[2021 Repost]
The property market in Singapore has been robust and doing well. Most commonly seen in the news is the dramatic rise of HDB resale prices. Latest HDB resale prices (at point of writing) has already exceeded the peak in April 2013. This growth is expected to continue.
Private property prices on the uptrend too
However, asides from that, the private property prices have been performing well too. Transactions and prices are on the up ever since the pandemic hits. However, what you will see is that this growth has been more modest in comparison. Let’s try to understand why.
As we can see in the graph from URA above – Prices in Q3 2021 has risen by 0.9%. This marks a sixth quarter-on-quarter increase, and this increase is driven largely by landed properties sales. Private condo prices have actually generally maintained a pretty stable price, though it has risen since 2020.
Landed Properties Average prices rising by 14% from Q4 2020
From the above segmented graphs – We can see the landed property segment growing by 14%. No doubt, this was helped along by the buoyant GCB market. However, the overall price gain remained modest at 0.9% due to majority of transactions in the resale and mass market segments; eg Outside of Central Region (OCR) condos. This typically fetches lower prices relatively.
Why do people turn to the resale and mass market segments in 2021 though?
Pandemic-induced factors
The most apparent reason would be similar to what we observed in the HDB market. There is a growing demand for space in a Work-From-Home (WFH) culture caused by the pandemic.
As people stayed more at home for both work and play – they require more space for privacy, home office, home gym and etc. This demand drives people to seek good value in the resale and OCR properties. Resale and OCR properties can provide the space at the reasonable prices they seek. Not only that, resale properties offer the immediacy and possibility of moving in as soon as possible.
This reason is of course, more apparent in the HDB market because HDB resale units offer much more affordable prices in comparison. You can see this reflected in the hot HDB resale market.
Little to no new supply
2021 has seen little supply as compared to the past years. There is a lack of new developments launching this year, plus a majority of these new developments are all located in the Core Central Region (CCR). CCR developments are priced much higher so we would expect lower transaction numbers for them generally.
As such, people would instead turn to resale condos or pay over the odds for the limited OCR new launches or existing projects. This is most keenly seen in the sale of Pasir Ris 8 in July, where prices increased 6 times on the day of balloting itself. While this drives property prices up for these segments, one can guess this will still not beat the much higher prices for a CCR property!
New liquidity
Next is a reason which I feel not only contributes to these 2 segments; but possibly to private home prices in general and in the future. These are the HDB upgraders. In a consequential action from the rising of HDB resale prices – these HDB sellers will inject a flush of liquidity into the private property market. As more upgraders grab the opportunity of rising HDB resale prices, they will look at not only the private resale market, but new launches and landed properties too. This will drive demand up for private properties.
What to expect next for private properties in 2021 & beyond?
We’ve seen how the pandemic and supply has pushed private property prices. We also looked at how HDB upgraders can increase the liquidity in the market. Asides, the market condition is still favourable with low interest rates and the opening of borders as foreign investors start to return to our shores.
This all bodes a further increase to private property prices, barring an intervention from the Government on the market. However, the increases thus far has been modest as seen. This is good news as it does not suggest an overheating of market.
And lastly, we can also say this viewpoint is shared by developers too. Land sales are hitting new price heights. This suggests a new price point once the next batch of new developments launch in the future.
For example, take a look at the latest land sales in Buona Vista at the one-north area. 2 land parcels just sold for about $1.2+k psf. A similar land parcel nearby sold for just about $1k psf – later developed as one-north Eden which sold for about $1.8-$2k psf.
Back in June too, a record price was sold for an Executive Condo (EC) site in Tengah – a whole new area that is still developing. Selling prices are expected to be in the range of $1,190 to $1,250psf. This is approximately about $100 psf more than current EC prices.
To summarise,
We believe with the existing supply sold, we are likely to look at a new price level in the future as developers ramp up their land-buying activities. This would be driven by current economic & pandemic-induced factors as demand remains strong in this climate.
Wondering what you can do? You can reach out to us for a non-obligatory session below!
Comments