Published Thu, Jul 09, 2020 · 5:50 am

THE Central Region of Singapore is a misnomer because it is situated in the southern, and not the central, part of Singapore. Its northern boundary touches the central water catchment area, near the centre of Singapore. The Central Region stretches from Marine Parade in the east to Queenstown in the west.
The Central Region can be divided into the Core Central Region (CCR) and the Rest of Central Region (RCR). The CCR covers the traditional prime residential districts 9, 10 and 11, Downtown Core and Sentosa Cove. It represents the high-end residential property market. The RCR, also known as the city-fringe area, represents the mid-tier housing market.
Overall real estate market sentiment in the Central Region started to dampen in March 2020 with the prevalent impact of the Covid-19 outbreak. However, the negative impact on different market segments varied within the Central Region itself.
Core Central Region (CCR)
Capital values of private non-landed housing started to weaken in the last quarter of 2019, before Covid-19 became a household word. The CCR non-landed residential price index decreased 2.8 per cent quarter on quarter (qoq) in Q4 2019.
In the following six months, the rate of price decline decelerated. In Q2 2020, the CCR price index slipped by just 0.1 per cent quarter on quarter. This could be attributed to underlying demand in the CCR primary market, even during the partial lockdown. In April and May 2020, developers sold 143 private residential units in the CCR, which was 3.6 per cent higher than the sales in the corresponding period in 2019.
The CCR primary market was relatively active in the first five months of this year. Eight out of the 14 private residential projects that were launched in January to May 2020 were located in the CCR.
They included Leedon Green, The Avenir, Van Holland, Dalvey Haus, The M, 19 Nassim and Kopar at Newton. One of the best sellers, The M, sold 380 of its 522 units during the weekend in February 2020 when it was launched.
In the second half of the year, homebuyers could expect between six and 10 new projects to be launched in the CCR. The bigger projects are Hyll on Holland with 319 units and an upcoming project by Hao Yuan Realty located on Bernam Street with an estimated 325 units. Two new launches can also be expected in the prime Cairnhill enclave, Cairnhill 16 and Klimt Cairnhill.
GuocoLand' s new development in the Bugis area is also expected to be launched in the second half of the year. Located next to Bugis MRT station, this project would add to the choice of housing in the colourful Bugis area.
Together, eight of the potential launches in the CCR are expected to yield around 2,100 housing units. This is very close to the 2,111 units already launched in the CCR in the first quarter of 2020.
Rest of Central Region (RCR)
The negative impact of the pandemic was also felt in the Rest of Central Region (RCR) property market. Based on data from URA Realis, the number of non-landed private housing units transacted fell 44 per cent quarter on quarter in Q2 2020 to 671 units.
The primary market held up better than the secondary market as most of the reduction in sales was in the latter. Primary market sales decreased 31 per cent quarter on quarter in the second quarter, while the sales in the secondary market in Q2 2020 was only one-third the volume in the preceding quarter.
Due to the lower demand, the decline in the RCR non-landed housing price index accelerated from a modest 0.5 per cent qoq fall in Q1 2020 to a 1.9 per cent contraction in the following quarter.
There was only one new launch in the city-fringe area in the first half of the year, Verticus by Soilbuild Group.
This 162-unit freehold development was launched in February 2020. With the " circuit breaker" in place during most of the second quarter, there was an absence of new launches in the RCR.
About eight new residential projects with an estimated 2,400 housing units are expected to be launched in the RCR in the coming months. The larger projects are located in the Geylang and Bukit Timah planning areas, such as Penrose by City Developments with 566 units and the 633-unit Forett @ Bukit Timah by Qingjian Realty. These new launches could benefit from the pent-up demand that had accumulated in the first half of 2020.
Foreign demand
Foreign buyers, including permanent residents in Singapore, are proportionally more active in the private housing market in the Central Region compared to the suburban areas. In H1 2020, about one-quarter of the transacted private dwelling units in the Central Region were acquired by non-Singaporeans.
The participation rate of foreign buyers was higher in the CCR than in the other parts of Singapore. Foreigners bought 28.2 per cent of the transacted CCR non-landed private housing units in the first six months of this year, compared to the 21.3 per cent of the non-landed private housing units sold in the RCR during the same period.
However, when the Covid-19 pandemic struck, foreign buyers were the first to beat a hasty retreat.
In Q1 2020, 24.8 per cent of the transacted non-landed private homes in the Central Region were acquired by foreign buyers.
In the following quarter, the proportion fell to 22.5 per cent. The slack was picked up by Singaporean buyers, whose share of property transactions increased to 77.5 per cent in Q2 2020.
The decrease in foreign demand was partly due to the risk aversion following the drastic sell-off in the global stock markets in March.
A second reason was the travel advisories and entry restrictions implemented by many governments globally to curb the spread of Covid-19.
For example, those who had visited China within a specified timeframe faced restrictions in entering Singapore.
Over the past year, Chinese citizens were the largest group of foreign homebuyers here. They made up 28 per cent of the foreign buyers of non-landed private residential properties in the CCR in Q4 2019.
The number of units bought by China nationals dropped from 84 units in Q4 2019 to 77 units in Q1 2020 and 30 units in Q2 2020.
Outlook
The partial lockdown in Singapore had reduced economic activities islandwide, including real estate transactions.
However, just like an electrical circuit breaker that can be reset to resume normal operation, the Singapore property market would steadily pick up its pace in the coming months.
Among the residential projects that are lined up to be launched, two-thirds of the projects are located in the Central Region. About 29 per cent and 33 per cent of the units in these upcoming launches are in the CCR and RCR respectively.
In 2019, only 13.4 per cent of the 11,345 units launched was in the CCR. In the upcoming launches, the overall proportion of units in the CCR will be more than double the 13.4 per cent last year.
Although foreign buyers had retreated to the sidelines in the second quarter, one should not be too quick to write them off.
Overall, about six out of every 10 private housing units launched in the next twelve months will be located in the Central Region.
Developers and their marketing agents will be exploring different methods to reach out to all potential buyers, both local and foreign.
If history is a guide, foreign buyers will return when the market condition stabilises and interesting new projects are launched.
There will be exciting days ahead in the Central Region real estate market.

• Nicholas Mak is head of the research & consultancy dept and Nguyen Thu Ha is an analyst, at ERA Realty

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