ANALYSIS: Are larger units really in greater demand after the pandemic?

A total of 33 caveats for D’Leedon have been lodged with URA this year. (Photo: EdgeProp Singapore)

SINGAPORE (EDGEPROP) – The first lockdown in Singapore due to COVID-19 took place in April 2020. During the lockdown and subsequent circuit breakers, work-from-home (WFH) arrangements were put in place to prevent the spread of the virus. WFH and flexible work arrangements have become more prevalent post-pandemic. As a result, it is often assumed that buyers prefer larger condo units after the pandemic to accommodate their WFH needs.

In this article, we examined the resale caveats of condo units lodged with URA from 2016 to the time of writing. A comparison was made of the sizes of the units sold before and after the pandemic to determine if spacious units are really more popular with buyers.

It is notable that total resale volume did not weaken during the pandemic. In 2020, 8,713 resale caveats for condo units were lodged with URA, up from 7,543 caveats lodged in 2019. A record high of 16,375 resale caveats was lodged in 2021, but the number declined to 12,124 caveats in 2022 and 10,228 caveats last year. At the time of writing, 3,930 resale caveats have been lodged this year.

Average sizes for resale units fell during pandemic

The average size for resale units fell from 1,223 sq ft in 2020 to 1,100 sq ft last year. There is a slight increase to 1,123 sq ft this year. However, it is notable that the average size of the resale units has consistently been higher than 1,000 sq ft, while the average size of new units has never crossed the benchmark.

Bulk of resale condo units measure 1,001 to 2,000 sq ft but smaller units gaining ground

Transacted units of 1,001 to 2,000 sq ft fell from 55.3% of total resale volume in 2020 to that of 46.8% last year and remained at 46.8% this year. Despite the decline in percentage, units of 1,001 to 2,000 sq ft in size still represent the bulk of the condo units sold in the resale market. Last year, 4,791 resale units measuring 1,001 to 2,000 sq ft were sold, higher than their smaller counterparts measuring 501 to 1,000 sq ft (3,898 transactions) as well as units measuring 500 sq ft and below (968 transactions).

D’Leedon and The Minton are examples of condos with units of 1,001 to 2,000 sq ft that performed well in the resale market this year. This year, 23 resale transactions for units of 1,001 to 2,000 sq ft from D’Leedon were sold at an average price of $1,945 psf, while 15 units of similar size from The Minton transacted at an average price of $1,475 psf. Both condos are leasehold developments located in very different neighbourhoods. D’Leedon is located along Leedon Heights in District 10, while The Minton is located along Hougang Street 11 in District 19. D’Leedon obtained its temporary occupation permit (TOP) in 2014, while The Minton obtained its TOP in 2013.

Attractive discounts were offered for The Residences at W Singapore Sentosa Cove and Cuscaden Reserve earlier this year. The discounts boosted demand for the two leasehold developments. A total of 39 units that measure 1,001 to 2,000 sq ft from The Residences at W Singapore Sentosa Cove were sold at an average price of $1,778 psf, while 12 units of similar size from Cuscaden Reserve were sold at an average price of $3,157 psf. The Residences at W Singapore Sentosa Cove is located in Sentosa and obtained its TOP in 2011, while Cuscaden Reserve is located in District 10 and obtained its TOP last year.

Contrary to the common belief that buyers prefer larger units to accommodate WFH arrangements, small units of 500 sq ft and below account for more of the total resale volume after the pandemic. In 2020, small units accounted for 6.8% of the total resale volume, increasing to 9.5% last year and 8.2% this year. Such small units in Sims Urban Oasis and Commonwealth Towers are popular with buyers. This year, 11 small units from Sims Urban Oasis exchanged hands at an average price of $1,832 psf while nine units from Commonwealth Towers fetched an average of $2,131 psf. Both developments are leasehold condos that obtained their TOP in 2017 but Commonwealth Towers is located in District 3 while Sims Urban Oasis is located in District 14.

It is interesting to note that units of 1,000 sq ft and below accounted for 36.7% of the total resale volume in 2020. The resale volume for such units grew to 47.4% of the total resale volume this year, surpassing that of units measuring 1,001 to 2,000 sq ft, which accounted for 46.8%.

Peeping into the future

Small units of below 500 sq ft are expected to remain in demand, with the number of one-person households increasing from 217,300 households in 2022 to 222,700 households last year.

However, units of 501 to 1,000 sq ft are expected to become more popular because such units are suitable for the majority of households in Singapore, which comprise two or three persons. Last year, there were 334,200 two-person households and 315,500 three-person households. The average household size was 3.11 persons last year, a slight increase from 3.09 persons in 2022.

Furthermore, there was a new ruling on unit size that took effect in January last year. At least 20% of the units in new non-landed developments in the central area must have a net internal area of at least 70 sq m (753 sq ft). Net internal area refers to the living space of the unit which excludes voids, balconies, aircon ledges, and other external spaces. This means that more new units that are just launched for sale are bigger. When these units are placed for sale in the resale market, they will increase the size of the available resale units.

The average resale price growth for condo units of 1,001 to 2,000 sq ft is stronger than that of their smaller counterparts. From 2020 to this year, the average price for condo units of 1,001 to 2,000 sq ft increased by 26.1% to $1,595 psf. The slowest price growth was observed for units that are 500 sq ft and below, which increased by 25.3% to $1,828 psf over the same timeframe. Price growth for units measuring 501 to 1,000 sq ft grew marginally stronger by 25.5% to $1,776 psf.

Source: EdgeProp Market Trends (as at 31 May 2024)

A household may desire a more spacious home, but they have to balance their desire for a spacious home with affordability. For example, a 2,000 sq ft resale condo unit will cost approximately $3.19 million at the average price of $1,595 psf. A 1,000-sq ft resale condo unit will cost significantly less at approximately $1.78 million because it has a lower average price of $1,776 psf.

Last year, median household income from work only grew 2.8% year-on-year to $10,869 per month. Singapore’s GDP grew 1.1% year-on-year last year and is forecasted to grow only 1% to 3% this year. In comparison, the average price for resale condo units measuring 501 to 1,000 sq ft rose by 9.5% y-o-y last year while the average price for their larger counterparts measuring 1,001 to 2,000 sq ft increased by 6.8% y-o-y.

Conclusion

During the pandemic, many assumed that buyers would prefer larger homes. However, our examination of resale data indicates that this assumption does not hold true. Instead, the average size of transacted resale condo units has been declining since 2020. Based on transactions for this year, the average size of resale condo units is 1,123 sq ft, down from 1,223 sq ft in 2020. Additionally, resale units have represented a larger percentage of sale transactions for condo units since 2021.

While resale units of 1,001 to 2,000 sq ft still represent the bulk of the resale transactions, their smaller counterparts are gaining popularity among buyers. Small units of 500 sq ft and below are still expected to command healthy demand due to the rise in the number of one-person households. Furthermore, households will have to balance their requirement for space with affordability, especially since the average price for resale condo units has grown at a faster pace than median household income and Singapore’s GDP.

Check out the latest listings for The Residences At W Singapore Sentosa Cove, Cuscaden Reserve, D'leedon, The Minton, Sims Urban Oasis, Commonwealth Towers properties