Battle Of The Districts: Price Growth And Capital Gains

PropNex Picks

March 23, 2022

Battle Of The Districts: Price Growth And Capital Gains

By PropNex Research and Editorial

The residential property market has had a stellar run in 2021, recovering in tandem with the economy as the world come to grips with the COVID-19 pandemic. There were many bright spots in the property market last year, one of the brightest was arguably the private residential resale market. For the whole of 2021, the resale market has sold 19,962 units – an 11-year high since 19,196 units were transacted in 2010.

The exuberance in the private resale market can be attributed to several factors such as ample liquidity in the market, low interest rates, and pent-up buying demand, including HDB upgraders who sought to capitalise on the booming HDB resale market – selling their flat and recycling the proceeds to buy a private home. The factors along with economic recovery and concerns over construction delays of new projects had contributed to the bumper sales achieved in 2021.

Bolstered by the strong transaction volumes, home prices caught wind in the sails and booked a 10.6% growth in 2021 - the steepest year-on-year increase since 2010 where values rose by 17.6%. The rising land cost had also contributed to the firmer home values, with new launches setting benchmark prices.

However, the price increase was uneven island-wide due to differences in locational attributes, with certain districts posting greater gains while some lagged behind. Surprisingly, the districts that had a good showing in 2021 were not located in the Core Central Region (CCR).

Diagram 1: 2021 vs 2020: Districts with the fastest pace of price growth over the past year

Taking the average transacted prices of resale transactions by district, PropNex research has identified five of the fastest growing districts where prices had risen the fastest from 2020 to 2021.

The districts that achieved the highest price increase over the past year were Districts 4, 6, 7, 10, 14, 15 and 21 (see Diagram 1). Based on caveats lodged, District 6 (High Street, Beach Road) emerged as the top gainer with the average resale price for non-landed homes jumping by 23.9% year-on-year (YOY) in 2021. While the growth rate is impressive, there were just five caveats lodged in 2021 and one done in 2020 – the thin volume of transactions meant that the price growth may not be as representative.

Apart from District 6, the other districts occupying the second to sixth spots posted YOY growth rates ranging from 8% to 20% in 2021. Interestingly, most of the districts on the list, except District 10, are located in the city fringe areas or Rest of Central Region (RCR). This is hardly surprising as RCR is favoured by many owner-occupiers and investors given the location near to the city and relatively attractive entry prices, compared to CCR homes.

Taking a 10-year period of assessment, the ranking of districts with the fastest pace of average resale price growth changes quite a bit (see Diagram 2).

Diagram 2: 2021 vs 2011: Districts with the fastest pace of price growth in past 10 years

Once more, District 6 topped the list, recording a 1004% price increase from 2011 to 2021. However, the thin transaction volume may have inadvertently skewed pricing. In second spot was District 7 (again) with a healthy 103% average price growth over 10 years. The rest of the pack featured Districts 21, 2, 20, and 26 which saw average resale values grew by 27% to 36% from 2011 to 2021.

Districts in the suburbs or the Outside Central Region (OCR), namely district 20 and 26, beat popular districts such as district 10 and 11 (which did not make the list), posting impressive growth rates of 29.4% and 27% respectively. While the improved infrastructure and transport networks could have helped to prop up values in these districts, the rising land cost and higher prices at new launches would also have given resale prices a lift.

Most profitable districts over the last 10 years

The rate of price growth as a percentage change in values, however, may not accurately reflect capital gains. For this purpose, PropNex research evaluated the average resale prices on an absolute quantum basis to identify the most profitable districts over the last 10 years (see Diagram 3).

Diagram 3: 2021 vs 2011: Districts with highest capital gains in the last 10 years

Besides District 6 which has been identified as an outlier previously, the top most profitable areas from 2011 to 2021 included Districts 2, 7, 10, 9, and 21. All these districts were either located in the city centre or city fringe.

Based on the analysis, homeowners in District 7 who have held on to their properties since 2011 and sold them in 2021 made an average capital gain of nearly $1.2 million. This was followed by city homes in Districts 10, 9, and 2 which garnered average capital gains of more than $735,000, $635,000 and $468,000 respectively over the same period.

Key takeaways and what can homeowners expect in 2022?

Looking at the study, it seems to suggest that resale homes in the city fringe, such as in Districts 7 and 21 tend to enjoy better prospects in terms of price growth and capital gains – as they are featured across all three analyses done by PropNex research (Diagrams 1 – 3). It is possible that recent new launches in Districts 7 and 21 had helped to support resale values. Some of the new projects put on the market in those districts include The M, Midtown Bay, Midtown Modern, The Linq @ Beauty World, Forett At Bukit Timah and Ki Residences At Brookvale.

RCR homes, as well as those in the OCR are expected to remain popular with Singapore home buyers, especially HDB upgraders. With the December 2021 cooling measures exerting pressure on foreigners and investors, Singapore buyers may potentially find good buying opportunities in the CCR, which tend to appeal to foreign buyers. To this end, buyers who have a tighter budget may want to consider resale properties as the new launch prices are expected to stay fairly elevated owing to the rising land price and construction costs. Looking ahead, PropNex projects that overall private home prices to rise by 3% to 5% for the whole of 2022 – substantially slower than the 10.6% jump in 2021.