Steep price cuts await OCR homes as number of unsold units mount

Almost 10,000 mass-market condos are still unsold.

Property developers are scrambling to slash prices in order to attract homebuyers in the Outside Central Region (OCR), where the staggering number of unsold condominium units is dragging property prices to record lows.

Statistics from the Urban Redevelopment Authority (URA) showed that home prices in the OCR dropped 1.3% quarter-on-quarter in Q1, the only market segment to record a price contraction during the period. In contrast, prices of homes in the Core Central Region (CCR) rose by 0.3%, while prices in the Rest of Central Region (RCR) stayed flat.

“Due to the sheer number of properties in the OCR, in the form of unsold stock from developers and individual sellers, it is inevitable that prices in the OCR are facing greater downward pressure,” said Eugene Lim, key executive officer of ERA Realty.

Anthea To, Senior Associate Director of Research and Advisory of Colliers International, noted that the decline in OCR condo prices shows that the mass-market home segment will be headed for steeper price declines in coming quarters.

“The 1.3 per cent decline in the OCR index shows that the suburban market is under greater pressure, as the bulk of unsold units are in this segment, where buyers have lower affordability and are more price sensitive,” she said.

As of the first quarter, the number of unsold and uncompleted homes in the OCR stood at 9,331 units, compared to 5,231 homes in the CCR and 7,808 units in the RCR. Out of this number, a total of 2,162 mass-market units have been launched but are yet unsold.

The unabated slide in OCR home prices might lead to higher sales rates in the future, as the price gap between developers and prospective buyers narrows.

For instance, JLL’s Head of Research for Singapore Tay Huey Ying noted that developers moved 829 uncompleted mass market homes in Q1, up from 624 units in Q4 2015. This was despite releasing just 493 new units during the quarter.

“The pick-up in sales momentum in the OCR came on the back of an overall easing in prices, by 1.3% QoQ, in Q1 2016. Apart from the more attractive price levels, the Government’s reiteration that the cooling measures will not be lifted in the near future may also have prompted genuine homebuyers to re-enter the market, amid risk of future interest rate hikes,” she said.