![](https://www.cmgassets.com/s3fs-public/styles/article_node_main_image/public/2024-08/singapore-residential-savills.jpg?h=c54f7eca&itok=oYRNghdZ)
Singapore’s residential market suffers from a “near-term indigestion problem”: analyst
New launches in H2 2024 are 3.5x more than levels seen a year ago.
According to a Savills report, transactional activity in Singapore’s primary residential market is likely to stay tepid until the slew of new launches hit the road in 2H/2024.
The table below shows the list of major new launches slated for launch in the second half of this year and the total number of units is expected at 6,868 units. This increase is by a factor of 3.5x over the 1,938 units launched in 1H/2024.
Here’s more from Savills:
Although supply tends to bootstrap up demand, that is, with more launches, new sales should increase, observations from recent launches seems to suggest that the market has some near-term indigestion problem.
Although the baseline price for OCR projects is currently slightly over S$2,000 psf, the sales rate of recent launches at the first week of launch is about 30% or less. On the other hand, resale volumes are up, and for the OCR and RCR, record prices are achieved in the secondary market as they play catch up to new sale prices. We believe that at this juncture, buyers of private properties who seek to live in them are mainly those that are looking to find an immediate move in rather than wait for the project to complete.
Depending on the market segment, the average pricing gap between new and resale is wide, ranging from 44.7% to 61.2%. An upgrader to a new sale may feel that the effectual timing of the sale of his/ her current home to match the completion date of the new home as two uncertain events. If the upgrader sells early, he/she may have to rack up rental expenses which increases the all-in cost of the new purchase.
Therefore, given the great abyss between a new launch price with what is available on the resale market, the optionality value to the upgrader is higher for the latter. Thus, we may continue to see new launch sales cluster around the 1-to-2-bedroom types as these appeal to investors and singles.
Unfortunately, developers who bought land in 2022 to 2023 may not have the flexibility to lower prices below S$2,000 psf (for the OCR market). Given this impasse, a stalemate may arise for a period of a quarter or two. The market for new sales would come back to life under two conditions. One is if new sale prices remained flat while resales climbed to narrow the gap. Two is when the new sale is nearing completion and potential buyers have greater confidence in the delivery date of their new unit.
On this second point, this means that a project may see two sales peaks, one at the start of launch, and another building momentum towards the project’s completion date. We are maintaining our forecast for prices to remain flat with some upside bias in 2024.