SINGAPORE, 28 January 2022 – Mr Lam Chern Woon (蓝振文), Head of Research and Consulting at EDMUND TIE comments on URA 4Q 2021 statistics.
The residential market exhibited stellar resilience in the second year of a global pandemic that has yet to be controlled. Primary sales volumes rose by 30% to a eight-year high while the secondary market saw a near doubling in transaction volumes to hit a decade-high.
In 2021, developers moved 13,027 residential units, a solid increase from 2020’s 9982 units, amid a strong economic rebound, abundant liquidity, and the fact that certain sectors of the economy have fared relatively better. This robust sales performance came on the back of a decline in total units launched for 2021 (10,496 vs 10,883 in 2020). Consequently, the number of unsold inventory stock with planning approvals declined by around 10,000 units to just 14,154 units during the year. Including other projects in the supply pipeline but with no approvals granted, the overall uncompleted unsold inventory declined to a record low of 21,433 units, which could be cleared in under 20 months if the pace of sales last year was to be repeated.
The robust spate of take-up and dwindling inventory have provided confidence to developers and a sense of urgency in the market; private home price growth accelerated to 5.0% qoq in the last quarter of 2021 from 1.1% growth in the previous quarter. For the full year, home prices rose by 10.6%, the fastest since 2010 when prices rose 17.7% fuelled by the global liquidity boom in the wake of the Global Financial Crisis. The landed segment saw a sharper pace of price growth of 13.3% in 2021 compared to the non-landed segment. Within the non-landed segment, the Rest of Central Region outperformed the other segments for the second consecutive year as buyers favoured locations in the city fringe which struck a balance between proximity to the city and affordability.
Looking ahead, in light of a return to trend economic growth this year from a high base and in the immediate wake of the cooling measures, we expect some caution from developers and homebuyers. Given the low unsold stock, developers will continue to retain pricing power, although we do expect launch and sales volumes to ease this year. The fundamentals of the housing market remain sound in terms of genuine first-time homebuying demand and affordability, but the rising number of Omicron cases is a case of concern.
Overall office rents rose by 0.9% qoq in 4Q 2021, a reversal from the 3.5% decline in 3Q 2021. Category 1 office buildings, referring to quality office spaces in prime locations, saw an increase in occupancies 0.4% pt after four consecutive quarters of decline as occupiers continued to take advantage of the current climate to upgrade their spaces from a traditional model to a modern and efficient setup that encourages collaboration and networking. The occupancy rate for the remaining office spaces has also started to stabilised and held steady in 4Q 2021 after three quarters of decline. As a result, the overall office vacancy rate fell by 0.1% point in 4Q 2021, after a 0.3% pt increase in the previous quarter.
Moving forward, as Singapore progresses along its endemic Covid-19 roadmap, leasing sentiment and demand improves with the 50% return of the workforce into the office from the start of the year, we expect rental growth of around 3% to 5% for the prime segment. This is also supported by demand from tenants relocated from older office buildings undergoing redevelopment, relatively tight supply pipeline for the year. Additionally, sectors such as technology, financial services and health care related industries continue to experience robust growth and will be the key sectors driving demand.
The overall retail climate improved in the last quarter of 2021, especially with retail rents in the Central Region posting the first increase in eight quarters. The occupancy rate in the Orchard planning area grew for the second consecutive quarter to 88.7% in 4Q 2021 from 88.4% in 3Q 2021. International and local brands remain on the lookout for opportunities to expand their presence in the Singapore market, especially in the prime areas and are willing to leverage on the current soft climate to secure preferred locations before the eventual rental recovery. The suburban segment continued to outperform, with the Outside Central Region occupancy rate rising by 0.5% qoq to 95.7% in 4Q 2021.
Looking ahead, we expect retailer sentiment to improve as the nation is now on a better footing to manage the Covid pandemic as the booster programme is rolled out to the majority of the population. We expect landlords to be increasingly selective in taking on tenants in order to curate a desirable trade mix and retail positioning for sustainable footfall growth. We expect suburban retail rents to lead the recovery in 2022 with around 5% to 10% of rental growth, while prime rents in OCR and OCA are also poised for a recovery.
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