Unsold housing stock in private housing on the increase ahead of new launches in 2024

It is not surprising that there are more unsold new homes. Many residential projects could be nearing their sales deadlines with many unsold units. The URA Realis database showed that, as of March 12, the projects included the 99 years leasehold Cuscaden Reserve project in District 10, which had 180 remaining units out of 192. The 99 years leasehold The Landmark project in District 3, has 51 unsold units out 396. And the 99 years leasehold One Bernam project in District 2, where 137 units remain out 351.

The Business Times believes that projects like the freehold Leedon Green or freehold Dalvey Haus in District 10 may also be facing a five-year deadline by this year with fewer than 5 unsold units.

Property developers who are involved in residential projects that have five or more units must pay an Additional Buyer Stamp Duty (ABSD), which is 40 per cent, on the land price. Of this amount, 35 per cent can be waived if they sell at least 90 percent of their units within five year. The ABSD is payable with interest if the developer does not sell at least 90% of units within five years.

The ABSD is payable for sites purchased between July 2018 and Dec 2021. A non-remissable portion of 5% is included. The rate for land purchased before July 2018 is 15%.

According to the Budget 2024 announcement, ABSD remission rates will be based on how many unsold units there are. According to Finance Minister Lawrence Wong, this will allow housing developers more flexibility in selling off their units and ensure that housing supplies will continue be released promptly.

The Hit

As ABSD deadlines approach, developers will offer discounts of between 10 and 15% to sell remaining units.

Cuscaden Reserve, for instance, has recently seen some marketing agents offer large discounts in an effort to attract buyers. The price of a three-bedroom apartment measuring 1,163 sq ft (sq ft), which was previously S$4.3m, has been reduced by S$900,000. A 700 sq. ft. one-bedder, which was previously priced at S$2.4million, is now being sold for S$2.1million, down S$300,000.

The average price per square foot (psf) for 12 units sold at the condominium since its launch in September 2019 is S$3,600 , which is around 20 per cent less.

Cuscaden Reserve is a project that has the intention of driving sales. Considering the recent awarding of a GLS residential plot in Orchard Boulevard, developers may adjust pricing to boost sales.

Song from CBRE noted that a UOL Group – Singapore Land joint-venture was awarded the Orchard Boulevard GLS in February for S$428.3million – or S$1,617psf/plot ratio. This was 32 percent lower than Cuscaden Reserve, which was granted at S$2,377psf/plot ratio in May 2018 – according to Song. Market watchers predict future Orchard Boulevard sales prices will be over S$3,000 per sq. ft.

The ABSD clawback could be less than 25 percent, depending on the time the site was acquired. In this case, some developers will choose to “take ABSD’s hit” to have more marketing time to sell the remaining unit.

Cuscaden reserve, for example, was built on land purchased in May 2018, and therefore is subject to the ABSD rate which is 15 per cent or S$61.5 Million.

In general, agents cannot offer discounts or incentives to close deals on their own. The developers pass on these discounts, who adjust their pricing strategy according to market conditions.

The island as a whole is affected, not just the project in the best district. But buyers still choose the units that they prefer over those with promotional offers.

ABSD deadlines are fast approaching for very few projects.

Analysts also believe the growing level of unsold stock is unlikely pose a problem to these projects.

The rising unsold stock since Q4 of 2021 is an indication that the supply has caught up with demand, which is good. The 17,262 units that remain unsold for Q4 of 2023 is much less than the average unsold number in the last 40 quarters (between Q1 2014 and 2023), which was 23,885 units.

The figure for Q4 2023 is also less that half of the highest recorded Q1 2019 (37,799 unsold units) and just 60% of Q4 2014.

As the market reached its bottom in Q2 2017 developers quickly replenished their stock of land. The result was more residential project launches for 2018 and 2019. Q1 2019 saw the highest number of unsold private houses.

In turn, the unsold stock dropped to “very low” levels that had not been seen in the last decade. As a result, the market was undersupplied and prices rose dramatically.

URA’s index of prices for non-landed private residences rose only by 8.6 percent between Q2 2017, and Q1 2019, Prices have increased by an impressive 33.7% since then.

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If you take the 10-year average for developer’s sales, from 2014 to 2023, which is 8,850 units annually, the 17,262 unsold units represent a little under two years worth of inventory.

Analysts believe that private housing stock will rise, but it will remain far below previous peaks.

The level of unsold inventories for Q4 in 2024 will be based on the planned launches and sales. Huttons’ data analysis estimates the number unsold units at between 18,000-19,000 by 2024. This is still a far cry from the 38,000 units that were unsold in Q1 of 2019.

Also, the unsold inventory will not exceed 22,000 units, as the underlying purchasing demand is still strong, and no financial recession in 2024 is anticipated.

Singapore’s stock of unsold private homes has increased 20 percent over the last two year and will continue to grow in 2024 with more projects coming to market.

Stamp duty payments of up to tens of million dollars could be a problem for certain residential projects.

The latest quarterly data, provided by the Urban Redevelopment Authority shows that the number of unsold units, including those in completed and incompleted projects, has increased by 20.4%, rising from 14,333 units at the end of Q4 2021 to 17262 units at the end of Q4 2023. Wong Xian Yang said this is mainly due a “coincidence” of a surge in new launches and cautious market demand.

The number of new homes sold in 2023 fell 9.6 percent yoy to 6,421 units. 7551 homes, or a 668.8% increase yoy, were launched that year. Tricia Sing, CBRE’s South-East Asia Head of Research, confirmed that the Government Land Sales Programme (GLS) will also increase the supply for private homes. The list of confirmed sites is expected to sell 9,235 units by 2023. According to the schedule, confirmed list sites will be sold according to their scheduled release date.

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