Q1 price growth of private homes moderates to 0.7% after cooling measures: URA

PRIVATE home prices grew at a slower pace in the first quarter of the year after December’s cooling measures, even as they rose for an eighth consecutive quarter to hit a historical high.

According to data from the Urban Redevelopment Authority (URA), prices of private homes were up by 0.7 per cent quarter on quarter in Q1 2022, moderating significantly from the 5 per cent notched in Q4 2021. At 0.7 per cent, this was marginally higher than URA’s flash estimate of 0.4 per cent earlier this month.

“Private home prices are 13.1 per cent higher than the previous peak in Q3 2013,” noted Huttons’ senior director (research) Lee Sze Teck. Nonetheless, Q1 registered the slowest quarterly increase since the height of the pandemic in Q2 2020.

Ismail Gafoor, chief of PropNex Realty, said: “The slower price growth and pullback in sales volume in Q1 2022 did not come as a surprise, given the fresh property curbs imposed in December. The Additional Buyer’s Stamp Duty (ABSD) hikes on foreign buyers and property investors, in particular, likely held back some demand for new and resale homes.”

As they digested the cooling measures, developers also introduced fewer project launches in the first quarter in view of the Chinese New Year festive period.

Gafoor went on to note that the “modest performance” comes on the back of rising interest rates and inflation, as well as geopolitical tensions, which should give rise to a more sustainable price growth this year. PropNex expects private home prices to increase by between 3 and 5 per cent this year, after a blistering 10.6 per cent growth in 2021.

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OrangeTee & Tie’s senior vice-president (research & analytics) Christine Sun also expects private home prices to continue to rise this year on the back of cost pressures, such as escalating energy, steel, raw material and shipping costs.

Data released by URA on Friday (Apr 22) morning showed that the 0.7 per cent increase in Q1 was led by landed properties, with prices for the segment rising by 4.2 per cent, compared with 3.9 per cent in the prior quarter. This was attributed to sales at new launch Belgravia Ace, along with resale tractions and limited supply.

On the other hand, prices of non-landed properties dipped by 0.3 per cent, after chalking up gains of 5.3 per cent in Q4 2021.

In the Core Central Region (CCR), prices of non-landed properties pulled back by 0.1 per cent, after a 2.7 per cent increase in the previous quarter.

Prices of non-landed homes in the Rest of Central Region (RCR) fell by a sharper 2.7 per cent, after jumping 6.7 per cent in Q4 2021 where the launch of Canninghill Piers was well received. However, analysts said sales in the RCR will likely pick up, thanks to upcoming launches such as Piccadilly Grand at Northumberland Road and LIV@MB at Arthur Road.

Prices in the Outside Central Region (OCR) bucked the trend with a gain of 2.2 per cent, albeit slowing from 5.7 per cent previously, as owner-occupiers are less affected by the latest cooling measures.

Lam Chern Woon, head of research at Edmund Tie, flagged that the impact of the cooling measures on foreign demand in the CCR appears “relatively muted”, with the proportion of foreigners purchasing non-landed homes in the CCR dipping to 9 per cent in the first few months of this year, from 9.1 per cent in 2021.

Lam said: “This suggests that keen foreign interest remains for homes in the prime districts of Singapore, although it has diluted for the fringe and suburban homes due to lower familiarity.”

During the first quarter, developers launched 613 uncompleted private homes (excluding executive condominiums or ECs) for sale as they took a wait-and-see approach in the wake of the cooling measures - a fraction of the 2,275 units launched in the previous quarter.

In the quarter under review, developers moved 1,825 private homes, nearly 40 per cent lower than the 3,018 units sold in Q4 2021. No ECs were launched for sale in Q1, but developers sold 131 EC units from previous launches.

Analysts generally expect developers to sell 9,000 to 10,000 new private homes this year, down from over 13,000 units in 2021, on the back of a limited pipeline of launches.

In the resale market, there were 3,377 resale transactions in Q1 2022, down nearly 29 per cent from 4,748 units in Q4 2021. Meanwhile, supply remains low, with 14,087 uncompleted unsold private homes (excluding ECs) and 1,878 unsold EC units at the end of the first quarter.

CBRE’s head of research, Tricia Song, expects that upcoming tenders of Government Land Sales (GLS) sites will “continue to see strong interest and stiff competition” from developers. “Some developers may still turn to private en bloc sites selectively, if they fail to secure GLS sites or do not find the available GLS sites attractive,” she added.

The URA data also showed that rents of private homes rose 4.2 per cent in the first quarter, accelerating from 2.6 per cent in the prior quarter. Rents were higher for both landed and non-landed properties, with the former increasing 5.3 per cent in Q1 2022, versus 1.2 per cent previously.

Rents of non-landed properties rose by 4.1 per cent, compared with a 2.7 per cent gain in the previous quarter. The RCR saw the biggest increase in rents in the non-landed segment at 4.7 per cent, compared with 2.8 per cent previously. Meanwhile, the vacancy rate dropped 0.7 percentage point to 5.3 per cent.

According to Knight Frank, rents in the private home market could climb a further 7 to 9 per cent this year on the back of buoyant demand, underpinned by buyers who have yet to find replacement homes. Other analysts expect rental demand to be supported by construction delays as well as the arrival of expatriates with the loosening of travel curbs.

Knight Frank’s head of research, Leonard Tay, said: “Higher property maintenance charges and inflationary pressures also have a knock-on impact on rents, as landlords, who wield greater negotiating power, are transferring the increased costs to tenants.” Even with interest rates heading north, higher rents will help to alleviate the hike in monthly instalments, he added.

Rental growth could taper off in 2023, said Cushman & Wakefield’s head of research Wong Xian Yang, citing an expected supply of 16,978 completed units coming onstream then.