Green lights for more upside: Private residential property market in 1Q 2020

The URA released the private housing statistics for the first quarter of 2021 (1Q 2021) today. Below are our analysis and commentary on the above topic.

Faster pace of growth of private residential property prices

According to the official real estate information for 1Q 2021, the private residential property price index appreciated 3.3% quarter-on-quarter (qoq), faster than the 2.1% qoq increase in the preceding quarter of 4Q 2020.

The faster price growth was led by the price expansion of non-landed properties in the city fringe area, also known as Rest of Central Region (RCR) and landed housing. The price index of RCR non-landed residential properties and landed housing increased by 6.1% and 6.7% qoq respectively.

Landed housing price growth

The robust price growth of landed housing was partly contributed by the growing demand for more spacious homes and the growing prices of non-landed housing. Since the start of the pandemic and work-from-home culture, many people would prefer more spacious homes but not everyone can afford to buy larger real estate.

Those who have the financial capabilities to do so had fuelled the increase in the transactions of landed housing. Furthermore, the rising prices of condominiums had also made landed housing appeared to be value for money, resulting in higher demand for the latter.

Before the pandemic, a total of 1,542 private landed housing units were transacted in the primary and secondary markets islandwide in 2019. This translated to an average of 385 units in each quarter of 2019.

In 3Q 2020, after the lifting of the Circuit Breaker, the transaction volume of landed houses tripled to 650 units from 213 units in the previous quarter.

Number of landed housing units sold islandwide

Source: ERA Research & Consultancy, URA

In 1Q 2021, based on the number of caveats lodged, 785 landed houses were sold. The quarter-on-quarter dip in the transaction volume in 1Q 2021 was due to the lull period during the Lunar New Year. Since 3Q 2020, the number of transacted landed homes in each quarter remained above the quarterly average of 385 houses in the pre-COVID period of 2019.

Due to the strong demand, the price index for landed housing increase 6.7% qoq in 1Q 2021, faster than the 2.5% qoq rise in the price index of non-landed residential properties over the same period.

City fringe areas lead the price growth

The main driving force behind the expansion of non-landed property prices in 1Q 2021 was the 6.1% qoq growth in non-landed property prices in the RCR. There were two relatively large condominium projects in the RCR that were launched in the first quarter of this year, namely Normanton Park and The Reef at King’s Dock with 1,862 and 429 units respectively.

The Reef at King’s Dock is located at the premium waterfront Keppel Bay area and within close proximity to the Central Business District. Therefore, housing units in this development were able to command comparatively high prices and could potentially drive up RCR non-landed price index.

In 1Q 2021, new homes at The Reef at King’s Dock were sold at a median price of $2,257 psf while the overall median transacted price of all new non-landed homes in the RCR was $1,820 psf. On the other hand, prices in the CCR and OCR grew by a relatively moderate 0.5% and 1.1% qoq respectively.

Outlook for private residential property market

Launch & sales

Despite the outbreak of the Covid-19 pandemic last year, real estate developers still managed to sell slightly more private housing units in 2020 than the preceding year, partly due to the steady stream of project launches. In 2020, developers launched 29 residential projects, including Executive Condominiums (EC), with 7,347 units in total.

In 1Q 2021, six residential developments with a total of 3,683 units were launched. The number of units in these 6 projects is half of the total number of units in the 29 residential developments launched last year. The 1,862-unit Normanton Park is the largest of the six projects launched in the first quarter and it is likely to be the largest project launched this year.

In the remaining nine months of this year, 19 residential projects with a combined 5,215 units are lined up for launch. If the developers were to launch all 19 projects this year, the total number of units launched in 2021 would be more than that in the pervious year. Since the number of housing units sold by developers is positively correlated to the number of units launched in the same period, developers could sell 10,000 to 11,000 private housing units plus 1,000 to 1,300 EC units in 2021.

Private housing price

The homebuying demand is powered by a combination of different factors, such as growing market confidence, fear of missing out (FOMO) and supported by low interest rates and ample liquidity. The concern about rising home prices and the policy risk of additional market cooling measures had also motivated some buyers to rush to acquire residential properties. Furthermore, the rising prices of HDB resale flats would also increase the purchasing power of HDB upgraders.

As a result, the private residential property price index could increase by 7% to 10% yoy in 2021.

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