In Q1/2023, the median price for new non-landed private residences above or equal to $2,000 psf and up to 800 sq ft* have increased by 3.4% year-on-year (YoY) from $1.58 million in Q1/2022 to $1.63 million in Q1/2023. Notably, the Rest of Central Region (RCR) recorded an increase of 31.3% YoY from $1.34 million in Q1/2022 to $1.76 million in Q1/2023.
Similarly, the Outside Central Region (OCR) also saw a notable rise of 15.3% YoY for median new sales prices in the same size segment, reaching $1.39 million in Q1/2023 compared to 2022’s value of $1.21 million.
Buyers' preference is turning to smaller sized homes and are willing to pay a premium for these unit types. This trend was evident in both the RCR and OCR segments based on the transactions that took place in Q1/2023. Even prior to the pandemic, smaller unit sizes had been popular among HDB upgraders and investors due to their more palatable price quantum.
Furthermore, the proportion of same-sized units transacted against total new sales increased from 21.4% in Q1/2022 to 47% in Q1/2023. The proportion of OCR and RCR segments also recorded increases in the same time period, from 9.1% to 54.6% and from 18.5% to 26% respectively, closely mirroring the increase in median prices for new non-landed private residences above or equal to $2,000 psf and up to 800 sq ft*.
This rising popularity of smaller one- and two-bedroom units may be attributed to several factors, including their rental potential and proximity to key amenities like schools, malls and MRT stations. Examples such as The Botany at Dairy Farm and Sceneca Residence in the OCR demonstrate the strong demand for these unit types. In Sceneca Residence, out of the total 268 units, 161 units were sold at an average price of S$2,082 psf, with 72.7% sales being the smaller one- and two-bedroom units.
OUTLOOK
The behaviour of buyers in the new sales market, as highlighted in the Q4/2022 Residential Sales Briefing, hints of their yearning for new private residential properties and that the desire to own one is driven by budget rather than by the number of bedrooms. Therefore, when prices on a S$psf go up, for buyers with a fixed budget, all else holding constant, demand would cascade to smaller units.
Alan Cheong, Executive Director of Research at Savills Singapore comments, “With rising unit square feet prices, new sale demand is funnelling in towards the small format homes. This means buyers are now paying more to buy smaller sized homes.”
Land and construction costs have also been increasing for each subsequent project. Consequently, these higher costs will inevitably be passed on to the buyers, especially through the pricing of smaller format homes.
Marcus Loo, Chief Executive Officer at Savills Singapore, adds, “Buyers are driven more by their affordability and total investment quantum. Consequently, in the new sale market, we are seeing newer homeowners and investors committing to smaller sized homes as increases in land and construction costs have also pushed up the quantum of investments.”
Savills maintains its forecast for a 7% increase in private residential property prices for the year 2023.
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*We assume that an area of 800 sq ft would be sufficient to accommodate up to a 2-bedroom configuration in non-landed private residential units.
Read the full Savills Residential Sales Briefing Q1 2023 briefing here.