International property consultant Edmund Tie is reporting this week interest in private homes in Singapore is increasing as the Country's property industry charts a path of recovery in 2021.
According to the URA All Residential Property Price Index (PPI), overall private home prices rose for the fourth consecutive quarter by 3.3% quarter-on-quarter (qoq) in Q1 2021, with the Landed PPI expanding by 6.7% qoq and the Non-Landed PPI by 2.5% qoq. Resale profitability has also improved this in 1Q 2021 as a result, with the proportion of loss-making transactions declining to 15.5% from 17.0% in the previous quarter.
The trajectory of non-landed prices belies the differing performance of various segments by unit size. Median prices of units in the most segments (500 - 700 sq ft, 700 - 1,000 sq ft, 1,000 - 1,500 sq ft, and 1,500 - 2,000 sq ft) proved resilient during the pandemic due to buoyant mass market demand, health affordability and a preference for more sizeable units due to pandemic-induced work-from-home arrangements. Median prices of small units below 500 sq ft saw the largest drop in 2Q 2020. Median prices of large units above 2,000 sq ft also exhibited a steep fall during 3Q 2020 before recovering thereafter.
Edmund Tie's senior director of research and consulting, Mr. Lam Chern Woon commented, "These trends are a direct reflection of the shifting preference for larger units given the rising prevalence of work-from-home (WFH) arrangements during the pandemic. The border restrictions would have also curbed foreign demand for prime location homes which are typically larger. Even so, we are seeing the return of foreign demand given Singapore's relatively successful containment of the pandemic."
Transaction volumes remained robust in 1Q 2021 with a total of 8,181 units sold in the primary and secondary markets. The primary market displayed an increase in transaction volume that was driven by the success of several major project launches in the CCR and RCR, which included Midtown Modern at Tan Quee Lan Street, which sold more than 80% of its launched units during the quarter, and the Reef at King's Dock at Harbourfront Avenue, which sold more than 85% of its launched units.
In terms of new sale units, there is a noted preference shift from purchasing units sized between 700 - 1,000 sq ft, which formed the highest proportion of primary market transactions in 4Q 2020, to smaller units between 500 - 700 sq ft, which formed the highest proportion of transactions quartering 1Q 2021. The proportion of units sized below 500 sq ft also rose for the first time after three quarters of decline, a break from the shift towards larger homes during the pandemic.
In terms of price range, the bulk or 40.6% of the transactions of 1Q 2021 were in the $1mn to $1.5mn band, which is a decline from the 44.2% recorded in 4Q 2020. There were sharp growths in the proportions of transactions in the higher price ranges, namely the $1.5mn to $2mn band and $3mn to $4mn band, from 23.8% and 1.4% in 4Q 2020 to 28.2% and 2.7% in 1Q 2021 respectively, suggesting a shift towards pricier homes.
Mr. Lam says, "We are seeing a possible divergence in homebuying demand in the primary market. On the one hand, the proportion of units priced above $1.5mn rose for the third consecutive quarter, led by rising prices. Conversely, the proportion of small units sized less than 500 sq ft posted a surprising increase. One reason could be demographics related where more elderly households downsize to smaller homes as part of retirement transition."
Due to travel restrictions, Singaporeans accounted for the bulk of non-landed residential sales, making up 79% of total transactions for the in 1Q 2021. Purchasers of all residential status grew during the quarter as well, owing to rising market confidence. Mainland Chinese remained the top foreign homebuyer in 1Q 2021 across all market segments.
Barring any government intervention to cool the property market or a significant worsening of the pandemic, the private homes market should remain on sound footing with transaction activity staying robust, driven by the economic recovery and improving market sentiment.
Mr. Lam further commented, "The positive climate in the HDB resale market and the volume of flats obtaining Minimum Occupation Period (MOP) this year will continue to support upgrading demand. Market sentiment has been boosted as the labor market has exhibited improvement over the past few months.
"However, developers are likely to be more cautious with their launch pipelines in the near term before the local Covid-19 situation is brought back to better control," he added. "We are sanguine that the longer decision-making process by homebuyers due to the tightened social gathering pax limit will result in sales volumes being diverted to the second half of the year after the pax limit is relaxed," he concluded.