Singapore private home prices may rise in 2021 amid reviving economy

Given ample liquidity, a low interest rate environment and improving buyer sentiment, there is room for private home prices to head upwards in 2021, say analysts. 

Updated from : The Business Times, 5 Jan 2021

PRIVATE home prices in Singapore could climb again this year as a recovering economy lifts sentiment after the private residential property index shrugged off the impact of a global pandemic to clock a 2.2 per cent gain in 2020.

According to the Urban Redevelopment Authority’s (URA) flash estimate on Monday, prices of private homes in Singapore rose 2.1 per cent quarter-on-quarter in Q4 2020 in the highest quarterly increase since the 3.4 per cent notched in Q2 2018 before the last round of cooling measures kicked in. This comes on the heels of a 0.8 per cent increase in Q3 2020.

In 2019, the private residential property index grew by 2.7 per cent.

The surprising turnaround in the private property market comes in a year where the local economy contracted by 5.8 per cent, based on the government’s advance estimates.

Maybank Kim Eng economist Chua Hak Bin pointed to supporting factors such as the collapse in mortgage rates – which has been a plus for the property market – while fiscal support, wage subsidies and hiring incentives from the government have also helped where jobs are concerned.

“This recession has been very uneven, it’s hit the lower-wage sectors a lot more,” he went on to say, adding that there are still certain sectors in the economy that continue to expand. “At the same time, one of the peculiarities about this recession is the surge in the personal savings rate, (with) the higher income segment not being able to spend on a lot of services, including travel. Some chose to plough it back into property.”

Ismail Gafoor, chief executive of PropNex, said: “We saw the sales momentum and price resilience in Q3 2020 carrying through to the final quarter of the year, as market sentiment and consumer confidence picked up steadily. In Q4 2020, market confidence got a shot in the arm on the prospect of Phase 3 as well as positive news around Covid-19 vaccines.”

Driven by the Rest of Central Region (RCR) and Core Central Region (CCR), prices of non-landed properties went up 3.2 per cent quarter-on-quarter in Q4 after edging up 0.1 per cent in the prior quarter.

By region, prices of non-landed homes in the CCR, or prime areas, rose 3.3 per cent in Q4, reversing from a 3.8 per cent decrease in Q3.

Noting that CCR had underperformed with its index shedding 3.4 per cent in the first three quarters of 2020, JLL’s senior director (research & consultancy) Ong Teck Hui, said: “The lower prices could have attracted buyers and contributed to the price increase in Q420. The rise in the CCR index was accompanied by an increase in the proportion of high value transactions of S$2,700 per square foot (psf) and above during the quarter.”

In the city fringe or RCR, prices increased 4.8 per cent quarter-on-quarter in Q4 2020, compared to 2.5 per cent in the previous quarter. Meanwhile, in the suburbs or outside central region (OCR), prices were up 1.7 per cent in Q4 2020, similar to the 1.7 per cent increase seen in Q3.

Analysts said that the higher prices in the RCR in Q4 were likely due to new projects that were launched in the fourth quarter. Notably, 108 units at The Landmark were sold at a median price of S$2,137 psf and 119 units were picked up at The Linq@Beauty World at a median price of S$2,171 psf – above the S$1,813 psf median price for all new non-landed homes in RCR in 2020.

Head of research & consultancy at OrangeTee & Tie, Christine Sun, highlighted that prices have also increased at many previously launched projects, including Fourth Avenue Residences and Kopar at Newton.

For 2020 as whole, prices of non-landed homes in CCR dipped 0.2 per cent, while prices in RCR and OCR rose by 5.1 per cent and 3.1 per cent respectively.

Meanwhile, the prices of landed properties fell 2.1 per cent in Q4, compared to a 3.7 per cent increase in Q3. For 2020, prices of landed homes edged up 0.6 per cent year-on-year, estimates Leonard Tay, head of research at Knight Frank Singapore, who reckons that demand will pick up this year. Mr Tay added: “Upgraders from large-sized condominiums in prime districts will likely take the chance to meet sellers’ price expectations sooner than later before any substantial price increase is observed in 2021 as the economy recovers.”

Given ample liquidity, a low interest rate environment and improving buyer sentiment, there is room for private home prices to head upwards in 2021, say analysts. The eventual easing of border control measures could also translate to more foreign buyers returning to Singapore.

With a number of “blockbuster launches” likely in the luxury and city fringe areas, “overall private home prices may rise by one to 4 per cent, while prices of new homes may grow at a faster pace of between 2 and 5 per cent in 2021,” said Ms Sun. She added: “We anticipate demand for resale homes to pick up further this year, while resale prices may increase around one to 4 per cent for the full year.”

Knight Frank estimates that overall private residential prices could go up by around 5 per cent this year, while PropNex forecasts home prices could climb a further 2 to 3 per cent, owing to a better market outlook and a decreasing supply of unsold units.

Huttons Asia’s director of research Lee Sze Teck expects private home prices to rise by up to 3 per cent in 2021, with up to 20 new projects to launch in H121. He said: “Selling prices are expected to edge up because of recent firm land tender prices and higher construction costs because of Covid-19 safety management measures.”