New-resale home psf price gap widens to 40% in 2019
Analysts expect spread to expand with more new supply available this year as interest rates remain low
Fri, Mar 20, 2020
SIOW LI SEN
SINGAPOREANS' penchant for the new is driving the premium between new homes and older ones wider.
Last year, the premium between new homes and resale units widened to a whopping 40 per cent, up from an already considerable 35 per cent in 2018, according to a Edmund Tie Research report released on Thursday.
In 2019, new homes in the core central region (CCR) averaged S$2,953 per sq ft (psf), 40 per cent more than resale units' average of S$2,105 psf. The price gap yawned further for homes in the outside central region (OCR): new homes price reached S$1,447 psf, 43 per cent more against S$1,014 psf for resale units.
Covid-19 notwithstanding, with interest rates plunging, the spread is likely to expand even more this year.
"With ample new supply coming onstream and demand staying stable for 2020 in the light of low interest rates, it is anticipated that the price differential between the primary and resale non-landed markets will remain at 40-45 per cent," said Alice Tan, Edmund Tie's senior director of research and consulting.
"There is therefore a distinct possibility that 2020 will outdo the preceding year," said Ms Tan.
Buyers of new homes were willing to pay more as the projects launched in 2019 offered exciting design concepts in good locations, the report said.
Additionally, buyers from the high-net-worth community prioritise prestige, locational attributes and project quality over price - which explains the encouraging take-up rates of new project launches.
Transactions recorded for new sale apartments and condominiums at premium prices are mainly at desirable locations, close to MRT stations, the Central Business District and growth areas such as the Greater Southern Waterfront and Bugis precincts.
In prime Districts 9 and 10, and central locations in Districts 1 and 7, home prices have exceeded S$3,000 psf.
The buying frenzy momentum for new homes has continued. Last month's launch of the 522-unit The M at Middle Road saw a 75 per cent sell-down rate.
Developers in Singapore sold 975 private homes in February, 57 per cent higher than January's take-up, as more units were launched for sale last month. Last month's sales was also more than double the 455 units sold in February 2019.
More than 9,000 new units are expected to be sold in 2020. Out of this number, more than 5,000 units are of 99-year leasehold tenure.
The RCR (rest of central region) at the city fringe has the least pipeline launch supply this year, with an estimated total of 1,855 units.
In 2018, the price gap between new and resale private homes stood at a considerable 35 per cent. New homes in the CCR averaged S$2,756 psf, while their resale counterparts commanded a substantially lower S$2,048 psf.
The widening divide between new and resale homes was also observed across the board among residential properties in the RCR and OCR.
While the gaps were respectively 29 per cent and 39 per cent in 2018, in 2019 they widened to 39 per cent and 43 per cent.
According to Ong Choon Fah, CEO of Edmund Tie: "A confluence of factors has led to remarkable resilience in the property market in Singapore. Asia is widely recognised as the next growth engine - evidenced by capital inflows into the region, including increased foreign direct investments, setting up of regional HQs and other critical business activities.
" As both financial and human capital flow into the region, the demand for residential property - further catalysed by low interest rates and easy availability of credit - will follow suit."
Ms Ong added that at the domestic level, home ownership is an important aspiration for Singaporeans; and the company has over the years seen keen interest in HDB owners who leverage on their public housing asset to upgrade to private property once the conditions are in their favour.
Data from 2019 supports this observation. In Q4 2019, a total of 4,693 units were launched in the RCR - an increase of 12.5 per cent from 2018. Correspondingly, sales volume picked up by 4.7 per cent annually, which registered a total of 4,204 new sales units last year. In the OCR, there was a total of 5,134 units launched in 2019, which is 24.5 per cent higher than the previous year. New sales volume reached 4,679 units last year, an increase of 16.6 per cent from 2018.
Demand in 2020 is likely to originate mainly from Singapore citizens and residents - similar to last year, said the report.
Singaporeans and residents made up 78 per cent and 16 per cent respectively of new home buyers in 2019.
The buying momentum of private homes from mainland Chinese buyers is envisaged to slow down significantly over the first quarter of 2020, due to the Covid-19 travel restrictions.
Among the transactions of non-landed homes by foreigners, mainland Chinese buyers made up the highest proportion with 27.1 per cent in 2019; it was 32.9 per cent in 2018.
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