Market Updates Q3-4 2020 | Private Resale market Reached Two-Year High
Private Resale Market Reaches 2 Year High
Private Condominium resale market reached a two-year high last month with 1,509 units changing hands. Resale volumes of non-landed private homes in Singapore rose 21.6 per cent month-on-month compared to September from the 1,241 units resold, a level not seen since May 2018.
It trumped the 1,311 transactions recorded in August, which had the highest monthly resale volume since May 2018.
Volumes were 72.9 per cent higher year-on-year (y-o-y) and 78 per cent higher than the five-year average volumes for the month of October, according to flash figures from real estate portal SRX Property on Tuesday.
A majority, or 58 per cent, of resale volumes came from the outside of central region (OCR), followed by 25.3 per cent from the rest of central region (RCR) or city fringes, and 16.8 per cent from the core central region (CCR).
Meanwhile, overall prices of private resale condominiums market rose by 0.8 per cent from September to last month, and 0.7 per cent higher y-o-y. Resale prices rose for all regions, with the CCR, RCR and OCR rising 0.5 per cent, 1 per cent, and 0.8 per cent respectively.
This comes amid healthy demand for homes, signalling recovery from the Covid-19 situation as more buyers enter the market, according to research heads from PropNex and ERA on Tuesday.
Transactions Mainly by Sales of Mass-market Homes
PropNex’s head of research and content Wong Siew Ying said that transactions of private resale market units last month were driven mainly by sales of mass-market homes, which accounted for 58 per cent of the total volume. Sales have been relatively brisk in recent months as buyers enter the market, sensing that the worst may be over and taking confidence from the gradually recovering economy.
“What we are seeing in the private condo resale market seems to be broadly in line with trends in the private new home sales market and the HDB resale segment,” she added.
“Sales have been relatively brisk in recent months as buyers enter the market, sensing that the worst may be over and taking confidence from the gradually recovering economy. Bargain hunters would also be on the prowl, searching the resale market for good-value buys amid the economic downturn,” she added.
The highest transacted price last month was for a resale unit at Wallich Residence in Tanjong Pagar, which was sold for $62 million.
The super penthouse in Singapore’s tallest building was previously owned by British billionaire inventor James Dyson, who purchased the unit a year ago for a reported $73.8 million.
The highest transacted price in the RCR was $9.1 million for a unit in Reflections at Keppel Bay in HarbourFront while a unit in Costa Del Sol, off Upper East Coast Road, resold for $2.9 million, the highest price in the OCR.
For Nicholas Mak, ERA Realty’s head of research and consultancy, SRX’s indicators show that the Singapore private resale non-landed housing market has more than recovered from the Covid-19 pandemic. He also said the result of the recent US presidential election is positive for the Singapore real estate market.
He noted that Democrat Joe Biden’s win in the recent United States presidential election would likely benefit a trade-dependent country such as Singapore and aid in its economic recovery.
This, in turn, would likely have a positive impact on the real estate market.
“Furthermore, the recent advances by pharmaceutical companies in the development of Covid-19 vaccines could also gradually improve investment sentiments, which would spill over to the real estate market,” he added.
Christine Sun, head of research and consultancy at OrangeTee & Tie, said the strong demand for properties across the various market segments spurred more sellers to put up their units for sale.
“In light of the pandemic, sellers were more willing to negotiate prices and the ‘realistic asking prices’ have resulted in more deals being closed in recent weeks,” she said.
Ms Sun estimates that around 8,500 to 9,000 resale homes could be sold this year as the coronavirus situation continues to stabilise in Singapore and as the country prepares to enter Phase Three of its reopening. Sales volume may increase slightly to between 9,000 and 10,000 units in 2021, she added.
SRX said the overall transaction over X-value (TOX) for October was zero, unchanged from September.
District 11 (Newton, Novena) posted the highest median TOX at positive S$9,000, while District 2 (Chinatown, Tanjong Pagar) posted the lowest median TOX at negative S$13,000.
TOX measures how much a buyer is overpaying (positive value) or underpaying (negative value) for a property based on SRX’s computer-generated market value. The data includes only districts with more than 10 resale transactions.
Drop in Sales of New Private Homes
However, Sales of new private homes in October were less than half that in the month before – which analysts have put down to buyers holding back on purchases following the clampdown on the re-issuing of options to purchase (OTPs) by developers.
New private home sales in October numbered 630, said Lee Sze Teck, Huttons Asia’s director of research, who had looked at caveats filed with the Urban Redevelopment Authority (URA) on Nov 10. (To be clear, the monthly sales figure may still change when the URA releases its take-up data next week.)
Consultants were expecting new property sales to take a hit following the Sept 28 tightening of the OTP rules to prevent market distortion.
The new conditions included:
- Restricting developers from providing upfront agreements to buyers to re-issue the OTPs;
- Restricting developers in the re-issuing of OTPs to the same buyers for the same unit within 12 months of the expiry of the earlier OTP; and
- Requiring that developers inform buyers of this condition upfront.
In the past, OTP validities could be extended for up to eight weeks, or re-issued upon expiry.
The fall in sales from the tightened rules was pretty drastic. Consultants say it is a knee-jerk reaction, and that buyers are holding back to see whether developers will adjust prices.
Huttons Asia’s Mr Lee said: “It’s an overreaction on the ground; previously you could buy (the new place) and then sell (your existing flat). Now, … you have to sell and wait three months for the proceeds.”
Christine Sun, OrangeTee & Tie’s head of research and consultancy, agreed. She thinks it will take a few months for the dust to settle, and noted that the situation was similar after the July 2018 cooling measures were implemented – buyers needed to take stock of the situation.
Nicholas Mak, ERA Realty research and consultancy head, said his observation in the first few days following the announcement of the measures was that sales in some projects slowed down. He expects buying momentum to return from buyers who are more financially capable of completing the transactions.
In some projects which had been more liberal about re-issuing OTPs, there were buyers who were able to exercise their option to buy on time, but had taken extensions on the OTP when offered them because it meant they were able to delay the drawdown on their cash; in other words, it was “free money” to them.
Consultants say the projects most affected by the tightened rules are likely those targeted at HDB upgraders. These buyers must now sell their flat first, pocket the proceeds and then rent a home while waiting for their new homes to be ready.
The curb in re-issues of OTPs from end September may also prompt buyers to look at fairly newly completed private condo units available for resale from October, said property analyst Ong Kah Seng.
For bargain hunters, as volume of private resale properties market increases, it will be harder to find bargains.
However, due to the new conditions of re-issue of OTPs, there is a drop of sales transaction for new private homes which will lead to more discount and bargain deals.