Residents of suburban condos can take advantage of a wide range amenities within their development, and also nearby public transport, healthcare, shopping, education, and recreation.
The price of non-landed properties has risen in response to the Covid-19 epidemic.
Using data provided by the Urban Redevelopment Authority(URA), the prices of non-landed homes in the Outside Central Regions (OCR), or the suburbs and the Rest of Central Regions (RCR), or the city edge, increased by 40 and 38 percent respectively between the Q4 of 2019 and the Q1 of 2024. In the Core Central Region (CCR), a region that includes districts 9, 10, 11, Downtown Core and Sentosa as well as prime districts, prices of non-landed homes increased by 14%.
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Singapore citizens and permanent resident (PRs), who purchase a second home or a subsequent home, will pay heftier ABSD rates. For non-PR foreigners, the ABSD rate has doubled, from 30% to 60%.
Citizens and PRs who purchase their first homes are unaffected by ABSD changes.
The demand for CCR condos has suffered due to the fact that non-PR residents were historically interested in these properties.
Today, land costs account for the majority in a housing project. Costs of construction and financing are increasing due to the higher interest rate.
In the meantime, buyers can be more selective in times of economic uncertainty and higher mortgage rates. There is also a wider choice on the market. Developers can be penalized by the ABSD for not selling all of their housing inventory in prescribed time frames.
It may be a good idea for housing developers to reduce their activities in the development of new projects or to concentrate on those that cater primarily to local first time buyers, such as suburban condominiums and executive condos.
UOL Group U14 0%, a listed company, has bought non-landed CCR sites.
In February, an 80:20 joint-venture between UOL and Singapore Land Group: U06, 0% acquired a 99 year leasehold Government Land Sale Site (GLS), zoned mostly for building private homes at Orchard Boulevard, District 10. The site was purchased for S$428,3 million or S$1,617 for each square foot of the plot ratio.
Last week a consortium comprising UOL (35%) CapitaLand Development (30%), Singapore Land (20%), and Kheng Leong (10%) was awarded a 99-year leasehold GLS site at Holland Drive, District 10, for S$805.4M, or S$1,285psfppr.
It is true that the cost of land for the two above sites is much less than the price of similar sites in 2018 sold by state tenders.
UOL, along with its partners, must still be betting on a robust demand for the new 99-year leasehold prime condos.
UOL may have been encouraged by the high sales of Watten House, a freehold condo in District 11 that was jointly developed by UOL & Singapore Land. The project was first offered for sale in November 2012 and as of April 2013, 78 per cent had been sold, according to URA’s sales data.
UOL’s large contrarian bets made on 99-year leasehold condominium projects located near MRT stations in prime districts may pay off.
First, the shrinking gap in prices between non-landed new homes in OCR versus CCR may encourage buyers to view CCR homes as having a higher relative value.
Orchard Boulevard, Holland Drive and other sites could sell new condos for S$3,200 and S$2,800 respectively. That’s about 27-45 per cent more than a condo unit at Lentor in District 26, near the Lentor MRT.
For example, a buyer may pay S$3,500 on average per square foot (psf) for a terraced house in the vicinity Orchard Road compared to S$1,900. This is an 84% premium.
Second, even though the Orchard Boulevard or Holland Road housing sites aren’t within 1km of a popular school, unlike Watten House and some suburban condos this shouldn’t deter many buyers.
If you live within one kilometer of a primary or secondary school, your child will have a better chance of being accepted. Many buyers look for homes near sought after schools, as this attribute increases the resale value of a house and draws a larger buyer pool.
Despite this, lifestyle characteristics could still influence singles and childless couple to select prime district homes not near popular primary schools.
Thirdly, you can expect that well-off PRs who are buying their home here will focus on the best condos.
For PRs, buying landed houses can be difficult as they require approval. Condos are not subject to this requirement. Singapore could continue to attract high-income PRs and wealthy people, who would be an excellent source for new buyers of prime condos.
The fourth reason is that while there are some buyers who prefer to own freehold properties in prime districts, new supply of prime freehold condominiums for sale is limited. Those looking for new condos within prime districts might need to consider 99 year leasehold projects.
Generally, developers buy older housing projects on the en bloc marketplace to build new condos. En bloc sales are difficult in existing developments where a majority of the units are owned by non-PRs.
Fifth, buyers of high-end condos located in prime districts might be better able to deal with any economic downturn because they may have enough savings to get them through the rough times.
It is also reasonable to expect that well-heeled buyers will be happy to pay a little more for a home, if it means they won’t have to pay transaction taxes.
Developers were undoubtedly unnerved at the recent steep price cuts to move sales in Cuscaden Reserve (99-year leasehold) near Orchard Boulevard.
Cuscaden Reserve is home to many smaller units. Many of the one- and two bedroom apartments are under 1,000 square foot. Do condo buyers today in high-end districts prefer bigger units?
UOL, its partners and their 99-year prime housing project could reap huge returns if they create the right product.
