Prime residential prices to moderate in 2023 despite shrinking stock: Knight Frank

Jan 06, 2023

PRICES of prime residential properties are expected to climb at a more “moderate” pace in 2023, even as the inventory of units available continues to shrink, according to real estate consultancy Knight Frank. 

In a report on the prime housing market released on Wednesday (Jan 4), Knight Frank noted that there were substantially fewer non-landed luxury homes sold in 2022, despite a slight bump in sales in H2 2022. This is in line with the dive in overall sales volume in the private housing market last year, when sales transaction volume plummeted by around 36 per cent to 21,437 units for the whole of 2022, from 33,557 in 2021.

In the latter half of 2022, there were 158 prime non-landed transactions totalling S$1.4 billion – a slight increase from the 138 transactions in H1 2022 that totalled S$1.2 billion. Prices also rose 5.7 per cent year on year to S$2,495 per square foot (psf) in H2 2022, from S$2,360 psf in H2 2021. 

The top four highest transactions in H2 2022 were for units at the ultra-luxury condominium Les Maisons Nassim, with prices ranging between S$36 million and S$68 million, or between S$5,296 and S$6,057 psf. 

This was followed by a 4,951 square foot freehold unit at Tomlinson Heights, which went for S$23 million or S$4,645 psf. 

Overall, 296 luxury non-landed homes were sold in 2022, down nearly 40 per cent from the 487 transactions recorded in 2021. Cumulative sales also fell 36.4 per cent in 2022 to S$2.5 billion, from the almost S$4 billion posted in the previous year.

“The low interest rate environment then encouraged buyers to make their purchases sooner rather than later, but the present high interest rates have now checked buyers,” said Nicholas Keong, head of residential prime sales and international project marketing at Knight Frank Singapore.

This is also due to a lack of family-sized units up for sale, especially as homeowners grow “cautious about selling before a replacement home is secured”, said Keong.

The landed luxury home segment, in particular, was characterised by a scant inventory of properties in 2022 amid rising prices. 

Just S$2.5 billion worth of landed homes were transacted in the latter half of 2022, down 20.3 per cent from the S$3.1 billion in H1 2022. Transaction volume fell by more than 20 per cent to 255 in H2 2022, from H1 2022’s 324. Volume was also down by about 23 per cent year on year, from the 421 transactions in H2 2021.

The top of the market, Good Class Bungalows (GCB) category, saw 10 deals in H2 2022. This brought the volume of GCB deals to a total of 20 for the year, just a third of the 2021 tally of 60 deals.

Meanwhile, the average land prices of GCBs surged by 27.1 per cent to S$2,108 psf in H2 2022, from S$1,658 in the first half of 2022. Year on year, the average land prices for GCBs in H2 2022 climbed 24.3 per cent from S$1,696 psf in H2 2021.

The top transaction in H2 2022 was for a 27,000 sq ft bungalow in the Belmont Park GCB Area, which sold for S$55.5 million or S$2,056 psf on land. This is the second transaction in the area in less than three years, at a unit land price 60.9 per cent higher than a previous transaction in October 2019.

Still, overall sales value of landed luxury homes plunged 43.8 per cent to S$5.6 billion in 2022, from the record high of almost S$10 billion in the previous year.  

“Even though buyers are willing to offer decent price premiums to incentivise landed homeowners to sell, most were decidedly averse, with some deterred by the 15-month wait-out for downgraders looking to purchase HDB flats,” noted Keong.

He added that the GCB market’s performance in 2021 is unlikely to be duplicated over consecutive years due to “the substantial price quantum characteristic of such rarefied luxury homes”. 

Looking ahead, Knight Frank expects market activity in both the landed and non-landed luxury home market to remain “subdued” in 2023, with prices growing at a more moderate pace. 

Sales of non-landed luxury homes are expected to be supported by “decently furnished” larger-sized units that are ready for immediate occupation in prime areas, as well as a return of foreign homebuyers as travel restrictions ease. 

In the prime landed segment, Knight Frank believes price growth in 2023 will be more “modest” than the estimated 9.5 per cent posted for the whole of 2022. Overall, private residential prices rose 8.4 per cent last year, according to flash estimates released by the government on Tuesday.

The market outlook in the longer term will remain positive, Knight Frank added, “especially with the growth of the electric vehicle population, these homes afford owners an exclusive charging point right at their doorstep”.

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