Cooling Measures Will Not Dampen Singapore New Home Launches

Christine Li • 07/11/2018

Home buyers in Singapore are becoming more discerning and selective in their purchases as the market adjusts to the new cooling measures. Demand is beginning to gravitate towards projects with perceived strong value propositions.

The August and September 2018 sales figures seem to bear this trend out. Two months after the new cooling measures were introduced, top selling projects appear to be enjoying higher market share gains. In August and September 2018, the top 5 projects took up 73% and 68% of total private new home sales respectively, while in June 2018, the top 5 took up only 61% of total new home sales in June 2018. This implies that older launches which are less flexible in terms of pricing could face more challenges in finding buyers, as compared to newer launches where developers still have leeway to revise pricing strategy in light of the ninth round of cooling measures.

A Winner-takes-all Market 


Higher ABSD charges have not snuffed out demand. In September 2018, developers sold 51 per cent more new private homes compared with August and also nearly 42 per cent higher than the units sold in September last year. 

But price growth has been tamed. According to flash estimates released by the Urban Redevelopment of Authority (URA), new home price growth across all residential types across all districts slowed to 0.5 per cent quarter-on-quarter in the third quarter of 2018, the slowest pace of increase in five quarters. The landed market was the key driver behind the price growth, rising 1.7% q-on-q compared to the non-landed prices which grew only 0.2% in the same time period. However, this is still much slower compared to the landed market’s price growth of 4.1% q-o-q in the second quarter of 2018.

Prices of non-landed apartments in the Central Core Region and Outside Core Region continued to grow, albeit at a slower pace, rising by 1.2% and 0.1% q-o-q respectively in 2Q 2018.

Nevertheless, real estate remains an attractive investment option. The positive price growth post-cooling measures is testament to the resilience of private property market. Three months after the imposition of the new stamp duty rates, the three projects launched at the eleventh hour before the new measures kicked in, continue to receive good take-up rates. As of the end of third quarter, Stirling Residences, Riverfront Residences and Park Colonial sold 35 per cent, 50 per cent and 62 per cent of the total units in these projects respectively.

Going by the healthy sales of Jadescape recently, which sold 327 units since the launch in late September, other developers may be encouraged to keep the launch momentum going.

Earlier this week, URA made another surprise move by raising the average size of new private apartments outside the central area from 70sq metre (sqm) to 85 sqm. The 85 sqm limit reduces the number of units by 18% and developers’ leeway to prop up profit margins by launching smaller units. Nevertheless, this new rule is not going to impact the pace of new launches in the next few years, as developers have already loaded up their landbanks in the last two years and are bound by the 5-year deadline to sell out all the units in the projects.

Resale prices appear to be fairly resilient against the latest cooling measures. In fact, resale properties that at 10 years and older appear to be holding up. Median prices of these older properties have grown, despite the fact that their collective sale appeal has diminished now that the en bloc market has come to a standstill.

Based on Cushman & Wakefield’s analysis of the caveats data, resale prices of these properties in general held up in the third quarter, with median prices of 7 postal districts showing zero or positive growth over the previous quarter, while 4 districts showing negative price growth (only districts with more than 30 transactions in each quarter are included in the study).

In fact, the price growth of resale properties of at least 10 years of age in District 19 is the highest islandwide at 19% q-o-q, all thanks to the widening price gap between the new and old homes, which results in resale prices playing catching up. District 19 saw 3 new launches in 2018, namely Garden Residences, Affinity and Riverfront Residences, injecting a total of 3,137 units to the district.

Growth drivers include firm economic growth, rising affluence, a stable labour market, and Singaporeans’ thirst for real estate investment. Developers are still flush with cash and have strong holding powers. As most of the new launches were from land sales in the past one and half year or so, developers do not face immediate threat from the Additional Buyer’s Stamp Duty deadlines which give them 5 years from the date of land acquisition to sell out their projects.

As such, barring any recession risk, developers are likely to pace their launches reasonably apart from their competitors and refrain from major price cuts until the dust settles post-cooling measures.

This article originally appeared in The Business Times on October 20, 2018.

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