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Singapore

JLL News Flash | Release of URA 1Q17 real estate statistics


URA 1Q17 real estate statistics​​​​

Residential

Ong Teck Hui, National Director, Research & Consultancy

王德辉, 新加坡董事


"Private home sales market on firmest footing since mid-2013

1Q17 marks the private residential sales market on its firmest footing since mid-2013 with the highest quarterly transaction volume of 5,202 units in 15 quarters, the lowest decline of 0.4% (other than 2Q16) in the URA private residential property price index since 3Q13 and the most upbeat market sentiments in more than three years. It is also the first time in 14 quarters that the non-landed price index remained stable while the OCR non-landed price index turned positive, inching up by 0.1%. Over the last year or so, we have already seen the CCR and RCR non-landed quarterly indices fluctuate between increases and declines which suggest the possibility of prices bottoming. The 5,202 private homes transacted in 1Q17 is 27% higher than the quarterly average in 2016 and if this momentum continues, we could see transaction volume in 2017 rise by 25 to 30% over the previous year. Market sentiments which was already positive in 2016 became more upbeat after the easing of the SSD and TDSR in March 2017, leading more buyers back to the market."


Healthier supply-demand balance

​As at 1Q17, there were 17,807 unsold private homes based on the REALIS time series of unsold uncompleted and completed units, a 15.6% decline from the 21,102 units in 4Q16. The significant decline is attributable to the strong take-up in developer sales during the quarter while decreased sale of residential sites and a lower level of development activity in recent times has contributed to less units being added to the unsold stock. This shows that the supply overhang has reached much more manageable proportions compared to say mid-2013 when there were nearly 34,000 unsold units.


Vacancy rates improve but rents continue to soften

The overall vacancy rate for private residential units has trended downwards from a high of 8.9% in 2Q16 to 8.1% in 1Q17. Notwithstanding the improvements in vacancy, the rental index continues to be in decline as reflected by the 3.1% drop from 2Q16 to 1Q17. The improvement in vacancy rate is more likely due to take-up by owner occupiers as take-up due to tenants is unlikely to be significant due to the slow leasing market. Rents are still under pressure due to the oversupply of units for lease. In 1Q17, the CCR rental index fell -0.7%, the RCR rental index by -1.2% while that for OCR rose +0.4%, which is unlikely to be indicative of a recovery just yet due to the weak leasing market fundamentals."


Office

Tay Huey Ying, Head of Research & Consultancy, Singapore

郑惠匀, 研究与咨询部主管 (新加坡)



"Second steepest quarterly rental decline likely due to the drag from older and poorer grade stock


In spite of the improved economic outlook, office occupiers remained cautious about their real estate commitments amid potential downside risks.  This is borne out in URA’s latest statistics which showed that office absorption stayed lacklustre in 1Q17, contracting by 6,000 sqm; and vacancy rate rose to 11.6%, the highest since the 11.7% recorded in 1Q12.  


Against this backdrop, URA’s rental index for office space in the Central Region recorded a 3.4% q-o-q fall in the first three months of 2017, the second steepest quarterly decline since the downtrend commenced in 2Q15.  JLL believes that the bulk of this rental decline stemmed from intense competition for tenants for older and poorer grade office developments as their occupiers took advantage of the tenant favourable market to upgrade to more efficient and newer space in the newer schemes.   


JLL’s research showed the average monthly gross rents for Grade A offices in the CBD are showing signs of firming as their pace of decline has slowed since 2Q16 and was unchanged at -1.1% q-o-q in 4Q16 and 1Q17 to average SGD 8.44 psf/month by the end of March 2017.  Downward pressure on Grade A CBD rents is observed to be abating as the relatively high pre-commitments in the recently completed UIC Building (NLA estimated at 0.29 million sq ft) and the soon-to-be-completed Marina One (NLA estimated at 1.9 million sq ft) have partially assuaged landlords’ anxiety over maintaining occupancy. This trend is foreseen to continue with a recovery in 2018 in sight for Grade A CBD office rents.  For the whole of 2017, JLL expects Grade A CBD office rents to ease by less than 5% compared to the 9.9% correction in 2016.  The next wave of rental correction will hit the older and lower-grade office space as they come under pressure to backfill space vacated by occupiers who upgraded to newer projects."


Retail

Tay Huey Ying, Head of Research & Consultancy, Singapore

郑惠匀, 研究与咨询部主管 (新加坡)



"The ongoing retail restructuring amid weak consumer sentiment weighs down demand and rents


URA’s latest statistics confirmed that the retail leasing market remained in the doldrums with rents recording their ninth consecutive quarter of decline and at a sharper pace of -2.9% q-o-q in 1Q17 compared to the -1.2% to -1.5% q-o-q seen for the preceding two quarters.   


Retailers continue to battle with challenges such as increased labour and operational costs as well as structural changes in consumer buying behavior and habits.  Demand for retail space remained weak amid the continuing shuttering of underperforming outlets as they succumbed to these challenges.  The rise in the number of retailers opting to downsize their operations in Singapore and expand regionally further weakened the demand for retail space.  The migration to omni-channel retailing platforms has also reduced the required footprint for brick-and-mortar space, further adding to the woes of landlords. 


On a brighter note, some retailers such as Miniso are instead continuing to concentrate on growing their outreach by opening more outlets. This is likely due to the need to increase brand awareness, especially in light of the growing competition that e-commerce poses. Moreover, marketing efforts to boost and attract higher quality visitors such as the Singapore Tourism Board (STB)’s recent announced tie-ups with Royal Caribbean International and Changi Airport Group (CAG) to boost arrivals by fly-cruise passengers, as well as with CAG and Singapore Airlines to promote Singapore as a choice stopover for travelers from the long-haul markets, could lend a hand in supporting retail sales. 


Additionally, as landlords and retailers gather experience in navigating through this changing retail landscape to gradually find the winning formula that can resonate with consumers, there is potential for demand in retail space to strengthen and support a gradual tapering down of rental declines in 2018."