Residential property sales rally post circuit breaker despite economic fallout

Singaporean property developers are making an unexpected comeback as sales rally in Q3

Residential property sales rally postcircuit breaker despite economic fallout

New home sales are on the rise, even though Singapore remains in recession.

It has been a challenging year in the middle of a pandemic-led A significant for businesses around the globe, recession should exceed that of a proportion and Singapore is no exception, fairly normal month a year ago, of HDB with the economy expected to notes Leonard Tay, head, research homeowners remain in recession for the whole at Knight Frank Singapore. were able to year. But property developers What made this possible was the capitalise on in the Lion City are making an pent-up need from buyers seeking their gains and unexpected comeback as demand new homes following months of no upgrade to the failed to falter despite the onslaught viewings due to social distancing private market of economic pitfalls. measures, as well as low interest

Private developers saw their rates Tay explained. “A significant sales rally in the third quarter proportion of the almost 50,000 immediately following the end of HDB homeowners who collected the circuit breaker period. New sales their keys in 2014 and 2015 were in the non-landed private residential also able to capitalise on their market rose to a fevered pitch and gains and upgrade to the private reached 1,329 units in September— market, after fulfilling the five-year its highest on record since July 2018, Minimum Occupation Period before the additional buyer’s stamp (MOP),” he added. duty (ABSD) went into effect. Whilst the newly issued directive

The sales volumes exceeded by the Urban Redevelopment every single monthly sales volume Authority (URA) restricting the rerecorded in 2019. It is also 4.8% issuance of the option to purchase higher than sales in September (OTP) might ease sales volume 2019—ironic that a month caught moderately, demand remains from buyers whose livelihoods remain relatively unaffected by the recession. There are also prospective buyers who have dry powder from previous en bloc proceeds.

In a separate report, OCBC Investment Research noted that amongst the top 10 best-selling projects in September, only one came at a medium price of $1,500 per square feet (psf). Overall, sales in Q3 reached 5,895 non-landed residential units sold (excluding executive condominiums), more than double or 146% higher than in the previous quarter. This is also 16% higher than Q3 2019 levels.

Sales prices remained flat during the quarter compared to Q2, and are expected to remain flat until the end of the year, according to Knight Frank’s Tay.

Meanwhile, new sale volumes are forecasted to reach about 8,000 to 9,000 units as Singapore moves

While we see some impact from the new OTP re-issuance regulation as highlighted earlier, the current runrate of new private residential property sales are likely to exceed our earlier forecast of 6,500-7,500 units for 2020. We now expect 8,000-9,200 new private homes to be sold this year.

Exhibit 3: Private residential units launched and sold monthly by developers excluding Private residential units launched and sold monthly ECs '000

2.5

2.0

1.5

1.0

0.5

0.0

Jan 2017 Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018 Jul 2018 Oct 2018 Jan 2019 Apr 2019 Jul 2019 Oct 2019

Private residential units sold by developers excluding ECs Private residential units launched by developers excluding ECs

Source: URA, Internal estimates Source: URA, Internal estimates

Jan 2020 Apr 2020 Jul 2020

towards Phase 3 of the circuit breaker, according to both Knight Frank and OCBC Investment Research reports.

Colliers’ Tricia Song also expects 2020 developer sales to fall by about 10% to 8,900 units from the 9,912 units in 2019.

CCR snubbed for cheaper options

One trend prominent in the real estate market in recent months is the rise prices in Singapore’s outer regions. Prices in the central region dropped 13.7% between February to June, compared with the overall market’s 7% price decline.

In contrast, real estate prices outside the central region—Outside of Central Region (OCR) and Rest of Central Region (RCR)—climbed 5.05% during the same period.

The price increase in Singapore’s outer regions indicates that there has been an increased demand for properties outside the city centre since COVID-19 began, according to a study by financial services provider ValueChampion.

People may be moving away from these areas in search of housing in less dense and cheaper places, they added.

Notably, neighbourhoods that are most distant from the central region all saw real estate prices jumped up to 17.51%.

This suggests that whilst population density may have played a role in homeowner decisions during COVID-19, the overall consumer preference may have been to move out of the central area.

In their September private resale market report, OrangeTee & Tie’s head of research and consultancy Christine Sun also noted that many owner-occupiers were thronging the resale market in search of value-buys, especially for attractively 4 priced, large-sized resale units.

The same is observed in the non-landed residential market, with condo prices in RCR and OCR rising, whilst CCR condo prices dropped from Q2 levels.

New sale volumes for RCR condos jumped 177% in Q3 compared with the previous quarter and recorded 1,797 transactions. Prices also picked up 3.3% QoQ.

It was bolstered mainly by new sales, thanks to launches during the third quarter, with projects such as Forett @ Bukit Timah and Penrose which sold around 30% and 60% of their total units respectively during their launch weekend. This also attests to the pent-up demand postcircuit breaker, according to Knight Frank analysts Linda Chern, head of sales and leasing; Khoo Zi Ting, analyst; and Tay.

Condo prices in the OCR also rose a healthy 1.7% in Q3 compared with the previous quarter. Transaction volumes more than doubled to 2,600 unit sold, a 127% increase from Q2.

CCR was the only market segment to record a price drop, with condo prices declining by 4.9% in Q3 compared to the previous quarter.

On the upside, transaction volumes in CCR grew 94.8% to

The third quarter has seen a rebound, and volumes are expected to pick up further in Q4 as sentiment improves

791 condo units sold, thanks to the resale market. Resale units hit 509 condos during the quarter, rising more than two-fold from the 207 units resold in the second quarter.

Investments gain momentum

Total property investment sales also rebounded and achieved growth in the third quarter. Following a muted Q2, property investments jumped 78% QoQ to reach $3.99b in Q3. Albeit still down 64.8% from last year’s numbers, this signifies that the real estate market is recovering, notes Colliers Research.

“[Q3] has seen a rebound, and we can expect volumes to pick up further in Q4 as sentiment improves. With more tech giant setting up bases in Singapore in the last few months and the URA Incentive Scheme to rejuvenate older precincts, investors will show a bigger appetite for CBD offices building in the long-term,” according to Jerome Wright, senior director of Capital Markets at Colliers International.

Recovery is mainly thanks to local investors, especially with borders still closed during the JulySeptember period.

Commercial and residential deals made up 87% of the $3.99b tally.

Specifically, residential transactions trebled to $844.4m during the quarter as transactions in Good Class Bungalows (GCBs) and landed housing quadrupled. However, total sales were still 72.5% lower compared with third quarter of 2019 on the absence of government land sales and fewer luxury condominiums.

“Active transactions in the domestic Good Class Bungalows and foreigner-allowed Sentosa Cove suggest Singapore is a safe haven to high net worth individuals. Monthly developer sales have also been buoyant after the circuit breaker,” added Steven Tan, senior director of investment services at Colliers International.

He added that if the buying pattern continues into Q1 2021, demand for collective residential sales—or en bloc—could pick up by the end-2021.