Singapore private residential mass market - Bright spots and challenges - Singapore | October 2017 - JLL Asia Pacific
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Singapore | October 2017 JLL Research Report Singapore private residential mass market - Bright spots and challenges
2 | JLL
Introduction
2017 has been a remarkable year so far for the private residential market, as signs
of a recovery have become clearer with a robust run-up in transactions and prices
showing signs of bottoming.
The total transaction volume of private homes in the first half of 2017 was 12,107
units, a 63.7% surge from the first half of 2016 and the highest half-year volume
since the first half of 2013 before the Total Debt Servicing Ratio was imposed. It
builds on the momentum in 2016 when 16,378 units were sold, 16% higher than
the previous year.
The URA residential property price index increased 0.5% in 3Q17 (based on flash
estimates), a turnaround after declining for nearly four years. Of the three sub-
markets, Outside Central Region (OCR) registered an increase of 0.7% in its non-
landed price index, higher than the 0.2% rise for Core Central Region (CCR) and 0%
for Rest of Central Region (RCR).
Driven by the perception that prices could be close to the bottom, buyers have
been flocking back to the market, exacerbated by pent-up demand from the last
few years.
This paper focuses on the mass market segment, dissecting the demand and
supply fundamentals for bright spots and challenges.
“ Driven by the perception that
prices could be close to the bottom,
buyers have been flocking back to
the market, exacerbated by pent-up
demand from the last few years.
Ong Teck Hui
National Director, Research & Consultancy
JLL Singapore
”
Singapore private residential mass market - Bright spots and challenges | 3
Mass market leading the charge
Among the three sub-markets, it is the mass market or
Outside Central Region (OCR) that is leading the upswing in
transactions.
There were 6,499 units in the OCR sold in the first half of 2017,
77.8% higher than in the first half of 2016, while the Core
Central Region (CCR) and the Rest of Central Region (RCR)
posted transaction volume increases of 40.6% and 55.1%,
respectively, for the same period.
Volume of transactions in 1H2017 higher than 1H2016
Outside Central Region (OCR)
77.8%
units sold
Rest of Central Region (RCR)
55.1%
units sold
Core Central Region (CCR)
40.6%
units sold
4 | JLL
What drove this surge in demand for mass market homes?
1. The OCR sub-market, with a relatively higher proportion 3. Most primary market opportunities for buyers are in
of owner-occupier and local purchasers, would be less the OCR where 3,076 units were launched for sale in the
hamstrung by the cooling measures that affect investor and first half of 2017, accounting for nearly 78% of the total
foreign buyers more significantly, especially in the CCR. launched supply from the three sub-markets.
2. In a market that is price-sensitive, OCR properties hold In general, major projects launched in the OCR have per-
the advantage of being the most affordable among the formed well in attracting buyers and achieving good take-up
three sub-markets. The median price of non-landed rates. The positive publicity generated would stoke market
homes in the OCR in the first half of 2017 at SGD 1,187 optimism further, attracting more buyers and sustaining the
per sq ft is 37% and 20% lower than that of the CCR and demand upswing.
the RCR, respectively.
Major private residential projects launched in the OCR since 2016
The Wisteria
Total (units) - 216
Launched (units) - 216
Sold (units) - 216
Median price (psf) - SGD 1,086
Take-up rate* - 100%
The Alps Residences
Lake Grande Total (units) - 626
Total (units) - 710 Forest Woods Launched (units) - 626
Launched (units) - 710 Total (units) - 519 Sold (units) - 529
Sold (units) - 650 Launched (units) - 519 Median price (psf) - SGD 1,061
Median price (psf) - SGD 1,344 Sold (units) - 453 Take-up rate* - 85%
Take-up rate* - 92% Median price (psf) - SGD 1,407
Take-up rate* - 89% Grandeur Park Residences
Total (units) - 720
Launched (units) - 720
The Clement Canopy Sold (units) - 579
Total (units) - 505 Median price (psf) - SGD 1,400
Launched (units) - 400 Take-up rate* - 80%
Sold (units) - 379
Median price (psf) - SGD 1,358
Take-up rate* - 95%
Le Quest
Total (units) - 516
Launched (units) - 300
Sold (units) - 286
Median price (psf) - SGD 1,309
Take-up rate* - 95%
Stars of Kovan Seaside Residences
Total (units) - 395 Total (units) - 841
Launched (units) - 350 Launched (units) - 560
Parc Riviera Sold (units) - 303 Sold (units) - 503
Total (units) - 752 Median price (psf) - SGD 1,431 Median price (psf) - SGD 1,720
Launched (units) - 635 Take-up rate* - 87% Take-up rate* - 90%
Sold (units) - 625
Median price (psf) - SGD 1,240
Take-up rate* - 98%
*As at August 2017
Source: ArcGIS/URA/JLL Research, Jul 2017
Singapore private residential mass market - Bright spots and challenges | 5Supply conditions favour the OCR sub-market firming
Weighed down by the cooling measures, the private list was trimmed from an average of 9,400 units per annum
residential market started to slow in the second half of 2013, between 2011 and 2013 to an average of 3,800 units per
with transaction volume falling significantly and prices annum between 2014 and 2016. The unsold stock comprising
starting to ease. To adjust to the lower level of demand and unsold units in completed and uncompleted projects fell by
to avoid over supplying the market, government land sales half, from 33,915 units in 2Q13 to 16,929 in 2Q17, reducing the
(GLS) planned supply of private homes under the confirmed risk of a severe oversupply.
Figure 1: Unsold stock by region from 4Q2007 to 2Q2017
Number of units
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
4Q2007 4Q2008 4Q2009 4Q2010 4Q2011 4Q2012 4Q2013 4Q2014 4Q2015 4Q2016 2Q2017
CCR RCR OCR
Source: URA/JLL Research
“ The immediate and near-term supply
of 3,884 units provides an uneasy
balance against the current level of
demand, which was 3,732 units in
the first half of the year.
Ong Teck Hui
National Director, Research & Consultancy
JLL Singapore
”
6 | JLLHowever, the unsold stock of private residential units in the The 2,072 units without pre-requisites for sale and unsold
OCR has dropped to 5,956 units in the second half of 2017, also appear an inadequate feeder to the launch pipeline.
about half of what it was three years ago. It is a relatively
low quantum, considering 3,732 units were sold in the Recent GLS supply from awarded sites has been low key and
OCR primary market in the first half of 2017. Of the 5,956 is unlikely to boost feeder supply for launches significantly.
unsold units, 500 units are in completed developments, The supply from the second half of 2017 GLS programme
1,416 have been launched and are unsold, 1,968 have sales would enter the market in late 2018 at the earliest or in 2019.
pre-requisites but not launched and 2,072 units are without There will also be a time lag for the new supply from recent
pre-requisites for sale and unsold. residential collective sales in the OCR to hit the market.
Therefore, 1,916 units are immediately available to buyers These conditions favour prices in the OCR sub-market
while 1,968 units could be available in the near-term if stabilising and turning around if current demand trends
they are launched. The immediate and near-term supply continue. According to the NUS-REDAS real estate
of 3,884 units provides an uneasy balance against the sentiment index for 2Q17, 45.7% of the developers
current level of demand, which was 3,732 units in the first anticipated residential property unit prices to increase
half of the year. moderately in the next six months.
An Uneasy Balance…
Demand in
m
Immediate & near-ter 1H 2017
of 3,8 84 un it
supply 3,732 units sold
hed,
Uncompleted, unlaunc
1,968 with sale licence
3,732
d
Uncompleted, launche
1,416 but unsold
Completed, launched
500 but unsold
Singapore private residential mass market - Bright spots and challenges | 7Increased investment opportunities …
While cooling measures tempered demand during the market The strong increase in OCR supply also coincided with
escalation after the global financial crisis, residential GLS the general downsizing trend in the market as developers
was increased significantly, especially between 2011 and endeavoured to keep units affordable while demand was
2013, to step up the supply. This contributed to a record level being squeezed by the cooling measures. In 2009, the median
of private home completions from 2014 to 2016, averaging size of non-landed private homes sold in the OCR primary
19,905 units per annum, a huge jump from the ten-year market was 1,238 sq ft, but from 2010 onwards, it started
average of 10,049 units between 2004 and 2013. Most new to decrease, reducing to 764 sq ft in 2016. The proliferation
home completions were in the OCR, which saw its total stock of smaller-sized units made them affordable, especially to
increase 26% from mid-2014 to mid-2017, while the CCR and investors with a limited budget.
the RCR registered rises of 13% and 15%, respectively, for the
same period.
Mass Market Saw Bumper Crop Completions (Mid 2014-Mid 2017)]
Outside Central Region (OCR) Core Central Region (CCR)
13%
mid-2014 to mid-2017
Rest of Central Region (RCR)
26%
mid-2014 to mid-2017
15%
mid-2014 to mid-2017
8 | JLL… but harder to realise returns
Increased investment activity in the OCR has led to a higher
“
supply of units for lease, which coincided with an economic
slowdown and policy tightening on the hiring of foreign labour.
In 2013, the overall leasing market recorded 56,773 rental
The mass market is a
contracts, which increased to 75,731 in 2016. However, part highly competitive market
of the increase is due to the trend of signing shorter lease
terms by foreign staff as they faced greater employment due to the sheer number
uncertainties. The OCR’s share of total rental contracts was
31.1% in 2013 but it increased to 36.7% in 2016. of units available for lease
The increase in rental contracts in the OCR belies weak leasing and tenants who tend to
conditions, which is reflected in the decline in rents. Between
its peak in 2Q13 and 2Q17, the URA’s rental index for the OCR be budget constrained.
dropped 15.6%, more than the declines of 8.7% in the RCR and
11.5% in the CCR from their respective peaks in 2014 and 2013.
It is easy to fall into the
So, while the OCR sub-market has provided affordable
affordability trap without
investment opportunities, realising reasonable returns has
been more challenging.
an adequate assessment
of how well the unit would
”
It is a highly competitive market due to the sheer number of
units available for lease and tenants who tend to be budget lease.
constrained. Investors should do well to consider units with
strong attributes, such as proximity to transportation like MRT
stations, shopping and eating amenities and employment Ong Teck Hui
hubs. National Director, Research & Consultancy
JLL Singapore
It is easy to fall into the affordability trap without an adequate
assessment of how well the unit would lease.
URA Rental Index
120
115
URA Rental Index
110
105
100
95
2016Q1
2016Q2
2016Q3
2017Q1
2017Q2
2015Q4
2012Q1
2012Q2
2012Q3
2012Q4
2014Q1
2014Q2
2014Q3
2014Q4
2016Q4
2011Q1
2011Q2
2011Q3
2011Q4
2013Q1
2013Q2
2013Q3
2013Q4
2015Q1
2015Q2
2015Q3
2010Q1
2010Q2
2010Q3
2010Q4
Non-landed CCR Non-landed RCR Non-landed OCR
Source : URA/JLL Research
Singapore private residential mass market - Bright spots and challenges | 9Authors Ong Teck Hui National Director, Research & Consultancy JLL Singapore 10 | JLL
JLL offices ASIA PACIFIC 9 Raffles Place #39-00 Republic Plaza Singapore 048619 tel +65 6220 3888 fax +65 6438 3361 www.jll.com.sg jll.com.sg Jones Lang LaSalle © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of Jones Lang LaSalle. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.
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