Private homes market steady as strong demand and controlled supply of private homes sustain upward trend
According to the Urban Redevelopment Authority’s (URA) All Residential Property Price Index (PPI), private homes prices rose for the fifth consecutive quarter in 2Q 2021 by 0.8% quarter-on-quarter (qoq), following the 3.3% qoq growth in 1Q 2021. On a year-on-year (yoy) basis, prices rose by 7.1% in 2Q 2021. This can be attributed to strong demand and controlled supply of private homes, sustaining the upward trend.
The quarter’s price growth was led by price increases for non-landed homes, whose PPI rose by 1.1% qoq, marking its fifth consecutive quarter of increase. Driven by work-from-home practices and the government’s continued efforts toward decentralizing workplaces, the non-landed PPI for the Outside Central Region (OCR) posted the strongest qoq growth of 1.9% in 2Q 2021, followed by a 1.1% and 0.1% qoq growth recorded by the Central Core Region (CCR) and Rest of Central Region (RCR) respectively. In contrast, the PPI for landed homes fell by 0.3% qoq in 2Q 2021 after a strong qoq growth of 6.7% in 1Q 2021.
EDMUND TIE’s Head of Research and Consulting, Mr Lam Chern Woon, said: “Looking at the trajectory of non-landed median prices by unit size in 2Q 2021, median prices for units that are 1,500 sqft and above showed the sharpest qoq growth of 8.7%, which suggests a growing preference among buyers for bigger units due to the longer time spent at home as a result of the pandemic.”
Transaction volume for 2Q 2021 held steady with a total of 8,449 units sold in the primary and secondary markets. This marked a 4.3% qoq increase and a substantial 217.2% yoy increase due to a low base effect arising from the Circuit Breaker period in 2Q 2020. The majority of the quarter’s transactions came from secondary sales, which contributed 5,483 units and represented a 19.0% qoq growth. In contrast, sales in the primary market recorded a 15.1% qoq decline to 2,966 units, as developers limited or postponed new launch activity in the wake of tighter COVID-19 safety measures introduced in May 2021 by the government in response to emerging clusters.
In 2Q 2021, among the market segments, the CCR posted the largest qoq growths of 19.4% and 29.1% in primary sales and secondary sales respectively. The CCR’s strong growth in primary sales volume for the quarter was accounted for by its sizeable 46.8% qoq growth in new launches, which at 1,019 units was the most out of the market segments.
Mr Lam commented: “Living in the prime and downtown areas continues to draw home buyers, with projects such as One Bernam and Irwell Hill Residences performing well and contributing to the CCR’s strong primary sales performance for 2Q 2021. There is still appeal in upmarket residential living that offers connectivity and proximity to town.”
In the RCR, secondary sales increased by 9.2% qoq, while primary sales decreased by 37.5% qoq in 2Q 2021. Buyers’ preference for homes in the OCR have held steady, which was reflected in the 1.6% and 20.7% qoq growths in the region’s primary and secondary sales respectively in 2Q 2021. In the non-landed primary market, the highest proportion or 32.3% of transactions in 2Q 2021 by unit size were of units between 500 and 700 sqft, suggesting healthy mass market demand for smaller and more affordable units against the backdrop of rising property prices.
For the smallest unit type of below 500sqft, 2Q 2021 recorded a qoq decline in the proportion of transactions for such units, from 12.7% in 1Q 2021 to 9.4%. Conversely, there was an increase in the proportion of transactions of larger units above 1,000 sqft, which collectively made up 27.3% of the primary sales in 2Q 2021.
Mr Lam remarked: “Studio apartments appear to have lost some of their appeal despite their lower price quantum, as more home buyers seek larger spaces to accommodate work-from-home arrangements. ”
In terms of price, the majority or 38.2% of primary transactions in 2Q 2021 were in the $1mn to $1.5mn band, a noticeable decline from the 47.6% recorded in 1Q 2021. There was a similar decline in the proportion of transactions below $1mn, from 15.6% in 1Q 2021 to just 5.4% in 2Q 2021, likely due to rising property prices and the preferential shift away from smaller homes. The trend to shift away from smaller homes is further reinforced by the growth in the proportion of transactions above $2mn, from 21.2% in 1Q 2021 to 24.1%, forming almost a quarter of all primary transactions in 2Q 2021.
As the government continuously calibrates border measures throughout 2Q 2021 in response to the more transmissible Delta variant, the number of purchases made by foreign (non-PR) buyers in the quarter dipped by 2.7% qoq, from 292 units to 284 units. The decline did not affect the CCR, where the number of transactions increased by a significant 35.8% qoq in 2Q 2021, from 109 units to 148 units. The CCR has overtaken the RCR as the region with the most transactions made by foreign by, as foreigners gravitated to a more familiar segment. The Mainland Chinese remained the top foreign homebuyer in 2Q 2021 across all regions.
The loss-making share for the overall market (landed and non-landed) fell from 14.0% in Mar 2021 to a record low of 10.5% in May 2021 before increasing to 13.8% in Jun 2021. Profitability in the secondary market was improving for the first two months of 2Q 2021 before home viewing restrictions kicked in mid-May, affecting the ease and profitability of transactions made in Jun 2021.
Mr Lam commented: “As the government continues to ease safety restrictions amidst the rising vaccination rates, owners can look forward to more certainty as they go about their marketing process. Resale profitability could pick up slightly in the coming months, barring the introduction of fresh homeviewing restrictions or a deterioration of the economic environment.”
With the government’s change in stance from curbing infections to living with an endemic COVID-19, there is a clear reopening road map that bodes well for the economy. The private home market continues to be supported by ample liquidity and optimistic buyer sentiments, and we expect developers to continue pricing units at a premium for well-designed products in choice locations. Barring possible cooling measures from the government, the private homes market should remain on sound footing, with new launch activity picking up over the second half of 2021 as Singapore progresses further along its national vaccination drive and relaxes its COVID-19 related measures.
Private homes market steady as interest rates remain low
“Buyers and investors should talk to trusted loan professionals to get the best home loans for their purchase,” he added,