The proportion of foreign home buyers in Singapore fell slightly to 24.6 percent in Q4 2015, marking a fifth consecutive quarter of decline.
According to the latest research from real estate firm Knight Frank, Chinese home buyers made up 31.1 percent of total transactions contributed by foreigners, regaining its position as the top foreign home buyer of Singapore residential properties after two consecutive quarters of falling behind Malaysians. The latter accounted for approximately 23.5 percent of total transactions in Q4 2015. Indonesian buyers were a distant third, forming 7.6 percent of total foreign transactions.
The motivations behind this trend are largely unchanged for the last three months in 2015; the slowdown in the Chinese economy, as well as uncertainty in Malaysia’s political scene and the Ringgit’s erratic movement have encouraged the respective groups of foreign home buyers to seek more stable investment havens like Singapore.
Singapore-wide private home prices (including Executive Condominiums) fell by 0.5 percent q-o-q in Q4 2015, marking the ninth consecutive quarter of decline.
Overall rents slipped 1.3 percent q-o-q. Total transaction volume for the fourth quarter declined by 23.1 percent q-o-q, with new sale volume recording a significant quarterly drop of 33.5 percent q-o-q. Chinese nationals regained its position as the top foreign homebuyer of Singapore properties.
Private Residential Sector
Overall transaction volumes increased on a whole-year basis, propped up by transactions in the Outside Central Region (OCR). The last quarter of 2015 saw total transaction volumes of 3,199 units (new sales, subsales and resales), representing a 23.1 percent q-o-q increase. On a whole-year basis, the total number of units transacted increased by 9.9 percent to 14,117 units. The positive performance in 2015 can be attributed to an increase in transactions in the OCR segment, particularly in the primary market.
Transaction volume of the mass-market OCR segment saw the largest q-o-q decline of 51.1 percent to 1,445 units. This was mainly led by a slowdown in new sale units, which fell by a notable 69.3 percent to 638 units. The two preceding quarters had seen greater transaction activity stemming from popular new project launches, such as High Park Residences, North Park Residences, and Botanique at Bartley.
On the other hand, the mid-tier Rest of Central Region (RCR) segment experienced 85.9 percent q-o-q growth to 1,366 transactions, of which 901 units were primary sales, reflecting a more than three-fold quarterly increase. This was attributed to well-received projects in the RCR, such as Principal Garden, The Poiz Residences and Thomson Impressions.
Prices for private homes continued to decline amid weak demand. According to the URA All Residential Property Price Index, private residential home prices (including EC) declined by 0.5 percent q-o-q or 3.7 percent y-o-y in Q4 2015. The OCR saw no change on a quarterly basis, while the Core Central Region (CCR) and RCR saw q-o-q declines of 0.3 percent0 and 0.4 percnt respectively. Notably, the 4.3 percent year-on-year (y-o-y) drop in RCR prices was most pronounced, followed by OCR at 3.7% percent and CCR at 2.5 percent.
In line with broad trends, prices of private landed properties also fell by a notable 1.8 percent q-o-q and 4.1 percent y-o-y. For the last quarter of 2015, the All Residential Property Rental Index fell by 1.3 percent q-o-q and 4.5 percent y-o-y.
Rents for private non-landed properties declined 1.1 percent q-o-q while that for private landed homes saw a more significant drop of 2.3 percent. However, on a y-o-y basis, the slide in private non-landed home rents was slightly higher at 4.6 percent than that for private landed home rents at 4.5 percent decline.
Outlook
Total new sales volume to ranged between 1,000 and 1,200 units in Q1 2016. With some highly-anticipated projects being lined up for launch, the first three months of 2016 were likely to see a higher number of newly-launched units. Nevertheless, in light of the prevailing economic uncertainties and recent hikes in the Singapore Interbank Offered Rate (SIBOR) pushing up mortgage costs, homebuyers are expected to remain highly cautious when making their purchase decisions.
As such, total developers’ sale volume for Q1 2016 is forecast to range between 1,000 and 1,200 units.
In view of the government’s recent reiteration that it is still “too early” to lift property market curbs and as economic growth patterns may turn south for Singapore, homebuyers’ sentiments are likely to remain largely muted.
As developers continue to price their developments realistically to drive sales and avoid hefty extension charges on unsold units, the downward trend in prices is expected to continue into Q1 2016.
In light of the notable q-o-q increases in unsold stock in Q4 2015 for RCR and OCR properties, annual price falls of 2.0 percent to 2.5 percent and 2.0 percent to 4.0 percent are expected in Q4 2016 respectively. In particular, the upcoming launches of two ECs in the first three months of 2016, Wandervale and Parc Life, are expected to further add to the competition for mass-market homebuyers.
With shrinking unsold inventory and a sizable pool of homebuyers scouring for value-buys in the high-end segment, annual price falls for luxury homes are likely to be more moderated, in the range of 1.5 percent to 2.0 percent in Q4 2016.
As at Q4 2015, the vacancy rate of private residential units was 8.1 percent, a slight increase from the 7.8 percent recorded in the previous quarter. Some 21,906 private residential units are expected to be completed in 2016, higher than the 18,634 units of new supply in 2015. The large upcoming supply is expected to put downward pressure on rents as landlords face more competition for a shrinking pool of tenants.
The continued tightening of foreign hiring and reductions in housing allowances are likely to lead to landlords moderating their asking rents in order to secure and retain tenants. As such, overall private home rents are expected to see an annual decline of between 4.0 percent and 6.0 percent in Q4 2016.
