What’s happening in new projects and the private home market?

Allow me to start with our familiar tone of sponsored content in the media.

• What Singaporeans need to know about condominium new launches
• Prices of “not-so-new” developer projects after discounts may surprise you
• Discover a smarter way to read the real estate market with URA’s property data
• How sales performance of new projects looks like years after first launch
• Here’s our list of top worst performing projects – what every buyer should help
(Recommended to you by PropertySoul.com)

Figures don’t lie. But liars figure?

Contrary to what developers, agents and the media want us to believe, the new home sales market is fast running out of steam. Many newly launched private residential projects are not selling well.

The numbers speak for themselves with the URA (Urban Redevelopment Authority) “private residential units sold by developers” data published online.

Developers had a great start at the beginning of this year. In January, they sold 2,122 new homes (including ECs). Despite slowing down after that, there were still four months (March, April, July and August) with sales volumes above 1,300 units. But from August onwards, sales went downhill month after month.

When results are bad, it is the job of salesmen to find good things to say. As usual, after URA released October’s developer sales figures, The Straits Times immediately came up with a face-saving article titled “Singapore new private home sales rebound with 9% rise in October”.

For the month of October, the market only moved 1,045 new units (including ECs). It is 19.4 percent lower than 1,296 units sold in the previous month. Fortunately, October new sales (excluding ECs) is 909 units. The 3-digit number nicely shows a 9 percent increase than 834 units in September. Anyway, no reader can possibly remember that developers sold 1,633 or 1.8 times more new units (excluding ECs) in January.

Economist Ronald Coase once said that if you torture data long enough, it’ll always confess to anything.

– Vina Ip, Behind The Scenes of The Property Market

The agency spokesperson told us that last month “recorded the highest monthly sales for October in five years”. That is great news! But wait, the last five years are 2017 to 2021. A check on the previous year’s figures in 2016 on the same month in October shows 1,542 units sold (including ECs) and 1,253 units sold (excluding ECs). The October performance six years ago is a whopping 47.6 percent higher (including ECs) and 37.8 percent higher (excluding ECs) than this year’s!

Lesson learned: Discover a smarter way to interpret data. Next time when it’s your turn to present your embarrassing sales results at the company meeting, remember two sure-win strategies:

1) Dig out any good among all the bad and emphasize only the good; and
2) Use the lowest base to compare your results to your advantage

How are new projects doing lately?

It is a no-brainer that the more new projects or units launched in the month, the more new units will be sold that month. However, developers are holding back their projects to launch under the rebound of Covid-19 cases. We can use one hand to count the number of new private residential projects launched lately. It shows developers’ lack of confidence amid market uncertainties.

Nonetheless, it is a relief that both developers and agencies are flexible to lower their expectations. Recently, we saw media articles cheering for CanningHill Piers and The Commodore which were 77 percent and 74 percent sold respectively during their launch weekend. Afterall, there is no hope to go back to the good old days in 2013 when new projects were 100 percent fully sold on the first day of launch.

Of course, among them we have a high-performer Jervois Mansion that sold 99 percent of units at launch. Frankly, a District 10 project priced at $2,500 psf is reasonable. It is even lower than many resale freehold projects in the prime districts.

Besides, developer Kimen Group was clever to hold back 25 units out of the total of 130 units. Another 29 units were sold before the launch. Now it’s a breeze to clear the rest of the 75 units by three marketing agents and to make the media story that reads “99% snapped up by buyers over the weekend”.

The developer has probably learned from the hard lesson from nearby project Petit Jervois. Not many are interested to pay $2,900 psf for a small one-bedroom unit with the bathroom right in the middle. Three years after the first launch of Petit Jervois in November 2018, SC Global only moved 10 units or 18 percent of the total units.

Similarly, there is another not-so-lucky luxury project Klimt Cairnhill in District 9. Developer Low Keng Huat only managed to sell one out of 138 units after three months.

Judging from the above, it sounds sarcastic when The Business Times came up with the headline “ … good takeup shows growing interest in CCR projects“.

New projects still selling well during Covid-19?

According to URA’s October data on “private residential units sold by developers”, 138 out of a total of 149 developer projects still have unsold units. Among them, 45 projects have 50 percent or more units unsold. They include Singhaiyi’s The Gazania and The Lilium, Yanlord’s Leedon Green, Fantasia’s Parkwood Collection, The Landmark, M Suites, Riviere, The Avenir, Pullman Residences, etc. Many of them have launched a long time ago and are not so new in the market.

What happened to those high-profile new launches that used to splurge on advertising and are widely covered by the media? Did they prove to defy the odds launching during the pandemic?

1) Pasir Ris 8

Developer: Allgreen Properties
Launch date: 24 July 2021 (4 months ago)
SPH headline: “Pasir Ris 8 sells 85% of units at up to S$2000 psf; developer”, The Business Times, 25 July 2021
My comments: “What happened to buyers who overpaid at new launch?”, PropertySoul.com
Unsold units: 13% unsold or 61 out of 487 units
Note: Pasir Ris 8 was 85% sold during its launch weekend. After that, it only moved 2% of leftover units despite continuous advertising in different media.

2) Normanton Park

Developer: Kingsford
Launch date: 16 January 2021 (10 months ago)
SPH headline: “Normanton Park developer sells nearly a third of 1,862 condo units on first day at $1,750 psf”, The Straits Times, 17 January 2021
My comments: “How well are developers’ new projects selling?”, PropertySoul.com
Unsold units: 29% unsold or 542 out of 1,862 units

3) The Landmark

Developer: MCC Land, SSLE Development and ZACD
Launch date: 28 November 2020 (12 months ago)
SPH headline: “90% of units sold at The Landmark condo over launch weekend”, The Straits Times, 29 November 2020
Unsold units: 64% unsold or 252 out of 396 units

4) The M

Developer: Wing Tai
Launch date: 22 February 2020 (21 months ago)
SPH headline: “Wing Tai sells 70% of The M over launch weekend”, The Straits Times, 23 February 2020
Unsold units: 11% unsold or 59 out of 522 units

5) Woodleigh Residences

Developer: SPH and Kajima
Launch date: 10 November 2018 (36 months ago)
SPH headline: “Convenient location makes The Woodleigh Residences a draw for home buyers”, The Straits Times, 11 November 2018
My comment: “When developer’s new launch becomes emperor’s new clothes”, PropertySoul.com
Unsold units: 21% unsold or 142 out of 667 units
Note: Recently, the developer rolls out the xth new round of advertising, with catchy words “direct developer discounts” and “over 80% sold”.

Below is our list of top 20 big developer projects (with more than 100 units) that still have over half of the units unsold as of November 2021. They were first launched from 2 months to 45 months ago.

What is really happening in the private home market?

With high uncertainties looming in the global economy, it is doubtful whether anyone can predict what will happen in six months, let alone the full year. Those who claim that they can do so are most likely either fortune-tellers or liars.

– Vina Ip, Behind The Scenes of The Property Market

1. Prices start to fall in CCR and OCR

There is a recent article “4 S’pore property trends to watch in 2022” in The Straits Times that predicts 2022 to be a seller’s market (really?).

As consumers, we never expect property articles to be neutral with no vested interest. However, nothing in this write-up was written with us homebuyers, investors and owners in mind. The target audience of the whole article were developers, sellers, en bloc hopefuls or whoever can bring in revenue for the property agency.

It mentioned prices of RCR condominium units and landed properties reached their peaks last quarter, while condo unit prices in OCR hit new highs in the 2nd quarter. But according to URA’s 3rd quarter 2021 real estate statistics, non-landed private residential prices in CCR and OCR are starting to fall, with negative growth of -0.5 percent and -0.1 percent respectively. Also, the vacancy rate in CCR has just risen to 9.7 percent last quarter.

2. Rising construction costs and interest rates

We understand that there are more new projects waiting to be launched than new projects that have launched. And there are far more old projects that have failed to go en bloc and want to try again compared with only two bigger projects that manage to do so this year.

But even if developers and buyers take the plunge to snap up en bloc projects and unsold new units, we are still facing the problems of increased borrowing cost and construction delay.

According to the NUS Q3 2021 Real Estate Sentiment Index, rising construction costs is the highest risk perceived by real estate executives, followed by increasing inflation and interest rates. Rate hike is threatening not only the homebuyers and property owners, but also the developers and contractors with high leveraging.

3. Rate hike and household debt

Yesterday (Dec 6), the Monetary Authority of Singapore warned us about rising mortgage debt ahead of potential interest rate hikes. Last quarter, Singapore household debt as a percentage of GDP rose to 70 percent. This is an increase of 6.8 percent over the past year. In comparison, even after recent burst of real estate bubble in China, the country’s household debt as a percentage of GDP is lower than us at 62 percent.

The MAS warning has come too late. Private home prices have climbed 8.7 percent since first quarter of last year. It is higher than Singapore’s GDP growth of 5.3 percent over the same period. Desperate homebuyers under the pandemic have already signed up new mortgages, under the perception that interest rate is low. The worst part is: These buyers have bought at high prices and maximized their borrowing.

To cope with inflation, countries that raised interest rates so far include New Zealand, South Korea, Russia, Brazil, Norway, Poland and The Czech Republic. Countries that indicated to follow suit next year are US, UK, Australia and Canada. In Singapore, mortgage fixed rates have already gone up. Variable rates will follow soon.

4. FOMO? There is no shortage of supply

Australia housing prices have jumped 16.8 percent last year. Analysts said the surge in home prices is driven by low interest rates and shortage of sellers, not houses. The rise in property prices is due to the land banking practices of developers. Contrary to what people believe, there is a risk of oversupply (rather than shortage) because of high levels of new buildings, but slow population growth due to Covid-19.

The same is true in many countries that experience surge in property prices during the pandemic, including Singapore. Our government has extended ABSD deadlines and developers can hold back launches. In the resale market, there are more homebuyers than home sellers. Prices are climbing due to shortage of sellers and low interest rates, not shortage of supply.

As at the end of 3rd quarter 2021, there was a total supply of 52,433 uncompleted private residential units (including ECs) in the pipeline with planning approvals. Among them, 18,721 units remained unsold. Apart from that, we have another 5,300 units from Government Land Sales that have not been granted planning approval yet. Under the pandemic, Singapore’s total population shrinks to 5.45 million from 5.69 million in 2020. The risk of oversupply is high due to a considerable supply pipeline and shrinking population.

In Malaysia, there are currently a total of 30,290 unsold houses that worth RM19.75 billion (S$6.38 billion). Johor Bahru alone has 70,000 unsold, unoccupied or abandoned houses. However, there is a surprising 2.64 percent drop in the number of unsold residential units in the 3rd quarter. Malaysia developers and agencies were quick to comment that this is a sign that proves the country’s property market is on track for recovery. But on the other hand, Malaysia’s NAPIC (National Property Information Centre explained that the 2.64 percent drop of unsold units was due to developer promotions and discounts last quarter. It is also probably the result after lifting Covid-19 lockdown.

Food for thought

As we have seen, the same set of data and facts can be interpreted very differently by different parties, depending on where they are coming from and who they are speaking for.

As homebuyers and property investors, whether we can make the right decision is determined by one thing: the information we receive and the intelligence we have access to. And whether they are transparent, accurate and neutral.

We don’t have to earn a degree to survive in a low-trust industry in a high-trust society like Singapore. We can choose to trust, but trust smartly rather than blindly. We can read any analyst’s comment with our eyes wide open. Amid mixed property market signals, we can stay sensible to tell facts from speculations and use official data rather than fictitious projections.

– Vina Ip, Behind The Scenes of The Property Market

If you need advice on property matters or residential properties in Singapore, you can check out my personal consultation service.

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