Private residential prices fall again in 1Q2019, by 0.7%

/ EdgeProp
April 26, 2019 6:14 PM SGT
Private home prices declined by 0.7% in 1Q2019, according to the latest statistics from the URA. This compared to the 0.6% decline as shown by its flash estimate.
This is the second consecutive quarter that private residential prices have fallen; they declined by 0.1% in 4Q2018. Private home prices are now 0.7% below the most recent price peak in 3Q2018, and 3.9% below the record high in 3Q2013, says Tricia Song, head of research for Singapore at Colliers International.
New sales
New home sales for the first three months of this year were at 1,838 units, little changed from 1,836 units sold in 4Q2018. This was 16% higher y-o-y due to more attractive new project launches. “About 70% of new private home sales comprise projects that have been previously launched. Developments that are priced sensitively have continued to garner interest among buyers and investors,” says Ismail Gafoor, CEO of PropNex Realty.
Meanwhile, private resale transactions fell by 5.7% q-o-q, or 49.3% y-o-y, to 1,858. “Sellers might be pulling the brakes, and buyers are potentially holding off the decision of buying,” says Gafoor. But a revitalised showing is expected for the coming three quarters, as en-bloc beneficiaries look for replacement homes with their sales proceeds, he adds.
The latest decline was led by a price drop of 3.0% in the city centre, or Core Central Region (CCR), as well as a 0.7% decline in city-fringe areas, or Rest of Central Region (RCR). Prices in the suburbs grew moderately at 0.2% compared to their 0.7% gain in 4Q2018, says Leong Boon Hoe, COO of List Sotheby’s International Realty Singapore.
There is strong demand for properties priced below $2 million as well as relatively healthy interest for properties priced above $5 million, which are luxury homes by industry standards, he says. Some of these projects are 3 Orchard-By-The-Park, South Beach Residences, and Boulevard 88. “This shows that there are buyers who are keen to enter the market for good developments, despite the higher ABSD (additional buyer’s stamp duty),” says Leong.
The 1Q2019 price decline in the CCR is the sharpest recorded for the segment since the 5.2% fall in 2Q2009 following the Great Financial Crisis in 2009, says Song. This is also the second consecutive quarterly price decline in the CCR, which is now 4.0% below its most recent peak in 3Q2018.
This quarterly result is “much steeper than our expectation”, says Song, and could have resulted from the decline in median prices at certain projects, as developers look to clear outstanding inventory in completed developments. These include Lloyd Sixtyfive, New Futura, and TwentyOne Anguilla Park.
Notably, three units at Lloyd Sixtyfive were sold last quarter at a median price of $2,852 psf, which is 13.6% lower than the median price of $3,301 psf for two units sold in 4Q2018. New Futura also sold three units over the same period at a median price of $3,471 psf, down 4.5% compared to the $3,520 psf median price set by three units sold in 4Q2018. Lastly, the median price for four units sold at TwentyOne Angullia Park fell by 4.5% to $3,362 psf, compared to $3,520 psf for three other units sold in the previous quarter.
Benchmark pricing
At the same time, several new projects in the CCR that were launched in 1Q2019 set benchmark pricing, such as Fourth Avenue Residences, RV Altitude, and Boulevard 88.
The highest psf price for a 99-year leasehold project along Bukit Timah was set by Fourth Avenue Residences which sold 77 units at a median price of $2,411 psf, according to URA caveats. RV Altitude sold 19 units at a median price of $2,834 psf, which is the highest psf price in the River Valley Grove area. Lastly, Boulevard 88 sold 26 units at $3,613 psf, which is one of the highest psf prices for large-format projects in Orchard Boulevard.
Prices in the RCR were lower than their flash estimates, falling by 0.7% instead of 0.2% last quarter, and overturning the 1.8% increase recorded in 4Q2018.
Earlier launched projects like Margaret Ville, Mayfair Gardens, and The Tre Ver moved more units compared to the previous quarter, while maintaining their prices. The 820-unit Park Colonial is now 72% sold and the developer has begun raising prices. The development achieved a median price of $1,791 psf in 1Q2019, from $1,750 psf in 4Q2018.
As the developer of the former Normanton Park has been issued a no-sale licence, this could create “some overhang and price pressure” when the new 1,862-unit project is eventually launched for sale, says Song. Other attractive new launches in the next few quarters include the former Pearl Bank Apartments, Avenue South Residence, Coastline Residences, Amber Park and Mayfair Modern, she says.
In the suburbs, or Outside Central Region, non-landed home prices climbed 0.2% in 1Q2019 compared to the earlier flash estimate, and this came on the heels of a 0.7% increase in the previous period. The announcement of the Cross Island Line helped developers hold on to prices, including for projects like Affinity at Serangoon, Gardens Residences and Riverfront Residences.
However, with the launch of two “mega-projects” – the 2,203-unit Treasure at Tampines and 1,410-unit The Florence Residences – in the last quarter, prices in the OCR are expected to soften for the rest of the year, says Song. To date, the two projects have respectively sold 13% and 5% of their total units.
Pipeline supply
To date, the total volume of unsold new units in the market is about 37,000 units. Assuming an annual take-up of 9,000 homes based on the annual average over the past six years, this would take four years to be absorbed, says Lee Sze Teck, head of research at Huttons Asia. This is well within the five-year time frame before the ABSD kicks in, he adds.
In addition to unsold stock, there is a “formidable” pipeline of 53,284 uncompleted private residential units that have been granted planning approvals, says Desmond Sim, head of research at CBRE. “With a five-year average demand of between 8,000 and 8,500 units, and in view of the current weaker sentiments, this supply might take more than five years to clear,” he says.
This does not include a potential supply of 5,200 units from awarded government land sales (about 4,700) and en-bloc sites (about 500), which have not been granted planning approval. Thus, while developers are unlikely to reduce prices in the near term, “more buyers are likely to stay by the sidelines as they are spoilt for choice, and as they await developers to buckle under the pressure and competition to clear their inventory”, Sim says.