Commentary What’s Behind The Surge Of New Launch Condo Purchases In January 2021?
- Ryan J
- February 16, 2021
- 7 min read
At this point, the prediction of new cooling measures may have become a self-fulfilling prophecy. New condo sales surged month-on-month, between December 2020 and January of this year; and while the reasons are varied, one of them may ironically be the fear of new cooling measures. Here’s what you need to know about the new launch numbers, which could result in serious policy changes ahead:
What happened to new launch condo purchases in January 2021?
According to Square Foot Research, there were 2,087 new sales (private non-landed homes, including Executive Condominiums) in January 2021. This is up from 1,233 units in December 2020, an increase of close to 70 per cent in transaction volume.
On a year-to-year basis, this is about a 283.6 per cent increase from January 2020, when we saw only 544 transactions.
It’s also significant that January’s monthly numbers are a 36 per cent increase from July 2018; the point at which the last round of cooling measures were introduced.
January’s surge in transactions, however, was not just a result of growing momentum. It was an uncharacteristic month, with sales driven by a few key factors:
- Fear of new cooling measures
- Normanton Park and Parc Central Residences provided a surge in sales numbers
- Strength of offerings by location
- Rising sale proceeds for upgraders
1. Fear of new cooling measures
In every round of cooling measures to date, we have seen the same general outcome: buyers rush to complete their purchases before midnight, to avoid higher stamp duties. This often results in a lot of disappointment, as desired units sell out, or buyers miss the deadline by hours. At this point, Singapore property buyers know better. They’re now making their move sooner, in the face of new cooling measures.
In particular, fear of new cooling measures could galvanise investors into action. Those who were previously uncertain may feel pushed to take the plunge, if there’s a chance that Additional Buyers Stamp Duty (ABSD) or loan curbs could increase in a few months.
This results in something of a domino effect – fear of cooling measures prompts more property purchases, which in turn heightens the likelihood of cooling measures when the numbers are announced. This then prompts even more purchases, and so forth, until the cooling measures end up being a self-fulfilling prophecy.
This is a pattern we’ve seen repeated over the past few rounds of cooling measures. If this keeps up, we may end up with the government dropping cooling measures with no warning instead (official or unofficial).
2. Normanton Park and Parc Central Residences provided a surge in sales numbers
Accompanying this was the launch of Parc Central Residences, a 700-unit EC in the mature neighbourhood of Tampines. At $1,177 psf, this is quite an attraction given the location (see below); this development also sold 60 per cent of its units over the launch weekend. It is also an EC, along with the usual features that makes such properties popular (no need to pay upfront ABSD, no Minimum Occupation Period for the second batch of buyers onward, etc. We explain the reasons in depth in another article).
Special mention to The Reef at King’s Dock, with a total of 221 sales.
These three projects plus a couple of others meant that there were 2,600 units launched for sale in January – the highest since the 3,489 units in March 2013. (Plus it is the highest January figure since 2007).
As such, January’s high transaction volumes mainly rest on the strength of these two developments; and we don’t think we’ll see a repeat performance for February or March.
3. Strength of offerings by location
Every one of the top five selling developments in January had a strong location. They read like a roll-call of property hotspots:
- Normanton Park (Buona Vista)
- Parc Central Residences (Tampines)
- The Reef at King’s Dock (Harbourfront)
- Ki Residences (Clementi)
- Treasure at Tampines (Tampines)
Normanton Park is situated close to the One-North tech and media hub, where housing has been in strong demand, but with limited supply until now. Parc Central Residences and Treasure at Tampines are both notably well priced, and are in the usually (much more expensive) mature town of Tampines; the regional centre for Singapore’s East End.
Ki Residences is close to both One-North and Holland Village, and The Reef at King’s Dock is in a prime city fringe region, close to Vivocity and Sentosa.
As such, January saw a strong slew of new launch offerings, and pricing was surprisingly affordable. Notice that, in the chart above, new launch prices averaged $1,906 psf in January 2020; but this had fallen to just $1,714 psf in January 2021, and $1,745 psf the month before; this despite strong offerings in the market.
4. Rising sale proceeds for upgraders
HDB upgraders make up a strong base of buyers in the current market. As such, resale flat prices indirectly affect new condo sales – the more you can sell your flat for, the more expensive the condo you can afford. Now while new condo prices had fallen between January 2020 and 2021, take a look at how resale flat prices moved:
HDB resale prices were at $454 psf in January 2021, and had been steadily rising from $408 psf in April. We’ve also pointed out that Cash Over Valuation (COV) has been creeping back into the HDB resale market, which adds to the buying power of HDB upgraders.
On a related note, the spike in resale flat prices in January 2021 may also speak to a wider phenomenon. There may be a general push to buy properties in multiple housing segments, not just new condos.
Is the momentum sustainable, in light of Covid-19?
A repeat performance of January 2021 is improbable, given that the slew of mega-developments seems to be exhausted; we’re not expecting any more new launches with 1,800+ units for the year. There isn’t anything the size of Normanton Park, Treasure at Tampines, etc. in the works.
However, we have seen that worries of the pandemic, GDP contraction, and other such issues haven’t dampened the enthusiasm for property; if anything, it seems to have fanned the flames. We’ve seen a steady pick-up in transaction volume since the end of the Circuit Breaker, and the very uncertainty may be what’s driving investors into the arms of the Singapore property market.
Perhaps the biggest driving force is still the bumper crop of flats reaching MOP in 2020 and 2021, and the higher prices that buyers will pay for five-year old flats.
So while January is likely an outlier, there’s likely to be sustained interest in property over the coming year; at least until we see new cooling measures. And at the rate things are going, this sort of government intervention is beginning to look inevitable.
At this point, many readers will ask “does this mean I should buy now”?
This is a common question, whenever the property market seems to be picking up, or new cooling measures are predicted. The best answer is to focus on your personal financial situation first, and the property market second.
Ensuring financial preparedness is generally easier than trying to time the market. If you buy a property you can afford, then you can ride out any down-cycles or mistakes without too much pain. Even many investors who bought at the last property peak of 2013 – arguably one of the worst times to buy – would realise gains if they were able to hold till this point.
There are certain times in the property market – such as during a pandemic downturn – when you can win just by not losing. For a more detailed consultation based on your situation, contact us directly; different strategies apply for different buyers.
In the meantime, follow us on Stacked for updates on the situation, as well as in-depth reviews of new and resale properties alike.