Residential properties price growth significantly moderated in 2018

Residential properties price growth was significantly moderated in 2018 said a recent Housing research report by Edmund Tie & Company (ETC).

On 6 July 2018, the Government introduced cooling measures, imposing higher initial costs and upfront payments for both developers, owner-occupiers and investors of residential properties.

The report noted that despite the cooling measures, the URA private residential price index rose by 7.9 per cent in 2018 vis-à-vis 1.1 per cent in 2017. This was largely attributed to the 3.9 and 3.4 per cent q-o-q increases in the index in Q1 and Q2 2018 respectively.

Consequently, the cooling measures moderated residential properties price growth significantly, with the index increasing marginally by 0.5 per cent q-o-q in Q3 2018 and falling slightly by 0.1 per cent q-o-q in Q4 2018.

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The 2018 residential properties price growth could possibly have been in the double digit range if not for the cooling measures. Units priced under $1.5m continued to make up 69.8 per cent of new sale and 61.8 per cent of resale transactions for non-landed properties, while units priced above $1.5m gained in market share, noted the research.

ETC noted that price hikes for newly launched units were more pronounced than resale units, as the higher land prices developers paid during the collective sales’ ‘rage’ (which started in May 2017) were factored into these new units.

Conversely, after three consecutive years of increase, total private residential sales volume fell 10.8 per cent to 21,658 units in 2018, largely underpinned by weaker demand in H2 2018 post-cooling measures, it said. Sales volume in H2 2018 declined by 26.4 per cent to 9,181 units, compared to the 12,477 units in H1 2018.

Similarly, new sales fell by 16.3 per cent to 8,367 units while resale and sub sales declined by a smaller 6.8 per cent to 13,291 units.

“With the property curbs favouring Singapore citizens (SCs) versus Singapore permanent residents (SPRs) and non- permanent residents (NPRs), the proportion of SCs buying non-landed properties reached 76.7 per cent in 2018, followed by the shrinking market share of SPRs and NPRs.

“Likewise, the proportion of buyers with Housing & Development Board (HDB) addresses has declined as the cooling measures increased the costs of upgrading and purchasing second and subsequent properties.”

With regards to the outlook on residential properties price growth, the report said that following the cooling measures, the sales volume for collective sales and private residential units have moderated significantly, as  developers and buyers have taken a wait-and-see approach.

“In addition, amid rising interest rates (since 2017), home loans grew by just 1.9 per cent in the first 11 months of 2018, compared to 4.2 per cent in 2017.

From the global economic front, there remains uncertainties from the ongoing US-China trade war, slowing Chinese and global economies, tightening financial markets and rising interest rates, which may pose some downside risks to Singapore’s economy and employment market and subsequently the residential market.

Subject to a stable economy and labour market, new sales for non-landed properties is projected to range from 8,000 to 10,000 units in 2019. On the supply side, there is an anticipated launch of 50 to 60 new projects in 2019, comprising more than 21,000 private non-landed units islandwide.”

The ETC report noted that most of the launches will be in the Outside Central Region (OCR). This it said, will provide a wide range of choices for buyers and has the potential to impact residential properties price growth.

“While the property curbs, higher interest rates and global economic uncertainties are expected to dampen foreign demand for non-landed properties, the slew of new launches in 2019 will likely attract foreign buyers, as Singapore is often perceived as an investment haven amid global uncertainties.”

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Commenting on the new sales market for private non-landed properties, the ETC report said that the total number of new private home sales (excluding ECs) in 2018 fell by 16.3 per cent to 8,367 units compared to 10,002 units in 2017. The report added: “the majority (74.9 per cent) of total new sales volume were for studio, 1- and 2-bedroom units vis-à-vis 69.3 per cent in 2017…The increased demand for smaller units was likely due to the lower price quantum/affordability, as buyers remain price-sensitive amid cooling measures and a rising interest rate  environment.”

The report added that the growing number of smaller household sizes in recent years, especially for single households and single parent households, helped to underpin some demand for smaller units. The report noted that the cooling measures coupled with economic uncertainties and rising interest rates (albeit at a slower pace), are (besides moderating residential properties price growth) expected to subdue the demand for new residential units, although demand for well-priced and well-amenitised projects are expected to perform relatively well.

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