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Home price fall eases but no rebound in sight

Q3 flash numbers show widening HDB-condo gap, worsening soft private mass market
Thursday, October 2, 2014 - 05:50
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Prices of private homes and HDB resale flats softened further in the third quarter, albeit at a slower rate for the private market. This, market players say, could be due to the holding power of private home owners and developers

[SINGAPORE] Prices of private homes and HDB resale flats softened further in the third quarter, albeit at a slower rate for the private market. This, market players say, could be due to the holding power of private home owners and developers.

Consultants added that the resulting stalemate does not mean private home prices have bottomed out, but could instead lead to a protracted and slow price correction.

Flash estimates released by the Urban Redevelopment Authority (URA) on Wednesday showed that the overall Private Residential Property Price Index, comprising both landed and non-landed homes, fell 0.6 per cent over the third quarter - after slipping one per cent in the preceding quarter. Prices have fallen 3.8 per cent over four consecutive quarters.

Resale HDB prices also showed continued weakness under the weight of the mortgage servicing ratio (MSR) that has shrunk the pool of potential buyers, particularly for larger units, while a continual supply of BTO (build-to-order) flats has soaked up some demand for resale flats.

Flash estimates from the HDB showed the resale price index falling 1.6 per cent in the third quarter, after slipping 1.4 per cent in the second quarter. Resale prices have fallen by 6.8 per cent since the third quarter of last year.

"With the widening of the price gap between HDB resale flats and private homes, HDB residents will find it more difficult to upgrade into the private mass market," said Ong Teck Hui, JLL national research director. "The weakened support from the HDB resale market will exacerbate the softening of the private mass market."

While the price decline in private homes in the third quarter has been most moderate since prices turned south in the fourth quarter of 2013, Mr Ong said it is not a sign of prices bottoming out, but a result of thin sales volumes and sellers maintaining their asking prices.

Chia Siew Chuin, director of research and advisory at Colliers International, also noted that the impasse between buyers and sellers has lent support to private home prices.

She added that given their current financial muscle and the belief that it will be some time before interest rates rise, sellers are in no hurry to lower their price expectations.

"Developers too have enjoyed the gains in the residential property price run-up from 2005," she added. "With the amount of profits made during the boom years, some of them have the financial power to maintain current prices or else offer moderate discounts."

At the same time, potential buyers are holding back in anticipation of lower prices down the road, consultants noted.

While the price fall for non-landed residential homes has moderated, the URA flash estimates showed that prices of landed properties extended a 1.7 per cent fall in the third quarter.

Mr Ong felt that this is because the pool of buyers for the more pricey landed properties has shrunk much more than that for private condos due to borrowing constraints under the total debt servicing ratio (TDSR).

Private non-landed homes in the Core Central Region saw prices slipping 0.9 per cent in Q3, after a 1.5 per cent fall in Q2, while prices in the Rest of Central Region slid 0.1 per cent, after a 0.4 per cent dip in the previous quarter. Prices in the Outside Central Region dipped 0.2 per cent, after a 0.9 per cent fall in the previous quarter.

URA's flash estimates are based on transaction prices from caveats lodged during the first 10 weeks of the quarter, supplemented by survey data on new units sold by developers. The figures will be updated four weeks later when the URA releases the full real estate statistics for the third quarter.

CBRE research head Desmond Sim believed the flash estimates might not have included units sold from Highline Residences and Seventy St Patrick's, which were launched in the later half of September. Highline Residences reportedly sold 140 units at around $1,900 per square foot (psf) while Seventy St Patrick's sold 96 units at $1,630 psf.

"By the time these units are added in the computation, it is probable that the quarter-on-quarter fall in the URA price index for Q3 2014 might be less than 0.6 per cent," he said.

Given the lending restrictions and fewer new project launches, the number of new homes sold in Q3 could have fallen to 1,500-1,600 units, down from 2,665 in Q2, based on CBRE estimates.

Consultants' estimates for the full year generally fall within a total 5-6 per cent drop in private home prices and a 5-8 per cent fall in HDB resale prices.

ERA Realty key executive officer Eugene Lim noted that the moderate price declines reflect some market resilience, underpinned by stable economic and employment fundamentals.

He added: "Also, the measures implemented by the government are designed to stabilise prices and not cause any huge sudden drop."