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Suburban share of private home launches set to fall

WEIGHED down by the cooling measures, the private residential real estate market has suffered a drop in prices and transactions in the past two years. Although the high-end market segment was the first to experience price decline in 2013, the contagion steadily spread to the mid-tier and mass-market segments within months.

This article will examine the market trends in the private mid-tier and mass-market housing segments. These two market segments occupy a very significant part of the private residential property market in Singapore. Based on the total sales transactions in the past five years, the number of transactions in these two market segments made up 84 per cent of the total market volume.

The private housing market in Singapore can be broadly divided into three segments, namely the mass-market, mid-tier and high-end segments. For the purpose of this report, the Core Central Region (CCR), Rest of Central Region (RCR) and Outside Central Region (OCR) will represent the high-end, mid-tier and mass-market segments respectively.

After reaching a peak in mid-2013, the RCR and OCR residential property price indices have been declining gradually. The turning point was triggered by the introduction of the Total Debt Servicing Ratio (TDSR) framework in late-June 2013.

Based on the third quarter 2015 flash estimates by the Urban Redevelopment Authority, its price index for non-landed homes in RCR has dropped 9.3 per cent from the peak in Q2 2013. The OCR price index peaked slightly later, in Q3 2013, and has decreased 6.7 per cent since then.

Although the decline in the price indices over the past two years does not appear to be very high, it is not an accurate barometer of the market sentiments. The spectre of further price drops due to the cooling measures weighs heavily on the real estate market and has created a sense of gloom which has resulted in a further drop in prices and transactions.


In the past five years, Government Land Sales (GLS) were the main source of development sites acquired by developers. As a large majority of the GLS sites were located in the OCR, it is not surprising that the mass-market occupied the lion's share of the primary market among the three market segments. This was especially so in April and July this year when three prominent projects - Botanique at Bartley, North Park Residences and High Park Residences - all in the OCR, were launched with healthy sales momentum.

The median take-up rates for OCR and RCR launches, as measured by the median of sales-to-launch ratio for January to August 2015, were 104.12 per cent and 115.70 per cent respectively. A take-up rate of more than 100 per cent would result in a reduction of developers' inventory of unsold units. The median take-up rate for RCR is higher than that for the OCR while the total number of unsold units in OCR constitutes the majority of total unsold units among the three market segments, implying faster clearance of unsold stock in RCR.


In the past five years, from 2010 to 2014, the respective shares of OCR, RCR and CCR of the total number of private homes launched were 59.6 per cent, 26.0 per cent and 14.4 per cent.

During this period, OCR launch and sales volume dominated the private residential primary market so much that it is hard to imagine a time when the OCR did not hog the limelight. The situation was quite different before 2009, when the number of private homes launched in the OCR made up less than 40 per cent of the total launch volume.

The market share of OCR in terms of the number of uncompleted private homes launched for sale increased steadily from 19.5 per cent in 2005 to 70.4 per cent in 2012. The most dramatic increase was in 2011 and 2012, when the primary market launch and sales volume in the OCR grew sharply at the expense of the market shares of CCR and RCR. It was also during these two years that the average prices of mass-market homes in the OCR climbed significantly. The OCR price index increased 14.6 per cent in the two-year period of 2011 and 2012. During the same period, the price indices for CCR and RCR rose only 4.8 per cent and 6.2 per cent respectively.

The relatively high increase in OCR prices corresponded with the sharp rise in the primary market activities in this market segment. However this upward trajectory in prices was possible in the absence of the TDSR framework and high Additional Buyer's Stamp Duty (ABSD).

In the next 18 to 24 months, the proportion of private homes in the OCR to be launched for sale is projected to fall below 50 per cent for the first time since 2010. Based on the analysis of the private housing projects that could be launched in the next two years, only 42.9 per cent of the total number of units in these projects is located in the OCR. As a result, there could be less downward pressure on the OCR property prices.


As the supply of new OCR launches offered to homebuyers in the next two years is projected to gradually decrease, some of the buyers could turn to the resale market or to buy executive condos (EC), especially as there is a large upcoming supply of new EC launches. On the other hand, the buyers of new launches in the RCR could expect to enjoy a steady supply. However, based on the prices paid by developers at recent GLS tenders, homebuyers should not expect prices of new launches in these two segments to fall significantly.

As the private housing market faces growing headwinds posed by a slowing economy and the prospect of rising interest rates, the average prices in all the three market segments are expected to remain weak in the coming year. The silver lining is that the government may ease some of the cooling measures if the real estate market were to be dramatically affected by an economic contraction. Such relaxation of the curbs would be necessary to address certain market imbalances in the near future.

  • The article is written by SLP research & consultancy department