If the place is right, buyers will jump in

Following several rounds of cooling measures, private property prices have fallen by 9.1 per cent in the first quarter from their peak in 2013 while transaction volume has more than halved from 2012. Despite this, the first few major project launches in 2016 have fared well in today’s languid market.

Located within walking distance of Choa Chu Kang MRT Station, Wandervale, an executive condominium (EC) project developed by the Sim Lian Group, saw about 50 per cent of its total number of units sold during its launch weekend. The following weekend, two other residential projects were launched: The Wisteria and Cairnhill Nine. Both the private housing projects were well received by buyers, who purchased 116 out of 216 units at The Wisteria in Yishun and 134 out of 268 at Cairnhill Nine.

BIG OR SMALL?

Developers have taken to launching smaller units to keep them affordable for buyers. The average gross floor area of units at new projects fell from 1,051sqf in 2010 to 810sqf in 2015 for city-fringe properties. Suburban developments saw a smaller decrease from 1,017sqf in 2011 to 811sqf in 2015.

At both Cairnhill Nine and The Wisteria, the bulk of the transactions were for small units. One-bedroom units made up 70 per cent of the units sold at Cairnhill Nine and all one-bedroom units were snapped up on the launch weekend of The Wisteria, thanks to their attractive prices.

At Cairnhill Nine, a one-bedder starts from S$1.35 million, presenting a fantastic opportunity to own a trophy Orchard Road property. Over at The Wisteria, one-bedroom units went for less than S$500,000. Coupled with the convenience of having a retail mall managed by Keppel Land Retail Consultancy just a lift ride away, buyers found this a value buy.

However, these sales figures tell a contrasting story to the one in 2015. Then, many of the newly launched projects saw strong take-up for two-bedroom units while one-bedroom units were largely not in favour.

A reason for the apparent preference for one-bedroom units now is the individual attributes of the developments. Cairnhill Nine is within a short walking distance of Mount Elizabeth Hospital, which would provide rental demand from medical tourists who need to stay in Singapore for an extended period. Furthermore, being integrated with Ascott Hotel and Residences guarantees a high level of service, which appeals to tenants as well. Hence, buyers tend to be investors who are looking to rent out their property.

Similarly, at The Wisteria, most of the buyers are investors. Its main draw is its affordability, with the relatively low quantum catering to the aspirations of Singaporeans to own private property. In addition, The Wisteria holds an edge over many private condominiums at the same price point because it is integrated with a retail mall — an extra layer of convenience that adds to the ease of renting out units in the future.

On the other hand, Wandervale, being an EC targeted at families, saw buyer activity focused on larger units. The four-bedders are 87 per cent sold and the larger three-bedroom premium units account for 66 per cent of the three-bedroom sales.

ECs have more stringent ownership regulations, which discourage investment activity. These include the five-year minimum occupation period and S$14,000 income ceiling. Hence, buyers of ECs tend to be families who are looking to occupy the units. As such, larger units are preferred.

FOREIGNER INTEREST STRONG FOR CAIRNHILL NINE

Buying activity from foreigners plummeted after the imposition of the Additional Buyer’s Stamp Duty (ABSD). When the ABSD was first introduced in December 2011, foreigner transactions dived. Figures for the first quarter of 2012 showed a 72 per cent drop in foreign purchases from the preceding quarter. Since then, foreigners have taken a back seat in buying properties in Singapore. This is most evident in the Core Central Region, where the number of foreign purchases fell from 285 to 74 after the ABSD was implemented.

However, we observed that Cairnhill Nine has drawn substantial foreign interest, with 46 per cent of the buyers being foreigners, mainly Indonesians. This corresponds to the historical preference of Indonesian buyers for the Cairnhill enclave. Last year, 39 per cent of their purchases in District 9 and 10 were in this area.

A reason for the increased interest could also be the price quantum. In addition to being a new project launch, the overall quantum for units at Cairnhill Nine was among the lowest in the area. As such, foreigners could have found the price palatable, even after accounting for the 15 per cent ABSD.

HDB UPGRADERS ACTIVE IN SUBURBAN PRIVATE MARKET

Buyers at The Wisteria with a HDB address accounted for almost 90 per cent of the total purchasers. Most of them bought the one-bedroom units, indicating that they probably intend to rent out the unit while continuing to live in their current HDB flat. This demand is significant, as almost all the one-bedroom units were bought by those with HDB addresses.

Pricing also comes into play here, as most HDB owners who want to buy an additional property must have enough savings, either in the form of cash or Central Provident Fund monies, to pay off the ABSD and at least 20 per cent of the sale price of the unit. Hence, this group of buyers tends to be extremely price-sensitive. In this regard, The Wisteria has managed to attract this target group effectively.

HDB owners looking to upgrade to a private address also contributed to the sales at The Wisteria, being the only group who bought three-bedroom units in the project. It is likely that these people are buying to occupy the units themselves, corresponding to the Singaporean dream of climbing up the housing ladder.

WINNING ATTRIBUTES

Cairnhill Nine, The Wisteria and Wandervale have performed well as they share some common attributes. First, they have kept their prices reasonable. In today’s market, buyers have many choices when it comes to selecting a property. In order for them to commit to a purchase, they have to be convinced that the project is a value buy and pricing plays an important role.

Second, these projects have certain non-price characteristics that appeal to their end-users. Cairnhill Nine offers services from Ascott, which high net worth individuals will probably prefer. The Wisteria is integrated with a decently sized shopping mall, which would contribute to rental demand, and hence appeal to investors. Wandervale, located between two MRT stations with convenient access to both, is also near schools and amenities, making it an attractive location for families.

As developers line up more launches, buyers are spoilt for choice. Recently launched projects include The Visionaire EC in Canberra Road and Sturdee Residences at Farrer Park. GEM Residences at Toa Payoh, Northwave EC in Woodlands and Treasure Crest at Sengkang are set to be launched in the coming months.

ABOUT THE AUTHORS: Eugene Lim is Key Executive Officer and Seah Yao Hui is Research Analyst at ERA Realty Network