Singapore private home prices rise up in the second quarter
Singapore’s private home prices rose 0.9 per cent in the second quarter from the previous three months, flash estimates released by the Urban Redevelopment Authority (URA) showed on Thursday (Jul 1).
The increase slowed from the two-and-a-half-year high pace in the first quarter, when prices rose by 3.3 per cent. However, it still marked the fifth consecutive quarterly rise, and came despite Singapore reimposing some COVID-19 curbs to combat a spike in community infections in mid-May.
On a year-on-year basis, private home prices were up 7.3 per cent.
The price increase in the second quarter was driven mainly by non-landed homes in the Outside Central Region (OCR), which increased the most by 1.8 per cent, compared with the 1.1 per cent increase in the previous quarter.
Prices in the Core Central Region (CCR) rose by 0.6 per cent, compared with the 0.5 per cent increase in the first quarter. In the Rest of Central Region (RCR), prices were up 0.3 per cent, down from the 6.1 per cent increase in the previous quarter.
Why is it likely private home prices will keep rising in 2021?
Better en-bloc potential in 2021
Government Land Sales (GLS) were reduced by almost a quarter, in the second half of 2020. As this was due to the Covid-19 situation, it was expected that 1H 2021 would make up for the reduction. However, the government instead continued to moderate the supply .
As such, developers may have to look outside of the limited GLS offerings this year; and they may have the confidence to do that, now that 2020 has proven the overall resilience of the property market.
Regional competition
On a regional basis, there are few alternatives for private home investment right now. Hong Kong, the closest contender, is in a state of political turmoil, and also has its own version of stamp duties for foreigners.
Australia’s property market has fared almost as well throughout Covid-19; but restrictions on foreign buyers, plus political tensions with China, are likely to make Chinese investors focus more on Singapore and Hong Kong.
Recovering employment numbers
As of 2021, however, employment levels among Singaporeans and Permanent Residents have begun to rebound ; although full recovery is unlikely until 2022. This is likely to result to have two effects:
First, we could see sustained momentum in the HDB resale flat market, as those facing lower paying jobs, retrenchments, etc. downgrade from private to HDB flats, or opt for bigger resale flats instead of upgrading to a condo.
Second, we didn’t see many mortgagee sales or fire sales even in Q3 2020, when unemployment was at its peak; nor did we see big price drops for the whole of 2020. As the situation is now improving rather than getting worse, the idea of a buyer’s market with steep discounts is growing dimmer for 2021.
Buyers turning to resale market : Analysts
With construction delays and a labour crunch amid the pandemic, more buyers are turning to the resale market, analysts said.
About 60.5 per cent of private property sales last quarter were resale homes, higher than the 56.6 per cent in the previous three months.
Ms Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, said there is an “enormous demand” for completed homes in the suburban areas.
More buyers also opted for bigger homes, with 39.6 per cent of transactions with homes of at least 1,200 sq ft, up from 35.8 per cent.
“Space has become a valued asset as many home owners saw their daily lives suddenly confined to their properties,” said Ms Sun. “Many owners were looking for homes with outdoor space and additional areas for solitude.”
However, some landed home owners raised their asking prices after a strong run-up in prices in the first quarter. This put their properties out of reach of some buyers, resulting in slower price gains in the second quarter, said Huttons Asia CEO Mark Yip.
The second quarter also saw fewer new launches amid Singapore’s heightened alert period. This pushed down property prices as new homes are typically sold at higher prices compared with resale homes, said Ms Sun.
