October cheer in the private residential market

The private housing market gained some momentum last month as buyers snapped up more units amid a larger number of new units launched. Transaction volume more than doubled from September, as developers sold a total of 1,252 units - up from 509 sold in the previous month. The number of units launched was also higher, at 1,467 - compared to 479 in the previous month (all excluding ECs).

The combination of more new units launched for sale and reasonable prices in the increasingly price sensitive market; together drew bargain-hunting homebuyers back to show flats. October’s sales also indicated that underlying demand is still present if prices are attractive. “The surge in primary home sales in October was largely in response to the sensitive pricing of the two major launches in the month – Forest Woods and The Alps Residences, which reignited buying interest and accounted for more than 55 per cent of the total number of units sold,” said Mr Ismail Gafoor, PropNex Realty CEO.

Mr Ismail notes that there are still several issues plaguing the private residential market namely; the mounting supply of homes amid the on-going implementation of stringent measures and strict loan curbs continued to weigh on buying sentiments. There is also an inertia to commitment as buyers remain on the sidelines whilst anticipating further price declines. As such, the primary market remains strongly launch driven, as witnessed by the Cairnhill Nine and GEM Residences – the other 2 projects which sold well during their respective launch months in March and May 2016.

Developers will continue to act with caution – taking a slow and deliberate approach in launching their projects, as well as having a competitive pricing strategy to further entice buyers.

OCR region most active

Outside Central Region (OCR) accounted for the bulk of private home sales in October with 1,043 units sold (or 83 per cent) with the balance in Rest of Central Region (RCR) – which sold 151 units (or 12 per cent) and Core Central Region (CCR) which sold 58 units (or 5 per cent).

Forest Woods and The Alps Residences - the chart-topping projects in October

The other top-selling projects in the month were:

Homebuyers expected to continue exercising heightened prudence

With the presence of price resistance, prices for upcoming new projects will remain competitive as there will be added pressure for developers to price their projects reasonably.

While selected projects which are reasonably priced and well located will continue to attract homebuyers, prices are expected to come under some pressure due to the large oncoming supply. As such, attractive pricing and location remain key drivers in helping developers move units

Sales performance next month will likely hover at about 1,000 units before tapering in December due to the seasonal school holidays. For the whole of 2016, we envisage sales volume to be close to 12,000 units (including ECs). Transactions will continue to be launch-driven; largely dependent on the price and location of the project.

PropNex expects healthy a healthy transaction volume in November due to the recently launched Queen’s Peak and Parc Riviera – which will both generate a reasonable amount of interest due to their good locations.

Q3 2016 HDB & URA Flash Estimates

Public home prices flat for past 4 quarters – could bottom out soon

HDB resale prices remained unchanged in Q3 2016 - the index has shown negligible price movements up and down in the past 4 quarters, therefore it is obvious that prices in a consolidation phase, with a possibility of bottoming out soon.

Mr Ismail Gafoor, PropNex Realty CEO said, “with prices consolidating, transactions will pick up. Buyers who have remained on the side-lines should have, by now, understood that prices will not fall very much more below this level. We believe that this is the new ‘norm’ – whereby prices will not fluctuate much as compared to the years of 2007 to 2011.”

In 2016, HDB resale prices is on track to end the year on a positive note due to the non-movement of prices for the last 2 quarters – the index will also see the lowest price fall in the last 3 years as compared to 2015 when overall resale prices fell 1.7 per cent, and 6.2 per cent in 2014. The current price points will entice more buyers to enter the market as it is attractive enough for young couples and upgraders.”

With lower prices, resale transactions in 2016 is expected to surpass 2015 - signaling a return in confidence of the current resale market. Resale prices to be flat in 2016, or rise slightly

In 2016, the government will maintain measures to stabilise the public housing market such as the Mortgage Servicing Ratio (MSR) cap of 30 per cent and the maximum loan term of 25 years for HDB mortgage loans, three-year wait for new PRs, and allowing singles to buy two-room BTO flats in non-mature estates. In addition, BTO supply will also increase to 18,000 new BTO flats, compared to the 15,000 which were launched last year. These will act as a counter balance to potential price increases. Mr. Ismail predicts that 2016 may spring a surprise as the current price points will entice more buyers to enter the market as it is attractive enough for young couples and/or upgraders – we will probably see a price movement of up to 1 per cent, with volume exceeding 20,000 units due to the lower asking prices.

Private home prices accelerate to largest quarterly decline in almost 3 years

Prices of private homes in Singapore fell 1.5 per cent quarter-on-quarter, higher than the 0.4 per cent decline in Q2 2016 – indicating continued pressure on private residential prices. With the property market continuing to operate in a tight financing and regulatory environment, Singapore’s private property market remains firmly within the down-cycle. This is the 12th consecutive quarter of decline which shows the sustained effectiveness of the numerous rounds of cooling measures.

"The greater fall in Q3 suggests that private residential prices is still under some considerable pressure due possibly to the continued enforcement of the cooling measures. I fully expect prices to continue its price correction for the next 2 quarters at least - decreasing by up to 3 per cent in 2016 - this is the lowest in the last 3 years.”

Broad based decline for all segments

After 2 consecutive quarters of price increases, luxury properties in the CCR fell 1.8 per cent after rising 0.3 per cent each, in the past 2 quarters. This is the largest fall in the CCR in the last 10 quarters.

“Though CCR properties are now more affordable than the past 2 or 3 years, we cannot discount the fact that buyers are still price sensitive and cautious, therefore sellers and developers have to be realistic about their pricing. The presence of high number of unsold stock does present buyers with many options.” In the RCR, prices fell 1.3 per cent in Q3 – the largest decline in the last 3 quarters. Mass market property prices also fell 1.2 per cent in the quarter.

Buyers of properties in the OCR and to a certain extent, the RCR, are generally more price sensitive, targeting properties with prices ranging from S$1,000-S$1,500psf in the mass market segment, and S$1,500-$2,000psf in the mid-tier segment.

Such buyers are usually bargain hunting, or looking for ‘value-buys’ – as such, the ability to take up loans is critical for their purchase decision – but many are hampered by the TDSR as Mr. Ismail believes that more potential buyers are finding greater difficulty to invest in a private home with a price quantum beyond $1.3 million given the lending curbs - and the situation is compounded by the ABSD.

Most purchasers are home-stayers and a significant group of them fall into the HDB-upgrader category. However, recent price indices from HDB and URA have fallen in the last couple of years, which again have impacted their upgrading ambitions.

“The non-increment in prices of HDB resale properties have led to a smaller gain achieved from the sale – which will in turn, limit the budget for their new private property and may cause some to put their plans on hold because the potential profit is insufficient to allow them to upgrade”.

In addition, secondary market sellers also face stiff competition from developers who are continuing to launch projects at attractive prices and incentives. As a result, re-sellers may have to lower prices in order to make a sale.

Outlook for 2016

There seems to be little respite for the private residential property market at least in the short term. This is due to the continued enforcement of the property measures and a large oncoming supply of homes. As such, Mr. Ismail predicts that a buyer’s market is expected to persist until the end of the year.

“We expect prices to remain relatively stable with a bit of downward pressure in 2016. Developers will continue to adjust launch prices to match the current inertia in the market, but will not drop prices too much due to the high price in which they have secured the land. Similarly, resale prices will take cue from the primary market in a bid to attract buyers”, said Mr. Ismail.

In view of these downside pressures, prices of private residential properties are projected to remain on a path of moderation. Furthermore, developers’ land bid strategies are expected to remain measured in the highly regulated residential property market, allowing them more flexibility in adjusting prices to encourage home purchases.

“However, Singapore’s property will be the asset choices of the most due to the economic and political stability and strong currency. As long as the macroeconomic environment remains stable, the residential market will remain resilient in the months to come."