Singapore Private Residential
Market Update
Singapore Private Residential 29 Mar 2017
SINGAPORE │ PRIVATE RESIDENTIAL
Cooling measures relaxed, what’s next? Property prices are closer to a turning point Singapore’s non-landed Private Residential Property Price Index (PRPPI) has contracted for 13 consecutive quarters. As compared to the longest down cycle that lasted 16 quarters post-SARS, we could perhaps see another 3 quarters of decline in property prices before it starts to recover. Amazingly, the PRPPI has only fallen by 10% in the current cycle as compared to above-20% decline in the previous cycles. Based on current momentum and past trend, we suggest that the turning point for property prices could be reached within the next 12 months.
Market sentiments have improved The primary home sales have seen a pick-up in recent months. The key drivers to the buoyant sales were the excellent performance of newly launched projects, such as Clement Canopy and Grandeur Park. Even large projects which have been on the market for sometime are also seeing an increased pace of sales. The Government eased some of the cooling measures on 10 March 2017 which are likely had limited immediate direct impact on sales. However, it has provided a positive boost for market sentiment.
Synopsis Singapore property price could see another 3 quarters of decline before reversing. Market sentiments seem to have turned better. Supply in the pipeline is shrinking and foreigners remain active in the market. Top new sale location: D5,18,19 Top resale location: D9,10, 15
REMS RESEARCH Contact Us [email protected] Visit Us www.rems.asia
Supply in the pipeline is shrinking As at end 2016, the supply of non-landed private residential units in the pipeline has decreased 1% month-on-month and 19% year-on-year to 47,016 units. This is its 16th consecutive quarter of decline since it peaked in 4Q2012. The reduction in the pace of Government land supply and redevelopment of projects on private land have contributed to the reduction in projects in the pipeline.
Foreign purchase demand seems to have picked up We observed that the number of foreign purchasers has been gradually increasing over the past 4 quarters, despite the hefty stamp duty. Foreigners’ interest in Singapore real estate could be because it is one of the most transparent markets, with relatively low transaction fee and with the lowest barrier to entry for a foreigner in Asia. This is in addition to the traditional attractiveness of Singapore.
Where are people buying? Buyers have been most active in snapping up new homes in District 5, District 18 and District 19 where there has been a nmber of new projects launched for sale. In the resale market, buyers have been active in soaking up projects in the prime districts of District 9 and District 10, as well as District 15. We will continue to monitor the market and publish analysis of transaction activities in each district to seek new and value investment opportunities. Keep a look out for our next research.
Terms of use can be found on the last page. All rights reserved.
1
29 March 2017
Is a turning point in sight? Longest down cycle lasted 16 quarters, we are now at 13 Singapore’s non-landed Private Residential Property Price Index (PRPPI) has contracted for 13 consecutive quarters. Based on historical trends, the down cycle lasted 10 quarters post-Asian Financial Crisis, 16 quarters post-SARS and, surprisingly, just four quarters post Global Financial Crisis (see Figure 1). This could suggest that perhaps we could see another 3 quarters of decline in property prices before property prices start to recover. Figure 1: Singapore Non-landed Private Residential Property Price Index
Source: URA, REMS Research
Prices fell by only 10% thus far Amazingly, the non-landed PRPPI has only fallen by 10% in the current cycle. This is a far cry from the 41.7% decline post-Asian Financial Crisis, 20.7% post-SARS and 26.1% post-Global Financial Crisis. This could perhaps be a testament to growing wealth of Singaporeans and the fact that we have not suffered any sharp economic crisis since the GFC. This could suggest that the next economic shocks could bring about a sharper than expected price decline. In the meantime, market sentiments seem to have turned for the better and if we look hard enough, there are signs that the bottom of the market might be closer than market participants expect.
Current Market Conditions Positive sentiments in the primary home sales market The primary home sales have seen a pick-up in recent months. In February 2017, developers sold 977 private residential units, an increase of 156% month-onmonth and 222% year-on-year (see Figure 2). This is the highest number of units sold in the past four months. The key driver to the buoyant sales was the excellent performance of a newly launched project, Clement Canopy at Clementi. It is expected that the March 2017 primary new sales to outperform due to the news of successful launches projects such as Grandeur Park at Tanah Merah and Park Place Residences at Paya Lebar Central.
Terms of use can be found on the last page. All rights reserved.
2
29 March 2017
Figure 2: Primary home sales increased by 156% in February
Source: URA, REMS Research
10,000 people visited a show flat over one weekend! Newly launched projects that are priced right have been attracting a large number of visitors. At the pre-launch event of Grandeur Park by CEL Development, it was reported that 10,000 people visited the show flat over one weekend. During its first weekend sale, it had successfully sold 420 units, which is more than half of the total project units. Even large projects which have been on the market for a while are also seeing increased pace of sales. For instance, Sims Urban Oasis which has 1,024 units in the project, has sold about 635 units, with 217 units sold within the last one year, according to URA’s primary home sales data released every 15 th of the month.
Figure 4: Sims Urban Oasis
Source: Google image
Figure 3: Grandeur Park Showflat attracted 10,000 visitors!
Source: REMS Research
Though quarterly market indicators remain weak It seems the good old times are back. This is despite the challenging economic conditions and the fact that many of the private residential property indicators point to room for more downside. From the market response over the past 2 months, it appears that people are now more willing to “take an option” that the prices of apartments will be higher than the present level 4-5 years from now. Terms of use can be found on the last page. All rights reserved.
3
29 March 2017
Gradual easing of cooling measures expected There has been plentiful of speculation that the Government will relax its cooling measures. However, the Government has continually discounted this possibility for the medium term and has also dismissed the possibility of reducing the supply of land for residential development. “Prices of private homes have been sliding for three years but the property cooling measures are here to stay for now,” said National Development Minister Lawrence Wong, according to The Straits Time, dated 10 Oct 2016.
Pleasant surprise for the market On 10 Mar 2017, the government unexpectedly gave the market a nice uplift and announced the relaxation of some of the cooling measures. Firstly, the holding period before Seller’s Stamp Duty kicks in is shortened from 4 years to 3 years and the rates are reduced by 4 percentage points for each tier. Secondly, homeowners seeking equity loan for their residential properties are allowed a higher limit of 60% for cashing out their equity. However, the Government intends to tax transactions of companies whose substantial assets are in residential properties to close a taxation loophole.
The Business Times, 17 Feb 2017 Lifting of property cooling measures seen unlikely http://www.businesstimes.com.sg/realestate/singapore-budget-2017/liftingof-property-cooling-measures-seenunlikely The Straits Time, 10 Oct 2016 Property cooling measures to remain for now http://www.straitstimes.com/singapore/ housing/cooling-measures-to-remainfor-now The Business Times, 11 Mar 2017 Surprise tweaks in property cooling measures http://www.businesstimes.com.sg/realestate/surprise-tweaks-in-propertycooling-measures-seen-signallingfurther-unwinding
Limited immediate impact but positive for sentiments While the direct impact of relaxation is likely to be limited, the news will boost sentiments and heighten expectations of further relaxation of the more punitive Additional Buyers’ Stamp Duties. Following the announcement of the relaxation, the market reacted positively to the property launches. According to The Business Times, 215 units of the 429-unit Park Places Residences were snapped up at the end of its first public sale on 25 Mar 2017.
Why are people investing? Increasingly, it appears that buyers are not heeding the views of the researchers that property market still has some way to go before the market can reach a bottom. Why do they think so?
Supply in the pipeline is shrinking As at end 2016, the supply of non-landed private residential units in the pipeline has dropped 1% month-on-month and 19% year-on-year to 47,016 units. This is its 16th consecutive quarter of decline since it peaked in 4Q2012. The reduction in the pace of Government land supply and redevelopment of projects on private land have contributed to the reduction in projects in the pipeline. Figure 5: Potential supply is at all time low
Source: URA’s REALIS, REMS Research
Terms of use can be found on the last page. All rights reserved.
4
29 March 2017
Unsold inventory being normalised The unsold inventory is being depleted as developers are increasingly adopting attractive pricing strategies to sell these units. The launched-but-unsold inventory decreased by 7% month-on-month and 12% year-on-year to reach 5,266 units in Feb 2017. This marks the third consecutive month of decline and the lowest level of launched-but-unsold inventory since Mar 2013. In addition, the increasingly successful launch of new projects means the nett addition to unsold inventory remains low though more projects have been launched in recent months. Figure 6: Unsold inventory is heading towards historical lows
Source: URA, REMS Research
Demand from foreign purchaser seems to have picked up In the past down cycles, resurgent demand from foreign purchasers have contributed to the upswing in property prices. This is most apparent in the run up of property prices from 2006-2008 and from 2009-2013. Though in absolute numbers, the number of units bought by foreign purchasers remain low compared to the previous booms, it is observed that the number foreign purchasers have been gradually increasing over the past 4 quarters, despite the hefty stamp duty. Foreigners remain interested in Singapore’s real estate as it is one of the most transparent markets, with relatively low transaction fee and with the lowest barrier to entry for foreign buyers in Asia. This complements its traditional attractiveness of safety, good education system, and being relatively easy for foreigners to “plug and play”. Thus, foreigners remain invested in Singapore as a store of wealth. Figure 7: Foreign purchase demand remains strong
Source: URA’s REALIS, REMS Research
Terms of use can be found on the last page. All rights reserved.
5
29 March 2017
Where are people buying now? Top 3 new sale postal districts: D5, D18, D19 Based on the data in URA’s REALIS, it reveals the top three postal districts that have the highest number of new sale units transacted in the past 6 months are (1) D5 - Pasir Panjang, Hong Leong Garden, Clementi New Town; (2) D18 - Tampines, Pasir Ris; (3) D19 - Serangoon Garden, Hougang, Ponggol. Figure 8: Top 3 new sale postal districts: D5, D18, D19
Figure 9: Major New Sale Projects Distric t D5
D18
D19
Major New Sale Projects Parc Riviera The Clement Canopy The Trilinq The Santorini Vue 8 Residence The Alps Residences Forest Woods Kingsford Waterbay Star of Kovan
Source: URA’s REALIS, REMS Research Date of data extraction: 23 Mar 2017
\
Source: URA’s REALIS, REMS Research Date of data extraction: 23 Mar 2017
Top 3 resale postal districts: D9, D10, D15 The top three postal districts that have the highest number of resale units transacted in the past 6 months are D9 (Orchard, Cairnhill, River Valley), D10 (Ardmore, Bukit Timah, Holland Road, Tanglin) and D15 (Katong, Joo Chiat, Amber Road), where D9 and D10 are the prime residential estate area in Singapore. Figure 10: Top 3 resale postal districts: D9, D10, D15
Source: URA’s REALIS, REMS Research Date of data extraction: 23 Mar 2017
What is next? What would be the good buy projects in those postal districts? We will continue to monitor the market and publish analysis of transaction activities in each district to seek new and value investment opportunities. Keep a look out for our next research.
Terms of use can be found on the last page. All rights reserved.
6
29 March 2017
KEY RESIDENTIAL MARKET INDICATORS Key market indicators as at 4th Quarter 2016. Figure 11: Non-landed Private Residential Price Index continues to fall
Source: URA’s REALIS, REMS Research
Figure 13: Rental Index declined for 13 quarters
Figure 12: Median price continues to fall
Source: URA’s REALIS, REMS Research
Figure 14: Gross rental yields continue to weaken
Source: URA’s REALIS, REMS Research
Source: URA’s REALIS, REMS Research
Figure 15: Potential supply continued to decline
Figure 16: Vacancy remains elevated
Source: URA’s REALIS, REMS Research
Source: URA’s REALIS, REMS Research
Terms of Use: Any reproduction or distribution of this report is prohibited unless authorised in writing by REMS Advisors Pte Ltd. This report is provided for general information only and should not be treated as advice for any specific user or property. Users of this report should consider this report as one of the many factors in making their investment decision a nd should seek specific investment advice. REMS Advisors and the authors of this report shall not accept and hereby disclaim all responsibilities and liability for consequences arising out of any use of this report.
Terms of use can be found on the last page. All rights reserved.
7
Singapore Private Residential 29 Mar 2017
SINGAPORE │ PRIVATE RESIDENTIAL
Cooling measures relaxed, what’s next? Property prices are closer to a turning point Singapore’s non-landed Private Residential Property Price Index (PRPPI) has contracted for 13 consecutive quarters. As compared to the longest down cycle that lasted 16 quarters post-SARS, we could perhaps see another 3 quarters of decline in property prices before it starts to recover. Amazingly, the PRPPI has only fallen by 10% in the current cycle as compared to above-20% decline in the previous cycles. Based on current momentum and past trend, we suggest that the turning point for property prices could be reached within the next 12 months.
Market sentiments have improved The primary home sales have seen a pick-up in recent months. The key drivers to the buoyant sales were the excellent performance of newly launched projects, such as Clement Canopy and Grandeur Park. Even large projects which have been on the market for sometime are also seeing an increased pace of sales. The Government eased some of the cooling measures on 10 March 2017 which are likely had limited immediate direct impact on sales. However, it has provided a positive boost for market sentiment.
Synopsis Singapore property price could see another 3 quarters of decline before reversing. Market sentiments seem to have turned better. Supply in the pipeline is shrinking and foreigners remain active in the market. Top new sale location: D5,18,19 Top resale location: D9,10, 15
REMS RESEARCH Contact Us [email protected] Visit Us www.rems.asia
Supply in the pipeline is shrinking As at end 2016, the supply of non-landed private residential units in the pipeline has decreased 1% month-on-month and 19% year-on-year to 47,016 units. This is its 16th consecutive quarter of decline since it peaked in 4Q2012. The reduction in the pace of Government land supply and redevelopment of projects on private land have contributed to the reduction in projects in the pipeline.
Foreign purchase demand seems to have picked up We observed that the number of foreign purchasers has been gradually increasing over the past 4 quarters, despite the hefty stamp duty. Foreigners’ interest in Singapore real estate could be because it is one of the most transparent markets, with relatively low transaction fee and with the lowest barrier to entry for a foreigner in Asia. This is in addition to the traditional attractiveness of Singapore.
Where are people buying? Buyers have been most active in snapping up new homes in District 5, District 18 and District 19 where there has been a nmber of new projects launched for sale. In the resale market, buyers have been active in soaking up projects in the prime districts of District 9 and District 10, as well as District 15. We will continue to monitor the market and publish analysis of transaction activities in each district to seek new and value investment opportunities. Keep a look out for our next research.
Terms of use can be found on the last page. All rights reserved.
1
29 March 2017
Is a turning point in sight? Longest down cycle lasted 16 quarters, we are now at 13 Singapore’s non-landed Private Residential Property Price Index (PRPPI) has contracted for 13 consecutive quarters. Based on historical trends, the down cycle lasted 10 quarters post-Asian Financial Crisis, 16 quarters post-SARS and, surprisingly, just four quarters post Global Financial Crisis (see Figure 1). This could suggest that perhaps we could see another 3 quarters of decline in property prices before property prices start to recover. Figure 1: Singapore Non-landed Private Residential Property Price Index
Source: URA, REMS Research
Prices fell by only 10% thus far Amazingly, the non-landed PRPPI has only fallen by 10% in the current cycle. This is a far cry from the 41.7% decline post-Asian Financial Crisis, 20.7% post-SARS and 26.1% post-Global Financial Crisis. This could perhaps be a testament to growing wealth of Singaporeans and the fact that we have not suffered any sharp economic crisis since the GFC. This could suggest that the next economic shocks could bring about a sharper than expected price decline. In the meantime, market sentiments seem to have turned for the better and if we look hard enough, there are signs that the bottom of the market might be closer than market participants expect.
Current Market Conditions Positive sentiments in the primary home sales market The primary home sales have seen a pick-up in recent months. In February 2017, developers sold 977 private residential units, an increase of 156% month-onmonth and 222% year-on-year (see Figure 2). This is the highest number of units sold in the past four months. The key driver to the buoyant sales was the excellent performance of a newly launched project, Clement Canopy at Clementi. It is expected that the March 2017 primary new sales to outperform due to the news of successful launches projects such as Grandeur Park at Tanah Merah and Park Place Residences at Paya Lebar Central.
Terms of use can be found on the last page. All rights reserved.
2
29 March 2017
Figure 2: Primary home sales increased by 156% in February
Source: URA, REMS Research
10,000 people visited a show flat over one weekend! Newly launched projects that are priced right have been attracting a large number of visitors. At the pre-launch event of Grandeur Park by CEL Development, it was reported that 10,000 people visited the show flat over one weekend. During its first weekend sale, it had successfully sold 420 units, which is more than half of the total project units. Even large projects which have been on the market for a while are also seeing increased pace of sales. For instance, Sims Urban Oasis which has 1,024 units in the project, has sold about 635 units, with 217 units sold within the last one year, according to URA’s primary home sales data released every 15 th of the month.
Figure 4: Sims Urban Oasis
Source: Google image
Figure 3: Grandeur Park Showflat attracted 10,000 visitors!
Source: REMS Research
Though quarterly market indicators remain weak It seems the good old times are back. This is despite the challenging economic conditions and the fact that many of the private residential property indicators point to room for more downside. From the market response over the past 2 months, it appears that people are now more willing to “take an option” that the prices of apartments will be higher than the present level 4-5 years from now. Terms of use can be found on the last page. All rights reserved.
3
29 March 2017
Gradual easing of cooling measures expected There has been plentiful of speculation that the Government will relax its cooling measures. However, the Government has continually discounted this possibility for the medium term and has also dismissed the possibility of reducing the supply of land for residential development. “Prices of private homes have been sliding for three years but the property cooling measures are here to stay for now,” said National Development Minister Lawrence Wong, according to The Straits Time, dated 10 Oct 2016.
Pleasant surprise for the market On 10 Mar 2017, the government unexpectedly gave the market a nice uplift and announced the relaxation of some of the cooling measures. Firstly, the holding period before Seller’s Stamp Duty kicks in is shortened from 4 years to 3 years and the rates are reduced by 4 percentage points for each tier. Secondly, homeowners seeking equity loan for their residential properties are allowed a higher limit of 60% for cashing out their equity. However, the Government intends to tax transactions of companies whose substantial assets are in residential properties to close a taxation loophole.
The Business Times, 17 Feb 2017 Lifting of property cooling measures seen unlikely http://www.businesstimes.com.sg/realestate/singapore-budget-2017/liftingof-property-cooling-measures-seenunlikely The Straits Time, 10 Oct 2016 Property cooling measures to remain for now http://www.straitstimes.com/singapore/ housing/cooling-measures-to-remainfor-now The Business Times, 11 Mar 2017 Surprise tweaks in property cooling measures http://www.businesstimes.com.sg/realestate/surprise-tweaks-in-propertycooling-measures-seen-signallingfurther-unwinding
Limited immediate impact but positive for sentiments While the direct impact of relaxation is likely to be limited, the news will boost sentiments and heighten expectations of further relaxation of the more punitive Additional Buyers’ Stamp Duties. Following the announcement of the relaxation, the market reacted positively to the property launches. According to The Business Times, 215 units of the 429-unit Park Places Residences were snapped up at the end of its first public sale on 25 Mar 2017.
Why are people investing? Increasingly, it appears that buyers are not heeding the views of the researchers that property market still has some way to go before the market can reach a bottom. Why do they think so?
Supply in the pipeline is shrinking As at end 2016, the supply of non-landed private residential units in the pipeline has dropped 1% month-on-month and 19% year-on-year to 47,016 units. This is its 16th consecutive quarter of decline since it peaked in 4Q2012. The reduction in the pace of Government land supply and redevelopment of projects on private land have contributed to the reduction in projects in the pipeline. Figure 5: Potential supply is at all time low
Source: URA’s REALIS, REMS Research
Terms of use can be found on the last page. All rights reserved.
4
29 March 2017
Unsold inventory being normalised The unsold inventory is being depleted as developers are increasingly adopting attractive pricing strategies to sell these units. The launched-but-unsold inventory decreased by 7% month-on-month and 12% year-on-year to reach 5,266 units in Feb 2017. This marks the third consecutive month of decline and the lowest level of launched-but-unsold inventory since Mar 2013. In addition, the increasingly successful launch of new projects means the nett addition to unsold inventory remains low though more projects have been launched in recent months. Figure 6: Unsold inventory is heading towards historical lows
Source: URA, REMS Research
Demand from foreign purchaser seems to have picked up In the past down cycles, resurgent demand from foreign purchasers have contributed to the upswing in property prices. This is most apparent in the run up of property prices from 2006-2008 and from 2009-2013. Though in absolute numbers, the number of units bought by foreign purchasers remain low compared to the previous booms, it is observed that the number foreign purchasers have been gradually increasing over the past 4 quarters, despite the hefty stamp duty. Foreigners remain interested in Singapore’s real estate as it is one of the most transparent markets, with relatively low transaction fee and with the lowest barrier to entry for foreign buyers in Asia. This complements its traditional attractiveness of safety, good education system, and being relatively easy for foreigners to “plug and play”. Thus, foreigners remain invested in Singapore as a store of wealth. Figure 7: Foreign purchase demand remains strong
Source: URA’s REALIS, REMS Research
Terms of use can be found on the last page. All rights reserved.
5
29 March 2017
Where are people buying now? Top 3 new sale postal districts: D5, D18, D19 Based on the data in URA’s REALIS, it reveals the top three postal districts that have the highest number of new sale units transacted in the past 6 months are (1) D5 - Pasir Panjang, Hong Leong Garden, Clementi New Town; (2) D18 - Tampines, Pasir Ris; (3) D19 - Serangoon Garden, Hougang, Ponggol. Figure 8: Top 3 new sale postal districts: D5, D18, D19
Figure 9: Major New Sale Projects Distric t D5
D18
D19
Major New Sale Projects Parc Riviera The Clement Canopy The Trilinq The Santorini Vue 8 Residence The Alps Residences Forest Woods Kingsford Waterbay Star of Kovan
Source: URA’s REALIS, REMS Research Date of data extraction: 23 Mar 2017
\
Source: URA’s REALIS, REMS Research Date of data extraction: 23 Mar 2017
Top 3 resale postal districts: D9, D10, D15 The top three postal districts that have the highest number of resale units transacted in the past 6 months are D9 (Orchard, Cairnhill, River Valley), D10 (Ardmore, Bukit Timah, Holland Road, Tanglin) and D15 (Katong, Joo Chiat, Amber Road), where D9 and D10 are the prime residential estate area in Singapore. Figure 10: Top 3 resale postal districts: D9, D10, D15
Source: URA’s REALIS, REMS Research Date of data extraction: 23 Mar 2017
What is next? What would be the good buy projects in those postal districts? We will continue to monitor the market and publish analysis of transaction activities in each district to seek new and value investment opportunities. Keep a look out for our next research.
Terms of use can be found on the last page. All rights reserved.
6
29 March 2017
KEY RESIDENTIAL MARKET INDICATORS Key market indicators as at 4th Quarter 2016. Figure 11: Non-landed Private Residential Price Index continues to fall
Source: URA’s REALIS, REMS Research
Figure 13: Rental Index declined for 13 quarters
Figure 12: Median price continues to fall
Source: URA’s REALIS, REMS Research
Figure 14: Gross rental yields continue to weaken
Source: URA’s REALIS, REMS Research
Source: URA’s REALIS, REMS Research
Figure 15: Potential supply continued to decline
Figure 16: Vacancy remains elevated
Source: URA’s REALIS, REMS Research
Source: URA’s REALIS, REMS Research
Terms of Use: Any reproduction or distribution of this report is prohibited unless authorised in writing by REMS Advisors Pte Ltd. This report is provided for general information only and should not be treated as advice for any specific user or property. Users of this report should consider this report as one of the many factors in making their investment decision a nd should seek specific investment advice. REMS Advisors and the authors of this report shall not accept and hereby disclaim all responsibilities and liability for consequences arising out of any use of this report.
Terms of use can be found on the last page. All rights reserved.
7
