Private home sales in primary, secondary markets surge

This, along with smaller declines in prices and rents, sets the stage for prices to start firming, say analysts. Some expect URA's private home price index to rise by up to 3 per cent next year, with improving sentiment and economic growth

July 29, 2017


LATEST official data shows a surge in private home sales across both primary and secondary market, which is seen as supporting a firming in prices.

Data from the Urban Redevelopment Authority (URA) released on Friday also showed smaller quarter-on-quarter declines in prices and rentals of private homes, offices and retail space. Vacancies continued to rise for office and retail space, however, but held steady for the residential segment.

The total number of private homes sold in both the primary and secondary markets reached 6,905 units in Q2 this year; this was the highest quarterly sales figure since Q2 2013, when 6,945 units were transacted before the total debt servicing ratio (TDSR) framework was introduced in late-June that year.

Knight Frank Singapore's head of research and consultancy Alice Tan said: "The broad-based moderation in price and rental declines for private residential property, coupled with improvement in transaction volume and falling unsold inventory, could signal an imminent bottoming out, possibly by the next one or two quarters in private home prices in general."

The 6,905 private homes sold in the second quarter reflected increases of 32.7 per cent quarter on quarter and 51.8 per cent year on year.

In the first half of 2017, the transaction volume in both the primary and secondary markets was 12,107 units, up 63.7 per cent from H1 2016.

JLL national director Ong Teck Hui said: "Driven by the perception that the market is close to the bottom, as well as prices having fallen to more attractive levels, buyers have been flocking back to the market. This trend is expected to continue into the second half of the year, with demand remaining upbeat as buyers try to catch the market before it turns around."

JLL's forecast for the full year's total transaction volume is 23,000 to 25,000 units, surpassing the 22,719 units in 2013.

Desmond Sim, who heads CBRE Research in Singapore and South-east Asia, observed that "buyers are starting to see value and making the decision to purchase - for fear of catching the wrong side of market growth".

Agreeing, Cushman & Wakefield Singapore research director Christine Li said: "The price-recovery story has nudged fence-sitters, some of whom could have waited on the sidelines for a few years, to take action."

On the price front, URA's benchmark overall private home price index dipped 0.1 per cent quarter on quarter in Q2 2017, a smaller decline than the 0.3 per cent fall reflected in URA's Q2 flash estimate released earlier this month.

The dip in the index in the second quarter is the smallest of the 15 consecutive quarter-on-quarter declines since the peak in Q3 2013. The index is now 11.6 per cent below the high.

In the leasing market, URA's overall rental index for private homes shed 0.2 per cent quarter on quarter in Q2, again a smaller dip than the 0.9 per cent slide in the previous quarter. The rental index is now 12.5 per cent below its recent peak in Q3 2013.

Lee Nai Jia, who heads research at Edmund Tie & Co, predicts that URA's private home price index will likely start appreciating slightly in Q3 and Q4 this year, with a stable reading on a full-year basis.

The index fell 3.1 per cent last year. "In 2018, we anticipate home prices to appreciate by 1 to 3 per cent," he added. "What is likely to bring up prices is the improvement in market sentiment, especially on the back of higher land bids and stronger developer sales. There is pent-up demand from buyers who have been waiting for an opportunity..."

That said, the magnitude of price increases will be kept in check by uncertainty of how much interest rates on Singapore home loans will increase, as well as reiterations by the authorities that the cooling measures are here to stay, he added.

Tricia Song, head of Singapore research at Colliers International, also expects URA's home price index to find a footing for the rest of this year and to grow by up to 3 per cent next year, supported by growth in Singapore's conomy. The price recovery is also expected to be aided by a more benign supply outlook.

From the record 20,803 new private homes completed last year, the figure is forecast to ease 20 per cent to 16,544 units this year, and halve to about 8,400 units annually for next year and the year after.

Mr Ong of JLL said that as the leasing market is still over-supplied, a turnaround in rents is expected only next year, when supply moderates significantly and expected economic improvement lifts demand.

Colliers' Ms Song said that rents could resume a growth trajectory when most of the new supply that has been completed over the past two years is gradually digested over the next six to 12 months. "So while we expect private home prices to begin improving from the start of 2018, a sustained recovery in rents is likely to start in mid-2018 or early 2019."

The island-wide vacancy rate for private homes was 8.1 per cent at end-Q2 2017, unchanged from three months before. The figure has eased from the recent high of 8.9 per cent in Q2 2016, when the market was in the throes of escalating home completions.

JLL's analysis of URA data showed that the stock of unsold private homes - comprising completed as well as uncompleted units - had fallen to 16,929 as at end Q2 2017, from the most recent high of 40,430 at the end of 2011.

Of significance is the unsold stock of 5,956 units in the suburbs or Outside Central Region (OCR), which appears to be at a low inventory level compared to the recent take-up rate. Primary market sales in OCR during H1 17 was 3,732 units. Assuming a doubling to 7,464 units for the full year, this figure would exceed the unsold stock. "This phenomenon could contribute to prices stabilising sooner, leading to an eventual turnaround," said Mr Ong.

URA's price index for landed homes dipped by 0.3 per cent in Q2 this year, a smaller drop than the 1.8 per cent fall in the previous quarter. Prices of non-landed properties dipped 0.1 per cent, after remaining unchanged in the previous quarter.

URA also provided a breakdown of non-landed property prices by region, with the sub-index for the prime areas or Core Central Region (CCR) shedding 0.5 per cent in Q2, compared with the 0.4 per cent decrease in the previous quarter. Prices of non-landed properties in the city fringe or Rest of Central Region (RCR) rose 0.6 per cent, compared with the 0.3 per cent increase in the previous quarter. In the OCR, prices fell 0.3 per cent, against an increase of 0.1 per cent in the previous quarter.