New sales volume registered a respectable performance in 2019. With a record number of 52 launches in 2019, the new sales segment dominated the private residential market with 9,912 private residential units sold, representing a 12.7% y-o-y increase. The healthy absorption of new homes indicates the underlying strength of the market and improving buyer sentiment despite the weaker macroeconomic environment even with cooling measures in place.
Looking ahead, there will be about 40 projects scheduled for launch in 2020. Taking into consideration an additional unsold inventory of 30,473 units (Figure 14), 2020 will be a buyer’s market and potential buyers will be spoilt for choice. Projects with a key differentiation in location, developer reputation and pricing will do well.
FIGURE 13: PROJECT LAUNCHES, FIGURE 14: UNSOLD INVENTORY FOR UNCOMPLETED UNITS
PROJECT LAUNCHES TO GO AHEAD
In light of the COVID-19 outbreak, developers are taking precautionary measures at showflats, with more opting for invite-only viewings or online marketing. In addition, most launches are expected to go on as scheduled in 2020 as majority of developers have already secured a Temporary Occupation License site for their projects.
The level of unsold inventory is still considered manageable as compared to the previous peak of 39,184 units in 2011. In the short term, the pressure for developers to reduce prices or give discounts is still not that immense. That said, developers may be incentivised to do so when unsold inventory increases over time with the upcoming launches that have been lined up.
BUYERS TO REMAIN PRICE SENSITIVE
BUYERS FAVOURING SMALLER UNIT SIZES
Buyers continued to lean towards smaller unit sizes. Over the past three years, the median price quantum for new homes hovered around the range of $1.2 mil, though higher price per sq. ft. prices were transacted. This was achieved via smaller unit sizes. The median size for units transacted declined from 828 sq. ft. in 2017 to 721 sq. ft. in 2019 (Figure 16).
The bulk of new sale transactions was also at a palatable amount of less than $2.0 mil as units which fall within this price range accounted for 88.6% of all new home sale purchases (Figure 15).
FIGURE 15: NO. OF UNITS TRANSACTED BY PRICE QUANTUM IN 2019
PRICE SENSITIVITY TO REMAIN
Buyers are expected to remain price sensitive in 2020. CBRE Research believes that the price quantum of $2.0 mil per unit will continue to be the sweet spot for investors. As a result, home sizes will be compromised to keep the absolute quantum palatable for buyers.
FIGURE 16: SIZE VS PRICE QUANTUM
DEMAND AND PRICES TO REMAIN STABLE
DEMAND TO REMAIN STABLE DESPITE MARKET UNCERTAINTIES
Projects from the Core Central Region (CCR) will be a prominent feature in 2020, making up close to 40.0% of units available to launch in the year.
In light of the COVID-19 outbreak, Chinese buyers are unlikely to feature in the short term but return in the mid to long term. This is as Singapore presents itself as a stable city with good governance, relative to other key markets. The Chinese accounted for 19.3% of new home purchases in the CCR in 2019, excluding Singaporeans.
In addition, continued low interest rates are also likely to help fuel and sustain the underlying demand from both local and foreign investors.
Even though market sentiments are expected to take a hit, CBRE Research expects prices to stabilise and achieve between 0% to 1% growth in 2020, due to high land costs. In addition, most of the projects with an Additional Buyer Stamp Duty deadline in 2020 either have their units 100% sold or close to fully sold. Thus, the pressure to reduce prices is not significant.
The primary and secondary market is projected to be slightly slower than 2019’s volume as prospective buyers adopt a more prudent approach. CBRE Research expects new home sales to fall within the range of 7,000 to 8,000 units, which remains the underlying demand of the market, despite a challenging H1 2020. Resale volume is expected to fall within the range of 6,000 to 7,000 units (Figure 17).