Singapore private home prices to tumble

Singapore private home prices to tumble

Singapore private home prices to tumble, question is by how much?

ALTHOUGH private home prices fell only one per cent in Q1, sharper price falls are a given for the rest of the year, it’s only a matter of magnitude. Not surprisingly larger price drops were already seen in the more expensive homes sold in Q1.

Prices in the core central region (CCR) fell the most, down 2.2 per cent compared with -0.5 per cent and -0.4 per cent in the rest of central region (RCR) and outside central region (OCR) respectively. The latest data was released by the Urban Redevelopment Authority (URA) on Friday.

The CCR 2.2 per cent fall is also more than the earlier flash estimate of -1.5 per cent. Flash estimates tracked transactions in the first 10 weeks of the quarter.

This brought CCR home prices to 4.9 per cent below the recent peak in Q3 2018 and 7.2 per cent below the all-time peak in Q1 2013, said Tricia Song, Colliers International head of research Singapore.

Still consultants are not prepared to revise sharply downwards their forecasts of where prices will be by the end of 2020 despite Singapore heading for a deep recession, citing factors like government relief measures.

The extended circuit breaker to June 1 has led to economists revising further downwards Singapore full year GDP to range from -6 to -10 per cent. The International Monetary Fund has also said the world is heading towards the worst recession since the Great Depression.

A fair correction in prices is expected in 2020, but not to the magnitude of the 24.9 per cent plunge over four quarters during the Global Financial Crisis (GFC), said Ong Teck Hui, JLL senior director, research & consultancy. During GFC, total transaction volume in 2008 plunged by two-thirds from 2007. This was due to a highly exuberant market in 2007 when 40,654 private homes changed hands, he said.

By contrast, the total transaction volume in 2019 was only 19,150 units, largely due to the cooling measures being in place. Therefore, while total transaction volume in 2020 may not decline as badly as 2008, it is possible that it could be around 40 per cent to 50 per cent, said Mr Ong.

“Sale volumes are expected to plunge in Q2 2020, as show galleries remain closed during the circuit breaker period,” said Christine Li, Cushman & Wakefield head of research.

Price falls may not be that steep in the coming two quarters at least as both buyers and sellers adopt a wait-and-see stance, she said. “This is due to the temporary relief that the government provides for the home owners who have difficulty repaying the mortgage. This will help owners to buy some time before they cave in to buyer’s price, but it will happen later in the year,” said Ms Li. She expects residential prices to correct by around 5 per cent this year with further decline next year.

Meanwhile bigger discounts were seen in selected projects in Q1.

The M, newly launched in February and the best-selling project in Q1 2020, sold 381 units in Q1 at a median price of SG$2,439 per sq foot (psf), compared to nearby Midtown Bay which sold 38 units at a median price of S$2,934 psf in Q4 2019 and sold 10 units at a median price of S$2,899 psf in Q1 2020, said Colliers’ Ms Song.

The Enclave at Holland, a 26-unit project launched since July 2018, sold 14 units in Q1 at a median price of S$1,851 psf, compared to earlier units sold at S$2,500 – S$2,600 psf.

Buyers of posh homes also restricted themselves to smaller units.

The steeper price fall in CCR could be attributed to a higher proportion of luxury homes transacted below S$2 million, which rose from 40.4 per cent in Q4 2019 to 58.4 per cent in Q1 2020, said Christine Sun, OrangeTee & Tie head of research & consultancy.

The one per cent price fall in Q1 was the first decline after three consecutive quarters of growth. This contrasts with an increase of 0.5 per cent quarter on quarter in Q4 2019.

Year-on-year prices rose 2.4 per cent.

The all private residential price index is now 1.6 per cent above the most recent peak in Q3 2018 and 1.6 per cent below the all-time peak in Q3 2013.

The URA also said that prices of landed properties fell 0.9 per cent in the first quarter of this year, after rising 3.6 per cent in the fourth quarter of 2019.

Rentals of private residential properties edged up 1.1 per cent in Q1 2020, compared with a fall of one per cent in the previous quarter.

Ms Song also thinks prices will not plunge like they did during GFC as there was rampant speculation and loose credit prior to the GFC. The nine rounds of property cooling measures in 2009-2018 have reined in speculation and price increases over the past three years were more sustainable.

This time, the government has extended measures to help save jobs and alleviate cashflow woes, including getting banks to defer home loan payments till end of the year. “These should help reduce distress and fire sales in the property market in the near term,” she said. “We also believe there is room for the government to ease or unwind earlier measures, which should lend some support to prices.”

On supply, URA said at the end of Q1, there were 48,868 uncompleted private residential units excluding executive condominiums (ECs) in the pipeline with planning approvals, compared with the 49,173 units in the previous quarter. Of this number, 29,149 units remained unsold as at the end of Q1, compared with the 30,162 units in the previous quarter.

After adding the supply of 3,613 EC units in the pipeline, there were 52,481 units in the pipeline with planning approvals. Of the EC units in the pipeline, 1,950 units remained unsold. In total, 31,099 units with planning approvals (including ECs) remained unsold, down from 32,272 units in the previous quarter.

Based on the expected completion dates reported by developers, 5,134 units (including ECs) will be completed in the remaining three quarters of 2020. Another 10,816 units (including ECs) will be completed in 2021.

Source: Buisness Times (click here)

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