URA's Q3 private home price index posts 1.3% q-o-q rise

This is higher than the 0.9% flash estimate on Oct 1, which excluded landed homes sales in latest phase of Luxus Hills project

Sat, Oct 26, 2019

KALPANA RASHIWALA


THE 1.3 per cent quarter-on-quarter rise in Singapore's overall private home price index in the third quarter of this year created some excitement in property circles on Friday. This was because the rise was higher than the 0.9 per cent increase in the flash estimate released on Oct 1.

Here's a simple explanation of what happened: Based on the flash estimate, the overall private home price index rose 0.9 per cent, taking into account the 1.7 per cent growth in the non-landed private home price index and the drop of 2.2 per cent in the landed home price index.

The final Q3 data released by the Urban Redevelopment Authority (URA) on Friday showed that the non-landed index had appreciated at a lower 1.3 per cent but the landed index posted a surprising reversal, rising by 1.0 per cent. "The unexpected change in the landed index from -2.2 per cent (flash) to +1.0 per cent contributed to the upward revision of the overall index," said JLL's senior director of research and consultancy, Ong Teck Hui.

The Business Times understands that the swing in the landed home price index was probably chiefly due to the inclusion of transacted prices for sales of landed homes in the latest phase of the Luxus Hills project in the Seletar Hills area, which were captured in the URA Realis system only in the second half of September.

The completed project achieved brisk sales at its preview on Aug 30.

However, because the project is delicensed, its transacted sale prices were captured by URA only after the buyers had begun exercising options and the contracts submitted for stamp duty payment to the taxman a few weeks later.

URA's Q3 2019 flash estimate data is based on transacted prices up to mid-September (and thus would have excluded the landed homes transacted in the latest phase of Luxus Hills); whereas the final Q3 data released on Friday morning covers the full quarter (and hence included the Luxus Hills sales).

(The URA collates data on sales in licensed projects from weekly submissions by developers. However, sales information in delicensed projects is compiled based on transaction prices stated in contracts submitted for stamp duty payment.)

A developer has to obtain a Housing Developer Sale Licence if it wants to sells units in a private housing project with more than four units before it is completed. Licensed developers that have obtained a Certificate of Statutory Completion for a private housing project and individual titles for all units in the project may apply to be delicensed.

Second consecutive rise

The 1.3 per cent rise in the URA overall private home price index marks the second consecutive quarter-on-quarter rise in the index. In Q2 this year, the index rose 1.5 per cent quarter on quarter. Year on year, the index is up 2.1 per cent.

Price gains for non-landed homes were led by the prime areas or Core Central Region (CCR), with the sub-index for the region increasing 2 per cent in Q3 2019 after rising 2.3 per cent in the previous quarter.

Non-landed private home prices in the city fringe or Rest of Central Region (RCR) appreciated 1.3 per cent in Q3 2019, after climbing 3.5 per cent in the previous quarter. In the suburbs, or Outside Central Region (OCR), non-landed home prices increased 0.8 per cent in Q3 2019 after appreciating 0.4 per cent previously.

Tricia Song of Colliers International noted that OCR index remains at an all-time high. Like most property consultants, she does not expect the authorities to roll out more cooling measures just yet.

DBS Group Research property analyst Derek Tan said the chances of cooling measures being introduced will increase if prices in the OCR start to escalate.

The price gains for non-landed homes in Q2 and Q3 this year have been driven largely by the CCR and RCR.

"Another thing we are tracking is whether foreign buying is creeping up in the OCR. That is where it would impact upgraders and become more of a bread-and-butter issue. In such a scenario, cooling measures may possibly target foreigners, most likely with a higher ABSD (additional buyer's stamp duty)."

Developers moved 3,281 new private homes in the primary market in Q3 2019 - the best showing since the 4,538 units sold in Q2 2013.

Rental index inches up

URA's overall rental index for private homes inched up 0.1 per cent, compared with the 1.3 per cent increase in the previous quarter. While the overall vacancy rate for completed private homes improved from the 6.4 per cent as at end-Q2 2019 to 6.1 per cent as at end-Q3 2019, the changes in the sub-markets were pretty mixed.

In the RCR, the vacancy rate for private homes eased from 6.4 per cent in Q2 2019 to 6.0 per cent in Q3 2019, accompanied by a 1.6 per cent q-o-q rise in the rental index for non-landed homes in Q3 2019. In OCR, too, non-landed rents increased by 0.8 per cent, as vacancy reduced from 5.7 per cent to 5.3 per cent.

Bucking the trend, CCR's vacancy increased from 7.8 per cent in Q2 2019 to 8.2 per cent in Q3 2019 while its non-landed rents fell 0.7 per cent.

"While the supply of newly completed units has been low, the economic slowdown has resulted in businesses being cautious and there have been reports of restructuring. This appears to have affected the CCR rental market more significantly as well as the landed market, while RCR and OCR are holding up due to their more affordable rents," said Mr Ong.

Savills Singapore executive director Alan Cheong too observed that leasing demand is budget sensitive and below the radars of most corporate leasing agents and relocation companies. "We're talking about people with a monthly rental budget of S$2,000 to S$3,000."

One factor that is favourable to the rental market is the low levels of private housing completions and higher population growth, said Wong Xian Yang, senior manager for research at Cushman & Wakefield. "Only 5,229 private residential units have been completed in the first three quarters of 2019 with an additional 2,704 units expected to be completed in 4Q2019, bringing total supply in 2019 to 7,933 units, substantially lower compared to the 10-year (2009-2018) annual average of 14,211 units."