RESIDENTIAL PROPERTY | Krisana Gallezo-Estaura, Singapore

Are home price gains moderating in the last quarter of the year?

Mid-market prices dropping for the first time since 1Q12 give a cue.

Private home prices increased 0.4% quarter-on-quarter (q-o-q) and 3.8 per cent year-on-year (y-o-y) in 3Q 2013.

The increase was mainly attributed to the mass market segment in Outside Central Region (OCR) with 2.1% q-o-q increase in 3Q 2013.

Prices of high-end non-landed properties in Core Central Region (CCR) declined further by 0.5% q-o-q in 3Q 2013, compared to 0.2% decrease in 2Q 2013.

Prices of mid-market properties in Rest of Central Region (RCR) fell by 1.1%, the first decline since 1Q 2012.

Here's how analysts see price movement in the last three months of the year:

Alice Tan, Associate Director & Head, Consultancy & Research

Looking ahead towards the last quarter this year, further price moderation is expected in the high-end segment with 0.3% to 0.5% price decrease. RCR could see an uptick in private home prices with modest price increase of about 0.2% q-o-q, in view of upcoming new project launches at good locations. Mass market home price could moderate with marginal increase of around 0.5% to 1% q-o-q, as developers adjust new sale prices to boost sales performance.

Chia Siew Chuin (谢岫君), Director of Research & Advisory.

The outlook for the private residential market is cautiously optimistic.

The government measures will continue to work through the market to curb extensive borrowing, affect affordability and rein in prices. Although mortgage rates in Singapore could stay low for a while longer, on the back of the decision by the United States Federal Reserve to withhold tapering its stimulus programme (unlike before where home buying is mainly driven by low interest rates and high liquidity), this driving factor is likely to be nullified by the effects of the government measures.

Projected weaker resale prices of HDB flats going forward are also expected to affect the affordability of the upgrader’s segment of the private residential market. According to HDB’s flash estimate for 3Q 2013, the Resale Price Index declined for the first time since 1Q 2009 by 0.7% over 2Q 2013.

Nevertheless, developers have found a way to overcome slow sales momentum and cautious buying sentiment by opening showflats a couple of weeks before sales bookings begin to allow time for potential homebuyers to obtain approval for housing loans.

Meanwhile, reasonably-priced homes with good product and location attributes will continue to find favour with homebuyers. As such, some developers are likely to continue to adjust and find an optimal price level to move sales. For instance, new projects launched in the RCR in September such as Thomson Three and Sky Vue were brisk following reports that the respective developers lowered price expectations in light of the new curbs on housing loans.

All things considered and barring any unforeseen shocks, overall private residential home prices are expected to flat line in 4Q 2013 and register a mild increase for the whole of 2013.

Mohamed Ismail, CEO of PropNex Realty

The latest new debt servicing framework introduced by MAS with loan interest rates pegged at 3.5% may prompt potential homebuyers to take a more discretionary view of home buying with the reduced affordability levels. We believe the Total Debt Servicing Ratio (TDSR) has reduced the purchasing power of some buyers and also slowed the purchasing process as loan assessments by banks take a longer time so buyers are unable to commit to purchases as quickly as before. Demand would have also softened due to the TDSR’s impact especially on buyers who already have other existing mortgages,” commented Mr Mohamed Ismail, CEO of PropNex Realty.

However, projects with good location attribute and attractive price offers would be enticing draws for prospective buyers. Developers are also likely to be nimble with their pricing strategy as witnessed at the recent launches at Skyvue and Thomson Tree in order to avoid hitting buyer’s price resistance level, especially after the TDSR. Moving forward, we expect the mass market segment to remain resilient as they are well-supported by genuine upgraders. We are cautiously optimistic that private property prices could rise by 2.5% for the whole year, with OCR properties to rise by up between 8 - 9 %. With more launches expected in the last quarter this year, we expect a healthy demand as long as developers priced them right.

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