prices keep buyers cautious; sentiment may improve in second half with interest rate cuts
Dec 17, 2023
A SLEW of new launches to come into a softening market will keep Singapore’s private home prices in check, although talk of interest rate cuts has sparked some optimism for the second half of the year.
And where residential prices have risen the fastest in the last few years, in suburban Outside Central Region (OCR) locations, househunters will be watching if prices might ease.
“The current price levels (in the OCR) are nearing the affordability limit for most property seekers,” said Lee Nai Jia, head of real estate intelligence, data and software solutions at PropertyGuru.
“Although buyers have relied on external financing, such as support from their parents, in the past few years there has been a noticeable easing in demand, as evidenced by the slowing number of transactions.”
Overall, private home prices have risen 3.9 per cent in the first three quarters of the year, and are expected to close out 2023 with growth of between 4 and 5 per cent. Forecasts for 2024 are pitched around 3 per cent. Prices rose 8.6 per cent in 2022 and 10.6 per cent in 2021.
Homebuyers contended with tighter lending limits and higher interest rates this year, along with hikes in stamp duties and property taxes.
Buyers will “continue to be sensitive towards pricing, particularly with tighter credit control and higher tax burdens”, said Chia Siew Chuin, head of residential research in Singapore at JLL Research & Consultancy.
CBRE head of research for Singapore and South-east Asia Tricia Song said: “The current tentative buying sentiment could stretch into H1 2024 amid still-high interest rates and uncertain economic conditions, before recovering more significantly in H2 2024 when interest rates ease and the economy recovers.”
She expects new home sales to tally in the range of 7,000 to 8,000 in 2024. This would be higher than the 6,500 to 6,700 units she estimates for 2023, but well below the five-year average of 9,763 units. Some 7,100 new units were sold in 2022.
New supply is tipped to expand to between 9,000 and 11,000 units next year.
Based on Huttons Asia’s estimate, the supply of new condos could pick up to around 11,600 units in 38 launches next year. Even if developers were to push back launches, there would still be at least 20 launches yielding up to 8,800 units, said Christine Sun, OrangeTee & Tie’s senior vice-president of research and analytics.
This includes six to nine large projects with more than 500 units each, such as Sim Lian Group’s Jalan Tembusu development, which will put 840 units on the market, IOI Properties’ 748-unit Marina View Residences, and the 512-unit Lumina Grand executive condo in Bukit Batok by City Developments Ltd (CDL).
Developers launched 6,491 units of private non-landed homes in the first nine months of 2023. Analysts put the full-year figure at about 7,500.
https://i.imgur.com/xOwnZtk.png
Lee Sze Teck, Huttons senior director of data analytics, said there may be up to 2,968 units launched in the prime Core Central Region (CCR) next year. This would be the largest supply since 2021, and includes projects such as CDL’s 246-unit Newport Residences, the 215-unit Skywaters Residences by Perennial Holdings, and the former Peace Centre with 373 units, developed by CEL Development, SingHaiyi Group and KSH Holdings.
“The CCR segment, in particular the leasehold units in the Central Business District, may see prices ease further as more supply is coming through,” said CBRE’s Song. “This is also the segment that historically attracted more investors and foreign buyers, whose activity may continue to be constrained by the cooling measures such as high Additional Buyer’s Stamp Duty.”
JLL’s Chia observed that prices in the CCR market have eased by 2 per cent in the first three quarters of 2023, but could hold steady in Q4, supported by prices at Watten House. In 2024, “demand for homes in the CCR is likely to remain soft, and CCR home prices could slip further on the lack of market demand catalysts in the market segment”, she said.
Others believe that prices in the OCR could moderate with the new projects to come to market and prices already at new highs.
Huttons sees up to 5,583 units being launched in the suburbs, the highest for the region in 11 years. This includes a 1,190-unit integrated mixed-use project along Tampines Avenue 11 by UOL Group and CapitaLand, as well as three more projects in the Lentor area.
Government data showed that 5,201 private homes were transacted in Q3, compared with 5,388 units in the previous quarter and 6,148 units in Q3 2022. This figure comprises new sales, resales and sub-sales, and excludes executive condos.
Sales have slowed, but the year’s larger new launches of projects with at least 100 units were, on average, 51 per cent sold, according to a Cushman & Wakefield report.
“While this is slower than 2022 new launch average take-up of 73 per cent, it is higher than 2019’s performance of about 23 per cent sold,” said the firm.
Two Q4 launches – J’Den in Jurong East and Watten House in Bukit Timah – sold surprisingly well, despite their high price points. CapitaLand’s J’den sold 88 per cent of its 368 units at launch at an average of S$2,451 per square foot (psf), while UOL and Singapore Land Group’s Watten House sold 57 per cent, or 102 out of 180 units, at an average price of S$3,230 psf.
Developers are likely to hold new launch prices steady with land and construction costs still high, and levels of unsold inventory still low, said JLL’s Chia. “The market has consistently demonstrated that homebuyers are receptive and drawn to selective projects that are appealing and compelling, even if they come with higher price tags.”
PropNex chief executive officer Ismail Gafoor predicts that OCR prices will remain “relatively stable” to ensure they are within reach of owner-occupiers and public housing upgraders. He sees prices hovering between S$2,100 and S$2,300 psf, while “extremely attractive projects” may command prices of around S$2,400 psf on average.
At PropertyGuru, Lee noted that the number of enquiries received on the property listing platform dipped in the third quarter of this year. Yet, asking prices remained firm, mainly because replacement costs for sellers are still elevated with interest rates yet to come down.
Land costs also remained high in 2023, said George Tan, Savills Singapore’s managing director of Livethere Residential, the consultancy’s digital residential marketing arm. A state tender for a plot in Toa Payoh, for instance, drew bullish bids, topped by an offer of S$968 million or S$1,360.09 psf per plot ratio.
But winning bids placed by developers for parcels in locations where other sites have been sold, such as in Lentor, Pine Grove and Jalan Tembusu, were generally lower than previous tenders, said Cushman & Wakefield.
Lee from PropertyGuru expects a slowdown in demand and a downward shift in buyers’ preferences towards lower-priced options.
At the same time, demand for high-end homes, such as landed properties and CCR projects, may slowly grow as the price gap between luxury and mass-market homes narrows, he added.
“The gradual build-up of unsold stock will likely also help to keep developers’ pricing in check,” said Gafoor. As at the end of Q3, there were around 16,747 unsold and uncompleted private residential units, with the CCR and OCR accounting for the bulk of these units.
Nevertheless, pockets of resilient demand could result in surprises on the upside next year.
“The reason why we believe that prices, despite strong economic headwinds, can hold in general, or even show some upside in the RCR and OCR is that next year’s new launches are not excessive,” said Alan Cheong, research and consultancy executive director at Savills Singapore.
Interest rates easing “will bring some relief to property owners with mortgages”, said Nicholas Mak, chief research officer at Mogul.sg.
While supply is on the rise, prices are peaking and sales moving slower, “I do not foresee the property market heading for a recession any time soon”, said Gafoor.
https://www.businesstimes.com.sg/property/higher-supply-softening-market-keep-private-home-prices-check-2024
Cooling measures and peaking prices keep buyers cautious; sentiment may improve in second half with interest rate cuts
Dec 17, 2023
A SLEW of new launches to come into a softening market will keep Singapore’s private home prices in check, although talk of interest rate cuts has sparked some optimism for the second half of the year.
And where residential prices have risen the fastest in the last few years, in suburban Outside Central Region (OCR) locations, househunters will be watching if prices might ease.
“The current price levels (in the OCR) are nearing the affordability limit for most property seekers,” said Lee Nai Jia, head of real estate intelligence, data and software solutions at PropertyGuru.
“Although buyers have relied on external financing, such as support from their parents, in the past few years there has been a noticeable easing in demand, as evidenced by the slowing number of transactions.”
Overall, private home prices have risen 3.9 per cent in the first three quarters of the year, and are expected to close out 2023 with growth of between 4 and 5 per cent. Forecasts for 2024 are pitched around 3 per cent. Prices rose 8.6 per cent in 2022 and 10.6 per cent in 2021.
Homebuyers contended with tighter lending limits and higher interest rates this year, along with hikes in stamp duties and property taxes.
Buyers will “continue to be sensitive towards pricing, particularly with tighter credit control and higher tax burdens”, said Chia Siew Chuin, head of residential research in Singapore at JLL Research & Consultancy.
CBRE head of research for Singapore and South-east Asia Tricia Song said: “The current tentative buying sentiment could stretch into H1 2024 amid still-high interest rates and uncertain economic conditions, before recovering more significantly in H2 2024 when interest rates ease and the economy recovers.”
She expects new home sales to tally in the range of 7,000 to 8,000 in 2024. This would be higher than the 6,500 to 6,700 units she estimates for 2023, but well below the five-year average of 9,763 units. Some 7,100 new units were sold in 2022.
New supply is tipped to expand to between 9,000 and 11,000 units next year.
Based on Huttons Asia’s estimate, the supply of new condos could pick up to around 11,600 units in 38 launches next year. Even if developers were to push back launches, there would still be at least 20 launches yielding up to 8,800 units, said Christine Sun, OrangeTee & Tie’s senior vice-president of research and analytics.
This includes six to nine large projects with more than 500 units each, such as Sim Lian Group’s Jalan Tembusu development, which will put 840 units on the market, IOI Properties’ 748-unit Marina View Residences, and the 512-unit Lumina Grand executive condo in Bukit Batok by City Developments Ltd (CDL).
Developers launched 6,491 units of private non-landed homes in the first nine months of 2023. Analysts put the full-year figure at about 7,500.
https://i.imgur.com/xOwnZtk.png
Lee Sze Teck, Huttons senior director of data analytics, said there may be up to 2,968 units launched in the prime Core Central Region (CCR) next year. This would be the largest supply since 2021, and includes projects such as CDL’s 246-unit Newport Residences, the 215-unit Skywaters Residences by Perennial Holdings, and the former Peace Centre with 373 units, developed by CEL Development, SingHaiyi Group and KSH Holdings.
“The CCR segment, in particular the leasehold units in the Central Business District, may see prices ease further as more supply is coming through,” said CBRE’s Song. “This is also the segment that historically attracted more investors and foreign buyers, whose activity may continue to be constrained by the cooling measures such as high Additional Buyer’s Stamp Duty.”
JLL’s Chia observed that prices in the CCR market have eased by 2 per cent in the first three quarters of 2023, but could hold steady in Q4, supported by prices at Watten House. In 2024, “demand for homes in the CCR is likely to remain soft, and CCR home prices could slip further on the lack of market demand catalysts in the market segment”, she said.
Others believe that prices in the OCR could moderate with the new projects to come to market and prices already at new highs.
Huttons sees up to 5,583 units being launched in the suburbs, the highest for the region in 11 years. This includes a 1,190-unit integrated mixed-use project along Tampines Avenue 11 by UOL Group and CapitaLand, as well as three more projects in the Lentor area.
Government data showed that 5,201 private homes were transacted in Q3, compared with 5,388 units in the previous quarter and 6,148 units in Q3 2022. This figure comprises new sales, resales and sub-sales, and excludes executive condos.
Sales have slowed, but the year’s larger new launches of projects with at least 100 units were, on average, 51 per cent sold, according to a Cushman & Wakefield report.
“While this is slower than 2022 new launch average take-up of 73 per cent, it is higher than 2019’s performance of about 23 per cent sold,” said the firm.
Two Q4 launches – J’Den in Jurong East and Watten House in Bukit Timah – sold surprisingly well, despite their high price points. CapitaLand’s J’den sold 88 per cent of its 368 units at launch at an average of S$2,451 per square foot (psf), while UOL and Singapore Land Group’s Watten House sold 57 per cent, or 102 out of 180 units, at an average price of S$3,230 psf.
Developers are likely to hold new launch prices steady with land and construction costs still high, and levels of unsold inventory still low, said JLL’s Chia. “The market has consistently demonstrated that homebuyers are receptive and drawn to selective projects that are appealing and compelling, even if they come with higher price tags.”
PropNex chief executive officer Ismail Gafoor predicts that OCR prices will remain “relatively stable” to ensure they are within reach of owner-occupiers and public housing upgraders. He sees prices hovering between S$2,100 and S$2,300 psf, while “extremely attractive projects” may command prices of around S$2,400 psf on average.
At PropertyGuru, Lee noted that the number of enquiries received on the property listing platform dipped in the third quarter of this year. Yet, asking prices remained firm, mainly because replacement costs for sellers are still elevated with interest rates yet to come down.
Land costs also remained high in 2023, said George Tan, Savills Singapore’s managing director of Livethere Residential, the consultancy’s digital residential marketing arm. A state tender for a plot in Toa Payoh, for instance, drew bullish bids, topped by an offer of S$968 million or S$1,360.09 psf per plot ratio.
But winning bids placed by developers for parcels in locations where other sites have been sold, such as in Lentor, Pine Grove and Jalan Tembusu, were generally lower than previous tenders, said Cushman & Wakefield.
Lee from PropertyGuru expects a slowdown in demand and a downward shift in buyers’ preferences towards lower-priced options.
At the same time, demand for high-end homes, such as landed properties and CCR projects, may slowly grow as the price gap between luxury and mass-market homes narrows, he added.
“The gradual build-up of unsold stock will likely also help to keep developers’ pricing in check,” said Gafoor. As at the end of Q3, there were around 16,747 unsold and uncompleted private residential units, with the CCR and OCR accounting for the bulk of these units.
Nevertheless, pockets of resilient demand could result in surprises on the upside next year.
“The reason why we believe that prices, despite strong economic headwinds, can hold in general, or even show some upside in the RCR and OCR is that next year’s new launches are not excessive,” said Alan Cheong, research and consultancy executive director at Savills Singapore.
Interest rates easing “will bring some relief to property owners with mortgages”, said Nicholas Mak, chief research officer at Mogul.sg.
While supply is on the rise, prices are peaking and sales moving slower, “I do not foresee the property market heading for a recession any time soon”, said Gafoor.
https://www.businesstimes.com.sg/property/higher-supply-softening-market-keep-private-home-prices-check-2024