CBRE's Commentary on Monthly New Home Sales - February 2023

New home sales picked up in February 2023 following the Lunar New Year seasonal lull. Developers launched 401 new units in February 2023, consistent with the 410 units in January 2022. 

Following the Lunar New Year seasonal lull, new developer sales (excluding ECs) in February 2023 rose 9.9% m-o-m to 432 units from January 2023’s 393 units. On a y-o-y basis, however, sales were down 20.3% y-o-y from February 2022’s 542 units, and 29.2% below the 5-year average in the month of February (610 units). This brings year-to-February new home sales to 825 units, a 32.7% y-o-y decrease from the 1,226 units in over the correspondingly period in 2022. This might be indicative of homebuyers staying on the sidelines amid the more uncertain current situation characterised by slowing economic conditions, high mortgage rates, tightened financing conditions and increased taxes.

Top 10 Selling Projects in February 2023 (including ECs and landed)

February 2023 saw two new freehold launches from the RCR, Gems Ville (24 units) and Terra Hill (270 units).

The top selling project in the month was new launch, Terra Hill, jointly developed by Hoi Hup and Sunway Realty. The subject property located at Yew Siang Road is the redevelopment of the former Flynn Park which was sold enbloc to the Hoi Hup-Sunway venture back in September 2021. As the first major RCR launch in 2023, the project was met with stable demand, moving 97 of its 270 total units (36%) at a median price of S$2,699 psf. This was largely attributed to the limited supply of freehold condominiums in the vicinity and its attractive relative price point.

The next two best performing projects in the month were Core Central Region (CCR) project, Pullman Residences Newton, which sold 38 units at a median price of S$3,171 psf and EC project Tenet which moved 24 units at a median price of S$1,399 psf.

7 of the top 10 best performing projects in February 2023 were from the CCR and on a freehold tenure. This is indicative that buyers continue to see value in the CCR amid the narrowing price gap between RCR and CCR new launches. Investors could also be deploying their capital into freehold assets for wealth perseveration reasons amid heightened uncertainty. Most notably, a Chinese buyer picked up a duplex penthouse unit at freehold CCR project, Klimt Cairnhill for S$27.50 mil ($4,645 psf). The transaction was closed on 14 February 2023, before the increase in BSD came into effect.

New launches in February 2023

Source: CBRE Research, URA

New Home Sales (excl. ECs) by quantum

Source: CBRE Research, URA

*Based on Realis new sales (excl. EC) caveats extracted on 15 February 2023

Based on quantum size, the largest proportion of new private homes sold (excl. ECs) were in the S$2.00 mil - S$2.50 mil range at 27.4%. This was followed by the S$1.50 mil – S$2.00 mil bracket at 26.0%.

By market segment, February 2023’s developer sales (excluding ECs) were skewed towards the Core Central Region (CCR) where 222 units (51.4%) were sold, followed by the Rest of Central Region (RCR) where 163 units (37.7%) were sold, and the Outside Central Region (OCR) which saw the sale of 47 units (10.9%). This compares to 40.5% in the CCR, 12.2% in the RCR and 47.3% in the OCR in January 2023.

Outlook

At the moment, the increase in BSD announced at Singapore’s 2023 Budget, appears to be having a marginal impact on purchasing decisions. Based on caveats downloaded by CBRE Research, 233 units or 55.1% of the month’s units were sold from 15 February 2023, despite the higher BSD levied on homebuyers. Overall take-up, however, continues to be dampened by the combination of slowing economic conditions, high mortgage rates and tightened financing conditions from September 2022’s round of cooling measures.

Sales volumes in March 2023 should be supported by suburban project, The Botany at Dairy Farm (386 units). It was reported that the project was met with healthy demand on its 4 March 2023 launch day, moving 187 or 48% of its 386 total units at an average price of S$2,070 psf.

Other new launches expected in the pipeline include RCR project Blossoms by the Park (265 units), the project located on the Slim Barracks Rise Parcel A GLS site awarded to EL Development in October 2021. In the OCR, Lentor Hills Residences (595 units) on Lentor Hills Parcel A GLS site could also launch in Q2 2023. The projects mentioned are part of the estimated 10,000 – 12,000 units expected from new launches in 2023.

The healthy pipeline of new launches could provide homebuyers with more options and support new home sales in 2023. However, the Silicon Valley Bank fallout over the past week had raised uncertainties in the financial market, and developers may wait-and-see and delay new launches in the near term.

Nonetheless, CBRE Research maintains our forecasts of approximately 7,500 – 8,500 new homes sales in 2023, a marginal increase from the 7,099 new homes sold in 2022, which was a 14-year low since 2008’s 4,264 units.

Stabilisation of interest rates should provide a clearer outlook in H2 2023 and bring back confidence. Barring major job losses and a sustained recession, home prices may rise 3 –5%, supported by low unsold inventory, healthy household balance sheets and higher rents.