Private home launches and sales pick up in 2Q2018

By EdgeProp Singapore

/ EdgeProp |

July 27, 2018 6:00 PM SGT

Launches of private homes picked up significantly in the second quarter of 2018 with 2,437 units placed on the market by developers – 164.6% higher than in 1Q2018 and 21.2% higher y-o-y –according to the 2Q2018 statistics released by the Urban Redevelopment Authority (URA) released on July 27.

Rising prices and a more buoyant market led developers to increase the number of launches during the second quarter.

According to Ong Teck Hui, national director of research and consultancy at JLL, launch figures for 3Q2018 could remain healthy as Riverfront Residences, Park Colonial and Stirling Residences have initiated their launches in July and other projects are also gearing up for launch including Daintree Residences and The Tre Ver.

The latest statistics show that developers sold 2,366 private residential units in 2Q2018, a 49.7% increase from 1Q18 but 23.1% less than the same period last year. Nevertheless, it reflects healthy demand which is supply-led. More units could have been sold if there had been more launches during the quarter. The tally for new private homes sold in 1H2018 is 3,947 units, while the full year estimate is 8,000 to 9,000 units, which is roughly 15% to 25% lower than in 2017.

Sales of private homes in the secondary market was also robust, registering 4,820 units in 2Q2018 which is a 28.6% increase from 1Q2018 and 25.9% higher y-o-y. It is the highest quarterly secondary market sales volume since 2Q2011, when 5,348 units were sold.

“As buying opportunities in the primary market were not picking up fast enough, many buyers resorted to the secondary market, pushing up its transaction volume. Sales volume in the secondary market could ease, due to a mismatch in price expectations between sellers and buyers, as the latter become more hesitant after the recent cooling measures,” says JLL’s Ong.

Strong price momentum in 2Q18

Source: URA

The URA private residential property price index rose 3.4% in 2Q18, unchanged from the earlier flash estimate, indicative of an even momentum in price increase. The price index for non-landed homes in Core Central Region (CCR) rose 0.9%, lower than the 1.4% recorded during the flash estimate and significantly less than the 5.5% increase in 1Q18. This could be indicative of some price resistance as CCR prices surged strongly in 1Q18. For example, the median prices of new sales in CCR jumped 18.1% during that quarter, which could constrain subsequent increases as buyers adjust to much higher pricing levels.

The non-landed price index for Rest of the Central Region (RCR) rose 5.6% in 2Q18, quite similar to the flash estimate of 5.7%. Price increases in RCR seems to be catching up after a gentle rise of 1.2% in 1Q18. The non-landed price index for Outside Central Region (OCR) registered a 3.0% increase, a touch higher than the 2.9% flash estimate and slower than the 5.6% increase in 1Q18.

In the landed segment, an increase of 4.1% in its price index was recorded, higher than the 3.8% during flash estimate and the 1.9% rise in 1Q18. Demand for landed homes has picked up strongly since the residential market turned around in mid-2017. The number of landed homes sold in the year from mid-2017 to mid-2018 rose by 59% compared to the preceding one year, based on URA Realis data.

Christine Sun, head of research and consultancy at OrangeTee & Tie (OT&T), says she expects prices to stabilise in the coming months, in light of the cooling measures. “We do not foresee huge dips in prices as developers are not offering huge discounts at this juncture. Many developers are deep pocketed or public listed companies with strong holding power and they have proven to ride through the odds during the past rounds of cooling measures,” says Sun.

She adds that the two-prong approach used by most developers now include giving a direct 3-5% discount to offset the extra ABSD or stricter LTV limit for buyers and to increase agents’ commission to ‘divert’ buyers to their projects. “The latter strategy is preferred especially for the high-end segment, as it serves to maintain ongoing sales without causing large price fluctuations for the entire project,” says OT&T’s Sun.

Vacancy rate fell for the third consecutive quarter on the back of low completed supply

Source: URA

In 2Q2918, 1,327 new private homes were completed, 32.9% less than in 1Q18 and 65.3% lower y-o-y. It is the lowest number of units completed since 2Q2017 when 1,116 units were completed. The low completion numbers contributed to a low net new supply of 1,152 units which fell short of new demand of 1,994 units resulting in vacancy rate dropping to 7.1% in 2Q18 from 7.4% in the previous quarter.

The lower vacancy rate augurs well for the rental market as reflected by the 1% rise in the overall rental index. It is noted that the indices for non-landed homes in CCR, RCR, OCR as well as for landed homes have all turned positive, the first time since 2Q2013. This suggests that the recovery in the residential rental market is likely to be on a firm footing. The trend of low net new supply is expected to continue, aided by collective sales units being withdrawn from the market, which will help to keep vacancy rates healthy and support further increases in rents.

According to Dr Tan Tee Khoon, Knight Frank executive director and head of residential project marketing, “The rental market for private homes is improving, as vacancy rates for the RCR and OCR continues to decline steadily. The vacancy rate for homes in OCR largely remains stable in 1H2018, hovering around 4.9% to 5.0%, which is close to the natural rate of vacancy for the overall rental market. The market has largely recalibrated and absorbed the new completions in 2016.”

Tan adds: “Separately, the vacancy remains high in CCR at 10.9%, despite falling by -0.7 percentage points q-o-q. Notwithstanding rents in CCR continue to increase. The higher vacancy may due to some projects that are completed but yet to be launched.”

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