From data to demand: will lower private home prices bring buyers back?

This week in Property

• Private home prices fell in Q3, while HDB resale prices escalated
• Could building bigger homes encourage people to have bigger families?
• Deals brewing in the commercial market  
• A New World succession drama unfolds

A two-speed market?

In a quarter marked by low sales volume and only three major new launches, private home prices fell 1.1 per cent, flash data showed. The decline in the residential price index is the first fall in five quarters and the biggest drop since 2016, when prices fell 1.5 per cent in Q3. Prices fell the most in the landed segments (down 3.8 per cent, reversing from their 1.9 per cent rise in Q2) and in the prime Core Central Region (down 1.5 per cent after easing 0.3 per cent in Q2). Will this bring buyers back, and could prices slip further?

In the public housing market, we saw a different story. HDB resale prices sped up in the third quarter, climbing 2.5 per cent on higher volume after rising 2.3 per cent in Q2. The fourth quarter will be one to watch to see if the latest HDB loan restrictions will dampen the market.

Private homebuyers in the market today are resisting higher prices. At recent new project launches, the smallest units with lower absolute price quantums have sold the fastest. This has led many developers to manage the mix in a way that moves sales – that is, to carve out more small units in their projects. One-bedroom apartments in old condos measure up to 700-800 square feet. Today, one-bedders are roughly 500 sq ft in size, while new two-bedroom homes have been shaved to under 800 sq ft, and some projects are starting to cut three-bedroom units down to less than 1,000 sq ft. 

Smaller units certainly punch above their weight in contributing to project returns by selling faster and fetching a higher price per square foot. But they don’t serve the needs of larger families, writes Leslie Yee. 

For sure, households are getting smaller: the average household size among resident households was 3.11 persons in 2023 versus 3.5 persons in 2010 and 3.7 persons in 2000. More couples today are choosing not to have children, and Singapore’s birth rate is steadily declining.

The government hopes to reverse this trend, and has rolled out measures to support parenthood. Leslie asks, might providing bigger condo units that can adequately house families with three or more young children encourage people to have larger families?

Deals brewing

A four-storey Bugis area shophouse is being sold for about S$42 million, while a deal is said to be brewing for three nearby shophouses that could go for S$75 million to S$85 million. There has been no let-up in interest in the shophouse market in Districts 1 and 2, with activity picking up in recent months, Kalpana Rashiwala reports. Word is that 96 Amoy Street, which was the home of popular Cantonese zi char eatery Ka-Soh, is being sold at around S$22 million to S$26 million. The Telok Ayer area conservation shophouse, now leased to a Sichuan restaurant, is owned by one of the associates of the 10 convicted money launderers from Fujian, China.    

Elsewhere in Singapore, the S$1.25 billion collective sale of freehold Katong building Roxy Square closed with no bids, Jessie Lim reports. Appetite for en bloc sites may not pick up any time soon despite the Federal Reserve’s oversized interest-rate cut, according to market watchers. Two other commercial buildings in the area have been put up for sale in past tenders.  Katong Plaza, which was asking S$188 million, is understood to be closing in on a deal. Katong Shopping Centre came onto the market last year with a reserve price of S$638 million but did not find a buyer.

CapitaLand Ascott Trust (Clas) is acquiring lyf Funan Singapore from a CapitaLand group private fund. The purchase consideration is estimated at S$146.4 million, based on the property’s agreed value of S$263 million, which is at a 1.9 per cent discount to the average of two independent valuations, Clas said. The acquisition is expected to be largely funded from Clas’ sale of Citadines Mount Sophia Singapore for S$148 million, which was completed in March 2024.

The strata commercial space, meanwhile, is stirring. Luxury watch retailer The Hour Glass is buying two floors of office space in Tong Building for S$68.5 million from See Hoy Chan Realty and See Hoy Chan Land.

Property players are also making moves outside Singapore. Mapletree Industrial Trust is buying a freehold, mixed-use property in Tokyo for 14.5 billion yen (S$130 million), a price that is a discount of about 3.3 per cent to valuation. The deal is expected to improve its yield and to be funded by yen-denominated borrowings. The asset is fully leased to a Japanese conglomerate with a weighted average lease to expiry of about five years.

Keppel is offloading a 70 per cent stake in a Vietnamese unit for up to S$391.1 million. The subsidiary, Saigon Sport City, holds rights to develop a 64-hectare tract of land in Vietnam. 

UOL and Singapore Land are in early talks to buy a 50 per cent stake in an office and retail building in Sydney, the companies said. The Australian Financial Review reported that Canadian property giant Brookfield was selling its half stake in a 28-storey office tower at 388 George Street in Sydney to UOL. The purchase was reported to range from A$450 million (S$397 million) to A$480 million, representing a capitalisation rate of about 6.2 per cent.

Manulife US Reit is divesting an office building in Sacramento, California, for US$117 million, just a shade under its valuation of US$118 million. Net proceeds from the all-cash sale amount to about US$108.8 million, which will be used to fully repay about US$130.7 million in loans maturing in 2025. Under a debt restructuring agreement, the Reit is targeting net proceeds of  US$230 million in 2024, and US$328.7 million in 2025, after it breached debt covenants when valuations fell last year. 

In other markets

Upper-crust Hong Kong was abuzz last week after Adrian Cheng, 44, abruptly stepped aside as the third-generation leader of New World, a pillar of one of Asia’s great business dynasties. The company’s chief operating officer Eric Ma – someone who is not a member of the multibillionaire Cheng family – has replaced him. Shares of New World jumped on Friday following the announcement, but insiders were stunned, Bloomberg reports. Hong Kong’s real estate families, who are among the city’s richest and most influential power players, rarely hand over to outsiders. 

Those in the know say that behind the scenes, Cheng’s 77-year-old father, Henry Cheng, stepped into the fray and reassumed a hands-on role at the family’s sprawling empire, including New World. After elevating his eldest son Adrian only to watch him lose billions, the family patriarch has assigned key parts of the business group to his daughter Sonia, 43; second son Brian, 41; and third son Christopher, 35. The succession drama is just unfolding. Stay tuned.

Three Chinese megacities eased restrictions on buying homes, and Beijing’s central bank said it would ask financial institutions to lower mortgage rates as the country seeks to pull itself out of a housing slump. 

The southern megacities of Guangzhou and Shenzhen – home to a combined 37 million people – said homebuyers would no longer be vetted for their eligibility to purchase a home. In central Guangzhou, where purchasers were previously barred from owning more than two homes, there will no longer be any restrictions on how many a person can buy. And in the economic powerhouse of Shanghai, authorities said they would lower the minimum down payments on a home to 15 per cent from 20 per cent.

Is the US commercial property market coming back to life? Buyers and sellers are increasingly convinced that the beleaguered market is reaching a bottom. With prices down 19 per cent from a peak in 2022, brokers are seeing steady improvements in transaction volume. Lenders and owners are wanting to cut losses and make new investments now that the Fed’s first rate cut in four years is bringing some clarity on where valuations stand. Struggling properties that took on too much debt at much lower rates will drive many of the transactions.

Will market sentiment and home sales pick up in the last quarter as developers nudge out delayed launches? Let me know your thoughts at mich@sph.com.sg

Top reads this week

• Singapore’s private home prices slip 1.1% in Q3; first drop since Q2 2023
• HDB resale prices speed up in Q3, rising 2.5%: flash data
• Four-storey Bugis shophouse fetches S$42 million, deal brewing for 3 adjoining units
• FairPrice, Sheng Siong in fine fettle even as Giant shrinks footprint
• S$8,000-a-month HDB flat rent ‘mistake’ prompts questions on data integrity