On the back of new launch supply pipeline, private home prices rose for the second consecutive quarter in 2019 with 2.8 per cent cumulative increase for the second and third quarter
Despite the softer economy in the first half of 2019, the appeal of new project launches has attracted more local and foreign homebuyers especially in Q3 2019. The attractiveness of new projects was further enhanced by the URA draft Master Plan 2019, together with the unveiling of future developments and transport infrastructure which are within proximity to various new launch projects.
Notwithstanding the new high pricing set by new launch projects compared to previous year’s launches, there is growing acceptance from homebuyers on the price premium factors accorded to well-located projects with attractive concepts that appeal in lifestyle and convenience. Other new projects that stand out are thoughtfully positioned in terms of value and design. As such, total new sales volume of private homes reached 3,281 units in Q3 2019, compared to 2,350 and 1,838 units in Q2 and Q1 2019 respectively.
In consideration of a potential recovery in economic outlook and assuming existing cooling measures to remain status quo, we could expect private home prices to trend at a steady growth path next year, akin to a ‘Goldilocks effect’. Our forecast of price movements are:
Continuing from the 2017/2018 collective land sales fever, developers have launched a total of 9,119 uncompleted private residential units for the past three quarters in 2019. This is 28 per cent higher compared to 7,112 units launched over the same period in 2018. A total of 7,469 units were sold over the past three quarters of 2019, which is 7.3 per cent higher compared to 6,959 units sold over the same period in 2018.
Throughout 2019, we have observed a gradual pick up of general sales rate (new sales volume out of total units in a development) of new launches, from an approximate average of 10 per cent to 15 per cent within the first month of launch during the first half of 2019, to as high as 30 per cent for some projects within the first two weeks of launch in the second half of 2019. In order to boost take-up rates, developers have been rolling out proactive marketing strategies to garner interest from prospective homebuyers. At the same time, they have stepped up on partnership efforts, such as working closely with marketing agencies to embark on market outreach and tap on the right target customer pool. Leveraging on technology tools to provide instant sales and promotional updates to customers have also helped developers and agents to reach out to more buyers effectively and enhance conversion.
Key trends at play
Against the backdrop of the property cooling measures and economic slowdown, one of the key impetus to support private residential demand is the URA draft Master Plan 2019 released in March 2019. The government’s plans to transform various precincts, notably the Greater Southern Waterfront, has provided confidence to property investors of the prospects of Singapore’s property landscape and investment potential for existing private homes. The unveiling of the finalised first phase of the Cross Island Line network has uplifted sales of new launch projects within proximity to some upcoming MRT stations.
The high liquidity in the market, fuelled by low interest rates, has also supported demand for residential property investment. With limited attractive options to invest in equities and bonds with compressed yields and returns, retail investors view property as a possible long-term investment and a hedge against inflation. For foreign investors, the strong Singapore Dollar which has held up well historically against regional currencies, is another attraction.
As an open economy, it is widely expected that Singapore’s 2020 economic performance will be impacted by on-going geopolitical tensions, including the US-China trade war, which still shows no signs of abating in the near term. Business conditions is likely to be constantly challenged by volatile market sentiment. Notwithstanding these headwinds, the quest for viable investment destinations and asset classes will remain strong, and investors searching for a stable investment environment and long-term capital preservation will embark on the Singapore property play.
We are cautiously optimistic of the demand for Singapore’s residential property as we envisage continuing local and foreign homebuyers interest for well-positioned and attractively designed private homes, such as projects near MRT stations and lifestyle amenities.
Senior Director, Research and Consulting
Cognisant of the upcoming launch pipeline in 2020, developers who have launched their projects in 2018 and 2019 are likely to embark on continuous marketing strategies, progressively rolling out promotions and client engagement programmes in stages to vie for market attention. Other developers may engage with marketing agents and consultants at the outset to conceptualise their product well and to capture target customers early. Seeking foreign homebuyers in regional markets could be in the plans for some developers with high-end projects.
We expect developer new sales of private homes to land between 9,500 and 10,500 units for 2019, while we envisage the secondary market (subsale and resale) volume to potentially range between 8,000 and 9,500 units for the same year.