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Singapore private property market set to face demand tests in 2019

Close to 50 new launches can be expected, some of them mega-projects, amid cautious demand and tighter financing

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Analysts generally expect prices to be flat or rise slightly in 2019. Displaced en bloc owners are likely to contribute to demand, while prices of new launches are likely to take into account the high prices locked in by developers when they acquired those sites.

Singapore

THE private residential property market here could face some demand tests ahead as higher interest rates and heftier duties from the authorities' cooling measures weigh on buyers' wallets.

As it is, property curbs unleashed in July have already sent the private property market on roller-coaster year in 2018.

Prices rose 7.4 per cent in the first half of the year, as "many new homes were sold at relatively high prices on the back of the market exuberance seen in the latest collective sales cycle," as Christine Sun, head of research and consultancy at OrangeTee & Tie put it.

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But demand moderated significantly after July. Prices in the third quarter rose just 0.5 per cent, and slipped 0.1 per cent in the fourth quarter.

Overall, prices rose some 7.9 per cent in the year.

Excluding executive condominiums (ECs), the private-public housing hybrid, developers' sales of new homes fell 16.7 per cent to 8,795, while launches rose 46 per cent to 8,769.

Tan Tee Khoon, executive director and head of residential project marketing at Knight Frank Singapore, said: "Buyers have been exercising more caution after the implementation of cooling measures, waiting along the sidelines and thereby leading to slower sales."

Some signs of this caution can be seen in flagging mortgage demand.

Data from the Monetary Authority of Singapore (MAS) showed that home-loan growth fell to 1.9 per cent between January and November of last year, less than half the 4.2 per cent increase posted in 2017.

Desmond Sim, head of research for Singapore and Southeast Asia for CBRE, said: "Amid cautious and tepid sentiments, demand will also be kept in check with tighter financing requirements as well as higher financing costs in a rising interest rate environment."

"Crazy rich Asians" may also be putting their purchases on hold. In the fourth quarter, prices of the landed property segment fell 2 per cent quarter-on-quarter, while prices of non-landed homes in the core central region (CCR) fell 1 per cent.

Christine Li, senior director and head of research at Cushman & Wakefield Singapore, said: "Investors for high-end homes are expected to adopt a wait-and-see approach, as uncertainties in the global financial market have dampened the sentiment somewhat.

"Recent cooling measures have also made it less attractive for foreigners to invest in Singapore residential in the near-term."

In the quarter, the non-landed segment managed a 0.5 per cent increase, helped by the Rest of Central Region (RCR) and Outside Central Region (OCR) segments which rose by 1.8 per cent and 0.7 per cent quarter-on-quarter.

Overall for the year, prices in CCR, RCR and OCR rose by 6.7 per cent, 7.4 per cent and 9.4 per cent respectively.

Despite signs of caution, the market is not expected to cave in. Analysts generally expect prices to be flat or rise slightly in 2019, with Ms Li from Cushman & Wakefield, predicting up to 3 per cent increases in prices barring external shocks.

Displaced en bloc owners are likely to contribute to demand, while prices of new launches are likely to "stay elevated" because of the high prices locked in by developers when they acquired those sites, she said.

In 2019, price-sensitive buyers will shop from a buffet of new projects to be launched in the year. Close to 50 new launches could be expected in 2019, with some mega-projects like Treasure at Tampines; the former Normanton Park and Parc Clematis to come, estimates PropNex Realty chief executive Ismail Gafoor.

At the end of 4Q18, the number of unsold private residential units (excluding ECs) in the pipeline with planning approvals was at 34,824, up from 30,467 units in 3Q18.

Ong Teck Hui, senior director, Research & Consultancy at JLL said: "The abundant supply of units for sale is likely to result in increased launches in 2019 as developers see fit to continue launching projects to avoid a bunching up of supply if launches are held back."

He estimates that 10,000 to 12,000 new private homes could be launched in 2019 and 9,000 to 10,000 units could be sold.

"The strong supply and price-sensitive demand are likely to keep prices on a generally flat trajectory assuming fairly stable economic and market conditions," he said.

Meanwhile, the large pipeline supply might also have contributed to contracting rents seen in the quarter by some 1 per cent.

Mr Ong attributed this to landlords wary of the large pipeline supply coming up after 2020 and who might now be more flexible in closing leasing deals.

He said: "It also shows the absence of strong leasing demand as policy controls on hiring of foreign labour remain in place and businesses become more cautious in hiring expatriates due to global uncertainties and an expected slower economy."

Vacancy rate excluding executive condominiums (ECs), dropped to 6.4 per cent at the end of the fourth quarter from 6.8 per cent in the third quarter.