Buying Interest Is Strong But Selective

Singapore, 20 May 2016 – 
By
Eugene Lim, Key Executive Officer
Seah Yao Hui, Research Analyst
ERA Realty Network Pte LtdSince the imposition of several rounds of cooling measures, private property prices have fallen by 9.1 per cent from their peak in 2013 while transaction volume has more than halved from 2012.The first few major project launches in 2016 have fared well in today’s languid market.

Located within walking distance of Choa Chu Kang Mass Rapid Transit (MRT) station, Wandervale, an executive condominium (EC) project developed by the Sim Lian Group, sold about 50 per cent of its total units in its launch weekend.

The following weekend, two other residential projects were launched, The Wisteria and Cairnhill Nine. Both were well received by buyers, who snapped up 116 out of 216 units at The Wisteria and 134 out of 268 at Cairnhill Nine.

Big or small?

Developers have taken to launching smaller units so as to keep the overall quantum affordable. The average gross floor area of units at new projects fell from 1,051 square feet in 2010 to 810 in 2015 for city fringe properties. Suburban developments saw a smaller decrease from 1,017 square feet in 2011 to 811 in 2015.

Correspondingly, at both Cairnhill Nine and The Wisteria, we note that the bulk of the transactions are small units. 1 bedroom units made up 70% per cent of all the units sold at Cairnhill Nine and all 1 bedroom units were snapped up the launch weekend of The Wisteria.

We attribute this to the attractive prices of these projects. At Cairnhill Nine, prices for a one-bedder started from $1.35 million. For buyers, this presents a fantastic opportunity to own a trophy Orchard Road property. Over at The Wisteria, one-bedroom units went for less than $500,000. Coupled with the convenience of having a retail mall managed by Keppel Land Retail Consultancy just a lift ride away, buyers found this a value buy.

However, these sales figures tell a contrasting story compared to 2015. Then, many of the newly launched projects saw strong take up for two-bedroom units, while one-bedroom units were largely not in favour.

A reason for the apparent preference for one-bedroom units would be the individual attributes of the developments. Cairnhill Nine is located within a short walking distance to Mount Elizabeth Hospital, which would provide some form of rental demand in the form of medical tourists who need to stay in Singapore for an extended period of time. Furthermore, being integrated with Ascott Hotel and Residences guarantees a high level of service provided to all residents, which appeals to tenants as well. Hence, buyers tend to investors who are looking to rent out their property.

Similarly at The Wisteria, majority of the buyers are investors. Its main draw is its affordability. The relatively low quantum caters to the aspirations of Singaporeans to own private property. In addition, The Wisteria holds an edge over many private condominiums at the same price point because it is integrated with a retail mall. The extra layer of convenience adds to the ease of renting out units in the future.

On the other hand, Wandervale, being an EC targeted at families, saw buyer activity focused on larger units. The four-bedders are 87 per cent sold and the larger three-bedroom premium units account for 66 per cent of the total three-bedroom sales.

This is because ECs have more stringent ownership regulations, which discourage investment activity. These include the five year minimum occupation period and income ceiling. Hence, buyers of ECs tend to be families who are looking to occupy the units. As such, larger units are preferred by this group of buyers.

Foreigner interest still strong

Buying activity from foreigners has plummeted after the imposition of the Additional Buyer’s Stamp Duty (ABSD). When the ABSD was first introduced in December 2011, foreigner transactions dived. Q1 2012 figures show a 72 per cent drop in foreign purchases from the preceding quarter.

Since then, foreigners have taken a back seat in purchasing properties in Singapore. This is most evident in the Core Central Region (CCR) where the number of foreign purchases fell from 285 to 74 after the ABSD was implemented.

However, we observed that Cairnhill Nine has seen substantial foreigner interest, with 46 per cent of the buyers being foreigners.

Amongst them, Indonesians formed the bulk of the buyers. This corresponds to the historical preference of Indonesian buyers for the Cairnhill enclave. Last year, 39 per cent of their purchases in District 9 and 10 were in this area.

A reason for the increased interest could be the price quantum. In addition to being a new project launch, the overall quantum for units at Cairnhill Nine was also among the lowest in the vicinity. As such, foreigners could have found it the price palatable, even after accounting for the 15 per cent ABSD.

HDB upgraders active

Buyers at The Wisteria with a HDB address accounted for almost 90 per cent of the total buyers. Most of them bought the one-bedroom units, indicating that are probably intending to rent out the unit while continuing to live in their current HDB flat. This demand is significant, as almost all the one-bedroom units were bought by purchasers with HDB addresses.

Pricing also comes into play here, as most HDB owners who want to purchase an additional property must have enough savings, either in the form of cash or Central Provident Fund (CPF) monies, to pay off the ABSD and at least 20 per cent of the sale price of the unit. Hence, this group of buyers tends to be extremely price sensitive. In this regard, The Wisteria has managed to attract this target group quite effectively.

HDB owners looking to upgrade to a private address also contributed to the sales at The Wisteria, being the only people who bought three-bedroom units. It is likely that these people are buying for their own occupation. This corresponds to the Singaporean dream of climbing up the housing ladder.

Age matters

Most buyers of private property tend to be older, owing to the higher capital requirements.

On this front, both Cairnhill Nine and The Wisteria share a common trend. Buyers over the age of 40 represent 59 per cent and 49 per cent of the total respectively.

However, we also note that many parents are buying homes in their children’s name, as some buyers are below the age of 30.

In Cairnhill Nine, the percentage is around 20 per cent. This is possibly due to the traditional Chinese mindset to help their children own their first home.

Wandervale, being an EC with eligibility conditions, attracted mostly buyers in their 30s. This group made up 55 per cent of the total. They are likely to be families who have bought their first flat and are looking to upgrade. An EC becomes an attractive option as it shares many similar features as private condominiums but are sold at a lower price.

These three recently launched projects have performed well as they share some common attributes.

First, they have kept their prices reasonable. In today’s market, buyers have many choices when it comes to buying a property. In order for them to commit to a purchase, they have to be convinced that the project is a value buy, and pricing plays an important role.
Second, these projects have certain non-price characteristics that appeal to their end users. Cairnhill Nine offers services from Ascott, which the high net worth individuals will probably prefer. The Wisteria is integrated with a decently sized shopping mall which would contribute to rental demand and hence appeal to investors. Wandervale located between two MRT stations with convenient access to both. Together with the schools and amenities nearby, it is an attractive package for families.

As developers line up more project launches in the coming months, buyers are faced with an array of options. Recently launched projects include The Visionaire EC in Canberra and Sturdee Residences at Farrer Park. GEM Residences at Toa Payoh, Northwave EC in Woodlands and Treasure Crest at Sengkang are set to be launched in the coming months.

With all these quality projects in the market, it is no wonder that buyers are spoilt for choice.