The number of unsold housing units in private homes is on the rise, ahead of a new launch in 2024.

Singapore’s unsold private home inventory has increased by 20 percent in the past two years. This trend is expected to continue into 2024 as new projects are brought to market.

It could be bad news for residential projects who are nearing a crucial sales deadline in the coming year or next. They will either have to sell almost all of their unsold units, or pay a huge stamp duty bill that can reach tens or even hundreds of millions of dollars.

According to the latest quarterly data of the Urban Redevelopment Authority the unsold stock, which includes unsold units from completed and uncompleted project, grew by 20.4 percent, from 14,333 in the fourth quarter 2021 to 17,262 in Q4 2023.

Wong Xian Yang is the head of Cushman & Wakefield’s research. He said that this was mainly because of a rapid increase in new launches, “coinciding with” cautious market demand. This is due to several rounds of cooling measures, and high financing costs.

In 2023, new home sales fell by 9.6 percent year-on-year (yoy), to 6,421 homes. In the same year, 7,551 new homes were built, representing a 66.8% yoy increase.

Tricia Song is CBRE’s South-east Asia head of research. She said that the government also increased the supply of private housing, with 9,235 homes to be provided from the confirmed list of sites for sale under the Government Land Sales programme in 2023. The confirmed list of sites is launched according to schedule regardless of demand.

The number of unsold private homes has increased.

In the meantime, a number of residential projects are likely to be approaching their crucial sales deadlines this year.

The data in URA’s Realis database shows that as of Mar 12, there are 180 unoccupied units in the 99 year leasehold Cuscaden Reserve, in District 10; 51 units in the 99 year leasehold The Landmark, in District 3; and 137 in the 99 year leasehold One Bernam, in District 2.

The Business Times has learned that some other projects, such as freehold Dalvey Haus and Leedon Green, both located in District 10, could also face the deadline of five years this year, with less than five units left unsold.

Developers of residential projects of five or more apartments are subject to a 40 percent Additional Buyer’s stamp duty (ABSD). Of this, 35 percent is remissionable if at least 90% of the units have been sold within five years. If not, the ABSD must be paid in full with interest.

Sites acquired between July 2018 – December 2021 will be subject to an ABSD of 25 %, with a 5 % non-remissable component. Prior to July 2018, land acquired is subjected to a 15% rate.

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As announced in Budget 2024, the ABSD clawback rate depends on how many unsold units are left. The Finance Minister Lawrence Wong said that this would give housing developers greater flexibility in selling units, while still ensuring housing supply is released quickly.

Take the Hit

Developers will often offer discounts between 10 and 15 percent to help clear out remaining units as the ABSD deadline for projects approaches.

Some marketing agents, for example, have been offering huge discounts in order to attract buyers at Cuscaden Reserve. A unit measuring 1,163 square feet is being sold for S$3.4m, a reduction of S$900k from the previous price. A 700 sq ft 1-bedder will also be sold for S$2.1m, a reduction of S$300k from its previous price of S$2.4m.

The two units are priced at S$2,950 per sq. ft. (psf), about 20 percent less than the average S$3,600 per sq. ft. of the 12 condos sold since the launch in September 2019.

The developers of Cuscaden Reserve will adjust their prices to increase sales.

Song, from CBRE, noted that in February, a UOL Group and Singapore Land joint venture won the Orchard Boulevard GLS plot for S$428.3 millions, or approximately S$1,617 per plot ratio. This is 32 per cent less than the Cuscaden reserve site, which had been awarded at S$2,377 per plot ratio in May 2018. Market watchers anticipate future Orchard Boulevard selling prices to exceed S$3,000 per square foot.

If the ABSD clawback is lower than 25%, it depends on the date the site was purchased. Some developers might choose to “take the ABSD” hit and gain more time in the market to sell remaining units.

Cuscaden Reserve is built on land that was acquired in May 2018. It is therefore subjected to the lower ABSD of 15% of the land purchase, or approximately S$61.5million.

Agents are generally not allowed to offer incentives or discounts to close a sale. He said that these discounts are handed down by developers who change their pricing strategies according to the market conditions.

It is not only for the projects in the most prestigious districts, but all over the island. Buyers still prefer to buy the units they like, not those that are on promotion.

This year, ABSD deadlines for projects with large numbers of unsold units are few.

Analysts believe that the increasing level of unsold inventories is unlikely to be a problem for these projects.

The increase in unsold units from Q4 2021’s trough is a positive sign that supply is finally catching up to demand (post pandemic). The 17,262 unsold units in Q4 are lower than the 23,885 unsold units in the 40 previous quarters, between Q1 2014 to Q4 2023.

The Q4 2023 figure is less than half the Q1 2019 peak of 37,799 units and only 60% of Q4 2014, which had 28,779 unsold units.

Developers quickly replenished land banks when the market bottomed out in Q2 2017. He said that this led to more residential projects being launched in 2018 and 2019 and an increase in the number of unsold homes in Q1 2019.

In the following years, unsold inventories fell to levels not seen for over a decade. The market was severely undersupplied as a result. Prices increased dramatically with the brisk demand.

The URA price index for private non-landed homes increased by only 8.6% between Q2 2017 to Q1 2019. Prices have risen by 33.7 percent since then.

If we take the average developer sales between 2014 and 2023 of 8,850 units a year, then the 17,262 unsold units are just over two years’ worth of stock.

Analysts predict that the stock of unsold private housing will continue to grow, but still remain lower than its previous peaks.

The amount of unsold stock in Q4 2024 is largely dependent on the sales volume and upcoming launches. Huttons data analytics estimates that the number of unsold units will be between 18,000 to 19,000 at end-2024, with more GLS land being sold in 2023. The number of unsold units is still far below the peak in Q1 2019 when there were almost 38,000 unsold units.

The underlying demand for goods and services is resilient. No financial recession is expected by 2024.

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