Private preview of Watten House supports Prime new sales in 4Q23

• In November, Watten House (180 units) had a private preview. The Prime non-landed project sold 113 units at a median price of SGD 3,208 per sq ft in the quarter, cushioning the fall in Prime new sales volume, which remained dampened by subdued sentiment. Another top-selling project in the quarter was the previously launched Klimt Cairnhill (13 units sold at a median price of SGD 3,509 per sq ft).
• The resale volume of Prime homes also declined q-o-q, leading to a fall in the overall Prime market transaction volume. The April 2023 market cooling measures, economic uncertainties and elevated interest rates continued to dampen buyer demand, and sales volume also fell due to the typical year-end holiday lull when many travelled overseas.

Prime vacancy expands on rise in new completions in 2023

• Available information as of end-December showed that three Prime non-landed projects received Temporary Occupation Permits in 4Q23. These were 19 Nassim (101 units), Les Maisons Nassim (14 units) and Surrey 21 (10 units). Other projects that could complete in the quarter include Leedon Green (638 units), Van Holland (69 units), 15 Holland Hill (57 units) and The Iveria (51 units).
• The Prime vacancy rate only expanded marginally q-o-q despite the higher number of completions in 4Q23, as homeowners who progressively moved into their new homes completed in earlier quarters helped to mitigate the rate of expansion.

Steeper quarterly declines in both Prime rents and prices

• Prices of completed Prime non-landed homes declined for the second straight quarter and at a marginally faster q-o-q pace, as buyer demand was subdued due to weaker market sentiment and the typical seasonal lull.
• Prime rents fell at a faster q-o-q pace in 4Q23. Leasing demand softened as temporarily-displaced homeowners exited the leasing market and moved into their new homes, while more cautious hiring by businesses limited the inflow of foreigners. Some tenants also moved to less expensive areas due to elevated Prime rents. The market shifted in favour of tenants as supply surged amid weaker demand.

Outlook: Correction in Prime rents to persist before stabilising

• The Additional Buyer’s Stamp Duty hike in April 2023 has significantly reduced demand for Prime homes from foreign buyers. In the near term, demand for Prime homes is expected to be supported by local residents seeking value deals, thereby keeping prices firm.
• Landlords are foreseen to be more open to negotiations in a tenants’ market, though they are also perceptive of increased costs due to higher property taxes and elevated interest rates. This may mitigate a steeper fall in rents. Prime rents are forecast to continue correcting before eventually stabilising on the expected economic recovery in 2H24.