AFTER rising 3.8 per cent in Q3, private home prices could grow more slowly in Q4 in the face of economic headwinds, the latest round of property cooling measures, and the year-end seasonal lull.

The increase in Q3, the 10th consecutive quarter of increasing prices, accelerated from 3.5 per cent in Q2 and was higher than the 3.4 per cent flash estimate by the Urban Redevelopment Authority (URA) earlier this month.

Lee Sze Teck, senior director (research) at Huttons, expects private home prices to grow by a more moderate 1 to 2 per cent in Q4, although he forecasts full-year price growth to clock at between 9 and 10 per cent. Prices of private homes jumped by 8.2 per cent in the first three quarters of the year.

CBRE’s head of research (South-east Asia), Tricia Song, said: “The new measures could engineer a soft landing, with new private home sales growth and price growth to cool in the next six to 12 months.” In late September, the government rolled out fresh property cooling measures to rein in demand and ensure prudent borrowing. However, Song does not expect a crash, citing healthy household balance sheets, limited unsold inventory and a supportive rental market.

Cushman & Wakefield’s head of research, Wong Xian Yang, also expects price growth to slow, but reckons developers are unlikely to cut prices at new launches. He said: “Unsold inventory remains low, while land acquisition and construction costs stay high. Developers are likely to pace their launch progress and recalibrate their marketing strategies in view of potentially lower demand due to higher interest rates and an economic slowdown.”

He estimates private home prices will grow 8 to 9 per cent this year, and then ease to 3 to 4 per cent next year.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

The higher private home prices in Q3 were led by prices of non-landed homes, which grew 4.4 per cent in Q3 after notching a 3.6 per cent gain in the previous quarter.

By region, prices of non-landed homes in the outside central region (OCR) grew by the most – at 7.5 per cent, thanks to major launches AMO Residence, Lentor Modern and Sky Eden@Bedok; these developments recorded brisk sales, even at benchmark prices. The median price of units sold at those projects in Q3 were all above S$2,100 per square foot (psf), as mass-market projects benefited from demand from HDB upgraders.

In comparison, prices of non-landed homes in the OCR rose 2.1 per cent in Q2.

In the core central region (CCR), prices of non-landed homes rose 2.3 per cent in Q3, versus 1.9 per cent in Q2; in the rest of central region (RCR), prices went up 2.8 per cent, slowing from 6.4 per cent in the previous quarter.

Lee noted that the narrowing price gap between the CCR and RCR has resulted in more buyers scooping up homes in the CCR. “As of Q3 2022, the estimated median (price) psf of new homes in the RCR stood at S$2,431, which is 13.5 per cent lower than the median (price) psf in the CCR. Developers sold 562 units in the CCR in Q3, despite launching only 240 units for sale,” he said.

Chief executive of PropNex Realty, Ismail Gafoor, said that foreign buyers are still looking to residential property in Singapore as a means of wealth preservation, amid the muscular Singapore dollar and stubborn inflation. Citing data from URA’s Realis platform, he said that foreign buyers accounted for about 12 per cent of non-landed new home sales in the CCR and RCR in Q3 – up from 9 per cent in Q2 and 6 per cent in Q1.

Meanwhile, prices of landed properties edged up 1.6 per cent in Q3, compared with the 2.9 per cent growth in the previous quarter.

Sales volumes declined for both new home sales and the resale market against the backdrop of rising interest rates and higher prices. Given the upcoming seasonal lull, analysts expect new sales volumes to drop in Q4, especially as both buyers and developers mull over the latest cooling measures. CBRE Research projects new home sales for 2022 to ease to around 8,000 units, down 39 per cent year on year, and resale volumes to fall to 14,000 units for the year, slumping 40 to 45 per cent.

Resale deals accounted for 60.5 per cent of all private homes sold in the third quarter. They numbered 3,719 units, down from 4,236 units transacted in the second quarter.

Developers sold 2,187 private homes (excluding executive condominiums or ECs) in Q3, as new sales volumes eased 8.8 per cent quarter-on-quarter. They also launched 1,455 units for sale, down from 1,956 units in the previous quarter. No EC units were launched for sale during the quarter, although developers moved 28 EC units that quarter.

JLL’s senior director for research and consultancy Ong Teck Hui highlighted that unsold inventory remained low at 15,777 units as at end Q3 2022, which is less than half the 37,799 units during the last pre-pandemic peak in Q1 2019. Of the 15,777 units, 15,677 were uncompleted.

“The market continues to face an undersupply, which in turn sustained price increases,” he said.

Developers are also turning more circumspect when it comes to snapping up sites. While the recent acquisition of residential sites at Lentor Central and Lentor Hills Road will add more supply into the market, “unsold inventory is expected to remain low in the short-term, as developers are cautious in acquiring sites, faced with high inflation, surging interest rates and macroeconomic uncertainties,” Ong added. “The mismatch in price expectations between developers and sellers also continues to affect the success rate of collective sale deals, which in turn affects future supply.”

The rental market remained robust as rents of private homes increased 8.6 per cent in Q3, versus 6.7 per cent in the previous quarter, in what analysts say is the fastest pace of growth since Q3 2007. The pandemic has derailed construction timelines, which has led to delays in the completion of housing projects.

Rents of landed properties shot up 10.9 per cent, compared with a 3.2 per cent increase in the previous quarter, while rents of non-landed properties rose 8.3 per cent. In Q2, rents of such homes went up 7.1 per cent. In the non-landed market, homes in the RCR registered the biggest rental hikes at 9.6 per cent, followed by the OCR and CCR at 8.8 per cent and 7 per cent respectively.

With this, rents have jumped 20.8 per cent in the first nine months of this year, said Leonard Tay, head of research at Knight Frank. “Rents in the private residential market will continue to increase in the remainder of 2022 and into 2023,” he said, noting the re-opening of borders, new policies to lure professional talent as well as locals on the hunt for replacement homes as factors supporting the market. In addition, the latest cooling measures saw the introduction of a 15 month wait-out period for those downgrading from private to HDB homes, which will prompt some to turn to the rental market.

Edmund Tie’s head of research and consulting, Lam Chern Woon, expects rental growth to come in at a more moderate pace next year, as the backlog of completion delays is cleared and supply increases.

According to the URA, 3,619 units (including ECs) will be completed in the last quarter of this year, with another 20,098 units slated for completion in 2023.

The URA said: “Around 28,800 units (including ECs) are expected to be completed in 2022 and 2023, which is close to three times the 10,400 units completed in 2020 and 2021. This will help to cater to housing needs in the immediate term”.