Updated from : The Straits Times, 18 Nov 2020
THE city fringe private residential market, commonly known as the rest of central region (RCR) is a diverse market comprising different planning areas. The sub-central market includes Geylang, Kallang and Marine Parade in the East, Bukit Merah and Outram in the South, Queenstown and Bukit Timah in the West and Bishan and Toa Payoh in the North.
The RCR also represents the mid-tier residential property market segment. In this report, the supply and demand of new homes in the RCR will be examined.
NEW HOMES SUPPLY
At first glance, it seemed that there was limited supply of new homes in the first nine months of this year. In this January to September period, there were only six residential projects launched in the RCR, 27 per cent of the 22 new launches islandwide.
This is significantly lower than the 19 RCR projects launched last year, which made up 34.5 per cent of the total number of residential projects launched in 2019.
However, the proportion of RCR units launched by developers has increased in 2020. From January to September 2020, 47.5 per cent of the 7,736 units released by developers for sale were located in the RCR.
By comparison, in the three years from 2017 to 2019, 39.2 per cent of the new homes released for sale were in the city fringe.
There was an absence of new residential launches in the RCR in Q2 2020, as developers were hesitant to launch any new project in an uncertain market, especially during the two-month “circuit breaker” which started in April 2020.
As the lockdown measures were lifted in June 2020, homebuyers’ confidence returned to the market, and there was pent-up supply and demand for new homes.
The increase in the number of city-fringe homes launched was most significant in Q3 2020 – 2,348 private housing units in the RCR were launched for sale, which was triple the launch volume in the second quarter.
In Q3 2020, five city-fringe condominiums were launched, including large projects such as Forett At Bukit Timah with 633 units and Penrose with 566 units.
CITY FRINGE NON-LANDED RESIDENTIAL PRICES
Geographically, the RCR is sandwiched between the core central region (CCR) and outside of central region (OCR).
The performance of the RCR residential property price trend for the past ten years was also between that of CCR and OCR.
From Q3 2010 to Q3 2020, the private non-landed housing price index of the RCR and OCR expanded
7.3 per cent and 32.8 per cent respectively, while the CCR price index contracted 1.2 per cent.
This trend was still present in the past twelve months. From Q3 2019 to Q3 2020, the rate of change in the private non-landed housing price index of the CCR, RCR and OCR were -6.2 per cent, -1.0 per cent and 4.2 per cent respectively.
A reason for this trend is that the price range of private housing in the RCR is between that of CCR and OCR properties. The RCR property price trend is influenced by both factors that influence prices in the CCR, as well as those that influence prices in the OCR.
In the twelve months from Q3 2019 to Q3 2020, prices of non-landed city fringe residential properties contracted for three consecutive quarters.
However, the RCR price index started to recover in this third quarter. The RCR property price index increased 2.5 per cent quarter-on-quarter (qoq), which was the highest rate of price growth among the three housing market segments in Q3 2020.
A contributing factor to the healthy growth of RCR property prices in Q3 2020 was the surge in the number of new housing units sold in the city fringe projects.
New homes in the primary market normally command higher prices than their resale counterparts. Real estate developers sold 1,850 private housing units in Q3 2020, which surpassed the figures in the other two market segments.
The CCR and OCR primary markets chalked up 286 units and 1,381 units sold respectively.
All the three market segments enjoyed an increase in sales in Q2 2020, partly due to pent-up demand and supply built up during the “circuit breaker” in Q2 2020.
However, the RCR primary market sales jumped by an astounding
176.1 per cent qoq, while sales in the CCR and OCR primary markets grew by 36.2 per cent and 65.8 per cent qoq respectively.
Based on the number of caveats lodged, the bestselling city-fringe residential projects in Q3 2020 are listed in the table (left, bottom). The top seller was Penrose, with the most attractive average transacted price among the five bestsellers.
With an increase in housing supply in the RCR, the take-up rate of new homes – defined as the number of units sold in the primary market over the number of units launched – contracted slightly in the first three quarters of 2020.
From January to September 2020, new home take-up rate for the RCR was 89.8 per cent, 0.7 percentage points lower than the take-up rate for 2019.
Compared to the other market segment, the rate of absorption for new launches in the RCR is in between those in the CCR at 74.6 per cent and those in the OCR at 111.7 per cent in 2020.
This trend has been consistent from 2017 till now, and is likely to continue in the future.
The supply of private residential projects in the city-fringe area will taper in the upcoming months as there are only five projects expected to be launched in the next 18 months.
All of these projects are relatively smaller, with less than 500 units each. Together, they would offer some 1,400 new homes in the RCR, which would make up about 22 per cent of the total number of housing units expected to be launched nationwide.
The limited supply of future new homes in the city fringe will give the market ample time to absorb current residential stock and provide support to prices.
Currently, there are two Government Land Sales (GLS) sites located in the RCR that are up for tender. The recently launched site at Northumberland Road is zoned residential with commercial use on the first storey, and can yield about 405 dwelling units.
The other site open for tender is located in Jalan Anak Bukit. This site will be developed into an Integrated Transport Hub, with an air-conditioned bus interchange and direct connection to Beauty World Mass Rapid Transit (MRT) station. It can potentially be built into 845 housing units with 20,000 square metres of commercial space.
This new mixed-use development would be a much-needed catalyst to rejuvenate the Beauty World neighbourhood.
In the coming years, improvements in the transport network will further enhance connectivity from city-fringe areas to both the city centre and the suburban areas.
Two out of three new MRT stations in the extension of the Circle Line are located in the RCR – namely, Keppel and Cantonment. This extension of the Circle Line is slated to complete by 2025 and will close the loop by connecting the existing Harbourfront to Marina Bay station.
Furthermore, the development of the new Thomson-East Coast line will also bring greater accessibility to the RCR, with around 11 out of 32 stations serving the city-fringe areas.
These new infrastructures would bring greater demand for housing in the RCR and would be the catalyst for price growth.