PROPERTY market turnarounds do not happen overnight but there are increasing signs that a turning point is on the horizon. First, the buying fervour. New residential launches this year are seen testing the affordability limits of buyers given their higher prices; yet, each project launch has enjoyed a strong take-up. Not only so, the buying momentum has also spilled into previously launched projects – all this happening without much help from the government.
With more buyers piling in to catch the price trough, the sales of new private homes by developers in the first eight months this year have already surpassed 2016’s full-year level. Unsold units – now at a historical low – are estimated to take developers only one-and-a-half years to clear. Residential prices and rents are also slowly finding their feet as their declines moderate.
A new shot in the arm for the residential market is coming from the revival in en bloc sales, which probably has legs to run given developers’ appetite for land and current limited supply in the government land sales programme.
While the displaced households from en bloc sales form an immediate source of demand as they seek replacement units, the supply of new launches and completions from these sites will take a much longer time to stream in. Thus, the anticipated tapering off in supply of completed residential units next year will still take place, which should lend support to rents.
Singapore’s residential market has also turned more attractive to foreigners after other countries imposed more punitive taxes on purchases by foreigners.
Things are looking up in the office sector too. There are signs that the premium office rents are starting to turn the corner.
Though official data still showed office rents dipping for the 9th consecutive quarter, net demand for office space in the Downtown Core – where the bulk of Singapore’s CBD offices are located – rose by 30,000 sqm in the second quarter, the strongest showing for the area since Q3 2012. Based on the baskets tracked by some property consultancies, Grade A office rents in the CBD already posted their first uptick in two years in the second quarter, followed by a steeper rise in the third quarter.
That said, there are still grounds for caution. It is uncertain if the recent improvement in economic conditions, as reflected in the strong growth in exports and manufacturing, will hold up and if the jobs market will stay benign. It is even harder to predict how the ongoing economic restructuring, digital disruption and focus on labour productivity will impact future employment.
Still, developers, landlords, and investors can make hay while the sun shines. For now, homeowners can rest assured that the value of their prized assets will likely stabilise and may even start to rise moderately. Though interest rates are entering a tightening phase, the pace of Fed rate hikes should be a measured one.
It is timely that in this edition of The Business Times’ Property Supplement, industry experts delve deeper into questions on the office market, the impact of developers’ land bidding behaviour, and the investment proposition of mass-market condominiums, among others.
One consultancy has probed further to look at whether Singapore is losing out to others in Asia as a retail hub; another firm explores the changing face of business parks and mixed-use clusters for the Industry 4.0. Emerging trends like “proptech” are also discussed.
It’s time to get ready for a turning point in the property market.
Source: Business Times 2017 Sept