Unsold private housing stocks on the rise before new launches ramp up in 2024
The ABSD rate of clawback may be lower than 25% depending on when the property was acquired. Developers who choose to “take ABSD hit” will have more time before the sale to promote the remaining units. Cuscaden, for instance is built on a land acquired in may 2018 and is subject to a lower ABSD at 15 per cent, or S$61.5million.
Agents cannot, as a general rule, offer discounts and incentives of their own volition to close a transaction. Developers pass these discounts on to agents, and they change their pricing strategies based on market conditions.
Not only are projects in prime districts included, but also all across the island. Even so, buyers tend to choose units that suit their tastes, rather than ones that have been marketed. ABSD deadlines this year are coming up fast for few projects that have significant amounts of unsold unit levels.
Analysts also think that the rise in unsold inventory will not pose a challenge to these projects.
Sales of new homes in 2023 decreased by 9.6 % year on year to 6,421 unit. 7551 homes launched in 2023, an increase of 66.8 percent yoy.
Tricia song, CBRE head of South-east Asia research, stated that the government had also boosted the supply of homes for private buyers. 9,235 units will be available from the list of confirmed sites in 2023 to be sold through the Government Land Sales program. Sites on the confirmed list are sold in accordance with schedule, regardless if demand is high or low.
There was a natural increase in the number of new private homes that were not sold. A significant number of unsold units may still be left in several residential developments as they approach their critical deadline for sales this year.
The URA Realis Database shows that on Mar 12, this project includes the 99-year-leasehold Cuscaden Reserve located in district 10, with 180 units left out of the 192 total; the a 99-year-leasehold The Landmark located in district 3, with 51 unsold units of the 396 total; and the a 99-year-leasehold One Bernam situated in district 2, with 137 remaining units of the 351.
The Business Times is aware that, this year, other projects in District 10, such as Leedon Green freehold and Dalvey Haus freehold, may face the same deadline, as there are less than five unsold units.
In residential developments with five units or more, property developers must pay an additional buyer’s stamp duty of 40% on the land value. However, 35 % of this is waived by the developer if he sells 90 % of his units in five years. This portion of ABSD will be charged with interest otherwise.
Sites purchased between July 2018, and December 2021 are subject to a 25 percent ABSD, with an additional 5 percent non-remissable. Before July 2018, the rate is 15 percent.
The ABSD clawback will be determined by how many unsold units remain, as announced in Budget 2020. Lawrence Wong from the Finance Ministry said this would allow housing developers to sell off units with more freedom while maintaining a timely housing supply.
Taking a hit
Singapore’s unsold new private home inventory grew by 20 per cent in the last two decades and is expected continue growing as more projects enter the market.
The bad news is that some residential projects are facing a deadline to sell all their units this year or in the following year. If they don’t, they will have to pay stamp duty amounts of upto tens and even hundreds of thousands of dollars.
According to most recent quarterly data from the Urban Redevelopment Authority, the unsold stocks comprising of unsold unit in completed and non-completed projects increased by 20,4% from 14,333 uncompleted units in Q4 2020 to 17,262 uncompleted units in Q4 2030.
Wong Xian Yang (head of research, Cushman & Wakefield) said that the reason for this is a combination of a high number of new launches “coinciding”, with sluggish market demand.
As ABSD deadlines for projects approach, it is common for developers to offer discounts ranging from 10 to 15% on remaining units to clear them.
Cuscaden Reserve is one example where some marketing agents are offering big discounts to attract customers. A three-bedroom 1,163 sq. ft. unit is now advertised for S$3.4mil, down S$900k compared to its previous price S$4.3mil. S$2.1million is the price for a 700 sqft, one-bedder. This was S$300,000.
Both units cost S$2,950 per Square Foot (psf), which is about 20 per cent below the average S$3,600 Psf price that 12 units sold for since September 2019, when the condo was first launched.
Cuscaden Reserve’s developers are trying to raise sales. They will be adjusting the price to do so, keeping in mind the award of the nearby GLS site on Orchard Boulevard.
Song of CBRE reported that in February a UOL Group/Singapore Land joint enterprise was awarded Orchard Boulevard GLS at S$428.3 Million. That’s around S$1,617 PSF per plot rate – 32% less than Cuscaden Reservation, where S$2,377 PSF ppr was awarded in May 2018. Market watchers are expecting future Orchard Boulevard prices to reach over S$3,000/sqf.
The increased stock of unsold homes from the low in Q4 2020 is a sign that demand is now catching up (post-pandemic), and this is good. The 17,262 unsold new units in Q4 2020 are significantly lower than the average of 23,885 private homes that were unsold over the past 40 quarters from Q1 2014. to Q4 2030.
The Q4 2020 figure is 60 percent less than Q4 2014 (28,779 units), and also less than the 37,799 unsold units recorded in Q1 2019.
The market bottomed quickly in Q2 of 2017. Developers replenished the land they had. According to him, this resulted in a surge in residential project launches between 2018 and 2019, as well as a peak in unsold private homes during Q1 2019.
Consequently, unsold inventory dropped to “very-low levels” that were not seen during the previous decade. Due to the severe undersupply, prices on the market increased significantly with an accelerated demand.
URA’s price index for non landed private homes only rose by 8.6 per cent from Q2 2017 to the Q1 of 2019. Since then, the price of private homes has increased by 33.7%.
If the developer’s average sales for the 10 years between 2014-2023 was 8,850 per year, then 17,262 units of unsold stock would represent just over 2 years.
Analysts anticipate that private housing unsold will continue to increase, though at a much lower level than in the past.
The level and type of unsold inventory in Q4 2020 will depend primarily on sales performance, as well as planned launches. Huttons estimates that if more GLS lands are sold in 2023 the number remaining unsold will be between 18 and 19,000. This is still well below the peak of 38,000 unsold units in Q1 2019, The unsold stock is also unlikely to exceed 22,000 units as the demand for products remains strong and there are no signs of a financial crisis in 2024.
