Each week, TODAY’s long-running Big Read series delves into the trends and issues that matter. This week, we look at how demand for newly-launched condominiums have stayed strong despite property cooling measures as well as soaring prices and mortgage rates. This is a shortened version of the full feature, which can be found here.
SINGAPORE — Although Anthony and his family of six are now living in a freehold condominium around Holland area, he is planning to buy a second private property.
He is eyeing a new three-bedroom unit at The Reserve Residences condominium development in Beauty World, with sizes ranging from 883 to 1,378 sq ft.
“I’m buying it for living-in. But also on the side, if there’s appreciation, why not?” said the 50-year-old, who spoke to TODAY at the 99-year leasehold project’s sales showroom recently.
Anthony, who works in the IT industry and declined to give his full name, said that he does not intend to let go of his existing property even after buying a second condominium.
He is not deterred by the fact that he will have to fork out hundreds of thousands of dollars in tax due to raised additional buyer stamp duty (ABSD), following the latest round of property cooling measures rolled out in late April.
A person who buys a second property will now have to pay 20 per cent in ABSD.
So if that property is S$2 million, which is about the indicative starting price of the unit Anthony is eyeing, this will mean having to pay a S$400,000 tax.
Anthony is among the many buyers who are prepared to pay more for newly-launched condominium units despite their ever-rising sale prices, high mortgage rates and a slowing economy.
With the jury still out on whether the market for new condominiums is frothy or fundamentally strong, TODAY takes a closer look at what fuels the demand for such properties and what are the possible implications.
WHY IT MATTERS
While the latest cooling measures are targeted at foreign and investor buyers, who comprise about 10 per cent of the private residential property market, the Government has over the last 12 years or so introduced many rounds of measures targeting general buyers in a bid to ensure that the property market remains sound and does not run ahead of economic fundamentals.
This was done through the tightening of loan rules, raising of ABSD as well as seller duty duties, which was aimed at discouraging speculation.
However, prices for new condominium units have continued to climb, especially in non-central areas, outstripping household income growth.
The URA divides areas in Singapore into 28 districts grouped in three regions: the core central region (CCR) such as Orchard Road and River Valley where most premium private properties are located; the less premium rest of central region (RCR) which includes Toa Payoh, Katong and Buona Vista; and the suburban or outside central region (OCR) where mass market condominiums are typically found.
For new launch condominiums specifically, data from property portal 99-SRX revealed that the price increase per square foot (psf) has been uneven across the three regions — though they all have outstripped median wage growth.
According to figures by URA and real estate agency Orange Tee and Tie, the median prices of new condominiums in the first quarter of this year is S$2,586 psf, up 30.5 per cent from the S$1,981 psf in the first quarter of 2022.
Industry players and experts attribute the rising launch prices to a slew of factors including escalating costs of land, construction and labour.
THE BIG PICTURE
Despite the soaring prices, new launch developments have seen strong interest among prospective buyers, experts noted.
Blossoms by the Park, a 99-year leasehold condominium near Buona Vista, sold 75 per cent of its 275 units at an average price of S$2,423 psf when it launched on April 28, just two days after the latest round of cooling measures.
The latest condominium to launch is the 732-unit The Reserve Residences on Saturday (May 27), the one which buyer Anthony is eyeing.
In a press statement on Saturday night, developer Far East Organization said that it has sold 486 units of 587 released, at an average price of S$2,450 psf.
This represents 83 per cent of the units launched and 66 per cent of all the units in the project slated for completion in 2028.
Dr Lee Nai Jia, head of real estate data intelligence, digital and software solutions at PropertyGuru Group, said: “The response rate (to new launches) has been robust, despite the introduction of new cooling measures, increased interest rates, and an environment of rising prices amid external uncertainties.”
Many factors contribute to the positive response towards these new condominium launches, said the experts.
These may include intangible factors such as being a first owner as well as the knock-on effect from a buoyant public housing market.
Another factor is being able to pay for a new condominium unit using a progressive payment scheme, which breaks down the payment requirements into phases based on the percentage of the development completed.
This makes it more attractive amid the current high interest rate environment.
Other factors include buyers’ confidence in the Singapore property market and their fear of being further priced out in the future.
“Fear of missing out is a major contributory factor as anxious buyers rush to market in anticipation of further cooling measures,” said Mr Devadas Krishnadas, director at consultancy firm Future Moves.
In response to TODAY’s queries, the Ministry of National Development (MND) said that there are two main drivers for the strong housing demand in Singapore.
The first is from local owner-occupation demand, which has been “especially strong”, particularly with an increase in nuclear families, singles and seniors who prefer to live on their own, said MND.
“Secondly, there has been a renewed interest from both local and foreign investors in the residential property market, as we emerge from the pandemic.”