IT HAS BEEN more than three months since the implementation of the latest series of property cooling measures. We can begin to assess how the residential landscape has changed and whether pockets of value are emerging in the market.
HISTORICAL CORRELATIONS
From Figure 1, we see that the increase of new launches in the primary market has slowed since the latest cooling measures. Nevertheless, they have been resilient.
There is a strong historical correlation between primary home prices of non-landed properties in District 15 in the East and those in the prime Orchard Road Districts of 9, 10 and 11. The likely explanation of this correlation is that both regions are homes to upper-income households.
PRICE PREMIUM BETWEEN D9-11 AND D15
The price premium for non-landed private residential properties in Districts 9, 10 and 11 over those in District 15 averaged 39% from 2012 to 2017. However, for the fi rst three quarters of 2018, the premium for non-landed homes in Districts 9, 10 and 11 has risen signifi cantly, and is more than 50% as at the fi rst week of October.
What is likely to happen is that prices in District 15 will rise to close that gap (see Figure 1), because future launches in the district have higher breakeven prices than those launched in 1H2018, including Amber45.
INCREASING BREAKEVEN PRICES
Although the collective sales fever has broken, it should be noted that the market is still primed for a series of launches at sequentially higher price from projects awaiting sales licences.
Figure 3 shows the estimated breakeven prices on a psf basis of developments in District 15 that will arise from the collective sale sites sold
between January 2017 and July 2018 (thick blue line). Breakeven prices have been trending up. The red line gives the estimated minimum launch prices of those projects that have broken even in the $2,000-to-$2,200 psf range (these projects are in District 15).
The support for future higher launch prices is coming not only from higher land costs but also from future launches of projects in Districts 9, 10 and 11 that, owing to high land cost again, will have to be sold at exponentially higher prices (see Figure 4).
If the historical price correlation between Districts 9, 10 and 11 hold into the future, we should expect District 15 launch prices to be further aided by the former.
In this new phase of the Singapore private residential property cycle, we would expect prices of between $1,700 and $1,900 psf for 99-year leasehold projects in the Rest of Central Region launched in 2H2018.
Most of the developers have good balance sheets and there is little they can do to lower prices because, for quite a number of them, their land price component is high and they have holding power.
GOOD VALUE PROPOSITION
“In this new property cycle, Amber45 is the fi rst project sale in District 15, setting benchmark prices for subsequent launches to build on,” says Alan Cheong, head of research at Savills Singapore.
Future launches in District 15 will be at higher prices than previous launches done in 1H2018. Prices north of $2,400 psf are expected for launches here, significantly greater than the average of $2,100 psf seen in the first week of October 2018.
In fact, recent transactions of 99-year leasehold projects with good attributes have already surpassed $2,000 psf. This further highlights the value of Amber45 because of its rare freehold tenure and the attractive price.
The completion of the Thomson-East Coast MRT Line will further hype up the accessibility factor of District 15, and Amber45 is located within a five-minute walk of Tanjong Katong MRT station. The freehold, 139-unit development at 45 Amber Road is a short drive from a host of top schools, East Coast Park and swanky restaurants and cafés.
The freehold, 139-unit development at 45 Amber Road is a short drive from a host of top schools, East Coast Park and swanky restaurants and cafés
Units in Amber45 are fitted with Laufen bathroom accessories and De Dietrich and Gaggenau kitchen appliances. Attractively priced versus leasehold properties in the vicinity, Amber45 has upside potential. The project is 70% sold and units are attractively priced from $1,763,000.
The show gallery is at 2 Dunman Road (near Dakota MRT station).
For private viewing, call 6100 6331.
This article appeared in The EdgeProp Pullout Issue 855 (November 5, 2018) of The Edge Singapore.