What do home prices hitting all-time high in 4Q mean for Singapore property market?

Fears over policy risks heightened.

Price index for private residential property for 4Q12 rose to 211.9 points in 4Q12 from 208.2 points the previous quarter. HDB’s flash estimate for 4Q12’s Resale Price Index (RPI) of 202.9 meanwhile indicates a 2.5% increase over 3Q12’s value of 197.9.

Here's how analysts view the results

Chia Siew Chuin, Director of Research & Advisory, Colliers International

URA’s flash estimate for 4Q 2012 showed that prices of private residential property rose 1.8% QoQ – culminating to a 2.8% YoY increase for 2012. Prices are now at an all-time high, after recovering 59% from the global financial crisis in 2Q 2009.

The overall yearly growth of 2.8% is slower than the 5.9% increase registered in 2011 – indicating that Government’s market cooling measures, such as the Additional Buyers’ Stamp Duty and the latest mortgage tenure curbs, have been effective to some extent in moderating the price growth of the private residential market in 2012.

Notwithstanding, low interest rates and high liquidity continued to persist and drive demand for homes. The pace of price growth in 4Q 2012 on a QoQ basis had increased to 1.8%, from 0.6% in 3Q 2012 and 0.4% in 2Q 2012.
All three market regions experienced higher rates of price growth, although the pace of increase varied across the regions.

The overwhelming popularity of homes in Outside Central Region (OCR) helped to boost prices of mass-market homes. Prices of non-landed private homes in OCR increased the most – rising 3.4% QoQ, a stronger uptick from the 1% quarterly growth in 3Q 2012.

The price appreciation in the OCR also drove homebuyers to consider homes in the Central Region, as the price gap between new mass-market homes and completed higher-tier properties continued to narrow.

As a result, prices of non-landed housing units in the Core Central Region (CCR) and Rest of Central Region (RCR) also rose by a faster 0.8% and 0.9%, respectively in 4Q 2012, compared to the corresponding increases of 0.1% and 0.8% three months earlier.

The increased momentum in the QoQ price up-trend – particularly in the mass-market housing segment, as well as the return of buying interest in the high-tier segments – are likely to keep the authorities high on guard again and have further heightened policy risks in the residential sector.


The residential market has enjoyed a good run of demand driven by local buyers. Low interest rates are likely to continue to be supportive of home-buying demand, while the volatile markets could push investors to seek refuge in the property sector that proved to be resilient to external shocks in the past year.

Nonetheless, the private residential market is likely to approach 2013 on a more tentative note, amid a more challenging economic environment and cautious employment prospects.

Although another wave of activity is expected in light of more offerings in the pipeline, especially in the mass-market segment on the back of strong response received from developers from 2012 Government Land Sales Programme, buyers are showing resistance to record high prices.

Additionally, while high land cost from robust tender bids is likely to keep prices elevated, the sizeable residential supply that will come on-stream in the next few years and the growing inertia towards further price appreciation are likely to keep prices in check.

The risk of further cooling measures from the Government should also put developers and the majority of home buyers on a cautiously-optimistic stand and contain their risk appetite; thus, limiting their propensity to commit to prices that are extensively higher than the last done.

As such, these factors should provide for stability and sustainability in the Singapore residential market in the next 12 months.

Barring any unforeseen circumstances, private residential property prices are expected to continue its flat lining, with projects that feature attractive locational and product attributes enjoying better upside potential. Overall price growth is likely to be capped at 2% to 3% in 2013. 

Mr Ong Teck Hui, National Director, Research & Consultancy, Jones Lang LaSalle

The 1.8% increase in the residential property price index indicates a clear resurgence in prices, especially after several quarters of minimal price growth. A significant contributor to this is the strong price increase in OCR at 3.4% during the quarter. OCR prices are underpinned by a robust HDB resale market where firm resale prices help HDB owners to upgrade into mass market private homes.

HDB resale price trend and that for OCR has been fairly similar; the former rising 6.6% in 2012 and the latter, 6.1%. On the other hand, 2012 price increases for RCR and CCR were only 1.6% and 0.9% respectively.

The 3.4% increase in OCR prices in 4Q12 is also due to a much higher proportion of higher value transactions occurring during the period compared to the third quarter. In 3Q12, of the 4096 caveats lodged in OCR, only 33% were for transactions of above $11,000 psm while in the fourth quarter, 52% of the 3714 caveats lodged (to-date) were of that price category. Projects with considerable sales volume in 4Q12 and with average prices above $1000 psf contributing to the quarter’s upbeat pricing in OCR include eCO ($1306 psf), Foresque Residences ($1152 psf), Kovan Regency ($1283 psf), Skies Miltonia ($1057 psf), The Luxurie ($1086 psf) and Parc Centros ($1095 psf)

It’s been barely 3 months since the last round of cooling measures and we are now faced with another challenging situation which could result in policy intervention again. It’s an extremely tricky situation if additional measures are imposed while economic conditions are deteriorating. The
cumulative effect of cooling measures could exacerbate a property downturn in an adverse economic environment.

Mohamed Ismail, CEO,  PropNex Realty

The HDB resale price index is now at its historical peak as this increase of 2.5% is the highest since 3Q11, when the price index grew by 3.8%. One of the reasons for the increase in resale price index is the tight supply of resale flats coupled with the strong demand,However, a closer look at the figures showed that the overall price increase of 6.4% for 2012 is the lowest for the past 5 years since 2007. Overall, I think HDB’s policy of increasing the housing supply had produced the desired results of moderating public housing prices.

The last two quarters in 2012, however, had set the tone for an expected price increase in the HDB resale market in 2013. We forecast a strong growth in the first half of 2013 even with an increase of 23,000 new BTO flats due to the construction time. The impact of this increased supply will only be felt in the second half of this year, as such it is predicted that HDB resale prices are likely to be increasing between 5 to 7% for the entire 2013.