Developer New Home Sales In October 2018 Remain Firm; May Soar After Growing Interest Of Foreign Institutional Investors
The October 2018 sales for real estate in Singapore remained firm even though the overall launches for new homes last month declined by 82.7%.In September the Singapore real estate industry saw launch of 1,169 units whereas, in October, the number dropped to only 202 units which are considerably low.
Real Estate Sales analysis for October 2018
In October the new launch units were mostly from a smaller 56-unit development 10 Evelyn. The market saw release of more units from the existing projects including Mayfair Gardens (15 units), The Tapestry (50 units), Martin Modern (27 units), The Tre Ver (50 units), and Wallich Residence (4 units). Out of the 487 units sold in October, 485 units were from the existing ones. The September month recorded a sell of 932 units which is much higher than the sale in October.
According to the latest sales analysis reports, even then it is much higher than the 460 units the real estate developers sold in the span of more than 12 months. The recent increase in the sale is an indication that the demand for new homes increased in the last three months after a bit of cooling period. It is a good time for the existing launches of real estate companies in Singapore with many projects maintaining their sales in October 2018 as compared to the sales of September.
According to the sales analysis for October 2018, Affinity project at Serangoon sold 81 units last month whereas it sold only 31 units in September. Accordingly, the luxury project from the company Marina One Residences sold 12 units in October as compared to 4 units sold in September. Also, the prominent projects like Riverfront Residences, Stirling Residences, The Tapestry, and the Park Colonial maintained their sales last month.
Market clarity and stable prices may attract buyers
The market now offers greater clarity. The prices have now almost consolidated or stabilized especially in certain segments. That is why; there is a huge chance of the sidelined buyers who have been waiting for the things to come within their limits to return back to the real estate market. An observation by Christine Sun, Head Of Research and Consultancy at OrangeTee revealed that the projects located in prominent locations with attractive pricing drew healthy buying interest. The purchase of new homes in bulk in October was 47.8%. Sun further added that the non-landed new homes priced above $3 million held steady similar to September at 4.1% and much above 1.4% in August and 1.8% in July this year.
It suggests that there is a possibility of high net worth individuals returning to the market as pricier home proportion is on the rise. According to Christine Sun, homebuilders sold 2 units above S$15 million at Marina One Residences. Incidentally transaction between S$3,000 and $4,000 psf took place in October as a result of sale of 17 luxury homes at 8 Saint Thomas, Wallich Residences, One in Draycott, and 8 in Hullet.
Sun at OrangeTee believes that the monthly sales transactions will rebound in November as real estate companies in Singapore are planning the launch of many new projects. All these projects possess good selling propositions, priced attractively in prominent locations. The company expects healthy sales take-up for these projects. Some of the major launches this month from real estate companies in Singapore include Mayfair Modern, Woodleigh Residences, Parc Esta, and Whistler Grand.
Will new policy from Singapore government affect real estate developers?
The Singapore government is planning to introduce a new policy on the sizes of apartments. Trade analysts believe that it can be welcome news for the home buyers. However, for the home builders, it will be a challenge to come up with the right pricing that will maintain a healthy profit margin and still attract the purchasers. According to the new guidelines on unit sizes, the average unit size now should be compulsorily 85 sqm as against the existing 70 sqm limit. It naturally will cut down the number of apartment units in a particular project by around 18% which is a big loss for the home builders.
The Urban Redevelopment Authority recently notified that the Singaporean government is planning to introduce this new policy at the start of next year. It will be applicable only to residential developments located to the outskirts of the central areas. The home builders will now face the biggest disadvantage of building bigger apartments at reduced selling prices to sell their units.
The good news for real estate developers and homebuilders in Singapore is that the policy will not be applicable to the projects launched in 2018. But it can affect the sales of condominiums in November and December this year as the home buyers will rather wait for 2019 to get a bigger unit and better deals next year.
Singapore on threshold of attracting foreign institutional investors
With the above policy announcement, the real estate world of Singapore is now desperate to find avenues that can improve their earnings in the last few months of 2018 and also in 2019. Hopefully, things are looking brighter for the homebuilders and real estate developers as the country now seems to be on the threshold of attracting foreign institutional investors yet again. The commercial property market will take off eventually with inflows from foreign investors such as pension funds, equity funds, sovereign wealth funds, insurance, and more.
The transaction value of investments from the foreign investors in all these funds in the past three years (2016 and 2018) is S$5.3 billion, which is almost five times more than the S$1.1 billion transaction value during the past six years between 2010 and 2015. It means that the institutional investors from the foreign country are now more confident about Singapore’s real estate fundamentals. Interestingly, investors having a long-term view are now well aware of the value that real estate market of Singapore values.
So, monthly sales can go well beyond its October sales figures if real estate companies come up with attractive projects to lure these institutional investors.