Mismatch for residential take-up and launches in Q1

Singapore

Some analysts say this might be a sign that potential buyers are resisting current price levels amid the mid the property cooling measures.

According to the Urban Redevelopment Authority's (URA) quarterly figures released on Friday, developers launched 2,989 units, compared to Q4's 1,657 units, but sold 1,838 units, similar to Q4's 1,836 units.

Unsold units also rose in the quarter, to 36,839 excluding executive condominium (EC) apartments, from 34,824 units in the previous quarter.

JLL senior director for research & consultancy Ong Teck Hui said: "As the mismatch between launches and sales take-up in 1Q19 is significant, it would send a strong message that it is difficult to attract more buyers at current price levels.

"This could have the effect of new projects being priced more competitively as well as the prices of previously launched projects being reviewed and adjusted in order to achieve better sales".

Another possible consequence is that developers may launch a smaller number of units in each release, "rather than launching so many and then finding they can't sell," Mr Ong said. Still, he and other analysts do not think there will be any big price cuts soon.

CBRE head of research for Singapore and South-east Asia Desmond Sim believes pressure to lower prices won't come until the additional buyer's stamp duty (ABSD) deadline draws near. "So now they can incentivise agents... or use other marketing schemes that would not affect the value of the development." In the first quarter, the overall private residential price index fell for the second straight quarter, this time by 0.7 per cent compared to the 0.1 per cent decrease in Q4.

The Q1 fall was also a notch higher than the 0.6 per cent decrease in URA's earlier flash estimate.

Overall, prices of non-landed properties fell 1.1 per cent, compared with a 0.5 per cent increase in the previous quarter. Non-landed properties in the central and city-fringe areas led the drop in prices.

Prices of non-landed properties in Core Central Region (CCR) decreased by 3.0 per cent in the first quarter, compared to a 1 per cent decrease in the previous quarter.

In the Rest of Central Region (RCR), non-landed prices fell 0.7 per cent in Q1, compared with a 1.8 per cent increase in Q4.

Mr Ong pointed out that the cooling measures, especially the higher ABSD rates, would have hit investor buyers in CCR and RCR harder.

Colliers head of research for Singapore Tricia Song studied transactions in the CCR and suggested that developers in the prime area may be clearing inventory for some completed projects, leading to a drop in median prices.

These include Lloyd Sixtyfive, New Futura and TwentyOne Angullia Park.

Meanwhile, OrangeTee & Tie's Christine Sun analysed Realis data and suggests that there were more new homes sold below S$3,000 per square foot in the quarter, which could have resulted in a lower weighted average price.

As for RCR, Ms Song said: "Prices appear to be normalising, after the uptick spurred by new launches such as Arena Residences, Kent Ridge Hill Residences and Parc Esta in Q4 2018."

In comparison, analysts say owner-occupier demand helped support prices for apartments and condos in the outside Central Region (OCR). That inched up by 0.2 per cent, compared with Q4's 0.7 per cent rise.

But Colliers' Ms Song warned that prices could soften for the rest of 2019, given the substantial new residential supply in mega-projects such as Treasure at Tampines and The Florence Residences.

Meanwhile, prices of landed properties increased by 1.1 per cent in the first quarter of 2019, compared with the 2.0 per cent decrease in the previous quarter.

Ms Song said: "The defensiveness in landed home prices could be due to supply scarcity, and the owner-occupation buyer profile which is less affected by the cooling measures."

As at the end of the first quarter, there was a total supply of 53,284 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals, compared with 51,498 units in Q4.

One bright spot could be the private rental market, which posted a 1 per cent increase, reversing a 1 per cent decline in Q4.

This is underpinned by low completion volumes until 2021, Christine Li, head of research for Singapore and South-east Asia said.

Vacancies, which also fell to their lowest in more than five years, also helped rents, as the fall in new completions of private homes outpaced that of net absorption, Mr Ong of JLL said.

Q1's vacancy rate stands at 6.3 per cent, down from from 6.4 per cent in the previous quarter,

He added: "For the rest of 2019, leasing market conditions would be tilted to favour landlords due to falling supply but rental increase could be moderated by less favourable economic and business conditions, which may have an impact on hiring and rental budgets."

PropNex expects the private property price index to hover between -2 per cent to +1 per cent for the rest of the year. ERA estimates price growth for 2019 to be in the range of -0.5 per cent to +0.5 per cent. OrangeTee & Tie's is 1 and 3 per cent for 2019.

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