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Singapore

JLL News Flash | URA3Q17 real estate statistics


URA 3Q17 real estate statistics

Residential

Mr Ong Teck Hui, National Director, Research & Consultancy

王德辉, 新加坡董事 (新加坡)

Prices indices – upgrade from flash estimates shows prices rising at a firmer pace 

The 3Q17 price indices reflect an upgrade from the flash estimates released earlier in the month. Except for non-landed properties in CCR, the actual indices for all the other segments are higher than the flash estimates resulting in the overall index rising by a higher 0.7 per cent than the previous 0.5 per cent flash estimate. Flash estimates lagging the actual means that price movements subsequent to the flash estimates were moving at a firmer pace. With the indices of all segments in positive territory, the price recovery appears to be broad-based supporting the likelihood of prices continuing to rise.

 

Percentage change over previous quarter

 

2Q17

3Q17 (flash)

3Q17 (actual)

All Residential

-0.1

0.5

0.7

Landed

-0.3

1.0

1.2

Non-landed

-0.1

0.4

0.6

CCR

-0.5

0.2

0.1

RCR

0.6

0.0

0.5

OCR

-0.3

0.7

0.8

Source: URA/JLL research

Sales Volume – strongest first nine months in five years, with secondary market dominating

In the first three quarters of 2017, 18,800 private homes were transacted in both the primary and secondary markets, 56.8 per cent higher than the same period last year, and the strongest first nine months in five years. As the market recovers, secondary market sales have been growing more significantly. For the first nine months of this year, 10,098 secondary market transactions were recorded, a 59.3 per cent increase y-o-y and it comprised 53.7 per cent of the total sales volume, compared to 52.8 per cent in 2016 and 46.5 per cent in 2015. 8,702 units were sold on the primary market in the first three quarters, a 53.9 per cent y-o-y increase. New sales launches have been lagging take-up with 5,143 units placed on the market in the first nine months, a mere 4.3 per cent increase y-o-y. With new launches remaining low-key and more buyers returning to the market, resale market activity is expected to strengthen and lead the primary market. As prices recover, some new launches may be expected to be held back and this would lead to more buyers sourcing in the resale market.

Rental index stabilizes after nearly four years

The residential rental index was flat in 3Q17 following a 0.2 per cent decline in 2Q17. The index stabilized mainly due to the landed rental index rising 0.6 per cent and the non-landed RCR index climbing 0.9 per cent. The non-landed rental indices for CCR and OCR fell -0.8 per cent and -0.3 per cent respectively. These could be signs of the residential leasing market starting to bottom but vacancy remains at a high level at 8.4 per cent in 3Q17, an increase from 8.1 per cent in the previous quarter. Some owners have withdrawn their units from the leasing market prompted by the turnaround in prices in the sales market.  This could have reduced leasing options for some tenants and have a positive impact on rents.

Executive condominium primary market strengthens while supply dwindles

In 3Q17, developers sold 1,539 new ECs, 61.3 per cent more than in 2Q17, and the highest quarterly volume since 4Q12. The 3,565 new ECs sold in the first nine months of the year is the highest for similar periods since such data was available in 2001. This was despite a large decline in the number of ECs launched from 2,656 units in the first three quarters of 2016 to 1,555 units for the same period in 2017. With stronger EC sales, the unsold units in launched EC projects with pre-requisites for sale and completed EC projects has dropped to 698 in 3Q17 from 1,620 in 2Q17. Supply of new ECs is tight with only one remaining new EC project, Rivercove Residences, in the launch pipeline. An increase in new EC prices may be expected given the limited supply and upbeat demand.

Office

Ms. Tay Huey Ying, Head of Research and Consultancy, Singapore

郑惠匀, 研究与咨询部主管 (新加坡)

Rent rose for the first time in nine quarters

URA’s statistics showed that office rents in the Central Region rose 2.4 per cent q-o-q in 3Q17, ending nine straight quarters of decline. 

This reinforced JLL’s earlier observation that CBD Grade A office rents are on a firm recovery footing.  JLL’s research showed that CBD Grade A office gross effective rents bottomed in 1Q17 and firmed by a marginal 0.7 per cent q-o-q in 2Q17 before speeding up with an increase of 4.3 per cent q-o-q in 3Q17 to end the quarter at SGD 8.86 per sq ft per month. 

Rent recovery is believed to be underpinned by improving demand as business sentiment has turned more upbeat on the back of a broadening economic recovery. Demand, however, continued to gravitate towards new developments in the CBD as evidenced by the net absorption of 51,000 sqm recorded for Downtown Core in the first nine months of 2017. In fact, the figure has already exceeded the area’s full-year net absorption for each of the last three years. 

Elsewhere, except for Outside Central Region which saw net absorption expanding by 11,000 sqm, demand for office space contracted in all the other areas (Orchard, Rest of Central Area and Fringe of Central Area) during the first nine months of 2017.    

Against the backdrop of a brighter economic outlook, business confidence should continue to improve and support real estate relocation and, increasingly, expansion plans.  On this note, with the tide turning in favour of landlords on the back of an expected tightening of supply available for lease, more occupiers can be expected to act swiftly to secure their premises.  This would pave the way for continued growth in office rents in the quarters ahead. 

We expect the monthly gross effective rents of CBD Grade A offices tracked by us to post full-year growth of between six and eight per cent in 2017 given that the year-to-date increase already stands at 3.7 per cent. 

Retail

Ms. Tay Huey Ying, Head of Research and Consultancy, Singapore

郑惠匀, 研究与咨询部主管 (新加坡)

Rental correction lowest in eleven quarters 

Some encouraging early signs that Singapore’s retail property market could be approaching the end of the downturn have emerged from URA’s 3Q17 real estate statistics.

Rental decline for retail space in the Central Region moderated for the second consecutive quarter and slipped by a mere 0.2 per cent q-o-q in 3Q17.  This is the mildest quarterly correction since the downtrend started in 1Q15 and comes alongside the strongest quarterly net absorption observed for 2017.  Demand for islandwide retail space expanded by 15,000 sqm in 3Q17, a reversal from the 41,000 and 3,000 sqm contraction posted in 1Q17 and 2Q17, respectively. 

While the expansion in demand was likely led by the 22,000 sqm of new supply that came on stream in 3Q17, we are of the view that the retail property market is looking healthier today than a year ago with attrition rate slowing.  At the same time, the market continues to welcome new entrants.  This includes Pablo Cheese Tart and Ah Mah Homemade Cakes – two F&B operators looking to leverage on food fads to expand into Singapore.  On the luxury fashion and accessory trade fronts, Moynat opened at Ngee Ann City and Niessing at Scotts Square in the quarter. 

The growing trend of lifestyle and wellness operators opening large space multi-concept stores has also helped to prop up demand.  Examples include MUJI taking on 17,000 sq ft of retail space previously occupied by John Little in Plaza Singapura. 

Looking forward, we are hopeful that the recent improvement in consumer sentiment amid the rosier economy and steady growth in visitor arrivals could soon start to translate into improving retailers’ confidence and encourage take-up. Total retail sales (excluding motor vehicles) have recorded six consecutive months of growth on a constant price y-o-y basis as of August 2017 while visitor arrivals grew 4.0 per cent y-o-y in the first eight months of 2017. 

Nonetheless, demand is still expected to continue to lag behind supply.  Thus, rents are likely to stay soft in the near term although full-year rental decline is poised to come in lower than the 8.3 per cent contraction recorded in 2016. This is taking into consideration that rents have declined by only 4.2 per cent in the first three quarters of 2017.