Quick takes: Demand for private homes in Singapore stays weak

SINGAPORE government data released on Friday showed private home prices slipping 0.9 per cent in the second quarter compared to the preceding quarter. This was the seventh consecutive quarter of price decline. Private rentals fell 1.1 per cent in Q2.

HDB resale prices slipped 0.4 per cent - the eight straight quarter of price decline.

Prices of office space rose 0.3 per cent in Q2, but office rents eased 2.6 per cent. Prices of retail space fell 0.5 per cent in Q2, while retail rents dropped 0.5 per cent.

Here are some comments from property consultants:

Desmond Sim, Head of CBRE Research, Singapore & Southeast Asia, said:

"As expected, performance indicators in the retail and office sectors both fell quarter on quarter under current market conditions. CBRE expects the sentiment to maintain for the rest of the year."

"However, one notable point from this quarter in the residential sector was that the number of vacant completed residential apartments is at an all-time high."

"This is the possible result of a record number of sales inked three to four years ago between 2011 and the first half of 2013. At that time, there was a surge in land sales and liquidity was cheap. Sales volume peaked at 22,197 units in 2012."

"While there may be a lag between the time a project is completed and when occupants take residence of the units, the reality is that the market is still coping with an overwhelming number of completions."

"CBRE expects vacancy rates to inch up further for the second half of 2015 when a further estimated 11,618 units are expected to be completed, adding further pressure on rents. CBRE projects rents to drop 5-8 per cent for the whole of 2015."

Nicholas Mak, SLP International executive director, said:

"The latest (decline in the) HDB resale price index...is the smallest rate of quarterly decline since the HDB price index started to decrease in Q3 2013."

"On a half-yearly basis, the price index has fallen by 1.5 per cent in H1 2015. This is smaller than 2.9 per cent contraction in H1 2014."

"The HDB resale volume in Q2 2015 has displayed the most robust increase, both in terms of absolute number and percentage terms since the HDB resale price index started to weaken in 3Q 2013. In the second quarter of this year, 1,151 more HDB resale flats were transacted than in the previous quarter. This represents a 27.8 per cent q-o-q increase."

"The slower rate of price decline and the increase in resale transaction volume could be an indication that the HDB resale market is achieving a soft landing to reach the bottom of the price cycle. However, macro-market factors that caused the price weakness are still present. Hence, the HDB price index is still expected to continue to contract in the short term."

"We estimate that for the whole of 2015, the HDB resale price index is expected to contract by 1.5 to 3.5 per cent year on year. This range is lower than the 6 per cent y-o-y decline in 2014, which is another indication that the HDB resale market is approaching a soft landing."

Wong Xian Yang, OrangeTee's senior manager of research & consultancy, said:

"On a whole, overall buying demand remains weak with total private residential volumes showing a decline of 2.5 per cent on a y-o-y basis."

"Notably, resale market volumes have risen, with 1,827 units transacted in Q2 2015. This is the highest number of resale transactions in a quarter since the Total Debt Servicing Ratio framework (TDSR) was implemented in June 2013. The resale market has been soaking up buying demand, in the absence of new launches. Only 3,288 units were launched for sale in H1 2015, compared to 4,807 units launched in H1 2014."

"Occupancy rates fell to 92.1 per cent, falling 0.7 percentage points in Q2 2015, reversing Q1 2015 rise of 0.6 percentage points. The fall in occupancy rates can be attributed to the North-East region, where occupancy rates fell from 94.2 per cent to 88.2 per cent. This was due to the completion of several major projects in the region."

"As more units continue to enter into the market, the downward pressure on occupancy rates is expected to persist."

"The large impending supply in the pipeline could possibly increase vacancy rates from single digit to double digits in (the suburbs). Over the next two and a half years, 46,829 private residential units are expected to come into the market. 58 per cent of this incoming supply will be in the (suburbs)."

"Property owners may see a strain on their holding power as competition in the rental market intensifies. Units will take longer to be rented out and rents may not be sufficient to cover the monthly installments should interest rates rise."