Residential property sector chugging along in an uncertain market

Data released by the Urban Redevelopment Authority (URA) on Monday (17 Feb) showed that residential property sector chugging along in an uncertain marketplace

Developers sold a total of 618 units in January 2020, up 14.9 per cent month-on-month compared to 538 units in December last year. Sales are also up 41.4 per cent year-on-year. Data released on Monday (17 Feb) by URA showed that developers sold 618 new private homes (excluding Executive Condos) last month. This is the best performing January sales since January 2013 (where 2,028 units were transacted).

Residential property sector chugging along for now

Commenting on the URA data, Colliers International said the general marketplace may be fraught with uncertainty, but the residential property sector appears to be chugging along, at least for now. The 618 units moved last month were 14.9% more than December’s transactions and 41.1% higher than the 437 units sold in January 2019. This is despite the Chinese New Year festivities and outbreak of COVID-19 during the latter part of January.

“To what extent can this sales momentum be sustained from February and beyond would depend on whether there is a crisis of confidence in the market and among the population, owing to the more muted economic growth outlook as we begin to count the cost of the ongoing COVID-19 outbreak. It must be said that the Singapore government has thus far managed the outbreak efficiently and we look to the Singapore Budget 2020 for more measures that will help businesses tide over this period. (See Outlook section below)

We believe the sales volume in January reflected the underlying demand for homes, with competitively priced projects gaining a fair share of buyers. The top selling private residential projects in January were: Jadescape (56 units at a median price of SGD1,690 psf); Treasure at Tampines (50 units at a median price of SGD1,371 psf); Parc Esta (44 units at a median price of SGD1,684 psf); Parc Botannia (39 units at a median price of SGD1,371 psf); and Parc Clematis (39 units at a median price of SGD1,610 psf).”

The residential property sector chugging along produced the following top 10 Selling Projects in January 2020 (including EC) said Colliers:

Source: Colliers International, URA

3 new launches in January 2020

Source: Colliers International, URA

Three projects, all located in the Core Central Region (CCR), were launched last month – Leedon Green sold 35 units at a median price of SGD2,782 psf, Van Holland shifted 15 units at a median price of SGD2,988 psf, while The Avenir shifted 24 units at a median price of SGD3,245 psf.  These prime projects have a price quantum of SGD2.7-5.0 million per unit.

The bulk of the developer sales were projects with units priced between SGD1 million and SGD1.5 million. We estimate that 67% of the total developer sales in January 2020 were priced at the median price of SGD1,000-2,000 psf.

Ms Tricia Song, Tricia Song, Colliers International’s Head of Research for Singapore, analysing the residential property sector chugging along said:

“There are concerns that the coronavirus outbreak could dent demand for homes due to: 1) weaker overall market sentiment; 2) social distancing as people shun crowded places, including showflats; and 3) postponement of home purchases (likely high-end units) by foreign buyers, particularly Chinese buyers, given the travel curbs. These concerns are valid; depending on how severe and protracted the situation develops, some of the planned new launches could be pushed to 2021.

In our view, it looks like home buyers were unfazed by the COVID-19 fears, so far. Based on Realis data, the first nine days of February already recorded some 146 new transactions (excl. EC). Meanwhile, The M and Verticus are scheduled to be launched later this month. The M reportedly drew 1,000 visitors on its first day of preview. For ECs, Parc Canberra sold 64% or 316 out of 496 apartments, while another EC – 548-unit OLA at Anchorvale will also be launched by end of February.

In addition, developers have put in place precautionary measures at showflats to safeguard visitors and property agents. Digital technology and social media also enabled developers to explore new ways to market their projects. These initiatives would go some way to ensure some business continuity, in ways which were not possible during the SARS outbreak in 2003.

Based on the experience during SARS, new sales fell to 119-228 units per month between January and May 2003, before rebounding to 775 units in June 2003 and 1,271 units in July 2003 as the epidemic subsided and pent-up demand returned. For the whole of 2003, private home prices fell 2.1%, extending the decline from the fallout post the dot-com crash.

Gleaning from history and barring a protracted downturn from the coronavirus outbreak, we think pent-up demand will return later and developers will refrain from major price cuts.”

Mr Paul Ho, chief mortgage officer at iCompareLoan, said, “the residential property sector chugging along is encouraging. This is because the first two months of the year tend to be seasonally lower due to the start of the school term.”