Private housing price growth slows in 3Q2023, up 0.8% q-o-q

/ EdgeProp Singapore |

October 27, 2023 5:32 PM SGT

Private housing prices edged up 0.8% q-o-q in 3Q2023, reversing from the 0.2% q-o-q decline the previous quarter (Picture: Samuel Isaac Chua/The Edge Singapore)

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SINGAPORE (EDGEPROP) _ Private housing prices edged up 0.8% q-o-q in 3Q2023, reversing from the 0.2% q-o-q decline the previous quarter, according to data released by URA on Oct 27. The 3Q2023 price growth is slightly higher than the 0.5% q-o-q increase indicated in URA’s flash estimates released at the start of the month.

This brings private housing price growth to 3.9% for the first nine months of 2023, lower than the 8.2% increase logged over the same period in 2022. The growth last quarter is also lower than the average quarterly increase of 2.1% recorded in 2022.

Leonard Tay, head of research at Knight Frank Singapore, believes prices have stabilised. “The balance of demand and supply is beginning to materialise in the private residential market,” he says. "The overall price growth has eased as homebuyers increasingly take more time to decide, and this will likely form the prevailing trend for the rest of the year and into 2024. "

Read also: New home sales rise 13.9% m-o-m in March

The price growth in 3Q2023 was underpinned by the non-landed segment, which rose by 2.2% q-o-q in 3Q2023, bouncing back from the 0.6% y-o-y decline in the previous quarter.

Condos in the Outside Central Region (OCR) led the way with prices rising 5.5% q-o-q, accelerating from a 1.2% q-o-q increase in 2Q2023. This was followed by the Rest of Central Region (RCR) where prices climbed 2.1% q-o-q, reversing from a decline of 2.5% the previous quarter.

“Genuine housing needs from local resident home-buyers continued to support demand, and higher price levels were also set by project launches in these regions in 3Q2023, with developers having committed to steeper land and related development costs previously,” observes Chia Siew Chuin, head of residential research, research and consultancy, Singapore at JLL.

In contrast, prices of condos in the Core Central Region (CCR), together with prices of landed properties, recorded a decline. Prices in the CCR fell 2.7% q-o-q in 3Q2023, extending the 0.1% fall registered in 2Q2023. Chia attributes this to the CCR’s greater exposure to foreign purchases and property investors, which have been impacted by the hike in Additional Buyer’s Stamp Duty rates that took effect in April. In 3Q2023, the proportion of foreign homebuyers in the CCR shrank to 5.3% compared to 10% in 2Q2023 and 15% in 1Q2023.

Landed homes saw prices fall 3.6% q-o-q in 3Q2023. This marks the first quarterly decline in landed home prices since 2Q2021, when it declined 0.3% q-o-q, remarks, Ismail Gafoor, CEO of PropNex Realty. For the first nine months of the year, landed home prices have risen 3.2%, significantly lower than the 9% growth charted across the corresponding period in 2022.

Private home sales volume falls

Developers sold 1,946 new private homes excluding executive condominiums or ECs in 3Q2023, a fall of 8.5% q-o-q from 2,127 units in the previous quarter and a fall of 11% y-o-y. Between January to September, primary home sales amounted to 5,329 units, marking a 16.9% fall compared to the same period in 2022, despite a 61.3% higher number of units launched, notes JLL’s Chia. She adds that this is the lowest new private home sales for the first nine months of the year since 2016 when 5,656 units were sold.

The private resale market also softened in 3Q2023, with 2,900 units changing hands. This is 2.6% less than the 2,976 units sold in 2Q2023. Meanwhile, the number of sub-sale transactions in the private housing market rose from 285 units in 2Q2023 to 355 units in 3Q2023.

The dip in sales volume reflects increased caution and softer buyer demand in the face of a cloudy economic outlook and new market cooling measures, JLL’s Chia comments. “In the primary market, buyers have also become more discerning, taking more time to pick from a broad spectrum of choices from newly released projects while keeping an eye on upcoming launches,” she explains.

In the secondary market, prolonged high interest rates and a tight resale stock continue to limit sales volume, Chia adds. The mandatory 15-month waiting period also deterred some private homeowners planning to downgrade to HDB resale flats from selling their private homes, further restricting the available resale stock and resale transactions.

Meanwhile. total unsold inventory fell 4.3% q-o-q to 17,161 units in 3Q2023.

Rental growth momentum further slows

In the private housing rental market, rents rose 0.8% q-o-q in 3Q2023, marking a fourth consecutive quarter of slower growth. In 2Q2023, private housing rents had risen 2.8% q-o-q while in 1Q2023, rents had grown 7.2% q-o-q.

JLL’s Chia adds that this is the first time in 11 quarters islandwide rents have recorded a q-o-q growth below 1%.

Rental growth was led by landed properties which saw a 4.4% q-o-q rise in 3Q2023 while non-landed properties observed a 0.2% q-o-q increase. In the non-landed segment RCR and OCR rents rose 1.9% and 1.3% respectively, albeit slowing down from previous quarters. In contrast, CCR rents declined for the first time since 4Q2020, falling by 1.7% q-o-q.

For the first nine months of the year, rents have climbed 11.1%. They are also up 58.5% since bottoming out in 3Q2020.

Tricia Song, head of research for Singapore and Southeast Asia at CBRE, notes that completions have outstripped demand, with the vacancy rate for private homes rising to 8.4% in 3Q2023 from 6.3% in 2Q2023. 15,883 private homes excluding ECs were completed in the first nine months of the year. “With 3,167 units due to complete in 4Q, 2023 will see a total completion of 19,050 units, the largest number of completions since 20,648 units in 2017,” adds Song.

She expects rents to ease further in the coming quarters alongside the abundant new supply. “Expatriate demand could moderate as companies restructure and cut back on hiring amid challenging economic conditions,” she adds.

Projected completions by year*

Source: URA, CBRE Research

*For private residential units and ECs with planning approvals

Headwinds to continue weighing on market

In the coming months, an overhang of cooling measures, a weak economic outlook and heightened interest rates will continue to weigh on buyer demand, says Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield.

On the other hand, the significant increase in replacement costs has prompted sellers to stay firm on their selling prices, he adds. “As such, we may see an increasing mismatch in buyer-seller expectations, and this would weigh on overall sales volumes.” Wong is projecting overall private housing sales volume in 2023 to fall between 18,000 to 20,000 units, lower than last year’s total of 21,890 units.

PropNex’s Gafoor notes while new launches such as J’den and Hillock Green will support sales and home prices in the fourth quarter, the cautious sentiment coming off the back of the cooling measures and macroeconomic uncertainties may prompt a pull-back in sales activity. “We reckon some prospective buyers are holding out for market catalysts (such as interest rates stabilisation), or are perhaps strategising on opportunistic buys including looking at options in the CCR segment,” he observes.

PropNex has revised its sales volume projections for 2023 downwards to 6,500 to 7,000 for new home sales excluding ECs and between 12,000 to 13,000 units for private resale properties. For prices, Gafoor anticipates private home price growth to come in between 4% to 5% in 2023.

Meanwhile, CBRE’s Song believes some developers may choose to push new project launches to 2024 when interest rates will have likely stabliised and sentiment improves. “As such, developer sales are expected to remain subdued in 4Q2023,” she predicts. CBRE expects between 6,500 to 7,000 new private homes to be sold in 2023, below the 7,099 units recorded in 2022.

Correspondingly, Song believes private home prices have peaked, with growth to be muted in 4Q2023. Nonetheless, barring widespread retrenchments and a sustained recession, she does not anticipate a significant price correction, given low unsold inventory and generally healthy household balance sheets. CBRE has maintained its full-year forecast of 3% price growth in 2023, easing from the 8.6% growth recorded in 2022, in line with lower GDP growth projected for the year. The Ministry of Trade and Industry is forecasting GDP growth between 0.5% and 1.5% for 2023, versus 3.6% in 2022.

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