The 3Q2018 HDB Resale Price Index (RPI) dropped 0.2% q-o-q and 1% y-o-y. The index’s growth rate has returned to negative territory after a short-lived 0.1% uptick q-o-q in 2Q2018. By end-September, the index had contracted 0.8% in the first nine months of the year.
Meanwhile, the URA price index for private residential property continued to rise, albeit at a slower rate of 0.5% q-o-q in 3Q2018. This increase was mostly led by a 1.7% q-o-q rise in the prices of landed homes (see Table 3).
Based on the flash estimates for 3Q2018, it may appear that the HDB resale market has been harder hit than private housing by the latest round of property cooling measures that kicked in on July 6. Nicholas Mak, ZACD executive director points out, however, that the measures are aimed at the private housing segment and not public housing.
He attributes the decline in the HDB RPI for six consecutive quarters from 4Q2016 to 1Q2018 partially to the strong supply of new Buildto- Order HDB flats. Another reason could be the concern over the shortening leases and depreciating value of ageing flats.
Although the government has announced programmes such as Home Improvement Programme 2 and the Voluntary Early Redevelopment Scheme, the details of the latter are still unavailable and it will not be implemented for another 20 years.
As a result, the uncertainty concerning the value of ageing HDB flats lingers on, exerting a downward pressure on resale prices, says Mak. He expects the HDB RPI to see a drop in the range of 1% to 2% y-o-y.
In the non-landed property sector, the prime districts in the Core Central Region (CCR) price index saw a rise of 1.2% q-o-q in 3Q2018, compared with 0.9% in the previous quarter. The city fringe, or Rest of Central Region (RCR), saw a 0.8% q-o-q contraction, unlike the previous quarter, in which it saw a 5.6% growth, says Mak. Meanwhile, in the suburban segment, or Outside Central Region (OCR), prices rose just 0.1% q-o-q in 3Q2018 versus 3% the previous quarter.
The 0.5% growth in the overall price index marks the slowest rate of growth since the price index started to recover in 3Q2017. Mak attributes this to the recent round of property cooling measures that has deflated market confidence. “If not for the cooling measures, the price index could have increased 2.5% to 3% q-o-q in 3Q2018.”
Eugene Lim, ERA key executive officer, says: “It is not the government’s intention to stop property prices from increasing, but for prices to grow at a sustainable rate, in line with economic fundamentals.”
The q-o-q growth in the price index for the CCR shows that there are still buyers at the top end of the market, despite the higher additional buyer’s stamp duty, notes Lim. Those shopping for a home in the RCR and OCR are likely to take a longer time to evaluate their options, given the additional 5% ABSD and lower borrowing limit, he adds.
There were 5,065 caveats lodged from July to September (until Sept 23). New-home sales made up 2,791 (55%) and resales and sub-sales made up 2,295 (45%) of the caveats lodged. Compared with the 2,366 new-home sales and 4,820 resales and sub-sales in 2Q2018, it shows that resales have been particularly affected by the property cooling measures in July, notes Lim. Meanwhile, new-home sales in 3Q2018 were boosted by the one-night buying frenzy on July 5, the eve of the property cooling measures, when almost 1,000 units were sold.
Developers are going ahead with their property launches as planned. “We have not seen significant discounts being offered, as most of the developers have strong holding power,” says Lim.
Ong Teck Hui, JLL national director of research and consultancy, says: “The measures have arrested price increases in existing new projects, moderated new launch prices and tempered asking prices in the resale market as well.
“We can expect this trend to continue, with price increases remaining low-key or flattening out in the next few quarters.”
Christine Li, senior director of research and consultancy at Cushman & Wakefield, sees the latest round of property cooling measures having a stabilising effect on the residential market, moderating the pace of price increase to only 0.5% in 3Q2018. This also sets the tone for the rest of the year, and she expects the full year price growth to range between 8% and 10%.
PropNex CEO Ismail Gafoor does not expect private-home prices to tumble, as developers are locked in by their high bid prices for land parcels purchased over the last two years. Ismail expects the full-year price growth to ring in at 8% to 9% in 2018; and 2% to 3% in 2019.