Continued recovery in private home prices, transactions expected this year

Rents will also likely improve in second-half of 2018 as completion of new homes dips

Sat, Jan 27, 2018

Lynette Khoo


THE recovery in prices and transactions of private homes is expected to continue this year on the back of pent-up demand, improved sentiment and upcoming new launches by developers, consultants say.

Rents, too, will likely find their footing in the second-half of the year, thanks to a steep fall in completions of new homes this year.

But favourable supply conditions may not stay interminably, with the government flagging a potential supply of 19,900 units from land sale sites that have not been granted planning approvals yet - these could be made available for sale later this year or next year, and be completed from 2021 onwards.

Figures from the Urban Redevelopment Authority (URA) on Friday showed a 1.1 per cent rise in prices and a 53 per cent surge in all private residential transactions to 25,010 units last year.

This broke a price fall that lasted more than three years since the third quarter of 2013, and followed a 3.1 per cent drop in prices and a 16 per cent rise in transactions in 2016.

The price rebound was led by non-landed properties, which rose 0.8 per cent during the three months to December, and 1.3 per cent for the full year.

Singapore's prime area or Core Central Region (CCR) led the price recovery in the fourth quarter with a 1.4 per cent increase; for the full year, the city-fringe or Rest of Central Region (RCR) that enjoyed the strongest price uptick of 1.8 per cent.

While rents continued to fall 1.9 per cent last year, analysts saw a silver lining from improved occupancies.

Vacancy rate for completed private homes improved to 7.8 per cent at end-Q4, compared to 8.4 per cent a quarter ago and a year ago. The 1.9 per cent full-year rental decline in 2017 was also less severe than the 4 per cent drop the previous year.

"The good news is vacancy is improving and could hit a critical inflection point sometime in 2018," said Tricia Song, Singapore research head at Colliers International.

"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. We expect prices to recover over 2018-2021, underpinned by rosier economic growth and supported by significantly lower supply."

ZACD Group executive director Nicholas Mak pointed out that about 10,000 private housing units are expected to be completed this year, much lower than the average of some 17,000 new units being occupied per year from 2015 to 2017.

"Therefore, the vacancy rate could break below 7 per cent by end of 2018," he said. "The gradual decline in the vacancy rate could be translated to an improvement in rentals. The rental index can stabilise this year before recovering by next year, assuming that the Singapore economy and job market remain healthy."

The resale market made up 56 per cent of the total residential transactions last year, amid a 78 per cent surge in resales to 14,043 units.

Developers also sold more units than they launched last year. While they put 6,020 new private units and 1,555 EC units on the market, they sold 10,566 units and 4,011 EC units. Their total sales represented a 22 per cent jump from 2016.

Consultants are expecting more launches by developers this year. JLL national director for research and consultancy Ong Teck Hui noted that the number of new private homes launched last year was the lowest in 13 years. But this year, there is possible launch pipeline of close to 9,000 to 10,000 units from the government land sales (GLS) and collective sales sites.

"If this supply materialises, it would provide a better balance between supply and demand as well as increasing choices for buyers," he said.

Mr Mak pegged his projection of new launches by developers this year higher at 14,500-16,000 private units from land parcels sold by the government and those from collective sales.

Even with the expected increase in launch pipeline, however, demand could still outpace supply in the short to medium term, said Cushman & Wakefield research director Christine Li. There are thousands of en bloc millionaires looking to purchase replacement homes or invest their windfalls, she added.

Supply tightness is even more severe in the EC market, where there is only one upcoming site at Sumang Walk, whose tender is closing this month under the GLS programme, and one other site at Canberra Link on the confirmed list of the first-half 2018 GLS programme.

The stock of unsold EC units at 983 units as at end-2017 was the lowest level since Q2 2014, Mr Ong said.

But the overall favourable supply conditions in the private residential market could give way to an oversupply risk in the medium to long term.

URA said in its report: "The redevelopment of private residential developments sold en-bloc in the past two years will add a significant number of new housing units to the supply pipeline."

In addition to the 19,755 unsold uncompleted units with planning approval as at end-2017, there is a potential supply of 19,900 units from land sale sites that have not been granted planning approvals yet, URA pointed out on Friday.

These include about 12,100 units from en-bloc sale sites sold up to mid-January 2018, as well as the 7,800 units from awarded GLS sites, sites on the GLS Reserve List that have been triggered for sale but not awarded yet, and GLS Confirmed List sites that have not been awarded yet.

"A large part of this new supply of 19,900 units could be made available for sale later this year or next year, and will be completed from 2021 onwards," URA said.