Busy showflats, business as usual?

May 30, 2023

Michelle Low

OVER the weekend, Far East Organization sold 520 units at its 732-unit Upper Bukit Timah project The Reserve Residences. The 71 per cent take-up rate for the city fringe project was topped only by GuocoLand’s Lentor Modern, which sold 508 units or 84 per cent of the suburban project’s 605 units at launch in September 2022.

Business as usual in Singapore’s hustling, bustling housing market? Except that the market is not entirely on an “as you were” footing. The government has stepped up measures to cool prices and demand in three interventions since December 2021, as prices continue to rise.

Tight lending limits are stuck in place. Today’s higher mortgage rates and tough borrowing criteria are a high hurdle that potential buyers have to clear.

A study by the Urban Land Institute looking at private home prices in cities across the Asia Pacific places Singapore - unsurprisingly - at the top of the heap. The median price of private homes here now stands at US$1.2 million or S$1.6 million, making Singapore the most expensive city in the region to buy a private property.

Far East’s S$2,460 per square foot average for units sold at the launch of The Reserve Residences compares favourably to prices at the April launch of Tembusu Grand. According to data on developers’ sales, City Developments Ltd and MCL Land sold 354 units at Tembusu Grand in April at a median S$2,463 psf. The launch after that, EL Development’s Blossoms By The Park, moved 205 units at S$2,427 psf.

List prices for The Reserve Residences, which is integrated with a transport hub and mall at Beauty World, started at S$1.1 million for one-bedroom units, which sold out during the launch. While the latest additional buyer’s stamp duty (ABSD) hikes may have sidelined foreign buyers, projects like The Reserve Residences saw mainly Singaporean and Permanent Resident buyers.

What’s driving demand at these levels? Leslie Yee suggests that today’s high interest rates actually make buying new projects advantageous compared to less pricey resale units. Even though a new home loan signed today comes with a significantly higher mortgage rate and instalment than two years ago, a buyer of an uncompleted new home need not draw down their home loan as quickly or fully as a buyer of a resale unit. There’s also the possibility that interest rates will start to ease in the near future.

Indeed, the latest available data shows volume in the condo resale market fell in April, after two months of higher monthly sales.

Analysts also point to the HDB resale market, where sellers continue to take profits at today’s price levels, giving them the capital required for their next property purchase.

A casual conversation with a young professional gives another perspective into buyer psychology. The 30-something falls into the market gap of earning “too much” to qualify to buy a new HDB flat, and not quite making enough to afford a condo. Her father’s advice? “Better buy now.” Even at today’s levels, prices, so the thinking goes, will end up higher in the long term.

While sales volumes were lower in 2022 compared to 2021, housing agents earned robust commissions last year, Ry-Anne Lim and Bryan Kow found. Higher home prices across the market and an uplift in commission rates from new launches fed agents’ earnings. But signs of a slowdown are manifesting. Sales are expected to slow at the top end of the market, where the higher ABSD bites the most, and deals are taking longer to close. Competition will intensify and may erode income for agents in the market.

The government is steadily feeding the supply lines, and last week released one site in Woodlands for 350 residential units. Another parcel in Toa Payoh, good for 775 units, will go up for tender if developers show interest. A plot in Punggol which will house a pilot project for short-term commercial lease seems destined to stay on the drawing board for now.

In addition, sites in six areas, including Woodlands, Lavender, Kallang and Whampoa, have been gazetted for rezoning to residential use, and are destined for high-density housing, writes Jessie Lim. Some of these will be new public housing projects, others may be put up for sale to developers.

Sentiment in the office market is decidedly cooler. Yet, amid a dearth of big-ticket deals, several building owners have quietly put assets on the market. Kalpana Rashiwala analyses what might be driving decisions of both sellers and buyers in the current environment. Locally listed landlords are facing tough calls as Singapore office property market reprices.

At Mapletree Investments, net profit fell almost 40 per cent to S$1.2 billion last year while revenue was flat. The group said it would invest and develop in resilient assets and markets, such as logistics development projects in China, India, Vietnam, Malaysia, Japan and Australia. Its Mapletree Logistics Trust has already announced planned acquisitions of over S$1 billion in assets in Japan, Australia, South Korea and China.

Elsewhere, more distressed assets are emerging in hard hit markets.

Brookfield, one of the world’s largest alternative investment managers, surrendered a Los Angeles office building to receivers. EY Plaza, with US$305 million in total debt, including a US$275 million commercial mortgage-backed security, is now in receivership, along with The Gas Company Tower, another Brookfield building in downtown LA where office vacancy hit 30 per cent in Q1.

US office Reits last week traded at their lowest since 2009, though industry watchers believe the worst may be over. Workers are starting to return to their desks and companies moving to restrict remote work policies.

In this little red dot, home buyers’ behaviour may look counter-intuitive and run contrary to trends elsewhere. It remains to be seen how far confidence and liquidity can go.

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