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Newsletter Dec 2023

By Kelvin Sin | | 27 Dec 2023

1. Market

2. Land Sales & Enbloc

3. HDB

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1.1 Private Residential Market Outlook for 2024

Singapore's housing market faced challenges due to geopolitical tensions, slower global economic growth, high cost of living, inflation, and increased interest rates. These were compounded by property cooling measures introduced in April and a major money laundering case. Despite ongoing uncertainties, market confidence is improving, with signs of recovery in manufacturing and business sentiment. However, challenges are expected to persist, especially in the first half of 2024. New Launches and Sales Performance: Successful new launches like J’den in Jurong Lake District and Watten House in District 11 indicated strong market sentiments. The median price of new homes sold in 2023 increased by 15.5% year-over-year. Mortgage Costs and Market Impact: The cost of new mortgages has decreased, and further interest rate cuts are anticipated in the second half of 2024, potentially boosting the new home market. Price Trends: Home prices are expected to increase, with projections suggesting up to 6% growth by the end of 2024. Gap Between New and Resale Homes: The widening price gap is driving buyers towards the sub-sale and resale markets, with newly completed homes gaining popularity. Regional Developments: Significant projects are planned in various regions, including the Central Core Region (CCR) and Outside Central Region (OCR), catering to diverse buyer preferences. Investor-Friendly City-Fringe Projects: Projects in city-fringe areas are attracting investors due to their proximity to employment nodes, amenities, and schools. Boutique, Freehold Developments: More than 10 boutique freehold or 999-year leasehold projects are in the pipeline, appealing to buyers preferring freehold homes in city-fringe areas. Market Diversity: The upcoming year's launches will offer a wide range of options, from prime to city-fringe and suburban locations, catering to different buyer preferences

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1.2 Private Residential Rents to Contract 5%, HDB Rents to Increase 8% in 2024

The global economic slowdown and geopolitical tensions are affecting Singapore's private housing rental market in the second half of 2023. Growth in new Employment Pass (EP) holders is slower in 2023 compared to 2022, indicating a reduced influx of new EP holders and a corresponding decline in tenant demand. Shift in Housing Preferences: Due to a significant rent increase in 2022, some EP holders are opting for more affordable co-living spaces, HDB flats, or relocating as digital nomads to locations like Johor Bahru, Batam, or Bali. Private Housing Supply: Over 18,000 new private residences were completed in 2023, contributing to a surplus in housing supply. Large residential projects accounted for nearly half of the new units completed in 2023. In 2024, around 7,500 new private residential units are expected to be launched, slightly more than in 2023, potentially inducing more rental demand for HDB flats. An increase in housing supply has led to more competition among landlords, who are now more inclined to negotiate rents. HDB Flats Rental Trends: The number of HDB flats rented out decreased in 2022 but rose in 2023. This is attributed to tenants moving from the private to the public housing sector and HDB upgraders temporarily renting while waiting for their new private homes. Despite an increase in demand, HDB rents show signs of stabilizing in 4Q2023 due to more availability. 2024 Forecast for Rental Market: With an expected brighter economic outlook in 2024 and potentially more S Pass holders, HDB rents are projected to grow around 5%, while Private Rents may contract around 5% in 2024. Landlords might find relief from high mortgage payments if interest rates ease in 2024. However, it might take the first half of 2024 for the market to adjust to absorb the supply of homes completed in 2023, potentially leading to downward pressure on rents.

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1.3 Higher Property Taxes for Residential Investment Property in 2024

The government announced an increase in property taxes for most residential properties in 2024 due to higher market rents and annual values (AVs). The tax increase primarily affects luxury condos and landed properties, meaning that only Higher-Value Properties are impacted. Rebates for Owner-Occupied Properties: The government is offering tax rebates to help with rising living costs, with varying rebate percentages for owner-occupied HDB flats and private properties. Unlikely Impact on Tenants: With an expected softening of rents in 2024, it's unlikely that landlords will pass the property tax increase to tenants. Higher Investment Costs in 2024: The rental market slowdown, along with high ABSD rates, elevated interest rates, and increased maintenance costs, will contribute to higher investment costs for property owners. Higher living costs, increased GST, and economic uncertainties will lead to more budget-conscious buyers. Investment Appeal Unaffected: Despite the tax increase, the potential for capital appreciation in residential property investments in Singapore remains appealing. The residential property market remained strong despite the announcement of increased property tax for non-owner occupied properties in the 2022 budget, with continued price increases.

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2.1 First Private Housing Site in Bayshore unveiled on the Reserve List

The first private development site in the future waterfront neighborhood in Bayshore is included in the 1H2024 Government Land Sales (GLS) program, covering 105,486 sq ft on Bayshore Road. This site is on the Reserve List, meaning it will only be launched for tender when a developer commits to a minimum acceptable price. Bayshore is planned as a waterfront residential neighborhood with 10,000 new homes, 70% of which are intended for public housing. The Bayshore Road site, if triggered for tender, could yield 480 private residential units. It is near the upcoming Bayshore MRT station and offers potential sea views. The site is expected to attract strong interest due to its location and potential. It's the first new GLS site on Bayshore Road in over two decades. Despite its attractiveness, some expect developers to be cautious due to the ample supply in the 1H2024 Confirmed List.

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3.1 Over 6,000 flats launched for sale under Dec 2023 BTO Exercise

The Housing & Development Board (HDB) launched 6,057 flats for sale in the December 2023 Build-To-Order (BTO) exercise. The flats are distributed across eight projects in seven towns: Bedok, Bishan, Bukit Merah, Queenstown, Bukit Panjang, Jurong West, and Woodlands. Projects in Bukit Merah and Queenstown are categorized under the PLH model. Bukit Merah - Alexandra Peaks: 904 units with prices starting from $218,000 for two-room flexi, $380,000 for three-room, and $533,000 for four-room flats. Queenstown - Ulu Pandan Vista: 890 units including three-room and four-room apartments priced from $430,000 and $598,000 respectively. The Prime Location Public Housing (PLH) projects in Bukit Merah and Queenstown had lower application rates, possibly due to tighter restrictions, higher clawback rates, and longer completion times Bedok - Chai Chee Green: 1,234 units, with three to five-room flats ranging from $298,000 to $569,000, including 250 community care apartments (CCAs) for seniors Bishan - Sin Ming Residences: 732 units of three and four-room flats, with prices starting from $374,000 and $519,000 respectively. The BTO project in Bishan had the second-highest overall application rate at 3.0 times for 732 flats. Bukit Panjang - Petir Park Edge: 334 units of two-room flexi and four-room flats, priced from $110,000 and $320,000 respectively. Jurong West - Jurong Arcadia: 716 units with a variety of flat types, priced from $110,000 for two-room flexi to $431,000 for five-room flats. Woodlands - Woodlands Beacon and Urban Rise @ Woodlands: close to the Woodlands MRT Station, 1,247 units with prices ranging from $145,000 to $468,000. The five-room flats in Woodlands received the strongest demand at 6.9 times the available units. Other flat types in Woodlands also saw healthy demand. The appeal for Woodlands projects is attributed to their proximity to Woodlands MRT station and town centre. Some applicants also perceive these projects as equivalent to Plus flats under the new classification system to be implemented in the second half of 2024.

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3.2 Record-Breaking Surge in Million-Dollar HDB Flats Defies 2023's Inflation and Policy Shifts

In 2023, around 460 HDB resale flats were sold for $1 million or more, a 25% increase from 2022. The highest-priced resale flat was a four-room jumbo flat in Tiong Bahru, sold for $1.5 million. The second and third highest transactions were a five-room flat at Pinnacle@Duxton for $1.48 million and a five-room flat at City Vue @Henderson for $1.46 million. Geographical Distribution: Million-dollar transactions have not occurred in Choa Chu Kang, Jurong West, Sembawang, and Sengkang. The most transactions occurred in Bukit Merah, Toa Payoh, and Kallang/Whampoa. Government Policy & New Classification: Property cooling measures introduced in 2022 and the 15-month wait-out period for former private homeowners affected the HDB resale market. From the second half of 2024, HDB estates will be classified as Central, North, Northeast, West, and East regions. New BTO flats in the Central Region will have a 10-year MOP and be categorized as Plus and Prime, affecting buyer interest and potentially influencing the resale market Supply Dynamics: The supply of flats reaching the Minimum Occupation Period (MOP) was about 15,549 in 2023, significantly lower than in 2022. This number is expected to decline further in 2024. The proportion of flats reaching MOP in mature estates is set to increase, which might push up overall HDB resale prices.To balance demand and supply, the government increased the supply of Built-to-Order (BTO) flats, attracting buyers to the BTO market and slightly reducing demand for resale flats. Private Residential Projects: An estimated 38 new private residential project launches are expected in 2024, likely attracting many HDB upgraders.

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3.3 Occupancy limit for 4-room HDB flats increases to eight persons from Jan 22

The occupancy limit for four-room and larger HDB flats will be temporarily increased from six to eight unrelated persons, effective from January 22 until December 31, 2026. This change applies to flat owners, occupants, and tenants. The raised occupancy limits also apply to the living quarters of HDB commercial properties (equivalent to or larger than a four-room flat) and larger private residential properties of at least 90 sqm (968.4 sq ft). The intention behind this temporary relaxation is to meet the market demand for rental housing in Singapore and support local households looking to rent. This change will help reduce rental costs, optimize space usage, and benefit lower-income groups, students, foreign workers, some Singaporeans, and large families. The measure is a response to the sharp increase in residential rents since 2022, attributed to market tightness due to COVID-19 disruptions and strong rental demand. A gradual decline in rental demand is expected over the next three years as more households move into new homes, potentially easing the rental market's tightness. Property owners wishing to accommodate more occupants need to apply to HDB or URA, depending on the property type. Private residential owners must register their properties through URA’s e-services with a $20 administrative fee. Approximately 40,000 new public and private residential homes are expected to be completed this year, with an additional 100,000 entering the market over the next two years. These new units, however, will not be immediately available for rental due to the Minimum Occupation Period (MOP). The change could lead landlords to increase the median rent for larger HDB units. However, the limited supply of large HDB flats might mean a minimal impact on rents overall. The new measure might also inadvertently increase the resale prices of bigger condos and larger HDB flats, as they become more attractive for rental income due to higher tenant capacity

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