2013 was the climax of the last real estate market, with all the devastation that often brings with it. In the course of the cooling measures, many developments – at the time mainly new startups – made a detour. If you are buying in 2021, this is a relevant question:
Could the prices also drop sharply for new startups if the cooling measures take effect overnight? And if so, does that mean that the first buyers will be “burned”?
We looked at the developments that caused prices to decline in 2013-14 to see if they recovered. The following developments have all seen a gradual recovery in prices, but to varying degrees:
How did we derive data for the following?
With new sales in 2013/14, we stuck to the development. In addition, we have adhered to developments in which the transaction volumes are higher in 2014 than in 2013.
We have also ruled out partial sales (units sold before completion), as these would distort the overall picture in the first few years of sale, as the effects of the secondary market are taken into account.
Please note that some of these developments only show low transaction volumes. Sometimes this cannot be avoided, especially with small developments with a few units. In addition, the price psf for unusual units such as penthouses can be outside the normal ranges. Apart from that, we have tried to give as precise a representation as possible.
What developments have you seen a “U-shaped” price movement?
The most notable recoveries were Sky Habitat and The Skywoods
For many of the above developments, a fall in prices followed by a recovery is not 100 percent certain. This is because some of them have low transaction volume. However, the pattern is most visible in Sky Habitat and The Skywoods.
Celestial habitat
Location: 15 Bishan Street (District 20)
Developer: Bishan Residential Development Pte. GmbH.
Lease: 99 years
TOP: 2015
Number of units: 509
$ PSF diagram:
Highlights:
The developer of Sky Habitat was too confident at launch, probably because the property market was so high in 2013. Sky Habitat was – and still is – the tallest skyscraper in Bishan.
It was designed by famous architect Moshe Safdie and a major selling point was the sky parks and walkways, as well as a sky pool (the pool is suspended between two blocks on the top floor).
It was also the most expensive non-CCR condominium in Singapore to date. There were units with a quantity that reached $ 2 million; and in 2013 that was a price point associated with condos in District 9 or 10.
[[nid:540586]]
The situation was exacerbated by cooling measures and the Total Debt Servicing Ratio (TDSR), which began to decrease around 2014. By around April 2014, Sky Habitat had rebooted with prices around 10 to 15 percent lower.
At this point, you can see developer prices began to decline – prices averaged $ 1,376 psf by the second quarter of 2015, compared to highs of $ 1,630 in 2013.
The good news is that on our last check, sellers averaged $ 1,599 for the third quarter of this year. This means that buyers who moved in on or after the relaunch (i.e., 2014 or later) are still likely to make a profit – but those who bought during the initial launch are still out of luck.
The Skywoods
Location: 9 Dairy Farm Heights (District 23)
Developer: Bukit Timah Green Development Pte. GmbH.
Lease: 99 years
TOP: 2016
Number of units: 420
$ PSF diagram:
Highlights:
The Skywoods experienced an aggressive marketing boost, almost certainly motivated by the new stamp duties and TDSR limits.
Buyers tend to react to cool-down measures by going into “wait and see” mode. Hence, it was painful, but likely necessary, to bring the price down – as low as $ 1,378 in 2015.
A niche property back in 2013, Skywoods was aimed at those who value privacy over amenities across the street.
We should keep in mind that at the time of its launch, The Skywoods was in an extremely inaccessible location with no amenities within walking distance.
The situation has improved a lot in recent years with the arrival of the Hillview MRT station (650 meters away). However, shopping like The Rail Mall and HillV2 are still not really within walking distance.
We feel like The Skywoods has gotten back on buyers’ radar after the launch of Dairy Farm Residences. With Dairy Farm Residences averaging $ 1,585 for its triple rooms,
Skywoods’ pricing looks competitive; After all, both condos are in the same general location and The Skywoods isn’t much older. Even for those looking for a cheaper alternative to Dairy Farm Residences, there aren’t many other options.
Overall, the “turnaround” in pricing appears to have been caused by sharp price declines in response to cooling measures, followed by the emergence of Hillview MRT and a nearby launch.
Some notable takeaways
One thing you can see in the above is that buying early is no guarantee of “immediate returns”. It is possible for the developers to lower prices for buyers in the later stage.
In many of the above cases, prices did not recover to their original average by the third quarter of 2021 either. For example, only eight of the developments were on average higher than the 2013/14 price:
- 28 RC Suites ($ 1,650 to $ 1,711 psf)
- Bliss @ Kovan ($ 1,384 to $ 1,545 psf)
- Hallmark Residences ($ 2,002 to $ 2,033 psf)
- Hills Twoone ($ 1,327 to $ 1,386 psf)
- The Cristallo ($ 1,270 to $ 1,286 psf)
- The Skywoods ($ 1,292 to $ 1,370 psf)
- Eastern Tropics ($ 1,298 to $ 1,528 psf)
- Over 388 ($ 1,304 to $ 1,333 psf)
There doesn’t seem to be a clear indication that any particular region (CCR, RCR, OCR) has any better chance of rebounding after prices have fallen.
Why do prices fall and rise this way?
It is difficult to isolate the exact reasons as they are different for each apartment. In general, however, you should note the following:
- The five-year ABSD limit for developers
- New policy changes
- New launches nearby
1. The five year ABSD limit for developers
Developers who don’t complete and sell a development within five years can end up paying over 30 percent of the property’s price in ABSD (over 30 percent when interest is included).
Hence, developers will sometimes cut the price if they feel they are not meeting the deadline. Note, however, that this is less common for condos with a high percentage of unsold units – if the development is only 30 percent sold and the deadline is short, the developer is likely to miss it with a discount, too.
Therefore, you will only see “Fire Sales” when there are only a handful of units left and the deadline is approaching.
As a rule, this does not apply to the condominiums listed here; most of the above would have received discounts due to new cooling measures. However, it is applicable today to some new launches that stem from the last tranche of the en bloc sale in 2017.
2. New policy changes
It is not just cooling measures like ABSD that can depress prices. Fundamental changes, such as TDSR-style credit restrictions, can also result in further discounts.
The worst-off buyers tend to be those who buy just before new measures go into effect; the developer may then not be able to raise the price and their “discounted” price will end up just being the norm (or higher than the norm in the case of some of the condos above).
This is a bit of a tightrope walk, as late purchases can mean new cooling measures will cost you dearly; But if you buy shortly beforehand, you can end up with top prices.
ALSO READ: New Product Launch Or Resale Property: 4 Considerations To Think About In 2021
3. New product launches nearby
In general, having more condos nearby is undesirable. It creates competition for tenants and in reselling. However, assuming demand remains constant and there aren’t too many new units around, a new launch can help increase resale prices.
In the past few years we’ve seen buyers being put off by the shrinking sizes of new startup units. These buyers often turn to resale alternatives that share the location but have larger units. This can do something to increase the resale value.
However, we should emphasize that in most cases it is better not to have too many new startups competing with your condo.
Don’t rush to buy or count on discounts on returns
Steep developer discounts are always nice. However, they should be viewed as a nice bonus rather than a great incentive to buy. Take your time and concentrate on the essentials: equipment, accessibility and rentability (if you are a landlord).
This article was first published in Stackedhomes.
