New Launch Prices In OCR – Will There Be Demand?

Photo Credit: The Business Times
Photo Credit: Edgeprop Singapore

Housing prices in Singapore have generally been on an uptrend since the Global Financial Crisis and there is a more pronounced demand after the Global Pandemic. Why did I make special mention of these two events? It is because Singapore has managed these 2 major events well such that Singaporeans and foreign investors alike are confident to purchase larger ticket items such as properties to hold for long term. There are several factors driving demand for housing in Singapore and let’s check them out in greater detail.

1. Confidence in Singapore’s crisis management. Foreigners are returning to Singapore as our borders open up and it was reported in the news yesterday that a Chinese national made a bulk purchase of 20 units at CanningHill Piers, a 99-year leasehold new launch which is redeveloped from the former Liang Court. The ABSD payable by a foreigner is a hefty 30% after the recent upward adjustment in Dec 2021!

2. Lack of supply in the resale market. Since the pandemic forced many of us to work from home, everyone now wants their own space. The single millennials go on to buy or rent 1-bedroom and 2-bedroom apartments while families upgrade to bigger units and landed properties. With a strong employment market and relaxed covid-19 measures, expats have streamed in Singapore seeking employment and sanity. This has boosted rental demand and rent prices such that landlords are happy to hold on to their properties longer. 

3. Strong household balance sheet. Singaporeans are fantastic savers holding ample liquidity in cash and CPF holdings as the total Singapore Household Networth stood at $2,295 billion as of 2Q2021. Wages have also risen as the number of households with household incomes of more than $15,000 has more than doubled to 322,527 in 2020, hence making private properties more affordable for Singaporeans.

4. Increase in land prices. The new launch supply is getting depleted and developers are vying to replenish their land bank through government land sales and collective sales. Prices for new private homes in the OCR will for the first time cross $2,000psf in 2022 as new homes will be launched in the coming months in Ang Mo Kio, Lentor and Jurong.

5. Low mortgage rates. Variable rate mortgage loans have stayed below 2% for more than a decade since the GFC. While the Fed has indicated it will make several more rate hikes, there is still room to accommodate before the variable rate hits 2%.

6. Cooling measures. The government monitors the property market actively to prevent housing bubbles from forming. Sub-sales of units are much fewer in volume as ABSD and SSD are in place to curb excessive speculations.

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