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Private residential price index increase but market fundamentals remain weak

Image credit: Wiki Commons

The Urban Redevelopment Authority announced on Friday that private residential price index rose by 3.9% in 1Q18 – higher than the 3.1% posted during the flash estimates, This indicates a steady upward momentum in prices as caveats in the remainder of the quarter were captured, boosting the index.

Jones Lang LaSalle Property Consultants (JLL) pointed out that the increase in the overall private residential price index was mainly due to a huge jump in the Outside Central Region (OCR) index for non-landed homes, from 3.8% during the flash estimates to 5.6% in the final data. Strong pricing in new projects with high transaction volumes contributed to the sharper increase in the index. The index for non-landed homes in Core Central Region (CCR) rose 5.5% instead of 5% recorded during the flash estimates.

private residential price index
Image credit: Wiki Commons

JLL said that with more new launches coming on the market in the coming quarters and expected optimistic pricing, there is a likelihood that the private residential price index would continue to move at an elevated pace of 3 to 5% per quarter.

Ong Teck Hui, JLL’s National Director for Research & Consultancy said: “921 private homes were launched for sale in 1Q18, 5% more than 4Q17 but a 52.7% drop y-o-y. The slow start in launches was partly due to the Lunar New Year falling in mid-February and the unhurried stance towards launches by developers. Primary market sales of 1,581 units were recorded in 1Q18, a 15.2% decline from 4Q17 and 46.6% drop y-o-y. The lack of new launches was the main contributor to the moderate level of sales by developers.”

He added: “The 3,747 units sold in the secondary market in 1Q18 was 13.8% lower than 4Q17 but 67.3% higher y-o-y. Constituting 70.3% of the total transaction volume of private homes in 1Q18, secondary market sales made up for the lack of opportunities in the primary market due to new launches remaining low key.”

Ong believes that a pick-up in launches and sales is expected in 2Q18, after the slow start in 1Q18. JLL’s report further said:

“1,977 new private residential units were completed in 1Q18, the lowest since 4Q12 when 1,728 units were completed. At the height of the residential construction cycle, new completions averaged 4,760 units per quarter between 2014 and 2017. The low completions in 1Q18 is indicative of a slowdown in completed supply which will result in vacancy rates trending downwards. Overall vacancy rates decreased to 7.4% in 1Q18 from 7.8% in 4Q17, contributing to the rental index rising 0.3% in 1Q18, the first increase since 3Q13. If this trend continues, it will mark the recovery of the leasing market.

In 1Q18, the number of unsold uncompleted and completed units totalled 25,337, a 21.8% increase from the 20,794 units in 4Q17 due to new projects arising from GLS and collective/en bloc sales. However, the uncompleted unsold units with pre-requisites for sales only increased from 4,387 units in 4Q17 to 4,818 units in 1Q18. If the slow pace of projects obtaining pre-requisites for sales continue, it could be an impediment to the pace of launches and the high launch estimates that many had forecasted may not materialise. This could place a squeeze on launch supply putting upward pressure on prices.”

Analysts had previously said that the launch of new projects contributed to the private residential price index increase. The en bloc fever has also contributed to fewer resale private units being available. With an estimated 5,800 households displaced and searching for replacement homes, the strong demand is met with limited supply. This would drive price growth further in the next few quarters.

Paul Ho, chief mortgage consultant at, believes that the rising private residential price index is no reason for investment buyers to jump into the market. “Savvy investors, those who already have more than 1 property, will stay away from the market as the prices are crazy and the fundamentals are weak and there is huge supply in the pipeline,” he said.

He pointed out that “current investors, such as those that bought the New Futura comprise mainly of foreigners.’ He is unsure if they will recover their investment given the low rental yields, rising interest costs. Mr Ho believes that despite the increasing private residential price index, the fundamentals of the property market here remains weak.

“I got a sense that it is more a portfolio diversification play given that they feel bullish about the Singapore Property market – given that the malaise of over supply has been digested for many years. The situation is nowhere as dire. So, this is more about the confidence and the sentiments. The fundamentals of the Singapore property market remains weak.”

If you are home-hunting, our Panel of Property agents and the mortgage consultants at can help you with affordability assessment and a promotional home loan. Just email our chief mortgage consultant, Paul Ho, with your name, email and phone number at

Written by Ravi Chandran


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