OrangeTee: Robust demand in the Singapore property market
Recent data by OrangeTee Research has revealed that prices in Singapore's private residential housing market have fallen by 0.4% quarter-on-quarter, continuing a record streak of price decline in the sector. Since a peak in the third quarter of 2013, prices of private residential properties have fallen for 14 consecutive quarters by a total 11.6%. However, this downward trend has not been reflected in demand, and market sentiment remains effervescent, as new launches in particular have fuelled the market.
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Singapore's property market sees jump in housing volumes
Overall, housing demand volumes rose by 18.6% quarter-on-quarter. There is much speculation as to the reasons behind this, but some causes could be attributed to the easing of seller stamp duty and other government-introduced cooling measures, the decline in volume and yield of the private rental market, the recent plethora of freshly completed and expected new builds, and a favourable increase in occupancy rates.
The government of Singapore has this year taken measures to stabilise the private residential property market, as well as make home ownership more attractive. These aids include the easing of seller stamp duty, which from March 11th this year was relaxed from 12% down to 8% for holding periods of 1-2 years, and fixed at 4% for holding periods of 2-3 years. For holding periods of more than three years, no seller stamp duty will be payable. The Total Debt Servicing Ratio (TDSR), implemented to discourage over-borrowing, has also been cut, as the government attempts to balance the market.
As these more attractive feeds coax potential renters to buy instead, while simultaneously sustaining the current trend of market demand, it's expected that the private rental market will continue to feel pressure for the foreseeable future.
But, increased property purchases is affecting rents
The decline in private rental market demand, which has fallen steadily since a peak in 2013, also looks set to continue – with a recent quarter-on-quarter decline of 0.7% contributing to a wider overall decline of 11.4% since the third quarter of 2013.
The increased demand for property purchases is also reflected in the falling gross rental yield, which is bad news for landlords across Singapore’s three regions. In 2016, the average gross rental yield fell from 3.9% to 3.3% in the Outside Central Region (OCR) of Singapore. The Core Central Region (CCR) was fixed at 2.9%, and the Rest of Central Region (RCR) at 3.2% in 2016, as a slow but steady number of residents decide purchasing is a better way to spend their cash.
In addition to more appealing fees and increased borrowing flexibility, there's also now considerably varied property choices in Singapore. In the primary market, 20,803 new units were completed in 2016 – that's the highest figure in 14 years – and a more prudent estimate of just under 16,000 units are on track for completion in 2017. The majority of units awaiting completion are located in the OCR. Attractive building features, locations and prices have all contributed to the recent surge in sales figures, and in the first quarter of 2017 the sale of 2,962 new units represented a quarter-on-quarter increase of 27.9%. Year-on-year, volumes have risen by 108.7% from the first quarter of 2016, when just 1,419 units were sold.
In the secondary market, prices and figures are also on the increase, albeit a more modest pace. Transaction volumes totalled 2,240 units in the first quarter of 2017, with a quarter-on-quarter growth of 8.3% and a year-on-year growth of 56.9%.
This sentiment is mirrored all around the property market, with year-on-year completions and sales both climbing for luxury residences too – including the curvilinear ascent of Tomlinson Heights, Leedon Residence, which has its own nature trail, and many more. Properties with a value of more than S$10 million in these and many other opulent developments have also seen an increase in demand, with 36 units sold in the last financial year.
However, occupancy rates continue to grow
Another indicator of the increased demand for property, despite the fall in prices, is the recent growth in occupancy rates. The overall occupancy rate for Singapore stood at 91.9% in the first quarter of 2017 – up 0.3% on the last quarter of 2016. Data from the first quarter of 2017 reveals that occupancy is highest in the OCR at 92.8%, lowest in the CCR at 90.4% and in the middle in the RCR at 91.6%.
In the second quarter of 2016, occupancy was at a high in the RCR at 92.8%, while both the CCR and OCR were equal at 90.4%. The recent dominance of the OCR is a result of the high-quality but relatively inexpensive building and developments, including those which are still being built, and the increase in appeal of the area as citizens increasingly look to live further from the CCR.
As interest mounts in the OCR, developers are acknowledging the relevance and profit associated with further development in the area. As such, specific areas including Bedok, Pasir Ris, Tampines, Clementi, Hougang, Sengkang, Serangoon and Yishun have been earmarked for residential supply, with at least 1,000 units intended for these areas (and in some cases as many as 2,285).
Market buoyancy is good news for buyers and sellers alike, while the government will be pleased to see results of their efforts to cool the market. Some analysts predict that with increased occupancy rates, impressive primary market performance and better-than-expected secondary market performance, and government-backed cooling measures, that the housing market recovery could be expected to bottom out towards the end of this year – much earlier than originally expected.