SINGAPORE, 15 December 2022 – Mr Lam Chern Woon (蓝振文), Head of Research and Consulting at EDMUND TIE comments on the developer sales in November 2022.
The private residential market saw softer sales momentum in November 2022, during which sales (excluding ECs) fell 17% to 259 units, from 312 units in October. This is notwithstanding the fact that units launched in November tripled. The take-up rate dipped below 100%, falling to 81% in November from 306% in October, which is also the lowest pace of absorption since Jan 2021 (63%).
The softer sales momentum can be explained by several factors: an increasingly tight financing environment, a year-end lull in homebuying activities, and the market holding back for new project launches next year. There were 3 new project launches in November – Hill House (72 units) and Sophia Regency (38 units) in the CCR and Kovan Jewel (34 units) in the OCR.
All three segments, CCR, RCR and OCR, saw a decline in sales in November by 14%, 10% and 37% m-o-m, respectively. In aggregate, the CCR accounted for 57% of sales in the month, while the RCR and OCR accounted for 28% and 15%, respectively. The outperformance in the CCR can be attributed to the fact that 273 new units were launched in this market segment, compared to just 12 and 34 new units in the RCR and OCR, respectively.
Our analysis of the caveats showed that, in terms of buying demand by unit size in the primary market within the CCR, demand rose for units sized between 1,000 and 1,500 sq ft in November (23% of total CCR units), compared to October (18%). Meanwhile, 30% of homes sold in the CCR in November were priced between $1.5 to 2 million. This is compared to 23% in October, reflecting inching-up prices.
In the CCR, sales were contributed by projects such as Leedon Green (16 units), One Holland Village Residences (15 units) and Perfect Ten (14 units), which accounted for 30% of the market segment’s sale in the month. In the RCR, sales were contributed by projects such as Riviere (19 units), The Landmark (13 units) and One Pearl Bank (11 units), accounting for 59% of the segment’s sales. In the OCR, sales were contributed by projects such Lentor Modern (9 units), The Commodore (6 units) and Parc Clematis (6 units), which contributed to 55% of the segment’s sales.
Among the top 10 best-selling projects islandwide, six were located in the CCR, another three were located in the RCR, while only one was located in the OCR. Homebuyers are finding value in the CCR segment, given the stronger run-up in prices in the RCR and OCR market segments in this market cycle.
In addition, prices were noticeably firm among the 10 top-selling projects in November, seven of which (Riviere, One Holland Village Residences, Perfect Ten, Pullman Residences Newton, The Landmark, One Pearl Bank and Lentor Modern) saw higher median sales price in November, as compared to October and the average price gain was 5% m-o-m.
With close to 7,000 units sold for the first 11 months of this year, 2022’s primary sales tally is likely to be around 7,500 units, a decrease from 13,027 units in 2021, and which is also the lowest since 2015’s 7,440 units.
Going into 2023, we expect housing demand to remain under pressure, given the ongoing macro headwinds, high living costs and slowing growth outlook. Likewise, the incessant increase in interest rates will weigh on housing affordability, although there appears to be some glimmer of hope that the pace of rate hikes could be slower going forward. Nonetheless, the labour market is still holding up with healthy wage growth, insulating homebuying demand from the vagaries of the macro environment.
We also expect the strong public resale market performance in 2022 to provide some tailwind to demand, while foreign demand should rise gradually on the back of our attraction as a safe haven. Given the low level of unsold stock and a balanced demand-supply situation, coupled with high land and construction costs, developers are likely to be able to push ahead with higher launch prices, albeit at a more sustainable pace, to cater to housing budgets. We are expecting prices to rise by 1-3% for 2023, after about 9% this year.
In addition to ensuring housing affordability, pricing strategy of developers will depend on locational attributes, such as accessibility, proximity to amenities/schools and price/supply competition. Mixed-use projects and transit-oriented developments are also likely to command a premium.
In the secondary market, affordability constraints will weigh on sales volumes and cap the price expectations of sellers. Loss-making transactions are at an all-time low in the current high price climate, and it will take a sharp recession and labour market downtown to push prices down. If labour market conditions hold up, we expect rising interest rates to weigh on sales, but not prices.
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