,Singapore

Cooling measures expected for heated private residential market: analysts

Private residential property prices rose for the fourth quarter in a row, leaving investors hungry for more.

Home prices increased for the fourth quarter in a row in the first quarter of 2021, up 3.3%, according to latest data from the Urban Redevelopment Authority (URA). This is also the steepest growth rate recorded since the 3.4% increase recorded in the second quarter of 2018.

Prices of landed property posted a rebound from the 1.6% decline in Q4, 2020 to 6.7% in Q1, 2021.

Prices of non-landed property increased at a slightly lower 2.5% in the first quarter compared to the 3.0% in the quarter previous, driven by a 6.1% price quarter-on-quarter increase recorded in the Rest of Central Region (RCR). This was bouyed by new launches such as the Normanton Park and the Reef At King's Dock. Prices in the Core Central Region (CCR) increased by 0.5%, following a 3.2% increase in the quarter previous. Home prices in the Outside Central Region (OCR) likewise grew in a slower 1.1% compared to the previous 1.8% due to a lack of new launches.

Rentals of private residential properties increased by a whopping 2.2%, compared to the almost flat 0.1% of the previous quarter.

Overall, developers sold a total of 3.493 new private homes in the first quarter, excluding executive condos, a 62.5% increase from the 2,149 units sold in the first quarter of 2020.

In the private home resale market, transactions more than doubled to 4,519 in the first quarter of 2021 compared to the 2,080 in the first quarter of 2020, the highest number of resale units sold in a quarter since the 4,700 recorded in the second quarter of 2018.

Propnex CEO Ismail Gafoor noted that the average transacted quantity for the region for new private homes was at $1.6 m, a palatable price for many buyers.

"For the full year 2021, we are projecting private home prices to rise by 6% to 7%, largely backed by the new launches. In particular, we expect CCR prices to potentially clock a slight increase this year, reversing the marginal decline in 2020. The slate of attractive CCR new launches such as Midtown Modern, Irwell Hill Residences, One Bernam, and Klimt Cairnhill should help to prop up prices in this sub-market," Gafoor said.

Barring government measures to cool down the market, Propnex anticipates more than 10,000 new private homes to be sold in 2021, and more than 12,000 resold.

PropertyGuru Singapore Country Manager Tan Tee Khoon said the property market was bullish in the first quarter, as expected. Affordable credit, low interest and a "self-feeding ecosystem" driven by those who wish to upgrade from living in HDB flats are among the reasons for this market vibracy.

"The unprecedented number of HDB Minimum Occupation Perioud (MOP)s resulted from the government increasing the BTO supply from 2011 to 2014. These HDB upgraders may move to the HDB resale market in search of larger properties or to the private market of entry-level condominiums. This would explain the rapid growth in HDB resale prices (3.0% growth in Q1 2021 over that in Q4 2020), as well as the strong sales of condos in the S$1 million to S$1.5 million price range," Tan said in a statement.

PropertyGuru expects the government to tighten measures to prevent investors from buying additional property to prevent the market from overheating.

"The previous round of property curbs was implemented in H2 2018, on the back of four quarters of price growth. This time, we observe a similar trend. So, the government may tighten measures targeted at investors who own multiple properties, such as increasing the Additional Buyer’s Stamp Duty (ABSD) or reverting the Seller’s Stamp Duty holding period to four years. Given that overleveraging is a concern, the government may also tighten the Loan-to-Value limit which is currently capped at 75% for first-time home buyers taking a bank loan, potentially pricing first-time home buyers out of the private market as a reduction of a few percentage points could translate to tens of thousands more required in down payment," Tan said.

CBRE Research and Cushman & Wakefield likewise said the government might implement cooling measures soon.

"To date, private property prices have already expanded by 6.6% from its previous trough in Q1 2020. The rate of price increase over the past few quarters also further raises the possibility of impending cooling measures. Barring any unforeseen circumstances, new home sales figures for 2021 could potentially fall closer to 10,000 units. In the longer term, the potential reopening of borders will also bring about the return of foreign investors to the residential market," said CBRE Research in a statement.

Cushman & Wakefield Singapore Head of Research Wong Xian Yang said the rising prices and potential cooling measures could limit the number of successful deals.

"Amidst strong new sales which reached 3,581 units in Q1 2021, unsold inventory has continued to fall, reaching 21,634 units, the lowest level of unsold inventory since Q4 2017. Notably, the current levels of unsold inventory are below that in Q2 2016 of 23,282 units, when the last enbloc cycle started. As unsold inventories dwindle, enbloc activities should pick up. However, rising prices which will raise owners’ expectations and the rising possibility of new cooling measures being implemented may lead to a gap in expectations between developers and owners, which will limit the number of successful deals," Wong said.

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