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Private Property Home Sales Prices Expected to Rise Further Due to Tight Supply and Demand

Private home prices is expected to rise as buyers for private properties jumped in after the Chinese New Year break in anticipation of an economic recovery amid a tight supply and demand.

The number of new private home sales last month increase to 1,296 units – the highest March take-up since 2017 and double the 645 units sold in February.

“Buyers flush with cash and seeking stability are investing in stable assets like properties,” said Mr Lee Sze Teck, director of research at Huttons Asia.

An estimated 3,574 new private homes were sold in the January to March period this year – the highest quarterly sales since the second quarter of 2013 when 4,538 units were taken up, he added.

About 42 per cent, or 546 units, of March sales were in the prime or core central region (CCR), helped by sales in Midtown Modern, RV Altitude and The M. This was followed by the city fringe or rest of central region (RCR) with 29.9 per cent, and suburbs or outside of central region (OCR) with 27.9 per cent.

“The previous high in the CCR was in November 2013 where 668 units were sold,” Mr Lee said.

He noted that 44 per cent of March’s transactions were priced below $1.5 million, 32.9 per cent were between $1.5 million to $2 million, and 23.1 per cent were above $2 million.

The bulk of purchases, about 82 per cent, were by Singaporeans, with permanent residents and foreigners making up 13.4 per cent and 4.3 per cent respectively.

According to URA Realis data  the number of non-landed homes bought by foreign buyers rose 66.7 per cent from 33 units in February to 55 units in March.

The number of non-landed home purchases by permanent residents jumped 98.9 per cent from 87 units to 173 units over the same period. This is just slightly lower than the 182 units inked in January 2021.

Ms Christine Sun, OrangeTee & Tie’s senior vice-president of research and analytics, said: “Backed by the prospects of further price growth and a better leasing environment, foreign demand is expected to return gradually. We may see more luxury homes being sold in the coming months as more such projects are slated to be launched.” 

All eyes will soon be on full real estate statistics for the first quarter – out on April 23 – with experts expecting the final rise in private home prices to be steeper than what flash estimates had indicated.

WHY ARE PRICES RISING?

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March’s strong sales have now lowered the stock of uncompleted, unsold units in the market, and this depleting inventory has been a factor in the continued rise in prices over the past few quarters, the experts said.

“As of Q4 2020, we were left with 24,296 uncompleted, unsold units in market. Compared to the peak of slightly over 33,000 in this cycle, it has come down a lot,” said Lee Sze Teck, Head of Research at Huttons Asia. 

He added that now, the figure probably stands between 21,000 and 22,000.

Many recent launches were also from the last tranche of sites sold in the en bloc cycle of 2017 to 2018, said Christine Sun, Senior Vice President of Research & Analytics, OrangeTee & Tie.

“After that, there was a hiatus of (sales) for about two years plus, so if buyers want to wait for the next batch of launches, it means they must wait two to three more years,” she said.

While supply is tightening, demand is holding steady, or even increasing, as buyers believe that the worst of the recession and pandemic are over, said Ong Teck Hui, Senior Director, Research & Consultancy, JLL Singapore.

The trend of rising home sales prices has also pushed more buyers to sign on the dotted line, as they want to enter the market before prices go up further, he said.

Ms Sun concurred: “If you are looking at the whole situation with the global economy, most are expecting it to recover from this year onwards.

“So if Singapore is also going to recover… then the likelihood for prices to go up further will be higher. There is not much reason or impetus for prices to fall.

Analysts also said demand has been supported by ample liquidity in the market and low interest rates. Yet, authorities have repeatedly warned buyers about possible rises in the latter, and the need to be prudent about long-term mortgage obligations.

Nevertheless, Ms Sun said that the firm’s agents have seen some developers revising prices upwards for launched projects, as there is no pressure for them to clear units quickly.

“If let’s say I only have 10 to 20 per cent of stock left, I can revise my prices upwards because I still have maybe one to three more years (to sell everything),” she said, referring to a five-year deadline to sell all units in a project, so as to avoid a levy.

Mr Ong added: “Offering price discounts for new home purchases by developers is a common practice but buyers are knowledgeable enough to compare the nett prices after discount among different projects.

“In a rising market, projects are likely to be launched at higher prices than those of earlier launches, which is a major factor contributing to the overall price increase in the market.”

POSSIBLE COOLING MEASURES?

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Growing home prices rise have heightened the possibility of cooling measures, the experts said.

The flash estimates for Q1 2021 represent the fourth straight quarter of price increases, following rises of 2.1 per cent, 0.8 per cent and 0.3 per cent in the quarters before.

But the analysts believe authorities will also be keeping tabs on other indicators, such as economic growth.

Mr Ong noted that in 2020, private home prices rose 2.2 per cent, but gross domestic product (GDP) growth fell 5.4 per cent.

But in 2021, GDP growth has been forecast to be 4 to 6 per cent, while home prices have risen 2.9 per cent so far.

He added that the last time cooling measures were implemented, the private land sales market was heated and robust.

Yet at the moment, the pick-up in the private land sales market has been moderate so far, he said.

Authorities may also look at the global situation, Ms Sun said, noting that property prices are currently on the upswing in many other countries.

Huttons’ Mr Lee also said that any decision affecting the market would be very carefully considered.

“Bearing in mind that the economy is just starting to come out of a recession, should there be measures, it will have a lot of repercussions on other sectors such as banking, construction – right down to retailers, home furnishing and renovation,” he said.

Should cooling measures be needed, analysts expect authorities to use existing levers, such as the Additional Buyer’s Stamp Duty (ABSD) or loan-to-value (LTV) limits.

In 2018, ABSD rates were raised for those buying their second or subsequent residential properties.

Meanwhile, LTV limits were tightened for housing loans granted by financial institutions.

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