Private home prices in Singapore edged up 0.3 per cent in a surprising turnaround from an initial flash estimate in early July which had the private residential property index declining by 1.1 per cent.

However, this may be a one-off as most analysts expect economic headwinds and weaker employment prospects to put downward pressure on prices and volumes this year.

The 0.3 per cent figure – which follows a 1 per cent decrease in Q1 – could be due to pent-up demand in the second half of June when Singapore moved into phase two of reopening, some analysts highlighted. Prior to that, developers had to shutter their showflats from April 7, while physical viewing of properties was disallowed.

Transaction volumes also took a tumble during the second quarter, slumping nearly 38 per cent quarter-on-quarter to 2,664 units due to the circuit breaker and slower economy.

According to the latest report from the Urban Redevelopment Authority, prices of landed properties remained unchanged in Q2, versus a 0.9 per cent decrease in Q1, while prices of non-landed properties edged up 0.4 per cent, led by the core central region (CCR). In comparison, non-landed properties slid 1 per cent in the previous quarter.

By location, prices of non-landed properties in the CCR rose 2.7 per cent in Q2, reversing from a 2.2 per cent decrease in the previous quarter. Meanwhile, prices of non-landed properties in the rest of the central region fell by 1.7 per cent, sharper than the 0.5 per cent decrease in the prior quarter. Outside the central region, prices went up marginally by 0.1 per cent, compared with the 0.4 per cent decrease in the previous quarter.

“There were almost no major project launches in Q2, which typically help to boost volume and support prices,” said Ismail Gafoor, chief executive of PropNex.

The primary market proved more resilient than the secondary market in Q2, analysts said, with the former accounting for nearly two thirds of all transactions.

Commenting on the surprise reversal in the private home price index, Ong Teck Hui, JLL’s senior director of research & consultancy pointed out that this suggested purchases – in particular for landed homes, and for non-landed units in the CCR – in the second half of June were at higher price levels. He said: “In the last two weeks of June, there was a surge in buying at 8 Saint Thomas, while high value sales were also recorded in other prime projects such as Leedon Green, Martin Modern, Van Holland and Pullman Residences.”

Knight Frank Singapore’s head of research Leonard Tay reckons buyers grew used to “transacting from home” as new home sales volumes started to pick up pace from end-April. With the turnaround in Q2, the overall prices of private residential homes only declined by 0.7 per cent in the first half of this year – which is “very mild, considering the unprecedented pandemic and economic disruption”, highlighted Mr Tay.

However, as the ongoing pandemic tips countries such as Singapore into recession, the increase in the price index could be a one-off. Mr Ong added: “Buyers remain cautious and price sensitive while unsold inventory remains substantial.”

According to PropNex Research, 90 per cent of the new private homes sold in Q2 costed less than S$2 million, vis-a-vis 86 per cent in the previous quarter.

In Q2, the resale market was hit harder than the primary sales market, with resale transactions accounting for 35 per cent of all private homes sold in the second quarter when the “circuit breaker” took place. This is down sharply from 2,080 units in Q1.

Including the 18 sub-sale units transacted, only 951 private homes were sold in the secondary market in Q2, which was about 45 per cent of the volume in the prior quarter, noted ERA Realty’s head of research & consultancy Nicholas Mak.

This is the lowest secondary market volume since the Asian financial crisis, when 644 units were transacted in Q1 1998, and is lower than during the Sars outbreak when 980 units changed hands in Q1 2003, he pointed out.

Developers sold 1,713 private residential units (excluding executive condominiums or ECs) in Q2, down about 20 per cent from Q1.

“Sales may be driven by some developers offering discounts and incentives,” said CBRE’s head of research (South-east Asia) Desmond Sim, adding that low interest rates has also spurred on buyers. “Moving forward, developers could be more flexible in their pricing expectations as the bunching up of projects may lead to some price competition.”

This year, Cushman & Wakefield’s associate director (research) Wong Xian Yang expects prices to come down gradually, estimating a decline of 3-6 per cent for 2020. He ruled out out widespread fire sales, although some deals could be thrown up by owners who need to free up cashflow. He added: “Most developers have healthy balance sheets and do not face pressure from ABSD (Additional Buyer’s Stamp Duty) deadlines in 2020 and 2021. The circuit breaker measures may also allow them to seek for an extension of ABSD deadlines.”

After developers sold over 3,860 new homes in H1 2020, Huttons Asia’s research director Lee Sze Teck projects developer sales for the year will clock between 8,000 and 8,500 units. This is made possible by the up to 20 new project launches pencilled in for the rest of the year, he reckoned, adding that prices could remain flat this year.

CBRE expects the residential property price index to correct by up to 5 per cent this year, as does Knight Frank, which sees developers selling 6,000 to 7,000 new private homes this year.

Mr Mak projected that developers could sell a higher range of 8,000 to 9,000 private homes citing pent up demand, with the residential property price index ranging from -2 per cent to 2 per cent this year. About three-quarters of the 5,243 units from the 17 new residential projects that could be launched in the next six to nine months are in the Central region, which could buttress property prices, Mr Mak added.

PropNex now expects prices to decline by 1-2 per cent this year, compared to its earlier forecast of a 3 per cent drop, while developer sales could clock 7,500 units (excluding ECs). Last year, 9,912 new private homes were sold.

Looking ahead, OrangeTee & Tie expects local demand could help support the property market, after Singaporeans accounted for 80.4 per cent of purchases of non-landed homes in Q2. At the same time “foreign buying interest (Singapore PR and non-PR) remained healthy despite the global lockdown,” said its head of research and consultancy Christine Sun, adding that 348 units were bought by PRs and 121 units by non-PRs. Anecdotally, OrangeTee has noticed more buyers from Hong Kong, the United States and China since Q3 2019.

Meanwhile, rentals of private residential properties decreased by 1.2 per cent in Q2 after increasing 1.1 per cent in the previous quarter. Amid the economic recession, travel curbs and cost cutting by companies, rents are likely to remain under pressure in the coming quarters as leasing demand wanes, analysts said. Huttons projected that rents may ease by as much as three per cent in the second half of the year.

Where supply is concerned, there was a total supply of 49,090 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals at the end of the quarter, compared to 48,868 units in the previous quarter. Of these, 27,977 units remained unsold at the end of Q2, compared with 29,149 units in the previous quarter.

After adding the 3,613 EC units in the pipeline – of which 1,899 units remain unsold – there were 52,703 units in the pipeline with planning approvals.

In total, 29,876 units with planning approvals (including ECs) remained unsold, down from 31,099 units in the previous quarter.


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