SINGAPORE - Condo resale prices climbed for a fourth consecutive month in May on the back of stronger sales, as buyers continue to turn to resale properties, given the sizeable price gap between new private homes and those on the secondary market.
An estimated 946 condo resale units changed hands in May, marking an 8.9 per cent increase from the 869 units resold in April, according to flash data released by real-estate portals 99.co and SRX on Tuesday.
However, the prices of condo resale units edged up at a slower rate of 0.9 per cent in May, compared to 1.3 per cent the month before, data showed.
PropNex head of research and content Wong Siew Ying cited Urban Redevelopment Authority (URA) Realis data showing that the median unit price gap between new condo units and resale properties stood at 62.3 per cent in May, widening from April’s 60.9 per cent. “Given the sizeable price gap between new launches and resale condos, the resale market would be the preferred hunting ground for bargain-seekers or those with less generous housing budgets,” she said.
But she added that monthly resale volumes have mostly stayed below the 1,000-unit mark since the round of cooling measures introduced in September 2022 to moderate demand and ensure prudent borrowing.
The “relatively measured” transaction volume in the past months could be due to a mismatch in price expectations between buyers and sellers, limited supply of resale homes on the market, and high interest rates, said Ms Wong.
ERA Realty Network key executive officer Eugene Lim said the launch of The Reserve Residences in the city fringe in May could have drawn some attention away from the resale condo market in the same month. The 99-year-leasehold condo development in the Upper Bukit Timah area sold more than 70 per cent of its units on the launch weekend.
Mr Lim said some buyers might be hedging against the high interest rates by going for new launches, as their mortgage payment is staggered over time, unlike buyers of resale properties who will face the full brunt of high interest rates at the point of purchase.
The lion’s share of condo resale transactions in May was recorded in the suburbs, or outside the central region, at 50.7 per cent, data showed.
Units in the city fringe made up 31.8 per cent of total transactions while those in central Singapore accounted for 17.5 per cent.
Ms Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, said demand from Housing Board flat upgraders may have helped to prop up the volume of transactions in the suburbs, as these buyers turn to the secondary market to avoid paying huge stamp duty fees upfront.
Under a fresh round of cooling measures introduced in end-April, Singaporeans buying their second residential property have to pay an additional buyer’s stamp duty (ABSD) rate of 20 per cent, up from the previous 17 per cent.
For instance, a Singaporean couple upgrading from an HDB flat to a $2 million condo unit in a new launch will have to fork out $400,000 for the ABSD upfront, if they were to keep their flat until the condo is completed several years down the line.
“Many buyers may not have sufficient cash to pay the ABSD upfront, even if they can apply for remission after selling their flats. Therefore, some buyers may choose to buy resale condos that are ready for immediate occupation,” said Ms Sun.
The impact of April’s ABSD rate hikes is also evident in the dip in the proportion of foreign buyers, for whom the ABSD rate has doubled to 60 per cent.
PropNex’s Ms Wong noted that foreign buyers accounted for 3.9 per cent of the sales in May, down from 4.9 per cent the month before.
Singaporeans accounted for three-quarters of May’s condo resale transactions, while PRs made up 20.9 per cent of the sales, she added.
However, some wealthy foreign buyers appear not to be affected, as the most expensive home resold in central Singapore – a $14.08 million six-bedroom townhouse in Yong An Park in River Valley – was purchased by a Chinese buyer, said Huttons senior director of research Lee Sze Teck, citing URA data.
Some analysts also noted an increasing number of buyers purchasing new condo units that are yet to be completed, under deals commonly referred to as “sub-sale transactions”.
Hutton’s Mr Lee said some buyers may opt for these yet-to-be-completed units to save on renovation costs which can be substantial in older resale units.
Mr Luqman Hakim, chief data and analytics officer at 99.co, said sub-sale transactions made up 8.6 per cent of the total resale transactions in May. The proportion is the second highest since sub-sale monthly transactions hit a historic low of 0.7 per cent in October 2020.
He noted that buyers typically sell their incomplete condo for capital gains, liquidity, or when the waiting period is too long. Another possible reason could be that they are unable to make further loan repayments due to a rise in mortgage interest rates, he added.
Mogul.sg chief research officer Nicholas Mak said he expected the secondary condo market to be continually supported by the current high rental market, with the resale condo price index rising by 7 to 10 per cent for the whole of 2023.
