SINGAPORE - Private residential prices in the second quarter continued their recovery with its fourth straight quarter of increase as transaction volumes also soared, but the impact of cooling measures that took effect early July will likely moderate growth for the rest of the year.
The 3.4 per cent increase this quarter announced by the Urban Redevelopment Authority (URA) on Friday (July 27) was in line with earlier flash estimates, and comes after a 3.9 per cent jump in the first quarter.
This means that private home prices rose by a cumulative 7.4 per cent in the first half of 2018.
All segments of the market recorded price increases in Q2. Landed properties led the way by rising by 4.1 per cent, compared with the 1.9 per cent increase in the previous quarter. Prices of non-landed properties rose by 3.2 per cent, compared with the 4.4 per cent increase in the previous quarter.
By location, non-landed Rest of Central Region (RCR) prices increased by 5.6 per cent, compared with the 1.2 per cent rise in the previous quarter. Properties in the Core Central Region (CCR) booked an increase of 0.9 per cent, compared with the 5.5 per cent rise in the previous quarter. Prices of non-landed properties in Outside Central Region (OCR) climbed 3.0 per cent, compared with the 5.6 per cent increase in the previous quarter.
Transaction volumes jumped 34.9 per cent to 7,186 units in Q2, with resale making up the bulk at 4,700 units. In the first half of the year, 12,514 units were transacted.
But with cooling measures that kicked in July 6 that include an increased additional buyers' stamp duty (ABSD) for Singaporeans and PRs buying their second home onwards and foreigners buying residential property, as well as tightened Loan-to-Value (LTV) limits, market watchers cut their price growth predictions for the year.
Eugene Lim, key executive officer for ERA Realty, is now projecting a 7 to 10 per cent increase in prices in 2018, down from his previous 10 to 12 per cent estimate.
"Price growth is expected to slow or even plateau," he said, with the luxury market to be most hard-hit.
"In the immediate term, buyers are likely not to hastily commit to a purchase, and will be looking out for value buys."
"At recent launches, developers are also adjusting their development prices sensitively with some offering discounts of up to 10 per cent, factoring in the ABSD increase that their buyers will incur," said PropNex Realty's chief executive Ismail Gafoor. "These will indirectly correlate to the price index movements in the coming quarters.”
He predicts an overall price growth of 7 to 9 per cent, down from his 8 to 10 per cent prediction when Q1 statistics were released.
Christine Li, senior director of research at Cushman & Wakefield, said: "Matching buyer and seller expectations will be the key to maintaining healthy transaction volumes in the coming months or quarters. As such, prices are unlikely to run away, nor will they dip unless the primary residential market sees a more severe downward adjustment in terms of prices of new launch prices."
She thinks transaction volumes will also be hard hit in Q3 due to the double whammy of cooling measures and the hungry ghost festival, when superstitious buyers tend to hold back on buying.
Mr Ismail said that the resale segment could potentially outperform the rest of the segments in the third and fourth quarters of this year as prices of resale properties are relatively lower, around 20 per cent cheaper than new launches at similar locations, and due to demand from en bloc owners who are looking for immediate replacement homes.
"Prices of resale properties are also typically lower than new launches; and as such they are likely to attract buyers who are looking for lower price quantum properties due to the lower loan-to-value ratio for loans and higher ABSD for second and subsequent properties," added Mr Lim of ERA.
Rentals of private residential properties increased by 1.0 per cent, compared with the 0.3% rise in the previous quarter.
Rentals of landed properties increased by 3.6 per cent, after remaining unchanged in the previous quarter. Rentals of non-landed properties increased by 0.6 per cent, compared with the 0.3 per cent rise in the previous quarter.
The vacancy rate of completed private residential units (excluding ECs) decreased by 0.3 percentage points to 7.1 per cent at the end Q2.
As at the end of the quarter, there was a total supply of 45,003 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals, compared with the 40,330 units in the previous quarter.
Of this number, 26,943 units remained unsold as at the end of Q2 2018, up from 23,514 units in the previous quarter.
After adding the supply of 2,518 EC units in the pipeline, there were 47,521 units in the pipeline with planning approvals. Of the EC units in the pipeline, 18 units remained unsold.
In total, 26,961 units with planning approvals (including ECs) remained unsold, up from 24,193 units in the previous quarter.
At the end of the quarter, there were 26,961 unsold units with planning approvals, up from 24,193 units as at the end of the first quarter.
There is a potential supply of 19,500 units (including ECs) from Government Land Sales (GLS) sites and awarded en-bloc sale sites that have not been granted planning approval yet.
A large part of this new supply of 19,500 units could be made available for sale later this year or next year, and will be completed from 2021 onwards, URA said.