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RESIDENTIAL PROPERTY | Staff Reporter, Singapore
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Private home prices may climb by up to 2% in 2019

The bonanza of 20,000 units to be launched in early 2019 may curb price growth.

Singapore developers may have to be more sensitive in their pricing going into 2019 thanks to the potential deluge of new project launches amounting to approximately 20,000 private residential units expected in H1, according to a report by OCBC Investment Research (OIR).

The bonanza of new property launches in early 2019 may curtail price growth for 2019, as according to the report, private residential price growth may come in near the low-end of their forecast of 8%-10% for 2018.

“We are projecting price growth to range between -3% to 2% as slower economic growth and the deluge of new launches may act as a dampener on home prices,” the analysts said. “For private transaction sales volumes, we project 8,000-10,000 units for 2018 and 10,000-12,000 units for 2019.”

Also read: Singapore housing market fairly valued: UBS

According to Urban Redevelopment Authority (URA) data excluding executive condominiums (ECs), there are 50,330 residential units in the supply pipeline as of 30 September which is 11.8% higher QoQ. Including ECs, the pipeline would consist of 53,164 units with planning approvals, on top of a potential pipeline supply of around 14,200 units from GLS sites and awarded en-bloc sale sites pending planning approval.

Data from URA and Edmund Tie & Company Research found that Sim Lian Group's Treasure at Tampines development will produce the most units at 2,225. It was followed by Kingsford Development's unnamed project and Logan Property's Florence Residences with 1,882 and 1,410 units available, respectively. 

Rising unsold inventory are causing some concern with developers’ unsold inventories with planning approvals increasing to 31,900 units in Q3 from 27,000 in Q2 2018. Of this, 24% are from the Core Central Region (CCR), 45.4% are in the rest of the central region (RCR) whilst 30.6% are located in the outside central region (OCR), OIR’s report revealed.

“However, we note that 57% of the unsold inventory has yet to meet the prerequisites for sale,” the analysts said.

On the other hand, real estate firms such as PropNex and APAC Realty may benefit as developers may be tempted to increase commission fees to incentivise property agents to boost their selling efforts amidst intense competition.

“The time to market would be critical for developers to beat the potential buyer fatigue,” OIR’s analysts said.

Meanwhile, the government’s cooling measures will continue to stifle the market going into 2019 as the cost of owning a home in Singapore has increased, with the exception of Singapore citizens and first time home buyers.

Some Singapore developers already saw relatively lacklustre performances in their share prices prior to the Additional Buyer’s Stamp Duty (ABSD) rates and Loan-to-Value (LTV) limits imposed by the Singapore government.

Also read: Cooling measures to curb demand for landed homes

“The timing of the aforementioned cooling measures caught the market by surprise and compounded the negative returns for developers with significant exposure to the Singapore residential market,” OIR analysts noted.

The analysts added how City Developments (CDL) bore the brunt of weakened investor sentiment as it is seen as a clear proxy to the the Singapore residential market with its sizeable land bank. On the other hand, CDL’s share price has rebounded 3.2% as at the closing price of $8.72 on 4 December, the report revealed.

Nevertheless, OIR analysts said that previously concluded deals could still present sizeable opportunities as a portion of displaced households may seek to buy replacement homes or redeploy their cash windfall back into the physical market as investments.

“From 2017 to 2018 YTD, we estimate that an aggregate $18.4b worth of collective sales were announced, involving approximately 6,500 units,” the analysts highlighted. “Assuming 50% of owners will buy replacement homes and that 80% of proceeds is owner equity, that would imply that around $7.4b of cash capital can be deployed back into the market for unsold homes.” 

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