Singapore property measures may have tempered buying of small units

GOING by recent government data, demand for one-bedder apartments, typically favoured by investors in the new home sales market, seems to have moderated, and the buying trend seems to have shifted to slightly larger units.

According to an analysis of caveats by OrangeTee & Tie, small units below 500 sq ft, usually the size of one-bedders, accounted for 63 units or 11 per cent of new home sales in August, below the monthly average of 100 units registered from January 2017.

Another analysis published last Thursday by Royston Foo, who covers real estate on Smartkarma, looked at recently launched projects. The results showed low take-up for units under 500 sq ft; at The Tre Ver in Potong Pasir, for example, such units made up as little as 6 per cent of the total number of caveats lodged.

Before the cooling measures, such small units were highly popular among investors at developments like The Tapestry in Tampines due to their lower prices. "Small units tend to sell well during a bullish property market," he wrote.

However, Mr Foo and OrangeTee diverged slightly in their views on the take-up for larger units.

In OrangeTee's analysis, 258 or 44 per cent of units bought last month were between 600 and 800 sq ft, about the size of a two-bedder - compared to the monthly average of 229 units between January 2017 and August.

OrangeTee's head of research and consultancy Christine Sun said: "Demand for two bedrooms remains resilient as affordability has dipped with the stricter LTV (loan-to-value) limits, and the price quantum of two-bedroom units is attractive to owner-occupiers."

Mr Foo described the demand for both two- and three-bedders as "healthy", as buyers are likely to be owner-occupiers.

But Ms Sun's analysis found that homes of between 800 and 1,300 sq ft that were transacted stood at 173 or 29 per cent of the month's sales - well below the 20-month average of 42 per cent of monthly sales at 314 units.

"All these show that the stricter LTV limits have affected affordability for owner-occupiers, in that fewer can afford larger-sized units," she said.

Other analysts have said launches from September may be more indicative of market sentiment after the imposition of cooling measures.

Nicholas Mak, executive director for ZACD Group, said it is too early to see a clear pattern, based on July and August figures.

He noted that at popular projects like Twin Vew (in West Coast Vale), Stirling Residences (Stirling Road) and Riverfront Residences (Hougang), the most common type of unit offered were between 600 and 1,299 sq ft. "It is logical that units of these sizes made up the higher number and higher proportion of units sold by developers in July and August," he said.

Qingjian Realty's JadeScape in Shunfu, which launched over the weekend and granted options for the purchase of about 300 of the 480 units launched and approximately 1,200 units in total, drew "interest ... well-spread across the different unit types". The developer did not release further details.

But still, observers are already sensing a reduced appetite for small units, and this has been confirmed by the data studied by the analysts.

Lee Nai Jia, senior director and head of research at Knight Frank, said that checks on the ground suggest that most are buying these units for their own occupation in the OCR (outside central region) and RCR (rest of central region). "Most of those who are buying second homes for investment have moved back to the sidelines."

Withers KhattarWong partner Kenneth Szeto said: "You can't borrow as much as you could before, and rental yields for the residential sector are still very weak. Investors are increasingly turning to commercial units (such as shop houses and strata office and retail units), where ABSD (Additional Buyer Stamp Duty) and SSD (Seller's Stamp Duty) do not apply."

Adapted from The Business Times, Sep 26, 2018.