Private property prices inched up in April, NUS index

The flash estimate of the National University of Singapore (NUS) Singapore Residential Price Index Series (SRPI) released on May 28 showed that private property prices inched up 0.2% in April 2019. The Index showed that private property prices inched up after staying flat in March.

SRPI is a transactions-based index that tracks the month-on-month price movements of private non-landed residential properties in Singapore. Developed by a team of researchers at IRES, the SRPI provides a resource for the development of property derivatives that would help to expand the suite of financial products offered in Singapore, particularly in the context of obtaining exposure to and managing risks associated with the real estate market. It will also complement existing property information on the state of the residential market.

Currently, SRPI indexes are published in the form of value-weighted indexes. The SRPI is the index for the overall non-landed residential market in Singapore based on the whole SRPI property basket. Two sub-indexes are also produced for the Central and non-Central regions. The Central region sub-basket comprises properties within the overall SRPI basket located in Postal Districts 1 through 4 and 9 through 11 while properties in the other postal districts are in the non-Central region sub-basket.

The private property prices inched up driven by a 1.4 per cent increase in prices for apartments in the central region, excluding small units. In March, prices in the location had edged up 0.1 per cent.

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However, private property prices outside the central region, excluding small units, fell 0.6 per cent in April following a 0.1 per cent dip in March. Prices of shoebox units again weakened by the same 0.4 per cent margin they did in March.

When compared with year-to-date data, overall private property prices fell 0.4 per cent, and prices of larger apartments in the central region declined 0.5 per cent, while prices in the non-central region are 0.3 per cent lower. On a year-on-year basis, prices of shoebox units suffered registering a 1.4 per cent fall.

Overall private property prices inched up 0.6 per cent from a year ago, with prices of larger apartments in the central region going up 0.3 per cent and prices in the non-central region rising by 0.9 per cent. But prices of small apartments bucked the trend, falling by 0.4 per cent lower.

Shoebox units are are properties that don’t exceed 500 square feet. Some of these units, such as The Ebony (Lorong Marican) and Royce Residences (Geylang), are in the range of 300 to 400 square feet. Apart from being tiny, the other distinguishing trait of a shoebox unit is the ridiculously high price per square foot. City Suites at Balestier Road for example, has apartments that range between $1,600 to $1,700 per square foot; and 474 sq ft apartments at 26 Newton go for upward of $2,500 psf.

Resale transactions analysed by experts (for which there were primary sales of the same units previously) show that owners who have sold their shoebox units enjoyed an average capital gain of 11.5 per cent or an annualised 2.4 per cent over their holding periods. These surpassed the 10.6 per cent average gain for resale transactions of all unit sizes or a 2.0 per cent annualised return for units from new projects launched since 2010.

However, the same data suggested that average transaction price of shoebox apartments in new projects only slightly increased from $727,846 in 2010 to $771,677 so far this year, while median psf pricing marginally increased from $1,473 psf to $1,495 psf over the same period.

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Mr Paul Ho, chief mortgage consultant at iCompareLoan said: “Shoebox units only serve to make money for developers – as developers can sell the property once they obtain the permit for sale and money will start to come in. This allows too much leverage and hence if developers feel that the cycle is approaching a positive cycle, they will bid very high and pass on the cost to buyers and potentially make explosive profits.”

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