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Home sales achieve soft landing in 2019 with 2.7% price gain

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Developers should breathe easier as the private home market seems to have achieved a soft landing in 2019 as prices rose moderately amid higher sales, despite tough cooling measures imposed in 2018.

Singapore

DEVELOPERS should breathe easier as the private home market seems to have achieved a soft landing in 2019 as prices rose moderately amid higher sales, despite tough cooling measures imposed in 2018.

Demand for private homes remained resilient with the price index up 0.5 per cent in Q4 over the prior quarter, and higher than the 0.3 per cent flash estimate released on Jan 2, according to the latest data from the Urban Redevelopment Authority (URA) on Thursday.

For the full year, prices rose - for the third straight year - though at a slower 2.7 per cent versus the sizzling 7.9 per cent rise previously as the market headed to a soft landing following measures to rein in exuberance.

Prices climbed 1.1 per cent in 2017.

"We believe the government has successfully brought the housing market to a soft landing via the July 2018 measures," said Tricia Song, Colliers International head of research for Singapore.

"Based on our observation, there is no over-exuberance in the market and buyers remain very price sensitive, which will rein in developers' ability to hike prices sharply," she added.

In 2019, developers sold 9,912 units (excluding executive condominium or EC units), 12.7 per cent more than the 8,795 units in 2018. The highest number of private home sales was 22,197 in 2012.

Lee Sze Teck, Huttons Asia director (research), said the performance "is remarkable considering that there was a round of cooling measures in July 2018 and a slow start in the beginning of 2019".

"This shows the level of resilience in the market and the attractiveness of property as an investment," said Mr Lee.

While prices rose across the board for 2019, they were uneven in the fourth quarter. Landed property prices increased by 3.6 per cent, after rising 1 per cent in Q3, while non-landed properties dipped 0.3 per cent compared with a gain of 1.3 per cent in Q3.

For the whole of 2019, landed property price rose by 5.7 per cent, while those of non-landed properties went up 1.9 per cent, slower than the 6.3 per cent and 8.3 per cent in 2018.

Giving the Q4 breakdown by region, URA said prices of non-landed homes in the prime areas or core central region (CCR) went down 2.8 per cent after rising 2 per cent in Q3.

In the city fringe or rest of central region (RCR), prices of non-landed homes fell by 1.3 per cent after chalking up a gain of 1.3 per cent in Q3.

In the suburbs or outside central region (OCR), prices of non-landed homes appreciated 2.8 per cent; it was up 0.8 per cent in the previous quarter.

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URA's rental index for private homes fell 1 per cent versus up 0.1 per cent in Q3. For the whole of 2019, rentals of private residential properties increased by 1.4 per cent, faster than 0.6 per cent in 2018.

Analysts expect rents to continue gaining this year, driven by higher demand from an increasing number of tech companies expanding in Singapore.

Surprisingly, overall rents fell 1 per cent q-o-q even as the occupancy rates continue to rise to 94.5 per cent, the highest since Q1 2013 when the occupancy rate stood at 94.8 per cent, said Christine Li, Cushman & Wakefield, head of research, Singapore & Southeast Asia.

For the whole of 2019, rents rose by 1.4 per cent, she noted.

"Rents are expected to continue rising into 2020, driven by high occupancy rates and low levels of incoming supply in 2020. Only 6,294 private residential units are expected to be completed in 2020, this would be a historic low since available data from 1996," said Ms Li.

As Singapore transforms into a world-class digital economy and rolls out more technology initiatives, the city-state's labour pool is poised to be one of the most tech-savvy workforces in the world, said Christine Sun, head of research & consultancy at OrangeTee & Tie.

"We will be a highly favoured destination among tech firms that are looking to expand their digital footprint in the region," said Ms Sun.

"We may expect an increasing number of tech giants to grow their businesses here. Expats with the state-of-the-art technological know-how may be deployed to Singapore.

"This may boost the tenant quality which may spur rental demand for homes in the prime and city-fringe areas. We estimate that leasing volume may increase slightly this year to be around 91,000 to 94,000 units for the whole of 2020," said Ms Sun.

Developers launched 2,226 uncompleted private residential units (excluding executive condominium or EC units) for sale in Q4 from 3,628 in Q3. For the whole of 2019, they launched 11,345 compared with 8,769 in the previous year.

They sold 2,443 private homes (excluding ECs) in Q4 compared with 3,281 in Q3. Full year 2019 sales was 9,912 units.

There were 2,342 resale transactions in Q4, which accounted for 48 per cent of all sale transactions in the quarter. For 2019, there were 8,949 resale transactions, compared with 13,009 in 2018.

As at the end of 2019, there was a total supply of 49,173 uncompleted private home units (excluding ECs) in the pipeline with planning approvals, compared with 50,964 units in Q3. Of this, 30,162 units remained unsold at the end of 2019, lower than the 31,948 units in Q3.

After adding the supply of 3,192 EC units in the pipeline, there were 52,365 units in the pipeline with planning approvals. Of the EC units in the pipeline, 2,100 units remained unsold.

In total about 32,260 units (including ECs) remained unsold, down from 34,089 in Q3 and 35,649 a year ago.

Analysts are optimistic that the momentum will continue in 2020.

Lee Nai Jia, Knight Frank Singapore's head of research, said: "We expect the price index for all properties to go up by 2 to 5 per cent in 2020, and sales to be a shade higher than in 2019. We also foresee more purchases from HDB upgraders, with the HDB resale market showing more liquidity after the introduction of the higher income ceiling and improved subsidies for potential buyers."

Era Realty's Nicholas Mak, head of research & consultancy, said more HDB upgraders will continue to buy private homes.

In 2020, an estimated 26,100 new HDB flats will be eligible to be sold in the resale market when they reach their 5-year MOP (Minimum Occupation Period), he said.

"This potential new supply of resale HDB flats is 50 per cent greater than the annual average of 17,400 flats in the past 5 years from 2015 - 2019. As some of the owners of these HDB flats will seek to upgrade to private properties, it will increase private housing demand," said Mr Mak.