Experts explain the 1.3% rise in private home prices in Q3 2019

PropertyGuru Editorial Team
Experts explain the 1.3% rise in private home prices in Q3 2019
If you don’t already know, private home prices in Singapore are creeping up, with the Urban Redevelopment Authority’s (URA) property price index rising 1.3% in Q3 2019, beating flash estimates of 0.9%, bur slower than the 1.5% increase seen in the previous quarter.
Comprising of postal districts 9,10, 11, Downtown Core and Sentosa, the Core Central Region (CCR) posted the steepest quarterly property price increase of 2%, followed by the Rest of Central Region (RCR) at 1.3%, and the Outside Central Region (OCR) at 0.8%.
The increase in property prices comes amid concerns over Singapore’s economic slowdown, rising unemployment (at a decade-high), and ongoing US-China trade tensions.
Not surprisingly, PropertyGuru’s latest Consumer Sentiment Survey found that the majority of Singaporeans are unhappy over the state of the housing market. In fact, roughly 82% of the 794 respondents polled think that property prices are too expensive.
But that hasn’t stopped many home buyers from snapping up condominium units, especially at new launches.
According to URA Realis data, there were 3,044 new units sold in Q3, which translates to 65% of all private home sales. This is up from 2,144 units in the quarter before, or 51% of all sales.

Demand high for centrally-located condos

One might assume that the strong demand is being driven by more affordable condo launches in the OCR, but instead analysts are seeing more activity in the pricier CCR and RCR.
“Private home prices in 2019 rose an estimated 1.7% on the back of more launches in the CCR and RCR and healthy demand from buyers,” said Lee Sze Teck, Director of Research at Huttons Asia.
“A number of new projects have been launched recently in these districts and some buyers may view this as a good opportunity to snag a new home given that some projects are well located, built by reputed developers or distinctly designed, said Christine Sun, Head of Research and Consultancy at OrangeTee & Tie.
Tan Tee Khoon, Country Manager at PropertyGuru, noted that a handful of successful condo launches in the RCR, namely Avenue South Residence at Silat Avenue and Parc Clematis in Clementi, continue to drive the bulk of sales.
The 1,074-unit Avenue South Residence sold 276 units on the first day of launch at an average price of $1,780 psf to $2,250 psf, while Parc Clematis moved 324 units on launch day at an average price of about $1,580 psf.
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Chinese buyers out in force

Over in the CCR, a total of 315 private homes found buyers in the first nine months of 2019, which nearly matches the pace of sales prior to the government’s introduction of cooling measures in July last year, said Tan.
He added that about one-third (97 units) were purchased by Chinese nationals, who make up the largest foreign buyer group in Singapore.
Sun has also noticed an increase in the number of mainland Chinese buying high-end properties in Singapore.
Citing URA Realis data, she said that the proportion of mainland Chinese who bought luxury homes in the CCR from Q1 to Q3 2019 was 25.9%, markedly higher when compared to the same period in 2017 (20.7%) and 2018 (18.6%).
“Some mainland Chinese may have parked their monies in properties here as a hedge against the further devaluation of the yuan. We have also seen well-heeled Chinese millionaires streaming into the market lately, which may explain why there are more units sold in prime districts 9 and 10,” she said.
Meanwhile, Hong Kong buyers, who’ve been beset by uncertainty in their home country, have been noticeably absent in the Singapore property market, with only eight units purchased by this group in the first three quarters of this year. Instead, Hong Kongers have been turning their attention to more affordable property destinations in the region such as Malaysia and Taiwan, or countries with perceived greater political freedom such as the United Kingdom or Canada.
Despite this, Lee pointed to Singapore’s political and financial stability as the key reasons why many foreigners still choose to invest here.
“The global economic uncertainty has pushed more people to seek a safe haven for their money. Property is a tried and tested investment vehicle and has provided stable returns over time,” he said.
Reflections @ Keppel Bay - PropertyGuru Singapore

Should we expect more property cooling measures?

Separately, the PropertyGuru survey found that 58% of respondents felt the government could do more to regulate private home prices in Singapore, up from 49% in the previous survey.
Despite the recent rise in property prices and more foreign demand, analysts don’t foresee government intervention in the private residential market anytime soon.
Sun noted that the pace of property price increase has slowed down over the last quarter while demand from property speculators remains weak.
“As of now, the proportion of sub-sale transactions is still at a low of around 1.6% of total sales as opposed to 10.9% in Q4 2009, which is before the implementation of the seller’s stamp duty in February 2010,” she said.
Looking ahead, analysts expect private home prices in Singapore to increase by between 1% to 3% for the rest of the year.
“The underlying demand for private homes remains resilient and has supported sales and prices in recent months,” said Tan. “In addition, the more benign interest rate environment is also favourable for the housing market.”

Look out for these upcoming launches

Tan pointed to the ample launch pipeline which should keep private home prices stable. Upcoming launches in the CCR include the 321-unit Hylle on Holland, One Holland Village with 559 units, the former Tulip Garden (672 units), and the former Pacific Mansion (376 units).
In the RCR, launches include Verdale with 258 units and the 132-unit Amber Sea. Meanwhile, in the OCR, potential launches include Sengkang Grand Residences (682 units), Midwood (564 units), and Infini at East Coast (36 units).
Coupled with economic uncertainties, the large supply of new private homes in the pipeline are expected to help keep property prices in check. Having said that, private home prices, in particular for properties in the CCR and certain sought-after RCR locations such as Novena, could rise by as much as 3% in 2019 due to strong demand from foreign buyers who regard Singapore as a safe haven.
While home sellers may see this as an opportunity to raise their asking prices and use the proceeds to fund their next property purchase, they should remain realistic as the buoyant demand is largely limited to new launches, for now.
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PropertyGuru contributor, Robert Devan, wrote this article.
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