A CGS-CIMB research said the Singapore residential market outlook remained relatively stable in 2019. The research ‘Real Estate Day wrap-up’ said both property developers and property services companies expect the Singapore residential market to remain relatively stable with primary transaction volumes in 2019 to remain relatively flat compared to 2018 as lower take-up rates are offset by a higher number of launches.
The pace of new launches is expected to pick up from 2Q19 and this is one reason why Singapore residential market outlook will remain stable.
The report on Singapore residential market outlook pointed out that buying appetite from local as well as foreign buyers remains fairly robust. CGS-CIMB research said that its projection for primary sales volume to reach 9,000-10,000 units is unchanged, as is its expectation for private homes price performance to remain range-bound between 0% and 3% this year.
The report on Singapore residential market outlook also looked at common questions raised by investors and said that they were generally related to:
- outlook on the Singapore private residential market;
- updates on overseas expansion activities; and
- impact of competition from proptech.
“The report said that in terms of Singapore residential market outlook it expects volumes to be comparable to 2018 due to the sheer number of launches offsetting the lower reported take-up rates at multiple projects.
“En-bloc sellers could help to prop up the resale and primary markets as they look for replacement homes. Management also highlighted that on a relative basis, Singapore property prices remain competitive for China-based buyers which has been a source of strong demand.
With the large number of upcoming launches, competition between projects is expected to lead developers to increased commission for agents. However, according to management the impact on margins would not be significant as the commission payout structure from APAC to its agents remains constant.
In terms of expansion plans, management revealed that APAC aims to use a franchise model for countries where it does not have an established presence like Vietnam and Cambodia, while a direct ownership model would be preferred for countries where the ERA brand name is established like Indonesia and Thailand.
In Indonesia, the ERA franchisee has over 20 years of operating history with c.7,000 agents. In Thailand, APAC Realty has a 80% stake in ERA Thailand via a JV with the current owner-operator. For the rest of the ASEAN countries, Japan, Taiwan and Korea, APAC Realty will employ a franchise strategy for the moment.
In terms of competition from proptech companies, management believes that companies like PropertyGuru and 99.co have helped to improve agent productivity by expanding its reach and lowering the cost of advertising. Successful proptech companies have been using listing portals which also help buyers find and shortlist properties so this does not directly compete with the brokerage business of APAC.
Furthermore, management mentioned that agencies are unlikely to be disrupted since property purchases are large ticket items which require agents to help broker deals, schedule viewings and settle documentation.”
Referring to property consultant feeback, the report said that Singapore flexible office space market is estimated to be 1.4m sqft or c.1.5% of total office stock in Singapore.
“As a tenant of major office landlords, co-working operators lease structures are fairly similar to other office tenants in terms of lease tenure and rents. From the perspective of lease terms of end-tenants with co-working operators, the tenure can range from 1 month to 2-3 years, with an estimated average of 1-2 years.
“Demand for flexible space comes largely from start-ups, small companies as well as swing space appetite from major corporates. In terms of new supply, there are confirmed deals for a further 0.4-0.5m sqft of new flex space coming into the market, which may cause some short-term indigestion in the market place.”
The report said that given the changing business needs today, flexible space providers fulfil the office space needs of small businesses/start-ups or provide swing space for major corporations.
“The Singapore flexible office space market is estimated to be about 1.4m sqft or c.1.5% of total office stock. With about 0.4m-0.5m sqft of new flexible space expected to come onstream in the CBD area, some consolidation is anticipated in this segment.”
The report added that strong interest remains from investors in the property sector, and that overall, investors continue to see value in property developers given the still inexpensive valuations.
CGS-CIMB continues to see strong investor interest in property companies spanning across the value chain, andiots outlook for the Singapore private residential market remains stable while overseas diversification remains one of the key strategies.
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