SINGAPORE, 18 January 2023 – Mr Lam Chern Woon (蓝振文), Head of Research and Consulting at EDMUND TIE comments on the developer sales in December 2022.
Developers moved 170 private residential units (excluding ECs) in December 2022, which is a third lower than November’s 259 units. This is due to a dearth of new project launches in December, during which only 45 units were launched in the month. Amid a year of rising interest rates, sky-high inflation, macroeconomic uncertainties and policy intervention, developers held back on launches, especially in the second half of last year. For the entire 2022, developers sold 7,150 homes, 45% lower than the 13,027 homes sold in 2021. Given the challenging environment last year, a sales take-up rate of 159% (accelerating from 2021’s 124%) is commendable, to say the least, attesting to ample liquidity and organic growth support housing demand.
The CCR accounted for 52% of primary sales in December, while the RCR and OCR accounted for 32% and 16%, respectively. CCR’s outperformance may be attributed to the fact that homebuyers saw more value in CCR home prices, which have run up less in this market cycle. The increasingly tight financing environment would have relatively less impact on buyers shopping in the CCR segment, while the continual easing of borders has also brought more well-heeled foreign participants into this market segment. Prices ticked up in this segment accordingly; compared to 60% in November, 72% of homes sold in the CCR in December were priced at S$2 million and above, as prices accelerated further in the CCR.
The share of foreign purchases in private homes rose to 8.9% in December 2022, up from 7.5% in November, as borders reopen. The significant milestone of China moving away from its zero-Covid stance at the turn of the year is expected to buoy foreign demand from the Mainland Chinese, and foreign demand is expected to reach 6-7% share for this year, compared to 4.7% in 2022. The share of foreign demand this year is then expected to be more in line with the pre-pandemic share of 6.0% in 2019, but a surge to 10% is unlikely, given the elevated ABSD rates in place for foreigners, compared to a decade ago.
In the CCR, sales were contributed by projects such as Leedon Green (11 units), Perfect Ten (10 units) and One Holland Village Residences (7 units), which accounted for 31% of the market segment’s sale in the month. In the RCR, sales were contributed by projects such as The Landmark (14 units), Riviere (14 units) and Canninghill Piers (5 units), accounting for 61% of the segment’s sales. In the OCR, sales were contributed by projects such The Gazania (7 units), The Commodore (6 units) and Parc Clematis (4 units), which contributed to 63% of the segment’s sales.
Among the top 10 best-selling projects islandwide, six were located in the CCR, another two were located in the RCR, with the remaining two located in the OCR. We observed a gravitation of demand towards the projects located in CCR, as foreign demand recovers with the reopening of the borders. In addition, price pressures have softened among the 10 top-selling projects in December. Among the top 10 top-selling projects, only 4 projects (The Landmark, Leedon Green, The Commodore and One Bernam) saw higher median sales price in December, as compared to November. Comparatively, 7 of the 10 best-selling projects saw higher prices in November.
For 2022, the stellar take-up of various suburban projects have helped push up prices to a new normal. For instance, close to half of new homes sold in the OCR were priced at S$2,000 psf or higher. Given the new market psychology that people are accustomed to higher price points, sustained housing demand and high land costs, we can expect new projects to be launched in 2023, at minimal price benchmarks of $3,000 psf, $2,500 and $2,000 psf in the CCR, RCR and OCR, respectively.
Looking ahead, we expect the property sector to face headwinds such as rising interest rates, a tight financing environment and a softer public resale market. Nonetheless, organic housing demand, supported by a tight labour market and strong household balance sheets, should help sustain the market. Primary sales volumes could rise to reach 8,000 to 9,000 units in 2023, up from about 7,150 units for 2022, as the launch pipeline for 2023 is tipped to be 10,000 units or more, barring a sharp deterioration in the economic climate. However, affordability and macro concerns will likely curtail price growth, and prices are likely to increase at a more sustainable pace of 1-3% this year, following 2022’s 8.4%.
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