Thailand
Singapore private home prices slip for first time in 3 years but it may be too early to call market peak
FOR the first time in three years, the Urban Redevelopment Authority’s (URA) widely watched overall private-home price index has eased.
It contracted 0.4 per cent quarter on quarter (qoq) in the second quarter of this year, based on the latest flash estimate data released by URA on Monday (Jul 3), in sharp contrast with the 3.3 per cent qoq rise in the first quarter of 2023. URA said the private housing market is showing signs of moderation.
The price fall in Q2 was driven largely by a 2.6 per cent qoq slide in prices of non-landed private homes in the city fringe or Rest of Central Region (RCR).
Based on the flash estimate, overall private-home prices have risen 2.9 per cent between Q4 2022 and Q2 2023. Most property consultants, however, are not expecting a sharp price correction in the second half.
Edmund Tie’s head of research and consulting Lam Chern Woon said: “While price growth momentum softened across the board, non-landed home prices in the Core Central Region (CCR) and Outside Central Region (OCR) continued to eke out increases.
“It is too early to call the peak of the market cycle, and we expect property prices to trade sideways for the next one to two quarters.”
Observers acknowledged the negative factors that could precipitate a correction in prices. These include deterioration in the economy and jobs market, along with a dampening in private-home buying demand from foreigners, as well as some local investors being impacted by the hike in the Additional Buyer’s Stamp Duty (ABSD) rates under the Apr 27 cooling measures.
However, a sharp price correction is unlikely.
Tricia Song, head of research for South-east Asia at CBRE, said: “Barring widespread retrenchments and a sustained recession, a significant price correction is not expected given low unsold inventory and generally healthy household balance sheets.”
CBRE is still forecasting price growth of 3 per cent for private homes for full year 2023, slower than the 8.6 per cent increase last year in URA’s benchmark index, due mainly to a weaker economic outlook.
Nicholas Mak, chief research officer of Mogul.sg, said that with the URA’s overall private-home price index already having expanded by 3.3 per cent in Q1 2023, this will save it from ending the year in the red.
“Even in a pessimistic scenario, the index would still increase by 1 per cent to 3 per cent year on year. In an optimistic scenario, the index could grow by 4 per cent to 7 per cent in 2023.”
Most property consultants’ forecasts for the full-year 2023 increase are in the range of 3 per cent to 5 per cent.
They are also expecting developers to sell 6,500 to 8,000 private housing units (excluding executive condominium units) this year. The figure for last year was 7,099 units.
PropNex Realty chief executive officer Ismail Gafoor forecasts that the resale volume of private homes this year could be 12,000 to 13,000 units – down from the 14,026 units in 2022 – “as the high interest rates and tight resale stock continue to weigh on sales”.
On the flash estimate drop in URA’s Q2 price index, Knight Frank Singapore’s head of research Leonard Tay said: “It appears that the latest round of cooling measures in late April, combined with rising interest rates limiting affordability, may have reined in price growth as homebuyers purchasing for investment become price resistant and adopt a wait-and-see attitude from the sidelines before deciding on their next move.”
Foreign buying affected
“The measures also acutely affected foreign homebuyers with the doubling of the ABSD rate applicable to them, to 60 per cent,” Tay added.
Huttons Asia’s analysis of URA Realis data showed that following the cooling measures, the number of non-landed private homes bought by foreigners (excluding Singapore permanent residents or PRs) has fallen significantly, from 112 in April to 69 in May and 21 in June. Observers suggest that the final June figure may be higher, given that the Realis data was downloaded on Jul 3 with the latest transaction dated Jun 25.
Foreigners’ share of non-landed private-home purchases has also slipped from 6.2 per cent in April to 3.4 per cent in May and 2.9 per cent in June. Conversely, the buying share of PRs has risen from 14.3 per cent in April to 15.6 per cent in May and 17.1 per cent in June.
Huttons chief executive Mark Yip sees the luxury residential segment likely bearing the brunt of the cooling measures in the interim, with fewer purchases of S$10 million and above by foreigners. “This may pick up in the long run if some of the foreigners… become a PR in Singapore,” he added.
More time needed to see full effects of measures
“It may take a few more months before the full effects of the cooling measures can be observed,” said Yip.
In a Facebook post on Monday, National Development Minister Desmond Lee noted the drop in URA’s private-home price index “comes after several rounds of measures since December 2021, including the latest ABSD rate increases in April this year”.
From a year ago, the index is up 7.2 per cent based on the Q2 flash estimate.
URA said the sale transaction volume for Q2 2023 (up to mid-June) totalled 4,762 private housing units (across both primary and secondary markets). This was 16 per cent above the Q1 2023 figure of 4,121 units, amid a rise in the number of units launched for sale. Nevertheless, the latest figure is a drop of about 30 per cent from the 6,811 units transacted in Q2 2022.
Landed home prices up marginally
Prices of non-landed properties decreased by 0.5 per cent qoq in Q2 2023, a reversal from the 2.6 per cent increase in the previous quarter. Prices of landed properties rose marginally by 0.1 per cent in Q2 2023, significantly moderating from the 5.9 per cent increase in the previous quarter. The gain in landed home prices in Q2 2023 was the smallest in two years, URA said.
The 2.6 per cent drop in non-landed property prices in the city fringe or RCR in Q2 2023 comes after a rise of 4.4 per cent in the previous quarter. In the prime areas or CCR, non-landed property prices rose 0.3 per cent – a moderation from the 0.8 per cent increase in Q1 2023.
Similarly, in the OCR, the price increase moderated to 1.2 per cent from the 1.9 per cent increase in the previous quarter.
Some property consultants are not quite sure why prices in the RCR slipped 2.6 per cent qoq in Q2 2023 based on the flash estimate reading.
Knight Frank’s Tay said: “Perhaps this was due to the freehold Terra Hill project in Pasir Panjang, being the major launch in the RCR in Q1 2023, set an average selling price of over S$2,650 per square foot (psf), while the combination of three 99-year leasehold launches in Q2 2023 (Blossoms By The Park, Tembusu Grand and The Reserve Residences) had slightly lower average selling prices of around S$2,423 psf to S$2,465 psf at launch.”
Putting things into context, Lam of Edmund Tie said: “The correction in the RCR is because prices in this segment have risen disproportionately more than the other two regions over the past two years. Since the end of 2020, non-landed prices in RCR have risen by almost 30 per cent, compared with increases of 22.5 per cent for OCR and 10 per cent for CCR.”
Lam also noted that although the URA’s overall home price index declined for the first time in three years, the index has risen by 42 per cent since mid-2017. It is also 25.5 per cent higher than the previous market peak in Q3 2013. He expects price increases for the rest of this year to be moderate as homebuyers will be spoilt for choice amid the slew of upcoming launches.
Upcoming launches include Lentor Hills Residences, The Myst in Upper Bukit Timah, Pinetree Hill, Grand Dunman and The Lakegarden Residences along Yuan Ching Road.