Private home prices may end 2020 in positive territory despite economic malaise: analysts

Forett At Bukit Timah was the best-selling project in the city fringe region in Q3. 

Updated from : The Business Times, 02 October 2020

PRIVATE residential property prices for 2020 as a whole may end in positive territory, some analysts say, after prices rose 0.8 per cent quarter-on-quarter (q-o-q) in Q3, nudging the overall price index up 0.1 per cent year-to-date.

As the economic recession puts job security and household income under pressure, Colliers International had previously expected private home prices to decline 5 per cent this year. “However, with the resilience of the market and price index up 0.1 per cent year-to-date, we now expect prices could be flat in 2020,” said Tricia Song, Colliers’ head of research (Singapore).

She added: “Private home prices are now 2.7 per cent above the most recent peak in Q3 2018 and 0.5 per cent below its all-time peak in Q3 2013.”

PropNex chief Ismail Gafoor believes that transactions in Q3 were likely underpinned by factors such as low interest rates, sensitive pricing by developers and re-sellers as well as the sanguine long-term outlook for the property market. He expects prices to increase 1 per cent for the full year.

Head of research at ERA Realty, Nicholas Mak, expects the private residential property price index to increase by 0.5 per cent to 1.5 per cent this year, barring further deterioration in the local economy.

Meanwhile, Christine Sun, head of research at OrangeTee & Tie, reckons market sentiment may continue to improve. She said: “Demand of properties may remain strong in the coming months as more sectors of the economy reopen and the country eases into Phase 3 of the post-circuit breaker.”

She pointed to the “tidal wave” of quantitative easing implemented by the world’s central banks, which should push up asset values and property prices as liquidity filters through economies. For the year as a whole, OrangeTee & Tie has tweaked its projections for private home prices to clock between -1 per cent and 1 per cent.

On the other hand, Wong Xian Yang, Cushman & Wakefield’s associate director of research, projects that demand could ease in Q4 owing to economic uncertainties and as pent-up demand from Q2 is slowly absorbed, while fresh measures by the Urban Redevelopment Authority (URA) to restrict the re-issuance of OTPs (option to purchase) could cause a slight pull-back in demand. This week, URA announced it was putting a stop to developers’ practice of re-issuing OTPs to the same buyer for the same unit. Mr Wong expect prices for 2020 as a whole to range between -1 per cent to 1 per cent.

The 0.8 per cent increase in Q3 was led by non-landed properties in the Rest of Central Region (RCR) and Outside of Central Region (OCR) – driven partly by HDB homeowners upgrading to private homes – as well as from the landed segment, analysts said. In Q2, private home prices saw a smaller increase of 0.3 per cent.

According to URA’s flash estimate released on Thursday morning, prices of non-landed private homes were flat in Q3 versus Q2, after a 0.4 increase in the previous quarter. However, prices of landed properties rose 3.8 per cent q-o-q in Q3, after remaining unchanged in Q2.

Leonard Tay, head of research at Knight Frank Singapore, noted that landed home sales – typically occurring in the resale market – more than doubled to 512 units for Q3 (based on transactions up to Sept 22), from the 211 units transacted in Q2.

Mr Tay reckons that buyers had waited for the circuit breaker to end before entering into transactions, since viewings were not allowed during that period.

For non-landed homes, prices in the Core Central Region (CCR) slid 4.9 per cent in Q3, reversing from a growth of 2.7 per cent in Q2.

According to senior director of research & consultancy at JLL, Ong Teck Hui, this was due to the absence of major new launches in the third quarter. He said: “The decline in the CCR non-landed index was very much due to transactions being dominated by the secondary market – 63 per cent – at fairly low prices. As a rough guide, the median price of non-landed resale homes in CCR in 3Q20 was S$1,773 per square foot (psf), significantly below the S$2,045 psf recorded in the previous quarter.”

Ms Song suggested that the decrease in non-landed prices in the CCR could have stemmed from “sporadic distressed sales in the secondary market” as well as discounts dangled at selected ongoing launches in the primary market, such as Leedon Green, 8 Saint Thomas, Fourth Avenue Residences and The Avenir.

In the city fringe or RCR, prices for non-landed homes went up by 3.3 per cent, compared to a decline of 1.7 per cent in the prior quarter, URA data showed. Mr Ong noted that the best selling project in the RCR in Q3 was Forett At Bukit Timah, with buyers scooping up 236 units at a median price of S$1,932 psf. Other projects that sold well included Jadescape (155 units), The Woodleigh Residences (140 units) and Daintree Residences (135 units), he added.

In the suburbs or OCR, prices for non-landed homes rose by 1.7 per cent in Q3, compared with a marginal increase of 0.1 per cent in Q2.

Projects that continued to steadily move units included Treasure at Tampines and Parc Clematis, analysts highlighted.

For non-landed homes, “transaction volumes increased in both the primary and secondary markets in all the three market segments (CCR, RCR and OCR) in 3Q 2020”, said Mr Mak, adding that the secondary market volume experienced a higher increase in percentage terms than the primary market as some buyers were attracted by the relatively lower price on a psf basis.

“The broad-based increase in the transactions is an encouraging sign as it indicates that the price growth in the third quarter could be sustained in the coming months,” Mr Mak added.

Cushman & Wakefield’s Mr Wong puts total transaction volumes for Q3 at about 5,900 units, higher than the 5,763 units seen in Q3 2019, partly owing to pent-up demand following the circuit breaker earlier this year.

The URA will release its full set of real estate statistics for the third quarter on Oct 23.