Private home price decline gained momentum in Q1 2019

Private home price decline gained momentum in Q1 2019 by dropping 0.7 per cent, following a 0.1 per cent decrease in the fourth quarter showed the Urban Redevelopment Authority (URA) statistics. The private home price decline was steeper than the 0.6 per cent decrease in URA’s flash estimate released earlier this month.

The private home price decline was felt in the Core Central Region (CCR) with prices of non-landed properties decreasing by 3.0 per cent, compared with the 1.0 per cent decline in Q4.

Prices of non-landed properties in Rest of Central Region (RCR) dropped 0.7 per cent, compared with the 1.8 per cent increase in the previous quarter. Prices for private homes in Outside Central Region (OCR) increased up by 0.2 per cent, compared with Q4’s 0.7 per cent increase. The OCR was the only segment which bucked the trend, rising by 0.2% on the back of several successful mass-market launches.

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Ms Tricia Song, Head of Research for Singapore for Colliers International commenting on the private home price decline said, “the property cooling measures of July 2018 – like speed bumps – have been effective in bringing down prices and total transaction volumes.:

She added: “Developers’ new sales in Q1 2019 were flat QOQ at 1,838 units, from 1,836 units in Q4 2018, but were still up 16% YOY due to more attractive launches. Meanwhile, resale transactions declined 5.7% QOQ and nearly halved YOY to 1,858 units.”

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The Colliers report on private home price decline noted:

“Non-Landed Private Residential
Notably, prices of non-landed properties decreased by 1.1% QOQ in Q1 2019, after climbing by 0.5% in Q4 2018 and flat in Q3 2018. This is the first decline in the non-landed price index since July 2018’s cooling measures, as the impact of the new curbs reverberated more uniformly across the market segments: Core Central Region (CCR); Rest of Central Region (RCR); and Outside Central Region (OCR).

The decline in prices of non-landed homes was largely due to a steeper price drop of 3.0% in CCR, and a 0.7% decline in RCR. Home value in OCR still grew by 0.2% QOQ, but the pace of growth slowed from the 0.7% gain in Q4 2018.

Core Central Region (CCR)
According to URA’s data, the CCR led the price decline in Q1, falling by 3.0% (compared to 2.9% in the flash estimates, signaling worse performance in the last 2-3 weeks of March, as flash estimates are based on data gathered in the first 10 weeks of the quarter) from the previous quarter. This is the sharpest quarterly price decline for the CCR segment since the 5.2% fall in Q2 2009, in the wake of the Global Financial Crisis. This is also the second consecutive quarter of decline in CCR, bringing total price decline to 4.0% since its recent peak in Q3 2018.

The decrease in Q1 non-landed CCR prices was much steeper than our expectation. A closer look at the transactions during the quarter suggests that the decline in median prices for certain projects could have contributed to the sharper drop as developers seek to clear inventory in their completed projects. These included Lloyd Sixtyfive, New Futura, and TwentyOne Angullia Park.

• Lloyd Sixtyfive sold 3 units in Q1 2019 at a median price of SGD2,852 psf, down 13.6% from the median price of SGD3,301 psf for the 2 units sold in Q4 2018.
• New Futura sold 3 units in Q1 2019 at a median price of SGD3,471 psf, down 6.1% from the median price of SGD3,698 psf for the 12 units sold in Q4 2018.
• TwentyOne Angullia Park sold 4 units at SGD3,362 psf, down 4.5% from the median price of SGD3,520 psf for the 3 units sold in Q4 2018.

That said, we note that some projects that launched in Q1 2019 had achieved benchmark pricing, including Fourth Avenue Residences, RV Altitude and Boulevard 88.

• According to caveats lodged as of April 25, Fourth Avenue sold 77 units at a median price of SGD2,411 psf in Q1 2019. This is the highest price on psf for a 99-year leasehold project along Bukit Timah Road.
• RV Altitude sold 19 units at a median price of SGD2,834 psf, the highest for projects along River Valley Grove.
• Boulevard 88 sold 26 units at SGD3,613 psf, one of the highest-priced on psf for a large format project in Orchard Boulevard.

Residential developments that may be launched for sale in CCR this year include: Wilshire Residences, Juniper Hill, Holland mixed development etc.

Rest of Central Region (RCR)
Meanwhile, non-landed home prices in RCR fell by 0.7% (versus 0.2% in flash estimates), overturning the 1.8% increase in the previous quarter. Prices appear to be normalising, after the uptick spurred by new launches such as Arena Residences, Kent Ridge Hill Residences, Parc Esta in Q4 2018.

We see some earlier launches such as Margaret Ville, Mayfair Gardens and The Tre Ver moving more units in Q1 2019 versus Q4 2018 while maintaining prices. Park Colonial, which has crossed 72% sales mark of its total 820 units as of March 2019, has started to raise prices, achieving a median price of SGD1,791 psf in Q1, from SGD1,750 psf in Q4.

We estimate that RCR private home values could firm up in H2 2019. Developers in general have priced freehold or attractively-located projects at a premium and there is still time to clear their inventory before the five-year ABSD timeline is up. We expect some attractive new launches in the next few quarters such as former Pearl Bank Apartments, Avenue South Residence, Coastline Residences, Amber Park, Mayfair Modern.

The developer of the former Normanton Park project has been issued a no-sale licence, prohibiting it from selling units before the Temporary Occupation Permit (TOP) is obtained. This could create some overhang and price pressure when the 1,862-unit project is eventually launched.

Outside Central Region (OCR)
Non-landed home values in OCR rose 0.2% (versus flat in flash estimates), following the 0.7% increase in the previous quarter. OCR prices continued to be resilient, given the boost in sentiment from the Cross Island Line announcement which helped developers hold onto prices. Projects such as Affinity at Serangoon, Gardens Residences and Riverfront Residences continued to do well.

Nonetheless, given the substantial new residential supply in the OCR – such as the 2,203-unit Treasure at Tampines and 1,410-unit The Florence Residences – which launched in Q1 2019 and moved 13% and 5% of their total units respectively, we expect prices in OCR could soften into the rest of 2019.

Landed Homes
Prices of landed properties increased 1.1%, after it fell by 2.0% QOQ in Q4. We think the relatively large increase in landed home values is counter-intuitive as we would expect the reduced loan-to-value (LTV) and higher Additional Buyers’ Stamp Duty (ABSD) should have some negative impact on larger quantum landed homes. However, the defensiveness in landed home prices could be due to supply scarcity, and the owner-occupation buyer profile which are less affected by the cooling measures.

The increase brings landed home prices to +9.4% since Q2 2017. Prices are still 8.1% below their Q3 2013 peak.”

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