THE Urban Redevelopment Authority’s benchmark overall private home price index fell for the second consecutive quarter. It eased 1.1 per cent quarter-on-quarter (q-o-q) in Q2 2020 based on the flash estimate issued on Wednesday, after slipping 1.0 per cent in Q1 2020.
Suburban non-landed private home prices remained unchanged in the April to June period.
Property consultants generally said that a price decline in Q2 was to be expected, given the drop in transaction volumes during the circuit- breaker partial lockdown to contain the Covid-19 bug.
From April 7 to June 18, showflats were shut and property viewings disallowed.
All things considered – the severe setback in terms of disruption to business activity and movement of people during the circuit breaker – most consultants termed the drop in URA’s benchmark index in Q2 as “mild” or “gentle”.
Said PropNex chief executive Ismail Gafoor: “We think the 1.1 per cent price drop in Q2 was measured and reflected some resilience amid this pandemic.”
That said, market insiders reiterated that headline sale prices reported by licensed housing developers to the authorities weekly may be propped up by the practice of agents who kick back to buyers a chunk of the fat commissions they have been receiving from developers.
“Moreover, a lot of the options to purchase (OTPs) granted by developers in Q2, especially in projects with a large number of units, involved an arrangement to continually re-issue the OTPs to buyers upon expiry, sans any forfeiture of booking fees,” said a senior agent who declined to be named.
This strategy can quickly bump up sales volumes in projects and consequently be used to hype the project.
Both tactics are not new; they first surfaced after the July 2018 property cooling measures and have continued to be in play, even during the circuit-breaker period.
Developers’ sales of private homes fell month-on-month in April before picking up in May.
On the whole, new private homes (excluding executive condo or EC units) sold fell 37.5 per cent q-o-q to 1,343 units in Q2 2020, shows Colliers International’s analysis of URA Realis data as of July 1.
The number of secondary market transactions of private homes shrank at an even steeper pace of 65.2 per cent q-o-q to 738 units in Q2 2020.
Year-on-year, URA’s benchmark private home price index is down 0.3 per cent based on the flash estimate. It is also 2.7 per cent below the all-time peak in Q3 2013.
Since the end of last year, the index has eased 2.1 per cent.
Property consultants’ forecasts for the full-year drop in the index vary. At the lower end of the range is Mr Ismail of PropNex, who is projecting a fall of up to 3 per cent, “with the potential rebound in new homes sales lending support to prices in the second-half of the year”.
CBRE’s research head for Southeast Asia Desmond Sim expects the index to correct by 5 to 8 per cent for the whole of 2020, factoring in a larger price correction in the second half amid slower economic growth.
The rest of the consultants’ forecasts fall between PropNex’s and CBRE’s projections.
For the whole of last year, URA’s private home price index appreciated 2.7 per cent, a slower pace compared with the 7.9 per cent hike in 2018.
Looking ahead, ERA Realty’s head of research and consultancy Nicholas Mak said: “The property market will be balancing opposing forces. There will be market forces that will depress property prices, such as economic headwinds and the weak job market.
“There will also be market forces that would support property prices, such as low interest rates, ample liquidity in the market, some pent-up demand, more active real estate marketing, foreigners seeking a safe haven outside their home countries and HDB upgraders’ demand.”
Mr Mak points out that HDB upgraders have helped to support demand for new suburban condo projects.
URA’s price index for non-landed private homes in the Outside Central Region (OCR) was the only segment with no change in Q2 2020 over the previous quarter amid a sea of declines registered for all other categories.
JLL’s senior director of research and consultancy Ong Teck Hui said that this could be attributed to the relatively healthier new sale transaction volumes in this market segment during the quarter.
New non-landed private home sales in OCR declined by about 17 per cent in Q2 2020 over the previous quarter, a much smaller drop than the declines of 67 per cent in the prime areas or Core Central Region and 31 per cent in the city fringe areas or Rest of Central Region.
“The resumption of launches will place more units for sale on the market and pricing is expected to be more competitive to attract buyers,” Mr Ong added.
Mr Sim of CBRE, too, expects developers to be more flexible about their price expectations, due to a slew of projects slated for launch in July. “The bunching up of projects may lead to some price competition among developers.
“While we might see a short-term resurgence in new sales volume following the lifting of circuit-breaker measures, current economic conditions will continue to weigh on buyers’ purchase considerations. Larger units with higher quantum of above S$2 million are likely to take the brunt.”
Developers, however, are in dilemma. As Savills Singapore executive director Alan Cheong put it: “Developers understand that the market is still price sensitive and will meet the market where it is. However, because their margins are razor thin, their ability to jiggle prices on the downside is limited.”