With growing acceptance from homebuyers on the price premium factors accorded to well-conceptualised projects with site and locational attributes, the private residential market has witnessed a price divergence between new and resale homes.
In 2019, the average price of new sale condominiums and apartments sold in the CCR stood at $2,950 psf – 40 per cent above the average transacted price for resale units, which hovered around $2,105 psf (see table). In 2018, the price premium for new sale transactions in the CCR is 35 per cent.
Table: Average Prices and Price Gaps between New Sale and Resale transactions – Condominiums & Apartments
Source: REALIS (as at 5 February 2020), EDMUND TIE Research
Alice Tan, senior director of research and consulting commented that many new apartment and condominium launches in 2019 offer exciting design concepts in good locations which have attracted more buyers and garnered acceptance for new price levels. Additionally, buyers from the high-net-worth community prioritise prestige, locational attributes and project quality over price and this explains the encouraging take-up rates of new project launches despite the prevailing cooling measures.
She added that some new launches were on land sites secured by developers during the 2017/2018 collective sales fever, as well as on government land sale sites in popular locations. Those sites were therefore acquired at elevated land costs, which translated into correspondingly higher launch prices at new benchmark levels in their respective locales. This has contributed to widening price gaps between the primary and secondary markets across CCR, RCR and OCR in 2019, as compared to 2018.
Transactions recorded for new sale apartments and condominiums at premium prices mainly originate from projects at desirable locations, such as in prime districts, within proximity to MRT stations, the Central Business District (CBD) and growth areas such as the Greater Southern Waterfront and Bugis precincts. In prime Districts 9 and 10, and in central locations in Districts 1 and 7, home prices have exceeded $3,000 psf, with some large units being transacted even at this quantum on a per sq ft basis.
Will the trend continue for 2020?
For 2020, which will see ample new supply coming on-stream and demand staying positive, it has been anticipated that the price differential between the primary and resale non-landed markets to remain at the 40 to 45 per cent range.
“With up to 20 new projects in the CCR slated for launch in 2020 and robust demand from buyers seeking quality homes in desirable locations, we expect new homes to continue commanding a sizeable premium above their resale counterparts,” said Alice.
In response to the current uncertainties, developers are adopting a wait-and-see stance by pacing out their launches and rolling out their projects at opportune times when the Wuhan virus situation stabilises.
Some developers could possibly exercise a “phased plus premium approach” to their pricing strategy, initially launching at attractive prices in the early phase, and then stepping up their offer prices subsequently for premium units or when the market sentiment improves.
Also given Singapore’s reputation as a safe haven with stable fundamentals, the high net worth community is likely to resume their investment activities after the virus situation stabilises, and set their sights on investing in prime residential property in Singapore.
Therefore, it is anticipated that the current price gaps across the three market segments to be maintained for 2020 at least, notwithstanding prevailing headwinds and challenges posed by the Wuhan virus outbreak.
CCR new sale prices are poised to be sustained at current prices for 2020, albeit with modest adjustments depending on how market sentiment pans out. RCR new sale projects could see some uplift in transactions as some buyers could opt for city fringe projects for better value over prime locations, while OCR new sale projects are likely to sustain its sales performance as home upgraders seize the opportunity to purchase suburban private homes at current prices, which are acceptable in light of the low interest rates.