While new private home sales appear to be on the rebound in Singapore, underpinned by higher prices of new launches and resilient demand amid an uncertain economic climate, the outlook may not be as good for resale condos.

A report by OrangeTee & Tie said resale transactions have slowed and some owners in the suburbs and city fringe areas may have lowered asking prices in the face of competition from new launches.

The result is a widening gap between average prices of new and resale condos – a trend that tracks back to 2015 but has accelerated more significantly in the first three quarters of this year, the report said.

This is happening because new projects are being launched at higher prices in recent months, causing new home prices to surge ahead of resale prices.

Some new launches are priced higher because developers paid higher land prices towards the end of the land-buying cycle that ended in early July last year. Freehold projects or those located near an MRT station are also able to command a price premium.

Illustrating this trend, the average prices of non-landed new private homes were 28.2 per cent higher than those of resales in the first three quarters of this year, compared with a 23.8 per cent gap last year, and a 15.1 per cent gap in 2017, the report said.

Christine Sun, head of research and consultancy at OrangeTee & Tie, said: “Resale condo sellers don’t have as much repower to overcome the cooling measures, but developers can stimulate sales through talks, roadshows and other incentives [for new homes].

“Even if resale condo sellers want to tag their prices higher, their unit sizes are much bigger than new homes, so they can’t increase the per square foot price too much or they will risk hurting buyer affordability.”

Furthermore, the number of new sales surpassed that of resales in the first three quarters of this year, a reversal of the situation in the past two years, she noted.

For instance, she said, in the first three quarters of this year, 53.1 per cent of total sales, or 7,469, were new sales, while 46.9 per cent or 6,607 were resales.

However, last year, 40.3 per cent or 8,795 were new sales, while 59.7 per cent or 13,009 were resales. The shift is likely due to more new projects being launched this year, and more new homes being transacted, she said.

But overall condo sales are still resilient because the price-to-income ratio has come down to 4.6 this year, from 5.1 in 2016, which means housing prices are more affordable as median household incomes continue to rise, noted Cushman & Wakefield head of research for Singapore and Southeast Asia Christine Li.

Sun said the widest gap between the average prices of new and resale non-landed homes for the third quarter is in the city fringe or the rest of central region (RCR), accounting for 43.4 per cent, where a number of new projects were launched.

This is followed by the suburbs or outside the central region (OCR) – at 41 per cent – and prime districts or the core central region (CCR) – 37.6 per cent, she added.

Taking into account upcoming launches this year, this year will see 57 new launches in total with 22 in CCR, 21 in RCR and 14 in OCR, according to Huttons Asia.

Prices of new homes jumped 9.8 per cent on a year-on-year basis across all three market segments in the third quarter of this year, with the largest rise in RCR (16.5 per cent), followed by OCR (8.1 per cent) and CCR (1.9 per cent), according to OrangeTee & Tie.

In the RCR, a number of new projects including Amber Park and Sky Everton have sold above an average price of S$2,000 per square foot (US$15,800 per square metre), which helped fuel the faster price growth, Sun said. In comparison, overall resale prices rose a mere 1.6 per cent year-on-year in the third quarter of this year.

CCR prices rose 1.1 per cent, but OCR prices dropped 1.5 per cent and RCR fell 2.1 per cent, due to competition intensifying from new launches in recent months, she added.

THE STRAITS TIMES (SINGAPORE)/ASIA NEWS NETWORK