Strong property prices growth reigned in by fresh cooling measures

Strong property prices growth have been reigned in by fresh cooling measures introduced in July said a report by Colliers International. Home values rose by 0.5% quarter-on-quarter (QOQ) – unchanged from initial estimates – in Q3 2018, following price increases of 3.4% in Q2 and 3.1% in Q1.

Cumulatively, private home prices have climbed by 7.9% in the first three quarters of 2018, 9.6% above the recent trough in Q2 2017. Home values are still 3.2% lower than the peak in Q3 2013, said Colliers.

Although the new measures have broadly weakened sentiment and arrested strong property prices increase, Colliers noted that market confidence seems to be improving on the back of relatively positive sales for new launches last month.

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Colliers believe there are still genuine buyers in the market seeking suitable and competitively-priced units. “With a healthy pipeline of new launches coming up, developers who are better in recalibrating their pricing strategy will likely see better turnover,” said the report.

In the near-term, Colliers does not foresee developers offering deep discounts to move units, with home prices likely to remain flat in Q4 2018. Colliers projected strong property prices increase by 8% for the full year in 2018 and potentially climb by 3% in 2019, in line with the economic growth – barring any external shocks.

Landed Homes
Prices of landed properties increased by 2.3% QOQ in Q3, lower than the 4.1% growth in Q2. This brought cumulative increase to 10.4% since Q2 2017. However, prices are still 7.3% below their Q3 2013 peak.

Non-Landed Homes
In particular, private non-landed home prices were flat QOQ, compared to a 0.2% increase in the flash estimate which recorded the price index for the first 10 weeks of the quarter. This also marked a significant slowdown, compared to the 3.2% growth in Q2, and putting an end to the rising trend for the past four quarters. They are now 1.9% below a Q3 2013 peak.

The reported noted that among these, Core Central Region (CCR) was the only segment that had strong property prices growth, while Rest of Central Region (RCR) and Outside Central Region (OCR) declined.

CCR

The increase in non-landed home prices in Q3 was led by the CCR which rose by 1.3%, compared with the 0.9% increase in the previous quarter. The CCR was the only region that saw a higher sequential price growth in Q3, supported by prices at luxury residential developments such as 8 Saint Thomas, Wallich Residences, New Futura and Martin Modern.

In Q3, 8 Saint Thomas was launched and sold 20 units at a median price of SGD3,226 psf, while Wallich Residences sold 10 units at median price of SGD3,553 psf, 8% higher than the median price of SGD3,283 achieved in Q2. New Futura and Martin Modern continued to sell 15 and 30 units sales in Q3 respectively while maintaining their median prices from Q2 2018.

This attests to our belief that properties in prime districts – especially Districts 9 and 10 – are in a better position to weather any potential slowdown in the market.

Colliers said that it also reflects the segment’s resilience and their appeal as trophy assets with potential for strong property prices growth.

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In the near term, Colliers expects prices to hold up better in CCR due to the replacement demand from collective sales owners coupled with limited new supply. The bulk of the collective sales in 1H18 had been focused on the prime region in CCR and the sales could be completing which could prompt replacement demand from the displaced owners.

RCR
Home values in the RCR fell by 1.3% in Q3 – after a 5.6% jump in Q2 – as selected projects cleared their remaining inventory at a discount. Sixteen35 Residences sold 11 units at a median price of SGD1,429 psf, 5% lower than the median price of SGD1,507 psf when it was launched in Q2. While some new launches after the cooling measures have seen fairly high takeup rates such as Mayfair Gardens (38%), many others have seen lower takeup rates which will likely keep any price increase in check.

However, in Q4, there are several relatively attractive offerings that bear watching: 1,399-unit Parc Esta near Eunos MRT Station, the first mixed integrated development in Bidadari — 667-unit Woodleigh Residences and 548-unit Kent Ridge Hill Residences.

OCR
Prices also fell in the OCR by a marginal 0.1% in Q3, compared with the 3.0% rise in Q2. The transactions were mixed with resale prices holding up while new projects such as The Affinity at Serangoon and Gardens Residences dropped prices to move sales after tepid takeup in June 2018.

In Q4, Whistler Grand in the west coast will be launching at an indicative price of SGD1,380psf, which would be similar to the launch price of its neighboring Twin Vew back in May 2018.

Supply pipeline and vacancy: Supportive of strong property prices in near term

During Q3 2018, 1,088 private homes obtained Temporary Occupation Permit (TOP), compared to 1,327 units in Q2, 1,977 units in Q1 and 4,249 units in Q4 2017. However, due to demolitions, the stock of completed private residential units (excluding ECs) increased by just 83 units in Q3.

URA estimates another 3,506 units to be completed in Q4 2018, bringing full year completions to 7,898, a sharp drop of 52% from 2017’s 16,449 units and 62% from 2016’s historical high of 20,803 units. URA expects 10,119, 3,796 and 12,263 private home completions in 2019, 2020, and 2021 respectively, which are below historical average completions. However, completions could rise sharply to 22,280 units in 2022, from the bumper en bloc transactions from 2016-mid 2018.

For the non-landed segment, vacancy rate continued to improve to 7.3% in Q3 from 7.6% in Q2, 8.0% in Q1 and 8.7% in Q4. The peak vacancy was 10.4% in Q2 2016.

Rentals
The overall private residential rental index rose for the third consecutive quarter, up 0.3% QOQ, decelerating from a 1.0% rise in Q2. Rents have lagged prices by three quarters, and are still 11.9% below their peak in Q3 2013.

Given the easing supply going forward, Colliers expects occupancy to continue to improve and rents could recover by another 1% in Q4 2018, and 5% in 2019, barring any external shocks.

Outlook
Tricia Song, Head of Research for Singapore at Colliers said the prominent real estate company is maintaining its strong property prices growth forecast of 8% for the full 2018 as new launches ahead should lend support to home values.

“We expect a slew of new projects to be launched before the year-end festive season, and particularly after the encouraging take-up in September which showed developer sales growing strongly by 51% month-on-month to 932 units.

“With regard to the recent revised guidelines on unit sizes announced in a circular by the Urban Redevelopment Authority, we think the new ruling should have little incremental impact on home prices as they would likely impact size configurations for projects completing beyond 2023. In the near-term, we believe the revised guidelines should not affect those developers which have already acquired land and obtained both Pre-Application Feasibility Study (PAFS) and planning approvals. Hence, the supply of residential units that is slated through 2023 – assuming a five-year construction period – should not be affected by the new guidelines.”

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