The first dip in Singapore’s housing market in three years was confirmed on Friday when the city-state’s government released official figures showing that average prices for new private homes dropped 0.2 percent in the second quarter, compared to the first three months of the year, ending a COVID-induced spike as developers roll out a wave of new projects.
With shortages caused by pandemic-related construction delays rapidly fading, analysts pointed to a gush of new supply boosting sales volumes and moderating prices after buyers had been forced to compete for a limited supply of new housing in 2022.
“The number of units launched in Q2 2023 doubled to 2,374 units from 1,312 units in Q1 2023, resulting in a fall in the take-up rate from 95.7 percent in 1Q 2023 to 89.6 percent in Q2 2023 – the lowest in 10 quarters since Q4 2020,” said Lam Chern Woon, head of research and consulting for Singapore at Edmund Tie.
With higher interest rates and increased sales taxes also deterring buyers, a barrage of new projects launching during the current quarter could bring home prices still lower, after the city experienced an 8.4 percent jump in average new home rates during 2022.
More Projects, Lower Prices
Friday’s official figures showed a less dramatic drop than flash statistics released at the beginning of the month, which had estimated a 0.4 percent decline, and came after prices had climbed 3.3 percent during the first quarter from the preceding three months.
The price slide came as developers launched a number of new projects around Singapore’s urban fringe (referred to under the URA’s nomenclature as the RCR) during the period, including Far East Organisation’s The Reserve Residences; Tembusu Grand, a joint venture by CDL and MCL Land; EL Development’s Blossoms by The Park and The Continuum, a joint venture between local players Hoi Hup and Sunway.
Despite the increased home sale levies introduced in April, sales of private homes. excluding the Executive Condo public-private hybrid segment, totalled 2,374 units during the quarter, almost double the mark achieved in the first three months of the year and up 21.4 percent from the same period in 2022, according to JLL.
Analysts speculated that growing competition among projects and construction delays suffered during the pandemic may have incentivised builders to begin marking down their homes to maintain sales momentum.
“It is likely that some developers, especially of projects in the CCR (core central region) that are completing soon or approaching the five-year ABSD (additional buyers stamp duty) deadline, might have eased prices moderately to spur transaction activity among locals,” said Leonard Tay, head of research for Knight Frank in Singapore.
In the prime areas referred to as the core central region, which have long been favourites with foreign buyers, analysts saw the impact of the government’s doubling of the ABSD in April, with home prices falling 0.1 percent during the period. Developers can remit 35 percent of the 40 percent stamp duty paid on acquisition costs, if their project is completed and sold-out within five years.
Just 56 homes in Singapore were sold to non-residents in the second quarter, according to a report by OrangeTee & Tie Research & Analytics. With the government having boosted the ABSD rate in April, there were 205 homes sold to foreigners in the April through June period, which was down from 265 such deals in the first three months of the year.
Home Supply Rebounds
With home prices showing signs of having peaked, more affordable home prices may be on the way in Singapore as developers launch new projects and temper their bidding for new projects.
Hong Leong Holdings’ Lentor Hills Residences, and City Developments Ltd’s The Myst in Bukit Timah were the first two projects to enter the market during the current half and found buyers for around 50 percent and 27 percent of their available homes, respectively during their launch weekends.
Lentor Hills Residences’ level of take up fell well below the 84 percent sales rate achieved by GuocoLand’s neighbouring Lentor Modern project on its debut weekend last September, while CDL introduced its project after The Reserve Residences and Sim Lian’s the Botany at Dairy Farm, both in the same vicinity, had sold over 800 homes in the first half of the year.
Singapore’s stock of completed private residential units grew to 4,227 units in the second quarter from 2,864 units in the previous three month period, according to the URA data, giving developers incentives to keep prices low.
Caution Back in Style
With Singapore announcing in mid-June its biggest pipeline of new housing projects in a decade, developers have lost some of their appetite for land.
Earlier this month a government tender for a residential site in eastern Singapore attracted just two bids, with Sim Lian Group picking the rights to develop 840 condos for S$828.8 million ($625.5 million), or about 18 percent less on a price per square foot of built area basis than CDL paid for a plot across the road from that project in January 2022.
Also this month, a joint venture between CapitaLand and UOL Group bested just one other bid to win a housing site in Tampines for S$1.2 billion, with that tender coming in at the low-end of analyst expectations.
With the market evolving, Wong Xian Yang, head of research for Singapore and Southeast Asia for Cushman & Wakefield expects builders to adopt strategies to avoid price cuts.
“Developers are likely to adopt various pricing strategies, such as offering early bird discounts and launching project in phases, in view of rising competition from more launches coming forth to the market this year,” Wong said. “Some developers may even choose to delay project launches to 2024,” he added.