Over 1700 private residential units sold in March 2017

Sales of brand new residential apartments in the private segment jump over 80 percent to approximately 1,780 homes in March. This is in stark contrast with February’s 970 private residential units.

The jump in sales is amidst the backdrop of global uncertainties and geopolitical issues that is going on with the launch of two new residential projects in Singapore. This two private residential projects were the mastermind behind the increase in sales, they are: Park Place Residences and Grandeur Park Residences, both accounting of over 40 percent of the total transaction volume.

Spokesman for renowned local property agency, ERA said that the strong sale numbers were signs of increased market participation because of the the well-received launches of Grandeur Park Residences, Park Place Residences At PLQ and iNz Residence. The spokesperson also mention that the slight tweak to the cooling measures also gave a shot of optimism amongst buyers which also brought sales to The Santorini at Tampines

The top seller was obviously Grandeur Park Residences with its 484 units selling at an average price of $1,400 per square foot. Runner-up Park Place Residences had achieved a sales figure of 217 units at an average price of $1,800 per square foot. The surprise came with the third place, Parc Riviera with more than 160 units sold at an average price of $1,250 per square foot.

See the new Park Place Residences

In the other segments, executive condominiums did relatively well with a total number of 578 executive condominium units sold in March 2017. This is an increment of 76 percent compared to the 329 units that were sold in February. The first executive condominium project to open for sale this year was Inz Residences, the masterpiece of Qingjian Realty, sold a total number of 187 units at an average price of $775 per square foot. This figure topped the chart in March and was followed by Sol Acres, which had over 140 units sold at an average price of $790 per square foot. Lastly, The Visionaire, also by Qingjian Realty, with 43 units sold at a median price of $811 psf.

Just in case you’re new to the housing market in Singapore, Executive Condominiums (ECs) are a form of hybrid public housing with the HDB rules regulations in place for the initial purchasers and that these HDB restrictions will be completely lifted 10 years after an EC project has been completed.

There is also Hundred Palms Residences, upcoming executive condominium at Yio Chu Kang which is slated to open for sale later this year. Hundred Palms EC is seen by many to be very attractive because it is nestled in mature housing estate and has a pool of potential buyers sitting on the sidelines.

Should you rent or buy a property in Singapore?

A lot of us tend to think that purchase a property is always more advantageous than leasing one in the long run because servicing the monthly mortgage is similar to paying the monthly rent. This ideology of buying a property in Singapore is common because home ownership is always the preferred choice.

However, the huge jump in property prices in Singapore over the last decade is now affecting the affordability of many people when it comes to purchasing one. Since the introduction of the property measures back in 2014, the government has managed to contain the property prices and it has to so call stabilise the property prices ever since. The rental market particularly, has witness a more than significant reduction in the rates and volume, compared to the property prices. Based on the statistics given by the Urban Redevelopment Authority (URA), rental rates has declined over 4 percent in 2016, compared to the drop in the residential non-landed private property which was only 2.6 percent. This has got many of us thinking that there are many rental deals to pick up in the market right now, but is this true? Let us have a quick look.

Seaside Residences (Upcoming at Siglap)

We will take a actual scenario right now in the private residential property market and see if it is better to buy or rent the same property in Singapore. Let us use the Sturdee Residences and its vicinity projects for reference, we will use City Square Residences, both of which are within walking distance to Farrer Park MRT. See Sturdee Residences Floor Plans

Projection on Rental

Units at City Square Residences are currently commanding at an reasonable four dollars per square foot on a monthly basis, this would mean that for an average size of a two bedroom unit, it would roughly cost around $3,230 for rental per month. Taking into consideration that the rental increment on average is annualised at 3.5 percent over the next four years. The total rent amount to be paid is over $160,000 Singapore dollars.

Tenancy Monthly Rent Annual Rent Increase Total Annual Rent
Year 1 $3,230 $38,760
Year 2 $3,327 3 percent $39,924
Year 3 $3,427 3 percent $41,124
Year 4 $3,530 3 percent $42,360
Total rent over 4 years $162,168

Projection on Buying a Property

On the basis of the recent transactions with the same development, a similar unit was sold at over $1,500,000 Singapore Dollars. Let us assume that the property purchaser is able to a mortgage loan with a thirty year tenure with the loan amount of $1,200,000 Singapore Dollars.

The upfront costs would include a downpayment of $300,000, and a buyer’s stamp duty (BSD) of $39,600. This works out to a total of $339,600. Of course, a huge amount of the money that goes to buying property is the cost of borrowing. While this can be hard to predict, we have done a simulation based on two different interest rate scenarios:

1.5 percent 2 percent
Monthly repayment $4,141 $4,435
Annual mortgage payment $49,692 $53,220
Annual maintenance costs $3,600 $3,600
Property tax $1,000 $1,000
Total costs per year $54,292 $57,820
Total costs for 4 years $217,168 $231,280

It can be seen that after the first four years, the initial costs of ownership would sum up to be a total of over $210,000 (this amount excludes the upfront costs) and it is over $55,000 more than the costs of renting for the four years. On an annual basis, you would be paying over $13,000 lesser if you were to lease the apartment instead.

But consider the scenario where the person is looking to sell this condominium after 4 years. At this point, the remaining loan principal stands at around $1.07 million. Including all upfront costs and what he had paid for the 4 years of ownership, he would need to set a minimum selling price of $1.63 million to break even. This number is also excluding all miscellaneous payments of renovation costs, agent’s commissions and bank administrative fees.

This means that over 4 years, the owner would need to have his property appreciate by about 8.3 percent. What this implies is that if the annual growth in value of the home were to be less than two percent per year, or if interest rates were to rise to more than 1.5 percent, the homeowner might have been better off renting in the coming years.

But the financial aspect is only one factor out of many for most people deciding on whether to buy or rent. Short-term factors can include the possibility of moving to other countries due to work/family, financial commitment issues such as a retrenchment possibility, and even the near-term interest rate/rental/price outlook.

For those who are looking to buy a property and sell it within the next 5 to 10 years, the provided example may give you some food for thought, since you may find that the gain may not be as much as you wished for.