Half of 2024 is gone in the blink of an eye. Is life treating you well so far?
My two 2024 family objectives have been accomplished. To ensure my younger child settle well in secondary school and to spend maximum time with the older one before she goes university.
I had more personal time in the first half of 2024. Thanks to the quiet real estate market.
Homebuyers: From fear of missing out to fear of buying now
It was the opposite around this time two years ago in 2022. There was an influx of one-to-one property consultation requests. Eager buyers of new condo projects tried desperately to schedule an earlier timeslot in order not to miss the first weekend sales. It was not easy not to let their fear of missing out become my emergency.
Since then, high interest rates and low affordability completely changed the private residential scene. In 2024, the market has slowed down a lot. It was not until last month that I received more property consultation requests.
They are no longer asking about the projects they plan to buy. Instead they want to confirm whether now is still the time to buy properties. Those who originally thought must buy and cannot wait any more are all having second thoughts.
Homebuyers’ fear of missing out has become fear of buying now.
For one thing, developers and agencies quoted by the vested media used to sing the same tune every time. The market is resilient with pent-up demand despite rising interest rates.
However, the first half of 2024 saw the private new home sales market suffering from dismal first weekend sales and poor monthly developer sales. Industry stakeholders finally admitted that buyers were selective and price sensitive under high interest rates and economic uncertainty.
Even the ever so optimistic Bloomberg said there is “a sign of fragile sentiment in the nation’s once-booming property market”. Likewise, it was alarming to see The Straits Times property article headline “New private home sales dive 78.7% year on year in May amid market slump”.
Dismal 2024 mid-year new home sales
It all started in January. Hillhaven and The Arcady at Boon Keng only sold about 50 units in the first weekend. PropNex claimed the sale is “encouraging” while Huttons said it is a “good start to the year”.
Under the jinx of “encouraging 50 units”, Lentoria moved 50 units (or 18.7 percent) out of 267 total units in March. In the same weekend in April, The Hill @ One-North cleared 43 out of 142 units while The Hillshore only sold three (or 5 percent) of 59 units. The only face-saving new project was Lentor Mansion which sold 75 percent of 533 units.
The past weekend 440-unit Sora sold 102 or 23 percent of units despite reporting a strong turnout of 3,000 visitors in the preview weekend. Anyway, these days it is by default for developers to announce a magical number of 2,000 or 3,000 visitors for their project preview. Believe it or not.
How we miss the good old days in 2013 when new projects were all 100 percent sold out on the first day of launch. Still remember the 1,400 blank cheques submitted for balloting of 738 units at J Gateway on 28 June 2013?
Last Monday (July 1), URA released 2024 2nd quarter private residential market flash estimate. In the last quarter, developers only sold 679 new units (excluding ECs). What a steep 68 percent year-on-year plunge compared with 2,127 new units sold in 2nd quarter of 2023.
For the first six months, the market just moved 1,843 new units (excluding ECs). This is 45.5 percent year-on-year decline from 3,383 units sold during the first half of 2023. Sadly, this is the lowest new home sales since the 2008 global financial crisis. But we are not in any financial crisis or pandemic now.
Growing stock of unsold units in 2024
Last year developers sold a total of 6,421 new units. It was half of the 13,027 new units sold two years ago in 2021. If developers only moved 1,843 new units for the first half of 2024, the chance is slim for the market to clock up even 5,000 new units this year.
According to URA, the Property Price Index (PPI) of non-landed private residential units grew 0.9 percent in the 2nd quarter. However, it was driven up mainly by the new launches in RCR (+2.2 percent). With no major launch in CCR, the PPI of the region fell from 3.4 percent growth in the 1st quarter to 0.2 percent decline in the 2nd quarter.
With a humble total transaction of 4,215 a quarter or 1,405 a month (including new sales, sub-sale and resale), the market really depends on new projects marketing at future prices to drive up the PPI.
Thus, the lack of major launches of big projects is a problem. In fact, developers are holding back over 20 new projects to wait for a better time to launch. However, the market is slowing down faster than expected.
A March Business Times article said unsold new private homes rose 20 percent over the last two years. We expect unsold stock to continue growing in 2024. URA data show 19,936 unsold private residential units (excluding ECs) in the 1st quarter, an increase of 17.7 percent from 16,929 from the previous quarter.
The market sold only 1,843 new units in the first six months this year, or 307 new units a month. That means we need 5 ½ years to absorb all the unsold units left on the shelves – provided that developers hold back all their new launches during the whole period.
Buy. Return. Repeat
According to URA’s monthly data on sales by developers, between January to May 2024, homebuyers returned 109 out of 2,216 total new units sold (including ECs) to the developers. The return rate is 4.9 percent. A bit better compare with 262 returned units out of 3,497 total new units sold during the same period last year. The 2023 January to May return rate is 7.5 percent.
“Tenet tops the chart with a total of 37 units returned to developer Qingjian Realty after its launch early last December … Occupying the 2nd position is Copen Grand with 18 returned units this year … The project with 3rd highest number of returned units is Pullman Residences.”
– “New project with most returned units. The winner is … “, PropertySoul.com
Guess which new project has the most returned units to the developer in the first five months of 2024?
Unsurprisingly, Lumina Grand being an EC tops the list with a total of 28 returned units. In April, the developer happily announced that there were 61 second round buyers. Unfortunately, 25 out of the 61 buyers had to return their unit at the end.
“The number of units sold might include buyers who may not be ready to commit to the purchase of a new private home.
If you change your decision to buy, your option money is forfeited by the seller. If you return the off-plan unit to the developer, you have to pay 25 percent of the booking fee or 1.25 percent of the property’s price. If the purchase price is $1.5 million per unit, you will lose the hefty sum of $18,750.”
Food for thought
The Singapore private home market is shrinking. For the first half, total transactions are 8,445 units or 1,408 units per month. In contrast, the strong workforce of 35,251 property agents is 25 times that of the 1,408 average monthly private home transactions.
Developers and agents alike need to come up with the magic to convince homebuyers that now is the time to buy:
1) Affordability is a major problem. It is not just the interest rates that are staying higher for longer. It is also the stamp duties, ABSD and property taxes that are staying higher forever.
2) Opportunity cost is another concern. There is no guarantee that property prices won’t drop in the near future. But putting money now in investments like fixed income products or US stocks can guarantee an immediate return much higher than an investment property.
Above all, there is no urgency to buy. With over 20 new private residential projects waiting to launch in the second half of the year, homebuyers will be spoilt for choice. The government has just announced the 2H2024 Government Land Sales (GLS) Programme with 19 new sites. Together they can build up to 8,140 private residential units.
Maybe we can talk about the GLS Great Singapore Sale in the next blog post?
Check out my new online courses How To Buy Good Quality Properties and Buy The Right Condos.
You can watch the recording of the presentations at the 2023 Mid-Year Singapore Property Review and Outlook seminar.
The video 2023 Singapore Private Home Market is available for viewing here.
If you need advice on property matters or residential properties in Singapore, you can check out my one-to-one consultation service.
My book Behind The Scenes of The Property Market is available for preview and order online.
Hi there, great post. i agree with your observations. However it doesn’t seem like D15 prices are still holding up pretty strong. my friend just sold my place in Telok Kurau and it was a record high in terms of PSF. Do you think it is specific to this district?
Why would home prices drop when stock prices are still going strong and the economy is not too bad?
Since the outbreak of Covid-19, sales transactions in District 15 and 16 have been higher than any other district. To these buyers, moving closer to the East Coast Park means better health. Well, different period of time there is preference for difference district. Remember Bishan in the 1990s?