Q4 private residential property prices rise due to the resilient underlying demand for homes, says Colliers International Research
Q4 private residential property prices in Singapore rose for the third straight quarter, supported by the resilient underlying demand for homes, said Colliers. It referred to the flash estimates from the Urban Redevelopment Authority (URA) on Thursday (2 Jan) which showed that Q4 private residential property prices climbed by 0.3% quarter-on-quarter (QOQ), slowing down from the 1.3% uptick in the previous quarter.
Cumulatively, private home prices have risen by 2.5% in 2019, down from 7.9% in 2018. Private home prices are now 2.4% above the most recent peak in Q3 2018 (149.7) and 0.8% below its all-time peak in Q3 2013 (154.6).
Based on caveats downloaded on 2 January 2020, developers sold 2,309 new homes in Q4 2019 – down by 29.6% QOQ (3,281 in Q3 2019) but up 25.8% year-on-year (YOY) (1,836 in Q4 2018). Meanwhile, secondary transactions stood at 2,033 units in Q4 2019, down 18.1% QOQ (from 2,482 in Q3 2019) and up marginally by 0.4% YOY (from 2,024 in Q4 2018).
Price analysis by regions
The Q4 private residential property prices growth was led by the landed segment (up 4.0% QOQ), while non-landed residential segment fell 0.7% QOQ, driven by volatile performance in the Core Central Region (CCR) which fell by 3.7% QOQ; Rest of Central Region (RCR) fell 1.4% QOQ; and Outside Central Region (OCR) where prices rose the most by 2.9% QOQ.
Core Central Region (CCR)
According to URA’s data, Q4 private residential property prices in the CCR declined 3.7% in Q4 from the previous quarter, after rising 2.0% QOQ in Q3 2019 and 2.3% in Q2 2019. This brought CCR home values to 3.6% below its recent peak in Q3 2018 and 5.9% below its all-time peak in Q1 2013.
A closer look at the transactions during the quarter suggests that the decrease in Q4 non-landed CCR prices could be due to projects that have been completed earlier but still have inventory:
- Marina One Residences (completed in 2017) saw 43 units sold in Q4 2019, at a median price of SGD2,242 psf compared to 30 units in Q3 2019 at a median price of SGD2,503 psf.
- South Beach Residences (completed in 2016) saw 9 units sold in Q4 2019, at a median price of SGD3,097 psf compared to 10 units in Q3 2019 at a median price of SGD3,349 psf.
Rest of Central Region (RCR)
Home values in RCR unexpectedly declined 1.4% QOQ in Q4, after rising 1.3% in Q3. This brought RCR home prices to 1.5% below the peak of 155.6 seen in Q2 2013.
We believe the decline is due to the high base achieved in new launches in Q3 2019 for new launches such as Avenue South Residence, One Pearl Bank and Meyer Mansion.
In Q4, there were no new project launches in RCR. New sales, from earlier launched projects, were 849 units during the quarter, almost halved the 1,502 units sold in Q3 2019.
Outside Central Region (OCR)
OCR prices rose the most among the market segments and remained at an all-time high. Non-landed home values in OCR increased by 2.9% in Q4, following the 0.8% increase in Q3 2019.
There were three major launches in Q4, namely:
- Sengkang Grand Residences, which sold 235 units at a median price of SGD1,741 psf
- Dairy Farm Residences, which sold 36 units at a median price of SGD 1,553 psf
- Midwood, which sold 22 units at a median price of SGD1,646 psf
Meanwhile, some earlier launches such as Treasure at Tampines and Florence Residences continued their progressive takeup:
- Treasure at Tampines moved 156 units at SGD1,375 psf, compared to 275 units at SGD 1,342 psf in Q3
- Florence Residences sold 53 units at a median price of SGD1,508 psf, compared to 293 units at SGD1,447 psf in Q3 2019.
Ms Tricia Song, Head of Research for Singapore at Colliers International said, “The full-year price increase of 2.5% is in line with the market and our expectations. The slowing pace of price increase indicates a stabilised environment, reducing any risk of government imposing more cooling measures at this stage.”
“According to advance estimates from the Ministry of Trade and Industry (MTI) today, Singapore’s GDP grew 0.8% in Q4 2019, bringing the full year 2019 GDP to 0.7%, the lowest annual GDP growth in 10 years, since 2009’s 0.2%.
With home prices highly correlated to household income and the economy, we expect private residential prices could grow 3.0% in 2020, tracking a recovery in economic growth. Oxford Economics expects the economy to do better in 2020, potentially growing 1.4%.
We expect a full-year takeup of 9,800 developer sales in 2020, similar to 2019. The demand for Singapore private homes is still relatively stable given the tight labour market, favourable interest rate environment, and relatively healthy household balance sheet.”
Home ownership is ranked highly on many Singaporeans’ list of priorities, and private housing remains a longstanding aspirational goal, both for first-timers and HDB upgraders. The injection of ample supply in the last few quarters, provided home seekers with abundant options and in tandem with competitive pricing, outstanding design and good locational attributes, catalysed a substantial volume of conversion. private residential properties’ demand was project specific and uneven across the market.
The flash estimates of the private residential property prices are compiled based on transaction prices given in contracts submitted for stamp duty payment and data on units sold by developers up till mid-December. The statistics will be updated on 23 January 2020 when URA releases its full set of real estate statistics for 4th Quarter 2019.
Past data of private residential property prices have shown that the difference between the quarterly price changes indicated by the flash estimate and the actual price changes could be significant when the change is small. The public is advised to interpret the flash estimates with caution.