Sunday, 17 November 2024
Written by Nicholas Mak
Summary
(1) Three major private residential projects launched this weekend achieved impressive sales, which is a case of when pent-up demand meets pent-up supply.
(2) Developers rush to launch in November due to a few reasons, including to capitalise on the robust home buying momentum and to avoid the risks of further economic uncertainties next year due to an expected trade war by the new US administration.
(3) The strong housing demand is fuel by lower interest rates which raises the demand for more risky assets, such as real estate. Another reason is the FOMO (Fear of Missing Out) propagated by property agents.
(4) The robust buying momentum raises the question whether the authorities would implement another round of property cooling measures.
(5) The surge in property sales in 4Q 2024 is expected to move the needle in the property price index and reverse the price decline resulting in a 2% to 3% price expansion for the whole of 2024.
Introduction
Three major private residential projects were launched in the weekend of 16 November 2024. They are Emerald of Katong, Nava Grove and Novo Place (Executive Condominium).
All three 99-year leasehold developments achieved impressive sales with more than half of the units in each project sold during the launch. (Please see Table 1)
When pent-up demand meets pent-up supply
In the first ten months of 2024, the number of private homes launched by property developers were significantly lower than previous years. From January to October this year, developers released and sold a total of 3,756 and 3,787 private housing units respectively, excluding Executive Condominium (EC).
However, the sales volume in the first ten months of 2024 pale by comparison when matched against the 5,533 private residential units sold by developers in the January to October period last year.
As a result, there is an accumulation of new residential projects slated to be launched in 4Q 2024 and in the first half of 2025. At the same time, some homebuyers are also waiting with their cheque books for the launch of some of the launches.
The star of the new launches this weekend
The 846-unit Emerald of Katong was launched over the weekend to a resounding success, with about 99% of the units in the development sold. The previous time that a condominium project achieved sales of more than 98% of the units on the first two days of the launch was the 738-unit J Gateway near Jurong East MRT station, which saw 737 units snapped up at a median price of $1,486 psf.
Contributing to the impressive sale at Emerald of Katong is its location in the middle-class Katong area. The condominium project is surrounded by a large and established private housing estate including landed housing, which could generate a large catchment of potential buyers.
The development is also conveniently located just 610 meters from Tanjong Katong MRT station and approximately 1,100 meters from Dakota MRT station, providing enhanced connectivity and greater travel convenience.
Furthermore, Emerald of Katong holds additional appeal for families with young children as it is located 1.3 kilometers from the popular Kong Hwa School. Being location within 2 km from this prestigious school would offer priority admission for children of the residents along Jalan Tembusu, making it an attractive option for families seeking quality education for their children.
The table below shows the details of the three residential projects launched this weekend.
Table 1: Developments launching on 16 November 2024
Project name | Street name | Postal district | Total no. of units in project | Land tenure | % of total units sold |
Emerald of Katong | Jalan Tembusu | 15 | 846 | 99 years | 99% |
Nava Grove | Ulu Pandan Road | 21 | 552 | 99 years | 64% |
Novo Place (EC) | Bukit Batok West Ave 8 | 24 | 504 | 99 years | 56% |
Source: Mogul.sg Research, URA
Despite the perceived popularity of Executive Condominiums, only 57% of the EC project Novo Place was sold. The sales at this EC project is the lowest in terms of the number of units and the proportion of the overall project among the three developments launched this weekend.
Why developers rush to launch in November
Property developers are rushing to launch their new projects this month partly to capitalise on the robust homebuying momentum that started in late-September.
Secondly, the window to launch new projects this year is closing with the approach of the December festive period when many residents would embark on overseas vacations. Furthermore, the Chinese New Year in January 2025 could also hinder the sales momentum in after the December holiday season.
The Trump factor
Another key reason for the developers’ rush to launch their residential developments is the expected global economic uncertainties that could be unleashed by US President-elect Donald Trump when he takes over the White House in the coming January.
Trump has promised to increased trade barriers on imports into the US, especially from China, which could stifle global trade. He is already filling his new administration with Cabinet members who are China hawks. Furthermore, his unpredictable management style would also increase geopolitical uncertainties.
This could adversely affect Singapore’s economic growth and the sentiments in the property market, as our economy is highly trade dependent. Hence, real estate developers are taking this opportunity to launch their projects in November before facing the risks of escalating economic uncertainties next year.
Reasons for strong homebuying momentum
One of the reasons for the strong homebuying momentum is the improvement in the employment market, which could have contributed to the positive property buying sentiments. The number of unemployed residents has declined for two consecutive quarters from 72,500 people in 1Q 2024 to 62,500 persons in 3Q 2024.
The easing of interest rates also contributed to the homebuying demand. The US Federal Reserve has reduced borrowing costs by 50 basis points on 18 September and could cut interest rates by another 25 basis points in this December. The reduction in US interest rates would influence the local borrowing costs.
Lower interest rates equates cheaper money which raises the demand for more risky assets, such as real estate.
Another reason is the FOMO (Fear of Missing Out) among buyers that is propagated by property agents. Some buyers are led to believe that private homes may slip out of their reach because property prices will rise sharply.
Red flag for more cooling measures
This is not the first weekend in the past month that strong homebuying demand is seen in the new residential launches. More than three quarters of the 916 units in another condominium, Chuan Park, were sold when the project was launched on 10 November at new benchmark prices for 99-year leasehold condominium in that location.
This raises the question of whether the authorities would implement another round of property cooling measures. In our opinion, the strong take-up rates at these recent launches have probably raised the red flag within the government. The authorities are closely monitoring the market situation. If the robust buying momentum continues into the first quarter of next year, with each new launches achieving more than half of the development sold during the initial days of the launch, the risk of government intervention would greatly increase.
Moving the needle
With the expected increase in residential property launches in November and based on our market intelligence and analysis, developers could sell between 2,000 and 2,500 private housing units in the last quarter of 2024, which would be about two-third of the primary housing units transacted in the first nine months of this year. As a result, property developers could end this year on a more positive note with about 5,000 to 5,500 units sold for the whole of 2024.
The private housing price index contracted 1.1% in 3Q 2024. The rise in property sales in the fourth quarter is expected to move the needle in the price index and reverse the price decline resulting in a 2% to 3% price expansion for the whole of 2024.
Therefore, this is an early Christmas present for property developers.
Looking to sell or buy a new home? Find out more at Mogul.sg.
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