The number of private housing sites launched has reduced significantly, as years go by. In 2011, almost 30 private housing sites excluding sites of executive condos, were launched. This is in contrast to less than 10 sites launched in 2016. It is then not surprising that of late, developers have a high appetite for land worsened by the stiffer competition from the foreign developers.
From mid-2016, state tenders have received bullish bids from developers. Of note is the top bid of $1239 psf ppr by GuocoLand in June 2016 for Martin Place site. This was the highest price paid for a residential site in a government land sales programme. The site would have a break-even price of $1800 psf – $1900 psf.
Three months after Martin Place site (Martin Modern) was sold, a Fernvale Road private housing site received a $517psf ppr top bid from joint developers Wee Hur Development and Sing Development. This was 17% higher than $443psf ppr attracted by a neighboring site of High Park Residences in August 2014. The break-even price for the Martin Place site is projected at $950 psf – $1050 psf and launch price of over $1100psf. Meanwhile, High Park Residences price is $989psf.
In December 2016, MCL Land acquired a Margaret Drive residential site at $998 psf ppr. This was 15% more than the $871 psf ppr paid for the Queens Peak site and 13% above the $883 psf ppr for the site of Commonwealth Towers.
Recently, China Construction bought a West Coast Vale private housing site at $592 psf ppr. This was 7% above the $551 psf ppr paid for the neighboring Parc Riviera site by EL Development.
In contrast, in 2015 and first half 2016, developers were less optimistic in their bids. For instance, in February 2016, the site for the Grandeur Park Residences was purchased at $761 psf ppr. The cost was less than the $791 psf ppr paid for The Glades site nearby in October 2012.
The current land sales prices portray a better picture of the residential market in Singapore after declining prices of more than 3 years. The bullish bids can translate to high development cost and consequently, new launches will have higher selling prices. However, any rise in price may be modest since homebuyers are still price sensitive. Also, the bid price is just one of the variables in determining prices and may have limited impact on the overall market.
Meanwhile, the resale market is facing challenges. As supply increased and population growth slowed, there was a reduction of 7% y-o-y between quarter four 2015 and quarter four 2016 on monthly rents for 1-bedroom units on all market segments. The same period recorded reduced rent for 2 bedrooms units by 3% y-o-y on the high-end market while suburban and city fringe reduced by 6% y-o-y. In addition, mortgage affordability may be dented since the US Federal Reserve intends to increase rates 3 times in 2017.
While a new launch may help to boost the prices of resale property nearby, it may be a temporary effect. For instance, Waterview’s average price reduced by 8% from its 2013 average price of $1,027 psf to the 2016 average price of $945. The Condo with 696 units was completed in 2014. The price reduced despite Q Bay Residences being launched at $1,043 psf in 2013 and The Santorini at $1123psf in 2014. The 2 projects are within 0.5 km from Waterview. Also, in Tanah Merah, East Meadows and Casa Merah prices reduced by 9% and 13% respectively from 2013 to 2016 even after the Glades was launched in 2013.
The non-landed homes URA price index in Outside Central Region reduced by 9% from quarter four 2013 to quarter four 2016.