PRIVATE RESIDENTIAL
Sales volume remained tempered amid cautious homebuying sentiments
In the first three quarters of 2024, total private residential sales volumes recorded 14,517 units, or about 1.3% yoy fall compared to 14,710 units transacted over the same corresponding period in 2023. Buying demand has slowed and remains selective amidst more options in the market and a still-elevated interest rate environment. Sellers are mostly holding on to their asking prices as replacement costs have increased, while buyers are taking their time to evaluate their options.
Between January to September 2024, only 3 out of 9 (33%) major new launch projects (excluding ECs, with more than 100 units) managed to sell more than 50% of their units during their month of launch. This compares to the same time period (Jan-Sep 2023) last year, where 6 out of 14 major new launches (43%) sold more than half of their stock within their month of launch.
Nonetheless, market volumes have improved on a qoq basis with more new launches. Overall private residential sales volume rose by 9.3% qoq to 5,372 units in Q3 2024, marking the second consecutive quarter of increase. New sale transactions rose 60.0% qoq to 1,160 units. The bulk of new sales volume was driven by robust sales performance of Kassia and Sora, which collectively drove about 23.7% of total new sales volume.
In Q4 2024, new sales volume could surprise on the upside, supported by recently launched projects such as Norwood Grand (292 units or 84% sold during launch weekend, according to media reports) and Meyer Blue (118 units or 52.2% sold to-date*) as well as upcoming major project launches like Chuan Park (916 units), Nava Grove (552 units) and Union Square Residences (366 units).
Resale transactions rose slightly by 1.5% qoq to 3,860 units in Q3 2024, the highest level since Q2 2022. In comparison, sub sale transactions fell by 9.3% qoq to 352 units.
Apart from the Core Central Region (CCR) segment which witnessed declines in overall sales (all sales) volume (-11.2% qoq to 724 units), the Rest of Central Region (RCR) (+11.6% qoq to 1,640 units) and Outside Central Region (OCR) (+14.3% qoq to 3,008 units) recorded higher sales volume.
* based on REALIS data pulled on 25 Oct 2024
Prices fell following past four consecutive quarters of increase
Private residential property prices fell 0.7% qoq in Q3 2024, following past four consecutive quarters of increase. In the first three quarters of 2024, private residential property prices grew 1.6% ytd, lower than 3.9% ytd growth over the same period in 2023.
Following 3 consecutive quarters of price increases, landed residential prices fell by 3.4% qoq in Q3 2024, or the largest quarterly decline since Q3 2023. However, a sustained decline in landed home prices is unlikely given their limited supply and resilient underlying local demand.
Non-landed residential prices rose 0.1% qoq in Q3 2024, or the fifth consecutive quarter of increase, easing from 0.6% qoq growth in Q2 2024.
Within the non-landed residential market, only RCR saw price growth of 0.8% qoq in Q3 2024. OCR prices saw no growth while CCR prices fell 1.1% qoq, marking the second consecutive quarter of decline. In the first three quarters of 2024, CCR, RCR and OCR prices grew 1.9%, 2.7% and 0.4% ytd respectively. This compares to 2023’s full year growth for the CCR, RCR and OCR of 1.9%, 3.1%, 13.7% yoy respectively. The steep moderation of OCR price ytd growth could be a sign of increasing buyer resistance for OCR home prices which have seen substantial price growth over the last few years.
Cautious bidding activities by developers observed in recent state tenders
Cautious bidding activities have continued to be observed by developers amidst the still-elevated interest rate environment. Recent GLS sites, namely, Media Circle and Jurong Lake District, were not awarded as their respective bids received was deemed to be too low. On the other hand, no bids were received for the Upper Thomson Road (Parcel A) site. In 2024 ytd, an average of around 2 bids were received per residential site, lower than the average of 3 bids in 2023 and 4 bids in 2022.
Total unsold inventory fell by 3.1% qoq to 20,122 units in Q3 2024, after 3 consecutive quarters of increase. Total unsold inventories remain relatively low as compared to the ten-year annual average of 23,369 units.
A combination of heightened construction costs, development risks and slower sales volumes have led to developers taking a watch and wait stance as they await market momentum to improve.
Rents returned to growth after three straight quarters of decline
Private residential rents rose 0.8% qoq in Q3 2024, reversing past three consecutive quarters of decline. In 2024 ytd, rents have declined by 1.9% ytd, compared to 11.1% ytd rental growth over the same corresponding period in 2023. Islandwide private residential vacancy rates rose by 1.1% points to 7.2% in Q3 2024.
Non-landed rents grew 0.5% qoq, led by the mass market OCR (+2.2% qoq) and mid-tier RCR (+1.7% qoq) segments. High-end CCR non-landed rents fell for the fifth consecutive quarter, recording a 1.6% qoq fall in Q3 2024.
A mild fall of up to -5% in rents may be recorded in 2024, compared to 8.7% yoy growth in 2023, due to steep number of supply completions from 2023, increasing tenants’ resistance and moderating rental demand.
Steady growth for prices and rents
We anticipate private home prices to grow by 1-4% for the whole of 2024, supported by resilient upgrading demand for private housing (HDB resale prices continued to grow by 2.7% in Q3 2024) amid still-low unemployment rates and strong household balance sheets. Interest rates are expected to gradually ease over time in line with cuts by the United States Federal Reserve, which should improve buyer affordability and support sales volume. Baring new cooling measures and unforeseen economic shocks, overall sales volumes are expected to end at 18,000-20,000 units in 2024, compared to 19,044 units in 2023.
Despite the current market slowdown, momentum in the overall private residential market could be building slowly with market conditions expected to improve in 2025. This will be supported by steady economic growth, low unemployment rates, slightly lower interest rate environment and resilient upgrading demand.
On the supply side, new completions (with planning approvals) from 2025 to >2027 will fall to an average of about 7,397 units annually, significantly lower than the 10-year (2014-2023) average of 13,275 units.
A combination of recovering demand and lower levels of supply bodes well for price and rental growth.
OFFICE
Subdued Market to Improve amidst a Potential Rise in Optimism
Central Region office rents edged down by -0.5% qoq in Q3 2024, retracting from the 3.1% growth in the previous quarter. The decline was mainly due to office rents in the Central Area which fell -0.5% qoq, as compared to office rents in the Fringe Area which grew 0.2% qoq. Year-to-date, Central Region office rents have increased by 0.8%, with Fringe Area office rents seeing a larger rise of 4.5%, compared to a modest 0.4% growth in Central Area rents. The increase in fringe area office rents could be due to landlords increasing rents given higher property operating costs.
The office market continues to see some degree of right-sizing as companies adjust their real estate footprints. Some have reduced their spatial requirements, while others have moved to better quality and located offices. Central Region office net demand turned negative, dropping by 0.2 million sf (msf) in the first three quarters of 2024, reversing the positive 0.6 msf recorded during the same period last year. Nonetheless, the office net demand in Downtown Core remained positive at 0.5 msf, albeit this is about half of the 1.0 msf registered in the same period last year.
Office demand has been skewed towards smaller users given an absence of large deals as larger occupiers continue to face CapEx constraints. Landlords are increasingly looking to offer fitted-out solutions to increase the marketability of their vacant office spaces.
Central Region office rental growth is expected to stay moderated this year due to weakened demand and higher supply from the recent completion of IOI Central Boulevard Towers (1.2 msf) and the availability of more secondary spaces in the market. Nevertheless, the rise in secondary office spaces has created opportunities for occupiers on the flight to quality. We understand that much of the space previously occupied by Meta at South Beach Tower has already been taken-up or is in advanced negotiations, by new and existing tenants.
Additionally, CBD grade A office shadow stock remains low at pre-pandemic levels of about 0.2 msf in Q3 2024, down from the previous peak of 0.3 msf in Q2 2023, based on our basket of office buildings in the CBD.
While the market is still going through a relatively soft patch amidst still-elevated interest rates, there are several catalysts on the horizon that could escalate demand and rent growth. Barring an unforeseen deterioration in economic conditions, most landlords are expected to hold on to their asking rents with most Grade A offices remaining well occupied. For 2024, CBD Grade A office rents are expected to grow 1-2% yoy.
Office lease activities may pick up towards 2025, fuelled by interest from emerging tech industries, wealth management firms and professional services companies. Demand for offices in the Central Region is expected to be supported by a tight labor market and high office attendance, driven by strong return-to-office mandates. Furthermore, the postponement of Shaw Tower's completion from 2025 to 2026 will tighten the supply next year with the only significant new supply expected to come from the completion of Keppel South Central (0.6 msf).
With supply tightening and demand improving due to lower interest rates, Central Region office rents could be poised for stronger growth in 2025. Occupiers should be ready to capitalize on opportunities before market optimism picks up.
In terms of pricing, Central Region office prices increased by 0.6% qoq in Q3 2024, marking the second consecutive quarter of growth. This was largely driven by the 47% qoq rise in transaction volumes for strata offices in the Central Region, particularly due to the sale of office spaces at Tong Building and Solitaire on Cecil.
RETAIL
Market Recovery to be Propelled by Brighter Economic Outlook
Retail rents in Central Region turned the corner in Q3 2024, driven by the ongoing tourism recovery and healthy footfall from the workforce. Central Region retail rents grew 0.3% qoq, following a stable performance in the prior quarter. The Singapore-China mutual 30-day visa-free scheme, along with a lineup of marquee events such as the Formula 1 Singapore Grand Prix, has fuelled tourism demand and uplifted retail rents in the Central Region.
Year-to-date, Central Region retail rents dropped slightly at -0.1%, largely due a decrease of -1.4% in the Fringe Area. Whereas retail rents in the Central Area increased 0.4% YTD amidst recovering demand and limited new supply. Central Area retail net demand rebounded to a positive 0.2 msf in in the first three quarters of 2024, a reversal of the negative -0.2 msf registered in the same period last year. In particular, the retail net demand in Orchard returned to positive territory at 0.1 msf as of Q3 2024 YTD, compared to the negative -0.2 msf in the same period last year.
Retail take-ups in Orchard are improving as tourist traffic and spending recover. Coupled with its retail net supply falling to -0.1 msf as of Q3 2024 YTD, Orchard’s retail vacancy rates tightened to 7.0% in Q3 2024, from 9.0% in end-2023. Notable store openings in Orchard in the second half of this year feature several foreign athleisure brands, drawn by the global shift towards more casual, versatile fashion, and the rise of hybrid work. American brand Columbia has opened its second outlet at Paragon, while Chinese brand Anta Sports is launching its tenth store at Tampines 1 after its debut at VivoCity last year. Li-Ning has also opened two stores in Singapore this year. Additionally, French brand Salomon is set to open its seventh outlet at Ngee Ann City, following its earlier debut at Raffles City this year.
Outside Central Region retail market has maintained strong demand, supported by consistent foot traffic from nearby residential areas and sustained consumer spending on essentials thanks to the tight labor market. Retail net demand outside central region accumulated to 0.4 msf as of Q3 2024 YTD in contrast to the negative -11,000 sf recorded in the same period last year. Hence, despite a higher retail supply of 0.5 msf as of Q3 2024 YTD, Outside Central Region vacancy rates have stayed low at 4.6% in Q3 2024. Retailers remain keen to expand and open in top tier retail malls in the outside central region. For example, Tampines 1 attained 100% committed occupancy with 68 new-to-mall concepts before its AEI completion in Sep 2024.
Islandwide retail net demand reached 0.8 msf in the first three quarters of 2024, about six-fold the net demand in the same period last year. Although the new retail supply islandwide is projected to be about 0.5 msf per year between 2024 and 2028, this is lower than the pre-pandemic historical annual average of 0.7 msf from 2015 to 2019.
Singapore's retail property market remains resilient, underpinned by limited supply, steady consumer spending, tourism growth, and a tight labor market. However, retailers face pressures from rising labor and rent costs, leading to increased turnover and consolidation. As such, the retail landscape in Singapore continues to be rejuvenated with new or expanding retailers quickly backfilling vacant spaces