The Urban Redevelopment Authority’s Quarter 2 data (URA Q2 statistics) showed that demand was not matched by supply leading to large numbers of unsold units in the market, said a research by CBRE. URA released yesterday the real estate statistics for 2nd Quarter 2018. The real estate statistics showed that prices of private residential properties increased by 3.4% in 2nd Quarter 2018, compared with the 3.9% increase in the previous quarter.
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URA Q2 statistics showed that prices of landed properties rose by 4.1% in 2nd Quarter 2018, compared with the 1.9% increase in the previous quarter.
Prices of non-landed properties rose by 3.2%, compared with the 4.4% increase in the previous quarter.
Prices of non-landed properties in Core Central Region (CCR) increased by 0.9% in 2nd Quarter 2018, compared with the 5.5% increase in the previous quarter. Prices of non-landed properties in Rest of Central Region (RCR) increased by 5.6%, compared with the 1.2% increase in the previous quarter. Prices of non-landed properties in Outside Central Region (OCR) increased by 3.0%, compared with the 5.6% increase in the previous quarter.
Commenting on URA Q2 statistics, CBRE noted that the take-up was healthy for Q2 2018 at 2,366 units, the highest in over six months. However, this was on the back of the highest number of launches in five quarters.
“Despite the healthy takeup, demand could not match the supply from the new launches, leading to a higher number of unsold units (26,961) in Q2 2018 as compared to 24,193 units last quarter.” said Desmond Sim, CBRE’s Head of Research, Singapore & SEA.
As at the end of 2nd Quarter 2018, there were 26,961 unsold units with planning approval, up from 24,193 units as at the end of 1st Quarter 2018, showed URA Q2 statistics.
In addition, there is a potential supply of 19,500 units (including ECs) from Government Land Sales (GLS) sites and awarded en-bloc sale sites that have not been granted planning approval yet.
They comprise of about 8,400 units from awarded GLS sites and Confirmed List sites that have not been awarded yet, and about 11,100 units from awarded en-bloc sale sites. A large part of this new supply of 19,500 units could be made available for sale later this year or next year, and will be completed from 2021 onwards.
Mr Sim said that “supply from enbloc sites might vary as completion is subject to various hurdles, due to the inherent complexities of the collective sale process as well as pressures from the recent measures.”
CBRE expects exuberance in the collective sale market to calm as the measures will have a greater impact on land acquisitions. ABSD rates for entities have increased to 30% from 15% (5% of which is non-remissible). Developers will have to adjust their pricing expectations, marketing strategies, and timing of their launches.
“On the demand side, buyers are expected to be more selective as they recalibrate their budgets and options,” said Mr Lim. “However, we expect the price index to continue to display some growth till year end, as some new launch prices are establishing new benchmarks on the back of higher land costs,” he added.
The URA Q2 statistics showed that prices of office space increased by 1.9% in 2nd Quarter 2018, compared with the 1.3% increase in the previous quarter. Rentals of office space increased by 1.6% in 2nd Quarter 2018, compared with the 2.6% increase in the previous quarter.
As at the end of 2nd Quarter 2018, there was a total supply of about 725,000 sq m GFA of office space in the pipeline, compared with the 791,000 sq m GFA of office space in the pipeline in the previous quarter. The amount of occupied office space increased by 74,000 sq m (nett) in 2nd Quarter 2018, compared with the increase of 14,000 sq m (nett) in the previous quarter.
The stock of office space increased by 60,000 sq m (nett) in 2nd Quarter 2018, compared with the increase of 11,000 sq m (nett) in the previous quarter. As a result, the island-wide vacancy rate of office space dropped to 12.2% at the end of 2nd Quarter 2018, from 12.5% at the end of the previous quarter.
Better quality buildings showed stronger rental growth, evidenced by the 2.4% q-o-q increase for Category 1 offices while Category 2 office rose only 1.4% q-o-q.
CBRE said that it believes that the Singapore office market is becoming a two-tier market, with stronger focus being placed on Grade A properties. Flight to efficiency has been a key theme for occupiers, with demand being driven by select sectors such as co-working, and to lesser extent technology firms.
“The fairly tight vacancy environment along with a tapering supply pipeline likely encouraged office landlords to continue to press for higher rents as they seek to benefit from the market upswing. The medium term rental outlook remains positive especially for the Grade A segment,” it added.
CBRE noted that potential risks remain, particularly on the demand side, in light of recent escalations in trade disputes and the possible dampening effects on global economic growth. Both landlords and occupiers will need careful navigation through the next 6 to 12 months as the actual strength of the market is tested.
URA’s retail property rental index for the Central Region declined by 1.1% in Q2 2018 over the preceding quarter, despite an increase of 0.1% in Q1 2018.
CBRE said that it “believes that despite the q-o-q corrections in the retail property rental index, rentals from prime space remain resilient from the fairly tight vacancies in this category. Any corrections in rental growth is likely to be attributed to the secondary areas and corridors. The need to fill up vacant space has tipped the balance between rental growth and occupancy.”
It noted that “Orchard Road space continued to display resilience as vacancy rates inched downwards to 5.6% in Q2 2018, the lowest in 14 quarters. This is possibly attributed to the lack of new supply introduced. At the same time, a growing tourism market will support the demand for Orchard Road space.”
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