As the adage goes: when the going gets tough, the tough get going. Since the new property cooling measures were implemented in July 2018, the residential property market has become more muted. Developers - many with new launches waiting in the wings - probably had to rethink their plans and re-evaluate market dynamics. More than half a year since the measures hit the market, it appears developers have taken them in their stride.
In recent months, developers have rolled out new projects cautiously - taking care not to flood the market with new supply. To this end, several residential launches have done relatively well. Spacing out new launches will continue to be important this year, particularly with more developments in the launch pipeline.
Launch and take-up
In Q4 2018, 1,657 uncompleted private homes were launched for sale, and 1,793 uncompleted units were sold, working out to a takeup rate of 1.1 times. While this rate is lower than the 2017 and Q1 2018 takeup rates of 1.5 times - during which there was a shortage of launches and buyers had to dig into earlier launches - a rate of close to 1.0 times is still very healthy.
In 2019, we expect buyers to be spoilt for choice with abundant launches as a result of the bumper land-banking in 2017-2018. We estimate over 17,000 units in 58 new projects could be launched for sale in 2019, though some could spill over to 2020.
In January, three projects, all in prime Core Central Region (CCR), were launched and moved 30-44 per cent of the number launched in the month. Based on Colliers' research, overall takeup for new private homes in January was 0.9 times.
Although developers' sales got off on a weaker note in January 2019 - with 433 units sold (excluding executive condos) - we expect take-up to improve as more projects are launched through the year.
In 2019, we estimate that developers could potentially sell 9,500-10,000 new homes amid the varied launch pipeline and gradual market acceptance of the new cooling measures. This would be slightly higher than the new home sales last year at 8,795 units. Price-wise, we anticipate a slower rate of growth at 3 per cent for the full 2019, barring any unforeseen events or policy shifts - down from the 7.9 per cent increase in 2018.
Developers could adopt the following strategies to stand out and achieve a win-win outcome in this environment.
1. Sensitive pricing and creative concepts
Of the upcoming launches of over 17,000 units, we estimate 19 per cent are in prime districts 9, 10 and 11, while the rest are in the city fringe and suburbs. District 19 (Hougang, Sengkang), District 5 (Pasir Panjang, Buona Vista) and District 18 (Tampines) will account for the bulk of the supply.
Developers with sites that are in locations with more competing supply from existing projects on the market and new launches, may go ahead with planned launches, but will need to have a strong product differentiation as well as a sensitive pricing strategy.
In District 19 - which includes Upper Serangoon, Hougang, Sengkang and Punggol - The Florence Residences started its preview on Feb 16 amid stiff competition from existing launches. On the March 2-3 weekend, 60 units were sold at an average of close to S$1,400 psf, a slight discount from the nearby launches of Affinity at Serangoon and Garden Residences.
Based on caveats downloaded on Feb 27, Affinity at Serangoon has sold 405 units (38 per cent of total 1,052 units) at an average price of S$1,488 psf since its launch in June 2018; and Garden Residences has sold 88 units (14 per cent of total 613 units) at an average price of S$1,619 psf.
Other than pricing, The Florence Residences also has a strong product differentiation - it is positioned as a "club-condo" which encompasses the lifestyle of a club and the luxury of private residential living. It will include 128 facilities grouped into 12 "clubs" such as a Gourmet Club. The developer will also provide complimentary lifestyle activities like yoga classes, cooking and baking lessons and flower arrangement workshops.
In addition, all units will come with smart home features and appliances and fittings from brands like Electrolux, Roca and Grohe. Given its strong value proposition, we expect pre-sales for the project would progressively pick up.
In District 5 (including Pasir Panjang, Clementi and Buona Vista), which also sees stiff competition from the likes of former Normanton Park and The Whistler Grand, the former Park West - to be named Parc Clematis - may feature a "co-living" concept, with shared facilities like a common kitchen and thematic dining rooms. The 1,468-unit condo is scheduled to be launched in Q3, and we expect it to be attractively priced.
2. Curate an optimal unit mix and unit size
With the new guidelines on minimum unit sizes outside the Central Area, developers may want to optimise their unit mix and size to match buyers' needs.
For large suburban projects, developers should continue to offer a range of unit sizes to cater to buyers from multi-generational families to singles and couples.
For smaller to medium-sized plots, developers could go to either end of the spectrum, depending on the existing stock and positioning. For example, RV Altitude featured 140 units - all two-bedders - with sizes from 441 to 624 sq feet.
As of Feb 27, it sold 21 units at an average price of S$2,890 psf, a significant premium to recent price points of between S$1,756 and 1,944 psf achieved at adjacent older projects Luma and 2RVG. RV Altitude's price quantum of around S$1.3-1.7 million is deemed affordable and provides an attractive entry point to a freehold District 9 property for well-heeled singles and investors.
On the other end of the spectrum, developers could also offer a unique all-large-format product. UOL is planning a 56-unit freehold project on the former Nanak Mansions site in Meyer Road.
The low-rise luxury freehold condo, Meyerhouse, will have large- format units - substantially four-bedroom apartments with some three-bedders and penthouses. This is an unusual strategy, going against the trend of small units, but may well work as it provides rare exclusivity for potential high-net-worth buyers in the popular East Coast enclave.
3. Innovative marketing campaigns
In the digital age, developers should maximise exposure and reach potential buyers via social media and by providing immersive experiences with videos and virtual showsuites.
In addition, developers could use "star buys" or "selective discounts" to sway prospective buyers to commit or decide between two or more competing projects, or to clear less attractive units within a project, such as a unit that faces the MRT track directly or is nearest to the main road.
Developers could also turn to good old-fashioned lucky draws and gifts to entice buyers. For projects that are completed and delicensed, developers could offer innovative payment options, such as a Deferred Payment Scheme (DPS) or a "Stay-then-Pay" scheme.
The various strategies, coupled with positive market fundamentals - such as a steady economic growth, slower to no further rate hikes, low unemployment rate, rising household income - should support housing affordability and demand for private homes.
Broadly, we believe the private residential market in Singapore will continue to stabilise this year in tandem the macroeconomic conditions. Depending on take-up of new units, developers could look into land-banking again in the latter part of the year.
This article was first published in The Business Times
on March 21, 2019.