_Q1 2021 Private Residential Flash Estimates
Based on the URA flash estimate, private residential prices increased by 2.9% in Q1 2021, after a 2.1% quarter-on-quarter (q-o-q) increment in Q4 2020. In the past twelve months, the private residential price index has risen by 6.2% from Q1 2020, about a year since the start of the circuit breaker of 7 April 2020 and the worst economic recession on record that soon followed.
The increase in prices in the first three months of 2021 was mainly due to landed homes which rose by 5.6% q-o-q and 7.8% year-on-year (y-o-y), and non-landed homes in the Rest of Central Region (RCR), where the index grew by 6.1% q-o-q and 11.7% y-o-y.
Landed housing has captured the headlines of late, especially with the interest in good class bungalows (GCBs). According to Knight Frank’s Wealth Report 2021, the number of Ultra-High-Net-Worth-Individuals (UHNWIs – individuals with a net worth of US$30 million inclusive of their primary residence) grew in 2020 despite the pandemic-driven recession, increasing by 10.2% from the previous year.
Many of these UHNWIs, especially those who have converted to Singapore citizens, would be attracted to landed homes of larger floor areas and in close proximity to amenities such as parks. Elderly retired landed home owners form a ready pool of sellers, as they would be incentivised to profit and downgrade as they grow older, even as the cost to upkeep such properties grows heavier.
With landed home supply not likely to increase significantly in the foreseeable future, these homes have become the new blue chip.
From January to March 2021, the increase in the price index in the RCR was driven primarily by new launches the likes of Normanton Park and The Reef At King’s Dock. It appears that new launches continue to churn sale volumes, with demand fueled by HDB upgraders as a result of the buoyant HDB resale market (the HDB Resale Index rose by 2.8% q-o-q and 8.0% y-o-y in Q1 2021 according to HDB flash estimates), recycled capital from those with prior property capital gains transiting their children into the private market, as well as retiree downgraders faced with empty-nest syndrome.
Prices in the Core Central Region (CCR) fell by a marginal 0.3% q-o-q and increased by a moderate 1.6% y-o-y in Q1 2021. Nevertheless, it is highly likely that when the finalised real estate statistics are announced later this month, the price index for the CCR will be higher, due to the launch and brisk take up of units at Midtown Modern.
Prices in the CCR have not grown as swiftly in the past year due to a lack of new launches in the top-tier class of homes, most of which can be found in this region, as well as the ongoing travel measures that have restricted potential foreign investors interested in purchasing homes.
Singapore’s attractiveness among the globally mobile wealthy as well as Asian family offices will continue to draw prospective foreign buyers to newly launched projects in the CCR, such as The Atelier and Irwell Hill Residences.
Not only is Singapore a traditional safe haven for investment homes, this reputation was further enhanced by the manner in which the government put the brakes on the virus and controlled community spread, as well as the financial muscle that the government employed through the use of national reserves to keep the economy going in 2020.
Given the flash estimates, overall private residential prices now looks to increase by more than 5% in 2021.
Commentary by
leonard.tay@sg.knightfrank.com