PRIVATE RESIDENTIAL
Overall sales volume remained tempered due to cautious home buying sentiments
Overall private residential sales volume fell by 2.4% qoq for the third consecutive quarter to 4,230 units in Q1 2024 as homebuying sentiments remained cautious amidst heightened price levels, cooling measures and slowing wage growth. Resale transactions fell by 5.0% qoq to 2,689 units and subsales fell to 377 units, a fall of 8.3% qoq. In contrast, the new sale market performance held up, with volume rising by 6.6% qoq to 1,164 units.
By market segments, both the Core Central Region (CCR) (-18.7% qoq to 605 units) and Rest of Central Region (RCR) (-5.0% qoq to 1,148 units) sales volume fell on a qoq basis. The weak sales performance of the CCR market was partially driven by a lack of major launches in Q1 2024 and the prolonged effects of cooling measures. On the other hand, the Outside Central Region (OCR) sales volume rose slightly by 4.0% qoq to 2,477 units, led by the new sales market. Lentor Mansion, which was launched in March, contributed to almost half (49.6%) of Q1 2024 OCR new sales volume (based on caveat data as of 26 April 2024) at median price of $2,269 psf. The project is about 77% sold out.
While there is still appetite for new launches, it has slowed down slightly. In 2024 Q1, new major launches (100 units and above and launched in Q1 2024) are on average about 39% sold out, compared to the average take-up of 54% for 2023 Q1 (major projects launched in Q1 2023 and their % sold out at the end of Q1 2023).
Baring new cooling measures and unforeseen economic shocks, overall sales volumes are expected to end at 19,000-21,000 units in 2024, compared to 19,044 units in 2023. Overall sales volume should be supported by a steady pipeline of new launches and expectations of easing financing costs in 2H 2024.
Easing private residential property price growth
Private residential prices grew 1.4% qoq in Q1 2024, easing from 2.8% qoq growth in Q4 2023. The increase in prices were driven by both landed and non-landed segments which saw price growth of 2.6% qoq and 1.0% qoq respectively in Q1 2024.
For the non-landed market, broad-based price growth was observed across all three segments with the Core Central Region (CCR) leading growth at 3.4% qoq in Q1 2024. The CCR could be seeing signs of catch-up growth given its historical underperformance. CCR prices grew by about 11% cumulatively over 2021 to 2023, starkly behind the Rest of Central Region (RCR) and Outside Central Region (OCR), which grew by over 30% each. Though part of CCR’s outperformance could be driven by price fluctuations due to low volumes, as CCR volumes fell 18.7% qoq to 605 units in Q1 2024, which was the lowest quarterly volumes in close to four years.
OCR non-landed price growth slowed to 0.2% qoq in Q1 2024 compared to previous quarter’s 4.5% qoq growth. OCR’s prices continue to be supported by steady demand for projects with strong locational attributes such as Lentor Mansion. The Rest of Central Region (RCR) non-landed prices rebounded by 0.3% qoq, reversing from previous quarter’s 0.8% qoq decline.
Overall private residential price is forecasted to grow by up to 3% in 2024, easing from 6.8% yoy growth in 2023. We expect local demand for private housing to remain resilient, supported by still-low unemployment rates, upgrading aspirations (resale HDB prices continued to increase by 1.8% qoq in Q1 2024) and strong household balance sheets, though buyer affordability remains weighed down and buyer resistance is set to rise due to still-high interest rates and heightened housing prices.
Weak participation in recent state tenders as developers grow wary
Despite low levels of unsold inventory, developers remained selective in their site acquisition activities, with preference towards smaller to medium sized sites and/or sites with low future market competition. Caution prevailed among developers during recent GLS tenders such as Zion Road, Upper Thomson, Media Circle and Orchard Boulevard, which received fewer than expected number of bids and fetched lower bid prices compared to past tenders within similar localities. 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.
However, the release of the Zion Road (Parcel B) reserve list site, which was recently triggered, highlights underlying developer confidence towards acquiring select sites with strong locational attributes and good future market demand.
While total unsold inventory rose by 17.0% qoq to 20,204 units in Q1 2024, it remains low compared to the ten-year annual average of 23,369 units. As more launches enter the market in 2024 amidst cautious buying sentiments, unsold inventory is expected to rise further.
Amidst a higher new launch pipeline this year, new launches are expected to be priced competitively. Developers are unlikely to lower prices significantly as unsold inventory remains low and development costs remain elevated.
Softening rental growth due to moderating demand and rising supply situation
Private residential rents fell for the second consecutive quarter by 1.9% qoq in Q1 2024. Islandwide private residential vacancy rates declined by 1.3% points to 6.8% in Q1 2024 as landlords relaxed their rental expectations in view of higher competition.
A broad-based decline in rents was recorded across all non-landed residential segments, of which the mid-tier RCR market saw the steepest fall of 1.9% qoq, followed by the high-end CCR (-1.6% qoq) and mass market OCR (-1.4% qoq).
The cumulative effects of a surge in rental supply, increasing tenants’ resistance and moderating rental demand could result in a mild fall of up to -5% in rents in 2024, easing from 8.7% yoy growth recorded in 2023. However, rents could stabilise by 2025, as new completions in 2025 and 2026 will fall to an average of about 6,691 units annually each, significantly lower than the 10-year average of 13,275 units.
OFFICE
Market Slows Amidst Higher-For-Longer Interest Rate Environment
Central Region office rents fell 1.7% qoq in Q1 2024. This marks the first decline in office rents after 9 consecutive quarters of growth. Some landlords may have slightly relaxed their rental expectations to maximise occupancy rates in view of slower-than-expected office leasing demand given a higher-for-longer interest rate environment. Additionally, more competition is on the horizon, with more supply from both primary and secondary markets in 2024.
That said, the overall health of the office market remains steady, and a prolonged rental correction is not expected. Singapore offices are still very well occupied amidst good office attendance. The launch of Singapore’s tripartite guidelines on flexible work arrangement requests is not expected to have a significant impact on Grade A office demand as many MNCs which are key occupiers of Grade A office spaces have already implemented or considered flexible working arrangements post pandemic.
A flight to quality continues to characterise the market, as tenants look for higher quality and better located office spaces. Notably, rents for central area offices were more resilient with a fall of only -1.5% qoq compared to a -2.4% qoq fall for fringe area offices. Net demand for downtown core offices remained in positive territory, though it remains muted at 21,528 sf in Q1 2024. While there are pockets of activity from smaller occupiers (10,000 sf and below), large occupier movements have been limited. Many occupiers are facing CapEx constraints and are adopting a wait and see approach given a higher for longer interest rate environment and geopolitical uncertainty.
Islandwide office vacancy rates have fallen to 9.6% in Q1 2024, the lowest since Q2 2016. Rents could start to pick up towards the end of the year as the market will return to a tight supply market from 2025 to 2027. About 3.8 msf of new islandwide office supply will come online in 2024, however, this will fall to about less than 0.7 msf annually on average from 2025 to 2027.
While office demand could remain muted for now, pent-up demand for offices is expected to accumulate as rising office-using employment and higher office attendance could prompt occupiers to relocate or expand. The market is in wait-and-see mode, and a few large occupier movements may become a catalyst for the market given Singapore’s low vacancy rates.
RETAIL
Market recovery remains on a gradual course
Retail rents in Central Region is expected to stay on the recovery track amidst steady office crowds and increasing tourist arrivals. Central Region retail rents edged down slightly by 0.4% qoq in Q1 2024, after falling 0.1% qoq in the last quarter. On a yoy basis, Central Region retail rents are still up 0.3% in Q1 2024.
The Central Area have led rental growth in the Central Region with improving retail demand. Central Area retail rents went up 0.2% qoq in Q1 2024, in contrast to the -1.8% qoq fall for retail rents at Fringe Area.
Within the Central Area, Orchard retail market continued to recover with the tourism boost. Within the Central Area, retail takeups were the strongest in Orchard where net demand recorded about 43,000 sf or about 80% of the total Central Area retail net demand in Q1 2024. The iconic shopping belt have been driving brand expansions as retailers position themselves strategically to capture tourists’ footfall and spending. In Q1 2024, fine jewellery chain Swarovski has opened its largest store of about 2,300 sf at Wisma Atria, following the homegrown womenswear brand Klarra’s opening of approximate 1,500 sf flagship boutique at ION Orchard. As retail demand improves, malls like Paragon and Wisma Atria have also attained full occupancy as of end last year.
Amidst recovery in air travel and tourism demand, the retail demand in Orchard could pick up pace and drive retail rental growth in the Central Region. Notably, visitor arrivals in Singapore got off a strong start in 2024. Visitor arrivals in Q1 2024 reached 4.35 million and are about 93% of pre-Covid levels (vs Q1 2019). The performance thus far suggests that recovery is on a good pace as China regains her position as the top source for visitor arrivals. The ongoing tourism recovery, a strong pipeline of events and potential economic improvements should bode well for Orchard retail.
Although vacancy rates in the Outside Central Region inched up slightly to 4.7% in Q1 2024 from 4.2% in the last quarter, this is still significantly below the pre-Covid vacancy rate of 8.4% in Q1 2019. This uptick in vacancy rate could be reflecting its persisting two-tier retail market where weaker malls might be facing higher vacancy rates and property management costs but higher-quality malls have been able to shore up occupancy and raise rents.
Underpinned by resilient local consumption and above pre-Covid levels of shopper traffic, brands continue to seize prime retail spaces in the Outside Central Region. Besides essential food & beverage brands, retailers from other segments are also revving up their expansion plans outside Central Region. Chinese activewear brand Beneunder has chosen to debut at Westgate last year. Hong Kong cosmetics chain Sa Sa has also reopened at Jurong Point in the same period and are opening three more outlets in the Outside Central Region in Q2 2024.
