Singapore's private home prices up by 3.8% in third quarter

SINGAPORE: Private home prices rose at a slower pace of 3.8 per cent in the third quarter of this year after a strong second quarter.

It was largely driven by the prices of non-landed homes across Singapore, which went up 4.4 per cent this quarter.

The private residential property price index increased to 187.8, up from 180.9 in the second quarter, according to real estate statistics released by the Urban Redevelopment Authority (URA) on Friday (Oct 28).

Prices of non-landed properties rose 4.4 per cent, up from 3.6 per cent last quarter.

Non-landed home prices in the core central region rose by 2.3 per cent, compared with 1.9 per cent in the previous quarter.

Those in the rest of the central region went up by 2.8 per cent, a decrease compared with the 6.4 per cent jump in the second quarter.

Prices of non-landed homes outside the central region saw the biggest jump, increasing by 7.5 per cent in the third quarter, up from 2.1 per cent in the last quarter.

"By market segment, prices rose the most in the suburbs or outside the central region, which increased by 7.5 per cent. This is the steepest quarterly increase since the third quarter of 2009" when that figure was 16.1 per cent, said OrangeTee & Tie’s senior vice president of research and analytics Christine Sun.

Mr Lee Sze Teck, senior director of research at Huttons Asia, said three major launches in this region in the third quarter - AMO Residence, Lentor Modern and Sky Eden@Bedok - are probably the drivers behind the increase in prices. 

Landed home prices increased by 1.6 per cent in the third quarter of this year, compared with a 2.9 per cent rise in the previous quarter.

Resale transactions accounted for about 60.5 per cent of all sale transactions in the third quarter. There were 3,719 resale transactions, compared with 4,236 units in the preceding three months.

Ms Sun said not as many people bought private property this quarter due to "rising interest rates and higher prices", pointing to URA data that showed a 9.7 per cent decline in sales volume between the second and third quarters of this year.

RENTS GREW AT FASTEST QUARTERLY PACE SINCE 2007

Rentals of private homes posted an overall increase of 8.6 per cent in the third quarter to hit a new high, after rising 6.7 per cent in the previous quarter.

In the first nine months of this year, rents have risen by 20.8 per cent, Ms Sun said. "Tenant budgets are stretched to new limits" as rents grew at the fastest quarterly pace since the third quarter of 2007, she added.

Rentals of non-landed properties in the core central region increased by 7 per cent in the third quarter, compared with 7.7 per cent in the previous quarter. Those in the rest of the central region rose by 9.6 per cent, up from the 5.9 per cent increase in the last three months.

Rentals of non-landed properties outside the central region increased by 8.8 per cent, up from 7.7 per cent, while landed property rentals jumped 10.9 per cent in the third quarter, compared with 3.2 per cent in the previous quarter.

Ms Sun noted that with "demand far outstripping supply and units readily snapped up by the highest bidder", many landlords have increased their asking prices above market value.

As a result, tenants are signing longer leases of up to three years "to secure units and lock in better rates", Ms Sun explained.

She also said that rising interest rates and inflation are making the situation worse. "More landlords pass on their increased mortgage repayments and living costs to tenants ... putting a squeeze on tenants' rental affordability," Ms Sun said.

She warned renters not to expect a "quick respite" from surging rent prices, as the trend of tenants signing longer leases will impact the number of homes available for rental, which may bump up demand.

What will also intensify demand are private homeowners who buy unsubsidised HDB resale flats, who will be affected by a 15-month wait-out period. They are likely to rent in the interim, driving demand, Ms Sun said.

Singapore introduced several property cooling measures on Sep 30, including a new 15-month wait-out period for private homeowners who sell their property prior to submitting an application to buy an HDB resale flat.

Mr Lee of Huttons' noted that the return of foreign students to Singapore and the sustained hiring of expatriates could have been another reason for strong rental demand in the third quarter. 

There has also been "some 'musical chairs' movement of tenants as the rising rents have exceeded their budget and displaced some of them", Mr Lee said.

"Some of them have moved from the core central region to the rest of the central region, while some have moved from the rest of the central region to outside the central region," pushing up rents in both regions, he added. 

With more homes slated for completion next year, the pace of rental price growth could slow from mid-2023, Ms Sun noted.

SUPPLY

Developers launched 1,455 uncompleted private residential units, excluding ECs, for sale in the third quarter, down from 1,956 units in the preceding quarter.

A total of 2,187 private homes, excluding ECs, were sold in the third quarter, a slight dip from 2,397 sold by developers in the preceding three months. 

No EC units were launched for sale this quarter, while just 28 such units were sold. Last quarter, developers launched 616 EC units for sale and sold 193. 

A total of 3,619 units, including ECs, are expected to be completed in 2022, said URA, while another 20,098 units, including ECs, are expected to be completed in 2023. 

In total, 28,800 units, including ECs, are expected to be completed in 2022 and 2023, close to three times the 10,400 units completed in 2020 and 2021. 

"This will help to cater to housing needs in the immediate term," URA said. "More supply with planning approval, totalling around 31,400 units as of the (third quarter of 2022), will be completed beyond 2023." 

OUTLOOK 

Ms Sun said climbing interest rates, geopolitical tensions and global recessionary risks may be why investors are losing confidence in equities and riskier assets, choosing instead to invest in real estate, "widely regarded as a safe-haven asset or a hedge against inflation". 

"Strong household balance sheets, tight domestic labour market and sustained income growth" will also prop up housing demand, she said, adding that while rising mortgage rates and prices are squeezing buyers, some will still snap up property before interest rates rise further. 

She said private home prices are projected to rise between 9 per cent and 11 per cent this year. 

"For investors and landlords, surging rents are still cushioning the impact of higher mortgage payments now. If mortgage rates continue to soar and competition stiffens (with more new homes on the market next year), some landlords may face difficulty coping with," Ms Sun warned. 

"The situation may worsen when property tax and cost of living increase further."