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Behind the price declines in the Core Central Region

30 April 2020

URA data showed that the Core Central Region (CCR) — which covers the traditional prime Orchard Road districts of 9, 10 and 11, Marina Bay and the CBD area as well as Sentosa Cove — suffered the biggest quarterly decline of 2.2% in 1Q2020. In comparison, the city fringe (Rest of Central Region) and suburban areas (Outside Central Region) saw 0.5% and 0.4% q-o-q declines over the same three months respectively.
The 2.2% drop in CCR prices followed a 2.8% q-o-q decline in 4Q2019.
This means that CCR home prices are now 4.9% below the recent peak in 3Q2018 and 7.2% below the all-time-high in 1Q2013, says Tricia Song, head of research for Singapore, Colliers International.

A closer look at the transactions during the quarter suggests that the decrease in the CCR non-landed property prices in 1Q2020 could be due to “selected launches sold at perceived discounts”, according to Song.

Wing Tai Holdings’ 522-unit The M, which was launched in February, was the best-selling project in 1Q2020. It sold 381 units last quarter at a median price of $2,439 psf, compared to nearby Midtown Bay, which sold 38 units at a median price of $2,934 psf in 4Q2019, and another 10 units at a median price of $2,898 psf in 1Q2020, points out Song.
The Enclave at Holland, by the property arm of Jean Yip Group, is a 26-unit, freehold private condominium in the Holland Road neighbourhood. The developer sold 14 units in 1Q2020 at a median price of $1,851 psf, compared to earlier units that were sold at prices ranging from $2,500 to $2,600 psf when the project was first launched in July 2018, adds Song.

“We believe the take-up has yet to reflect the full impact of Covid-19 as the circuit breaker measures kicked in after 1Q2020 ended, and most of the transactions had occurred in January and February,” notes Song.
In her analysis of property purchases by nationality from January 2019 to April 2020 to date, Han Huan Mei, director of research at List Sotheby’s International Realty, found that property purchases in the CCR by Singapore permanent residents (PRs) and foreigners grew steadily from October onwards (see chart below). “This was partly a function of supply, and partly due to a gradual return of confidence as the US-China trade negotiations were beginning to see daylight,” she says.

“The M was a beneficiary of this upturn,” adds Han. “However, the numbers began to decline when the Covid-19 outbreak struck Southeast Asia.”

The number of transactions by PRs and foreigners is likely to be affected for a longer period of time now that the circuit breaker has been extended by another month, up to June 1. “Buying sentiment in the real estate sector is likely to remain cautious as the focus is on the economy and job security,” writes Han.
Meanwhile, foreigners who are already residents in Singapore might adopt a wait-and-see approach, but may be motivated to enter the market if developers dangle sweeteners to move sales, especially in the CCR and RCR, adds Han.

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