Prices of new leasehold condos in suburbs set to rise
Prices of new leasehold condos in suburbs set to rise. New 99-year leasehold condominiums in the suburbs, a segment bolstered by HDB upgraders, are set to rise even further in price.
Analysts predict that the 372-unit AMO Residence in Ang Mo Kio Avenue 1 and the 605-unit mixed development Lentor Modern will be launched at a median price of around $2,000 per sq ft, a price level more commonly seen in the prime and city fringe condo markets.
Prices of new leasehold condos. They cited increased construction costs and competitive bids for Government Land Sales sites in the suburbs. The AMO Residence Ang Mo Kio Avenue 1 site was sold for $381.4 million, or $1,118 per sq ft per plot ratio (psf ppr), while the Lentor Central site was sold for $784.1 million, or $1,204 psf ppr. “Based on the land price, the break-even point is between $1,900 and $2,000 per square foot. As a result, developers will need to sell above $2,000 per square foot to cover their costs “Ms Christine Sun, OrangeTee & Tie’s senior vice-president of research and analytics, stated as much.
Only freehold projects in the suburbs have yet to exceed the $2,000 psf median launch price. For example, Baywind Residences in Telok Kurau was launched in May of this year at a median price of $2,012 psf. Two freehold condos, The Lilium and The Gazania, were launched in May 2019 at a median price of $2,036 psf and $2,067 psf, respectively. The most recent new development in Ang Mo Kio was the freehold condo Lattice One, which opened in June 2019 and has a median unit price of $1,779 psf. For the first five months of this year, the median unit price of new freehold and leasehold non-landed private homes in Ang Mo Kio was $1,904 psf, while it was $1,792 psf in the overall suburbs.
According to analysts, AMO Residence and Lentor Modern may set a new price benchmark for the leasehold non-landed mass market in Ang Mo Kio and the suburbs. According to Mr Wong Xian Yang, head of research at Cushman & Wakefield, their launch performance will be “a litmus test of broad suburban demand at pricing levels above $2,000 psf, which are more commonly seen in the high-end and city fringe markets.” Given the proximity of these two projects to the city fringe, JLL’s senior director of research and consultancy, Mr Ong Teck Hui, noted that “it may not be surprising to see their prices trend closer to those in the Rest of Central Region (RCR) or city fringe area.”
According to URA Realis data as of June 29, the median price of new private homes in the city outskirts is $2,262 psf in the second quarter. “The RCR boundary is slightly further away from Lentor Modern than it is from AMO Residence. The projects are also located in popular residential areas and near MRT stations “According to Mr. Ong. He believes that the most likely buyers will be “HDB upgraders with larger budgets and private investors who can afford the $2,000 psf level.” Mr. Ong stated that the thriving private residential leasing market has contributed to the increased investment potential of suburban properties.
Suburban condominium and apartment rents increased the most in the first quarter of this year, rising 13.1% year on year. This was followed by a 12.4% year-on-year increase in the city outskirts and a 10.8% increase in the prime district. “The suburbs also led in terms of volume of leasing transactions of condos and apartments between the second quarter of 2021 and the first quarter of 2022, accounting for 36.5 percent of the market share, while the city fringe and prime district accounted for 32.7 percent and 30.8 percent, respectively,” Mr Ong said.
According to Edmund Tie’s head of research and consulting, Mr Lam Chern Woon, suburban condo demand has been boosted in the last two years by high liquidity, low interest rates, a robust HDB resale market, and the economic recovery. According to Ms Sun, the median unit price for new suburban launches is $1,900 to $2,100 psf, which translates to $1.68 million to $2.28 million for units ranging from 800 to 1,200 square feet.
Analysts estimate that the median price for new leasehold suburban condos is currently around $1.7 million. “Given the 30% increase in construction costs in the last two years, a higher launch price (for new suburban projects) in 2022 is not surprising,” said Huttons Asia CEO Mark Yip. However, he believes that HDB upgraders have muscle. “This year, four-room resale flats at new Build-To-Order projects in Ang Mo Kio have sold for more than $800,000 each. According to the most recent SingStat data, there are over 12,000 households in the Ang Mo Kio planning area with a monthly income of $14,000 or more.”
While the second quarter flash estimate for the overall private home price index surprised with a 3.2% increase after a 0.7% increase in the first quarter, some analysts questioned the sustainability of such price increases. He does, however, believe that HDB upgraders have muscle. “Four-room resale flats in new Build-To-Order developments in Ang Mo Kio have sold for more than $800,000 each this year. According to the most recent SingStat data, over 12,000 households in the Ang Mo Kio planning area earn $14,000 or more per month.”
While the flash estimate for the overall private home price index for the second quarter surprised with a 3.2 percent increase after a 0.7 percent increase in the first quarter, some analysts questioned the sustainability of such price increases. Strong demand for new launches on the city outskirts drove a 6% quarter-on-quarter increase in that sub-market in the second quarter, compared to a 2.7% drop the previous quarter. However, Mr Nicholas Mak, ERA Realty Network’s head of research and consultancy, warned of an impending clash between rising mortgage rates and recession fears, and developers unwilling to lower the prices of upcoming launches due to higher land, construction, and financing costs.
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