Industry Perspective Singapore residential sector - shifting to a slower pace - United Overseas Bank
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Real Estate & Hospitality
Industry Perspective
Singapore residential
sector – shifting to a
slower pace
Industry Perspective
Real Estate & Hospitality 2
(This page is left blank intentionally)
Industry Perspective
Real Estate & Hospitality 3
Executive summary
The Singapore property market was caught off-guard by the Government’s
cooling measures in July 2018 which included an increase in Additional
Buyer Stamp Duty (ABSD) for non-first time buyers, non-remittable ABSD
for developers and the lowering of Loan-To-Value (LTV) limits by five
percentage points for all housing loans granted by financial institutions.
These collectively led to an immediate decline in transaction volumes both
in the primary and secondary markets.
Real Estate &
Hospitality Based on the Urban Redevelopment Authority’s (URA) fourth quarter 2018
(4Q18) statistics and first quarter 2019 (1Q19) flash estimates, there are
emerging signs of a subdued market in the coming months compared with
the pre-July 2018 market levels where total sales volume had dipped by
more than 20% quarter on quarter (QoQ) in 3Q18 and 4Q18.
Our baseline scenario will be for prices to remain flat, with downside bias of
low single-digit decline in URA’s Property Price Index (PPI) on average.
Ideally, sales volume is to be supply-led but this is expected to be
tempered by cautious buyer demand. The balance sheets of households
and developers are expected to remain generally healthy with demand
supported by replacement demand arising from cashed-up en bloc sellers
and first time buyers spared from ABSD.
While the upcoming strong supply of new launches, i.e. with 18,000 units
launch-ready this year, will increase options for buyers and developers may
price their projects competitively, there might be limited room for bargain
hunting and developers hold their ground on pricing for now given their healthy
balance sheet.
In addition, developers who acquired land between 2016 and 2018 will only
hit the five-year sales deadline from 2021. Hence slow take-up rates may
characterise the project launches in the coming months. The only challenge
to that view is if developers turn pessimistic and try to mitigate their risk by
accelerating sales to lock in any residual demand.
Expect Going forward, the downside risks will stem mainly from further
overall price macroeconomic deterioration, such as negative repercussions related to
any fallout from the ongoing US-China trade tariff negotiations. We expect
levels in 2019 interest rate such as the 3-month Singapore Interbank Offered Rate
to remain flat (SIBOR) and Swap Offer Rate (SOR) to rise before plateauing between
end-2019 and the first quarter of 2020 (1Q20). This rate increase could
with low pose additional headwind for developers for the rest of 2019.
single-digit
downside For more information on the above insights and banking solutions,
bias please contact us at industry-insights@UOBgroup.com.
June 2019
Industry Perspective
Real Estate & Hospitality 4
Content
03 Executive summary
Sector:
Real Estate &
Hospitality
Singapore 05 Shifting to a
slower pace
residential
sector –
shifting to a
slower pace
26 AppendixIndustry Perspective
Real Estate & Hospitality 5
Shifting to a slower pace
Emerging signs of subdued market post-July 2018 measures
The market was caught off-guard by the Government’s cooling measures in July 2018 which included an
increase in ABSD for non-first time buyers, non-remittable ABSD for developers and the lowering of LTV
limits by five percentage points for all housing loans granted by financial institutions. These collectively led
to an immediate decline in transaction volumes both in the primary and secondary markets.
In this perspective piece, we first present an overview, primarily via URA’s 4Q18 statistics, to share how
and to what degree the market has responded to the measures and any indicative market trends. This is
timely as the 4Q18 statistics is the first full calendar quarter immediately following the July 2018 measures
and a full 2018 calendar year which enables multi-year comparison. We then overlay this with on-the-
ground market activities and dovetail this with URA’s 1Q19 flash estimates.
Figure 1: Singapore property market through the cycles
180 2010: Introduced 2011: Introduced
SSD ABSD
160
140
PPI: 15% above 2Q96 peak
120
HDB: 33% above 4Q96 peak
100 2018: Additional
cooling measures
80 & trade war related
uncertainty
60
40
1997: Asian Crisis 2001: Dot com bust 2008: Global 2013: Peak of
20 PPI -45% over 10 2003: SARS outbreak Financial Crisis tightening cycle (ABSD
quarters PPI -20% over 15 PPI -25% over rates ↑, TDSR)
quarters 4 quarters PPI -12% over 15 quarters
0
1Q90
4Q90
3Q91
2Q92
1Q93
4Q93
3Q94
2Q95
1Q96
4Q96
3Q97
2Q98
1Q99
4Q99
3Q00
2Q01
1Q02
4Q02
3Q03
2Q04
1Q05
4Q05
3Q06
2Q07
1Q08
4Q08
3Q09
2Q10
2Q12
1Q13
4Q13
3Q14
2Q15
1Q16
4Q16
3Q17
2Q18
Private Property Price Index HDB Resale Price Index
Source: URA, HDB, UOB analysis
The preceding chart uses the URA’s Property Price Index (PPI) and the Housing Development Board (HDB)
Resale Price Index as proxies showing how Singapore’s private and public residential property market have
evolved over cycles, mapped over key macro market events and government policy measures.Industry Perspective
Real Estate & Hospitality 6
URA 4Q18 statistics: Review and observations
Based on URA’s statistics for 4Q18, which is the immediate full calendar quarter after the July 2018
measures, total sales volume dipped by more than 20% QoQ for two consecutive quarters, driven by the
plunge in secondary sales (4Q18: -26.5%, 3Q18: -42.9%). This was also the first negative periodic change
after five consecutive quarters of positive growth.
Figure 2: Total sales volume on a decline
12,000
10,000
8,000
6,000
Units
4,000
2,000
0
1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18
Executive Condominiums (EC) Primary Sales (Private) Secondary Sales
Source: URA, UOB analysis
The decline in total sales volume was cushioned by the home sales activity in new launches. Developers appeared
to gear up to capture any residual demand given the prospect of a strong pipeline of new project launches.
Major launches included Parc Esta (1,399 units), Whistler Grand (716 units), Kent Ridge Residences (548
units) and The Woodleigh Residences (667 units).
Figure 3: New home sale figures in 4Q18-1Q19
2,500
2,000
Uptick in new launches
1,500
Units
1,000
500
0
Jul-17
Jul-18
Jan-17
Mar-17
Jun-17
Aug-17
Sep-17
Jan-18
Jun-18
Aug-18
Sep-18
Jan-19
Apr-17
Oct-17
Nov-17
Dec-17
Mar-18
Apr-18
Oct-18
Nov-18
Dec-18
Mar-19
Feb-17
May-17
Feb-18
May-18
Feb-19
Total monthly new private home sales Executive Condominiums (EC)
Source: URA, UOB analysisIndustry Perspective
Real Estate & Hospitality 7
As sentiment took a hit, the pace of sales eased with potential buyers sidelined into a state of inertia,
anticipating potential discounts as the market weakened, though we saw an increase in March 2019 due to
more project launches.
Figure 4: Projects that sold well in 2018
Core Central Region (CCR)
Rest of Central Region (RCR)
Outside Central Region (OCR)
Total units Units sold Median price Total sold
Name (#) (#) (S$ psf) to date (%)
Marina One Residences
521 63 2,500 12
CCR
(Garden Tower)
New Futura 124 102 3,511 82
Martin Modern 450 98 2,756 68
8 Saint Thomas 250 55 3,226 22
Park Colonial 805 562 1,757 70
RCR
Stirling Residences 1,259 500 1,749 40
Parc Esta* 1,399 395 1,700 28
Jadescape 1,206 363 1,670 30
Riverfront Residences 1,472 837 1,311 57
OCR
The Tapestry 861 561 1,407 65
Twin Vew 520 454 1,385 87
Affinity At Serangoon 1,052 306 1,516 29
*New launches in Q4 2018; #Units sold in 2018. Source: URA, List SIRIndustry Perspective
Real Estate & Hospitality 8
The introduction of ABSD has made Singapore’s residential market a less attractive investment destination
for foreigners and investors. The percentage of foreign buyers has declined since the peak of ~20% in end-
2011. Foreign buyers currently account for only ~5% of the market.
Comparatively, buyer demand for permanent residents have been more resilient and likely due to the less
punitive ABSD rate of 5% for first time buyers, although their share has also eased from peak levels of
~20% to ~15%. In short, the demand profile has shifted to a heavier reliance on local first-time buyers and
long-term investors.
Figure 5: Breakdown of sales (excluding EC) by residential status of buyers
Jan-13
ABSD raised 5-7%
25%
Dec-11
ABSD first introduced Jul-18
20% ABSD +5 – 10%
15%
10%
5%
0%
1995Q1
1995Q4
1996Q3
1997Q2
1998Q1
1998Q4
1999Q3
2000Q2
2001Q1
2001Q4
2002Q3
2003Q2
2004Q1
2004Q4
2005Q3
2006Q2
2007Q1
2007Q4
2008Q3
2009Q2
2010Q1
2010Q4
2011Q3
2012Q2
2013Q1
2013Q4
2014Q3
2015Q2
2016Q1
2016Q4
2017Q3
2018Q2
2019Q1
PR Foreigner Company
Source: URA, UOB analysisIndustry Perspective
Real Estate & Hospitality 9
Changing buyer profile
We noted a shift in the composition of buyers, with the number of Indonesian buyers decreasing steadily
over the past decade despite their traditional dominance together with the Malaysian buyers.
Figure 6: Breakdown of 2018 sales by Figure 7: Long-term trend of key foreign buyers within the
foreigners foreigner pool
50%
Australia 45%
2% 40%
Others 35%
26% 30%
United China 25%
Kingdom 31% 20%
2% 15%
10%
5%
USA India 0%
3% 8%
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
2012Q1
2013Q1
2014Q1
2015Q1
2016Q1
2017Q1
2018Q1
2019Q1
Taiwan
2%
Malaysia Indonesia Korea
19% 7% 2% China India Indonesia Malaysia
Over the same period, the decline in demand from Malaysian and Indonesian buyers was balanced by the
influx of Chinese buyers, who currently comprise approximately a third of foreign buyers. Compared with
the profile of Singapore buyers, Malaysian buyers appear to be more price-sensitive while Indonesian
buyers appear to be more active in the higher-end market segments.
Figure 8: Composition of sales in 2018
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Singapore China Malaysia Indonesia India
S$5 mn
Source for all charts: URA, UOB analysisIndustry Perspective
Real Estate & Hospitality 10
Post-July 2018 measures, price cuts were evident as developers offered
discounts of about 5-10% and other sweeteners for new launches. For example:
Post-July 2018
• Daintree Residence: the first condominium launch post-July 2018 measures,
measures offered a 5% discount from the expected S$1,800 psf to an projects were
average of S$1,710 psf. The bulk of the launch sales were two-
bedroom apartments priced between S$1.06 million and S$1.4 million, launched at a
followed by three-bedders for between S$1.71 million and S$2.13 price discount
million. The developer said that nine in 10 of the buyers were Singapore
relative to
citizens. Of the 80 apartments offered over the launch weekend, 50
units were taken up. The whole development at Toh Tuck Road market
comprises 327 units. comparables
• Affinity At Serangoon: 624 sf two-bedroom units on levels 11 to 15
were sold at S$1,797 psf in June 2018, but decreased by more than
10% to S$1,525 psf in September 2018.
In a sign of their weaker confidence, some developers offered higher
commissions to agents and engaged more sales agencies to reach out to
buyers.
Developer margins are expected to face some pressure with approximately
80% of total potential launch units in 2019 estimated to have less than 10%
margin due to the relatively high breakeven cost, driven by the run-up in land
cost. As such, there is a limit to the amount of discounts that developers will be
prepared to give in order to maintain profitability, which suggests a price fall is
likely to be benign. Nonetheless, in the event that prices fall more than
expected, there is a possible risk of land bank write-downs.Industry Perspective
Real Estate & Hospitality 11
Impact of July 2018 measures: by region and segment
Based on URA’s 4Q18 and 3Q18 data, the July 2018 measures appeared to have a significant impact on the
prime Core Central Region (CCR), which is typically dominated by foreigners and investors. We note that CCR
prices declined by 1.0% in 4Q18 relative to the 0.7% and 1.8% gain in Outside Central Region (OCR) and Rest
of Central Region (RCR).
Figure 9: URA segmental price indices
180
160
140
120
100
80
60
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18
Core Central Region (CCR) Outside Central Region (OCR) Rest of Central Region (ROCR)
Source: URA, UOB analysis
As expectations on pricing diverge, the resale market reached a stalemate in terms of transaction volume
but sellers are starting to blink and entering the market to purchase. This can be seen from the flat and
slight decline price trends of developments across the various market segments, from mass market to the
luxury segments.Industry Perspective
Real Estate & Hospitality 12
Figure 10: Price trend – mass market
The Quartz @ Buangkok
1,400
1,200
1,000
S$ psf
800
600
400
200
May-05 Oct-06 Feb-08 Jul-09 Nov-10 Apr-12 Aug-13 Dec-14 May-16 Sep-17 Feb-19 Jun-20
Source: URA, UOB analysis
Figure 11: Price trend – mid segment
Queens
1,600
1,400
1,200
1,000
S$ psf
800
600
400
200
0
May-05 Oct-06 Feb-08 Jul-09 Nov-10 Apr-12 Aug-13 Dec-14 May-16 Sep-17 Feb-19 Jun-20
Source: URA, UOB analysisIndustry Perspective
Real Estate & Hospitality 13
Figure 12: Price trend – upper-mid segment
The Cosmopolitan, River Valley
2,800
2,600
2,400
2,200
S$ psf
2,000
1,800
1,600
1,400
1,200
1,000
800
May-05 Oct-06 Feb-08 Jul-09 Nov-10 Apr-12 Aug-13 Dec-14 May-16 Sep-17 Feb-19 Jun-20
Source: URA, UOB analysis
Figure 13: Price trend – luxury segment
Ardmore Park
4,000
3,500
3,000
S$ psf
2,500
2,000
1,500
1,000
May-05 Oct-06 Feb-08 Jul-09 Nov-10 Apr-12 Aug-13 Dec-14 May-16 Sep-17 Feb-19 Jun-20
Source: URA, UOB analysisIndustry Perspective
Real Estate & Hospitality 14
Impact of July 2018 measures: on en bloc sales activities
With the increase in ABSD and the imposition of non-remissible ABSD being a major hit, mega sites (with
close to or over 1.0 million square feet) have been the most affected, given the five-year deadline to build
and to sell.
The collective sales activities in 2018 effectively slowed to a standstill since July last year. Total residential
en bloc deals transacted amounted to more than S$10 billion. Tenders for more than 50 projects closed
without a buyer and sellers are forced to reduce prices by as much as more than 20%. Demand for
government land sale (GLS) sites was also affected with the January 2019 tender of the Kampong Java
Road (Newton) site which attracted a lower-than-expected bid of S$1,192 psf per plot ratio from a bid by
CELH Development Pte Ltd, a unit of Singapore-listed Chip Eng Seng Corp.
Figure 14: En bloc sales – boom and bust
14,000 100
90
12,000
80
10,000 70
60
8,000
S$ mn
50
6,000
40
4,000 30
20
2,000
10
0 0
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Value No of deals (RHS)
Source: UOB analysis, CBREIndustry Perspective
Real Estate & Hospitality 15
Rising housing inventory and potential supply
As developers focused on replenishing land bank and pursuing en bloc activities, housing inventory
bottomed in 2017 and has since risen steeply to approximately 42,000 units in 4Q18. Generally, one unit
taken out of the market through a collective sale is replaced with about three or four smaller units and this is
expected to contribute to the swelling supply pipeline.
Based on URA data as at 4Q18, the overall inventory represents approximately 4.6 years of supply based
on a 3-year average demand. The potential supply is expected to weigh on prices. Out of the total
inventory, 16,500 units have obtained pre-requisites for sale and are launch-ready, with more than 18,000
units that potentially can be launched for sale this year. Pre-requisites for sale refer to the requirements that
developers of residential projects have to obtain, such as the Housing Developer Sale Licence and Building
Plan Approval before they can sell their residential units.
Figure 15: Steep rise in inventory from 2017
60,000
50,000
40,000
30,000
Units
20,000
10,000
0
2Q98
4Q98
2Q99
4Q99
2Q00
4Q00
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
2Q14
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
2Q18
4Q18
Without pre-requisites for sale With pre-requisites for sale
Source: URA, UOB analysis
Figure 16: Proportion of inventory that has obtained approval
25,000
20,000
15,000
10,000
Units
5,000
0
4Q99
3Q00
2Q01
1Q02
4Q02
3Q03
2Q04
1Q05
4Q05
3Q06
2Q07
1Q08
4Q08
3Q09
2Q10
1Q11
4Q11
3Q12
2Q13
1Q14
4Q14
3Q15
2Q16
1Q17
4Q17
3Q18
Completed but unsold In construction with pre-requisites not launched
In construction and with pre-requisites, launched but unsold Planned with pre-requisites not launched
Planned with pre-requisites, launched but unsold
Source: URA, UOB analysisIndustry Perspective
Real Estate & Hospitality 16
With their business assumptions being re-defined by the latest measures, developers are seeking to pare
down their inventory by adopting a rapid asset turnover strategy. As the punitive ABSD rates kick in if they
fail to complete and sell all units within five years, developers have accelerated the pace of their launches.
Based on en bloc sales completed in 2017 that have since been launched, the time to market has averaged
12 months. Hence, we expect the wave of new launches to pick up momentum and hit the market in 2019
to 2020.
Figure 17: Time to market of projects
En bloc Launch No. of Ratio of expected
Project New launch Developer
date date months new to old supply
Apartment 8 The Addition Oxley Holdings Dec-17 Sep-18 9 3.3
Vista Park Kent Ridge Hill Residences Oxley Holdings Dec-17 Nov-18 11 2.6
Jervois Garden Petit Jervois SC Global Sep-17 Nov-18 14 3.2
Serangoon Ville Affinity at Serangoon Oxley consortium Jul-17 Jun-18 11 4.3
Lotus at Pasir Panjang Verandah Residences Oxley Jul-17 Apr-18 9 1.2
1 Draycott Park One Draycott SDB Jun-17 Jun-18 12 8.0
Eunosville Parc Esta MCL Land Jun-17 Nov-18 17 4.2
Rio Casa Riverfront Residences Oxley-Lian Beng May-17 Jul-18 14 5.1
One Tree Hill One Tree Hill Collection Lum Chang May-17 Jul-18 14 1.1
Source: URA, UOB analysis
Interest rate and rental yields
In 2019, we expect that rising interest rates could pose additional headwinds for developers even though
some market analysts are now unwinding their expectations of further US Federal Reserve rate increases.
Short-term interest rates have risen sharply with the 3-month SIBOR up from the low of 0.3% in 2Q13 to
1.9% in December 2018, with mortgage rising in tandem. UOB expects interest rates to rise with end-2019
3-month Swap Offer Rate (SOR) and SIBOR to reach 2.10% and remain flat between 2019 and 1Q20. The
view is premised on the fact that Monetary Authority of Singapore (MAS) called for policy hold in April 2018,
implying some downside risk on the SGD and hence upside risk on SOR.Industry Perspective
Real Estate & Hospitality 17
Figure 18: 3M SIBOR expected to increase in 2019 to 1Q20F
2.15
2.10 2.10 2.10 2.10
2.10
2.05 2.05
2.05
%
2.00 2.00
2.00
1.95 1.94 1.94
1.90
1.85
22-Mar-19 2Q19F 3Q19F 4Q19F 1Q20F
SGD 3M SIBOR SGD 3M SOR
Source: UOB Global Economics and Markets Research
Given the expectations of rising interest rates, coupled with the higher required downpayment due to the
lowering of LTVs in the latest round of measures, we expect housing affordability to weaken further,
curtailing demand for housing. For investors who purchase homes for rental income, the compressed rental
yields (i.e. where prime rental yield is already low at 2.2% as at 4Q18) and rising interest rates will erode
positive carry (if any) and may exert pressure on capital values. The spread of prime residential property
yield over the average 3-month SIBOR has been on a declining trend and the spread was sub-1% as at
end-2018. The last time the spread was sub-1% was in 2007.
Figure 19: Prime rental yields and spread over 3-month SIBOR
5
4.3
3.9
3.9
3.6
3.5
3.4
4
3.2
3.2
3.1
3.1
3.1
3.0
3.0
3.0
2.9
2.9
2.8
2.8
2.8
2.8
2.7
2.6
2.5
2.3
3
2.2
2
1
%
0
-1
-2
1997
2008
1994
1995
1996
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Prime yield Spread over SIBOR
Source: CBRE, Bloomberg, UOB analysisIndustry Perspective
Real Estate & Hospitality 18
Physical market
After the significant supply ramp-up from 2014 to 2017 that weighed heavily on rents, the physical supply
appeared to normalise in 2018 relative to the long-term average demand. The compounded annual growth
rate (CAGR) of 3.8% (~198,000 units) of total housing stock from 2014 to 2017 was almost four times the
population growth of 1.0% per annum (p.a.).
Figure 20: Long-term trend of housing supply versus population growth and demand
60,000 6.0%
HDB
2014-2017 supply: 3.8% p.a.
supply glut 5.0%
50,000 2014-2017 population: 1.0% p.a.
4.0%
40,000
3.0%
30,000 HDB under-
Units
building, private 2.0%
en bloc boom
20,000
caused severe 1.0%
shortage
10,000
0.0%
0 -1.0%
-10,000 -2.0%
2004
1996
1997
1998
1999
2000
2001
2002
2003
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2020E
2019E
2021E
2022E
Net change EC Net change private Net change HDB
Long-term average demand 5-year average demand Population growth (RHS)
Source: URA, HDB, UOB analysis
Looking ahead, private completions are forecasted to decrease to 4,200 units in 2020. Housing stock is
expected to taper to a CAGR of 1.4% from 2019 to 2020, slower than the projected CAGR of 1.5% in
population. The stock decline is also on the back of units taken out of the market (~1.0% of total stock) from
the en bloc sales.Industry Perspective
Real Estate & Hospitality 19
As such, we will likely see some decline in vacancy rates. Private vacancy rate peaked at 8.9% in 2Q16
and gradually fell to 6.4% in 4Q18. We forecast this figure to go below 6.0% by 2020 due to the tapering
supply and removal of en bloc units. In terms of regional breakdown, vacancy rates in the CCR (as at
4Q18), despite remaining the highest at 7.9% versus OCR and RCR, dropped to the lowest level in five
years. The executive condominium vacancy rate also improved to 6.2% in 4Q18 as the surge in supply was
absorbed progressively.
Figure 21: Private residential demand, supply and vacancy rate
10
25,000
8
20,000
6
Units
15,000
4
10,000
5,000 2
0 0
1990
2003
2020E
1989
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019E
Demand Supply 10-year average demand Vacancy rate (%, RHS)
Source: URA, HDB, UOB analysis
Figure 22: Residential vacancy by region
18
16
14
12
%
10
8
6
4
2
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
CCR RCR OCR EC
Source: URA, UOB analysisIndustry Perspective
Real Estate & Hospitality 20
Rental market dynamics
After rising for three consecutive quarters since end-2017, private residential rents dipped in 4Q18 but still
recorded an increase of 0.6% year on year. The marked fall in rents has driven a flight to quality with
disproportionate pressure on the suburban segment, older properties and shoebox units. Demand is still
weighed down by the muted inflow of expatriates and with more of them on local packages. However, the
en bloc supply taken out will underpin a tighter rental market, with displaced sellers being an additional
demand driver.
Figure 23: Residential rents by segment Figure 24: Comparison of median rents of 4-room HDB
7.00 3,300
3,100
6.00
2,900
5.00 2,700
2,500
4.00 2,300
3.00 2,100
S$ pm
S$ psf
1,900
2.00 1,700
1.00 1,500
4Q12
2Q13
4Q13
2Q14
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
2Q18
4Q18
0.00
1Q97
2Q98
3Q99
4Q00
1Q02
2Q03
3Q04
4Q05
1Q07
2Q08
3Q09
4Q10
1Q12
2Q13
3Q14
4Q15
1Q17
2Q18
Central Queenstown
Jurong East Marine Parade
Luxury Prime Islandwide Punggol
Source: CBRE, UOB analysis Source: HDB, UOB analysis
Figure 25: URA private rental index and growth
140 50%
40%
120
30%
100
20%
80 10%
60 0%
-10%
40
-20%
20
-30%
0 -40%
1Q90
1Q91
1Q92
1Q93
1Q94
1Q95
1Q96
1Q97
1Q98
1Q99
1Q00
1Q01
1Q02
1Q03
1Q04
1Q05
1Q06
1Q07
1Q08
1Q09
1Q10
1Q11
1Q12
1Q13
1Q14
1Q15
1Q16
1Q17
1Q18
Rental Index % YoY
Source: URA, UOB analysisIndustry Perspective
Real Estate & Hospitality 21
The fundamental demand remains constrained by policy-induced demographic trends. For example, the
2011 watershed General Election put a brake on the growth of permanent residents (i.e. ~30,000 p.a. over
the past eight years versus 79,000 p.a. in year 2008), with the number of non-residents falling for two
consecutive years. According to the Ministry of Manpower, the number of foreigners working in Singapore
fell by 32,000 in 2017, the largest drop in 15 years.
While this decline was mostly seen among work permit holders in the construction and marine, the number
of Employment Pass (EP) holders also fell by 4,600 in 2017, its first decline in more than six years. No
changes are to the immigration policy are expected on the horizon.
Figure 26: Inflow of new PRs and foreigners
250
200
150
('000s)
100
50
0
(50)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
PRs granted No. of citizens granted Change in no. of foreigners
Source: Department of Statistics, UOB analysis
Figure 27: Growth in Singapore foreign workforce by categories
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
2013 2014 2015 2016 2017
Growth in total foreign workforce Growth in no. of EPs
Growth in no. of S Pass Growth in no. of WP
Source: MOM, UOB analysisIndustry Perspective
Real Estate & Hospitality 22
1Q19: Prime areas hardest hit by July 2018 measures
Residential apartments and condominiums in the prime areas or CCR led declines in private home prices in
the first quarter of 2019.
Overall, the private residential property index decreased 0.9 point from 149.6 points in 4Q18 to 148.7 points
in 1Q19, a decrease of 0.6%, compared with the 0.1% decrease in the previous quarter. It is worth noting
that this is the second consecutive quarterly decline, suggesting that the impact of the measures is
beginning to gather momentum.
1Q19 flash estimate:
CCR private non-landed
residential property index
2.9% CCR
Relative to RCR and OCR, CCR, as the preferred location of investors and foreigners, was the hardest hit
by the increase in ABSD in July 2018. We note during 4Q18, there were four prime projects launched in the
CCR, namely, Fourth Avenue Residences, RV Altitude, Fyve Derbyshire and Boulevard 88. The appetite for
CCR projects remains positive as seen in the take-up rates at project launches:
• The 154-unit high-end freehold Boulevard 88 in prime District 10 is located along Orchard Boulevard
and Cuscaden Road with dual frontages. The developer managed to sell 20 of the 25 units launched and
the average transacted price was S$3,550 psf.
• As at February 2019, the 140-unit RV Altitude in River Valley sold 21 units at an average of S$2,890 psf.Industry Perspective
Real Estate & Hospitality 23
The URA’s 1Q19 flash estimates showed the price index for non-landed
homes in the CCR fell 2.9% QoQ, the sharpest quarterly drop since the
5.2% slide in 2Q09 post-global financial crisis. If we were to incorporate URA 1Q19 flash
the 1.0% decline in the preceding quarter, the total decline would amount estimates
to 3.9% from the recent peak in 3Q18, the quarter when the measures
were announced.
showed price
index for CCR
For the other regions, prices in RCR decreased by 0.2% in 1Q19 from
non-landed
4Q18, after an increase of 1.8% in the previous quarter. Prices in OCR
were unchanged in 1Q19, following the 0.7% increase in 4Q18. homes fell 2.9%
QoQ, the
In terms of CCR performance in 1Q19, JLL estimated that more than 300
private homes were launched in the CCR in 1Q19, at least 65% higher
sharpest
than the 182 launched in 4Q18. Unsold units from projects launched last quarterly drop
year also contributed to the increase in cumulative unsold stock, since the 5.2%
exacerbating the supply and demand imbalance in the CCR primary
market. Ongoing launches of which developers are continuing to clear
slide in 2Q09
inventory include Marina One Residences, New Futura and TwentyOne post-global
Angullia Park. financial crisis
For public housing, HDB’s flash estimate for the 1Q19 Resale Price Index
slipped 0.3% QoQ. This could partly explain the resilience in the OCR’s
price performance as stabilising HDB resale prices typically provide some
support to demand in the OCR segment as HDB upgraders usually start
their entry into private homes in the OCR.Industry Perspective
Real Estate & Hospitality 24
Non-prime areas saw less-than-ideal but encouraging take-up rates
For a flavour of the rest of the market, we note that the less-than-ideal take-up rates at some recent
launches suggest the muted sentiment has permeated across the rest of the region.
1 Treasure at Tampines 2 The Florence Residences
District: 18 District: 19
Tenure: 99 years leasehold w.e.f 29-Nov-18 Tenure: 99 years leasehold w.e.f 24-Dec-18
T.O.P date (est): 31-Dec-23 (expected by 1Q23) T.O.P date: 31-Mar-23
Total no. of units: 2,203 Total no. of units: 1,410
Average psf: S$1,280 Average psf: Nearly S$1,400
Singapore’s largest condominium, Treasure at In March 2019, the 1,410-unit The Florence
Tampines, sold 272 units at an average of S$1,280 Residences in Hougang sold close to 60 out of the
psf during its launch weekend in late March 2019. 200 units released during its launch weekend,
representing a 30% take-up rate.
Located at Tampines Street 11 on the former
Tampines Court site, the 99-year project offers a The average selling price was nearly S$1,400 psf.
total of 2,203 units. Hence, the 272 sold units A likely boost to the sales at The Florence
translated to a 12% take-up rate. Against the 490 Residences was the announcement of the 12 new
units launched in the initial phase, that was a 56% stations and their locations in the first phase of the
take-up rate. On both measures, the take-up rate Cross Island Line (“CIL”). The existing nearest
was less than ideal but encouraging in the context MRT station to the project is Kovan MRT station
of the weaker sentiments and project size. The which is about 780 metres away. With the CIL, The
56% take-up based on units launched in the initial Florence Residences will be just 600 metres away
phase would be more reflective of market or a six-minute walk from the Hougang MRT
acceptance as the remaining 1,713 units are not station which will be an interchange station for the
tested in the market given that they were not North East and Cross Island Lines.
available for sale.
Other upcoming mega-launches include Amber
Park and Normanton Park.Industry Perspective
Real Estate & Hospitality 25
Conclusion and outlook
Our baseline scenario will be for prices to remain flat, with downside bias
of low single-digit decline in the URA’s Property Price Index on average.
Ideally, sales volume is to be supply-led but this is expected to be Projects with
tempered. The balance sheets of households and developers are expected
strong
to remain generally healthy with demand supported by replacement
demand arising from cashed-up en bloc sellers and first time buyers competing
spared from ABSD. supply of new
More than 40 projects totalling some 18,000 units (inclusive of those
launches will
already launched in 1Q19) could be launch-ready this year, though some face downward
could flow into next year. pricing
The upcoming strong supply of new launches will increase options for
pressure
buyers and developers may price their projects competitively, ever mindful
of the supply glut. However there might be limited room for bargain hunting
as developers hold their ground on pricing for now given their healthy
balance sheet.
For developers that acquired land between 2016 and 2018, they will hit the
five-year sales deadline in 2021 earliest. Hence slow take-up rates may
characterise the launches in the coming months. The only challenge to that
is if developers turn pessimistic and try to mitigate their risk by accelerating
sales to lock in any residual demand.
Going forward, the downside risks will stem mainly from further
macroeconomic deterioration, such as negative repercussions related to
any fallout from the ongoing US-China trade tariff negotiations. In 2019, we
expect interest rates to rise before plateauing between end-2019 and
1Q20. This rate increase could pose additional headwind for developers
for the rest of 2019.
We would like to thank our colleagues from the Country and Credit Risk
Management team for their contribution to this report’s analyses and narrative.Industry Perspective
Real Estate & Hospitality 26
Appendix
Potential launches in 2019
Project name Location District Developer No. units
Silat Ave Silat Ave 3 UOL/ UIC/ Kheng Leong 1,101
Parc Clematis (former Park West) Jln Lempeng 5 Singhaiyi Group 1,765
Normanton Park Normanton Park 5 Kingsford Development 1,863
Midtown Suites Beach Road 7 Guocoland 219
Uptown @ Farrer Perumal Rd 8 Low Keng Huat 116
Haus on Handy Handy Rd 9 CDL 188
Jiak Kim St Jiak Kim St 9 Frasers Centrepoint 500
RV Altitude River Valley 9 Roxy Pacific 140
Bukit Timah Collection (former Royalville) Bkt Timah Rd 10 Allgreen Properties 285
Cuscaden Rd Cuscaden Rd 10 SC Global, Far East, New world 220
Dunearn 386 (Dunearn Court) Dunearn Rd 10 Roxy Pacific 35
Dunearn Gardens Dunearn Rd 10 EL Devt 348
Former Toho Mansion Holland Rd 10 Koh Brothers 90
Fourth Avenue Residences Fourth Ave 10 Allgreen Properties 476
Jervois Prive (Jervois Green) Jervois Road 10 Spring Court Owner-led Consortium 50
Juniper Hill (Crystal Tower) Ewe Boon Rd 10 Allgreen Properties 130
Juniper Hill Condo (Crystal Tower) Ewe Boon Rd 10 Allgreen Properties 130
Tulip Garden Farrer Rd 10 MCL Land/ Yanlord 672
35 Gilstead (Casa Contendere) Gilstead Road 11 Tee Land/ TG Devt 70
Fyve Derbyshire Derbyshire Road 11 Roxy Pacific 70
Mattar Road Mattar Road 14 Tiong Aik/ Hock Lian Seng/ Keong Hong 266
Rezi24 Lg 24 Geylang 14 KSH Hlgs/ Lian Beng/ Heeton 90
Amber Park Amber Gardens 15 CDL/ Hong Leong 616
Arthur Rd (Katong Park Towers) Arthur Rd 15 Bkt Sembawang 290
Coastline Residences (Parkway Mansions) Amber Road 15 Sustained Land 140
Former Lodge 77 Upper East Coast Rd 15 KTC Group 50
Meyerhouse (Nanak Mansions) Meyer Road 15 UOL/ Kheng Leong 56
One Meyer (The Albracca) Meyer Road 15 Sustained Land 60
Changi Garden Upper Changi Rd North 17 Chip Eng Seng 320
Treasure at Tampines Tampines St 11 18 Sim Lian 2,225
Anchorvale Crescent (EC) Anchorvale Crescent 19 Evia Real Estate/ Gamuda 550
Parkwood Collection (landed) Lg 1 Realty Park 19 Fantasia Invt 53
Parkwood Residences (Toho Green) Yio Chu Kang Rd 19 Oxley 18
Sengkang Central Sengkang Central 19 Capl/ CDL 700
Sumang Walk (EC) Sumang Walk 19 CDL/ TID 820
The Florence Residences (Florence Regency) Florence Rd 19 Logan Property 1,410
The Gazania (Sun Rosier) How Sun Drive 19 Singhaiyi Group 250
The Lilium (How Sun Park) How Sun Drive 19 Singhaiyi Group 80
Lattice One Seraya Crescent 20 Tee Land 40
Jln Jurong Kechil Jln Jurong Kechil 21 Cohl SG/ CSC Land 284
Mayfair Modern Rifle Range Rd 21 Oxley 171
Dairy Farm Rd Gilstead Road 23 United Engineers 589
Hillview Rise Hillview Rise 23 Hong Leong 570
The Essence Chong Kuo Road 26 Lian Soon/ OKP Land 85
Canberra Link (EC) Canberra Link 27 Hoi Hup/ Sunway Devt 580
Total units 18,781
Source: Various sources including URA, real estate agencies and media reports, etc.; UOB analysisIndustry Perspective
Construction & Infrastructure 27
Contacts
Real Estate & Hospitality Team
Lam Li Min Kelvin Ngo
Head of Real Estate & Hospitality Business Insights & Analytics
Centre Of Excellence Kelvin.NgoYW@UOBgroup.com
Lam.LiMin@UOBgroup.com
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