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Comments on the URA Q2 2021 Real Estate Statistics

Private residential property prices in Q2 2021 in Singapore continued to grow, albeit at a slower pace.


SINGAPORE, 23 July 2021 --

Residential
Office
Retail

Shirley Wong, Senior Associate Director of Research for Singapore at Colliers:

Residential

Private residential property prices in Q2 2021 in Singapore continued to grow, albeit at a slower pace. Final statistics from the Urban Redevelopment Authority (URA) on Friday (23 July) showed that the private residential property prices grew by 0.8% quarter-on-quarter (QOQ) in Q2 2021, after rising 3.3% QOQ in Q1 2021. This final figure is slightly below the 0.9% flash estimate increased announced on 1 July. 

On a year-on-year (YOY) basis, private residential property prices have grown 7.1%. The private residential property prices have increased by 4.1% since Q4 2020.

In addition, in Q2 2021, developers sold 2,966 private residential units (excluding ECs), 15% QOQ lower than the previous quarter of 3,493 units. However, this is 27.2% higher on a YOY basis, largely due to the lower volume sold during the circuit breaker period that took place in 2020. The CCR or high-end segment attributed to 43.3% to the sold units in Q2 2021, reflecting strong investor sentiment in Singapore as a safe haven. 

While the property prices grew slower this quarter, prices could increase in the near term as supply lags demand recovery due to possible delay in completion of new projects. Strong investors’ confidence coupled with optimism in business conditions and ongoing vaccination roll-out could boost the demand for private homes.  

As the government continues to remain vigilant and monitor the property market closely, additional cooling measures on the demand side could be premature, given a recovering economy and that the year-on-year private home price increases are still in the single digits.

However, we do not rule out more curbs should prices outpace economic fundamentals, resulting in signs of overheating of the market. We expect private home prices to rise 6% in 2021, tracking GDP growth.

Price analysis by regions
The price increase in Q2 2021 was led by the non-landed segment (up 1.1% QOQ), while the landed segment declined marginally by 0.3% QOQ. 

After a price increase of 6.7% in Q1 2021, the landed segment took a breather and dipped marginally by 0.3% QOQ in Q2 2021. This brings the landed price index to be 3.3% above its Q3 2013’s peak.  

The non-landed segment grew a further 1.1% in Q2 2021, albeit slower than Q1’s 2.5%. This brings non-landed price index to 6.6% above its Q3 2013’s peak.

The non-landed segment was led by Outside Central Region (OCR) where prices rose 1.9%, followed by Core Central Region (CCR) and Rest of Central Region (RCR) with a 1.1% and 0.1% QOQ increase, respectively. 

Core Central Region (CCR)
Based on URA’s data, prices in the CCR extended its growth by 1.1% in Q2 2021, after rising 0.5% QOQ in Q1 2021. CCR home price index is now 3.8% below its all-time peak in Q1 2013 and 1.6% below its recent peak in Q3 2019. 

The best-selling private residential project in June was Hyll on Holland which sold 87 units (or 27% of total units) at a median price of SGD2,387 psf. While in May, Les Maisons Nassim sold a unit at a median price of SGD5,930 psf. One Bernam, which was one of the best-selling projects in May sold 83 units or 24% of total units during the month with a median price of SGD2,471 psf.

Rest of Central Region (RCR)
Home prices in RCR continued to rise, albeit a much slower rate of 0.1% QOQ in Q2 2021, after two consecutive quarters of price increases. It is now 9.6% above the peak in Q2 2013.  

Outside Central Region (OCR)
Non-landed home values in OCR led the non-landed segment in Q2 2021 with a 1.9% QOQ increase, clocking price increase over five consecutive quarters. OCR home prices are 10.6% above its Q3 2013 peak. 

The resilient trend could be driven by upgraders’ demand, as public housing (HDB) resale price index showed a further 3.0% increase in Q2 2021, after a 3.0% QOQ price increase in Q1 2021 and a full year 2020 increase of 5.0%.  

There was no new OCR launch in Q2 2021, but upgraders’ demand led to earlier launches such as Treasure at Tampines, Florence Residences and Parc Clematis selling 92%, 78% and 82% of their units, respectively as of end-June 2021.

Take-up
Developers launched 2,356 uncompleted private residential units (excluding ECs) for sale in Q2 2021, less than the 3,716 launched units in the previous quarter. A total of 6,072 units were launched in H1 2021, a 53.9% increase from the same period in 2020.
 
Developers sold 2,966 private residential units (excluding ECs) in Q2 2021, 15% lower than the 3,493 units sold in the previous quarter. For H1 2021, developers have sold a total of 6,459 units, 67.2% higher than the same period in 2020.
 
Supply pipeline, vacancy, unsold inventory
In Q2 2021, 1,696 private homes (excluding ECs) were completed, slightly below 1,856 units completed in the previous quarter.
  
With 3,684 units to be completed in the second half of 2021, full-year 2021 completions will likely rise to 5,380 private homes. URA expects completions of 10,626 units in 2022, and 14,456 units in 2023 and 13,660 units in 2024.

For the non-landed segment, with continual demand, the vacancy rate slipped by marginally from 6.8% in Q1 2021 to 6.7% in Q2 2021.
 
As at the end of Q2 2021, there were 21,055 unsold units (including ECs) with planning approvals, down from 23,735 units as at end of Q1 2021. URA added that there is a potential supply of about 6,700 units (including ECs) from Government Land Sales (GLS) sites that have not been granted planning approval yet. Assuming the take-up rate of 8,000-10,000 units a year, it will take 2.8 to 3.5 years to clear the stock.

Rentals
The overall private residential rental index continued to rise at an increasing rate by 2.9% QOQ in Q2 2021. Rents have since increased three consecutive quarters but are still 7.5% below the peak in Q3 2013. 

Rents at non-landed segment extended its increase by 3.1% QOQ, following a 2.4% growth in Q1 2021. The increase in non-landed segment in Q2 2021 was led by OCR’s 3.6% increase, while CCR and RCR rose 3.1% and 2.8%, respectively. 

We expect overall rents to rise in 2021, given slower completion of under-construction projects. Average annual completions in 2021 – 2022 will still be below the 10-year historical annual average of 11,780 units. 

Outlook and forecasts 
Macroeconomic conditions continued to improve in Q2 2021. Based on advance estimates from the Ministry of Trade and Industry (MTI), Singapore’s economy grew 14.3% YOY in Q2 2021, largely due to a low base during the same period in 2020.

MTI’s projection of Singapore GDP’s growth remains at 4%-6% in 2021. And as of 23 July 2021, Oxford Economics is projecting Singapore’s economy at a growth rate of 6.4% YOY in 2021.

Buyer demand is expected to remain strong in the well-priced city fringe and suburban projects, with a sweet spot of SGD1 to 1.5 million per unit, which is well-supported by the strong HDB resale market, which has seen prices grow a further 3.0% in Q2 2021. 

As the government continues to remain vigilant and monitor the property market closely, additional cooling measures on the demand side could be premature, given a recovering economy and that the year-on-year private home price increases are still in the single digits.

However, we do not rule out more curbs should prices outpace economic fundamentals, resulting in signs of overheating of the market. We expect private home prices to rise 6% in 2021, tracking GDP growth. 

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Office

After turning around in Q1 2021, the office market continued to improve along with the economic recovery. Office rents grew 1.3% QOQ in Q2 2021, led by the Fringe Area, although Central Area rents have climbed more on a YTD basis. Prices also rebounded after two quarters of decline by 0.9% QOQ, led by Central Area, although on a YTD basis, prices declined -1.8%. Vacancy increased to 12.6% in Q2 2021 from 11.9% in Q1 2021, given higher net supply while net absorption stayed negative. 

Rents
URA’s Office Rental Index for the Central Region grew 1.3% QOQ in Q2 2021 (Q1 2021: 3.3% QOQ). This brings H1 2021 rental increases to 4.6%, and the URA Office Rental Index is currently 14.8% below its most recent peak in Q1 2015. Fringe Area performed better in Q2 2021, with rents rising 1.7% QOQ (Q1 2021: 1.3% QOQ), while Central Area rents rose 1.2% QOQ (Q1 2021: 3.3% QOQ). On a YTD basis, rents in Central Area and Fringe Area have already risen 4.6% and 3.1%, respectively. 

Prices
After two quarters of decline, URA’s Office Price Index for the Central Region showed an uptick of 0.9% QOQ in Q2 2021 (Q1 2021: -2.7% QOQ), bringing H1 2021 decline to -1.8%. Prices in Q2 2021 was led by the Central Area, which was up 1.1% QOQ (Q1 2021: -4.0% QOQ), while prices in Fringe Area declined 2.6% QOQ (Q1 2021: 5.8% QOQ). On a YTD basis, prices in Central Area have fallen 2.9%, while Fringe Area have recovered 3.0%.

Vacancy and completions
Islandwide vacancy of office properties tracked by the URA increased to 12.6% in Q2 2021 from 11.9% in Q1 2021. This was attributed to an increase in the net supply of 366,000 sq ft compared to a reduction of office stock by 96,900 sq ft in Q1 2021. Meanwhile, net absorption continued to decline by 248,000 sq ft due to continued business downsizing and office space rationalisation. 

Outlook
Based on Colliers’ research, CBD Grade A office stabilised further in Q2 2021, declining only -0.1% QOQ to SGD9.52 per sq ft despite negative net absorption pushing up the vacancy. Nonetheless, new demand continued to be driven by the technology sector, while the flexible workspace sector also expands modestly. 

Overall vacancy deteriorated in Q2 2021, as businesses continue to rationalise real space needs and seek value space options. CBD Grade A vacancy expanded to 5.6% from 5.0% in the previous quarter, while Grade B vacancy rose 2.1 ppts to 9.3%. We expect vacancy to moderate to 5.5% by end-2021, and benign supply of average 2.6% of stock per annum in 2021-2022 (versus 4.7% for the last five years) to keep vacancy rates at 5.0% or below thereafter.

As Singapore accelerates its vaccination program to immunise 75% of its population by early October and at least two-thirds by 9 August 2021, this could allow for potential easing measures in Q4 2021 despite a reversion to Phase 2 (Heightened Alert) in Q3 2021. We expect a recovery in H2 2021 supported by strong economic growth and forecast rents to grow 2.1% in 2021. 

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Retail

Pace of decline slowed down for both retail rents and prices, attributed to better sequential performance at Central Area. Retail rents edged down 0.5% QOQ compared to Q1 2021’s decline of 4.4% QOQ, while prices slid -2.8% QOQ in Q2 2021 (Q1 2021: -3.2% QOQ).

Rents
Pace of rental declines for the Central Region moderated in Q2 2021 as the URA Retail Rental Index edged down 0.5% QOQ versus Q1 2021’s decline of 4.4% QOQ. YTD, rents have declined 4.8% in H1 2021. This is sixth consecutive quarter of decline, resulting in rents falling by 18.8% in total and bringing rents to 30.7% below the previous peak in Q4 2014. The drag came from Fringe Area, which saw rents decline 1.4% QOQ in Q2 2021 (Q1 2021: -2.5% QOQ), while Central Area rents stayed flat (Q1 2021: -4.8% QOQ). 

Prices
The URA Retail Price Index for the Central Region declined for the third consecutive quarter at -2.8% QOQ in Q2 2021 (Q1 2021: -3.2% QOQ). Performance was dragged by the Fringe Area, which saw prices fell 6.1% QOQ (Q1 2021: 1.6% QOQ), while Central Area prices was down 1.5% QOQ (Q1 2021: -5.8% QOQ). This brings declines in H1 2021 to 6.0%, dragged by the Central Area (-7.3%). 

Vacancy and completions
Islandwide retail vacancy remain unchanged at 8.5% in Q2 2021. Net absorption retreated to 151,000 sq ft from 301,000 sq ft in Q1 2021. Net supply on the other hand, increased to 194,000 sq ft from 108,000 sq ft in Q1 2021. 

Outlook
Total retail sales (ex-motor vehicles) rebounded strongly in May 2021 by 61.6% YOY on a low base (Circuit Breaker 7 April to 18 June 2020), with strongest recovery seen for segments that suffered the most during Circuit Breaker last year: Watches & Jewellery, Department Stores and Wearing Apparel & Footwear. Online sales as a proportion of total retail sales rose to 13.7%, and is likely to see further gains going forward amid a structural shift of consumer habits.

We continue to expect a K-shaped recovery for the retail sector with an uneven recovery among different trades. However, we believe recovery of the overall retail market is likely to be slow, with no inbound tourist spending in the near term, and structural challenges such as increasing competition from e-commerce as well as high occupancy costs remain.

As landlords continue to optimise their tenant mix and pivot their strategies, we expect average retail rents to decline marginally in 2021. While the reversion to Phase 2 (Heightened Alert) from 22 July to 18 August 2021 could be a drag, higher vaccination rates could allow for potential easing measures in Q4 2021. Further, we see a reprieve from the limited 2021-2025 islandwide supply at 0.8% of total stock p.a. vs the 10- year historical average of 1.1%. In addition, the new supply is mostly concentrated in suburban and fringe areas, where there are well-defined population catchments.

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