Reflections at Keppel Bay sold 139 units and achieved a median price of $1,601 psf over the 20 months to August 2021. (Picture: Samuel Isaac Chua/The Edge Singapore)
Resale volumes in the private residential market have rebounded strongly over the first seven months of this year, after a relatively muted performance in 2019 and 2020.
According to URA caveats, 9,160 private residential units (excluding executive condos or ECs) were sold in the seven months. This is more than the 8,767 units sold in 2020 and higher than the 7,547 units that were moved in 2019.
According to a report by OrangeTee & Tie (OTT) Research & Analytics, the resale transactions so far this year have also surpassed the sales in each of the years from 2013 to 2016.
The OTT report points out that resale volume had plunged following the property cooling measures in July 2018. Resale demand had remained low, at an average of 1,700 units per quarter from 4Q2018 to 2Q2020, says Christine Sun, senior vice president of reserch & analytics at OTT. By comparison, 1Q2021 resale volume more than doubled to 3,752 units, while 4,161 units changed hands in the resale market in 2Q2021, she adds.
Sun notes that an increase in resale volume was recorded across all sectors, but demand was highest in the Outside Central Region (OCR) market. The rise in demand coincided with diminishing supply of available resale units in the secondary market.
In 2Q2021, 2,116 units changed hands in the resale market in the OCR. This was more than six times the 343 units sold in the corresponding quarter a year ago. Resales in the OCR represented 50.9% of the total resale volume last quarter, while 28.5% came from the Core Central Region (CCR) and 20.6% from the Rest of Central Region (RCR).
According to Sun, there are two reasons for the strong resale performance this year.
The first is the lack of new launches in the suburban areas or OCR. “Over the past 18 months, there have only been two major new launches in this segment, not including ECs,” she says.
High Park Residences in District 28 moved 126 units at a median price of $1,232 psf, compared to the median new launch price of $1,372 psf in the same district. (Picture: Samuel Isaac Chua/The Edge Singapore)
She expects supply in the OCR to remain low, as most developers have yet to replenish their landbanks in these areas. The land supply in the suburban and city fringe areas has also fallen to a new low since the end of the last collective sale cycle in 2018.
“There have been few successful en bloc deals, and supply from the government land sales has been moderated,” says Sun.
The second reason is the strong performance in the HDB resale market over the same 18-month period. “HDB upgraders who have sold their homes recently will typically search for new homes in the same vicinity. These buyers usually pick larger-sized units that help support a stronger resale market,” says Sun.
The experience of working from home during this pandemic has also encouraged more homeowners to seek out larger homes to accommodate a dedicated workspace, says Sun. For example, where some buyers might have picked a two-bedroom unit before the pandemic, these days, they are more likely to pick a two-plus study unit or even a three-bedroom condo, she says.
The resurgence in the resale demand has also sparked a price recovery and the market seems to be at the beginning of an upcycle, says Sun. In 2Q2021, resale prices for the entire private residential market rose 3.4% y-o-y to $1,305 psf.
The highest price increase was recorded in the OCR segment. Sun expects prices in this segment to climb by 8% to 11% for the whole of 2021, higher than the 3.1% increase recorded a year ago.
OTT notes that from 2Q2020 to 2Q2021, new condo prices grew at a faster pace of 17.1% compared to the 3.4% increase recorded for the resale market. This has caused the price gap between new and resale condos to widen from 30.2% in 2Q2020 to 47.4% in 2Q2021.
“The widening price gap may fuel more demand for resale properties, but the most significant demand push factor will still be the tight supply situation in the OCR market,” says Sun.
She expects the price gap to continue to widen on the back of more new launches in the CCR and RCR regions.
According to OTT, the top-selling completed condominiums in the secondary market are Reflections at Keppel Bay, Sims Urban Oasis and Caribbean at Keppel Bay. These projects are located in the city fringe or RCR.
In the OCR, the top spots were taken up by High Park Residences, The Minton and Parc Rosewood. “The performance of these OCR projects reflects the pure market demand for popular projects in their respective neighbourhoods. The top-selling projects in the OCR tend to be larger-sized developments with many facilities and proximity to amenities, thus they draw in more HDB upgraders,” says Sun.
So far, the price increase in the resale market has been largely in line with economic fundamentals, says Sun.
When the government considers any property cooling measures, it has to take into account the economic conditions of the whole economy, as the property market is closely tied to other industries such as construction and finance, and some service industries.
“Any cooling measures may have the unintended consequence of derailing economic recovery for some sectors and other unintended knock-on factors,” she says, adding that developers and construction firms are already struggling with rising manpower and construction costs.
Ultimately, the government also has to consider who is driving the recent market demand, and in this case, it seems to be genuine home buyers who are behind the resurgence, she says. “There are already strong measures in place to temper the market and this means that most buyers are not over-leveraging their property purchase.”
The most sought-after units in the resale market this year were the three- and four-bedroom units. These are popular with owner- occupiers buying for their own use. Some HDB upgraders have also been able to capitalise on profits of more than $700,000 that can support their upgrading needs.