Don't expect Singapore's private home prices to match growth of 2018: Experts

Don't expect Singapore's private home prices to match growth of 2018: Experts

Private home prices in Singapore rose 7.9 per cent in 2018, compared with a 1.1 per cent rise the year before. Looking ahead, analysts are mixed as to whether the market will remain steady. Brandon Tanoto crunches the numbers. 

SINGAPORE: Private home prices may have risen by close to 8 per cent last year according to flash estimates from the Urban Redevelopment Authority (URA), but analysts say that this increase will not be sustained in 2019.

Private home prices in Singapore rose 7.9 per cent in 2018, said the URA on Wednesday (Jan 2), a 6.8 percentage point increase from the year before. 

However, the growth appeared to have slowed significantly after the Government introduced measures in July to cool the market. Private home prices slowed to a 0.5 per cent increase in the third quarter of 2018, and fell 0.1 per cent in the fourth quarter, URA's estimates showed.

Experts said that such an increase in prices is unlikely to repeat itself, as the effect of cooling measures continue to linger over the market.

"The 7.9 per cent increase was mainly contributed by what happened in the first two quarters as well as what happened early in July when developers quickly launched (properties) on the day that cooling measures happened," explained Mr Ku Swee Yong, CEO of International Property Advisor.

READ: Panic buying at showflats after new cooling measures

Private home prices rose to their highest point in four years during the April to June quarter last year, before the Government announced in early July that it was raising Additional Buyer's Stamp Duty (ABSD) rates and tightening loan-to-value limits on residential property purchases, in an effort to "cool the property market and keep price increases in line with economic fundamentals".

Coupled with the cooling measures, factors such as an increase in the three-month Singapore Interbank Offered Rate (SIBOR), a key benchmark interest rate used to price home loans, also meant that the cost for developers and investors has also risen, said Mr Ku.

"Private property prices are now a lot more expensive, which has turned away some buyers. When the demand drops, prices can't rise," added Mr Chris Koh, director of property firm Chris Koh International.  

"Ever since the cooling measures were introduced in July, many of us expected prices to hover or increase by just a little."

"FERVOUR" OF EN BLOC MARKET WANING

While en bloc sales were a factor in the jump in private property prices last year, Mr Ku added that the "fervour of the en bloc market has waned".

"When developers were willing to pay a higher price, then those in the same neighbourhood who were individually selling their apartments would also raise their prices, so there was some rub-off on the secondhand market and that's why the index went up," he said. 

READ: More than 30 en bloc bids fail to find buyers since cooling measures

READ: Amid property curbs, some en bloc attempts go on while others change tracks

"Last quarter's flash estimates did not drop significantly because many apartments are still in the process of trying to get an en bloc ... But give the market a few more months, many of these owners catch up with reality and start to sell their apartments when the en bloc does not materialise and therefore prices should be pressured down."

Facing the "challenges" of selling older developments such as en bloc sites, property consultancy Knight Frank said that some sellers are likely to be "more flexible".

"The resale prices of older developments are likely to decline in 2019, and drag down the overall price index," it said in a commentary.

"Moving forward, we anticipate the price index to remain largely stable in 2019, with the price indices experiencing small fluctuations throughout. Prices for non-landed homes, especially for older developments in the resale market, are likely to decline under the pressure of slower demand and the plethora of options in the primary market. This is likely to be more prevalent, particularly with the cooling of the en bloc market," Knight Frank said.

READ: Property cooling measures – examining the case for a ‘sledgehammer’

Mr Koh added that it could be a muted year for the property market. "We could see private home prices increase by a healthy 2 to 3 per cent in 2019, which means only an increase of 0.1 to 0.5 per cent per quarter," he said.

With more new launches in the pipeline, 2019 is likely to be more of a buyers' rather than sellers' market, said Mr Ku, who predicts a "3 to 5 per cent drop" in private home prices as compared to 2018. 

"Overall, things are working against sellers, so it will be a buyers' market," he said. "I think it will be tough for 2019 to sustain the positives (of the previous year)."

Source: CNA/mt(cy)

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