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November 10, 2017

Underpinned by the ongoing collective sales frenzy, the Singapore private residential market is looking its rosiest in years.

In 2017 alone, 17 residential sites in Singapore have undergone collective sales, including the record-breaking S$907 million paid for the 213,675 sq ft Amber Park condominium, the largest freehold collective sale site by value, which works out to be S$1,515 per-square-foot per plot ratio.

The most recent collective sale was the purchase of Florence Regency by Chinese developer, Logan Property Company, for S$629 million.

According to JLL, the firm’s collective sale deals alone add up to S$1.9 billion so far this year, compared to the overall market figure of S$1 billion generated in 2016 .

“The market’s overall collective sales have already reached S$6 billion this year,” says Regina Lim, JLL’s Head of Capital Markets Research in Southeast Asia. “Developers are cognizant of the upside from capital recycling, when taking into account the primary market home sales which total S$16 billion this year.”

Market recovery
The strength of collective sales is also indicative that Singapore’s market has nearly turned around, says Tan Hong Boon, from JLL’s Capital Markets team in Asia Pacific. “The market has shown signs of improvements generally from increased private home prices and brisk new home sales.”

Private home prices rose for the first time in four years with a 0.7 percent increase during the last quarter. Meanwhile, new home sales rose 29.1 percent in September from a year ago according to data from the Urban Redevelopment Authority.

Research from JLL indicates that prime home prices in Singapore are set to rise 24 percent over the next four years with Lim predicting that most developers will price in 10 to 20 percent increase in home prices over the next 24 to 36 months. “In our view, this is not excessive – even if prices rose 24 percent over the next four years amid two percent annual wage increases, the home price to income ratio of six years will still be moderate compared to many other global cities.”

Fear of cooling measures
However, market watchers are similarly wary that the bullish market could be a sign of overheating, prompting fears of another round of cooling measures.

According to a recent survey by Real Estate Developers’ Association of Singapore (Redas) and the National University of Singapore’s (NUS) Department of Real Estate, developer optimism has reached a seven-year high, bringing it to the same level seen just before the government introduced policy measures to cool the market in 2010.

But, Tan isn’t concerned. “There is little to suggest that the government will make any changes to cooling measures at the moment considering that the seller stamp duties and the total debt servicing ratio were tweaked earlier in March this year,” she says. “They will likely watch the market to ensure that home prices do not rise too fast.”

Click here to read more about real estate investment in Singapore

 

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Regina Lim

Head of Capital Markets Research, JLL Singapore

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