Buyer's market for private homes due to unsold units: CBRE

Buyers from China accounted for 19.3 per cent of new home purchases in the central core region last year.
Buyers from China accounted for 19.3 per cent of new home purchases in the central core region last year.PHOTO: ST FILE

Buyers will have the upper hand in the private residential market this year.

Sellers may need to check prices and sweeten their offers, with unsold inventory rising amid falling demand from China due to the coronavirus outbreak.

About 40 new project launches are in the pipeline while last year's unsold inventory stands at 30,473 units, said CBRE Research.

It noted in a report that Singapore will be a buyer's market this year and potential customers will be spoilt for choice. "In the light of the Covid-19 outbreak, Chinese buyers are unlikely to feature in the short term," it added.

Buyers from China accounted for 19.3 per cent of new home purchases in the central core region last year.

The unsold inventory level looks manageable compared with the previous peak of 39,184 units in 2011.

But developers may be motivated to reduce prices or give discounts when the stock of unsold homes increases over time with upcoming launches, CBRE said.

The virus outbreak has prompted developers to take precautionary measures at showflats, with more opting for invite-only viewings or online marketing. Still, most launches are expected to go on as scheduled, as most developers have already secured temporary occupation licences for their projects.

A record 52 launches last year helped the new-sales segment dominate the private residential market with 9,912 units sold, up 12.7 per cent on 2018.

"The healthy absorption of new homes indicates the underlying strength of the market and improving buyer sentiment despite the weaker macroeconomic environment even with cooling measures in place," CBRE said.

Projects with a key differentiation in location, developer reputation and pricing will do well.

Developments in the central core region will be prominent this year and are likely to make up almost 40 per cent of units available to launch in the year.

Buyers will remain price-sensitive and continue to lean towards smaller unit sizes.

Over the past three years, the median price quantum for new homes has hovered around $1.2 million a unit but per sq ft prices were done at higher levels via smaller unit sizes.

The median size for units transacted declined from 828 sq ft in 2017 to 721 sq ft last year.

And units sold for under $2 million accounted for 88.6 per cent of all new home purchases.

CBRE believes $2 million will remain the sweet spot for investors. As a result, home sizes will be compromised to keep the absolute quantum palatable for buyers.

Poor consumer sentiment and high land costs may keep price growth to about 1 per cent this year.

For now, the pressure on developers to reduce prices or give discounts is still not that immense.

And most of the projects with an additional buyer's stamp duty deadline in 2020 either have had all their units sold or close to fully sold, so the pressure to reduce prices is not significant in the short term.

CBRE expects new home sales to fall within the range of 7,000 to 8,000 units, despite a challenging first half this year, while resale volume is tipped at between 6,000 and 7,000 homes.

A version of this article appeared in the print edition of The Straits Times on March 03, 2020, with the headline 'Buyer's market for private homes due to unsold units: CBRE'. Subscribe