URA4Q17 real estate statistics
Mr Ong Teck Hui, National Director, Research & Consultancy
王德辉, 新加坡董事 (新加坡)
Launches – lowest quarterly launches since 4Q 2008
Only 877 private homes were launched for sale in 4Q17, a 25.9% dip from 3Q17 and the lowest level since 4Q08 when the global financial crisis resulted in 706 units being launched. It is significant to note that in 4Q16, 2,944 private homes were launched for sale by developers to capitalize on rising market sentiments but in 4Q17, in spite of upbeat sentiments only 877 units were launched. Launches are being held back in order to ride on rising prices with sellers knowing that the market is now in their favour. For the whole of 2017, only 6,020 units were launched. This is again another new low in 13 years.
However, the launch situation is expected to reverse in 2018 with a possible launch pipeline of close to 9,000 to 10,000 units from GLS and collective sales projects. If this supply materializes, it would provide a better balance between supply and demand as well as increasing choices for buyers.
Sales Volume – buyers turning to resale market to widen options
With activity in the primary market impeded by lower new launches, buyers of private homes have been turning to the resale market to widen their options. The number of units sold in the secondary market in 4Q17 as well as for the whole of 2017 surged to a 5 year high of 4,346 and 14,444 units respectively. Full year secondary market volume of 14,444 units is 36.7% higher than the 10,566 units sold in the primary market. Compared to 2016, secondary market volume was just 5.4% more than that of the primary market. The total transaction volume comprising both primary and secondary markets in 2017 was 25,010 units, a 52.7% surge from 2016.
Price Indices – price recovery on firm footing
The twin effect of lower new launches and returning buying interest has kept prices of private homes trending upwards . The overall private residential price index for 4Q 2017 rose by 0.8% q-o-q, trending quite similarly to the 0.7% q-o-q growth in 3Q17. The 4Q17 price indices also reflect an upgrade from the 0.7% q-o-q flash estimates released earlier in the month. Except for landed properties and non-landed properties in CCR, the actual indices for the other segments saw an improvement from the flash estimates. With the indices of all segments recording at least two consecutive quarters of growth, the price recovery appears to be on a firm footing.
% change over previous quarter
Source: URA/JLL research
Rental index treaded into negative territory again in 4Q17
Affected by the seasonal lull in leasing demand towards the end of the year, the overall residential rental index fell 0.9% q-o-q in 4Q17, after holding flat in 3Q17. Rents for landed properties led the fall with a 1.3% q-o-q correction in 4Q17, which reversed the 0.6% q-o-q rise in 3Q17.
However, on a year-on-year basis, there was a noticeable moderation in the fall in rents. For the entire 2017, overall residential rents only fell 1.9%. This is almost half of the decline of 4.0% in 2016 and is the lowest annual drop since rents turned down at the end of 2013. The moderation in the decline in rents suggests that the leasing market could be headed for stability.
Vacancy rates dropped to a 7-quarter low of 7.8%
The slowdown in rental decline in 2017 was in line with the improvement in vacancy rates. With new completion moderating to a 4-year low of 16,449 units in 2017 and net new take-up staying at a healthy level of 16,852 units in 2017, overall vacancy rate fell to 7.8% at the end of 2017, the lowest level since 1Q16. With new completions in 2018 potentially dipping further to 10,000-11,000 units in the face of more favourable economic and business conditions, vacancy rates are likely to decline raising the prospects of rents stabilizing.
Executive condominium primary market – low supply impedes take-up
In 4Q17, developers only sold 446 new EC units, a 71% plunge as compared to the 1,539 units sold in 3Q17, and recorded the lowest quarterly sales volume since 2Q15. For the full year, developers sold 4,011 EC units, about the same level as the 3,999 units sold in 2016. This was in spite of only 1,555 units launched for sale in 2017, a 43.4% drop from the 2,749 units placed on the market in 2016. The stock of unsold EC units fell for the sixth consecutive quarter to 983 units as of 4Q17. This is the lowest level of unsold stock level since 2Q14. The EC market is in need of a catch up in supply as current inventory is low and EC land sale supply remains meagre with only the Sumang Walk site currently available for sale (tender closing next Tuesday 30 Jan 18) and the Canberra Link site being the only one on the confirmed list under 1H18 GLS programme.
Healthy demand lifts absorption, rents and prices
The office leasing market continues to pick up, underpinned by improving global and domestic economic conditions and more positive business sentiments. The 4Q17 net new demand for office space in the Central Region at 46,000 sqm is the highest since 3Q2014. It is a significant increase from the 4,000 sqm registered in 3Q17 and a huge reversal from the negative absorptions in the first two quarters. The strong take-up in the Central Region was mainly contributed by good demand for Downtown Core office space, especially in quality and efficient buildings. The 4Q17 Downtown Core quarterly net new demand of 43,000 sqm was the highest in more than five years (i.e. since 3Q12).
The stronger take-up in the fourth quarter has also propelled rents and prices upwards. Office rents in Central Region rose 2.6% q-o-q in 4Q17, slightly faster than the 2.4% q-o-q increase in the previous quarter. This is reflective of the leasing market having turned in favour of landlord and we can expect this trend to continue in 2018. JLL’s forecast is for CBD office rents to increase by 10-15% in 2018. Prices of office space in Central Region has also risen in tandem with rents, as investment sentiments strengthen with the prospects of rising rents. This is reflected by the 2.7% q-o-q rise in prices of Central Region office space in 4Q17, a marked increase from the 0.4% q-o-q growth in 3Q17.
Robust net new demand reflects improving confidence
In 4Q17, net new demand for islandwide retail space saw an expansion of 64,000 sqm, significantly higher than the 15,000 sqm in 3Q17 and a vast improvement from the negative absorptions in the first and second quarters. Consequently, Central Region’s rental decline for retail space in 4Q17 remained mild at -0.5% bringing the total decline to -4.7% for the full year. This is a significant moderation from the -8.3% registered in 2016 and could be indicative of the retail property market heading towards the bottom of its downcycle.
The stronger absorption in 4Q17 has resulted in an improvement in vacancy rates which likely came on the back of retailers rushing to open in time for the festivities ahead. We have also seen larger concept retailers entering the market, and possibly at favourable rents due to their significant take-up in retail space. Some of the larger format retailers that opened this quarter include Don Don Donki (24-hour operational discount chain store), occupying 15,000 sq ft in Orchard Central. Their opening caused a ripple effect, boosting interest in F&B operators to also take up space within the mall. Another notable opening was Lumine in Clarke Quay Central, which spans about 10,000 sq ft, and carries over 20 clothing brands as well as its own café.
Looking forward, we expect to see more of such larger format retailers sprouting up, and together with improvements in consumer sentiment and visitor arrivals, will help to strengthen retailers’ confidence. Furthermore, with the future islandwide planned supply at low levels, absorption of both existing and new retail space should see gradual improvements, on the back of a rosier economic outlook.