Private home prices stage first full-year growth since 2013: URA flash estimates

THE Urban Redevelopment Authority's (URA) widely watched private residential property price index rose 0.7 per cent in the fourth quarter of 2017 over the preceding quarter, based on a flash estimate released by the authority on Tuesday morning.

This is the same as the 0.7 per cent quarter-on-quarter (q-o-q) increase posted by the index in the third quarter of 2017.

For the whole of 2017, prices appreciated one per cent - contrasting with the 3.1 per cent decline in 2016.

In the fourth quarter, prices of non-landed private homes rose 0.7 per cent over the previous quarter, compared with a 0.6 per cent gain in the third quarter.

However, prices of landed homes rose at a slower pace of 0.6 per cent in the fourth quarter, following a 1.2 per cent hike in the third quarter.

Giving a breakdown of non-landed private home prices by region in the fourth quarter, the URA said that prices rose by 1.6 per cent in the prime areas or Core Central Region (CCR); this was a steeper gain compared with the 0.1 per cent increase in the previous quarter.

However, prices in the city fringe or Rest of Central Region (RCR) increased by 0.2 per cent, a slower pace of increase compared with the 0.5 per cent hike in the previous quarter. Prices in the suburbs or Outside Central Region (OCR) also rose at a slower pace of 0.6 per cent, after posting a 0.8 per cent increase in the previous quarter.

For the whole of 2017, prices in CCR, RCR and OCR rose 0.8 per cent, 1.6 per cent and 1.2 per cent respectively.

The flash estimates are compiled based on transaction prices given in contracts submitted for stamp duty payment and data on units sold by developers up till mid-December. The statistics will be updated on Jan 26, 2018 when the URA releases its full set of real estate statistics for the fourth quarter of 2017. Past data have shown that the difference between the quarterly price changes indicated by the flash estimate and the actual price changes could be significant when the change is small.

"The public is advised to interpret the flash estimates with caution," the URA said.

Property consultants note that the increase in private home prices last year was driven by higher sales volumes of private homes in both the primary and secondary markets amid an improvement in sentiment, especially after the government tweaked the seller's stamp duty (SSD) in March last year.

"There was pent-up demand for private homes from owner occupiers as well as investors. Most of these buyers had been on the sidelines waiting for the cooling measures to be lifted but decided not to wait further," said Edmund Tie & Co research head Lee Nai Jia.

JLL national director Ong Teck Hui noted that "prices are recovering at a moderate pace so far and not sharply, which could also be indicative of the price momentum going forward".

"In both the third and fourth quarters of 2017, the indices for all sub-markets were in positive territory, reflective of a broad-based recovery. These trends confirm that price recovery in the private residential market is likely to be on a firm footing," he added.

Property analysts expect private home prices to continue appreciating this year, on the back of the higher land prices paid by developers in 2017 at both state tenders as well as private sector-led collective sales. This will result in developers wanting to launch their projects on these sites at higher prices.

PropNex Realty chief executive Ismail Gafoor predicts a 6 to 8 per cent increase in URA's private home price index this year. He envisages "steady growth of up to 3 per cent" in the first half, with a bigger increase of up to 5 per cent in the second half.

"So we're looking at a total increase in the index of up to 8 per cent in 2018 - mainly contributed by higher price points at new launches, which will in turn lift overall selling prices of the private residential resale market as well as developers' existing launches moving forward".

Dr Lee of Edmund Tie & Co is predicting a 4 to 8 per cent increase in URA's private home price index this year, citing among other factors, demand for replacement private homes from those who have sold their homes through en bloc sales. "Notwithstanding this, the caution against over-exuberance sounded by the government may temper the increase in prices."

However, ERA Realty Network key executive officer Eugene Lim expects URA's private home price index to post only a moderate increase of 1-2 per cent this year. He noted that except for the tweak to the seller's stamp duty, all of the other property cooling measures as well as the strict property financing rules remain unchanged.

"Therefore we expect the price increase to be gradual in order to be sustainable. We're not in a season of runaway price hikes; buyers remain price sensitive and selective. And, as buyers are not short of choices, sellers who overprice their properties are likely to drive these buyers to other sellers who are more realistic."

Mr Lim added: "Going forward, we do not expect any of the cooling measures to be removed or tweaked - as prices are already increasing with these measures still in place."