Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting cushmanwakefield.com to read:%0A%0A {0} %0A%0A {1}

Commentary On Q2 2022 URA Real Estate Statistics

Xian Yang Wong • 29/07/2022

Private Residential

Market activities surge on the back of favourable response to new launches and improvement in the resale market

New sales volumes picked up in Q2 2022 with 2,397 units transacted, 31.3% q-o-q higher than that in the preceding quarter given robust sales performances at major new launches. Major projects which were launched during the quarter included Piccadilly Grand and LIV @ MB managed to sell 325, 231 units, respectively. New sales volumes are expected to climb up further in the upcoming quarter as a slew of launches are expected, including AMO Residence, Lentor Modern and The Arden.

Similarly, secondary market sales volumes (including resale and sub-sale) went up in Q1 2022 following two consecutive quarter of declines as buyers who have been waiting for the price reducing impact of recent cooling measures decided to make their purchases as prices stayed firm. Secondary market sales volumes increased by 25.5% q-o-q in Q2 2022. For H1 2022, secondary market sales reached 7,932 units, about 21.4% y-o-y lower than H1 2021. The slowdown in secondary market sales could be due to buyers being more cautious in views of new cooling measures and macro headwinds.

Prices climb, driven by higher new launch pricing

On the back of higher sales volumes, private home prices rose by 3.5% q-o-q in the second quarter of 2022 – faster pace than the 0.7% q-o-q registered in Q1 2022. Prices have increased by a total 18.9% for nine consecutive quarters. The growth in prices even when interest rates are rising reflects resilient buying demand amid a tight labour market.

The increase in overall private home prices was driven by both the landed and non-landed properties segments. Prices of landed properties rose 2.9% q-o-q in Q2 2022, after climbing 4.2% in the previous quarter, underpinned by the scarcity of landed houses in Singapore and firm demand from high income households.

Prices of non-landed properties improved by 3.6% q-o-q in Q2 2022, reversing from a marginally 0.3% q-o-q drop in Q1 2022. The rise in non-landed property prices were driven by price increases across all three market segments with Core Central Region (CCR), Rest of Central Region (RCR) and Outside Central Region (OCR) registering growth of 1.9%, 6.4% and 2.1% q-o-q, respectively.

Among the three market segments, non-landed homes in the city-fringe or RCR, outperformed with 6.4% q-o-q growth in Q2 2022, after shrinking 2.7% q-o-q in the previous quarter. The much stronger price gain in Q2 2022 could be attributed to strong sales at Piccadilly Grand and LIV@MB at high median prices of 2,174 psf and 2,409 psf, respectively.

In H1 2022, RCR and OCR have outperformed, growing by 3.5% and 4.4% YTD. Given rising interest rates and cooling measures which have impacted buyers affordability, buying demand has gravitated towards the RCR and OCR markets where prices are relatively lower compared to the CCR. Also, HDB resale prices have continued to grow, increasing by 2.8% q-o-q during Q2 2022, supporting HDB upgrader demand which tends to gravitate towards the RCR and OCR markets.

Developers to continue land banking amidst low unsold inventory

Unsold inventory continue to inch up by 12.0% q-o-q during Q2 2022, extending the marginal rise in the previous quarter of 0.2% q-o-q. Nonetheless, unsold stock remained at a low level of 16,079 units, as compared to a ten-year annual average of 26,953 units.

Rising private residential prices and robust performance of recent new launches have fueled confidence in the enbloc market. The enbloc market has also seen a slew of successful deals of late, and signals developers desire to landbank as unsold inventories remain low. Developers whom have sold most of their existing stock would be looking to acquire land. That said, developer remain cautious, and we anticipate the majority of deals done in 2022 to be small-to-medium sized sites. We could see larger sites transact successfully though the price needs to be right.

It is unlikely to be a blockbuster year for enbloc deals as developers remain cautious given current cooling measures and an uncertain macroenvironment. Nonetheless, we remain sanguine as developers would continue ramping up their land acquisition activities in subsequent quarters as they are still looking to replenish their depleting land banks amid a rising and resilient market. For now the level of activities are still moderate with ten residential developments (incl park view mansions sale) being sold en bloc for $1.9 billion during 2022 YTD, which is still far cry from the 2018 (whole year) peak, where total enbloc transaction values exceeded $10 billion.

Residential Rents Surge

Private residential rents continued to climb up by 6.7%, reaching a historical high, according to available data since Q1 1990, following the 4.2% q-o-q rise in the previous quarter. Rentals have been rising for seven consecutive quarters and are expected to increase in the upcoming months amid a tight residential leasing market, underpinned by the arrivals of more foreign expatriates following the reopening of Singapore and strict zero-covid policies in Greater China.

During H1 2022, rents have increased across three market segments with mass-market rents rising the most by 12% YTD, followed by rental increases in the CCR (11.7%) and OCR (10.9%). The popularity of OCR was reflected by its vacancy rates of only 3.8% - the lowest across the three segments, underpinned by its more affordable rents. Also, CCR also witnessed robust rental growth during first half of the year as vacancy rates tightened further from 9.3% in Q4 2021 to 7.4% in Q2 2022.

The rental market could remain tight and undersupplied in H2 2022 as expected completions in 2022 of 10,696 units would still be below the 10 year (2012-2021) annual average of 12,673 units. Rental growth could slow in 2023, as expected completions would increase to 17,394 units.

Prices to remain on an uptrend though volumes may moderate

For the first half of 2022, 4,222 new units were sold while resale volumes clocked in 7,613 units. Sales volumes for the whole of 2022 could be lower compared to 2021 of 13,027 new sale units and 19,962 resale units, due to a slower start in 2022 and a limited launch pipeline. New sales volumes are expected to be range-bound between 9,000 – 10,000 units while resale volumes can reach 13,000 -14,000 units in 2022.

Overall private residential prices have risen by 4.2% during the first six months of this year and could continue its rising trend, albeit at a more gradual pace. Fast rising mortgage rates could temper demand and price growth as buyers affordability fall. Nonetheless, rising rents and higher inflation which could increase property replacement costs, would be supportive of price growth. The market response for the upcoming AMO Residence would be a litmus test for buyers sentiments and appetite for rising prices amidst an uncertain economic outlook. For full-year 2022, private residential price could increase by 5%-7% y-o-y, extending the 10.6% y-o-y growth in the preceding year.

OFFICE

Favourable demand supply dynamics propel rents

The Singapore office market continues to see favourable demand supply dynamics, leading to higher rents. Central Region office rents trended higher by 2.4% qoq in Q2 2022, a third consecutive quarter of growth. Notably, growth was broad-based, with central area and fringe area rents marking 1.6% and 8.8% qoq growth respectively. The growth in fringe area office rents could be an outlier and is expected to moderate next quarter.

Islandwide office vacancy rates fell to 12% in Q2 2022 from 12.8% in the last quarter, driven by islandwide office net demand rebounding to 258,000 sf in Q2 2022 from -140,000 sf in the previous quarter. Notably, office net demand for the Downtown Core turned positive at 118,000 sf in Q2 2022 after six quarters of staying in the negative territory, as a testament to resilient demand for office spaces in the CBD despite hybrid work.

While we remain positive on the mid to long term outlook of the Singapore office market, demand could slow in H2 2022, as tightening financing conditions and an uncertain macro-outlook dampens office demand. The tech sector, a key source of office demand, would be weighed down by tightening financing conditions as they adopt a wait-and-see stance and assess market liquidity. However, long-term prospects of the tech sector remain unchanged and well-capitalised and growing tech firms could still drive pockets of demand. Non-bank finance firms would continue to lend support to office demand as they expand their operations in Singapore and tap on the increasing wealth in Asia.

In sum, overall office rents are still expected to grow, albeit at a slower pace, in 2H 2022 as the market would continue to be supported by tight supply conditions even as demand starts to falter.

Central Region office prices dropped 5.1% qoq in Q2 2022, reversing the rebound of 4.4% qoq in the previous quarter. The fall in prices in Q2 2022 could be due to a higher proportion of strata office transactions outside of the core CBD, where strata office prices are lower. In Q2 2022, about 22% of total office strata transactions were within the downtown core, this compares to 41% in Q1 2022.

RETAIL

Rents to pick up from rock-bottom levels amidst economic reopening

Central Region retail rents declined by 0.5% qoq in Q2 2022, extending its 0.4% qoq decline in the previous quarter. Overall retail rents in Central Region remained soft as landlords accepted lower rents to shore up occupancy in non-prime retail space.

Central Region retail vacancy rates fell to 9.8% in Q2 2022 from 10.2% in the prior quarter. Central Region retail net demand turned around to positive territory of 172,000 sf in Q2 2022 from -65,000 sf in the previous quarter. Given workers are returning to office and borders are reopening, retailers had more confidence to take up physical retail spaces.

Retail vacancy rates in Orchard rose to 11.7% in Q2 2022, as net demand in the area dropped to -22,000 sf after staying flat in the last quarter. We anticipate retail net demand in Orchard to return to positive territory in H2 2022 with the area still being a key destination for new-to-market, digital-native and established brands alike. H&M’s sister brand & Other Stories is opening at ION Orchard, while online fashion brands Claude and Neonmello are debuting their physical stores at Takashimaya Shopping Centre and Plaza Singapura respectively. Also, sportswear giant Puma will open a flagship store of about 7,000 sf at 313@Somerset and homegrown furniture brand Castlery will launch its largest showroom of 24,000 sf at Liat Towers.

Retail vacancy rates in the Outside Central Region (OCR) remained low at 5.1%, as compared to 9.8% vacancy rate in the Central Region. This is despite retail net demand in the OCR fell by 86,000 sf in Q2 2022, a second consecutive quarter of negative net demand. OCR retail spaces remain sought after by retailers due to stable footfalls from nearby residential catchments and higher footfalls from hybrid work.

We anticipate a pick-up in central region retail rents in H2 2022 as rents pick up from near rock bottom levels and footfalls return due to higher tourist arrivals and return-to-office momentum. That said, recovery will be balanced with headwinds such as higher inflation and interest rates, supply chain disruptions which would temper consumer spend and retailer profits. The recovery in tourism also remains weighed down by border restrictions in North-east Asia. As such, the recovery in Central Region retail rents would be mild and drawn out.

Insights

Singapore Carbon Tax 2022 card
Research • Sustainability

Singapore Carbon Tax 2022

What Will The Singapore Carbon Tax Cost You?
Chee Kit Ho • 29/03/2022
Outlook22 Singapore
Podcast • Workplace

Outlook 2022 Singapore Podcast

Join our commercial real estate experts to discuss the top challenges and opportunities for investors and occupiers in Singapore. 
28/02/2022
Singapore Office Market Outlook 2022
Insights • Office

Singapore Office Market Outlook 2022

Following a strong recovery in office demand, reduced vacancies and rental growth last year, the Singapore office market is expected to further pick up pace in 2022.
Xian Yang Wong • 08/02/2022
With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Privacy & Cookies.
MORE OPTIONS
AGREE AND CLOSE
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All
SAVE SETTINGS