Research & Forecast Report

Singapore | Residential1Q 2015

Accelerating success.

Outside Central Region (OCR) slipped 0.6%, 1.8% and 0.9%, respectively, in 1Q 2015 on a QoQ basis. This followed their corresponding quarterly moderations of 0.9%, 1.4% and 0.8% in 4Q 2014.

Falling home prices came about as overarching concerns pertaining to the sooner-than-expected rise in interest rates and the mounting supply of homes amid the on-going implementation of stringent cooling measures and strict loan curbs continued to weigh on buying sentiments. To entice homebuyers, some developers priced projects attractively while others offered discounts.

Some homeowners who were previously holding out for higher prices also softened their stances. This is particularly evident in owners of luxury and super-luxury homes, especially those with multiple properties acquired in 2007 at the peak of the property boom before the financial crisis.

For example, a 2,626 sq ft luxury condominium unit at The Coast at Sentosa Cove was sold in January for about $3.13 million or just $1,190 per sq ft. This price is about $1.21 million below the original purchase price of $4.34 million or $1,653 per sq ft that the seller paid in March 2007, according to the URAs Real Estate Information System (REALIS) caveats.

Year Off to a Dismal Start on Multiple Downward PressuresPlagued by languid demand, Singapores private residential home prices and rents continued to buckle under the weight of multiple downside pressures, setting the year off to a dismal start.

According to the Urban Redevelopment Authoritys (URA) preliminary estimates, prices of Singapores private residential homes island-wide headed south for the sixth consecutive quarter, easing 1.1% quarter-on-quarter (QoQ) after falling by the same magnitude in 4Q 2014.

The price correction in 1Q 2015 was broad-based across all three market segments. Prices of non-landed homes in the Core Central Region (CCR), Rest of Central Region (RCR) and

Source: URA *Flash Estimate

Residential Property Price Movement

Quarter-on-Quarter Change in Price Indices of Private Residential Properties

PERIOD ALL RESIDENTIALNON-LANDED RESIDENTIAL

CORE CENTRAL REGION REST OF CENTRAL REGIONOUTSIDE CENTRAL

REGION

1Q 2014 -1.3% -1.1% -3.3% -0.1%

2Q 2014 -1.0% -1.5% -0.4% -0.9%

3Q 2014 -0.7% -0.8% -0.4% -0.3%

4Q 2014 -1.1% -0.9% -1.4% -0.8%

1Q 2015* -1.1% -0.6% -1.8% -0.9%

2 Research & Forecast Report | 1Q 2015 | Residential | Colliers International

In yet another example, a 6,017 sq ft two-storey penthouse at St Regis Residences on Tanglin Road was reportedly sold in February at a price of $12.20 million ($2,028 per sq ft) with the seller booking a loss of $15.80 million, the biggest loss ever made on an apartment sale in Singapore.

As such, it came as no surprise that luxury and super-luxury apartments located within the CCR sustained the heftiest fall in prices in the first three months of 2015. Colliers Internationals research showed that their prices, which recorded a QoQ decline of 0.6% in 4Q 2014, trended down by another 3.7% in 1Q 2015 to average at $2,746 per sq ft by the end of March 2015.

Despite lower prices, homebuyers largely kept to the side-lines. Besides nagging concerns relating to the potential supply overhang and the soft rental market amid a stringent regulatory environment, the rise of interest rates also kept homebuyers at bay. The three-month Singapore Interbank Offered Rate (SIBOR), a key interest rate that determines housing loans, reportedly rose to above 1% by 24 March 2015 for the first time in six years, further fuelling uncertainty and denting home-buying demand.

With the odds stacked against them, developers acted with caution. They released 1,249 units in the first three months of 2015, down 21.5% QoQ. Faced with strong inertia to commit, buyers took up 1,329 units in 1Q 2015, just a mere 2.6% more than the 1,295 units sold in 4Q 2014, which was a five-year low.

Market activity sluggishAmid renewed affordability concerns brought on by the recent sharp increase in interest rates, market activity centred on mass-market homes in the OCR. The 818 units released by developers constituted 65.5% of island-wide launches while the 781 mass-market homes sold accounted for a significant 58.8% of all new home transactions in 1Q 2015. Due to the step-up in project launches in the segment, launch volume more than doubled from the 330 units launched in 4Q 2014 while sales of mass-market homes improved 39.0% QoQ.

Nonetheless, these are still a far cry from the average launch and sales volumes of 5,025 and 4,927 units the market was recording, respectively, in the two years prior to the imposition of the TDSR in June 2013.

Reigniting interest in the segment were two major suburban condominium projects. Collectively, these 99-year leasehold projects accounted for 60.4% and 31.2% of all new units launched and sold, respectively, in the OCR in 1Q 2015.

In the Northeast region, developer Kingsford Development launched Kingsford Waterbay, on Upper Serangoon Road. The development, which features 1,165 apartments served by six retail units and a childcare centre, was reportedly launched below its initial expected selling price of $1,200 per sq ft. Homebuyers picked up 155 of the 314 units launched at prices ranging between $904 and $1,181 per sq ft by the end of the quarter.

Designed with affordability in mind, EL Development released 180 units from the 660-unit Symphony Suites at Yishun in 1Q 2015. Priced at the lower end of market expectations, 89 units were moved at prices ranging from $947 to $1,100 per sq ft in the January to March quarter.

Additionally, units from some previously launched projects were also released with price reductions to lure buyers back into the market. These include non-landed projects such as the freehold Trilive and 99-year leasehold The Skywoods. Located on Tampines Road, Roxy-Pacific Holdings reduced prices on selected units at the Trilive. Some 34 units were moved at prices between $1,231 and $1,659 per sq ft in 1Q 2015. Comparatively, prices achieved ranged from $1,435 to $1,674 per sq ft when it was launched in June 2014.

Similarly, homebuyers picked up 52 units at The Skywoods located in the Bukit Timah vicinity after its developer launched a star buy promotion for the project, which was first launched in September 2013, in order to clear its unsold inventory that stood at 241 units at the beginning of 2015.

Mirroring the OCR, primary market activity in the RCR remained sluggish despite recording improved sales and launch volumes. Some 456 new units were sold, up 46.6% QoQ while launch volume rose 13.4% to 363 units.

Driving market activity in the city fringe was the debut of the 1,024-unit Sims Urban Oasis. Developer GuocoLand offered discounts of up to 19% over the Lunar New Year holiday period to lure homebuyers. Located within walking distance of the Aljunied Mass Rapid Transit (MRT) Station, this 99-year leasehold condominium project found buyers for 205 units at prices ranging from $1,282 to $1,548 per sq ft by the end of March.

Marine Blue, which comprises four strata-landed and 120 non-landed homes, also contributed to sales in the RCR. Developer Capitaland reportedly offered a 10% discount off listed prices to lure buyers during its preview in January. Of the 50 units released, some 28 units at the freehold project located within walking distance of the upcoming Marine Parade MRT station were taken up at prices between $1,398 and $2,021 per sq ft by the end of the quarter.

Source: URA/Colliers International Research

Geographical Distribution of New Units Launched & Sold in 1Q 2015

Outside Central RegionRest of Central RegionCore Central RegionProportion of Units Launched Proportion of Units Sold

100%

80%

60%

40%

20%

0%

65.5%58.8%

34.3%

6.9%5.4%

29.1%

3 Research & Forecast Report | 1Q 2015 | Residential | Colliers International

Sample List of Newly-Launched Residential Projects for 1Q 2015

DEVELOPMENT LOCATION TENURETOTAL NUMBER

OF UNITS IN DEVELOPMENT

UNITS LAUNCHED IN

1Q 2015

UNITS SOLD IN 1Q 2015

TRANSACTED PRICE RANGE ($ PER SQ FT)

NON-LANDED

Kingsford Waterbay Upper Serangoon View 99 years 1165 314 155 $904 - $1,181

Marine Blue Marine Parade Road Freehold 124 50 28 $1,398 - $2,021

Sims Urban Oasis Sims Drive 99 years 1024 205 205 $1,282 - $1,548

Symphony Suites Yishun Close 99 years 660 180 89 $947 - $1,100

LANDED/STRATA-TITLED LANDED

Alias Villas Jalan Haji Alias 99 years 6 6 0 -

New Project Launches

Source: URA/Colliers International Research

Collectively, new homes in the RCR accounted for 29.1% and 34.3% of island-wide launches and sales, respectively, in the first three months of 2015.

Sales performance pulled down by CCR Over in the CCR, only one smallish project the six-unit Alias Villas was released in 1Q 2015. This stood in stark contrast to the preceding quarter during which the mega 1,042-unit Marina One Residences was launched for sale. As a result, primary market launch volume plunged 14 fold to 68 units,

while the number of new homes sold in the CCR dropped 78.2% QoQ to 92 units in the three months ending in March 2015.

No units were sold at Alias Villas, a freehold strata-landed housing project located along Jalan Haji Alias. Instead, interest was thinly spread across various previously launched projects, such as V on Shenton and Goodwood Residence where 10 units were sold from each project.

All in, the 68 units launched and 92 units sold by developers in 1Q 2015 accounted for 5.4% and 6.9% of all new private homes launched and sold, respectively.

Average Capital Values and Monthly Gross Rents of Luxury (Including Super Luxury) Apartments

Source: Colliers International Research

rents eased 2.2% QoQ in 1Q 2015 to $5.02 per sq ft per month as of the end of March 2015.

The lackadaisical demand for homes exacerbated the already weak leasing market. The unsold inventory and newly completed homes competed with the existing leasing stock to vie for a limited pool of tenants which comprised mainly of existing ones looking for alternative accommodation. New expatriate arrivals remained limited due to tight immigration policies.

To stretch their dollar in a tenants market, more are looking for larger apartments at the same rent and landlords are hard pressed to revise rents downwards or accommodate home improvement requests in order to secure renewals. Consequently, according to Colliers Internationals research, the average monthly gross rents of luxury and super-luxury apartments eased a steeper 2.2% QoQ in 1Q 2015 following 4Q 2014s 0.8% QoQ decrease to $5.02 per sq ft per month as of the end of March 2015.

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4 Research & Forecast Report | 1Q 2015 | Residential | Colliers International

Intermittent threats will keep market on its toes for the rest of the year With intermittent threats keeping the market on its toes, homebuyers are expected to exercise heightened prudence for the rest of the year.

As more homes obtain temporary occupation permits, the reality of a record 21,359 new homes expected to be completed in 2015 is fast sinking in. This contrasts with the 10-year average net new supply of 8,691 units and is higher than the net new supply of 19,444 private homes recorded last year.

While this bumper completion represents a greater variety of housing options, some homebuyers are expected to stay on the side-lines in anticipation of further price corrections, while others purchasing homes for investment may be hesitant to commit in view of the repercussions on the rental market.

Coupled with interest rates, which have already increased sooner and steeper than expected, home-buying momentum will remain curbed. Consequently, the total new sales for the whole of 2015 is forecast to come close to 2014s 7,316 units, hovering in the region of 6,500 to 7,500 units, as long as the cooling measures and stringent loan curbs remain in place.

As both home sellers and developers direct their strategies towards an increasingly price-sensitive group of homebuyers, private home prices are anticipated to soften by about 5% to 8% in 2015 following the 4.0% moderation in 2014. This is also taking into consideration developers measured bids in recent land tenders that gives them more flexibility in adjusting prices downward where necessary a sign of their expectations of weakening home prices ahead.

private home prices are anticipated to soften

Specifically for the luxury and super-luxury segment, prices, which have fallen 15.1% since 2Q 2011, have prompted funds and institutions to scour the segment for opportunities. However, prices are expected to remain depressed as buyers remain opportunistic in view of the headwinds facing the high-end segment amid renewed affordability concerns. Additionally, based on URAs monthly developer sales figures as of March 2015, developers have on hand an unsold inventory of 6,740 high-end homes with prerequisites for sale, of which some 2,053 have been launched. This will put a drag on prices. Hence, prices of luxury and super-luxury apartments that have moderated by some 7.4% in 2014 and 3.7% in 1Q 2015 may slide by a steeper 10% to 15% in 2015.

Turning to rents, weak buying sentiments have prompted developers to withhold launches and put units up for lease instead, adding to the already mounting supply of homes available in the rental market. With landlords getting the shorter end of the stick, a tenants market is likely to persist.

Consequently, the average monthly gross rents of luxury/super-luxury apartments are projected to decline by some 8% to 10% in 2015 after falling 2.2% QoQ in 1Q 2015 and 4.6% for the whole of 2014.

Copyright 2015 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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