Private property price growth eases in Q3 following cooling measures

Singapore

PRIVATE homes prices grew at a slower pace in the third quarter as the latest property cooling measures kicked in, although the top end of the market proved to be more resilient.

Prices edged up 0.5 per cent - in line with earlier flash estimates - in Q3, compared to an increase of 3.4 per cent in the previous quarter, according to the latest report from the Urban Redevelopment Authority (URA).

Market watchers pointed to disruptions during the quarter, namely the July 6 cooling measures which brought higher additional buyer's stamp duty (ABSD) and tighter loan-to-value limits, as well as the Hungry Ghost festival which generally sees slower sales.

In the third quarter, prices of landed properties - still seen as relatively attractive by some buyers - rose by 2.3 per cent in Q3, easing from 4.1 per cent growth in Q2.

Prices of non-landed properties remained unchanged in Q3, versus a 3.2 per cent increase in Q2.

By location, however, it was a mixed bag. Prices of non-landed homes in the core central region (CCR) rose by 1.3 per cent, up from a 0.9 per cent increase in the previous quarter.

Prices of non-landed properties in the rest of the central region (RCR) fell by 1.3 per cent, versus an increase of 5.6 per cent previously. Outside the central region (OCR), prices of non-landed homes dipped 0.1 per cent, reversing from the 3 per cent increase in the second quarter.

Ong Teck Hui, JLL senior director (research & consultancy) noted that the CCR recorded launches of only 17 non-landed units during the quarter, and the dearth of new supply resulted in buyers resorting to the CCR secondary market, which accounted for 91 per cent of non-landed transactions during the quarter.

He said: "The low sales volume of non-landed units in CCR - 481 units - shows that units for sale in the market are not abundant and sellers may still be firm in their price expectations."

Huttons Asia research head Lee Sze Teck said: "Many were expecting the CCR to be hit hard by the cooling measures because of more punitive taxes on foreigners.

"However, the proportion of foreigners buying residential properties in Districts 9 and 10 rose to 18 per cent in Q3, "probably due to foreigners finding Singapore a value proposition compared to other cities."

Analysts also cited other factors such as high net worth buyers being less affected by the revised ABSD and reduced loan quantums, as well as demand from home-owners who had sold their homes in collective sales.

In the third quarter, 2,672 resale units were sold, slumping by over 40 per cent from 4,700 units in the second quarter.

"In the resale market, sellers held on to their prices and buyers were not as forthcoming in the take-up of the resale properties," said PropNex Realty chief Ismail Gafoor. This could change in Q4, he said, as those whose homes have gone en bloc hunt for replacements.

Developers sold 3,012 private residential units (excluding ECs) in Q3, with 81 sub-sale units making up the balance. The surge in sales of new homes was fuelled by panic-buying on July 5 before the cooling measures kicked in as an estimated 1,000 homes were sold that night.

Top selling projects in Q3 included Riverfront Residences, Park Colonial, Stirling Residences, Jadescape and The Tre Ver, according to Huttons.

Rentals of private residential properties edged up by 0.3 per cent in Q3, compared with 1 per cent in the previous quarter, URA data showed. Rentals of landed properties rose by 0.5 per cent; rentals of non-landed properties were up 0.3 per cent.

The vacancy rate of completed private residential units (excluding ECs) decreased by 0.3 percentage point to a 41/2-year low of 6.8 per cent.

At the end of the quarter, there were 50,330 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals, compared to 45,003 units in the previous quarter. Of these, 30,467 units remained unsold at the end of Q3, up from 26,943 units in Q2.

After adding the supply of 2,834 EC units, there were 53,164 units in the pipeline with planning approvals. Of the EC units, 828 units remained unsold. There were 31,295 unsold units with planning approvals, up from 26,961 units as at the end of the second quarter.

In addition, there is a potential supply of 14,200 units (including ECs) from Government Land Sales sites and awarded en-bloc sale sites that have not been granted planning approvals yet. A large part of the 14,200 units could be made available for sale next year, and will be completed by 2022 onwards, the URA said.

Christine Li, senior director (research) at Cushman & Wakefield, said: "Price growth is still expected to remain positive, albeit at a much slower upward trajectory."

Tricia Song, head of research at Colliers International, reckons there are still genuine buyers seeking suitable and competitively-priced units.

ERA Realty expects price growth for 2018 to be in the range of 8-8.5 per cent, while real estate consultancy ZACD Group expects residential prices to expand by 6.5 per cent to 8.5 per cent this year.

Some analysts also reckon that URA's revised guidelines which boosts the minimum average unit size of private flats and condominiums to 85 square metres (sq m) from Jan 17 next year will spark demand for shoe-box units. Nine designated areas will have an even stricter threshold of 100 sq m threshold.

"Demand for these units are currently still strong and a reduced future supply will likely push up prices of such homes in the future," said Christine Sun, head of research & consultancy at OrangeTee & Tie. "We have revised the expected new home sales volume upwards to between 8,500 and 9,500 units for the full-year."

Lee Nai Jia, senior director and head of research at Knight Frank Singapore, said: "With the latest guidelines, we expect greater demand for one-bedroom units. In the middle-to-long term, home prices - especially in the nine designated areas - will appreciate faster as supply growth in the area will be capped by the guidelines."

In the HDB resale market, the number of resale flats increased in the third quarter as prices declined slightly, according to a report released by the Housing Board.

The number of HDB resale flats sold rose by nearly 19 per cent, while the resale price index dipped by 0.1 per cent from 131.7 in the second quarter to 131.6.

There were 7,063 resale flat transactions in the third quarter, up from 5,941 in the second quarter. This translates to a 21.6 per cent increase year on year.