Huttons’ comments on URA and HDB 1Q 2021 numbers

Demand for properties was extremely strong in 1Q 2021. Total transactions stood at 8,100 which is the highest since 4Q 2012. Resale transactions accounted for 55.8% of the transactions as buyers who are unable to secure their choice unit at new launches went to the resale market. The resale market which included the landed segment probably drove much of the 3.3% price gains in 1Q 2021. For example, the 20-unit Eden was sold for $4,827 psf while a GCB in the Nassim area was sold for a record $4,005 psf.

3,457 uncompleted units were sold in 1Q 2021, slightly lesser than the 3,487 units sold in 3Q 2020. Sales in the CCR was at an eight-year high, aided by the robust sales at Midtown Modern, RV Altitude and The M.

This has driven down the uncompleted unsold units to 21,602 units. This is 44.1% lower than the peak of 36,839 uncompleted unsold units in 1Q 2019.

There is an urgency among developers to replenish their land bank. But the risks of fresh cooling measures have tempered price expectations and many new en-bloc sites have been relaunched at lower prices.

The supply of land is not sufficient in our view. Assuming all the en-bloc sites and sites on the Confirmed and Reserve List of the 1H 2021 GLS programme are sold, this will probably add up to around 7,000 units. It will not be enough to meet the average annual demand of 9,400 units in the last five years.

In view of the excellent first quarter numbers, we revised our forecast for developer sales to 9,000 to 10,000 units and price growth of up to 5% in 2021. Some of the price growth may come from the cost pressure in the construction industry which is facing a manpower crunch because of Covid-19. The latest ban on foreign workers from India will further add to the costs in 2021 and 2022.

HDB resale prices grew 3% in 1Q 2021 as demand continued to outstrip supply. Delays in completion in both HDB and private properties resulted in owners holding back the sale of their HDB flats. It has also pushed first time buyers to rent HDB flats while waiting for the completion of their properties.

The transacted volume of 7,581 resale flats is the highest first quarter sales since 2010. The buoyancy in the HDB resale market may encourage more upgraders to either the private residential or EC market in the next few quarters. However the delays in completion is a dampener on supply. On balance, we think the HDB resale market may see volume between 24,000 and 25,000 units and a price gain of up to 8% in 2021.

The 7.8% growth in HDB resale prices since the circuit breaker in 2Q 2020 has outpaced the price growth of 6.3% in the private market. Furthermore with more instances of cash over valuation happening, it has raised the question of affordability and whether there is a need for the Government to review the situation.

The upcoming May 2021 BTO launch is expected to see high interest in the Bukit Merah and Geylang flats. The Bukit Merah BTO is the first since the launch of Telok Blangah Parcview in 2013. The Geylang BTO is right next to the Macpherson MRT interchange. We can expect more than 10 applicants for each flat.