New Reporter
13-03-24, 09:39
Unsold private housing stock on the rise ahead of ramp-up in new launches in 2024
Mar 13, 2024
SINGAPORE’S inventory of unsold new private homes rose 20 per cent over the last two years and is expected to continue growing in 2024, as more projects come to market.
This could signal bad news for some residential projects that are approaching a critical sales deadline this year or the next – to clear almost all unsold units or stump up a hefty stamp duty payment running into the tens of millions of dollars.
According to latest quarterly data from the Urban Redevelopment Authority, unsold stock comprising unsold units in completed and uncompleted projects grew 20.4 per cent, from 14,333 units in the fourth quarter of 2021 to 17,262 units in Q4 2023.
This is mainly due to a ramp-up in new launches “coinciding” with cautious market demand, thanks to multiple rounds of cooling measures and still-high financing costs, said Wong Xian Yang, head of research at Cushman & Wakefield.
New home sales for 2023 dropped by 9.6 per cent year on year (yoy) to 6,421 units. Meanwhile, 7,551 homes were launched in that year, a 66.8 per cent yoy surge.
The government has also bumped up the supply of private homes, with 9,235 units to be supplied from 2023’s confirmed list of sites to be sold under the Government Land Sales (GLS) programme, said Tricia Song, CBRE’s head of research for South-east Asia. Confirmed list sites are launched for sale according to schedule, regardless of demand.
This naturally resulted in an increase in unsold new private homes.
At the same time, several residential projects may be closing in on their critical sales deadline this year with a significant number of unsold units remaining.
According to data from URA’s Realis database as at Mar 12, these projects include the 99-year leasehold Cuscaden Reserve in District 10, with 180 units remaining out of 192; the 99-year leasehold The Landmark in District 3, with 51 unsold units out of 396; and the 99-year leasehold One Bernam in District 2, with 137 units remaining out of 351.
The Business Times understands that other projects such as the freehold Leedon Green and freehold Dalvey Haus, both in District 10, may be facing the five-year deadline this year as well, with fewer than five unsold units remaining.
https://i.imgur.com/KDkcq40.jpeg
In residential projects with five or more units, property developers are subject to an Additional Buyer’s Stamp Duty (ABSD) of 40 per cent on land price, of which 35 per cent is remissable if the developer sells at least 90 per cent of units within five years. Otherwise, that portion of the ABSD has to be paid with interest.
For sites acquired between July 2018 and December 2021, the ABSD payable is 25 per cent, with a non-remissable component of 5 per cent. Land acquired before July 2018 is subject to a 15 per cent rate.
The ABSD remission clawback rate will depend on how many units remain unsold, as announced during Budget 2024. This will give housing developers more leeway in selling off units while ensuring that housing supply will continue to be released promptly, Finance Minister Lawrence Wong had said.
Taking the hit
CBRE’s Song noted that as the ABSD deadline approaches for projects, it is normal for developers to offer discounts of 10 to 15 per cent to clear remaining units.
For instance, some marketing agents have recently been offering large discounts to draw buyers in at Cuscaden Reserve. A three-bedroom unit spanning 1,163 square feet (sq ft) is now being advertised at S$3.4 million, down S$900,000 from its previous price of S$4.3 million. A 700 sq ft one-bedder is also going for S$2.1 million, down S$300,000 from S$2.4 million previously.
Both work out to S$2,950 per square feet (psf), around 20 per cent lower than the average price of about S$3,600 psf that 12 units have sold for since the condo was launched in September 2019.
“In the case of Cuscaden Reserve, the intent is to drive sales, and keeping in mind that a nearby GLS residential site in Orchard Boulevard has been awarded recently, the developers will want to try to lift sales by adjusting their pricing,” said Wong Siew Ying, head of research at PropNex.
In February, a UOL Group-Singapore Land joint venture was awarded the Orchard Boulevard GLS site at S$428.3 million or around S$1,617 psf per plot ratio – 32 per cent lower than the Cuscaden Reserve site, which was awarded for S$2,377 psf ppr in May 2018, noted Song from CBRE. Market watchers expect future selling prices of the Orchard Boulevard project to be at over S$3,000 psf.
PropNex’s Wong also noted the ABSD clawback rate could be lower than 25 per cent, depending on when the site was acquired, and if so, some developers may opt to “take the ABSD hit” and have more time to market to sell the remaining units.
Cuscaden Reserve, for instance, is built on land acquired in May 2018 and is therefore subject to the lower ABSD rate of 15 per cent of the land acquisition, or around S$61.5 million.
Lee Sze Teck, Huttons senior director of data analytics, added that as a rule, agents are not allowed to offer discounts or incentives on their own accord to close a deal. These discounts are passed down from developers, which vary their pricing strategies in response to market conditions, he said.
This is not just for projects in the prime district, but across the island, Lee added. Still, he has observed that buyers generally opt for units they prefer, rather than those marketed with promotions.
Knight Frank research head Leonard Tay noted that “there are not many projects with significant levels of unsold units” that are approaching their ABSD deadline this year.
Analysts also believe that the rising level of unsold inventory is unlikely to pose an issue for these projects.
https://i.imgur.com/Ux42XD1.png
“The increasing unsold stock from the trough in Q4 2021 is a sign of supply catching up with demand (post-pandemic), which is a good thing,” said Tay. The 17,262 new units unsold in Q4 2023 are much lower than the average number of unsold private homes in the past 40 quarters between Q1 2014 and Q4 2023, at 23,885 units.
Q4 2023’s figure is also less than half of the peak recorded in Q1 2019, which saw 37,799 unsold units, and is just 60 per cent of Q4 2014’s 28,779 units.
Lee from Huttons explained that when the market bottomed in Q2 2017, developers replenished their land bank rapidly. This resulted in more residential project launches in 2018 and 2019, and a Q1 2019’s peak of unsold private homes, he said.
Subsequently, unsold inventory fell to “very low levels” not seen in the past decade, said Knight Frank’s Tay. “This caused the market to be severely undersupplied, such that prices increased very substantially with brisk demand.”
URA’s price index for non-landed private homes rose by just 8.6 per cent between Q2 2017 and Q1 2019. Since then, prices have grown by a substantial 33.7 per cent.
“Taking the 10-year average of developers’ sales, between 2014 and 2023, of 8,850 units per year, the 17,262 unsold units represent just under two years of stock,” added PropNex’s Wong.
Analysts expect the unsold stock of private housing to rise further, but remain much lower than previous peaks.
The level of unsold inventory for Q4 2024 will primarily depend on sales take-up and planned launches in the pipeline, said Lee from Huttons. “With more GLS land sold in 2023, Huttons’ data analytics estimate the number of unsold units to be between 18,000 and 19,000 by end-2024. This is still way below the peak of almost 38,000 unsold units in Q1 2019.”
Likewise, Cushman’s Wong believes unsold inventory is unlikely to surpass 22,000 units since “underlying buying demand remains resilient, with no financial recession expected in 2024”.
https://www.businesstimes.com.sg/property/unsold-private-housing-stock-rise-ahead-ramp-new-launches-2024
Mar 13, 2024
SINGAPORE’S inventory of unsold new private homes rose 20 per cent over the last two years and is expected to continue growing in 2024, as more projects come to market.
This could signal bad news for some residential projects that are approaching a critical sales deadline this year or the next – to clear almost all unsold units or stump up a hefty stamp duty payment running into the tens of millions of dollars.
According to latest quarterly data from the Urban Redevelopment Authority, unsold stock comprising unsold units in completed and uncompleted projects grew 20.4 per cent, from 14,333 units in the fourth quarter of 2021 to 17,262 units in Q4 2023.
This is mainly due to a ramp-up in new launches “coinciding” with cautious market demand, thanks to multiple rounds of cooling measures and still-high financing costs, said Wong Xian Yang, head of research at Cushman & Wakefield.
New home sales for 2023 dropped by 9.6 per cent year on year (yoy) to 6,421 units. Meanwhile, 7,551 homes were launched in that year, a 66.8 per cent yoy surge.
The government has also bumped up the supply of private homes, with 9,235 units to be supplied from 2023’s confirmed list of sites to be sold under the Government Land Sales (GLS) programme, said Tricia Song, CBRE’s head of research for South-east Asia. Confirmed list sites are launched for sale according to schedule, regardless of demand.
This naturally resulted in an increase in unsold new private homes.
At the same time, several residential projects may be closing in on their critical sales deadline this year with a significant number of unsold units remaining.
According to data from URA’s Realis database as at Mar 12, these projects include the 99-year leasehold Cuscaden Reserve in District 10, with 180 units remaining out of 192; the 99-year leasehold The Landmark in District 3, with 51 unsold units out of 396; and the 99-year leasehold One Bernam in District 2, with 137 units remaining out of 351.
The Business Times understands that other projects such as the freehold Leedon Green and freehold Dalvey Haus, both in District 10, may be facing the five-year deadline this year as well, with fewer than five unsold units remaining.
https://i.imgur.com/KDkcq40.jpeg
In residential projects with five or more units, property developers are subject to an Additional Buyer’s Stamp Duty (ABSD) of 40 per cent on land price, of which 35 per cent is remissable if the developer sells at least 90 per cent of units within five years. Otherwise, that portion of the ABSD has to be paid with interest.
For sites acquired between July 2018 and December 2021, the ABSD payable is 25 per cent, with a non-remissable component of 5 per cent. Land acquired before July 2018 is subject to a 15 per cent rate.
The ABSD remission clawback rate will depend on how many units remain unsold, as announced during Budget 2024. This will give housing developers more leeway in selling off units while ensuring that housing supply will continue to be released promptly, Finance Minister Lawrence Wong had said.
Taking the hit
CBRE’s Song noted that as the ABSD deadline approaches for projects, it is normal for developers to offer discounts of 10 to 15 per cent to clear remaining units.
For instance, some marketing agents have recently been offering large discounts to draw buyers in at Cuscaden Reserve. A three-bedroom unit spanning 1,163 square feet (sq ft) is now being advertised at S$3.4 million, down S$900,000 from its previous price of S$4.3 million. A 700 sq ft one-bedder is also going for S$2.1 million, down S$300,000 from S$2.4 million previously.
Both work out to S$2,950 per square feet (psf), around 20 per cent lower than the average price of about S$3,600 psf that 12 units have sold for since the condo was launched in September 2019.
“In the case of Cuscaden Reserve, the intent is to drive sales, and keeping in mind that a nearby GLS residential site in Orchard Boulevard has been awarded recently, the developers will want to try to lift sales by adjusting their pricing,” said Wong Siew Ying, head of research at PropNex.
In February, a UOL Group-Singapore Land joint venture was awarded the Orchard Boulevard GLS site at S$428.3 million or around S$1,617 psf per plot ratio – 32 per cent lower than the Cuscaden Reserve site, which was awarded for S$2,377 psf ppr in May 2018, noted Song from CBRE. Market watchers expect future selling prices of the Orchard Boulevard project to be at over S$3,000 psf.
PropNex’s Wong also noted the ABSD clawback rate could be lower than 25 per cent, depending on when the site was acquired, and if so, some developers may opt to “take the ABSD hit” and have more time to market to sell the remaining units.
Cuscaden Reserve, for instance, is built on land acquired in May 2018 and is therefore subject to the lower ABSD rate of 15 per cent of the land acquisition, or around S$61.5 million.
Lee Sze Teck, Huttons senior director of data analytics, added that as a rule, agents are not allowed to offer discounts or incentives on their own accord to close a deal. These discounts are passed down from developers, which vary their pricing strategies in response to market conditions, he said.
This is not just for projects in the prime district, but across the island, Lee added. Still, he has observed that buyers generally opt for units they prefer, rather than those marketed with promotions.
Knight Frank research head Leonard Tay noted that “there are not many projects with significant levels of unsold units” that are approaching their ABSD deadline this year.
Analysts also believe that the rising level of unsold inventory is unlikely to pose an issue for these projects.
https://i.imgur.com/Ux42XD1.png
“The increasing unsold stock from the trough in Q4 2021 is a sign of supply catching up with demand (post-pandemic), which is a good thing,” said Tay. The 17,262 new units unsold in Q4 2023 are much lower than the average number of unsold private homes in the past 40 quarters between Q1 2014 and Q4 2023, at 23,885 units.
Q4 2023’s figure is also less than half of the peak recorded in Q1 2019, which saw 37,799 unsold units, and is just 60 per cent of Q4 2014’s 28,779 units.
Lee from Huttons explained that when the market bottomed in Q2 2017, developers replenished their land bank rapidly. This resulted in more residential project launches in 2018 and 2019, and a Q1 2019’s peak of unsold private homes, he said.
Subsequently, unsold inventory fell to “very low levels” not seen in the past decade, said Knight Frank’s Tay. “This caused the market to be severely undersupplied, such that prices increased very substantially with brisk demand.”
URA’s price index for non-landed private homes rose by just 8.6 per cent between Q2 2017 and Q1 2019. Since then, prices have grown by a substantial 33.7 per cent.
“Taking the 10-year average of developers’ sales, between 2014 and 2023, of 8,850 units per year, the 17,262 unsold units represent just under two years of stock,” added PropNex’s Wong.
Analysts expect the unsold stock of private housing to rise further, but remain much lower than previous peaks.
The level of unsold inventory for Q4 2024 will primarily depend on sales take-up and planned launches in the pipeline, said Lee from Huttons. “With more GLS land sold in 2023, Huttons’ data analytics estimate the number of unsold units to be between 18,000 and 19,000 by end-2024. This is still way below the peak of almost 38,000 unsold units in Q1 2019.”
Likewise, Cushman’s Wong believes unsold inventory is unlikely to surpass 22,000 units since “underlying buying demand remains resilient, with no financial recession expected in 2024”.
https://www.businesstimes.com.sg/property/unsold-private-housing-stock-rise-ahead-ramp-new-launches-2024