How resilient is the demand for high-end condos? - by EdgeProp

SINGAPORE (EDGEPROP) - On Jan 3, just two days after ringing in the New Year, potential buyers thronged the preview of three prime, freehold projects in Districts 9 and 10.

Crowd at Leedon Green preview on Jan 3 (Photo: MCL Land-Yanlord Land)

These were the 69-unit boutique development, Van Holland (former Toho Mansion) by Koh Brothers Group; the 638-unit Leedon Green (redevelopment of the former Tulip Garden) by a joint venture between MCL Land and Yanlord Land; and the 376-unit The Avenir on the site of the former Pacific Mansion, by joint venture partners, Hong Leong Holdings, GuocoLand and Hong Realty.

Dominic Lee, PropNex Realty’s head of luxury team, calls it “an anomaly” to have three high-end developments in the Core Central Region (CCR) kickstart the rollout of new project launches for 2020.

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“These developers probably want to launch ahead of the competition to avoid cannibalisation, especially for projects located near each other,” says Lee.

Still, this was in line with last year when three new projects in the CCR debuted on the first weekend of January 2019. These were the 71-unit Fyve Derbyshire and 140-unit RV Altitude, both freehold projects by Roxy-Pacific Holdings; and Allgreen Properties’ 476-unit, 99-year leasehold Fourth Avenue Residences, located in the Bukit Timah Area right at the doorstep of the Sixth Avenue MRT station.

Crowd at Fyve Derbyshire at launch weekend in January 2019 (Photo: Roxy-Pacific Holdings)

According to a report by ERA Research & Consultancy Department on Jan 9, there are about 20 prime residential developments in the CCR, with an estimated 3,700 units slated for launch this year. But who will be the buyers of these prime condominium units this year?

Over the past five years from 2014 to 2019, only 7% of the total private housing units launched for sale were located in the CCR, says Nicholas Mak, head of research & consultancy department at ERA.

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In its latest report, ERA compared the effects of the July 2018 property cooling measures on transaction volume of private non-landed housing units. Two 18-month periods were used for comparison: the period from January 2017 to June 2018; and from July 2018 to end December 2019.

The study is based on URA transaction data, after stripping out units that were acquired in collective sales or en bloc sales during the two periods. Executive condos or ECs were also excluded because they are a hybrid private-public housing property and foreigners are excluded from purchasing until 10 years after completion.

In the 18-month period from Jan 2017 to June 2018, a total of 32,866 private non-landed residential units were transacted in both the primary and secondary markets. Post-cooling measures, transaction volume sank by 23.5% to 25,148 units over the next 18-month period (See Table 1).

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Source: URA, ERA Research & Consultancy

According to ERA’s Mak, the high-end segment was “more susceptible” to the latest market curbs compared to other market segments. This was evidenced by the steeper decline in transactions in the CCR which contracted by 36.5% to 3,716 units from 5,847 units before (See Table 2).

Source: URA, ERA Research & Consultancy

The market share of high-end condominium transactions therefore shrank from 17.8% of overall non-landed residential property transactions to 14.8% post-property cooling measures, notes ERA.

As the additional buyer’s stamp duty (ABSD) for foreigners was raised to 20% which is still higher than that for locals, the impact on homebuying demand also differs, explains Mak.

Typically, about one-fifth to a third of private home transactions are attributed to non-Singaporean buyers. “The level of foreign participation in the Singapore private residential market wax and wane according to the market climate and government intervention,” says Mak.

In the three-year period from January 2017 to December 2019, about 23.1% of the 58,000 private non-landed residential property transactions islandwide were purchases by foreigners.

Foreign buyer representation is usually higher in the luxury condominium segment as these housing units are beyond the reach of most Singaporeans. Over the past three years for example, 31.9% of the transactions in the CCR were purchases by foreign individuals, says Mak.

The cooling measures introduced in July 2018 adversely affected foreign demand for residential real estate more than local demand in the overall market. Transactions by Singaporeans in the 18-month period post-cooling measures was 19,673 units nationwide. This was 20.1% below the transacted volume in the corresponding 18-month period before the cooling measures. Over the same period, purchases by foreigners fell a steeper 32.4% nationwide to 5,399 units, according to ERA.

“Companies or non-individual entities staged the largest retreat from the private residential property market after the implementation of the market curbs,” notes Mak. The number of transactions from these parties plunged 71% in the 18-month period post-cooling measures compared to before.

This significant drop is attributed to the hike in ABSD by companies or non-individual entities to 25% of the residential property purchase price – compared to 15% before.

In the luxury residential real estate market, foreign buying demand proved to be more resilient than local demand in the face of the latest cooling measures. The number of non-landed transactions in the CCR by foreigners fell 30.2% to 1,254 units compared to local purchases, which saw a sharper drop of 38.3% to 2,413 units post-cooling measures. “The retreat by Singaporeans in the high-end residential property market was bigger than the contraction of foreign demand,” points out Mak.

Foreign buyer across 61 countries reduced their real estate purchases in the CCR after July 2018. However, the rankings of the four biggest groups of foreign buyers by nationality — namely China, Malaysia, Indonesia and the US — remained largely unchanged, even though their volume of transactions dropped.

Among the foreign buyers of non-landed homes in the CCR, Chinese nationals maintained their pole position, even though they bought 30.1% fewer homes since the cooling measures.

The proportion of Malaysian buyers dropped by a wider margin (–62.1%) compared to Indonesian buyers (–28.7%). Hence, Indonesians swapped places with Malaysians, taking second and third place respectively.

Americans maintained their position in fourth place, even though they bought 22.1% fewer homes.

Before the property cooling measures, homebuyers from India were the fifth biggest group of foreign buyers in the luxury segment. In the 18-months following the July 2018 curbs, they have dropped to 10th place, with Taiwanese buyers in fifth position.

In conclusion, foreign buying demand in the high-end residential segment weathered the cooling measures better than foreign buying demand in the rest of the residential market, according to ERA. “The success of these high-end property launches will require demand from foreigners,” says Mak.

By

Cecilia Chow

/ EdgeProp Singapore

|

January 10, 2020 8:58 AM SGT

Source: EdgeProp Singapore (14 Jan 2020)

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Is 2020 the Right Time to Buy Private Property in Singapore? - by 99.co

Photo by cottonbro from Pexels

We’re nearing that time of year – when your relatives start asking when you’re getting married, and your mental stability is strained by every shop blasting Gong Xi Ni. That’s also the time of year when many of you consider looking for a private property, either to upgrade or as your first home. But given the economic situation, is 2020 the right year to “go private”? The answer gets complicated:

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The property market in 2020 is different from anything we’ve seen in the past decade

The flight to safety helps; every time Trump tweets, one lucky property agent sells a penthouse to a foreigner.

If you had told someone in 2010 that they could someday buy condos in Bugis for $1.38 million, or that we’d have a massive 32,000 home supply glut but prices aren’t tanking, they would have have said “ha, sure, and Donald Trump will become President of the US”.

My point is, a lot of things haven’t gone quite as planned this year; even the things that were foreseen to some extent (like the supply glut from the 2017/18 en-bloc fever) have manifested in pretty unpredictable ways. So that the rest of this article makes sense, here are some wider issues you need to grasp:

• The same en-bloc fever that caused the supply glut is also preventing prices from plummeting
• Expensive properties aren’t doing too well, but really super expensive properties are
• We may be seeing a cartoonishly huge mob of upgraders in 2020 to 2021
• A weak economic outlook makes us worry if we can afford our homes, while at the same time making our homes more affordable

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1. The same en-bloc fever that caused the supply glut is also preventing prices from plummeting

“And this is the area where we bury all hope for profitability” – Developers in 2017/18

At present, we have some 32,000 odd unsold homes to clear. The general consensus is that – at the present volume of transactions – we should clear up this glut by about 2024 or 2025. That’s a long time and a lot of unsold homes, which should send prices tumbling. But that isn’t happening for one simple reason:

Developers paid insane prices for land during the collective sales fever. Back then, I pointed out that Chinese developers with deep pockets were happy to pay huge sums, and prompt aggressive bids from local counterparts as well. Land at the time was at a 29 per cent premium compared to 2015.

The same year, I pointed that we also saw the biggest spike in Development Charges (DCs) in around 10 years, which further raised costs to developers.

So the supply glut today – which was caused by the over-eager buying in 2017/18 – means we have a lot of unsold homes, that were also expensive for developers to build. Given the already thin margins for developers, there just isn’t much room for further discounts.

2. Expensive properties aren’t doing too well, but really super expensive properties are

Expensive properties (those reaching the $3 million mark) are hard to move when investors are cautious, and bracing for a downturn. But ironically, the same downturn is helping properties that are not expensive, but very expensive.

Sale of super-lux units, such as those priced at $10 million or above, spiked to an 11-year high in 2019. Firstly because if you’re Chinese, very wealthy, and don’t know where the economy is headed, you’ll want a safer place to park your cash besides just the mainland.

Second – and this is open to debate – some believe that such super-lux properties, being rare and one-of-a-kind, are more likely to hold their value even in turbulent markets. A historic conserved bungalow, for example, isn’t threatened by things like “supply overhang” given that zero new ones are built per year.

Singapore real estate isn’t just prestigious, it’s considered a safe haven

On top of that, Singapore real estate is often viewed as (1) assets in a stable country friendly to foreign investment, and (2) prestigious enough to meet their Crazy Rich Asian lifestyle. Hence, the same economic turmoil that’s making us cut out NTUC coupons is also drawing rich (mainly Chinese) buyers back to our real estate market.

According to the logic of trickle-down economics, this should miraculously result in us being able to afford our flat mortgages or something. Go celebrate with your coupons.

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3. We may be seeing a cartoonishly huge mob of upgraders in 2020 to 2021

So during the last property peak in 2013, a portion of buyers upgraded from their HDB flats to private homes after their Minimum Occupancy Period (MOP). Not everyone upgrades right after their MOP of course, but it’s not an uncommon move that adds to demand for private housing.

Now, you know how many flats reached their MOP between 2013 to 2014? About 9,000.

You know how many flats are reaching their MOP between this year to 2021? About 50,000.

Now assuming they’re not all too spooked by economic uncertainties, this could translate to an usually large number of upgraders, and jammed toilets at showflats.

4. A weak economic outlook makes us worry if we can afford our homes, while at the same time making our homes more affordable

Interest rates are almost as depressed as investors are right now

When the economy isn’t faring too well, the United Stated Federal Reserve (the Fed) keeps interest rates low. That’s a stimulus measure that keeps up spending, even as the storm clouds gather. There’s a knock-on effect though, as home loans interest rates in Singapore tend to move in tandem.

(Our home loan rates change for more reasons than just the Fed obviously, but it’s something of a major contributor).

So while the economic situation looks bleak (which would lead us to say, don’t commit to expensive properties right now), the home loan interest rates also look set to stay low. This improves affordability for anyone using a bank loan; and just for reference, home loan interest rates have been at around two per cent (lower than HDB loans’ 2.6 per cent) for more than a decade now.

In light of all that, is 2020 going to be the “ideal” time to buy a private property?

If you want the consensus, analysts are projecting a two to three per cent increase in the overall private property market; so a wait-and-see approach will probably result in buying at a slightly higher price next year.

But that being said, it’s better to base the decision on your income than on what the market looks like at the moment. Does the price of your desired private property exceed five to seven times your annual household income? If the answer is yes, then don’t buy.  Economic downturns result in lower wage growth, and sometimes greater risk of unemployment. A 25-year loan is not a commitment you want to handle by being a part time Grab driver.

If you need to pay two per cent more in subsequent years, while waiting to ensure affordability, that’s a small price.

Are you going to buy a private property in 2020? Voice your thoughts in our comments section or on our Facebook community page.

Looking for a property? Find the home of your dreams today on Singapore’s largest property portal 99.co! You can also access a wide range of tools to calculate your down payments and loan repayments, to make an informed purchase.

4 days ago · 7 min read · by Ryan Ong

Source: 99.co (14 Jan 2020)

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