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Comments On Q4 2021 Ura Real Estate Statistics

Xian Yang Wong • 17/02/2022

Private Residential

Private home prices record strongest quarterly price growth in over a decade

Private home prices have reached a historical high after growing 5.0% qoq in the last quarter in 2021. This is the highest quarterly growth in prices since Q2 2010 when prices increased by 5.3% qoq. For the whole of 2021, private home prices increased by 10.6%, extending the 2.2% growth the year before. This was the highest annual growth since 2010, when private home prices inched up by 17.6%.

In Q4 2021, private residential prices rose across the board, with non-landed and land private home prices rising 5.3% and 3.9% qoq, respectively. On a yearly basis, non-landed and landed homes rose by 9.8% and 13.3% yoy, respectively.

Landed home prices were underpinned by strong local demand and robust wealth creation effects such as a strong economic rebound, rising stock prices and a booming tech sector.

Within the non-landed segment, there was broad-based growth with Rest of Central Region (RCR) outperforming the rest of the segments, rising 6.7% qoq in Q4 2021. The Outside Central Region (OCR) and Core Central Region (CCR) rose by 5.7% and 2.7% qoq, respectively. For the whole of 2021, CCR, RCR, and OCR prices grew by 3.8%, 16.3% and 8.8%, respectively.

The outperformance of RCR prices was driven by the strong take up rates of a slew of new launches. RCR total sales volumes saw a higher proportion of new sales, at 50% of total sales. This compares to CCR and OCR which only 39% and 31% of total sales were new sales.

Popular new RCR launches include Canninghill Piers, One-North Eden, Normanton Park and The Reef At King’s Dock, all of which are near to sold out (take-up rate of at least 80%) as of end December 2021. For the CCR, popular new launches included Jervois Mansion, Irwell Hill Residences and Midtown Modern which achieved sold-out rates of 78%, 76% and 73%, respectively as of end December 2021. The Commodore, The Watergardens At Canberra and Pasir Ris 8 are amongst the attractive newly projects in the OCR, which managed to sell 74%, 74% and 88% of their total units as of end December 2021. 

Volumes slowed in December

The market was weighed down by the double whammy of the year-end lull period due to the Christmas festive season and fresh property cooling measures introduced in the last month of Q4 2021. Some potential homebuyers held off their housing activities as they went on holidays as travel borders re-opened. Others are waiting at the sideline to assess market situation in view of the latest round of cooling measures. 

New sale voumes went down by nearly 15% qoq in Q4 2021, clocking 3,018 units sold as compared to 3,550 units transacted in the previous quarter. Specifically, new home sales in October and November 2021 were much higher than sales volumes in December 2021. Secondary market sales volumes (including resale and sub-sale) also inched down in Q4 2021 after following an uptrend since Q2 2020, with 4,907 units sold during the quarter as compared to 5,533 units changed hand in the preceding quarter. 

Despite the moderation in sales during the last quarter of 2021, total home sales for full-year 2021 reached 33,557 units, almost 61% higher than 2020's sales of 20,909 units, indicating a buoyant market alongside strong economic recovery. 

For the whole of 2021, new home sales totaled 13,027 units – the highest volume since 2013 when 14,948 new units were sold. According to the URA’s project list as of Q4 2021, there were 4,599 units with pre-requisites for sale but have not been launched yet. Last year, 10,496 private residential units were launched. Lower launch volumes in 2022 coupled with the impact of cooling measures on buyers’ sentiments could result in lower new home sales this year at round 9,000 – 10,000 units. 

Developers to hold on to prices as inventory levels remain low

On the back of healthy developers’ sales, the rate of stock clearing was higher than the rate of additional inventory being added. Hence, unsold inventory reached 14,333 in Q4 2021 – an historical low since available data from Q3 2006. Unsold inventory has come down significantly by 62% since the peak of 37,799 units registered in Q1 2019. Low inventory level might help to mitigate the impact of cooling measures on prices of new units and land acquisition activities as developers are expected to hold onto their prices and continued searching for residential development land to top up their landbanks. Developers are likely to continue looking to replenish their depleting stock, albeit being more prudent and cautious in selecting sites and bidding prices. Therefore, activities in the collective sales market could be moderated in the near-term with large development sites facing more challenges. Pricing will be key for success in the collective sales market.

Prices and volumes to cool in 2022 but remain positive

Prices and volumes could stagnate in Q1 2022 as the market takes time to adjust to the latest round of cooling measures. Nonetheless, there are several factors which could edge prices higher. Singapore’s economic fundamentals remain sound with economic growth expected at 3% to 5% in 2022 (according to MTI) and a tightening labour market. Underlying local demand for homes remains strong, as seen from the favourable market response of landed housing project, Belgravia Ace, which managed to sell 72% of units during their launch in January. Unsold inventory remains low and the pipeline of new launches remains limited. As developers balance sheets remain healthy, they are expected to largely hold on to their prices.

After a stellar run in 2021, the private residential market is expected to cool in 2022, with prices expected to appreciate by about 1% to 2%. New homes and resale volumes are expected to reach 9,000 to 10,000 units and 11,000 – 13,000 units, respectively.

Positive outlook for residential leasing market in 2022

As private residential vacancy rates tightened to 6.0% in Q4 2021 from 6.4% in Q3 2021, rents continued to climb up, rising by 2.6% qoq during Q4 2021, at faster pace compared to rent growth of 1.8% qoq registered in Q3 2021. Rents are projected to rise further in 2022 as ongoing completion delays have encourage many families to look for temporary housing arrangements and more foreign expatriates / students are expected to come in following the gradual relaxation of borders. Nonetheless, rental growth could slow as completions start to ramp up in 2022 with a total of 11,247 units expected to be completed. This remains below the 10 year (2011 to 2020) annual average of 13,281 units. However, rents could face downward pressure in 2023 given the substantial supply of 17,276 units to be finished by then. 


Office rents return to growth

Central Region office rents grew by 0.9% qoq in Q4 2021, despite the Omicron situation. This is propelled by a higher quarterly increase in Central Area rents (0.8% qoq) as compared to Fringe Area rents (0.3% qoq). For the whole of 2021, Central Region rents are up by 1.9%. The growth in rents is backed by a flight to quality where tenants are showing growing appetite for good quality offices alongside a robust global economic rebound. This is evidenced by Category 1 office median rentals growing 0.6% qoq in Q4 2021, the third consecutive quarterly increase. Notably, Category 2 office spaces grew 0.4% qoq in Q4 2021 as well, suggesting a broad-based recovery in the office market. 

Islandwide office demand remained in the negative territory at -108,000 sf in Q4 2021, as we may see a slower and drawn-out recovery momentum due to the rise of hybrid work. Although islandwide office demand improved from the -850,000 sf in 2020, reaching -614,000 sf for the whole of 2021, in tandem with a strong economic recovery. With the growth in office demand, islandwide office vacancy rates tightened to 12.8% in Q4 2021, after four consecutive quarters of increase.

Office demand is expected to continue recovering, supported by relocations from tenants displaced from redevelopments as well as technology and financial companies that are expanding as they embark on a hiring spree. While the trend towards hybrid work has seen companies rationalizing their office footprints, they will still need to provide a variety of workspaces for collaboration, socializing and focus work to cater to the new role of offices and encourage attendance.

Notable CBD office space deals in the last few months of 2021 include Red Hat picking up about 57,500 sf of space at newly completed CapitaSpring and Swiss Re’s lease of about 30,000 sf at upcoming development, Guoco Midtown. These large take-ups, coupled with limited new office supply and increasing leasing momentum amid further reopening of economy, bodes well for the office market in 2022. 

Going forward in 2022, Central Region office rents could stay on the uptrend, driven by higher rental growths amongst higher grade office buildings in the Central Area (CBD Grade A offices). We are projecting the CBD Grade A office rents to grow by 4.6% yoy in 2022, coupled with tightening vacancy rates, against a backdrop of sustained demand and limited supply. 


A Light at the End of the Tunnel

Retail rents in Central Region turned the corner in Q4 2021, rising by 0.6% qoq after seven quarters of declines since the first quarter of 2020. Central Area retail rents also turned to grow by 0.9% qoq in Q4 2021, higher than the 0.3% qoq growth in Fringe Area retail rents. Not withstanding the Omicron situation, retailers remain cautiously optimistic for recovering footfall from office workers and inbound travellers with the progressive easing of work-from-home and cross-border travel restrictions.

Islandwide retail vacancy rates remained stable at 8.1% in Q4 2021, improving from 8.8% in Q4 2020. Demand for physical retail space remains strong with islandwide retail net demand bouncing back substantially at around 1,076,000 sf for the whole of 2021, from about -1,744,000 sf in 2020. The bulk of demand was driven by predominately by the suburban market which drove 969,000 sf of net demand in 2021.

Robust take ups were observed at the newly developed suburban malls, amongst which French sporting goods retail chain, Decathlon has opened its sixth experience store of about 45,000 sf at Northshore Plaza and American based athletic apparel retailer, Lululemon Athletica, has chosen i12 Katong to open its fourth physical store. Indeed, Suburban retail vacancy rates continued to lower marginally to 6.1% in Q4 2021, the lowest suburban vacancy rate seen in six years. Underpinned by the hybrid work and shifts in consumer shopping behaviour, the Suburban retail market is expected to lead recovery of the retail market in 2022 and prime retail rents in the area are expected to grow by about 2% yoy in 2022.

The Orchard retail market is expected to recover as well, albeit gradually, as the tourism market continues to improve amidst a gradual relaxation of border restrictions. As net demand in Orchard retail market turned positive at about 43,000 sf in Q4 2021, retail vacancy rates in the area lowered for a second consecutive quarter to 11.3% in Q4 2021 and are expected further tighten in 2022 amidst a recovering retail demand and limited new supply. While net demand for Orchard retail spaces turned in at only about 32,000 sf for the whole of 2021, it is also a solid performance, considering that net demand in the area was around -118,000 sf in 2019 and -355,000 sf in 2020. Orchard prime retail rents are expected to rise by around 1% yoy in 2022.

Orchard remains the location of choice for new-to-market international or luxury brands looking to expand into Singapore. Store openings in Orchard during Q4 2021 include two established fragrance brands (Replica by Maison Margiela and Maison Francis Kurkdjian) that launched their first physical outlets at Takashimaya Shopping Centre as well as two other Italian brands (luxury paper product brand, Moleskine and fashion brand, Golden Goose) that debuted at Paragon. Amidst a slow recovering tourism market, Orchard Road is also steadily undergoing a change in tenant mix to revitalize its shopping experience with retailers like Courts opening its flagship store to occupy the space vacated by Robinsons at The Heeren. More local brands and e-retailers are also sprouting up along the iconic shopping street as they leverage on lower rents and higher vacancy to secure prime spaces that rarely come onto the market. 


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