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85% sale of Pasir Ris 8 over weekend shows initial signs of 'asset bubble behaviour': DBS

Felicia Tan
Felicia Tan7/29/2021 04:19 PM GMT+08  • 4 min read
85% sale of Pasir Ris 8 over weekend shows initial signs of 'asset bubble behaviour': DBS
The mixed-use development launched over the weekend to huge fanfare, with close to 85% of the 487 units sold just within one day.
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DBS Group Research analysts Derek Tan, Rachel Tan, Dale Lai and Geraldine Wong, in a Singapore property flash note dated July 27, says they remain on close watch on potential cooling measures from the government after the strong sale performance of Pasir Ris 8 on July 24.

The mixed-use development launched over the weekend to huge fanfare, with close to 85% of the 487 units sold just within one day.

The project raised the price six times through the day with a 700 sq ft two-bedroom unit going for as high as $1.5 million, which translates to $2,100 psf, from $1.15 million for a similar-sized unit earlier in the day.

The initial launch price, according to marketing materials from the property, started from $1,400 psf.

“While such price increases through the course of the sale launch is a common occurrence in property launches, the robust increase and of this quantum within the launch weekend is seldom seen and we see this as initial signs of ‘asset bubble’ behaviour,” they write.

See also: CDL, Bukit Sembawang and UOL are analysts' top picks amid brisk March property sales

To the analysts, the robust price increase is not seen as a “positive” for the overall market, as there is the heightened risk of government cooling measures, they write.

That said, the strong interest in Pasir Ris 8 was anticipated due to its strategic location of being within walking distance to Pasir Ris MRT.

The residential component of Pasir Ris 8 sits on top of a 350,000 sq ft retail mall and bus interchange.

“With Pasir Ris 8 being able to achieve a strong sale pricing and sales performance, we wonder what kind of prices upcoming projects in Ang Mo Kio Avenue Avenue 1 and Lentor Central can achieve,” they write.

The government is likely to watch this with strong interest, say the analysts, with the Monetary Authority of Singapore (MAS) chief Ravi Menon highlighting the potential of levying property tax gain in recent media comments.

With the many indications of “bubbly behaviour”, with land prices hitting new records and strong responses from new launches, such sales momentum should be regarded with caution, given possible actions to cool the strong demand for property in a still-fragile economy recovery in the ongoing pandemic, note the analysts.

The next property to watch is the 448-unit The Watergardens at Canberra, where the rumoured price of $1,350 psf represents a 50% increase from the $900 psf at launch in 2016.

According to REALIS data from the Urban Redevelopment Authority (URA), the number of sub-sale transactions units for the 7M2021 hit a three-year high of 178 units.

As at 1H2021, the total number of sub-sale transactions stood higher than the total number of transactions in the whole of 2019 to 2020.

To the analysts, the overall numbers may remain small in 2021, representing only 1.0% of total transactions or 1.7% of resale transactions, they “believe this to be an important datapoint to watch out to see whether investors are taking the current robust sentiment to lock in their investments or if speculations are seeping back in the system”.

A sub-sale transaction refers to the sale of a unit by a seller who has signed an agreement to purchase the unit from a developer and sold it prior to the development’s temporary occupation permit (TOP).

On the trend, the analysts believe that the reduction in the seller stamp duty (SSD) and reduction in period from four years to three years from March 2017 may be a catalyst for prospective buyers or investors to return back to investing in uncompleted properties.

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In fact, the higher sub-sale transactions may imply that there are more investors snapping up the units as opposed to real “upgraders”.

“There is nothing wrong in this,” say the analysts, “but if the market continues on its current ‘red hot’ form, we do not rule that more buyers from 2017 may look to realising their investments in the coming months, especially when the average transaction value over the past few years has ranged $1.5 million to $1.6 million with units averaging lower than 950 sq ft”.

Photo: Samuel Isaac Chua / EdgeProp Singapore

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