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News Release

Singapore

JLL’s perspective: URA release 1st quarter 2014

Residential market – weak first quarter with low sales volumes as prices continue declining


SINGAPORE, 25 April 2014

Private Residential Sector

Prices and sales volume
While there are minor refinements to some of the 1Q14 flash estimates, the decline in the main index remains at 1.3 per cent, which is indicative of an increased momentum in price softening as well as the likely price trends over the next few quarters. If demand deteriorates, it is likely that the rate of quarterly price decline will increase. We estimate that prices of private residential properties may decline by 1 per cent to 2 per cent per quarter for the rest of 2014, so we could see a decline of 5 per cent to 8 per cent for the full year.

The 1,744 units sold by developers in 1Q14 is the lowest volume since 4Q08, when the market was hit by the global financial crisis. Going forward, the developer sales volumes will depend mainly on how the new launches are priced. If prices are attractive, sales volumes could improve, otherwise they will remain muted as sales continue to be sluggish. We estimate that developer sales for 2014 could range from 7,000 to 10,000 units.

Growing number of unsold units in launched projects

Since the TDSR was introduced in June 2013, the number of unsold units in launched private residential projects has increased significantly by 19 per cent from 5,243 units in 2Q13 to 6,247 units in 1Q14. This is reflective of the slower take-up of units at new sales launches, resulting in the build-up of unsold units. These will add to the pressure on new projects to be launched as they have to compete with a significant backlog of unsold inventory.

Rental market – increasing number of units being completed and softening rentals

In 1Q14, 4,114 private residential units were completed, up 25 per cent from the quarterly average of 3,287 in 2013. The number of units being completed has been rising, from 10,329 units in 2012 to 13,150 in 2013. Consequently, vacancy rates have also been rising e.g. that for non-landed has risen from 5.8 per cent in 1Q13 to 7.6 per cent in 1Q14. The impact on the leasing market is a softening in rents as seen in the 0.7 per cent decline in 1Q14 following a 0.5 per cent easing in 4Q13.

Retail sector

URA is now providing data on retail space instead of just shop space as it gives a more complete picture on the retail market, which also includes F&B, entertainment, health & fitness uses in addition to shop use. By just comparing the 1Q11 to 1Q14 data, we already see a useful trend of shop space supply growing at a slower 2.4 per cent during the 3 years compared to 6.5 per cent for F&B, entertainment, health & fitness space. This reflects the supply change in response to lifestyle and affluence factors.

Office Sector – slow take-up but rents rising

Take-up decreased to 6,000 sqm in 1Q14 from 30,000 sqm in 4Q13, resulting in vacancy rate inching up to 10 per cent in the first quarter from 9.9 per cent in 4Q13. While take-up has been slow, rents have risen moderately by 2.4 per cent in the first quarter. In the absence of larger leasing deals, most of the deals involve smaller spaces which would have resulted in higher rental rates. The asking rents for better quality office buildings have also risen as their vacancy rates are generally lower and this would have also contributed to rising rents.

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