Ravi Chandran
“Winter is Coming”, warns Sotheby’s International Realty (ListSIR) in its recent research on the Singapore residential market.
“Winter Is Coming” is the motto of House Stark, one of the Great Houses of Westeros from the hit HBO series, Game of Thrones. The meaning behind these words is one of warning and constant vigilance. The Starks, being the lords of the North, strive to always be prepared for the coming of winter, which hits their lands the hardest.
Q2 2019 will be a watershed quarter as the world awaits the outcome of Brexit and the US-China trade negotiations, said the ListSIR research.
The research said these external factors will impact the Singapore economy and affect market sentiment, which will in turn affect the residential market.
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“So far, developers have faced much difficulty in selling their new projects and the unsold inventory is building up. Given the current tax regime and the large supply pipeline, home buyers will be very selective,” said Ms Huan Mei Han, Director at LIST Sotheby’s International Realty. She added, “it is difficult to tell where the market is heading for the rest of the year.”
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Looking at the projects which developers have lined up, the research said that there should be some exciting new launches in the coming months. Some of these are Avenue South Residence at Silat Avenue, Riviere at Jiak KimStreet, Midtown Bay at Beach Road and Eden at Draycott Park, listed List SIR. It said that these projects could garner a better response than those in Q1 if market sentiments improve.
A stronger demand will lend support to home prices in the residential market, leading to a modest upside in prices in H2 2019, said the report.
The Singapore residential market will remain resilient, as proven in the past. The various measures put in place by the government are meant to ensure a more stable residential market with sustainable price growth. This market resilience is why high-net-worth investors are still attracted to the Singapore residential market.
Private home price decline gained momentum in Q1 2019 by dropping 0.7 per cent, following a 0.1 per cent decrease in the fourth quarter showed the Urban Redevelopment Authority (URA) statistics. The private home price decline was steeper than the 0.6 per cent decrease in URA’s flash estimate released earlier this month.
The private home price decline was felt in the Core Central Region (CCR) with prices of non-landed properties decreasing by 3.0 per cent, compared with the 1.0 per cent decline in Q4. Prices of non-landed properties in Rest of Central Region (RCR) dropped 0.7 per cent, compared with the 1.8 per cent increase in the previous quarter. Prices for private homes in Outside Central Region (OCR) increased up by 0.2 per cent, compared with Q4’s 0.7 per cent increase. The OCR was the only segment which bucked the trend, rising by 0.2% on the back of several successful mass-market launches.
Ms Tricia Song, Head of Research for Singapore for Colliers International commenting on the price decline in the residential market for Q1 said, “the property cooling measures of July 2018 – like speed bumps – have been effective in bringing down prices and total transaction volumes.:
She added: “Developers’ new sales in Q1 2019 were flat QOQ at 1,838 units, from 1,836 units in Q4 2018, but were still up 16% YOY due to more attractive launches. Meanwhile, resale transactions declined 5.7% QOQ and nearly halved YOY to 1,858 units.”
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The ListSIR report said there is some good news from the rental market brought some relief to residential market: the rental index rose by 1.0% q-o-q in Q1 2019, after a fall of 1.0% in Q4 2018. The uptick was jointly contributed by a 0.2% growth in the rents of landed homes and a 1.1% growth in non-landed homes in Q1 2019. Both price indices recorded a a q-o-q decline of 2.1% and 0.8% respectively in Q4 2018.
By locality, the OCR rental index showed the largest rise of 1.7% q-o-q, followed by a 1.6% rise in the CCR rental index. This could be attributed to a shrinking supply of rental apartments following the sale of several apartment developments in these locations for the purpose of redevelopment. Rents were given a boost as supply tightened. On the other hand, the RCR rental index fell for the second consecutive quarter by 0.3% q-o-q. Pressure on rents could have come from fresh supply in newly completed condos in H2 2018.
Going forward, the reducing trend of vacant units is likely to continue as fewer new homes will be completed in 2019 (8,926 units) and 2020 (4,231 units), said the report. Adding, vacant units would rise again as projected completions will rise steeply with the bumper of new projects under construction from 2017 onwards.
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