Mass Market New Home Prices May Hit Record Highs From Developer Costs

Rising costs and limited inventory could lead to new benchmark prices in the private residential market this year, with average prices for some suburban projects expected to approach or exceed the S$2,000 per square foot mark.

Land, construction, and material costs are on the rise, while the number of unsold units has decreased, especially in the Outside Central Region (OCR) or suburbs. Rising interest rates will also translate into higher financing costs for developers.

Leo Kwek, a senior property agent at AnjiaSG, said: “We do expect new benchmark prices for new launches in the suburbs because rising land costs are also a significant component of the selling price.”

AnjiaSG expects average prices for new launches in the Outside Central Region to range from S$1,900 to S$2,300 per square foot. New projects in the Core Central Region (CCR) could see average prices of S$2,800 to S$2,900 psf and above, while those in the Rest of Central Region (RCR) could be priced between S$2,400 and S$2,700 psf.

Average Unit Price of New Non-Landed Private Residential Sales

*Data as of May 22, 2022

Source: URA Realis

Goh Boo Kui, contracts director at local construction firm Unison Construction, told AnjiaSG that construction costs have generally soared by 20-30% compared to pre-COVID levels due to rising labour and material costs. Transportation costs have also increased. Kenneth Loo, executive director of Straits Construction, said that the construction cost for a suburban condominium with 400-500 units is now above S$400 per square foot (psf) of Gross Floor Area (GFA), depending on its finishing. This is up from S$250-300 psf before the pandemic.

Leo Kwek noted that at the same time, demand has been driven up by cash-rich buyers. However, Mr. Kwek added that a project needs unique attributes to achieve new benchmark prices, such as being part of an integrated development, being close to an MRT station, or located in a mature estate lacking new supply. Being in an area where HDB resale prices are high is also a factor.

According to AnjiaSG’s estimates, AMO Residence, a 99-year leasehold project on Ang Mo Kio Avenue 1 jointly developed by UOL Group, Singapore Land Group, and Kheng Leong, could be priced at an average of S$2,000 to S$2,100 psf. Lentor Modern, a 99-year leasehold private residential project with commercial space on the ground floor by GuocoLand, may see average prices of S$2,100 to S$2,200 psf. Both projects are expected to launch in the third quarter of 2022.

Sceneca Residence, a mixed-use project on Tanah Merah Kechil Link with 268 units, could be priced at S$1,900 to S$2,000 psf when it launches in the second half of 2022. The project is jointly developed by MCC Land, The Place Holdings, and Ekovest.

Analysts are divided on whether such price levels for suburban projects will face resistance from buyers. Local property agent Leo Kwek said the rise in property prices is due to cost-push inflation rather than being demand-led. “Some buyers may be priced out of the market,” he noted. Lee Nai Jia, Deputy Director of the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore, also believes some buyers might pull back. He added that those who can afford to take the risk might act, fearing they will be priced out in the future as prices rise. “Such buyers are already in the majority, and we will see more of this,” he said.

Leo Kwek said some buyers might turn to real estate assets as a hedge against inflation, while others might want to lock in current interest rates before they rise further. Mr. Kwek also pointed out that inventory in the OCR is very low, meaning buyers eagerly awaiting new launches have limited options. “If they are worried about affordability, they still have to opt for the OCR. Many may not qualify to buy an Executive Condominium (EC).”

According to AnjiaSG’s research data, the number of launched and unsold private residential units in the OCR was only 726 in April. This is lower than the 1,541 units in the CCR and 821 units in the RCR. As prices in the OCR trend upwards, this could push prices in other regions to follow suit. “Prices in the CCR and RCR will also slowly rise,” said Leo Kwek. Deputy Director Lee Nai Jia also expects a ripple effect.

A report by AnjiaSG noted that some upcoming launches in the OCR could start from S$2,200 psf. The report highlighted that before the pandemic, many new city-fringe condos in areas like Queenstown, Potong Pasir, and Eunos were priced at an average of around S$1,800 psf.

Mr. Kwek added: “The recent strong sales of two RCR projects after their launch—Piccadilly Grand and LIV@MB, with average prices of S$2,150 psf and S$2,387 psf respectively—show that there are still buyers willing to opt for units with average prices above S$2,000 psf.”

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