Singapore property market going from strength to strength
Mr Ong Teck Hui, National Director, Research & Consultancy
Prices rising faster than expected
The private residential price index rose by 3.9% in 1Q18, higher than the 3.1% posted during the flash estimates, indicating a steady upward momentum in prices as caveats in the remainder of the quarter were captured, boosting the index. The increase in the overall index was mainly due to a huge jump in the Outside Central Region (OCR) index for non-landed homes, from 3.8% during the flash estimates to 5.6% in the final data. Strong pricing in new projects with high transaction volumes contributed to the sharper increase in the index. Examples of such projects and their median prices include The Tapestry ($1,408 psf), Grandeur Park Residences ($1,525 psf), Parc Botannia ($1,283 psf), Seaside Residences ($1,684 psf) and Kingsford Waterbay ($1,365 psf).
The index for non-landed homes in Core Central Region (CCR) rose 5.5% instead of 5% recorded during the flash estimates. Examples of contributors to the increase included 8 Hullet which had a robust median price of $3,490 psf and Martin Modern, whose median price of $2,772 psf in March was 6.5% higher than that in February.
With more new launches coming on the market in the coming quarters and expected optimistic pricing, there is a likelihood that the price index would continue to move at an elevated pace of 3 to 5% per quarter.
Moderate launches and sales volume in 1Q18 to pick up next quarter
921 private homes were launched for sale in 1Q18, 5% more than 4Q17 but a 52.7% drop y-o-y. The slow start in launches was partly due to the Lunar New Year falling in mid-February and the unhurried stance towards launches by developers. Primary market sales of 1,581 units were recorded in 1Q18, a 15.2% decline from 4Q17 and 46.6% drop y-o-y. The lack of new launches was the main contributor to the moderate level of sales by developers.
The 3,747 units sold in the secondary market in 1Q18 was 13.8% lower than 4Q17 but 67.3% higher y-o-y. Constituting 70.3% of the total transaction volume of private homes in 1Q18, secondary market sales made up for the lack of opportunities in the primary market due to new launches remaining low key.
A pick-up in launches and sales is expected in 2Q18, after the slow start in 1Q18.
Low completions contributing to improving vacancy rates and rentals
1,977 new private residential units were completed in 1Q18, the lowest since 4Q12 when 1,728 units were completed. At the height of the residential construction cycle, new completions averaged 4,760 units per quarter between 2014 and 2017. The low completions in 1Q18 is indicative of a slowdown in completed supply which will result in vacancy rates trending downwards. Overall vacancy rates decreased to 7.4% in 1Q18 from 7.8% in 4Q17, contributing to the rental index rising 0.3% in 1Q18, the first increase since 3Q13. If this trend continues, it will mark the recovery of the leasing market.
Sales pipeline rises but slow increase in supply with sales pre-requisites
In 1Q18, the number of unsold uncompleted and completed units totalled 25,337, a 21.8% increase from the 20,794 units in 4Q17 due to new projects arising from GLS and collective/en bloc sales. However, the uncompleted unsold units with pre-requisites for sales only increased from 4,387 units in 4Q17 to 4,818 units in 1Q18. If the slow pace of projects obtaining pre-requisites for sales continue, it could be an impediment to the pace of launches and the high launch estimates that many had forecasted may not materialise. This could place a squeeze on launch supply putting upward pressure on prices.
Ms. Tay Huey Ying, Head of Research and Consultancy, Singapore
郑惠匀, 研究与咨询部主管 (新加坡)
A landlord-favourable market drives a third consecutive quarter of growth in office rents
URA's statistics released today is in line with our observations that the Singapore's office property market is continuing on a steady growth path.
The rapid shift from a tenant-favourable to a landlord-favourable market has fuelled the third consecutive quarter of uptick in URA's rental index for the Central Region in 1Q18.
Excess supply in the Downtown Core is gradually being absorbed amid occupiers' physical move into their fitted-out premises in recently completed developments such as Marina One and UIC Building. This has driven down the planning area's vacancy rate for two consecutive quarters, to 13.7% in 1Q18, from the recent high of 15.6% in 3Q17, according to URA's statistics.
Occupier sentiment continues to run high as demonstrated by the healthy pre-leasing activity in projects scheduled for completion in 2018. Close to 70% of the 0.8 million sq ft of net lettable space in Frasers Tower and 18 Robinson – the two developments scheduled for completion in the CBD in 2018 - are estimated to be already pre-committed. Even CapitaSpring has already secured JP Morgan as anchor tenant three years ahead of its completion in 2021.
In light that demand is expected to stay robust amid a rosy economic outlook, the squeeze for good quality office space will worsen. This will be especially pronounced in the CBD given the lack of major en bloc completions in 2019. Rents are thus forecast to continue to chart higher ground in the rest of 2018, with CBD outperforming the general market.
In fact, JLL is optimistic that Grade A office rents of $9.51 psf per month as of 1Q18 could rise by more than 10% to hit the recent high of $10.56 psf per month recorded in 1Q15 within the next 12 months.
Singapore's upbeat leasing market continues to draw the interest of global investors. Supported by ample liquidity, URA's office price indices for Central Region which had recorded three straight quarters of growth are also similarly expected to stay on the expansionary path over the next 12 months.
Ms. Tay Huey Ying, Head of Research and Consultancy, Singapore
郑惠匀, 研究与咨询部主管 (新加坡)
Firmer signs of a stabilizing retail property market
Singapore's retail property market could finally be emerging from the doldrums after three challenging years of intense battle against disruption brought about by technology amid rising operational costs and weak consumer sentiment.
For the first time in three years, URA's retail price and rental indices entered into the positive territory across all regions tracked. This came on the back of firm islandwide vacancy rate in the private sector, at 8.1% in both 4Q17 and 1Q18.
Occupier demand in 1Q18 was observed to be underpinned by new-to-market entrants from Japan, Korea and Taiwan islandwide, as well as outlet expansion by existing F&B operators, primarily into the Suburban submarket. Lifestyle, wellness-related and entertainment-focused trades also contributed to leasing demand with the expansion of gyms and schools offering sports-related activities, as well as activity-based centres offering interactive games.
Improving occupier demand on the back of sustained economic growth prospects and steady growth in retail sales and tourism should continue to underpin rents for retail space. However, we expect the extent of rent growth to remain modest in the quarters ahead in view of the high occupancy costs of retail space, particularly in the Orchard submarket, as well as leasing competition from the expected opening of new malls in the Marina and Suburban submarkets over these two years.
In addition, a recent change in leasing strategy where landlords are observed to be increasingly opting to draw in longer-term tenants at more realistic rent expectation over filling vacant spaces with temporary pop-up stores could also result in measured rent growth in the quarters ahead.
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JLL (NYSE: JLL) is a leading professional services firm that specialises in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com
JLL has over 50 years of experience in Asia Pacific, with over 37,000 employees operating in 96 offices in 16 countries across the region. The firm won 23 awards at the International Property Awards Asia Pacific in 2017 and was named number one real estate investment advisory firm in Asia Pacific for the seventh consecutive year by Real Capital Analytics. www.ap.jll.com.