Do mass-market condominium projects still have a compelling appeal?

New launch benchmarks have driven up suburban condo prices, but they are expected to fall in 2024

Owning and living in private condominium units is an indication of upward mobility for many families. It’s also a way to build capital – just like the Singapore Dream. Many have taken the leap.

Over the years, the number of private condominiums has increased in Singapore.

According to the Singapore Department of Statistics, in 2022 there will be 237.500 households that live in condominiums and apartments. This is an increase of nearly 70% from 139.900 households in 2012.

Entry to the private housing market

Many house hunters start their search in the mass market segment, also known as Outside Central Region. Private housing prices in suburbs are more affordable compared to those on the city edge and in central locations.

The average price per square foot of private non-landed homes in the OCR in 2023 was S$2,145 in the primary market and S$1,383 at resale.

The price difference between the OCR, the Rest of Central Region and the Core Central Region was substantial – from 18 to 55 percent.

Families who want to upgrade their HDB flat to private housing can also benefit from the OCR segment.

The proportion of buyers who have an HDB address, as a proxy of HDB upgraders, accounted for a large portion of OCR new and resale non-landed private home sales from 2019 to 2023, with 45 percent.

Based on the caveats filed, this compares to 32 percent in the RCR during the same time period and 17 percent in the CCR.

Do higher prices for OCR condos make them less affordable?

Prices of non-landed OCR private homes have increased over the past few years. In 2023, the sub-market price index increased by 13.7% after a 9.3% increase in 2022.

The mass-market home buyers are the most sensitive to price increases. If prices rise without a pause, they may become more resistant. OCR prices are likely to rise at a slower pace, probably between 3 and 5 percent per year for the entire of 2024.

Last year, several OCR launches in the primary market reached a price point of S$2,000 per sq ft.

J’den, in Jurong East, achieved a benchmark average price greater than S$2,400 in November when it was launched. The project’s rapid sales also helped to boost OCR house prices in the 4th quarter of 2023.

What will be the impact of this on OCR launch prices by 2024?

It is unlikely that most projects will share the same qualities that made J’den so attractive to buyers.

In the short term, new OCR launch price will remain at an average of S$2,000 to S$2,100 per sq. ft.

What can S$2 Million buy in OCR?

Based on the number of homes sold at prices below S$2,000,000, it appears that OCR houses are still affordable for many households. In 2023, 66 percent of OCR non-landed home sales were below S$2,000,000. According to caveat data, this proportion is even higher in the OCR resale sector, with 88 percent.

The majority of the sales (34%) were in District 26, mainly in projects in Lentor Estate, while 30% were in District 23, in Bukit Panjang, Bukit Batok and the Bukit Batok Planning Area.

On the OCR resale property market, however, approximately 45 per cent (or 900-1,300 square feet) of non-landed homes sold for less than S$2million were between 600 and 800 square feet, with 17 per cent being units that ranged from 600 to 800. The District 19 (Serangoon Garden Hougang Punggol) has the highest proportion of OCR resale homes below S$2million, with 21.8 percent of sales.

Districts 17, 22, and 26 had the biggest differences in unit prices between new and resale apartments by 2023. In District 17, there were only four new transactions at The Shorefront.

The benchmark prices of The LakeGarden Residences & J’den were the main drivers behind the 70 percent price difference in Jurong. New launches in Lentor opened up a gap of 62 percent in average unit prices compared to resale units in District 26.

New launches versus resale

Resales are a good option for buyers with limited budgets who want larger units. Entry prices will be lower. They should consider whether they’re willing to accept a potential slower capital appreciation when buying older resale property.

A declining lease or deteriorating building conditions are two factors to be considered. If you buy in the resale marketplace, any subsequent sales will face competition from other homeowners who bought their homes directly from the developer.

Giverny Residences

Some buyers prefer to buy new units despite the higher price. New launches are not only more likely to have a positive capital gain, but also offer modern facilities and smart home features, along with a 99-year lease.

As of Feb 1, there are more than 1100 OCR new homes still on the market. Of these, approximately 45 percent are three-bedroom units and 26 percent are four-bedroom units. In 2024, there will be several OCR developments, including Lentoria and Lentor Mansion on Yuan Ching Road. Other projects include a mixed-development at Tampines Avenue 11 as well as the Champions Way Project.

OCR homes are still popular with the public, thanks to their affordability and variety. They have become a mainstay of the private housing market.

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